Form 10-K
Crestar Financial Corporation And Subsidiaries
FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file Number 1-7083
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Crestar Financial Corporation
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(Exact name of registrant as specified in its charter)
State of Virginia 54-0722175
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
919 East Main Street, Post Office Box 26665, Richmond, VA 23261-6665
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (804)782-5000
-----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock $5 Par Value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
The aggregate market value (average of the high and low prices) of Crestar
Financial Corporation voting stock held by non-affiliates as of January 31, 1997
was $3,842,271,000.
As of January 31, 1997, Crestar Financial Corporation had 110,568,950 shares of
Common Stock $5 Par Value outstanding.
The Proxy Statement of the annual meeting of shareholders to be held April 25,
1997 is incorporated by reference in Part III of this Form 10-K.
<PAGE>
Management's Discussion And Analysis Of Operations And Financial Condition
Crestar Financial Corporation And Subsidiaries
This commentary provides an overview of Crestar Financial Corporation's (Crestar
or the Corporation) financial condition, changes in financial condition and
results of operations for the years 1994 through 1996. The following discussion
should assist readers in their analysis of the accompanying consolidated
financial statements and supplemental financial information. On December 31,
1996, Crestar completed its merger with Citizens Bancorp (Citizens), a $4.1
billion asset bank holding company based in Laurel, Maryland. The merger was
accounted for as a pooling of interests business combination. Accordingly, the
accompanying consolidated financial information reflects the results of
operations of both Crestar and Citizens, on
Table 1 Selected Financial Information1
Dollars in thousands, except per share data
<TABLE>
<CAPTION>
<S> <C>
Results Of Operations (for the year): 1996 1995 1994 1993 1992
Income from earning assets $ 1,563,379 $ 1,491,903 $ 1,300,794 $ 1,175,881 $ 1,231,736
Net interest income 866,310 814,855 777,851 707,284 660,062
Provision for loan losses 95,890 66,265 36,509 63,325 120,821
Net Income 218,271 (2) 215,887 (3) 215,158 179,586 117,212
Preferred dividend requirements - - - 2,221 2,475
Income applicable to
common shares $ 218,271 $ 215,887 $ 215,158 $ 177,365 $ 114,737
Earnings Per Share
Primary:
Net Income $ 1.95 $ 1.92 $ 1.93 $ 1.60 $ 1.13
Average shares outstanding (000s) 112,037 112,432 111,643 110,836 101,885
Fully diluted:
Net Income $ 1.94 $ 1.92 $ 1.93 $ 1.60 $ 1.12
Average shares outstanding (000s) 112,408 112,623 111,665 111,007 102,096
Dividends paid
per common share $ 1.01 $ .88 $ .77 $ .57 $ .40
=========================================================================================================================
Financial Condition (at December 31):
Total assets $22,861,941 $22,332,611 $20,167,656 $18,924,076 $17,702,869
Long-term debt 659,336 671,295 715,132 604,026 334,423
Total equity 1,779,510 1,785,588 1,601,538 1,510,109 1,384,345
=========================================================================================================================
Selected Ratios (for the year):
Return on average assets 1.01% 1.06% 1.11% 1.01% .69%
Equity leverage 12.15x 11.90x 12.41x 12.08x 13.46x
Return on average common equity 12.28 12.58 13.78 12.39 9.47
Net interest margin 4.44 4.44 4.47 4.47 4.44
Dividend payout ratio
on common stock 60.93 (4) 40.31 35.68 33.90 38.42
Equity formation rate 4.804 (4) 7.51 8.86 7.95 5.62
Based on averages:
Total equity to total assets 8.23 8.40 8.06 8.28 7.43
Total loans to total equity 7.67x 7.97x 7.56x 6.75x 7.92x
==========================================================================================================================
Other Data (at December 31):
Number of banking offices 508 480 483 446 443
Full-time equivalent employees 8,720 8,487 9,212 8,803 8,356
==========================================================================================================================
</TABLE>
(1) For all periods presented, shares outstanding and per share data have been
restated to reflect Crestar's two-for-one stock-split in the form of a stock
dividend. The stock split was approved on December 20, 1996 and distributed
on January 24, 1997 to shareholders of record on January 3, 1997.
(2) Net income in 1996 reflects $32.5 million of after-tax merger costs
associated with Crestar's merger with Citizens Bancorp on December 31, 1996.
(3) Net income in 1995 reflects $29.3 million of after-tax merger costs
associated with Crestar's merger with Loyola Capital Corporation on December
31, 1995.
(4) Based on dividends paid (versus dividends declared), Crestar's 1996 dividend
payout ratio was 45.20% and the equity formation rate was 6.73%.
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<PAGE>
Management's Discussion
CRESTAR FINANCIAL CORPORATION AND SUBSIDIARIES
Table 2 Pooling Of Interests Merger With Citizens Bancorp
Dollars in thousands, except per share data
Results Of Operations (for the year ended December 31, 1996):
<TABLE>
<CAPTION>
Excluding Merger Costs and
Other Non-recurring Items
--------------------------
Other Non- Combined
Crestar (1) Citizens (1) Merger recurring Results
1996 1996 Subtotal Costs Items (2) 1996
<S> <C>
Net interest income (3) $733,964 $142,293 $ 876,257 $ - $ - $ 876,257
Provision for loan losses 90,670 5,220 95,890 - - 95,890
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Net credit income 643,294 137,073 780,367 - - 780,367
Securities gains 3,370 23 3,393 - - 3,393
Other noninterest income 307,634 43,580 351,214 (18,249) - 332,965
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Net credit and noninterest income 954,298 180,676 1,134,974 (18,249) - 1,116,725
Noninterest expense 605,264 112,367 717,631 31,785 34,103 783,519
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Income before taxes 349,034 68,309 417,343 (50,034) (34,103) 333,206
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Tax-equivalent adjustment 9,947 - 9,947 - - 9,947
Book tax expense 120,742 24,958 145,700 (17,503) (23,209) 104,988
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Income tax expense 130,689 24,958 155,647 (17,503) (23,209) 114,935
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Net income $218,345 $ 43,351 $ 261,696 $(32,531) $(10,894) $ 218,271
============================================================================================================
Earnings per share (4) $ 1.94 $ .39 $ 2.33 $ (.29) $ (.10) $ 1.94
Return on average assets 1.25% 1.07% 1.21% 1.01%
Return on average equity 15.27 12.50 14.73 12.28
Net interest margin 4.61 3.74 4.44 4.44
Overhead ratio 57.92 60.45 58.30 64.61
============================================================================================================
</TABLE>
(1) Results of operations before December 31, 1996 pooling of interests business
combination and excluding non-recurring items
(2) Non-recurring items include a $21.5 million after-tax charge to recapitalize
the Savings Association Insurance Fund, and a $10.6 million after-tax
benefit related to the repeal of thrift bad debt tax legislation, each
occurring in the third quarter of 1996
(3) Tax-equivalent basis
(4) Based on 112,408,000 fully-diluted average common shares outstanding for
1996
a combined basis, for all periods presented. Previously, on December 31, 1995,
Crestar merged with Loyola Capital Corporation (Loyola), a $2.5 billion asset
thrift holding company headquartered in Baltimore, Maryland. The merger with
Loyola was also accounted for as a pooling of interests. The accompanying
consolidated financial information reflects the results of operations of Crestar
and Loyola, on a combined basis, for all periods prior to the merger. Certain
reclassifications have been made to prior years' consolidated financial
statements and related financial information to conform to the 1996
presentation.
Crestar's subsidiaries provide banking and non-banking services
throughout Virginia, Maryland and Washington, D.C., which compose Crestar's
primary market area. Crestar has the largest deposit market share in Virginia,
within the markets in which we serve, and in the Greater Washington metropolitan
area, and holds the number two position in deposit market share in Maryland.
This market area is characterized as economically diverse. Crestar's market area
is also 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. Upon merging with Citizens on December 31, 1996,
Crestar became the parent company for three separate banking subsidiaries
Crestar Bank, Citizens Bank of Maryland (Citizens Bank), and Citizens Bank of
Washington, N.A. (Citizens Bank N.A.). The Corporation expects to merge Citizens
Bank and Citizens Bank N.A. into Crestar Bank during the first quarter of 1997.
Crestar Bank will continue to carry on its business and operations in Virginia,
Maryland and Washington, D.C., conducted by the former banking subsidiaries.
In December 1996, Crestar's Board of Directors declared a two-for-one
split, in the form of a common stock dividend. The two-for-one stock split was
distributed on January 24, 1997. For all periods presented in these financial
statements, average shares outstanding and per common share data have been
adjusted to reflect the common stock split.
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<PAGE>
Return on
Average Assets
(percent)
[Graph]
1992 1993 1994 1995 1996
------------------------------------
.69 1.01 1.11 1.06 1.01
Return on Average
Common Equity
(percent)
[Graph]
1992 1993 1994 1995 1996
------------------------------------
9.47 12.39 13.78 12.58 12.28
Net Interest
Income*
($ in millions)
[Graph]
1992 1993 1994 1995 1996
------------------------------------
$678 722 790 826 876
* Tax-equivalent basis
Earnings Overview
Crestar Financial Corporation earned net income of $218.3 million in 1996,
representing $1.94 in fully diluted earnings per share. Net income in 1995 was
$215.9 million or $1.92 per common share. Net income for 1996 was affected by
several non-recurring items during the year, including $32.5 million in one-time
after-tax charges associated with the December 31, 1996 merger with Citizens. In
addition to the Citizens merger costs, other non-recurring items affecting net
income for 1996 included a $21.5 million after-tax charge from the Federal
Deposit Insurance Corporation (FDIC) to recapitalize the Savings Association
Insurance Fund (SAIF), incurred in the third quarter, as well as a $10.6 million
after-tax benefit related to the repeal of certain thrift bad debt tax
legislation, also recorded in the third quarter. Excluding these three
non-recurring items, net income for 1996 totaled $261.7 million, or $2.33 per
common share.
Crestar's net income for 1995 was reduced by $29.3 million in after-tax
one-time merger expenses associated with the December 31, 1995 merger with
Loyola. Excluding the Loyola one-time merger costs, net income for 1995 was
$245.2 million, or $2.18 per share. Excluding all non-recurring charges, net
income for 1996 represented an increase over comparable 1995 results of $16.5
million, or 7%, attributable to growth in earning assets and noninterest income,
and management of controllable expenses.
The key profitability measures of return on average assets (ROA) and return
on average total shareholders' equity (ROE) for 1996 in comparison to 1995
reflect the non-recurring items impacting each year's results. Return on average
assets was 1.01% for 1996, compared to 1.06% in 1995. Reported net income
reflects a ROE of 12.28% in 1996 versus 12.58% in 1995. These ratios, along with
other selected earnings and balance sheet information for each of the years in
the five-year period ended December 31, 1996, are shown in Table 1. Excluding
the one-time costs incurred during the year, Crestar's ROA was 1.21%, and ROE
was 14.73%, for 1996. The comparable results for 1995, which exclude one-time
costs associated with the Loyola merger, represent a ROA of 1.20% and a ROE of
14.28%. Table 2 provides a summary of 1996 results for both Crestar and Citizens
on a stand alone basis and displays the impact of the third quarter 1996
non-recurring items and the one-time expenses associated with the combination of
the two financial institutions. These merger related expenses, which totaled
$32.5 million on an after-tax basis, included investment banking and
professional fees, severance benefits related to staff reductions, and
write-offs and lease terminations of facilities and systems. Significant items
affecting the change in earnings per share for 1996 and 1995 are summarized in
Table 3. Each applicable item is net of federal income taxes computed using a
35% effective rate.
-15-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
Table 3 Analysis Of Primary
Earnings Per Share
1996 1995
vs. vs.
1995 1994
Primary Earnings Per Share--
prior period $1.92 $1.93
- ------------------------------------ ----------------
Interest income .41 1.12
Interest expense (.12) (.90)
Provision for loan losses (.20) (.15)
Securities gains or losses .03 .05
Other noninterest income .12 .18
Foreclosed properties expense (.02) .04
One-time merger costs:
Citizens Bancorp (.29) -
Loyola Capital Corporation .26 (.26)
SAIF assessment expense (.20) -
Repeal of thrift bad debt tax legislation .10 -
Other noninterest expense (.06) (.05)
Change in effective income tax rate (.01) (.02)
Decrease (increase) in shares
outstanding .01 (.02)
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Net increase (decrease) .03 (.01)
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Primary Earnings Per Share--
current period $1.95 $1.92
===============================================================
Mergers And Acquisitions
Crestar continued to enhance its presence in current markets, and expand into
contiguous markets, through the completion of acquisitions during 1996. On
December 31, 1996, Crestar completed the Corporation's largest ever business
combination with the pooling-of-interests merger with Citizens Bancorp. Crestar
issued 12.6 million (25.3 million on a post-split basis) of its shares of common
stock for all of the outstanding common stock of Citizens. Citizens was a bank
holding company for Citizens Bank and Citizens Bank N.A., operating in Maryland,
Virginia and the District of Colombia with approximately $2.9 billion in
deposits, $2.4 billion in loans and $4.1 billion in total assets. At the time of
the merger, Crestar Financial Corporation became the bank holding company for
Crestar Bank, Citizens Bank and Citizens Bank N.A. Crestar expects to merge the
assets and operations of Citizens Bank and Citizens Bank N.A. into Crestar Bank
during the first quarter of 1997. The merger with Citizens resulted in the
addition of 103 branches to Crestar's operating structure at year-end 1996.
Approximately 26 of these branches are expected to be consolidated with existing
Crestar Bank branches, as part of the merger process, during 1997.
On June 6, 1996, Crestar purchased the deposits and customer accounts, plus
selected loans, of ten branches of Mellon Bank (MD), located in the Maryland
suburbs of the metropolitan Washington, D.C. area. The purchase included
approximately $150 million in deposits. Also in the second quarter of 1996,
Crestar Mortgage Corporation completed the purchase of Ryland Funding Group, a
wholesale mortgage banker with four mortgage loan production offices.
In December 1996, Crestar acquired the student lending business of Great
Western Financial Corporation of California. The acquisition included a $370
million portfolio of student loans, predominantly in California and Florida, and
represents a significant expansion of the Corporation's national education
lending operations. At December 31, 1996, Crestar's student loan portfolio
totaled approximately $850 million.
With the exception of Citizens, each of the acquisitions completed in 1996
has been accounted for under the purchase method of accounting, whereby the
purchase price has been allocated to the underlying assets acquired and
liabilities assumed based on their respective fair values at the date of
acquisition. Crestar's 1996 results include the results of operations of the
assets purchased and liabilities assumed from Mellon Bank (MD), Ryland Funding
Group, and Great Western Financial Corporation from the date of their respective
purchase. The acquisition of Citizens was accounted for as a pooling of
interests and, accordingly, all pre-merger historical financial data has been
restated to reflect the combined results of both Crestar and Citizens. Financial
statement note 2 contains additional information concerning mergers and
acquisitions.
Under interstate banking and branching legislation enacted by Congress in
1995, previously existing restrictions on interstate bank acquisitions were
abolished, subject to certain conditions. Bank holding companies from any state
are now able to acquire banks and bank holding companies located in any other
state. Effective June 1, 1997, the law will allow interstate bank mergers,
subject to earlier "opt-in" or "opt-out" action by individual states. The law
also allows interstate branch acquisitions and new branch activity if permitted
by the host state. Virginia, Maryland, and the District of Columbia have adopted
early "opt-in" legislation that allows interstate bank mergers. These laws also
permit interstate branch acquisitions and new branching by out-of-state banks if
reciprocal treatment is accorded in the state of the acquiring bank or bank
holding company. The new legislation has not had any significant effect on
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<PAGE>
Common Stock Price
& Book Value*
($ per share)
[Graph]
1992 1993 1994 1995 1996
Book Value $12.48 $13.72 $14.57 $16.12 $16.20
High 19 7/8 23 1/4 27 7/8 30 1/2 37 3/4
Low 8 5/8 17 1/2 18 18 1/2 26 1/4
*Price range for the year and book value at year end
Net Interest
Margin*
(percent)
[Graph]
1992 1993 1994 1995 1996
4.44 4.47 4.47 4.44 4.44
Sources of Funds-
Averages
($ in millions)
[Graph]
1992 1993 1994 1995 1996
----------------------------------------------
Long-Term Debt $ 308 $ 464 $ 588 $ 696 $ 689
Other Sources - Net 2,150 2,610 2,858 3,004 3,234
Purchased Liabilities 1,374 1,717 1,901 2,400 3,296
Interest-Bearing Core Deposits 11,454 11,362 12,333 12,503 12,500
acquisition or branching activity in the region in which Crestar operates.
However, management expects the level of competition to remain high, and
potentially increase in the future, in the Corporation's marketing area.
Moreover, Crestar increasingly competes with other financial services providers,
including consumer finance companies, savings and loan associations, brokerage
firms, insurance companies, credit card issuers, credit unions and leasing
companies.
Common Stock And Dividends
On December 31, 1996, Crestar's common stock price was $37 1/4 ($74 3/8 on a
pre-split basis), an increase of 26% from the December 31, 1995 split-adjusted
closing price of $29 5/8. Significant increases were noted in many financial
institution stocks during 1996, and the S&P 500 posted an increase of 20%.
Book value per common share was $16.20 at December 31, 1996, compared to a
December 31, 1995 book value per share of $16.12. The ratio of year-end market
value to book value was 2.3x at December 31, 1996. Total market capitalization
at December 31, 1996, based on common stock outstanding, was $4.1 billion. On
the basis of 1996 earnings per common share of $1.94 and the year-end market
price of $37 1/4, the December 31, 1996 price/earnings ratio was 19.2x.
Excluding the impact of one-time merger costs related to the Citizens
acquisition, and non-recurring third quarter 1996 items (SAIF deposit assessment
and thrift bad debt recapture legislation) the December 31, 1996 price/earnings
ratio was 16.0x.
In December 1996, simultaneous with the announcement of the two-for-one
common stock split, Crestar's Board of Directors announced a 3.8% increase in
the common stock dividend, effective with the February 1997 dividend payment
date. The new quarterly dividend rate of $0.27 per share is payable February 21,
1997 to shareholders of record on February 3, 1997. The December 1996 dividend
declaration meant that the Corporation paid four quarterly dividends during
1996, but declared five cash dividends. It is expected that no common stock
dividend will be declared in the first quarter of 1997 (the Corporation expects
to pay four quarterly dividends in 1997, of which three will be declared in 1997
and one will have been declared in December 1996). Cash dividends on Crestar's
common stock are customarily paid on the 21st day of February, May, August and
November.
Dividends declared in 1996 were $1.28 per common share, compared with
dividends declared of $0.88 per share in 1995. Dividends paid during 1996
totaled $1.01 per common share, compared to $0.88 per share in 1995,
representing an increase of 15%. Reflecting improved operating results, the
common dividend was increased during the second quarter of 1996, from $0.225 to
$0.26 per share. Crestar's current quarterly dividend of $0.27 represents an
annualized dividend of $1.08 per share, equating to a yield of 2.9% based on the
split-adjusted year-end
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<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
market price. The Corporation's objective is to pay dividends of approximately
30% to 40% of earnings to common shareholders, with a current bias toward the
higher end of this range, given our strong capital position.
Capital Resources
And Adequacy
Crestar ended 1996 with strong capital ratios. Average shareholders' equity was
$1.8 billion during 1996, representing a 4% increase over 1995 levels. Equity
growth in 1996 is primarily attributable to the earnings of the Corporation.
This factor was partially offset by Crestar's cash dividends declared, the
impact of net unrealized losses on securities available for sale, and by the
purchase of common stock during the year. During 1996, Crestar purchased and
retired over 3.4 million shares of common stock at an average price of $29.03
per share. Of this amount, 2.4 million was purchased primarily to meet the needs
of the dividend reinvestment plan, employee stock options and thrift and profit
sharing plan. The remaining 984,000 shares were repurchased as part of a Board
approved common stock repurchase plan, authorized in July 1996. This plan was
rescinded by the Board in September 1996, at the time of the announcement of the
pending merger of Crestar and Citizens. The Corporation purchased and retired
approximately 3.5 million shares of common stock at an average price of $23.27
per share during 1995. The Consolidated Statements of Changes in Shareholders'
Equity provide details of these and other equity transactions.
Crestar's equity to assets ratio at December 31, 1996 was 7.8%, compared to a
ratio of 8.0% at December 31, 1995. The average equity to assets ratio was 8.2%
for 1996, compared to 8.4% for 1995. Other capital ratios for 1996 and 1995 are
shown in Table 4. A key measure of equity's ability to absorb losses is the
ratio of average equity to average loans. This measure continued to reflect
Crestar's capital strength, increasing from 12.55% for 1995 to 13.04% for 1996.
Despite several non-recurring costs incurred in 1996, in addition to the
declaration of five cash dividends, the equity formation rate (calculated as net
income less dividends declared divided by average total equity) was 4.80% for
1996; the comparable rate for 1995 was 7.51%.
Risk-based capital ratios are another measure of capital adequacy. At
December 31, 1996, Crestar's consolidated risk-adjusted capital ratios were
10.5% for Tier 1 and 13.4% for total capital, well above the required minimums
of 4.0% and 8.0%, respectively.
Table 4 Capital Adequacy
<TABLE>
<CAPTION>
Dollars in thousands
Risk-Adjusted Capital at December 31 1996 1995
<S> <C>
Tier 1 Capital:
Shareholders' equity $ 1,779,510 $ 1,785,588
Minority interest - trust preferred stock 200,000 -
Goodwill and other adjustments (152,632) (183,818)
- ------------------------------------------------------------------------------------------------------------
Total Tier 1 capital 1,826,878 1,601,770
- ------------------------------------------------------------------------------------------------------------
Tier 2 Capital:
Allowable long-term debt 284,690 294,634
Allowable allowance for loan losses net of certain adjustments 214,642 211,881
- ------------------------------------------------------------------------------------------------------------
Total Tier 2 capital 499,332 506,515
- ------------------------------------------------------------------------------------------------------------
Total risk-adjusted capital 2,326,210 2,108,285
- ------------------------------------------------------------------------------------------------------------
Risk-adjusted assets, net of allowance 17,361,823 17,202,102
Fourth quarter average assets, net of adjustments 21,798,477 21,163,175
Risk-adjusted capital ratios:
Tier 1 10.5% 9.3%
Total 13.4 12.3
Tier 1 leverage ratio 8.4 7.6
- ------------------------------------------------------------------------------------------------------------
Other Capital Ratios
Average equity to:
Average total assets 8.23 8.40
Average total loans 13.04 12.55
Equity leverage 12.15x 11.90x
Equity formation rate 4.80% 7.51%
Period-end equity to assets 7.78 8.00
============================================================================================================
</TABLE>
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<PAGE>
These rations are calculated using regulatory capital (either Tier 1 or total
capital) as the numerator and both on- and off-balance sheet risk weighted
assets as the denominator. Tier 1 capital consists primarily of common equity
less goodwill and certain other intangible assets. Total capital adds certain
qualifying debt instruments and a portion of the allownace for loan losses to
Tier 1 capital. One is four risk weights, primarily based on credit risk, is
applied to coth on- and off-balance sheet assets to determine the asset
denominatro. Under FDIC rules, each of Crestar's three subsidiary banks was
considered "well-capitalized," the highest category of capitalization defined by
the regulators allowing for the lowest level of FDIC insurance premium payments,
as of Decenmber 31, 1996. Note 14 to the consolidated financial statements
includes data on regulatory banks as of December 31, 1996.
Additional regulatory capital measures include the Tier 1 leverage ratio and
the tangible leverage ratio. The Tier 1 leverage ratio is defined as Tier 1
capital divided by average total assets less goodwill and certain other
intangibles and has a regulatory minimum of 3.0%, with most institutions
expected to maintain a ratio of at least 4.0% to 5.0%, depending primarily upon
risk profiles. At December 31, 1996, Crestar's Tier 1 leverage ratio was 8.4%.
The tangible leverage ratio is calculated by excluding intangibles from both
assets and capital, and is utilized by the Federal Reserve Board in evaluating
proposals for expansion or acquisitions. At December 31, 1996, Crestar's
tangible leverage ratio was 7.1%, well within accepted Federal Reserve Board
ranges.
A double leverage ratio of over 100% measures the extent to which the equity
capital of subsidiaries is supported by Parent Company debt rather than equity.
Calculated as the investment in its subsidiaries divided by its own equity
accounts, Crestar Financial Corporation's double leverage was 94.7% at December
31, 1996, compared to 101.3% at December 31, 1995. Financial statement note 21
contains Parent Company financial statements.
Crestar has filed shelf registration statements with the Securities and
Exchange Commission pertaining to the possible future issuance of securities.
Under the currently effective registration statements, Crestar may issue in the
future approximately $300 million in subordinated debt securities, preferred
stock or common stock, or any combination thereof.
Net Interest Income
And Net Interest Margin
The fundamental source of Crestar's earnings, net interest income, is defined as
the difference between income on earning assets and the cost of funds supporting
those assets. Significant categories of earning assets are loans and securities
while deposits and short-term borrowings represent the major portion of
interest-bearing liabilities. The level of net interest income is impacted
primarily by variations in the volume and mix of these assets and liabilities,
as well as changes in the levels of interest rates.
Net interest income in Table 5 is presented on a tax-equivalent basis to
enhance the comparability of assets with different tax attributes. This
comparability is achieved through increasing interest income on tax-exempt
assets by an amount equal to the Federal income taxes which would have been paid
had the income been fully taxable. This tax-equivalent adjustment is based on
the applicable statutory federal corporate income tax rate and resulted in an
increase to pre-tax income from earning assets in 1996, 1995 and 1994 of $9.9
million, $11.3 million and $12.2 million, respectively. On a tax-equivalent
basis, net interest income increased $50.1 million or 6% in 1996 following a
$36.0 million or 5% rise in 1995. These increases reflect an increase in average
earning assets of 6% in 1996 and 5% in 1995.
The net interest margin is calculated as tax-equivalent net interest income
divided by average earning assets and represents the Corporation's net yield on
its earning assets. In 1996, the net interest margin of 4.44% equaled the margin
achieved during 1995, based on restated results for the pooling-of-interests
merger with Citizens. Significant items affecting net interest margin from 1995
to 1996 are summarized in Table 6. Positive influences on the 1996 margin
include favorable changes in rates paid on funding sources, and changes in the
impact from off-balance sheet hedging transactions. These factors were offset by
the impact of unfavorable changes in the composition of earning assets and
funding sources.
Changes in earning asset mix decreased the 1996 net interest margin by
approximately 8 basis points. Loans as a percentage of total earning assets
decreased from an average of 74% in 1995 to 69% in 1996. Average loan balances
were relatively stable, while overall average total earning assets increased 6%
from 1995 to 1996. Average balances of real estate-
-19-
<PAGE>
Table 5 Average Balances, Net Interest Income And Rate/Volume Analysis1
Dollars in millions
<TABLE>
<CAPTION>
Average Balance Yield/Rate
1996 1995 1994 1996 1995 1994
<S> <C>
$ $ $ % % %
3,717 3,616 3,511 8.12 8.46 7.82 Commercial
1,259 1,260 1,106 8.76 8.63 8.20 Real estate - income property
354 401 406 9.49 10.02 8.73 Real estate - construction
3,698 3,244 2,763 8.38 8.49 7.96 Installment
1,529 1,582 1,155 12.49 11.31 11.95 Bank card
3,072 3,573 2,871 7.77 7.84 7.47 Real estate - mortgage
- ----------------------------------------------------------------------------------------------------------
13,629 13,676 11,812 8.70 8.70 8.24 Total loans (2)
978 2,081 2,250 5.92 5.97 5.76 Taxable securities held to maturity
82 93 107 8.50 8.79 10.26 Tax-exempt securities held to maturity
- ----------------------------------------------------------------------------------------------------------
1,060 2,174 2,357 6.12 6.09 5.96 Total securities held to maturity
3,862 2,043 2,449 6.28 6.53 5.81 Securities available for sale
332 337 650 5.39 5.99 4.37 Money market investments
836 374 408 7.54 7.52 7.08 Mortgage loans held for sale
- ----------------------------------------------------------------------------------------------------------
19,719 18,604 17,676 7.98 8.08 7.43 Total earning assets
==========================================================================================================
5,814 5,691 5,720 2.94 3.17 2.67 Interest-bearing demand deposits
1,690 1,864 2,102 2.59 2.76 2.69 Regular savings deposits
4,997 4,949 4,511 5.20 5.20 4.28 Domestic time deposits
- ----------------------------------------------------------------------------------------------------------
12,501 12,504 12,333 3.80 3.91 3.26 Total interest-bearing core deposits
510 73 59 5.45 5.39 4.43 Certificates of deposit $100,000 and over
2,785 2,327 1,842 5.20 5.75 4.30 Short-term borrowings
- ----------------------------------------------------------------------------------------------------------
3,295 2,400 1,901 5.24 5.73 4.30 Purchased liabilities
688 696 588 7.19 7.19 6.59 Long-term debt
- ----------------------------------------------------------------------------------------------------------
16,484 15,600 14,822 4.23 4.34 3.53 Total interest-bearing liabilities
3,235 3,004 2,853 Other sources - net
- ----------------------------------------------------------------------------------------------------------
19,719 18,604 17,675 3.54 3.64 2.96 Total sources of funds
- ----------------------------------------------------------------------------------------------------------
4.44 4.44 4.47 Net Interest Margin/Income
==========================================================================================================
</TABLE>
(1) Income and yields are computed on a tax-equivalent basis using the statutory
federal income tax rate, exclusive of the alternative minimum tax and
nondeductible interest expense, and the tax-equivalent adjustment to
interest income was $9.9 million, $11.3 million and $12.2 million in 1996,
1995 and 1992, respectively.
(2) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis.
mortgage loans decreased by 14%, or $500 million, reflecting the sale of
selected mortgage loans during 1996. The reduction in consumer real
estate-mortgage loans reflect efforts to re-balance the Corporation's loan
portfolio following the 1995 acquisitions of three savings and loan
institutions. Bank card loan average balances edged downward from $1.6 billion
to $1.5 billion, as marketing efforts directed to new accounts were curtailed
from previous levels, in light of higher than desired delinquency statistics and
pending a reassessment of the Corporation's bank card strategy. Also, as lower
promotional interest rates on selected bank card loans expired, some customers
elected to pay-off or pay-down outstanding balances. Increased average balances
were experienced in the Corporation's instalment and commercial loan portfolios,
with average consumer instalment loans increasing 14% during 1996. Average
balances of mortgage loans held for sale, reflecting greater underwriting
volumes and longer holding periods, increased by $461 million from prior year
levels, and represented 4% of total average earning assets in 1996. Combined
security holdings, composed of the securities available for sale and securities
held to maturity portfolios, averaged $4.9 billion during 1996 versus $4.2
billion in 1995, and represented 25% of the Corporation's average earning assets
during 1996.
The composition of Crestar's sources of funds shifted slightly to higher cost
sources during the year, negatively impacting the 1996 net interest margin by 5
basis points. Average interest-bearing core deposits totaled $12.5 billion for
both 1996 and 1995. With a 6% increase in average earning assets during this
time period, these deposits as a percent of average earning
-20-
<PAGE>
<TABLE>
<CAPTION>
In thousands
1996 vs. 1995
----------------------------------
Income/Expense (3)
------------------------------ Increase Change due to (4)
1996 1995 1994 (Decrease) Rate (5) Volume
------- ------- ------- ---------- -------- ---------
<S> <C>
$ $ $ $ $ $
Commercial 301,812 305,853 274,451 (4,041) (12,590) 8,549
Real estate - income property 110,281 108,807 90,667 1,474 1,615 (141)
Real estate - construction 33,563 40,139 35,444 (6,576) (1,893) (4,683)
Instalment 309,833 275,500 219,947 34,333 (4,143) 38,476
Bank card 190,954 178,840 137,989 12,114 18,036 (5,922)
Real estate - mortgage 238,688 280,036 214,410 (41,348) (2,207) (39,141)
- -------------------------------------------------------------------------------------------------------------------
Total loans (2) 1,185,131 1,189,175 972,908 (4,044) (90) (3,954)
Taxable securities held to maturity 57,841 124,191 129,521 (66,350) (508) (65,842)
Tax-exempt securities held to maturity 6,953 8,161 11,012 (1,208) (244) (964)
- -------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 64,794 132,352 140,533 (67,558) 282 (67,840)
Securities available for sale 242,486 133,290 142,357 109,196 (9,102) 118,298
Money market investments 17,901 20,204 28,383 (2,303) (2,002) (301)
Mortgage loans held for sale 63,012 28,145 28,854 34,867 66 34,801
- -------------------------------------------------------------------------------------------------------------------
Total earning assets 1,573,324 1,503,166 1,313,035 70,158 (19,836) 89,994
===================================================================================================================
Interest-bearing demand deposits 171,109 180,600 152,539 (9,490) (14,414) 4,924
Regular savings deposits 43,850 51,368 56,602 (7,518) (2,731) (4,787)
Domestic time deposits 259,971 257,418 193,254 2,553 185 2,368
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing core deposits 474,930 489,386 402,395 (14,455) (14,313) (142)
Certificates of deposit $100,000 and over 27,843 3,915 2,600 23,927 316 23,611
Short-term borrowings 144,797 133,709 79,192 11,088 (15,182) 26,270
- -------------------------------------------------------------------------------------------------------------------
Purchased liabilities 172,640 137,624 81,792 35,015 (16,262) 51,277
Long-term debt 49,499 50,038 38,756 (539) (65) (474)
- -------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 697,069 677,048 522,943 20,021 (18,513) 38,534
Other sources - net
- -------------------------------------------------------------------------------------------------------------------
Total sources of funds 697,069 677,048 522,943 20,021 (20,701) 40,722
- -------------------------------------------------------------------------------------------------------------------
Net Interest Margin/Income 876,255 826,118 790,092 50,137 865 49,272
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
In thousands
1995 vs. 1994
-------------------------------
Increase Change due to (4)
(Decrease) Rate (5) Volume
---------- ------- --------
<S> <C>
$ $ $
Commercial 31,402 23,229 8,173
Real estate - income property 18,140 5,438 12,702
Real estate - construction 4,695 5,143 (448)
Instalment 55,553 17,296 38,257
Bank card 40,851 (10,223) 51,074
Real estate - mortgage 65,626 13,229 52,397
- ----------------------------------------------------------------------------
Total loans (2) 216,267 62,738 153,529
Taxable securities held to maturity (5,330) 4,407 (9,737)
Tax-exempt securities held to maturity (2,851) (1,358) (1,493)
- ----------------------------------------------------------------------------
Total securities held to maturity (8,181) 2,770 (10,951)
Securities available for sale (9,067) 14,545 (23,612)
Money market investments (8,179) 5,474 (13,653)
Mortgage loans held for sale (709) 1,648 (2,357)
- ----------------------------------------------------------------------------
Total earning assets 190,131 121,180 68,951
============================================================================
Interest-bearing demand deposits 28,061 28,849 (788)
Regular savings deposits (5,234) 1,182 (6,416)
Domestic time deposits 64,164 45,370 18,794
- ----------------------------------------------------------------------------
Total interest-bearing core deposits 86,991 81,416 5,575
Certificates of deposit $100,000 and over 1,315 696 619
Short-term borrowings 54,517 33,651 20,866
- ----------------------------------------------------------------------------
Purchased liabilities 55,832 34,345 21,487
Long-term debt 11,282 4,215 7,067
- ----------------------------------------------------------------------------
Total interest-bearing liabilities 154,105 126,675 27,430
Other sources - net
- ----------------------------------------------------------------------------
Total sources of funds 154,105 126,644 27,461
- ----------------------------------------------------------------------------
Net Interest Margin/Income 36,026 (5,464) 41,490
============================================================================
</TABLE>
(3) Includes tax-equivalent net loan fees of $978,000, $1.3 million and $1.6
million for 1996, 1995 and 1994, respectively.
(4) Variances are computed on a line-by-line basis and are non-additive.
(5) Variances caused by the change in rate times the change in balances are
allocated to rate.
assets fell from 67% in 1995 to 63% in 1996. Growth in earning assets during
1996 was partially funded by higher balances of purchased liabilities, which are
composed of short-term borrowings and certificates of deposit $100,000 and over.
Average balances of purchased liabilities totaled $3.3 billion during 1996,
versus $2.4 billion in 1995, and represented 17% of average earning assets
during 1996. Long-term debt and other sources of funds represented 4% and 16%,
respectively, of total average earning assets during 1996. Demand deposits, a
component of other sources-net in the Corporation's funding, averaged $3.0
billion in 1996, an increase of 6% from the average balances of 1995.
A positive impact on the net interest margin for 1996 stemmed from the
combined changes in interest rates received on earning assets and paid on
funding sources. Such changes in interest rates contributed a positive impact of
7 basis points in comparison to 1995 average interest rates, as lower rates paid
on sources of funds offset lower yields on earning assets. Yields on average
earning assets fell 10 basis points from the prior year, totaling 7.98% in 1996
versus 8.08% in 1995. The average yield on Crestar's loan portfolio remained
stable, equaling 8.70% in both 1996 and 1995. Higher yields on the bank card
loan portfolio (which repriced upwards from promotional rates) were offset by
declines in most other loan categories. Real estate-mortgage, instalment and
commercial loans, which combined represented over 75% of Crestar's average loan
portfolio during 1996, had average yield decreases of 7, 11 and 34 basis points,
respectively. During the same time period, the average yield on bank card loans
increased from
-21-
<PAGE>
Management's Discussion
Crestar Financial Corporation and Subsidiaries
Table 6 Analysis Of Net Interest Margin
<TABLE>
<CAPTION>
Percent of Average
Margin Change Earning Assets
------------- ------------------
1996 1995
<S> <C>
1995 Net Interest Margin 4.44%
- -----------------------------------------------------------------------------------
Earning Asset Mix: (8) bp
Loans - net of unearned income 69.1% 73.5%
Securities held to maturity and securities available for sale 25.0 22.7
Money market investments 1.7 1.8
Mortgage loans held for sale 4.2 2.0
Funding Mix: (5)
Interest-bearing core deposits 63.4 67.2
Purchased liabilities 16.7 12.9
Long-term debt 3.5 3.7
Other sources - net 16.4 16.2
Decreased nonperforming assets 1
Off-balance sheet hedges 5
Interest rate changes 7
- -----------------------------------------------------------------------------------
Net Interest Margin Net Change - bp
- -----------------------------------------------------------------------------------
1996 Net Interest Margin 4.44%
===================================================================================
</TABLE>
11.31% in 1995 to 12.49% in 1996. The lower yield in 1995 primarily reflects the
impact of promotional interest rates on specific bank card programs. While the
Corporation's securities held to maturity investment portfolio exhibited a 3
basis point increase in average yield for 1996, this was offset by the decline
in yield on the much larger securities available for sale portfolio. Securities
available for sale yielded a return of 6.28% in 1996, compared to a return of
6.53% in 1995. While the yield on average balances of mortgage loans held for
sale was up 2 basis points in 1996, in comparison to the prior year, yields on
money market investments fell from 5.99% to 5.39% during the same time period.
Lower rates paid on funding sources were a benefit to the Corporation's net
interest margin during this period of falling yields on earning assets. During
1996, average rates on interest-bearing demand deposits declined 23 basis
points, with rates on regular savings deposits decreasing 17 basis points. The
average rate paid on all interest-bearing deposits during 1996 was 3.86%, in
comparison to 3.92% in 1995. Rates paid on short-term borrowings fell 55 basis
points in 1996, averaging 5.20% in 1996 compared to 5.75% in 1995. Average rates
paid on long-term debt remained the same during this time period.
Off-balance sheet hedging activities (interest rate swaps, caps and floors)
had a positive impact on Crestar's 1996 margin when compared to 1995. Total
off-balance sheet interest rate hedges positively impacted net interest income
by $1.1 million in 1996, which was composed of a $1.2 million increase in
interest income and a $0.1 million increase in interest expense, based on the
underlying asset or liability being hedged. In 1995, the comparable impact of
hedging activity was a decrease of $7.0 million to net interest income. This
difference equated to a 5 basis point positive impact on the 1996 net interest
margin, as compared to 1995 results.
Lower levels of nonperforming assets in 1996 had a favorable impact on the
net interest margin of approximately one basis point. Additional income of
approximately $12.3 million for 1996 and $16.2 million for 1995 would have been
realized had all nonperforming assets performed as originally expected.
Nonperforming assets exclude loans that are both past due 90 days or more and
not deemed nonaccrual, due to an assessment of collectibility (see
"Nonperforming Assets and Other Risk Elements").
The extent to which Crestar will be able to maintain its current net interest
margin is significantly influenced by the economic environment in its markets
and the economic policy of the Federal Reserve Board, in addition to competitive
market conditions for both loans and deposits. Competitive pressures, especially
with regard to deposit rates, may lead to decreases in net interest margins in
future periods.
From 1994 to 1995, the net interest margin fell slightly, moving from 4.47%
in 1994 to 4.44% in 1995. This reduction reflected changes in Crestar's
-22-
<PAGE>
Uses of Funds-
Averages
($ in millions)
[Graph]
1992 1993 1994 1995 1996
--------------------------------------------
Mortgage Loans Held for Sale $ 368 $ 430 $ 408 $ 374 $ 836
Money Market Investments 1,228 878 650 337 332
Securities Held to Maturity &
Securities Available for Sale 3,739 4,895 4,805 4,216 4,922
Loans 9,951 9,950 11,812 13,676 13,629
Average Core
Deposit Mix
(percent)
[Graph]
1992 1993 1994 1995 1996
-------------------------------------
Demand Deposits 16 18 18 19 20
Interest-Bearing
Demand Deposits 37 38 38 37 37
Regular Savings Deposits 10 13 14 12 11
Other Domestic Time Deposits 37 31 30 32 32
-------------------------------------
100 100 100 100 100
funding sources towards higher-rate deposit categories. In addition, cash flows
from off-balance sheet hedges negatively impacted net interest income. These
factors were partially offset by favorable changes in the earning asset mix.
Average loans as a percentage of earning assets increased from 67% in 1994 to
74% in 1995. Table 5 presents a comparison of the earning assets and sources of
funds for these two years. Purchase acquisitions completed during 1995 added
over $13 million to Crestar's 1995 net interest income, in comparison to 1994,
but did not have a significant impact on the Corporation's net interest margin
for 1995.
Noninterest Income
Noninterest income increased 4% in 1996, following a 12% increase in 1995.
Excluding securities gains and losses, noninterest income in 1996 increased $7.9
million or 2% over 1995, compared with a 1995 increase of $25.5 million or 9%
over 1994.
The comparability of results for 1996 and 1995 are impacted by nonrecurring
branch and equipment charges recorded as reductions of noninterest income, in
addition to other items. In 1996, as part of the costs incurred in the merger
with Citizens, Crestar recorded an $18.2 million charge for branch closing
costs. These costs are classified as a loss on sale or disposal of branches,
which reduces noninterest income. Of the 103 full service branch locations
acquired in the year-end 1996 merger with Citizens, 26 are expected to be closed
or consolidated with existing Crestar branches during 1997. Noninterest income
for 1996 also includes non-merger related net losses on the sale and disposal of
branches, totaling $4.1 million, representing the cost of closing selected
banking locations as part of Crestar's strategy of refining its service delivery
systems. In 1995, as part of the merger with Loyola, $5.8 million in branch
closing costs were recorded. Offsetting this charge were net gains of $3.5
million on branch closings and sales (including sale of related branch deposit
accounts) from 1995 activity. These results are included in the totals for gain
(loss) on sale and disposal of branches-net in Table 7, for the applicable year.
During 1995, Crestar recorded a gain of $4.3 million from the annuitization of
certain retiree pension obligations; there were no such gains recorded in 1996.
Excluding the above items, and gains or losses from sale of securities,
noninterest income totaled $355.3 million and $323.0 million for 1996 and 1995,
respectively, representing an increase of 10%.
Most categories of noninterest income exhibited growth in 1996, with strong
increases recorded in trust and investment advisory fees and mortgage
origination income. Trust and investment advisory income increased $6.1 million
or 10% from 1995. This increase reflects new account growth coupled with the
effects of a rising stock market. At year-end 1996, trust assets held by
Crestar's Trust and Investment Management Group approximated $34 billion, and
assets under management totaled $13 billion. Reflecting greater origination
volume and favorable market conditions for the sale of loans to investors,
mortgage origination income totaled $12.2 million in 1996, compared to $2.8
million in 1995. Mortgage origination income is reported net of direct costs
associated with the mortgage underwriting process. Mortgage servicing income
exhibited an increase of 6%, rising to $17.1 million in 1996 compared to $16.1
million in 1995. Gains on sales of mortgage servicing rights totaled $8.3
million in 1996, versus gains of $11.0 million recorded in the previous year.
Crestar's loan servicing portfolio exceeded $11 billion at December 31, 1996,
compared to $10.9 billion at year-end 1995.
-23-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
Table 7 Noninterest Income
<TABLE>
<CAPTION>
In thousands 1996 1995 1994 1993 1992
<S> <C>
Service charges on deposit accounts $114,249 $109,264 $103,692 $100,978 $ 94,014
Trust and investment advisory 65,939 59,841 54,963 56,797 49,782
Bank card-related 55,261 52,845 43,810 31,212 26,227
Mortgage servicing - net 17,085 16,087 17,082 7,691 12,542
Mortgage origination - net 12,212 2,753 389 9,580 8,025
Automated teller machine fees 18,684 17,856 13,828 11,959 9,715
Trading account activities 3,833 3,515 1,874 5,227 7,753
Commissions on letters of credit 4,980 4,805 5,575 7,712 5,460
Safe deposit box rentals 5,312 5,251 5,049 3,766 4,666
Annuities 9,637 9,394 8,751 6,554 4,950
Mutual funds 5,877 3,170 2,673 3,379 1,104
Insurance 3,958 3,727 3,062 2,997 2,976
Gain on sale of mortgage
servicing rights 8,268 11,000 18,732 3,600 1,761
Gain (loss) on sale and disposal
of branches - net (22,380) (2,317) - - -
Miscellaneous 30,050 27,854 20,019 20,028 19,853
Securities gains (losses) 3,393 (2,067) (10,766) 2,094 6,523
- -------------------------------------------------------------------------------------------------------------
Total noninterest income $336,358 $322,978 $288,733 $273,574 $255,351
=============================================================================================================
</TABLE>
Reflecting increased merchant fee volume, bank card-related fee income
increased by $2.4 million, or 5%, during 1996. Service charges on deposit
accounts increased 5%, or $5.0 million, from 1995 levels, reflecting growth in
deposit accounts and selected fee increases. Other sources of growth in
noninterest income were fees from sales of mutual funds, insurance and
annuities, as Crestar continued to expand its marketing of these financial
products. Automated teller machine (ATM) income continues to be a growing source
of noninterest income, due to increased use and a greater number of ATM machines
in our network. Such income recorded an increase of 5% in 1996, totaling $18.7
million in 1996 compared to $17.9 million in 1995. Crestar's network of ATM
machines totaled 496 at year-end 1996, compared to 469 at year-end 1995.
Noninterest Expense
Noninterest expense increased $62.4 million or 9% in 1996 following an increase
of $20.5 million or 3% in 1995. Excluding the impact of foreclosed properties
expense, noninterest expense increased 7% in 1996 and 4% in 1995. The 1996
increase primarily reflects nonrecurring acquisition-related costs, in addition
to a one-time assessment on SAIF insured deposits during the third quarter of
1996. Noninterest expense in 1995 also includes nonrecurring costs related to
the December 31, 1995 merger with Loyola. Excluding the impact of nonrecurring
merger costs in 1996 and 1995, and the 1996 SAIF assessment, noninterest expense
excluding foreclosed properties expense was $715 million in 1996, compared to
$704 million in 1995, representing an increase of 2%.
With the consummation of the merger with Citizens in the fourth quarter of
1996, Crestar incurred approximately $27.8 million in nonrecurring noninterest
expenses (this balance excludes branch closure and fixed asset disposal costs
recorded as a reduction of noninterest income, and also excludes foreclosed
properties cost and the merger's impact on income tax expense). These
merger-related expenses included severance and other personnel costs of $11.3
million, professional fees of approximately $5.4 million, and outside data
services expense of $4.8 million. Noninterest expenses recorded as part of the
Loyola merger in 1995 totaled $20.8 million, and included $11.3 million in
severance and other personnel expense, professional fees of $3.6 million and
outside data services of $1.2 million.
Foreclosed properties expense increased from a net recovery of $3.6 million
in 1995 to an expense of $6.9 million in 1996. Of the 1996 expense, $4.0 million
was recorded in connection with the year-end 1996 merger with Citizens Bancorp,
reflecting Crestar's accelerated marketing and disposal plans for specific
foreclosed properties. Excluding the additional provision expense recorded in
connection with the Citizens merger, 1996 provision expense for foreclosed
properties was $2.6 million, compared to a favorable $3.9 million adjustment to
the allowance for certain foreclosed properties recorded in 1995. Net
-24-
<PAGE>
Table 8 Noninterest Expense
<TABLE>
<CAPTION>
In thousands 1996 1995 1994 1993 1992
<S> <C>
Salaries $320,890 $311,286 $307,478 $273,376 $253,672
Benefits 76,558 77,256 65,112 51,247 43,866
- -----------------------------------------------------------------------------------------------------------
Total personnel 397,448 388,542 372,590 324,623 297,538
Occupancy - net 64,450 62,851 63,290 56,374 53,852
Equipment 38,479 37,916 35,063 32,999 32,007
Communications 38,572 34,446 30,840 26,519 25,379
Stationery, printing and supplies 12,669 12,709 11,781 10,786 9,892
Professional fees and services 30,692 22,620 17,996 18,413 20,379
Loan expense 12,216 9,281 10,727 9,633 9,140
FDIC premiums - net 41,174 24,812 34,855 31,859 30,406
Advertising and marketing 26,165 20,400 26,171 18,734 12,307
Transportation 7,056 7,281 7,140 6,641 6,471
Outside data services 32,571 29,148 26,291 21,663 17,816
Bank franchise tax 6,140 3,789 3,199 2,810 2,845
Amortization of intangibles 16,673 15,416 7,740 12,337 10,673
Miscellaneous 52,342 55,514 47,219 41,955 45,528
- -----------------------------------------------------------------------------------------------------------
Subtotal 776,647 724,725 694,902 615,346 574,233
Foreclosed properties 6,872 (3,616) 5,725 37,436 67,713
- -----------------------------------------------------------------------------------------------------------
Total noninterest expense $783,519 $721,109 $700,627 $652,782 $641,946
===========================================================================================================
</TABLE>
gains of $3.9 million from the sale of foreclosed properties were recorded in
1995, compared to net gains in 1996 of $0.8 million.
Crestar recorded an expense of $34.1 million in 1996 associated with
congressional legislation regarding the recapitalization of the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation
(FDIC). The legislation, which resulted in an after-tax charge of $21.5 million
or $0.19 per share during the third quarter, addressed the disparity between
deposit insurance premiums for SAIF-insured deposits and deposits insured under
the Bank Insurance Fund. As of December 31, 1996, all of the Corporation's
insured deposits are part of the FDIC's Bank Insurance Fund; future earnings are
expected to be augmented by a reduction in the amount of ongoing FDIC insurance
premiums. The assessment of $34.1 million is reflected in 1996's noninterest
expense as part of FDIC premiums - net.
During the third quarter of 1995, Crestar's deposit insurance assessments on
BIF-insured deposits decreased from 0.23% to 0.04%, on an annualized basis. The
decrease was retroactive to June 1995. The assessments for SAIF-insured deposits
remained unchanged. Due primarily to the change in assessments, FDIC premium
expense declined from 1994 levels, falling from $34.9 million in 1994 to $24.8
million in 1995.
Total capital expenditures for 1996, 1995 and 1994 were approximately $73
million, $58 million and $48 million, respectively. The 1996 figure included
expenditures for branch and office refurbishments, new branch computer
technology, and construction outlays for a new office building located adjacent
to the Crestar Mortgage Corporation (CMC) headquarters in Richmond. Capital
expenditures in 1997 are anticipated to approximate $135 million. Of this
amount, approximately $45 million will be expenditures for the completion of the
five-story office building.
Income Taxes
In 1996, Crestar's income tax expense was $105.0 million, down from $134.6
million in 1995 and $114.3 million in 1994. The effective tax rates for 1996,
1995 and 1994 were 32.5%, 38.4% and 34.7%, respectively. The 1996 decrease in
the effective tax rate was primarily attributable to a nonrecurring $10.6
million reduction of income tax expense in the third quarter of 1996. This
reduction of expense arose from the repeal of the tax law that previously
required, under certain circumstances, thrift institutions to recapture into
taxable income the pre-1988 loan loss allowance. Crestar had recorded the charge
at the time of the merger with Loyola Capital Corporation on December 31, 1995.
The effective tax rates for 1996 and 1995, normalized to exclude the adjustment,
were 35.7% and 35.4%, respectively. Other fluctuations in Crestar's effective
tax rates for 1996 compared to 1995 were caused by changes in the proportions of
tax-exempt interest and dividends, provisions for state income taxes, and
nondeductible expenses in 1996
-25-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
versus 1995. The increase in Crestar's effective tax rate from 1994 to 1995 is
attributable to the same factors.
Deferred tax assets and liabilities are based on the differences between
financial statement and tax bases of assets and liabilities. The tax effects of
these differences are measured using enacted tax rates that will be effective
for the period during which the differences are expected to reverse. A valuation
allowance is provided against deferred tax assets if, and to the extent, it is
more likely than not that the deferred tax assets will not be fully realized. In
management's judgment, no valuation allowance was necessary at December 31, 1996
and 1995. Deferred tax expense is measured by the change in the net deferred tax
assets or liabilities for the period.
Liquidity And Interest Sensitivity
Bank liquidity is a measure of the ability to generate and maintain sufficient
cash flows to fund operations and to meet financial obligations to depositors
and borrowers promptly and in a cost-effective manner. Liquidity is provided
through securities available for sale, money market investments, maturing loans
and investments, and the ability to generate new deposits or borrowings as
needed. 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 this
objective 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 59% of total funding sources at
December 31, 1996 compared with 64% at December 31, 1995. As an additional
indication of adequate liquidity, securities available for sale represented 21%,
and money market investments represented 4%, of Crestar's total earning assets
at December 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 and Interest
Rate Risk committees. The committees establish limits on the earnings at risk
for a current planning period, generally either the current calendar year or the
remainder of the current year plus the next calendar year. The level of exposure
taken is based on an assessment of the market environment, and will vary from
period to period.
The primary tool used to assess interest rate exposure is the quantification
of market value changes for all assets and liabilities given an increase or
decrease in interest rates. This approach provides a view of interest rate risk,
capturing all expected future cash flows. Assets and liabilities with option
characteristics are valued based on numerous interest rate path valuations using
mathematical rate simulation techniques. Crestar has been developing this tool
and is incorporating it as its primary component of interest rate risk
management. However, the Corporation's measurement and interpretation process
for market valuation models continues to be in a developmental stage. Another
tool used is net interest income simulations. The committee establishes limits
on net interest income at risk for a relevant planning period of 9 to 24 months.
A 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.
Based on the most recent simulations as of December 31, 1996, Crestar's
projected net interest income under the consensus interest rate scenario for
1997 would decrease by approximately 6% in a high interest rate scenario, and
would increase by approximately 8% in a low interest rate scenario. These
projections were within Crestar's tolerance for interest
-26-
<PAGE>
Earning Asset Mix
($ in millions)
[GRAPH]
December 31,
1996
------------
Mortgage Loans Held For Sale $ 658.8
Money Market Investments $ 745.7
Securities Held To Maturity &
Securities Available For Sale $ 5,285.9
Loans $14,049.7
---------
Total $20,740.1
Funding Mix
($ in millions)
[GRAPH]
December 31,
1996
------------
Long-Term Debt $ 659.3
Other Sources-Net $ 3,646.5
Purchased Funds $ 4,256.6
Interest-Bearing Core Deposits $12.177.7
---------
Total $20,740.1
rate risk, and indicate a sufficient liquidity position and acceptable operating
environment, under the high, low and consensus interest rate scenarios.
Another interest rate risk tool 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 on Table 9, and reflects the earlier of the maturity or
repricing dates for various assets and liabilities at December 31, 1996. At that
point in time, Crestar had a cumulative net liability sensitive twelve-month gap
with $5.0 billion excess of interest-sensitive sources of funds over uses of
funds. This generally indicates that earnings should improve in a declining
interest rate environment as liabilities reprice more quickly than assets. The
opposite would be true of a positive, or asset-sensitive, gap.
In addition to the traditional gap measurement presentation, Table 9 presents
interest sensitivity on a Beta adjusted basis. These adjustments are based on a
ratio of actual changes in consumer deposit rates to changes in the prime rate
during interest rate cycles for the last several years. Essentially, the beta
factors recognize that certain consumer deposit rates are less
interest-sensitive than market-based rates such as commercial paper. In addition
to a beta adjustment, the table also incorporates an adjustment to reflect the
sensitivity of the Corporation's commercial demand deposit balances to the level
of interest rates. The adjustment, based on historical trends and estimated as a
percentage of commercial interest deposits, reflects a greater sensitivity on
the part of commercial demand deposits to fluctuating interest rates than
experienced with consumer deposits. On a cumulative twelve-month basis, Crestar
had a liability sensitive "adjusted gap" at December 31, 1996, with $1.3 billion
excess of interest-sensitive sources of funds over uses of funds. In comparison,
the level of total earning assets at December 31, 1996 was $20.7 billion. The
static gap and adjusted gap do not include $1.55 billion (notional amount) of
interest rate caps that would potentially offset the effect of rising interest
rates on the securities available for sale portfolio. In addition, the static
gap and adjusted gap do not include $1.0 billion (notional amount) of interest
rate floors to potentially offset the effect of falling interest rates on the
fair value of fixed rate domestic time deposits.
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, or unusual market relationships for financial instruments.
-27-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
Table 9 Interest Sensitivity Analysis
<TABLE>
<CAPTION>
December 31, 1996
In millions Maturity/Rate Sensitivity
-------------------------
0-3 3-6 6-12 one to over
Use of Funds months months months five years five years Total
<S> <C>
Loans:
Commercial $ 2,484.5 $ 395.3 $ 90.3 $ 124.2 $ 908.3 $ 4,002.6
Real estate - income property 434.0 85.4 22.1 55.9 644.7 1,242.1
Real estate - construction 217.9 49.7 1.1 2.3 43.0 314.0
Instalment 1,141.6 132.2 643.9 323.9 1,818.6 4,060.2
Bank card 394.8 168.8 130.8 277.5 451.0 1,422.9
Real estate - mortgage 146.9 276.0 418.7 772.3 1,394.0 3,007.9
Securities held to maturity 52.7 99.0 76.7 77.4 661.7 967.5
Securities available for sale 363.3 388.2 83.8 149.9 3,333.2 4,318.4
Money market investments 740.7 .1 4.9 - - 745.7
Mortgage loans held for sale 658.8 - - - - 658.8
- ------------------------------------------------------------------------------------------------------------------
Total earning assets 6,635.2 1,594.7 1,472.3 1,783.4 9,254.5 20,740.1
Interest sensitivity hedges on assets (350.0) (350.0) - - 700.0 -
- ------------------------------------------------------------------------------------------------------------------
Total uses $ 6,285.2 $ 1,244.7 $ 1,472.3 $ 1,783.4 $9,954.5 $20,740.1
==================================================================================================================
Sources of Funds
Interest-bearing demand deposits $ 5,913.4 $ - $ - $ - $ - $ 5,913.4
Regular savings deposits 1,620.9 - - - - 1,620.9
Domestic time deposits 400.2 776.7 1,100.9 1,174.1 1,191.5 4,643.4
Certificates of deposit
$100,000 and over 42.1 61.0 25.3 11.0 1.1 140.5
Short-term borrowings 3,936.6 4.5 175.0 - - 4,116.1
Long-term debt - 11.6 11.3 30.6 605.8 659.3
- ------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 11,913.2 853.8 1,312.5 1,215.7 1,798.4 17,093.6
Other sources - net - - - - 3,646.5 3,646.5
Interest sensitivity hedges on liabilities - (35.0) - - 35.0 -
- ------------------------------------------------------------------------------------------------------------------
Total sources $11,913.2 $ 818.8 $ 1,312.5 $ 1,215.7 $5,479.9 $20,740.1
==================================================================================================================
Cumulative maturity/rate
sensitivity gap $(5,628.0) $(5,202.1) $(5,042.3) $(4,474.6) $ - $ -
==================================================================================================================
Adjustments
Beta adjustments:
Interest-bearing demand deposits
(beta factor .39) $ 3,596.3
Regular savings (beta factor .13) 1,410.2
Demand deposit sensitivity (1,215.7)
- ------------------------------------------------------------------------------------------------------------------
Cumulative adjusted maturity/rate
sensitivty gap $(1,837.2) $(1,411.3) $(1,251.5) $ (683.8) $ - $ -
==================================================================================================================
</TABLE>
As noted, Crestar entails 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 December 31, 1996 are utilized to
convert certain variable rate assets to fixed rates as part of the Corporation's
interest risk management strategy. Interest rate caps are utilized to minimize
interest rate risk associated with rising rates on both fixed rate securities
and real estate loans, and on floating rate money market deposits. Interest rate
floors are utilized to minimize interest rate risk associated with falling rates
on fixed rate domestic time deposits. Because financial derivatives typically do
not have actual principal dollars transferred between parties, notional
principal amounts are used to express the volume of such transactions. However,
the notional amount of derivative contracts does not represent direct credit
exposure, which the Corpora-
-28-
<PAGE>
Table 10 Off-Balance Sheet Derivatives Activity (1)
<TABLE>
<CAPTION>
In thousands
Interest Rate Conversions Market Value Hedges
------------------------- --------------------- Hedges of
Interest Interest Interest Interest Lending
Rate Rate Rate Rate Commit-
Swaps Caps Caps Floors ments (2) Total
<S> <C>
Balance, January 1, 1996 $1,200,000 $40,000 $ - $ - $ 547,790 $ 1,787,790
Additions 300,000 - 1,750,000 1,000,000 3,535,603 6,585,603
Terminations (500,000) - - - - (500,000)
Maturities (100,000) (5,000) - - (3,376,662) (3,481,662)
- -----------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 900,000 $35,000 $1,750,000 $1,000,000 $ 706,731 $ 4,391,731
===========================================================================================================
</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.
tion believes is a combination of current replacement cost of those instruments
with a positive market value plus an amount for prospective market movement.
Crestar has established policies governing derivative activities, and the
counterparties used by Crestar are considered high quality credit risks. In
addition, Crestar may demand collateral from a counterparty to further minimize
credit risk. There were no past due amounts or reserves for possible derivative
credit losses at December 31, 1996, nor has Crestar ever experienced any
charge-offs related to the credit risk of derivative transactions. Interest rate
simulation and duration of equity assessment techniques are used by Crestar to
monitor market risk in the Corporation's derivative portfolio, just as it
measures and assesses our balance sheet risk.
The notional amount of Crestar's interest rate swaps, caps and floors
(excluding customer positions where Crestar simply acts as an intermediary) was
$3.7 billion at December 31, 1996. Forward contracts with a notional balance of
$707 million, utilized to hedge lending commitments of Crestar's mortgage
banking subsidiary, were also outstanding at December 31, 1996, bringing the
total notional value of derivative financial instruments related to interest
rate risk management activities to $4.4 billion at year-end 1996. Maturities on
such instruments ranged from less than one month to 4.7 years. Tables 10, 11 and
12 present information regarding the fair values, maturity, average rates, and
activity for 1996 for these off-balance sheet derivative instruments. The net
unrealized losses on these instruments totaled $11.4 million as of December 31,
1996, which was composed of gross unrealized gains of $2.6 million and gross
unrealized losses of $14.0 million. At December 31, 1995, derivatives used as
hedges of interest rate risk had gross unrealized gains of $13.6 million and
gross unrealized losses of $6.1 million, and at December 31, 1994, such
derivatives had gross unrealized gains of $0.4 million and gross unrealized
losses of $95.6 million. Financial statement note 21 also contains additional
information pertaining to these types of agreements.
During the course of 1996 and 1995, Crestar terminated prior to maturity
certain interest swaps and caps being utilized as hedges against interest rate
risk. Losses upon termination were not material, and the Corporation had no
unamortized deferred gain or loss balances from terminated instruments at
December 31, 1996 and December 31, 1995. Terminations of derivative instruments
prior to maturity may occur in the future in response to modifications of
interest rate risk management strategies.
Estimated fair values of financial instruments held at December 31, 1996 and
1995 are presented in financial statement note 22. Management is concerned about
the comparability of fair value estimates between financial institutions due to
the wide range of valuation techniques utilized and the numerous estimates and
assumptions that must be made, given the absence of active secondary markets for
many financial instruments. This is particularly true for estimated fair values
computed for loan portfolios and deposit liabilities. Lack of uniform valuation
methodologies introduces a great degree of subjectivity to such fair value
estimates.
A brief description of the methodologies used in computing fair value
estimates, and the resulting estimated fair values, are provided in financial
statement note 22. Crestar's loan portfolio, which constitutes the Corporation's
largest financial instrument asset category, had an estimated fair value of
approximately 1% in excess of recorded book value at December 31, 1996. Credit
quality trends and the effects of the year-end interest rate environment were
major factors in the determination of the estimated fair value for net loans.
Deposit liabilities payable on short notice or demand, which constituted 69% of
Crestar's total deposits at December 31, 1996, were assigned an estimated fair
value equal to the balance payable on
-29-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiairies
Table 11 Off-Balance Sheet Derivative Financial Instruments (1)
<TABLE>
<CAPTION>
December 31, 1996 Average
Weighted Fixed Estimated
Dollars in thousands Notional Average Receive Fair
Balance Maturity Rate Value Comments
<S> <C>
Interest Rate Conversions
Generic interest rate swaps $ 900,000 2.8 yrs. 5.86% Notional amounts of $650
Carrying amount(2) $ 258 million and $250 million
Commercial loan program convert floating rate
Unrealized gains 154 commercial and instalment
Unrealized losses (5,413) loans, respectively, to fixed
Instalment loan program rate. Floating rates paid
Unrealized losses (1,433) tied to LIBOR.
---------
Estimated fair value (6,434)
---------
Interest rate caps 35,000 0.8 yrs. 5.93%(3) Notional amount of $35 million
Carrying amount(2) 3 hedges the interest rate risk
Money market deposit associated with rising interest
program rates on floating rate money
Unrealized gains 73 market deposits (strike rate tied
--------- to LIBOR).
Estimated fair value 76
---------
Market Value Hedges
Interest rate caps 1,750,000 3.2 yrs. 7.57%(3) Notional amount of $1.55 billion
Carrying amount(2) 18,240 hedges the market value of fixed
Securities available for sale rate securities available for sale
program(5) (strike rate for $1 billion tied to
Unrealized losses (5,445) 5 year CMT; strike rate for $550
Real estate income property million tied to LIBOR). Notional
loan program amount of $200 million hedges
Unrealized losses (673) the market value of fixed rate
---------
real estate income property loans
(strike rate tied to LIBOR).
Estimated fair value 12,122
---------
Interest rate floors 1,000,000 3.7 yrs. 5.63%(4) Notional amount of $1.0 billion
Carrying amount(2) 5,539 hedges the fair value of fixed
Domestic time deposit program rate domestic time deposits
Unrealized gains 900 (strike rate tied to 5 year
Unrealized losses (306) CMT)
---------
Estimated fair value 6,133
---------
Hedges of Lending Commitments
Forward contracts 706,731 .1 yrs. n/a Hedges of residential
Unrealized gains 1,494 mortgage lending
Unrealized losses (761) commitments.
---------
Estimated fair value 733
Total hedges against ---------- ---------
interest rate risk $4,391,731 $12,630
========================================================================================================
</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 and floors.
(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) Represents average strike rate. For interest rate floors purchased, Crestar
will receive interest if a specified market index rate falls below a fixed
strike rate during the term of the contract. Any interest received is based
on the difference between a lower index interest rate and the contractual
floor rate, applied to the underlying notional balance. No interest payments
are received if the index rate remains above the floor rate.
(5) 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
5 year CMT - Yield on 5 year constant maturity U.S. Treasury securities
-30-
<PAGE>
Table 12 Off-Balance Sheet Derivatives--Expected Maturities (1)
<TABLE>
<CAPTION>
December 31, 1996
Dollars in thousands Within One to Three to
One Year Three Years Five Years Total
<S> <C>
Interest Rate Conversions
Generic interest rate swaps
Notional amount $ -- $ 550,000 $ 350,000 $ 900,000
Average fixed receive rate -- 5.91% 5.77% 5.86%
Carrying amount $ -- $ 118 $ 140 $ 258
Net unrealized loss -- (1,588) (5,104) (6,692)
Interest rate caps
Notional amount $ 25,000 $ 10,000 $ -- $ 35,000
Average strike rate 5.80% 6.25% -- 5.93%
Carrying amount $ 3 $ -- $ -- $ 3
Unrealized gains 29 44 -- 73
Market Value Hedges
Interest rate caps
Notional amount $ -- $ 200,000 $ 1,550,000 $ 1,750,000
Average strike rate -- 7.75% 7.55% 7.57%
Carrying amount $ -- $ 1,232 $ 17,008 $ 18,240
Unrealized losses -- (673) (5,445) (6,118)
Interest rate floors
Notional amount $ -- $ 300,000 $ 700,000 $ 1,000,000
Average strike rate -- 5.63% 5.63% 5.63%
Carrying amount $ -- $ 1,009 $ 4,530 $ 5,539
Net unrealized gain -- 4 590 594
Hedges of Lending Commitments
Forward contracts (2)
Notional amount $706,731 $ -- $ -- $ 706,731
Net unrealized gain 733 -- -- 733
Total hedges against
interest rate risk:
Notional amount $731,731 $ 1,060,000 $ 2,600,000 $ 4,391,731
Carrying amount 3 2,359 21,678 24,040
Net unrealized gain (loss) 762 (2,213) (9,959) (11,410)
-------- ----------- ----------- -----------
Estimated fair value $ 765 $ 146 $ 11,719 $ 12,630
=================================================================================================
</TABLE>
(1) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
(2) Hedges of residential mortgage lending commitments.
demand, in accordance with mandatory accounting standards. However, recent
purchase transactions of such deposits have generally reflected premiums of
approximately 4% to 12% of recorded book value, reflecting the relationship
value of such deposits over their projected life and their value as a low cost
source of funds.
Securities held to maturity are carried at amortized cost on the
Corporation's Consolidated Balance Sheets, as Crestar has the ability and
positive intent to hold these securities to maturity. Trading account securities
(classified as money market investments) are carried at fair value as they are
intended to be sold in the near term. Securities available for sale are carried
at fair value and represent securities not classified as held to maturity or
trading account securities. Unrealized holding gains or losses on securities
available for sale are excluded from the Consolidated Statement of Income and
reported, net of tax, as a separate component of shareholder's equity. At
December 31, 1996, the fair market value of securities classified as available
for sale was $4.318 billion. The amortized cost of these securities was $4.351
billion. The net unrealized loss on securities available for sale, net of tax,
at December 31, 1996 was $21.3 million. At December 31, 1995 the net unrealized
gain on securities available for sale, net of tax, was $13.2 million. The net
unrealized gain or loss on securities
-31-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
available for sale, recorded as a component of shareholders' equity, will
continue to be subject to change in future periods due to fluctuations in market
values, acquisition activities, sales, purchases, maturities and calls.
Securities held to maturity at December 31, 1996 had an amortized cost of
$968 million and a market value of $967 million. Unrealized pre-tax gains on
such securities at year-end 1996 were $5.3 million, with unrealized pre-tax
losses of $6.1 million. No sales of investments classified as securities held to
maturity occurred during 1996 or 1995.
All mortgage-backed securities in the securities available for sale and the
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 such 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.
In assessing risk in asset-backed securities, regulatory authorities have
designed tests to determine those securities with the highest risk
characteristics. The Federal Financial Institutions Examination Council (FFIEC)
has issued regulations, endorsed by the Federal Reserve Bank, defining a
high-risk mortgage security. These regulations define a high-risk mortgage
security as any mortgage derivative product (including mortgage backed
pass-through securities and collateralized mortgage obligations) that exhibits
greater price volatility than a benchmark fixed rate thirty-year mortgage backed
pass-through security. The regulations further quantify the characteristics of a
high-risk mortgage security through the use of three tests: (a) the mortgage
security has an expected weighted average life greater than ten years, (b) the
expected weighted average life of the mortgage security extends by more than
four years, assuming an immediate and sustained parallel shift in the yield
curve of plus 300 basis points, or shortens by more than six years, assuming an
immediate and sustained parallel shift in the yield curve of minus 300 basis
points, or (c) the estimated change in the price of the mortgage security is
more than 17%, due to an immediate and sustained parallel shift in the yield
curve of plus or minus 300 basis points. The yield curve relates to interest
yields on U.S. Treasury securities of various maturity dates. Floating rate
mortgage instruments are subject to the price sensitivity test, but are exempt
from the average life and average life sensitivity tests as long as their
interest rate at the time purchase, or interest rate reset date, is below the
contractual interest rate cap of the floating rate instrument.
A mortgage backed pass-through security or collateralized mortgage obligation
(CMO) that meets any one of the three tests is considered a high-risk security;
certain securities are exempt from this classification. Institutions must
evaluate quarterly that any holdings of high-risk securities reduce the
institution's overall interest rate risk profile. The Corporation had no
security holdings at December 31, 1996 that met the definition of a high-risk
mortgage derivative product, per the FFIEC regulations.
All investment securities, including mortgage backed pass-through securities,
CMO securities and automobile collateralized 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 security, in
addition to the contractual obligation of the issuer to collect and remit such
payments to individual security owners. In some respects, such credit risk is
similar to the risks incurred by purchasers of corporate bond securities. The
Corporation monitors credit risk by assessing, and monitoring on an ongoing
basis, the financial strength and performance of the issuers of such securities.
At December 31, 1996 the fair value of Crestar's holdings of mortgage backed
pass-through securities of Federal agencies was $2.7 billion, of which the vast
majority was classified as securities available for sale. Crestar's securities
available for sale and securities held to
Table 13 Debt And Other Security
Ratings (as of February 3, 1997)
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
Deposits:
Long-Term A2 A Not rated
Short-Term P-1 A-1 TBW-1
Crestar Capital Trust I
Preferred Stock Baa1 BBB Not rated
================================================================
-32-
<PAGE>
maturity portfolios at year-end 1996 also included CMO securities with a fair
value of approximately $700 million. See "Uses of Funds" for a further
description of the Corporation's security holdings.
The Corporation's debt ratings are presented in Table 13. During the fourth
quarter of 1996, $200 million in preferred stock securities were issued by
Crestar Capital Trust I, a subsidiary of Crestar Financial Corporation (see
Sources of Funds). The trust preferred stock issuance received a rating of Baa1,
and a rating of BBB, from the Moody's and Standard & Poor's rating agencies,
respectively.
Sources Of Funds
Crestar's largest and most important funding source is core deposits, which
totaled $15.5 billion at December 31, 1996, representing 75% of total funding
sources at year-end 1996. Core deposits totaled $16.2 billion at December 31,
1995, or 81% of total funding sources at year-end 1995. Average core deposits
were relatively stable, increasing by $179 million or 1% from 1995 to 1996.
Demand deposits increased $51 million, or 2%, from year-end 1995 to year-end
1996. Interest checking and money market deposit accounts also displayed
increases of $12 million and $28 million, respectively, during this period.
Declines were noted in regular savings accounts and, to a greater degree,
domestic time deposits. Deposit pricing contributed to the decline in consumer
certificates of deposit accounts. Growth in sales of mutual fund and insurance
annuity products within Crestar's branch system was also a factor in declines in
year-end balances of domestic time deposits, from year-end 1995 levels.
Purchased liabilities are composed of certificates of deposit of $100,000 and
over (large CDs) and short-term borrowings. Total purchased liabilities
increased $1.3 billion from December 31, 1995, reflecting balance sheet growth
and management strategies in a changing interest rate environment. At December
31, 1996, approximately 25% of Crestar's purchased funds consisted of funds
invested by local customers and, as such, are less volatile than other
categories of purchased funds. At December 31, 1996, Crestar had over $1.9
billion in par value of unpledged marketable securities.
Long-term debt decreased $12 million during 1996, or 2%, primarily reflecting
scheduled reductions of collateralized mortgage obligation bonds, mortgage
indebtedness and capital lease obligations.
On December 31, 1996 Crestar Capital Trust I, a wholly-owned special purpose
finance subsidiary of Crestar, issued 200,000 shares of preferred stock capital
securities (Trust Preferred Stock), with a stated value of $1,000 per share.
Total proceeds to the subsidiary from the sale of the securities were $200
million. The Trust Preferred Stock pays a semi-annual fixed dividend to security
holders based on 8.16% (annual yield) of the stated value, and has a mandatory
redemption date, subject to specific call provisions, of December 15, 2026. The
stated value of the Trust Preferred Stock is unconditionally guaranteed, on a
subordinated basis, by Crestar Financial Corporation. Through an inter-company
lending transaction, proceeds received by the subsidiary were invested in junior
subordinated debentures of Crestar, the parent company. Crestar intends to use
the proceeds of the debentures for general corporate purposes and working
capital needs, including possible future acquisitions of financial institutions
or other businesses of a type eligible for acquisition by bank holding
companies. Pending such use, the Corporation may invest the proceeds in
securities or money market investments. Issuance of the Trust Preferred Stock
further strengthened the Corporation's Tier 1 and Total regulatory capital
positions. Footnote 13 to the consolidated financial statements contains further
details as to the issuance, terms and accounting for the Trust Preferred Stock.
Uses Of Funds
Total earning assets at December 31, 1996 were $20.7 billion, an increase of
$694 million or 3% from year-end 1995, compared with a 10% increase in the prior
year. Average earning assets for 1996 increased $1.1 billion or 6% above the
average level of earning assets in 1995. Increases in average deposit levels and
short-term borrowings were used to fund growth in the Corporation's securities
portfolio, as well as increased levels of mortgage loans held for sale. Average
balances of loans were relatively unchanged during 1996, in comparison to 1995
levels, as increases in commercial and installment lending were offset by
reductions in Crestar's real estate-mortgage and bank card loans outstanding.
Total securities (classified as either held to maturity or available for
sale) as of December 31, 1996 increased $477 million or 10% from December 31,
1995. This followed a $470 million or 11% increase in 1995 over 1994 year-end
levels, reflecting the impact of acquisitions completed by Crestar in 1995. The
composition of Crestar's securities portfolio along with related yield and
maturity information as of December 31, 1996 are presented in Table 14 (Analysis
of Securities Held to Maturity) and Table 15 (Analysis of Securities Available
For Sale). Both average expected maturity and actual stated maturity are shown
in these tables. The average expected maturity considers
-33-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
Table 14 Analysis Of Securities Held To Maturity (1)
<TABLE>
<CAPTION>
Average Average
Expected Stated
December 31, 1996 Par Amortized Market Average Maturity Maturity
Dollars in thousands Value Cost Value Yield(2) (Yrs/Mos) (Yrs/Mos)
<S> <C>
U.S. Treasury and Federal agencies:
Within one year $ 29,500 $ 29,413 $ 29,480 6.2%
One to five years 205,500 208,529 206,895 5.5
- -----------------------------------------------------------------------------------------------------------
Total U.S. Treasury and
Federal agencies 235,000 237,942 236,375 5.6 02/01 02/01
- -----------------------------------------------------------------------------------------------------------
Mortgage-backed obligations
of Federal agencies:
Within one year 2 2 2 8.3
One to five years 1,904 1,921 1,984 8.9
Five to ten years 14,562 14,761 15,445 9.4
After ten years 2,006 1,882 2,045 10.7
- -----------------------------------------------------------------------------------------------------------
Total mortgage-backed
obligations of Federal agencies 18,474 18,566 19,476 9.5 07/05 08/01
- -----------------------------------------------------------------------------------------------------------
States and political subdivisions:
Within one year 10,761 10,765 10,820 10.3
One to five years 22,007 22,188 22,499 9.2
Five to ten years 15,295 15,199 15,430 9.6
After ten years 29,622 29,454 29,711 8.8
- -----------------------------------------------------------------------------------------------------------
Total states and political
subdivisions 77,685 77,606 78,460 9.3 07/10 08/03
- -----------------------------------------------------------------------------------------------------------
Other taxable securities:
Within one year 19,767 19,758 19,783 6.4
One to five years 32,796 32,854 32,783 5.8
Five to ten years 152,682 152,565 151,740 5.9
After ten years 431,636 428,219 428,133 6.3
- -----------------------------------------------------------------------------------------------------------
Total other taxable securities 636,881 633,396 632,439 6.2 01/11 14/00
- -----------------------------------------------------------------------------------------------------------
Total securities held to maturity $968,040 $967,510 $966,750 6.4% 02/06 10/06
===========================================================================================================
</TABLE>
(1) Maturity line classifications are based on stated maturity
(2) Tax-equivalent basis, based on amortized cost
prepayments and amortization, resulting in a more realistic measure of
maturities than actual stated maturity.
The "Other taxable securities" category in Tables 14 and 15 consists largely
of collateralized mortgage obligations and certificates of automobile
collateralized receivables. The Corporation's securities portfolio includes
investments in both mortgage-backed pass-through securities and collateralized
mortgage obligations (CMO). A mortgage-backed pass-through obligation depends on
the underlying pool of mortgage loans to provide a stream of cash flows to the
investor consisting of both principal and interest payments from the underlying
mortgages. A CMO is a mortgage-backed security that is comprised of classes of
bonds created by prioritizing the cash flows from underlying mortgage pools in
order to meet different objectives of investors. The Corporation had
approximately $700 million (fair market value) invested in CMO securities at
December 31, 1996, of which approximately $560 million were classified as
securities held to maturity, and approximately $140 million classified as
securities available for sale. Automobile collateralized receivables depend on
the underlying pool of automobile installment loans to provide a stream of cash
flows, representing principal and interest payments, but typically have a
shorter maturity than mortgage pass-through securities. Holdings of such
collateralized receivables were approximately $75 million (fair market value) at
year-end 1996.
None of Crestar's securities holdings by individual issuer (excluding U.S.
Treasury and Federal agencies) exceeded 10% of total shareholders' equity at
December 31, 1996.
-34-
<PAGE>
Table 15 Analysis Of Securities Available For Sale (1)
<TABLE>
<CAPTION>
Average Average
Expected Stated
December 31, 1996 Par Amortized Market Average Maturity Maturity
Dollars in thousands Value Cost Value Yield(2) (Yrs/Mos) (Yrs/Mos)
<S> <C>
U.S. Treasury and Federal agencies:
Within one year $ 37,060 $ 36,961 $ 36,959 5.8%
One to five years 770,685 771,246 766,260 5.8
Five to ten years 13,500 13,471 13,561 6.2
After ten years 1,500 1,440 1,400 6.6
- ------------------------------------------------------------------------------------------------------------
Total U.S. Treasury and
Federal agencies 822,745 823,118 818,180 5.8 02/08 02/08
- ------------------------------------------------------------------------------------------------------------
Mortgage-backed obligations
of Federal agencies:
Within one year 5,506 5,545 5,612 6.9
One to five years 206,982 208,170 208,709 6.6
Five to ten years 1,001,877 993,281 996,399 6.7
After ten years 1,534,745 1,533,911 1,502,659 6.4
- ------------------------------------------------------------------------------------------------------------
Total mortgage-backed
obligations of Federal agencies 2,749,110 2,740,907 2,713,379 6.5 09/01 12/04
- ------------------------------------------------------------------------------------------------------------
Other taxable securities:
Within one year 118,626 118,865 118,774 7.7
One to five years 26,590 26,482 26,551 6.4
Five to ten years 88,801 88,820 88,152 6.1
After ten years 342,530 342,744 343,070 6.7
- ------------------------------------------------------------------------------------------------------------
Total other taxable
securities: 576,547 576,911 576,547 6.8 13/05 13/07
- ------------------------------------------------------------------------------------------------------------
Total interest-earning investments 4,148,402 4,140,936 4,108,106 6.4 09/05 10/09
Common and preferred stocks 210,203 210,203 210,243 6.2
- ------------------------------------------------------------------------------------------------------------
Total securities available for
sale $4,358,605 $4,351,139 $4,318,349 6.4%
============================================================================================================
</TABLE>
(1) Maturity line classifications are based on stated maturity
(2) Tax-equivalent basis, based on amortized cost
During 1996, approximately $4.3 billion (fair value) of securities were sold,
generating net securities gains of $3.4 million. In 1995, approximately $1.9
billion (fair value) of securities were sold at a net loss of $2.1 million. All
securities sold were from the Corporation's securities available for sale
portfolio.
Money market investments increased by $229 million or 44% from December 31,
1995 to $746 million at December 31, 1996. Year-end money market investment
levels reflect an appropriate level of money market investments given liquidity
needs and balance sheet management strategies. Average balances of money market
investments in 1996 were relatively unchanged from prior year levels, totaling
$332 million in 1996 versus $337 million in 1995. Mortgage origination and
refinancing activity, coupled with longer holding periods for loans held for
sale, resulted in higher average levels of mortgage loans held for sale during
1996, which increased from $374 million during 1995 to an average of $836
million for 1996.
Total loans net of unearned income were $14.0 billion at both December 31,
1996 and 1995. Previously, loan balances exhibited a 6% increase from year-end
1994 to year-end 1995, reflecting a combination of loan growth and bank and
thrift acquisitions. During 1996, the composition of the loan portfolio changed
slightly as growth in instalment and commercial loans was offset by anticipated
declines in Crestar's bank card and real estate-mortgage loan portfolios. The
percentage of business loans to total loans at year-end increased from 39% in
1995 to 40% in 1996, with both the commercial loan and real estate-income
property portfolios exhibiting increases over prior year
-35-
<PAGE>
Management's Discussion
Crestar Financial Corporation and Sudsidiaries
Table 16 Loan Portfolio Analysis
<TABLE>
<CAPTION>
December 31,
Dollars in millions 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ -------------
<S> <C>
$ % $ % $ % $ % $ %
Business Loans:
Commercial 4,003 29 3,773 27 3,868 30 3,520 33 3,587 37
Real estate - income
property 1,242 9 1,225 9 1,098 8 1,029 10 943 10
Real estate - construction 314 2 407 3 391 3 437 4 402 4
Consumer Loans:
Instalment 4,060 29 3,653 26 2,942 22 2,501 23 2,348 25
Bank card 1,423 10 1,699 12 1,488 11 988 9 576 6
Real estate - mortgage 3,008 21 3,276 23 3,408 26 2,191 21 1,724 18
- -----------------------------------------------------------------------------------------------------------
Total loans - net of
unearned income 14,050 100 14,033 100 13,195 100 10,666 100 9,580 100
===========================================================================================================
</TABLE>
levels. Real estate-construction loan balances fell to $314 million at year-end
1996, representing 2% of the Corporation's total loan portfolio.
Consumer instalment loans exhibited the strongest growth of all loan
categories during 1996, increasing by $407 million or 11% over year-end 1995
levels. During the fourth quarter of 1996, Crestar completed the purchase of a
$370 million student loan portfolio from Great Western Financial Corporation.
The acquisition represents a significant expansion of Crestar's student loan
portfolio, and reflects the continued national growth of the Corporation's
education lending business. Student loans represented approximately $850 million
of the total installment loan category at year-end 1996.
Bank card loans decreased $276 million or 16% in 1996 as a result of
curtailment of most solicitation efforts outside of Crestar's primary marketing
area of Virginia, Maryland and Washington, DC. Also contributing to the decline
was a higher level of account charge-offs, and reduction of some account
balances as low promotional interest rates were reset during the year to higher
market rates. In 1995, bank card loans increased by approximately $210 million
or 14%, which was attributable to increased sales efforts and promotional
activity. Bank card balances represented 10% of the total loan portfolio at
December 31, 1996, versus 12% at year-end 1995.
Real estate-mortgage loans decreased $269 million or 8% during 1996, and
totaled $3.0 billion at December 31, 1996. Reductions in consumer real
estate-mortgage loans reflect efforts to rebalance the Corporation's loan
portfolio, through selected sales of residential mortgage loans, following the
1995 purchases of three savings and loan institutions. Consumer real
estate-mortgage loans represented 21% of the Corporation's total loan portfolio
at December 31, 1996, compared to 23% at year-end 1995.
As previously mentioned, Crestar purchased and retired 3.4 million shares of
its common stock during 1996. As of December 31, 1996, Crestar had a remaining
authorization to purchase and retire up to 600 thousand shares of common stock
in order to meet the needs of the dividend reinvestment plan, thrift and profit
sharing plan and other stock-based plans.
Types Of Lending
Crestar's loan portfolio is broadly segmented into commercial and consumer
loans.
The commercial loans are more specifically segmented into loans to
corporations, partnerships and sole proprietorships. These loans can have
various purposes which include financing working capital, equipment, real
estate, and to a lesser degree acquisitions and recapitalizations. Loan types
can be either short-term lines of credit, term loans or mortgage financing. Loan
maturities are managed such that they are compatible with the maturity structure
of the Corporation's sources of funding.
Commercial real estate is further segmented into owner-occupied property,
income property and construction. Owner-occupied property is considered to be
similar to traditional commercial loans since repayment is primarily from the
cash flow of the owner, with the real estate being a secondary repayment source.
Income property loans are made to entities or individuals engaged in real estate
investment and the primary source of repayment is expected from the rental
income of the property. Construction loans are to build or develop real estate
properties and can be expected to either be refinanced at completion, sold,
converted to income property or be owner-occupied. Table 16 shows the various
loan categories.
Consumer loans are comprised of residential real estate, bank card and
instalment loans. Instalment
-36-
<PAGE>
loans represent a broad loan category that can be for various purposes,
including car or boat purchases, home improvement and college tuition, among
other purposes. Bank card loans are unsecured lines of credit while most other
consumer loans are secured. Instalment Loans have various maturity structures
with most maturing within five years. Real estate-mortgage loans are mostly
underwritten to maturity, which may extend to 30 years. Most residential real
estate loans are underwritten to national market standards and therefore can be
securitized and sold into the secondary market.
Credit Underwriting
And Risk Management
Crestar has comprehensive policies and procedures which define and govern both
commercial and consumer loan origination and management of risk. All loans are
underwritten in a manner that emphasizes the borrowers capacity to pay. The
measurement of capacity to pay delineates the potential risk of nonpayment or
default. The higher potential for default determines the need for and amount of
collateral required. Crestar makes unsecured loans when the capacity to pay is
considered substantial. As capacity lessens, collateral is required to provide a
secondary source of repayment and to mitigate the risk of loss. Various policies
and procedures provide guidance to the lenders on such factors as amount, terms,
price, maturity and appropriate collateral levels. Each risk factor is
considered critical to assuring that Crestar receives an adequate return for the
risk undertaken, and that the risk of loss is minimized.
Crestar effectively manages the risk associated with commercial loans, which
generally have balances larger than consumer loans, by having lending
professionals work in tandem with credit underwriting personnel to maintain a
balance between growth and risk requirements. To further assess loan portfolio
quality, there is a Credit Review group that independently reviews various
individual loans and loan segments to assess quality and support the credit
management process.
Crestar's commercial loans are not considered to be concentrated, except
those loans to real estate developers and investors (REDI). Diversification is
achieved through lending to various industries located within Crestar's market
area. This diversification is believed to reduce investment risk associated with
changes in economic conditions.
Due to its concentration and its specialized nature, commercial real estate
investment lending is governed by its own distinct policies and procedures.
Also, this loan class is mostly underwritten and managed by a specialized
division of lending professionals. Underwriting policies delineate such factors
as concentrations by property type, amount, terms, price and collateral. Real
estate investment lending is almost entirely collateralized and, as such, market
conditions are monitored closely. Key market measurements include vacancy rates,
rental rates, absorption rates for new properties and loan-to-value ratios. The
Federal Deposit Insurance Corporation Improvement Act (FDICIA) establishes
guidelines, by loan type, for real estate lending. Maximum real estate
loan-to-value ratios under these guidelines include 65% for undeveloped land,
75% for land development loans, 80% for commercial, multifamily and other
nonresidential construction loans, and 85% for residential (1 to 4 family)
construction loans. Crestar's policies for loan-to-value are within the
parameters established by the FDICIA.
Based upon Standard Industrial Classification codes used for bank regulatory
reporting purposes, the Corporation had no aggregate loan classifications of 10%
or more of total loans in any particular industry at year-end 1996. Under a
broader view of the portfolio, Crestar had $1.6 billion in loans outstanding at
December 31, 1996 to real estate developers and investors (REDI), comprising
11.6% of the loan portfolio at year-end 1996. The REDI designation is based on
borrower type and encompasses non-owner occupied real estate and construction
loans as well as other forms of credit extended to real estate developers or
investors. Crestar monitors the REDI portfolio with respect to diversification
on a basis of both geographic location and loan type. REDI loans are classified
on the consolidated balance sheet as real estate-income property ($1.242
billion), and within the real estate-construction ($232 million) and commercial
loan ($155 million) categories.
Consumer loans, by their nature and size, are generally not subject to risks
associated with concentration. However, a portfolio of a specific consumer loan
type may create concentration risk, and therefore portfolios are monitored
closely. The underwriting of consumer loans at Crestar is done primarily by two
lending groups. The Consumer Finance Group concentrates on instalment and bank
card lending, with Crestar's mortgage banking subsidiary, Crestar Mortgage
Corporation, handling real estate-mortgage
-37-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subidiaries
Table 17 Allowance For Loan Losses
<TABLE>
<CAPTION>
Dollars in thousands 1996 1995 1994 1993 1992
<S> <C>
Beginning balance $ 274,430 $ 265,171 $ 254,682 $ 244,226 $ 243,321
- ------------------------------------------------------------------------------------------------------------
Allowance from acquisitions
and other activity-net (888) 8,353 15,687 22,000 9,700
- ------------------------------------------------------------------------------------------------------------
Provision for loan losses 95,890 66,265 36,509 63,325 120,821
- ------------------------------------------------------------------------------------------------------------
Loans charged off:
Commercial 7,696 11,295 16,662 33,075 48,600
Real estate - income property 2,250 3,819 13,036 26,473 21,517
Real estate - construction 2,668 1,043 817 5,307 29,995
Instalment 28,757 21,746 14,571 16,848 21,035
Bank card 88,811 57,595 28,573 21,064 24,458
Real estate - mortgage 1,903 1,303 1,815 2,807 3,820
- ------------------------------------------------------------------------------------------------------------
Total loans charged off 132,085 96,801 75,474 105,574 149,425
- ------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial 8,646 8,747 9,480 11,630 5,572
Real estate - income property 4,662 5,211 6,513 920 270
Real estate - construction 1,920 3,461 4,389 5,077 1,020
Instalment 9,641 8,718 8,352 8,017 8,151
Bank card 6,617 4,924 4,676 4,882 4,707
Real estate - mortgage 35 381 357 179 89
- ------------------------------------------------------------------------------------------------------------
Total recoveries 31,521 31,442 33,767 30,705 19,809
- ------------------------------------------------------------------------------------------------------------
Net charge-offs 100,564 65,359 41,707 74,869 129,616
- ------------------------------------------------------------------------------------------------------------
Allowance, December 31:
Commercial 53,321 64,836 78,028 78,708 99,618
Real estate - income property 27,211 41,003 39,810 50,731 47,741
Real estate - construction 10,622 18,771 17,475 18,015 17,760
Instalment 27,914 24,337 23,251 24,546 24,010
Bank card 67,303 56,898 27,442 20,399 12,330
Real estate - mortgage 13,333 13,482 12,266 8,726 8,131
Unallocated 69,164 55,103 66,899 53,557 34,636
- ------------------------------------------------------------------------------------------------------------
Balance, December 31 $ 268,868 $ 274,430 $ 265,171 $ 254,682 $ 244,226
============================================================================================================
Loans:
Total at year end $ 14,049,705 $14,032,820 $13,194,738 $10,666,472 $9,580,095
Average during year 13,629,552 13,675,135 11,811,269 9,950,341 9,951,479
Net charge-offs to:
Average total loans .74% .48% .35% .75% 1.30%
Provision for loan losses 104.87 98.63 114.24 118.23 107.28
Allowance for loan losses to:
Year-end loans 1.91 1.96 2.01 2.39 2.55
Net charge-offs 2.67x 4.20x 6.36x 3.40x 1.88x
Net charge-offs earnings coverage 4.17 6.38 8.77 4.38 2.11
============================================================================================================
</TABLE>
loans. Having two groups is considered to be the most effective approach to cost
management and reduction of credit risk. Credit underwriting across product
types utilizes the skills of lending professionals as well as incorporating the
use of statistically-based credit-scoring models. The underwriting process
considers both macro-economic factors, such as interest rates, employment,
consumer income, consumer debt and delinquency levels, in conjunction with
micro-factors, such as an individual's employment history, payment history,
current debt levels and, if applicable, collateral values. Underwriting
guidelines are continually evaluated and subject to modification based upon
these factors. Future loss expectations consider prevailing economic and
consumer trends in conjunction with the current product underwriting guidelines.
-38-
<PAGE>
Provision And
Allowance For Loan Losses
Both the amount of the provision and the level of the allowance for loan losses
are impacted by many factors, including general economic conditions, actual and
expected credit losses, loan performance measures, historical trends and other
circumstances, both internal and external. The amount of the provision for loan
losses is established based on evaluation of the current level of the allowance.
Individual loan-by-loan reviews are performed quarterly on large commercial and
real estate exposures in the lower quality risk ratings categories. For the
remainder of the portfolio, a formula-based approach is utilized. The formula is
determined by a statistical analysis of risk rating movements and loss rates.
The formula may be adjusted for changes in the subjective factors listed above.
Loan loss allowances for the consumer loan portfolio are also based on
historical and anticipated losses and the current and projected characteristics
of the different types of consumer loans. Management's evaluation and resulting
provision and allowance decisions are reviewed by the Board of Directors on a
quarterly basis.
Total credit costs, which equals the sum of the provision for loan losses and
foreclosed properties expense, were $102.8 million in 1996, an increase of $40.1
million or 64% from the $62.6 million in credit costs recorded 1995. Crestar
made provisions for loan losses of $95.9 million in 1996, up $29.6 million or
45% from 1995. The increase in provision expense primarily reflects the
performance of Crestar's bank card loan portfolio during the year, which was
evidenced by high levels of loan charge-offs compared to prior year results.
Also contributing to an increase in total credit costs was an increase in
foreclosed properties expense, which totaled $6.9 million for 1996. Included in
this balance is provision expense for foreclosed properties of $4.0 million
recorded as part of the one-time Citizens merger costs in 1996, to recognize
Crestar's accelerated disposition strategy with respect to specific foreclosed
properties held by Citizens at year-end 1996.
Total credit costs in 1995 of $62.6 represented an increase of $20.4 million
from the total credit costs recorded in 1994. Crestar experienced an increase in
provision for loan losses of $29.8 million from 1994 to 1995, primarily
reflecting higher levels of consumer loan balances outstanding, and higher
levels of risk in the bank card loan portfolio. The Corporation's average
consumer loan balances totaled $8.4 billion in 1995, an increase of $1.6 billion
or 24% from 1994 levels. Bank card loans increased 37%, to $1.6 billion, during
this time period, with instalment loans increasing 17%, to $3.2 billion.
Partially offsetting the impact of higher loan provision costs, Crestar
experienced net recoveries of $3.6 million on foreclosed properties in 1995,
compared to a foreclosed properties expense of $5.7 million in 1994.
Net loan charge-offs in 1996 of $100.6 million were up $35.2 million or 54%
from 1995 levels. Net charge-offs as a percentage of average loans were 0.74% in
1996, compared to 0.48% in 1995 and 0.35% in 1994. The largest proportion of net
loan charge-offs during 1996 and 1995 occurred in the bank card loan portfolio.
Net charge-offs for bank card loans were $82.2 million for 1996, compared to
$52.7 million in 1995. Net bank card loan charge-offs as a percentage of bank
card loans (on an annualized basis) were 6.54% for the fourth quarter of 1996,
compared to 5.54% for the third quarter, 5.14% for the second quarter, and 4.82%
for the first quarter of 1996. The ratio for the full-year 1996 was 5.37%,
compared to 3.33% in 1995 and 2.09% in 1994.
The growth of bank card net charge-offs is a result of the significant growth
in Crestar's bank card loan portfolio during 1993 through 1995. Crestar's
experience suggests the delinquency and loss performance of newly underwritten
loans typically do not reach their highest levels until after 24 months from
origination. Crestar's bank card loss rates are higher than originally expected
due to an unanticipated decline in consumer payment performance, influenced by a
substantial increase in consumer bankruptcy filings. The increase in the net
charge-off ratio is a result of a more seasoned portfolio, higher than expected
bankruptcies and slower growth of new accounts as a result of planned moderation
of new card marketing programs to allow time for a reassessment of the portfolio
strategy. Moderating new marketing programs has contributed to a decline in
outstanding loan balances during 1996.
Excluding the impact of bank card loans, net loan charge-offs were $18.3
million in 1996. Net recoveries were recorded in 1996 in the commercial and real
estate-income property loan categories. Net charge-offs in Crestar's real
estate-mortgage portfolio were $1.9 million, or less than 0.01% of the average
balance outstanding during the year. For 1996, the real estate-construction loan
category recorded net charge-offs of less than $750 thousand. Exhibiting some of
the increased risk in consumer lending, as evidenced by higher consumer
bankruptcy filings, instalment loan net charge-offs increased to $19.1 million
in 1996, versus $13.0 million in 1995.
Net loan charge-offs of $65.4 million in 1995 represented an increase of
$41.7 million or 57% from 1994 levels. Reasons for the increase center on higher
charge-off levels in the Corporation's bank card loan portfolio. A sizable
percentage of Crestar's bank card
-39-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
loan accounts began to reach a maturity level during 1995, with net charge-off
levels climbing from the levels experienced when the accounts were less than two
years old from time of underwriting. Consumer instalment loans also demonstrated
increased levels of net charge-offs, reflecting higher consumer bankruptcy
levels coupled with an increase of 17% in average outstanding balances. The
business loan categories of commercial and real estate-income property
demonstrated lower net charge-off levels in 1995, compared to 1994, as did net
charge-off levels for consumer real estate-mortgage loans. Real
estate-construction loans experienced net recoveries of $2.4 million in 1995,
versus net recoveries of $3.6 million in 1994.
The allowance for loan losses at December 31, 1996 was $269 million,
representing 1.91% of year-end loans, 247% of total nonperforming assets and
330% of total nonperforming loans. At December 31, 1995, the allowance for loan
losses was $274 million, representing 1.96% of loans, 213% coverage of total
nonperforming assets and 305% coverage of total nonperforming loans at that
date. Improvement in the two coverage ratios was due to reductions in both
nonperforming loans and nonperforming assets from 1995 levels. Details of the
activity in the allowance for loan losses for the past five years is shown in
Table 17. Based on current expectations relative to portfolio characteristics
and performance measures including loss projections, management considers the
level of the allowance adequate.
Although the allowance for loan losses is a general allowance applicable to
all loan categories, the allocation provided in Table 17 is made to provide an
indication of the relative risk assessment of the components of the loan
portfolio.
Nonperforming Assets
And Other Risk Elements
Nonperforming assets consist of nonaccrual loans, formally restructured loans
and foreclosed properties. Generally, commercial and consumer real
estate-mortgage loans are placed in nonaccrual status when principal or interest
is 90 days or more past due, or earlier if it is known or expected that interest
will not be paid or full collection of all principal and interest is unlikely.
Bank card loans are not placed in nonaccrual status, but are charged off when
past due 180 days. Instalment loans are generally placed in nonaccrual status
when past due 120 days, and charged off when past due 180 days, or sooner upon
bankruptcy notification. Loans may be restructured as to rate, maturity or other
terms as determined on an individual credit basis. Using the Corporation's
criteria for classification of nonperforming loans, loans that are both past due
90 days or more, but are deemed to be adequately secured and are in the
near-term process of collection are not necessarily placed in nonaccrual status
and are therefore excluded from the definition of nonperforming assets. As
mentioned, the consumer charge-off policy does not require certain loans to be
placed in nonaccrual status since active collection efforts are underway and
since account resolution via charge-off will automatically occur within no more
than 90 days. Accruing loans past due 90 days or more, excluded from
classification as nonperforming assets, totaled $72 million at December 31,
1996, with consumer loan balances representing 86% of this balance (see Table
18). These loans are in the process of collection, with the intention of
collecting all principal and interest due. Foreclosed properties represent
properties acquired through legal foreclosure or similar proceedings.
At December 31, 1996, nonperforming assets of $109.0 million were down $20.0
million or 16% from December 31, 1995. REDI nonperforming assets totaled $61.8
million and comprised 57% of total nonperforming assets at December 31, 1996.
The REDI nonperforming asset balance reflects a decrease of $17.1 million, or
22%, from December 31, 1995. In addition, the commercial, instalment and real
estate-mortgage categories of nonperforming assets declined during the year.
Foreclosed properties decreased $11.5 million or 30% from December 31, 1995 to
December 31, 1996. The December 31, 1996 foreclosed properties balance of $27.5
million is net of a $18.4 million valuation allowance to address exposure to
prevailing market and economic conditions on the marketability of the portfolio.
The ratio of nonperforming assets to loans and foreclosed properties at December
31, 1996 was 0.77%, compared to 0.92% at December 31, 1995 and 1.15% at December
31, 1994.
Potential problem loans consist of loans that are currently performing in
accordance with contractual terms but for which potential operating or financial
concerns of the obligors have caused management to have serious doubts regarding
the ability of such obligors to continue to comply with present repayment terms.
At December 31, 1996, potential problem loans that are not included in Table 18
as nonperforming or past due loans amounted to $153 million. Of this balance,
over 90% percent represent commercial or commercial real estate-income property
related credits. In addition, $9 million of standby letters of credits in
various industries were being monitored at December 31, 1996. Depending on
changes in the economy and other future events, these loans and others not
presently identified could be classified as nonperforming assets in the future.
Potential problem loans were $193 million at December 31, 1995. There are no
loans classified for
-40-
<PAGE>
Table 18 Nonperforming Assets(1) And Past Due Loans
<TABLE>
<CAPTION>
December 31,
Dollars in thousands
Nonaccrual loans: 1996 1995 1994 1993 1992
<S> <C>
Commercial $ 20,348 $ 29,714 $ 39,943 $ 46,185 $ 97,630
Real estate - income property 22,624 28,366 28,193 31,256 41,124
Real estate - construction 10,368 6,096 8,624 12,782 18,112
Instalment 2,895 5,883 5,878 6,810 7,424
Real estate - mortgage 25,208 19,925 13,532 14,326 18,717
- -----------------------------------------------------------------------------------------------------------
Total nonaccrual loans 81,443 89,984 96,170 111,359 183,007
Restructured loans - - 8,339 3,208 249
- -----------------------------------------------------------------------------------------------------------
Total nonperforming loans(1) 81,443 89,984 104,509 114,567 183,256
Foreclosed properties - net 27,515 39,054 48,224 63,219 134,687
- -----------------------------------------------------------------------------------------------------------
Total nonperforming assets(1) $108,958 $129,038 $152,733 $177,786 $317,943
===========================================================================================================
Nonperforming assets1 to:
Loans and foreclosed properties - net .77% .92% 1.15% 1.66% 3.27%
Total assets .48 .58 .76 .94 1.80
Allowance for loan losses to:
Nonperforming assets(1) 247 213 174 143 77
Nonperforming loans(1) 330 305 254 222 133
Allowance for loan losses plus
shareholders' equity to
nonperforming assets(1) 18.80x 15.96x 12.22x 9.93x 5.12x
===========================================================================================================
Accruing loans past due 90 days:
Commercial $ 9,480 $ 6,111 $ 1,626 $ 2,185 $ 3,359
Real estate - income property 503 3,712 1,618 7,931 4,763
Real estate - construction - 926 198 197 46
Instalment:
Student 21,614 9,101 14,705 7,879 9,057
Other 7,587 4,689 1,552 2,051 3,678
Bank card 25,573 20,680 10,868 6,418 7,491
Real estate - mortgage 7,117 10,304 5,920 2,809 2,340
- -----------------------------------------------------------------------------------------------------------
Total accruing loans past due
90 days: $ 71,874 $ 55,523 $ 36,487 $ 29,470 $ 30,734
===========================================================================================================
</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 from the
definition of nonperforming
regulatory purposes as loss, doubtful, substandard, or special mention that have
not been disclosed above, that either (i) represent or result from trends or
uncertainties that management reasonably expects will materially impact future
operating results, liquidity or capital resources or (ii) represent material
credits about which management is aware of any information that causes
management to have serious doubts as to the ability of such borrowers to comply
with loan repayment terms.
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (SFAS 114), as amended, requires that impaired loans
within the scope of the accounting pronouncement be measured and reported on the
basis of the present value of expected cash flows discounted at the loan's
effective interest rate, or at the fair value of the loan's collateral if the
loan is deemed collateral dependent. Impaired loans are specifically reviewed
loans for which it is probable that the creditor will be unable to collect all
amounts due according to the terms of the loan agreement. Under SFAS 114, a
creditor may use existing methods for recognizing interest income on an impaired
loan. For Crestar's nonaccrual loans, including impaired loans, interest
receipts are recognized as interest revenue, or are applied to principal when
management believes the ultimate collectibility of principal is in doubt.
At December 31, 1996, impaired loans of $29.8 million were included in the
nonaccrual loan balances of Crestar. The balance of impaired loans at December
31, 1995 totaled $33.8 million. Because the majority
-41-
<PAGE>
Management's Discussion
Crestar Financial Corporation And Subsidiaries
Table 19 Nonaccrual Loans As A Percent Of Loan Category (1)
<TABLE>
<CAPTION>
December 31, 1996 1995 1994 1993 1992
<S> <C>
Commercial .5% .8% 1.0% 1.3% 2.7%
Real estate - income property 1.8 2.3 2.6 3.0 4.4
Real estate - construction 3.3 1.5 2.2 2.9 4.5
Instalment .1 .2 .2 .3 .3
Real estate - mortgage .8 .6 .4 .7 1.1
- ------------------------------------------------------------------------------------------------------------
Total .6% .6% .7% 1.0% 1.9%
============================================================================================================
</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 from the
definition of nonperforming
of loans deemed impaired during 1996 and 1995 were collateral dependent,
valuations of impaired loans did not vary materially from the values previously
assigned to this population of loans. The initial adoption of the new accounting
standard as of January 1, 1995 did not require an increase to Crestar's
allowance for loan losses.
The market area for the Corporation, which operates primarily in Virginia,
Maryland, and the District of Columbia, was dampened in 1996 by federal
downsizing but possesses fundamentally strong characteristics. At the beginning
of the year, growth in the regional economy slowed because of the federal
government shutdown, severe winter weather, and slower growth in the national
economy. As the year progressed, 16,000 federal civilian jobs in the regional
economy were eliminated. This job loss contributed to the slower rate of
employment growth in the market area economy relative to the nation. In
contrast, however, Crestar's market area maintains its historically higher per
capita income level relative to the nation and has begun to pick up speed in
diversifying into high-technology industries. As a provider of credit to both
commercial and credit customers, Crestar's future financial results can be
impacted by significant changes in the regional and national economy. Looking
ahead, the Crestar market area is likely to exhibit growth similar to the
national average.
Crestar is currently in the process of addressing a potential problem that is
facing all users of automated information systems. The problem is that many
computer systems process transactions based on two digits for the year of the
transaction (for example, "97" for 1997), rather than a full four digits. These
computer systems may not operate effectively when the last two digits become
"00", as occurs on January 1, 2000. In some cases the new date will cause
computers to stop operating, while in other cases incorrect output may result.
The problem could affect a wide variety of automated information systems, such
as mainframe applications, personal computers and communications systems. This
is not just a banking problem, as corporations around the world and in all
industries are similarly impacted. Crestar is using a combination of internal
and external resources to assess the needed changes to the Corporation's many
different information systems. A corporate wide task force is in place, led by
the Crestar's Technology and Operations Group, with representation from all
major business segments. Some of the necessary changes in computer instructional
code will be made during the course of normal maintenance. Other changes will
necessitate re-writing of computer instructional code, the majority of which is
expected to occur in 1998. At present, Crestar does not have an estimate of the
total cost of evaluating and fixing these potential problems. However, most of
the costs incurred in addressing the Year 2000 problem are expected to be
expensed as incurred, in compliance with generally accepted accounting
principles. The project may also impact capital expenditure budgets, through
increased expenditures for vendor-supplied software and computer hardware.
Accounting Issues
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation" in October 1995. This Standard established financial accounting
and reporting standards for stock-based employee compensation plans, including
stock option plans, effective with financial statements issued for 1996. 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 elected to continue to
record the costs of its stock-based compensation plans under the intrinsic value
method of APB 25, and believes this election will be consistent with a majority
of public companies.
-42-
<PAGE>
Accordingly, the implementation of SFAS 123 had no impact on the Corporation's
reported net income or earnings per share for 1996 or prior years. Pro forma
disclosure of net income and earnings per share for the years ended December 31,
1996 and 1995, as if the fair value based method of accounting defined in SFAS
123 had been applied for stock-based compensation awards granted in 1996 and
1995, is contained in note 16 to the consolidated financial statements.
Statement of Financial Accounting Standards No. 125 (SFAS 125), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" was issued by the FASB in June 1996. Among other requirements, SFAS
125 establishes new criteria for determining whether a transfer of financial
assets in exchange for cash or other consideration should be accounted for as a
sale or as a pledge of collateral in a secured borrowing. SFAS 125 also
establishes new accounting requirements for pledged collateral. After issuance
of SFAS 125, the FASB became aware that the volume of certain transactions and
related changes to information systems and accounting processes necessary to
comply with the requirements of SFAS 125 would present significant difficulty to
some affected corporations to comply with the provisions of SFAS 125 as soon as
January 1, 1997. In addressing this concern, the FASB issued SFAS 127 in
December 1996, which deferred the effective date for certain provisons of SFAS
125 for one year. The adoption of SFAS 125, as amended by SFAS 127, will have a
minimal effect on the accounting practices of the Corporation.
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," issued in 1995, requires that long-lived assets and certain identifiable
intangibles 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. Crestar adopted this new accounting standard as of
January 1, 1996. There was no impact to the Corporation's net income or balance
sheet upon implementation of SFAS 121.
Inflation
The effect of changing prices on financial institutions is typically different
than on non-banking companies since virtually all of a bank's assets and
liabilities are monetary in nature. In particular, interest rates are
significantly affected by inflation, but neither the timing nor magnitude of the
changes are directly related to price level indices; therefore, the Corporation
can best counter inflation over the long term by managing net interest income
and controlling net increases in noninterest income and expenses.
Information in the above "Management's Discussion and Analysis of Operations
and Financial Condition," other than historical information, may contain
forward-looking statements that involve risks and uncertainties, including, but
not limited to, the Corporation's interest rate risk position, credit and
economic trends on both a regional and national basis, technological change, the
number and size of competitors in the Corporation's market, and the impact of
future legal and regulatory actions, including the establishment of federal
deposit insurance rates. It is important to note that the Corporation's actual
results may differ materially from those projected in forward-looking
statements.
-43-
<PAGE>
Consolidated Balance Sheets
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Dollars in thousands, except share data December 31,
-----------------------------
1996 1995
<S> <C>
Assets Cash and due from banks $ 1,105,036 $ 1,285,245
Securities held to maturity (note 3) 967,510 1,105,076
Securities available for sale (note 4) 4,318,349 3,703,378
Money market investments (note 5) 745,672 516,268
Mortgage loans held for sale 658,838 688,218
Loans (notes 6, 11, 14, 21):
Business Loans:
Commercial 4,002,574 3,773,181
Real estate - income property 1,242,097 1,225,040
Real estate - construction 314,016 406,575
Consumer Loans:
Instalment 4,060,174 3,652,639
Bank card 1,422,934 1,698,969
Real estate - mortgage 3,007,910 3,276,416
------------------------------------------------------------------------------------------
Total Loans 14,049,705 14,032,820
Less: Allowance for loan losses (note 7) (268,868) (274,430)
------------------------------------------------------------------------------------------
Loans - net 13,780,837 13,758,390
------------------------------------------------------------------------------------------
Premises and equipment - net (notes 8 and 12) 435,316 412,656
Customers' liability on acceptances 3,186 5,143
Intangible assets - net 180,420 187,773
Foreclosed properties - net (notes 6 and 9) 27,515 39,054
Other assets 639,262 631,410
------------------------------------------------------------------------------------------
Total Assets (note 22) $22,861,941 $22,332,611
==========================================================================================================
Liabilities Demand deposits $ 3,352,921 $ 3,302,323
Interest-bearing demand deposits 5,913,373 5,873,657
Regular savings deposits 1,620,925 1,738,573
Domestic time deposits 4,643,409 5,266,275
Certificates of deposit $100,000 and over 140,582 116,211
------------------------------------------------------------------------------------------
Total deposits 15,671,210 16,297,039
Short-term borrowings (note 11) 4,116,051 2,871,521
Liability on acceptances 3,186 5,143
Other liabilities and minority interest (note 13) 632,648 702,024
Long-term debt (note 12) 659,336 671,296
------------------------------------------------------------------------------------------
Total Liabilities (note 22) 21,082,431 20,547,023
- ----------------------------------------------------------------------------------------------------------
Shareholders' Preferred stock. Authorized 2,000,000 shares; none issued - -
Equity Common stock, $5 par value. Authorized 200,000,000 shares
in 1996 and 100,000,000 in 1995; outstanding 109,869,886
in 1996; 55,382,341 in 1995 549,350 276,912
Capital surplus 227,079 466,039
Retained earnings 1,024,365 1,029,409
Net unrealized gain (loss) on securities available
for sale (notes 4 and 10) (21,284) 13,228
------------------------------------------------------------------------------------------
Total Shareholders' Equity (notes 12, 14 and 16) 1,779,510 1,785,588
Commitments and contingencies (notes 8 and 21)
------------------------------------------------------------------------------------------
Total Liabilities And Shareholders' Equity $22,861,941 $22,332,611
==========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-44-
<PAGE>
Consolidated Statements of Income
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands, except per share data Years Ended December 31,
--------------------------------------------
1996 1995 1994
<S> <C>
Income Interest and fees on loans $1,178,236 $1,181,048 $ 964,453
From Interest on taxable securities held to maturity 56,394 123,118 129,521
Earning Interest on tax-exempt securities 5,376 6,124 7,226
Assets held to maturity
Interest and dividends on securities available
for sale 242,486 133,290 142,357
Income on money market investments 17,875 20,178 28,383
Interest on mortgage loans held for sale 63,012 28,145 28,854
-----------------------------------------------------------------------------------------------
Total income from earning assets 1,563,379 1,491,903 1,300,794
- ---------------------------------------------------------------------------------------------------------------
Interest Interest-bearing demand deposits 171,109 180,600 152,539
Expense Regular savings deposits 43,850 51,368 56,602
Domestic time deposits 259,971 257,418 193,254
Certificates of deposit $100,000 and over 27,843 3,915 2,600
-----------------------------------------------------------------------------------------------
Total interest on deposits 502,773 493,301 404,995
Short-term borrowings 144,797 133,709 79,192
Long-term debt 49,499 50,038 38,756
-----------------------------------------------------------------------------------------------
Total interest expense 697,069 677,048 522,943
- ---------------------------------------------------------------------------------------------------------------
Net Credit Net Interest Income 866,310 814,855 777,851
Income Provision for loan losses (note 7) 95,890 66,265 36,509
-----------------------------------------------------------------------------------------------
Net Credit Income 770,420 748,590 741,342
- ---------------------------------------------------------------------------------------------------------------
Noninterest Service charges on deposit accounts 114,249 109,264 103,692
Income Trust and investment advisory income 65,939 59,841 54,963
Bank card-related income 55,261 52,845 43,810
Other income (note 18) 97,516 103,095 97,034
Securities gains (losses) (note 4) 3,393 (2,067) (10,766)
-----------------------------------------------------------------------------------------------
Total noninterest income 336,358 322,978 288,733
- ---------------------------------------------------------------------------------------------------------------
Net Credit And Noninterest Income 1,106,778 1,071,568 $1,030,075
- ---------------------------------------------------------------------------------------------------------------
Noninterest Personnel expense (notes 15, 16 and 17) 397,448 388,542 372,590
Expense Occupancy expense - net 64,450 62,851 63,290
Equipment expense 38,479 37,916 35,063
Other expense (note 19) 283,142 231,800 229,684
-----------------------------------------------------------------------------------------------
Total noninterest expense 783,519 721,109 700,627
- ---------------------------------------------------------------------------------------------------------------
Net Income Income before income taxes 323,259 350,459 329,448
Income tax expense (note 10) 104,988 134,572 114,290
-----------------------------------------------------------------------------------------------
Net income $ 218,271 $ 215,887 $ 215,158
===============================================================================================================
Earnings Per Share
Primary $ 1.95 $ 1.92 $ 1.93
Fully Diluted 1.94 1.92 1.93
===============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-45-
<PAGE>
Consolidated Statements of Cash Flows
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands Years Ended December 31,
--------------------------------------------------
1996 1995 1994
<S> <C>
Operating Net Income $ 218,271 $ 215,887 $ 215,158
Activities Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Provisions for loan losses, foreclosed
properties and other losses 100,540 65,068 43,401
Depreciation and amortization of premises
and equipment 46,719 46,948 44,066
Securities losses (gains) (3,393) 2,067 10,766
Amortization of intangible assets 16,673 15,416 7,740
Deferred income tax expense (benefit) (4,826) 8,363 806
Gain on foreclosed properties (546) (1,322) (3,298)
Gain on sales of mortgage servicing rights (8,268) (11,000) (18,732)
Net increase in trading account (424) (3,565) 1,486
Origination and purchase of loans held for sale (4,204,696) (2,854,956) (3,245,404)
Proceeds from sales of loans held for sale 4,234,076 2,392,666 3,742,026
Net decrease (increase) in accrued interest
receivable, prepaid expenses and other assets (56,105) (13,998) 30,541
Net increase (decrease) in accrued interest
payable, accrued expenses and other liabilities 70,778 16,900 (55,367)
Other, net 2,326 5,449 8,618
-------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 411,125 (116,077) 781,807
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Proceeds from maturities and calls of securities
Activities held to maturity 413,760 443,674 759,826
Proceeds from maturities and calls of securities
available for sale 2,110,023 550,384 779,987
Proceeds from sales of securities available for sale 4,349,327 1,937,661 1,739,244
Purchases of securities held to maturity (276,492) (70,242) (1,043,138)
Purchases of securities available for sale (7,207,722) (2,709,418) (1,085,091)
Net decrease (increase) in money market investments (228,980) (60,053) 244,359
Principal collected on non-bank subsidiary loans 71,013 21,636 11,284
Loans originated by non-bank subsidiaries (286,615) (164,147) (459,856)
Net increase in other loans (108,720) (85,961) (911,282)
Purchases of premises and equipment (72,861) (57,617) (48,113)
Proceeds from sales of foreclosed properties 21,354 48,102 51,563
Proceeds from sales of mortgage servicing rights 15,971 16,518 32,198
Purchases of net assets of financial institutions 138,628 144,875 23,703
Proceeds from sales of branch deposits and premises (7,837) (91,861) -
Other, net (28,747) (16,864) (5,449)
-------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (1,097,898) (93,313) 89,235
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Net decrease in demand, interest-bearing demand
Activities and regular savings deposits (140,758) (214,450) (162,996)
Net increase (decrease) in certificates of deposit (626,637) 427,435 (676,194)
Net increase in short-term borrowings 1,297,730 345,552 132,466
Proceeds from issuance of long-term debt 63 8,626 181,643
Proceeds from issuance of preferred stock by subsidiary 200,000 - -
Principal payments on long-term debt (65,374) (82,447) (103,396)
Cash dividends paid (98,660) (87,031) (76,777)
Common stock purchased and retired (98,823) (82,144) (48,450)
Proceeds from the issuance of common stock 41,109 31,718 28,112
Other, net (2,086) - 2,583
-------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 506,564 347,259 (723,009)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash And Increase (decrease) in cash and cash equivalents (180,209) 137,869 148,033
Cash Cash and cash equivalents at beginning of year 1,285,245 1,147,376 999,343
-------------------------------------------------------------------------------------------------------------
Equivalents Cash and cash equivalents at end of year $ 1,105,036 $ 1,285,245 $ 1,147,376
==================================================================================================================================
</TABLE>
Cash and cash equivalents consist of cash and due from banks; see accompanying
notes to consolidated financial statements.
-46-
<PAGE>
Consolidated Statements Of Changes In Shareholders' Equity
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) On
Common Stock Securities
------------ Capital Retained Available
In thousands, except per share data Shares Amount Surplus Earnings For Sale Total
<S> <C>
Balance, December 31, 1993 55,027 $275,136 $356,634 $ 878,339 $ - $1,510,109
Net Income - - - 215,158 - 215,158
Cash dividends declared on
common stock ($.765 per share) - - - (76,777) - (76,777)
Cumulative effect of change in accounting
for securities available for sale (note 4) - - - - 32,812 32,812
Change in net unrealized gain on securities
available for sale (notes 4,10) - - - - (72,205) (72,205)
Common stock purchased and
retired (1,120) (5,602) - (42,848) - (48,450)
Common stock issued:
For acquisition of financial institution 264 1,321 11,267 - - 12,588
For dividend reinvestment plan 345 1,726 12,150 - - 13,876
For thrift and profit sharing plan 183 918 6,607 - - 7,525
For directors' stock compensation plan 2 9 69 - - 78
Upon exercise of stock options
(including tax benefit of $1,193) 265 1,321 5,390 - - 6,711
Upon conversion of
debentures 12 61 52 - - 113
- --------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 54,978 $274,890 $392,169 $ 973,872 $(39,393) $1,601,538
Net Income - - - 215,887 - 215,887
Cash dividends declared on
common stock ($.875 per share) - - - (87,031) - (87,031)
Change in net unrealized loss on
securities available for sale (notes 4, 10)- - - - 52,621 52,621
Common stock purchased and
retired (1,765) (8,825) - (73,319) - (82,144)
Common stock issued:
For acquisition of financial
institutions 1,318 6,589 45,973 - - 52,562
For dividend reinvestment plan 376 1,881 14,792 - - 16,673
For thrift and profit sharing plan 231 1,156 7,967 - - 9,123
For other stock compensation plans 10 50 387 - - 437
Upon exercise of stock options
(including tax benefit of $1,290) 234 1,171 4,751 - - 5,922
- --------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 55,382 $276,912 $466,039 $1,029,409 $13,228 $1,785,588
Net Income - - - 218,271 - 218,271
Cash dividends declared on
common stock ($1.275 per share) - - - (133,002) - (133,002)
Change in net unrealized gain on
securities available for sale (notes 4, 10)- - - - (34,512) (34,512)
Common stock purchased and
retired (1,702) (8,510) - (90,313) - (98,823)
Cash paid in lieu of fractional shares (1) (8) (78) - - (86)
Common stock issued:
For dividend reinvestment plan 357 1,783 17,799 - - 19,582
For thrift and profit sharing plan 119 593 6,010 - - 6,603
For other stock compensation plans 19 97 868 - - 965
For two-for-one split
in the form of a stock dividend 54,935 274,675 (274,675) - - -
Upon exercise of stock options
(including tax benefit of $6,572) 761 3,808 11,116 - - 14,924
- --------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 109,870 $549,350 $227,079 $1,024,365 $(21,284) $1,779,510
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-47-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(1) Nature Of Operations, Use Of Estimates And Accounting Policies
Crestar Financial Corporation and Subsidiaries (Crestar or the Corporation)
provide banking and non-banking financial services throughout Virginia, Maryland
and Washington, DC, which compose Crestar's primary market area. Through a
network of 508 banking locations and 496 automated teller machines, Crestar
provides a broad range of banking services, including various types of deposit
accounts and instruments, commercial and consumer loans, trust and investment
management services, bank credit cards and international banking services. These
services are offered through three bank subsidiaries. Other financial services
are provided through non-bank subsidiaries. Mortgage loan origination, servicing
and wholesale mortgage lending are offered by Crestar Mortgage Corporation, and
Capitoline Investment Services Incorporated provides investment advisory
services. Crestar Insurance Agency, Inc. offers a variety of personal and
business insurance products. Securities brokerage and investment banking
services are offered by Crestar Securities Corporation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying footnotes. Actual results could differ from those estimates.
The accounting and reporting policies of Crestar conform to generally
accepted accounting principles and to general practice within the banking and
financial institutions industry. Certain reclassifications have been made to
prior years' consolidated financial statements to conform to the 1996
presentation. The following is a summary of significant policies:
(a) Principles Of Consolidation
The consolidated financial statements of Crestar include the accounts of all
wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. In the condensed financial
statements of Crestar Financial Corporation (Parent), the investments in
subsidiaries are stated at equity in the net assets of such subsidiaries (note
20).
On December 31, 1996 Crestar merged with Citizens Bancorp (Citizens), a
multi-bank holding company, in a transaction accounted for as a pooling of
interests. Accordingly, historical financial data for periods before the merger
have been restated to include the combined results of both Crestar and Citizens.
Business combinations accounted for as purchases are included only from their
respective dates of acquisition. The excess of cost over the estimated fair
value of the tangible assets and liabilities acquired is recorded as intangible
assets and amortized over the periods estimated to be benefited (generally 15
years).
Assets held in an agency or fiduciary capacity are not assets of Crestar and
are not included in the accompanying consolidated balance sheets.
(b) Stock Split
On December 20, 1996, the Corporation's Board of Directors declared a
two-for-one split of its common stock in the form of a 100% stock dividend,
effective January 24, 1997. Average common shares outstanding and per common
share data in the consolidated financial statements have been retroactively
adjusted to reflect the common stock split.
(c) Securities
Effective January 1, 1994, Crestar prospectively adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities." In accordance with SFAS 115, securities are
classified as either securities held to maturity, securities available for sale
or trading securities. Securities held to maturity are carried at amortized
cost, as the Corporation has the positive intent and ability to hold these
securities to maturity. Trading securities are carried at estimated fair value
as they are intended to be sold in the near term: trading securities are
classified as money market investments on the accompanying consolidated balance
sheets. Securities not classified as held to maturity or trading are classified
as available for sale. Available for sale securities are stated at estimated
fair value, with the unrealized gains and losses, net of tax, reported in a
separate component of shareholders' equity. Quoted market prices are used to
determine estimated fair value.
The amortized cost of securities classified as held to maturity or available
for sale is adjusted for amortization of premiums and accretion of discounts to
maturity, or earlier call date if appropriate, using the level yield method.
Such amortization is included in interest income from securities. Realized gains
and losses, and declines in value judged to be other than temporary are included
in securities gains (losses) in the accompanying consolidated statements of
income. Realized gains and losses are computed using the specific identification
method.
(d) Money Market Investments
Money market investments are stated at cost, which approximates market value,
except for trading securities, which are carried at market value. Trading
securities primarily include U.S. Treasury and municipal debt obligations.
Trading securities may
-48-
<PAGE>
include positions in derivative financial instruments such as futures contracts
and purchased options (note 21). Adjustments to market and trading account gains
and losses are classified as other income in the accompanying consolidated
statements of income. Trading account interest and dividend income are included
in income on money market investments.
(e) Mortgage Loans Held For Sale
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value. Adjustments to market and realized gains and losses are classified
as other income in the accompanying consolidated statements of income.
(f) Loans
Loans are stated at the principal amounts outstanding net of unearned income.
Interest on loans is accrued by multiplying the applicable rates by the
principal amounts outstanding.
Interest receipts on nonaccrual loans are recognized as interest revenue or
are applied to principal when management believes the ultimate collectibility of
principal is in doubt. Generally, business and consumer real estate-mortgage
loans are placed in nonaccrual status when principal or interest is 90 days or
more past due, or earlier if it is known or expected that interest will not be
paid, or full collection of all principal and interest is unlikely, based upon
an evaluation of the financial strength of the borrower and the net realizable
value of the collateral. Bank card loans are not placed in nonaccrual status,
but are charged off when past due 180 days, or sooner upon bankruptcy
notification. Instalment loans are generally placed in nonaccrual status when
past due 120 days. Charge-offs of instalment loans occur when past due 180 days,
or sooner in instances of collateral repossession and deficiency. Loans may be
restructured as to rate, maturity or other terms as determined on an individual
credit basis. Past due loans are loans which are delinquent 90 days or more but
which are currently not in nonaccrual status based on accounting and
collectibility criteria.
Loan origination and commitment fees and certain direct loan origination
costs are deferred and the net amount is amortized as an adjustment of the
related loan's yield. Crestar amortizes these amounts over the contractual life
of the related loans or over the commitment period.
Foreign activities represent less than 1 percent of total assets, revenues,
income before income taxes and net income for all years presented.
(g) Impaired Loans
Effective January 1, 1995, Crestar adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS
114), and No. 118, "Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures" (SFAS 118). In accordance with SFAS 114, impaired
loans are measured and reported based on the present value of expected cash
flows discounted at the loan's effective interest rate, or at the fair value of
the loan's collateral if the loan is deemed "collateral dependent." A valuation
allowance is required to the extent that the measure of the impaired loans is
less than the recorded investment.
Impaired loans are specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due according to the terms of
the loan agreement. The specific factors that influence management's judgment in
determining when a loan is impaired include evaluation of the financial strength
of the borrower and the fair value of the collateral. A specifically reviewed
loan is not impaired during a period of "minimum delay" in payment, regardless
of the amount of shortfall, if the ultimate collectibility of all amounts due is
expected. Crestar defines "minimum delay" as past due less than 90 days.
SFAS 114 does not apply to larger groups of homogeneous loans such as
consumer instalment, bank card and real estate mortgage loans, which are
collectively evaluated for impairment. Impaired loans are therefore primarily
business loans, which include commercial loans and income property and
construction real estate loans. Crestar applies the measurement methods
described above to these loans on a loan-by-loan basis. Smaller balance
populations of business loans, which are not specifically reviewed in accordance
with Crestar's normal credit review procedures, are also excluded from the
application of SFAS 114. Crestar's impaired loans are nonaccrual loans, as
generally loans are placed in nonaccrual status on the earlier of the date that
principal or interest amounts are past due 90 days or more, or the date that
collection of such amounts is judged uncertain based on evaluation of the
financial strength of the borrower and the fair value of the collateral.
Restructured loans are impaired loans in the year of restructuring; thereafter,
such loans are subject to management's evaluation of impairment based on the
restructured terms.
Crestar's charge-off policy for impaired loans is consistent with its policy
for loan charge-offs to the allowance: impaired loans are charged-off when an
impaired loan, or a portion thereof, is considered uncollectible or is
transferred to foreclosed properties.
SFAS 118 allows a creditor to use existing methods for recognizing interest
income on an impaired loan. Consistent with Crestar's method for nonaccrual
loans, interest receipts on impaired loans are recognized as interest income or
are applied to principal when the ultimate collectibility of principal is in
doubt. In accordance with SFAS 114 and SFAS 118, no retroactive
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<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
application of their provisions has been made to the consolidated financial
statements for periods prior to January 1, 1995. The initial adoption of SFAS
114 and SFAS 118 did not require an increase to Crestar's allowance for loan
losses.
(h) Allowance For Loan Losses
Both the amount of the provision and the level of the allowance for loan losses
are effected by many factors, including general economic conditions, actual and
expected credit losses, loan performance measures, historical trends and other
circumstances, both internal and external. The amount of the provision for loan
losses is established based on evaluation of the current level of the allowance.
Individual loan-by-loan reviews are performed quarterly on large commercial and
real estate exposures in the lower quality risk ratings categories. For the
remainder of the portfolio, a formula-based approach is utilized. The formula is
determined by a statistical analysis of risk rating movements and loss rates.
The formula may be adjusted for changes in the subjective factors listed above.
Loan loss allowances for the consumer loan portfolio are also based on
historical and anticipated losses and the current and projected characteristics
of the different types of consumer loans. Management's evaluation and resulting
provision and allowance decisions are reviewed by the Board of Directors on a
quarterly basis.
Loan charge-offs to the allowance are made when a loan, or a portion
thereof, is considered uncollectible or is transferred to foreclosed properties.
(i) Premises And Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization charges are computed using the
straight-line method. Premises and equipment are depreciated over the estimated
useful lives of the assets, except for leasehold improvements which are
amortized over the terms of the respective leases or the estimated useful lives
of the improvements, whichever is shorter. Certain noncancelable leases have
been capitalized and are classified as premises and equipment in the
accompanying consolidated balance sheets. Related amounts representing capital
lease obligations are classified as long-term debt in the accompanying
consolidated balance sheets and are amortized using the interest method to
allocate payments between principal and interest. The initial carrying amounts
represent the present value of the future rental payments, discounted at the
incremental borrowing rate of the lessee. Capital lease assets are amortized
over the lease term.
Estimated lives of the principal items of premises and equipment are: 3 to
50 years for buildings and improvements, and 3 to 12 years for furniture,
fixtures and equipment. The costs of major renovations are capitalized, while
the costs of ordinary maintenance and repairs are expensed as incurred. Interest
costs are capitalized based on a rate representative of the Corporation's long
term cost of funds and the average balance of construction in progress during
the period.
(j) Intangible Assets
Intangible assets consisted of goodwill and deposit based intangibles, having a
combined balance of $179,993,000 and $187,290,000 at December 31, 1996 and 1995,
respectively, and favorable lease rights of $427,000 and $483,000, respectively.
Accumulated amortization of goodwill was $67,174,000 and $53,416,000 at December
31, 1996 and 1995, respectively. Goodwill is amortized on a straight-line basis
over 15 years. Deposit base intangibles are amortized over the estimated lives
of the related deposit relationships, ranging from 8 to 15 years.
(k) Capitalized Mortgage Servicing Rights
Effective January 1, 1995, Crestar adopted Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122). In
accordance with SFAS 122, the cost of mortgage loans purchased or originated
with a definitive plan to sell the loans and retain the mortgage servicing
rights is allocated between the loans and the servicing rights based on their
estimated fair values at the purchase or origination date. A definitive plan to
sell the loans exists if purchase commitments, which include estimates of
selling price, are obtained either prior to the purchase or origination date, or
within a reasonable period thereafter. The estimated fair value of mortgage
loans is determined by reference to quoted prices in active secondary markets.
The estimated fair value of mortgage servicing rights is determined by reference
to the bid and ask prices of recent trades of comparable servicing rights or is
determined based on the expected future cash flows, discounted at a rate
commensurate with the risks involved. These recognition provisions have been
applied prospectively to transactions occurring on or after January 1, 1995.
For the purpose of evaluating and measuring impairment under SFAS 122,
capitalized mortgage servicing rights are stratified according to one or more of
the predominant risk characteristics of the underlying loans. Impairment is
recognized through a valuation allowance for each stratum based on any excess of
the amount capitalized, net of amortization, over fair value. Fair value in
excess of the amount capitalized, net of amortization, is not recognized. These
impairment provisions apply to all capitalized mortgage servicing rights.
Crestar has elected to stratify mortgage servicing rights based on the
underlying loan type. Crestar performs an impairment
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<PAGE>
analysis based on whether the mortgage servicing rights relate to conventional
residential mortgage loans or to government guaranteed residential mortgage
loans.
Capitalized mortgage servicing rights of $49,040,000 and $26,832,000 at
December 31, 1996 and 1995, respectively, were included in other assets in the
accompanying consolidated balance sheets. Mortgage servicing rights of $38
million and $17 million were purchased or originated during 1996 and 1995,
respectively. At December 31, 1996, capitalized mortgage servicing rights were
net of a related valuation allowance of $305,000. The activity in such valuation
allowance, which had a balance of $269,000 and $174,000 at December 31, 1995 and
1994, respectively, was not material to the consolidated financial statements
for 1996, 1995 and 1994.
The fair value of capitalized mortgage servicing rights was approximately
$74 million at December 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 serving and credit
costs. Amortization expense for capitalized mortgage servicing rights totaled
$8.5 million and $5.6 million in 1996 and 1995, respectively.
(l) Foreclosed Properties
Property acquired through legal foreclosure proceedings, abandonment of the
property, acceptance of deed in lieu of foreclosure or transfer in exchange for
an outstanding loan is initially recorded at estimated fair value less estimated
selling costs at the date of foreclosure, establishing a new cost basis. At the
time of foreclosure, any excess of cost over the estimated fair value is charged
to the allowance for loan losses, and estimated selling costs are expensed as
foreclosed properties expense. After foreclosure, valuations are routinely
performed by management and the property is carried at the lower of cost or fair
value less estimated selling costs. Write-downs are charged against any
applicable foreclosed property valuation allowance or current earnings.
(m) Income Taxes
The Parent and its subsidiaries file a consolidated federal income tax return.
The provision for income taxes for each company is recorded on the basis of
filing separate income tax returns, after adjustments relating to consolidated
income tax regulations and signed tax sharing agreements. Income taxes currently
payable or receivable by each subsidiary are paid to or received from the
Parent.
The Corporation records a provision for income taxes based on the amounts of
current and deferred taxes payable (or refundable) for the year. The deferred
tax expense or benefit represents the change in the net deferred tax asset or
liability during the period. Deferred tax assets and liabilities are recognized
for the tax effects of differing carrying values of assets and liabilities for
tax and financial statement reporting purposes that will reverse in future
periods.
(n) Shareholders' Equity
During December 1996, the Corporation's Board of Directors increased the common
stock authorization from 100,000,000 to 200,000,000 shares.
During 1996, 1995 and 1994 the Corporation purchased and retired 3,404,000,
3,530,200 and 2,240,600 shares of common stock (on a post-split basis) at an
average cost of $29.03, $23.27 and $21.62 per share, respectively. No shares
were beneficially owned by a subsidiary.
During 1994, all remaining subordinated debentures were converted into 12,210
shares of common stock.
(o) Earnings Per Share
Earnings per share are computed by dividing net income applicable to common
shares by the weighted average number of common shares outstanding during the
period, including average common equivalent shares attributable to dilutive
stock options. Fully diluted earnings per share include the maximum dilutive
effect of dilutive stock options.
The weighted average number of common shares outstanding during 1996, 1995
and 1994 was 110,537,000, 110,986,000 and 110,957,000, respectively. For 1996,
1995 and 1994 average common equivalent shares used to compute primary earnings
per share were 1,500,000, 1,446,000 and 686,000, respectively. For 1996, 1995
and 1994 average common equivalent shares used to compute fully diluted earnings
per share were 1,871,000, 1,637,000 and 708,000, respectively.
(p) Fee Revenue
Crestar generally records mortgage loan servicing income as payments are
collected, based on a percentage of the principal balance of loans serviced.
Loan servicing expenses are charged to operations when incurred. Trust and
investment advisory revenues are recorded on an accrual basis, with income
recognized when earned. Fee income from matched swap, cap and floor arrangements
for which Crestar serves as a financial intermediary is recognized over the
lives of the related agreements and is classified as other income in the
consolidated statements of income.
(q) Risk Management Instruments
Interest rate swaps, caps and floors used to achieve interest rate risk
management objectives are accounted for in a manner consistent with the
accounting basis of
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<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
the related asset or liability. An instrument designated to hedge an asset or
liability carried at historical cost is accounted for on an accrual basis,
whereby the interest income or expense of the related asset or liability is
adjusted for the net amount of any interest receivable or payable generated by
the hedging instrument during the reporting period. For such instruments, no
amounts other than any accrued interest receivable or payable, or any deferred
premiums paid, are included in the accompanying consolidated balance sheets.
Interest rate swaps involve the exchange of payments between counterparties
based on the interest differential between a fixed and a floating interest rate
applied to a notional balance. Under accrual accounting, this interest
differential is recognized as an adjustment to the interest income or expense of
the related asset or liability in the accompanying statements of income. In
exchange for a premium paid, purchased interest rate caps and floors provide for
a payment to Crestar based on the difference between an index interest rate and
the contractual cap or floor rate. Under accrual accounting, this payment is
recognized as an increase to the interest income or as a decrease to the
interest expense of the related asset or liability, respectively. The premium
paid for interest rate caps or floors is amortized over the life of the
instrument as a decrease to the interest income or as an increase to the
interest expense of the related asset or liability, respectively.
To qualify for accrual accounting, these derivative instruments are
required to meet an identified risk management objective, to be designated to
specific pools of assets or liabilities in the consolidated balance sheets, and
to have underlying indices that highly correlate (i.e., move concurrently and
are of the same relative duration) with the indices of the designated assets or
liabilities. In addition to establishing expected index and balance correlation
at inception, management performs a periodic assessment to demonstrate ongoing
correlation. Should these derivative instruments fail to meet the accrual
criteria at inception or over the life of the instruments, the instruments would
be marked to market as trading securities (note 1(c)). Crestar has had no
derivative instruments used for risk management purposes which have failed to
meet accrual criteria over the life of the instruments.
Upon early termination of derivative instruments which otherwise meet
accrual criteria, the net proceeds received or paid are deferred, if material,
in the accompanying consolidated balance sheet and amortized to the interest
income or expense of the related asset or liability over the lesser of the
remaining contractual life of the instrument or the maturity of the related
asset or liability. At December 31, 1996 and 1995, there were no deferred gains
or losses in the accompanying consolidated balance sheets arising from the
termination of instruments qualifying for accrual accounting prior to maturity.
Forward contracts are used to hedge interest rate exposure on mortgage loan
commitments and mortgage loans held for sale. Unrealized gains and losses on the
contracts are included in the cost basis used in adjusting the carrying value of
mortgage loans held for sale to the lower of cost or market value. Realized
gains and losses and adjustments to the lower of cost or market value are
included in mortgage loan origination income in the accompanying consolidated
statements of income.
(r) Retirement, Postretirement And Postemployment Benefits
Substantially all employees are covered by a pension plan. The net periodic
pension expense includes a service cost component, a component reflecting the
actual return on plan assets, an interest cost component, and the effect of
deferring and amortizing certain actuarial gains and losses and the unrecognized
net transition asset over 15 years. Costs of retiree benefits other than
pensions are accrued in a manner similar to pension costs.
Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers'
Accounting for Postemployment Benefits," was adopted by Crestar on January 1,
1994. Under SFAS 112, benefits provided to inactive or former employees before
retirement are accrued during the period of active employment, rather than being
expensed as paid. Adoption of SFAS 112 resulted in a pre-tax charge to employee
benefit expense of $1.8 million in the first quarter of 1994.
(2) Mergers And Acquisitions
On December 31, 1996 Crestar merged with Citizens Bancorp (Citizens), a bank
holding company based in Laurel, Maryland, in a transaction accounted for as a
pooling of interests business combination. Accordingly, historical financial
data for periods before the merger have been restated to include the combined
results of both Crestar and Citizens. Based on an exchange ratio of 1.67 shares
(.835 shares on a pre-split basis) of Crestar common stock for each outstanding
share of Citizens common stock, Crestar issued approximately 25,300,000 shares
of common stock. Citizens had total assets of approximately $4.1 billion at the
date of acquisition. Excluding the impact of $32.5 million (after-tax) in merger
related expenses, Citizens had net income of $43.4 million, and Crestar had net
income of $207.4 million, on a pre-merger
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<PAGE>
basis for the year ended December 31, 1996. Net interest income for the year
ended December 31, 1996, on a pre-merger basis, was $142.3 million for Citizens
and $724.0 million for Crestar.
On December 31, 1995 Crestar merged with Loyola Capital Corporation (Loyola),
a savings bank holding company based in Baltimore, Maryland. The merger with
Loyola was also accounted for as pooling of interests business combination, and
historical financial data for periods before the merger were restated at that
time to include the combined results of Crestar and Loyola. Approximately
10,426,000 shares of common stock were issued by Crestar to the former
shareholders of Loyola. Loyola had total assets of approximately $2.5 billion at
the date of merger. Excluding the impact of $29.3 million (after-tax) in merger
related expenses, and the subsequent restatement of results for the Citizens
pooling of interests merger, Loyola had net income of approximately $19.1
million and Crestar had net income of approximately $189.9 million, on a
pre-merger basis, for the year ended December 31, 1995. Net interest income for
the year ended December 31, 1995, on a pre-merger basis, was $71.3 million for
Loyola and $608.1 million for Crestar.
Net interest income, net income and net income per share amounts for
Crestar, Citizens and Loyola, prior to restatement for pooling of interests
mergers, are presented below:
<TABLE>
<CAPTION>
========================================================================================
In millions, except per share amounts
Years ended December 31 1995 1994
<S> <C>
Crestar Financial Corporation
Net interest income $679.4 $579.8
Net income 179.8 169.1
Net income per common share 2.06 2.23
Citizens Bancorp
Net interest income 135.5 131.2
Net income 36.1 31.0
Net income per
Citizens common share 2.40 2.09
Loyola Capital Corporation
Net interest income NA 66.9
Net income NA 15.0
Net income per
Loyola common share NA 1.74
Combined Crestar
Financial Corporation
Net interest income 814.9 777.9
Net income 215.9 215.2
Net income per common share 1.92 1.93
=========================================================================================
</TABLE>
NA - Not applicable due to 1995 merger date
On June 6, 1996, Crestar purchased the deposits and customer accounts,
plus selected loans, of ten branches of Mellon Bank (MD), located in the
Maryland suburbs of the metropolitan Washington, D.C. area. The purchase
included approximately $150 million of deposits. Also in the second quarter of
1996, Crestar's mortgage banking subsidiary completed the purchase of Ryland
Funding Group, a wholesale mortgage banker with four mortgage loan production
offices. In December 1996, Crestar acquired the student lending business of
Great Western Financial Corporation of California, expanding the Corporation's
national education lending operations. The acquisition included a $370 million
portfolio of student loans, which are classified as consumer-installment loans
on the consolidated balance sheets. Each of these three acquisitions was
accounted for as a purchase and, accordingly, their results of operations are
included in the accompanying financial statements since their respective
acquisition dates. The results of operations for the periods prior to their
respective acquisition dates were not material to the results of Crestar. The
excess of cost over the estimated fair value of the tangible assets and
liabilities acquired in the purchase transactions was recorded as an intangible
asset, totaling approximately $10.2 million, on the accompanying consolidated
financial statements.
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<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaires
(3) Securities Held To Maturity
The amortized cost (carrying values) and estimated fair values of securities
held to maturity at December 31 follow:
<TABLE>
<CAPTION>
===========================================================================================================
Amortized Unrealized Unrealized Market
In thousands Cost Gains Losses Value
<S> <C>
1996
U.S. Treasury and Federal agencies $ 237,942 $ 733 $2,300 $ 236,375
Mortgage-backed obligations of Federal agencies 18,566 910 - 19,476
Other taxable securities 633,396 2,656 3,613 632,439
States and political subdivisions 77,606 1,018 164 78,460
- -----------------------------------------------------------------------------------------------------------
Total $ 967,510 $5,317 $6,077 $ 966,750
- -----------------------------------------------------------------------------------------------------------
1995
U.S. Treasury and Federal agencies $ 210,686 $ 821 $1,274 $ 210,233
Mortgage-backed obligations of Federal agencies 27,857 1,777 - 29,634
Other taxable securities 779,497 2,291 3,657 778,131
States and political subdivisions 87,036 3,041 69 90,008
- -----------------------------------------------------------------------------------------------------------
Total $1,105,076 $7,930 $5,000 $1,108,006
===========================================================================================================
The stated maturities of securities held to maturity at December 31, 1996
follow:
===========================================================================================================
Amortized Market
In thousands Cost Value
Due in one year or less $ 59,938 $ 60,085
Due after one year through five years 265,492 264,161
Due after five years through ten years 182,525 182,615
Due after ten years 459,555 459,889
- -----------------------------------------------------------------------------------------------------------
Total $967,510 $966,750
===========================================================================================================
</TABLE>
At December 31, 1996 and 1995 securities held to maturity with an aggregate
carrying value of $418,470,000 and $304,453,000, respectively, were pledged to
secure deposits and for other purposes.
(4) Securities Available For Sale
The amortized cost and estimated fair values (carrying values) of securities
available for sale at December 31 follow:
<TABLE>
<CAPTION>
===========================================================================================================
Amortized Unrealized Unrealized Market
In thousands Cost Gains Losses Value
<S> <C>
1996
U.S. Treasury and Federal agencies $ 823,118 $ 203 $ 5,141 $ 818,180
Mortgage-backed obligations of Federal agencies 2,740,907 11,587 39,115 2,713,379
Other taxable securities 576,911 2,676 3,040 576,547
Common and preferred stocks 210,203 40 - 210,243
- -----------------------------------------------------------------------------------------------------------
Total $4,351,139 $14,506 $47,296 $4,318,349
- -----------------------------------------------------------------------------------------------------------
1995
U.S. Treasury and Federal agencies $ 646,659 $ 3,559 $ 462 $ 649,756
Mortgage-backed obligations of Federal agencies 2,278,922 19,384 3,646 2,294,660
Other taxable securities 570,508 2,545 1,076 571,977
Common and preferred stocks 186,771 214 - 186,985
- -----------------------------------------------------------------------------------------------------------
Total $3,682,860 $25,702 $ 5,184 $3,703,378
===========================================================================================================
</TABLE>
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<PAGE>
The stated maturities of securities available for sale at December 31, 1996
follow:
<TABLE>
<CAPTION>
==========================================================================================================
Amortized Market
In thousands Cost Value
<S> <C>
Due in one year or less $ 161,371 $ 161,345
Due after one year through five years 1,005,898 1,001,520
Due after five years through ten years 1,095,572 1,098,112
Due after ten years 1,878,095 1,847,129
- -----------------------------------------------------------------------------------------------------------
4,140,936 4,108,106
Common and preferred stocks 210,203 210,243
- -----------------------------------------------------------------------------------------------------------
Total $4,351,139 $4,318,349
===========================================================================================================
</TABLE>
At December 31, 1996 and 1995, securities available for sale with an aggregate
carrying value of $1.9 billion and $1.4 billion, respectively, were pledged to
secure deposits and for other purposes.
Proceeds from sales of securities available for sale were $4.3 billion in
1996, $1.9 billion in 1995 and $1.7 billion in 1994. Gross gains of $12.7, $5.3
and $6.2 million and gross losses of $9.3 million, $7.4 million and $17.0
million were realized on such sales during 1996, 1995 and 1994, respectively.
As a result of the issuance of Financial Accounting Series No. 155-B, "A
Guide to Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities," Crestar transferred securities having an
amortized cost of $966 million and an estimated market value of $963 million
from held to maturity to available for sale during the fourth quarter of 1995.
As a result of Crestar's initial adoption of SFAS 115 (note 1(c)), securities
having an amortized cost of $2.989 billion and an estimated market value of
$3.041 billion were classified as securities available for sale on January 1,
1994, resulting in an increase in shareholders' equity of $32.8 million. This
increase was the amount by which the fair value of securities available for
sale, net of tax, exceeded the amortized cost of such securities on January 1,
1994.
(5) Money Market Investments
Money market investments at December 31 included:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
<S> <C>
Federal funds sold $178,120 $269,285
Securities purchased under agreements to resell 417,000 194,000
Time deposits 125,041 40,040
U.S. Treasury 5,802 5,501
Trading account securities 7,563 4,490
Other 12,146 2,952
- -----------------------------------------------------------------------------------------------------------
Total money market investments $745,672 $516,268
===========================================================================================================
</TABLE>
(6) Nonperforming Assets And Impaired Loans
Nonperforming assets at December 31 are shown below. Nonperforming assets
include nonaccrual loans, loans which meet the accounting definition of a
troubled debt restructuring (restructured loans) and foreclosed properties.
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, excluded from the amounts shown below, totaled $71.9 million and $55.5
million at December 31, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
<S> <C>
Nonaccrual loans $ 81,443 $ 89,984
Foreclosed properties - net 27,515 39,054
- -----------------------------------------------------------------------------------------------------------
Total nonperforming assets $108,958 $129,038
===========================================================================================================
Average nonperforming loans for the year $ 82,700 $109,600
===========================================================================================================
Average nonperforming assets for the year $117,700 $150,100
===========================================================================================================
</TABLE>
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<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
Non-cash additions to foreclosed properties were $7.9 million, $14.6 million and
$14.1 million in 1996, 1995 and 1994, respectively. On December 31, 1996,
Crestar had commitments to lend approximately $1.7 million to customers whose
loans were classified as nonperforming. At December 31, 1996 and 1995 loans
accounted for as restructured loans, included in nonaccrual loans, totaled $17.4
million and $10.1 million, respectively. Nonaccrual loans are classified as
loans in the accompanying consolidated balance sheets.
The aggregate recorded investment in nonperforming loans outstanding at
December 31, 1996, 1995 and 1994, the pro forma interest income that would have
been earned in 1996, 1995 and 1994 if such loans had not been classified as
nonperforming, and the amount of interest income actually included in net
interest income for such years follows:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands Nonperforming Loan Category
------------------------------------------------------------------------------
Real Estate- Real Estate-
1996 Commercial Income Property Construction All Other Total
<S> <C>
Recorded investment $20,348 $22,624 $10,368 $28,103 $81,443
Pro forma interest 4,460 3,621 1,412 258 9,751
Interest earned 279 583 - 38 900
- -----------------------------------------------------------------------------------------------------------
1995
Recorded investment $29,714 $28,366 $ 6,096 $25,808 $ 89,984
Pro forma interest 6,411 6,059 1,206 1,255 14,931
Interest earned 58 240 7 221 526
- -----------------------------------------------------------------------------------------------------------
1994
Recorded investment $39,943 $36,532 $ 8,624 $19,410 $104,509
Pro forma interest 4,913 4,569 873 975 11,330
Interest earned 252 235 11 203 701
===========================================================================================================
</TABLE>
Included in Crestar's nonperforming loans above are certain impaired loans as
defined by SFAS 114. SFAS 114, as amended by SFAS 118, was adopted by Crestar
effective January 1, 1995 (note 1(g)). Impaired loans and the allocated
valuation allowance at December 31 were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
--------------------- ---------------------
Loan Valuation Loan Valuation
Balance Allowance Balance Allowance
<S> <C>
Impaired with valuation allowance $29,830 $5,390 $31,740 $5,230
Impaired without valuation allowance - - 2,054 -
- -----------------------------------------------------------------------------------------------------------
Total impaired loans $29,830 $5,390 $33,794 $5,230
===========================================================================================================
</TABLE>
Collateral dependent loans, which were measured at the fair value of the
collateral, constituted 100% of impaired loans at December 31, 1996. The
allocated valuation allowance for impaired loans, and activity related thereto,
is included in the allowance for loan losses (note (7)).
The average recorded investment in impaired loans and the amount of interest
income recognized for the years ended December 31 were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
<S> <C>
Average recorded investment in impaired loans $34,387 $37,609
Interest income recognized during impairment 738 157
===========================================================================================================
</TABLE>
-56-
<PAGE>
(7) Allowance For Loan Losses
Transactions in the allowance for loan losses for the years ended December 31
were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Beginning balance $274,430 $265,171 $254,682
- -----------------------------------------------------------------------------------------------------------
Charge-offs (132,085) (96,801) (75,474)
Recoveries 31,521 31,442 33,767
- -----------------------------------------------------------------------------------------------------------
Net charge-offs (100,564) (65,359) (41,707)
Provision for loan losses 95,890 66,265 36,509
Allowance from acquisitions and other activity - net (888) 8,353 15,687
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) (5,562) 9,259 10,489
- -----------------------------------------------------------------------------------------------------------
Ending balance $268,868 $274,430 $265,171
===========================================================================================================
</TABLE>
In 1996, 1995 and 1994 there were no loans charged off representing allocated
transfer risk reserves.
(8) Premises And Equipment
Premises and equipment at December 31 included:
====================================================
In thousands 1996 1995
Land $ 67,136 $ 69,672
Buildings and improvements 386,215 384,242
Furniture, fixtures and
equipment 331,655 325,301
Capitalized leases
Land and buildings 1,942 3,154
Equipment - -
Less: Accumulated deprecia-
tion and amortization (399,311) (385,402)
- ----------------------------------------------------
387,637 396,967
Construction in progress 47,679 15,689
- ----------------------------------------------------
Total premises and
equipment - net $435,316 $412,656
====================================================
At December 31, 1996, future minimum lease payments under noncancelable capital
and operating leases that have an initial term in excess of one year follow:
===================================================
Operating Capital
In thousands Leases Leases
1997 $ 25,418 $ 259
1998 21,443 184
1999 17,788 177
2000 13,419 177
2001 9,453 170
Later years 46,872 703
- ---------------------------------------------------
Total minimum lease
payments $134,393 $1,670
Imputed interest (rates
of 8 5/8 - 14 3/8%) (682)
- ---------------------------------------------------
Present value of net
minimum lease payments
(included in long-term debt) $ 988
===================================================
Total minimum lease payments included in the preceding table have not been
reduced by future minimum sublease rentals of $776,000. There were no new
capital lease obligations incurred in 1996, 1995 or 1994.
Crestar owns and, along with its subsidiaries, is the principal tenant of the
corporate headquarters building in Richmond, Virginia, the Crestar Mortgage
Corporation headquarters building in Richmond, an operations center in Richmond,
and regional office buildings in Roanoke and Norfolk, Virginia, Washington, DC,
and Baltimore, Maryland. At December 31, 1996, Crestar had 508 banking
locations, of which approximately 55% were owned facilities with the remainder
as leased properties. Management considers these properties suitable and
adequate for current operations.
During 1996 and 1995, Crestar capitalized interest of $485,000 and $1.4
million, respectively, associated with construction in progress.
Lease expense relating to both cancelable and noncancelable operating lease
agreements (including month-to-month rental agreements) is shown below.
Customarily, these leases provide that the lessee pay taxes, maintenance,
insurance and certain other operating expenses applicable to the leased
property.
===================================================
In thousands 1996 1995 1994
Buildings $25,867 $26,414 $26,136
Equipment 4,699 4,172 3,985
- ---------------------------------------------------
Total lease expense $30,566 $30,586 $30,121
===================================================
-57-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(9) Allowance For Foreclosed Properties
Transactions in the allowance for losses on foreclosed properties for the years
ended December 31 were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Beginning balance $13,574 $22,463 $18,054
- -----------------------------------------------------------------------------------------------------------
Provision for foreclosed properties 6,550 (2,119) 4,883
Write-downs (1,204) (9,464) (6,013)
Allowance from acquisitions - net (471) 2,694 5,539
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) 4,875 (8,889) 4,409
- -----------------------------------------------------------------------------------------------------------
Ending balance $18,449 $13,574 $22,463
===========================================================================================================
</TABLE>
(10) Income Taxes
The current and deferred components of income tax expense allocated to
continuing operations for the years ended December 31 in the accompanying
consolidated statements of income were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Current:
Federal $107,402 $118,226 $106,579
State and local 2,412 7,983 6,905
- -----------------------------------------------------------------------------------------------------------
Total current tax expense 109,814 126,209 113,484
- -----------------------------------------------------------------------------------------------------------
Deferred:
Federal (6,290) 6,391 1,239
State and local 1,464 1,972 (433)
- -----------------------------------------------------------------------------------------------------------
Total deferred tax expense (benefit) (4,826) 8,363 806
- -----------------------------------------------------------------------------------------------------------
Total income tax expense $104,988 $134,572 $114,290
===========================================================================================================
</TABLE>
In addition to the state and local income tax expense above, Crestar incurred
Virginia bank franchise tax expense of $6,103,000 in 1996, $3,863,000 in 1995
and $3,259,000 in 1994. This tax is imposed on banks in Virginia in lieu of
income and personal property taxes. Crestar remits 80 percent of the tax to the
Virginia municipalities in which it does business and the remaining 20 percent
to the Commonwealth of Virginia.
The differences between the amounts computed by applying the statutory
federal income tax rate to income before income taxes and the actual income tax
expense allocated to operations for the years ended December 31 were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Income before income taxes $323,259 $350,459 $329,448
Tax expense at statutory rate 113,141 122,661 115,307
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in taxes resulting from:
Allowance for loan loss recapture (8,694) 8,694 -
Tax-exempt interest and dividends (7,314) (8,047) (8,030)
Nondeductible interest expense 1,079 807 459
Amortization of goodwill 4,146 3,928 2,552
State income taxes 1,866 7,138 4,207
Other - net 764 (609) (205)
- -----------------------------------------------------------------------------------------------------------
Total increase (decrease) in taxes (8,153) 11,911 (1,017)
- -----------------------------------------------------------------------------------------------------------
Total income tax expense $104,988 $134,572 $114,290
- -----------------------------------------------------------------------------------------------------------
Effective tax rate 32.5% 38.4% 34.7%
===========================================================================================================
</TABLE>
-58-
<PAGE>
The Corporation made income tax payments of $114,131,000, $105,270,000 and
$110,946,000 during 1996, 1995 and 1994, respectively.
The sources and tax effects of temporary differences that gave rise to
significant portions of deferred income tax assets (liabilities) at December 31
were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
<S> <C>
Deferred income tax assets:
Allowance for loan losses $ 85,797 $ 74,650
Intangible assets 16,211 17,804
Compensation and employee benefits 28,568 23,816
Mortgage servicing - 895
Unrealized loss on securities available for sale 11,484 -
Other 9,692 9,222
- -----------------------------------------------------------------------------------------------------------
Total deferred income tax assets 151,752 126,387
- -----------------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Premises and equipment (15,543) (15,786)
Loans (5,091) (5,975)
Mortgage servicing (9,462) -
Unrealized gain on securities available for sale - (7,255)
Other (4,697) (5,359)
- -----------------------------------------------------------------------------------------------------------
Total deferred income tax liabilities (34,793) (34,375)
- -----------------------------------------------------------------------------------------------------------
Net deferred income tax asset $116,959 $ 92,012
===========================================================================================================
</TABLE>
The net deferred income tax asset is included in other assets in the
accompanying consolidated balance sheets. There was no valuation allowance
relating to the net deferred tax asset at December 31, 1996 and 1995. Crestar
has sufficient taxable income in the available carryback periods to realize all
of its deferred income tax assets.
(11) Short-Term Borrowings
Short-term borrowings outstanding as of December 31 and their weighted average
interest rates were:
<TABLE>
<CAPTION>
==========================================================================================================
In thousands 1996 1995 1994
-------------------- -------------------- -------------------
Amount Rate Amount Rate Amount Rate
<S> <C>
Federal funds purchased $2,452,338 6.23% $1,536,553 5.46% $1,052,672 6.29
Securities sold under repurchase
agreements 888,281 5.58 725,104 5.19 805,998 5.73
Federal Home Loan Bank borrowings 525,000 5.50 427,200 5.83 371,200 6.27
Notes payable 248,194 5.26 181,125 4.92 163,442 5.39
Other 2,238 6.23 1,539 2.91 2,220 3.75
- -----------------------------------------------------------------------------------------------------------
Total short-term borrowings $4,116,051 $2,871,521 $2,395,532
===========================================================================================================
</TABLE>
Federal funds purchased generally mature daily. Securities sold under repurchase
agreements generally mature within two weeks or are due upon demand. The Federal
Home Loan Bank borrowings mature within 365 days. Notes payable are due upon
demand.
The Corporation is required to maintain as collateral for its Federal Home
Loan Bank borrowings, including those classified as long-term obligations in
note 12, real estate mortgage loans in an amount approximating 133% of the
outstanding principal balance of the borrowings.
At December 31, 1996, the Parent's unused committed lines of credit totaled
$30 million.
The Corporation paid $647,802,000, $621,684,000 and $479,777,000 in interest
on deposits and short-term borrowings in 1996, 1995 and 1994, respectively.
-59-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(12) Long-Term Debt
Long-term debt at December 31 included:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
<S> <C>
Parent:
8 3/4% Subordinated notes due 2004 $149,693 $149,654
8 1/4% Subordinated notes due 2002 125,000 125,000
8 5/8% Subordinated notes due 1998 49,987 49,976
- -----------------------------------------------------------------------------------------------------------
Total Parent 324,680 324,630
4 3/8 - 7 3/8% Federal Home Loan Bank obligations payable through 2015 310,225 317,591
7 7/8 - 11 1/4% Collateralized mortgage obligation bonds maturing through 2019 14,864 18,587
7 - 8 1/4% Mortgage indebtedness maturing through 2009 8,579 9,369
8 5/8 - 14 3/8% Capital lease obligations maturing through 2006 988 1,119
- -----------------------------------------------------------------------------------------------------------
Total consolidated long-term debt $659,336 $671,296
===========================================================================================================
</TABLE>
In 1994, Crestar completed the sale of $150 million of 8 3/4% subordinated
notes. Net of underwriting discounts, the notes resulted in net proceeds to the
Corporation of $148.6 million. Neither the 8 3/4% nor the 8 1/4% subordinated
notes are redeemable prior to maturity. The 8 5/8% subordinated notes may not be
exchanged or redeemed prior to maturity, except upon the occurrence of certain
events relating to the federal income tax treatment of the notes to the
Corporation. The 8 3/4%, 8 1/4% and 8 5/8% subordinated notes all qualify as
Tier 2 capital for Federal bank regulatory purposes. Expenses relating to the
issuance of the 8 3/4%, 8 1/4% and 8 5/8% notes are being amortized to maturity
on a straight-line basis. Outstanding debt agreements at December 31, 1996 place
restrictions upon the disposal of subsidiaries common stock.
Mortgage indebtedness consists of the debt relating to two pledged facilities
owned by Crestar Bank which have an aggregate carrying value of $20,989,000 at
December 31, 1996. Mortgage payments in 1996, including interest, were
$1,529,000; payments in 1997 are expected to approximate the 1996 amount.
The Corporation made payments of $49,833,000, $48,174,000 and $38,514,000 in
interest on long-term debt in 1996, 1995 and 1994, respectively.
The combined maturities of all long-term debt for the years 1997 through 2001
are as follows:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1997 1998 1999 2000 2001
<S> <C>
Parent $ - $ 49,987 $ - $ - $ -
Consolidated 64,331 116,662 63,455 55,785 17,912
===========================================================================================================
</TABLE>
(13) Minority Interest - Guaranteed Trust Preferred Stock
Crestar Capital Trust I (the Trust) is a wholly-owned special purpose finance
subsidiary of the Parent Company, Crestar Financial Corporation (Crestar),
operating in the form of a grantor trust. The Trust was created in 1996 solely
to issue capital securities and remit the proceeds to Crestar. Crestar is the
sole owner of the common stock securities of the Trust.
On December 31, 1996, the Trust issued 200,000 shares of Preferred Stock
capital securities (Trust Preferred Stock) with a stated value of $1,000 per
share, and a fixed dividend yield of 8.16% of the stated value. The stated value
of the Trust Preferred Stock is unconditionally guaranteed on a subordinated
basis by the Parent Company. The securities have a mandatory redemption date of
December 15, 2026, and are subject to varying call provisions at the option of
Crestar beginning December 15, 2006. Through an inter-company lending
transaction, proceeds received by the Trust from the sale of the securities were
invested in junior subordinated debentures of Crestar, the Parent Company. The
Trust Preferred Stock is senior to the Parent's common stock in event of claims
against the Parent, but is subordinate to all senior and subordinated debt
securities. Crestar has the right to terminate the Trust upon the occurrence of
certain events, including (a) dividend payments on the preferred stock
securities are no longer deemed tax-deductible, or the Trust is taxed on the
income received from the underlying inter-company debt agreement with the
Parent, (b) the capital securities are no longer considered Tier 1 capital under
Federal Reserve Bank guidelines, or (c) the Trust, through a change of law, is
deemed to be an investment company under the Investment Company Act of 1940 and
subject to that act's reporting requirements.
Shares of the Trust Preferred Stock are capital securities which are distinct
from the common stock or preferred stock of the Parent; the shares are not
considered part of the consolidated stockholders' equity of Crestar. Because the
Trust Preferred Stock represents capital securities of a subsidiary of Crestar,
the securities are classified as Minority Interest in the consolidated financial
statements.
-60-
<PAGE>
(14) Regulatory Requirements And Restrictions
The Corporation's banking affiliates are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Corporation's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the banking affiliates must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The banking
affiliates' capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the banking affiliates to maintain minimum amounts and ratios of total
and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average
assets. Management believes, as of December 31, 1996, that each banking
affiliate meets all capital adequacy requirements to which it is subject. As of
December 31, 1996, the most recent notification from the Federal Reserve Bank
categorized each banking affiliate as "well capitalized" under the regulatory
framework for prompt corrective action. There are no conditions or events since
that notification that management believes have changed each institution's
category.
The banking affiliates' actual regulatory capital amounts and ratios are set
forth below:
<TABLE>
<CAPTION>
===========================================================================================================
In millions Minimum To Be Well
Requirements Capitalized Under
For Capital Regulatory
Actual Adequacy Purposes Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
<S> <C>
As of December 31, 1996: $ % $ % $ %
Total Capital (to Risk Weighted Assets):
Consolidated 2,326 13.4 1,389 8.0 1,736 10.0
Crestar Bank 1,597 11.0 1,163 8.0 1,454 10.0
Citizens Bank of Maryland 334 12.7 211 8.0 263 10.0
Citizens Bank of Washington, N.A. 35 15.9 17 8.0 22 10.0
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 1,827 10.5 694 4.0 1,042 6.0
Crestar Bank 1,129 7.8 581 4.0 872 6.0
Citizens Bank of Maryland 303 11.5 105 4.0 158 6.0
Citizens Bank of Washington, N.A. 32 14.7 9 4.0 2 6.0
Tier 1 Capital (to Average Assets):
Consolidated 1,827 8.4 872 4.0 1,090 5.0
Crestar Bank 1,129 6.5 692 4.0 865 5.0
Citizens Bank of Maryland 303 7.9 152 4.0 190 5.0
Citizens Bank of Washington, N.A. 32 11.1 11 4.0 14 5.0
===========================================================================================================
</TABLE>
-61-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
===========================================================================================================
In millions Minimum To Be Well
Requirements Capitalized Under
For Capital Regulatory
Actual Adequacy Purposes Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
<S> <C>
As of December 31, 1995: $ % $ % $ %
Total Capital (to Risk Weighted Assets):
Consolidated 2,108 12.3 1,376 8.0 1,720 10.0
Crestar Bank(1) 1,587 10.9 1,162 8.0 1,453 10.0
Citizens Bank of Maryland(2) 312 13.2 189 8.0 236 10.0
Citizens Bank of Washington, N.A. 31 14.1 17 8.0 22 10.0
Tier 1 Capital (to Risk Weighted Assets):
Consolidated 1,602 9.3 688 4.0 1,032 6.0
Crestar Bank(1) 1,225 8.4 581 4.0 872 6.0
Citizens Bank of Maryland(2) 284 12.0 94 4.0 142 6.0
Citizens Bank of Washington, N.A. 28 12.8 9 4.0 13 6.0
Tier 1 Capital (to Average Assets):
Consolidated 1,602 7.6 847 4.0 1,058 5.0
Crestar Bank(1) 1,225 7.0 704 4.0 880 5.0
Citizens Bank of Maryland(2) 284 8.3 137 4.0 172 5.0
Citizens Bank of Washington, N.A. 28 10.0 11 4.0 14 5.0
===========================================================================================================
</TABLE>
(1) During 1996, the three bank and one savings bank affiliates of Crestar
Financial Corporation were merged into one banking entity, named Crestar
Bank. All data as of December 31, 1995 for Crestar Bank reflects the pro
forma balances of the four affiliates (Crestar Bank, Crestar Bank MD,
Crestar Bank N.A. and Crestar Bank FSB) as if the mergers into one bank
affiliate had taken place on December 31, 1995. Each individual affiliate
was "well capitalized" as of year-end 1995 under the applicable regulatory
guidelines.
(2) During 1996, one of the three bank affiliates of Citizens Bancorp, Citizens
Bank of Virginia, was merged into Citizens Bank of Maryland. All data as of
December 31, 1995 for Citizens Bank of Maryland reflects the pro forma
balances of the affiliates (Citizens Bank of Maryland and Citizens Bank of
Virginia) as if the merger had taken place on December 31, 1995. Each
individual affiliate was "well capitalized" as of year-end 1995 under the
applicable regulatory guidelines.
Under the current supervisory practices of the Bank subsidiaries' regulatory
agencies, prior approval from those agencies is required if cash dividends
declared in any given year exceed net income for that year plus retained
earnings of the two preceding years. The amount of dividends available to the
Parent from the Bank subsidiaries at January 1, 1997, without prior approval,
was approximately $213.2 million. Cash dividends paid by the Bank subsidiaries
to the Parent in 1996, 1995 and 1994 were $144.7 million, $89.1 million and
$111.2 million, respectively.
Section 23A of the Federal Reserve Act imposes limitations on the amount of
credit that may be extended to the Parent by the Bank subsidiaries. Generally,
up to 10% of the Bank subsidiaries' total risk-based capital and excess
allowance for loan losses may be loaned by the bank subsidiaries to the Parent.
As of December 31, 1996, $202 million of credit was available to the Parent
under this limitation, although no Section 23A extensions of credit were
outstanding.
For the reserve maintenance period in effect at December 31, 1996 and 1995,
the Bank subsidiaries were required to maintain average daily balances totaling
approximately $289.5 million and $471.8 million, respectively, with the Federal
Reserve Bank. The average amount of reserve balances for the year ended December
31, 1996 totaled approximately $381.8 million.
As of January 1, 1996, aggregate loans to directors and executive officers
and their associates were $89,354,000. Additions and repayments totaled
$24,511,000 and $62,260,000, respectively, during 1996 and the balance was
$37,283,000 at year end. A net reduction of $14,322,000 in 1996 resulted from
change in executive officer and director status. These loans were made in the
ordinary course of business and were arms-length in terms of credit risk,
interest rates and collateral requirements prevailing at the time for comparable
transactions. These loans do not represent more than a normal credit risk. None
of these loans were nonaccrual, past due or restructured at December 31, 1996.
Balances include pre-merger activity from pooling-of-interests business
combinations.
-62-
<PAGE>
(15) Pension Plans
Substantially all employees are participants in the Corporation's
noncontributory defined benefit pension plans. Benefits under the plans are
based on length of service and a percentage of qualifying compensation during
the final years of employment. The Corporation's funding policy is to contribute
annually the maximum amount that can be contributed for federal income tax
purposes. Contributions are intended to provide not only for benefits attributed
to service to date but also for those expected to be earned in the future.
A summary of the plans' funded status and amounts recognized in the
Corporation's consolidated balance sheets at December 31, 1996 and 1995 based on
a measurement date of September 30 for each year, follows.
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
--------- --------
<S> <C>
Accumulated benefit obligations:
Vested $125,637 $107,318
Nonvested 3,330 6,422
- -----------------------------------------------------------------------------------------------------------
Total accumulated benefit obligations 128,967 113,740
===========================================================================================================
Projected benefit obligations for service rendered to date (177,634) (156,708)
Plan assets at fair value, primarily listed stocks and
U.S. Treasury bonds 169,862 147,187
- -----------------------------------------------------------------------------------------------------------
Plan assets less than projected benefit
obligations (7,772) (9,521)
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (4,407) (822)
Unrecognized prior service costs 9,734 10,166
Adjustment required to recognize minimum liability - (532)
Unrecognized net obligations being amortized
over approximately 15 years (1,965) (3,220)
- -----------------------------------------------------------------------------------------------------------
Accrued pension expense $ (4,410) $ (3,929)
===========================================================================================================
Net periodic pension expense included the following components in 1996, 1995 and
1994:
===========================================================================================================
In thousands 1996 1995 1994
Service cost - benefits earned during the year $ 8,601 $ 7,258 $ 7,682
Interest expense on projected benefit obligations 11,507 11,727 10,913
Effect of actual return on plan assets (24,289) (3,137) (1,070)
Net amortization and deferral 12,985 (10,508) (11,765)
- -----------------------------------------------------------------------------------------------------------
Net periodic pension expense $ 8,804 $ 5,340 $ 5,760
===========================================================================================================
</TABLE>
During 1995, Crestar purchased annuities to settle pension obligations for
selected retirees of the Corporation. As a result, the projected benefit
obligation was reduced by $18,948,000 in 1995, and a pre-tax gain of $4,340,000
was recognized as noninterest income.
The Citizens and Loyola plans were each valued separately for periods prior
to their merger with Crestar, and each plan independently determined its
assumptions. The aggregate disclosures above, therefore, reflect the following
weighted average assumptions used in determining the actuarial present value of
the projected benefit obligations:
<TABLE>
<CAPTION>
===========================================================================================================
Crestar Citizens Loyola
------- -------- ------
<S> <C>
1996 1995 1994 1996 1995 1994 1995 1994
Weighted average discount rate 7.75% 7.75% 8.50% 7.75% 7.00% 7.50% 7.75% 8.00%
Expected long-term rate of return 9.25 9.25 9.00 8.00 8.00 8.00 9.25 8.50
Rate of increase in future compensation 4.75 4.75 5.00 4.75 5.00 5.00 4.75 5.00
===========================================================================================================
</TABLE>
-63-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(16) Stock Compensation Plans
The Corporation applies Accounting Principles Board (APB) Opinion 25 and related
interpretations in accounting for stock-based compensation plans. Accordingly,
no compensation cost has been recognized for its fixed stock options. Had
compensation cost for the Corporation's fixed stock options been determined
based on the fair value at the grant dates consistent with the alternative
method of FASB Statement No. 123 (SFAS 123), the Corporation's net income and
earnings per common share would have been reduced to the pro forma amounts
indicated below. In accordance with the transition provisions of SFAS 123, the
pro forma amounts reflect fixed stock options with grant dates subsequent to
January 1, 1995.
<TABLE>
<CAPTION>
===========================================================================================================
In thousands except per share data 1996 1995
<S> <C>
Net income As reported $218,271 $215,887
Pro forma 215,219 213,601
Earnings per common share As reported 1.95 1.92
Pro forma 1.92 1.90
===========================================================================================================
</TABLE>
Under the 1993 Stock Incentive Plan, the Corporation may grant incentive and
non-qualified stock options, stock appreciation rights (SARs), financial
performance-related stock awards and outright awards of stock to any employee.
The Corporation may grant a maximum of 3.4 million shares under the 1993 Stock
Incentive Plan; stock awards, including the settlement of performance awards,
are limited to a maximum of 1,200,000 shares. Under the 1981 Stock Option Plan,
922,334 previously granted incentive and non-qualified stock options are
outstanding at December 31, 1996. No future options are available for grant
under this plan. Under both plans, the exercise price of each fixed stock option
equals the market price of the Corporation's stock on the date of grant. An
option's maximum term is 10 years. Options vest one year from date of grant.
For the purpose of computing the pro forma amounts indicated above, the fair
value of each option on the date of grant is estimated using the Black-Scholes
option-pricing model with the following assumptions used for Crestar's grants in
1996 and 1995: dividend yields of 2.9% to 5.5%; expected volatility of 30% and
27%, respectively; risk-free interest rates of 6.3% to 7.7%; and an expected
option life of 3.8 years. Citizens used the following assumptions for grants in
1996 and 1995: dividend yields of 3.8% to 4.2%; expected volatility of 25% and
26%, respectively; a risk-free interest rates of 6.6%; and an expected option
life of 4.8 years.
The weighted-average fair value of each option granted by Crestar during 1996
and 1995 was $5.95 and $4.18, respectively. The weighted-average fair value of
each option granted by Citizens during 1996 and 1995 was $4.54 and $4.09,
respectively. A summary of the status of the Corporation's fixed stock option
plans as of December 31 and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
===========================================================================================================
1996 1995 1994
---- ---- ----
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
<S> <C>
Outstanding, Jan. 1 4,672,427 $12 4,365,879 $11 4,260,711 $10
Granted 706,630 26 811,014 18 656,836 18
Exercised (1,779,490) 9 (495,222) 10 (545,719) 11
Forfeited (5,009) 18 (9,244) 13 (5,949) 17
----------- --------- ---------
Outstanding, Dec. 31 3,594,558 17 4,672,427 12 4,365,879 11
=========== ========= =========
Options exercisable at year-end 2,814,769 3,805,648 3,693,434
===========================================================================================================
</TABLE>
-64-
<PAGE>
The following table summarizes information about fixed stock options
outstanding:
<TABLE>
<CAPTION>
==========================================================================================================
As of December 31, 1996 Options Outstanding
------------------------------------------
Options Exercisable
Weighted- -------------------------
Average Weighted- Weighted-
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
(000) Life Price (000) Price
<S> <C>
$ 3.33 to 9.44 423,448 4.2 years 9 423,448 9
10.45 to 14.50 1,339,029 4.7 13 1,235,594 13
16.02 to 19.78 615,611 8.2 19 529,821 19
20.19 to 24.13 605,906 6.7 21 605,906 21
26.72 to 35.78 610,564 9.1 27 20,000 27
----------- -----------
$ 3.33 to 35.78 3,594,558 4.7 17 2,814,769 15
===========================================================================================================
</TABLE>
The Value Share Program was established under the 1993 Stock Incentive Plan to
provide senior managers with an opportunity for reward based on the
Corporation's long-term performance. Under this program, the Corporation granted
96,450 performance shares (value shares) and 96,450 value options in 1994 when
Crestar's stock price was $22 per share. Value shares are payable in fifty
percent stock and fifty percent cash; the percentage of value share awards
earned and each share's value is determined by Crestar's stock price at the end
of a performance cycle. Value options are nonqualified stock options granted at
the end of a performance cycle; upon grant, such options have characteristics
identical to other non-qualified stock options. The percentage of value options
earned is the same percentage as applied to value shares. The performance cycle
is three years; value shares and value options may be earned earlier if certain
stock price growth goals are met; applicable goals were met during 1996. There
were no new value share awards granted in 1996 and 1995; 7,818 value shares and
value options were forfeited in the current performance cycle, of which 7,676
were reallocated to other participants.
During 1995, the Corporation granted 30,000 performance shares, subject only
to a three year vesting requirement, to the Chairman and Chief Executive Officer
when the stock price was $28 per share. These performance shares are not issued
and have no voting rights, but do receive dividend equivalents which are
converted to additional shares.
The Corporation recognized compensation expense for performance shares,
including awards granted in years prior to 1994, of $3.3, $1.3 and $.5 million
in 1996, 1995 and 1994, respectively. Outright grants of stock were not material
in the years presented.
During 1996, the Corporation's shareholders approved the Directors' Equity
Program. Under the Directors' Equity Program, each non-employee director is
eligible to receive equity awards covering a five-year cycle. Equity awards are
not issued and have no voting rights; equity awards do receive dividend
equivalents which are converted to additional shares. Equity awards vest over
the five-year cycle in 20 percent increments based on the participant's total
years of board service, including years prior to 1996. Equity awards granted in
1996 totaled 20,400 shares, each granted when the stock price was $30 per share.
Compensation expense recognized in 1996 related to directors' equity awards
totaled $600,000. Directors' may also defer annual retainers which may be
payable in stock at the election of the director; such amounts were not material
in the years presented.
-65-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(17) Other Employee Benefit Plans
The Corporation provides postretirement life and contributory health insurance
benefit plans for eligible retirees. The cost of such benefits are accrued in a
manner similar to pension costs. The projected status of Crestar's
postretirement life and contributory health insurance benefit plans for eligible
retirees as of December 31 follow:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995
<S> <C>
Accumulated postretirement benefit obligations (other than pensions):
Retirees $ 47,104 $ 33,688
Eligible active plan participants 6,320 8,673
Ineligible active participants 11,613 9,880
- -----------------------------------------------------------------------------------------------------------
Total 65,037 52,241
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions (19,333) (7,681)
Unrecognized transition obligation to be recognized over 20 years (29,773) (31,634)
- -----------------------------------------------------------------------------------------------------------
Accrued postretirement benefit expense $ 15,931 $ 12,926
===========================================================================================================
Postretirement benefit expense for the years ended December 31 included:
===========================================================================================================
In thousands 1996 1995 1994
Service cost $1,039 $ 870 $ 1,055
Interest cost 3,847 4,026 3,178
Net amortization and deferral 2,343 2,132 1,844
- -----------------------------------------------------------------------------------------------------------
Net postretirement benefit expense $7,229 $ 7,028 $ 6,077
===========================================================================================================
</TABLE>
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits for health insurance is 8% for 1997 and is assumed to decrease
gradually to 6% in 1999 and remain at that level thereafter. Increasing the
assumed health care trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation for the medical plan
by approximately $5.8 million, and would increase the aggregate of the service
and interest components of net postretirement benefit expense by approximately
$470 thousand for 1996. The weighted average discount rate used in projecting
the accumulated plan benefit obligation was 7.75% for 1996, and the average rate
of annual compensation increase was 4.75%.
The Corporation maintains a grantor trust to pay certain employee benefits as
they become due. Assets of the trust are restricted to use for applicable
employee benefit plans, including deferred compensation and medical benefit
plans. Such trust assets of approximately $91 million and $70 million at
December 31, 1996 and 1995, respectively, are included in the Corporation's
total assets.
The Corporation has thrift and profit-sharing plans covering substantially
all full-time employees beginning January 1 after date of hire. The Corporation
makes matching contributions of 50 cents for every $1 of employee contributions
to the thrift plan, up to 6 percent of base pay. Employer profit-sharing
contributions are determined by applying a formula based on return on equity to
covered compensation. Thrift and profit-sharing plan expenses totaled $16.8
million, $16.0 million and $17.9 million in 1996, 1995 and 1994, respectively.
-66-
<PAGE>
(18) Other Income
Other income in the consolidated statements of income includes:
<TABLE>
<CAPTION>
==========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Mortgage servicing - net $17,085 $ 16,087 $17,082
Mortgage origination - net 12,212 2,753 389
Automated teller machine fees 18,684 17,856 13,828
Trading account activities 3,833 3,515 1,874
Commissions on letters of credit 4,980 4,805 5,575
Safe deposit box rentals 5,312 5,251 5,049
Gain on sale of mortgage servicing rights 8,268 11,000 18,732
Loss on sale and disposal of branches - net (22,380) (2,317) -
Miscellaneous 49,522 44,145 34,505
- ----------------------------------------------------------------------------------------------------------
Total other income $97,516 $103,095 $97,034
==========================================================================================================
</TABLE>
(19) Other Expense
Other expense in the consolidated statements of income includes:
<TABLE>
<CAPTION>
==========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Communications $ 38,572 $ 34,446 $ 30,840
Stationery, printing and supplies 12,669 12,709 11,781
Professional fees and services 30,692 22,620 17,996
Loan expense 12,216 9,281 10,727
FDIC premiums - net 41,174 24,812 34,855
Advertising and marketing 26,165 20,400 26,171
Transportation 7,056 7,281 7,140
Outside data services 32,571 29,148 26,291
Amortization of purchased intangibles 16,673 15,416 7,740
Foreclosed properties 6,872 (3,616) 5,725
Miscellaneous 58,482 59,303 50,418
- ----------------------------------------------------------------------------------------------------------
Total other expense $283,142 $231,800 $229,684
==========================================================================================================
</TABLE>
-67-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
(20) Condensed Parent Information
The Parent's Condensed Balance Sheets at
December 31 were:
<TABLE>
<CAPTION>
==========================================================================================================
In thousands 1996 1995
<S> <C>
Cash in banks $ 76,611 $ 60,069
Securities held to maturity 3,676 10,119
Securities available for sale 123,747 115,199
Money market investments 380,499 73,402
Notes receivable from subsidiaries 336,369 273,206
Investments in wholly-owned subsidiaries:
Bank subsidiaries 1,662,418 1,781,649
Non-bank subsidiaries 15,974 27,429
Investment in Crestar Capital Trust I 6,200 -
Other assets 57,704 18,451
- ----------------------------------------------------------------------------------------------------------
Total Assets $2,663,198 $2,359,524
==========================================================================================================
Short-term borrowings from subsidiaries $ 50,051 $ 31,172
Other short-term borrowings 202,962 157,929
Other liabilities 99,795 60,205
Long-term note payable to subsidiary 206,200 -
Other long-term debt 324,680 324,630
Total shareholders' equity 1,779,510 1,785,588
- ----------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,663,198 $2,359,524
==========================================================================================================
</TABLE>
The Parent's retained earnings were $1.0 billion at December 31, 1996 and 1995,
and were comprised primarily of the undistributed earnings of its subsidiaries.
The Parent's Condensed Statements of Income for each of the last three years
ended December 31 were:
<TABLE>
<CAPTION>
==========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Cash dividends from bank subsidiaries $144,721 $ 89,072 $111,151
Interest from subsidiaries 20,943 21,011 15,692
Interest on securities held to maturity 434 716 895
Interest on securities available for sale 4,346 2,896 1,041
Income on money market investments 6,472 8,631 5,606
Other income 1,231 721 599
- ----------------------------------------------------------------------------------------------------------
Total income 178,147 123,047 134,984
- ----------------------------------------------------------------------------------------------------------
Interest on short-term borrowings from subsidiaries 1,545 951 273
Interest on other short-term borrowings 8,109 7,869 4,739
Interest on long-term debt 27,800 27,800 16,318
Other expense 2,341 6,521 3,159
- ----------------------------------------------------------------------------------------------------------
Total expense 39,795 43,141 24,489
- ----------------------------------------------------------------------------------------------------------
Income before income taxes and equity in undistributed
net income of subsidiaries 138,352 79,906 110,495
Income tax benefit (3,697) (4,068) (801)
- ----------------------------------------------------------------------------------------------------------
Income before equity in undistributed net income of subsidiaries 142,049 83,974 111,296
Equity in undistributed net income of subsidiaries 76,222 131,913 103,862
- ----------------------------------------------------------------------------------------------------------
Net Income $218,271 $215,887 $215,158
==========================================================================================================
</TABLE>
-68-
<PAGE>
The Parent's Condensed Statements of Cash Flows for each
of the last three years ended December 31 were:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands 1996 1995 1994
<S> <C>
Operating Activities
Net income $218,271 $215,887 $215,158
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed net income of subsidiaries (76,222) (131,913) (103,862)
Amortization and accretion, net 430 407 259
Net decrease (increase) in accrued interest receivable, prepaid
expenses and other assets (38,154) (1,010) 28
Net increase (decrease) in accrued interest payable,
accrued expenses and other liabilities (1,266) 1,044 7,230
Other, net 918 531 575
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 103,977 84,946 119,388
- -----------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from maturities of securities held to maturity 6,402 1,347 -
Proceeds from maturities of securities available for sale 724,989 487,734 114,000
Purchases of securities available for sale (733,381) (518,995) (194,176)
Net decrease (increase) money market investments (307,097) 105,126 (31,788)
Net increase in notes receivable from subsidiaries (63,163) (37,999) (50,000)
Net decrease (increase) in investment in subsidiaries 172,800 27,537 (5,264)
Net cash paid for acquisitions - (22,643) (28,877)
Other, net 363 988 (1,131)
- -----------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (199,087) 43,095 (197,236)
- -----------------------------------------------------------------------------------------------------------
Financing Activities
Net increase in short-term borrowings 63,912 20,864 42,833
Proceeds from the issuance of long-term debt - - 149,615
Proceeds from advance from subsidiary 206,200 - -
Cash dividends paid (98,660) (87,031) (76,777)
Common stock purchased and retired (98,823) (82,144) (48,450)
Proceeds from the issuance of common stock 41,109 31,718 28,112
Other, net (2,086) - (1,250)
- -----------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 111,652 (116,593) 94,083
- -----------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 16,542 11,448 16,235
Cash and cash equivalents at beginning of year 60,069 48,621 32,386
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 76,611 $ 60,069 $ 48,621
===========================================================================================================
</TABLE>
Cash and cash equivalents consist of cash in banks.
(21) Commitments, Contingencies
And Other Financial Instruments
In the normal course of business, there are outstanding commitments, contingent
liabilities and other financial instruments that are not reflected in the
accompanying consolidated financial statements. These include commitments to
extend credit, standby letters of credit, interest rate caps, floors and
collars, swaps and forward contracts, which are some of the instruments used by
Crestar to meet the financing needs of its customers and to manage its own
interest rate risk. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
consolidated balance sheets. Any losses which may result from these transactions
are not expected to have a material effect on the accompanying consolidated
financial statements. Notional principal amounts often are used to express the
volume of the transaction, but the amounts potentially subject to credit risk
are much
-69-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
smaller. The contract or notional amount, the estimated fair value and
the credit risk amount of each class of such instruments at December 31 was:
<TABLE>
<CAPTION>
==============================================================================================================
In thousands 1996 1995
--------------------------------------- ------------------------------------
<S> <C>
Estimated Estimated
Fair Value Contract/ Fair Value Contract/
Asset Notional Credit risk Asset Notional Credit risk
(Liability) Amount Amount (Liability) Amount Amount
Financial instruments whose
notional or contract amounts
equaled maximum credit risk:
Legally binding unfunded com-
mitments to extend credit $(3,551) $ 8,148,955 $ 8,148,955 $(1,173) $7,131,967 $7,131,967
Standy letters of credit - 387,672 387,672 - 401,452 401,452
Commercial and similar letters
of credit - 97,510 97,510 - 86,345 86,345
Recourse obligations - 1,633,445 1,633,445 - 1,134,966 1,134,966
- --------------------------------------------------------------------------------------------------------------
Total $(3,551) $10,267,582 $10,267,582 $(1,173) $8,754,730 $8,754,730
==============================================================================================================
Financial instruments whose
notional or contract amounts
exceeded maximum credit risk:
For interest rate risk management
Interest rate swaps $(6,434) $ 900,000 $ 20,597 $13,416 $1,200,000 $ 86,288
Interest rate caps 12,198 1,785,000 26,637 151 40,000 3,325
Interest rate floors 6,133 1,000,000 16,605 - - -
Forward contracts 733 706,731 - (6,076) 547,790 -
As a financial intermediary
Interest rate swaps 312 98,372 5,813 264 98,434 15,522
Interest rate caps - 33,920 15 - 67,600 599
Interest rate collars - 26,000 395 - 30,897 2,037
- --------------------------------------------------------------------------------------------------------------
Total $12,942 $ 4,550,023 $ 70,062 $ 7,755 $1,984,721 $ 107,771
==============================================================================================================
</TABLE>
Commitments to extend credit are legally binding agreements to lend to a
customer which typically contain clauses that permit cancellation of the
commitment in the event of credit deterioration of the borrower. Standby letters
of credit are conditional commitments issued by Crestar to guarantee the
performance of customers to a third party. Crestar receives a commitment fee for
entering into such agreements.
The credit risk associated with commitments to extend credit and standby
letters of credit is similar to direct lending; therefore, all of these items
are subject to the Corporation's loan approval and review procedures and
policies. Based upon management's credit evaluation of the customer, Crestar may
require the customer to provide various types of collateral as security for the
agreement, including balances on deposit, investment securities, real estate and
inventory. The maximum credit risk associated with commitments to extend credit
and standby letters of credit assumes that the counterparty defaults and the
collateral proves to be worthless. The total contract amounts do not necessarily
represent future cash requirements, since many of these items are expected to
expire without being drawn upon.
A geographic concentration exists within Crestar's loan portfolio since most
of Crestar's business activity is with customers located in Virginia, Maryland
or Washington, DC. Based upon Standard Industrial Classification codes used for
regulatory purposes, the Corporation had no aggregate loan concentration of 10%
or more of total loans in any particular industry at December 31, 1996. However,
under a broader view of the portfolio, Crestar had $1.6 billion in loans
outstanding to real estate developers and investors at year-end 1996. These
loans are diversified by geographic region within Crestar's market and by
project type and are made in accordance with the Corporation's normal credit and
underwriting guidelines and risk management policies.
The Corporation services mortgage loans other than those included in the
accompanying consolidated financial statements and, in some cases, accepts a
recourse liability on the serviced loans. Recourse obligations at December 31,
1996 included $138 million of contractual recourse liability accepted by
-70-
<PAGE>
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 maintains an allowance
(included in Other liabilities in the consolidated balance sheet), which had a
balance of $309,000 at December 31, 1996, based on estimates of future losses on
this contractual recourse liability. Recourse obligations also included $158
million of contractual recourse liability accepted by Crestar on certain
mortgage loan sales to private investors. For the period extending up to one
year from origination, investors have the right to sell loans that meet certain
delinquency criteria back to Crestar. The remaining notional balance of recourse
obligations of $1.3 billion at December 31, 1996 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 $962
million of this notional balance was insured by agencies of the Federal
government or private insurance companies at December 31, 1996.
As a financial institution, Crestar entails interest rate risk as a provider
of banking services to its customers. This risk can be managed through
derivative interest rate contracts, such as interest rate swaps, caps and
floors. Changes in the fair value of such derivatives are generally offset by
changes in the fair value of the underlying hedged asset or liability. For
interest rate risk management purposes, Crestar was using interest rate (fixed
receive) swaps with notional balances of $650 million and $250 million at
December 31, 1996 to convert floating rate commercial and instalment loans,
respectively, to fixed rates. Crestar was using purchased interest rate caps
with notional balances of $1.55 billion and $200 million to hedge the market
value of fixed rate securities available for sale and real estate income
property loans, respectively, and $35 million to minimize interest rate risk
associated with rising rates on floating rate money market deposits. Crestar was
using interest rate floors to hedge the fair value of fixed rate domestic time
deposits. Crestar also serves as a financial intermediary in interest rate swap,
cap and collar agreements, providing interest rate risk management services to
customers. As an intermediary, Crestar becomes a principal in the exchange of
interest payments between parties and is exposed to loss should one party
default. The Corporation performs normal credit review on each counterparty and
minimizes its exposure by entering into offsetting positions or by using hedging
techniques.
The notional amount of these over-the-counter traded interest rate swaps,
caps, floors 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 $19.5
million, less collateral held of approximately $9.3 million, plus an amount for
prospective market movement. One counterparty constituted 16%, two
counterparties 12% each, two counterparties 11% each and one counterparty 10% of
the estimated credit and market exposure of $70.1 million at December 31, 1996.
Crestar also had forward agreements outstanding at December 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.
Crestar may, from time to time, enter into certain derivative contracts, such
as purchased futures or options contracts, for trading purposes. Such contract
amounts were not material in 1996 and 1995.
The fair values of commitments to extend credit, standby letters of credit
and commercial and similar letters of credit were estimated based on the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and creditworthiness of counterparties.
Unfunded loan commitments are generally priced at market at the time of funding
and are subject to certain credit standards. The fair values of forward
agreements are estimated based on current settlement values. The fair values of
interest rate swaps, caps and floors are estimated based on the amount the
Corporation would receive or pay to terminate the contracts or agreements. Such
amounts are determined using a valuation model which considers current market
yields, counterparty credit risk and other relevant variables. The carrying
value of interest rate swaps, caps, floors and forward contracts related to
interest rate risk management activities was $24.0 million and less than
$100,000 at December 31, 1996 and 1995, respectively. The carrying value of such
instruments includes any accrued interest receivable and/or payable balances,
and unamortized premiums paid for interest rate caps and floors. The carrying
value of other off-balance sheet financial instruments was not material at
December 31, 1996 and 1995.
In November 1996, a purported class action lawsuit was brought against
Crestar Mortgage Corporation (CMC), an affiliated subsidiary of the Corporation,
alleging that compensation paid to mortgage brokers in the form of "yield spread
premium" violates the Real Estate Settlement Procedures Act (RESPA) prohibition
on referral fees. The suit is similar to a number of other suits pending
nationwide against mortgage lenders. The suit seeks three times the amount of
all settlement charges paid by CMC to mortgage brokers for settlement services
on mortgage loans closed since November 12, 1995,
-71-
<PAGE>
Notes To Consolidated Financial Statements
Crestar Financial Corporation And Subsidiaries
plus interest, court costs, attorney fees and other litigation expenses.
Although the potential for liability is open-ended because of the ongoing nature
of the suit, CMC estimates that yield spread premiums paid to mortgage brokers
in the one year period prior to the filing of the suit totaled between $14
million and $17 million, an amount that could be trebled under RESPA. Management
believes, however, that its industry-accepted method of compensating mortgage
brokers is entirely legal and is vigorously contesting all aspects of the suit.
Management, in consultation with legal counsel, is of the opinion that there is
no other pending or threatened litigation that could, individually or in the
aggregate, have a material impact on the Corporation's financial condition or
financial statements beyond liabilities established for this purpose.
(22) Fair Value Of Financial Instruments
Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures
about Fair Value of Financial Instruments," defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. As the majority of Crestar's financial instruments lack an
available trading market, significant estimates, assumptions and present value
calculations are required to determine estimated fair value. Comparability among
financial institutions is difficult due to the wide range of acceptable
valuation techniques and the subjectivity of required assumptions. Crestar's
remaining assets and liabilities, not considered financial instruments, have not
been valued differently than customary, historical cost accounting, nor have
lines of business been separately valued. Information regarding the estimated
fair values of Crestar's financial instruments at December 31 follows:
<TABLE>
<CAPTION>
===========================================================================================================
In thousands Estimated Fair Value Carrying Value
Assets (Liabilities) Assets (Liabilities)
-------------------- --------------------
<S> <C>
1996 1995 1996 1995
Cash and due from banks $ 1,105,036 $ 1,285,245 $ 1,105,036 $ 1,285,245
Securities held to maturity 966,750 1,108,006 967,510 1,105,076
Securities available for sale 4,318,349 3,703,378 4,318,349 3,703,378
Money market investments 745,672 516,268 745,672 516,268
Net loans, including loans held for sale 14,628,000 14,606,000 14,439,675 14,446,608
Other financial instrument assets 321,437 381,956 321,744 381,591
Deposits with no stated maturities (10,887,219) (10,914,553) (10,887,219) (10,914,553)
Deposits with stated maturities (4,765,000) (5,397,000) (4,783,991) (5,382,486)
Short-term borrowings (4,116,051) (2,871,521) (4,116,051) (2,871,521)
Long-term debt (680,067) (717,253) (659,336) (671,296)
Other financial instrument liabilities (425,188) (642,509) (425,188) (642,509)
Off-balance sheet financial instruments - net 9,391 6,582 - -
===========================================================================================================
</TABLE>
The carrying amounts in the table are included in the consolidated balance
sheets under the indicated captions, except for off-balance sheet financial
instruments which are discussed in note 21. The carrying value of cash and due
from bank balances and money market investments approximates fair value.
Financial instruments actively traded in a secondary market, such as securities,
were valued using available quoted market prices.
The Corporation's loan portfolio was valued based on estimated future cash
flows, discounted at various rates. The discount rates used were commensurate
with rates paid on U.S. Treasury securities with various maturity dates,
adjusted for noninterest operating costs, anticipated credit losses and
prepayment risk. The estimated fair value of the loan portfolio excludes the
intangible value attributable to account relationships, including bank card,
home equity line or similar revolving line of credit arrangements.
Other financial instrument assets consist largely of customers' liability on
acceptances and accrued interest receivable, for which carrying amount
approximates fair value. The fair value of other financial instruments included
in other assets was based on estimates of the present value of future net cash
flows.
The carrying value of demand deposits, interest checking deposits, money
market deposit accounts and regular savings deposits is defined by SFAS 107 to
approximate fair value. Deposits with stated maturities were valued based on
estimated future cash flows, discounted at various rates. The discount rates
used were commensurate with rates paid on U.S. Treasury securities, adjusted for
factors such as operating expenses and prepayment risk. The estimated fair value
of deposits excludes the intangible value attributable to long-term
relationships with depositors.
-72-
<PAGE>
The carrying value of short-term borrowings approximates fair value.
Long-term debt was valued based on interest rates currently available to Crestar
for debt with similar terms and remaining maturities.
Other financial instrument liabilities consist largely of liability on
acceptances, interest payable on deposits and balances due upon settlement of
securities purchases, for which carrying value approximates fair value. The fair
value of other financial instrument liabilities was estimated based on estimates
of the present value of future net cash payments.
(23) Quarterly Financial Results (Unaudited)
Consolidated quarterly results of operations for the
years ended December 31 were:
<TABLE>
<CAPTION>
===========================================================================================================
Dollars in thousands, except per share data First Second Third Fourth
1996 Quarter Quarter Quarter(1) Quarter(2)(3)
<S> <C>
Income from earning assets $385,826 $392,897 $388,870 $395,786
Net interest income 211,653 218,620 215,568 220,469
Provision for loan losses 22,230 24,430 25,100 24,130
Securities gains (losses) 2,373 270 96 654
Other noninterest income 85,838 92,178 81,064 73,885
Net credit and noninterest income 277,634 286,638 271,628 270,878
Noninterest expense 175,779 181,584 212,883 213,273
Income before income taxes 101,855 105,054 58,745 57,605
Net Income 65,111 66,876 48,118 38,166
- -----------------------------------------------------------------------------------------------------------
Primary:
Earnings per share $ .58 $ .60 $ .43 $ .34
Average shares outstanding (000s) 112,405 111,923 111,101 111,447
Fully diluted:
Earnings per share $ .58 $ .60 $ .43 $ .33
Average shares outstanding (000s) 112,413 111,923 111,141 111,647
Dividends declared per common share $ .225 $ .260 $ .260 $ .530
===========================================================================================================
1995
Income from earning assets $361,624 $373,330 $374,529 $382,420
Net interest income 202,982 204,598 202,444 204,831
Provision for loan losses 12,021 15,311 16,056 22,877
Securities gains (losses) (2,484) (842) (69) 1,328
Other noninterest income 76,334 81,796 83,649 83,266
Net credit and noninterest income 264,811 270,241 269,968 266,548
Noninterest expense 175,036 178,021 173,284 194,768
Income before income taxes 89,775 92,220 96,684 71,780
Net Income 58,261 60,541 61,525 35,560
- -----------------------------------------------------------------------------------------------------------
Primary:
Earnings per share $ .52 $ .54 $ .54 $ .32
Average shares outstanding (000s) 112,263 112,579 112,409 112,329
Fully diluted:
Earnings per share $ .52 $ .54 $ .54 $ .32
Average shares outstanding (000s) 112,478 112,659 112,455 112,341
Dividends declared per common share $ .200 $ .225 $ .225 $ .225
===========================================================================================================
</TABLE>
(1) During the third quarter of 1996 Crestar recorded a one-time after-tax
charge of $21.5 million, or $.19 per share, associated with congressional
legislation regarding the recapitalization of the Savings Association
Insurance Fund. Also in the third quarter of 1996, a nonrecurring tax
benefit of $10.6 million, or $.09 per share, was recorded in connection with
the repeal of thrift bad debt tax legislation.
(2) During the fourth quarter of 1996, nonrecurring merger costs totaling $32.5
million (after-tax basis), or $.29 per share, were recorded as part of the
pooling-of-interests merger with Citizens Bancorp.
(3) During the fourth quarter of 1995, nonrecurring merger costs totaling $29.3
million (after-tax basis), or $.26 per share, were recorded as part of the
pooling-of-interests merger with Loyola Capital Corporation.
-73-
<PAGE>
CRESTAR FINANCIAL CORPORATION
The Board Of Directors And Shareholders
We have audited the accompanying consolidated balance sheets of Crestar
Financial Corporation and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of income, cash flows and changes in
shareholders' equity for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We
did not audit the consolidated financial statements of Citizens Bancorp
(Citizens), which was acquired during 1996 in a transaction accounted for as a
pooling of interests, as discussed in note 2. Such statements are included in
the consolidated financial statements of the Corporation and reflect total
assets constituting 18% at December 31, 1996 and 1995, and total income from
earning assets constituting 18% in 1996 and 1995 and 17% in 1994 of the related
consolidated totals. Those statements were audited by other auditors whose
report, dated January 16, 1997 expressed an unqualified opinion thereon. The
other auditors' report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Citizens, is based solely on the report of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Crestar Financial
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
January 16, 1997
-74-
<PAGE>
CRESTAR FINANCIAL CORPORATION
Statement On Corporate Responsibility
The financial statements on pages 44 to 73 have been prepared by management in
accordance with generally accepted accounting principles and include some
amounts that are necessarily based on our best estimates and judgments. We are
responsible for the accuracy, integrity, objectivity, consistency and fair
presentation of the financial statements and all other financial information
contained in this Annual Report. We fulfill these responsibilities by relying on
a system of internal controls, which has been designed to ensure that
transactions are properly authorized and recorded in our financial records. Our
internal auditing function independently assesses the effectiveness of internal
controls and recommends possible improvements thereto. Because of inherent
limitations in any system of controls, there can be no absolute assurance that
errors or irregularities will not occur. Nevertheless, we believe that our
system of internal controls provides reasonable assurance as to the integrity
and reliability of our financial records.
Some of the financial information in this Annual Report is presented on
a tax-equivalent basis to improve comparative analysis. In addition, some of the
business segment information incorporates allocation methods for which there are
no generally accepted accounting principles. However, in all other respects, it
is consistent with the audited financial statements.
Through its Audit Committee, which is composed of directors who are not
officers or employees of the Corporation, the Board of Directors fulfills its
oversight responsibility for determining that the accounting policies employed
by management in preparing the Corporation's financial statements are
appropriate and that our system of internal controls is adequately reviewed and
maintained. The Committee periodically reviews, with management and the internal
auditors, accounting policies, control processes and procedures, and audit and
regulatory examination reports of the Corporation and its subsidiaries. In
addition, our external auditors meet regularly with and have full and free
access to the Committee, privately and with management present, to discuss the
results of their audits and other auditing, accounting and financial reporting
matters. The Committee reports to the full Board after each of its meetings.
KPMG Peat Marwick LLP has audited the accompanying consolidated
financial statements. Their report, located above, represents their judgment as
to whether our consolidated financial statements present fairly our financial
position and results of operations and cash flows in conformity with generally
accepted accounting principles.
We are committed to ensuring that corporate affairs are conducted in
accordance with consistently applied standards of conduct applicable to all
officers and associates. In essence, everyone is expected to manage their
responsibilities with integrity. Our standards provide guidance on general
business conduct, political activities, community involvement, outside
employment and business activities, conflict of interests, personal finances,
and the use and safeguard of confidential information.
Crestar Financial Corporation
-75-
<PAGE>
<PAGE>
Board of Directors of Crestar Financial Corporation
Crestar Financial Corporation And Subsidiaries
J. Carter Fox
Chairman &
Chief Executive Officer
Chesapeake Corporation
Richmond, Virginia
Packaging and Paper
Products Manufacturer
Executive and Nominating
and Governance Committee
Bonnie Guiton Hill
President and Chief
Executive Officer
Times Mirror Foundation
Los Angeles, California
Charitable Foundation
Audit and Nominating and
Governance Committee
(Chairman)
Gene A. James
President &
Chief Executive Officer
Southern States
Cooperative, Inc.
Richmond, Virginia
Farm Supply Cooperative
Human Resources and
Compensation Committee
H. Gordon Leggett, Jr.
Principal
Leggett Associates LLC
Lynchburg, Virginia
Family Business and Human
Resource Consulting
Human Resources and
Compensation Committee
Charles R. Longsworth
Chairman Emeritus
The Colonial Williamsburg
Foundation
Williamsburg, Virginia
Educational Museum,
Hotels and Restaurants
Executive Committee and
Human Resources and
Compensation Committee
(Chairman)
Patrick J. Maher
Chairman &
Chief Executive Officer
Washington Gas
Washington, DC
Natural Gas Utility
Executive Committee and
Audit Committee
(Chairman)
Frank E. McCarthy
Executive Vice President
National Automobile
Dealers Association
McLean, Virginia
Human Resource and
Compensation Committee
Paul D. Miller
President &
Chief Executive Officer
Sperry Marine, Inc.
Charlottesville, Virginia
Marine Navigation and
Control Systems
Audit Committee
G. Gilmer Minor III
Chairman, President &
Chief Executive Officer
Owens & Minor, Inc.
Richmond, Virginia
Medical/Surgical
Supply Distributor
Human Resources and
Compensation and
Nominating and Governance
Committee
Gordon F. Rainey, Jr.
Partner, Chairman of the
Executive Committee
Hunton & Williams
Richmond, Virginia
Attorneys
Executive Committee
Frank S. Royal
Member & President
Frank S. Royal, M.D., P.C.
Richmond, Virginia
Family Medicine
Executive Committee
Alfred H. Smith, Jr.
General Partner
A. H. Smith Associates,
Limited Partnership
Branchville, Maryland
Sand & Gravel Business
Jeffrey R. Springer
Vice Chairman-Greater
Washington Region
Crestar Bank
Richard G. Tilghman
Chairman &
Chief Executive Officer
Crestar Financial
Corporation and
Crestar Bank
Executive Committee
(Chairman)
Eugene P. Trani
President
Virginia Commonwealth
University
Richmond, Virginia
Audit Committee
L. Dudley Walker
Chairman
Bassett-Walker, Inc.
Martinsville, Virginia
Textile and Apparel
Manufacturer
Audit Committee
James M. Wells III
President & Chief
Operating Officer
Crestar Financial
Corporation and
Crestar Bank
Executive Committee
Robert C. Wilburn
President & Chief
Executive Officer
The Colonial
Williamsburg Foundation
Williamsburg, Virginia
Educational Museum,
Hotels and Restaurants
Audit Committee
Karen Hastie Williams
Partner
Crowell & Moring
Washington, DC
Attorneys
Audit Committee
76
<PAGE>
Principal Officers of Crestar Financial Corporation
Crestar Financial Corporation and Subsidiaries
Richard G. Tilghman, 56
Chairman &
Chief Executive Officer
30 years of service.
Elected President and
Chief Executive Officer
in 1985 and Chairman in 1986.
James M. Wells III, 50
President & Chief
Operating Officer
28 years of service.
Elected President in 1988
and to current position in 1997.
William V. Bunting, 56
Group Executive Vice
President-Consumer Finance Group
30 years of service. Elected
Executive Vice President-Operations in
1986 and of Consumer Lending in
1992 and to current position in 1997.
William K. Butler II, 50
President-Eastern Region
24 years of service. Elected
President-Norfolk in 1984
and to current position in 1985.
Thomas M. Eckis, 48
Corporate Executive Vice
President & Senior Credit Officer
22 years of service. Elected
Group Executive Vice
President-Real Estate Finance
in 1990 and of Corporate Banking
in 1994 and to current position in 1995.
William M. Ginther, 50
Group Executive Vice
President-Technology & Operations
26 years of service. Elected
Executive Vice President in 1987
and to current position in 1994.
C. Garland Hagen, 51
Corporate Executive Vice
President-Corporate Development
& Funds Management Group 24
years of service. Elected
Executive Vice President in
1985 and to current position
in 1987.
F. Edward Harris, 55
President-Western Region
32 years of service. Elected
Executive Vice President-Western
Region in 1982 and to current
position in 1985.
C.T. Hill, 46
President-Capital Region
26 years of service. Elected
Executive Vice President-Capital
Region Commercial Division in 1990
and to current position in 1994.
Thomas D. Hogan, 50
Group Executive Vice President-
Crestar Investment Group
8 years of service. Elected Executive
Vice President-Trust & Investment
Management Group in 1988 and
to current position in 1996.
Richard F. Katchuk, 50
Corporate Executive Vice President
& Chief Financial Officer 1 year of service.
Elected to current position in 1995.
James J. Kelley, 52
Group Executive Vice President-
Management Resources Group
23 years of service. Elected Senior
Vice President in 1986 and to
current position in 1995.
Peter F. Nostrand, 49
President-Greater Washington Region
23 years of service. Elected
Senior Executive Vice President of Greater
Washington Region in 1988 and
to current position in 1995.
O.H. Parrish, Jr., 54
President-Regional &
Corporate Banking
31 years of service. Elected
Executive Vice President
& Senior Credit Officer in
1985 and President-Virginia
Banking in 1994 and to
current position in 1997.
Marc C. Smith, 49
President-Crestar
Mortgage Corporation
22 years of service.
Elected Executive Vice
President & Chief Operating
Officer-Crestar Mortgage Corporation
in 1989 and to current position in 1990.
William A. Wycoff, 49
President-Maryland Region
15 years of service. Previously
served as Executive Vice President
and Manager of Community Banking,
Marketing and Administration at
Loyola Capital Corporation. Elected
to current position in 1995.
77
<PAGE>
Statement of Business
Crestar Financial Corporation and Subsidiaries
Crestar Financial Corporation (Crestar) is the holding company for Crestar Bank,
Citizens Bank of Maryland and Citizens Bank of Washington, N.A. Crestar Bank is
the resulting institution following the consolidation in November 1996 of
Crestar Bank (Virginia), Crestar Bank, N.A. (Washington, DC), Crestar Bank MD
(Maryland) and Crestar Bank FSB (Maryland). In March 1997, the two Citizens
banks will be merged into Crestar Bank. At December 31, 1996, Crestar had $15.7
billion in total deposits and $1.8 billion in total shareholders' equity.
In 1963, six Virginia banks combined to form United Virginia Bankshares
Incorporated (UVB), a Virginia stock corporation and registered bank holding
company. During the 1960s and 1970s, UVB acquired 18 other Virginia banks and
formed one de novo bank. On December 31, 1979, all of the UVB banks were merged
into United Virginia Bank. During the 1980s, nine more banks were acquired,
including NS&T Bank, N.A. in the District of Columbia in 1985 and Bank of
Bethesda in Maryland in 1986. In September, 1987 UVB changed its name to Crestar
Financial Corporation. Since 1990, Crestar Financial Corporation has acquired 22
banks and thrifts in Virginia, Maryland and Washington, DC . The most
significant transaction in 1996 was the acquisition of Citizens Bancorp, the
holding company for Citizens Bank of Maryland and Citizens Bank of Washington,
N.A., which added 103 full service banking offices and $2.9 billion in deposits.
Crestar is supervised and examined by the Board of Governors of the Federal
Reserve system under the Bank Holding Company Act of 1956 (BHCA). The BHCA
requires Federal Reserve approval for bank acquisitions and regulates
non-banking activities of bank holding companies. Deposits of Crestar's three
subsidiary banks are insured by the Federal Deposit Insurance Corporation
(FDIC). Crestar Bank is regulated by the State Corporation Commission of
Virginia and the Federal Reserve Bank of Richmond; Citizens Bank of Washington,
N.A. is regulated by the Comptroller of the Currency; and Citizens Bank of
Maryland is regulated by the Maryland Bank Commissioner and the FDIC.
Since September 1995, the BHCA has permitted bank holding companies from any
state to acquire banks and bank holding companies located in any other state,
subject to certain conditions, including nationwide and state imposed
concentration limits. Banks will be able to branch across state lines by
acquisition, merger or de novo, effective June 1, 1997 (unless state law permits
interstate branching at any earlier date), if state law expressly permits
interstate branching. The laws of Virginia, the District of Columbia and
Maryland expressly permit interstate branching.
A fundamental principle underlying the Federal Reserve's supervision and
regulation of bank holding companies is that bank holding companies should be a
source of managerial and financial strength to their subsidiary banks.
Subsidiary banks in turn are to be operated in a manner that protects the
overall soundness of the institution and the safety of deposits. Bank regulators
can take various remedial measures to deal with banks and bank holding companies
that fail to meet legal and regulatory standards.
The 1989 Financial Reform, Recovery and Enforcement Act (FIRREA) expanded
federal regulatory enforcement powers. The Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) created five capital-based supervisory levels
for banks and requires bank holding companies to guarantee compliance with
capital restoration plans of undercapitalized insured depository affiliates.
Crestar Bank and the two newly-acquired Citizens banks were considered
"well-capitalized" under regulatory definitions in effect at December 31, 1996.
This is the highest rating presently available.
Crestar serves customers through a network of 508 banking offices and 496
automated teller machines as of December 31, 1996. The Crestar banks offer a
broad range of banking services, including various types of deposit accounts and
instruments, commercial and consumer loans, trust and investment management
services, bank credit cards and international banking services. Services also
are provided through non-bank subsidiaries. Crestar Insurance Agency, Inc.
offers a variety of personal and business insurance products. Securities
brokerage and investment banking services are offered by Crestar Securities
Corporation. Mortgage loan origination, servicing and wholesale lending are
offered by Crestar Mortgage Corporation, and Crestar Asset Management Company
(formerly Capitoline Investment Services Incorporated) provides investment
advisory services. Both Crestar Mortgage and Crestar Asset Management Company
are subsidiaries of Crestar Bank.
The mission of Crestar Financial Corporation is to provide a board array of
financial products and services at a price that represents the best value for
our customers' money and, by doing so, to provide a superior return for our
shareholders.
Crestar's executive offices are located at Crestar Center, 919 East Main
Street, Richmond, Virginia. Regional headquarters are located in Norfolk and
Roanoke, Virginia, Washington, DC and Baltimore, Maryland. Crestar's operations
centers are located in Richmond and Glen Burnie, Maryland.
78
<PAGE>
Form 10-K Cross-Reference Index
Crestar Financial Corporation And Subsidiaries
<TABLE>
<S> <C>
Part I Item I Business...................................................................................78
Guide 3 Disclosures................................20-21, 34-35, 36-42, 49-50, 54-57, 57, 80, 82-84
Item 2 Properties.............................................................................57, 78
Item 3 Legal Proceedings..........................................................................71
Item 4 Submission of Matters to a Vote of Security Holders(1)
Part II Item 5 Market for the Registrant's Common Equity and
Related Shareholder Matters......................................................61, 84, Back Cover
Item 6 Selected Financial Data....................................................................13
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations...13-43
Item 8 Financial Statements and Supplementary Data
Consolidated Financial Statements:
Crestar Financial Corporation and Subsidiaries
Consolidated Balance Sheets....................................................................44
Consolidated Statements of Income..............................................................45
Consolidated Statements of Cash Flows..........................................................46
Consolidated Statements of Changes in Shareholders' Equity.....................................47
Notes to Consolidated Financial Statements....................................................48-73
Independent Auditors' Report.....................................................................74
Condensed Financial Information of Registrant.........................................60, 61, 68-69
Selected Quarterly Financial Data................................................................73
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....None
Part III Item 10 Directors(2) and Executive Officers of the Registrant.................................76, 77
Item 11 Executive Compensation(2)
Item 12 Security Ownership of Certain Beneficial Owners and Management(2)
Item 13 Certain Relationships and Related Transactions(2)
Part IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K:
See Item 8 for a listing of all Financial Statements and Supplementary Data
Reports on Form 8-K............................................................................None
Exhibits(3)
</TABLE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf on February 28, 1997 by the
undersigned, thereunto duly authorized.
/s/ Linda F. Rigsby
--------------------------------
Crestar Financial Corporation, Linda F. Rigsby,
Registrant Senior Vice President,
Deputy General Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed on February 28, 1997 by the
following persons in the capacities indicated.
/s/ Richard G. Tilghman
----------------------------------
Richard G. Tilghman,
Chairman and Chief Executive Officer
/s/ James M. Wells III
--------------------------------------
James M. Wells III, President
/s/ Richard F. Katchuk
----------------------------------------
Richard F. Katchuk,
Corporate Executive Vice President and
Chief Financial Officer
/s/ James D. Barr
-----------------------------------------
James D. Barr, Group Executive Vice President,
Controller and Treasurer
A Majority Of The Directors Of The Registrant
whose names appear on page 76.
- ------------------------------
(1) On December 30, 1996, a Special Meeting of the Shareholders of Crestar
Financial Corporation (Crestar) was held, in accordance with the
shareholder approval policy of the New York Stock Exchange, to consider and
vote on the issuance of up to 26,400,000 shares (on a post-split basis) of
Crestar Common Stock in accordance with the Agreement and Plan of
Reorganization pertaining to the merger of Crestar with Citizens Bancorp.
Of the total shares eligible to vote at the meeting (on a post-split
basis), 60,916,834 or 72% were voted for the proposed issuance of shares,
and 697,836 shares or less than 1% were voted against the proposed issuance
of shares. Abstaining votes totaled 753,860 shares, also representing less
than 1% of total shares eligible to vote. "Broker non-votes" were not
included in determining the number of votes cast. The proposal was passed
by a majority of the shares eligible to vote, with the merger of Crestar
and Citizens Bancorp and related issuance of shares subsequently occurring
on December 31, 1996.
(2) This information is omitted pursuant to Instruction G of Form 10-K since
the Registrant intends to file with the Commission a definitive Proxy
Statement, pursuant to Regulation 14A, not later than 120 days after
December 31, 1996.
(3) A list of Exhibits was filed separately. Copies of any Exhibits not
contained herein may be obtained by writing to Linda F. Rigsby, Secretary,
Crestar Financial Corporation, 919 East Main Street, Richmond, VA
23261-6665.
Note: Any information not included herein has been omitted because it is not
applicable.
79
<PAGE>
Supplemental Financial Information
Crestar Financial Corporation And Subsidiaries
Maturity And Rate Sensitivity Of Selected Loans
December 31, 1996
<TABLE>
<CAPTION>
In millions Maturity
-----------------------------------------
within 1 year 1-5 years over 5 years Total
<S> <C>
Commercial $2,455.3 $1,085.1 $462.2 $4,002.6
Real estate - income property 546.5 526.3 169.3 1,242.1
Real estate - construction 234.7 60.6 18.7 314.0
- -----------------------------------------------------------------------------------------------------------
Total business loans 3,236.5 1,672.0 650.2 5,558.7
Less: Business loans with predetermined rates 557.9 1,255.5 463.9 2,277.3
- -----------------------------------------------------------------------------------------------------------
Business loans with adjustable rates $2,678.6 $ 416.5 $186.3 $3,281.4
===========================================================================================================
</TABLE>
Time Deposits $100,000 And Over
December 31, 1996
<TABLE>
<CAPTION>
In millions Maturity
--------------------------------------------------
0-3 mos. 3-6 mos. 6-12 mos. over 1 yr. Total
<S> <C>
Certificates of deposit $100,000 and over $42.1 $ 61.0 $25.3 $ 12.2 $140.6
Domestic time deposits 53.1 46.8 65.9 125.0 290.8
- -----------------------------------------------------------------------------------------------------------
Total $95.2 $107.8 $91.2 $137.2 $431.4
===========================================================================================================
</TABLE>
Maximum Short-Term Borrowings
<TABLE>
<CAPTION>
In thousands Maximum Outstanding At Any Month End
------------------------------------------
1996 1995 1994
<S> <C>
Federal funds purchased $2,524,420 $1,723,928 $1,862,138
Securities sold under repurchase agreements 1,008,946 1,140,666 1,307,364
Federal Home Loan Bank borrowings 640,000 484,200 371,200
Notes payable 218,212 177,300 163,731
Other 3,035 5,200 4,660
===========================================================================================================
</TABLE>
Short-Term Borrowings--Average Balances And Rates
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- -------------------- ---------------------
Dollars in thousands Amount Rate Amount Rate Amount Rate
<S> <C>
Federal funds purchased $1,474,463 5.38% $1,037,663 5.91% $ 711,878 4.35%
Securities sold under
repurchase agreements 670,549 4.87 760,351 5.52 786,831 3.81
Federal Home Loan Bank
borrowings 428,825 5.52 368,879 6.08 208,561 6.26
Notes payable 208,437 4.55 158,249 4.95 131,562 3.67
Other 3,201 6.56 2,206 3.26 3,166 6.30
- -----------------------------------------------------------------------------------------------------------
Total $2,785,475 5.20 $2,327,348 5.75 $1,841,998 4.30
===========================================================================================================
</TABLE>
80
<PAGE>
Consolidated Statements of Income (Five Years) And Supplementary Data
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
In thousands, except per share data Years Ended December 31,
----------------------------------------------------------------------
Income From Earning Assets 1996 1995 1994 1993 1992
<S> <C>
Interest and fees on loans $1,178,236 $1,181,048 $ 964,453 $ 827,512 $ 908,120
Interest on securities held to maturity 61,770 129,242 136,747 201,578 241,683
Interest and dividends on securities
available for sale 242,486 133,290 142,357 86,590 5,464
Income on money market investments 17,875 20,178 28,383 30,670 47,947
Interest on mortgage loans held
for sale 63,012 28,145 28,854 29,531 28,522
- -----------------------------------------------------------------------------------------------------------
Total income from earning assets 1,563,379 1,491,903 1,300,794 1,175,881 1,231,736
- -----------------------------------------------------------------------------------------------------------
Interest Expense
Interest-bearing demand deposits 171,109 180,600 152,539 136,840 164,299
Regular savings deposits 43,850 51,368 56,602 51,920 51,018
Domestic time deposits 259,971 257,418 193,254 192,845 279,514
Certificates of deposit $100,000
and over 27,843 3,915 2,600 2,043 7,797
- -----------------------------------------------------------------------------------------------------------
Total interest on deposits 502,773 493,301 404,995 383,648 502,628
Short-term borrowings 144,797 133,709 79,192 51,893 42,012
Long-term debt 49,499 50,038 38,756 33,056 27,034
- -----------------------------------------------------------------------------------------------------------
Total interest expense 697,069 677,048 522,943 468,597 571,674
- -----------------------------------------------------------------------------------------------------------
Net Interest Income 866,310 814,855 777,851 707,284 660,062
Provision for loan losses 95,890 66,265 36,509 63,325 120,821
- -----------------------------------------------------------------------------------------------------------
Net Credit Income 770,420 748,590 741,342 643,959 539,241
- -----------------------------------------------------------------------------------------------------------
Noninterest Income
Service charges on deposit accounts 114,249 109,264 103,692 100,978 94,014
Trust and investment advisory income 65,939 59,841 54,963 56,797 49,782
Bank card-related income 55,261 52,845 43,810 31,212 26,227
Other income 97,516 103,095 97,034 82,493 78,805
Securities gains (losses) 3,393 (2,067) (10,766) 2,094 6,523
- -----------------------------------------------------------------------------------------------------------
Total noninterest income 336,358 322,978 288,733 273,574 255,351
- -----------------------------------------------------------------------------------------------------------
Net Credit And Noninterest Income 1,106,778 1,071,568 1,030,075 917,533 794,592
- -----------------------------------------------------------------------------------------------------------
Noninterest Expense
Personnel expense 397,448 388,542 372,590 324,623 297,538
Occupancy expense - net 64,450 62,851 63,290 56,374 53,852
Equipment expense 38,479 37,916 35,063 32,999 32,007
Other expense 283,142 231,800 229,684 238,786 258,549
- -----------------------------------------------------------------------------------------------------------
Total noninterest expense 783,519 721,109 700,627 652,782 641,946
- -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes 323,259 350,459 329,448 264,751 152,646
Income tax expense 104,988 134,572 114,290 85,165 35,434
- -----------------------------------------------------------------------------------------------------------
Net Income $ 218,271 $ 215,887 $ 215,158 $ 179,586 $ 117,212
===========================================================================================================
Earnings Per Share
Primary $ 1.95 $ 1.92 $ 1.93 $ 1.60 $ 1.13
Fully diluted 1.94 1.92 1.93 1.60 1.12
===========================================================================================================
Supplementary Data
Average shares outstanding (000s):
Primary 112,037 112,432 111,643 110,836 101,885
Fully diluted 112,408 112,623 111,665 111,007 102,096
===========================================================================================================
</TABLE>
81
<PAGE>
Consolidated Average Balances/Net Interest Income/Rates(1)
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
1996 1995
--------------------------------- --------------------------------
Income(4)/ Yield/ Income(4)/ Yield/
Dollars in thousands Balance Expense Rate Balance Expense Rate
--------------------------------- --------------------------------
<S> <C>
Assets $ $ % $ $ %
Taxable securities held to maturity 977,628 57,841 5.92 2,080,801 124,191 5.97
Tax-exempt securities held to maturity 81,842 6,953 8.50 92,800 8,161 8.79
- -------------------------------------------------------------------------------------------------------------
Total securities held to maturity(2) 1,059,470 64,794 6.12 2,173,601 132,352 6.09
Securities available for sale(2) 3,862,323 242,486 6.28 2,042,723 133,290 6.53
Money market investments(2) 332,182 17,901 5.39 337,167 20,204 5.99
Mortgage loans held for sale(2) 835,770 63,012 7.54 374,482 28,145 7.52
- -------------------------------------------------------------------------------------------------------------
Commercial 3,717,001 301,812 8.12 3,615,826 305,853 8.46
Real estate - income property 1,258,762 110,281 8.76 1,260,403 108,807 8.63
Real estate - construction 353,868 33,563 9.49 400,718 40,139 10.02
Instalment 3,698,106 309,833 8.38 3,243,571 275,500 8.49
Bank card 1,529,341 190,954 12.49 1,581,916 178,840 11.31
Real estate - mortgage 3,072,474 238,688 7.77 3,572,701 280,036 7.84
- -------------------------------------------------------------------------------------------------------------
Total loans(2,3) 13,629,552 1,185,131 8.70 13,675,135 1,189,175 8.70
Allowance for loan losses (274,460) (271,024)
- -------------------------------------------------------------------------------------------------------------
Loans - net 13,355,092 13,404,111
Cash and due from banks 922,638 944,423
Premises and equipment - net 418,394 413,353
Customers' liability on acceptances 9,741 9,335
Intangible assets - net 184,427 161,123
Foreclosed properties - net 36,735 40,464
Other assets 571,199 534,974
- -------------------------------------------------------------------------------------------------------------
Total Assets 21,587,971 20,435,756
========== ==========
Total Earning Assets 19,719,297 1,573,324 7.98 18,603,108 1,503,166 8.08
========== ========= ==== ========== ========= ====
Liabilities and Shareholders' Equity
Interest-bearing demand deposits 5,814,157 171,109 2.94 5,690,529 180,600 3.17
Regular savings deposits 1,689,981 43,850 2.59 1,863,640 51,368 2.76
Domestic time deposits 4,995,653 259,971 5.20 4,949,176 257,418 5.20
Certificates of deposit $100,000 and over 510,341 27,843 5.45 72,665 3,915 5.39
- -------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits(2) 13,010,132 502,773 3.86 12,576,010 493,301 3.92
Demand deposits 3,038,032 2,855,475
- -------------------------------------------------------------------------------------------------------------
Total deposits 16,048,164 15,431,485
Short-term borrowings(2) 2,785,475 144,797 5.20 2,327,348 133,709 5.75
Long-term debt(2) 688,953 49,499 7.19 695,537 50,038 7.19
Liability on acceptances 9,741 9,335
Other liabilities 278,895 255,393
- -------------------------------------------------------------------------------------------------------------
Total liabilities 19,811,228 18,719,098
- -------------------------------------------------------------------------------------------------------------
Preferred stock - -
Common shareholders' equity 1,776,743 1,716,658
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,776,743 1,716,658
- -------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity 21,587,971 20,435,756
========== ==========
Total interest-bearing liabilities 16,484,560 697,069 4.23 15,598,895 677,048 4.34
Other sources-net 3,234,737 3,004,213
- -------------------------------------------------------------------------------------------------------------
Total Sources of Funds 19,719,297 697,069 3.54 18,603,108 677,048 3.64
========== ======= ==== ========== ======= ====
Net Interest Spread 3.75 3.74
Net Interest Income/Margin 876,255 4.44 826,118 4.44
=============================================================================================================
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
1994 1993
-------------------------------- -------------------------------
Income(4)/ Yield/ Income(4)/ Yield/
Dollars in thousands Balance Expense Rate Balance Expense Rate
-------------------------------- -------------------------------
<S> <C>
Assets $ $ % $ $ %
Taxable securities held to maturity 2,249,938 129,521 5.76 3,095,327 190,200 6.14
Tax-exempt securities held to maturity 107,358 11,012 10.26 184,949 17,223 9.31
- -----------------------------------------------------------------------------------------------------------------
Total securities held to maturity(2) 2,357,296 140,533 5.96 3,280,276 207,423 6.32
Securities available for sale(2) 2,448,915 142,357 5.81 1,615,535 86,590 5.36
Money market investments(2) 649,669 28,383 4.37 877,688 30,724 3.50
Mortgage loans held for sale(2) 407,796 28,854 7.08 429,638 29,531 6.87
- -----------------------------------------------------------------------------------------------------------------
Commercial 3,511,264 274,451 7.82 3,367,982 258,459 7.67
Real estate - income property 1,105,522 90,667 8.20 1,008,293 80,124 7.95
Real estate - construction 405,849 35,444 8.73 392,963 29,769 7.58
Instalment 2,762,983 219,947 7.96 2,408,510 204,418 8.49
Bank card 1,154,573 137,989 11.95 712,928 97,447 13.67
Real estate - mortgage 2,871,078 214,410 7.47 2,059,665 166,183 8.07
- -----------------------------------------------------------------------------------------------------------------
Total loans(2,3) 11,811,269 972,908 8.24 9,950,341 836,400 8.41
Allowance for loan losses (271,298) (256,999)
- -----------------------------------------------------------------------------------------------------------------
Loans - net 11,539,971 9,693,342
Cash and due from banks 897,363 864,769
Premises and equipment - net 400,504 373,835
Customers' liability on acceptances 8,537 16,260
Intangible assets - net 110,815 75,416
Foreclosed properties - net 62,524 104,244
Other assets 496,718 493,221
- -----------------------------------------------------------------------------------------------------------------
Total Assets 19,380,108 17,824,224
========== ==========
Total Earning Assets 17,674,945 1,313,035 7.43 16,153,478 1,190,668 7.37
========== ========= ==== ========== ========= ====
Liabilities and Shareholders' Equity
Interest-bearing demand deposits 5,720,111 152,539 2.67 5,313,313 136,840 2.58
Regular savings deposits 2,101,876 56,602 2.69 1,794,233 51,920 2.89
Domestic time deposits 4,510,528 193,254 4.28 4,254,935 192,845 4.53
Certificates of deposit $100,000 and over 58,671 2,600 4.43 46,650 2,043 4.38
- -----------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits(2) 12,391,186 404,995 3.27 11,409,131 383,648 3.36
Demand deposits 2,754,656 2,574,752
- -----------------------------------------------------------------------------------------------------------------
Total deposits 15,145,842 13,983,883
Short-term borrowings(2) 1,841,998 79,192 4.30 1,670,436 51,893 3.11
Long-term debt(2) 588,269 38,756 6.59 463,691 33,056 7.13
Liability on acceptances 8,537 16,260
Other liabilities 234,141 214,997
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 17,818,787 16,349,267
- -----------------------------------------------------------------------------------------------------------------
Preferred stock - 43,890
Common shareholders' equity 1,561,321 1,431,067
- -----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,561,321 1,474,957
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity 19,380,108 17,824,224
========== ==========
Total interest-bearing liabilities 14,821,453 522,943 3.53 13,543,258 468,597 3.46
Other sources-net 2,853,492 2,610,220
- -----------------------------------------------------------------------------------------------------------------
Total Sources of Funds 17,674,945 522,943 2.96 16,153,478 468,597 2.90
========== ======= ==== ========== ======= ====
Net Interest Spread 3.90 3.91
Net Interest Income/Margin 790,092 4.47 722,071 4.47
=================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992
---------------------------------
Income(4)/ Yield/
Dollars in thousands Balance Expense Rate
---------------------------------
<S> <C>
Assets $ $ %
Taxable securities held to maturity 3,400,113 226,764 6.67
Tax-exempt securities held to maturity 249,138 22,187 8.91
- --------------------------------------------------------------------------------
Total securities held to maturity(2) 3,649,251 248,951 6.82
Securities available for sale(2) 89,189 5,464 6.13
Money market investments(2) 1,227,909 47,947 3.90
Mortgage loans held for sale(2) 367,734 28,522 7.76
- --------------------------------------------------------------------------------
Commercial 3,688,846 301,509 8.17
Real estate - income property 898,291 92,180 10.26
Real estate - construction 512,849 36,530 7.12
Instalment 2,410,803 244,485 10.14
Bank card 550,388 83,064 15.09
Real estate - mortgage 1,890,302 160,986 8.52
- --------------------------------------------------------------------------------
Total loans(2,3) 9,951,479 918,754 9.23
Allowance for loan losses (263,124)
- --------------------------------------------------------------------------------
Loans - net 9,688,355
Cash and due from banks 822,557
Premises and equipment - net 355,926
Customers' liability on acceptances 20,991
Intangible assets - net 68,410
Foreclosed properties - net 157,501
Other assets 462,367
- --------------------------------------------------------------------------------
Total Assets 16,910,190
==========
Total Earning Assets 15,285,562 1,249,638 8.18
========== ========= ====
Liabilities and Shareholders' Equity
Interest-bearing demand deposits 5,043,495 164,299 3.26
Regular savings deposits 1,406,936 51,018 3.63
Domestic time deposits 5,003,338 279,514 5.59
Certificates of deposit $100,000 and over 120,481 7,797 6.47
- --------------------------------------------------------------------------------
Total interest-bearing deposits(2) 11,574,250 502,628 4.34
Demand deposits 2,250,569
- --------------------------------------------------------------------------------
Total deposits 13,824,819
Short-term borrowings(2) 1,253,645 42,012 3.35
Long-term debt(2) 308,491 27,034 8.76
Liability on acceptances 20,991
Other liabilities 245,463
- --------------------------------------------------------------------------------
Total liabilities 15,653,409
- --------------------------------------------------------------------------------
Preferred stock 45,000
Common shareholders' equity 1,211,781
- --------------------------------------------------------------------------------
Total shareholders' equity 1,256,781
- --------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity 16,910,190
==========
Total interest-bearing liabilities 13,136,386 571,674 4.35
Other sources-net 2,149,176
- --------------------------------------------------------------------------------
Total Sources of Funds 15,285,562 571,674 3.74
========== ======= ====
Net Interest Spread 3.82
Net Interest Income/Margin 677,964 4.44
================================================================================
</TABLE>
(1) Income and yields are computed on a tax-equivalent basis using the
statutory federal income tax rate exclusive of the alternative
(2) Indicates earning asset or interest-bearing liability. $14.8 million in
1993 and $17.9 million in 1992.
(3) Nonaccrual loans are included in the average loan balances and income on
such loans is recognized on a cash basis. minimum tax and nondeductible
interest expense.
(4) The tax-equivalent adjustment to net interest income was $9.9 million in
1996, $11.3 million in 1995, $12.2 million in 1994, $14.8 million in
1993 and $17.9 milion in 1992.
83
<PAGE>
Selected Ratios And Other Data
Crestar Financial Corporation And Subsidiaries
<TABLE>
<CAPTION>
Ratios 1996 1995 1994 1993 1992
<S> <C>
Net interest margin(1) 4.44% 4.44% 4.47% 4.47% 4.44%
Noninterest expense to:
Net interest income(1) and noninterest income 64.61 62.75 64.94 65.56 68.78
Average assets 3.63 3.53 3.62 3.66 3.80
Net Income to net interest and noninterest income 18.15 18.97 20.17 18.31 12.80
Average earning assets to average total assets 91.34 91.03 91.20 90.63 90.39
Net Income to:
Average earning assets 1.11 1.16 1.22 1.11 .77
Average assets 1.01 1.06 1.11 1.01 .69
Average total equity 12.28 12.58 13.78 12.18 9.33
Income applicable to common shares to average
common equity 12.28 12.58 13.78 12.39 9.47
Average total equity to:
Average loans 7.67 7.97 7.56 6.75 7.92
Average assets 8.23 8.40 8.06 8.28 7.43
Dividend payout ratio:
On common stock 60.93 40.31 35.68 33.90 38.42
On common and preferred stock 60.93 40.31 35.68 34.72 39.72
Equity formation rate 4.80 7.51 8.86 7.95 5.62
Long-term debt at year end to:
Total equity at year end 37.05 37.60 44.65 40.00 24.16
Total equity and long-term debt at year end 27.03 27.32 30.87 28.57 19.46
Net charge-offs to:
Average total loans .74 .48 .35 .75 1.30
Provision for loan losses 104.87 98.63 114.24 118.23 107.28
Allowance for loan losses to year-end loans 1.91 1.96 2.01 2.39 2.55
Nonperforming assets to year-end loans and
foreclosed properties - net(2) .77 .92 1.15 1.66 3.27
Net charge-offs earnings coverage 4.17x 6.38x 8.77x 4.38x 2.11x
Average equity leverage 12.15 11.90 12.41 12.08 13.46
===============================================================================================================================
Other data
Cash dividends paid per common share(3) $ 1.01 $ .88 $ .77 $ .57 $ .40
Number of average primary shares (000s) 112,037 112,432 111,643 110,836 101,885
Market price of common stock:
High $ 37 3/4 $ 30 1/2 $ 27 7/8 $ 23 1/4 $ 19 7/8
Low 26 1/4 18 1/2 18 17 1/2 8 5/8
Last 37 1/4 29 5/8 18 7/8 21 19 1/2
At year end:
Book value per common share 16.20 16.12 14.57 13.72 12.48
Fully diluted price/earnings multiple 19.14x 15.43x 9.78x 13.13x 17.41x
Dividend yield on common stock(3) 2.72% 2.97% 4.08% 2.71% 2.05%
Number of common shareholders of record 21,771 21,047 20,004 20,091 19,492
Number of banking offices 508 480 483 446 443
Number of employees 9,199 8,944 9,657 9,126 8,611
Full-time equivalent employees 8,720 8,487 9,212 8,803 8,356
===============================================================================================================================
</TABLE>
(1) Tax-equivalent basis
(2) Loans which are both past due 90 days or more and not deemed nonaccrual due
to an assessment of collectibility are specifically excluded from the
definition of nonperforming
(3) Dividends paid per common share represent historical dividends per common
share paid by Crestar Financial Corporation; dividend yield on common stock
is based on cash dividends paid during year
84
<PAGE>
General Information
Crestar Financial Corporation And Subsidiaries
Corporate Headquarters
Crestar Center
919 East Main Street, P.O. Box 26665
Richmond, Virginia 23261-6665
(804)782-5000 TELEX: 827420
Annual Meeting
The 1997 Annual Meeting of Shareholders will be
held at 10:00 a.m. on Friday, April 25, 1997 in our
Corporate Headquarters auditorium.
Common Stock
Crestar's common stock is traded on the New York
Stock Exchange where our symbol is CF. Dividends
are customarily paid on the 21st of February, May,
August and November.
Quarterly Common Stock
Prices And Dividends
The high, low and last price of Crestar's common
stock for each quarter of 1996 and 1995 and the
dividends paid per share are shown below.
Market Price Dividends
Quarter ------------------------
Ended High Low Last Paid
1996
March 31 $29 7/8 $26 1/2 $28 3/4 $.225
June 30 29 1/4 26 5/8 26 5/8 .260
September 30 30 3/4 26 1/4 29 1/2 .260
December 31 37 3/4 29 37 1/4 .260
- ---------------------------------------------------
1995
March 31 $22 1/8 $18 1/2 $22 $.200
June 30 24 3/4 21 5/8 24 1/2 .225
September 30 29 1/4 23 7/8 28 .225
December 31 30 1/2 27 1/2 29 5/8 .225
===================================================
All data has been restated to reflect the two-for-one stock split
distributed January 24, 1997. In December 1996, an increased
dividend of $.27 per share was declared, payable on February
21, 1997.
Financial Information
To obtain financial information on Crestar, contact
Eugene S. Putnam, Jr., Senior Vice President-Investor
Relations and Corporate Finance, at the Corporate
Headquarters, (804)782-5619.
Corporate Publications
Crestar's Annual Report and Form 10-K, Quarterly
Reports and other corporate publications are available
on request by writing or calling our Investor Relations
Department at the Corporate Headquarters,
(804)782-7152. The Securities and Exchange
Commission (SEC) maintains a web site which
contains reports, proxy and information statements
pertaining to registrants which file electronically with
the SEC, including Crestar. The SEC's web site address
is http://www.sec.gov.
Shareholder Information
In you have questions about a specific stock owner-
ship account, write or call our Investor Relations
Department at the Corporate Headquarters,
(804)782-7933.
Dividend Reinvestment
And Stock Purchase Plan
Common shareholders receive a 5% discount from
market price when they reinvest their Crestar
dividends in additional shares. Shareholders partici-
pating in the Plan can also make optional cash
purchases of common stock at market price and pay
no brokerage commissions. To obtain our Plan
prospectus and enrollment card, write or call our
Investor Relations Department at the Corporate
Headquarters, (804)782-7933.
Cash Dividend Direct Deposit
Shareholders may elect to have their Crestar dividends
directly deposited to a checking, savings or money
market account. This service provides a convenient
and safe method of receiving dividends and is offered
at no cost to shareholders. To obtain additional
information and an enrollment form, write or call our
Investor Relations Department at the Corporate
Headquarters, (804)782-7933.
[RECYCLED LOGO] This annual report is printed on recycled paper.
EXHIBITS
The following exhibits are filed with this form or are incorporated by reference
in response to Item 14(c). Those exhibits not included herein are not applicable
or the required information is shown in the Consolidated Financial Statements or
the notes thereto.
2(a) Agreement and Plan of Reorganization among Crestar Financial Corporation,
CDM Acquisition Subsidiary, Inc., Crestar Bank DC, Citizens Bancorp, and
Citizens Bank of Maryland dated September 15, 1996 (filed as Annex 1 to
Registrant's Form S-4, Registration Statement No. 333- 13871, and
incorporated by reference herein).
2(b) Agreement and Plan of Merger By and Between Crestar Financial Corporation
and Loyola Capital Corporation dated May 16, 1995 (filed as Annex 1 to
Registrant's Form S-4, Registration Statement No. 33-60637, and
incorporated by reference herein).
3(a) Restated Articles of Incorporation as amended through December 20, 1996
(filed herewith).
3(b) Bylaws as amended through December 20, 1996 (filed herewith).
4(a) Indenture dated as of September 1, 1993 for subordinated debt securities
(filed as Exhibit 4.1 to Registration Statement No. 33-50387 and
incorporated by reference herein). Pursuant to his indenture, a series of
$150,000,000 of 8 3/4% subordinated Notes due 2004 have been issued, the
terms of which are described in 4(g) below.
4(b) Indenture dated as of February 1, 1985 for subordinated debt securities
(filed as Exhibit 4(c) to Registrant's 1985 Form 10-K and incorporated by
reference herein). Pursuant to this Indenture, a series of $50,000,000 of
8 5/8% Subordinated Notes Due 1998 and a series of $125,000,000 of 8 1/4%
Subordinated Notes Due 2002 have been issued, the terms of which are
described in 4(c) and 4(e) below.
4(c) First Supplemental Indenture dated as of March 1, 1986 covering
$50,000,000 of 8 5/8% Subordinated Notes due 1998 (filed as Exhibit 4(b)
to Registration Statement No. 33-4332 and incorporated by reference
herein).
4(d) Second Supplemental Indenture dated as of September 1, 1986 (filed as
Exhibit 4.1 to Registrant's Form 8-K current report dated July 16, 1992
and incorporated by reference herein).
4(e) Third Supplemental Indenture dated as of July 1, 1992 covering
$125,000,000 of 8 1/4% Subordinated Notes Due 2002 (filed as Exhibit 4(c)
to Registrant's 1992 Form 10-K and incorporated by reference herein).
4(f) Rights Agreement dated June 23, 1989, between the Registrant and Mellon
Bank, NA, as Rights Agent (filed as Exhibit 4.1 to the Registrant's Form
8-K current report dated June 23, 1989, and incorporated by reference
herein).
4(g) Board of Directors Resolutions approving issuance of $150,000,000 of 8
3/4% Subordinated Notes due 2004 (filed as Exhibit 4(g) to Registrant's
1994 Form 10-K and incorporated by reference herein).
10(a) Performance Equity Plan of United Virginia Bankshares Incorporated (filed
as Exhibit 10(a) to Registrant's 1987 Form 10-K and incorporated by
reference herein).
10(b) Management Incentive Compensation Plan of Crestar Financial Corporation
(filed as Exhibit 10(b) to Registrant's 1989 Form 10-K and incorporated
by reference herein).
10(c) Crestar Financial Corporation Executive Life Insurance Plan as amended
and restated effective January 1, 1991 (filed as Exhibit 10(d) to
Registrant's 1993 Form 10-K and incorporated by reference herein).
10(d) Crestar Financial Corporation Executive Welfare Plan (filed as Exhibit
10(d) to Registrant's 1990 Form 10-K and incorporated by reference
herein).
10(e) Amendments (effective December 18, 1992) to Crestar Financial Corporation
Executive Welfare Plan (filed as Exhibit 10(e) to Registrant's 1992 Form
10-K and incorporated by reference herein).
10(f) 1981 Stock Option Plan of Crestar Financial Corporation and Affiliated
Corporations as amended through January 25, 1991 (filed as Exhibit 10(e)
to Registrant's 1991 Form 10-K and incorporated by reference herein).
10(g) Severance Agreement between the Corporation and Richard G. Tilghman dated
February 23, 1996 (filed as Exhibit 10(g) to Registrant's 1995 Form 10-K
and incorporated by reference herein).
10(h) Severance Agreement between the Corporation and James M. Wells III dated
February 23, 1996 ((filed as Exhibit 10(h) to Registrant's 1995 Form 10-K
and incorporated by reference herein).
10(i) Severance Agreement between the Corporation and O. H. Parrish, Jr. dated
February 23, 1996 (filed as Exhibit 10(i) to Registrant's 1995 Form 10-K
and incorporated by reference herein).
10(j) Severance Agreement between the Corporation and William C. Harris dated
February 23, 1996 ((filed as Exhibit 10(j) to Registrant's 1995 Form 10-K
and incorporated by reference herein).
10(k) Severance Agreement between the Corporation and C. Garland Hagen dated
February 23, 1996 (filed as Exhibit 10(k) to Registrant's 1995 Form 10-K
and incorporated by reference herein).
10(l) Severance Agreement between the Corporation and Richard C. Katchuk dated
February 23, 1996 (filed herewith).
10(m) Crestar Financial Corporation Executive Severance Plan, as amended and
restated effective February 23, 1996 (filed as Exhibit 10(l) to
Registrant's 1995 Form 10-K and incorporated by reference herein).
10(n) Crestar Financial Corporation Excess Benefit Plan (filed as Exhibit 10(k)
to Registrant's 1990 Form 10-K and incorporated by reference herein).
10(o) Amendments (effective December 18, 1992) to Crestar Financial Corporation
Excess Benefit Plan (filed as Exhibit 10(m) to Registrant's 1992 Form
10-K and incorporated by reference herein).
10(p) United Virginia Bankshares Incorporated Deferred Compensation Program
under Incentive Compensation Plan of United Virginia Bankshares
Incorporated and Affiliated Corporations (filed as Exhibit 10(m) to
Registrant's 1988 Form 10-K and incorporated by reference herein).
10(q) Amendment (effective 1/1/87) to United Virginia Bankshares Incorporated
Deferred Compensation Program Under Incentive Compensation Plan of United
Virginia Bankshares Incorporated and Affiliated Corporations (filed as
Exhibit 10(p) to Registrant's 1995 Form 10-K and incorporated by
reference herein).
10(r) Amendments (effective 1/1/87 and 1/1/88) to United Virginia Bankshares
Incorporated Deferred Compensation Program Under Incentive Compensation
Plan of United Virginia Bankshares Incorporated and Affiliated
Corporations (filed as Exhibit 10(q) to Registrant's 1995 Form 10-K and
incorporated by reference herein).
10(s) Amendment (effective 1/1/94) to Crestar Financial Corporation Deferred
Compensation Program Under Incentive Compensation Plan of Crestar
Financial Corporation and Affiliated Corporations (filed as Exhibit 10(r)
to Registrant's 1995 Form 10-K and incorporated by reference herein).
10(t) Crestar Financial Corporation Deferred Compensation Plan for Outside
Directors of Crestar Financial Corporation and Crestar Bank (filed as
Exhibit 10(n) to Registrant's 1988 10-K and incorporated by reference
herein).
10(u) Amendments (effective April 24, 1991) to Crestar Financial Corporation
Deferred Compensation Plan for Outside Directors of Crestar Financial
Corporation and Crestar Bank (filed as Exhibit 10(p) to Registrant's 1992
Form 10-K and incorporated by reference herein).
10(v) Crestar Financial Corporation Additional Nonqualified Executive Plan
(filed as Exhibit 10(n) to Registrant's 1990 Form 10-K and incorporated
by reference herein).
10(w) Amendments (effective December 18, 1992) to Crestar Financial Corporation
Additional Nonqualified Executive Plan (filed as Exhibit 10(r) to
Registrant's 1992 Form 10-K and incorporated by reference herein).
10(x) Crestar Financial Corporation Benefit Assurance Plan (filed as Exhibit
10(p) to Registrant's 1990 Form 10-K and incorporated by reference
herein).
10(y) Amendments (effective December 18, 1992) to Crestar Financial Corporation
Benefit Assurance Plan (filed as Exhibit 10(v) to Registrant's 1992 Form
10-K and incorporated by reference herein).
10(z) Crestar Financial Corporation Supplemental Benefit Plan (filed as Exhibit
10(q) to Registrant's 1990 Form 10-K and incorporated by reference
herein).
10(aa) Amendments (effective December 18, 1992) to Crestar Financial Corporation
Supplemental Benefit Plan (filed as Exhibit 10(x) to Registrant's 1992
Form 10-K and incorporated by reference herein).
10(ab) Deferred Compensation Plan for Selected Employees of United Virginia
Bankshares Incorporated and Affiliated Corporations (filed as Exhibit
10(r) to Registrant's 1990 Form 10-K and incorporated by reference
herein).
10(ac) Amendment (effective January 1, 1987) to Deferred Compensation Plan for
Selected Employees of United Virginia Bankshares Incorporated and
Affiliated Corporations (filed as Exhibit 10(z) to Registrant's 1992 Form
10-K and incorporated by reference herein).
10(ad) Amendments (effective 1/1/87 and 1/1/88) to Deferred Compensation Plan
for Selected Employees of United Virginia Bankshares Incorporated and
Affiliated Corporations (filed as Exhibit 10(ac) to Registrant's 1995
Form 10-K and incorporated by reference herein).
10(ae) Amendment (effective 1/1/94) to Deferred Compensation Plan for Selected
Employees of Crestar Financial Corporation and Affiliated Corporations
(filed as Exhibit 10(ac) to Registrant's 1995 Form 10-K and incorporated
by reference herein).
10(af) Crestar Financial Corporation Premium Assurance Plan (filed as Exhibit
10(s) to Registrant's 1991 Form 10-K and incorporated by reference
herein).
10(ag) Amendments (effective December 18, 1992) to Crestar Financial Corporation
Premium Assurance Plan (filed as Exhibit 10(ab) to Registrant's 1992 Form
10-K and incorporated by reference herein).
10(ah) Crestar Financial Corporation 1993 Stock Incentive Plan (filed as Exhibit
10(ad) to Registrant's 1993 Form 10-K and incorporated by reference
herein).
10(ai) Amendments (effective October 27, 1995) to Crestar Financial Corporation
1993 Stock Incentive Plan (filed as Exhibit 10(ah) to Registrant's 1995
Form 10-K and incorporated by reference herein).
10(aj) Amendments (effective December 20, 1996) to the Crestar Financial
Corporation Supplemental Executive Retirement Plan and to the Crestar
Financial Corporation 1993 Stock Incentive Plan (filed herewith).
10(ak) Crestar Financial Corporation Directors' Stock Compensation Plan (filed
as Exhibit 10(ae) to Registrant's 1993 Form 10-K and incorporated by
reference herein).
10(al) Crestar Financial Corporation Temporary Executive Benefit Plan as amended
through December 18, 1992 (filed as Exhibit 10(af) to Registrant's 1993
Form 10-K and incorporated by reference herein).
10(am) Crestar Financial Corporation Permanent Executive Benefit Plan as amended
through December 18, 1992 (filed as Exhibit 10(ag) to Registrant's 1993
Form 10-K and incorporated by reference herein).
10(an) Crestar Financial Corporation Supplemental Executive Retirement Plan,
effective January 1, 1995 (filed as Exhibit 10(al) to Registrant's 1995
Form 10-K and incorporated by reference herein).
10(ao) Crestar Financial Corporation Directors' Equity Program, effective
January 1, 1996 (filed herewith).
10(ap) Amendment (effective December 20, 1996) to Crestar Financial Corporation
Directors' Equity Program (filed herewith).
10(aq) Crestar Financial Corporation Crestar/Citizens Stock Option Plan (filed
herewith).
10(ar) Citizens Bank of Maryland Unfunded Compensation Master Plan (filed
herewith).
10(as) Employment and Severance Agreement between the Corporation (as successor
to Citizens Bancorp) and Jeffrey R. Springer dated September 23, 1987
with Amendment No. 1 dated October 18, 1989, Amendment No. 2 dated
December 15, 1993 and Correction to Amendment No. 2 dated June 19, 1996
(filed herewith).
21 Subsidiaries (filed herewith).
23(a) Consent of KPMG Peat Marwick LLP (filed herewith).
23(b) Consent of Deloitte & Touche LLP (filed herewith).
99(a) Independent Auditor's Report for Consolidated Financial Statements of
Citizens Bancorp and Subsidiaries, dated January 16, 1997 (filed
herewith).
99(b) Crestar Bank, Consolidated Reports of Condition and Income for A Bank
With Domestic and Foreign Offices, Federal Financial Institutions
Examination Council Report 031 (FFEIC 031), as of December 31, 1996
(filed herewith).
Note: All Item 10 documents represent Executive Compensation Plans or
Arrangements, or Amendments thereto.
Exhibit 3(a)
CRESTAR FINANCIAL CORPORATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
1. The name of the Corporation is Crestar Financial Corporation.
2. On the effective date of these Articles of Amendment, the Articles of
Incorporation are restated in the form attached as Exhibit A.
3. The restatement was adopted by the Board of Directors on October 22, 1993.
The restatement does not contain an amendment that requires shareholder
approval.
4. These Articles of Amendment shall be effective upon the issuance of a
Certificate of Restatement by the State Corporation Commission of Virginia.
Dated: October 27, 1993
CRESTAR FINANCIAL CORPORATION
By: /s/ John C. Clark, III
----------------------------
John C. Clark, III
Senior Vice President,
General Counsel & Secretary
<PAGE>
Exhibit A
RESTATED
ARTICLES OF INCORPORATION
OF
CRESTAR FINANCIAL CORPORATION
1. NAME. The name of the Corporation is Crestar Financial Corporation.
2. PURPOSE. The purpose of the Corporation is to acquire, own, manage
and dispose of the capital stock and other securities of banks and other
corporations. In addition, the Corporation shall have power to carry on business
of any character not prohibited by law or required to be stated in these
articles.
3. AUTHORIZED STOCK. The Corporation shall have the authority to issue
2,000,000 shares of preferred stock of a par value of $25 per share and
100,000,000 shares of common stock of a par value of $5 per share.
Preferred stock. Authority is expressly vested in the Board of Directors
to divide the preferred stock into series and, within the following limitations,
to fix and determine the relative rights and preferences of the shares of any
series so established and to provide for the issuance thereof. Each series shall
be so designated as to distinguish the shares thereof from the shares of all
other series and classes. All shares of preferred stock shall be identical
except as to the following relative rights and preferences, as to which there
may be variations between different series.
(a) The rate of dividend, the time of payment and the dates from which
dividends shall be cumulative, and the extent of participation rights, if
any;
(b) Any right to vote with holders of shares of any other series or
class and any right to vote as a class, either generally or as a condition
to specified corporate action;
(c) The price at and the terms and conditions on which shares may be
redeemed;
(d) The amount payable upon shares in event of involuntary liquidation;
(e) The amount payable upon shares in event of voluntary liquidation;
<PAGE>
(f) Sinking fund provisions for the redemption or purchase of shares;
and
(g) The terms and conditions on which shares may be converted, if the
shares of any series are issued with the privilege of conversion.
Prior to the issuance of any shares of a series of preferred stock the
Board of Directors shall establish such series by adopting a resolution setting
forth the designation and number of shares of the series and the relative rights
and preferences thereof to the extent that variations are permitted by the
provisions hereof.
All series of preferred stock shall rank on a parity as to dividends and
assets with all other series according to the respective dividend rates and
amounts distributable upon any voluntary or involuntary liquidation of the
Corporation fixed for each such series and without preference or priority of any
series over any other series; but all shares of the preferred stock shall be
preferred over the common stock as to both dividends and amounts distributable
upon any voluntary or involuntary liquidation of the Corporation. All shares of
any one series shall be identical.
The designations and separate terms of the two series of the Preferred
Stock authorized and issued as of the date of these Restated Articles of
Incorporation are as follows:
(i) Adjustable Rate Cumulative Preferred Stock
Series B
Authorized December 5, 1985
The Corporation has designated 900,000 shares of the authorized but
unissued shares of the Corporation's Preferred Stock par value $25 per
share, as Adjustable Rate Cumulative Preferred Stock Series B, with a
stated value of $50 per share, hereinafter referred to as "Series B".
The terms of the Series B shares, in the respects in which the shares of
such series may vary from shares of other series of Preferred Stock, are as
follows:
(a) Dividends and Distributions. The holders of shares of Series B shall
be entitled to receive, out of funds legally available for the payment of
dividends, if, when and as declared by the Board of Directors, from the date of
original issuance to and including January 30, 1986, and for each dividend
period commencing on January 31, May 1, July 31 and October 31 in each year
after January 30, 1986 and ending on and including the day next preceding the
first day of the next dividend period (such period ending January 30, 1986 and
each of such other periods herein referred to as a "Dividend Period") at a rate
<PAGE>
as follows: (i) for the Dividend Period from the date of original issuance of
the Series B to and including January 30, 1986, (the "Fixed Dividend Period"),
the rate shall be 7.11% per annum of the stated value thereof, and (ii) for each
Dividend Period commencing after January 30, 1986 (the "Adjustable Dividend
Periods") at a rate per annum of the stated value equal to the Applicable Rate
(as defined in Section (c)) in respect of such Adjustable Dividend Period. The
amount of dividend per share payable for the Fixed Dividend Period and for any
Dividend Period less than a full Dividend Period shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in the period for which payable. The amount of dividend per share payable for
each full Dividend Period commencing after January 30, 1986 shall be computed by
dividing the annual dividend rate for such Dividend Period by four and applying
such resulting rate against the stated value per share of the Series B.
Dividends shall be payable if, when and as declared by the Board of Directors,
out of funds legally available therefor, on January 30, April 30, July 30 and
October 30 of each year, commencing January 30, 1986, to holders of record at
the close of business on the January 10, April 10, July 10 and October 10, as
the case may be, next preceding such dividend payment date. Dividends on account
of arrears for any past Dividend Periods MAY be declared and paid at any time,
without reference to any regular dividend payment date, to holders of record on
such date not exceeding 30 days preceding the payment date thereof as may be
fixed by the Board of Directors. No dividends shall be declared on any other
series or class or classes of preferred stock ranking on a parity (as that term
is defined in Section (h)) with the Series B as to dividends in respect of any
Dividend Period unless there shall likewise be or have been declared on all
shares of Series B at the time outstanding like dividends for all Dividend
Periods coinciding with or ending before such Dividend Period, ratably in
proportion to the respective dividend rates fixed for all such other series or
class or classes of preferred stock and the Series B. Dividends shall be
cumulative and will accrue on each share of Series B from the date of original
issuance thereof. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments which may be in arrears.
All dividends declared payable to the holders of record of Series B as
of a date on which shares are owned by the Corporation shall be deemed to have
been paid in respect of such shares owned by the Corporation on such date.
Except as herein provided, the Series B shall not be entitled to
participate in the earnings or the assets of the Corporation.
<PAGE>
(b) Restrictions on Payments. If dividends at the rate per share set out
in Section (a) for any Dividend Period shall not have been declared and paid or
set apart for payment on all outstanding shares of Series B for such Dividend
Period and all preceding Dividend Periods from and after the date of issuance
thereof, then, until the aggregate deficiency shall be declared and fully paid
or set apart for payment, the Corporation shall not (i) declare or pay or set
apart for payment any dividends or make any other distribution on the Common
Stock, par value $5, of the Corporation ("Common Stock") or any other capital
stock of the Corporation ranking junior to Series B with respect to the payment
of dividends or distribution of assets on liquidation, dissolution or winding up
of the Corporation (which for all purposes of this resolution shall mean any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary) (the Common Stock and such other stock being herein referred to as
"Subordinate Stock"), other than dividends or distributions paid in shares of,
or options, warrants or rights to subscribe for or purchase shares of,
Subordinate Stock, or (ii) make any payment on account of the purchase,
redemption or other retirement of any Subordinate Stock.
(c) Applicable Rate. Except as provided below in this paragraph, the
"Applicable Rate" for any Adjustable Dividend Period shall be (a) 3.00% less
than (b) the highest of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined for
the Adjustable Dividend Period. If the Corporation determines in good faith that
for any reason one or more of such rates cannot be determined for any Adjustable
Dividend Period, then the Applicable Rate for such Dividend Period shall be
3.00% less than the higher of whichever of such rates can be so determined. If
the Corporation determines in good faith that none of such rates can be
determined for any Adjustable Dividend Period, then the Applicable Rate in
effect for the preceding Dividend Period shall be continued for such Dividend
Period. Anything herein to the contrary notwithstanding, the Applicable Rate for
any Adjustable Dividend Period shall in no event be less than 5.50% per annum or
greater than 11.50% per annum.
Except as provided below in this paragraph, the "Treasury Bill Rate" for
each Adjustable Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period (as defined below)) for three-month U. S. Treasury
bills, published by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") during the Calendar Period immediately prior to the ten
calendar days immediately preceding the January 30, April 30, June 30 and
October 30, as the case may be, immediately prior to the Adjustable Dividend
Period for which the dividend rate on Series
<PAGE>
B is being determined. If the Federal Reserve Board does not publish such a
weekly per annum market discount rate during any such Calendar Period, then the
Treasury Bill Rate for such Adjustable Dividend Period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate shall be
published during the relevant Calendar Period) for three-month U. S. Treasury
bills, published during such Calendar Period by any Federal Reserve Bank or by
any U. S. Government department or agency selected by the Corporation. If a per
annum market discount rate for three-month U. S. Treasury bills shall not be
published by the Federal Reserve Board or by any Federal Reserve Bank or by any
U. S. Government department or agency during such Calendar Period, then the
Treasury Bill Rate for such Adjustable Dividend Period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate shall be
published during the relevant Calendar Period) for all the U. S. Treasury bills
then having maturities of not less than 80 nor more than 100 days, finally
published during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such rates, by any Federal Reserve Bank
or by, any U. S. Government department or agency selected by the Corporation. If
the Corporation determines in good faith that for any reason no such U. S.
Treasury bill rates are published as provided above during such Calendar Period,
then the Treasury Bill Rate for such Adjustable Dividend Period shall be the
arithmetic average of the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of marketable
noninterest-bearing U. S. Treasury securities with a maturity of not less than
80 nor more than 100 days from the date of each such quotation, as chosen and
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U. S. Government securities dealers selected by the
Corporation. If the Corporation determines in good faith that for any reason the
Corporation cannot determine the Treasury Bill Rate for any Adjustable Dividend
Period as provided above in this paragraph, the Treasury Bill Rate for such
Adjustable Dividend Period shall be the arithmetic average of the per annum
market discount rates based upon the closing bids during such Calendar Period
for each of the issues of marketable, interest-bearing U. S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from the date of each
such quotation, as chosen and quoted daily for each business day in New York
City (or less frequently if daily quotations shall not be generally available)
to the Corporation by at least three recognized U. S. government securities
dealers selected by the Corporation.
Except as provided below in this paragraph, the "Ten
Year Constant Maturity Rate" for each Adjustable Dividend Period shall
<PAGE>
be the arithmetic average of the two most recent weekly per annum Ten Year
Average Yields, as defined below (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be published during the relevant Calendar
Period), published by the Federal Reserve Board during the Calendar Period
immediately prior to the 10 calendar days immediately preceding the January 30,
April 30, July 30 and October 30, as the case may be, immediately prior to the
Adjustable Dividend Period for which the dividend rate on the Series B is being
determined. If the Federal Reserve Board does not publish such a weekly per
annum Ten Year Average Yield during any such Calendar Period, then the Ten Year
Constant Maturity Rate for such Adjustable Dividend Period shall be the
arithmetic average of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
Yield shall be published during the relevant Calendar Period), published during
such Calendar Period by any Federal Reserve Bank or by any U. S. Government
department or agency selected by the Corporation. If a per annum Ten Year
Average Yield shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U. S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Adjustable
Dividend Period shall be the arithmetic average of the two most recent weekly
per annum average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the relevant Calendar
Period) for all of the actively traded marketable U. S. Treasury fixed interest
rate securities, (other than Special Securities, as defined below) then having
maturities of not less than eight nor more than 12 years, finally published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such yields, by any Federal Reserve Bank or by
any U. S. Government department or agency selected by the Corporation. If the
Corporation determines in good faith that for any reason the Corporation cannot
determine the Ten Year Constant Maturity Rate for any Adjustable Dividend Period
as provided above in this paragraph, then the Ten Year Constant Maturity Rate
for such Adjustable Dividend Period shall be the arithmetic average of the per
annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U. S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eight nor more than 12 years from the date of
each such quotation, as chosen and quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Adjustable Dividend Period shall be the arithmetic
average of the two most recent weekly per annum
<PAGE>
Twenty Year Average Yields, as defined below (or the one weekly per annum Twenty
Year Average Yield, if only one such Yield shall be published during the
relevant Calendar Period), published by the Federal Reserve Board during the
Calendar Period immediately prior to the 10 calendar days immediately preceding
the January 30, April 30, July 30 and October 30, as the case may be,
immediately prior to the Adjustable Dividend Period for which the dividend rate
on the Series B is being determined. If the Federal Reserve Board does not
publish such a weekly per annum Twenty Year Average Yield during any such
Calendar Period, then the Twenty Year Constant Maturity Rate for such Adjustable
Dividend Period shall be the arithmetic average of the two most recent weekly
per annum Twenty Year Average Yields (or the one weekly per annum Twenty Year
Average Yield, if only one such Yield shall be published during the relevant
Calendar Period), published during such Calendar Period by any Federal Reserve
Bank or by any U. S. Government department or agency selected by the
Corporation. If a per annum Twenty Year Average Yield shall not be published by
the Federal Reserve Board or by any Federal Reserve Bank or by any U. S.
Government department or agency during such Calendar Period, then the Twenty
Year Constant Maturity Rate for such Adjustable Dividend Period shall be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly average yield to maturity, if only one such yield
shall be published during the relevant Calendar Period) for all of the actively
traded marketable U. S. Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less than 18 nor more than 22
years, finally published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank or by any U. S. Government department or agency selected by
the Corporation. If the Corporation determines in good faith that for any reason
the Corporation cannot determine the Twenty Year Constant Maturity Rate for any
Adjustable Dividend Period as provided above in this paragraph, then the Twenty
Year Constant Maturity Rate for such Adjustable Dividend Period shall be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U. S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than 18 nor more than 22
years from the date of each such quotation, as chosen and quoted daily for each
business day in New York City (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three recognized U. S.
Government securities dealers selected by the Corporation.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
<PAGE>
The Applicable Rate with respect to each Adjustable Dividend Period
will be calculated as promptly as practicable by the Corporation according to
the appropriate method described herein. The Corporation will cause each
Applicable Rate to be published in a newspaper of general circulation in New
York City prior to the commencement of the new Adjustable Dividend Period to
which it applies and will cause notice of such Applicable Rate to be included
with the dividend payment checks next mailed to the holders of the Series B.
For the purposes of this Section, the weekly per annum market discount
rate for three month U. S. Treasury bills shall be the secondary market rate.
As used in this Section, the terms
(i) "Calendar Period" shall mean a period of 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the
option of the holder, be surrendered at face value in payment of any federal
estate tax or which provide tax benefits to the holder and are priced to reflect
such tax benefits or which were originally issued at a deep or substantial
discount;
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U. S. Treasury fixed interest rate
securities (adjusted to constant maturities of 10 years); and
(iv) "Twenty Year Average Yield" means the average yield to maturity
for activity traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
(d) Liquidation Preference. In the event of any liquidation, dissolution
or winding up of the Corporation, before any payment or distribution of the
assets, or proceeds thereof, of the Corporation shall be made to or set apart
for the holders of any Subordinate Stock, the holders of the shares of Series B
shall be entitled to receive the stated value thereof ($50) plus an amount equal
to all dividends (whether or not earned or declared) accrued and unpaid thereon
to the date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of the shares of the Series B shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other preferred stock ranking, as to liquidation, dissolution or
winding up, on a parity with the Series B, then
<PAGE>
such assets, or the proceeds thereof, shall be distributed among the holders of
Series B and any such other preferred stock ratably in accordance with the
respective amounts which would be payable on such shares of Series B and any
such other preferred stock if all amounts payable thereon were paid in full. For
the purposes of this Section (d), a consolidation or merger of the Corporation
with or into one or more corporations shall not be deemed to be a liquidation,
dissolution or winding up.
Subject to the rights of the holders of shares of any series or class or
classes of stock ranking on a parity with or prior to the Series B, upon any
liquidation, dissolution or winding up of the Corporation, after payment shall
have been made in full to the Series B as provided in this Section (d), but not
prior thereto, any Subordinate Stock shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the Series B shall not be entitled to
share therein.
(e) (i) Redemption. The Corporation may not redeem the Series B prior to
January 31, 1991. The Series B shall be redeemable, at the option of the
Corporation, in whole or in part, on or after January 31, 1991 through January
30, 1996 at a redemption price of $51.50 per share plus accrued and unpaid
dividends thereon to the date fixed for redemption. Thereafter the Series B
shall be redeemable, at the option of the Corporation, in whole or in part, at a
redemption price of $50 per share plus accrued and unpaid dividends thereon to
the date fixed for redemption.
(ii) In the event the Corporation shall redeem shares of Series B
pursuant to Section (e)(i), notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior
to the redemption date, to each holder of record of the shares to be redeemed,
at such holder's address as the same appears on the stock register of the
Corporation. Each such notice shall state: (1) the redemption date; (2) the
number of shares of Series B to be redeemed and, if less than all the shares
held by such holder are to be redeemed, the number of such shares to be redeemed
from such holder; (3) the redemption price and the manner in which such
redemption price is to be paid and delivered; (4) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; and (5) that dividends on the shares to be redeemed will cease to accrue
on such redemption date. Notice having been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing funds for the payment of the redemption price), dividends on the
shares of Series B so called for redemption shall cease to accrue, and said
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as shareholders of the Corporation (except the right to receive
<PAGE>
from the Corporation the redemption price) shall cease. The Corporation's
obligation to provide funds in accordance with the preceding sentence shall be
deemed fulfilled if, on or before the redemption date, the Corporation shall
deposit with a bank or trust company (which may be an affiliate of the
Corporation), having an office or agency in the City of Richmond, Virginia,
having a capital and surplus of at least $200,000,000, or with any other such
bank or trust company located in the continental United States as may be
designated from time to time by the Corporation, funds necessary for such
redemption, in trust, with irrevocable instructions that such funds be applied
to the redemption of the shares of Series B so called for redemption. Any
interest accrued on such funds shall be paid to the Corporation from time to
time. Any funds so deposited and unclaimed at the end of six years from such
redemption date shall be repaid or released to the Corporation, after which the
holder or holders of such shares of Series B so called for redemption shall look
only to the Corporation for payment of the redemption price without interest.
(iii) Upon surrender in accordance with said notice of the
certificates for any shares redeemed pursuant to Section (e)(i) (properly
endorsed or assigned for transfer, if the Board of Directors of the Corporation
shall so require and the notice shall so state), such shares shall be redeemed
by the Corporation at the redemption price. If less than all the outstanding
shares of Series B are to be redeemed, shares to be redeemed shall be selected
by the Corporation from outstanding shares of Series B not previously called for
redemption by lot or pro rata (as nearly as may be) or by any other method
determined by the Board of Directors of the Corporation in its sole discretion
to be equitable.
(iv) In no event shall the Corporation redeem less than all the
outstanding shares of Series B pursuant to Section (e)(i) unless full cumulative
dividends shall have been paid or declared and set apart for payment upon all
outstanding shares of Series B for all past Dividend Periods.
(v) The Corporation shall also have the right to purchase or acquire
shares of the Series B from time to time, at public or private sale, at such
price or prices as the Corporation may determine.
(f) Shares to Be Retired. Shares of the Series B purchased or redeemed
shall not thereafter be disposed of as shares of such series, and upon issuance
by the State Corporation Commission of Virginia of a certificate of reduction,
such shares shall become authorized and unissued shares which may be designated
as shares of any other series.
(g) Conversion or Exchange. The holders of shares of
<PAGE>
Series B shall not have any right to convert such shares into or exchange such
shares for shares of any other class or classes or any other series of any class
or classes of capital stock (or any other security) of the Corporation.
(h) Voting. (i) Except as hereinafter in this Section (h) expressly
provided for and as otherwise from time to time required by the laws of the
Commonwealth of Virginia, the Series B shall have no voting rights. Whenever, at
any time or times, dividends payable on the Series B shall be in arrears in an
amount equal to at least six full quarterly dividends on the Series B at the
time outstanding, whether or not consecutive, the holders of the outstanding
Series B shall have the exclusive right, voting separately as a class with
holders of shares of any one or more other series of preferred stock ranking on
a parity with the Series B either as to dividends or the distribution of assets
upon liquidation, dissolution or winding up and upon which like voting rights
have been conferred and are exercisable, to elect two of the authorized number
of members of the Board of Directors of the Corporation at the Corporation's
next annual meeting of shareholders and at each subsequent annual meeting of
shareholders. At elections for such directors, each holder of Series B shall be
entitled to one vote for each share held (the holders of shares of any other
series of preferred stock ranking on such a parity and having like voting rights
being entitled to such number of votes, if any, for each share of such stock
held as may be granted to them). The right of the holders of Series B, voting
separately as a class, to elect (either alone or together with the holders of
shares of any one or more other series of preferred stock ranking on such a
parity and having like voting rights) members of the Board of Directors of the
Corporation as aforesaid shall continue until such time as all dividends
accumulated on the Series B shall have been fully paid or set apart for payment,
at which time such right shall terminate, except as herein or by law expressly
provided, subject to revesting in the event of each and every subsequent default
of the character above mentioned. Upon any termination of the right of the
holders of the Series B as a class to vote for directors as herein provided, the
term of office of all directors then in office elected by the Series B shall
terminate immediately. Any director who shall have been so elected pursuant to
this paragraph may be removed at any time, either with or without cause, and any
vacancy thereby created may be filled, only by the affirmative vote of the
holders of Series B voting separately as a class (either alone or together with
the holders of shares of any one or more other series of preferred stock ranking
on such a parity and having like voting rights). If the office of any director
elected by the holders of Series B voting as a class becomes vacant for any
reason other than removal from office as aforesaid, the remaining director may
choose a successor who shall hold office for the unexpired term in respect of
which such vacancy occurred.
<PAGE>
(ii) So long as any shares of Series B remain outstanding, and unless
the vote or consent of a greater number of shares of such stock shall then be
required by law, the consent of the holders of at least two-thirds of the shares
of Series B outstanding at the time (voting separately as a class together with
all other series of preferred stock ranking on a parity with the Series B either
as to dividends or the distribution of assets upon liquidation, dissolution or
winding up and upon which like voting rights have been conferred and are
exercisable) given in person or by proxy, either in writing or at any special or
annual meeting called for the purpose, shall be necessary to permit, effect or
validate anyone or more of the following:
(A) the authorization, creation or issuance of a new class or series of
shares having rights, preferences or privileges prior (as that term is defined
in Section (h)(iv)) to the shares of the Series B, or any increase in the number
of authorized shares of any class or series having right-, preferences or
privileges prior to the shares of Series B; or
(B) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Articles of
Incorporation of the Corporation or of this resolution which would materially
and adversely affect any right, preference, privilege or voting power of the
Series B or of the holders thereof; provided, however, that any increase in the
amount of authorized Common Stock or authorized Preferred Stock or the creation
and issuance of other series of Common Stock or Preferred Stock, in each case
ranking on a parity with or junior to the Series B with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
(iii) The foregoing voting provisions shall not apply, if at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series B shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
(iv) Any class or classes of stock of the Corporation shall be
deemed to rank:
(A) prior to the Series B as to dividends or as to distribution of
assets upon liquidation, dissolution or winding up if the holders of such class
shall be entitled to the receipt of dividends or of amounts distributable upon
<PAGE>
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Series B; and
(B) on a parity with the Series B as to dividends or as to
distribution of assets upon liquidation, dissolution or winding up, whether or
not the dividend rates, dividend payment dates or redemption or liquidation
prices per share thereof are different from those of the Series B, if the
holders of such class of stock and of the Series B, shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be in proportion to their respective dividend
rates or liquidation prices, without preference or priority one over the other.
(i) Maximum Number of Shares. The maximum number of shares of the
Series B issuable shall be 900,000, but the Board of Directors may, by articles
of serial designation filed with the State Corporation Commission of Virginia,
reclassify any of the authorized but unissued shares of such series as shares,
or additional shares, of any other series. No additional shares of Preferred
Stock, however, may be classified as shares of Series B.
[zz]
(ii) Participating Cumulative Preferred Stock
Series C
Authorized June 23, 1989.
The Corporation has designated 100,000 shares of the authorized but
unissued shares of the Corporation's Preferred Stock, par value $25 per
share, as Participating Cumulative Preferred Stock, Series C (hereinafter
referred to as "Series C Preferred Stock").
The preferences, limitations and relative rights of the Series C
Preferred Stock shall be as follows:
(a) Dividends and Distributions.
(1) Subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Series C Preferred Stock with
respect to dividends, the holders of shares of Series C Preferred
Stock in preference to the holders of Common Stock and of any
other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available
therefor, dividends payable quarterly on the 30th day of
January, April, July and October (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on
<PAGE>
the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series C Preferred
Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $200 or (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series C
Preferred Stock. In the event the Corporation shall at any time
after June 23, 1989 (the "Rights Declaration Date"), (i) declare
any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of
Series C Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.
(2) The Corporation shall declare a dividend or
distribution on the Series C Preferred Stock as provided in
paragraph (1) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable
in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a
dividend at the rate of $200 per share on the Series C Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series C
<PAGE>
Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series C Preferred
Stock, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series C
Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares
of Series C Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Series C Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to the date
fixed for the payment thereof.
(b) Voting Rights. The holders of shares of Series C Preferred
Stock shall have the following voting rights:
(1) Subject to the provision for adjustment hereinafter
set forth, each share of Series C Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a
vote of the shareholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the number of votes per share
to which holders of shares of Series C Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number
<PAGE>
of shares of Common Stock that were outstanding immediately
prior to such event.
(2) Except as otherwise provided herein, in the Restated
Articles of Incorporation or under applicable law, the holders
of shares of Series C Preferred Stock and the holders of shares
of Common Stock shall vote together as one voting group on all
matters submitted to a vote of stockholders of the Corporation.
(3) (i) If at any time dividends on any shares of Series
C Preferred Stock shall be in arrears in an amount equal
to six quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (a
"default period") that shall extend until such time when
all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly
dividend period on all shares of Series C Preferred Stock
then outstanding shall have been declared and paid or set
apart for payment. During each default period, all
holders of the outstanding shares of Series C Preferred
Stock together with any other series of Preferred Stock
then entitled to such a vote under the terms of the
Restated Articles of Incorporation, voting as a separate
voting group, shall be entitled to elect two members of
the Board of Directors of the Corporation.
(ii) During any default period, such voting
right of the holders of Preferred Stock may be exercised
initially at a special meeting called pursuant to
subparagraph (iii) of this Subsection (b)(3) or at any
annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such
voting right nor the right of the holders of any other
series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall
be exercised unless the holders of ten percent (10%) in
number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise
by the holders of Preferred Stock of such voting right.
At any meeting at which the holders
<PAGE>
of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall
have the right, voting as a separate voting group, to
elect Directors to fill such vacancies, if any, in the
Board of Directors as may then exist up to two (2)
Directors, or if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number which
may be so elected at any special meeting does not amount
to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the
election by them of the required number. After the
holders of the Preferred Stock shall have exercised their
right to elect Directors in any default period and during
the continuance of such period, the number of Directors
shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant
to the rights of any equity securities ranking senior to
or pari passu with the Series C Preferred Stock.
(iii) Unless the holders of Preferred Stock
shall, during an existing default period, have previously
exercised their right to elect Directors, the Board of
Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%)
of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the
Chairman, President, a Vice Chairman, a Vice-President
or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of
Preferred Stock are entitled to vote pursuant to this
paragraph (b)(3)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on
the books of the Corporation. Such meeting shall be
called for a time not earlier than 10 days and not later
than 60 days after such order or request. In the event
such meeting is not called within 60 days after such
order or request, such meeting may be called on similar
notice by any stockholder or
<PAGE>
stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred
Stock outstanding. Notwithstanding the provisions of this
paragraph (b)(3)(iii), no such special meeting shall be
called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of
the stockholders.
(iv) In any default period, the holders of
Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders
of Preferred Stock shall have exercised their right to
elect two (2) Directors voting as a separate voting
group, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock
shall continue in office until their successors shall
have been elected by such holders or until the expiration
of the default period, and (y) any vacancy in the Board
of Directors may (except as provided in paragraph
(b)(3)(ii)) be filled by vote of a majority of the
remaining Directors theretofore elected by the voting
group which elected the Director whose office shall have
become vacant. References in this paragraph (b)(3)(iv) to
Directors elected by a particular voting group shall
include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock,
as a separate voting group, to elect Directors shall
cease, (y) the term of any Directors elected by the
holders of Preferred Stock, as a separate voting group,
shall terminate, and (z) the number of Directors shall be
such number as may be provided for in, or pursuant to,
the Restated Articles of Incorporation or bylaws
irrespective of any increase made pursuant to the
provisions of paragraph 5(b)(3)(ii) (such number being
subject, however, to change thereafter in any manner
provided by law or in the Restated Articles of
Incorporation or bylaws). Any vacancies in the Board of
Directors affected by the provisions of
<PAGE>
clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors, even
though less than a quorum.
(4) Except as set forth herein or as otherwise provided
in the Restated Articles of Incorporation, holders of Series C
Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any
corporate action.
(c) Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or
distributions payable on the Series C Preferred Stock as provided in
Subsection (a) are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares
of Series C Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay or set apart for payment any
dividends (other than dividends payable in shares of any
class or classes of stock of the Corporation ranking junior
to the Series C Preferred Stock) or make any other
distributions on, any class of stock of the Corporation
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred Stock
and shall not redeem, purchase or otherwise acquire, directly
or indirectly, whether voluntarily, for a sinking fund, or
otherwise any shares of any class of stock of the Corporation
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred Stock,
provided that, notwithstanding the foregoing, the Corporation
may at any time redeem, purchase or otherwise acquire shares
of stock of any such junior class in exchange for, or out of
the net cash proceeds from the concurrent sale of, other
shares of stock of any such junior class;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
<PAGE>
winding up) with the Series C Preferred Stock, except
dividends paid ratably on the Series C Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding
up) with the Series C Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (either
as to dividends or upon dissolution, liquidation or winding
up) to the Series C Preferred Stock;
(iv) purchase or otherwise acquire for consideration
any shares of Series C Preferred Stock, or any shares of
stock ranking on a parity with the Series C Preferred Stock,
except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(2) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (1) of Subsection (c), purchase or otherwise acquire such
shares at such time and in such manner.
(d) Reacquired Shares. Any shares of Series C Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
<PAGE>
Stock to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth herein.
(e) Liquidation. Dissolution or Winding Up.
(1) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series C Preferred Stock unless, prior thereto,
the holders of shares of Series C Preferred Stock shall have
received $l,000 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series C Liquidation
Preference"). Following the payment of the full amount of the
Series C Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series C Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall
have received an amount per share (the "Common Adjustment") equal
to the quotient obtained by dividing (i) the Series C Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth
in subparagraph 3 below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii) being hereinafter referred to
as the "Adjustment Number"). Following the payment of the full
amount of the Series C Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series C
Preferred Stock and Common Stock, respectively, holders of Series
C Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Series C Preferred Stock and Common Stock,
on a per share basis, respectively.
(2) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series C
Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, then such remaining
assets shall be distributed ratably to the holders of all such
shares in proportion to their
<PAGE>
respective liquidation preferences. In the event, however, that
there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(3) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted
by multiplying such Adjustment Number by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(f) Consolidation, Merger, Share Exchange,. etc. In case the
Corporation shall enter into any consolidation, merger, share exchange,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series C Preferred Stock shall at
the same time be similarly exchanged or changed in an amount per share (subject
to the provision for adjustment hereinafter set forth) equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series C Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(g) Redemption. The outstanding shares of Series
<PAGE>
C Preferred Stock may be redeemed at the option of the Board of Directors as a
whole, but not in part, at any time, or from time to time, at a cash price per
share equal to (i) 100% of the product of the Adjustment Number times the
Average Market Value (as such term is hereinafter defined) of the Common Stock,
plus (ii) all dividends which on the redemption date have accrued on the shares
to be redeemed and have not been paid or declared and a sum sufficient for the
payment thereof set apart, without interest. The "Average Market Value" is the
average of the closing sale prices of a share of the Common Stock during the
30-day period immediately preceding the date before the redemption date on the
Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is
not quoted on the Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as amended, on
which such stock is listed, or, if such stock is not listed on any such
exchange, the average of the closing bid quotations with respect to a share of
Common Stock during such 30-day period on the National Association of Securities
Dealers, Inc. Automated Quotation System or any system then in use, or if no
such quotations are available, the fair market value of a share of the Common
Stock as determined by the Board of Directors in good faith.
(h) Ranking. The Series C Preferred Stock shall rank on a parity with
all other series of Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
(i) Amendment. Except as permitted by the Virginia Stock Corporation
Act, the Restated Articles of Incorporation or the Bylaws, the Restated Articles
of Incorporation shall not be further amended in any manner that would adversely
affect the preferences, rights or powers of the Series C Preferred Stock.
(j) Fractional Shares. Series C Preferred Stock may be issued in
fractions of one one-thousandth of a share (and integral multiples thereof)
which shall entitle the holder, in proportion to such holders' fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series C
Preferred Stock.
Common Stock. The holders of common stock shall, to the
<PAGE>
exclusion of the holders of any other class of stock of the Corporation, have
the sole and full power to vote for the election of directors and for all other
purposes without limitation except only (i) as otherwise provided in the
certificate of amendment for a particular series of preferred stock, and (ii) as
otherwise expressly provided by the then existing statutes of the Commonwealth
of Virginia. The holders of common stock shall have one vote for each share of
common stock held by them.
Subject to the provisions of the certificate of amendment for series of
preferred stock, the holders of common stock shall be entitled to receive
dividends if, when and as declared by the Board of Directors out of funds
legally available therefor and to the net assets remaining after payment of all
liabilities upon voluntary or involuntary liquidation of the Corporation.
4. PARTNERSHIPS AND JOINT VENTURES. The Corporation shall have power to
enter into partnership or joint venture agreements with other corporations,
whether organized under the laws of this or another state, or with any
individual or individuals.
5. OFFICER AND DIRECTOR LIABILITY, INDEMNIFICATION.
A. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, a Director or officer of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages.
B. To the full extent permitted and in the manner prescribed by the
Virginia Stock Corporation Act and any other applicable law, the Corporation
shall indemnify a Director or officer of the Corporation who is or was a party
to any proceeding by reason of the fact that he is or was such a Director or
officer or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The Board of Directors is
hereby empowered, by majority vote of a quorum of disinterested Directors, to
contract in advance to indemnify any Director or officer.
C. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in Section B of this
Article who was or is a party to any proceeding, by reason of the fact that he
is or was an employee or agent of the Corporation, or is or was serving
<PAGE>
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, to the same extent as if such person were specified as one to
whom indemnification is granted in Section B.
D. The Corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance, in such amounts as the Board
of Directors may determine, on behalf of any person who is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by such person in
any such capacity or arising from his status as such, whether or not the
Corporation would have power to indemnify him against such liability under the
provisions of this Article.
E. In the event there has been a change in the composition of a majority
of the Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to Section A of this Article 5 shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
F. The provisions of this Article 5 shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof, whether
arising from any action taken or failure to act before or after such adoption.
No amendment, modification or repeal of this Article shall diminish the rights
provided hereby or diminish the right to indemnification with respect to any
claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
G. Reference herein to Directors, officers, employees or agents shall
include former Directors, officers, employees and agents and their respective
heirs, executors and administrators.
6. NO PRE-EMPTIVE RIGHTS. No holder of capital stock shall have any
pre-emptive right to purchase (i) any shares of
<PAGE>
any class of stock of the Corporation, (ii) any warrants, rights or options to
purchase any such stock, or (iii) any securities convertible into any such stock
or into warrants, rights or options to purchase any such stock.
7. REQUIRED SHAREHOLDER VOTE. Except as otherwise expressly provided in
any Article, an amendment or restatement of these Articles, other than an
amendment or restatement that amends or affects the shareholder vote required by
the Virginia Stock Corporation Act to approve a merger, statutory share
exchange, sale of all or substantially all of the Corporation's assets or the
dissolution of the Corporation, shall be approved by a majority of the votes
entitled to be cast by each voting group that is entitled to vote on the matter.
8. CLASSIFICATION OF BOARD OF DIRECTORS. (a) Number, Election, and Terms
of Directors. The number of Directors shall be set forth in the Bylaws. The
number of Directors set forth in the Bylaws cannot be increased by more than
four during any 12 month period except by the affirmative vote of the holders of
more than 66 2/3% of outstanding Voting Shares. Commencing with the 1990 Annual
Meeting of Shareholders, the Board of Directors shall be divided into three
classes, denominated Class I, Class II, and Class III, each as nearly equal in
number to the other two as possible. At the 1990 Annual Meeting of Shareholders,
Directors of Class I shall be elected to hold office for a term expiring at the
1991 Annual Meeting of Shareholders; Directors of Class II shall be elected to
hold office for a term expiring at the 1992 Annual Meeting of Shareholders; and
Directors of Class III shall be elected to hold office for a term expiring at
the 1993 Annual Meeting of Shareholders. At each Annual Meeting of Shareholders
after 1990, the successors to the class of Directors whose terms shall then
expire shall be identified as being of the same class as Directors they succeed
and shall be elected to hold office for a term expiring at the third succeeding
Annual Meeting of Shareholders. When the number of Directors is changed, any
newly-created directorships or any decrease in directorships shall be so
apportioned among the classes by the Board of Directors as to make all classes
as nearly equal in number as possible.
(b) Newly-created Directorships and Vacancies. Subject to the rights of
the holders of Preferred Stock then outstanding, any vacancy occurring on the
Board of Directors, including a vacancy resulting from an increase in the number
of Directors, may be filled by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of Directors. If at
the time any such vacancy is filled, any person, or any associate or affiliate
of such person (as those terms are defined in Rule 12b-2 of the General Rules
and
<PAGE>
Regulations under the Securities Exchange Act of 1934, or any successor rule or
regulation) is directly or indirectly the beneficial owner of 10% (or more) of
outstanding Voting Shares, the vacancy shall be filled by the affirmative vote
of a majority of the remaining Directors in the class of Directors in which the
vacancy has occurred. Directors so chosen shall hold office for a term expiring
at the next following Annual Meeting of Shareholders at which Directors are
elected. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
(c) Removal of Directors. Subject to the rights of the holders of
Preferred Stock then outstanding, any Director may be removed, with cause, only
by the affirmative vote of the holders of at least 66 2/3% of outstanding Voting
Shares.
(d) Amendment or Repeal. The provisions of this Article 8 shall not be
amended or repealed, nor shall any amendment to the Articles of Incorporation be
adopted that is inconsistent with this Article 8, unless such action shall have
been approved by a majority of those Directors who are Disinterested Directors
and the affirmative vote of the holders of at least 66 2/3% of outstanding
Voting Shares.
(e) Certain Definitions. For purposes of this Article 8:
1. "Disinterested Director" shall mean any member of the Board of
Directors who:
A. was elected to the Board of Directors at the 1990 Annual Meeting
of Shareholders; or
B. was recommended for election by a majority of the Disinterested
Directors then on the Board, or was elected by the Board to fill a vacancy
and received the affirmative vote of a majority of the Disinterested
Directors then on the Board.
2. "Voting Shares" shall mean the outstanding shares of all classes or
series of the Corporation's stock entitled to vote generally in the election of
Directors.
<PAGE>
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
CRESTAR FINANCIAL CORPORATION
1. The name of the corporation is
CRESTAR FINANCIAL CORPORATION.
2. Article III of the Articles of Incorporation is amended by striking the
first sentence thereof and substituting the following therefor:
The Corporation shall have authority to issue 2,000,000 shares of
preferred stock of a par value of $25 per share and 200,000,000
shares of common stock of a par value of $5 per share.
3. The Corporation has only common stock stock outstanding.
4. The amendment was adopted by the Board of Directors on December 20, 1996,
and changed each issued and unissued share of common stock into a greater
number of whole shares of common stock as authorized by Section 13.1-706.3
of the Virginia Stock Corporation Act.
5. Submission of the amendment to and approval of the amendment by the
shareholders is not required pursuant to Section 13.1-706.3. of the
Virginia Stock Corporation Act.
6. The amendment shall become effective at 11:59 p.m. on January 3, 1997.
December 20, 1996 CRESTAR FINANCIAL CORPORATION
By: /s/ JOHN C. CLARK, III
----------------------
John C. Clark, III
Corporate Senior Vice
President, General Counsel
and Assistant Secretary
Exhibit 3(b)
Bylaws
of
Crestar Financial Corporation
Incorporated Under The Laws
Of The Commonwealth Of Virginia
Adopted December 20, 1979
(And Including Amendments Adopted
Thereto Through December 20, 1996)
<PAGE>
Index
To
Bylaws
Of
Crestar Financial Corporation
Article I - Meetings Of Stockholders
1.1 - Place of Meetings......................................1
1.2 - Annual Meetings........................................1
1.3 - Special Meetings.......................................1
1.4 - Notice of Meetings.....................................1
1.5 - Quorum.................................................1
1.6 - Voting.................................................1
1.7 - Conduct of Meetings....................................2
1.8 - Inspectors.............................................3
Article II - Board Of Directors
2.1 - General Powers.........................................3
2.2 - Number of Directors....................................3
2.3 - Quorum.................................................3
2.4 - Meetings of the Board..................................3
2.5 - Compensation...........................................4
2.6 - Eligibility............................................4
Article III - Committees
3.1 - Standing Committees....................................4
3.2 - Executive Committee....................................5
3.3 - Audit Committee........................................6
3.4 - Human Resources and Compensation Committee.............6
3.5 - Nominating & Governance Committee......................7
3.6 - Other Committees.......................................7
Article IV - Officers
4.1 - Number and Manner of Election or Appointment...........7
4.2 - Term of Office.........................................8
4.3 - Removal................................................8
4.4 - Resignations...........................................8
4.5 - Vacancies, New Offices and Promotions..................8
4.6 - Chairman of the Board..................................8
4.7 - President..............................................8
<PAGE>
Article IV - Officers (continued)
4.8 - Corporate Secretary....................................9
4.9 - Treasurer..............................................9
4.10 - Auditor................................................9
4.11 - Powers and Duties of Other Officers....................9
4.12 - Deposit Accounts.......................................9
4.13 - Securities Accounts....................................9
Article V - Capital Stock
5.1 - Certificates..........................................10
5.2 - Lost, Destroyed and Mutilated Certificates............10
5.3 - Transfer of Stock.....................................10
5.4 - Closing of Transfer Books and Fixing Record Date......10
Article VI - Miscellaneous Provisions
6.1 - Seal..................................................11
6.2 - Voting of Stock Held..................................11
6.3 - Fiscal Year...........................................11
6.4 - Checks, Notes and Drafts..............................11
6.5 - Control Share Acquisitions............................11
Article VII - Emergency Bylaws...........................................12
Article VIII - Indemnification Of Directors And Officers.................13
Article IX - Amendments..................................................14
<PAGE>
Crestar Financial Corporation
Bylaws
Article I
Meeting Of Stockholders
1.1 Place of Meetings. All meetings of the stockholders shall be held at
such place, either within or without the State of Virginia, as may be designated
by the Board of Directors.
1.2 Annual Meetings. The annual meeting of stockholders, for the election
of Directors and transaction of such other business as may come before the
meeting, shall be held at such time and date as designated by the Board of
Directors.
1.3 Special Meetings. Special meetings of the stockholders for any purpose
or purposes may be called at any time by the Chairman of the Board, by the
President, or by a majority of the Board of Directors. No business shall be
transacted and no corporate action shall be taken at a special meeting other
than that stated in the notice of the meeting.
1.4 Notice of Meetings. Unless waived in the manner prescribed by law,
notice of each meeting of stockholders shall be given in writing, not less than
ten nor more than sixty days before the day of the meeting, or such other notice
as is required by law, to each stockholder entitled to vote at such meeting and
shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. If
mailed, such notice shall be deemed to have been given when deposited in the
United States mail, with postage thereon prepaid, directed to the stockholder at
his address as it appears on the stock transfer books of the Corporation.
1.5 Quorum. Any number of stockholders together holding a majority of
outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business. If less than a quorum shall be in attendance at the time for which
a meeting shall have been called, the meeting may be adjourned from time to time
by a majority of the stockholders present or represented by proxy without notice
other than by announcement at the meeting until a quorum shall attend.
1.6 Voting. At any meeting of the stockholders, each stockholder of a
class entitled to vote on any matter coming before the meeting shall, as to such
matter, have one vote, in person or by proxy, for each share of capital stock of
such class standing in his name on the stock transfer books of the Corporation
on that date, not more than seventy days prior to such meeting, as designated by
the Board of Directors, for the purpose of determining stockholders entitled to
vote, as the date on which the stock transfer books of the Corporation are to be
closed or as the record date. Every proxy shall be in writing and signed by the
stockholder entitled to vote or signed by his duly authorized attorney in fact.
At a meeting where a quorum is present, the affirmative vote of the majority of
the shares represented at the meeting and entitled to vote shall be the act of
the stockholders.
<PAGE>
1.7 Conduct of Meetings. At each meeting of the stockholders, the Chairman
of the Board or the President shall act as chairman and preside. In their
absence, the Chairman of the Board may designate another officer of the
Corporation who need not be a Director to preside. The Corporate Secretary of
the Corporation or an Assistant Corporate Secretary, or in their absence, a
person whom the chairman of such meeting shall appoint, shall act as corporate
secretary of such meeting.
At any meeting of stockholders of the Corporation, only that business that is
properly brought before the meeting may be presented to and acted upon by
stockholders. To be properly brought before the meeting, business must be
brought (a) by or at the direction of the Board of Directors or (b) by a
stockholder who has given written notice of business he expects to bring before
the meeting to the Corporate Secretary of the Corporation not less than 60 or
more than 90 days prior to the anniversary date of the immediately preceding
Annual Meeting. If mailed, such notice shall be sent by certified mail, return
receipt requested, and shall be deemed to have been given when received by the
Corporate Secretary of the Corporation. A stockholder's notice to the Corporate
Secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (a) a brief description of the business to be brought before
the meeting and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the Corporation's
stock beneficially owned by the stockholder, and (d) any material interest of
the stockholder in such business. No business shall be conducted at a meeting of
stockholders except in accordance with the procedures set forth in this Section
1.7. The chairman of a meeting of stockholders shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 1.7, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Any nomination for Director made by a stockholder must be made in writing to the
Corporate Secretary of the Corporation not less than 60 or more than 90 days
prior to the anniversary date of the immediately preceding Annual Meeting. If
mailed, such notice shall be sent by certified mail, return receipt requested,
and shall be deemed to have been given when received by the Corporate Secretary
of the Corporation. A stockholder's nomination for Director shall set forth (a)
the name and business address of the stockholder's nominee, (b) the fact that
the nominee has consented to his name being placed in nomination, (c) the name
and address, as they appear on the Corporation's books, of the stockholder
making the nomination, (d) the class and number of shares of the Corporation's
stock beneficially owned by the stockholder, and (e) any material interest of
the stockholder in the proposed nomination. The chairman of a meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that a director nomination was not properly brought before the meeting in
accordance with the provisions of this Section 1.7, and if he should so
determine, he shall so declare to the meeting and any such nomination not
properly brought before the meeting shall not be considered.
<PAGE>
Notwithstanding compliance with this Section 1.7, the chairman of a meeting of
stockholders may rule out of order any business brought before the meeting that
is not a proper matter for stockholder consideration. This Section 1.7 shall not
limit the right of stockholders to speak at meetings of stockholders on matters
germane to the Corporation's business, subject to any rules for the orderly
conduct of the meeting imposed by the Chairman of the meeting. The Corporation
shall not have any obligation to communicate with stockholders regarding any
business or Director nomination submitted by a stockholder in accordance with
this Section 1.7 unless otherwise required by law.
1.8 Inspectors. An appropriate number of inspectors for any meeting of
stockholders may be appointed by the chairman of such meeting. Inspectors so
appointed will open and close the polls, will receive and take charge of proxies
and ballots, and will decide all questions as to the qualifications of voters,
validity of proxies and ballots, and the number of votes properly cast.
Article II
Board Of Directors
2.1 General Powers. The business and affairs of the Corporation shall be
managed by the Board of Directors and, except as otherwise expressly provided by
law, in accordance with the Articles of Incorporation or these Bylaws.
2.2 Number of Directors. The Board of Directors shall consist of not less
than five nor more than twenty-six Directors, the exact number to be designated
by the Board.
2.3 Quorum. A majority of the number of Directors pursuant to these Bylaws
at the time of the meeting, shall constitute a quorum for the transaction of
business. The act of a majority of Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. Less than a quorum
may adjourn any meeting.
2.4 Meetings of the Board.
(a) Place of Meetings. Meetings of the Board of Directors shall be held at
such place and at such time, either within or without the State of Virginia as
may be designated by the Board, or upon call of the Chairman of the Board or the
President.
(b) Organizational Meeting. An organizational meeting shall be held as
soon as practicable after the adjournment of the annual meeting of stockholders
at which the Board of Directors is elected, for the purpose of electing
officers, appointing committees for the ensuing year, and for transacting such
other business as may properly come before the meeting.
(c) Regular Meetings. Regular meetings of the Board of Directors may be
held at such time and place as the Board may designate, and no notice thereof
need be given.
(d) Special Meetings. Special meetings of the Board of Directors may be
held at any time or place upon the call of the Chairman of the Board or the
President, or any three members of the Board.
<PAGE>
Notice of each such meeting shall be given to each Director by mail at his
business or residence address at least forty-eight hours before the meeting, or
by telephoning or telegraphing notice to him at least twenty-fours hours before
the meeting. Meetings may be held at any time without notice if all of the
Directors are present, or if those not present waive notice in writing either
before or after the meeting. The notice of meetings of the Board need not state
the purpose of the meeting.
(e) Conduct of Meetings. At each meeting of the Board of Directors, the
Chairman of the Board or the President shall act as chairman and preside. In
their absence, the Chairman of the Board may designate another officer of the
Corporation who need not be a Director, to preside. The Corporate Secretary of
the Corporation or an Assistant Corporate Secretary, or in their absence, a
person whom the chairman of such meeting shall appoint, shall act as corporate
secretary of such meeting.
Any action required or permitted to be taken by the Board may be taken without a
meeting if all Directors consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents of the directors
shall be filed with the minutes of the proceedings of the Board meeting.
2.5 Compensation. Directors, and members of any committee of the Board who
are not officers of the Corporation or subsidiaries thereof, shall be paid such
compensation as the Board of Directors from time to time may determine for his
services as Director, or as chairman or a member of any committee of the Board,
and shall, in addition, be reimbursed for such expenses as shall be incurred by
him in the performance of his duties. Nothing herein shall preclude Directors,
and members of any committee of the Board from serving the Corporation in other
capacities and receiving compensation therefor.
2.6 Eligibility. No person shall be eligible to serve as a Director
unless, when his term commences, he is not less than twenty-one years of age nor
more than seventy years of age. No Director shall be eligible for reelection
after he has attained the age of 70 or after his separation from the business or
professional organization with which he was primarily associated at the time he
first became a Director, unless elected after becoming associated with another
business or professional organization. Except for the Chief Executive Officer,
no Director who is an officer of the Corporation or any subsidiary shall be
eligible for reelection after he has retired.
Article III
Committees
3.1 Standing Committees.
(a) Number. There shall be three standing committees of the Board of
Directors which shall be comprised only of Directors. The standing committees
are as follows: Executive, Audit, and Human Resources and Compensation. In order
to broaden the experience of Directors, it shall be the policy of the
Corporation to seek rotation among Directors as members of various committees.
<PAGE>
At the first meeting of the Board of Directors after the annual meeting of the
stockholders, the Chairman of the Board shall recommend the membership of each
committee and the Board shall elect the membership of each committee, who shall
serve at the pleasure of the Board.
(b) Quorum. A majority of the number of members of any standing committee
shall constitute a quorum for the transaction of business. The action of a
majority of members present at a committee meeting at which a quorum is present
shall constitute the act of the committee.
(c) Conduct of Meetings. Any action required or permitted to be taken by
the committee may be taken without a meeting if all members of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and written consents of the members shall be filed with the minutes
of the proceedings of the committee.
(d) Meetings and Minutes. Subject to the foregoing, and unless the Board
shall otherwise decide, each committee shall fix its rules of procedure,
determine its action and fix the time and place of its meetings. Special
meetings of a committee may be held at anytime upon the call of the Chairman of
the Board, the chairman of the committee, or any two members of the committee.
Each committee shall keep minutes of all meetings which shall be at all times
available to Directors. Action taken by a committee shall be reported promptly
to the Board but not less frequently than quarterly.
(e) Term of Office. A member of any standing committee shall hold office
until the next organizational meeting of the Board of Directors or until he is
removed or ceases to be a Director.
(f) Vacancies. Should a vacancy occur on any standing committee resulting
from any cause whatsoever, the Board, by resolution, may fill such vacancy at
any time.
(g) Resignation and Removal. A member of a standing committee may resign
at any time by giving written notice of his intention to do so to the Chairman
of the Board or the Corporate Secretary of the Corporation, and may be removed
at any time by the Board of Directors.
3.2 Executive Committee.
(a) How Constituted. The Executive Committee shall consist of not less
than five nor more than nine Directors, including the Chairman of the Board, who
shall be Chairman of the Committee, and the President. If the Chairman of the
Board will not be present at a meeting, the President shall preside, and if the
President will not be present, the Chairman may designate another officer of the
Corporation, who need not be a member of the Committee or a Director, to preside
at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the
Executive Committee shall consist of: exercise of all powers of the Board of
Directors between meetings of the Board except as to matters exclusively
reserved to the Board under law; annual review of management's financial goals
and business plan; service as the Board's steering committee on capital,
liquidity, asset/liability and credit issues, as well as the Board's advisor on
mergers and acquisitions and corporate structure matters; review of loan policy
and procedure, the quarterly classification of loans and the adequacy of the
allowance for loan loss reserves; review and recommendation to the Board of the
<PAGE>
annual capital budget and authorization of capital expenditures within a level
established by the Board; supervision over the exercise of fiduciary powers;
oversight over the Corporation's contributions policy, approval of the annual
contributions budget and authorization or recommendation to the Board of larger
individual contributions as specified by the Board; joint consultation with the
Human Resources and Compensation Committee and recommendation to the Board of
any titling changes and management succession involving the top five officers of
the Corporation; and evaluation and recommendation to the Board of nominees for
election as Directors.
3.3 Audit Committee.
(a) How Constituted. The Audit Committee shall consist of not less than
five nor more than nine Directors, none of whom shall be officers of the
Corporation or any subsidiary thereof. The Chairman of the Committee shall be
appointed by the Board of Directors upon recommendation of the Chairman of the
Board. If the Chairman of the Committee will not be present at a meeting, he may
designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Audit
Committee shall consist of: recommendation of the selection of independent
accountants and auditors; review of the scope of the accountant's examination
and approval of any non-audit services to be performed by the independent
accountants; review of examination reports by the independent accountants and
regulatory agencies; approval of, and review of the results of, the internal
audit plan; review of the procedures for establishing the allowance for loan
losses and monitoring of the credit process review function; review of Crestar's
Community Reinvestment Act policy, plans and performance; review of internal
programs to assure compliance with laws and regulations and the adequacy of
internal controls; review of the adequacy of insurance coverage; and review of
compliance with the Standards of Conduct.
3.4 Human Resources and Compensation Committee.
(a) How Constituted. The Human Resources and Compensation Committee shall
consist of not less than five nor more than eight Directors none of whom shall
be officers of the Corporation or any subsidiary thereof. The Chairman of the
Committee shall be appointed by the Board of Directors upon recommendation of
the Chairman of the Board. If the Chairman of the Committee will not be present
at the meeting, he may designate any member of the Committee to preside at the
meeting.
(b) Primary Responsibilities. The primary responsibilities of the Human
Resources and Compensation Committee shall consist of: review and approval of
major compensation policies; determination of appropriate performance targets
under the Corporation's benefit plans; recommendation to the Board of salaries,
and approval of other compensation to be paid or awarded to the highest level
and most highly paid officers; recommendation of officers requiring Board
approval and joint consultation with the Executive Committee to the Board and
recommendation of any titling changes and management succession involving the
top five
<PAGE>
officers of the Corporation; review of other matters pertaining to management
structure, succession planning and executive development; review and
recommendation for Board approval of new and significant changes to qualified
and nonqualified benefit plans; and recommendation for Board approval of
appropriate changes in Director compensation.
3.5 Nominating and Governance Committee
(a) How Constituted. The Nominating and Governance Committee shall consist
of not less than three nor more than five Directors, none of whom shall have
served as an officer of the Corporation or any subsidiary thereof within the
calendar year of appointment or the calendar year immediately preceding the year
of appointment. The Chairman of the Committee shall be appointed by the Board of
Directors upon recommendation of the Chairman of the Board. If the Chairman of
the Committee will not be present at a meeting, he or she may designate any
member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the
Nominating and Governance Committee shall consist of: interpreting the Bylaws
whenever a member's change in circumstance, such as illness, retirement or
modification of primary employment, may impact eligibility for continued Board
service; recommending changes to eligibility requirements as needed to ensure
that the Board consists of highly-qualified persons who can provide constructive
input into the business of the Corporation and represent a cross section of
Crestar constituencies; conducting a comprehensive study of board governance
practices of similarly-situated corporations and recommending adoption of
Crestar corporate governance guidelines as appropriate; monitoring effectiveness
of such guidelines and implementing modification as needed; and establishing and
implementing a nomination process to identify and recommend Board nominees as
appropriate.
3.6 Other Committees. The Board of Directors may, by resolution establish
such other committees of the Board as it may deem advisable. The members, terms
and authority of such committees shall be set forth in the resolutions.
The Chairman of the Board may establish such other committees of the Board of
Directors as he deems advisable, and may appoint the members of such committees.
Any such committees shall have the authority to consider, review, advise and
recommend to the Chairman of the Board with respect to such matters as may be
referred to it by the Chairman of the Board, but shall have no authority to act
for the Corporation except with the prior approval of the Board of Directors.
Article IV
Officers
4.1 Number and Manner of Election or Appointment. The officers of the
Corporation shall be:
(a) The Chairman of the Board, the President, a Corporate Secretary, a
Treasurer, an Auditor, one or more Regional Presidents, and one or more
corporate Executive Vice Presidents, each of whom shall be elected by the Board.
<PAGE>
(b) Such other officers as the Chairman of the Board or President may
deem necessary, each of whom shall be appointed by the Chairman of the Board or
President.
One person may hold more than one office except that the offices of the
President and Corporate Secretary may not be held by the same person.
4.2 Term of Office. The officers designated in Section 4.1(a) shall be
elected annually by the Board at its organizational meeting. Such officers shall
each hold office until the next organizational meeting of the Board and until
their successors are elected.
The officers designated in Section 4.1(b) may be appointed at any time by the
Chairman of the Board or the President.
4.3 Removal. Any officer may be removed from office, with or without
cause, at any time, by the Board of Directors. Any officer appointed by the
Chairman of the Board or the President may be removed from office by him with or
without cause at any time.
4.4 Resignations. Any officer may resign at any time by giving written
notice to the Board, Human Resources and Compensation, Chairman of the Board,
President, or the Corporate Secretary. Such resignation shall be effective on
the date of receipt of such notice or any later date specified therein, and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
4.5 Vacancies, New Offices and Promotions. A vacancy from any cause in any
office may be filled at any time for the unexpired portion of the term, in the
manner prescribed in these Bylaws for regular election to such office. New
offices may be created and filled, and the promotions and changes in officers'
titles may be made at any time in the manner prescribed in these Bylaws for
regular election to such office.
4.6 Chairman of the Board. The Chairman of the Board shall be the Chief
Executive Officer and shall have general supervision of the policies and
operations of the Corporation, and subject to the direction and control of the
Board. He shall preside at all meetings of the stockholders, the Board of
Directors and the Executive Committee. He shall have the power to sign checks,
orders, contracts, leases, notes, drafts and other documents and instruments in
connection with the business of the Corporation, and have such other powers and
perform such other duties as shall be designated by the Board of Directors or as
may be incidental to his office. The Chairman of the Board shall have the
authority to appoint officers of the Corporation below the rank of Executive
Vice President.
4.7 President. The President shall participate in the supervision of the
policies and management of the Corporation, and may, if so designated by the
Board of Directors, be the chief administrative officer of the Corporation. He
shall perform all duties incidental to the office of President and shall perform
such other duties as may be assigned to him from time to time by the Board of
Directors or the Chairman of the Board. In the absence of the Chairman of the
Board, he shall preside at meetings of stockholders, the Board of Directors and
the Executive Committee. He shall have the same power to sign for the
Corporation and to appoint officers as prescribed in these Bylaws for the
Chairman of the Board.
<PAGE>
4.8 Corporate Secretary. The Corporate Secretary shall: a) keep the
minutes of all meetings of the Stockholders, the Board of Directors, the
Executive Committee, and such other Committees as the Board may designate; b)
see that all notices of such meetings are given in accordance with these Bylaws
or as required by law; c) be custodian of the seal to any documents requiring
such seal and to attest the same; d) sign, with the Chief Executive Officer,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; and e) in general
perform all duties incident to the office of Corporate Secretary and such other
duties as from time to time may be assigned to him by the Board of Directors or
the Chief Executive Officer. In the absence of the Corporate Secretary, an
Assistant Corporate Secretary shall act in his stead.
4.9 Treasurer. The Treasurer shall perform such duties with respect to
securities and funds of the Bank as may be prescribed by the Board of Directors
or the Chief Executive Officer, and such other duties as may be incidental to
the office of Treasurer.
4.10 Auditor. The Auditor shall have general supervision over the internal
audit of the Corporation and its subsidiaries. He shall be responsible to the
Board of Directors, through the Audit Committee, for independently evaluating
the adequacy, effectiveness, and efficiency of the Corporation's systems of
internal control and of employee compliance therewith. He shall have the duty of
reporting his findings and recommendations to the Audit Committee at least
quarterly on any matters concerning the Corporation, except those with respect
to credit quality, responsibility for which has been vested in the officer in
charge of credit administration. Should the Auditor deem any matter to be of
special importance or his independence to be in jeopardy, he shall report
immediately to the Chairman of the Audit Committee or, in his absence, any
member of the Committee. The Auditor shall have such other duties and perform
such special audits and examinations as may be prescribed from time to time by
the Audit Committee or the Board of Directors. For administrative purposes, the
Auditor shall be accountable to the Chief Executive Officer.
4.11 Powers and Duties of Other Officers. The powers and duties of all
other officers of the Corporation shall be those usually pertaining to their
respective offices, subject to the direction and control of the Board of
Directors and as otherwise provided in these Bylaws, or as prescribed by the
Chief Executive Officer.
4.12 Deposit Accounts. The President, the Executive Vice President -
Investment Bank, the Executive Vice President, Controller and Treasurer, the
Managing Director - Asset/Liability Management Division, and the Managing
Director - Funds Management Division are individually authorized and empowered
to open and maintain in the name of the Corporation one or more deposit accounts
at other financial institutions. The aforementioned officers shall designate the
personnel authorized to sign for and transact business in such accounts and may
agree to any terms governing such accounts. Any resolutions required of this
Corporation in connection with such accounts may be certified by the Corporate
Secretary as if specifically adopted by the Board of Directors.
4.13 Securities Accounts. The President, the Executive Vice President -
Investment Bank, the Managing Director - Asset/Liability Management Division,
and the Managing Director - Funds Management Division are individually
authorized and empowered to open and maintain in the name of the Corporation one
or more securities accounts for the purpose of purchasing, selling, reselling,
<PAGE>
borrowing, lending, and otherwise dealing in money market instruments and
securities of any and every kind, including agreements or contracts for their
repurchase or future delivery, with banks, brokers, dealers, securities firms,
or other organizations, and to issue written, telephonic, telegraphic, or verbal
orders or instructions for transactions to be carried out in such accounts. The
aforementioned officers shall designate the personnel authorized to sign for and
transact business in such accounts and may agree to any terms governing such
accounts. Any resolutions required of this Corporation in connection with such
accounts may be certified by the Corporate Secretary as if specifically adopted
by the Board of Directors.
Article V
Capital Stock
5.1 Certificates. The shares of capital stock of the Corporation shall be
evidenced by certificates in forms prescribed by the Board of Directors and
executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
the stock of the Corporation may be appointed by the Board of Directors and may
be required to countersign certificates representing stock of such class or
classes. If any officer whose signature or facsimile thereof shall have been
used on a stock certificate shall for any reason cease to be an officer of the
Corporation and such certificate shall not then have been delivered by the
Corporation the Board of Directors may nevertheless adopt such certificate and
it may then be issued and delivered as though such person had not ceased to be
an officer of the Corporation.
5.2 Lost, Destroyed and Mutilated Certificates. Holders of the stock of
the Corporation shall immediately notify the Corporation of any loss,
destruction of mutilation of the certificate therefor, and the Board of
Directors or the Executive Committee may cause one or more new certificates for
the same number of shares in the aggregate to be issued to such stockholder upon
the surrender of the mutilated certificate or upon satisfactory proof of such
loss or destruction, and the deposit of a bond in such form and amount and wish
such surety as the Board of Directors may require.
5.3 Transfer of Stock. The stock of the Corporation shall be transferable
or assignable only on the books of the Corporation by the holders in person or
by attorney on surrender of the Certificate for such shares duly endorsed and,
if sought to be transferred by attorney, accompanied by a written power of
attorney to have the same transferred on the books of the Corporation. The
Corporation shall recognize, however, the exclusive right of the person
registered on its books as the owner of shares to receive dividends and to vote
as such owner. To the extent that any provision of the Rights Agreement between
the Corporation and Mellon Bank, N.A., as Rights Agent, dated as of June 23,
1989, is deemed to constitute a restriction on the transfer of any securities of
the Corporation, including, without limitation, the Rights, as defined therein,
such restriction is hereby authorized by the Bylaws of the Corporation.
5.4 Closing of Transfer Books and Fixing Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
<PAGE>
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period but not to exceed in any case, seventy days.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than seventy days prior to the date on date
which the particular action requiring such determination of stockholders, is to
be taken. If the stock transfer books are not closed and no record date is fixed
for the determination of stockholders entitled to notice of or to vote at a
meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notices of the meeting are mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
stockholders. When determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
Article VI
Miscellaneous Provisions
6.1 Seal. The corporate seal of the Corporation shall consist of a
flat-faced circular die, on which there shall be engraved the Crestar logogram
and the name of the Corporation. Any officer of the Corporation designated in
writing by the Chief Executive Officer, the President or Corporate Secretary
shall have authority to affix and attest the seal. Failure to use the corporate
seal shall not affect the validity of any instrument.
6.2 Voting of Stock Held. Unless otherwise provided by resolution of the
Board of Directors or of the Executive Committee, the Chairman of the Board, the
President, or any Executive or Senior Vice President may from time to time
appoint an attorney or attorneys or agent or agents of this Corporation, in the
name and on behalf of this Corporation, to cast the vote which this Corporation
may be entitled to cast as a stockholder or otherwise in any other corporation,
any of whose stock or securities may be held by this Corporation, at meetings of
the holders of the stock or other securities of such other corporation, or to
consent in writing to any action by any such other corporation. Such officer
shall instruct the person or persons so appointed as to the manner of casting
such votes or giving such consent and may execute or cause to be executed on
behalf of this Corporation such written proxies, consents, waivers or other
instruments as may be necessary or proper. In lieu of an appointment of an
attorney or agent, the officer may himself attend any meetings of the holders of
stock or other securities of any such other corporation and there vote or
exercise any or all power of this Corporation as the holder of such stock or
other securities of such other corporation.
6.3 Fiscal Year. The fiscal year of the Corporation shall be the calendar
year.
6.4 Checks, Notes and Drafts. Checks, notes, drafts and other orders for
the payment of money shall be signed by such persons as the Board of Directors
from time to time may authorize. When the Board of Directors so authorizes,
however, the signature of any such person may be a facsimile.
6.5 Control Share Acquisitions. Article 14.1 of Chapter 9 of Title 13.1
of the Code of Virginia (1950) does not apply to acquisitions of shares of the
Corporation.
<PAGE>
Article VII
Emergency Bylaws
7.1 The Emergency Bylaws provided in this Article VII shall be operative
during any emergency resulting from an attack of the United States or any
nuclear or atomic disaster, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the
Corporation or in the Virginia Stock Corporation Act (other than those
provisions relating to emergency bylaws). To the extent not inconsistent with
these Emergency Bylaws, the Bylaws provided in the preceding articles shall
remain in effect during such emergency and upon the termination of such
emergency the Emergency Bylaws shall cease to be operative unless and until
another such emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of
the Corporation or by any Director. The notice thereof shall specify the time
and place of the meeting. To the extent feasible, notice shall be given only to
such of the Directors as it may be feasible to reach at the time, by such means
as may be feasible at the time, including publication or radio, and at a time
less than twenty-four hours before the meeting if deemed necessary by the person
giving notice. Notice shall be similarly given, to the extent feasible, to the
other persons referred to in (b) below.
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of Directors fixed at the time in accordance with Article
II of the Bylaws. If the Directors present at any particular meeting shall be
fewer than the number required for such quorum, other persons present may be
included in the number necessary to make up such quorum, and shall be deemed
Directors for such particular meeting as determined by the following provisions
and in the following order of priority:
(i) Officers designated in Section 4.1(a) of the Bylaws, Executive
Vice Presidents not already serving as Directors, in the order of their
seniority of first election to such offices, or if two or more shall have been
first elected to such offices on the same day, in the order of their seniority
in age;
(ii) All other officers of the Corporation in the order of their
seniority of first election to such offices, or if two or more shall have been
first elected to such offices on the same day, in order of their seniority in
age; and
(iii) Any other persons that are designated on a list that shall
have been approved by the Board of Directors before the emergency, such persons
to be taken in such order of priority and subject to such conditions as may be
provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency,
may provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the Corporation shall
for any reason be rendered incapable of discharging their duties.
<PAGE>
(d) The Board of Directors, during as well as before any such emergency,
may provide, and from time to time change the principal office, or designate
several alternative offices, or authorize the officers to do so.
No officer, Director or employee acting in accordance with these Emergency
Bylaws shall be liable except for willful misconduct.
These Emergency Bylaws shall be subject to repeal or change by further action of
the Board of Directors or by action of the stockholders, except that no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action or inaction prior to the time of such repeal or change.
Any such amendment of these Emergency Bylaws may make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.
Article VIII
Indemnification Of Directors And Officers
8.1 A. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, a Director or officer of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages.
B. To the full extent permitted and in the manner prescribed by the
Virginia Stock Bank Act and any other applicable law, the Corporation shall
indemnify a Director or officer of the Corporation who is or was a party to any
proceeding by reason of the fact that he is or was such a Director or officer or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. The Board of Directors is hereby
empowered, by majority vote of a quorum of disinterested Directors, to contract
in advance to indemnify any Director or officer.
C. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in Section B of this
Article who was or is a party to any proceeding, by reason of the fact that he
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, to the same extent as if such person were specified as one to whom
indemnification is granted in Section B.
D. The Corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance, in such amounts as the Board
of Directors may determine, on behalf of any person who is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by such person in
any such capacity or arising from his status as such, whether or not the
<PAGE>
Corporation would have power to indemnify him against such liability under the
provisions of this Article.
E. In the event there has been a change in the composition of a majority
of the Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to Section A of this Article VIII shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
F. The provisions of this Article VIII shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof, whether
arising from any action taken or failure to act before or after such adoption.
No amendment, modification or repeal of this Article shall diminish the rights
provided hereby or diminish the right to indemnification with respect to any
claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
G. Reference herein to Directors, officers, employees or agents shall
include Area Board Directors, former Directors, officers, employees and agents
and their respective heirs, executors and administrators.
Article IX
Amendments
9.1 These Bylaws may be amended, altered, or repealed at any meeting of
the Board of Directors by affirmative vote of a majority of the number of
Directors fixed by resolution of the Board pursuant to these Bylaws. The
stockholders entitled to vote in an election of Directors, however, shall have
the power to rescind, alter, amend or repeal any Bylaws and to enact Bylaws
which, if expressly so provided, may not be amended, altered or repealed by the
Board of Directors.
Exhibit 10(1)
CRESTAR FINANCIAL CORPORATION
EXECUTIVE SEVERANCE PLAN
AGREEMENT
THIS AGREEMENT, dated February 23, 1996, is made by and between
Crestar Financial Corporation, a Virginia corporation (the "Company"), and
Richard F. Katchuk, ("Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control (as defined in the last section of this
Agreement) exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its shareholders;
and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control; and
WHEREAS, the Company has adopted the Crestar Financial Corporation
Executive Severance Plan (the "Plan") with the intent of fulfilling the above
objectives and Executive has been designated as a participant in the Plan;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and Executive agree to the terms of the
Plan, including the following provisions as set forth in this Agreement:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in the last Section of this Agreement and, if not defined
there, are defined in the Plan document.
2. TERM OF AGREEMENT. This Agreement shall commence on the date
first written above and shall continue in effect through December 31, 1998;
provided, however, that if a Change in Control shall have occurred during the
term of this Agreement, this Agreement shall continue in effect for a period of
not less than thirty-six months following the month in which the Control Change
Date occurs. Beginning on December 31, 1996, and on each December 31 thereafter,
the term of this Agreement shall automatically be extended for one additional
<PAGE>
calendar year unless the Human Resources and Compensation Committee of the
Company's Board adopts a resolution prior to that date affirmatively electing
not to extend this Agreement and notifies Executive of its decision not to
extend this Agreement.
3. COMPANY'S COVENANTS SUMMARIZED. In order to describe the amount
and circumstances under which Executive will receive benefits under the Plan and
this Agreement and to induce Executive to remain in the employ of the Company
and its Affiliates and in consideration of Executive's covenants as set forth in
Section 4 of this Agreement, the Company agrees, under the conditions described
in this Agreement, to pay Executive the severance payments determined pursuant
to Section 6 of this Agreement and the other payments and benefits described
herein in the event Executive's employment with the Company is terminated for
certain reasons after a Change in Control and during the term of this Agreement.
No amount or benefit shall be payable under this Agreement unless there shall
have been (or, under the terms of this Agreement, there shall be deemed to have
been) a termination of Executive's employment with the Company and all its
Affiliates following a Change in Control. This Agreement shall not be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Company and Executive, Executive shall
not have any right to be retained in the employ of the Company or any of its
Affiliates.
4. EXECUTIVE'S COVENANTS. Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the term of this Agreement, Executive will remain in the employ
of the Company until the earliest of (a) a date which is six months after the
date of such Potential Change in Control, (b) the Control Change Date, (c) the
date of termination by Executive of Executive's employment for Good Reason
(determined by treating the Potential Change in Control as a Change in Control
in applying the definition of Good Reason), by reason of death or Disability, or
(d) the termination by the Company of Executive's employment for any reason.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
(A) EXECUTIVE'S INCAPACITY. Following a Change in Control and during
the term of this Agreement, during any period that Executive fails to perform
Executive's full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay Executive's full salary to
Executive at the rate in effect at the commencement of such period of
Executive's incapacity, together with all compensation and benefits then payable
to Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company during such period until Executive's
employment is terminated by the Company for Disability.
<PAGE>
(B) PAYMENT AFTER NOTICE OF TERMINATION. If Executive's employment
shall be terminated for any reason following a Change in Control and during the
term of this Agreement, the Company shall pay Executive's full salary to
Executive through the Date of Termination at the rate in effect at the time the
Notice of Termination is given, together with all compensation and benefits
payable to Executive through the Date of Termination under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period.
(C) NORMAL POST-TERMINATION COMPENSATION AND BENEFITS. If
Executive's employment shall be terminated for any reason following a Change in
Control and during the term of this Agreement, the Company shall pay Executive's
normal post-termination compensation and benefits to Executive as such payments
become due. Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company's retirement, insurance,
incentive and other compensation or benefit plans, programs and arrangements.
6. SEVERANCE PAYMENTS.
(A) CALCULATION OF SEVERANCE AMOUNT. Subject to Subsections (b),
(c), and (d) of this Section 6, the Company shall pay Executive the Severance
Amount, which is equal to the sum of the amounts described in paragraphs (1) and
(2) below, upon the termination of Executive's employment following a Change in
Control and during the term of this Agreement, in addition to the payments and
benefits described in Section 5 of this Agreement, unless such termination is
(i) by the Company for Cause, (ii) by reason of Executive's death or Disability,
or (iii) by Executive without Good Reason. Executive's employment shall be
deemed to have been terminated following a Change in Control by the Company
without Cause or by Executive with Good Reason if Executive's employment is
terminated without Cause prior to a Change in Control at the direction of a
Person who has entered into an agreement with the Company, the consummation of
which will constitute a Change in Control, or if Executive terminates his
employment with Good Reason prior to a Change in Control (determined by treating
a Potential Change in Control as a Change in Control in applying the definition
of Good Reason) if the circumstance or event which constitutes Good Reason
occurs at the direction of such Person.
(1) SEVERANCE PAY. In lieu of any further salary payments to
Executive for periods subsequent to the Date of Termination, the Company shall
pay to Executive a lump sum severance payment, in cash, equal to 3.75 times
Executive's Annual Base Salary.
(2) QUALIFIED PLAN BENEFITS. In addition to the severance pay
described in paragraph (1) above, the Severance Amount shall also include an
amount equal to the amount of the Company's profit sharing contribution that
would have been allocated to Executive's profit sharing account under the Thrift
<PAGE>
Plan for the plan year that includes Executive's Date of Termination, based on
Executive's compensation (as defined under the Thrift Plan) calculated as
follows: Executive's annualized cash compensation on Executive's Date of
Termination or, if higher, Executive's annualized cash compensation immediately
before the Control Change Date.
The portion of Executive's Severance Amount determined under this paragraph (2)
will be calculated with reference to the benefits that would have been allocated
under the Thrift Plan but for the limitations prescribed by the Code and without
regard to any deferral election that Executive may have made under the Crestar
Financial Corporation Additional Nonqualified Executive Plan. Notwithstanding
the preceding sentence, the portion of Executive's Severance Amount determined
under this paragraph (2) will be reduced to the extent such amounts are
allocated to or accrued on behalf of Executive under the Crestar Financial
Corporation Additional Nonqualified Executive Plan or the Crestar Financial
Corporation Excess Benefit Plan.
(B) CERTAIN REDUCTION IN SEVERANCE AMOUNT.
(1) The Severance Amount and other payments that
Executive is entitled to receive under other plans, programs, and
agreements may constitute Parachute Payments that are subject to the
"golden parachute" rules of Code section 280G and the excise tax of
Code section 4999. The Company and Executive intend to reduce any
Parachute Payments if, and only to the extent that, a reduction will
allow Executive to receive a greater Net After Tax Amount than
Executive would receive absent a reduction. The remaining provisions
of this subsection (b) describe how that intent will be effectuated.
(2) The Accounting Firm will first determine the amount
of any Parachute Payments that are payable to Executive. The
Accounting Firm will also determine the Net After Tax Amount
attributable to Executive's total Parachute Payments.
(3) The Accounting Firm will next determine the amount
of Executive's Capped Parachute Payments. Thereafter, the Accounting
Firm will determine the Net After Tax Amount attributable to
Executive's Capped Parachute Payments.
(4) Executive will receive the total Parachute Payments
unless the Accounting Firm determines that the Capped Parachute
Payments will yield Executive a higher Net After Tax Amount, in
which case Executive will receive the Capped Parachute Payments. If
Executive will receive the Capped Parachute Payments, Executive's
total Parachute Payments will be adjusted by first reducing the
amount payable under any other plan, program, or agreement that, by
its terms, requires a reduction to prevent a "golden parachute"
<PAGE>
payment under Code section 280G; by next reducing Executive's
benefit, if any, under the Crestar Financial Corporation
Supplemental Executive Retirement Plan, to the extent it is a
Parachute Payment; by next reducing the Severance Amount payable
under Subsection 6(a) of this Agreement; and thereafter by reducing
Parachute Payments payable under other plans and agreements (with
the reductions first coming from cash benefits and then from noncash
benefits). The Accounting Firm will notify Executive and the Company
if it determines that the Parachute Payments must be reduced to the
Capped Parachute Payments and will send Executive and the Company a
copy of its detailed calculations supporting that determination.
(5) As a result of any uncertainty in the application of
Code sections 280G and 4999 at the time that the Accounting Firm
makes its determinations under this Subsection 6(b), it is possible
that amounts will have been paid or distributed to Executive that
should not have been paid or distributed under this Section 6
("Overpayments"), or that additional amounts should be paid or
distributed to Executive under this Section 6 ("Underpayments"). If
the Accounting Firm determines, based on either controlling
precedent, substantial authority or the assertion of a deficiency by
the Internal Revenue Service against Executive or the Company, which
assertion the Accounting Firm believes has a high probability of
success, that an Overpayment has been made, then Executive shall
have an obligation to pay the Company upon demand an amount equal to
the sum of the Overpayment plus interest on such Overpayment at the
prime rate of Crestar Bank (or its successor) as such prime rate
shall change from time to time (or, if higher, the rate provided in
Code section 7872(f)(2)) from the date of Executive's receipt of
such Overpayment until the date of such repayment; provided,
however, that Executive shall be obligated to make such repayment
if, and only to the extent, that the repayment would either reduce
the amount on which Executive is subject to tax under Code section
4999 or generate a refund of tax imposed under Code section 4999. If
the Accounting Firm determines, based upon controlling precedent or
substantial authority, that an Underpayment has occurred, the
Accounting Firm will notify Executive and the Company of that
determination and the Company will pay the amount of that
Underpayment to Executive promptly in a lump sum, with interest
calculated on such Underpayment at the prime rate of Crestar Bank
(or its successor) as such prime rate shall change from time to time
(or, if higher, the rate provided in Code section 7872(f)(2)) from
the date such Underpayment should have been paid until actual
payment.
(6) All determinations made by the Accounting Firm under
this Subsection 6(b) are binding on Executive and the Company and
must be made as soon as practicable but no later than thirty days
after Executive's Date of Termination. Within thirty days after
Executive's Date of Termination, the Company will pay to Executive
<PAGE>
the Severance Amount under Section 6(a) or the reduced Severance
Amount as calculated by the Accounting Firm pursuant to Section
6(b).
(C) SECURITIES VIOLATION PAYMENTS. Notwithstanding any other
provision of this Agreement, no payment will be made to Executive under this
Agreement to the extent that such payment would be described in Code section
280G(b)(2)(B) (relating to payments pursuant to an agreement that violates any
generally enforceable securities laws or regulations).
(D) FEDERAL LAWS AND REGULATIONS. Notwithstanding any other
provision of this Agreement, no payment will be made to Executive under this
Agreement to the extent that such payment would be prohibited by federal rules
or regulations that apply to the Company as a bank holding company or to any
Affiliate of the Company for which Executive serves as an officer.
7. WITHHOLDING ON PAYMENTS. All payments under this Agreement and
the Plan shall be paid net of applicable withholding required under federal,
state or local law and any additional withholding to which Executive has agreed.
8. NO MITIGATION OR SETOFFS. The Company agrees that if Executive's
employment by the Company is terminated during the term of this Agreement,
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to Executive by the Company pursuant to this
Agreement. Further, any amount payable under the Plan or this Agreement to
Executive shall not be reduced by any compensation earned by Executive as the
result of employment by another employer, by retirement benefits or amount, or
by offset against any amount claimed to be owed by Executive to the Company or
any Affiliate or otherwise.
9. EXPENSES AND LEGAL FEES. The Company shall pay any legal fees and
expenses incurred by Executive in seeking in good faith to obtain or enforce any
right or benefit provided by this Agreement or the Plan, including all fees
incurred in disputing any termination of employment, regardless of whether
Executive obtains a successful result, and expenses incurred in connection with
any tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five business days after delivery of Executive's
written request for payment accompanied with such evidence of fees and expenses
incurred, as the Company may reasonably require. Any expenses attributable to
determinations by independent experts under any section of the Agreement (for
example, under Section 6) shall be paid by the Company.
<PAGE>
10. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
(A) NOTICE OF TERMINATION. After a Change in Control and during the
term of this Agreement, any purported termination of Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party to the other party to this Agreement, in accordance
with Section 12 of this Agreement. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the Date of Termination
and the specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to Executive and an opportunity for Executive, together
with Executive's counsel, to be heard before the Board) finding that, in the
good faith opinion of the Board, Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause in this Agreement, and specifying
the particulars of such Cause in detail.
(B) DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of Executive's employment after a Change in Control and
during the term of this Agreement, shall mean (1) if Executive's employment is
terminated for Disability, thirty days after Notice of Termination is given
(provided that Executive shall not have returned to the full-time performance of
Executive's duties during such thirty-day period), and (2) if Executive's
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a termination by the Company, shall not be
less than thirty days (except in the case of a termination for Cause) and, in
the case of a termination by the Executive, shall not be less than fifteen days
nor more than thirty days, respectively, from the date such Notice of
Termination is given).
(C) DISPUTE CONCERNING TERMINATION. If within fifteen days after any
Notice of Termination is given, or, if later, prior to the Date of Termination
(as determined without regard to this subsection (c)), the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
is finally resolved, either by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence.
<PAGE>
(D) COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with subsection (c) above, the Company
shall continue to pay Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which Executive was participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved in accordance
with subsection (c) above. Amounts paid under this subsection (d) are in
addition to all other amounts due under this Agreement (other than those due
under Section 5(b) hereof) and shall not be offset against or reduce any other
amounts due under this Agreement, unless the Accounting Firm determines a
reduction is required pursuant to Section 6(b) of this Agreement.
11. SUCCESSORS; BINDING AGREEMENT.
(A) SUCCESSORS BOUND. In addition to any other obligations imposed
by law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company,
regardless of whether such occurrence constitutes a Change in Control, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effective date of any such succession shall be a breach
of this Agreement and shall entitle Executive to compensation from the Company
in the same amount and on the same terms as Executive would be entitled to under
this Agreement if Executive were to terminate Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(B) EXECUTIVE. This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive under
this Agreement (other than any amounts which, by their terms, terminate upon the
death of the Executive) if Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
Executive's estate.
12. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
<PAGE>
the respective addresses set forth below or to a different address that is
delivered in writing to by one party to the other party, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
Crestar Financial Corporation
919 East Main Street
Richmond, Virginia 23219
Attention: Director of Human Resources
To the Executive:
Richard F. Katchuk
Crestar Financial Corporation
919 East Main Street
Richmond, Virginia 23219
13. MISCELLANEOUS. This Agreement is part of and subject to the
terms of the Plan. No provision of this Agreement may be modified, waived, or
discharged unless that waiver, modification, or discharge is agreed to in
writing and signed by Executive and by the Chairman of the Board's Human
Resources and Compensation Committee or by such officer of the Company as may be
specifically designated by the Board's Human Resources and Compensation
Committee. No waiver by either party to this Agreement at any time of any breach
by the other party of, or compliance with, any condition or provision of this
Agreement to be performed by that other party is a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter of this Agreement and the Plan have been made by
either party which are not expressly set forth in this Agreement and the Plan.
The obligations of the Company and Executive under Sections 6 and 10 shall
survive the expiration of this Agreement.
14. VALIDITY. The validity, interpretation, construction, and
performance of this Agreement are governed by the laws of Virginia (other than
its choice-of-law rules if those rules would require the application of the laws
of a state other than Virginia), to the extent that state laws are not
superseded by federal law. The invalidity or unenforceability of any provisions
of this Agreement does not affect the validity or enforceability of any other
provision of this Agreement, each of which will remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which is deemed to be an original but all of which
together constitute one and the same instrument.
<PAGE>
16. DISPUTES.
(A) CLAIMS FOR BENEFITS. All claims for benefits by Executive shall
be submitted to the Plan Administrator in writing as set forth in the claims
procedures under the Plan.
(B) ARBITRATION. Any further dispute or controversy arising under or
in connection with this Agreement that is not settled between the parties and
which Executive wishes to pursue after the claims procedures under the Plan have
been exhausted, shall be settled exclusively by arbitration in accordance with
the rules of the American Arbitration Association then in effect at such
location in the Commonwealth of Virginia as Executive may select. Judgment may
be entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of
Executive's right to be paid through the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this Agreement
or the Plan.
17. PRIOR AGREEMENTS SUPERSEDED. Effective as of the date set forth
on the first page of this Agreement, any prior severance agreement between
Executive and the Company or an Affiliate is superseded in its entirety by this
Agreement and is of no further force or effect.
18. DEFINITIONS. For purposes of this Agreement and the Plan, the
following terms shall have the meanings indicated below:
(A) "Accounting Firm" means the accounting firm most recently
approved by the Company's shareholders as the Company's independent auditor. If,
however, such firm declines or is unable to undertake the determinations
assigned to it under this Agreement, then "Accounting Firm" shall mean such
other independent accounting firm mutually agreed upon by the Company and the
Executive.
(B) "Annual Base Salary" means Executive's annual base salary,
determined according to the Company's normal pay practices, as in effect on the
Date of Termination, one year before the Date of Termination, on the Control
Change Date, or one year before the Control Change Date, whichever date produces
the greatest amount.
(C) "Board" means the Board of Directors of the Company.
(D) "Capped Parachute Payments" means the largest amount of
Parachute Payments that may be paid to Executive without liability for any
excise tax under Code section 4999.
(E) "Cause" for termination by the Company of Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by Executive to substantially perform Executive's duties with
<PAGE>
the Company (other than such failure resulting from Executive's incapacity due
to physical or mental illness or any such actual or anticipated failure after
the issuance of a Notice of Termination for Good Reason pursuant to Section
10(a) of this Agreement) after a written demand for substantial performance is
delivered to Executive by the Board, which demand specifically identifies the
manner in which the Board believes that Executive has not substantially
performed Executive's duties, or (ii) the willful engaging by Executive in
conduct which is demonstrably and materially injurious to the Company or its
Affiliates, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, no act, or failure to act, on Executive's part shall be deemed
"willful" unless Executive has acted, or failed to act, with an absence of good
faith and without a reasonable belief that Executive's act, or failure to act,
was in the best interests of the Company and its Affiliates. If the purpose
alleged by the Board is as set forth in clause (i) above, then Executive shall
be given the opportunity to cure such failure within a reasonable period of
time, not less than thirty days, following Executive's receipt of the Board's
demand for substantial performance.
(F) "Change in Control" means "Change in Control" as defined under
the Crestar Financial Corporation 1993 Stock Incentive Plan, as amended from
time to time, and any successor thereto.
(G) "Code" means the Internal Revenue Code of 1986, as amended at
the relevant time.
(H) "Company" means Crestar Financial Corporation and any successor
to its business and/or assets which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(I) "Control Change Date" means the date on which a Change in
Control occurs. If a Change in Control occurs on account of a series of
transactions, the Control Change Date is the date of the last of such
transactions.
(J) "Date of Termination" is defined in Section 10(b) of this
Agreement.
(k) "Disability" means a mental or physical condition that qualifies
Executive to receive benefits under the Company's long-term disability plan
available to executive officers or that would qualify Executive to receive such
benefits if Executive were a participant in such plan. Disability shall be
deemed the reason for the termination by the Company of Executive's employment
if Executive is determined to have a Disability and the Company shall have given
Executive a Notice of Termination for Disability, and within thirty days after
such Notice of Termination is given, Executive shall not have returned to the
full-time performance of Executive's duties.
<PAGE>
(L) "Executive" means the individual named in the first paragraph of
this Agreement.
(M) "Good Reason" for termination of Executive's employment with the
Company or its successor means the occurrence (without Executive's express
written consent) of any one of the following acts by the Company, or failures by
the Company to act, unless in the case of any act or failure to act described in
paragraph (1), (5), (6) or (7) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(1) the assignment to Executive of any duties
inconsistent with Executive's status as a senior officer of the
Company, or a substantial adverse alteration in the nature or status
of Executive's responsibilities from those in effect immediately
prior to the Control Change Date; or
(2) a reduction by the Company in Executive's annual
base salary as in effect on the date of this Agreement or as the
same may be increased from time to time (except for across-the-board
salary reductions similarly affecting all senior officers of the
Company and all senior officers of any Person in control of the
Company); or
(3) the Company's requiring Executive as a condition of
Executive's continuing employment to be based at a principal office
more than twenty-five miles from the principal office out of which
Executive is working immediately prior to a Change in Control
(except for required travel on the Company's business to an extent
substantially consistent with Executive's current business travel
obligations); or
(4) the failure by the Company, without Executive's
written consent, to pay Executive any portion of Executive's current
compensation (except pursuant to an across-the-board compensation
deferral by the Company which similarly affects all senior officers
of the Company and all senior officers of any Person in control of
the Company), or to pay Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within seven days of the date such payment is due; or
(5) the failure by the Company to continue in effect any
compensation plan in which Executive participates immediately prior
to the Change in Control which is material to Executive's total
compensation, including but not limited to, the Company's stock
incentive plan and any programs in effect under such plan, the
management incentive plan and the deferred compensation plan for
incentive awards, the supplemental executive retirement plan, and
nonqualified plans providing make-whole benefits not provided under
qualified plans, and the executive life insurance plan, or any
substitute plans adopted prior to the Change in Control, unless an
<PAGE>
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue Executive's participation in any
such plan (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of Executive's participation relative to
other participants, as existed immediately prior to the Control
Change Date; or
(6) the failure by the Company to continue to provide
Executive with benefits substantially similar to those Executive
enjoyed under any of the Company's pension, life insurance,
incentive, medical, health and accident, or disability plans in
which Executive was participating immediately prior to the Control
Change Date, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive Executive of any material fringe benefit enjoyed by
Executive immediately prior to the Control Change Date, or the
failure by the Company to provide Executive at least as many paid
vacation days as Executive is entitled to receive under the
Company's normal vacation policy as in effect immediately prior to
the Control Change Date;
(7) any purported termination of Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 10(a) of this Agreement; for purposes of
this Agreement, no such purported termination shall be effective.
Executive's right to terminate Executive's employment for Good Reason shall not
be affected by Executive's incapacity due to physical or mental illness.
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(N) "Net After Tax Amount" means the amount of any Parachute
Payments or Capped Parachute Payments, as applicable, net of taxes imposed under
Code sections 1, 3101(b) and 4999 and any state or local income taxes applicable
to Executive as in effect on the date of the payment under Section 6 of this
Agreement. The determination of the Net After Tax Amount shall be made using the
highest combined effective rate imposed by the foregoing taxes on income of the
same character as the Parachute Payments or Capped Parachute Payments, as
applicable, in effect for the year for which the determination is made.
(O) "Notice of Termination" is defined in Section 10(a) of this
Agreement.
(P) "Parachute Payment" means a payment that is described in Code
section 280G(b)(2) (without regard to whether the aggregate present value of
such payments exceeds the limit prescribed by Code section 280G(b)(2)(A)(ii)).
The amount of any Parachute Payment shall be determined in accordance with Code
<PAGE>
section 280G and the regulations promulgated thereunder, or, in the absence of
final regulations, the proposed regulations promulgated under Code section 280G.
(R) "Plan" means the Crestar Financial Corporation Executive
Severance Plan, as in effect at the relevant time.
(S) "Potential Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(1) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(2) any Person who is or becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), directly or indirectly, of securities of the
Company representing ten percent (10%) or more of the combined
voting power of the Company's then outstanding securities, increases
such Person's beneficial ownership of such securities by five
percent (5%) or more over the percentage so owned by such Person on
the date hereof; or
(3) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in Control has
occurred.
(T) "Retirement" means termination of Executive's employment on or
after attaining the Retirement Plan's normal retirement age.
(U) "Retirement Plan" means the Retirement Plan for Employees of
Crestar Financial Corporation and Affiliated Corporation or any successor plan
or program as in effect on Executive's Date of Termination.
(V) "Thrift Plan" means the Crestar Employees' Thrift and
Profit-Sharing Plan.
(W) "Severance Amount" is defined in Section 6 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement
effective as of the date first written above.
CRESTAR FINANCIAL CORPORATION
By: /s/ James J. Kelley
_____________________________
Title HR Director
EXECUTIVE
/s/ RICHARD F. KATCHUK
--------------------------------
Richard F. Katchuk
Exhibit 10(aj)
CRESTAR FINANCIAL CORPORATION
BOARD OF DIRECTORS MEETING
FRIDAY, DECEMBER 20, 1996
RESOLUTIONS AMENDING THE SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN AND THE 1993 STOCK INCENTIVE PLAN:
RESOLVED, that the Board of Directors of Crestar Financial Corporation
hereby amends Section 4.01 of the Crestar Financial Corporation
Supplemental Executive Retirement Plan such that the benefit payable to
the surviving spouse of a participant who dies before attaining age 55
shall be the greater of (i) the benefit payable under the current SERP
formula or (ii) the benefit that would be payable under the SERP
benefit formula taking into account the participant's base salary as in
effect on the date of death and his prior year's bonus (if the
participant completed less than six months' service in the year of
death) or his current bonus (if the participant completed at least six
months' service in the year of death).
FURTHER RESOLVED, that the Board of Directors of Crestar Financial
Corporation hereby amends Section 7.03 of the Crestar Financial
Corporation 1993 Stock Incentive Plan in the manner set forth on the
attached Exhibit I.
FINALLY RESOLVED, that the appropriate officers of the Corporation are
hereby authorized and directed to take such actions and to execute such
documents as they may deem necessary or appropriate to implement the
foregoing resolutions, all without the necessity of further action by
this Board.
<PAGE>
EXHIBIT I
7.03. Transferability. (a) Except as provided in Section 7.03(b), each Option
and SAR granted under this Plan shall be nontransferable except by will or by
the laws of descent and distribution. In the event of any such transfer, the
Option and any Corresponding SAR that relates to such Option must be transferred
to the same person or persons or entity or entities. Except as provided in
Section 7.03(b), during the lifetime of the Participant to whom the Option or
SAR is granted, the Option or SAR may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or subject
to, any lien, obligation, or liability of such Participant.
(b) Section 7.03(a) to the contrary notwithstanding, if the Agreement
provides, an Option that is not an incentive stock option and an SAR that is not
related to an incentive stock option may be transferred by a Participant to the
Participant's children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members are
the only partners, on such terms and conditions as may be permitted under
Securities Exchange Commission Rule 16b-3 as in effect from time to time. The
holder of an Option or SAR transferred pursuant to this Section 7.03(b) shall be
bound by the same terms and conditions that governed the Option or SAR during
the period that it was held by the Participant; provided, however, that such
transferee may not transfer the Option or SAR except by will or the laws of
descent and distribution. In the event of any transfer of an Option or SAR (by
the Participant or his transferee), the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person or persons or
entity or entities.
Exhibit 10(ao)
CRESTAR FINANCIAL CORPORATION
DIRECTORS' EQUITY PROGRAM
EFFECTIVE JANUARY 1, 1996
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. PURPOSE................................................. 1
2. DEFINITIONS............................................. 1
3. EQUITY AWARDS........................................... 4
4. DEFERRAL ELECTION....................................... 4
5. VESTING................................................. 5
6. CREDITS TO ACCOUNTS..................................... 6
7. DISTRIBUTION............................................ 7
8. HARDSHIP DISTRIBUTIONS.................................. 8
9. COMPANY'S OBLIGATION.................................... 8
10. CONTROL BY PARTICIPANT.................................. 9
11. CLAIMS AGAINST PARTICIPANT'S DEFERRED STOCK BENEFIT..... 9
12. AMENDMENT OR TERMINATION................................ 9
13. NOTICES................................................. 10
14. WAIVER.................................................. 10
15. CONSTRUCTION............................................ 10
16. EFFECTIVENESS........................................... 10
<PAGE>
1. PURPOSE. The Crestar Financial Corporation Directors' Equity Program is
intended to assist the Company in promoting a greater identity of
interest between the Company's non-employee directors and its
shareholders and to assist the Company in attracting and retaining
non-employee directors by affording Participants an opportunity to
share in the future success of the Company. The Plan is also intended
to constitute a deferred compensation program for corporate directors'
fees.
2. DEFINITIONS. The following definitions apply to this Plan and to the
Deferral Election Forms.
(a) ACCOUNT means that bookkeeping record established for each
Participant and is the sum of the Participant's Equity Award
Account and his Elective Deferral Account. An Account is
established only for purposes of measuring a Deferred Stock
Benefit and not to segregate assets or to identify assets that
may or must be used to satisfy a Deferred Stock Benefit.
(b) ADMINISTRATOR means the Company's Director of Human Resources.
(c) BENEFICIARY or BENEFICIARIES means a person or persons or
other entity designated on a Beneficiary Designation Form by a
Participant as allowed in subsection 7(c) to receive a
Deferred Stock Benefit. If there is no valid designation by
the Participant, or if the designated Beneficiary or
Beneficiaries fail to survive the Participant or otherwise
fail to take the benefit, the Participant's Beneficiary is the
first of the following who survives the Participant: the
Participant's spouse (the person legally married to the
Participant when the Participant dies); the Participant's
surviving issue, per stirpes; the Participant's parents and
the Participant's estate.
(d) BENEFICIARY DESIGNATION FORM means a form acceptable to the
Administrator or his designee used by a Participant according
to this Plan to name his or her Beneficiary or Beneficiaries
who will receive the Participant's Deferred Stock Benefit
under this Plan upon the Participant's death.
(e) BOARD means the Board of Directors of the Company.
(f) COMPANY means Crestar Financial Corporation and any successor
business by merger, purchase, or otherwise and any other
business that maintains the Plan.
(g) COMPENSATION means a Director's Retainer Fee and Stock Award
for the Deferral Year.
(h) DEFERRAL ELECTION FORM means a document governed by the
provisions of section 4 of this Plan, including the portion
that is the Distribution Election Form and the related
Beneficiary Designation Form that applies to all of that
Participant's Deferred Stock Benefit under the Plan.
<PAGE>
(i) DEFERRAL YEAR means a calendar year for which a Director has
submitted a Deferral Election Form that is acceptable to the
Administrator.
(j) DEFERRED STOCK BENEFIT means the benefit that a Participant is
entitled to receive under this Plan.
(k) DIRECTOR means a duly elected or appointed member of the Board
who is not an employee of the Company, excluding any member of
the Board who is required to transfer, assign or pay his or
her Retainer Fee to the member's employer or firm.
(l) DISTRIBUTION ELECTION FORM means a form used by a Participant
according to this Plan to establish the frequency of
distributions from his or her Elective Deferral Account. If a
Participant has no Distribution Election Form that is
operative according to this Plan, distribution of that
Deferred Stock Benefit is governed by section 7 of this Plan.
(m) EFFECTIVE DATE means January 1, 1996.
(n) ELECTION DATE means the date established by this Plan as the
date on or before which a Director must submit a valid
Deferral Election Form to the Administrator. For each Deferral
Year, the Election Date is December 31 of the preceding
calendar year. However, for an individual who becomes a
Director during a Deferral Year, the Election Date is the
thirtieth day following the date that he or she becomes a
Director. Despite the three preceding sentences, the
Administrator may set an earlier date as the Election Date for
any Deferral Year.
(o) ELECTIVE DEFERRAL ACCOUNT means that bookkeeping record
established for each Participant who elects to defer his or
her Retainer Fee, Stock Award, or both for a Deferral Year. An
Elective Deferral Account is established only for purposes of
measuring that portion of a Deferred Stock Benefit
attributable to deferred Retainer Fees, Stock Awards, or both
and not to segregate assets or to identify assets that may or
must be used to satisfy a Deferred Stock Benefit. An Elective
Deferral Account will be credited with the Participant's
Compensation deferred according to a Deferral Election Form
and according to section 6 of this Plan. An Elective Deferral
Account will be credited periodically with amounts determined
under subsection 6(b) of this Plan.
(p) EQUITY AWARD means an award stated with reference to a number
of whole shares of Company common stock that is credited to a
Participant's Equity Award Account in accordance with section
3 of this Plan.
<PAGE>
(q) EQUITY AWARD ACCOUNT means that bookkeeping record established
for each Participant. An Equity Award Account is established
only for purposes of measuring that portion of a Deferred
Stock Benefit attributable to awards according to section 3 of
this Plan and not to segregate assets or to identify assets
that may or must be used to satisfy a Deferred Stock Benefit.
An Equity Award Account will be credited periodically with
amounts determined under subsection 6(b) of this Plan.
(r) EQUITY AWARD DATE means the Effective Date and each January 1
that is a multiple of the fifth anniversary of the Effective
Date. The initial EQUITY AWARD DATE of a Participant who
becomes a Director after the Effective Date shall be the first
day of the month coincident with or next following the date
that the individual becomes a Director.
(s) FAIR MARKET VALUE means, on any given date, the average
(rounded to the nearest one-eighth of a dollar) of the high
and low prices of a share of Company common stock as reported
on the New York Stock Exchange composite tape on such day or,
if the Company common stock was not traded on the New York
Stock Exchange on such day, then the next day that the Company
common stock is traded on such exchange, all as reported by
such source as the Administrator may select. If shares of
Company common stock are not then traded on the New York Stock
Exchange, the Fair Market Value shall be determined by the
Administrator using any reasonable method in good faith.
(t) PARTICIPANT means a member of the Board who is a Director on
an Equity Award Date or, with respect to any Deferral Year,
has a Deferral Election Form that is operative for that
Deferral Year.
(u) PLAN means the Crestar Financial Corporation Directors' Equity
Program.
(v) RETAINER FEE means that portion of a Director's Compensation
that is a fixed cash amount determined without regard to his
or her attendance at meetings.
(w) STOCK AWARD means the number of shares of Company common stock
that would have been issuable to a Participant under the
Crestar Financial Corporation Directors' Stock Compensation
Plan but for the Participant's election to defer such award
under this Plan.
(x) TERMINATE, TERMINATING, or TERMINATION, with respect to a
Participant, means cessation of his or her relationship with
the Company as a member of the Board whether by death,
disability or severance for any other reason.
<PAGE>
(y) YEAR OF SERVICE means a period of twelve consecutive full
months of service as a member of the Board.
3. EQUITY AWARDS. Equity Awards are governed by the provisions of this
section.
(a) As of the Effective Date and each subsequent Equity Award
Date, the Equity Award Account of each Participant who is then
a Director will be credited with an Equity Award. The Equity
Award shall be stated with respect to a number of whole shares
of Company common stock that has a Fair Market Value as of
such date that most nearly equals $40,000.
(b) The preceding subsection 3(a) to the contrary notwithstanding,
the initial Equity Award for a Director who becomes a
Participant after the Effective Date shall be governed by this
subsection 3(b). The initial Equity Award for a Participant
described in the preceding sentence shall be credited to such
Participant's Equity Award Account as of his or her first
Equity Award Date and shall be stated with respect to a number
of whole shares of Company common stock. The number of whole
shares of Company common stock credited to the Equity Award
Account shall be the product of (i) that number of whole
shares of Company common stock that has a Fair Market Value as
of such date that most nearly equals $40,000 and (ii) a
fraction, the numerator of which is the number of whole months
preceding the next Equity Award Date under subsection 3(a) and
the denominator of which is 60.
4. DEFERRAL ELECTION. A deferral election is valid when a Deferral
Election Form, that is acceptable to the Administrator, is completed,
signed by the electing Director, and received by the Administrator no
later than the applicable Election Date. Deferral elections are
governed by the provisions of this section.
(a) A Director may submit a Deferral Election Form for any
Deferral Year if he or she is a Director at the beginning of
that Deferral Year or becomes a Director during that Deferral
Year.
(b) Before each Deferral Year's Election Date, each Director will
be provided with a Deferral Election Form and a Beneficiary
Designation Form. Under the Deferral Election Form for a
single Deferral Year, a Director may elect on or before the
Election Date to defer the receipt of his or her Retainer Fee
or his or her Stock Award or both for the Deferral Year which
will be earned and payable after the Election Date.
(c) Each Distribution Election Form is part of the Deferral
Election Form on which it appears or to which it states that
it is related. The Administrator may allow a Participant to
file one Distribution Election Form for his or her entire
Elective
<PAGE>
Deferral Account or multiple Distribution Election Forms that
each relate to Deferred Stock Benefits credited to his or her
Elective Deferral Account for one or more Deferral Years. The
provisions of section 7 of this Plan apply to any Deferred
Stock Benefit credited to his or her Elective Deferral Account
under this Plan if there is no operative Distribution Election
Form for that Deferred Stock Benefit.
(d) If he or she does so on or before the Election Date for the
Deferral Year, the Administrator may reject any Deferral
Election Form or any Distribution Election Form, or both, and
the Administrator is not required to state a reason for any
rejection. The Administrator may modify any Distribution
Election Form at any time to the extent necessary to comply
with any federal securities laws or regulations. However, the
Administrator's rejection of any Deferral Election Form or any
Distribution Election Form or the Administrator's modification
of any Distribution Election Form must be based upon action
taken without regard to any vote of the Director whose
Deferral Election Form or Distribution Election Form is under
consideration, and the Administrator's rejections must be made
on a uniform basis with respect to similarly situated
Directors. If the Administrator rejects a Deferral Election
Form, the Director must be paid the Compensation he or she
would have been entitled to receive if he or she had not
submitted the rejected Deferral Election Form.
(e) A Director may not revoke a Deferral Election Form after the
Deferral Year begins. Any revocation before the beginning of
the Deferral Year is the same as a failure to submit a
Deferral Election Form or a Distribution Election Form unless
the Director submits a new Deferral Election Form on or before
that Deferral Year's Election Date. Any writing signed by a
Director expressing an intention to revoke his or her Deferral
Election Form that is delivered to the Administrator before
the close of business on the relevant Election Date is a
revocation.
(f) A Director who has not submitted a valid Deferral Election
Form to the Administrator on or before the relevant Election
Date may not defer any part of his or her Compensation for
that Deferral Year under this Plan. The provisions of section
7 govern the distribution of amounts credited to the Elective
Deferral Account of a Director who submits a valid Deferral
Election Form but who fails to submit a valid Distribution
Election Form for that portion of his or her Deferred Stock
Benefit before the relevant Election Date or who otherwise has
no valid Distribution Election Form for that Deferred Stock
Benefit.
5. VESTING. A Participant's interest in his or her Elective Deferral
Account is always 100% vested and nonforfeitable. A Participant whose
service as a member of the Board terminates on account of death or
disability (as determined by the Board in its discretion), shall have a
100% vested and nonforfeitable interest in his or her Equity Award
Account.
<PAGE>
A Participant whose service as a member of the Board terminates for
reasons other than death or disability shall have a vested and
nonforfeitable interest in his or her Equity Award Account in
accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than one 0%
One but less than two 20%
Two but less than three 40%
Three but less than four 60%
Four but less than five 80%
Five or more 100%
Each Participant's interest in his or her Equity Award Account shall be 100%
vested and nonforfeitable as of a Control Change Date (as such term is defined
in the Crestar Financial Corporation 1993 Stock Incentive Plan).
6. CREDITS TO ACCOUNTS.
(a) An Equity Award Account and Elective Deferral Account will be
established for each Participant and shall be credited with
amounts determined under sections 3 and 4 and shall be further
credited with earnings in accordance with subsection 6(b). A
Deferred Stock Benefit attributable to a deferred Retainer Fee
will be credited to the Participant's Elective Deferral
Account as a number of whole and fractional shares of Company
common stock based on the Fair Market Value on the date that
the Retainer Fee would have been paid. A Deferred Stock
Benefit attributable to a deferred Stock Award will be
credited to the Participant's Elective Deferral Account as a
number of whole and fractional shares of Common Stock based on
the Fair Market Value on the date that the Stock Award would
have been issued.
(b) The basis for additional credits to Accounts (in whole and
fractional shares of Company common stock) will be variable
rates based on the value of dividends paid on Company common
stock and the Fair Market Value on the date that such
dividends are paid on Company common stock. The value of an
Account at any relevant time is determined as if the Equity
Awards made to, and the Compensation deferred by, the
Participant under the Plan and any additional credits under
this subsection had been used to purchase Company common stock
at the Fair Market Value on the date those amounts were
credited to the Account. Additional credits are accrued
through the end of the month preceding the distribution of a
Deferred Stock Benefit.
<PAGE>
(c) If a trust is established under section 9 of this Plan, an
electing Participant may instruct the trustee under the
governing trust agreement how to vote shares of Company common
stock allocated to that Participant's separate account under
the trust according to this subsection and the provisions of
the governing trust agreement. Before each annual or special
meeting of the Company shareholders, the trustee under the
governing trust agreement must furnish each Participant with a
copy of the proxy solicitation and other relevant material for
the meeting as furnished to the trustee by the Company, and a
form addressed to the trustee requesting the Participant's
confidential instructions on how to vote shares of Company
common stock allocated to his or her account as of the
valuation date established under the governing trust agreement
preceding the record date. Upon receipt of those
instructions, the trustee under the governing trust agreement
must vote such stock as instructed.
7. DISTRIBUTIONS.
(a) According to a Participant's Distribution Election Form, but
subject to Plan subsection 4(d), a Deferred Stock Benefit must
be distributed in shares of Company common stock equal to the
number of whole shares of Company common stock credited to the
Participant's Account on the last day of the month preceding
the month of distribution. However, cash must be paid in lieu
of a fractional share of Company common stock credited the
Participant's Deferred Stock Account on the last day of the
month preceding the month of distribution.
(b) Deferred Stock Benefits will be paid in a lump sum unless the
Participant's Distribution Election Form specifies annual
installment payments over a period of 5 years. A Deferred
Stock Benefit payable in installments will continue to accrue
additional credits under Plan subsection 6(b) on the unpaid
balance of the Account through the end of the month preceding
the distribution. Distribution of a Deferred Stock Benefit
attributable to a Participant's vested Equity Award Account
will be paid or begin on the February 15 of the year after his
or her Termination.
(c) Deferred Stock Benefits may not be assigned by a Participant
or Beneficiary. Unless the Administrator announces otherwise,
a Participant may use only one Beneficiary Designation Form to
designate one or more Beneficiaries for all of his or her
Deferred Stock Benefits under the Plan; such designations are
revocable. Each Beneficiary will receive his or her portion of
the Participant's Deferred Stock Benefit in a lump sum on
February 15 of the year following the year of the
Participant's death.
(d) Any Company common stock distributed pursuant to the Plan
shall have been acquired by an "agent independent of the
issuer" (i.e., the Company) within the meaning of 17 CFR
240.10b-18, as such regulation or any successor is in effect
<PAGE>
from time to time. Such acquisitions may be effected in all
cases on the open market or, in the event that the Company
makes available newly issued common stock, directly from the
Company, provided that such common stock has been registered
with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or any successor thereto
at the time such purchase is made or an exemption from such
registration requirement is, in the opinion of counsel to the
Company, available.
(e) No Participant or Beneficiary shall have any rights as a
shareholder of the Company by virtue of having any interest
under this Plan until, and to the extent that, shares of
Company common stock are issued in satisfaction of a Deferred
Stock Benefit payable in accordance with this Plan.
8. HARDSHIP DISTRIBUTIONS.
(a) At the Administrator's sole discretion and at the request of a
Participant before or after the Participant's Termination, or
at the request of any of the Participant's Beneficiaries after
the Participant's death, the Administrator may accelerate and
pay all or part of any amount attributable to a Participant's
vested Deferred Stock Benefits under this Plan. Accelerated
distributions may be allowed only in the event of a financial
emergency beyond the Participant's or Beneficiary's control
and only if disallowance of a distribution would create a
severe hardship for the Participant or Beneficiary. An
accelerated distribution must be limited to the amount
determined by the Administrator to be necessary to satisfy the
financial emergency.
(b) For purposes of an accelerated distribution under this
section, the value of a Deferred Stock Benefit is determined
by the value of the Participant's Account at the end of the
month preceding the date of distribution.
(c) A distribution under this section is in lieu of that portion
of the Deferred Stock Benefit that would have been paid
otherwise. A Deferred Stock Benefit is adjusted for a
distribution under this section by reducing the value of the
Participant's Account by the amount of the distribution.
9. COMPANY'S OBLIGATION.
(a) The Plan is unfunded. A Deferred Stock Benefit is at all times
a mere contractual obligation of the Company. A Participant
and his or her Beneficiaries have no right, title, or interest
in the Deferred Stock Benefits or any claim against them other
than as general unsecured creditors of the Company. The
Company will not segregate any funds or assets for Deferred
Stock Benefits nor issue any notes or security for the payment
of any Deferred Stock Benefit.
<PAGE>
(b) Subject to Plan subsection 9(c), the Company may establish a
grantor trust and transfer to that trust shares of Company
common stock or other assets. Trust assets must be invested
in Company common stock for the purpose of measuring the value
of Accounts under the Plan to be distributed as Deferred Stock
Benefits in the form of Company common stock, plus cash in
lieu of fractional shares. The governing trust agreement must
require a separate account to be established for each electing
Participant. The governing trust agreement must also require
that all Company assets held in trust remain at all times
subject to the Company's creditors.
(c) The Company may only contribute to a trustee under a trust
agreement by transferring cash or assets with a fair market
value equal to the value (determined at the nearest month end)
of the related Accounts if the trust agreement contains
provisions sufficient (in the opinion of either the Internal
Revenue Service or counsel selected by the Company) to allow
the Participants to defer income taxation on their Deferred
Stock Benefits until they are distributed according to this
Plan and provisions sufficient (in the opinion of counsel
selected by the Company) to exempt the Plan and the trust from
sections 10(b) and 16(b) of the Securities Exchange Act of
1934 and applicable rules and regulations. If the Internal
Revenue Service refuses to give the required opinion on such a
trust, and if counsel selected by the Company is the opinion
that no such trust can be created, Plan subsection 9(b) will
not become effective.
10. CONTROL BY PARTICIPANT. A Participant has no control over Deferred
Stock Benefits except according to his or her Deferral Election Forms,
his or her Distribution Election Forms, and his or her Beneficiary
Designation Forms.
11. CLAIMS AGAINST PARTICIPANT'S DEFERRED STOCK BENEFIT. No Account under
this Plan is subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt
to do so is void. Deferred Stock Benefits are not subject to attachment
or legal process for a Participant's debts or other obligations.
Nothing contained in this Plan gives any Participant any interest,
lien, or claim against any specific asset of the Company. A Participant
or his or her Beneficiary has no rights to receive Deferred Stock
Benefits other than as a general creditor of the Company.
12. AMENDMENT OR TERMINATION. Except as otherwise provided in this
section, this Plan may be altered, amended, suspended, or terminated at
any time by the Board. No amendment will become effective without the
approval of the Company's shareholders if the amendment (i) materially
increases the number of shares of Company common stock that may be
issued under the Plan, (ii) materially increases the benefits accruing
to Participants, under the Plan, or (iii) materially changes the class
of individuals who may participate in the Plan. The Plan may not be
amended more than once in any six month period other than to comply
with changes in the Internal Revenue Code or the Employee
<PAGE>
Retirement Income Security Act of 1974. Except for a termination of the
Plan caused by the determination of the Board that the laws upon which
the Plan is based have changed in a manner that negates the Plan's
objectives, the Board may not alter, amend, suspend, or terminate this
Plan without the majority consent of all Directors who are Participants
if that action would result either in a distribution of all Deferred
Stock Benefits in any manner other than as provided in this Plan or
that would result in immediate taxation of Deferred Stock Benefits to
Participants. Notwithstanding the preceding sentence, if any amendment
to the Plan, subsequent to the date the Plan becomes effective,
adversely affects Deferred Stock Benefits hereunder, after the
effective date of any such amendment, and the Internal Revenue Service
declines to rule favorably on any such amendment or to rule favorably
only if the Board makes amendments to the Plan not acceptable to the
Board, the Board, in its sole discretion, may accelerate the
distribution of part or all amounts attributable to affected Deferred
Stock Benefits due Participants and Beneficiaries hereunder.
13. NOTICES. Notices and elections under this Plan must be in writing. A
notice or election is deemed delivered if it is delivered personally or
if it is mailed by registered or certified mail to the person at his or
her last known business address.
14. WAIVER. The waiver of a breach of any provision in this Plan does not
operate as and may not be construed as a waiver of any later breach.
15. CONSTRUCTION. This Plan is created, adopted, and maintained according
to the laws of the Commonwealth of Virginia (except its choice-of-law
rules). It is governed by those laws in all respects except to the
extent that the laws of the United States apply to the Plan. Headings
and captions are only for convenience; they do not have substantive
meaning. If a provision of this Plan is not valid or not enforceable,
that fact in no way affects the validity or enforceability of any other
provision. Use of one gender includes all, and the singular and plural
include each other.
16. EFFECTIVENESS. The Board adopted this Plan subject to the approval of
the Company's shareholders at the 1996 annual meeting of the Company.
If the requisite shareholder approval is not obtained (i) this Plan
shall be deemed void ab initio, (ii) amounts credited -- to
Participants' Accounts shall be forfeited and (iii) deferred
Compensation (and any earnings credited under subsection 6(b)) shall be
paid to participants as soon as practicable after such meeting or
credited to Participants' accounts under the Company's Deferred
Compensation Plan for Outside Directors in accordance with each
Participant's written instructions delivered to the Administrator
before the Effective Date.
<PAGE>
IN WITNESS WHEREOF, Crestar Financial Corporation has caused
this Plan to be executed by its duly authorized officer effective as of January
1, 1996.
CRESTAR FINANCIAL CORPORATION
By:____________________________
Title:_________________________
Exhibit 10(ap)
CRESTAR FINANCIAL CORPORATION
BOARD OF DIRECTORS MEETING
FRIDAY, DECEMBER 20, 1996
RESOLUTIONS AMENDING THE DIRECTORS' EQUITY PROGRAM:
RESOLVED, that the Board of Directors of Crestar Financial Corporation
hereby amends Section 2(k) of the Crestar Financial Corporation
Directors' Equity Program to provide as follows:
DIRECTOR MEANS A DULY ELECTED OR APPOINTED MEMBER OF THE BOARD WHO IS
NOT AN EMPLOYEE OF THE COMPANY OR AN AFFILIATE OR SUBSIDIARY OF THE
COMPANY, EXCLUDING ANY MEMBER OF THE BOARD WHO IS REQUIRED TO TRANSFER,
ASSIGN OR PAY HIS OR HER RETAINER FEE TO THE MEMBER'S EMPLOYER OR FIRM.
FINALLY RESOLVED, that the appropriate officers of the Corporation are
hereby authorized and directed to take such actions and to execute such
documents as they deem necessary or appropriate to implement the
foregoing resolution, all without the necessity of further action by
this Board.
Exhibit 10(aq)
CRESTAR FINANCIAL CORPORATION
CRESTAR/CITIZENS STOCK OPTION PLAN
Introduction
Effective December 31, 1996, Citizens Bancorp (Citizens)
merged with and into Crestar Financial Corporation (Crestar). The terms of that
transaction are set forth in an Agreement and Plan of Reorganization (the
Reorganization Agreement) between Citizens and Crestar.
Options to purchase common stock of Citizens (the Citizens
Options) were granted prior to December 31, 1996, pursuant to the terms of the
Citizens Bancorp 1986 Incentive Stock Option Plan and the Citizens Bancorp 1988
Stock Option Plan. The Citizens Options were surrendered to Citizens for
cancellation, without receipt of consideration from Citizens, prior to the
effectiveness of the merger with and into Crestar.
The Reorganization Agreement provides that Crestar will grant
options (the Crestar Options) to purchase Crestar common stock to those persons
who surrendered Citizens Options. The number of shares covered by the Crestar
Options and the option price per share will be the same as under the Citizens
Options, as adjusted in accordance with the Reorganization Agreement. The
remaining terms of the Crestar Options will be the same as the terms of the
Citizens Options.
Crestar Financial Corporation adopted this Crestar/Citizens
Stock Option Plan (the Plan) on December 20, 1996. The Plan is comprised of two
distinct Chapters.
Chapter I of the Plan pertains to Crestar Options that were
granted in substitution of Citizens Options that had been granted under the
Citizens Bancorp 1986 Incentive Stock Option Plan. Those Crestar Options will be
governed by Chapter I and the terms of the original Citizens Option agreement,
as adjusted by the Reorganization Agreement.
Chapter II of the Plan pertains to Crestar Financial
Corporation Options that were granted in substitution of Citizens Options that
had been granted under the Citizens Bancorp 1988 Stock Option Plan. Those
Crestar Options will be governed by Chapter II and the terms of the original
Citizens Option agreement, as adjusted by the Reorganization Agreement.
Any reference in Chapters I and II to Citizens shall be
interpreted as a reference to Crestar. Any reference in Chapters I and II to the
common stock of Citizens shall be interpreted as a reference to the common stock
of Crestar.
<PAGE>
CRESTAR/CITIZENS STOCK OPTION PLAN
CHAPTER II
Relating to Crestar Options Granted to Individuals Who Surrendered
Citizens Options Granted Under the Citizens Bancorp 1986 Incentive Stock Option
Plan.
<PAGE>
CITIZENS BANCORP
1986 INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan
This 1986 Incentive Stock Option Plan, as amended (hereinafter called
the "Plan") for CITIZENS BANCORP (hereinafter called the "Corporation") is
intended to advance the interests of the Corporation by providing senior
officers and other key employees who have substantial responsibility for the
direction and management of the Corporation with additional incentive for them
to promote the success of the business, to increase their proprietary interest
in the success of the Corporation, and to encourage them to remain in its
employ. The above aims will be effectuated through the granting of certain stock
options. It is intended that options issued under the Plan and designated by the
Board of Directors under Section 3(b) will qualify as incentive stock options
(hereinafter called "ISOs") under Section 422A of the Internal Revenue Code of
1986, as amended (the "Code") and the terms of the Plan shall be interpreted in
accordance with this intention. The Plan, as amended, shall only be applicable
to options granted hereunder on or after January 1, 1987.
2. Administration of the Plan
Subject to the provisions of the Plan, the Board of Directors (the
"Board") or a duly appointed committee thereof shall have plenary authority, in
its discretion: (a) to determine the employees of the Corporation and its
subsidiaries (from among the class of employees eligible under Section 3 to
receive options under the Plan) to whom options shall be granted; (b) to
determine the time or times at which options shall be granted; (c) to determine
the option price of the shares subject to each option, which price shall not be
less than the minimum specified in Section 5; (d) to determine (subject to
Section 7) the time or times when each option shall become exercisable and the
duration of the exercise period; (e) to interpret the Plan and to prescribe,
amend, and rescind rules and regulations relating to it; and (f) to make all
other action which the Board shall deem necessary or advisable for the
administration of the Plan.
3. Eligibility and Limitations on Options Granted Under the Plan
(a) Options will be granted only to persons who are key employees of
the Corporation or a subsidiary corporation of the Corporation who agree, in
writing, to remain in the employ of, and render services to, the Corporation or
a subsidiary corporation of the Corporation for a period of at least two (2)
years from the date of the granting of the option. The term "key employee" shall
include senior officers, directors and other executives of the Corporation or a
subsidiary corporation of the Corporation. The term, "subsidiary corporation"
shall, for the purposes of the Plan, be defined in the same manner as such term
is defined in Section 425(f) of the Internal Revenue Code.
(b) At the time of the grant of each option under this Plan, the Board
shall determine whether such option is to be designated as an ISO. If an option
is so designated as an ISO, then
<PAGE>
the provisions of Section 7(d) of this Plan shall be made applicable to such
option. In addition, no option granted to any employee, who at the time of such
grant, owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Corporation or any of its subsidiaries, may
be designated as an ISO, unless at the time of such grant, the option price is
fixed at not less than 110 percent of the fair market value of the stock subject
to the option, and exercise of such option is prohibited by its terms after the
expiration of five (5) years from the date such option is granted.
(c) The aggregate fair market value (determined at the time an ISO is
granted) of the Common Stock with respect to which all ISOs are exercisable for
the first time by an optionee during any calendar year shall not exceed One
Hundred Thousand Dollars ($100,000).
4. Shares of Stock Subject to the Plan
There will be reserved for use upon the exercise of options to be
granted from time to time under the Plan (subject to the provisions of Section
13) an aggregate of 100,000 shares of the common stock of the Corporation, par
value of $2.50 per share (the "Common Stock"), which shares may be in whole or
in part, as the Board shall from time to time determine, authorized but unissued
shares or issued shares that shall have been reacquired by the Corporation. Any
shares of Common Stock subject to an option under the Plan, which option for any
reason expires or is terminated unexercised as to such shares, may again be
subjected to an option under the Plan.
5. Option Price
The exercise price of each option under the Plan shall be determined by
the Board at the time the option is granted, but in no event shall such exercise
price be less than one hundred percent (100%) of the fair market value of the
Common Stock on the date of grant.
The term "fair market value" shall be defined as the average of the
high and low sale prices of the Common Stock as reported on the NASDAQ National
Market System on the date of grant of the option, or, if there are no sales on
such date, on the most recent date upon which such stock was traded.
6. Dilution or Other Adjustment
(a) In the event that additional shares of Common Stock are issued
pursuant to a stock split or a stock dividend, the number of shares of Common
Stock then covered by each outstanding option granted hereunder shall be
increased proportionately with no increase in the total exercise price of the
shares then so covered, and the number of shares of Common Stock reserved for
the purpose of the Plan shall be increased by the same proportion. In the event
that the shares of Common Stock of the Corporation from time to time issued and
outstanding are reduced by a combination of shares, the number of shares of
Common Stock then covered by each outstanding option granted hereunder shall be
reduced proportionately with no reduction
<PAGE>
in the total exercise price of the shares then so covered, and the number of
shares of Common Stock reserved for the purposes of the Plan shall be reduced by
the same proportion.
(b) In the event that the Corporation transfers assets to another
corporation and distributes the stock of such other corporation without the
surrender of Common Stock of the Corporation, and if such distribution is not
taxable as a dividend and no gain or loss is recognized by reason of Section 355
of the Internal Revenue Code of 1986, or some similar section, then the total
purchase price of the shares then covered by each outstanding option shall be
reduced by an amount which bears the same ratio to the total purchase price then
in effect as the market value of the stock distributed in respect of a share of
Common Stock, immediately following the distribution, bears to the aggregate of
the market value at such time of a share of Common Stock and the stock
distributed in respect thereof.
(c) For purposes of this Section 5(g)(ii) the term "option shares"
shall mean the number of shares of Common Stock on which an option under the
Plan originally was granted, as from time to time adjusted pursuant to Section
5(g)(i). In the event that shares of Common Stock are issued to holders of the
Common Stock upon the exercise of any rights distributed or issued to such
holders to purchase shares of Common Stock at a price that is less than the
then- fair market value of the Common Stock, the number of shares of Common
Stock subject to the Plan and to an option and the exercise price of the option
shall be adjusted in the following manner:
(A) The number of shares of Common Stock subject to the
option shall be adjusted to equal the number of
option shares immediately before such rights become
exercisable plus the total number of shares of Common
Stock that would be issuable upon the exercise in
full of all such rights to which the optionee would
be entitled if he were the holder of record of the
option shares as of the record date for such rights.
(B) The per share exercise price of the option shall be
adjusted to equal the total exercise price of the
option (option shares times exercise price)
immediately before any such rights became exercisable
plus the total exercise price of all such rights to
which the optionee would be entitled if he were the
holder of record of the option shares as of the
record date for any such rights, divided by the
number of option shares, as adjusted in Section
5(g)(ii)(A).
(C) The number of shares of Common Stock subject to the
Plan shall be adjusted to equal the number of shares
subject to the Plan immediately before such rights
became exercisable (for purposes of this Section
5(g)(ii), the "Plan shares") plus the product of the
Plan shares multiplied by the number of shares of
Common Stock issuable upon the exercise of one such
right.
(d) All adjustments pursuant to this Section 6 shall be made by
the Board, whose determination shall be final and binding upon optionee. No
fractional shares shall be issued, and
<PAGE>
any fractional shares resulting from the computations pursuant to this Section 6
shall be eliminated from the respective option. No adjustment shall be made for
cash dividends or the issuance to stockholders of rights to subscribe for
additional Common Stock or other securities.
7. Period of Option and Certain Limitations on Right to Exercise
(a) All options issued under the Plan shall be for such period as the
Board shall determine, but in no event for more than ten (10) years from the
date of grant thereof.
(b) The period of the option, once it is granted, may be reduced only
as provided for in Section 9 in connection with the termination of employment of
the optionee.
(c) The Board of Directors may in its discretion provide that an option
granted under the Plan may be exercised in whole at any time or in part from
time to time during any period or periods of the term of the option. Except as
otherwise provided herein or in an option agreement hereunder, any option
granted under the Plan may be exercised in whole at any time or in part from
time to time during its term. Notwithstanding the foregoing and subject to
Section 9 hereof, no option may be exercised unless the optionee is at the time
of such exercise in the employ of the Corporation or of a subsidiary corporation
of the Corporation and shall have been continuously so employed since the grant
of his option. Absence or leave approved by the management of the Corporation
shall not be considered an interruption of employment for any purpose under the
Plan.
(d) The exercise of any option shall also be contingent upon receipt by
the Corporation of cash or certified bank check drawn to its order, shares of
the Corporation's Common Stock, or any combination of the foregoing in an amount
equal to the aggregate exercise price of the shares being purchased. For
purposes of this paragraph, shares of the Corporation's Common Stock that are
delivered in payment of the option price shall be valued at their fair market
value determined as set forth in Section 5 as of the date of the exercise of the
option. However, in order to facilitate the accumulation of funds to enable
employees to exercise their option, they will have the right, if they so elect,
to direct the Corporation or a subsidiary corporation of the Corporation to
withhold from their compensation regular amounts to be applied toward the
exercise of the options. Funds credited to the stock option accounts will be
under the control of the Corporation until applied to the payment of the
exercise price at the direction of the employee or returned to the employee in
the event the amount is not used for purchase of shares under option, and all
funds received or held by the Corporation under the Plan may be used for any
corporate purpose, and no interest shall be payable to a participant on account
of any amounts so held. Such amounts may be withdrawn by the employee at any
time, in whole or in part, for any reason.
(e) No optionee or his legal representative, legatees, or distributees,
as the case may be, will be, or will be deemed to be, a holder of any Common
Stock subject to an option unless and until certificates for such shares are
issued to him or them under the terms of the Plan. No adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
<PAGE>
(f) Exercise of an option in any manner shall result in a decrease in
the number of shares of Common Stock which thereafter may be available under the
Plan by the number of shares as to which the option is exercised.
(g) Upon exercise of an option not designated as an ISO pursuant to
Section 3(b) of the Plan, the optionee shall remit to the Corporation at the
time of exercise the amount of any taxes required to be withheld by the
Corporation under federal, state or local law as result of the exercise of such
option. Failure to remit the amount of any such taxes at the time of exercise
shall constitute an authorization by the optionee for the Corporation to
withhold the amount of such taxes from any regular cash compensation payable to
the optionee.
8. Assignability
Each option granted under this Plan shall be transferable only by will
or by the laws of descent and distribution and shall be exercisable, during his
lifetime, only by the employee to whom the option is granted. Except as
permitted by the preceding sentence, no option granted under the Plan or any of
the rights and privileges thereby conferred shall be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and no such option, right, or privilege shall be subject to execution,
attachment, or similar process. Upon any attempt so to transfer, assign, pledge,
hypothecate, or otherwise dispose of the option, or of any right or privilege
conferred thereby, contrary to the provisions thereof, or upon the levy of any
attachment or similar process upon such option, right or privilege, the option
and such rights and privileges shall immediately become null and void.
9. Termination of Employment
(a) In the event that an optionee ceases to be an employee of the
Corporation due to death or Disability, all of the optionee's options shall
immediately become fully vested and exercisable and shall remain so for a period
of one (1) year from the date of termination of employment, but in no event
after their respective expiration dates.
(b) In the event that an optionee ceases to be an employee of the
Corporation as a result of Retirement, all of the optionee's options that were
fully vested and exercisable on the date of termination of employment shall
remain fully vested and exercisable (i) for a period of three (3) months from
the date of termination of employment with respect to an ISO or (ii) until their
respective termination dates, with respect to all other options. All of the
optionee's options that were not fully vested and exercisable on such date shall
terminate immediately.
(c) In the case of an option that was not designated as an ISO under
Section 3(b), if the optionee voluntarily ceases to be an officer or employee of
the Corporation for any Good Reason, other than through Retirement, with one (1)
year after a Change in Control, or in the event an optionee involuntarily ceases
to be an officer or employee of the Corporation for any reason other than death,
Disability or Cause within two (2) years after a Change in Control, all of the
optionee's options that were fully vested and exercisable on the date of such
termination of service shall remain fully vested and exercisable for a period of
three (3) years from the date of such termination of service as an officer or of
employment, but in no event after their
<PAGE>
respective expiration dates. All of the Optionee's options that were not fully
vested and exercisable on the date of such termination shall continue to accrue
to vest in accordance with their respective terms.
(d) In the event that an optionee ceases to be an employee of the
Corporation for any other reason, all of the optionee's options shall terminate
immediately.
10. Listing and Registration of Shares
Each option shall be subject to the requirement that if at any time the
Board shall determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities exchange or
under any state or federal law or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the granting of such option or the issuance or purchase of shares
thereunder, such option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board.
11. Certain Definitions
For purposes of the Plan, the following terms shall have the meanings
set forth below:
(a) "Cause" shall mean the occurrence of one of the following acts;
(i) a conviction of the optionee for a felony or for any
lesser crime or offense than a felony involving the property of the Corporation
or one of its subsidiaries;
(ii) the engaging by the optionee in conduct which has caused
demonstrable and serious injury to the Corporation, monetary or otherwise, as
evidenced by a determination in a binding and final judgment, order or decree of
a court or administrative agency of competent jurisdiction, in effect after
exhaustion or lapse of all rights or appeal, in an action, suit or proceeding,
whether civil, criminal, administrative or investigative; or
(iii) gross neglect of his duties as a director, officer or
employee, gross dereliction of duty or other grave misconduct by the optionee
and failure to cure such situation within thirty (30) days after receipt of
notice hereof from-the President of the Corporation.
(b) "Change in Control" shall mean the occurrence of any one of the
following events:
(i) any "person" (as that term is used in Sections 13(d) and
14(d)of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of twenty-five percent (25%) or more of
the Common Stock; or
<PAGE>
(ii) any person (as defined above) is or becomes the
beneficial owner (as defined above), directly or indirectly, of securities of
Citizens representing forty percent (40%) or more of the combined voting power
of the Corporation's then outstanding securities; or
(iii) the sale by Citizens of all or substantially all of the
capital stock of Citizens Bank of Maryland (formally known as Citizens Bank and
Trust Corporation of Maryland) (the "Bank") owned by it or the sale by Citizens
of substantially all of the assets of the Bank.
(c) "Disability" shall mean a permanent and total disability as defined
by Section 72(m)(7) of the Code or other applicable section of the Code, or any
successor thereto of similar import.
(d) "Good Reason" shall mean the occurrence of any one of the following
events:
(i) without his express written consent, the assignment to the
optionee of any duties materially inconsistent with his position, duties,
responsibilities and status with the Corporation prior to the Change in Control
or a change in his reporting responsibilities;
(ii) the removal of the optionee from, or the failure to
re-elect the optionee to, any of the positions held by him prior to the Change
in Control, except in connection with promotions to higher office or the
termination of employment by reason of his death or for Cause; or
(iii) a failure by the Corporation to provide or pay to the
optionee any of the perquisites, benefits or compensation provided prior to the
Change in Control or a reduction in any of such perquisites, benefits or
compensation, except to the extent that the perquisites or benefits provided to
all other key officers or employees of the Corporation (whichever is applicable
to the optionee) are similarly modified or reduced.
(e) "optionee" shall mean an officer or employee of the Corporation to
whom an option is granted under the Plan.
(f) "Retirement" shall mean the termination of employment of an
individual pursuant to the regular retirement policy of the Corporation upon his
or her attaining age 65 or upon his or her attaining early retirement age and
with the consent of the Corporation.
12. Expiration and Termination of the Plan
Options may be granted under the Plan at any time or from time to time
as long as the total number of shares optioned or purchased under this Plan does
not exceed 100,000 shares of Common Stock (subject to adjustment under Section
6). The Plan may be abandoned or terminated at any time by the Board of
Directors of the Corporation except with respect to any options then outstanding
under the Plan. No option shall be granted pursuant to the Plan after five (5)
years from the effective date of the Plan.
<PAGE>
13. Amendment of the Plan
The Board of Directors may at any time and from time to time modify and
amend the Plan in any respect; provided, however, that no such amendment shall:
(a) increase (except in accordance with Section 6) the maximum number of shares
for which options may be granted under the Plan either in the aggregate or to
any individual employee; or (b) reduce (except in accordance with Section 6) the
minimum exercise price that may be established under the Plan; or (c) change the
provisions relating to the determination of employees to whom options shall be
granted and the number of shares to be covered by such options; or (d) change
the provisions relating to adjustments to be made upon changes in
capitalization. The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his rights under an option
theretofore granted to him.
14. Effective Date of the Plan
This Plan shall become effective on the later of the date of its
adoption by the Board of Directors of the Corporation or its approval by the
vote of the holders of a majority of the outstanding shares of the Common Stock.
This Plan shall not become effective unless such shareholder approval shall be
obtained within twelve (12) months before or after the adoption of the Plan by
the Board of Directors.
Adopted by the Board of Directors: February 19, 1986
Approved by the Stockholders: April 2, 1986
Amended by the Board of Directors: February 15, 1989
Amended by the Board of Directors: November 9, 1993
<PAGE>
CRESTAR/CITIZENS STOCK OPTION PLAN
CHAPTER II
Relating to Crestar Options Granted to Individuals Who Surrendered
Citizens Options Granted Under the Citizens Bancorp 1988 Stock Option Plan.
<PAGE>
CITIZENS BANCORP
1988 STOCK OPTION PLAN
1. Purpose This 1988 Stock Option Plan, as amended (herein the "Plan")
is intended as an employment incentive and to encourage stock ownership by
certain key officers and employees of Citizens Bancorp ("Citizens") and its
subsidiaries (together, the "Corporation") so that they may increase their
proprietary interest in the Corporation's success. In this way, the Corporation
will be assisted in its efforts to attract and retain highly qualified
management personnel.
2. Administration The Plan shall be administered, construed and
interpreted by the Compensation Committee, as appointed by the Board of
Directors of Citizens (herein the "Committee"). The Committee shall consist of
not less than three members of the Board of Directors. The Board of Directors
may from time to time remove members from or add members to the Committee, and
vacancies on the Committee, however caused, shall be filled by the Board of
Directors. No member of the Committee shall be or have been eligible to
participate in the Plan during the period of service on the Committee or during
the twelve months immediately prior to commencement of such service. Subject to
the provisions of the Plan and to the approval of the Board of Directors, the
Committee shall determine:
(a) The officers and employees to whom options shall be granted;
(b) The number of shares on which options shall be granted to each
officer and employee;
(c) The price to be paid for the shares upon the exercise of option;
(d) The termination date of such options; and
(e) All other matters deemed necessary or advisable for the
administration of the Plan.
No member of the Board of Directors or the Committee shall be liable
for any action or determination made in good faith, and the members shall be
entitled to indemnification and reimbursement in the manner provided in
Citizens' Articles of Incorporation or otherwise provided by law. The Committee
shall furnish the Board with copies of all decisions, orders and determinations
made by the Committee.
3. Eligibility The individuals who shall be eligible to participate in
the Plan shall be such key salaried officers and employees of the Corporation as
the President of Citizens shall recommend to the Committee or as the Committee
shall determine from time to time. An optionee may hold more than one (1)
option, but only on the terms and conditions herein set forth.
<PAGE>
4. Stock The stock subject to the options and other provisions of the
Plan shall be shares of Citizens' common stock, par value $2.50 per share, which
is authorized but unissued, or reacquired common stock (the "Common Stock").
Subject to adjustment in accordance with the provisions of Section 5(g) hereof,
the total amount of Common Stock on which options may be granted to persons
under the Plan shall not exceed in the aggregate 750,000 shares.
5. Terms and Conditions of Options Stock Options granted pursuant to
the Plan shall be evidenced by agreements in such form as the Board of Directors
shall, from time to time, approve, which agreements shall in substance include
and comply with and be subject to the following terms and conditions:
(a) Medium and Time of Payment The option price shall be payable in
United States dollars upon the exercise of the option and may be paid
in cash or by certified check, bank draft or money order payable to the
order of the Corporation. The option price may also be paid in the form
of shares of Common Stock already owned by the Optionee, which shall be
valued at the average of the high and low sale prices of the Common
Stock as reported in the NASDAQ National Market System on the date that
the option is exercised (or the most recent date prior to the date of
exercise on which a transaction in the Common Stock was reported in
such system). The "date that the option is exercised" shall be the date
on which the Optionee delivers written notice of exercise of the option
to the Secretary of Citizens.
(b) Number of Shares The option shall state the total number of shares
to which it pertains. No option may be exercised for less than one
hundred (100) shares unless the issue of a lesser number is sufficient
to exhaust the option.
(c) Option Price The option price shall be the fair market value of the
shares of Common Stock on the date of the granting of the option. The
fair market value per share of the Common Stock shall be the average of
the high and low sale prices of the Common Stock as reported in the
NASDAQ National Market System. The "date that the option is granted"
shall be the date on which Citizens issues a letter to the optionee
advising him of the award of such option; provided, however, that the
Optionee shall have no rights under such option until he exercises the
option agreement described in this Section.
(d) Expiration of Options Each option granted under the Plan shall
expire not more than ten (10) years from the date such option is
granted, as determined by the Committee.
(e) Date of Exercise The Committee may in its discretion provide that
an option may be exercised in whole or in part during any period or
periods of time specified by the Committee. Except as herein otherwise
provided, any option granted hereunder may be exercised in whole at any
time, or in part from time to time, during its term.
<PAGE>
(f) Termination of Employment
(i) In the event an Optionee ceases to be an employee of the
Corporation due to Death or Disability, all of the Optionee's
options shall immediately become fully vested and exercisable
and shall remain so for a period of one (1) year from the date
of termination of employment, but in no event after their
respective expiration dates.
(ii) In the event an Optionee ceases to be an employee of the
Corporation as a result of Retirement, all of the Optionee's
options that were fully vested and exercisable on the date of
termination of employment shall remain fully vested and
exercisable until their respective termination dates. All of
the Optionee's options that were not fully vested and
exercisable on such date shall terminate immediately.
(iii) In the event an Optionee voluntarily ceases to be an
officer or employee of the Corporation for any Good Reason,
other than through Retirement, within one (1) year after a
Change in Control, or in the event an Optionee involuntarily
ceases to be an officer or employee of the Corporation for any
reason other than Death, Disability or Cause within two (2)
years after a Change of Control, all of the Optionee's options
that fully vested and exercisable on the date of such
termination shall remain fully vested and exercisable for a
period of three (3) years from the date of such termination of
service as an officer or of employment, but in no event after
their respective expiration dates. All of the Optionee's
options that were not fully vested and exercisable on the date
of such termination shall continue to accrue to vest in
accordance with their respective terms.
(iv) In the event an Optionee ceases to be an employee of the
Corporation for any other reason, all of the Optionee's
options shall be terminated immediately.
(g) Adjustments on Changes in Stock
(i) The aggregate number of shares of Common Stock on which
options may be granted to persons eligible to participate in
the Plan, the number of shares thereof covered by each
outstanding option and the price per share thereof in each
such option, shall, subject to any required action by the
stockholders of Citizens, be proportionately adjusted by the
Committee for any increase or decrease in the number of issued
shares of Common Stock resulting from the subdivision or
consolidation of shares or other capital adjustment, or the
payment of a stock dividend, or other increase or decrease in
such shares, effected without receipt of consideration by
citizens; provided, however, that no such adjustment shall be
made unless and until the aggregate effect of all such
increases and decreases accruing after the effective date of
the Plan shall have increased or decreased the number of
issued shares of Common Stock by five percent (5%) or more;
and provided, further, that any fractional shares resulting
from any such adjustment
<PAGE>
shall be eliminated. Any such determination by the Committee
shall be conclusive.
(ii) For purposes of this Section 5(g)(ii), the term "option
shares" shall mean the number of shares of Common Stock on
which an option under the Plan originally was granted, as from
time to time adjusted pursuant to Section 5(g)(i). In the
event that shares of Common Stock are issued to holders of the
Common Stock upon the exercise of any rights distributed or
issued to such holders to purchase shares of Common Stock at a
price that is less than the then-fair market value of the
Common Stock, the number of shares of Common Stock subject to
the Plan and to an option and the exercise price of the option
shall be adjusted in the following manner:
(A) The number of shares of Common Stock subject to
the option shall be adjusted to equal the number of
option shares immediately before such rights became
exercisable plus the total number of shares of Common
Stock that would be issuable upon the exercise in
full of all such rights to which the Optionee would
be entitled if he were the holder of record of the
option shares as of the record date for such rights.
(B) The per share exercise price of the option shall
be adjusted to equal the total exercise price of the
option (option shares times exercise price)
immediately before any such rights became exercisable
plus the total exercise price of all such rights to
which the Optionee would be entitled if he were the
holder of record Of the option shares as of the
record date for any such rights, divided by the
number of option shares, as adjusted in Section 5(g)
(ii) (A).
(C) The number of shares of Common Stock subject to
the Plan shall be adjusted to equal the number of
shares subject to the Plan immediately before such
rights became exercisable (for purposes of this
Section 5(g)(ii), the "Plan shares") plus the product
of the Plan shares multiplied by the number of shares
of Common Stock issuable upon the exercise of one
such right.
(iii) Except as hereinbefore expressly provided, the Optionee
shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment
of any stock dividend or other increase or decrease in the
number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off
of assets or stock of another corporation; and any issue by
Citizens of shares of stock of any class or securities
convertible into shares of stock of any class shall not
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock
subject to the option.
<PAGE>
(iv) The grant of an option pursuant to the Plan shall not
affect in any way the right or power of Citizens to make
adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge, consolidate,
dissolve or liquidate or to transfer all or part of its
business or assets.
(h) Assignability No option shall be assignable or transferable except
by will or by the laws of descent and distribution. During the lifetime of an
Optionee, an option shall be exercisable only by him.
(i) Agreement by Optionee If, at the time of the exercise of any
option, it is necessary or desirable that the Optionee exercising the option
shall agree that he or she will purchase the shares that are subject to the
option for investment and not with any present intention to resell the same, the
Optionee will, at the request of the Committee, execute and deliver to Citizens
an agreement to such effect.
(j) Tax Withholding The Optionee may remit to Citizens at the time of
exercise of an option any taxes required to be withheld by Citizens under
federal, state or local law as a result of the exercise of such option.
Alternatively, the Optionee may (i) direct Citizens to withhold from the shares
to be received upon such exercise the number of shares sufficient to satisfy the
applicable tax withholding requirements or (ii) deliver shares already owned by
the Optionee in satisfaction of the tax withholding requirements. In either
event, such shares will be valued at the fair market value (as defined in
Section 5(a)) of the Common Stock on the date of exercise of the option. If the
Optionee does not remit such taxes at the time of exercise of an option, the
Optionee will be deemed to have authorized the Corporation to withhold such
taxes in accordance with applicable law from any regular cash compensation
payable to him.
(k) Other Conditions The option agreement authorized under the Plan may
contain such other provisions as the Committee shall deem advisable.
6. Certain Definitions For purposes of the Plan, the following terms
shall have the meanings set forth below:
(a) "Cause" shall mean the occurrence of one of the following acts:
(i) A conviction of the Optionee for a felony or for any
lesser crime or offense than a felony involving the property
of the Corporation or one of is Subsidiaries;
(ii) The engaging by the Optionee in conduct which has caused
demonstrable and serious injury to the Corporation, monetary
or otherwise, as evidenced by a determination in a binding and
final judgment, order or decree of a court or administrative
agency of competent jurisdiction, in effect after exhaustion
or lapse of all rights of appeal, in an action, suit or
proceeding, whether civil, criminal, administrative or
investigative; or
(iii) Gross neglect of his duties as a director, officer or
employee, gross dereliction of duty or other grave misconduct
by the Optionee and failure to cure
<PAGE>
such situation within thirty (30) days after receipt of notice
thereof from the President of Citizens.
(b) "Change in Control" shall mean the occurrence of any one of the
following events:
(i) any "person" (as that term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act")), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
twenty-five percent (25%) or more of the Common Stock; or
(ii) any "person", as described above, is or becomes the
"beneficial owner", directly or indirectly, of securities of
Citizens representing forty percent (40%) or more of the
combined voting power of the Corporation's then outstanding
securities; or
(iii) the sale by Citizens of all or substantially all of the
capital stock of Citizens Bank of Maryland (formally known as
Citizens Bank and Trust Company of Maryland) (the "Bank")
owned by it or the sale by Citizens of substantially all of
the assets of the Bank.
(c) "Disability" shall mean a permanent and total disability as defined
by Section 72(m)(7) of the Internal Revenue Code of 1986, as from time
to time amended, or any successor thereto of similar import.
(d) "Good Reason" shall mean the occurrence of any one of the following
events:
(i) without his express written consent, the assignment to the
Optionee of any duties materially inconsistent with his
position, duties, responsibilities and status with the
Corporation prior to the Change in Control or a change in his
reporting responsibilities;
(ii) the removal of the Optionee from, or the failure to
reelect the Optionee to, any of the positions held by him
prior to the Change in Control, except in connection with
promotions to higher office or the termination of employment
by reason of his death or for Cause; or
(iii) a failure by the Corporation to provide or pay to the
Optionee any of the perquisites, benefits or compensation
provided prior to the Change in Control or a reduction in any
of such perquisites, benefits or compensation, except to the
extent that the perquisites or benefits provided to all other
key officers or employees of the Corporation (whichever is
applicable to the Optionee) are similarly modified or reduced.
(e) "Optionee" shall mean an officer or employee of the Corporation to
whom an option is granted under the Plan.
<PAGE>
(f) "Retirement" shall mean the termination of employment of an
individual pursuant to the regular retirement policy of the Corporation
upon his or her attaining age 65 or upon his or her attaining early
retirement age and with the consent of the Corporation.
7. Modification of Options Subject to the terms and conditions and
within the limitations of the Plan, the Board of Directors may modify, extend or
renew outstanding options (to the extent not theretofore exercised) and
authorize the granting of new options in substitution therefor; provided,
however, that any such modifications shall be limited to those which are not
adverse to the interests of the Optionee or are necessary to cause the Plan or
options to comply with any applicable legal requirements.
8. Amendment of the Plan The Board of Directors may, from time to time,
with respect to any shares reserved under the Plan but not subject to options,
revise or amend the Plan in any respect. However, the Board of Directors may
not, without stockholder approval, (a) increase the number of shares of Common
Stock which may be reserved for issuance under the Plan, except as provided in
Paragraph 5(g) hereof, (b) fix the option price at less than the fair market
value of the Common Stock on the date the option is granted, or (c) change the
provisions relating to the administration of the Plan by a Committee consisting
of directors of Citizens not eligible to receive options.
9. Termination The Board of Directors may terminate the Plan at any
time, and no option shall be granted thereafter. Such termination shall not
affect the validity of any option agreement then outstanding.
10. Effective Date The Plan shall become effective when it is
approved by the holders of a majority of the Common Stock.
o Adopted by the Board of Directors on December 16, 1987.
o Approved by the Stockholders on April 6, 1988.
o Amended by the Board of Directors on February 15, 1989.
o Amended Plan approved by Stockholders on May 9, 1990.
o Amended by the Board of Directors on December 10, 1992.
o Amended Plan approved by Stockholders on May 12, 1993.
o Amended by the Board of Directors on November 9, 1993.
Exhibit 10(ar)
CITIZEN'S BANK OF MARYLAND
UNFUNDED DEFERRED COMPENSATION MASTER PLAN
1. PURPOSE:
The purpose of this Unfunded Deferred Compensation Master Plan (the
"Plan") is to enable Participants (as defined in Section 2) to defer receipt of
all or any portion of any Incentive Awards by so electing in accordance with the
provisions of this Plan. An "Incentive Award" is a bonus awarded to a
Participant pursuant to an Executive Compensation Incentive Plan (the "Incentive
Plan") which may be sponsored by Citizens Bank of Maryland (the "Company") from
time to time.
2. ELIGIBILITY:
Only those individuals who are senior department heads at the
Company and who are included in the Executive Compensation Incentive Plan are
eligible to participate in this Plan. Any such eligible individual who executes
and delivers a valid Election to Defer (in the form attached as "Exhibit A") is
referred to as a "Participant."
3. PARTICIPATION:
(a) Each year in which an Incentive Plan is sponsored by the
Company, each eligible employee shall have the right to
irrevocably elect to defer receipt of all or any portion
of his Incentive Award for that year, if any, but not
less than $5,000 (the "Deferred Compensation Amount").
(b) A separate election must be filed for each year in which
an Incentive Plan is sponsored by the Company. A valid
Election to Defer must be completed and filed by the
Participant with the Plan Committee before any amounts
become payable to the Participant under the Incentive
Plan to which the Election to Defer applies and nor
later than December 31 of the calendar year to which the
Incentive Plan applies.
(c) A valid Election to Defer shall become effective on the
date it is received by the Plan Committee.
<PAGE>
4. DEFERRED COMPENSATION ACCOUNT:
(a) A separate general ledger account (the "Account") shall
be established on the Company's books for each year in
which a Participant has filed a valid Election to Defer.
The Participant's Deferred Compensation Amount for such
year shall be credited to the Participant's Account as
of the date the Incentive Award to which the
Participant's Election to Defer applies would otherwise
have been payable to the Participant (the "Deferral
Date"). Each Participant's Accounts shall be increased
as provided in Sections 4(b) and (c). The Accounts shall
be for bookkeeping purposes only. Title to and
beneficial ownership of the Accounts shall remain in the
Company.
(b) Each separate Account shall be increased by the Annual
Rate (as hereinafter defined) applicable to that
Account, computed on the basis of a 365-day year and
compounded quarterly. The "Annual Rate" shall equal the
Index Rate (as hereinafter defined) plus fifty basis
points. The "Index Rate" shall be determined separately
for each Account and shall equal the yield, as of the
Deferral Date applicable to the Account, on United
States Treasury Securities having a maturity equal to
the Account's Total Term (as hereinafter defined). Such
yield for United States Treasury Securities shall be
determined from the Federal Reserve Statistical Release
Form H.15 (519) (the "Release") based on the appropriate
term adjusted to a constant maturity. The "Total Term"
of an Account shall equal the sum of the Deferral Term
(as hereinafter defined) plus the length of the Payout
Period (as hereinafter defined). Notwithstanding the
foregoing, if the Total Term of an Account exceeds five
years, the initial Index Rate applicable to that Account
shall equal the yield as of the Deferral Date applicable
to United States Treasury Securities having a maturity
of five years as reported in the Release. The Index Rate
shall thereafter be changed on each fifth anniversary of
the Deferral Date to equal the yield for United States
Treasury Securities having a maturity of the lesser of
five years or the remaining amount of the Total Term.
The "Deferral Term" shall be the period beginning on the
Deferral Date applicable to the Account and ending on
the Commencement Dare (as defined in Section 5(a)). The
"Payout Period" shall be the period beginning on the
Commencement Date and ending on the date the final
distribution of the Account balance is to be made, as
specified in Paragraph III of the Election to Defer.
(c) In the event the Total Term is other than a period for
which the Release contains rate information, the yield
to be used in calculating the Index Rate shall be
determined by interpolation of yields set forth in the
Release for United States Treasury Securities. In the
absence of manifest error, the Index Rate as determined
by the Company shall be deemed presumptively correct. If
<PAGE>
United States Treasury Securities cease to be published
as of a readjustment date, the Company, in its sole
discretion, shall set the Index Rate utilizing, a
comparable interest rate or other source and its
determination shall be final.
(d) If, pursuant to Section 3201 of the Internal Revenue
Code of 1986, as amended, the Company is required to
withhold FICA contributions from a Participant's
Deferred Compensation Amount, such FICA contribution
shall be immediately withdrawn from the Participant's
regular salary.
5. PAYMENTS FROM THE PLAN:
(a) Except as otherwise provided in this Section 5, the
balance in each Account established for a Participant
shall be paid in the manner specified in the
Participant's Election to Defer applicable to that
Account. The date on which payments from a Participant's
Account shall first be made (the "Commencement Date")
shall occur no earlier than the second anniversary date
of the Deferral Date. Subsequent installments, if any,
shall be paid on each anniversary date of the
Commencement Date until the entire Account shall have
been paid in full. The supplemental amounts described in
Sections 4(b) and (c) shall continue to be credited to
the Account until the entire Account is paid in full.
(b) The Company shall withhold from any lump sum or
installment payment due the Participant any required tax
withholding amounts and shall remit the balance to the
Participant.
(c) If a Participant's employment with the Company is
terminated for any reason including death, disability,
voluntary or involuntary termination, prior to the
normal retirement age established by the Company, the
Company, in its sole discretion, may elect to distribute
the entire balance of all of the Participant's Accounts
in one lump sum or to continue the deferral in
accordance with the Participant's Elections to Defer.
(d) If a Participant shall have voluntarily terminated his
employment with the Company prior to the normal
retirement age established by the Company and the
Company elects under Section 5(c) to continue the
deferral, the Annual Rate applicable to such
Participant's Accounts from the date of such voluntary
termination shall be reduced thereafter by 50 basis
points so as to equal the Index Rate as defined in
Sections 4(b) and (c).
<PAGE>
6. DESIGNATION OF BENEFICIARY:
Each Participant shall designate a beneficiary for purposes of
distributions under this Plan for each of the Participant's Accounts. In the
event of a Participant's death, the beneficiary for an Account shall be the
person or persons last designated as such in writing, signed by the Participant
and received by the Plan Committee before the Participant's death, except that
any individual so designated must be surviving at the Participant's death. The
Participant's filing of a valid beneficiary designation for an Account under
this Plan shall be effective when received by the Plan Committee and shall
automatically revoke any prior beneficiary designations filed by the Participant
for that Account. Unless otherwise specified by the Participant as a part of
his beneficiary designation, if there are two or more designated beneficiaries
who are surviving at the Participant's death, they shall share equally, per
capita in the distributions from the applicable Accounts. In the event that no
validly designated beneficiary exists at the Participant's death for any
Accounts, then the Participant's estate shall be the Participant's beneficiary
for such Accounts.
7. COMPANY'S OBLIGATIONS:
(a) The Company's obligations under this Plan shall not be
secured in any manner. No asset of the Company shall be
placed in trust or in escrow or otherwise physically or
legally segregated for the benefit of any Participant.
The eventual payment of Participant Accounts shall not
be secured by the issuance of any negotiable instrument
or other evidence of indebtedness of the Company.
Neither the Participant, his beneficiary, nor any other
person shall be deemed to have any property interest,
legal or equitable, in any specific asset of the
Company, and to the extent that any person acquires any
right to receive payments under this Plan, that right
shall be no greater than, nor shall it have any
preference or priority over, the rights of any unsecured
general creditor of the Company.
(b) The Company makes no representation regarding the tax
consequences to a Participant in the Plan.
8. ALIENATION OR ENCUMBRANCE:
No payments, benefits or rights under this Plan shall be subject in
any manner to anticipation, sale, transfer, assignment, mortgage, pledge,
encumbrance, charge or alienation by the Participant, his beneficiary or any
other person who could or might possibly receive future payments or benefits
under this Plan.
<PAGE>
9. ADMINISTRATION OF PLAN:
(a) The Plan will be administered by an internal committee
designated by the Company from time to time (the "Plan
Committee").
(b) The Plan Committee shall have full power to interpret and
administer the Plan, and the Plan Committee's interpretations
and actions shall be binding and conclusive on all persons for
all purposes. The Plan Committee shall act by vote, or written
consent, of a majority of its members entitled to vote. Neither
the Plan Committee nor any person acting on its behalf shall be
liable to any person for any action taken or omitted in
connection with the interpretation and administration of the
Plan unless attributable to willful misconduct.
(c) If a Participant is also a member of the Plan Committee, such
Participant may not vote or act upon matters relating
specifically to his own participation under the Plan except when
such matters relate to the Plan generally.
10. ADOPTION DATE:
This Plan was adopted by the Company and approved by the Board of
Directors of the Company on October 18, 1991. This Plan completely amends and
restates the Citizens Bank of Maryland Unfunded Deferred Compensation Plan
initially established on December 14, 1988, the Citizens Bank of Maryland
Unfunded Deferred Compensation Plan adopted on September 20, 1989, and the
Citizens Bank of Maryland Unfunded Deferred Compensation Plan adopted on October
17, 1990. Any prior Elections to Defer under those prior plans shall be
effective under this Plan.
11. AMENDMENT AND TERMINATION:
(a) The Company may unilaterally amend this Plan at any time;
provided, however, that no amendment of this Plan may reduce or
modify a Participant's accrued benefit determined as of the
effective date of the amendment without the consent of the
affected Participants. A Participant's accrued benefit as of any
date is the benefit the Participant or his beneficiary would
receive under this Plan if the Participant terminated employment
on that date.
<PAGE>
(b) Notwithstanding any provision in this Plan, the Company reserves
the right, in its sole discretion, to terminate this Plan at any
time, regardless of any tax consequences to Participants which
may result from such termination. Upon such termination, the
entire balance of each participant's Account shall be
immediately distributed to such Participant or his designated
beneficiary.
12. CONSTRUCTION:
This Plan shall be construed according to the laws of Maryland,
except where superseded by Federal law. Use of the masculine gender includes
the feminine gender, use of the singular case includes the plural, and vice
versa. The invalidity of any portion of this Plan shall not invalidate the
remainder of the Plan, which shall continue in full force and effect.
WITNESS: CITIZENS BANK OF MARYLAND
By: (SEAL)
- ------------------------------ -------------------
Title: President
Exhibit 10(as)
EMPLOYMENT AND SEVERANCE AGREEMENT
This EMPLOYMENT AND SEVERANCE AGREEMENT is made and entered into as
of the 23rd day of September, 1987, by and between CITIZENS BANCORP, a Maryland
corporation having its principal place of business in Riverdale, Maryland (the
"Corporation"), CITIZENS BANK & TRUST COMPANY OF MARYLAND, a bank organized
under the laws of the State of Maryland and having its principal place of
business in Riverdale, Maryland (the "Bank") (the Corporation and the Bank are
hereinafter sometimes collectively called "Employer"), and JEFFREY R. SPRINGER,
who resides in Baltimore County, Maryland ("Executive").
WITNESSETH:
WHEREAS, the Corporation and the Bank, a wholly-owned subsidiary of
the Corporation, wish to employ the Executive, effective as of October 26, 1987,
as the Bank's President and Chief Operating Officer; and
WHEREAS, in today's business climate of takeovers and acquisitions,
the Executive may be concerned about the continuation of his employment and his
status and responsibilities in the event of a change in the ownership of either
the Corporation or the Bank, and the Employer is concerned that the Executive
may be approached by others with employment opportunities; and
WHEREAS, the Employer desires to ensure that, in the event a change
in the ownership of either the Corporation or the Bank appears possible, the
Executive will be in a secure position from which he can objectively engage in
any potential deliberations or negotiations respecting such change in ownership
without fear of any direct or implied threat to his future;
WHEREAS, the Executive is willing to leave his present employment
and become employed by the Employer, provided that the Employer agrees to and
carries out the understandings hereinafter set forth; and
WHEREAS, the Executive desires to have the foregoing assurances.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants and conditions set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. TERM. (a) The initial term of this Agreement and the Executive's
employment hereunder shall commence on October 26, 1987 and shall continue until
December 31, 1990. This Agreement and the Executive's employment hereunder shall
be deemed to be renewed automatically without the necessity of notice by either
party, on the same terms and conditions contained herein, for additional
consecutive terms of three (3) years each as of January 1, 1991 and as of the
<PAGE>
end of each renewal term thereafter. All references herein to "the term of this
Agreement" refer to the original term and all renewals thereof.
(b) Notwithstanding the foregoing, the
Executive's employment under this Agreement is subject to termination, pursuant
to Section 12 of this Agreement, prior to the expiration of the term of this
Agreement. In. the event of such termination, applicable provisions of this
Agreement shall remain in full force and effect until both parties have
fulfilled or discharged all of their obligations under this Agreement.
2. DUTIES. (a) The Executive is hereby employed as the President and
Chief Operating Officer of the Bank. The Executive shall perform the duties of
those positions, and is hereby given the broad authority to manage and run the
day-to-day operations of the Bank. The Executive shall have direct
responsibility and authority for the general supervision, management and control
of the activities, affairs and property of the Bank (and its subsidiaries),
including by way of illustration and not limitation, personnel (including
hiring, firing, promotions, and compensation), lending, credit authorization,
asset/liability management, strategic planning, financial management, pricing
and budgeting, subject to the oversight of the Board of Directors of the Bank.
Any activities, subsidiaries or personnel within the Corporation (and its
subsidiaries) shall also be subject to the control, supervision, and authority
of the Executive, it being the understanding of the parties that at all times
during the term of the Executive's employment under this Agreement, the
Executive shall be the highest ranking full-time employee of both the
Corporation and the Bank reporting to the Chairmen of their Boards.
(b) During the term of the Executive's
employment under this Agreement, the Executive shall devote substantially all
of his time, services, skills and abilities to his employment hereunder, except
during periods of vacation, illness or disability. Notwithstanding the
foregoing, the Executive shall be permitted to devote such time and energy as he
deems appropriate to: (i) the prompt winding-up of all active business pursuits
in which he is engaged as of the date of this Agreement; (ii) passive
investments, including, but not limited to, real estate and stock investments;
(iii) reasonable and customary commitments to community or civic affairs; and
(iv) membership on boards of directors of other corporations; provided that none
of the foregoing activities materially interferes with Executive's duties
hereunder or materially conflicts with the interests of the Employer.
(c) During the term of this Agreement, the
Board of Directors of the Corporation and the Bank, respectively, shall
re-elect the Executive to the offices of President and Chief Operating Officer
of the Bank.
3. COMPENSATION. (a) During the period from October 26, 1987 through
December 31, 1988, the Executive shall receive a salary from the Employer at the
annual rate of Two Hundred Fifty Thousand Dollars ($250,000), payable in equal
biweekly installments. This annual salary shall be reviewed annually by the
Board of Directors of the Corporation or the Bank, as the case may be, and shall
<PAGE>
be increased as of January 1 of each year, beginning on January 1, 1989, which
increase shall in no event be less than five percent (5%) per year above the
prior year's salary.
(b) For each calendar year subsequent to
1987, the Executive shall be eligible to receive a cash bonus from the Employer
of up to 40% of the Executive's salary during such calendar year based upon the
Executive's success in achieving various performance standards and/or objectives
agreed upon by the Employer and the Executive prior to the beginning of such
calendar year. Notwithstanding the above, for the period from January 1, 1988
through December 31, 1988, the Executive shall be paid a minimum bonus of
$50,000 by the Employer. The Employer and the Executive agree to act in good
faith and in a reasonable manner in implementing this bonus system and in
agreeing upon performance standards and objectives. The Employer may determine,
in its discretion, to pay the Executive a greater bonus than otherwise due under
this Section 3(b). All bonuses payable under this Section 3(b) shall be paid
within 60 days after the end of the calendar year in question.
4. HEALTH, DISABILITY AND LIFE INSURANCE BENEFITS. So
long as Executive is employed by the Employer, and thereafter to the extent
provided in Section 12, the Employer shall provide the Executive, at the
Employer's expense, with the following health, disability and life insurance
benefits:
(a) comprehensive major medical, health and
dental insurance and term life insurance covering Executive and his immediate
family on the same terms and conditions as provided to other employees of the
Corporation and Bank from time to time, with full coverage commencing as of
October 26, 1987 notwithstanding any otherwise applicable waiting periods or
other conditions precedent to coverage;
(b) short and long-term disability insurance
under a policy and with an insurer reasonably acceptable to the Executive,
providing monthly benefits of not less than $15,000 per month commencing
immediately upon the Executive's disability and continuing for Executive's life
provided that Employer may, in its discretion, self-insure such benefits for up
to the first six (6) months of any disability; and
(c) guaranteed renewable term life insurance
under a policy and with an insurer reasonably acceptable to the Executive, the
beneficiary of which shall be designated by the Executive, and in a face amount
not less than the greater of: (i) three times his annual salary as in effect
from time to time; or (ii) $900,000. Such term life insurance policy shall be
assigned to Executive, at his request, upon the termination of Employer's
obligation to maintain such insurance policy.
5. RETIREMENT BENEFITS; RIGHT TO RETIRE. (a) The
Executive shall be entitled to participate in the Employer's retirement and
pension plans, in accordance with their respective terms as in effect from
time to time.
<PAGE>
(b) In addition to the benefits provided
under Section 5(a) above, the Employer shall provide the Executive with
monthly guaranteed supplemental retirement benefits determined and payable as
follows:
(i) The amount of the
monthly supplemental retirement benefit (the "Supplemental
Retirement Benefit") shall be equal to the amount set forth in
Section 5(c) (the "Monthly Amount") opposite the age of the
Executive as of the Payment Initiation Date (as defined in Section
5(d)) (or, if the Executive is not living as of the Payment
Initiation Date, the age he would have been as of the Payment
Initiation Date), multiplied by the Vested Percentage (as defined in
Section 5(e)). Once the payment of the Supplemental Retirement
Benefits commences, the amount of the monthly Supplemental
Retirement Benefit shall be fixed for the entire term of such
payments.
(ii) Payment of the Supplemental
Retirement Benefits shall be made in cash in equal monthly
installments by the Employer commencing on the Payment Initiation
Date and continuing on the first day of each month thereafter until
the later of: (A) the Executive's death; or (B) until the Executive
or his Designated Beneficiary shall have received the number of
monthly guaranteed payments set forth below based upon the
Executive's age as of the Payment Initiation Date:
Executive's Age as of Number of Guaranteed
Payment Initiation Date Monthly Payments
----------------------- --------------------
55 - 59 years 216
60 - 64 years 180
65 years or older 120
For example, if the Executive elects to begin receiving the Supplemental
Retirement Benefits when he is 58 years of age, he or his Designated Beneficiary
shall receive no less than 216 guaranteed monthly payments.
(c) The Monthly Amounts are as follows:
Age of Executive as of
Payment Initiation Date Monthly Amount
55 $12,500
56 14,167
57 15,833
58 17,500
59 19,167
60 20,833
61 23,333
<PAGE>
Age of Executive as of
Payment Initiation Date Monthly Amount
62 25,833
63 28,333
64 30,833
65 or older 33,333
(d) The "Payment Initiation Date" means the
date on which payment of the Supplemental Retirement Benefits is to commence,
as specified by written notice which the Executive or his Designated Beneficiary
gives to the Employer. Such notice may be given at any time before or after the
Executive's termination of employment, but at least 30 days prior to the Payment
Initiation Date specified in the notice.
For example, if the Executive were to retire from the Employer at
age 52 and he delivers a notice designating a Payment Initiation Date which is
at a time when the Executive would be 60 years old, the monthly guaranteed
Supplemental Retirement Benefit would be $20,833, multiplied by the Vested
Percentage.
(e) The "Vested Percentage" shall mean a
percentage equal to 0.5%, multiplied by the number of months (a partial month
to be rounded up or down to the nearest whole month) during which the Executive
has been in the employ of either the Corporation or the Bank as of the date of
termination of employment of the Executive, subject to Sections 12(a)(ii)(C) and
12(a)(iii)(C). However, in the event the Executive is in the employ of either
the Corporation or the Bank at the age of 55, the Vested Percentage
automatically shall be 100%. The vesting of the Executive shall continue to be
effective, and the Executive shall be entitled to the vested Supplemental
Retirement Benefits provided in this Section 5, notwithstanding the termination
of his employment for any reason whatsoever.
For example, if the employment of the Executive were to terminate at
a time when he had been employed for 120 months, the Vested Percentage would be
60%. Such Vested Percentage would be applicable regardless of when the payment
of the Supplemental Retirement Benefits commences. Thus, if the Payment
Initiation Date occurred when the Executive is (or would have been if living) 60
years old, the monthly benefit would be $12,500 per month ($20,833 x 60%).
(f) In the event payment of the
Supplemental Retirement Benefits is to be made subsequent to the Executive's
death in accordance with Section 5(b)(ii)(B), such payments shall be made to
those person or persons designated by the Executive pursuant to written notice
given by the Executive to Employer (the "Designated Beneficiary"). If the
Executive fails to designate any Designated Beneficiary prior to his death, or
his Designated Beneficiary predeceases him, payments shall be made to the
Executive's estate. In the event the Executive's Designated Beneficiary survives
the Executive, but dies prior to payment in full of the guaranteed amounts due
under Section 5(b)(ii)(B), such payments otherwise due to the Executive's
<PAGE>
deceased Designated Beneficiary shall be made to those persons designated by
that Designated Beneficiary by delivery of written notice to the Employer. If
such deceased Designated Beneficiary fails to so designate a Designated
Beneficiary or his Designated Beneficiary predeceases him, payment of the
amounts due shall be made to the deceased Designated Beneficiary's estate.
(g) In the event of the Executive's death
prior to the termination of his employment with the Employer, no Supplemental
Retirement Benefits shall be paid subsequent to his death. In the event of the
Executive's death subsequent to the termination of his employment, whether
before or after the commencement of the payment of the Supplemental Retirement
Benefits, his Designated Beneficiary shall be entitled to receive the
Supplemental Retirement Benefits for the remaining number of guaranteed months
specified in Section 5(b)(ii)(B).
(h) For the purposes of the Supplemental
Retirement Benefits payable pursuant to Section 5(b), the Executive's age as of
a given date shall be deemed to be his age as of his closest birthday.
6. VACATIONS. The Executive shall be entitled to 4 weeks'
vacation with pay during each calendar year (or portion thereof) of this
Agreement.
7. PERQUISITES. So long as the Executive is employed by Employer,
and thereafter to the extent provided in Section 12, he shall receive the
following additional perquisites and fringe benefits: an automobile selected by
him (with a cost not to exceed the approximate cost of a luxury American-made
car, such as a Cadillac Seville) and replaced every three years or 60,000 miles
(whichever is sooner), together with all associated expenses, including
insurance, maintenance and gasoline; the initial fee and annual dues for a
country club selected by the Executive; and any other perquisites and benefits
customarily provided to employees of the Employer from time to time. The cost of
all such perquisites and benefits shall be paid solely by the Employer.
8. STOCK OPTIONS. (a) So long as the Executive is employed
by the Employer, and thereafter to the extent provided in Section 12, the
Executive shall be entitled to participate in any stock option plan which the
Employer may adopt.
(b) As of the date of initial employment with
the Employer under this Agreement, the Executive shall receive, pursuant to the
Corporation's existing stock option plan, an option to purchase 5,000 shares of
the Corporation's Common Stock at a price equal to the fair market value for
such shares on such date of initial employment. This option shall vest and be
exercisable immediately. The number of shares covered by this option shall be
subject to appropriate adjustment to reflect any stock splits, stock
combinations, stock dividends, recapitalizations, and other similar changes in
the capitalization of the Employer subsequent to the execution and delivery of
this Agreement.
<PAGE>
9. BUSINESS EXPENSES AND OTHER PERQUISITES. The Employer shall, so
long as the Executive is employed by the Employer, reimburse Executive for all
reasonable and proper expenses incurred by him in the furtherance of the
business of the Employer in accordance with its standard practices and
procedures for top executive officers. In addition, the Employer shall, so long
as the Executive is employed by the Employer, continue to furnish the Executive
an office and suitable office fixtures, telephone service, and secretarial
assistance, all of which shall be appropriate to his position and status.
10. OTHER BENEFITS. (a) If, while the Executive is employed by the
Employer or, to the extent provided in Section 12, after the termination of his
employment with the Employer, the Employer establishes or provides benefits for
its top executive officers in addition to those described herein, the Executive
also shall be entitled to receive such additional benefits on the same terms and
conditions as other top executive officers.
(b) The Employer and the Executive acknowledge
and agree that stock option programs and other incentive plans are crucial to
the successful recruitment and retention of key management personnel of the
Employer Accordingly, the Employer agrees to use its best efforts to establish
and implement, and, if the approval of the Corporation's stockholders is
required, to recommend to its stockholders the adoption of, with the advice of
the Executive and other officers of the Employer: (i) a stock option program
under which key executives (including the Executive) are awarded options to
purchase stock of the Corporation on an annual basis, and (ii) an incentive
program under which key executives are eligible to receive annual cash bonuses
based upon their success in achieving performance standards. These programs
shall be reasonably comparable to those offered by similar banking corporations
in the financial services industry, and shall be implemented as soon as
reasonably practicable, but no later than December 31, 1988.
11. NON-COMPETITION. (a) The Executive agrees that,
during the one (1) year period following the expiration or termination of this
Agreement, he shall not directly solicit business from any customer or client of
the Employer.
(b) The Executive shall be relieved of the
restrictions under Section 11(a) in the event that: (i) the Employer terminates
the Executive's employment under this Agreement other than for Strict Cause (as
defined in Section 12(i)); or (ii) the Executive terminates his employment under
this Agreement for Good Reason (as defined in Section 12(i)).
12. TERMINATION; WHEN COMPENSATION AND BENEFITS PAYABLE.
(a) The Executive may terminate his
employment under this Agreement at any time by delivering a Notice of
Termination to Employer at least 90 days prior to the effective date of such
termination.
<PAGE>
(i) In the event such termination
occurs for other than Good Reason, the Executive shall be entitled
to no further compensation or benefits under this Agreement upon his
termination, except for:
(A) those benefits
which, by their terms, such as the benefits payable
pursuant to Section 5, extend beyond or become payable
after the termination of Executive's employment under
this Agreement; and
(B) immediate payment
of salary, bonuses, and any other amounts earned,
but unpaid, as of the date of termination.
(ii) In the event such termination
occurs for Good Reason prior to a Change of Control (and not in
anticipation of a Change of Control), the Executive shall be
entitled to:
(A) payments during
the Severance Period equal in amount to his salary it
the same annual rate as in effect as of the date of
termination, and payable in biweekly installments at the
same time as such salary would have been paid;
(B) continuation of
all benefits and perquisites provided under Sections
4, 5(a), and 8 (but only to the extent that options have
theretofore been granted to the Executive) of this
Agreement during the Severance Period;
(C) payment of
benefits pursuant to Section 5(b), without change or
diminution. For the purposes of determining the Vested
Percentage, the Executive shall be deemed to be in the
employ of the Employer during the Severance Period;
(D) maintenance and
payment of any other benefits which, by their terms,
extend beyond or become payable after the termination of
the Executive's employment under this Agreement; and
(E) immediate payment
of salary, bonuses, and any other amounts earned,
but unpaid, as of the date of termination.
(iii) In the event such termination
occurs for Good Reason after or in anticipation of a Change in
Control, the Executive shall be entitled to:
(A) payment of: (1)
liquidated damages consisting of a lump sum cash
payment in an amount equal to 2.99 times the average
annual salary and bonus which was paid by the Employer
to the Executive and includible in the Executive's gross
income during the five (5) most recent taxable years
ending before the Change of Control (or such portion of
<PAGE>
such period during which the Executive performed
services for the Employer); or (2) at the Executive's
election, a series of payments with an aggregate present
value equal to the amount of such lump sum cash payment,
as determined pursuant to Section 28OG of the Internal
Revenue Code of 1986, as amended from time to time, or
any successor thereto of similar import, and any
regulations promulgated thereunder (the "Code"). Such
lump sum payment or the first installment of the series
of payments, as the case may be, shall be paid by the
Employer within 90 days after the Notice of Termination;
(B) continuation of
all benefits and perquisites provided under Sections
4, 5(a), and 8 (but only to the extent that options have
theretofore been granted to Executive) of this Agreement
during the Severance Period;
(C) payment of
benefits pursuant to Section 5(b), without change or
diminution. For purposes of determining the Vested
Percentage, Executive shall be deemed to be in the
employ of Employer during the Severance Period;
(D) maintenance and
payment of any other benefits which, by their terms,
extend beyond or become payable after the termination of
the Executive's employment under this Agreement; and
(E) immediate payment
of salary, bonuses, and any other amounts earned,
but unpaid, as of the date of termination.
For purposes of determining the Executive's average
annual salary and bonus under Section 12(a)(iii)(A), any
salary and bonus paid to the Executive for less than an
entire taxable year shall be annualized.
(b) The Employer may terminate the Executive's
employment under this Agreement for any reason (including, but not limited to,
the Executive's death) by delivery of a Notice of Termination to the Executive
at least 90 days prior to the effective date of such termination.
(i) If such termination is for
Strict Cause, the Executive shall be entitled to payments and
benefits in the same amounts and on the same terms as set forth in
Section 12(a)(i).
(ii) Except as provided by Section
12(b)(iii) below, if such termination is for any reason other than
termination for Strict Cause or due to the Executive's death or
Disability, the Executive shall be entitled to payments and benefits
in the same amounts and on the same terms as set forth in Section
12(a)(ii).
<PAGE>
(iii) If the Employer terminates
the Executive's employment for other than Strict Cause or due to
the Executive's death or Disability, either in anticipation of a
Change of Control or at any time within three (3) years after a
Change in Control, Executive shall be entitled to liquidated damages
and benefits in the same amounts and on the same terms as set forth
in Section 12(a)(iii).
(iv) If Executive's employment is
terminated by reason of the Executive's death, the Employer:
(A) shall maintain
and pay to the Executive's estate all benefits which
by their terms, such as the benefits payable pursuant to
Section 5(a), extend beyond or become payable after the
termination of the Executive's employment under this
Agreement;
(B) shall immediately
pay to the Executive's estate all salary, bonuses,
and any other amounts earned, but unpaid, as of the date
of Executive's death; and
(C) shall maintain
medical, health and dental insurance covering the
Executive's immediate family, more particularly
described in Section 4(a), for a period of one year
following the termination of the Executive's employment
under this Agreement.
(v) If the Employer terminates
the Executive's employment due to the Executive's Disability, the
Executive shall be entitled to:
(A) payments and
benefits in the same amounts and on the same terms as
set forth in Section 12(a)(i); and
(B) continuation of
the term life insurance policy, more particularly
described in Section 4(c) of this Agreement, at the
Employer's expense, for a period of one year following
the termination of Executive's employment under this
Agreement.
(c) The parties acknowledge that the
payments and benefits provided to the Executive pursuant to Section 12(a) or
Section 12(b), including but not limited to the payments under Sections
12(a)(iii)(A) and 12(b)(iii), are paid in consideration for the Executive's
services to the Employer prior to the Change of Control or termination of his
employment, as the case may be, the restrictions imposed on the Executive under
Section 11 and the constraints imposed upon the Executive's subsequent
employment by other employers pursuant to Section 12(f).
(d) For the purposes of Sections 12(a) and
12(b), termination of the Executive's employment by Employer shall be deemed to
be "in anticipation of a Change of Control" if a Change of Control occurs within
<PAGE>
sixty (60) days subsequent to the date of termination of the Executive's
employment or if other facts and circumstances support such a finding.
(e) For the purposes of Section 12(a)
and 12(b), the determination of any benefit or perquisite provided under
Sections 4, 5, or 8 subsequent to the termination of the Executive's employment
shall be based upon the following premises, but only to the extent relevant to
such determination:
(i) reference shall be made to
the Executive's annual salary in effect as of the date of
termination of his employment and the bonus last paid to, or
earned by, the Executive; and
(ii) the Executive shall be
deemed to be in the employ of the Employer during the Severance
Period.
(f) In the event the Executive's employment
is terminated, whether before or following a Change of Control, the Executive
shall have no obligation to seek other employment in order to mitigate his
damages hereunder if any. However, in the event the Executive obtains full-time
employment with a financial institution engaging in the business of providing
banking services ("Other Employment"), payments due to the Executive pursuant to
Section 12(a) and Section 12(b) shall be subject to adjustments as follows:
(i) In the case of termination of
the Executive's employment pursuant to Section 12(a)(ii) or Section
12(b)(ii):
(A) The following
adjustment shall be made within 7 days of the end of
each calendar month during the Severance Period:
(1) If the
salary actually paid in cash to the
Executive from Other Employment during such
month (the "Current Monthly Salary") exceeds
70% of the amounts actually paid in cash to
the Executive by the Employer pursuant to
Section 12(a)(ii)(A) during such month (the
"Monthly Salary Equivalent"), the Executive
shall refund to the Employer an amount equal
to the lesser of: (i) the Current Monthly
Salary; or (ii) the Monthly Salary
Equivalent.
(2) If the
Current Monthly Salary does not exceed 70%
of the Monthly Salary Equivalent, no refund
shall be due from Executive.
<PAGE>
(B) The following
further adjustment shall be made within 30 days of the
end of each consecutive twelve month period during the
Severance Period:
(1) If the
salary and bonuses actually paid in cash
to the Executive from Other Employment
during such twelve month period (the
"Current Annual Compensation") exceeds 70%
of the salary and bonuses actually paid in
cash to the Executive by the Employer during
the twelve month period immediately
preceding the termination of his employment
with the Employer (the "Prior Annual
Compensation"), the Executive shall refund
to the Employer the amount by which: (i) the
aggregate amount of Monthly Salary
Equivalents actually paid in cash to the
Executive by the Employer during such twelve
month period, less the aggregate amount
refunded by the Executive to the Employer
with respect to such period; exceeds (ii)
the aggregate amount of Monthly Salary
Equivalents which the Employer was required
to pay to the Executive during such twelve
month period (without reduction under
Section 12(f)(i)(A)) reduced (but not below
zero) by the Current Annual Compensation.
(2) If the
Current Annual Compensation does not exceed
70% of the Prior Annual Compensation, the
Employer shall pay to the Executive an
amount equal to the amounts refunded by the
Executive to the Employer pursuant to
Section 12(f)(i)(A).
(ii) In the case of termination
pursuant to Section 12(a)(iii) or Section 12(b)(iii), payments by
Employer of amounts described in Section 12(a)(iii)(A) ("Liquidated
Damages") shall be subject to the following adjustments, within 30
days of the end of each consecutive twelve month period during the
36 month period commencing as of the first date on which Liquidated
Damages are payable by the Employer pursuant to Section
12(a)(iii)(A) (the "Mitigation Period"):
(A) If the Current
Annual Compensation for such twelve month period
exceeds 70% of the Prior Annual Compensation, and the
Executive has elected to receive Liquidated Damages in
lump sum or in installments over a period of 36 months
or less, the Executive shall refund to the Employer an
amount equal to the lesser of: (i) the Current Annual
Compensation; or (ii) an amount equal to one-third of
the amount of the Liquidated Damages which would have
been payable to the Executive by the Employer had he
elected to receive payment of the Liquidated Damages in
a lump sum (the "Deemed Payment"). In no event, however,
shall the Executive be required to refund to the
Employer, pursuant to this Section 12(f)(ii)(A), any
amount, which, together with amounts previously refunded
<PAGE>
by the Executive pursuant to this Section 12(f)(ii)(A),
exceeds the aggregate amount of Liquidated Damages
actually paid to the Executive by the Employer as of the
end of such twelve month period.
(B) If the Current
Annual Compensation for such twelve month period
exceeds 70% of the Prior Annual Compensation, and the
Executive has elected to receive payment of Liquidated
Damages in installments over a period of more than 36
months, the Executive shall be obliged to refund to the
Employer an amount (the "Annual Refund") equal to the
lesser of: (i) the Current Annual Compensation; or (ii)
the Deemed Payment. However, the amount of the Annual
Refund to be paid by the Executive within 30 days of the
end of such twelve month period, pursuant to this
Section 12(f)(ii)(B), shall not exceed the amount of
Liquidated Damages actually paid to the Executive by the
Employer during such period (the "Actual Annual
Damages"). The portion of the Annual Refund which is
required to be paid pursuant to this Section
12(f)(ii)(B) in excess of Actual Annual Damages for a
given twelve month period (the "Carryover") shall be
carried forward and aggregated with the Carryovers, if
any, accrued with respect to other twelve month periods
during the Mitigation Period. Each installment of
Liquidated Damages payable to the Executive after the
Mitigation Period shall be reduced (but not below zero)
by an amount equal to the aggregate amount of the
Carryovers divided by the number of installments of
Liquidated Damages remaining to be paid as of the end of
the Mitigation Period.
(C) If the Current
Annual Compensation for such twelve month period does
not exceed 70% of the Prior Annual Compensation, no
refund shall be due from the Executive for such period.
(iii) The Employer shall have no
obligation to provide the Executive with any of the benefits
described in Section 4 hereof to the extent that Executive receives
equal or superior to benefits from Other Employment.
(g) The Employer's obligation to make the
payments and the arrangements provided in Sections 12(a) and 12(b) of this
Agreement shall be absolute and unconditional and shall not be affected by any
circumstance, including without limitation any offset, counterclaim, recoupment,
defense or other right which the Employer may have against the Executive or
anyone else. All amounts payable by the Employer hereunder shall be paid without
notice or demand.
(h) The parties acknowledge that, in the case
of termination of the Executive's employment under this Agreement, assessment of
the damages to the Executive would be impracticable. Accordingly, the parties
agree that this Section 12 sets forth the entire understanding as to the
parties' respective rights and obligations in the event of the termination of
the Executive's employment under this Agreement, and that neither party shall
<PAGE>
have any further legal recourse against the other party other than to enforce
the provisions of this Section 12.
(i) As used herein, the following words and
phrases shall have the meanings set forth below:
(i) "Change in Control." A
"Change in Control" shall mean the occurrence of the following
event with respect to either the Corporation or the Bank: a change
of a nature that would be required to be reported, by persons or
entities subject to the reporting requirements of Section 13(d) of
the Securities and Exchange Act of 1934 (hereinafter called the
"Exchange Act"), in Schedule 13D of Regulation 13D-G, or any
successor provisions thereto, promulgated under the Exchange Act;
provided that a Change in Control shall be deemed to have occurred
only if any "person" (as that term is used in Section 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 issued under the Exchange Act), directly or
indirectly, of securities of the Corporation or the Bank
representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's or the Bank's then outstanding
securities.
(ii) "Disability." "Disability"
shall mean that the Executive shall be ill, incapacitated or
disabled, physically or mentally, for a continuous, uninterrupted
period of no less than 365 days, to such an extent so as to prevent
the Executive, in the opinion of a physician chosen by the Executive
and reasonably acceptable to the Employer, from substantially
performing all of his duties under this Agreement.
(iii) "Good Reason." "Good Reason"
shall mean the occurrence of any of the following, in the
reasonable judgment of Executive: (A) without the Executive's
express prior written consent, the assignment to the Executive of
any duties materially inconsistent with his position, duties,
responsibilities and status with the Employer, a change in his
responsibilities, or the appointment of a higher ranking full-time
employee; (B) the removal of the Executive from or the failure to
re-elect the Executive to any one or all of the positions described
in Section 2(a) hereof, except in connection with promotions to
higher office, the termination of the Executive's employment by
reason of his death, or the termination of this Agreement by the
Employer for Strict Cause; (C) a failure by the Employer to provide
or timely pay to the Executive any of the perquisites, benefits or
compensation provided for in this Agreement; or (D) any material
breach or default by either the Corporation or the Bank in any of
its agreements, undertakings or covenants under this Agreement.
(iv) "Notice of Termination."
"Notice of Termination" shall mean a written notice indicating
the specific termination provision in this Agreement relied upon and
<PAGE>
setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for the termination.
(v) "Severance Period". "Severance
Period" shall mean the two year period commencing as of the date of
the termination of the Executive's employment under this Agreement.
(vi) "Strict Cause." "Strict
Cause" shall mean any of the following: (A) a conviction of the
Executive for a felony or for any lesser crime or offense than a
felony involving the property of the Employer or of one of its
subsidiaries; or (B) gross neglect of his duties hereunder, gross
dereliction of duty or other willful misconduct by the Executive and
failure to cure such situation within thirty (30) days after receipt
of notice thereof from the Board of Directors of the Corporation,
unless such situation cannot be completely cured within such 30 day
period, in which case, Strict Cause shall not be deemed to occur if
the Executive commences the cure of same within such 30 day period
and diligently continues to cure same.
13. SUCCESSORS; ASSIGNABILITY. (a) The Corporation and the Bank
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Corporation or the Bank, respectively, by written agreement in
form and substance satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent as the
Corporation or the Bank would be required to perform if no such succession had
occurred. Failure of the Corporation or the Bank to obtain such agreement prior
to the effective date of any such succession shall be a breach of this Agreement
which shall entitle the Executive to terminate this Agreement on the same terms
and conditions and to obtain the same amounts and benefits as due in the case of
termination for Good Reason pursuant to Section 12(a)(iii).
(b) As used in this Agreement, "Corporation"
and "Bank" shall mean the Corporation and the Bank, respectively, as
hereinbefore defined and any successor to all or substantially all of its
business or assets which becomes bound by all of the terms and conditions of
this Agreement, whether by the terms hereof, by operation of law, or otherwise.
It is expressly understood and agreed that the obligations of the Employer under
this Agreement constitute the joint and several obligations of the Bank and the
Corporation, and the default or breach by either the Bank or the Corporation
hereunder shall constitute a default or breach by the other.
(c) This Agreement is personal in nature and
neither of the parties hereto shall assign or transfer this Agreement or any
rights or obligations hereunder, except by operation of law or pursuant to the
terms of this Section 13.
(d) The Corporation and the Bank each
acknowledge and represent and warrant to the Executive that: (i) the execution,
delivery, and performance of this Agreement have been duly authorized by their
<PAGE>
respective Boards of Directors and any and all other required corporate action;
and (ii) upon execution and delivery, this Agreement constitutes the valid and
binding legal obligation of both the Bank and the Corporation, enforceable
against each of them in accordance with its terms.
14. ENFORCEABILITY. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal and legal representatives,
executors, administrators, assigns, heirs, distributees, devisees and legatees.
15. WITHHOLDING OF TAXES AND HEALTH INSURANCE PREMIUMS. The Employer
may withhold from any compensation or benefits payable under this Agreement all
federal, state and local taxes as shall be required to be withheld by law,
regulation or ruling, and that portion of the premium costs which the Executive
is required to bear under the Employer's health insurance plan in accordance
with the terms of such plan.
16. MODIFICATION, WAIVER AND DISCHARGE. No provision of this
Agreement may be modified, waived or discharged unless the modification, waiver
or discharge is agreed to in writing signed by the Executive and the Employer.
No waiver by either party hereto at any time or any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
17. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered or given upon personal
delivery or upon mailing to the parties at their respective addresses, as set
forth below, or such other address as a party may designate by prior notice to
the other party:
If to the Employer:
Citizens Bancorp
6200 Baltimore Boulevard
Riverdale, Maryland 20737
If to the Executive:
Jeffrey R. Springer
13000 Dulaney Valley Road
Glen Arm, Maryland 21057
18. ENTIRE AGREEMENT. This is the entire agreement of the
parties; no agreements or representations, oral or otherwise, express or
implied, have been made with respect to the subject matter hereof by either
party which are not expressly set forth in this Agreement.
<PAGE>
19. LAW GOVERNING. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Maryland.
20. SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.
WITNESS:
__________________________________________ ____________________(SEAL)
JEFFREY R. SPRINGER
ATTEST: CITIZENS BANCORP
__________________________________________ By: _________________(SEAL)
Alfred H. Smith, Jr.
Title: Chairman of the Board
CITIZENS BANK & TRUST
COMPANY OF MARYLAND
__________________________________________ By: _________________(SEAL)
Witness Alfred H. Smith, Jr.
Title: Chairman of the Board
<PAGE>
AMENDMENT NO.1 TO EMPLOYMENT AND SEVERANCE AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AND SEVERANCE AGREEMENT is made
and entered into as of the 18th day of October, 1989, by and between CITIZENS
BANCORP, a Maryland corporation having its principal place of business in
Laurel, Maryland (the "Corporation"), CITIZENS BANK OF MARYLAND, a bank
organized under the laws of the State of Maryland and having its principal place
of business in Laurel, Maryland (the "Bank") [the Corporation and the Bank are
hereinafter sometimes collectively called "Employer"], and JEFFREY R. SPRINGER,
who resides in Baltimore County, Maryland ("Executive").
EXPLANATORY STATEMENT
A. Employer and Executive entered into an Employment
and Severance Agreement on September 23, 1987 (the "Employment Agreement").
B. In consideration of the Executive's agreement to
receive a smaller bonus than originally envisioned in the Employment
Agreement, the Employer and the Employee have agreed to certain other changes
to the Employment Agreement.
C. Employer and Executive therefore desire to amend
the Employment Agreement in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing Explanatory
Statement, which is incorporated herein, the mutual covenants and conditions set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that the
Employment Agreement is hereby amended as follows:
1. Section 2(a) of the Employment Agreement is hereby
deleted and the following is inserted in lieu thereof:
"(a) The Executive is hereby employed as the President
and Chief Operating Officer of the Bank and the
Corporation, and is hereby given the broad authority and
responsibility to manage and direct the day-to-day
operations of the Bank, the Corporation, their
respective affiliates and subsidiaries, and any entity
which directly or indirectly controls the Corporation
(collectively, the "Entities"). The Executive shall have
direct responsibility and authority for the general
supervision, management and control of the activities,
affairs and property of each of the Entities, including
by way of illustration and not limitation, personnel
(including hiring, firing, promotions and compensation),
lending, credit authorization, asset/liability
management, strategic planning, financial management,
pricing and budgeting, subject to the oversight of the
Board of Directors of the particular Entity in question.
At all times during the term of the Executive's
employment under this Agreement, it is agreed that the
<PAGE>
Executive shall be the highest ranking salaried and
full-time employee of the Bank, the Corporation and any
entity which directly or indirectly controls the
Corporation, reporting to the Chairmen of their
respective Boards."
2. Section 3(a) of the Employment Agreement sets forth the procedure
to determine the salary of the Executive. The parties hereto acknowledge that
the annual salary of the Executive for the calendar year 1989 is Three Hundred
Thousand Dollars ($300,000.00), and the annual salary of the Executive for the
calendar year 1990 shall be Three Hundred Eighty-four Thousand Dollars
($384,000.00).
3. Section 3(b) of the Employment Agreement is hereby amended by
deleting the first sentence thereof and inserting in lieu thereof:
"For the calendar year 1988, the Executive shall be
eligible to receive a cash bonus from the Employer of up
to 40% of the Executive's salary during such calendar
year, and for each calendar year subsequent to 1988, the
Executive shall be eligible to receive a cash bonus from
the Employer of up to 20% of the Executive's salary
during such calendar year. In all cases, the cash bonus
shall be based upon the Executive's success in achieving
various performance standards and/or objectives agreed
upon by the Employer and the Executive."
4. Section 4(c) of the Employment Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
"(c) guaranteed renewable term life insurance or whole
life insurance under a policy and with an insurer
reasonably acceptable to the Executive, the beneficiary
of which shall be designated by the Executive, and in a
face amount not less than the greater of (i) 2.6 times
his annual salary as in effect from time to time; or
(ii) One Million Dollars ($1,000,000.00). At the
election of the Executive, such life insurance policy
may be owned by the Executive or assigned to the
Executive at his request. If the Executive elects that a
whole life insurance policy shall be acquired, the
Executive shall pay to the Employer an amount equal to
the difference, if any, between the premium that would
have been paid had the policy been a term life insurance
policy, and the actual premium paid for the whole life
insurance policy."
(For informational purposes only, attached hereto is a schedule reflecting the
current premium for a $1,000,000 term life insurance policy on the life of the
Executive. The premiums are subject to change.)
5. Section 5(b)(ii) of the Employment Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
<PAGE>
"(ii) Payment of the Supplemental Retirement Benefits
shall be made in cash in equal monthly installments by
the Employer commencing on the Payment Initiation Date
and continuing on the first day of each month thereafter
until the later of: (A) the Executive's death; (B) the
death of Suzanne C. Springer, if she is the Designated
Beneficiary of the Executive; or (C) January 1, 2027."
6. Section 5(e) of the Employment Agreement is hereby amended by
deleting in the first sentence thereof the percentage "0.5%" and inserting
in lieu thereof the percentage "0.7%."
7. Section 5(g) of the Employment Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
"Whether or not the Executive dies prior to or
subsequent to the termination of his employment, his
Designated Beneficiary shall be entitled to receive the
Supplemental Retirement Benefits for the period
specified in Section 5(b)(ii)."
8. Section 7 of the Employment Agreement is hereby amended by
deleting in the first sentence thereof the phrase "(with a cost not to exceed
the approximate cost of a luxury American-made car, such as a Cadillac
Seville)", and inserting at the end of Section 7 the following:
"It is acknowledged that the automobile furnished to the
Executive may be occasionally driven by members of the
Executive's family or such other individuals to whom the
Executive grants permission. In the event the Executive
selects an automobile whose cost exceeds the approximate
cost of a fully equipped Cadillac Seville, the Executive
shall reimburse the Employer for an amount equal to the
difference between the lease value of the actual
automobile selected and the lease value of a Cadillac
Seville, which values shall be determined using the
Internal Revenue Service publication for leasing of
vehicles. Such reimbursement shall be made no less
frequently than quarterly over the period of use of the
automobile and, at the Executive's election, may be made
through payroll deductions from the Executive's salary."
9. Section 12(i)(i) of the Employment Agreement is hereby
amended by adding at the end thereof, after the words "Bank's then outstanding
securities" the following:
", or the sale by the Corporation of all or
substantially all of the capital stock of the Bank
owned by it, or the sale by the Bank of substantially
all of the assets of the Bank."
<PAGE>
10. Section 17 of the Employment Agreement is hereby amended by
deleting the address shown therein for the Employer and inserting in lieu
thereof the following:
"14401 Sweitzer Lane, Laurel, Maryland, 20707."
11. All references in the Employment Agreement to "Citizens Bank
and Trust Company of Maryland" shall instead refer to "Citizens Bank of
Maryland."
12. The Employment Agreement, as amended hereby, is hereby
ratified and affirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 1 to Employment and Severance Agreement under seal as of the
date and year first above written.
WITNESS:
_______________________________ ______________________________(SEAL)
JEFFREY R. SPRINGER
WITNESS: CITIZENS BANCORP
_______________________________ By: ________________________(SEAL)
Alfred H. Smith, Jr.
Title: Chairman of the Board
CITIZENS BANK OF MARYLAND
_______________________________ By: ________________________(SEAL)
Alfred H. Smith, Jr.
Title: Chairman of the Board
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SPRINGFIELD, MASSACHUSETTS 01111
AUGUST 22, 1989
HYPOTHETICAL TERM ILLUSTRATION
PROPOSED INSURED: JEFFREY SPRINGER AGE 45 MALE
PLAN: YEARLY RENEWABLE TERM POLICY NONSMOKER
AMOUNT OF INSURANCE: $1,000,000 ANNUAL PREMIUM: $4,280.00
DIVIDEND OPTION: PRECEDING YEAR'S DIVIDEND USED TO REDUCE CURRENT PREMIUM
DIVIDENDS ARE NOT GUARANTEED AND ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
CHANGES IN DIVIDENDS WILL CHANGE ALL NON-GUARANTEED VALUES. SEE DIVIDENDS
FOOTNOTE FOR FURTHER INFORMATION.
TOTAL ANNUAL TOTAL
ANNUAL ANNUAL PRECEDING NET DEATH
POL PREMIUM PREMIUM YEAR'S PREMIUM BENEFIT
YR BEG YEAR BEG YEAR DIVIDEND BEG YEAR END YEAR
1 2 3 4 5
1 3,630 4,280 4,280 1,000,000
2 3,970 4,666 4,666 1,000,000
3 4,370 5,132 5,132 1,000,000
4 6,760 7,585 2,390 5,195 1,000,000
5 7,400 8,301 2,650 5,651 1,000,000
6 8,100 9,104 2,960 6,144 1,000,000
7 8,780 10,000 3,200 6,800 1,000,000
8 9,570 11,043 3,510 7,533 1,000,000
9 10,450 12,209 3,920 8,289 1,000,000
10 11,420 13,535 4,390 9,145 1,000,000
11 12,580 15,091 5,120 9,971 1,000,000
12 13,900 17,007 5,790 11,217 1,000,000
13 15,380 19,066 6,400 12,666 1,000,000
14 16,940 21,262 7,030 14,232 1,000,000
15 18,620 23,471 7,780 15,691 1,000,000
16 20,390 25,250 8,520 16,730 1,000,000
17 22,330 27,199 9,500 17,699 1,000,000
18 24,500 29,378 10,440 18,938 1,000,000
19 26,990 31,877 11,580 20,297 1,000,000
20 29,810 34,709 12,900 21,809 1,000,000
@60 18,620 23,471 7,780 15,691 1,000,000
@65 29,810 34,709 12,900 21,809 1,000,000
<PAGE>
AMENDMENT NO. 2 TO EMPLOYMENT AND
SEVERANCE AGREEMENT
THIS AMENDMENT NO. 2 to EMPLOYMENT AND SEVERANCE AGREEMENT is entered into as of
the 15th day of December, 1993, between CITIZENS BANCORP, a Maryland corporation
(the "Corporation"), CITIZENS BANK OF MARYLAND, a Maryland state chartered bank
(the "Bank") [the Corporation and the Bank sometimes collectively the
"Employer"] and JEFFREY R. SPRINGER, a resident of Baltimore County, Maryland
(the "Executive").
EXPLANATORY STATEMENT
A. The Employer and the Executive entered into an Employment and
Severance Agreement dated September 23, 1987 (the "Employment Agreement").
B. The terms of the Employment Agreement were amended by Amendment No.
1 to Employment and Severance Agreement dated October 18, 1989, and by
subsequent annual letter agreements.
C. The parties now desire to make certain other amendments to the
Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants and conditions set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1 . Section 5(e) of the Employment Agreement is hereby amended by deleting in
the first sentence thereof (as amended) the percentage "0.7%" and inserting in
lieu thereof the percentage "1.1%".
2. Section 3 of the Employment Agreement is hereby amended to read as follows:
"(a) During the period from January 1, 1994 through
December 31, 1994, the Executive shall receive a salary from the
Employer at the annual rate of $472,500, payable in equal biweekly
installments. This salary shall be reviewed annually by the Board of
Directors of the Corporation or of the Bank, as the case may be, and
may be increased, but shall not be subject to decrease, as of
January 1 of each year, beginning on January 1, 1995.
(b) For the calendar year 1994, the Executive shall be
eligible to receive a cash bonus from the Employer of up to
$100,000, based upon the Executive's success in achieving various
performance standards and/or objectives agreed upon by the Employer
and the Executive prior to the beginning of such calendar year. For
<PAGE>
calendar years beginning in 1995, the bonus for which the Executive
shall be eligible shall be reviewed annually by the Board of
Directors of the Corporation or the Bank, as the case may be, shall
be modified each year, and shall be increased no less than 5% above
the eligible bonus applicable to the prior year."
3. Section 4(a) is hereby amended to read as follows:
"(a) comprehensive major medical, health and dental
insurance covering Executive and his immediate family, such benefits
to be no less comprehensive, in the reasonable judgment of the
Executive, than those provided to him in 1993. At the election of
the Employer and subject to the consent of the Executive (which
shall be reasonably exercised), such benefits may be provided by the
Employer's medical plan or by direct reimbursement to the Executive
or by a combination of the two."
4. Section 5 is hereby amended to add Section 5(i) and 5(j), which
shall read as follows:
"(i) Upon retirement and until the death of the
Executive, the Employer shall provide the Executive and his
immediate family, at the expense of the Employer, with the benefits
set forth in Section 4(a), such benefits to be no less
comprehensive, in the reasonable judgment of the Executive, than
those provided to him in 1993."
(j) "Retirement" as used herein and other than for the
purpose of the Employer's pension plans, shall mean and shall be
deemed to occur upon the first to occur of the election of the
Executive to retire from employment with the Corporation and the
Bank at any time after reaching age 55 or the election of the
Executive to retire from employment with the Corporation and the
Bank for Good Reason upon the occurrence of a Change in Control."
5. Section 5(c) is hereby amended to delete the Monthly Amounts set
forth therein and to substitute in lieu thereof the following Monthly Amounts:
Age of Executive as of
Payment Initiation Date Monthly Amount
----------------------- --------------
55 $21,000
56 23,000
57 25,000
58 27,000
59 29,000
60 31,000
61 33,000
<PAGE>
Age of Executive as of
Payment Initiation Date Monthly Amount
----------------------- --------------
62 35,000
63 37,000
64 39,000
65 41,000
6. The example set forth in Section 5(d) is hereby amended to show a
monthly guaranteed Supplemental Retirement Benefit of $31,000, multiplied by the
Vested Percentage.
7. The example set forth in Section 5(e) is hereby amended to show a
monthly benefit of $31,000 per month ($31,000 x 100%).
8. Section 12 is hereby amended to provide that, whenever the
Executive is entitled to receive the benefits described in Section 4(a), such
benefits shall be no less comprehensive, in the reasonable judgment of the
Executive, than those provided to him in 1993.
9. Section 12(f) is hereby deleted in its entirety and the following
is substituted in lieu thereof:
"(f) In the event the employment of the Executive is
terminated, whether before or following a Change of Control, the
Executive shall have no obligation to seek other employment to
mitigate his damages hereunder, if any; and, if the Executive does
obtain other employment at anytime subsequent to the termination of
his employment with the Employer, the payments and/or benefits
payable to him pursuant to this Section 12 shall not be subject to
modification or adjustment."
10. Section 13(a) is hereby amended to add the following
language at the end of the existing text:
"If the successor is part of a holding company structure, then the
publicly-traded parent company shall join in the written agreement
to assume and agree to perform this Agreement as set forth herein."
11. The term "Change of Control," wherever used in the Employment
Agreement or in any amendment thereto, shall have the same meaning as the term
"Change in Control."
12. The Employment Agreement, as amended, is hereby ratified and
affirmed, and shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 2 under seal as of the day and year first above written.
WITNESS: CITIZENS BANCORP
_____________________________________ By: _________________________(SEAL)
Alfred H. Smith, Jr.
Title: Chairman of the Board
WITNESS: CITIZENS BANK OF MARYLAND
_____________________________________ By: _________________________(SEAL)
Alfred H. Smith, Jr.
Title: Chairman of the Board
_____________________________________ ______________________________(SEAL)
JEFFREY R. SPRINGER
<PAGE>
CORRECTION TO AMENDMENT NO. 2 TO
EMPLOYMENT AND SEVERANCE AGREEMENT
WHEREAS, Citizens Bancorp, a Maryland corporation (the
"Corporation"), Citizens Bank of Maryland, a Maryland State chartered commercial
bank (the "Bank") [the Corporation and the Bank hereinafter collectively
referred to as "Employer"] and Jeffrey R. Springer, a resident of Baltimore
County, Maryland (the "Executive") entered into an Employment and Severance
Agreement dated September 23, 1987 (the "Agreement") as amended by Amendment No.
1 dated October 18, 1989, and Amendment No. 2 dated December 15, 1993, and by
subsequent annual letter agreements; and
WHEREAS, it was the intent of the parties to the Agreement that,
pursuant to Amendment No. 2, certain benefits set forth in Section 4(a) of the
Agreement be provided by the Employer to the Executive and his immediate family
upon retirement of the Executive and until the deaths of both the Executive and
his spouse:
NOW, THEREFORE, the Employer and the Executive agree that:
1. Section 5(i) of Amendment No. 2 to the Agreement should be
corrected to clarify the intent of the parties and more accurately reflect the
agreement of the parties that certain benefits set forth in Section 4(a) of the
Agreement will be provided by the Employer to the Executive and his immediate
family upon retirement of the Executive and until the deaths of both the
Executive and his spouse by restating Section 5(i) as follows:
"(i) Upon retirement and until the death of both the Executive and
his spouse, the Employer shall provide the Executive and his immediate family,
at the expense of the Employer, with the benefits set forth in Section 4(a),
such benefits to be no less comprehensive, in the reasonable judgment of the
Executive, than those provided to him in 1993."
2. The Agreement, as amended and corrected , is hereby ratified and
affirmed, and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Correction
to Amendment No. 2 under seal this 19th day of June, 1996.
WITNESS: CITIZENS BANCORP
_____________________________________ By __________________________(Seal)
Alfred H. Smith, Jr.
Title: Chairman of the Board
WITNESS: CITIZENS BANK OF MARYLAND
_____________________________________ By __________________________(Seal)
Alfred H. Smith, Jr.
Title: Chairman of the Board
_____________________________________ ____________________________(Seal)
Jeffrey R. Springer
Exhibit 21
All subsidiaries of the Registrant included in the Consolidated Financial
Statements as of December 31, 1996 are listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY DESCRIPTION OF ACTIVITY JURISDICTION OF INCORPORATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Crestar Bank (1) Banking Services Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Crestar Mortgage Corporation (2) Mortgage Banking Services Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
CMC Oreo, Inc. (3) Real Estate Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Crestar Leasing Corporation (2) Equipment Leasing Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Capitoline Investment Services Incorporated (2) Investment Advisory Services Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Southern Service Corporation (2) Real Estate Mortgage Trustee Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Crestar Securities Corporation (1) Securities Brokerage Services Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Crestar Insurance Agency, Incorporated (1) Insurance Agency Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Annapolis Federal Funding Corporation I (2) Investment Securities Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
VA Properties, Inc. (2) Real Estate Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Fifth GWR REFG, Inc. (2) Real Estate Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Villages of KC Properties, Inc. (2) Real Estate Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Hilltop of Virginia, Inc. (2) Real Estate Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
MD Properties, Inc. (2) Real Estate Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
MD Oreo, Inc. (2) Real Estate Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
DC Properties, Inc. (2) Real Estate Holding (Inactive) District of Columbia
- ------------------------------------------------------------------------------------------------------------------------------------
DC Properties II, Inc. (2) Real Estate Holding (Inactive) District of Columbia
- ------------------------------------------------------------------------------------------------------------------------------------
Jefferson Funding Corporation I (2) Investment Securities Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Jefferson Funding Corporation II (2) Investment Securities Holding Virginia
- ------------------------------------------------------------------------------------------------------------------------------------
Covenant Towers Holding Corp. (2) Real Estate Development South Carolina
- ------------------------------------------------------------------------------------------------------------------------------------
Loyola Financial Corporation (1) Real Estate Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Bay Woods, Inc. (4) Real Estate Development (Inactive) Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Loyola Financial and Development Corporation (2) Real Estate Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Cromwell Station, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Dover Meadows, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Hunt Country, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Loyola Investors, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Builders, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Valley Manor, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Woodmore Highlands, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
FSB Development, Inc. (2) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Financial Group, Inc. (3) Mortgage Origination Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Loyola Westpalm Corp. (2) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Crestar Capital Trust I (1) Issuer of Trust Preferred Securities Delaware
- ------------------------------------------------------------------------------------------------------------------------------------
J.J.K. Development Co. IV, Inc. (5) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Citizens Bank of Maryland (1) Banking Services Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Citizens Bank of Washington, N.A. (1) Banking Services National Banking Association
- ------------------------------------------------------------------------------------------------------------------------------------
Citizens Mortgage Company (6) Mortgage Banking Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
CBRE Holding Company (6) Real Estate Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
CBRE II, Inc. (6) Real Estate Holding U.S. Virgin Islands
- ------------------------------------------------------------------------------------------------------------------------------------
BTH, Inc. (6) Real Estate Holding Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
Citizens Community Development Company (6) Real Estate Development Maryland
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Table
- -----
(1) Wholly-owned by Crestar Financial Corporation
(2) Wholly-owned by Crestar Bank
(3) Wholly-owned by Crestar Mortgage Corporation
(4) Wholly-owned by Loyola Financial Corporation
(5) Wholly-owned by Loyola Financial and Development Corporation
(6) Citizens Bank of Maryland
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Crestar Financial Corporation:
We consent to incorporation by reference in Registration Statement No. 33-57710
on Form S-3, in Registration Statement No. 33-50387 on Form S-3, in Registration
Statement No. 33-64195 on Form S-3, in Registration Statement No. 33-50921 on
Form S-8, in Registration Statement No. 33-63606 on Form S-8, in Registration
Statement No. 33-54523 on Form S-8, in Registration Statement No. 33-00049 on
Form S-8, in Registration Statement No. 333-00051 on Form S-8 and in
Registration Statement No. 333-19321 on Form S-8 of Crestar Financial
Corporation of our report dated January 16, 1997, relating to the consolidated
balance sheets of Crestar Financial Corporation and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of income, cash flows
and changes in shareholders' equity for each of the years in the three-year
period ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 10-K of Crestar Financial Corporation. Our report refers
to our reliance on another auditors' report with respect to amounts related to
Citizens Bancorp included in the aforementioned consolidated financial
statements.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
March 26, 1997
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated January 16,
1997, relating to the consolidated balance sheets of Citizens Bancorp and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1996, appearing in this Annual Report on
Form 10-K of Crestar Financial Corporation for the year ended December 31, 1996.
Registration
Form Statement No.
---- -------------
S-3 33-57710
S-3 33-50387
S-3 33-64195
S-8 33-50921
S-8 33-63606
S-8 33-54523
S-8 333-00049
S-8 333-00051
S-8 333-19321
/s/ DELOITTE & TOUCHE
Richmond, Virginia
March 31, 1997
Exhibit 99(a)
INDEPENDENT AUDITORS' REPORT
Boards of Directors
Citizens Bancorp and
Crestar Financial Corporation
We have audited the accompanying consolidated balance sheets of Citizens Bancorp
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Citizens Bancorp and
subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
Janaury 16, 1997
Exhibit 99(b)
Federal Financial Institutions Examination Council
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Please refer to page i, Table of Contents, for the required disclosure
of estimated burden.
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices - FFIEC 031
Report at the close of business September 30, 1996
(960630)
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than
two directors (trustees) for State nonmember banks and three directors for
State member and National banks.
I, Richard G. Tilghman, Chairman and Chief Executive Officer
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/ RICHARD G. TILGHMAN
Signature of Officer Authorized to Sign Report
Date of Signature 1/12/97
________________________________________________________________________________
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that
it has been examined by us and to the best of our knowledge and belief has
been prepared in conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
/s/ unclear signature
Director (Trustee)
/s/ GORDON F. RAINEY, JR.
Director (Trustee)
/s/ unclear signature
Director (Trustee)
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate
Federal Reserve District Bank.
State Nonmember Banks: Return the original only in the special return
address envelope provided. If express mail is used in lieu of the special
return address envelope, return the original only to the FDIC, c/o Quality
Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
FDIC Certificate Number
(RCRI 9050)
Crestar Bank
P.O. Box 26665
Richmond, VA 23261
E512430000 55124300000
December 31, 1996
31
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-1
Consolidated Report of Income
for the period January 1, 1996 - December 31, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
1480
Dollar Amounts in Thousands RIAD Bill Mil Thou
<S> <C> <C> <C>
1. Interest Income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate 4011 544,542 1.a.(1)(a)
(b) Loans to depository institutions 4019 36 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers 4024 398 1.a.(1)(c)
(d) Commercial and industrial loans 4012 142,078 1.a.(1)(d)
(e) Acceptances of other banks 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal
expenditures:
(1) Credit cards and related plans 4054 231,671 1.a.(1)(f)(1)
(2) Other 4055 150,631 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations 4503 1,706 1.a.(1)(h)(1)
(2) Tax-exempt obligations 4504 11,444 1.a.(1)(h)(2)
(i) All other loans in domestic offices 4058 11,264 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases 4505 90 1.b.(1)
(2) Tax-exempt leases 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions: (1)
(1) In domestic offices 4105 2 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4106 1,181 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations 4027 165,858 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities 4506 0 1.d.(2)(a)
(b) Tax-exempt securities 4507 2,819 1.d.(2)(b)
(3) Other domestic debt securities 3657 36,458 1.d.(3)
(4) Foreign debt securities 3658 0 1.d.(4)
(5) Equity securities (including investments in mutual funds) 3659 4,855 1.d.(5)
e. Interest income from trading assets 4069 0 1.e.
</TABLE>
__________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-2
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBF's 4020 9,524 1.f.
g. Total Interest income (sum of items 1.a through 1.f) 4107 1,314,557 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and telephone and
preauthorized transfer accounts) 4508 17,128 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs) 4509 127,008 2.a.(1)(b)(1)
(2) Other savings deposits 4511 32,262 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more 4174 39,427 2.a.(1)(b)(3)
(4) All other time deposits 4512 190,181 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFs 4172 103 2.a.(2)
b. Expense of federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBFs 4180 78,434 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and other borrowed money 4185 45,267 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized
leases 4072 872 2.d.
e. Interest on subordinated notes and debentures 4200 19,753 2.e.
f. Total interest expense (sum of items 2.a through 2.e) 4073 550,435 2.f.
3. Net interest income (item 1.g minus 2.f) RIAD 4074 764,122 3.
4. Provisions:
a. Provision for loan and lease losses RIAD 4230 90,282 4.a.
b. Provision for allocated transfer risk RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities 4070 47,316 5.a.
b. Service charges on deposit accounts in domestic offices 4080 94,309 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum
items 8.a through 8.d) A220 415 5.c.
d. Other foreign transaction gains (losses) 4076 0 5.d.
e. Not applicable
f. Other noninterest income:
(1) Other fee income 5407 145,963 5.f.(1)
(2) All other noninterest income* 5408 37,095 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) RIAD 4079 327,098 5.g.
6. a. Realized gains (losses) on held-to-maturity securities RIAD 3521 0 6.a.
b. Realized gains (losses) on available-for-sale securities RIAD 3196 3,376 6.b.7.
Noninterest expense:
a. Salaries and employee benefits 4135 314,018 7.a.
b. Expenses of premises and fixed assets (net or rental income)
(excluding salaries and employee benefits and mortgage interest) 4217 82,574 7.b.
c. Other noninterest expense* 4092 308,833 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) RIAD 4093 705,425 7.d.
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and
7.d) RIAD 4301 298,889 8.
9. Applicable income taxes (on item 8) RIAD 4302 97,103 9.
10. Income (loss) before extraordinary items and other adjustments (item 8
minus 9) RIAD 4300 201,786 10.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
4
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-3
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments, gross of income taxes 4310 0 11.a.
b. Applicable income taxes (on items 11.a)* 4315 0 11.b
c. Extraordinary items and other adjustments, net of income taxes (item 11.a
minus 11.b) RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) RIAD 4340 201,786 12.
</TABLE>
<TABLE>
<CAPTION>
I481
Memoranda Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases
acquired after August 7, 1986, that is not deductible for federal income tax
purposes 4513 665 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8) 8431 467 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees on payroll at end of current period Number
(round to nearest whole number) 4150 6,891 M.5.
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying
push down accounting this calendar year, report the date of the bank's MM/DD/YY
acquisition 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative
instruments) (sum of Memorandum items 8.a through 8.d must equal
Schedule RI, item 5.c): Bill Mil Thou
a. Interest rate exposures 8757 (1,020) M.8.a.
b. Foreign exchange exposures 8758 435 M.8.b.
c. Equity security and index exposures 8759 0 M.8.c.
d. Commodity and other exposures 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other
than trading:
a. Net increase (decrease) to interest income 8761 1,220 M.9.a.
b. Net (increase) decrease to interest expense 8762 (101) M.9.b.
c. Other (noninterest) allocations 8763 0 M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions) A251 0 M.10.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
5
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-4
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports
of Condition and Income 3215 1,007,296 1.
2. Equity capital adjustments from amended Reports of Income, net* 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) 3217 1,007,296 3.
4. Net income (loss)(must equal Schedule RI, item 12) 4340 201,786 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net 4346 1,732 5.
6. Changes incident to business combinations, net 4356 418,906 6.
7. LESS: Cash dividends declared on preferred stock 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 127,175 8.
9. Cumulative effect of changes in accounting principles from prior years* (see
instructions for this schedule) 4411 0 9.
10. Corrections of material accounting errors from prior years* (see
instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale
securities 8433 (34,780) 11.
12. Foreign currency transaction adjustments 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7
or 8 above) 4415 (200,000) 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must
equal Schedule RC, item 28) 3210 1,267,765 14.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
I486
(Column A) (Column B)
Charge-offs Recoveries
Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile) 4651 7,972 4661 9,559 1.a.
b. To non-U.S. addressees (domicile) 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of the banks:
a. To U.S. banks and other U.S. depository institutions 4653 0 4663 0 2.a.
b. To foreign banks 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers 4655 0 4665 11 3.
4. Commercial and industrial loans;
a. To U.S. addressees (domicile) 4645 2,198 4617 3,433 4.a.
b. To non-U.S. addressees (domicile) 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans 4656 89,462 4666 6,617 5.a.
b. Other (includes single payment, installment, and all student loans) 4657 24,438 4667 8,371 5.b.
6. Loans to foreign governments and official institutions 4643 0 4627 0 6.
7. All other loans 4644 1,182 4628 1,078 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile) 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile) 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) 4635 125,252 4605 29,069 9.
</TABLE>
6
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-5
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Charge-offs Recoveries
Memoranda Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1-3. Not applicable
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above 5409 0 5410 0 M.4.
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part I, item 1, above):
a. Construction and land development 3582 1,896 3583 1,598 M.5.a.
b. Secured by farmland 3584 40 3585 100 M.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit 5411 1,912 5412 479 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties 5413 2,258 5414 457 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties 3588 144 3589 311 M.5.d.
e. Secured by nonfarm nonresidential properties 3590 1,722 3591 6,614 M.5.e.
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition
and Income 3124 196,121 1.
2. Recoveries (must equal part I, item 9, column B above) 4605 29,069 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) 4635 125,252 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) 4230 90,282 4.
5. Adjustments* (see instructions for this schedule) 4815 43,616 5.
6. Balance end of current period (sum of items 1 through 5)(must equal Schedule RC,
item 4.b) 3213 233,836 6.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
I489
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Federal 4780 92,497 1.
2. State and local 4790 4,606 2.
3. Foreign 4795 0 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9
and 11.b) 4770 97,103 4.
5. Deferred portion of item 4 RIAD 4772 (3,543) 5.
</TABLE>
7
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-6
Schedule RI-D--Income form International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs:
a. Interest income booked 4837 N/A 1.a.
b. Interest expense booked 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs (item 1.a minus 1.b) 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at
domestic offices 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign
offices 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations 4239 N/A 3.c.
d. Net non-interest income (expense) attributable to international operations (item
3.a minus 3.b and 3.c) 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before
capital allocation adjustment (sum of items 1.c, 2.c, and 3.d) 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international
operations to reflect the effects of equity capital on overall bank funding
costs 4845 N/A 5.
6. Estimated pretax income attributable to international operations after
capital allocation adjustment (sum of items 4 and 5) 4846 N/A 6.
7. Income taxes attributable to income from international operations as
estimated in item 6 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) 4341 N/A 8.
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations
Required by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income booked at IBFs 4849 N/A 1.
2. Interest expense booked at IBFs 4850 N/A 2.
3. Noninterest income attributable to international operations booked at
domestic offices (excluding IBFs):
a. Gains (losses) and extraordinary items 5491 N/A 3.a.
b. Fees and other noninterest income 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations
booked at domestic offices (excluding IBFs) 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at
domestic offices (excluding IBFs) 4853 N/A 5.
</TABLE>
8
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-7
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all
extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest
expense in Schedule RI. (See instructions for details.)
<TABLE>
<CAPTION>
1495
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains on other real estate owned 5415 0 1.a.
b. Net gains on sales of loans 5416 10,155 1.b.
c. Net gains on sales of premises and fixed assets 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 5.f.(2):
d. Text 4461 Personalized Check Sales 4461 8,471 1.d.
e. Text 4462 Omnitrust Income 4462 4,705 1.e.
f. Text 4463 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets 4531 21,006 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned 5418 0 2.b.
c. Net losses on sales of loans 5419 0 2.c.
d. Net losses on sales of premises and fixed assets 5420 0 2.d.
Itemize and describe the three largest amounts that exceed 10% of Schedule RI,
item 7.c.:
e. Text 4464 FDIC Insurance Assessment 4464 41,122 2.e.
f. Text 4467 4467 2.f.
g. Text 4468 4468 2.g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and
applicable income tax effect (from Schedule RI, item 11.b) (itemize and
describe all extraordinary items and other adjustments):
a. (1) Text 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 3.a.(2)
b. (1) Text 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 3.b.(2)
c. (1) Text 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule
RI-A, item 2) (itemize and describe all adjustments):
a. Text 4492 4492 4.a.
b. Text 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from
Schedule RI-A, item 9) (itemize and describe all changes in accounting
principles):
a. Text 4494 4494 5.a.
b. Text 4495 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule
RI-A, item 10 (itemize and describe all corrections):
a. Text 4496 4496 6.a.
b. Text 4497 4497 6.b.
</TABLE>
9
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RI-8
Schedule RI-E--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A,
item 13) (itemize and describe all such transactions):
a. Text 4498 Transfer of Capital 4498 (200,000) 7.a.
b. Text 4499 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B,
part II, item 5) (itemize and describe all adjustments):
a. Text 4521 Provision for Bank Acquisitions 4521 44,116 8.a.
b. Text 4522 Sale of Loans 4522 (500) 8.b.
9. Other explanations (the space below is provided for the bank to briefly
describe, at its option, any other significant items affecting the Report
of Income): I498 I499
No comment __ (RIAD 4769)
Other explanations (please type or print clearly):
(Text 4769)
</TABLE>
10
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-1
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for December 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) 0081 909,567 1.a.
b. Interest-bearing balances(2) 0071 125,041 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 62,780 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 3,686,207 2.b.
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds sold 0276 178,120 3.a.
b. Securities purchased under agreements to resell 0277 54,820 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 12,317,245 4.a.
b. LESS: Allowance for loan and lease losses RCFD 3123 233,836 4.b.
c. LESS: Allocated transfer risk reserve RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a. minus 4.b. and 4.c.) 2125 12,083,409 4.d.
5. Trading assets (from Schedule RC-D) 3545 0 5.
6. Premises and fixed assets (including capitalized leases) 2145 354,678 6.
7. Other real estate owned (from Schedule RC-M) 2150 17,218 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 2,509 8.
9. Customers' liability to this bank on acceptances outstanding 2155 3,186 9.
10. Intangible assets (from Schedule RC-M) 2143 210,067 10.
11. Other assets (from Schedule RC-F) 2160 576,750 11.
12. Total assets (sum of items 1 through 11) 2170 18,264,352 12.
</TABLE>
__________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-2
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part I) RCON 2200 12,826,561 13.a.
(1) Noninterest-bearing(1) RCON 6631 2,792,797 13.a.(1)
(2) Interest-bearing RCON 6636 10,033,764 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule
RC-E, part II) RCFN 2200 0 13.b.
(1) Noninterest-bearing RCFN 6631 0 13.b.(1)
(2) Interest-bearing RCFN 6636 0 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds purchased RCFD 0278 1,991,674 14.a.
b. Securities sold under agreements to repurchase RCFD 0279 621,600 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D) RCFD 3548 0 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less RCFD 2332 547,291 16.a.
b. With a remaining maturity of more than one year RCFD 2333 315,298 16.b.
17. Mortgage indebtedness and obligations under capitalized leases RCFD 2910 9,568 17.
18. Bank's liability on acceptances executed and outstanding RCFD 2920 3,186 18.
19. Subordinated notes and debentures RCFD 3200 335,000 19.
20. Other liabilities (from Schedule RC-G) RCFD 2930 346,409 20.
21. Total liabilities (sum of items 13 through 20) RCFD 2948 16,996,587 21.
22. Limited-life preferred and related surplus RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus RCFD 3838 0 23.
24. Common Stock RCFD 3230 172,572 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 181,892 25.
26. a. Undivided profits and capital reserves RCFD 3632 937,028 26.a.
b. Net unrealized gains (losses) on available-for-sale securities RCFD 8434 (23,727) 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 1,267,765 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22, and 28) RCFD 3300 18,264,352 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the Number
bank by independent external auditors as of any date during 1995 RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm which submits a report on the bank.
2 = Independent audit of the bank's parent holding company conducted
in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the
consolidated holding company (but not on a bank separately).
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority).
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority).
5 = Review of the bank's financial statements by external auditors.
6 = Compilation of the bank's financial statements by external
auditors.
7 = Other audit procedures (excluding tax preparation work).
8 = no external audit work.
__________
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
12
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-3
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
C405
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and
currency and coin 0022 759,070 1.
a. Cash items in process of collection and unposted debits 0020 602,561 1.a.
b. Currency and coin 0080 156,509 1.b.
2. Balances due from depository institutions in the U.S. 0082 16,599 2.
a. U.S. branches and agencies of foreign banks
(including their IBFs) 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository
institutions in the U.S. (including their IBFs) 0085 16,599 2.b.
3. Balances due from banks in foreign countries and foreign
central banks 0070 1,463 3.
a. Foreign branches of other U.S. banks 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks 0074 1,463 3.b.
4. Balances due from Federal Reserve Banks 0090 9,955 0090 9,955 4.
5. Total (sum of items 1 through 4) (total of column A must
equal Schedule RC, sum of items 1.a. and 1.b.) 0010 787,087 0010 787,087 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum RCON Bil Mil Thou
Dollar Amounts in Thousands
<S> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks
in the U.S. (included in items 2, column B above) 0050 36,249 M.1.
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
C410
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities 0211 0 0213 0 1286 599,759 1287 596,691 1.
2. U.S. Government agency and
corporation obligations
(exclude mortgage-backed
securities):
a. Issued by U.S. Government
agencies(2) 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government-
sponsored agencies(3) 1294 0 1295 0 1297 69,720 1298 68,382 2.b.
</TABLE>
__________
(1) Includes equity securities without readily determinable
fair values at historical cost in item 6.c., column D.
(2) Includes Small Business Administration "Guaranteed Loan
Pool Certificates," U.S. Maritime Administration obligations,
and Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities)
issued by the Farm Credit System, the Federal Home Loan Bank,
System, the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Financing Corporation,
Resolution Funding Corporation, the Student Loan Marketing
Association, and the Tennessee Valley Authority.
13
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-4
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states
and political subdivisions
in the U.S.
a. General obligations 1676 1,685 1677 1,665 1678 0 1679 0 3.a.
b. Revenue obligations 1681 39,495 1686 39,897 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations 1694 300 1695 302 1696 0 1697 0 3.c.
4. Mortgage-backed securities
(MBS):
a. Pass-through securities:
(1) Guaranteed by GNMA 1698 0 1699 0 1701 92,766 1702 90,310 4.a.(1)
(2) Issued by FNMA and FHLMC 1703 15,955 1705 16,648 1706 2,201,637 1707 2,173,632 4.a.(2)
(3) Other pass-through
securities 1709 0 1710 0 1711 0 1713 0 4.a.(3)
b. Other mortgage-backed
securities (include CMOs,
REMICs, and stripped MBS):
(1) Issued or guaranteed by
FNMA, FHLMC, or GNMA 1714 0 1715 0 1716 96,501 1717 96,585 4.b.(1)
(2) Collateralized by MBS
issued or guaranteed
by FNMA, FHLMC, or GNMA 1718 0 1719 0 1731 126,128 1732 126,255 4.b.(2)
(3) All other mortgage-backed
securities 1733 3,095 1734 3,095 1735 174,540 1736 174,637 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities 1737 0 1738 0 1739 286,206 1741 284,117 5.a.
b. Foreign debt securities 1742 2,250 1743 2,250 1744 0 1746 0 5.b.
6. Equity securities:
a. Investments in mutual
funds 1747 345 1748 345 6.a.
b. Other equity securities
with readily determinable
fair values 1749 10,010 1751 10,077 6.b.
c. All other equity
securities(1) 1752 65,176 1753 65,176 6.c.
7. Total (sum of items 1 through
6) (total of column A must
equal Schedule RC, item 2.a)
(total of column D must equal
Schedule RC, item 2.b.) 1754 62,780 1771 63,857 1772 3,722,788 1773 3,686,207 7.
</TABLE>
__________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c., column D.
14
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-5
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Memoranda C412
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Pledged securities(2) 0416 1,797,005 M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in
nonaccrual status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less 0343 524 M.2.a.(1)
(2) Over three months through 12 months 0344 2,390 M.2.a.(2)
(3) Over one year through five years 0345 873,777 M.2.a.(3)
(4) Over five years 0346 2,667,323 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through
2.a.(4) 0347 3,544,014 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently 4544 124,631 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly 4545 4,744 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4551 0 M.2.b.(3)
(4) Less frequently than every five years 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1)
through 2.b.(4)) 4553 129,375 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must
equal total debt securities from Schedule RC-B, sum of items 1 through 5,
columns A and D, minus nonaccrual debt securities included in Schedule RC-N,
item 9, column C) 0393 3,673,389 M.2.c.
3. Not applicable
4. Held-to-maturity debt securities restructured and in compliance with
modified terms (included in Schedule RC-B, items 3 through 5, column A,
above) 5365 0 M.4.
5. Not applicable
6. Floating rate debt securities with a remaining maturity of one year or less
(2),(4) (included in Memorandum items 2.b.(1) through 2.b.(4) above) 5519 0 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to
available-for-sale or trading securities during the calendar year-to-date
(report the amortized cost at date of sale or transfer) 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and
available-for-sale accounts in Schedule RC-B, item 4.b.):
a. Amortized cost 8780 0 M.8.a.
b. Fair value 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-B, items 2, 3, and 5):
a. Amortized cost 8782 0 M.9.a.
b. Fair value 8783 0 M.9.b.
</TABLE>
__________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
15
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-6
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading.
<TABLE>
<CAPTION>
C415
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate 1410 6,139,590 1.
a. Construction and land development 1415 211,931 1.a.
b. Secured by farmland (including farm residential and other improvements) 1420 15,579 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential properties
and extended under lines of credit 1797 622,568 1.c.(1)
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens 5367 3,528,814 1.c.(2)(a)
(b) Secured by junior liens 5368 236,882 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties 1460 140,140 1.d.
e. Secured by nonfarm nonresidential properties 1480 1,383,676 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S. 1505 783 2.a.
(1) To U.S. branches and agencies of foreign banks 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. 1507 783 2.a.(2)
b. To other depository institutions in the U.S. 1517 0 1517 0 2.b.
c. To banks in foreign countries 1510 1,182 2.c.
(1) To foreign branches of other U.S. banks 1513 0 2.c.(1)
(2) To other banks in foreign countries 1516 1,182 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers 1590 2,934 1590 2,934 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) 1763 1,932,721 1763 1,932,721 4.a.
b. To non-U.S. addressees (domicile) 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks 1756 0 1756 0 5.a.
b. Of foreign banks 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal expenditures
(i.e., consumer loans) (includes purchased paper) 1975 3,666,789 6.
a. Credit cards and related plans (includes check credit and other revolving
credit plans) 2008 1,433,436 6.a.
b. Other (includes single payment, installment, and all student loans) 2011 2,233,353 6.b.
7. Loans to foreign governments and official institutions (including foreign
central banks) 2081 278 2081 278 7.
8. Obligations (other than securities and leases) of states and political
subdivisions in the U.S. (includes nonrated industrial development
obligations) 2107 255,313 2107 255,313 8.
9. Other loans 1563 317,089 9.
a. Loans for purchasing or carrying securities (secured and unsecured) 1545 83,223 9.a.
b. All other loans (exclude consumer loans) 1564 233,866 9.b.
10. Lease financing receivables (net of unearned income) 2165 566 10.
a. Of U.S. addressees (domicile) 2182 566 10.a.
b. Of non-U.S. addressees (domicile) 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10
minus item 11) (total of column A must equal Schedule RC, item 4.a.) 2122 12,317,245 2122 12,317,245 12.
</TABLE>
16
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-7
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Memoranda Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms (included
in Schedule RC-C, part I, above and not reported as past due or nonaccrual in
Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile) 1687 0 M.2.a.(1)
(2) To non U.S. addressees (domicile) 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to
individuals for household, family, and other personal expenditures) 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables of
non-U.S. addressees (domicile) included in Memorandum item 2.b. above 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those in
nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less 0348 2,395,241 M.3.a.(1)
(2) Over three months through 12 months 0349 1,333,734 M.3.a.(2)
(3) Over one year through five years 0356 2,135,810 M.3.a.(3)
(4) Over five years 0357 1,324,722 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum items 3.a.(1)
through 3.a.(4)) 0358 7,189,507 M.3.a.(5)
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently 4554 3,818,127 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly 4555 1,109,282 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4561 101,773 M.3.b.(3)
(4) Less frequently than every five years 4564 32,450 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1)
through 3.b.(4)) 4567 5,061,632 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) (must
equal the sum of total loans and leases, net, from Schedule RC-C, part I,
item 12, plus unearned income from Schedule RC-C, part I, item 11, minus
total nonaccrual loans and leases from Schedule RC-N, sum of items 1 through
8, column C) 1479 12,251,139 M.3.c.
d. Floating rate loans with a remaining maturity of one year or less
(included in Memorandum items 3.b.(1) through 3.b.(4) above) A246 736,593 M.3.d.
4. Loans to finance commercial real estate, construction, and land development
activities (not secured by real estate) included in Schedule RC-C, part I,
items 4 and 9, column A, page RC-6(2) 2746 0 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) 5369 658,838 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), RCON Bil Mil Thou
column B, page RC-6) 5370 1,645,570 M.6.
</TABLE>
__________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-8
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a. through 14.e.,
columns A through D).
<TABLE>
<CAPTION>
C420
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
Assets
1. U.S. Treasury securities in domestic offices RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices
(exclude mortgage-backed securities) RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in
domestic offices RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or
GNMA (include CMOs, REMICs, and stripped MBS) RCON 3535 0 4.b.
c. All other mortgage-backed securities RCON 3536 0 4.c.
5. Other debt securities in domestic offices RCON 3537 0 5.
6. Certificates of deposit in domestic offices RCON 3538 0 6.
7. Commercial paper in domestic offices RCON 3539 0 7.
8. Bankers acceptances in domestic offices RCON 3540 0 8.
9. Other trading assets in domestic offices RCON 3541 0 9.
10. Trading assets in foreign offices RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other
commodity and equity contracts:
a. In domestic offices RCON 3543 0 11.a.
b. In foreign offices RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC,
item 5) RCFD 3545 0 12.
</TABLE>
<TABLE>
<CAPTION>
Liabilities Bil Mil Thou
<S> <C> <C> <C>
13. Liability for short positions RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other
commodity and equity contracts RCFD 3547 0 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule
RC, item 15.b.) RCFD 3548 0 15.
18
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-9
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
</TABLE>
<TABLE>
<CAPTION>
C425
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
Dollar Amounts in Thousands RCON BIL Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships,
and corporations 2201 2,744,077 2240 2,435,043 2346 9,621,831 1.
2. U.S. Government 2202 35,326 2280 30,593 2520 2,069 2.
3. States and political subdivisions
in the U.S. 2203 136,081 2290 100,829 2530 59,354 3.
4. Commercial banks in the U.S. 2206 142,224 2310 142,224 2550 433 4.
5. Other depository institutions
in the U.S. 2207 41,890 2312 41,890 2349 1,058 5.
6. Banks in foreign countries 2213 4,221 2320 4,221 2236 0 6.
7. Foreign governments and
official institutions
(including foreign central banks) 2216 0 2300 0 2377 0 7.
8. Certified and official checks 2330 37,997 2330 37,997 8.
9. Total (sum of items 1 through 8)
(sum of columns A and C must
equal Schedule RC, item 13.a) 2215 3,141,816 2210 2,792,797 2385 9,684,745 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts 6835 1,183,474 M.1.a.
b. Total brokered deposits 2365 0 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less 2344 0 M.1.c.(2)
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with
a remaining maturity of one year or less (included in Memorandum item
1.c.(1) above) A243 0 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a
remaining maturity of one year or less (included in Memorandum
item 1.b above) A244 0 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions
in the U.S. reported in item 3 above which are secured or collateralized as
required under state law) 5590 192,979 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a
through 2.d must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) 6810 4,650,620 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) 0352 1,214,729 M.2.a.(2)
b. Total time deposits of less than $100,000 6648 3,413,471 M.2.b.
c. Time certificates of deposit of $100,000 or more 6645 404,225 M.2.c.
d. Open-account time deposits of $100,000 or more 6646 1,700 M.2.d.
3. All NOW accounts (included in column A above) 2398 349,019 M.3.
4. Not applicable
</TABLE>
19
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-10
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000
(sum of Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum
item 2.b above): (1)
a. Fixed rate time deposits of less than $100,000 with a remaining maturity
of:
(1) Three months or less A225 799,726 M.5.a.(1)
(2) Over three months through 12 months A226 1,579,040 M.5.a.(2)
(3) Over one year A227 918,200 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing
frequency of:
(1) Quarterly or more frequently A228 116,505 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly A229 0 M.5.b.(2)
(3) Less frequently than annually A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining
maturity of one year or less (included in Memorandum items 5.b.(1)
through 5.b.(3) above) A231 60,542 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time
certificates of deposit of $100,000 or more and open-account time deposits
of $100,000 or more) (sum of Memorandum items 6.a.(1) through 6.b.(4) must
equal the sum of Memorandum items 2.c and 2.d above): (1)
a. Fixed rate time deposits of $100,000 or more with a remaining
maturity of:
(1) Three months or less A232 166,178 M.6.a.(1)
(2) Over three months through 12 months A233 155,327 M.6.a.(2)
(3) Over one year through five years A234 76,388 M.6.a.(3)
(4) Over five years A235 854 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a
repricing frequency of:
(1) Quarterly or more frequently A236 7,178 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually A238 0 M.6.b.(3)
(4) Less frequently than every five years A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity
of one year or less (included in Memorandum items 6.b.(1) through
6.b.(4) above) A240 884 M.6.c.
</TABLE>
__________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-11
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and Agreement subsidiaries
and IBFs)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations 2621 0 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks,
including their IBFs) 2625 0 3.
4. Foreign governments and official institutions (including foreign central
banks) 2650 0 4.
5. Certified and official checks 2330 0 5.
6. All other deposits 2668 0 6.
7. Total (sum of items 1 through 6)(must equal Schedule RC, item 13.b) 2200 0 7.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C>
1. Time deposits with a remaining maturity of one year or less (included in
Part II, item 7 above) A245 0 M.1.
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION> C430
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. Income earned, not collected on loans RCFD 2164 91,254 1.
2. Net deferred tax assets (1) RCFD 2148 91,696 2.
3. Excess residential mortgage servicing fees receivable RCFD 5371 4,352 3.
4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2168 389,448 4.
a. Text 3549 RCFD 3549 90,639 4.a.
b. Text 3550 RCFD 3550 4.b.
c. Text 3551 RCFD 3551 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) RCFD 2160 576,750 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes RCFD 5610 0 M.1.
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION> C435
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices (2) RCON 3645 17,435 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) RCFD 3646 153,074 1.b.
2. Net deferred tax liabilities (1) RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2938 175,900 4.
a. Text 3552 Securities Trade Date Payable RCFD 3552 49,719 4.a.
b. Text 3553 Foreign Currency Purchase Contacts RCFD 3553 55,176 4.b.
c. Text 3554 RCFD 3554 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) RCFD 2930 346,409 5.
</TABLE>
__________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-12
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440
Domestic Offices
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding 2155 3,186 1.
2. Bank's liability on acceptances executed and outstanding 2920 3,186 2.
3. Federal funds sold and securities purchased under agreements to resell 1350 232,940 3.
4. Federal funds purchased and securities sold under agreements to repurchase 2800 2,613,274 4.
5. Other borrowed money 3190 862,589 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs 2163 126,784 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs 2941 N/A 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement
subsidiaries, and IBFs) 2192 18,137,568 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement
subsidiaries, and IBFs) 3129 16,996,587 9.
</TABLE>
Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices.
<TABLE>
<CAPTION>
RCON Bil Mil Thou
<S> <C> <C> <C>
10. U.S. Treasury securities 1779 596,691 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed
securities) 1785 68,382 11.
12. Securities issued by states and political subdivisions in the U.S. 1786 41,480 12.
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1787 2,279,897 13.a.(1)
(2) Other pass-through securities 1869 0 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS):
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1877 96,585 13.b.(1)
(2) All other mortgage-backed securities 2253 303,987 13.b.(2)
14. Other domestic debt securities 3159 284,117 14.
15. Foreign debt securities 3160 2,250 15.
16. Equity securities:
a. Investments in mutual funds 3161 345 16.a.
b. Other equity securities with readily determinable fair values 3162 10,077 16.b.
c. All other equity securities 3169 65,176 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10
through 16) 3170 3,748,987 17.
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank 3051 N/A M.1.
OR
2. Net due to the IBF of the domestic offices of the reporting bank 3059 N/A M.2.
</TABLE>
22
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-13
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
C445
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC,
item 12) 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C,
part I, item 12, column A) 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I,
item 4, column A) 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of
Schedule RC-E, part II, items 2 and 3) 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1,
4, 5, and 6 2381 N/A 6.
</TABLE>
Schedule RC-K-Quarterly Averages (1)
<TABLE>
<CAPTION> C455
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. Interest-bearing balances due from depository institutions RCFD 3381 8,193 1.
2. U.S. Treasury securities and U.S. Government agency and corporation
obligations(2) RCFD 3382 2,910,389 2.
3. Securities issued by states and political subdivisions in the U.S.(2) RCFD 3383 43,902 3.
4. a. Other debt securities(2) RCFD 3647 557,948 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal
Reserve stock) RCFD 3648 74,361 4.b.
5. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs RCFD 3365 400,738 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans RCON 3360 11,833,450 6.a.(1)
(2) Loans secured by real estate RCON 3385 6,220,607 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers RCON 3386 3,724 6.a.(3)
(4) Commercial and industrial loans RCON 3387 1,894,723 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures RCON 3388 3,332,343 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN 3360 0 6.b.
7. Trading assets RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income) RCFD 3484 563 8.
9. Total assets(4) RCFD 3368 17,444,180 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts,
ATS accounts, and telephone and preauthorized transfer accounts) (exclude
demand deposits) RCON 3485 184,771 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs) RCON 3486 4,683,542 11.a.
b. Other savings deposits RCON 3487 1,222,087 11.b.
c. Time certificates of deposit of $100,000 or more RCON 3345 1,616,143 11.c.
d. All other time deposits RCON 3469 3,464,220 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs RCFN 3404 0 12.
13. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs RCFD 3353 974,876 13.
14. Other borrowed money RCFD 3355 864,757 14.
</TABLE>
__________
(1) For all items, banks have the option of reporting either (1) an
average of daily figures for the quarter, or (2) an average of weekly
figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on
amortized cost.
(3) Quarterly averages for all equity securities should be based on
historical cost.
(4) The quarterly average for total assets should reflect all debt
securities (not held for trading) at amortized cost, equity securities
with readily determinable fair values at the lower of cost or fair
value, and equity securities without readily determinable fair values
at historical cost.
23
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-14
Schedule RC-L-Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule
RC-L. Some of the amounts reported in Schedule RC-L are regarded as
volume indicators and not necessarily as measures of risk.
<TABLE>
<CAPTION>
C460
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties,
e.g., home equity lines 3814 715,679 1.a.
b. Credit card lines 3815 2,965,741 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate 3816 251,431 1.c.(1)
(2) Commitments to fund loans not secured by real estate 6550 0 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 3,780,502 1.e.
2. Financial standby letters of credit and foreign office guarantees 3819 295,856 2.
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 498 2.a.
3. Performance standby letters of credit and foreign office guarantees 3821 90,425 3.
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 1 3.a.
4. Commercial and similar letters of credit 3411 72,731 4.
5. Participations in acceptances (as described in the instructions) conveyed to
others by the reporting bank 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by
the reporting (nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is
indemnified against loss by the reporting bank) 3433 0 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been
treated as sold for Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date 3650 0 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3651 0 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan
pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date 3652 157,632 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3653 157,632 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report
date 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3655 0 9.c.(2)
d. Small business obligations transferred with recourse under Section 208
of the Riegle Community Development and Regulatory Improvement Act of 1994:
(1) Outstanding principal balance of small business obligations transferred
as of the report date A249 0 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date A250 0 9.d.(2)
10. When-issued securities:
a. Gross commitments to purchase 3434 0 10.a.
b. Gross commitments to sell 3435 0 10.b.
11. Spot foreign exchange contracts 8765 10,330 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet
derivatives) (itemize and describe each component of this item over 25% of
Schedule RC, item 28, "Total equity capital") 3430 1,475,813 12.
a. TEXT 3555 Mortgage servicing with recourse RCFD 3555 1,475,813 12.a.
b. TEXT 3556 RCFD 3556 12.b.
c. TEXT 3557 RCFD 3557 12.c.
d. TEXT 3558 RCFD 3558 12.d.
</TABLE>
24
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-15
Schedule RC-L--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital") 5591 0 13.
a. Text 5592 RCFD 5592 13.a.
b. Text 5593 RCFD 5593 13.b.
c. Text 5594 RCFD 5594 13.c.
d. Text 5595 RCFD 5595 13.d.
</TABLE>
<TABLE>
<CAPTION>
C461
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
<S> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., notional amounts)
(for each column, sum of items 14.a
through 14.e must equal sum of items
15,16.a, and 16.b):
a. Future contracts 0 0 0 0 14.a.
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
b. Forward contracts 706,731 19,162 0 0 14.b.
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded option contracts:
(1) Written options 0 0 0 0 14.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
(2) Purchased options 0 0 0 0 14.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
d. Over-the-counter option contracts:
(1) Written options 42,960 0 0 0 14.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
(2) Purchased options 2,827,960 0 0 0 14.d.(2)
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
e. Swaps 998,372 0 0 0 14.e.
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
15. Total gross notional amount of derivative
contracts held for trading 0 19,162 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
16. Total gross notional amount of derivative
contracts held for purposes other
than trading:
a. Contracts marked to market 0 0 0 0 16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
b. Contracts not marked to market 4,576,023 0 0 0 16.b.
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
</TABLE>
25
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-16
Schedule RC-L--Continued
<TABLE>
<CAPTION>
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17. Gross fair values of
derivative contracts:
a. Contracts held for trading:
(1) Gross positive fair value 8733 0 8734 462 8735 0 8736 0 17.a.(1)
(2) Gross negative fair value 8737 0 8738 463 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes
other than trading that
are marked to market:
(1) Gross positive fair value 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative fair value 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes
other than trading that are
not marked to market:
(1) Gross positive fair value 8749 21,020 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair value 8753 8,079 8754 0 8755 0 8756 0 17.c.(2)
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1.-2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are
reported in Schedule RC-L, items 1.a through 1.e, above (report only the
unused portions of commitments that are fee paid or otherwise legally
binding) 3833 2,975,759 M.3.
a. Participations in commitments with an original maturity
exceeding one year conveyed to others RCFD 3834 0 M.3.a.
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addresses (domicile) included in Schedule
RC-L, items 2 and 3, above 3377 90 M.4.
5. Installment loans to individuals for household, family, and other personal
expenditures that have been securitized and sold without recourse (with
servicing retained), amounts outstanding by type of loan:
a. Loans to purchase private passenger automobiles (to be completed
for the September report only) 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans) 2743 N/A M.5.c.
(to be completed for the September report only)
</TABLE>
26
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-17
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
C465
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers,
directors, principal shareholders, and their related interests as of the
report date:
a. Aggregate amount of all extensions of credit to all executive officers,
directors, principal shareholders, and their related interests. 6164 9,158 1.a.
b. Number of executive officers, directors, and principal shareholders to whom
the amount of all extensions of credit by the reporting bank (including
extensions of credit to related interests) equals or exceeds the lesser of
$500,000 or 5 percent of total capital as defined for this Number
purpose in agency regulations. RCFD 6165 2 1.b.
2. Federal funds sold and securities purchased under agreements to resell with
U.S. branches and agencies of foreign banks(1) (included in Schedule RC,
items 3.a and 3.b) 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans
serviced for others (include both retained servicing and purchased
servicing):
a. Mortgages serviced under a GNMA contract 5500 1,337,341 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer 5501 4,848 4.b.(1)
(2) Serviced without recourse to servicer 5502 2,241,222 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract 5503 133,625 4.c.(1)
(2) Serviced under a special option contract 5504 2,441,222 4.c.(2)
d. Mortgages serviced under other servicing contracts 5505 5,100,817 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items
5.a and 5.b must equal Schedule RC, item 9):
a. U.S. addresses (domicile) 2103 3,186 5.a.
b. Non-U.S. addresses (domicile) 2104 0 5.b.
6. Intangible assets:
a. Mortgage servicing rights 3164 49,040 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships 5506 0 6.b.(1)
(2) All other identifiable intangible assets 5507 3,173 6.b.(2)
c. Goodwill 3163 157,854 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) 2143 210,067 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock
dedicated to redeem the debt 3295 0 7.
</TABLE>
__________
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-18
Schedule RC-M--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices RCON 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices RCON 5510 6,921 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices RCON 5511 443 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices RCON 5512 9,854 8.a.(2)(e)
(f) In foreign offices RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) RCFD 2150 17,218 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures RCFD 5374 2,509 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated
companies RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) RCFD 2130 2,509 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies RCFD 5376 9,269 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in
Schedule RC, item 23, "Perpetual preferred stock and related surplus" RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter
(include proprietary, private label, and third party products):
a. Money market funds RCON 6441 67,231 10.a.
b. Equity securities funds RCON 8427 14,102 10.b.
c. Debt securities funds RCON 8428 3,951 10.c.
d. Other mutual funds RCON 8429 10,258 10.d.
e. Annuities RCON 8430 35,961 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a
through 10.e above) RCON 8784 7,244 10.f.
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
Memorandum RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December
report only):
a. Reciprocal holdings of banking organizations' capital instruments 3836 0 M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments 3837 0 M.1.b.
</TABLE>
28
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-19
Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets
The FFIEC regards the information reported in all of Memorandum item 1, in
items 1 through 10, column A, and in Memorandum items 2 through 4, column A,
as confidential.
<TABLE>
<CAPTION>
C470
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addresses (domicile) 1245 102,825 1246 9,095 1247 58,735 1.a.
b. To non-U.S. addresses (domicile) 1248 0 1249 0 1250 0 1.b.
2. Loans to depository institutions and
acceptances of other banks:
a. To U.S. banks and other U.S. depository
institutions 5377 0 5378 0 5379 0 2.a.
b. To foreign banks 5380 0 5381 0 5382 0 2.b.
3. Loans to finance agricultural production
and other loans to farmers 1594 278 1597 0 1583 0 3.
4. Commercial and industrial loans:
a. To U.S. addresses (domicile) 1251 16,490 1252 9,156 1253 2,683 4.a.
b. To non-U.S. addresses (domicile) 1254 0 1255 0 1256 0 4.b.
5. Loans to individuals for household, family,
and other personal expenditures:
a. Credit cards and related plans 5383 38,007 5384 25,550 5385 0 5.a.
b. Other (includes single payment,
installment and all student loans) 5386 69,185 5387 26,576 5388 2,522 5.b.
6. Loans to foreign governments and official
institutions 5389 0 5390 0 5391 0 6.
7. All other loans 5459 3,974 5460 0 5461 2,166 7.
8. Lease financing receivables:
a. Of U.S. addresses (domicile) 1257 0 1258 0 1259 0 8.a.
b. Of non-U.S. addresses (domicile) 1271 0 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude
other real estate owned and other
repossessed assets) 3505 0 3506 0 3507 0 9.
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or
partially guaranteed by the U.S.
Government. 5612 35,900 5613 21,614 5614 0 10.
a. Guaranteed portion of loans and leases
included in item 10 above. 5615 35,889 5616 21,614 5617 0 10.a.
</TABLE>
29
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-20
Schedule RC-N--Continued
<TABLE>
<CAPTION> C473
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Tho RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included
in Schedule RC-N, items 1 through 8,
above (and not reported in Schedule RC-C,
part I, Memorandum item 2) 1658 0 1659 0 1661 8,745 M.1.
2. Loans to finance commercial real estate,
construction, and land development
activities (not secured by real estate)
included in Schedule RC-N, items 4
and 7, above 6558 0 6559 0 6560 0 M.2.
<CAPTION>
RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
3. Loans secured by real estate in domestic
offices
(included in Schedule RC-N, item 1, above):
a. Construction and land development 2759 1,482 2769 0 3492 9,901 M.3.a.
b. Secured by farmland 3493 11 3494 0 3495 93 M.3.b.
c. Secured by 1-4 family residential
properties:
(1) Revolving, open-end loans secured by
1-4 family residential properties and
extended under lines of credit 5398 4,042 5399 1,362 5400 95 M.3.c.(1)
(2) All other loans secured by 1-4 family
residential properties 5401 78,623 5402 7,438 5403 28,824 M.3.c.(2)
d. Secured by multifamily (5 or more)
residential properties 3499 4,249 3500 0 3501 1,664 M.3.d.
e. Secured by nonfarm nonresidential
properties 3502 14,418 3503 295 3504 18,158 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and
other commodity and equity contracts:
a. Book value of amounts carried as assets 3522 0 3528 0 M.4.a.
b. Replacement cost of contracts with a
positive replacement cost 3529 0 3530 0 M.4.b.
</TABLE>
30
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-21
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION> C475
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits 0030 N/A 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits (1) 0032 0 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits 3510 N/A 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits (1) 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not
included in total deposits in domestic offices) 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured
branches in Puerto Rico and U.S. territories and possessions (not included
in total deposits):
a. Demand deposits of consolidated subsidiaries 2211 11,940 4.a.
b. Time and savings deposits (1) of consolidated subsidiaries 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and
possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) 2229 0 5.a.
b. Time and savings deposits (1) in insured branches (included in Schedule
RC-E, Part II) 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches (included in
Schedule RC-G, item 1.b) 5515 0 5.c.
Item 6 is not applicable to state nonmember banks that have not been authorized
by the Federal Reserve to act as pass-through corespondents.
6. Reserve balances actually passed through to the Federal Reserve by the
reporting bank on behalf of its respondent depository institutions that are
also reflected as deposit liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5,
column B) 2314 5 6.a.
b. Amount reflected in time and savings deposits (1) (included in Schedule
RC-E, Part I, item 4 or 5, column A or C, but not column B) 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums 5516 0 7.a.
b. Unamortized discounts 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under
Section 5(d)(3) of the Federal Deposit Insurance Act (from most recent FDIC
Oakar Transaction Worksheet(s)) 5518 0 8.
9. Deposits in lifeline accounts 5596 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included
in total deposits in domestic offices) 8432 0 10.
</TABLE>
__________
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
31
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-22
Schedule RC-O--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule
RC-E for certain reciprocal demand balances:
a. Amount by which demand deposits would be reduced if reciprocal demand
balances between the reporting bank and savings associations were reported
on a net basis rather than a gross basis in Schedule RC-E 8785 0 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand
balances between the reporting bank and the U.S. branches and agencies of
foreign banks were reported on a gross basis rather than a net basis in
Schedule RC-E A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of
collection were included in the calculation of net reciprocal demand
balances between the reporting bank and the domestic offices of U.S. banks
and savings associations in Schedule RC-E A182 0 11.c.
</TABLE>
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1a.
(1) and 1.b.(1) must equal schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of $100,000 or less 2702 9,062,965 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be completed for the
June report only) Number
RCON 3779 N/A M.1.a.(2)
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000 2710 3,763,596 M.1.b.(1)
Number
(2) Number of deposit accounts of more than $100,000 RCON 2722 13,229 M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000 reported
in Memorandum item 1.b.(2) above by $100,000 and subtracting the result from
the amount of deposit accounts of more than $100,000 reported in Memorandum
item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the
estimate described above Yes No
6861 X M.2.a.
b. If the box marked Yes has been checked, report the estimate of uninsured
deposits determined by using your bank's method or procedure RCON Bil Mil Thou
5597 N/A M.2.b.
</TABLE>
Person to whom questions about the Reports of Condition and Income should be
directed: C477
Natie P. Hennelly (804)782-5320
Name and Title (TEXT 8901) Area code/phone number/extension
(TEXT 8902)
32
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-23
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that
reported total assets of $1 billion or more in Schedule RC, item 12,
for June 30, 1995, must complete items 2 through 9 and Memoranda items
1 and 2. Banks with assets of less than $1 billion must complete
items 1 through 3 below or Schedule RC-R in its entirety, depending on
their response to item 1 below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Test for determining the extent to which Schedule RC-R must be completed. To
be completed only by banks with total assets of less than $1 billion.
C480 Indicate in the appropriate box at the right whether the bank has total
capital Yes No greater than or equal to eight percent of adjusted total
assets. RCFD 6056
1.
</TABLE>
For purposes of this test, adjusted total assets equals total assets
less cash, U.S. Treasuries, U.S. Government agency obligations, and 80
percent of U.S. Government-sponsored agency obligations plus the allowance
for loan and lease losses and selected off-balance sheet items as reported
on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to
complete items 2 and 3 below. If the box marked NO has been checked, the
bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not
in compliance with the risk-based capital guidelines.
NOTE: All banks are required to complete items 2 and 3 below. See optional
worksheet for items 3.a through 3.f.
<TABLE>
<CAPTION>
(Column A) (Column B)
Subordinated Debt (1) Other
and Intermediate Limited-
Term Preferred Life Capital
Stock Instruments
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
2. Subordinated debt (1) and other limited-life capital
instruments (original weighted average maturity of
at least five years) with a remaining maturity of:
a. One year or less 3780 0 3786 0 2.a.
b. Over one year through two years 3781 50,000 3787 0 2.b.
c. Over two years through three years 3782 10,000 3788 0 2.c.
d. Over three years through four years 3783 0 3789 0 2.d.
e. Over four years through five years 3784 0 3790 0 2.e.
f. Over five years 3785 275,000 3791 0 2.f.
3. Amounts used in calculating regulatory capital ratios
(report amounts determined by the bank for its own
internal regulatory capital analyses): RCFD Bil Mil Thou
a. Tier 1 capital 8274 1,129,222 3.a.
b. Tier 2 capital 8275 467,744 3.b.
c. Total risk-based capital 3792 1,596,965 3.c.
d. Excess allowance for loan and lease losses A222 53,838 3.d.
e. Risk-weighted assets (Net of all deductions, including excess allowance) A223 14,346,543 3.e.
f. "Average total assets" (Net of all assets deducted from Tier 1 capital) (2) A224 17,281,865 3.f.
</TABLE>
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks that
answered NO to item 1 above and by banks with total assets of $1 billion or
more.
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(2)
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and claims unconditionally
guaranteed by, the U.S. Government and its agencies and other OECD
central governments 3794 311,821 4.a.(1)
(2) All other 3795 166,344 4.a.(2)
b. Credit equivalent amount of off-balance sheet items 3796 0 4.b.
</TABLE>
__________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
(3) Do not report in column B the risk-weighted amount of assets reported
in column A
33
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-24
Schedule RC-R--Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items (1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) Claims conditionally guaranteed by the U.S. Government
and its agencies and other OECD central governments 3798 841,226 5.a.(1)
(2) Claims collateralized by securities issued by the
U.S. Government and its agencies and other OECD
central governments; by securities issued by U.S.
Government-sponsored agencies; and by cash on deposit 3799 0 5.a.(2)
(3) All other 3800 3,480,933 5.a.(3)
b. Credit equivalent amount of off-balance sheet items 3801 21,751 5.b.
6. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet 3802 3,630,677 6.a.
b. Credit equivalent amount of off-balance sheet items 3803 924,167 6.b.
7. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet 3804 9,571,445 7.a.
b. Credit equivalent amount of off-balance sheet items 3805 1,842,996 7.b.
8. On-balance sheet asset values excluded from the calculation
of the risk-based capital ratio (2) 3806 (23,727) 8.
9. Total assets recorded on the balance sheet (sum of items
4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC,
item 12 plus items 4.b and 4.c) 3807 18,498,188 9.
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts
covered by the risk-based capital standards 8764 21,020 M.1.
</TABLE>
<TABLE>
<CAPTION>
With a remaining maturity of
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
2. Notional principal amounts of
off-balance sheet derivative
contracts (3):
a. Interest rate contracts 3809 69,664 8766 3,719,565 8767 37,102 M.2.a.
b. Foreign exchange contracts 3812 19,162 8769 0 8770 0 M.2.b.
c. Gold contracts 8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals contracts 8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts A000 0 A001 0 A002 0 M.2.f.
</TABLE>
__________
(1) Do not report in column B the risk-weighted amount of assets
reported in column A.
(2) Include the difference between the fair value and the amortized
cost of available-for-sale securities in item 8 and report the
amortized cost of these securities in items 4 through 7 above. Item 8
also includes on-balance sheet asset values (or portions thereof) of
off-balance sheet interest rate, foreign exchange rate, and commodity
contracts and those contracts (e.g., futures contracts) not subject to
risk-based capital. Exclude from item 8 margin accounts and accrued
receivables as well as any portion of the allowance for loan and lease
losses in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
Page RC-25
Optional Narrative Statement Concerning the Amounts Reported in the
Reports of Condition and Income at close of business on June 30, 1996
Crestar Bank Richmond, Virginia
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of
Condition and Income. This optional statement will be made available
to the public, along with the publicly available data in the Reports
of Condition and Income, in response to any request for individual
bank report data. However, the information reported in column A and
in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING
TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL
ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT
WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF
THEIR CUSTOMERS. Banks choosing not to make a statement may check the
"No comment" box below and should make no entries of any kind in the
space provided for the narrative statement; i.e., DO NOT enter in this
space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement
should not exceed 100 words. Further, regardless of the number of
words, the statement must not exceed 750 characters, including
punctuation, indentation, and standard spacing between words and
sentences. If any submission should exceed 750 characters, as
defined, it will be truncated at 750 characters with no notice to the
submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must
be accurate and not misleading. Appropriate efforts shall be taken by
the submitting bank to ensure the statement's accuracy. The statement
must be signed, in the space provided below, by a senior officer of
the bank who thereby attests to its accuracy.
If, subsequent to the original submission, material changes are
submitted for the data reported in the Reports of Condition and
Income, the existing narrative statement will be deleted from the
files, and from disclosure; the bank, at its option, may replace it
with a statement, under signature, appropriate to the amended data.
The optional narrative statement will appear in agency records and in
release to the public exactly as submitted (or amended as described in
the preceding paragraph) by the management of the bank (except for the
truncation of statements exceeding the 750-character limit described
above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY
THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE
STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY
HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED
THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE
OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING
BANK.
No comment [] (RCON 6979) C471 C472
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
Item 8 of Schedule RC-0 is stated as zero because the Reporting
Bank experienced significant negative growth
/s/ James D. Barr 2-6-97
_____________________________________ _________________
Signature of Executive Officer of Bank Date of Signature
35
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 12/31/96 ST-BK: 51-2430 FFIEC 031
PAGE RC-26
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<TABLE>
<S> <C>
Crestar Bank DECEMBER 31, 1996 OMB No. for OCC: 1557-0081
P.O. Box 26665 OMB No. For FDIC: 3064-0052
Richmond, VA 23261 OMB No. For Federal Reserve: 7100-0036
E512430000 55124300000 Expiration Date: 3/31/99
Special Report
(Dollar Amounts in Thousands)
Close of Business FDIC Certificate Number
Date
12/31/96 12543 C-700
31
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
The following information is required by Public Laws 90-44 and 102-
242, but does not constitute a part of the Report of Condition. With
each Report of Condition, these Laws require all banks to furnish a
report of all loans or other extensions of credit to their executive
officers made since the date of the previous Report of Condition.
Data regarding individual loans or other extensions of credit are not
required. If no such loans or other extensions of credit were made
during the period, insert "none" against subitem (a). (Exclude the
first $15,000 of indebtedness of each executive officer under bank
credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the
Code of Federal Regulations (Federal Reserve Board Regulation O) for
the definitions of "executive officer" and "extension of credit,"
respectively. Exclude loans and other extensions of credit to
directors and principal shareholders who are not executive officers.
</TABLE>
<TABLE>
<S> <C> <C> <C>
a. Number of loans made to executive officers since the
previous Call Report date RCFD 3561 0 a.
b. Total dollar amount of above loans (in thousands of
dollars) RCFD 3562 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) RCFD 7701 0.00% to
RCFD 7702 0.00% c.
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
<S> <C>
/s/ PETER C. TOMS, SENIOR VICE PRESIDENT 1/29/97
</TABLE>
<TABLE>
<S> <C>
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION
(TEXT 8904)
Natie P. Hennelly (804)782-5320
</TABLE>
FDIC 8040/53 (6/95)
36
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,105,036
<INT-BEARING-DEPOSITS> 12,318,289
<FED-FUNDS-SOLD> 595,120
<TRADING-ASSETS> 7,563
<INVESTMENTS-HELD-FOR-SALE> 4,318,349
<INVESTMENTS-CARRYING> 967,510
<INVESTMENTS-MARKET> 966,750
<LOANS> 14,049,705
<ALLOWANCE> 268,868
<TOTAL-ASSETS> 22,861,941
<DEPOSITS> 15,671,210
<SHORT-TERM> 4,116,051
<LIABILITIES-OTHER> 635,834
<LONG-TERM> 659,336
0
0
<COMMON> 549,350
<OTHER-SE> 1,230,160
<TOTAL-LIABILITIES-AND-EQUITY> 22,861,941
<INTEREST-LOAN> 1,178,236
<INTEREST-INVEST> 304,256
<INTEREST-OTHER> 80,887
<INTEREST-TOTAL> 1,563,379
<INTEREST-DEPOSIT> 502,773
<INTEREST-EXPENSE> 697,069
<INTEREST-INCOME-NET> 866,310
<LOAN-LOSSES> 95,890
<SECURITIES-GAINS> 3,393
<EXPENSE-OTHER> 783,519
<INCOME-PRETAX> 323,259
<INCOME-PRE-EXTRAORDINARY> 218,271
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218,271
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.94
<YIELD-ACTUAL> 4.44
<LOANS-NON> 81,443
<LOANS-PAST> 71,874
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 153,000
<ALLOWANCE-OPEN> 274,430
<CHARGE-OFFS> 132,085
<RECOVERIES> 31,521
<ALLOWANCE-CLOSE> 268,868
<ALLOWANCE-DOMESTIC> 199,704
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 69,164
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,285,245
<INT-BEARING-DEPOSITS> 12,994,716
<FED-FUNDS-SOLD> 463,285
<TRADING-ASSETS> 4,490
<INVESTMENTS-HELD-FOR-SALE> 3,703,378
<INVESTMENTS-CARRYING> 1,015,076
<INVESTMENTS-MARKET> 1,108,006
<LOANS> 14,032,820
<ALLOWANCE> 274,430
<TOTAL-ASSETS> 22,332,611
<DEPOSITS> 16,297,039
<SHORT-TERM> 2,871,521
<LIABILITIES-OTHER> 707,167
<LONG-TERM> 671,296
0
0
<COMMON> 276,912
<OTHER-SE> 1,508,676
<TOTAL-LIABILITIES-AND-EQUITY> 22,332,611
<INTEREST-LOAN> 1,181,048
<INTEREST-INVEST> 262,532
<INTEREST-OTHER> 48,323
<INTEREST-TOTAL> 1,491,903
<INTEREST-DEPOSIT> 493,301
<INTEREST-EXPENSE> 677,048
<INTEREST-INCOME-NET> 814,855
<LOAN-LOSSES> 66,265
<SECURITIES-GAINS> (2,067)
<EXPENSE-OTHER> 721,109
<INCOME-PRETAX> 350,459
<INCOME-PRE-EXTRAORDINARY> 215,887
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,887
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 1.92
<YIELD-ACTUAL> 4.44
<LOANS-NON> 89,984
<LOANS-PAST> 55,523
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 193,000
<ALLOWANCE-OPEN> 265,171
<CHARGE-OFFS> 96,801
<RECOVERIES> 31,442
<ALLOWANCE-CLOSE> 274,430
<ALLOWANCE-DOMESTIC> 219,327
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 55,103
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,147,376
<INT-BEARING-DEPOSITS> 12,219,545
<FED-FUNDS-SOLD> 443,655
<TRADING-ASSETS> 3,574
<INVESTMENTS-HELD-FOR-SALE> 1,890,930
<INVESTMENTS-CARRYING> 2,447,497
<INVESTMENTS-MARKET> 2,790,862
<LOANS> 13,194,738
<ALLOWANCE> 265,171
<TOTAL-ASSETS> 20,167,656
<DEPOSITS> 15,200,018
<SHORT-TERM> 2,395,532
<LIABILITIES-OTHER> 255,436
<LONG-TERM> 715,132
0
0
<COMMON> 274,890
<OTHER-SE> 1,326,648
<TOTAL-LIABILITIES-AND-EQUITY> 20,167,656
<INTEREST-LOAN> 964,453
<INTEREST-INVEST> 279,104
<INTEREST-OTHER> 57,237
<INTEREST-TOTAL> 1,300,794
<INTEREST-DEPOSIT> 404,995
<INTEREST-EXPENSE> 522,943
<INTEREST-INCOME-NET> 777,851
<LOAN-LOSSES> 36,509
<SECURITIES-GAINS> (10,766)
<EXPENSE-OTHER> 700,627
<INCOME-PRETAX> 329,448
<INCOME-PRE-EXTRAORDINARY> 215,158
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,158
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.93
<YIELD-ACTUAL> 4.47
<LOANS-NON> 96,170
<LOANS-PAST> 36,487
<LOANS-TROUBLED> 8,339
<LOANS-PROBLEM> 221,000
<ALLOWANCE-OPEN> 254,682
<CHARGE-OFFS> 75,474
<RECOVERIES> 33,767
<ALLOWANCE-CLOSE> 265,171
<ALLOWANCE-DOMESTIC> 198,272
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 66,899
</TABLE>
