UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number 0-8829
CENTRAL FIDELITY BANKS, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1091649
(State of incorporation) (I.R.S. Employer
Identification No.)
1021 East Cary Street 23219
Richmond, Virginia (Zip Code)
(Address of principal executive offices)
(804) 782-4000
(Registrant's telephone number, including area code)
Central Fidelity Banks, Inc. (1) has filed all report required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
As of November 8, 1996, the latest practicable date, Central Fidelity
Banks, Inc. had 59,262,781 shares of its Common Stock outstanding.
This is the only class of outstanding shares.
1
<PAGE>
<TABLE>
CENTRAL FIDELITY BANKS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements 3
Consolidated Balance Sheet 4-5
Statement of Consolidated Income 6
Statement of Consolidated Cash Flows 7
Statement of Changes in Consolidated Shareholders'
Equity 8
Supplemental Data to Financial Statements:
Consolidated Financial Highlights 9
Average Balances and Interest Rates
(Taxable Equivalent Basis) 10-13
Selected Loan Loss Data 14
Nonperforming Assets and Past-due Loans 15
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-24
PART II. OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K 25
SIGNATURES 26
EXHIBIT INDEX 27
</TABLE>
2
<PAGE>
PART I
-----------
FINANCIAL INFORMATION
-----------------------------------------
CENTRAL FIDELITY BANKS, INC.
ITEM 1. FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1996, the
statement of consolidated income for the three-month and nine-month
periods ended September 30, 1996 and 1995, the statement of
consolidated cash flows and the statement of changes in consolidated
shareholders' equity for the nine-month period ended September 30,
1996 and 1995 are unaudited and do not include all of the information and
footnotes included in the Company's annual financial statements filed on
Form 10-K with the Securities and Exchange Commission. In the opinion
of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month and nine-month periods
ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 which is the source of the Company's balance
sheet as of that date.
3
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
- ------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
- ------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------
Cash and due from banks $278,450 $338,580
Temporary investments:
Federal funds sold and securities purchased
under agreements to resell 111,754 157,734
Other money market investments 20,000 75,000
Trading account securities 7,576 422
- ------------------------------------------------------------------
Total temporary investments 139,330 233,156
- ------------------------------------------------------------------
Assets available for sale:
Securities 3,154,268 3,629,887
Loans 7,670 15,653
- ------------------------------------------------------------------
Total assets available for sale 3,161,938 3,645,540
- ------------------------------------------------------------------
Loans 6,611,239 6,301,160
Allowance for loan losses (110,000) (110,000)
- ------------------------------------------------------------------
Net loans 6,501,239 6,191,160
- ------------------------------------------------------------------
Accrued interest receivable 62,088 67,436
Premises and equipment, net 155,253 152,879
Due from customers on acceptances 14,273 18,741
Other assets 184,383 163,482
- ------------------------------------------------------------------
Total assets $10,496,954 $10,810,974
- ------------------------------------------ ========== ==========
</TABLE>
4
<TABLE>
<CAPTION> September 30, December 31,
LIABILITIES 1996 1995
<S> <C> <C>
- ------------------------------------------------------------------
Deposits:
Demand $1,145,730 $1,037,906
Savings and other time 6,441,408 6,599,645
Certificates of deposit $100,000 and
over 379,621 348,347
- ------------------------------------------------------------------
Total deposits 7,966,759 7,985,898
- ------------------------------------------------------------------
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 987,716 1,041,951
Other short-term borrowings 67,531 88,045
Medium-term notes -- 252,250
Federal Home Loan Bank borrowings 404,000 350,700
Long-term debt 150,337 150,386
Capitalized lease obligations 7,440 7,746
- ------------------------------------------------------------------
Total borrowings 1,617,024 1,891,078
- ------------------------------------------------------------------
Dividends payable 13,123 12,052
Accrued interest payable 30,305 37,911
Bank acceptances outstanding 14,273 18,741
Accounts payable and accrued liabilities 40,471 38,747
- ------------------------------------------------------------------
Total liabilities 9,681,955 9,984,427
- ------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------
Preferred stock, none issued -- --
Common stock, par value $5 per share, authorized
100,000,000 shares, shares issued: 59,193,194
and 40,192,879, respectively 295,966 200,964
Capital surplus 170,531 195,151
Retained earnings 350,738 406,567
Unrealized gains (losses) on securities available
for sale, net of income taxes (2,236) 23,865
- ------------------------------------------------------------------
Total shareholders' equity 814,999 826,547
- ------------------------------------------------------------------
Total liabilities and shareholders'
equity $10,496,954 $10,810,974
- ------------------------------------------ ========== ==========
- ------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
- -------------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
(In thousands, except share and per share
data) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------
Income From Earning Assets
- -------------------------------------------------------------------------------------
Interest and fees on loans $145,119 $134,215 $424,543 $390,351
Interest on securities available for sale:
U.S. Government and agencies 32,753 42,540 102,770 126,653
States and political subdivisions 1,386 1,840 4,284 5,564
Other 17,599 16,958 55,076 46,188
Interest on loans available for sale 135 132 677 242
Interest on money market investments 996 1,140 3,876 4,403
Interest on trading account securities 63 8 97 46
- -------------------------------------------------------------------------------------
Total income from earning assets 198,051 196,833 591,323 573,447
- -------------------------------------------------------------------------------------
Interest Expense
- -------------------------------------------------------------------------------------
Interest on deposits 80,754 84,059 241,488 235,024
Interest on federal funds purchased and securities
sold under agreements to repurchase 11,815 13,866 36,686 44,089
Interest on other short-term borrowings 842 880 2,774 2,368
Interest on medium-term notes 91 3,723 3,932 15,619
Interest on Federal Home Loan Bank
borrowings 6,386 5,636 18,815 14,852
Interest on long-term debt 2,559 2,729 7,594 8,260
Interest on capitalized lease obligations 166 176 504 532
- -------------------------------------------------------------------------------------
Total interest expense 102,613 111,069 311,793 320,744
- -------------------------------------------------------------------------------------
Net interest income 95,438 85,764 279,530 252,703
Provision for loan losses 11,062 8,704 32,013 17,352
- -------------------------------------------------------------------------------------
Net income from earning assets 84,376 77,060 247,517 235,351
- -------------------------------------------------------------------------------------
Noninterest Income
- -------------------------------------------------------------------------------------
Trust income 4,181 3,878 12,949 10,808
Deposit fees and charges 9,349 8,762 28,170 25,964
Profits (losses) on securities available for sale and
trading account securities (196) 2,164 (197) 2,522
Other income 7,537 5,893 20,936 19,014
- -------------------------------------------------------------------------------------
Total noninterest income 20,871 20,697 61,858 58,308
- -------------------------------------------------------------------------------------
Noninterest Expense
- -------------------------------------------------------------------------------------
Personnel expense 35,211 32,125 104,050 98,415
Occupancy and equipment expense 11,504 11,025 34,370 31,925
FDIC insurance expense 729 1,713 2,063 9,685
Other real estate expense 403 233 1,711 2,566
Special SAIF assessment 6,412 -- 6,412 --
Other expense 14,391 12,107 40,875 34,975
- -------------------------------------------------------------------------------------
Total noninterest expense 68,650 57,203 189,481 177,566
- -------------------------------------------------------------------------------------
Earnings
- -------------------------------------------------------------------------------------
Income before income taxes 36,597 40,554 119,894 116,093
Income tax expense 11,465 13,002 37,972 36,797
- -------------------------------------------------------------------------------------
Net income $25,132 $27,552 $81,922 $79,296
- ----------------------------------------- ======= ======= ======= =======
Earnings Per Share
- -------------------------------------------------------------------------------------
Net income $0.42 $0.46 $1.37 $1.33
Average shares outstanding 59,586,194 59,863,652 59,888,903 59,510,831
- -------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
- -----------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
(In Thousands) For the nine months ended September 30,
<CAPTION>
1996 1995
<S> <C> <C>
- -----------------------------------------------------------------------
OPERATING ACTIVITIES
- -----------------------------------------------------------------------
Net income $81,922 $79,296
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 32,013 17,352
Depreciation of premises and equipment 12,140 11,845
Net amortization of premium and accretion of discount
on securities available for sale (632) (5,091)
Gains on securities available for sale (398) (2,959)
Deferred income taxes (1,517) 3,477
(Increase) decrease in trading account
securities (7,154) 351
Originations of loans available for sale (90,079) (55,955)
Purchases of loans available for sale (69,866) (26,566)
Proceeds from sales of loans available for sale 167,952 76,549
(Increase) decrease in accrued interest
receivable 5,348 (6,695)
Decrease in accrued interest payable (7,606) (1,807)
Other, net (6,765) (49,010)
- -----------------------------------------------------------------------
Net cash provided by operating activities 115,358 40,787
- -----------------------------------------------------------------------
INVESTING ACTIVITIES
- -----------------------------------------------------------------------
Purchases of securities available for sale (281,782) (765,462)
Proceeds from sales of securities available for
sale 194,067 286,409
Proceeds from maturities and repayments of securities
available for sale 524,209 296,530
Net increase in loans (347,512) (388,196)
Purchases of premises and equipment (15,395) (14,729)
Proceeds from the disposition of premises and
equipment 1,519 214
Proceeds from the disposition of foreclosed
properties 7,917 8,645
Net cash received in acquisition -- 413,022
- -----------------------------------------------------------------------
Net cash provided (used) by investing
activities 83,023 (163,567)
- -----------------------------------------------------------------------
FINANCING ACTIVITIES
- -----------------------------------------------------------------------
Net increase in demand, interest checking
and regular savings deposits 114,892 21,144
Net increase (decrease) in money market accounts (6,087) 59,082
Net increase (decrease) in consumer certificates (159,218) 40,539
Net increase in certificates of deposit $100,000
and over 31,274 34,211
Net increase (decrease) in short-term borrowings (74,749) 180,675
Proceeds from medium-term notes and FHLB borrowings 101,000 106,700
Payments on medium-term notes and FHLB borrowings (299,950) (309,250)
Payments on long-term debt and capitalized lease
obligations (355) (324)
Proceeds from issuance of common stock 9,213 13,806
Common stock purchased (38,283) --
Cash in lieu of fractional shares for stock split (78) --
Cash dividends (37,150) (33,985)
- -----------------------------------------------------------------------
Net cash provided (used) by financing
activities (359,491) 112,598
- -----------------------------------------------------------------------
Decrease in cash and cash equivalents (161,110) (10,182)
Cash and cash equivalents at beginning of
year 571,314 496,672
- -----------------------------------------------------------------------
Cash and cash equivalents at end of period $410,204 $486,490
- --------------------------------------------------- ======== ========
- -----------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
<CAPTION> Unrealized
Gains (Losses)
on Securities Total
(In thousands) Common Common Capital Retained Available Shareholders'
For the nine months ended September 30,1995 Shares Stock Surplus Earnings for Sale Equity
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Balance at beginning of period 39,324 $196,621 $180,458 $348,219 ($102,226) $623,072
Net income -- -- -- 79,296 -- 79,296
Common stock issued under Plans 639 3,192 10,614 -- -- 13,806
Cash dividends declared on common stock -- -- -- (34,971) -- (34,971)
Change in unrealized losses on securities available
for sale, net of income taxes of
$55,316 -- -- -- -- 102,730 102,730
- --------------------------------------------------------------------------------------------------------
Balance at end of period 39,963 $199,813 $191,072 $392,544 $504 $783,933
- ----------------------------------------- ====== ======== ======== ======== ======== ========
For the nine months ended September 30, 1996
- --------------------------------------------------------------------------------------------------------
Balance at beginning of period 40,193 $200,964 $195,151 $406,567 $23,865 $826,547
Net income -- -- -- 81,922 -- 81,922
Common stock issued under Plans 406 2,034 7,179 -- -- 9,213
Common stock purchased (1,296) (6,484) (31,799) -- -- (38,283)
Cash dividends declared on common stock -- -- -- (38,221) -- (38,221)
Common stock issued for 3-for-2 stock
split 19,890 99,452 -- (99,530) -- (78)
Change in unrealized gains on securities available
for sale, net of income taxes of
$14,054 -- -- -- -- (26,101) (26,101)
- --------------------------------------------------------------------------------------------------------
Balance at end of period 59,193 $295,966 $170,531 $350,738 ($2,236) $814,999
- ----------------------------------------- ====== ======== ======== ======== ======== ========
- --------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands, except share and per share 1996 1995 Change 1996 1995 Change
- ------------------------------------------------------------------------------------------------------------------------------
Results Of Operations
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income (tax-equivalent basis) $97,262 $87,682 10.9 % $284,935 $258,526 10.2%
Provision for loan losses 11,062 8,704 27.1 32,013 17,352 84.5
Noninterest income 20,871 20,697 0.8 61,858 58,308 6.1
Noninterest expense 68,650 57,203 20.0 189,481 177,566 6.7
Net income 25,132 27,552 (8.8) 81,922 79,296 3.3
Per Share Data
- ------------------------------------------------------------------------------------------------------------------------------
Net income $0.42 $0.46 (8.7)% $1.37 $1.33 3.0%
Book value 13.77 13.08 5.3 13.77 13.08 5.3
Average Daily Balance
- ------------------------------------------------------------------------------------------------------------------------------
Assets $10,322,912 $10,368,193 (0.4)% $10,381,674 $10,132,757 2.5%
Loans 6,533,058 6,040,321 8.2 6,433,458 5,930,025 8.5
Earning assets 9,812,041 9,829,092 (0.2) 9,865,781 9,631,527 2.4
Deposits 7,894,381 7,785,793 1.4 7,841,468 7,465,678 5.0
Shareholders' equity 810,104 771,990 4.9 813,016 733,163 10.9
Shares outstanding 59,586,194 59,863,652 (0.5) 59,888,903 59,510,831 0.6
Balance At Quarter-End
- ------------------------------------------------------------------------------------------------------------------------------
Assets $10,496,954 $10,746,359 (2.3)% $10,496,954 $10,746,359 (2.3)%
Loans 6,618,909 6,147,106 7.7 6,618,909 6,147,106 7.7
Earning assets 9,912,507 10,143,986 (2.3) 9,912,507 10,143,986 (2.3)
Deposits 7,966,759 7,834,791 1.7 7,966,759 7,834,791 1.7
Shareholders' equity 814,999 783,933 4.0 814,999 783,933 4.0
Shares outstanding 59,193,194 59,940,505 (1.2) 59,193,194 59,940,505 (1.2)
Key Performance Ratios (Basis point change)
- ------------------------------------------------------------------------------------------------------------------------------
Return on average assets 0.97 % 1.06 % (0.09) 1.05 % 1.04 % .01
Return on average shareholders' equity 12.41 14.28 (1.87) 13.44 14.42 (0.98)
Net interest margin (tax-equivalent basis) 3.94 3.54 0.40 3.86 3.59 0.27
Efficiency 57.68 53.64 4.04 54.11 55.68 (1.57)
Allowance for loan losses as a percentage 1.66 1.79 (0.13) 1.66 1.79 (0.13)
Equity to total assets 7.76 7.29 0.47 7.76 7.29 0.47
Risk-based capital 13.07 13.24 (0.17) 13.07 13.24 (0.17)
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK PERFORMANCE AND DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock Prices
-------------------------------------------------------- Dividends
1996 1995 Per Share
- ------------------------------------------------------------------------------------------------------------------------------
High Low High Low 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
First Quarter $23.00 $21.09 $18.17 $16.17 $.20 $.19
Second Quarter 23.67 22.00 20.33 16.83 .22 .20
Third Quarter 25.38 21.50 22.33 19.50 .22 .20
Fourth Quarter 22.83 20.33 .20
- ------------------------------------------------------------------------------------------------------------------------------
Stock Split Information
On May 8, 1996, the Board of Directors of the Company declared a 3-for-2 stock split in the form of a dividend payable on June
14, 1996 to shareholders of record May 20, 1996. The number of outstanding shares, earnings and dividends per share, and
common stock prices have been adjusted to reflect this transaction.
</TABLE>
9
<PAGE>
<TABLE>
AVERAGE BALANCES AND INTEREST RATES
(TAXABLE EQUIVALENT BASIS)
- --------------------------------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
(In thousands) For the three months ended September 30,
<CAPTION> 1996 1995
- --------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------------------------------
Interest-earning assets:
Loans:
Commercial and commercial
real estate $2,081,736 $43,659 8.34 % $1,902,013 $41,404 8.64 %
Construction 294,214 6,960 9.41 307,672 7,321 9.44
Residential real estate 1,602,458 30,658 7.61 1,585,383 28,794 7.21
Consumer second mortgage 698,694 16,859 9.60 583,103 14,524 9.88
Installment 1,039,487 22,157 8.48 997,413 21,638 8.61
Bank card 809,769 25,588 12.57 655,842 21,447 12.97
- ------------------------------------------------------------- ------------------------
6,526,358 145,881 8.89 6,031,426 135,128 8.89
Assets available for sale:
Securities:
U.S. Government and agencies 2,025,772 32,753 6.43 2,587,081 42,540 6.52
States and political
subdivisions 102,667 2,129 8.29 133,848 2,753 8.23
Other 1,059,851 17,835 6.69 987,173 16,960 6.82
- ------------------------------------------------------------- ------------------------
3,188,290 52,717 6.58 3,708,102 62,253 6.66
Loans 6,700 135 8.03 8,895 132 5.89
- ------------------------------------------------------------- ------------------------
3,194,990 52,852 6.58 3,716,997 62,385 6.66
Money market investments 87,016 1,075 4.92 80,078 1,227 6.08
Trading account securities 3,677 67 7.28 591 11 7.72
- ------------------------------------------------------------- ------------------------
Total interest-earning
assets 9,812,041 $199,875 8.10 % 9,829,092 $198,751 8.02 %
- ----------------------------------------------- ======== ------------- ========
Noninterest-earning assets:
Cash and due from banks 242,099 280,095
Premises and equipment, net 154,728 150,252
Other assets 224,044 218,754
Allowance for loan losses (110,000) (110,000)
- ---------------------------------------------------- ------------------
Total assets $10,322,912 $10,368,193
- ---------------------------------- ========== ==========
</TABLE>
10
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking $693,084 $3,534 2.03 % $670,439 $3,895 2.31 %
Regular savings 734,568 4,900 2.65 746,713 5,267 2.80
Consumer certificates 4,003,860 56,902 5.65 4,103,607 59,911 5.79
Money market accounts 1,037,907 10,285 3.94 1,066,468 11,255 4.19
Certificates of deposit $100,000
and over 374,448 5,133 5.45 255,458 3,731 5.79
Federal funds purchased and
repos 933,726 11,815 5.03 966,669 13,866 5.69
Other short-term borrowings 68,450 842 4.89 65,720 880 5.32
Medium-term notes -- 91 -- 252,250 3,723 5.86
Federal Home Loan Bank
borrowings 404,000 6,386 6.29 343,200 5,636 6.51
Long-term debt 150,344 2,559 6.77 150,401 2,729 7.20
Capitalized lease obligations 7,474 166 8.84 7,918 176 8.78
- ------------------------------------------------------------- ------------------------
Total interest-bearing
liabilities 8,407,861 $102,613 4.86 % 8,628,843 $111,069 5.11 %
- ----------------------------------------------- ======== ------------- ========
Noninterest-bearing liabilities:
Demand deposits 1,050,514 943,108
Other 54,433 24,252
- ---------------------------------------------------- ------------------
Total noninterest-bearing
liabilities 1,104,947 967,360
Shareholders' equity 810,104 771,990
- ---------------------------------------------------- ------------------
Total liabilities and
shareholders' equity $10,322,912 $10,368,193
- ---------------------------------- ========== ==========
Net interest earnings $97,262 $87,682
- ---------------------------------- ======== ========
Net interest spread 3.24 % 2.91 %
- ---------------------------------- ==== ====
Net interest margin 3.94 % 3.54 %
- ---------------------------------- ==== ====
- --------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
AVERAGE BALANCES AND INTEREST RATES
(TAXABLE EQUIVALENT BASIS)
- --------------------------------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
(In thousands) For the nine months ended September 30,
<CAPTION> 1996 1995
- --------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------------------------------
Interest-earning assets:
Loans:
Commercial and commercial
real estate $2,042,236 $127,517 8.34 % $1,887,727 $122,887 8.70 %
Construction 289,543 20,510 9.46 313,604 22,872 9.75
Residential real estate 1,604,600 90,156 7.51 1,578,324 85,300 7.23
Consumer second mortgage 657,836 47,756 9.70 570,163 41,493 9.73
Installment 1,037,174 66,153 8.52 946,123 58,429 8.26
Bank card 790,043 74,857 12.66 629,259 62,127 13.20
- ------------------------------------------------------------- ------------------------
6,421,432 426,949 8.88 5,925,200 393,108 8.87
Assets available for sale:
Securities:
U.S. Government and agencies 2,118,075 102,770 6.48 2,563,308 126,653 6.61
States and political
subdivisions 106,228 6,588 8.27 134,989 8,343 8.24
Other 1,103,679 55,516 6.72 900,212 46,193 6.86
- ------------------------------------------------------------- ------------------------
3,327,982 164,874 6.62 3,598,509 181,189 6.73
Loans 12,026 677 7.52 4,825 242 6.70
- ------------------------------------------------------------- ------------------------
3,340,008 165,551 6.62 3,603,334 181,431 6.73
Money market investments 102,283 4,116 5.38 101,962 4,666 6.12
Trading account securities 2,058 112 7.28 1,031 65 8.46
- ------------------------------------------------------------- ------------------------
Total interest-earning
assets 9,865,781 $596,728 8.08 % 9,631,527 $579,270 8.04 %
- ----------------------------------------------- ======== ------------- ========
Noninterest-earning assets:
Cash and due from banks 249,112 270,657
Premises and equipment, net 154,086 148,046
Other assets 222,695 192,527
Allowance for loan losses (110,000) (110,000)
- ---------------------------------------------------- ------------------
Total assets $10,381,674 $10,132,757
- ---------------------------------- ========== ==========
</TABLE>
12
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1996 1995
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking $688,203 $10,419 2.02 % $654,684 $11,432 2.33 %
Regular savings 736,368 14,786 2.68 745,357 15,623 2.80
Consumer certificates 4,067,229 173,651 5.70 3,885,891 165,509 5.69
Money market accounts 1,041,766 30,832 3.95 1,025,479 32,173 4.19
Certificates of deposit $100,000
and over 289,569 11,800 5.44 241,598 10,287 5.69
Federal funds purchased and
repos 960,879 36,686 5.10 1,012,053 44,089 5.82
Other short-term borrowings 75,663 2,774 4.90 58,614 2,368 5.40
Medium-term notes 87,328 3,932 6.01 347,566 15,619 6.01
Federal Home Loan Bank
borrowings 397,990 18,815 6.31 299,790 14,852 6.62
Long-term debt 150,359 7,594 6.75 150,414 8,260 7.34
Capitalized lease obligations 7,584 504 8.88 8,013 532 8.87
- ------------------------------------------------------------- ------------------------
Total interest-bearing
liabilities 8,502,938 $311,793 4.90 % 8,429,459 $320,744 5.09 %
- ----------------------------------------------- ======== ------------- ========
Noninterest-bearing liabilities:
Demand deposits 1,018,333 912,669
Other 47,387 57,466
- ---------------------------------------------------- ------------------
Total noninterest-bearing
liabilities 1,065,720 970,135
Shareholders' equity 813,016 733,163
- ---------------------------------------------------- ------------------
Total liabilities and
shareholders' equity $10,381,674 $10,132,757
- ---------------------------------- ========== ==========
Net interest earnings $284,935 $258,526
- ---------------------------------- ======== ========
Net interest spread 3.18 % 2.95 %
- ---------------------------------- ==== ====
Net interest margin 3.86 % 3.59 %
- ---------------------------------- ==== ====
- --------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
SELECTED LOAN LOSS DATA
- ----------------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
(In thousands) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------
Balance at beginning of period $110,000 $110,000 $110,000 $110,000
Provision charged to expense 11,062 8,704 32,013 17,352
- ----------------------------------------------------------------------------------------
121,062 118,704 142,013 127,352
Loans charged off:
Commercial and commercial real estate 175 1,010 2,607 3,532
Construction 500 214 1,120 286
Residential real estate 100 73 391 167
Installment 5,143 3,616 15,004 9,421
Bank card 8,730 6,569 24,978 18,351
- ----------------------------------------------------------------------------------------
Total charge-offs 14,648 11,482 44,100 31,757
- ----------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial and commercial real estate 713 843 2,062 5,911
Construction 158 110 1,291 2,988
Residential real estate 4 4 8 13
Installment 1,806 1,143 6,142 3,283
Bank card 905 678 2,584 2,210
- ----------------------------------------------------------------------------------------
Total recoveries 3,586 2,778 12,087 14,405
- ----------------------------------------------------------------------------------------
Net charge-offs 11,062 8,704 32,013 17,352
- ----------------------------------------------------------------------------------------
Balance at end of period $110,000 $110,000 $110,000 $110,000
- -------------------------------------------- ======== ======== ======== ========
Average loans $6,533,058 $6,040,321 $6,433,458 $5,930,025
Loans at period-end $6,618,909 $6,147,106 $6,618,909 $6,147,106
Ratio of provision for loan losses to
average loans 0.68% 0.58% 0.66% 0.39%
Ratio of net charge-offs to average loans 0.68% 0.58% 0.66% 0.39%
Ratio of allowance for loan losses to loans 1.66% 1.79% 1.66% 1.79%
- ----------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
NONPERFORMING ASSETS AND PAST-DUE LOANS
- ---------------------------------------------------------------------------------
Central Fidelity Banks, Inc. and Subsidiaries
(In thousands)
<CAPTION> September 30, December 31,
1996 1995 1995
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
Nonperforming Assets
- ---------------------------------------------------------------------------------
Nonaccrual loans:
Land acquisition, land development
or construction:
Commercial $4,127 $6,104 $6,236
Residential 12,776 16,910 16,784
Residential real estate 6,272 5,093 4,655
Commercial real estate 10,628 11,044 11,825
Commercial and industrial 9,409 10,414 9,263
- ---------------------------------------------------------------------------------
Total nonaccrual loans 43,212 49,565 48,763
- ---------------------------------------------------------------------------------
Restructured loans -- -- --
- ---------------------------------------------------------------------------------
Total nonperforming loans 43,212 49,565 48,763
- ---------------------------------------------------------------------------------
Foreclosed properties:
Land and developed lots:
Commercial 2,553 2,830 2,742
Residential 7,943 12,147 10,370
Residential real estate 3,409 2,237 3,318
Commercial real estate 567 723 706
Other 60 --
- ---------------------------------------------------------------------------------
Total foreclosed properties 14,532 17,937 17,136
- ---------------------------------------------------------------------------------
Total nonperforming assets $57,744 $67,502 $65,899
- --------------------------------------------- ======= ======= =======
Ratio of nonperforming assets to
loans and foreclosed properties 0.87% 1.09% 1.04%
- ---------------------------------------------------------------------------------
Past-due Loans (90 days or more and still accruing)
- ---------------------------------------------------------------------------------
Commercial and construction $1,666 $849 $1,159
Residential real estate 7,158 5,057 7,941
Installment 5,105 3,401 4,028
Bank card 8,432 6,319 7,855
- ---------------------------------------------------------------------------------
Total past-due loans $22,361 $15,626 $20,983
- --------------------------------------------- ======= ======= =======
- ---------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
CENTRAL FIDELITY BANKS, INC.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion is intended to provide information about the
Company's financial condition and results of operations which may not
be readily apparent from the consolidated financial statements and
tables included in this report. Reference should be made to those
statements and tables and other selected financial data presented
elsewhere in this report for an understanding of the following
discussion and analysis. All per share amounts have been restated to
reflect the 3-for-2 stock split paid June 14, 1996 to shareholders of
record May 20, 1996.
Results of Operations
- -----------------------------
Net income for the first nine months ended September 30, 1996 was
$81.9 million, 3.3% higher than the $79.3 million earned in the first nine
months of 1995. On a per share basis, net income increased 3.0% to
$1.37 from $1.33. Net income for the nine months ended September 30,
1996 was impacted by a $6.4 million charge related to a one-time
assessment by the Federal Deposit Insurance Corporation (FDIC) to
recapitalize the Savings Association Insurance Fund (SAIF). The
SAIF-related charge is based upon management's estimate as of
September 30, 1996 of the potential assessment by the FDIC calculated
on aggregate deposits acquired by the Company's principal subsidiary
from SAIF-insured entities. Absent this one-time charge, net income for
the first nine months would have increased 8.6% to $86.1 million, and net
income per share would have increased 8.3% to $1.44.
On a tax-equivalent basis, net interest income for the nine months
ended September 30, 1996 was $284.9 million, a 10.2% increase from the
net interest income earned in the corresponding 1995 period. The net
interest margin was 3.86% for the nine months ended September 30,
1996, up 27 basis points from 3.59% during the same period in 1995. The
growth in net interest income and net interest margin during the first nine
months of 1996 were impacted by the higher yield on earning assets and
a reduced cost of interest-bearing liabilities. For the first nine months of
1996, average earning assets grew $234.3 million from the level recorded
in the first nine months of 1995, or 2.4%. Interest earned on earning assets
grew $17.5 million, an increase of 3.0% over the corresponding amount
earned during the first nine months of 1995. The yield on average earning
assets increased a modest 4 basis points, and average interest-bearing
liabilities increased $73.5 million, or a modest .9% from the nine months
ended September 30, 1995. Interest expense on interest-bearing
liabilities declined $9.0 million to $311.8 million, or 2.8%, from the
corresponding 1995 period, and the cost of interest-bearing liabilities
16
declined 19 basis points.
For the nine-month period ended September 30, 1996, the Company's
interest rate swap activities produced declines in interest income of
$1,468,000 and interest expense of $1,055,000 compared to a $1,662,000
decrease in interest income and a $1,561,000 increase in interest
expense for the corresponding period in 1995. The Company's interest
rate swap activities resulted in reductions of net interest income of
$413,000 for the nine months ended September 30, 1996 and $3,223,000
for the same period in 1995.
The provision for loan losses was $32.0 million for the nine months
ended September 30, 1996 compared with $17.4 million recorded for the
corresponding period in 1995. The increase in the provision was
prompted by a higher level of net charge-offs due to lower commercial
and commercial real estate and construction loan recoveries and higher
levels of losses in both consumer installment and bank card loans when
compared to the first nine months of 1995. Commercial and commercial
real estate and construction loan recoveries of $3.4 million in the first nine
months of 1996 compared with $8.9 million in the prior year. Higher levels
of net loan charge-offs for the first nine months of 1996 resulted principally
from a continued trend of consumer bankruptcies in both bank card and
installment loan portfolios.
Noninterest income totalled $61.9 million for the nine months ended
September 30, 1996 compared with $58.3 million for the same period in
1995, representing an increase of 6.1% The increase resulted from higher
trust income, growth in deposit fees and charges and other miscellaneous
fee categories, despite lower profits on securities sold.
Noninterest expense grew 6.7% to $189.5 million for the first nine
months of 1996 compared with the same period in 1995. The growth in
noninterest expense was due primarily to the one-time SAIF assessment
and higher personnel, occupancy and equipment, and other expenses.
Excluding the impact of the $6.4 million SAIF assessment, noninterest
expense grew 3.1% when compared to the same period in 1995.
Balance Sheet
- --------------------
Total assets as of September 30, 1996 were $10.5 billion, a decrease
from $10.8 billion at the end of 1995. Total loans at September 30, 1996
were $6.6 billion, or 4.8% higher than at December 31, 1995, representing
growth primarily in both the commercial and consumer loan categories.
Total deposits were $8.0 billion at September 30, 1996, flat from 1995's
year-end level. Shareholders' equity at September 30, 1996 was $815.0
million, or 7.8% of total assets. At December 31, 1995, shareholders'
equity was $826.5 million, or 7.6% of total assets. Book value per share
grew from $13.71 at December 31, 1995 to $13.77 at September 30, 1996.
17
The return on average total assets during the first nine months of 1996
was 1.05% compared to 1.04% for the comparable 1995 period. The
return on average shareholders' equity was 13.44% versus 14.42% in
1995. Excluding the SAIF assessment, the return on average total
assets would have been 1.11% and the return on average shareholders'
equity would have been 14.11%.
Asset Quality
- -----------------
Nonperforming assets as of September 30, 1996 were $57.7 million, or
.55% of total assets, compared to $65.9 million or .61% of total assets at
December 31, 1995 and $67.5 million or .63% of total assets at
September 30, 1995. At September 30, 1996, nonperforming assets were
.87% of loans and foreclosed properties, compared to 1.04% at
December 31, 1995 and 1.09% at September 30, 1995. The lower level of
nonperforming assets was primarily a result of overall improved quality in
the loan portfolio.
The allowance for loan losses was $110.0 million at September 30,
1996, December 31, 1995 and September 30, 1995. At September 30,
1996, the allowance for loan losses was 1.66% of loans, compared to
1.74% at December 31, 1995 and 1.79% at September 30, 1995. At
September 30, 1996, the allowance for loan losses to nonperforming
assets was 190.5%, compared to 166.9% at December 31, 1995 and
163.0% at September 30, 1995. Net loan charge-offs for the three months
ended September 30, 1996 were $11.1 million, representing .68% of
average loans on an annualized basis. Net loan charge-offs were $9.4
million or .60% of average loans for the three months ended December
31, 1995 and $8.7 million or .58% of average loans for the three months
ended September 30, 1995.
The allowance for loan losses represents management's estimate of
an amount adequate to absorb potential losses inherent in the loan
portfolio. In assessing the adequacy of the allowance, management
relies predominately on its ongoing review of the lending process and the
risk characteristics of the portfolio in the aggregate. Among other factors
management considers the Company's loan loss experience, the amount
of past-due and nonperforming loans, current and anticipated economic
conditions, and the estimated current values of collateral securing loans
in assessing the level of the allowance for loan losses.
While it is the Company's policy to charge off in the current period
loans for which a loss is considered probable, there are additional
risks of future losses which cannot be quantified precisely or attributed
to particular loans or classes of loans. Because these risks include the
state of the economy as well as conditions affecting individual
borrowers, management's judgment of the allowance is necessarily
approximate and imprecise. It is also subject to regulatory
examinations and determinations as to its adequacy.
18
Capital Resources
- -------------------------
Central Fidelity National Bank (the "Bank"), the principal subsidiary
of Central Fidelity Banks, Inc., is 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 Bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for Prompt Corrective Action ("PCA"), the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's 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 Bank to maintain minimum ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of
September 30, 1996, that the Bank meets all capital adequacy
requirements to which it is subject.
The most recent notification from the Office of the Comptroller of
the Currency, the Bank's primary regulator, categorized the Bank as
well capitalized under the regulatory framework for PCA. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the
table. The Bank's category is determined solely for the purposes of
applying PCA and that category may not constitute an accurate
representation of the Bank's overall financial condition or prospects.
There are no conditions or events since that notification that
management believes have changed the Bank's capital adequacy
category.
The regulatory framework for PCA is applicable only to banks and
not to bank holding companies and their non-bank subsidiaries.
During the nine months ended September 30, 1996, the Company
purchased and retired 1,296,000 shares of its common stock for a total of
$38,283,000 under the Stock Repurchase Program. The repurchased
shares may be used for general corporate purposes. Repurchases
under the program may be discontinued or interrupted at any time.
19
<TABLE>
<CAPTION> Minimum Ratio
To Be considered
For Capital Well Capitalized
Actual Adequacy Under
(Dollars in thousands) Amount Ratio Purposes PCA Provisions
<S> <C> <C> <C> <C>
-------------------------------------------
As of September 30, 1996
Total Risk-Weighted Assets:
Consolidated $7,673,083 -- -- --
Subsidiary Bank $7,669,417 -- -- --
Total Average Assets:
Consolidated $10,262,677 -- -- --
Subsidiary Bank $10,231,770 -- -- --
Total Capital (to Risk-Weighted Assets):
Consolidated $1,003,001 13.07% 8.0% N/A
Subsidiary Bank $985,037 12.84% 8.0% 10.0%
Tier I Capital (to Risk-Weighted Assets):
Consolidated $756,914 9.86% 4.0% N/A
Subsidiary Bank $738,995 9.64% 4.0% 6.0%
Tier I Capital (to Average Assets):
Consolidated $756,914 7.38% 4.0% N/A
Subsidiary Bank $738,995 7.22% 4.0% 5.0%
As of September 30, 1995
Total Risk-Weighted Assets:
Consolidated $7,246,032 -- -- --
Subsidiary Bank $7,236,427 -- -- --
Total Average Assets:
Consolidated $10,303,228 -- -- --
Subsidiary Bank $10,275,353 -- -- --
Total Capital (to Risk-Weighted Assets):
Consolidated $959,212 13.24% 8.0% N/A
Subsidiary Bank $924,784 12.78% 8.0% 10.0%
Tier I Capital (to Risk-Weighted Assets):
Consolidated $718,397 9.92% 4.0% N/A
Subsidiary Bank $684,087 9.45% 4.0% 6.0%
Tier I Capital (to Average Assets):
Consolidated $718,397 6.97% 4.0% N/A
Subsidiary Bank $684,087 6.66% 4.0% 5.0%
</TABLE>
20
Off-Balance-Sheet Derivatives
- ------------------------------------------
Interest rate swaps have been the main derivative instrument used
to modify the repricing characteristics of various balance sheet assets
and liabilities. The typical interest rate swaps entered into by the
Company are commitments to participate in cash settlements with a
counterparty at various future dates as agreed to in the swap contract.
These cash settlements result from movements in interest rates and
are based on differences in specific rate indexes as applied to the
notional principal amount of the contract.
The Company utilizes financial derivatives in its strategy of
managing liability sensitivity. In the implementation of this strategy, the
use of off-balance-sheet derivatives is limited compared to the size of
various on-balance-sheet instruments.
Market values of derivatives transactions fluctuate based upon
movements in the underlying financial indices such as interest rates.
Market values are monitored on a monthly basis through external
pricing mechanisms and then tested by using internal calculations.
The Company's objective measurement system together with risk
limits and timely reporting to senior management help to mitigate the
likelihood of any material gain or loss recognition on the Company's
interest rate swaps. In the event that a derivative product is terminated
prior to its contractual maturity, it is the Company's policy to recognize
the resulting gain or loss over the remaining life of the underlying
hedged asset or liability.
Financial derivatives may expose the Company to credit risk to the
extent of the fair value gain of an instrument should the counterparty
default on its obligation to perform. The Company seeks to reduce
credit risk by dealing only with highly rated counterparties and by
setting exposure limits based on independent industry ratings from the
major rating agencies and other relevant criteria. Furthermore, the
Company uses bilateral netting agreements and collateral
arrangements to reduce credit risk. Collateral is delivered by either
party when the fair value of the transaction exceeds established credit
risk thresholds.
The Company has also entered into a small number of interest rate
swap agreements to accommodate the needs of commercial
customers. In order to offset the interest rate risk of customer swaps,
the Company has executed offsetting transactions with third parties.
The Company intends to continue using off-balance-sheet financial
derivatives as a limited end-user in the prudent management of
interest rate sensitivity.
21
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------
Summary of Interest Rate Swaps
The weighted average variable rates are based upon the contractual rates in effect at September 30, 1996:
(In thousands) September 30, 1996
<CAPTION>
Average Year-To-Date
Notional Weighted Average Rate Maturity Interest Unrecognized
Amount Receive Pay In YearIncome/(Expense)Gains (Losses)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Company Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Variable rate medium-term
borrowings $50,000 5.63 % (1) 6.42 % 0.71 ($192) ($211)
Securities available for sale 12,972 5.80 (2) 9.00 1.99 (653) (374)
Fixed rate commercial loans 22,406 5.59 (1) 6.84 2.93 (207) (196)
- ------------------------------------------------ -------------- -------------
Total pay fixed/receive
variable 85,378 5.65 6.92 1.49 (1,052) (781)
- ------------------------------------------------ -------------- -------------
Receive fixed/pay variable:
Fixed rate subordinated debt 150,000 7.10 5.54 (1) 6.13 1,674 3,029
Fixed rate medium-term
borrowings -- -- -- -- (427) --
Variable rate commercial loans 100,000 4.77 5.63 (1) 0.31 (608) (610)
- ------------------------------------------------ -------------- -------------
Total receive fixed/pay
variable 250,000 6.17 5.57 3.80 639 2,419
- ------------------------------------------------ -------------- -------------
Total company hedging swaps $335,378 6.03 % 5.92 % 3.21 ($413) $1,638
- ----------------------------------======== ======== ========
- --------------------------------------------------------------------------------------------------------
Customer Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable $4,500 5.48 % (1) 9.11 % 1.56 $495 ($331)
Receive fixed/pay variable 4,500 9.20 5.48 (1) 1.56 (492) 338
- ------------------------------------------------ -------------- -------------
Total customer hedging swaps $9,000 7.34 % 7.29 % 1.56 $3 $7
- ----------------------------------======== ======== ========
The weighted average variable rates are based upon the contractual rates in effect at September 30, 1995:
(In thousands) September 30, 1995
- --------------------------------------------------------------------------------------------------------
Company Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Variable rate medium-term
borrowings $ -- -- % (1) -- % -- ($45) $ --
Variable rate deposits 50,000 5.84 (3) 6.42 1.70 186 (418)
Securities available for sale 22,804 6.41 (2) 9.00 3.99 (35) (934)
Fixed rate commercial loans 25,838 5.85 (1) 6.83 3.93 (146) (583)
- ------------------------------------------------ -------------- -------------
Total pay fixed/receive
variable 98,642 5.98 7.12 2.82 (40) (1,935)
- ------------------------------------------------ -------------- -------------
Receive fixed/pay variable:
Fixed rate subordinated debt 150,000 7.10 5.88 (1) 7.13 1,018 6,215
Fixed rate medium-term
borrowings 200,000 5.14 5.91 (1) 1.55 (2,720) (1,636)
Variable rate commercial loans 100,000 4.77 5.94 (1) 1.31 (1,481) (1,730)
- ------------------------------------------------ -------------- -------------
Total receive fixed/pay
variable 450,000 5.71 5.90 3.36 (3,183) 2,849
- ------------------------------------------------ -------------- -------------
Total company hedging swaps $548,642 5.76 % 6.12 % 3.26 ($3,223) $914
- ----------------------------------======== ======== ========
- --------------------------------------------------------------------------------------------------------
Customer Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable $4,000 5.85 % (1) 9.57 % 2.59 $760 ($450)
Receive fixed/pay variable 4,000 9.62 5.85 (1) 2.59 (754) 455
- ------------------------------------------------ -------------- -------------
Total customer hedging swaps $8,000 7.74 % 7.71 % 2.59 $6 $5
- ----------------------------------======== ======== ========
- --------------------------------------------------------------------------------------------------------
(1) Variable rate is tied to London Inter-Bank Offered Rate (LIBOR) with designated 3-month maturity.
(2) Variable rate is tied to London Inter-Bank Offered Rate (LIBOR) with designated 1-month maturity plus
60 basis points.
(3) Variable rate is tied to U.S. Treasury bill rate.
</TABLE>
22
<PAGE>
<TABLE>
- -------------------------------------------------------------------
Interest Rate Swaps - Notional Amount Rollforward
Pay fixed/ Pay variable Total
(In thousands) receive receive All
<CAPTION> variable fixed Swaps
<S> <C> <C> <C>
- -------------------------------------------------------------------
Notional Amount
- -------------------------------------------------------------------
Company Swaps:
Beginning balance, January 1,
1996 $96,814 $450,000 $546,814
New swaps 50,000 -- 50,000
Matured swaps (50,000) (200,000) (250,000)
Amortization of swaps (11,436) -- (11,436)
- -------------------------------------------------------------------
Ending balance, September
30, 1996 $85,378 $250,000 $335,378
- ------------------------------- ======== ======== ========
Customer Swaps:
Beginning balance, January 1,
1996 $4,000 $4,000 $8,000
New swaps 500 500 1,000
- -------------------------------------------------------------------
Ending balance, September
30, 1996 $4,500 $4,500 $9,000
- ------------------------------- ======== ======== ========
- -------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------
Expected Maturities of Interest Rate Swaps
<CAPTION>
Due After OneAfter Two After ThreeAfter Four
Within Through Through Through Through After
(In thousands) September 30, One YearTwo YearsThree YearsFour YearsFive YearsFive Years Total
1996
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Company Hedging Swaps
- ----------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Notional amount $61,377 $8,506 $14,092 $153 $1,250 -- $85,378
Weighted average pay rate 6.72% 8.51% 6.82% 7.03% 7.03% -- 6.92%
Weighted average receive rate:
Contractual rate* 5.65% 5.73% 5.60% 5.50% 5.50% -- 5.65%
Forward yield curve** 5.83% 6.09% 6.29% 6.45% 6.45% -- 5.94%
Receive fixed/pay variable:
Notional amount $100,000 -- -- -- -- $150,000 $250,000
Weighted average pay rate:
Contractual rate* 5.63% -- -- -- -- 5.54% 5.57%
Forward yield curve** 5.69% -- -- -- -- 6.79% 6.35%
Weighted average receive rate 4.77% -- -- -- -- 7.10% 6.17%
- ----------------------------------------------------------------------------------------------------
Customer Hedging Swaps
- ----------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Notional amount -- $4,500 -- -- -- -- $4,500
Weighted average pay rate -- 9.11% -- -- -- -- 9.11%
Weighted average receive rate:
Contractual rate* -- 5.48% -- -- -- -- 5.48%
Forward yield curve** -- 6.09% -- -- -- -- 6.09%
Receive fixed/pay variable:
Notional amount -- $4,500 -- -- -- -- $4,500
Weighted average pay rate:
Contractual rate* -- 5.48% -- -- -- -- 5.48%
Forward yield curve** -- 6.09% -- -- -- -- 6.09%
Weighted average receive rate -- 9.20% -- -- -- -- 9.20%
- ----------------------------------------------------------------------------------------------------
* The weighted average variable rates are based upon the contractual rates in effect at September 30, 1996.
** The weighted average variable rates are projected based upon the implied forward yield curve from date
of analysis through maturity.
</TABLE>
24
<PAGE>
PART II
-----------
OTHER INFORMATION
----------------------------------
CENTRAL FIDELITY BANKS, INC.
ITEM 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
Exhibit 11 - Statement re computation of per share earnings
27 - Financial data schedule
B. Reports on Form 8-K:
There were no reports filed on Form 8-K during the third quarter
ended September 30, 1996.
25
<PAGE>
SIGNATURES
--------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CENTRAL FIDELITY BANKS, INC.
- ----------------------------
(Registrant)
/s/ Charles W. Tysinger
Charles W. Tysinger
Corporate Executive Vice President and Treasurer
(Principal Financial Officer)
/s/ James F. Campbell
James F. Campbell
Senior Vice President & Controller
(Principal Accounting Officer)
Date: November 13, 1996
26
<PAGE>
EXHIBIT INDEX
------------------------
Exhibit No. Description
- ----------- ------------------
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
27
<PAGE>
<TABLE>
EXHIBIT 11
CENTRAL FIDELITY BANKS, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands)
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1996 1995 1996 1995
------ ------ ---- ----
<S> <C> <C> <C> <C>
Earnings:
Net income $25,132 $27,552 $81,922 $79,296
======= ======= ======= =======
Shares:
Weighted average number of common shares used
in computing primary earnings per share 59,586 59,864 59,889 59,511
Dilutive stock options - based on treasury stock
method 1,065 1,032 997 899
------------------------------------------
Weighted average number of common shares used
in computing fully diluted earnings
per share 60,651 60,896 60,886 60,410
======= ======= ======= =======
Earnings per share:
Primary earnings per share $0.42 $0.46 $1.37 $1.33
Fully diluted earnings per share $0.41 $0.45 $1.35 $1.31
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000276235
<NAME> CENTRAL FIDELITY BANKS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 278,450
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 131,754
<TRADING-ASSETS> 7,576
<INVESTMENTS-HELD-FOR-SALE> 3,154,268
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,618,909
<ALLOWANCE> 110,000
<TOTAL-ASSETS> 10,496,954
<DEPOSITS> 7,966,759
<SHORT-TERM> 1,055,247
<LIABILITIES-OTHER> 98,172
<LONG-TERM> 561,777
<COMMON> 295,966
0
0
<OTHER-SE> 519,033
<TOTAL-LIABILITIES-AND-EQUITY> 10,496,954
<INTEREST-LOAN> 425,220
<INTEREST-INVEST> 162,130
<INTEREST-OTHER> 3,973
<INTEREST-TOTAL> 591,323
<INTEREST-DEPOSIT> 241,488
<INTEREST-EXPENSE> 311,793
<INTEREST-INCOME-NET> 279,530
<LOAN-LOSSES> 32,013
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 189,481
<INCOME-PRETAX> 119,894
<INCOME-PRE-EXTRAORDINARY> 119,894
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,922
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.35
<YIELD-ACTUAL> 3.77
<LOANS-NON> 43,212
<LOANS-PAST> 22,361
<LOANS-TROUBLED> 168
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 110,000
<CHARGE-OFFS> 44,100
<RECOVERIES> 12,087
<ALLOWANCE-CLOSE> 110,000
<ALLOWANCE-DOMESTIC> 110,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
