<PAGE>
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): February 17, 1995
SIGNET BANKING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Virginia
(State or other Jurisdiction of Incorporation)
1-6505 54-6037910
(Commission File Number) (I.R.S. Employer
Identification No.)
7 North Eighth Street
Richmond, Virginia 23219
(Address of principal
executive offices)
(804) 747-2000
(Registrant's Telephone Number, Including Area Code)
<PAGE>
Item 5. Other Events.
On February 17, 1995, Signet Banking Corporation ("Signet") distributed to
its shareholders the materials attached hereto as Exhibits 20.1, 20.2, 20.3,
99.1 and 99.2, in connection with the special dividend of one share of Capital
One Financial Corporation common stock for each Signet share held by Signet
shareholders of record as of February 10, 1995.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
--------
20.1 Letter dated February 17, 1995 distributed to Signet Banking
Corporation shareholders.
20.2 Question and answer summary distributed to Signet Banking
Corporation shareholders.
20.3 Information Statement dated February 17, 1995 distributed to
Signet Banking Corporation shareholders.
99.1 Signet Banking Corporation press release dated January 24, 1995.
99.2 Capital One Financial Corporation press release dated January 24,
1995.
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.
SIGNET BANKING CORPORATION
Date: February 17, 1995 By /s/ DAVID L. BRANTLEY
-------------------------------
David L. Brantley
Executive Vice President
and Treasurer
2
<PAGE>
INDEX TO EXHIBITS
Document
--------
20.1 Letter dated February 17, 1995 distributed to Signet Banking
Corporation shareholders.
20.2 Question and answer summary distributed to Signet Banking
Corporation shareholders.
20.3 Information Statement dated February 17, 1995 distributed to
Signet Banking Corporation shareholders.
99.1 Signet Banking Corporation press release dated January 24, 1995.
99.2 Capital One Financial Corporation press release dated
January 24, 1995.
3
<PAGE>
Exhibit 20.1
[ART]
February 17, 1995
Dear Signet Shareholder:
We are pleased to provide you the enclosed information regarding a special
distribution declared on Tuesday, January 24, 1995 by your Board of Directors.
The distribution consists of all of the Capital One Financial Corporation
common stock owned by Signet. As explained in the enclosed Information
Statement, holders of record of Signet common shares as of the close of
business on February 10, 1995 will receive one share of Capital One common
stock for each Signet common share.
The distribution is one of a series of actions announced last July that will
enable Signet to concentrate on its core banking business and allow
shareholders to participate more directly in the value created by our credit
card business. We completed a successful initial public offering of
approximately 10.8% of the shares of Capital One on November 22, 1994. Signet
retains approximately 88.5% of the outstanding shares. The stock was initially
sold at $16.00 per share, establishing a market valuation of Capital One at
that time of approximately $1.06 billion. Capital One stock is traded on the
New York Stock Exchange under the symbol COF.
Signet shareholders of record on February 10, 1995 will automatically receive
the distribution and are not required to take any further action. Capital One
stock certificates will be mailed on or about February 28, 1995. Signet will
receive an opinion of counsel that, for federal tax purposes, the distribution
of Capital One stock will qualify as tax-free to Signet shareholders.
In addition to the Information Statement, we are also enclosing a "Q & A"
regarding the distribution. SHOULD YOU HAVE ADDITIONAL QUESTIONS, PLEASE USE
OUR TOLL-FREE NUMBER: 1-800-442-3120, MONDAY THROUGH FRIDAY, 9 A.M. - 5 P.M.
(EASTERN STANDARD TIME) UNTIL MARCH 31, 1995.
As a new shareholder of Capital One, you will have a stake in one of
America's premier financial services organizations. Its strategic approach in
the credit card market emphasizes an information based strategy, innovative
products and a conservative capital structure.
Signet takes great pride in the success of Capital One. We are pleased that
Signet shareholders will have the opportunity to participate directly in its
future growth.
Sincerely,
Robert M. Freeman, Chairman of the
Board and Chief Executive Officer
<PAGE>
Exhibit 20.2
QUESTIONS AND ANSWERS
SIGNET BANKING CORPORATION
DISTRIBUTION OF COMMON STOCK OF CAPITAL ONE FINANCIAL CORPORATION
1. HOW ARE MY SIGNET SHARES AFFECTED BY THE DISTRIBUTION?
Signet shareholders of record on February 10, 1995 will receive one share of
Capital One Financial Corporation common stock for each share of Signet common
stock they own. For example, if you owned 100 Signet common shares on February
10, 1995, you will receive 100 shares of Capital One stock. You will continue
to own 100 shares of Signet common stock.
2. WHEN WILL I RECEIVE MY CAPITAL ONE SHARES?
Stock certificates will be mailed on or about February 28, 1995. IF YOUR
SIGNET COMMON SHARE CERTIFICATES ARE HELD IN YOUR NAME OR IN THE SIGNET
DIVIDEND REINVESTMENT AND INVESTOR STOCK PURCHASE PLAN, YOUR CAPITAL ONE STOCK
CERTIFICATES WILL BE MAILED TO YOU. If your Signet common share certificates
are held by your stockbroker or bank, your Capital One stock certificates will
be sent to your stockbroker or bank.
3. WHAT DO I HAVE TO DO TO RECEIVE MY SHARES IN CAPITAL ONE?
Nothing. Your shares of Capital One stock will be either sent to you or
credited to your account with your broker or nominee on or about February 28,
1995.
4. HOW MUCH IS A SHARE OF CAPITAL ONE STOCK WORTH?
Capital One stock is listed on the New York Stock Exchange under the symbol
COF. Since the initial public offering on November 22, 1994 at $16.00 per
share, Capital One stock has traded at prices ranging from $13.875 to $17.75
per share as reported on the New York Stock Exchange Composite Tape, and the
closing price on February 10, 1995 was $17.125.
5. IS THE DISTRIBUTION LIKELY TO AFFECT THE MARKET PRICE OF MY SIGNET SHARES?
As a result of the planned distribution, Signet's common stock began to trade
"ex-distribution" on February 6, 1995. The New York Stock Exchange initiated
trading in a "when issued" market for Signet, reflecting the approximate value
of Signet shares without Capital One. The opening price of Signet "when issued
ex-distribution" stock was $16.75 per share. Together, the market value of your
Signet and Capital One shares should add up to approximately the price of your
Signet shares before February 6, 1995, subject to market factors.
6. HOW WILL THE DISTRIBUTION AFFECT THE DIVIDENDS I CURRENTLY RECEIVE ON MY
SIGNET SHARES?
You will be entitled to receive dividends from both Signet and Capital One.
For example, if you owned 100 Signet common shares on the record date, after
the distribution you will own 100 Signet common shares and 100 shares of
Capital One stock. If Signet pays a quarterly dividend of $.17 per share and
Capital One pays a quarterly dividend of $.08 per share, you would receive
$17.00 from Signet and approximately $8.00 from Capital One for a total of
approximately $25.00 a quarter.
Initially, the combined annual dividend for Signet and Capital One is
intended to be equivalent to the $1.00 per share that Signet paid previously.
That is, Signet intends to pay $.68 per share and Capital One intends to pay
$.32 per share.
As with any company, the declaration and payment of dividends are subject to
the discretion of Signet and Capital One's respective Boards of Directors and
will depend on various factors.
7. DO I HAVE TO PAY TAXES ON THE CAPITAL ONE STOCK THAT I RECEIVE?
Signet will receive an opinion of counsel that Signet shareholders will not
recognize a taxable gain or loss when receiving whole shares of Capital One
stock. If you are a participant in Signet's Dividend Reinvestment and Investor
Stock Purchase Plan or Employee Stock Purchase Plan, cash received from the
sale of fractional shares allocable to your interests in such plans will be
treated as proceeds from the sale of stock and may be taxable. If you have any
additional questions, please consult your tax advisor.
8. WILL THERE BE ANY CHANGE IN THE FEDERAL TAX BASIS OF MY SIGNET COMMON SHARES
AS A RESULT OF THE DISTRIBUTION?
Yes. For more information regarding your tax basis, see the material under
"The Distribution--Federal Income Tax Consequences" on page 3 of the
Information Statement. Shortly after the distribution date, you will receive
additional information that will help you calculate the new tax basis for your
Signet common shares. Each shareholder should consult his or her tax advisor as
to the particular consequences of the distribution to the shareholder,
including the application of state, local and foreign tax laws, and as to
possible changes in the tax laws that may affect the tax consequences described
above.
9. FOR MORE INFORMATION, WHO SHOULD I CALL?
FOR MORE INFORMATION YOU SHOULD CALL THE SIGNET HOTLINE AT 1-800-442-3120,
MONDAY THROUGH FRIDAY, 9 A.M. - 5 P.M. (EASTERN STANDARD TIME) UNTIL MARCH 31,
1995.
<PAGE>
Exhibit 20.3
INFORMATION STATEMENT
Concerning the Distribution of 58,477,850 (Approximately 88.5%) of the
Outstanding Shares of
CAPITAL ONE FINANCIAL CORPORATION
Common Stock
(Par Value $.01 Per Share)
By
SIGNET BANKING CORPORATION
This Information Statement is being furnished by Signet Banking Corporation
("Signet") in connection with the distribution (the "Distribution") to Signet
common shareholders of one share of Capital One Financial Corporation ("Capital
One") common stock for each Signet common share owned on the Record Date (as
defined below). The Distribution will result in approximately 88.5% of the
outstanding shares of Capital One common stock (all of the remaining shares of
Capital One owned by Signet) being distributed to holders of Signet common
shares. Approximately 10.8% of Capital One common stock was sold to the public
by Capital One in November, 1994.
Certificates for Capital One common stock will be mailed on or about February
28, 1995 to holders of record of Signet common stock at the close of business
on February 10, 1995 (the "Record Date"). No consideration will be paid by
Signet shareholders for shares of Capital One common stock. As a result of the
Distribution, Capital One will cease to be a subsidiary of Signet. Following
the Distribution, Signet will not own any shares of Capital One stock.
Capital One common stock is listed on the New York Stock Exchange. The
Capital One common stock received in the Distribution will be freely tradeable
by nonaffiliates of Capital One. See "The Distribution--Market for Capital One
Common Stock."
Signet will receive an opinion of counsel to the effect that the Distribution
is not taxable for federal income tax purposes to Signet and its shareholders.
See "The Distribution--Federal Income Tax Consequences."
----------------
NO VOTE OF SIGNET SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE
DISTRIBUTION. THEREFORE, WE ARE NOT ASKING YOU FOR A PROXY, AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Information Statement is February 17, 1995.
<PAGE>
INTRODUCTION
On January 24, 1995, the Board of Directors of Signet declared a distribution
(the "Distribution") to Signet common shareholders of 58,477,850 shares of
Capital One Financial Corporation ("Capital One" or the "Company") common stock
on the basis of one share of Capital One common stock for each Signet common
share outstanding on the Record Date (as defined below). Certificates for
Capital One common stock will be mailed on or about February 28, 1995 to
holders of record of Signet common shares at the close of business on February
10, 1995 (the "Record Date"). No consideration will be paid by holders of
Signet common shares for such shares of Capital One common stock.
The announcement of the Distribution follows the completion of the initial
public offering by the Company of 7,125,000 shares, or approximately 10.8%, of
its common stock, on November 22, 1994, at an initial offering price of $16.00
per share.
SHAREHOLDERS OF SIGNET WITH INQUIRIES RELATING TO THE DISTRIBUTION SHOULD
CALL 1-800-442-3120, MONDAY THROUGH FRIDAY, 9 A.M. - 5 P.M. (EASTERN STANDARD
TIME) UNTIL MARCH 31, 1995.
INFORMATION ABOUT CAPITAL ONE
Unless the context otherwise requires, the term "Company," as used herein,
means the Signet Credit Card Business, a division of Signet Bank/Virginia for
the periods prior to November 22, 1994, and Capital One and its consolidated
subsidiaries for the periods following November 22, 1994.
The Company is one of the oldest continually operating bank card issuers in
the U.S., having commenced operations in 1953, the same year as the formation
of what is now MasterCard International. It is the twelfth largest issuer of
Visa and MasterCard credit cards in the United States based on managed loans
outstanding as of September 30, 1994. During the six years ended December 31,
1994, the Company's managed loan portfolio grew at a 43% compound annual rate
from $0.9 billion at year end 1988 to $7.4 billion. As of December 31, 1994,
the Company had approximately five million credit card accounts.
The growth achieved by the Company has been due to general industry dynamics
that have existed over the past several years and the success of the
information based strategy ("IBS") adopted by the Company in 1988. IBS is
designed to allow the Company to differentiate among customers based on credit
risk and usage characteristics and to capture profitable opportunities by
effectively matching client characteristics with attractive product offerings.
Through IBS, the Company is able to design and target customized solicitations
at various customer segments, thereby enhancing customer response levels and
the returns on solicitation expenditures within given underwriting parameters.
The Company has applied IBS to other areas of its business, including account
management (credit line management, pricing strategies, usage stimulation,
collections, recoveries and account balance retention). Management believes
that IBS has allowed the Company to gain market share in a highly competitive
environment.
The Company has been an innovator of strategies designed to attract
customers, such as offering credit cards with low introductory rates and
balance transfer option and secured card products. These strategies, combined
with the segmenting and targeting capabilities of IBS, have contributed to the
growth in recent periods of the Company's account originations and account
balances.
Copies of the press releases dated January 24, 1995 containing summary
financial information for Signet and Capital One, respectively, for the year
ended December 31, 1994 are enclosed with this Information Statement.
2
<PAGE>
THE DISTRIBUTION
MANNER OF EFFECTING THE DISTRIBUTION
Signet will effect the Distribution on February 28, 1995 (the "Distribution
Date") by delivering shares of Capital One common stock to Mellon Bank, as the
distribution agent (the "Distribution Agent"), for distribution to the holders
of record of Signet common shares on the Record Date. The Distribution will be
made on the basis of one share of Capital One common stock for each Signet
common share outstanding on the Record Date. All such shares of Capital One
common stock will be fully paid and nonassessable and the holders thereof will
not be entitled to preemptive rights. Certificates for Capital One common stock
will be mailed to Signet common shareholders on or about February 28, 1995.
No holder of Signet common shares will be required to pay any cash or other
consideration for the shares of Capital One common stock received in the
Distribution or to surrender or exchange Signet common shares in order to
receive Capital One common stock.
FEDERAL INCOME TAX CONSEQUENCES
Signet has been advised by its special tax counsel, Wachtell, Lipton, Rosen &
Katz ("Tax Counsel"), that, based upon certain customary representations made
by Signet and the Company, the Distribution will qualify as a tax-free
distribution under Section 355 of the Code. The Distribution is conditioned
upon receipt of an opinion of Tax Counsel satisfactory to the Board of
Directors of Signet to the same effect. So long as the Distribution qualifies
under Section 355 of the Code, in the opinion of Tax Counsel the principal
federal income tax consequences of the Distribution will be as follows:
1. No gain or loss will be recognized by, or be includable in the income of,
a holder of Signet common stock solely as a result of the receipt of Capital
One common stock in the Distribution, other than in respect of cash received in
lieu of fractional shares of Capital One common stock by participants in
Signet's Dividend Reinvestment and Investor Stock Purchase Plan and Employee
Stock Purchase Plan ("Participants").
2. No gain or loss will be recognized by Signet with respect to the Capital
One common stock distributed in the Distribution.
3. Assuming that a holder of Signet common stock holds such Signet common
stock as a capital asset, such holder's holding period for the Capital One
common stock received in the Distribution (including, for this purpose, any
fractional shares of Capital One common stock allocable to Participants) will
include the period during which such Signet common stock was held.
4. The tax basis of Signet common stock held by Signet shareholders
immediately prior to the Distribution will be apportioned (based upon relative
fair market values at the time of the Distribution) between such Signet common
stock and the Capital One common stock received by such shareholder in the
Distribution (including, for this purpose, any fractional shares of Capital One
common stock allocable to Participants).
5. A Participant receiving cash on the sale of a fractional interest in a
share of Capital One common stock will recognize gain or loss measured by the
difference between the amount of cash received and the tax basis of such
holder's fractional interest. Provided that the Signet common stock is held as
a capital asset, such gain or loss will be a capital gain or loss.
The foregoing is only a summary of the material federal income tax
consequences of the Distribution under current law and does not take into
account any special circumstances that may apply to particular shareholders.
Each shareholder should consult his or her tax advisor as to the particular
consequences of the Distribution to such shareholder, including the application
of state, local and foreign tax laws, and as to possible changes in tax laws
that may affect the tax consequences described above. This summary may not be
applicable to shareholders who received their Signet common stock pursuant to
the exercise of options or otherwise as compensation or who are not citizens or
residents of the United States.
The opinion of Tax Counsel referred to above would not be binding upon the
Internal Revenue Service (the "IRS") and would be subject to certain factual
representations and assumptions. Signet is not aware of
3
<PAGE>
any present facts or circumstances which should cause such representations and
assumptions to be untrue. However, certain future events not within the control
of Signet or Capital One, including certain extraordinary purchases of Signet
common stock or Capital One common stock, could cause the Distribution not to
qualify as tax free. Depending on the event, Capital One may be liable for some
or all of the taxes resulting from the Distribution not qualifying under
Section 355 of the Code as tax-free. If the Distribution was taxable, then (i)
each holder of Signet common stock who receives shares of Capital One common
stock in the Distribution would be treated as if such shareholder received a
taxable distribution, taxed as dividend to the extent of such shareholder's pro
rata share of Signet's current and accumulated earnings and profits and (ii)
corporate level taxes would be payable by the consolidated group of which
Signet is the common parent, based upon the excess of the fair market value of
the Capital One common stock on the date of the Distribution over Signet's tax
basis therein. Signet does not intend to effect the Distribution if, prior to
the Distribution Date, Signet becomes aware of circumstances that would result
in the Distribution being a taxable transaction.
Information with respect to the allocation of tax basis between Capital One
common stock and Signet common stock will be provided to shareholders at the
time of distribution of the certificates representing shares of Capital One
common stock.
MARKET FOR CAPITAL ONE COMMON STOCK
Capital One common stock is listed on the New York Stock Exchange under the
symbol COF. Shares of Capital One common stock distributed to Signet
shareholders will be freely transferable, except for shares received by persons
who may be deemed to be "affiliates" of Capital One under the Securities Act of
1933, as amended.
The following table sets forth for the periods indicated the high and low
sale prices of Capital One common stock as reported on the New York Stock
Exchange Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fourth Quarter, 1994 (from November 16)................... $16.625 $13.875
First Quarter, 1995 (through February 10, 1995)........... $17.75 $15.375
</TABLE>
OTHER INFORMATION
Following the Distribution, Signet will not hold any shares of Capital One
common stock. Signet will continue to be a publicly-held corporation whose
common shares are traded on the New York Stock Exchange.
Signet originated from the combination of Bank of Virginia, Union Trust
Bancorp of Maryland and Security National Bank of Washington, D.C. It was
incorporated under the laws of Virginia in 1987. Its general offices are
located at 7 North Eighth Street, Richmond, Virginia 23219. Following the
Distribution, Signet will continue to be engaged in general commercial and
consumer banking businesses and provide a full range of financial services to
individuals, business and organizations through 249 banking offices, 253
automated teller machines and a 24-hour full-service Telephone Banking Center.
Signet also offers investment services including municipal bond, government,
federal agency and money market sales and trading, foreign exchange trading and
discount brokerage. In addition, an international operation concentrating on
trade finance, specialized services for trust, leasing, asset based lending,
cash management, real estate, insurance, and consumer financing are offered.
Signet's primary market area includes Virginia, Maryland and the District of
Columbia.
DIVIDENDS
Although Capital One expects to reinvest a substantial portion of its
earnings in its business, the Company intends to pay regular quarterly cash
dividends of $0.08 per share of common stock beginning with the dividend
payable with respect to the first calendar quarter of 1995 (which will be
declared during the
4
<PAGE>
month following the end of the quarter and paid thereafter). The declaration
and payment of dividends, as well as the amount thereof, is subject to the
discretion of the Board of Directors of Capital One and will depend upon the
Company's results of operations, financial condition, cash requirements, future
prospects and other factors deemed relevant by the Board of Directors, and
there can be no assurance that Capital One will declare and pay any dividends.
As a holding company, the ability of Capital One to pay dividends is dependent
upon the receipt of dividends or other payments from its subsidiaries. Banking
regulations applicable to Capital One Bank, a subsidiary of the Company, and
provisions that may be contained in borrowing agreements of Capital One or its
subsidiaries may restrict the ability of the Company subsidiaries to pay
dividends to Capital One or the ability of Capital One to pay dividends to its
shareholders.
Signet's dividend for the first quarter of 1995 (which will be declared and
paid after the end of the quarter) is expected to be reduced to $.17 per Signet
common share from the previous level of $.25 to reflect the Distribution.
Accordingly, the aggregate dividend received by Signet shareholders who receive
shares of Capital One stock is not expected to decrease as a result of the
Distribution. Although Signet currently intends to continue paying dividends,
the payment and amount of dividends is subject to the discretion of its Board
of Directors and will depend on Signet's results of operations, financial
condition, cash requirements, future prospects and other factors deemed
relevant by its Board of Directors.
ADDITIONAL INFORMATION
Capital One has registered the Capital One common stock under the Securities
Exchange Act of 1934 (the "Exchange Act"). Capital One and Signet are each
subject to the reporting requirements of the Exchange Act, and in accordance
therewith have filed registration statements, reports and other information
(collectively, the "SEC Reports") with the Securities and Exchange Commission
(the "SEC"). For further information pertaining to Capital One (including
financial statements and other financial information), its common stock and
related matters, Signet shareholders are urged to read Capital One's SEC
Reports.
In addition, a copy of the prospectus, dated November 15, 1994 (the
"Prospectus"), relating to Capital One's initial public offering of its common
stock may be obtained free of charge by contacting the Signet hotline at 1-800-
442-3120, Monday through Friday, 9 a.m. to 5 p.m. (Eastern Standard Time) until
March 31, 1995.
The SEC Reports and the Prospectus can be inspected and copied at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C.;
Seven World Trade Center, 13th Floor, New York, New York; and 500 West Madison
Street, Suite 1400, Chicago, Illinois; and copies of such material also can be
obtained at prescribed rates from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. The SEC Reports and the Prospectus
can also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York.
5
<PAGE>
Exhibit 99.1
Signet Banking Corporation
7 North Eighth Street
PO Box 25970
Richmond VA 23260
804-771-7210
News Release
Release Date January 24, 1995 Contact Teri A. Temples
Public Relations Director
(804) 771-7210
[LOGO OF SIGNET BANKING
CORPORATION APPEARS HERE]
Signet Banking Corporation Annual Earnings
Up 20% before Special Charges
RICHMOND, Va. (January 24, 1995) - Signet Banking Corporation today
reported 1994 fourth quarter net income of $42.9 million, or $.73 per share,
after pre-tax restructuring charges of $9.6 million. Net income for the full
year was $149.8 million, or $2.59 per share, including pre-tax restructuring and
contract termination charges totaling $92.2 million.
Adjusting for the special charges, Signet earnings grew 20 percent from
$174.4 million, or $3.06 per share, in 1993 to $209.8 million, or $3.63 per
share, in 1994. On the same basis, the return on assets was 1.83 percent and the
return on equity was 19.74 percent.
Financial statements and results for the fourth quarter and the year
include Signet's ownership interest in Capital One Financial Corporation -
formerly Signet's credit card division. In July 1994, Signet announced its
intention to spin-off this division. Today, Capital One reported net income of
$26.5 million and $95.3 million for the quarter and the year respectively.
Chairman and Chief Executive Officer Robert M. Freeman characterized 1994
as a watershed year for Signet. "During the year, we established a separate
credit card company, Capital One, and took on the task of redesigning our
business processes." Pointing to vigorous growth in the consumer loan portfolio,
Freeman said, "In 1994, we also began to see convincing evidence that
information strategies could be employed successfully throughout our banking
businesses."
Freeman cited Signet's expertise in managing risk as an important factor in
the company's performance. "Signet's strong capital ratio and superior asset
SBK-1
Listed on New York Stock Exchange - Symbol SBK
<PAGE>
quality reflect the conservatism of our balance sheet management, as well as a
low tolerance for credit risk."
During the year, non-performing assets declined 58 percent from $116.5
million to $48.5 million. Net charge-offs for 1994 amounted to $45.8 million, or
.71 percent of average loans, compared with $56.6 million, or .91 percent, for
1993. At December 31, 1994, the allowance for loan losses was $220.5 million,
equal to 8.5 times non-performing loans and 2.78 percent of total loans
outstanding.
Total revenues (net interest income plus non-interest income) increased 20
percent in 1994 from $894.8 million to $1.1 billion. Strong growth in credit
card, student and other consumer loan portfolios were primarily responsible for
the higher revenues in 1994.
Total revenues in the fourth quarter 1994 amounted to $276.6 million, up 10
percent from the same period in 1993. Rising interest rates and narrower margins
contributed to the slower rate of revenue growth during the quarter.
Excluding special charges of $92.2 million, non-interest expense was up 26
percent during the year and up 18 percent over the fourth quarter of 1993.
Higher solicitation and other credit card expenses accounted for most of the
increase in adjusted non-interest expense in both periods.
At December 31, 1994, total assets amounted to $12.9 billion, an increase
of $1.1 billion from the end of 1993, primarily due to the interim funding of
Capital One and the resulting growth of temporary assets. Loans, net of unearned
income, grew 26 percent to $7.9 billion, reflecting consumer responsiveness to
Signet's innovative product offerings.
Signet Banking Corporation serves commercial and individual customers
through a 24-hour full-service Telephone Banking Center and 250 regional offices
in Virginia, Maryland, and the District of Columbia.
###
SBK-2
<PAGE>
Signet Banking Corporation
Financial Summary
(dollars in thousands-except per share)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Year Ended
December 31 Percent December 31 Percent
1994 1993 Change 1994 1993 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings
Net interest income (taxable equivalent) $ 131,611 $ 133,545 (1.4) % $ 523,717 $ 545,093 (3.9) %
Net interest income 128,163 129,756 (1.2) 510,011 529,340 (3.7)
Net income 42,874 49,944 (14.2) 149,834 174,414 (14.1)
Net income excluding restructur-
ing/contract termination 49,110 49,944 (1.7) 209,772 174,414 20.3
Per Common Share
Net income $ 0.73 $ 0.87 (16.1) $ 2.59 $ 3.06 (15.4)
Net income excluding restructur-
ing/contract termination 0.84 0.87 (3.4) 3.63 3.06 18.6
Cash dividends declared 0.25 0.25 0.0 1.00 0.80 25.0
Book value 18.56 17.04 11.3
Period-end price 28.63 34.75 (17.6)
Average Balance
Assets $ 12,088,230 $ 11,601,461 4.2 $ 11,468,628 $ 11,617,451 (1.3)
Earning assets 10,597,502 10,446,944 1.4 10,152,195 10,552,698 (3.8)
Loans (net of unearned income) 6,966,496 5,074,233 14.7 6,407,635 6,206,417 3.2
Deposits 7,768,493 7,781,507 (0.2) 7,746,605 7,732,585 0.2
Core deposits 7,178,265 7,169,032 (0.1) 7,191,181 7,259,452 (0.9)
Common stockholders' equity 1,093,817 939,405 16.4 1,045,899 889,161 17.6
Managed credit card portfolio* 7,266,115 4,662,531 65.8 6,469,561 3,530,299 83.3
Common shares outstanding 58,927,134 57,087,297 3.2 57,862,927 56,920,090 1.7
Ratios
Return on assets 1.41 % 1.71 % (17.5) 1.31 % 1.50 % (12.7)
Return on common stockholders'
equity 15.55 21.09 (26.3) 14.33 19.62 (27.0)
Net yield margin 4.93 5.07 (2.8) 5.16 5.17 (0.2)
Allowance for loan losses to:
Non-performing loans 846.32 342.63 147.0
Non-performing assets 454.34 217.45 108.9
Net loans 2.78 4.01 (30.7)
Non-performing assets to loans
and foreclosed properties 0.81 1.83 (56.7)
Common equity to assets 5.60 8.14 5.7
At Period-end
Assets $ 12,931,229 $ 11,649,222 9.1
Earning assets 11,478,818 10,745,155 6.8
Loans (net of unearned income) 7,924,177 6,310,312 25.6
Deposits 7,821,613 7,820,813 0.0
Core deposits 7,169,234 7,260,505 (1.3)
Common stockholders' equity 1,111,479 964,662 15.2
Non-performing assets 48,536 116,486 (58.3)
Managed credit card portfolio* 7,675,963 5,098,171 50.6
Number of common stockholders 15,603 14,606 6.1
Full-time employees 6,028 5,753 4.8
Part time employees 1,311 1,386 (5.4)
</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".
SBK-3
<PAGE>
Signet Banking Corporation
Consolidated Balance Sheet
(dollars in thousands - except per share) (unaudited)
<TABLE>
<CAPTION>
December 31
1994 1993
---------------------------------
<S> <C> <C>
Assets
Cash and due from banks $631,747 $463,358
Interest bearing deposits with other banks 355,795 540,312
Federal funds sold and securities purchased under resale agreements 1,135,821 1,075,764
Trading account securities 363,040 379,638
Loans held for sale 69,506 421,361
Securities available for sale 1,241,696 248,163
Investment securities 398,783 1,769,615
Loans:
Commercial 2,472,620 2,299,973
Credit card 2,559,172 1,808,516
Other consumer 2,053,461 1,297,309
Real estate-construction 209,183 309,842
Real estate-commercial mortgage 526,956 681,529
Real estate-residential mortgage 191,508 71,411
---------------------------------
Gross loans 8,012,900 6,368,579
Less: Unearned income (88,723) (58,267)
Allowance for loan losses (220,519) (253,313)
---------------------------------
Net loans 7,703,668 6,058,999
Premises and equipment (net) 258,715 216,524
Interest receivable 98,557 84,118
Other assets 783,911 593,380
---------------------------------
Total assets $12,931,229 $11,849,222
=================================
Liabilities
Non-interest bearing deposits $1,542,349 $1,544,852
Interest bearing deposits:
Money market and interest checking 1,050,176 1,039,215
Money market savings 1,453,629 1,745,066
Savings accounts 1,170,990 880,072
Savings certificates 1,952,090 2,051,300
Large denomination certificates 643,054 347,820
Foreign 9,225 212,288
---------------------------------
Total interest bearing deposits 6,279,164 6,275,761
---------------------------------
Total deposits 7,821,513 7,820,613
Securities sold under repurchase agreements 875,458 1,281,845
Federal funds purchased 881,693 942,969
Commercial paper 108,664 168,488
Bridge financing facility 1,300,000
Other short-term borrowings 146,955 232,024
Long-term borrowings 253,641 266,152
Interest payable 31,078 28,205
Minority interest in Capital One Financial Corporation 108,900
Other liabilities 293,848 144,464
---------------------------------
Total liabilities 11,819,750 10,884,550
Stockholders' Equity
Common stock, par value $5 per share; Authorized 100,000,000 shares,
issued and outstanding 58,636,759, and 56,605,578 shares, respectively 293,184 283,043
Capital surplus 198,869 133,038
Retained earnings 619,426 548,581
---------------------------------
Total stockholders' equity 1,111,479 964,862
---------------------------------
$12,931,229 $11,849,222
=================================
</TABLE>
<PAGE>
Signet Banking Corporation
Statement of Consolidated Income
(dollars in thousands - except per share) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
1994 1993 1994 1993
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees:
Commercial $42,337 $40,353 $163,195 $157,157
Credit card 61,174 48,162 212,157 215,607
Other consumer 42,733 23,320 130,513 95,273
Real estate-construction 5,203 6,475 20,977 31,570
Real estate-commercial mortgage 12,651 10,889 47,520 44,830
Real estate-residential mortgage 3,152 1,736 8,399 7,634
---------------------------------------------------------------
Total loans, including fees 187,250 130,935 582,761 552,071
Interest bearing deposits with other banks 3,138 2,932 11,512 12,031
Federal funds sold and resale agreements 19,068 6,333 44,294 23,196
Trading account securities 6,038 6,592 21,487 31,297
Credit card loans held for securitization 2,111 12,993 41,015 36,263
Loans held for sale 1,864 6,085 13,010 16,875
Securities available for sale 16,511 3,349 72,896 17,084
Investment securities-taxable 3,392 21,513 4,395 93,538
Investment securities-nontaxable 3,559 5,121 15,843 21,390
---------------------------------------------------------------
Total interest income 222,931 195,853 807,013 803,725
Interest expense:
Money market and interest checking 6,124 5,508 23,123 22,544
Money market savings 10,954 11,026 44,571 45,463
Savings accounts 10,106 6,621 33,461 24,079
Savings certificates 19,514 12,852 61,377 58,514
Large denomination certificates 4,553 3,195 14,527 10,970
Foreign 3,393 2,299 10,071 6,627
---------------------------------------------------------------
Total interest on deposits 54,644 41,501 187,130 168,197
Securities sold under repurchase agreements 10,095 9,144 37,712 42,193
Federal funds purchased 9,180 5,551 28,182 21,793
Other short-term borrowings 16,344 6,359 27,293 25,521
Long-term borrowings 4,505 3,542 16,685 18,681
---------------------------------------------------------------
Total interest expense 94,768 86,097 297,002 274,385
---------------------------------------------------------------
Net interest income 128,163 129,756 510,011 529,340
Provision for loan losses 3,000 10,278 14,498 47,286
---------------------------------------------------------------
Net interest income after provision for loan losses 125,183 119,480 495,513 482,054
Non-interest income:
Credit card servicing income 91,395 82,399 337,284 153,018
Credit card service charges 22,505 16,385 73,321 63,222
Service charges on deposit accounts 16,104 16,058 66,141 64,471
Trust income 5,025 4,148 19,442 17,599
Other 13,137 20,656 68,436 82,808
---------------------------------------------------------------
Non-interest operating income 148,166 119,654 564,524 361,118
Securities available for sale gains 220 2,248 3,413 3,913
Investment securities gains 47 254 46 405
---------------------------------------------------------------
Total non-interest operating income 148,433 122,156 668,083 385,436
Non-interest expense:
Salaries 64,983 59,055 257,297 212,665
Employment benefits 12,783 20,902 88,188 65,249
Credit card solicitation 31,049 15,579 100,886 55,815
Travel and communications 16,181 10,269 57,543 35,416
Supplies and equipment 16,266 10,855 54,862 40,550
External data processing services 13,570 11,243 50,026 36,578
Occupancy 12,455 10,464 47,059 40,192
Contract termination 49,000
Restructuring charges 9,593 43,212
Other 33,995 31,567 120,350 111,851
---------------------------------------------------------------
Total non-interest expense 210,875 169,934 846,423 598,316
---------------------------------------------------------------
Income before income taxes 62,721 71,702 217,173 249,174
Applicable income taxes 19,847 21,758 67,339 74,760
---------------------------------------------------------------
Net income $42,874 $49,944 $149,834 $174,414
===============================================================
Earnings per common share $0.73 $0.87 $2.59 $3.06
Cash dividends declared per share 0.26 0.25 1.00 0.80
Average common shares outstanding 58,927 57,087 57,863 58,920
</TABLE>
Note: Other non-interest expense for the three months and year ended 1994
included $1,272 (net of income taxes) of minority interest in Capital One
Financial Corporation.
SBK-5
<PAGE>
Exhibit 99.2
Capital One Financial Corporation
2890 Fairview Park Drive
Falls Church, VA 22042
(804) 771-7210
News Release
------------------------------------------
[LOGO OF CAPITAL ONE FINANCIAL
CORPORATION APPEARS HERE]
Release Date: January 24, 1995 Contact: Teri Temples
Director, Public Relations
(804) 771-7210
Capital One Financial Corporation Reports Earnings
FALLS CHURCH, Va. (January 24, 1995) - Capital One Financial Corporation,
the new credit card subsidiary of Signet Banking Corporation, today announced
fourth quarter earnings of $26.5 million, or $.40 per share, versus $40.6
million, or $.61 per share, for the comparable period of the prior year. For the
full year, earnings were $95.3 million, or $1.44 per share, compared to $110.5
million, or $1.67 per share, in the prior year. Full year 1994 results include a
non-recurring $31.9 million (after-tax), or $.48 per share, contract termination
charge taken in the third quarter. Decreases in period-to-period earnings also
reflect the short-term impact of unhedged interest rate positions resulting from
the separation from Signet.
Capital One Financial Corporation and its wholly owned subsidiary, Capital
One Bank, became stand-alone companies on November 22, 1994, when the credit
card operations of Signet Bank/Virginia were transferred to Capital One Bank. On
the same day, the Company issued 7,125,000 shares of its common stock in an
initial public offering ("IPO") and 464,400 shares of restricted stock (together
representing approximately 11.5 percent of the Company) in anticipation of the
planned spin-off from Signet. Signet currently holds the remaining 88.5 percent
of the Company's outstanding common stock, and it is expected to spin-off its
ownership during the first quarter of 1995.
On a pro forma basis, fourth quarter earnings were $21.8 million or $.33
per share. Pro forma results represent Capital One's performance as if the
separation from Signet had occurred prior to the beginning of the quarter and
Capital One were independently funded and a stand-alone company for the full
quarter. The pro forma adjustments were made on a basis consistent with those
made in the registration statement filed in connection with the IPO.
Capital One's Chief Executive Officer Richard D. Fairbank said, "We are
pleased with our fourth quarter performance. Although earnings are down due to
the short-term effects of the separation, the fundamentals of the business
remain strong. Net account growth was approxi-
COF-1
Listed on New York Stock Exchange - Symbol COF
<PAGE>
mately 535,000 in the fourth quarter versus 390,000 in the third quarter.
Outstandings increased by $618 million compared to $442 million in the third
quarter. We attribute this growth to the strength of our information-based
strategy and a strong holiday season. We have maintained our focus on generating
low-risk assets. We are encouraged by the results we have continued to achieve
in both the balance transfer and the non-balance transfer businesses."
Capital One also has been successful in establishing new funding sources
since the IPO. At year-end, Capital One had raised approximately $1.2 billion in
new funding, allowing the Company to support its asset growth and to partially
reduce reliance on the $1.7 billion bridge financing it obtained in connection
with its separation from Signet and the IPO. Since year-end, Capital One has
successfully raised in excess of $500 million in additional new funding.
Net interest margin (managed) was 6.10 percent in the fourth quarter versus
8.41 percent for the comparable period for 1993 and 6.69 percent in the third
quarter. This decrease reflects the impact of increasing interest rates and
independent funding. On a pro forma basis, net interest margin (managed) was
5.40 percent in the fourth quarter versus 5.35 percent in the third quarter,
reflecting asset repricings.
Asset quality remained strong, but net loan losses increased within
anticipated levels as existing portfolios matured. Net loan loss rates were 1.64
percent on a managed basis in the fourth quarter versus 1.28 percent in the
third quarter. The allowance for loan losses as a percentage of on-balance sheet
receivables was 3.07 percent at year-end.
Capital One's year-end capital ratios were 15.35 percent on reported assets
and 5.76 percent on managed assets. The Company expects to remain well above
levels required to be "well-capitalized" for regulatory purposes.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation
is a financial services company that offers credit card products as its primary
business. The Company had more than five million credit card customers and
approximately $7.4 billion in managed loans outstanding at December 31, 1994.
Capital One is one of the largest providers of Visa and MasterCard services in
the United States.
###
COF-2
<PAGE>
Capital One Financial Corporation
Financial Summary
(dollars in thousands - except per share)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Year Ended
December 31 Percent December 31 Percent
1994 1993 Change 1994 1993 Change
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings - Historical
Net interest income $32,602 $47,115 -30.80% $164,977 $191,863 -14.01%
Non-interest income 112,050 74,928 49.54% 396,902 194,825 103.72%
Non-interest expense(1) 97,443 53,780 81.19% 384,325 181,804 111.40%
Net income 26,525 40,551 -34.59% 95,263 110,485 -13.78%
Earnings - Pro Forma(2)
Net interest income $26,043 $128,004
Non-interest income 112,496 399,357
Non-interest expense(1) 98,551 391,140
Net income 21,832 68,397
Per Common Share
Net income - historical $.40 $.61 -34.59% $1.44 $1.67 -13.78%
Net income - pro forma(2) 0.33 1.04
Book value 7.18
Period-end price 16.00
Average Daily Balance - Historical
Assets $2,683,806 $2,353,864 14.02% $2,629,920 $2,289,043 14.89%
Earnings Assets 2,291,914 2,239,877 2.32% 2,349,310 2,213,378 6.14%
Loans 2,041,410 2,239,877 -8.86% 2,286,684 2,213,378 3.31%
Ratios - Historical
Return on average assets 3.95% 6.89% -42.63% 3.62% 4.83% -24.95%
Return on average equity 32.28 39.76
Net interest margin (managed)(3) 6.10 8.41 -27.47% 6.97 9.55 -27.02%
Allowance for loan losses to loans 3.07 3.41 -9.83%
Common equity to assets 15.35
Managed Loan Data(3)
Loans held for securitization (average) $73,337 $556,111 -86.81% $432.581 $393,835 9.84%
On-balance sheet loans (average) 1,968,073 1,683,766 16.89% 1,854,103 1,819,543 1.90%
Securitized loans (average) 4,956,913 2,155,677 129.95% 3,910,739 1,052,187 271.68%
--------- --------- --------- ---------
Total managed loans (average) 6,998,323 4,395,554 59.21% 6,197,423 3,265,565 89.78%
Total volume 2,770,535 1,979,740 39.94% 9,923,792 6,211,845 59.76%
Managed loan yield 12.11% 12.40% -2.30% 11.84% 13.24% -10.58%
Managed loan delinquency ratio 2.97 2.39 24.27%
Managed loan net loan loss ratio 1.64 1.64 0.00% 1.48 2.09 -29.19%
At Period-end
Assets $3,091,980 $1,991,207 55.28%
Earning assets 2,654,025 1,862,744 42.48%
Loans 2,228,455 1,862,744 19.63%
Common equity 474,557 168,879 181.00%
Managed credit card portfolio 7,378,455 4,832,400 52.69%
Total accounts (000's) (period-end) 5,049 3,118 61.93%
</TABLE>
(1) Non-interest expense includes a $49.0 million ($31.9 million after tax, or
$.48 per share) nonrecurring charge for computer services contract
termination expense in the third quarter of 1994.
(2) Pro forma data includes estimated incremental costs as if Capital One were
independently funded and a standalone company for all periods presented.
(3) Managed data reflect the adjustment to add back the effect of securitized
loans.
COF-3
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheet
(in-thousands - unaudited)
<TABLE>
<CAPTION>
December 31
1994 1993
-------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 93,880 $ 955
Federal funds sold 300,000
Interest bearing deposits at other banks 13,000
Securities available for sale 99,070
Investment securities 13,500
Loans 2,228,455 1,862,744
Less: Allowance for loan losses (68,516) (63,516)
-------------------------
Net loans 2,159,939 1,799,228
Premises and equipment (net) 99,684 32,679
Interest receivable 14,615 8,293
Accounts receivable from securitizations 237,015 107,048
Other assets 61,277 43,004
-------------------------
Total assets $3,091,980 $1,991,207
=========================
LIABILITIES
Interest bearing deposits $ 474,201
Federal funds purchased 686,688
Bridge financing facility 1,300,000
Affiliate borrowings 54,000 $1,791,464
Interest payable 9,264
Other liabilities 93,270 30,864
-------------------------
Total liabilities 2,617,423 1,822,328
STOCKHOLDERS'/DIVISION EQUITY
Common stock 661
Paid-in capital/division equity, net 462,844 168,879
Retained earnings 11,052
-------------------------
Total stockholders'/division equity 474,557 168,879
-------------------------
Total liabilities and stockholders'/division
equity $3,091,980 $1,991,207
=========================
</TABLE>
COF-4
<PAGE>
CAPITAL ONE FINANCIAL CORPORATION
Statement of Income
(in thousands - unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
1994 1993 1994 1993
-------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $57,652 $50,094 $214,100 $223,594
Credit card loans held for securitization 2,111 12,993 41,015 36,263
Fed funds & resell agreements 2,483 2,483
Other earning assets 1,074 1,074
-------------------------------------------------------
Total interest income 63,320 63,087 258,672 259,857
Interest expense
Interest on deposits 2,417 2,417
Federal funds purchased 2,927 2,927
Borrowings from affiliates 13,288 15,972 76,265 67,994
Bridge financing facility 12,086 12,086
-------------------------------------------------------
Total interest expense 30,718 15,972 93,695 67,994
-------------------------------------------------------
Net interest income 32,602 47,115 164,977 191,863
Provision for loan losses 6,133 5,876 30,727 34,030
-------------------------------------------------------
Net interest income after provision for loan losses 26,469 41,239 134,250 157,833
Non-interest income:
Credit card servicing income 86,220 54,613 312,108 122,362
Credit card service charges 13,934 9,549 46,083 38,587
Interchange 7,308 6,836 25,580 24,635
Other 4,588 3,930 13,131 9,241
-------------------------------------------------------
Total non-interest income 112,050 74,928 396,902 194,825
Non-interest expense:
Salaries 21,779 13,703 76,528 43,767
Employee benefits 4,370 3,990 18,211 11,517
Credit card solicitation 31,049 15,579 100,886 55,815
Data processing services 8,084 7,473 34,932 23,120
Travel and communications 10,310 4,888 35,152 17,893
Supplies and equipment 7,311 2,677 21,794 8,778
Occupancy 2,811 791 6,746 2,647
Contract termination 49,000
Other 11,929 4,879 41,076 18,267
-------------------------------------------------------
Total non-interest expense 97,443 53,780 384,325 181,804
-------------------------------------------------------
Income before income taxes 41,076 62,387 146,827 170,854
Applicable income taxes 14,551 21,836 51,564 60,369
-------------------------------------------------------
Net income $26,525 $40,551 $95,263 $110,485
=======================================================
</TABLE>
COF-5
