<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities Act of
1934 for the quarterly period ended March 31, 1994 or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act for the transition period from _______ to _______.
Commission file number 1-6505
SIGNET BANKING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Virginia 54-6037910
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization) 23260
7 North Eighth Street, Richmond, Virginia (Zip Code)
(Address of principal executive offices) 804 747-2000
Registrant's telephone number, including
area code
Not Applicable
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Common Shares outstanding as of April 30, 1994 - 56,743,557
Page 1 of 25
<PAGE>
INDEX
SIGNET BANKING CORPORATION AND SUBSIDIARIES
MARCH 31, 1994
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet 3
Statement of Consolidated Income 4
Statement of Changes in Consolidated Stockholders' Equity 5
Statement of Consolidated Cash Flows 5
Supplemental Notes to Quarterly Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS-EXCEPT PER SHARE) (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1994 1993 1993
<S> <C> <C> <C>
Assets
Cash and due from banks $ 502,040 $ 524,063 $ 463,358
Interest bearing deposits with other banks 217,430 253,876 540,312
Federal funds sold and securities purchased under resale
agreements 728,735 777,510 1,075,754
Trading account securities 262,944 631,165 379,638
Credit card loans held for securitization 1,000,000
Loans held for sale 241,312 127,939 421,361
Securities available for sale 1,637,359 317,570 248,163
Investment securities 232,393 2,002,751 1,769,615
Loans:
Commercial 2,163,035 2,146,579 2,299,973
Credit card 1,600,756 1,816,937 1,808,515
Other consumer 1,335,054 1,171,299 1,297,309
Real estate-construction 278,554 508,850 309,842
Real estate-commercial mortgage 578,906 623,601 581,529
Real estate-residential mortgage 71,927 87,707 71,411
Gross loans 6,028,232 6,354,973 6,368,579
Less: Unearned income (53,494) (50,438) (58,267)
Allowance for loan losses (250,477) (273,283) (253,313)
Net loans 5,724,261 6,031,252 6,056,999
Premises and equipment (net) 232,267 199,094 216,524
Interest receivable 92,951 103,406 84,118
Other assets 657,883 551,560 593,380
$11,529,575 $11,520,186 $11,849,222
Liabilities
Non-interest bearing deposits $ 1,631,185 $ 1,397,995 $1,544,852
Interest bearing deposits:
Money market and interest checking 1,032,734 953,816 1,039,215
Money market savings 1,686,754 1,798,024 1,745,066
Savings accounts 951,792 720,672 880,072
Savings certificates 2,018,711 2,441,621 2,051,300
Large denomination certificates 333,452 215,408 347,820
Foreign 280,056 57,999 212,288
Total interest bearing deposits 6,303,499 6,187,540 6,275,761
Total deposits 7,934,684 7,585,535 7,820,613
Securities sold under repurchase agreements 1,188,883 1,460,137 1,281,645
Federal funds purchased 694,093 749,149 942,969
Commercial paper 131,469 116,735 168,488
Other short-term borrowings 87,496 267,135 232,024
Long-term borrowings 254,124 297,587 266,152
Interest payable 35,490 31,820 28,205
Other liabilities 185,403 153,763 144,464
Total liabilities 10,511,642 10,661,861 10,884,560
Stockholders' Equity
Common Stock, $5 par value;
Authorized 100,000,000 shares, issued and
outstanding 56,718,841, 28,049,628
and 56,608,578 shares, respectively* 283,594 140,248 283,043
Capital Surplus 137,942 128,295 133,038
Retained Earnings 596,397 589,782 548,581
Total stockholders' equity 1,017,933 858,325 964,662
$11,529,575 $11,520,186 $11,849,222
</TABLE>
* The number of shares of Common Stock outstanding at March 31, 1994 and
December 31, 1993 reflect the two-for-one stock split in the form of a
dividend declared on June 23, 1993, and distributed July 27, 1993.
3
<PAGE>
STATEMENT OF CONSOLIDATED INCOME
(IN THOUSANDS-EXCEPT PER SHARE) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
1994 MARCH 31 1993
<S> <C> <C>
Interest income:
Loans, including fees:
Commercial $ 40,655 $ 40,673
Credit card 50,776 50,092
Other consumer 25,274 24,029
Real estate-construction 5,235 9,484
Real estate-commercial mortgage 10,408 11,906
Real estate-residential mortgage 1,816 1,966
Total loans, including fees 134,164 138,150
Interest bearing deposits with other banks 2,571 3,266
Federal funds sold and resale agreements 4,950 5,167
Trading account securities 5,640 9,406
Credit card loans held for securitization 7,875
Loans held for sale 5,761 1,935
Securities available for sale 23,893 5,021
Investment securities-taxable 385 25,366
Investment securities-nontaxable 4,396 5,559
Total interest income 189,635 193,870
Interest expense:
Money market and interest checking 5,552 5,712
Money market savings 11,318 12,079
Savings accounts 6,948 5,468
Savings certificates 13,050 13,703
Large denomination certificates 3,224 2,265
Foreign 2,181 753
Total interest on deposits 42,273 39,980
Securities sold under repurchase agreements 8,203 12,461
Federal funds purchased 5,024 3,175
Other short-term borrowings 3,053 3,846
Long-term borrowings 3,866 4,528
Total interest expense 62,419 63,990
Net interest income 127,216 129,880
Provision for loan losses 5,499 15,498
Net interest income after provision for loan
losses 121,717 114,382
Non-interest income:
Credit card servicing income 76,537 29,862
Service charges on deposit accounts 15,697 16,046
Credit card service charges 15,448 11,385
Trust income 4,801 4,424
Other 16,160 13,049
Non-interest operating income 128,643 74,766
Securities available for sale gains
(losses) (212) 1,665
Investment securities gains (losses) (68) 103
Total non-interest income 128,363 76,534
Non-interest expense:
Salaries 59,941 50,016
Employee benefits 18,062 15,199
Credit card solicitation 21,387 9,253
Travel and communications 13,317 7,930
Supplies and equipment 11,999 9,637
External data processing services 11,279 7,942
Occupancy 10,711 8,878
Other 25,413 25,202
Total non-interest expense 172,109 134,057
Income before income taxes 77,971 56,859
Applicable income taxes 24,858 18,592
Net income $ 53,113 $ 38,267
Earnings per common share* $ 0.93 $ 0.68
Cash dividends declared per share* 0.25 0.15
Average common shares outstanding* 57,247 56,705
</TABLE>
* Adjusted to reflect the two-for-one stock split declared on June 23, 1993 and
distributed July 27, 1993.
4
<PAGE>
STATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
COMMON CAPITAL RETAINED
STOCK SURPLUS EARNINGS
<S> <C> <C> <C>
Three Months Ended March 31, 1994
Balance at beginning of period $283,043 $133,038 $548,581
Net income 53,113
Issuance of Common Stock 551 4,904
Cash dividends (14,162)
Adjustment to beginning balance for change
in accounting method for net
unrealized gain on securities available
for sale, net of tax of $16,147 29,987
Change in net unrealized gains on securities
available for sale, net of tax benefit of $11,374 (21,122)
Balance at end of period $283,594 $137,942 $596,397
Three Months Ended March 31, 1993
Balance at beginning of period $139,904 $126,282 $560,446
Net income 38,267
Issuance of Common Stock 344 2,013
Cash dividends (8,402)
Change in valuation allowance-marketable equity
securities (529)
Balance at end of period $140,248 $128,295 $589,782
</TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
1994 MARCH 31 1993
<S> <C> <C>
Operating Activities
Net income $ 53,113 $ 38,267
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 5,499 15,498
Provision and writedowns on foreclosed property 89 1,007
Depreciation and amortization 10,499 8,259
Investment securities losses (gains) 68 (103)
Securities available for sale losses (gains) 212 (1,665)
Increase in interest receivable (8,833) (2,554)
Increase in other assets (67,152) (9,578)
Increase in interest payable 7,285 4,210
Increase in other liabilities 40,940 32,374
Increase in loans held for securitization (1,000,000)
Sales of loans held for sale 6,978,723 2,906,549
Purchases and originations of loans held for sale (6,798,674) (2,819,404)
Sales of trading account securities 3,619,068 2,678,869
Purchases of trading account securities (3,492,434) (2,641,723)
Net cash (used) provided by operating activities (651,597) 210,006
Investing Activities
Maturities of investment securities 17,258 70,399
Purchases of investment securities (150)
Sales and maturities of securities available for sale 285,539 30,938
Purchases of securities available for sale (156,754)
Net decrease (increase) in loans 318,734 (514,181)
Recoveries of loans previously charged-off 8,505 10,518
Purchases of premises and equipment (23,054) (6,078)
Net cash provided (used) by investing activities 450,228 (408,554)
Financing Activities
Net increase (decrease) in deposits 114,071 (237,779)
Net decrease in short-term borrowings (523,186) (402,684)
Repayment of long-term debt (12,028) (375)
Issuance of common stock 5,455 2,357
Payment of cash dividends (14,162) (8,402)
Net cash used by financing activities (429,850) (646,883)
Decrease in cash and cash equivalents (631,219) (845,431)
Cash and cash equivalents at beginning of period 2,079,424 2,400,880
Cash and cash equivalents at end of period $1,448,205 $1,555,449
</TABLE>
5
<PAGE>
SUPPLEMENTAL NOTES TO QUARTERLY FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS) (UNAUDITED)
GENERAL
The accompanying financial statements (unaudited) reflect all adjustments
which are, in the opinion of management, necessary for a fair presentation. All
such adjustments are of a normal recurring nature. The financial statements have
been prepared based on the accounting policies as described in the 1993 annual
report and as noted below, except certain amounts which have been reclassified
for prior periods to conform to the 1994 presentation format.
STATEMENT OF CONSOLIDATED CASH FLOWS
Cash and cash equivalents, as presented in this statement, includes cash
and due from banks, interest bearing deposits with other banks and federal funds
sold and securities purchased under resale agreements. Cash paid for interest
during the three months ended March 31, 1994 and 1993 was $55,134 and $59,780,
respectively. Cash paid for income taxes for the three months ended March 31,
1994 and 1993 was $42 and $55, respectively. During the three months ended March
31, 1994 and 1993, $635 and $4,292, respectively, was transferred from loans to
foreclosed property.
SECURITIES AVAILABLE FOR SALE
Effective January 1, 1994, the Company adopted the Financial Accounting
Standard Board's Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investment in Debt and Equity Securities." Under SFAS
No. 115, debt securities classified as investment securities are required to be
carried at amortized cost. Debt and equity securities classified as securities
available for sale are required to be reported at fair value with unrealized
gains and losses reported in a separate component of stockholders' equity, net
of tax. At adoption, securities totaling $1.5 billion were reclassified from
investment securities to securities available for sale.
Securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1994 MARCH 31, 1993 DECEMBER 31, 1993
FAIR FAIR FAIR
COST VALUE COST VALUE COST VALUE
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and agency
obligations--
Mortgage-backed securities $ 388,608 $ 389,130 $117,393 $125,490 $ 47,672 $ 50,795
Other 1,123,830 1,138,381 199,314 201,406 199,641 201,125
State and political subdivisions 14,635 15,166
Other 96,648 94,681 863 863 850 850
Total $1,623,721 $1,637,358 $317,570 $327,759 $248,163 $252,770
</TABLE>
INVESTMENT SECURITIES
Investment securities are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1994 MARCH 31, 1993 DECEMBER 31, 1993
FAIR FAIR FAIR
COST VALUE COST VALUE COST VALUE
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and agency
obligations--
Mortgage-backed securities $ 702,422 $ 714,690 $ 461,345 $ 466,151
Other 867,801 906,057 925,225 964,482
State and political subdivisions $211,234 $223,457 281,113 303,515 258,815 277,456
Other 21,159 21,159 151,415 142,290 124,230 121,142
Total $232,393 $244,616 $2,002,751 $2,066,552 $1,769,615 $1,829,231
</TABLE>
See Securities Available for Sale footnote for discussion of SFAS No. 115.
INCOME TAXES
Differences between the effective rate of income taxes and the statutory
rate arise principally from non-taxable interest on investments and loans.
6
<PAGE>
RECENT ACCOUNTING STATEMENTS
The Financial Accounting Standards Board recently issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." The new statement, which is
effective for financial statements issued for fiscal years beginning after
December 15, 1994, requires impaired loans be measured at the present value of
expected future cash flows discounted at the loan's effective interest rate or
at the loan's observable market value or the fair value of the collateral if the
loan is collateral dependent. The new statement also requires troubled debt
restructurings involving a modification of terms be remeasured in a similar
manner. The Company is currently evaluating the impact that SFAS No. 114 will
have on the Company's future results of operations and financial position.
However, management does not expect that this statement will have a materially
adverse impact on future results of operations or financial position.
SIGNET BANKING CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLARS IN THOUSANDS-EXCEPT PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 PERCENT
1994 1993 CHANGE
<S> <C> <C> <C>
Earnings
Net interest income (taxable equivalent) $ 130,650 $ 133,902 (2.4)%
Net interest income 127,216 129,880 (2.1)
Net income 53,113 38,267 38.8
Per Common Share
Net income $ 0.93 $ 0.68 36.8
Cash dividends declared 0.25 0.15 66.7
Book value 17.95 15.30 17.3
Period-end price 39 1/2 27 5/8 43.0
Average Balance
Assets $11,310,310 $11,142,643 1.5
Earning assets 10,111,663 10,141,805 (0.3)
Loans (net of unearned income) 6,235,210 6,029,009 3.4
Deposits 7,815,385 7,565,610 3.3
Core deposits 7,223,874 7,258,167 (0.5)
Common stockholders' equity 1,007,162 841,121 19.7
Managed credit card portfolio* 5,461,682 2,524,609 116.3
Common shares outstanding 57,247,462 56,704,786 1.0
Ratios
Return on assets 1.90% 1.39% 36.7
Return on common stockholders' equity 21.39 18.45 15.9
Net yield margin 5.24 5.35 (2.1)
Allowance for loan losses to:
Non-performing loans 521.72 352.36 48.1
Non-performing assets 283.44 192.25 47.4
Net loans 4.19 4.33 (3.2)
Non-performing assets to loans and foreclosed properties 1.47 2.23 (34.1)
Common equity to assets 8.83 7.45 18.5
At Period-end
Assets $11,529,575 $11,520,186 0.1
Earning assets 10,294,911 10,415,346 (1.2)
Loans (net of unearned income) 5,974,738 6,304,535 (5.2)
Deposits 7,934,684 7,585,535 4.6
Core deposits 7,321,176 7,312,128 0.1
Common stockholders' equity 1,017,933 858,325 18.6
Non-performing assets 88,370 142,147 (37.8)
Managed credit card portfolio* 5,890,412 2,816,937 109.1
Number of common stockholders 14,756 14,509 1.7
Full-time employees 6,072 4,966 22.3
Part-time employees 1,391 1,128 23.3
</TABLE>
*The managed credit card portfolio includes credit card loans, credit card loans
held for securitization and securitized credit card loans.
The Common Stock of Signet Banking Corporation is traded on the New York Stock
Exchange under the symbol "SBK."
The per common share and common shares outstanding data above reflect a
two-for-one common stock split in the form of a dividend which was declared on
June 23, 1993 to shareholders of record July 6, 1993 and distributed July 27,
1993.
7
<PAGE>
TABLE 1
SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1ST QTR 4TH QTR 3RD QTR 2ND QTR 1ST QTR
1994 1993 1993 1993 1993
<S> <C> <C> <C> <C> <C>
Summary of Operations
(dollars in thousands-except per share)
Net interest income (taxable equivalent) $ 130,650 $ 133,546 $ 144,084 $ 133,561 $ 133,902
Taxable equivalent adjustment 3,434 3,790 4,162 3,779 4,022
Net interest income 127,216 129,756 139,922 129,782 129,880
Provision for loan losses 5,499 10,276 12,501 9,011 15,498
Net interest income after provision for loan
losses 121,717 119,480 127,421 120,771 114,382
Non-interest income 128,363 122,156 85,517 81,229 76,534
Non-interest expense(1) 172,109 169,934 147,516 146,809 134,057
Income before income taxes 77,971 71,702 65,422 55,191 56,859
Applicable income taxes 24,858 21,758 19,659 14,751 18,592
Net income $ 53,113 $ 49,944 $ 45,763 $ 40,440 $ 38,267
Per share:(2)
Net income $ 0.93 $ 0.87 $ 0.80 $ 0.71 $ 0.68
Cash dividends declared 0.25 0.25 0.20 0.20 0.15
Average shares outstanding(2) 57,247,462 57,087,297 57,010,088 56,871,316 56,704,786
Selected Average Balances
(dollars in millions)
Assets $ 11,310 $ 11,601 $ 12,035 $ 11,682 $ 11,143
Earning assets 10,112 10,447 10,970 10,644 10,142
Investment securities 247 1,790 1,840 1,953 2,037
Loans (net of unearned income) 6,235 6,074 6,210 6,512 6,029
Deposits 7,815 7,782 7,823 7,757 7,566
Core deposits 7,224 7,189 7,283 7,308 7,258
Interest bearing liabilities 8,511 8,945 9,516 9,236 8,780
Stockholders' equity 1,007 939 907 868 841
Managed credit card portfolio(3) 5,462 4,663 3,818 3,090 2,525
Ratios
Return on average assets 1.90% 1.71% 1.51% 1.39% 1.39%
Return on average common stockholders' equity 21.39 21.09 20.02 18.69 18.45
Net loan losses to average loans 0.36 0.77 0.93 1.40 0.51
Net interest spread 4.77 4.65 4.81 4.62 4.95
Net yield margin 5.24 5.07 5.21 5.03 5.35
At period-end:
Allowance for loan losses to:
Non-performing loans 521.72 342.63 471.00 410.98 352.36
Non-performing assets 283.44 217.46 222.41 199.30 192.25
Net loans 4.19 4.01 4.42 4.44 4.33
Non-performing assets to loans and foreclosed
properties 1.47 1.83 1.97 2.20 2.23
Total stockholders' equity to assets 8.83 8.14 7.92 7.39 7.45
Total stockholders' equity + allowance to
loans 21.23 19.30 20.49 19.73 17.95
</TABLE>
(1) The first, second, third and fourth quarters of 1993 included $9.3, $17.2,
$13.7 and $15.6 million of credit card soliciation expenses, respectively.
The first quarter of 1994 included $21.4 million of credit card solicitation
expense.
(2) The per common share and common shares outstanding data above reflect a
two-for-one common stock split in the form of a dividend which was declared
on June 23, 1993 to shareholders of record July 6, 1993 and distributed July
27, 1993.
(3) The managed credit card portfolio includes credit card loans, credit card
loans held for securitization and securitized credit card loans.
8
<PAGE>
TABLE 2
NET INTEREST INCOME ANALYSIS
TAXABLE EQUIVALENT BASIS(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST QUARTER 1994 COMPARED FIRST QUARTER 1994 COMPARED
WITH FIRST QUARTER 1993 WITH FOURTH QUARTER 1993
INCREASE CHANGED DUE TO* INCREASE CHANGE DUE TO*
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans, including fees $(4,171) $(8,829) $ 4,658 $ 3,079 $1,288 $ 1,791
Securities available for sale 19,053 (655) 19,708 20,767 214 20,553
Investment securities (26,728) (272) (26,456) (22,282) 575 (22,857)
Other earning assets 7,023 2,757 4,266 (8,138) 16 (8,154)
Total interest income (4,823) (4,236) (587) (6,574) 2,381 (8,955)
Interest expense:
Interest bearing deposits 2,293 1,944 349 772 902 (130)
Fed funds and repurchase agreements (2,409) (390) (2,019) (1,468) 242 (1,710)
Other short-term borrowings (793) (522) (271) (3,306) (662) (2,644)
Long-term borrowings (662) (70) (592) 324 446 (122)
Total interest expense (1,571) 400 (1,971) (3,678) 594 (4,272)
Net interest income $(3,252) $(2,855) $ (397) $(2,896) $2,792 $(5,688)
</TABLE>
* The change in interest due to both volume and rates has been allocated in
proportion to the relationship of the absolute dollar amount of the changes in
each.
The changes in income and expense are calculated independently for each line
in the schedule. The totals for the volume and rate columns are not the sum of
the individual lines.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Signet Banking Corporation ("Signet" or "the Company"), with headquarters
in Richmond, Virginia, is a registered multi-bank, multi-state holding company
listed on the New York Stock Exchange under the symbol SBK. At March 31, 1994,
Signet had assets of $11.5 billion and operated banking subsidiaries (239
full-service banking offices and 243 automated teller machines) in Virginia
(Signet Bank/Virginia), Maryland (Signet Bank/Maryland) and Washington, D.C.
(Signet Bank, N.A.) and several non-banking subsidiaries. The Company has gained
national prominence as an issuer and servicer of credit cards. Signet's primary
market area extends from Baltimore to Washington, south to Richmond, and on to
Hampton Roads/Tidewater Virginia. Signet's credit card business operates
nationally.
The following discussion should be read in conjunction with the
accompanying financial statements, notes and other supplemental information
contained in this document. The per common share data included in the discussion
which follows reflect the two-for-one common stock split in the form of a stock
dividend distributed July 27, 1993.
EARNINGS ANALYSIS
For the first quarter of 1994, consolidated net income totaled a record
$53.1 million, or $.93 per share, a substantial increase from net income of
$38.3 million, or $.68 per share, for the same quarter last year and $49.9
million, or $.87 per share for the fourth quarter of 1993. The earnings for the
1994 first quarter compared with first quarter 1993 reflected increases in
non-interest sources of revenue (credit card servicing income and credit card
service charges) and a reduction in the loan loss provision due to improvement
in asset quality, which was due primarily to the success of the Accelerated Real
Estate Asset Reduction Program ("the Program"). Accomplishing its goal of
significantly reducing the Company's overall exposure to risk real estate
assets, the Program terminated effective January 1, 1994. In addition, the
Company continued its successful credit card solicitation program, which
resulted in solicitation expenses for the 1994 first quarter increasing to $21.4
million from $9.3 million, in the first quarter of 1993. Also, during the
quarter, Signet recognized nominal net losses on investment securities
transactions compared with net gains of $1.8 million during the same quarter
last year, and net gains of $2.5 million for the 1993 fourth quarter.
Key profitability ratios reflected the high level of earnings for the first
quarter of 1994. The return on assets (ROA) was an impressive 1.90% for the
first quarter, while the return on common stockholders' equity (ROE) was also
strong at 21.39%.
9
<PAGE>
This represented a significant improvement over the comparable ROA and ROE
ratios for the 1993 first quarter which were 1.39% and 18.45%, respectively.
NET INTEREST INCOME
Taxable equivalent net interest income, the principal component of
earnings, totaled $130.7 million for the first quarter of 1994, slightly lower
than the same period last year and the fourth quarter of 1993. The net yield
margin for the first quarter of 1994 fell 11 basis points from the same period
in 1993, but was up 17 basis points from the fourth quarter of 1993. The 11
basis point decline in the net yield margin from the first quarter of 1993 is
primarily due to a lower yield on the total on balance sheet portfolio of credit
card loans. Although the average balance increased $647 million, the overall
yield on this portfolio fell to 10.80% from the 13.14% reported in the first
quarter of 1993. The yield on credit card loans declined due to rapid growth in
lower rate credit card products. Table 3 analyzes the change in the net yield
margin from first quarter 1993 to first quarter 1994. An approximate basis point
impact was calculated for each item noted. The increases in the net interest
spread and the net interest margin from the fourth quarter of 1993 were
primarily due to an improvement in the mix of earning assets as the average
balance of lower yielding Federal funds and resale agreements declined. During
the first quarter of 1994, the net interest margin benefited from a higher
proportion of funding from non-interest bearing liabilities.
Signet uses various off-balance sheet interest rate derivatives as an
integral part of its asset and liability management. For Signet's core business,
variable rate assets generally exceed variable rate liabilities. To hedge
against the resulting interest rate risk, Signet has entered into derivative
transactions. At March 31, 1994, the notional values of the Company's derivative
products for the purpose of hedging interest rate risk were $2.5 billion of
interest rate swaps, $700 million of interest rate floors and $400 million of
interest rate caps. Interest rate derivative products contributed 76 basis
points to the first quarter 1994 margin compared with 82 basis points in the
fourth quarter of 1993. The total income from these contracts decreased from
$21.5 million in the fourth quarter of 1993 to $19.0 million in the current
quarter.
Credit card securitizations also have an effect on net interest income and
the net yield margin. Adjusting for all securitizations, net interest income in
the first quarter of 1994 would have been $200.7 million, or 22 percent higher
than the comparable 1993 figure of $164.9 million. For a detailed analysis of
this effect, see the Credit Card Business section elsewhere in this report.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Reflecting the continued positive trends in credit quality, the provision
for loan losses was $5.5 million for the first quarter of 1994 down
significantly from $15.5 million for the same period last year and $10.3 million
for the fourth quarter of 1993.
TABLE 3
ANALYSIS OF NET YIELD MARGIN
FIRST QUARTER 1993 VERSUS FIRST QUARTER 1994
<TABLE>
<S> <C>
Net Yield Margin for First Quarter 1993 5.35%
Lower funding costs excluding derivatives 0.48
Decline in derivative income (0.38)
Change in on balance sheet credit card
(volume and yield-net) (0.18)
Recovered interest on loans returned
to accrual in first quarter 1993 (0.08)
Increase in average non-interest bearing
funding sources 0.07
Other (net) (0.02)
Net Yield Margin for First Quarter 1994 5.24%
</TABLE>
For the first quarter of 1994, net charge-offs totaled $5.6 million, also down
from $7.8 million in the same quarter of 1993 and from $11.7 million in the 1993
fourth quarter. As a percentage of average loans, first quarter net loan losses
declined 15 basis points from the comparable period in 1993 and 41 basis points
from the 1993 fourth quarter. The majority of the commercial loan charge-offs in
the first quarter of 1994 related to one large commercial credit which was sold
early in 1994, well within the loan's allocated allowance. Real
estate-construction and real estate-mortgage loans experienced modest net
10
<PAGE>
recoveries for the 1994 first quarter, in contrast to the fourth and first
quarters of 1993. Continued improvement in the credit quality and substantial
growth of the credit card portfolio caused the percentage of net credit card
losses to average credit card loans on balance sheet to decline for the first
quarter of 1994 from the same period in 1993 and from the 1993 fourth quarter.
Net losses for the three months of 1994 on the total managed credit card
portfolio, which included securitized receivables, were 1.61% of total average
managed credit card loans, compared with 3.03% reported for the same period in
1993. The low level of credit card losses reflects management's attention to the
diversification of the portfolio as well as the quality of Signet's credit card
underwriting standards and collection efforts. The low credit card charge-off
ratios are also influenced by the high growth in new accounts, some of which
have not aged sufficiently to experience any significant charge-offs.
At March 31, 1994, the reserve for foreclosed properties totaled $5.7
million, a slight decrease from December 31, 1993, the result of write-downs on
foreclosed properties taken in the first quarter.
TABLE 4
STATEMENT OF CHANGES IN ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 DECEMBER 31
1994 1993 1993
<S> <C> <C> <C>
Balance at beginning of period $253,313 $265,536 $ 254,706
Provision for loan losses 5,499 15,498 10,276
Transfer to loans held for securitization (2,750)
Loans charged off:
Commercial 4,750 5,601 3,570
Credit card 8,288 10,139 8,531
Other consumer 640 612 654
Real estate-construction 1,545 5,178
Real estate-mortgage(1) 412 371 3,007
Total loans charged off 14,090 18,268 20,940
Recoveries of loans previously charged off:
Commercial 3,128 5,548 3,841
Credit card 3,258 4,231 2,902
Other consumer 237 355 357
Real estate-construction 225 193 1,928
Real estate-mortgage(1) 1,657 190 243
Total recoveries 8,505 10,517 9,271
Net loans charged off 5,585 7,751 11,669
Balance at end of period(2) $250,477 $273,283 $ 253,313
Net loan losses (annualized) as a percentage of average loans:
Commercial .30% .01% (.05)%
Other consumer .12 .09 .09
Real estate (.62) .49 2.35
Subtotal .05 .16 .54
Credit card 1.10 1.55 1.38
Total .36% .51% .77%
Allowance for loan losses to net loans at end of period 4.19% 4.33% 4.01%
</TABLE>
(1) Real estate-mortgage includes real estate-commercial mortgage and real
estate-residential mortgage. Real estate-residential mortgage charge-offs
and recoveries were not significant for the periods presented.
(2) Included $97,905 and $57,631 allocated to the Accelerated Real Estate Asset
Reduction Program at March 31, 1993, and December 31, 1993, respectively.
The allowance for loan losses at March 31, 1994 was $250.5 million, or
4.19% of net loans, compared to $273.3 million, or 4.33% of net loans, at March
31, 1993 and $253.3 million, or 4.01%, at December 31, 1993. The decrease from
March 31, 1993 primarily reflected charge-offs taken on Program loans during
1993. In general, to determine the appropriate level of
11
<PAGE>
allowance for loan losses, management identifies and examines the commercial,
real estate and large consumer loans warranting attention on a monthly basis and
reviews factors such as the credit position of the borrower, the adequacy of
underlying collateral and the impact of business and economic conditions upon
the borrower. Based on this information and action plans provided by the lending
units, Signet's Credit Risk Management Division determines the aggregate level
of the allowance according to the distribution of the loan risk classifications.
The credit card portfolio receives an overall allocation based on such factors
as current and anticipated economic conditions, historical charge-off and
recovery rates and trends in delinquencies, projected charge-offs by loan
solicitation tranche, bankruptcies and loan volume. The remaining loan portfolio
(unclassified commercial, real estate and consumer loans) receives a general
allocation deemed to be reasonably necessary to provide for losses based on risk
ratings and the factors listed above. The allowance designated for the Program
through December 31, 1993 was determined and maintained separately from the
general allocation process discussed above. While this allocation was developed
after an analysis of individual assets, it represented a general allocation
applicable to all loans included in the Program. The allocation shown in Table 5
is a general allowance applicable to the entire loan portfolio and should not be
interpreted as a prediction of future charge-off trends. Furthermore, the
portion allocated to each loan category is not the total amount available for
future losses that might occur within such categories since the total allowance
is a general allowance applicable to the entire loan portfolio.
Management believes that the allowance for loan losses is adequate to cover
anticipated losses in the loan portfolio under current economic conditions.
As previously noted, the Company initiated a program in December 1991, to
accelerate the reduction of real estate assets. The Program's objective was to
significantly reduce the Company's overall exposure to risk real estate assets
through the use of heavy discounts without adversely impacting future earnings.
The Program was very successful and substantially accomplished its objective. As
a result of the success, Signet terminated the Program and separate reporting
effective January 1, 1994. The remaining assets were assigned to work out units
or in some cases will be allowed to mature in accordance with their terms. Since
the inception of the Program, its assets (before reserves) declined by 65%, or
$567.1 million. The Program started with $645.8 million of assets (net of the
allowance for loan losses of $179.5 million and the reserve for foreclosed
properties of $41.6 million) and ended 1993 with $236.5 million of assets (net
of the allowance for loan losses of $57.6 million and the reserve for foreclosed
properties of $5.7 million).
TABLE 5
ALLOWANCE FOR LOAN LOSS ALLOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1994
PERCENTAGE OF
ALLOWANCE ALLOWANCE TO LOANS
AMOUNT IN EACH CATEGORY
<S> <C> <C>
Commercial $ 22,779 1.08%
Credit Card 63,500 3.97
Other Consumer 3,395 .25
Real Estate 83,245 8.96
Unallocated 77,558
Total $250,477 4.19%
</TABLE>
12
<PAGE>
TABLE 6
NON-INTEREST INCOME AND EXPENSE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 DECEMBER 31
1994 1993 1993
<S> <C> <C> <C>
Non-interest income:
Credit card servicing income $ 76,537 $ 29,862 $ 62,399
Service charges on deposit accounts 15,697 16,046 16,068
Credit card service charges 15,448 11,385 16,385
Trust income 4,801 4,424 4,146
Mortgage servicing and origination 5,645 3,127 8,093
Trading profits (losses) (451) 1,691 (751)
Other service charges and fees 3,728 3,550 5,218
Other 7,238 4,681 8,096
Non-interest operating income 128,643 74,766 119,654
Securities available for sale gains (losses) (212) 1,665 2,248
Investment securities gains (losses) (68) 103 254
Total non-interest income $128,363 $ 76,534 $ 122,156
Non-interest expense:
Salaries $ 59,941 $ 50,016 $ 58,091
Employee benefits 18,062 15,199 21,866
Total staff expense 78,003 65,215 79,957
Credit card solicitation 21,387 9,253 15,579
Travel and communications 13,317 7,930 10,269
Supplies and equipment 11,999 9,637 10,855
External data processing services 11,279 7,942 11,243
Occupancy 10,711 8,878 10,464
Professional services 4,280 3,057 5,624
Public relations, sales and advertising 4,268 4,802 3,927
FDIC assessment 3,891 4,733 4,396
Credit and collection 2,653 2,395 2,894
Foreclosed property (216) 2,144 4,495
Other 10,537 8,071 10,231
Total non-interest expense $172,109 $134,057 $ 169,934
</TABLE>
NON-INTEREST INCOME
For the first quarter of 1994, non-interest income rose 68% from the same
quarter in 1993 to $128.4 million. The primary sources of growth were increases
in credit card servicing income, credit card service charges and mortgage
servicing and origination fees. Credit card servicing income rose $46.7 million
from the 1993 first quarter to $76.5 million primarily as a result of the 1993
securitizations. This category houses the income received for servicing the $3.3
billion of securitized credit card receivables ($500 million in September, 1990,
$500 million in March, 1991, $1.2 billion in September, 1993 and $1.1 billion in
December, 1993). The $4.1 million increase in income from credit card service
charges for the first quarter of 1994 compared with the same time period in 1993
was attributable to the large increase in credit card outstandings resulting
from the success of Signet's credit card solicitation program. Mortgage
servicing and origination fee income rose 81% to $5.7 million as a result of a
significant increase in mortgage loan volume. For the first quarter of 1994,
Signet incurred trading losses of $.5 million versus trading gains of $1.7
million in the 1993 first quarter.
Non-interest income grew $6.2 million or 5% during the current quarter
compared with the fourth quarter of 1993. A $14.1 million increase in credit
card servicing income due to the December, 1993 securitization, was partially
offset by declines in other areas. Credit card service charges fell 6% quarter
to quarter due to the securitization of $1.1 billion of loans in December, 1993.
A decline in mortgage origination volume resulting from rising rates and
seasonal factors caused this category to fall 30% from the fourth quarter of
1993. In the first quarter of 1994, $.2 million of net losses were recognized on
transactions in the securities available for sale portfolio compared with $1.7
million and $2.2 million of net gains for the first
13
<PAGE>
and fourth quarter of 1993, respectively. Also, during the first quarter of
1994, Signet recognized net losses of $68 thousand on investment securities that
were called compared with nominal net gains for the first and fourth quarters of
1993.
NON-INTEREST EXPENSE
Total non-interest expense for the first quarter of 1994 was $172.1
million, an increase of 28% from the same period in 1993 and 1% from the fourth
quarter of 1993. When comparing the first quarter of 1994 to the same quarter in
1993, increases occurred in all the major categories except marketing,
foreclosed property and FDIC assessment. Foreclosed property expense for the
first three months of 1994 reflected a credit balance as a result of income and
gains from sales exceeding costs of maintaining and operating these properties.
Much of the increase in non-interest expense was the result of the continuation
of the credit card solicitation program and the growth in the credit card
business. Excluding direct costs related to credit card, non-interest expense
during the first quarter rose 6% compared to the same quarter in 1993 and fell
11% from the fourth quarter. Greater salary expense resulted mainly from
increased staffing to support the significant growth in the credit card
business. The number of full-time equivalent employees rose 22% and 5% from
first quarter and fourth quarter of 1993, respectively. Employee benefits for
the fourth quarter of 1993 included the cost of implementing SFAS No. 112
"Employers' Accounting for Postemployment Benefits," which totaled $6.0 million.
Total salary and employee benefits increased $12.8 million from the same period
in 1993 and decreased $2.0 million from the fourth quarter of 1993. The overall
increase in employee benefits between the two first quarters reflected the
increase in staff levels and the rising cost of medical insurance and other
benefits. For the 1994 first quarter, expenses associated with the credit card
solicitation program were $21.4 million, an increase of $12.1 million from the
comparable period of 1993. For the fourth quarter of 1993, credit card
solicitation program expenses amounted to $15.5 million. Management expects to
incur additional solicitation expense in the future as Signet continues to
invest in its credit card business. Travel and communication expense for 1994
reflects not only an increase in the bank card area, but also increases related
to Student Loan, Home Equity Line and Home Mortgage solicitations. The other
non-interest expense categories reflected the costs associated with increased
business volume, primarily in the credit card area.
Signet's efficiency ratio (the ratio of non-interest expense to taxable
equivalent operating income) for the first three months of 1994 was 66.38%
compared with 64.24% for the same period of 1993 and 67.11% for the fourth
quarter of 1993. Excluding the amount of foreclosed property expense (income)
from non-interest expense causes the ratio to change to 66.46%, 63.22% and
65.34% for the respective time periods. Considering that charge-offs on
securitized credit card loans reduce credit card servicing income, operating
income, for the purpose of calculating the efficiency ratio, should exclude the
negative impact of these charge-offs. Making this adjustment to revenue reduces
the ratio to 62.57% for 1994 compared with 60.28% and 61.47% for the first and
fourth quarters of 1993, respectively. Management is not satisfied with the
level of non-interest expense and is committed to improve Signet's efficiency
ratio.
INCOME TAXES
Signet recorded income tax expense of $24.9 million for the quarter ended
March 31, 1994 compared to $18.6 million for the same period of 1993 and $21.8
million in the fourth quarter. The increase in tax expense was principally due
to the significant increase in taxable income and the continued decline in the
level of tax-exempt income. The effective tax rate for the first quarter of 1994
was 32% compared to 33% for the same period of 1993 and 30% for the fourth
quarter.
FINANCIAL CONDITION
Earning assets averaged $10.1 billion for the first quarter of 1994, a
slight decrease from the same period last year. Average investment securities
declined $1.8 billion or 88% and average securities available for sale rose $1.4
billion from the prior year's first quarter as approximately $1.5 billion of
securities were reclassified from investment securities to securities held for
sale when Signet adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" at the beginning of 1994. Credit card loans held for
securitization averaged $344 million for the quarter compared to $554 million
for the fourth quarter of 1993. These assets were reclassified from the credit
card loan category in anticipation of an additional $1 billion of credit card
loan securitization in the second quarter of 1994. Total loans averaged $6.2
billion for the quarter, reflecting increases of $206 million and $161 million
from the first and fourth quarters in 1993, respectively. The loan category with
the largest increase from the first quarter of 1993 was credit card, up 20% to
$1.8 billion. Average credit card loans on the balance sheet, including held for
securitization, increased 43% to $2.2 billion as a result of the success of
Signet's solicitation program. The rise in other consumer loans resulted from a
$199 million growth in student loans. The loan category experiencing the largest
decline from the first quarter of 1993 was real estate-construction, down 44% to
$293 million. Average real estate-commercial mortgage loans declined 9% to $581
million and real estate-residential mortgages
14
<PAGE>
were down 8% to $72.3 million. The decline in construction loans was principally
the result of the Program established in late 1991 to reduce the level of risk
real estate asset exposure. The yield on earning assets was 7.74% for the
quarter, compared with a yield of 7.91% in the prior year's first quarter and
7.58% in the prior year's fourth quarter. The increase in the yield on earning
assets from the fourth quarter resulted from an improvement in earning assets
mix as the dollar amount of low yielding Federal funds and resale agreements
declined $197 million.
Average interest bearing liabilities totaled $8.5 billion, down 5% from the
fourth quarter of 1993 and 3% from the corresponding time period in 1993.
Savings certificates decreased $428 million, or 17% and $108 million, or 5%,
from the first and fourth quarters of 1993, respectively, as depositors
responded to lower interest rates by shortening the maturities of their
investments and transferring their funds into money market and demand products.
Additionally, money market savings declined $110 million, or 6%, from the first
quarter of 1993 to $1.7 billion. Deposit categories experiencing increases as a
result of the factors noted above included money market and interest checking
and savings accounts. Foreign deposits and large denomination certificates also
rose $165.7 million and $118.3 million, respectively, from the first quarter of
1993. Average core deposits remained relatively stable when comparing first
quarter 1994 with the first and fourth quarters of 1993. Purchased funds, which
include large denomination certificates, foreign deposits, Federal funds and
repurchase agreements and other short-term and long-term borrowings averaged $
2.8 billion for the 1994 first quarter, down slightly from the comparable 1993
period and down 13% from the fourth quarter of 1993. The increased volume in
purchased funds in the fourth quarter of 1993 was to temporarily fund the growth
in credit card receivables prior to securitization. The average rate on interest
bearing liabilities remained stable when compared with the first quarter of 1993
but increased 4 basis points from the fourth quarter of 1993 due to a rise in
market rates and lower income from derivative products.
15
<PAGE>
TABLE 7
CONSOLIDATED AVERAGE BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994
THREE MONTHS ENDED
DECEMBER 31
MARCH 31 1993 1993
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Earning assets (tax equivalent
basis):*
Interest bearing deposits
with other banks $ 260,623 $ 2,571 3.95% $ 311,553 $ 3,266 4.19% $ 254,288 $ 2,932
Federal funds and resale
agreements 607,287 4,950 3.26 665,138 5,167 3.11 804,379 6,333
Trading account securities 286,083 5,640 8.00 646,452 9,406 5.90 342,040 6,592
Loans held for
securitization 344,445 7,875 9.15 554,348 12,993 9.38
Loans held for sale 356,398 5,761 6.47 122,672 1,996 6.51 370,742 6,085
Securities available for
sale 1,775,042 24,135 5.44 330,478 5,021 6.10 257,378 3,368
Investment
securities-taxable 26,886 385 5.71 1,749,842 25,465 5.86 1,525,637 21,560
Investment
securities-nontaxable 219,689 6,645 12.10 286,661 8,293 11.57 263,899 7,752
Loans (net of unearned
income):
Commercial 2,141,690 40,985 7.76 2,081,722 41,026 7.99 2,148,601 40,751
Credit card 1,827,581 50,776 11.11 1,524,609 50,092 13.14 1,631,570 48,162
Other consumer 1,319,627 25,274 7.70 1,180,271 24,029 8.22 1,270,924 23,320
Real estate-construction 293,423 5,241 7.14 528,088 9,488 7.19 357,018 6,482
Real estate-commercial
mortgage 580,572 11,015 7.69 635,684 12,677 8.09 594,071 11,577
Real estate-residential
mortgage 72,317 1,816 10.04 78,635 1,966 10.00 72,049 1,736
Total loans 6,235,210 135,107 8.79 6,029,009 139,278 9.37 6,074,233 132,028
Total earning assets 10,111,663 $193,069 7.74% 10,141,805 $197,892 7.91% 10,446,944 $ 199,643
Non-rate related assets:
Cash and due from banks 489,161 430,498 500,041
Allowance for loan losses (252,360) (270,557) (257,082)
Premises and equipment
(net) 224,308 199,282 206,315
Other assets 737,538 641,615 705,243
Total assets $11,310,310 $11,142,643 $11,601,461
Liabilities and Stockholders'
Equity
Interest bearing liabilities:
Deposits:
Money market and interest
checking $ 1,021,613 $ 5,552 2.20% $ 929,652 $ 5,712 2.49% $ 1,004,644 $ 5,508
Money market savings 1,699,044 11,318 2.70 1,809,098 12,079 2.71 1,677,785 11,026
Savings accounts 910,572 6,948 3.09 694,266 5,468 3.19 853,318 6,621
Savings certificates 2,036,432 13,050 2.60 2,464,865 13,703 2.25 2,144,485 12,852
Large denomination
certificates 328,939 3,224 3.92 210,612 2,265 4.30 322,479 3,195
Foreign 262,572 2,181 3.32 96,831 753 3.11 269,996 2,299
Total interest bearing
deposits 6,259,172 42,273 2.74 6,205,324 39,980 2.61 6,272,707 41,501
Federal funds and repurchase
agreements 1,718,941 13,227 3.08 1,980,272 15,636 3.16 1,907,648 14,695
Other short-term borrowings 275,074 3,053 4.44 297,103 3,846 5.18 497,739 6,359
Long-term borrowings 258,266 3,866 5.99 297,764 4,528 6.08 266,420 3,542
Total interest bearing
liabilities 8,511,453 $ 62,419 2.97% 8,780,463 $ 63,990 2.96% 8,944,514 $ 66,097
Non-interest bearing
liabilities:
Demand deposits 1,556,213 1,360,286 1,508,800
Other liabilities 235,482 160,773 208,742
Common stockholders' equity 1,007,162 841,121 939,405
Total liabilities and
stockholders' equity $11,310,310 $11,142,643 $11,601,461
Net interest spread 4.77% 4.95%
Interest income to average
earning assets 7.74% 7.91%
Interest expense to average
earning assets 2.50 2.56
Net yield margin 5.24% 5.35%
<CAPTION>
YIELD/
RATE
<S> <C>
Assets
Earning assets (tax equivalent
basis):*
Interest bearing deposits
with other banks 4.51%
Federal funds and resale
agreements 3.08
Trading account securities 7.65
Loans held for
securitization
Loans held for sale 6.42
Securities available for
sale 5.12
Investment
securities-taxable 5.62
Investment
securities-nontaxable 11.75
Loans (net of unearned
income):
Commercial 7.52
Credit card 11.81
Other consumer 7.30
Real estate-construction 7.10
Real estate-commercial
mortgage 7.73
Real estate-residential
mortgage 9.64
Total loans 8.62
Total earning assets 7.58%
Non-rate related assets:
Cash and due from banks
Allowance for loan losses
Premises and equipment
(net)
Other assets
Total assets
Liabilities and Stockholders'
Equity
Interest bearing liabilities:
Deposits:
Money market and interest
checking 2.18%
Money market savings 2.61
Savings accounts 3.08
Savings certificates 2.38
Large denomination
certificates 3.88
Foreign 3.33
Total interest bearing
deposits 2.62
Federal funds and repurchase
agreements 3.01
Other short-term borrowings 5.00
Long-term borrowings 5.20
Total interest bearing
liabilities 2.93%
Non-interest bearing
liabilities:
Demand deposits
Other liabilities
Common stockholders' equity
Total liabilities and
stockholders' equity
Net interest spread 4.65%
Interest income to average
earning assets 7.58%
Interest expense to average
earning assets 2.51
Net yield margin 5.07%
</TABLE>
*Includes the effects of taxable equivalent adjustments using a tax rate of 35%.
16
<PAGE>
CREDIT CARD BUSINESS
The credit card industry is highly competitive and operates in a legal and
regulatory environment increasingly focused on the cost of services charged to
consumers. There is an increasing use of advertising, target marketing, pricing
competition and incentive programs. The Company has responded to competition by
targeting the origination of new accounts through the creation of products for
multiple customer segments using various marketing channels. For example, Signet
offers credit cards nationwide with different finance charge and fee
combinations or other special features such as a balance transfer option. The
Company approves prospective account holders through preapproval in conjunction
with full application underwriting procedures. Using information derived from
proprietary statistical models, Signet matches prospective account holders who
meet the various applicable underwriting criteria with an appropriate credit
card product.
The Company has invested heavily over the past five years in a
sophisticated information-based strategy for originating and managing credit
card accounts. Signet uses this strategy to develop improved credit risk models
which increase the credit quality of new solicitations. Signet's credit card
business continues to benefit significantly from its information-based strategy.
The managed credit card portfolio (which includes securitized receivables)
increased by $3.1 billion, or 109%, from March 31, 1993 and by $792 million, or
16%, from December 31, 1993. Absolute dollars of net loan losses, on a managed
portfolio basis, also rose from $19.5 million for the first three months of 1993
to $22.2 million for the same time period of 1994. However, the ratio of
charge-offs to average loans fell from 3.03% for the first three months of 1993
to 1.61% for 1994, which is evidence of the high credit quality of the accounts
obtained through the solicitation program, the improved credit quality of the
more seasoned accounts in the portfolio and the overall impact of recent growth.
The high quality of the credit card portfolio is also reflected in loan
delinquency data. The total managed credit card loans sixty days or more past
due dropped to 1.30% of related loans at March 31, 1994 from 1.53% at year-end
1993, while the dollar amount remained relatively stable at approximately $78
million at the same respective dates. Refer to Table 8 for a summary of
delinquency data related to credit card loans. New account solicitations
represent a diversity of product offerings, largely targeted at lower risk
consumers. Management is committed to continually increasing sophistication in
all areas of risk management. It is management's expectation that growth in
outstandings and accounts will continue for the near term.
Signet's managed credit card portfolio is comprised of credit card loans,
credit card loans held for securitization and securitized credit card
receivables. Securitized credit card receivables are not assets of the Company
and, therefore, are not shown on the balance sheet. See Table 9 for a summary of
Signet's managed credit card portfolio.
Securitization is the transformation of a pool of credit card receivables
into marketable securities. Credit card receivables are transferred to a trust
and interests in the trust are sold to investors for cash. The securitization of
credit card receivables is an effective balance sheet management tool for
facilitating the credit card growth. Such securitizations reduce the net yield
margin and provision for loan losses and increase non-interest income, but the
net effect on Signet's earnings is minimal, while increasing the return on
assets. Signet's Credit Card Division services the related credit card accounts
after the receivables are securitized. Because securitization changes Signet's
involvement from that of a lender to that of a loan servicer, there is a change
in how the revenue is reported on the income statement. For securitized
receivables, amounts that would previously have been reported as interest
income, credit card service charges and provision for loan losses are instead
reported in non-interest income as credit card servicing income. Because credit
losses are absorbed against these cash flows, Signet's credit card servicing
income over the terms of these transactions may vary depending upon the credit
performance of the securitized receivables. However, Signet's exposure to credit
losses on the securitized receivables is contractually limited to these cash
flows.
In certain marketing programs, Signet makes use of introductory periodic
finance charge rates which are predominantly fixed for some initial period and
at the conclusion of this period rise to a higher, variable rate finance charge.
17
<PAGE>
TABLE 8
MANAGED CREDIT CARD PORTFOLIO DELINQUENCIES*
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30
NUMBER 1994 1993 1993 1993
OF DAYS DELINQUENT DELINQUENT DELINQUENT DELINQUENT
DELINQUENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30-59 days $ 50,461 .85% $ 52,099 1.01% $ 44,810 1.02% $ 42,620 1.23%
60-89 days 27,575 .46 28,236 .55 24,516 .56 24,345 .70
90+ days 50,278 .84 50,359 .98 48,881 1.12 49,265 1.43
Total $128,314 2.15% $130,694 2.54% $118,207 2.70% $116,230 3.36%
<CAPTION>
MARCH 31
NUMBER 1993
OF DAYS DELINQUENT
DELINQUENT AMOUNT PERCENT
<S> <C> <C>
30-59 days $ 44,058 1.55%
60-89 days 24,648 .86
90+ days 50,843 1.78
Total $119,549 4.19%
</TABLE>
*The portfolio for this schedule includes the managed credit card portfolio as
well as an immaterial amount of credit line loans serviced on the bank card
system.
TABLE 9
MANAGED CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
1994 1993 1993 1993 1993
<S> <C> <C> <C> <C> <C>
Period-end balances:
On balance sheet loans held for
securitization $1,000,000 $ 750,000 $1,000,000
On balance sheet loans 1,600,756 $1,808,515 1,348,928 1,406,089 $1,816,937
Off balance sheet loans 3,289,656 3,289,656 2,186,580 1,000,000 1,000,000
Total period-end managed portfolio $5,890,412 $5,098,171 $4,285,508 $3,406,089 $2,816,937
Average balances:
On balance sheet loans held for
securitization $ 344,445 $ 554,348 $ 997,283 $ 11,000
On balance sheet loans 1,827,581 1,631,570 1,820,507 2,078,630 $1,524,609
Off balance sheet loans 3,289,656 2,476,613 1,012,898 1,000,000 1,000,000
Total average managed portfolio $5,461,682 $4,662,531 $3,830,688 $3,089,630 $2,524,609
</TABLE>
18
<PAGE>
TABLE 10
IMPACT OF THE CREDIT CARD SECURITIZATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
1994 1993 1993 1993 1993
<S> <C> <C> <C> <C> <C>
Statement of Consolidated Income (as
reported)
Net interest income $ 127,216 $ 129,756 $ 139,922 $ 129,782 $ 129,880
Provision for loan losses 5,499 10,276 12,501 9,011 15,498
Non-interest income 128,363 122,156 85,517 81,229 76,534
Non-interest expense 172,109 169,934 147,516 146,809 134,057
Income before income taxes $ 77,971 $ 71,702 $ 65,422 $ 55,191 $ 56,859
Adjustments for Securitizations
Net interest income $ 73,492 $ 61,006 $ 35,431 $ 36,255 $ 34,970
Provision for loan losses 16,116 15,959 13,783 14,507 13,384
Non-interest income (57,376) (45,047) (21,648) (21,748) (21,586)
Non-interest expense -- -- -- -- --
Income before income taxes $ -- $ -- $ -- $ -- $ --
Managed Statement of Income (adjusted)
Net interest income $ 200,708 $ 190,762 $ 175,353 $ 166,037 $ 164,850
Provision for loan losses 21,615 26,235 26,284 23,518 28,882
Non-interest income 70,987 77,109 63,869 59,481 54,948
Non-interest expense 172,109 169,934 147,516 146,809 134,057
Income before income taxes $ 77,971 $ 71,702 $ 65,422 $ 55,191 $ 56,859
As reported:
Average earning assets $10,111,663 $10,446,944 $10,970,422 $10,643,674 $10,141,805
Return on assets 1.90% 1.71% 1.51% 1.39% 1.39%
Net yield margin 5.24 5.07 5.21 5.03 5.39
Including securitized credit cards:
Average earning assets $13,401,319 $12,923,557 $11,983,320 $11,643,674 $11,141,805
Return on assets 1.48% 1.41% 1.39% 1.28% 1.28%
Net yield margin 6.18 5.97 5.94 5.85 6.15
Yield on managed portfolio 12.32% 12.85% 13.24% 14.38% 15.59%
</TABLE>
If accountholders choose to utilize competing sources of credit, the rate at
which new receivables are generated may be reduced and certain purchase and
payment patterns with respect to the receivables may be affected.
Signet has securitized a total of $3.3 billion of credit card receivables
as of March 31, 1994. Table 10 indicates the impact of the securitizations on
the statement of consolidated income, average assets, return on assets and net
yield margin. Signet plans to securitize an additional $1 billion of credit card
receivables during the 1994 second quarter; therefore, these receivables were
reclassified from the loan portfolio to credit card loans held for
securitization during the first quarter of 1994. It is management's intention to
continue to solicit new credit card accounts.
During the first quarter of 1994, Signet announced plans to establish a
separate credit card bank subsidiary which will be wholly owned by Signet
Banking Corporation. Establishing such a subsidiary will improve its funding
flexibility, better focus Signet's resources and enhance the Company's
organizational flexibility which will improve Signet's competitiveness in the
national credit card market.
Signet has successfully implemented its information-based strategy to
originate and manage credit card accounts. While Signet plans to continue to
increase its investment in the credit card business and expects continued growth
and further successes, the growth rate experienced during 1993 and so far in
1994 is not sustainable indefinitely. As a result, Signet plans to or has
already started to implement this information-based strategy in other areas of
the Company, such as educational lending, equity line and mortgage banking.
However, it is too early to determine the success of this strategy.
19
<PAGE>
TABLE 11
NON-PERFORMING ASSETS AND PAST DUE LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH
31 MARCH 31 DECEMBER 31
1994 1993 1993
<S> <C> <C> <C>
Non-accrual loans:
Commercial $17,191 $ 23,791 $ 42,303
Consumer 2,591 1,419 2,191
Real estate-construction 17,258 47,800 17,837
Real estate-mortgage* 5,895 4,123 6,523
Total non-accrual loans 42,935 77,133 68,854
Restructured loans:
Commercial 1,607 425 1,609
Real estate-construction 3,468 3,470
Total restructured loans 5,075 425 5,079
Total non-performing loans 48,010 77,558 73,933
Legally foreclosed properties 39,227 62,748 37,938
In substance foreclosed properties 6,786 11,479 10,357
Less foreclosed property reserve (5,653) (9,638) (5,742)
Total foreclosed properties 40,360 64,589 42,553
Total non-performing assets $88,370 $142,147 $ 116,486
Percentage to loans (net of unearned) and foreclosed properties 1.47% 2.23% 1.83%
Allowance for loan losses to:
Non-performing loans 521.72 352.36 342.63
Non-performing assets 283.44 192.25 217.46
Accruing loans past due 90 days or more $52,702 $ 80,207 $ 58,891
</TABLE>
*Real estate-mortgage includes real estate-commercial mortgage and real
estate-residential mortgage. Real estate-residential mortgage non-accrual loans
were not significant for the periods presented.
RISK ELEMENTS
NON-PERFORMING ASSETS
Non-performing assets include non-accrual loans, restructured loans and
foreclosed properties. Non-performing assets declined $28.1 million or 24% from
December 31, 1993 primarily as a result of the Company selling one large
commercial credit ($24.7 million) that was on non-accrual status at year-end.
The Company sold this loan well within the allocated allowance at December 31,
1993. Non-performing assets declined $53.8 million, or 38%, from March 31, 1993
to $88.4 million (net of the $5.7 million foreclosed property reserve).
Non-performing assets represented 1.47% of loans and foreclosed properties at
March 31, 1994, down from 1.83% and 2.23% at December 31, 1993 and March 31,
1993, respectively. Approximately $4.5 million of foreclosed properties were
sold or written down in the first quarter of 1994. The allowance for loan losses
equaled 522% of non-performing loans at March 31, 1994, an improved coverage
from 343% at December 31, 1993 and 352% at March 31, 1993. The ratio of the
allowance to non-performing assets also improved to 283% at March 31, 1994 from
217% at December 31, 1993 and 192% at March 31, 1993.
Foreclosed properties totaled $40.4 million (net of reserve) at the end of
the first quarter of 1994 and were equal to 46% of total non-performing assets
and 60% of non-performing real estate assets. The gross foreclosed properties
balance reflected an aggregate discount of approximately 48% from prior
charge-offs and write-downs. Signet sold $4.5 million and $14.1 million of
foreclosed properties during the first quarter of 1994 and the fourth quarter of
1993, respectively.
Accruing loans which are contractually past due 90 days or more as to
principal or interest payments totaled $52.7 million at March 31, 1994. This is
a decline from the $58.9 million 1993 fourth quarter level, and represents a 34%
improvement from the $80.2 million reported at March 31, 1993. The March 31,
1994 total was comprised of $2.6 million of commercial loans; $14.3 million of
credit card loans; $19.3 million of other consumer loans (of which $14.6 million
are student loan delinquencies which are government guaranteed and do not
represent material loss exposure); $4.7 million of mortgage loans; and $11.8
million of construction loans. Although credit card outstandings have risen
sharply since the end of the first quarter of 1993, the amount of credit card
loans past due 90 days or more has fallen $5.0 million.
20
<PAGE>
REAL ESTATE LENDING
Signet's real estate-construction loan exposure at March 31, 1994 totaled
$278.6 million, a 45% decline from the 1993 first quarter-end level and a 10%
decline from the December 31, 1993 level. Of the total construction loan
portfolio, approximately 58% was located in the Metro-Washington area. The
largest type of construction financing was residential at 25%, followed by
office buildings at 19%. Commercial mortgage loans totaled $578.9 million at
March 31, 1994 and included $307.6 million of mini-permanent (interim) mortgage
loans.
TABLE 12
SELECTED CAPITAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 MARCH 31 DECEMBER 31
1994 1993 1993
<S> <C> <C> <C>
Qualifying common stockholders' equity $1,009,069 $ 858,325 $ 964,662
Less goodwill and other disallowed intangibles (22,582) (25,271) (23,404)
Total Tier I capital 986,487 833,054 941,258
Qualifying debt 215,067 253,393 222,607
Qualifying allowance for loan losses 114,113 108,564 107,646
Total Tier II capital 329,180 361,957 330,253
Total risk-based capital $1,315,667 $1,195,011 1,271,511
Total risk-adjusted assets $8,992,661 $8,520,435 $8,466,048
Ratios:
Tier I capital 10.97% 9.78% 11.12%
Total risk-based capital 14.63 14.03 15.02
Tier I leverage 8.74 7.49 8.13
Tangible 8.55 7.27 7.88
Total stockholders' equity to assets 8.83 7.45 8.14
Total stockholders' equity + allowance to loans 21.23 17.95 19.30
Common dividend payout ratio (year-to-date) 26.88 22.22 26.14
Book value per share* $ 17.95 $ 15.30 $ 17.04
</TABLE>
*Adjusted to reflect the two-for-one stock split declared on June 23, 1993 and
distributed July 27, 1993.
STOCKHOLDERS' EQUITY DATA
At March 31, 1994, stockholders' equity totaled $1.0 billion, an increase
of 19% from the previous year's level of $858 million. This increase reflects
the strong earnings of the Company over the past year. On June 23, 1993, the
Company declared a two-for-one split of its Common Stock in the form of a 100%
stock dividend. One additional share of stock was issued on July 27, 1993, for
each share held by stockholders of record at the close of business on July 6,
1993. All per share data in this document has been adjusted to reflect this
stock split. In recognition of the Company's excellent earnings, improved asset
quality and strong capital position, the Board of Directors increased the common
stock dividend twice during 1993 by a total of 67%, from an annual rate of $.60
per share at the end of 1992 to $1.00 per share by year-end 1993.
During the first quarter of 1994, Signet announced an agreement to acquire
Pioneer Financial Corporation, the parent company of Pioneer Federal Savings
Bank, a $400 million financial institution located in Chester, Virginia. The
transaction is expected to close in the fall of 1994. According to the terms of
the agreement, the transaction will be a tax-free exchange of stock. Pioneer's
shareholders will receive .6232 shares of Signet common stock for each Pioneer
share held subject to adjustment under certain circumstances. It is anticipated
that the transaction will have little dilutive effect on Signet's earnings per
share.
The Company's equity-to-assets ratio was a strong 8.83% at March 31, 1994,
which is an improvement from 8.14% at December 31, 1993 and 7.45% at March 31,
1993. Signet's risk-adjusted capital ratios at March 31, 1994 remained strong at
10.97% and 14.63% for Tier I and Total Capital, respectively. Signet's leverage
ratio at March 31, 1994 was 8.74%, an improvement from 8.13% at December 31,
1993. For most corporations, including Signet, the minimum leverage ratio is 3%
plus an additional cushion of 100 to 200 basis points depending upon risk
profiles and other factors. At March 31, 1994, all three of Signet's banking
subsidiaries met the criteria established by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") for "well capitalized"
institutions.
21
<PAGE>
INTEREST RATE SENSITIVITY AND LIQUIDITY
Signet's interest rate sensitivity position is managed by the Asset and
Liability Committee ("ALCO") and measured through the use of simulations on rate
sensitive pre-tax income. Interest rate sensitivity is the relationship between
changes in market interest rates and changes in rate sensitive income due to the
repricing characteristics of assets and liabilities. For example, in periods of
declining rates, earnings on the investment portfolio improve as funding costs
decline. Improved spreads in the investment portfolio are offset by narrower
spreads in the core banking businesses as changes in consumer deposit costs lag
decreases in market interest rates. ALCO routinely uses derivatives such as
interest rate swaps to insulate the Company against the possibility of sudden
changes in interest rates. ALCO, in managing interest rate sensitivity, also
uses simulations to better identify the impact that market changes and
alternative strategies might have on net interest income. Currently simulations
show that an immediate and sustained 100 basis point change in interest rates
would have less than a 4% impact on rate sensitive income over the next twelve
months, reflecting Signet's conservative balance sheet strategy.
Asset liquidity is generally provided by interest earning assets other than
investment securities held to maturity and loans. This group of interest-earning
assets (interest bearing deposits with other banks, Federal funds sold and
securities purchased under resale agreements, trading account securities, credit
card loans held for securitization, and loans held for securitization) totaled
$4.1 billion, or 41% of earning assets at March 31, 1994. The loan portfolio is
a secondary source of asset liquidity. Liability liquidity is measured by the
Company's ability to obtain funds at favorable rates and in adequate amounts.
Core deposits are the largest and most important funding source. These deposits
totaled 123% of total loans as of March 31, 1994. Purchased funds consisted
primarily of funds from local customers which are considered to be less volatile
than other purchased liabilities and repurchase agreements. For the first
quarter of 1994, cash and cash equivalents decreased by $631 million primarily
as a result of a sharp decline in interest bearing deposits with other banks and
Federal funds sold overnight. Cash used by operations was $652 million for this
time period resulting mainly from the $792 million increase in credit card loans
and subsequent reclassification of $1 billion of credit card loans to held for
securitization. Cash provided by investing activities amounted to $450 million
principally due to a decrease in loans resulting from the same reclassification
net of the purchase of $157 million in securities available for sale. Cash used
by financing activities amounted to $430 million as there was a decrease in
short-term borrowings.
22
<PAGE>
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Registrant was held on April 28,
1994. At the meeting, the following individuals were elected directors of the
Registrant:
<TABLE>
<CAPTION>
VOTE AGAINST
NAME OF DIRECTOR IN FAVOR OR WITHHELD ABSTAIN
<S> <C> <C> <C>
J. Henry Butta 42,923,972 132,159 13,650,036
Norwood H. Davis, Jr. 42,936,953 119,178 13,650,036
William C. DeRusha 42,921,773 134,358 13,650,036
Robert M. Freeman 42,933,063 123,068 13,650,036
Dr. William R. Harvey 42,923,998 132,133 13,650,036
Elizabeth G. Helm 42,931,760 124,371 13,650,036
Robert M. Heyssel 42,936,674 119,457 13,650,036
Malcolm S. McDonald 42,937,445 118,686 13,650,036
Henry A. Rosenberg, Jr. 42,935,884 120,247 13,650,036
Louis B. Thalheimer 42,940,070 116,061 13,650,036
Stanley I. Westreich 42,941,425 114,706 13,650,036
</TABLE>
The shareholders also approved: (i) adoption of the Annual Executive
Incentive Compensation Plan (the "Short-Term Plan"). The Short-Term Plan is an
annual bonus plan in which only the Corporation's Chairman and President
participate. 40,678,606 shares voted for, 1,882,488 shares voted against and
14,145,073 abstained from adoption of the Short-Term Plan; (ii) amending and
restating of the Executive Long-Term Incentive Plan (the "Long-Term Plan"). The
Long-Term Plan covers the members of the Corporation's management committee
which includes the Chairman (and CEO), the President (and COO) and other senior
executive department heads. 40,810,553 shares voted for, 1,697,042 shares voted
against and 14,198,572 abstained from adoption of the Executive Long-Term Plan;
(iii) adoption of the 1994 Stock Incentive Plan (the "1994 Plan"). The 1994 Plan
is intended to provide a means for selected key management employees of the
Corporation to increase their personal financial interest in the Corporation,
thereby stimulating their efforts on behalf of the Corporation and its
shareholders. 37,650,484 shares voted for, 4,976,611 shares voted against and
14,079,072 abstained from adoption of the 1994 Plan; and (iv) ratification of
the selection of Ernst & Young as independent auditors to audit the financial
statements of the Corporation for 1994. 42,821,800 shares voted for, 103,458
shares voted against and 13,780,909 abstained from ratification.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Annual Executive Incentive Compensation Plan (Incorporated by reference to
Exhibit I to Proxy Statement for 1994 Annual Meeting of Shareholders).
10.2 Annual Executive Long-Term Incentive Plan (Incorporated by reference to
Exhibit II to Proxy Statement for 1994 Annual Meeting of Shareholders).
10.3 1994 Stock Incentive Plan (Incorporated by reference to Exhibit III to
Proxy Statement for 1994 Annual Meeting of Shareholders
11.1 Computation of Earnings Per Share (Filed herewith)
(b) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K, dated February 22, 1994,
reporting that Signet Banking Corporation announced an agreement to merge with
Pioneer Federal Savings Bank. The merger will be accounted for as a purchase.
The Registrant filed a Current Report on Form 8-K, dated March 28, 1994,
reporting that Signet Banking Corporation announced 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.
II-1
<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 there-unto duly authorized.
SIGNET BANKING CORPORATION
(Registrant)
Date: May 11, 1994
Date: May 11, 1994
/s/ Wallace B. Millner, III
Wallace B. Millner, III
Senior Executive Vice President &
Chief Financial Officer
/s/ D. S. Norris
D. S. Norris
Executive Vice President & Controller
(Chief Accounting Officer)
II-2
SIGNET BANKING CORPORATION AND SUBSIDIARIES
FORM 10-Q
EXHIBIT 11.1--COMPUTATION OF EARNINGS PER SHARE
(DOLLAR AMOUNTS--EXCEPT PER SHARE--IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
1994 1993
<S> <C> <C>
Common and common equivalent:
Average shares outstanding 56,665,688 56,012,468
Dilutive stock options--based on the treasury stock method
using average market price 550,283 626,682
Shares used 57,215,971 56,639,150
Net income applicable to Common Stock $53,113 $38,267
Per share amount $.93 $.68
Assuming full dilution:
Average shares outstanding 56,665,688 56,012,468
Dilutive stock options--based on the treasury stock method
using the period end market price, if higher than
average market price 581,774 692,318
Shares used 57,247,462 56,704,786
Net income applicable to Common Stock $53,113 $38,267
Per share amount $.93 $.68
</TABLE>
The calculations of common and common equivalent earnings per share and
fully diluted earnings per share are submitted in accordance with Securities
Exchange Act of 1934 Release No. 9083 although both calculations are not
required by footnote 2 to paragraph 14 of APB Opinion No. 15 because there is
dilution of less than 3%. The Registrant has elected to show fully diluted
earnings per share in its financial statements.
The per common share and common shares outstanding data above reflect a
two-for-one common stock split in the form of a dividend which was declared on
June 23, 1993 to shareholders of record July 6, 1993 and distributed July 27,
1993.
