SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 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)
7 North Eighth Street, Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 804 747-2000
Not Applicable
Former name, former address and former fiscal year, if changed since last report
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 July 31, 1997 - 60,484,553
<PAGE>
Index
SIGNET BANKING CORPORATION AND SUBSIDIARIES
June 30, 1997
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
<S> <C>
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 6
Supplemental Notes to Quarterly Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 24
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Signet Banking Corporation and Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
June 30 December 31
(in thousands-- except per share) (unaudited) 1997 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Cash and due from banks $ 543,005 $ 533,728 $ 566,520
Interest bearing deposits with other banks 215,871 1,977 3,200
Federal funds sold and securities purchased
under resale agreements 1,010,194 599,027 777,999
Trading account securities 554,546 546,756 546,372
Loans held for securitization 300,000
Loans held for sale 27,155 320,316 102,826
Securities available for sale 2,420,624 2,547,445 2,623,280
Loans:
Consumer 2,471,309 2,016,363 2,300,558
Commercial 3,430,266 3,209,292 3,451,230
Real estate-construction 238,575 255,822 244,653
Real estate-commercial mortgage 199,224 332,856 254,060
Real estate-residential mortgage 228,483 258,996 329,466
- ----------------------------------------------------------------------------------------------------------------------------
Gross loans 6,567,857 6,073,329 6,579,967
Less: Unearned income (222,661) (161,109) (225,081)
Allowance for loan losses (119,740) (126,442) (136,707)
- ----------------------------------------------------------------------------------------------------------------------------
Net loans 6,225,456 5,785,778 6,218,179
Premises and equipment (net) 177,629 195,410 184,413
Interest receivable 103,986 116,767 107,504
Other assets 574,435 578,609 590,125
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $11,852,901 $11,525,813 $11,720,418
============================================================================================================================
Liabilities
Non-interest bearing deposits $ 1,928,931 $ 1,669,006 $ 1,751,238
Interest bearing deposits:
Interest bearing demand 3,109,712 2,530,148 2,955,576
Savings accounts 630,962 705,910 651,544
Savings certificates 2,196,767 2,290,154 2,256,838
Large denomination certificates 162,675 146,500 228,879
Foreign 25,478 138,168 43,267
- ----------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 6,125,594 5,810,880 6,136,104
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 8,054,525 7,479,886 7,887,342
Securities sold under repurchase agreements 1,782,488 1,767,963 1,467,565
Federal funds purchased 413,164 948,969 495,171
Long-term borrowings 350,007 250,021 400,014
Interest payable 27,878 26,010 30,507
Due to broker 25,812 300,000
Other liabilities 262,991 190,616 215,704
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 10,916,865 10,663,465 10,796,303
Stockholders' Equity
Common stock, $5 par value; authorized 100,000,000
shares, issued and outstanding 60,382,648, 59,563,853
and 60,077,489 shares, respectively 301,913 297,819 300,387
Capital surplus, net 213,961 204,763 209,327
Retained earnings 405,020 360,529 399,268
Unrealized gains (losses) on securities available for sale,
net of deferred taxes 15,142 (763) 15,133
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 936,036 862,348 924,115
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $11,852,901 $11,525,813 $11,720,418
============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
Signet Banking Corporation and Subsidiaries
Statement of Consolidated Income
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30 Six Months Ended June 30
- ------------------------------------------------------------------------------------------------------------------------
(in thousands-- except per share) (unaudited) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest income:
Loans, including fees:
Consumer $ 65,333 $ 54,725 $129,058 $107,787
Commercial 61,320 56,568 122,349 111,920
Real estate-construction 5,792 6,064 11,356 12,126
Real estate-commercial mortgage 6,573 7,710 11,308 15,860
Real estate-residential mortgage 4,283 4,176 9,873 7,380
- -----------------------------------------------------------------------------------------------------------------------
Total loans, including fees 143,301 129,243 283,944 255,073
Interest bearing deposits with other banks 1,800 43 2,531 197
Federal funds sold and resale agreements 13,089 9,543 24,042 17,731
Trading account securities 7,298 7,865 14,378 15,987
Loans held for securitization 5,992 13,411
Loans held for sale 1,011 9,579 2,598 19,665
Securities available for sale 45,209 43,961 91,304 85,744
- -----------------------------------------------------------------------------------------------------------------------
Total interest income 211,708 206,226 418,797 407,808
Interest expense:
Interest bearing demand 27,427 18,209 53,996 36,289
Savings accounts 4,214 7,530 8,429 19,025
Savings certificates 26,316 25,395 52,137 47,930
Large denomination certificates 2,622 1,731 5,473 3,256
Foreign 774 2,415 1,849 3,694
- -----------------------------------------------------------------------------------------------------------------------
Total interest on deposits 61,353 55,280 121,884 110,194
Securities sold under repurchase agreements 17,618 17,084 34,339 31,595
Federal funds purchased 6,690 12,693 13,568 24,502
Long-term borrowings 6,004 3,796 11,807 7,910
- -----------------------------------------------------------------------------------------------------------------------
Total interest expense 91,665 88,853 181,598 174,201
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 120,043 117,373 237,199 233,607
Provision for loan losses 13,350 13,794 29,750 25,051
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 106,693 103,579 207,449 208,556
Non-interest income:
Service charges on deposit accounts 17,250 17,100 34,430 33,331
Consumer loan servicing and service charge income 11,756 15,276 24,041 27,432
Trust and other financial services income 9,758 10,108 20,553 19,713
Other 21,371 21,223 45,123 40,655
- -----------------------------------------------------------------------------------------------------------------------
Non-interest operating income 60,135 63,707 124,147 121,131
Securities available for sale gains 10 164 113 756
- -----------------------------------------------------------------------------------------------------------------------
Total non-interest income 60,145 63,871 124,260 121,887
Non-interest expense:
Salaries 47,668 52,302 95,024 101,002
Employee benefits 10,121 10,466 22,342 22,867
Supplies and equipment 10,790 9,985 21,508 19,590
Occupancy 9,104 9,520 18,096 19,714
External data processing services 9,090 8,333 17,894 15,479
Travel and communications 5,107 6,706 10,775 12,626
Restructuring charge 58,712 58,712
Other 21,588 24,199 42,659 45,848
- -----------------------------------------------------------------------------------------------------------------------
Total non-interest expense 172,180 121,511 287,010 237,126
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit) (5,342) 45,939 44,699 93,317
Applicable income taxes (benefit) (3,368) 15,458 13,623 31,641
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1,974) $ 30,481 $ 31,076 $ 61,676
=======================================================================================================================
Earnings per common share $ (0.03) $ 0.50 $ 0.51 $ 1.02
Cash dividends declared per share 0.21 0.20 0.42 0.40
Average common shares outstanding 61,566 60,502 61,424 60,429
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
Signet Banking Corporation and Subsidiaries
Statement of Changes in Consolidated Stockholders' Equity
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Common Stock Capital Deferred
(in thousands) (unaudited) Shares Amount Surplus Compensation
- ----------------------------------------------------------------------------------------------------
<S> <C>
Six Months Ended June 30, 1997
Balance at beginning of period 60,077,489 $300,387 $212,416 $(3,089)
Net income
Issuance of Common Stock 299,757 1,499 4,257
Restricted stock awards 5,402 27 159 (186)
Amortization of deferred compensation 404
Cash dividends
Change in net unrealized gains on
securities available for sale,
net of tax of $5
- ----------------------------------------------------------------------------------------------------
Balance at end of period 60,382,648 $301,913 $216,832 $(2,871)
====================================================================================================
Six Months Ended June 30, 1996
Balance at beginning of period 59,208,745 $ 296,044 $ 200,093
Net income
Issuance of Common Stock 355,108 1,775 4,670
Cash dividends
Change in net unrealized gains (losses)
on securities available
for sale, net of tax benefit
of $24,748
- ----------------------------------------------------------------------------------------------------
Balance at end of period 59,563,853 $ 297,819 $ 204,763
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Unrealized Total
Gains/(Losses) Retained Stockholders'
(in thousands) (unaudited) on Securities Earnings Equity
- -----------------------------------------------------------------------------------------
<S> <C>
Six Months Ended June 30, 1997
Balance at beginning of period $15,133 $399,268 $924,115
Net income 31,076 31,076
Issuance of Common Stock 5,756
Restricted stock awards
Amortization of deferred compensation 404
Cash dividends (25,324) (25,324)
Change in net unrealized gains on
securities available for sale,
net of tax of $5 9 9
- -----------------------------------------------------------------------------------------
Balance at end of period $15,142 $405,020 $936,036
=========================================================================================
Six Months Ended June 30, 1996
Balance at beginning of period $ 45,198 $ 322,614 $ 863,949
Net income 61,676 61,676
Issuance of Common Stock 6,445
Cash dividends (23,761) (23,761)
Change in net unrealized gains (losses)
on securities available
for sale, net of tax benefit
of $24,748 (45,961) (45,961)
- -----------------------------------------------------------------------------------------
Balance at end of period $ (763) $ 360,529 $ 862,348
=========================================================================================
</TABLE>
5
<PAGE>
Signet Banking Corporation and Subsidiaries
Statement of Consolidated Cash Flows
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30
- ------------------------------------------------------------------------------------------------------------------------
(in thousands) (unaudited) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operating Activities
Net Income $ 31,076 $ 61,676
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Provision for loan losses 29,750 25,051
Writedowns on foreclosed property 211 86
Depreciation and amortization 32,411 20,003
Securities available for sale gains (113) (756)
Other gains, net (17,417) (14,448)
Increase in interest receivable 3,518 (12,330)
Increase in other assets 18,477 200,621
Increase in interest payable (2,629) 6,550
(Decrease) increase in other liabilities (226,904) (192,792)
Proceeds from securitization of consumer loans 90,000
Proceeds from sales of loans held for sale 12,715,814 16,186,298
Purchases and originations of loans held for sale (12,577,221) (16,103,597)
Proceeds from sales of trading account securities 10,960,776 8,409,487
Purchases of trading account securities (10,955,163) (8,473,753)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,586 202,096
Investing Activities
Proceeds from sales of securities available for sale 9,608 812,459
Proceeds from maturities of securities available for sale 198,055 275,049
Purchases of securities available for sale (1,044) (1,303,843)
Net decrease (increase) in loans (108,251) (564,169)
Recoveries of loans previously charged-off 5,557 2,190
Purchases of premises and equipment (9,188) (15,909)
Purchases of mortgage servicing rights (16,900) (14,821)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 77,837 (809,044)
Financing Activities
Net increase in deposits 167,183 (113,085)
Net increase in short-term borrowings 232,916 812,634
Payments on long-term debt (50,007) (3,012)
Net issuance of common stock 6,160 6,445
Payment of cash dividends (25,324) (23,761)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 330,928 679,221
- ------------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 421,351 72,273
Cash and cash equivalents at beginning of period 1,347,719 1,062,459
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $1,769,070 $1,134,732
- ------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures
Interest paid $ 184,227 $ 167,652
Income taxes paid 9,526 9,697
Transfer of loans to foreclosed property 6,375 6,100
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
6
<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 1996 annual report
and as noted below, except certain amounts which have been reclassified for
prior periods to conform to the 1997 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.
Securities Available for Sale
Securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996 December 31, 1996
Fair Fair Fair
Cost Value Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. Government and agency obligations-
Mortgage-backed securities $2,053,649 $2,068,580 $1,896,047 $1,890,831 $2,124,019 $2,135,422
Other 173,437 176,008 452,014 456,124 298,175 302,320
States and political subdivisions 11,777 12,016 33,774 34,702 22,244 22,784
Other 160,197 164,020 170,324 165,788 160,347 162,754
- ---------------------------------------------------------------------------------------------------------------------------------
Total $2,399,060 $2,420,624 $2,552,159 $2,547,445 $2,604,785 $2,623,280
=================================================================================================================================
</TABLE>
Income Taxes
Differences between the effective rate of income taxes and the statutory rate
arise principally from non-taxable interest on investments and loans.
Securitizations
Signet periodically securitizes loans, primarily consumer loans such as credit
card receivables, home equity lines and student loans. In accordance with these
agreements, a fixed amount of cash or excess servicing fees may be required to
be set aside to cover credit losses and is included in other assets. Recourse
obligations related to these transactions are not material. Amounts related to
these securitizations are as follows:
<TABLE>
<CAPTION>
Credit Home Equity Student
Card Lines Loans
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Six Months Ended June 30, 1997:
Initial Amount Securitized
Initial Gain Recorded
Gain on Sales of Receivables Under Revolving Structures $ 1,766
At June 30, 1997:
Receivables Outstanding $252,778 377,541 $403,160
Amount Set Aside to Absorb Credit Losses 5,288 5,977
- ----------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1996
Initial Amount Securitized $ 90,000
Initial Gain Recorded
Gain on Sales of Receivables Under Revolving Structures $ 3,988
At June 30, 1996:
Receivables Outstanding 275,000 438,368
Amount Set Aside to Absorb Credit Losses 5,288
- ----------------------------------------------------------------------------------------------------------------------------
At December 31, 1996:
Receivables Outstanding $ 263,889 $406,896 $ 428,435
Amount Set Aside to Absorb Credit Losses 5,288 6,317
============================================================================================================================
</TABLE>
7
<PAGE>
Supplemental Notes to Quarterly Financial Statements (continued)
(dollars in thousands) (unaudited)
Recent Accounting Statements
Signet adopted Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," on January 1, 1997. SFAS No. 125 provides accounting and
reporting standards for transfers and servicing of financial assets, including
securitizations, and extinguishments of liabilities. The adoption of SFAS No.
125 did not have a material impact on the Company's financial position or
results of operations.
Subsequent to the issuance of SFAS No. 125, SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," was issued.
SFAS No. 127 defers the effective date of accounting for secured borrowings and
collateral, repurchase agreements, dollar-roll, securities lending, and similar
transactions until January 1, 1998. The effect of adopting the deferred
requirements of SFAS No. 125 for existing transactions is not expected to have a
material impact on the Company's financial position or results of operations.
In February 1997, SFAS No. 128, "Earnings per Share," was issued, which is
required to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently being used to compute earnings per share
and to restate all prior periods. Under the new requirements, primary earnings
per share will be replaced with "basic" earnings per share which excludes the
dilutive effect of stock options. The impact of calculating basic earnings per
share is expected to have no impact on the quarter ended June 30, 1997 primary
earnings per share and result in a $0.01 per share increase in the primary
earnings per share reported for the six months ended June 30, 1997 and the
quarter ended June 30, 1996. The impact of calculating basic earnings per share
is expected to result in a $0.02 per share increase in the primary earnings per
share reported for the six months ended June 30, 1996. The impact of SFAS No.
128 on the calculation of fully diluted earnings per share for these periods is
not expected to be material.
Commercial Fraud Loss
On March 19, 1996, Signet's management discovered that the Company was one of
several major financial institutions that were victims of fraudulent commercial
loan transactions which occurred prior to 1996. The Company had loan
outstandings related to these transactions of approximately $81 million. Federal
authorities informed the Company that there had been substantial recoveries of
assets related to these transactions. Management recorded a $35 million
commercial fraud loss in non-interest expense at December 31, 1995 and recorded
the estimated probable recovery amount of $46 million in other assets as a
receivable. The receivable represented an amount management believed was likely
to be recovered based on facts and circumstances at the time. The amount of the
recovery was based on the Company's share of known claims to the total amount
held by federal authorities, less associated costs. The recovery amount was
subject to change as additional assets were recovered and/or additional claims
were asserted.
In June 1997, Federal authorities distributed funds to the various banks
victimized by the fraud. Signet's share represented principal and interest
earned on the funds while held by the authorities. A portion of the funds
received by Signet remain in dispute with the other financial institutions
involved. Signet's share, net of the disputed amount, was applied against the
receivable with the resulting excess amount of $3.6 million applied to
non-interest income and as a reduction to non-interest expense. The Company will
vigorously pursue all other sources of recovery, but currently is unable to
determine the probability or amount of additional recoveries.
Restructuring Charge
In the second quarter of 1997, Signet recorded a restructuring charge of
$58,712, $37,022 after-tax or $0.60 per share as a result of a comprehensive
redesign program which commenced in June 1997 and is expected to continue into
1999. The objectives of the program were to align Signet's infrastructure with
its business strategies to better serve customers, enhance revenues, and improve
efficiency. The components of the restructuring charge were as follows:
<TABLE>
<CAPTION>
Requiring 1997
Cash Cash
Total Outflow Outflow
- ----------------------------------------------------------------------------------------------
<S> <C>
Severance and other personnel related costs $24,723 $24,723 $ 511
Facilities related charges 10,079 9,076 395
Technology write-offs and other charges 15,410 12,389 10,458
Goodwill write-off 8,500 - -
- ----------------------------------------------------------------------------------------------
Totals $58,712 $46,188 $11,364
- ----------------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1997, the remaining accrual for restructuring related charges
was $38,848.
Merger with First Union Corporation
On July 21, 1997, subsequent to the release of Signet's second quarter 1997
earnings, First Union Corporation ("First Union") announced that Signet and
First Union signed a definitive merger agreement which would create the leading
banking company in Virginia, based on combined deposits on June 30, 1997, of
approximately $20 billion. As of June 30, 1997, Signet had assets of $12 billion
and First Union had assets of $143 billion. First Union agreed to exchange 0.55
shares of its common stock for each share of Signet common stock. Reflecting
First Union's previously announced two-for-one stock split payable on July 31,
1997, the exchange ratio would be 1.10 shares. The merger, which would be
accounted for as a pooling of interests, is expected to be consummated by
December 31, 1997, pending Signet shareholder approval, regulatory approval and
other customary conditions of closing.
8
<PAGE>
Signet Banking Corporation and Subsidiaries
Financial Summary
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Three Months Ended
June 30 Percent
(dollars in thousands-- except per share) 1997 1996 Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Earnings
Net interest income (taxable equivalent) $ 121,942 $ 119,122 2.4%
Net interest income 120,043 117,373 2.3
Net income (loss) * (1,974) 30,481 N/M
- ----------------------------------------------------------------------------------------------------------------------
Per Common Share
Net income (loss) * $ (0.03) $ 0.50 N/M
Cash dividends declared 0.21 0.20 5.0
Book value 15.50 14.48 7.0
Period-end price 36.00 23.25 54.8
- ----------------------------------------------------------------------------------------------------------------------
Average Daily Balance
Assets $11,441,515 $11,346,682 0.8
Earning assets 10,245,094 10,075,496 1.7
Loans (net of unearned income) 6,238,431 5,814,446 7.3
Managed loan portfolio 7,264,493 6,840,564 6.2
Deposits 7,805,959 7,525,462 3.7
Core deposits 7,568,155 7,219,199 4.8
Common stockholders' equity 936,233 847,007 10.5
Common shares outstanding 61,565,610 60,502,076 1.8
- ----------------------------------------------------------------------------------------------------------------------
Ratios
Return on average assets * N/M% 1.08% N/M
Return on average common stockholders' equity * N/M 14.47 N/M
Net yield margin 4.77 4.75 0.4
Allowance for loan losses to:
Non-performing loans 508.47 371.73 36.8
Non-performing assets 359.44 230.46 56.0
Net loans 1.89 2.14 (11.7)
Non-performing assets to loans
and foreclosed properties 0.52 0.92 (43.5)
Stockholders' equity to assets 7.90 7.48 5.6
- ----------------------------------------------------------------------------------------------------------------------
At Period-end
Assets $11,852,901 $11,525,813 2.8
Earning assets 10,573,586 10,227,741 3.4
Loans (net of unearned income) 6,345,196 5,912,220 7.3
Managed loan portfolio 7,346,172 6,925,588 6.1
Deposits 8,054,525 7,479,886 7.7
Core deposits 7,866,372 7,195,218 9.3
Common stockholders' equity 936,036 862,348 8.5
Non-performing assets 33,313 54,864 (39.3)
Number of common stockholders 14,562 15,137 (3.8)
Full-time employees 3,565 4,221 (15.5)
Part-time employees 893 1,003 (11.0)
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Six Months Ended
June 30 Percent
(dollars in thousands-- except per share) 1997 1996 Change
- --------------------------------------------------------------------------------------------------------
<S> <C>
Earnings
Net interest income (taxable equivalent) $ 240,938 $ 237,500 1.4%
Net interest income 237,199 233,607 1.5
Net income (loss) * 31,076 61,676 (49.6)
- --------------------------------------------------------------------------------------------------------
Per Common Share
Net income (loss) * $ 0.51 $ 1.02 (50.0)
Cash dividends declared 0.42 0.40 5.0
Book value
Period-end price
- --------------------------------------------------------------------------------------------------------
Average Daily Balance
Assets $11,416,262 $11,207,156 1.9
Earning assets 10,231,690 9,890,747 3.4
Loans (net of unearned income) 6,263,904 5,690,458 10.1
Managed loan portfolio 7,304,838 6,725,763 8.6
Deposits 7,770,106 7,538,362 3.1
Core deposits 7,509,733 7,282,917 3.1
Common stockholders' equity 932,329 853,198 9.3
Common shares outstanding 61,423,904 60,429,366 1.6
- --------------------------------------------------------------------------------------------------------
Ratios
Return on average assets * 0.55% 1.11% (50.5)
Return on average common stockholders' equity * 6.72 14.54 (53.8)
Net yield margin 4.75 4.83 (1.7)
========================================================================================================
The common stock of Signet Banking Corporation is traded on the New York Stock
Exchange under the symbol "SBK".
* The second quarter of 1997 included a $58.7 million pre-tax and $37.0 million
after-tax restructuring charge.
See management's discussion for further details.
9
<PAGE>
Table 1
Selected Quarterly Financial Information
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
2nd Qtr 1st Qtr 4th Qtr
1997 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Summary of Operations
(dollars in thousands -- except per share)
Net interest income (taxable equivalent) $121,942 $118,996 $118,992
Less: taxable equivalent adjustment 1,899 1,840 2,273
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 120,043 117,156 116,719
Provision for loan losses 13,350 16,400 29,800
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 106,693 100,756 86,919
Non-interest income 60,145 64,115 89,561
Non-interest expense * 172,180 114,830 125,337
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit) (5,342) 50,041 51,143
Applicable income taxes (benefit) (3,368) 16,991 17,498
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) * $ (1,974) $ 33,050 $ 33,645
- -----------------------------------------------------------------------------------------------------------------------
Per common share:
Net income * $ (0.03) $ 0.54 $ 0.55
Cash dividends declared 0.21 0.21 0.21
Book value 15.50 15.37 15.38
Average shares outstanding (in thousands) 61,566 61,281 61,089
Selected Average Balances (in millions)
Assets $ 11,442 $ 11,391 $ 11,610
Earning assets 10,245 10,218 10,391
Loans (net of unearned income) 6,238 6,290 6,320
Managed loan portfolio 7,264 7,346 7,309
Deposits 7,806 7,734 7,709
Core deposits 7,568 7,451 7,337
Interest bearing liabilities 8,646 8,667 8,867
Stockholders' equity 936 928 911
Ratios
Return on average assets * N/M% 1.18% 1.15%
Return on average common stockholders' equity * N/M 14.44 14.69
Efficiency ratio (excluding restructuring charge
and foreclosed property expense) * 62.72 62.27 62.31
Net interest spread 4.11 4.08 3.93
Net yield margin 4.77 4.72 4.56
Stockholders' equity to assets 7.90 7.91 7.88
Credit Quality Data (dollars in thousands)
Non-performing assets $ 33,313 $ 40,669 $ 38,800
Accruing loans past due 90 days or more 68,924 59,604 71,484
Net charge-offs 14,842 14,865 21,552
Allowance for loan losses to:
Non-performing loans 508.47% 449.83% 483.02%
Non-performing assets 359.44 298.09 352.34
Net loans 1.89 1.95 2.15
Non-performing assets to loans and foreclosed properties 0.52 0.65 0.61
Net loan losses to average loans 0.95 0.95 1.36
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
3rd Qtr 2nd Qtr
1996 1996
- ---------------------------------------------------------------------------------------------
<S> <C>
Summary of Operations
(dollars in thousands -- except per share)
Net interest income (taxable equivalent) $120,492 $119,122
Less: taxable equivalent adjustment 2,058 1,749
- ---------------------------------------------------------------------------------------------
Net interest income 118,434 117,373
Provision for loan losses 19,000 13,794
- ---------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 99,434 103,579
Non-interest income 68,129 63,871
Non-interest expense * 122,855 121,511
- ---------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit) 44,708 45,939
Applicable income taxes (benefit) 15,102 15,458
- ---------------------------------------------------------------------------------------------
Net income (loss) * $ 29,606 $ 30,481
- ---------------------------------------------------------------------------------------------
Per common share:
Net income * $ 0.49 $ 0.50
Cash dividends declared 0.20 0.20
Book value 14.89 14.48
Average shares outstanding (in thousands) 60,738 60,502
Selected Average Balances (in millions)
Assets $ 11,429 $ 11,347
Earning assets 10,204 10,075
Loans (net of unearned income) 5,928 5,814
Managed loan portfolio 6,933 6,841
Deposits 7,569 7,525
Core deposits 7,201 7,219
Interest bearing liabilities 8,781 8,694
Stockholders' equity 864 847
Ratios
Return on average assets * 1.03% 1.08%
Return on average common stockholders' equity * 13.63 14.47
Efficiency ratio (excluding restructuring charge
and foreclosed property expense) * 64.92 66.16
Net interest spread 4.11 4.19
Net yield margin 4.70 4.75
Stockholders' equity to assets 7.74 7.48
Credit Quality Data (dollars in thousands)
Non-performing assets $ 43,851 $ 54,864
Accruing loans past due 90 days or more 78,033 70,762
Net charge-offs 16,983 13,785
Allowance for loan losses to:
Non-performing loans 441.17% 371.73%
Non-performing assets 292.95 230.46
Net loans 2.08 2.14
Non-performing assets to loans and foreclosed properties 0.71 0.92
Net loan losses to average loans 1.15 0.95
=============================================================================================
</TABLE>
* The second quarter of 1997 included a $58.7 million pre-tax and $37.0 million
after-tax restructuring charge.
See management's discussion for further details.
10
<PAGE>
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-state bank holding company whose stock
is listed on the New York Stock Exchange under the symbol SBK. Signet provides
interstate financial services through its principal subsidiary, Signet Bank, a
Virginia banking corporation headquartered in Richmond. Signet Bank has banking
offices in Virginia, Maryland and the District of Columbia.
Signet engages in general commercial and consumer banking businesses and
provides a full range of financial services to individuals, businesses and
organizations through 230 banking offices, 249 automated teller machines,
on-line INTERNET access and a 24-hour full-service Telephone Banking Center.
Signet offers investment services including municipal bond, government, federal
agency and money market sales and trading, foreign exchange trading, mutual
funds and discount brokerage. In addition, it provides specialized services for
trust, leasing, asset based lending, cash management, real estate and insurance.
Signet's primary market area for its traditional banking business extends from
Baltimore to Washington, south to Richmond, and on to Hampton Roads/Tidewater,
Virginia. The Company markets several of its products nationally and is
exploring the national marketing of other products.
On July 21, 1997, First Union Corporation ("First Union") announced that
Signet and First Union had signed a definitive merger agreement which would
create the leading banking company in Virginia, based on combined deposits on
June 30, 1997, of approximately $20 billion. As of June 30, 1997, Signet had
assets of $12 billion and First Union had assets of $143 billion. First Union
agreed to exchange 0.55 shares of its common stock for each share of Signet
common stock. Reflecting First Union's previously announced two-for-one stock
split payable on July 31, 1997, the exchange ratio would be 1.10 shares. The
merger, which would be accounted for as a pooling of interests, is expected to
be consummated by December 31, 1997, pending Signet shareholder approval,
regulatory approval and other customary conditions of closing.
On June 3, 1997, Signet announced the results of a comprehensive redesign
program, named ADVANCE, that would enable it to achieve its strategic goal of
becoming a leading national, customer-focused, information- based financial
services company with a strong Mid-Atlantic presence. Signet began ADVANCE in
October 1996. The objective was to align Signet's infrastructure with its
business strategies to better serve customers, enhance revenues, improve
efficiency and create superior value for shareholders. Implementation of ADVANCE
was expected to add $10 million to revenues and to reduce expenses by $58
million for an annual total benefit of $68 million pre-tax by year-end 1998.
These benefits are net of implementation costs and significant investments in
technology. The per share improvement was expected to be $.72 after tax by
December 1998, excluding the effect of the branch sales described below.
However, the announced merger with First Union may have a significant impact on
the implementation of ADVANCE initiatives, the effect of which cannot be
determined at this time. In connection with ADVANCE, Signet recorded a $58.7
million pre-tax restructuring charge in the second quarter of 1997.
As part of the restructuring, the Company planned to sell 39 of its
branches, outsource some services such as student loan servicing and consolidate
certain areas such as private banking and personal trust. These actions have
been placed on hold for further review as a result of the pending merger with
First Union. Signet also announced that its board of directors authorized the
repurchase of up to 5 percent of its common shares outstanding, to be completed
by year-end 1997. The plan to repurchase common shares was rescinded by the
Board of Directors on July 18, 1997.
During the second quarter, Signet signed a definitive agreement to sell
its Corporate Trust business. The transaction is expected to close in the third
quarter.
The following discussion of the operating results and financial
condition at June 30, 1997 is intended to help readers analyze the accompanying
financial statements, notes and other supplemental information contained in this
document. Results of operations for the six months ended June 30, 1997 are not
necessarily indicative of results to be attained for any other period.
Forward-Looking Statements
When used in this quarterly report, in Form 10-K or other filings by the Company
with the Securities and Exchange Commission, in the Company's press releases or
other public or shareholder communications, or in oral statements made with the
approval of an authorized Company executive officer, the words or phases "would
be," "will allow," "intends to," "will likely result," "are expected to,"
"expects to," "will continue," "is anticipated," "estimate," "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
While forward-looking statements are provided to assist in the
understanding of the Company's anticipated future financial performance, the
Company cautions readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made. Forward- looking statements
are subject to significant risks and uncertainties, many of which are beyond the
Company's control. Although the Company believes that the assumptions underlying
its forward-looking statements are reasonable, any of the assumptions could
prove to be inaccurate. Actual results may differ materially from those
contained in or implied by such forward-looking statements for a variety of
reasons. Factors that might cause such a difference include, but are not limited
to: sharp and/or rapid changes in interest rates that could, among other things,
11
<PAGE>
impact the Company's interest margins; significant changes in the economic
scenario from the currently anticipated scenario which could materially change
anticipated credit quality, charge-off and delinquency trends and the ability to
generate new loans; significantly increased competition in the banking and
financial services industries; significant delays in or inability to grow
revenues and/or control expenses to improve the Company's efficiency ratio;
changes in the capital markets that could affect the ability of the Company to
fund itself in a cost-effective manner; and significant changes in accounting,
tax, or governmental and regulatory practices or requirements. Further
information about factors affecting the Company's business and operations are
included in the Company's most recent Form 10-K.
In addition, any forward-looking statements relating to ADVANCE involve
significant risks and uncertainties. Actual results derived from ADVANCE may
differ significantly from the results discussed in such forward-looking
statements. Factors that could cause such a difference include, but are not
limited to: expected cost savings from ADVANCE cannot be fully realized or
realized within the expected time frame; income or revenues from ADVANCE are
lower than expected or operating costs are higher; competitive pressures in the
banking and financial services industries increase significantly, particularly
in connection with nationwide product delivery; business disruption related to
implementation of certain ADVANCE programs or methodologies; general economic
conditions either nationally or in states in which the Company seeks to expand
its business opportunities are weaker than expected; or other unanticipated
occurrences which could delay the implementation of all or part of ADVANCE,
increase the costs associated with the project or decrease the financial
benefits of the project.
Table 2
<TABLE>
<CAPTION>
Net Interest Income Analysis
- ------------------------------------------------------------------------------------------------------------------------------
Second Quarter 1997 Compared Second Quarter 1997 Compared
with Second Quarter 1996 with First Quarter 1997
- ------------------------------------------------------------------------------------------------------------------------------
Increase Change due to* Increase Change due to*
Taxable Equivalent Basis (in thousands) (Decrease) Rate Volume (Decrease) Rate Volume
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest income:
Loans, including fees $14,423 $4,347 $10,076 $2,734 $2,915 $(181)
Securities available for sale 1,033 248 785 (903) 684 (1,587)
Other earning assets (9,824) (5,539) (4,285) 2,847 402 2,445
- ------------------------------------------------------------------------------------------------------------------------------
Total interest income 5,632 1,736 3,896 4,678 3,606 1,072
Interest expense:
Interest bearing deposits 6,073 3,682 2,391 822 709 113
Fed funds and repurchase agreements (5,469) (655) (4,814) 709 636 73
Long-term borrowings 2,208 236 1,972 201 567 (366)
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,812 3,264 (452) 1,732 1,751 (19)
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 2,820 $ 560 $ 2,260 $2,946 $2,363 $ 583
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net Interest Income Analysis
- ------------------------------------------------------------------------------------
YTD June 30, 1997 Compared
with YTD June 30, 1996
- ------------------------------------------------------------------------------------
Increase Change due to*
Taxable Equivalent Basis (in thousands) (Decrease) Rate Volume
- -------------------------------------------------------------------------------------
<S> <C>
Interest income:
Loans, including fees $29,226 $ 1,963 $27,263
Securities available for sale 5,051 358 4,693
Other earning assets (23,442) (7,996) (15,446)
- -------------------------------------------------------------------------------------
Total interest income 10,835 (1,198) 12,033
Interest expense:
Interest bearing deposits 11,690 4,512 7,178
Fed funds and repurchase agreements (8,190) (906) (7,284)
Long-term borrowings 3,897 (96) 3,993
- -------------------------------------------------------------------------------------
Total interest expense 7,397 3,465 3,932
- -------------------------------------------------------------------------------------
Net interest income $ 3,438 $(2,512) $ 5,950
=====================================================================================
</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.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
Earnings Analysis
Signet reported a consolidated net loss for the second quarter of 1997 of $2.0
million, or $.03 per share, after a $58.7 million, pre-tax, restructuring
charge. This compared with $30.5 million, or $.50 per share, of net income in
the second quarter of 1996. Net income for the first six months of 1997 was
$31.1 million, or $.55 per share, compared with $61.7 million, or $1.02 per
share, for the same period last year. Excluding the restructuring charge,
earnings for the quarter and six months would have been $35.0 million, or $.57
per share, and $68.1 million, or $1.11 per share, respectively. The return on
assets ("ROA") and return on common stockholders' equity ("ROE") for the six
months ended June 30, 1997 was 0.51% and 6.72%, respectively. Adjusting for the
restructuring charge, Signet's ROA for the quarter and six months ended June 30,
1997 was 1.23% and 1.20%, respectively. This compares with 1.08% and 1.11% for
same periods in 1996. Adjusting for the restructuring charge, Signet's ROE for
the quarter and six months ended June 30, 1997 was 14.92% and 14.68%,
respectively, compared with 14.47% and 14.54% for the comparable periods for
last year.
Net Interest Income
Taxable equivalent net interest income, a primary contributor to earnings,
totaled $121.9 million for the quarter and $240.9 million for the six months
ended June 30, 1997, up modestly from the same periods of 1996. The net yield
margin for the second quarter of 1997 was 4.77%, a 5 basis point rise from the
12
<PAGE>
first quarter of 1997. Table 3 analyzes the change in the net yield margin from
the first to the second quarter of 1997. The increase in the net yield margin
was primarily the result of returning a commercial mortgage loan to accruing
status.
The net interest spread of 4.11% for the second
Table 3
<TABLE>
<CAPTION>
Analysis of Change in Net Yield Margin
First Quarter 1997 Versus Second Quarter 1997
- ---------------------------------------------------------------------------------
<S> <C>
Net Yield Margin for First Quarter 1997 4.72%
Impact of returning loans to accrual status 0.06
Rise in funding costs (0.04)
Other (net) - Primarily change in mix and yield on
remaining earning assets 0.03
- ---------------------------------------------------------------------------------
Net Yield Margin for Second Quarter 1997 4.77%
=================================================================================
</TABLE>
quarter of 1997 increased 3 basis points from the previous quarter and declined
8 basis points from the second quarter of 1996 level of 4.19%. The decline from
the 1996 second quarter resulted from funding rates rising more rapidly than
yields on earning assets. One reason funding rates rose is that Signet is using
its direct mail expertise to grow core deposits, some of which offer a
relatively high interest rate initially. The overall yield on earning assets for
the second quarter of 1997 was 8.36%, up 7 basis points from the 1997 first
quarter, while the rate paid for interest bearing liabilities amounted to 4.25%,
up 4 basis points from the previous quarter.
Signet uses various off-balance sheet interest rate derivatives as an
integral part of its asset and liability management and trading activities. For
Signet, variable rate assets generally exceed variable rate liabilities. To
manage the resulting interest rate risk, Signet enters into derivative
transactions. Derivative contracts, used for interest rate risk management
purposes, decreased interest on earning assets by $1.5 million, $1.1 million and
$1.4 million and decreased borrowing costs by $4.2 million, $5.0 million and
$3.9 million for the second quarter of 1997, the first quarter of 1997 and the
second quarter of 1996, respectively. The overall increase in the net yield
margin as a result of these instruments amounted to 10, 15 and 10 basis points
for the respective periods. Loan securitizations also have an effect on net
interest income and the net yield margin. For a detailed analysis of this
effect, refer to the discussion of Consumer Loan Growth and Table 8 elsewhere in
this report.
Provision and Allowance for Loan Losses
The provision for loan losses totaled $13.4 million for the second quarter of
1997 down slightly from $13.8 million in the second quarter of 1996. Table 4
provides a summary of activity in the allowance for loan losses along with
details of the charge-offs and recoveries by loan category.
Net charge-offs amounted to $14.8 million in the second quarter of 1997,
compared with $13.8 million for the same quarter in the prior year. For the
first six months of 1997, net charge-offs totaled $29.7 million, up from $28.3
million in 1996. Higher consumer loan net charge-offs were nearly offset by net
recoveries of commercial loans. The loan loss provision increased $4.7 million
year-to-date resulting primarily from growth and increased losses in the
loan-by-check portfolio. The loan-by-check risk test loans mentioned in footnote
1 to Table 4 were generated from direct mail solicitations in late 1994 as
Signet ran controlled tests to determine the criteria to be used in future
loan-by-check solicitations. Signet sold the remaining loan-by-check risk test
portfolio for a modest gain in March, 1997. See footnote 1 to Table 4 for more
detailed information on the loan-by-check charge-offs.
The allowance for loan losses at June 30, 1997 was $119.7 million, or
1.89% of period-end loans, compared with the June 30, 1996 allowance of $126.4
million, or 2.14% of loans. The June 30, 1997 allowance for loan losses equated
to 5.1 times quarter-end non-performing loans and 3.6 times quarter-end
non-performing assets, up from June 30, 1996 when the allowance for loan losses
amounted to 3.7 times non-performing loans and 2.3 times non-performing assets.
The decline in the level of the allowance reflected the first quarter 1997 sale
of the Company's loan-by-check risk test portfolio, in anticipation of which,
$17.0 million of the allowance for loan losses was transferred to loans held for
sale.
13
<PAGE>
Table 4
<TABLE>
<CAPTION>
Changes in Allowance for Loan Losses
- -----------------------------------------------------------------------------------------------------------
Three Months Ended
- -----------------------------------------------------------------------------------------------------------
June 30 March 31
- -----------------------------------------------------------------------------------------------------------
(dollars in thousands) 1997 1996 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Balance at beginning of period $121,232 $126,433 $136,707
Additions to allowance charged to expense 13,350 13,794 16,400
Transfer to loans held for sale (17,010)
Loans charged off:
Consumer (1) 15,509 12,656 15,023
Commercial 1,773 55 167
Real estate-construction 45 914
Real estate-mortgage (2) 96 2,186 1,737
- -----------------------------------------------------------------------------------------------------------
Total loans charged off 17,423 14,897 17,841
Recoveries of loans previously
charged off:
Consumer (1) 1,202 440 961
Commercial 428 440 1,910
Real estate-construction 188 132 71
Real estate-mortgage (2) 763 100 34
- -----------------------------------------------------------------------------------------------------------
Total recoveries 2,581 1,112 2,976
- -----------------------------------------------------------------------------------------------------------
Net loans charged off 14,842 13,785 14,865
- -----------------------------------------------------------------------------------------------------------
Balance at end of period $119,740 $126,442 $121,232
===========================================================================================================
Net loan losses (annualized) as a
percentage of average loans:
Consumer 2.38% 2.38% 2.39%
Commercial 0.17 (0.05) (0.22)
Real estate (0.49) 0.94 1.33
- -----------------------------------------------------------------------------------------------------------
Total 0.95% 0.95% 0.95%
===========================================================================================================
Allowance for loan losses to net
loans at end of period 1.95%
===========================================================================================================
(1) Consumer includes loan-by-check as noted below:
Net charge-offs:
Loan-by-check risk tests $ (83) $ 6,504 $ 2,732
Other loan-by-check 13,096 4,626 10,261
- -----------------------------------------------------------------------------------------------------------
Total loan-by-check net charge-offs $ 13,013 $ 11,130 $ 12,993
===========================================================================================================
Average loan-by-check:
Loan-by-check risk tests $136,598 $ 55,383
Other loan-by-check $943,641 676,586 912,404
- -----------------------------------------------------------------------------------------------------------
Total loan-by-check $943,641 $813,184 $967,787
===========================================================================================================
Net loan losses (annualized) as a
percentage of average loan-by-check:
Loan-by-check risk tests N/M 19.05% 19.73%
Other loan-by-check 5.55% 2.73 4.50
- -----------------------------------------------------------------------------------------------------------
Total loan-by-check 5.52% 5.47% 5.37%
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Changes in Allowance for Loan Losses
- -----------------------------------------------------------------------------------
Six Months Ended
-----------------------
June 30
----------------
(dollars in thousands) 1997 1996
- ----------------------------------------------------------------------------------
<S> <C>
Balance at beginning of period $136,707 $129,702
Additions to allowance charged to expense 29,750 25,051
Transfer to loans held for sale (17,010)
Loans charged off:
Consumer (1) 30,532 23,937
Commercial 1,940 2,936
Real estate-construction 959 839
Real estate-mortgage (2) 1,833 2,789
- ----------------------------------------------------------------------------------
Total loans charged off 35,264 30,501
Recoveries of loans previously
charged off:
Consumer (1) 2,163 794
Commercial 2,338 831
Real estate-construction 259 180
Real estate-mortgage (2) 797 385
- ----------------------------------------------------------------------------------
Total recoveries 5,557 2,190
- ----------------------------------------------------------------------------------
Net loans charged off 29,707 28,311
- ----------------------------------------------------------------------------------
Balance at end of period $119,740 $126,442
==================================================================================
Net loan losses (annualized) as a
percentage of average loans:
Consumer 2.38% 2.34%
Commercial (0.03) 0.14
Real estate 0.49 0.76
- ----------------------------------------------------------------------------------
Total 0.95% 1.00%
- ----------------------------------------------------------------------------------
Allowance for loan losses to net
loans at end of period 1.89% 2.14%
==================================================================================
(1) Consumer includes loan-by-check as noted below:
Net charge-offs:
Loan-by-check risk tests $ 2,649 $ 13,737
Other loan-by-check 23,357 7,298
- ---------------------------------------------------------------------------------
Total loan-by-check net charge-offs $ 26,006 $ 21,035
=================================================================================
Average loan-by-check:
Loan-by-check risk tests $ 27,539 $147,561
Other loan-by-check 928,109 596,164
- ---------------------------------------------------------------------------------
Total loan-by-check $955,648 $743,725
=================================================================================
Net loan losses (annualized) as a
percentage of average loan-by-check:
Loan-by-check risk tests 19.24% 18.62%
Other loan-by-check 5.03 2.45
- --------------------------------------------------------------------------------
Total loan-by-check 5.44% 5.66%
================================================================================
</TABLE>
(2) 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.
Non-Interest Income
A significant portion of Signet's revenue is derived from non-interest related
sources including service charges on deposit accounts, consumer loan servicing
and service charge income, trust and other financial services income and other
income. Signet's business strategies continued to emphasize non-interest
operating income sources. Table 5 details the various components of non-interest
income for the second quarter and first six months of 1997 compared with the
same periods in 1996 as well as the first quarter of 1997.
Non-interest income for the second quarter of 1997 was $60.1 million, down
6% from the second quarter of 1996. Several factors contributed to the decline.
Service charges on deposit accounts as well as trust and other financial
services income remained relatively level. Consumer loan servicing and service
charge income, which totaled $11.8 million, was down 23% from last year's second
14
<PAGE>
Table 5
<TABLE>
<CAPTION>
Non-Interest Income and Expense
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30 March 31 June 30
------------ ------------- -----------
(in thousands) 1997 1996 1997 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-interest income:
Service charges on deposit accounts $ 17,250 $ 17,100 $ 17,180 $ 34,430 $ 33,331
Consumer loan servicing and service
charge income 11,756 15,276 12,285 24,041 27,432
Trust and other financial services
income 9,758 10,108 10,795 20,553 19,713
Trading profits 7,060 3,000 6,727 13,787 3,767
Mortgage servicing and origination 4,283 8,797 4,798 9,081 16,465
Other service charges and fees 4,749 3,916 4,786 9,535 7,798
Gain on sale of mortgage loans 204 2,606 1,677 1,881 4,182
Gain on sale of mortgage servicing 3,073 6,499
Other 5,075 (169) 5,764 10,839 1,944
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest operating income 60,135 63,707 64,012 124,147 121,131
Securities available for sale gains 10 164 103 113 756
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income $ 60,145 $ 63,871 $ 64,115 $124,260 $121,887
==================================================================================================================================
Non-interest expense:
Salaries $ 47,668 $ 52,302 $ 47,356 $ 95,024 $101,002
Employee benefits 10,121 10,466 12,221 22,342 22,867
- ----------------------------------------------------------------------------------------------------------------------------------
Total staff expense 57,789 62,768 59,577 117,366 123,869
Supplies and equipment 10,790 9,985 10,718 21,508 19,590
Occupancy 9,104 9,520 8,992 18,096 19,714
External data processing services 9,090 8,333 8,804 17,894 15,479
Travel and communications 5,107 6,706 5,668 10,775 12,626
Restructuring charge 58,712 58,712
Public relations, sales and advertising 6,680 4,559 4,662 11,342 9,448
Professional services 5,551 3,797 3,846 9,397 7,110
Credit and collection 869 1,307 893 1,762 2,654
FDIC assessment 280 180 189 469 350
Foreclosed property - net (725) 552 874 149 (268)
Other 8,933 13,804 10,607 19,540 26,554
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense $172,180 $121,511 $114,830 $287,010 $237,126
==================================================================================================================================
</TABLE>
quarter primarily due to $3.8 million of gains associated with sales under
existing securitizations. Mortgage servicing and origination income totaled $4.3
million for the second quarter of 1997 compared with $8.8 million in the second
quarter of 1996. The 51% decline was a result of a decrease in the volume of
mortgage loans originated due to the sale of Signet's residential mortgage loan
production offices in December, 1996. The Company retained its mortgage
servicing activities. The Company's mortgage servicing portfolio grew to $8.0
billion at June 30, 1997, up from $7.8 billion at March 31, 1997. Other service
charges and fees totaled $4.7 million, up 21% versus the second quarter of 1996
primarily from increased ATM fees. Trading profits improved to $7.1 million for
the second quarter of 1997, up from $3.0 million in the same period of 1996 due
to stronger trends in rate and currency markets. The remaining portion of
non-interest operating income, which included venture capital income, earnings
on money recovered from the 1995 fraud loss (see notes to consolidated financial
statements) and miscellaneous income from other sources, amounted to $5.1
million for the second quarter of 1997, up $5.2 million from the same period of
the prior year. During 1996, charge-offs on loans held for sale on behalf of
Capital One Bank (the successor to the Company's credit card operations) were
charged to this category, resulting in a negative amount.
Non-interest income decreased $4.0 million, or 6%, in the second quarter
of 1997 compared with the first quarter of 1997. During the first quarter,
Signet reported $1.5 million higher gains on sales of mortgage loans. Trust and
other financial services income dropped $1.0 million from the first quarter.
Also, during the first quarter of 1997, Signet recorded a modest gain on the
sale of the loan-by-check risk test portfolio.
15
<PAGE>
Table 6
<TABLE>
<CAPTION>
Average Balance Sheet
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
June 30
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Average Income\ Yield\ Average Income\ Yield\
(dollars in thousands) Balance Expense Rate Balance Expense Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Earning assets (tax equivalent basis):*
Interest bearing deposits with other banks $ 128,540 $ 1,800 5.54% $ 2,862 $ 43 5.94%
Federal funds and resale agreements 924,454 13,089 5.60 703,429 9,543 5.37
Trading account securities 463,529 7,298 6.32 493,912 7,865 6.40
Loans held for securitization 300,000 5,992 8.03
Loans held for sale 68,813 1,011 5.81 381,530 9,579 9.93
Securities available for sale 2,421,327 45,348 7.49 2,379,317 44,315 7.45
Loans (net of unearned income):
Consumer 2,406,937 65,333 10.89 2,055,518 54,725 10.71
Commercial 3,173,195 62,709 7.93 2,923,535 57,485 7.91
Real estate-construction 237,996 5,796 9.63 252,540 6,064 9.50
Real estate-commercial mortgage 205,993 6,940 13.51 348,219 8,188 9.46
Real estate-residential mortgage 214,310 4,283 7.99 234,634 4,176 7.12
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans 6,238,431 145,061 9.33 5,814,446 130,638 9.04
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 10,245,094 $213,607 8.36% 10,075,496 $207,975 8.30%
- ----------------------------------------------------------------------------------------------------------------------------------
Non-rate related assets:
Cash and due from banks 406,387 514,523
Allowance for loan losses (120,768) (126,569)
Premises and equipment (net) 180,649 197,471
Other assets 730,153 685,761
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $11,441,515 $11,346,682
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 3,110,727 $ 27,427 3.54% $ 2,537,684 $ 18,209 2.89%
Savings accounts 644,260 4,214 2.62 949,193 7,530 3.19
Savings certificates 2,198,855 26,316 4.80 2,158,040 25,395 4.73
Large denomination certificates 182,302 2,622 5.69 126,537 1,731 5.41
Foreign 55,502 774 5.52 179,726 2,415 5.32
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 6,191,646 61,353 3.97 5,951,180 55,280 3.74
Federal funds and repurchase agreements 2,080,252 24,308 4.62 2,491,809 29,777 4.73
Long-term borrowings 374,185 6,004 6.35 250,606 3,796 5.99
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 8,646,083 $ 91,665 4.25% 8,693,595 $ 88,853 4.11%
- ----------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits 1,614,313 1,574,282
Other liabilities 244,886 231,798
Common stockholders' equity 936,233 847,007
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $11,441,515 $11,346,682
==================================================================================================================================
Net interest income/spread $121,942 4.11% $119,122 4.19%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest income to average earning assets 8.36% 8.30%
Interest expense to average earning assets 3.59 3.55
- ----------------------------------------------------------------------------------------------------------------------------------
Net yield margin 4.77% 4.75%
==================================================================================================================================
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
March 31
1997
- ---------------------------------------------------------------------------------------
Average Income\ Yield\
(dollars in thousands) Balance Expense Rate
- ---------------------------------------------------------------------------------------
<S> <C>
Assets
Earning assets (tax equivalent basis):*
Interest bearing deposits with
other banks $ 55,596 $ 731 5.26%
Federal funds and resale agreements 812,797 10,953 5.39
Trading account securities 450,428 7,080 6.37
Loans held for securitization
Loans held for sale 103,956 1,587 6.11
Securities available for sale 2,505,700 46,251 7.38
Loans (net of unearned income):
Consumer 2,354,234 63,725 10.98
Commercial 3,172,472 62,330 7.97
Real estate-construction 236,034 5,565 9.43
Real estate-commercial mortgage 237,069 5,117 8.75
Real estate-residential mortgage 289,850 5,590 7.71
- ---------------------------------------------------------------------------------------
Total loans 6,289,659 142,327 9.18
- ---------------------------------------------------------------------------------------
Total earning assets 10,218,136 $208,929 8.29%
- ---------------------------------------------------------------------------------------
Non-rate related assets:
Cash and due from banks 403,811
Allowance for loan losses (133,705)
Premises and equipment (net) 184,130
Other assets 718,355
- ---------------------------------------------------------------------------------------
Total assets $11,390,727
- ---------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 3,020,159 $ 26,569 3.57%
Savings accounts 650,507 4,215 2.63
Savings certificates 2,236,645 25,821 4.68
Large denomination certificates 202,435 2,851 5.63
Foreign 80,758 1,075 5.32
- ---------------------------------------------------------------------------------------
Total interest bearing deposits 6,190,504 60,531 3.97
- ---------------------------------------------------------------------------------------
Federal funds and repurchase
agreements 2,076,387 23,599 4.55
Long-term borrowings 400,013 5,803 5.80
- ---------------------------------------------------------------------------------------
Total interest bearing liabilities 8,666,904 $ 89,933 4.21%
- ---------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits 1,543,353
Other liabilities 252,088
Common stockholders' equity 928,382
- ---------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $11,390,727
=======================================================================================
Net interest income/spread $118,996 4.08%
- ---------------------------------------------------------------------------------------
Interest income to average earning assets 8.29%
Interest expense to average earning assets 3.57
- ---------------------------------------------------------------------------------------
Net yield margin 4.72%
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Average Income\ Yield\ Average Income\ Yield\
(dollars in thousands) Balance Expense Rate Balance Expense Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Earning assets (tax equivalent basis):*
Interest bearing deposits with
other banks $ 92,270 $ 2,531 5.46% $ 7,747 $ 197 5.03%
Federal funds and resale agreements 868,934 24,042 5.50 647,413 17,731 5.42
Trading account securities 457,014 14,378 6.34 499,976 15,987 6.43
Loans held for securitization 315,279 13,411 8.55
Loans held for sale 86,287 2,598 5.99 385,550 19,665 10.09
Securities available for sale 2,463,281 91,599 7.44 2,344,324 86,548 7.38
Loans (net of unearned income):
Consumer 2,380,731 129,058 10.93 1,981,143 107,787 10.94
Commercial 3,172,836 125,039 7.95 2,907,962 113,991 7.88
Real estate-construction 237,020 11,361 9.53 248,889 12,126 9.64
Real estate-commercial mortgage 221,446 12,057 10.98 353,104 16,878 9.61
Real estate-residential mortgage 251,871 9,873 7.84 199,360 7,380 7.40
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans 6,263,904 287,388 9.25 5,690,458 258,162 9.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total earning assets 10,231,690 $422,536 8.33% 9,890,747 $411,701 8.37%
- ---------------------------------------------------------------------------------------------------------------------------------
Non-rate related assets:
Cash and due from banks 405,106 521,782
Allowance for loan losses (127,201) (127,536)
Premises and equipment (net) 182,380 196,892
Other assets 724,287 725,271
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $11,416,262 $11,207,156
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest bearing liabilities:
Deposits:
Interest bearing demand $ 3,065,693 $ 53,996 3.55% $ 2,506,128 $ 36,289 2.91%
Savings accounts 647,366 8,429 2.63 1,098,800 19,025 3.48
Savings certificates 2,217,645 52,137 4.74 2,053,719 47,930 4.69
Large denomination certificates 192,313 5,473 5.66 118,865 3,256 5.42
Foreign 68,060 1,849 5.40 136,580 3,694 5.35
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 6,191,077 121,884 3.97 5,914,092 110,194 3.75
- ---------------------------------------------------------------------------------------------------------------------------------
Federal funds and repurchase
agreements 2,078,330 47,907 4.58 2,348,771 56,097 4.72
Long-term borrowings 387,027 11,807 6.07 251,799 7,910 6.21
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 8,656,434 $ 181,598 4.23% 8,514,662 $174,201 4.11%
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities:
Demand deposits 1,579,029 1,624,270
Other liabilities 248,470 215,026
Common stockholders' equity 932,329 853,198
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $11,416,262 $ 11,207,156
=================================================================================================================================
Net interest income/spread $ 240,938 4.10% $237,500 4.26%
- ---------------------------------------------------------------------------------------------------------------------------------
Interest income to average earning assets 8.33% 8.37%
Interest expense to average earning assets 3.58 3.54
- ---------------------------------------------------------------------------------------------------------------------------------
Net yield margin 4.75% 4.83%
=================================================================================================================================
</TABLE>
* Includes the effects of taxable equivalent adjustments using the federal
income tax rate and state tax rates, as applicable, reduced by the
nondeductible portion of interest expense.
17
<PAGE>
Non-Interest Expense
Non-interest expense for the second quarter of 1997 totaled $172.2 million, up
$50.7 million from the second quarter of 1996 due to the $58.7 million
restructuring charge. Excluding the restructuring charge, non-interest expense
for the second quarter of 1997 totaled $113.5 million, down $8.0 million, or 7%,
from the second quarter of 1996, and down slightly from the first quarter of
1997. The restructuring charge consisted of $24.7 million for severance and
other personnel related charges, $10.1 million for facilities, $8.5 million for
writing off goodwill and $15.4 million for technology and other expenses. As of
June 30, 1997, the remaining liability for restructuring related charges was
approximately $38.9 million.
Staff expense (salaries and employee benefits), the largest component of
non-interest expense, totaled $57.8 million in the second quarter of 1997, an 8%
decline from the second quarter of 1996. From June 30, 1996 to June 30, 1997,
the number of full-time employees declined over 15% as a result of Signet
selling its mortgage production offices in December 1996 along with the hiring
freeze and elimination of positions implemented with ADVANCE. For the same
period, the number of part-time employees declined 11%.
Certain of the non-interest expense categories reflected costs associated
with increased business volume. The $0.8 million increases in supplies and
equipment expense as well in external data processing expense were attributable
to servicing the expanded consumer loan base. Public relations, sales and
advertising expense rose $2.1 million as Signet increased its consumer loan
solicitation programs. This strategy was implemented to increase account growth
and outstandings and has required significant out-of-pocket expenses to launch
large scale but carefully planned national solicitations. The Company's
solicitation strategy, which uses extensive testing, is designed to improve the
efficiency of the solicitation process, thereby improving opportunities to
create value by controlling credit exposure and creating higher probabilities
for successful growth. The success of this strategy is evidenced by the growth
in the total managed consumer loan portfolio from $1.6 billion at December 31,
1993 to $3.5 billion at June 30, 1997. Since year-end 1996, Signet's managed
consumer loan portfolio has grown $106 million. The slower growth rate in 1997
is attributable to the March 1997 sale of the $76 million loan-by-check risk
test portfolio. Travel and communications expense declined $1.6 million, or 24%
from the second quarter last year. The decrease resulted largely from selling
the mortgage origination business in December 1996. Lower operating losses along
with the termination of the service level agreement with Capital One and a
reduction to non-interest expense for the excess funds recovered from the 1995
fraud loss (see notes to consolidated financial statements), accounted for an
improvement in other non-interest expense.
Excluding the restructuring charge, non-interest expense dropped $1.4
million from the first quarter of 1997 primarily due to lower staff and
foreclosed property expenses. The lower staff expenses resulted principally from
higher payroll taxes in the first quarter related to incentive payments.
Signet's efficiency ratio (the ratio of non-interest expense to taxable
equivalent operating income) excluding the restructuring charge and foreclosed
property expense was 63% for the second quarter of 1997, an improvement from 66%
for the second quarter of 1996 but up slightly from the first quarter.
Income Taxes
Signet recorded a $3.4 million income tax benefit for the quarter and income tax
expense of $13.6 million for the six months ended June 30, 1997, compared with
expense of $15.5 million and $31. 6 million for the same periods of 1996. The
second quarter 1997 tax benefit resulted from the restructuring charge.
Financial Condition
Average earning assets totaled $10.2 billion for the second quarter of 1997, as
shown in Table 6--Average Balance Sheet, a 2% increase from the 1996 level for
the same quarter. The portfolios experiencing the largest declines were loans
held for securitization ($300 million) and loans held for sale ($313 million),
while loans, interest bearing deposits with other banks, federal funds sold and
resale agreements and securities available for sale increased by $424 million,
$126 million, $221 million and $42 million, respectively. The securitization of
student loans in December, 1996, reduced the 1997 average and therefore distorts
the comparison of on-balance sheet loan balances. Including securitized assets
and loans held for securitization, average managed loans grew $424 million, or
6%, from the second quarter of 1996 to the same quarter of 1997. During the 1997
first quarter, the Company sold $165 million of adjustable rate residential
mortgage loans and the $76 million portfolio of loan-by-check risk test
receivables. Average balances increased from the 1996 second quarter in the
consumer and commercial loan categories, while all three of the real estate loan
categories - construction, commercial mortgage and residential mortgage average
balances declined. Consumer loans averaged $2.4 billion for the second quarter
of 1997, a 17% increase from the second quarter of 1996. Refer to the Consumer
Loan Growth section for a detailed discussion of this topic.
Commercial loans averaged $3.2 billion for the second quarter of 1997, a
9% increase from last year, as Signet successfully grew its leasing portfolio
and targeted certain specialized industries. Real estate-commercial mortgage
loans averaged $206 million, down 41% from the 1996 second quarter. Real
estate-commercial mortgage loans decreased partially as a result of the sale of
approximately $43 million of these loans in 1996. Real estate-residential
mortgage loans fell $20 million, or 9%, from the second quarter 1996 to average
18
<PAGE>
$214 million as Signet sold approximately $27 million of adjustable rate
residential mortgage loans in December 1996 and an additional $165 million in
the first quarter of 1997. Trading account securities averaged $464 million for
the second quarter of 1997, down 6% from the $494 million level for the same
period last year. Securities available for sale for the second quarter of 1997
averaged $2.4 billion, an increase of $42 million over the second quarter of
1996 level.
Interest bearing liabilities averaged $8.6 billion in the second quarter
of 1997, down $48 million from the second quarter of 1996. Average deposits
totaled $7.8 billion for the second quarter of 1997, up 4% from the second
quarter of 1996. Core deposits averaged $7.6 billion for the 1997 second
quarter, up 5% from the 1996 second quarter. Savings accounts, which fell $305
million, was the only core deposit category which experienced a decline. Until
the end of June, 1996, savings accounts included deposits held on behalf of
Capital One Bank as collateral for Capital One's secured card product.
Approximately $462 million of the savings deposits were transferred to another
financial institution in the first quarter of 1996 and the remaining $237
million were transferred to Capital One at the end of the second quarter of
1996. These transfers caused the majority of the decline in average savings
accounts. Interest bearing demand deposits increased $573 million, non-interest
bearing demand deposits rose $40 million and savings certificates were up $41
million. Signet is using its direct mail expertise to grow core deposits. At
June 30, 1997, a total of approximately $819 million of interest bearing demand
deposits had been obtained in that manner. The competition among financial
institutions for these deposits and increased consumer awareness have
effectively increased the relative cost of and reduced the overall benefits
received from these deposits.
Table 7
<TABLE>
<CAPTION>
Managed Consumer Loan Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- ---------------------------------------------------------------------------------------------------------------------------------
June 30 March 31 December 31 September 30 June 30
(in thousands) 1997 1997 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Average balances:
Installment loans $1,166,105 $1,191,192 $1,172,210 $1,015,639 $1,035,592
Student loans 806,282 801,276 829,001 788,904 776,326
Home equity loans 203,075 184,960 171,865 147,376 122,649
Credit card 64,089 65,754 55,954 48,845 60,792
Other loans 167,386 111,052 69,445 60,968 60,159
- ---------------------------------------------------------------------------------------------------------------------------------
Sub-total average consumer loan portfolio 2,406,937 2,354,234 2,298,475 2,061,732 2,055,518
- ---------------------------------------------------------------------------------------------------------------------------------
Consumer loans held for sale 2,035 161,860 202,029
Student loans held for securitization 283,696 300,000 300,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total average on-balance sheet portfolio 2,406,937 2,356,269 2,582,171 2,523,592 2,557,547
Securitized home equity loans 386,830 400,729 414,176 429,728 451,118
Securitized student loans 377,175 389,321 21,412
Securitized credit card loans 262,057 263,889 269,324 275,000 275,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total securitized consumer loans 1,026,062 1,053,939 704,912 704,728 726,118
Less loans to be sold to Capital One (161,860) (202,029)
- ---------------------------------------------------------------------------------------------------------------------------------
Total average managed consumer loan
portfolio $3,432,999 $3,410,208 $3,287,083 $3,066,460 $3,081,636
=================================================================================================================================
Period-end balances:
Installment loans $1,164,452 $1,165,886 $1,212,492 $1,128,607 $ 994,243
Student loans 813,227 808,222 756,340 820,319 773,196
Home equity loans 209,259 193,155 181,879 164,805 135,064
Credit card 75,670 65,949 69,287 47,524 49,630
Other loans 208,701 141,116 80,560 59,989 64,230
- ---------------------------------------------------------------------------------------------------------------------------------
Sub-total period-end consumer loan
portfolio 2,471,309 2,374,328 2,300,558 2,221,244 2,016,363
- ---------------------------------------------------------------------------------------------------------------------------------
Consumer loans held for sale 194,097
Student loans held for securitization 300,000 300,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total period-end on-balance sheet
portfolio 2,471,309 2,374,328 2,300,558 2,521,244 2,510,460
Securitized home equity loans 377,494 393,141 406,776 420,446 438,368
Securitized student loans 370,705 384,002 394,691
Securitized credit card loans 252,777 263,889 263,889 275,000 275,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total securitized consumer loans 1,000,976 1,041,032 1,065,356 695,446 713,368
Less loans to be sold to Capital One (194,097)
- ---------------------------------------------------------------------------------------------------------------------------------
Total period-end managed consumer loan
portfolio $3,472,285 $3,415,360 $3,365,914 $3,216,690 $3,029,731
=================================================================================================================================
</TABLE>
19
<PAGE>
Consumer Loan Growth
Consumer loans averaged $2.4 billion for the second quarter of 1997, a 17%
increase from the second quarter of 1996. The growth was achieved through a
variety of products offered to carefully targeted customer segments. In 1994,
Signet expanded its use of information-based strategies which significantly
increased growth in the consumer loan portfolio. This technique involved
generating a data base of potentially creditworthy customers for particular
products and then following up with direct mail solicitations. Much of the
growth was in a new product, loan-by-check, whereby customers received a
direct-mail solicitation in the form of a check for a specified loan amount. To
activate the loan, customers simply endorse and present the check at their local
bank. Signet also is beginning to apply information-based strategies to home
equity line, closed-end second mortgage, student and small business loans.
Solicitations in these areas are in testing stages. These tests are designed to
help Signet develop products that are both appealing to customers and
economically profitable for the Company. As a result of these solicitations,
from June 30, 1996 to June 30, 1997, the installment loan portfolio (primarily
loan-by-check) grew $170 million and the closed-end second mortgage loan
portfolio was up $154 million. In addition, the student loan portfolio
(including securitized loans) increased $111 million. During the first quarter
of 1997, the growth in Signet's loan-by-check portfolio was not significant as
the $76 million portfolio of loan-by-check risk test receivables was sold.
Growth in the second quarter was modest as the Company continues to test a
variety of loan-by-check products using different credit criteria. The managed
consumer loan portfolio is comprised of consumer loans, consumer loans held for
securitization and securitized consumer loans. Securitized consumer loans are
not assets of the Company and, therefore, are not shown on the balance sheet.
Signet's managed consumer loan portfolio increased by $443 million, or 15%, from
June 30, 1996 to June 30, 1997 as indicated in Table 7.
Table 8
<TABLE>
<CAPTION>
Impact of Consumer
Loan Securitizations
- --------------------------------------------------------------------------------------------------------------------------------
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
(dollars in thousands) 1997 1997 1996 1996 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Statement of Income
Net interest income $ 120,043 $ 117,156 $ 116,719 $ 118,434 $ 117,373
Provision for loan losses 13,350 16,400 29,800 19,000 13,794
Non-interest income 60,145 64,115 89,561 68,129 63,871
Non-interest expense 172,180 114,830 125,337 122,855 121,511
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ (5,342) $ 50,041 $ 51,143 $ 44,708 $ 45,939
- --------------------------------------------------------------------------------------------------------------------------------
Adjustments for Securitizations
Net interest income $ 11,986 $ 12,401 $ 11,862 $ 12,206 $ 12,484
Provision for loan losses 3,036 2,828 2,682 3,276 2,322
Non-interest income (8,037) (8,593) (17,330) (7,575) (11,750)
Non-interest expense
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) to income
(loss) before income taxes $ 913 $ 980 $ (8,150) $ 1,355 $ (1,588)
- --------------------------------------------------------------------------------------------------------------------------------
Adjustments for Loans To Be Sold
to Capital One
Net interest income $ (2,333) $ (3,322)
Provision for loan losses
Non-interest income 2,333 3,322
Non-interest expense
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) to income
(loss) before income taxes
- --------------------------------------------------------------------------------------------------------------------------------
Managed Statement of Income
(adjusted)
Net interest income $ 132,029 $ 129,557 $ 128,581 $ 128,307 $ 126,535
Provision for loan losses 16,386 19,228 32,482 22,276 16,116
Non-interest income 52,108 55,522 72,231 62,887 55,443
Non-interest expense 172,180 114,830 125,337 122,855 121,511
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ (4,429) $ 51,021 $ 42,993 $ 46,063 $ 44,351
- ----------------------------------------------------------------------------------------------------------------------------------
As reported:
Average earning assets $10,245,094 $10,218,136 $10,390,925 $10,203,525 $10,075,496
Return on assets N/M 1.18% 1.15% 1.03% 1.08%
Net yield margin 4.77% 4.72 4.56 4.70 4.75
On a managed basis:
Average earning assets $11,271,156 $11,272,075 $11,095,837 $10,746,393 $10,599,585
Return on assets N/M 1.10% 0.92% 1.01% 1.00%
Net yield margin 4.77% 4.73 4.69 4.83 4.87
Yield on managed consumer
loan portfolio 10.96% 11.03% 10.87% 10.86% 10.89%
==================================================================================================================================
</TABLE>
20
<PAGE>
Table 9
<TABLE>
<CAPTION>
Non-Performing Assets
- ----------------------------------------------------------------------------------------------------------------------------
June 30 March 31 December 31 September 30 June 30
(dollars in thousands) 1997 1997 1996 1996 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-accrual loans:
Commercial $17,245 $10,230 $ 8,850 $10,672 $ 7,552
Consumer 2,836 2,729 2,404 2,374 1,694
Real estate - construction 916 2,577 2,842 1,206 9,596
Real estate - mortgage * 2,552 11,415 14,207 14,866 15,172
- ----------------------------------------------------------------------------------------------------------------------------
Total non-accrual loans 23,549 26,951 28,303 29,118 34,014
Foreclosed properties 9,764 13,718 10,497 14,733 20,850
- ----------------------------------------------------------------------------------------------------------------------------
Total non-performing assets $33,313 $40,669 $38,800 $43,851 $54,864
============================================================================================================================
Percentage to loans (net of unearned)
and foreclosed properties 0.52% 0.65% 0.61% 0.71% 0.92%
Allowance for loan losses to:
Non-performing loans 508.47 449.83 483.02 441.17 371.73
Non-performing assets 359.44 298.09 352.34 292.95 230.46
============================================================================================================================
* 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.
</TABLE>
Risk Elements
Non-performing assets at June 30, 1997 totaled $33.3 million, or .52 % of loans
and foreclosed properties. This compares favorably with $54.9 million, or .92 %,
respectively, at June 30, 1996. Overall non-performing real estate assets
declined $21.6 million from June 30, 1996 to June 30, 1997, including an $11.1
million decline in foreclosed properties. Foreclosed properties totaled $9.8
million at the end of the second quarter of 1997, and were equal to 29% of total
non-performing assets and 74% of non-performing real estate assets. Signet sold
$4.9 million of foreclosed properties during the second quarter of 1997.
Accruing loans past due 90 days or more as to principal or interest
payments totaled $68.9 million, $59.6 million and $70.8 million as of June 30,
1997, March 31, 1997 and June 30, 1996, respectively. The details of these past
due loans are displayed in Table 10. The past due commercial and real estate
loans were in the process of collection and were adequately collateralized. The
improvement in loan delinquency totals from the prior year-end is primarily
attributable to the sale of the loan-by-check risk test portfolio mentioned
earlier. Past due student loans accounted for $28.6 million, or 41%, of all the
past due loans. Of the past due student loans, more than 95% were indirectly
government guaranteed and do not represent material loss exposure to Signet.
Table 10
<TABLE>
<CAPTION>
Accruing Loans Past Due 90 Days or More
- --------------------------------------------------------------------------------------------------------------------------
June 30 March 31 December 31 September 30 June 30
(dollars in thousands) 1997 1997 1996 1996 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Commercial $18,152 $10,164 $ 6,334 $ 6,969 $ 5,308
Consumer:
Student loans 28,580 28,705 35,763 45,159 37,374
Credit card 1,693 1,917 2,180 1,950 3,396
Loan-by-check-risk tests 5,890 6,865 7,530
Loan-by-check other 12,235 10,803 9,272 8,321 5,666
Other consumer 1,352 2,397 2,356 2,320 2,286
- --------------------------------------------------------------------------------------------------------------------------
Total consumer 43,860 43,822 55,461 64,615 56,252
Mortgage 6,743 5,547 7,508 6,083 6,197
Construction 169 71 2,181 366 3,005
- --------------------------------------------------------------------------------------------------------------------------
Total $68,924 $59,604 $71,484 $78,033 $70,762
==========================================================================================================================
</TABLE>
21
<PAGE>
Stockholders' Equity
Stockholders' equity provides a source of permanent funding, allows for future
growth and assists the Company in withstanding unforeseen adverse developments.
At June 30, 1997, stockholders' equity totaled $936 million, an increase of $74
million, or 9%, from the June 30, 1996 level of $862 million. Since December 31,
1996, stockholders' equity increased $12 million as net income, the issuance of
common stock and net unrealized gains on securities available for sale exceeded
dividends declared. During the first half of 1997, the change in net unrealized
gains and losses on securities available for sale, net of tax, increased equity
by a nominal amount. At June 30, 1997, the net unrealized gains, net of tax,
related to securities available for sale, totaled $15 million. Dividends
declared during the second quarter of 1997 were $12.7 million or $0.21 per
common share. At June 30, 1997, Signet's banking subsidiary, Signet Bank, met
the criteria established by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") for "well capitalized" institutions.
As detailed in Table 11, the Company's consolidated risk-based capital
ratios at June 30, 1997 were 14.36% and 10.99% for Total Capital and Tier I
Capital, respectively. Signet's leverage ratio at June 30, 1997 was 7.73%. The
Company's total stockholders' equity to assets ratio improved to 7.90% at June
30, 1997 up from 7.48% at June 30, 1996.
Table 11
<TABLE>
<CAPTION>
Selected Capital Data
- ----------------------------------------------------------------------------------------------------------------
June 30 December 31
- ----------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1997 1996 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Qualifying common stockholders' equity $ 920,894 $ 861,171 $ 908,982
Less goodwill and other disallowed intangibles (40,301) (55,525) (52,163)
- ----------------------------------------------------------------------------------------------------------------
Total Tier I capital 880,593 805,646 856,819
Qualifying debt 170,000 63,667 211,667
Qualifying allowance for loan losses 100,110 97,863 99,793
- ----------------------------------------------------------------------------------------------------------------
Total Tier II capital 270,440 161,530 311,460
- ----------------------------------------------------------------------------------------------------------------
Total risked-based capital $1,151,033 $ 967,176 $1,168,279
================================================================================================================
Total risk-adjusted assets $8,015,901 $7,800,477 $7,946,546
================================================================================================================
Ratios:
Tier I capital 10.99% 10.33% 10.78%
Total risk-based capital 14.36 12.40 14.70
Tier I leverage 7.73 7.14 7.43
Tangible Tier I leverage 7.03 6.49 6.72
Common equity to assets 7.90 7.48 7.88
Common dividend payout ratio (year-to-date) 82.35 39.22 39.32
Book value per share $ 15.50 $ 14.48 $ 15.38
================================================================================================================
</TABLE>
Interest Rate Sensitivity
Signet's interest rate sensitivity position is managed by the Enterprise Risk
Management Committee ("ERMC") and monitored 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 rising rates, banking businesses will experience wider spreads as
consumer deposit costs lag increases in market interest rates. Improved spreads
due to the lag in pricing on consumer deposits will be partially offset to the
extent that the funding cost on the investment portfolio increases. ERMC
routinely uses derivatives such as interest rate swaps to manage the Company's
interest rate risk. At June 30, 1997, the notional value of the Company's
derivative products for the purpose of managing interest rate risk were $1.2
billion of interest rate swaps and $650 million of interest rate floors.
ERMC, in managing interest rate sensitivity, also uses simulations to
measure the impact that market changes and alternative strategies might have on
net interest income and other income exposed to changing rates. Current period
maturity, repricing information and projected balance sheet strategies are used
to simulate rate sensitivity. The lag effect of consumer deposit rates,
determined through historical analysis and forecasting techniques, is also
modeled. These simulations show that an immediate and sustained 100 basis point
change in interest rates would have less than a 0.5% impact on rate sensitive
income over the next twelve months, reflecting Signet's conservative balance
sheet strategy. ERMC operates under a policy designed to limit the impact of a
sudden 100 basis point change in interest rates to no more than a 5% change in
rate sensitive income over a twelve month period.
22
<PAGE>
Liquidity
Asset liquidity is generally provided by interest bearing deposits with other
banks, federal funds sold and securities purchased under agreements to resell,
securities available for sale, loans held for sale and trading account
securities. Liability liquidity is measured by the Company's ability to obtain
deposits and purchased funds at favorable rates and in adequate amounts and by
the length of maturities. Since core deposits are the most stable source of
liquidity a bank can have because they are government insured, the high level of
average core deposits during the first half of 1997 maintained the Company's
strong liquidity position. During the first half of 1997, Signet's average loan
balances were entirely funded with core deposits. Signet's equity base, as noted
earlier, also provides a stable source of funding. The parent company has not
recently relied on the capital markets for funding. During the second quarter of
1996, Signet Bank established a $2.5 billion Senior and Subordinated Bank Note
facility due from 30 days to 30 years from date of issue. A total of $150
million of subordinated bank notes had been issued under the facility at June
30, 1997.
For the first half of 1997, cash and cash equivalents increased $421
million primarily due to a rise in federal funds sold and securities purchased
under resale agreements as well as an increase in interest bearing deposits with
other banks which more than offset a decline in cash and due from banks. Cash
provided by operations was $13 million for this time period. Cash provided by
investing activities amounted to $77 million principally due to sales and
maturities of securities available for sale which more than offset an increase
in loans. Cash provided by financing activities amounted to $331 million
primarily due to an increase in short-term borrowings and deposits.
23
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings On March 19, 1996, Signet's management
discovered that the Company was one of several major financial
institutions that were victims of fraudulent commercial loan
transactions which occurred prior to 1996. The Company had loan
outstandings related to these transactions of approximately $81
million. Federal authorities informed the Company that there had
been substantial recoveries of assets related to these
transactions. Management recorded a $35 million commercial fraud
loss in non-interest expense at December 31, 1995 and recorded
the estimated probable recovery amount of $46 million in other
assets as a receivable. The receivable represented an amount
management believed was likely to be recovered based on facts
and circumstances at the time. The amount of the recovery was
based on the Company's share of known claims to the total amount
held by federal authorities, less associated costs. The recovery
amount was subject to change as additional assets were recovered
and/or additional claims were asserted.
In June 1997, Federal authorities distributed funds to
the various banks victimized by the fraud. Signet's share
represented principal and interest earned on the funds while
held by the authorities. A portion of the funds received by
Signet remain in dispute with the other financial institutions
involved. Signet's share, net of the disputed amount, was
applied against the receivable with the resulting excess amount
of $3.6 million applied to non-interest income and as a
reduction to non-interest expense. The Company will vigorously
pursue all other sources of recovery, but currently is unable to
determine the probability or amount of additional recoveries.
In connection with the fraudulent loan transactions
referred to above, the Company is involved in proceedings in the
United States District Court for the Eastern District of
Virginia, and in the United States District Court for the
Eastern District of Pennsylvania, in which the relief sought
will determine whether the Company has any on-going duties, or
liabilities, to any of the financial institutions to which the
Company sold interests in the fraudulent loans. The three
plaintiff financial institutions are suing for recovery of
approximately $130 million in the aggregate, plus unspecified
amounts for interest, costs and attorneys' fees. Management
plans to vigorously defend all claims made against it in these
and any other similar proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per
Share
Exhibit 27 - Financial Data Schedule (filed
electronically)
(b) Reports on Form 8-K:
The Registrant filed a Current Report on
Form 8-K dated June 3, 1997 announcing the
results of a comprehensive redesign program
that would enable the Registrant to achieve
its strategic goal of becoming a national,
customer focused, information-based
financial services company.
The Registrant filed a Current Report on
Form 8-K dated July 21, 1997 reporting that
the Registrant and First Union Corporation
signed a definitive merger agreement.
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
(Registrant)
Date: August 8, 1997 /s/ Wallace B. Millner III
-----------------------------------------
Wallace B. Millner III
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
Date: August 8, 1997 /s/ W. H. Catlett, Jr.
-----------------------------------------
W. H. Catlett, Jr.
Executive Vice President and Controller
(Principal Accounting Officer)
24
SIGNET BANKING CORPORATION AND SUBSIDIARIES
FORM 10-Q
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30
- ------------------------------------------------------------------------------------------------------------
<S> <C>
(dollars in thousands-- except per share) 1997 1996
- ------------------------------------------------------------------------------------------------------------
Common and common equivalent:
Average shares outstanding 60,307,099 59,471,286
Dilutive stock options--based on the treasury
stock method using average market price 1,102,101 1,030,790
============================================================================================================
Shares used 61,409,200 60,502,076
============================================================================================================
Net income (loss) applicable to Common Stock $ (1,974) $ 30,481
============================================================================================================
Per share amount $ (0.03) $ 0.50
============================================================================================================
Assuming full dilution:
Average shares outstanding 60,307,099 59,471,286
Dilutive stock options--based on the treasury
stock method using the period end market price,
if higher than the average market price 1,258,511 1,030,790
============================================================================================================
Shares used 61,565,610 60,502,076
============================================================================================================
Net income (loss) applicable to Common Stock $ (1,974) $ 30,481
============================================================================================================
Per share amount $ (0.03) $ 0.50
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30
- ------------------------------------------------------------------------------------------------------------
<S> <C>
(dollars in thousands-- except per share) 1997 1996
- ------------------------------------------------------------------------------------------------------------
Common and common equivalent:
Average shares outstanding 60,228,792 59,383,180
Dilutive stock options--based on the treasury
stock method using average market price 1,116,907 1,041,210
- ------------------------------------------------------------------------------------------------------------
Shares used 61,345,699 60,424,390
============================================================================================================
Net income (loss) applicable to Common Stock $ 31,076 $ 61,676
============================================================================================================
Per share amount $ 0.51 $ 1.02
============================================================================================================
Assuming full dilution:
Average shares outstanding 60,228,792 59,383,180
Dilutive stock options--based on the treasury
stock method using the period end market price,
if higher than the average market price 1,195,112 1,046,186
===========================================================================================================
Shares used 61,423,904 60,429,366
===========================================================================================================
Net income (loss) applicable to Common Stock $ 31,076 $ 61,676
- ------------------------------------------------------------------------------------------------------------
Per share amount $ 0.51 $ 1.02
============================================================================================================
</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 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.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIGNET
BANKING CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 543,005
<INT-BEARING-DEPOSITS> 215,871
<FED-FUNDS-SOLD> 1,010,194
<TRADING-ASSETS> 554,546
<INVESTMENTS-HELD-FOR-SALE> 27,155
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,567,857
<ALLOWANCE> 119,740
<TOTAL-ASSETS> 11,852,901
<DEPOSITS> 8,054,525
<SHORT-TERM> 2,195,652
<LIABILITIES-OTHER> 316,681
<LONG-TERM> 350,007
0
0
<COMMON> 301,913
<OTHER-SE> 634,123
<TOTAL-LIABILITIES-AND-EQUITY> 11,852,901
<INTEREST-LOAN> 283,944
<INTEREST-INVEST> 0
<INTEREST-OTHER> 134,853
<INTEREST-TOTAL> 418,797
<INTEREST-DEPOSIT> 121,884
<INTEREST-EXPENSE> 181,598
<INTEREST-INCOME-NET> 237,199
<LOAN-LOSSES> 29,750
<SECURITIES-GAINS> 113
<EXPENSE-OTHER> 287,010
<INCOME-PRETAX> 44,699
<INCOME-PRE-EXTRAORDINARY> 13,623
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,076
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
<YIELD-ACTUAL> 4.75
<LOANS-NON> 23,549
<LOANS-PAST> 68,924
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 136,707
<CHARGE-OFFS> 35,264
<RECOVERIES> 5,557
<ALLOWANCE-CLOSE> 119,740
<ALLOWANCE-DOMESTIC> 109,406
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10,334
</TABLE>
