SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 28, 1994
SIGNET BANKING CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 1-6505 54-6037910
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7 North Eighth Street, Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 804 747-2000
Not Applicable
Former name, former address and former fiscal year, if changed since last report
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ITEM 5. Other Events.
Signet Banking Corporation has announced that it plans to apply for
regulatory approval to establish a separately chartered credit card bank.
Signet hopes to establish the Bank Card Division as a separate wholly-owned
subsidiary in the second half of 1994. See Exhibit 1 for the News Release
dated March 28, 1994.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
1. News release dated March 28, 1994.
SIGNATURE
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 there unto duly authorized.
SIGNET BANKING CORPORATION
(Registrant)
Date: April 1, 1994 /s/ Wallace B. Millner, III
Wallace B. Millner, III
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
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Exhibit 1
March 28, 1994 Teri A. Temples
7:30 a.m. E.S.T. Public Relations Director
(804) 771-7210
Signet Banking Corporation Releases
Line of Business Results for Bank Card Division
RICHMOND, Va. Signet Banking Corporation's 1993 Annual Report, which
was mailed to shareholders today, disclosed for the first time the
financial results of Signet's Bank Card Division (BCD). Robert M. Freeman,
chairman and chief executive officer of Signet Banking Corporation, said
"BCD achieved extraordinary success during 1993 with net income rising to
$113 million from $17 million in 1992, and with the managed loan portfolio
growing from $2.3 billion at year-end 1992 to $5.2 billion at year-end
1993." BCD's strong performance reflects the accelerating success of the
information-based strategy initiated in 1988 and aggressively developed
since that time.
Extensive testing of product and customer market segments, continuing
credit policy refinement and the application of proprietary statistical
modeling techniques have all focused on improving the asset quality of new
solicitations. These efforts have yielded systematically lower delinquency
and charge-off rates for each successive vintage of accounts originated
over the last several years. Loss experience on older portfolio segments
continues to improve as a result of the maturation of accounts, account
management policies and the improved economy.
During 1993, Signet was among industry leaders in percentage growth and
dollar growth of managed loans. Signet remains among industry leaders in
product and market development, participating in such innovations as
introductory rate pricing, balance transfer programs and secured credit
cards for those with little or poor credit histories. Signet Banking
Corporation also announced that it plans to apply for regulatory approval
to establish a separately chartered credit card bank. Establishing a
separate credit card bank will provide Signet with greater funding
flexibility and will enable BCD to compete more effectively on a national
basis with other credit card companies. Signet stated that it hopes to
establish BCD as a separate wholly-owned subsidiary in the second half of
1994.
Attachment: Bank Card Division's Financial Performance
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Signet's Bank Card Financial Performance
Methodologies
The accompanying financial information is based on certain internal
allocation and funding methodologies. The equity allocation to managed
assets is determined by using both external benchmarks and an amount
estimated to cover unexpected losses. The equity assignment differs from
the equity held for risk-based regulatory guidelines. The loan loss
provision is based on actual losses, plus an amount required to maintain an
adequate loss allowance.
Bank Card's assets are funded under a transfer pricing system that
removes most of the interest rate risk from the line of business. Directly
attributable non-interest expenses from support and corporate units are
allocated to Bank Card. Remaining overhead is allocated based on the
line's proportion of non-interest expenses to Signet's total non-interest
expenses. Periodically, these numbers are revised when improvements to the
assignments, allocations and transfer pricing methodologies are made.
When we compare our Bank Card results with those of publicly traded
credit card companies, we consider several factors:
o Our transfer pricing system produces a funding cost that might differ
significantly from that of an independent company funding through external
sources.
o We do not allocate any investment portfolio to Bank Card; independent
companies require liquidity portfolios of significant size.
o Bank Card makes use of various Signet financial and administrative
services that are paid for through overhead allocations; these costs can
differ significantly for companies that generate such services in their own
infrastructures.
Financial Results
Bank Card's net interest income rose from $68 million in 1992 to $172
million in 1993, an increase of 154%. This reflected the impact of the
significant credit card receivables growth and lower funding costs. Net
interest income also was impacted by the $2.3 billion of securitizations
during the latter part of 1993, which transformed net interest income into
non-interest income.
During 1992, Bank Card increased the allowance for loan losses as a
result of the rapid growth in outstandings and an anticipated increase in
losses as the new receivables seasoned. However, the charge-off rate for
on-balance sheet credit card receivables declined sharply from 4.13% in
1992 to 1.28% in 1993. The improved credit quality of the portfolio and the
1993 securitizations resulted in a 39% decrease in provision for loan
losses year over year.
Non-interest income, which included servicing income and various credit
card service charges, totaled $224 million, an increase of 75% over 1992.
The $2.3 billion of credit card securitizations in 1993 caused a dramatic
surge in servicing income. Also, the overall increase in accounts and
outstandings contributed to the increase in non-interest income. For
securitized receivables, any benefit or penalty resulting from mismatches
between the receivables' maturity and repricing characteristics, and those
of the related investor coupons, is excluded from Bank Card's servicing
income.
Non-interest expense for 1993 totaled $188 million, an increase of $75
million, or 66% from 1992. This increase reflected the expenses incurred to
originate, service and support the significant growth in outstandings
during 1993. Expenses from the card solicitation program totaled $56
million in 1993 compared to $23 million in the prior year, an increase of
$33 million. The increase in other expenses, primarily salaries and
benefits, was principally due to servicing the expanded credit card base
(accounts and out-standings).
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Signet Bank's
Bank Card Line of Business
Financial Results
(dollars in thousands - except per account) Year Ended
December 31
1993 1992
Net interest income $172,185 $67,686
Provision for loan losses 33,693 55,288
Non-interest income 223,748 127,581
Non-interest expense 188,471 113,570
Income before income taxes 173,769 26,409
Applicable income taxes 60,819 8,979
Net Income $112,950 $17,430
Average allocated equity $218,038 $109,711
Return on average allocated equity 51.80% 15.89%
Average on-balance sheet earning assets $2,211,108 $772,414
Average managed portfolio $3,582,795 $1,772,414
Year-end managed portfolio $5,152,470 $2,306,540
Managed portfolio 60-day delinquency
rate at year-end 1.53% 3.30%
Managed portfolio net charge-off ratio 2.34% 5.31%
Purchase charge volume $3,113,871 $1,742,117
Number of accounts outstanding at year-end 3,406,691 1,961,751
Outstandings per account at year-end $1,512 $1,176
The Bank Card line of business loan portfolio includes approximately
$60,000 of other consumer-type loans.
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