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 March 31, 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 April 30, 1997 - 60,294,706
1
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Index
SIGNET BANKING CORPORATION AND SUBSIDIARIES
March 31, 1997
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet 3
Statement of Consolidated Income 4
Statement of Changes in Consolidated Stockholders' Equity 5
Statement of Consolidated Cash Flows 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 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 22
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2
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
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Signet Banking Corporation and Subsidiaries
Consolidated Balance Sheet
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March 31 December 31
(in thousands--except per share) (unaudited) 1997 1996 1996
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Assets
Cash and due from banks $ 542,141 $ 477,370 $ 566,520
Interest bearing deposits with other banks 123,499 2,479 3,200
Federal funds sold and securities purchased under resale agreements 966,079 1,048,139 777,999
Trading account securities 614,725 487,206 546,372
Loans held for securitization 300,000
Loans held for sale 34,864 297,147 102,826
Securities available for sale 2,428,158 2,443,956 2,623,280
Loans:
Consumer 2,374,328 2,086,519 2,300,558
Commercial 3,433,827 3,011,812 3,451,230
Real estate-construction 237,129 250,046 244,653
Real estate-commercial mortgage 214,730 359,445 254,060
Real estate-residential mortgage 194,326 232,322 329,466
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Gross loans 6,454,340 5,940,144 6,579,967
Less: Unearned income (229,057) (146,093) (225,081)
Allowance for loan losses (121,232) (126,433) (136,707)
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Net loans 6,104,051 5,667,618 6,218,179
Premises and equipment (net) 182,877 201,690 184,413
Interest receivable 110,289 106,094 107,504
Due from broker 299,645
Other assets 605,595 562,325 590,125
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Total assets $11,712,278 $11,893,669 $11,720,418
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Liabilities
Non-interest bearing deposits $ 1,703,237 $ 1,713,563 $ 1,751,238
Interest bearing deposits:
Interest bearing demand 3,106,639 2,585,045 2,955,576
Savings accounts 653,298 961,171 651,544
Savings certificates 2,197,107 2,065,355 2,256,838
Large denomination certificates 195,200 126,077 228,879
Foreign 40,108 291,382 43,267
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Total interest bearing deposits 6,192,352 6,029,030 6,136,104
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Total deposits 7,895,589 7,742,593 7,887,342
Securities sold under repurchase agreements 1,646,526 1,228,482 1,467,565
Federal funds purchased 518,710 1,002,344 495,171
Long-term borrowings 400,011 252,974 400,014
Interest payable 30,935 24,873 30,507
Due to broker 37,000 600,812 300,000
Other liabilities 257,602 186,938 215,704
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Total liabilities 10,786,373 11,039,016 10,796,303
Stockholders' Equity
Common stock, $5 par value; authorized 100,000,000 shares,
issued and outstanding 60,226,315, 59,387,304 and
60,077,489 shares, respectively 301,132 296,936 300,387
Capital surplus, net 211,369 202,513 209,327
Retained earnings 419,673 341,946 399,268
Unrealized gains (losses) on securities available for sale,
net of deferred taxes (6,269) 13,258 15,133
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Total stockholders' equity 925,905 854,653 924,115
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Total liabilities and stockholders' equity $11,712,278 $11,893,669 $11,720,418
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</TABLE>
See notes to consolidated financial statements.
3
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Signet Banking Corporation and Subsidiaries
Statement of Consolidated Income
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Three Months Ended March 31
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(in thousands--except per share) (unaudited) 1997 1996
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<S> <C>
Interest income:
Loans, including fees:
Consumer $ 63,725 $ 53,062
Commercial 61,029 55,352
Real estate-construction 5,564 6,062
Real estate-commercial mortgage 4,735 8,150
Real estate-residential mortgage 5,590 3,204
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Total loans, including fees 140,643 125,830
Interest bearing deposits with other banks 731 154
Federal funds sold and resale agreements 10,953 8,188
Trading account securities 7,080 8,122
Loans held for securitization 7,419
Loans held for sale 1,587 10,086
Securities available for sale 46,095 41,783
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Total interest income 207,089 201,582
Interest expense:
Interest bearing demand 26,569 18,080
Savings accounts 4,215 11,495
Savings certificates 25,821 22,535
Large denomination certificates 2,851 1,525
Foreign 1,075 1,279
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Total interest on deposits 60,531 54,914
Securities sold under repurchase agreements 16,721 14,511
Federal funds purchased 6,878 11,809
Long-term borrowings 5,803 4,114
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Total interest expense 89,933 85,348
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Net interest income 117,156 116,234
Provision for loan losses 16,400 11,257
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Net interest income after provision for loan losses 100,756 104,977
Non-interest income:
Service charges on deposit accounts 17,180 16,231
Consumer loan servicing and service charge income 12,285 12,156
Trust and other financial services income 10,795 9,605
Other 23,752 19,432
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Non-interest operating income 64,012 57,424
Securities available for sale gains 103 592
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Total non-interest income 64,115 58,016
Non-interest expense:
Salaries 47,356 48,700
Employee benefits 12,221 12,401
Supplies and equipment 10,718 9,605
Occupancy 8,992 10,194
External data processing services 8,804 7,146
Travel and communications 5,668 5,920
Other 21,071 21,649
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Total non-interest expense 114,830 115,615
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Income before income taxes 50,041 47,378
Applicable income taxes 16,991 16,183
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Net income $ 33,050 $ 31,195
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Earnings per common share $ 0.54 $ 0.52
Cash dividends declared per share 0.21 0.20
Average common shares outstanding 61,281 60,357
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</TABLE>
See notes to consolidated financial statements.
4
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Signet Banking Corporation and Subsidiaries
Statement of Changes in Consolidated Stockholders' Equity
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Unrealized Total
Common Stock Capital Deferred Gains/(Losses) Retained Stockholders'
(in thousands) (unaudited) Shares Amount Surplus Compensation on Securities Earnings Equity
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<S> <C>
Three Months Ended March 31, 1997
Balance at beginning of period 60,077,489 $300,387 $212,416 ($3,089) $15,133 $399,268 $924,115
Net income 33,050 33,050
Issuance of Common Stock 147,306 737 1,853 2,590
Restricted stock awards 1,520 8 38 (46)
Amortization of deferred compensation 197 197
Cash dividends (12,645) (12,645)
Change in net unrealized gains (losses)
on securities available for sale, net of
tax benefit of $11,524 (21,402) (21,402)
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Balance at end of period 60,226,315 $301,132 $214,307 ($2,938) ($ 6,269) $419,673 $925,905
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Three Months Ended March 31, 1996
Balance at beginning of period 59,208,745 $ 296,044 $ 200,093 $ 45,198 $ 322,614 $ 863,949
Net income 31,195 31,195
Issuance of Common Stock 178,559 892 2,420 3,312
Cash dividends (11,863) (11,863)
Change in net unrealized gains on
securities available for sale, net of
tax benefit of $17,198 (31,940) (31,940)
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Balance at end of period 59,387,304 $ 296,936 $ 202,513 $ 13,258 $ 341,946 $ 854,653
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5
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Signet Banking Corporation and Subsidiaries
Statement of Consolidated Cash Flows
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Three Months Ended March 31
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(in thousands) (unaudited) 1997 1996
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Operating Activities
Net Income $ 33,050 $ 31,195
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Provision for loan losses 16,400 11,257
Writedowns on foreclosed property 10
Depreciation and amortization 11,758 7,226
Securities available for sale gains (103) (592)
Other gains, net (10,153) (5,769)
Increase in interest receivable (2,785) (1,657)
Increase in other assets (9,295) (85,739)
Increase in interest payable 428 5,413
(Decrease) increase in other liabilities (241,832) 397,430
Proceeds from securitization of consumer loans 90,000
Proceeds from sales of loans held for sale 7,289,190 8,123,516
Purchases and originations of loans held for sale (7,126,239) (8,054,701)
Proceeds from sales of trading account securities 5,044,858 4,275,721
Purchases of trading account securities (5,106,484) (4,283,437)
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Net cash (used) provided by operating activities (101,207) 509,873
Investing Activities
Proceeds from sales of securities available for sale 5,305 595,337
Proceeds from maturities of securities available for sale 159,061 169,214
Purchases of securities available for sale (1,044) (856,045)
Net decrease (increase) in loans 30,527 (393,627)
Recoveries of loans previously charged-off 2,976 1,078
Purchases of premises and equipment (6,405) (15,353)
Purchases of mortgage servicing rights (6,099) (12,488)
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Net cash provided (used) by investing activities 184,321 (511,884)
Financing Activities
Net increase in deposits 8,247 149,622
Net increase in short-term borrowings 202,500 326,528
Payments on long-term debt (3) (59)
Net issuance of common stock 2,787 3,312
Payment of cash dividends (12,645) (11,863)
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Net cash provided by financing activities 200,886 467,540
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Increase in cash and cash equivalents 284,000 465,529
Cash and cash equivalents at beginning of period 1,347,719 1,062,459
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Cash and cash equivalents at end of period $1,631,719 $1,527,988
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Supplemental disclosures
Interest paid $ 89,506 $ 79,935
Income taxes paid 9,109 573
Transfer of loans to foreclosed property 4,933 304
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</TABLE>
See notes to consolidated financial statements.
6
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Supplemental Notes to Quarterly Financial Statements
(dollars in thousands) (unaudited)
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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>
March 31, 1997 March 31, 1996 December 31, 1996
Fair Fair Fair
Cost Value Cost Value Cost Value
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U.S. Government and agency obligations-
Mortgage-backed securities $2,094,453 $2,076,331 $1,752,036 $1,765,446 $2,124,019 $2,135,422
Other 173,297 174,633 462,011 470,541 298,175 302,320
States and political subdivisions 13,981 14,314 42,689 44,151 22,244 22,784
Other 160,185 162,880 169,903 163,818 160,347 162,754
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Total $2,441,916 $2,428,158 $2,426,639 $2,443,956 $2,604,785 $2,623,280
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</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>
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Credit Home Equity Student
Card Lines Loans
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Three Months Ended March 31, 1997:
Initial Amount Securitized
Initial Gain Recorded
Gain on Sales of Receivables Under Revolving Structures $ 1,844
At March 31, 1997:
Receivables Outstanding $263,889 393,296 $428,435
Amount Set Aside to Absorb Credit Losses 5,288 6,317
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Three Months Ended March 31, 1996
Initial Amount Securitized $ 90,000
Initial Gain Recorded
Gain on Sales of Receivables Under Revolving Structures
At March 31, 1996:
Receivables Outstanding 275,000 $459,949
Amount Set Aside to Absorb Credit Losses 5,288
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At December 31, 1996:
Receivables Outstanding $ 263,889 $406,896 $ 428,435
Amount Set Aside to Absorb Credit Losses 5,288 6,317
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</TABLE>
7
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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 result in a $0.01 per share increase in the primary
earnings per share reported for the quarters ended March 31, 1997 and March 31,
1996. The impact of SFAS No. 128 on the calculation of fully diluted earnings
per share for these quarters 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 have informed the Company that there have 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 represents an amount management believes is
likely to be recovered based on current facts and circumstances. 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
is subject to change, even in the near term, as additional assets are recovered
and/or additional claims are asserted. Management continues to believe the $35
million charge to 1995 earnings is adequate to cover estimated losses related to
these fraudulent transactions based on currently available information, but is
unable to predict the timing of the recovery. The Company will vigorously pursue
all other sources of recovery, but currently is unable to determine the
probability or amount of additional recoveries.
8
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Financial Highlights
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Three Months Ended
March 31 Percent
(dollars in thousands--except per share) 1997 1996 Change
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Earnings
Net interest income (taxable equivalent) $ 118,996 $ 118,378 0.5%
Net interest income 117,156 116,234 0.8
Net income 33,050 31,195 5.9
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Per Common Share
Net income $ 0.54 $ 0.52 3.8
Cash dividends declared 0.21 0.20 5.0
Book value 15.37 14.39 6.8
Period-end price 29.63 24.88 19.1
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Average Daily Balance
Assets $11,390,727 $11,067,630 2.9
Earning assets 10,218,136 9,705,995 5.3
Loans (net of unearned income) 6,289,659 5,566,470 13.0
Managed loan portfolio 7,345,633 6,610,961 11.1
Deposits 7,733,857 7,551,264 2.4
Core deposits 7,450,664 7,346,635 1.4
Common stockholders' equity 928,382 859,388 8.0
Common shares outstanding 61,281,330 60,356,655 1.5
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Ratios
Return on average assets 1.18% 1.13% 4.4
Return on average common stockholders' equity 14.44 14.60 (1.1)
Net yield margin 4.72 4.91 (3.9)
Allowance for loan losses to:
Non-performing loans 449.83 395.64 13.7
Non-performing assets 298.09 267.85 11.3
Net loans 1.95 2.18 (10.6)
Non-performing assets to loans and foreclosed properties 0.65 0.81 (19.8)
Stockholders' equity to assets 7.91 7.19 10.0
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At Period-end
Assets $11,712,278 $11,893,669 (1.5)
Earning assets 10,392,608 10,372,978 0.2
Loans (net of unearned income) 6,225,283 5,794,051 7.4
Managed loan portfolio 7,266,315 6,829,000 6.4
Deposits 7,895,589 7,742,593 2.0
Core deposits 7,660,281 7,325,134 4.6
Common stockholders' equity 925,905 854,653 8.3
Non-performing assets 40,669 47,203 (13.8)
Number of common stockholders 14,840 15,176 (2.2)
Full-time employees 3,663 4,119 (11.1)
Part-time employees 870 954 (8.8)
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</TABLE>
Note: The common stock of Signet Banking Corporation is traded on the New York
Stock Exchange under the symbol "SBK."
9
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Table 1
Selected Quarterly Financial Information
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1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
1997 1996 1996 1996 1996
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Summary of Operations
(dollars in thousands--except per share)
Net interest income (taxable equivalent) $118,996 $118,992 $120,492 $119,122 $118,378
Less: taxable equivalent adjustment 1,840 2,273 2,058 1,749 2,144
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Net interest income 117,156 116,719 118,434 117,373 116,234
Provision for loan losses 16,400 29,800 19,000 13,794 11,257
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Net interest income after provision for loan losses 100,756 86,919 99,434 103,579 104,977
Non-interest income 64,115 89,561 68,129 63,871 58,016
Non-interest expense 114,830 125,337 122,855 121,511 115,615
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Income before income taxes 50,041 51,143 44,708 45,939 47,378
Applicable income taxes 16,991 17,498 15,102 15,458 16,183
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Net income $ 33,050 $ 33,645 $ 29,606 $ 30,481 $ 31,195
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Per common share:
Net income $ 0.54 $ 0.55 $ 0.49 $ 0.50 $ 0.52
Cash dividends declared 0.21 0.21 0.20 0.20 0.20
Book value 15.37 15.38 14.89 14.48 14.39
Average shares outstanding (in thousands) 61,281 61,089 60,738 60,502 60,357
Selected Average Balances (in millions)
Assets $ 11,391 $ 11,610 $ 11,429 $ 11,347 $ 11,068
Earning assets 10,218 10,391 10,204 10,075 9,706
Loans (net of unearned income) 6,290 6,320 5,928 5,814 5,566
Managed loan portfolio 7,346 7,309 6,933 6,841 6,611
Deposits 7,734 7,709 7,569 7,525 7,551
Core deposits 7,451 7,337 7,201 7,219 7,347
Interest bearing liabilities 8,667 8,867 8,781 8,694 8,336
Stockholders' equity 928 911 864 847 859
Ratios
Return on average assets 1.18% 1.15% 1.03% 1.08% 1.13%
Return on average common stockholders' equity 14.44 14.69 13.63 14.47 14.60
Efficiency ratio (excluding foreclosed prop. exp.) 62.27 62.31 64.92 66.16 66.23
Net interest spread 4.08 3.93 4.11 4.19 4.32
Net yield margin 4.72 4.56 4.70 4.75 4.91
Stockholders' equity to assets 7.91 7.88 7.74 7.48 7.19
Credit Quality Data (dollars in thousands)
Non-performing assets $ 40,669 $ 38,800 $ 43,851 $ 54,864 $ 47,203
Accruing loans past due 90 days or more 59,604 71,484 78,033 70,762 65,199
Net charge-offs 14,865 21,552 16,983 13,785 14,526
Allowance for loan losses to:
Non-performing loans 449.83% 483.02% 441.17% 371.73% 395.64%
Non-performing assets 298.09 352.34 292.95 230.46 267.85
Net loans 1.95 2.15 2.08 2.14 2.18
Non-performing assets to loans and
foreclosed properties 0.65 0.61 0.71 0.92 0.81
Net loan losses to average loans 0.95 1.36 1.15 0.95 1.04
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</TABLE>
10
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<TABLE>
<CAPTION>
Table 2
Net Interest Income Analysis
- ---------------------------------------------------------------------------------------------------------------------------
First Quarter 1997 Compared First Quarter 1997 Compared
with First Quarter 1996 with Fourth Quarter 1996
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 $14,803 ($ 495) $15,298 ($1,461) $ 458 ($1,919)
Securities available for sale 4,018 371 3,647 262 (43) 305
Other earning assets (13,618) (7,000) (6,618) (4,706) (2,947) (1,759)
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income 5,203 (4,099) 9,302 (5,905) 386 (6,291)
Interest expense:
Interest bearing deposits 5,617 2,863 2,754 (825) (546) (279)
Fed funds and repurchase agreements (2,721) (1,057) (1,664) (4,724) (1,260) (3,464)
Long-term borrowings 1,689 (448) 2,137 (360) (360)
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 4,585 1,621 2,964 (5,909) (2,857) (3,052)
Net interest income $ 618 ($5,066) $ 5,684 $ 4 $2,682 ($2,678)
</TABLE>
* The change in interest due to both volume and rates has been allocated in
proportion to the relationship of the absolute dollar amountof the changes in
each. The changes in income and expense are calculated independently for each
line in the schedule. The totals for the volume and rate columns are not the sum
of the individual lines.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
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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. At March 31,
1997, Signet had assets of approximately $11.7 billion and provided 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 238 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 October 17, 1996, Signet announced that it was initiating a wide-ranging
business redesign project, subsequently named ADVANCE, to accelerate the
Company's transformation from a traditional regional bank to a national,
information-based, financial services company. ADVANCE began in late 1996 with a
comprehensive seven-month review to be followed by an eighteen to twenty-four
month implementation period. The principal goals of ADVANCE are to align
Signet's processes and procedures more closely with strategies and to enhance
revenue by shifting focus from products to customers. Management expects
improved profitability as a result of ADVANCE. The Company has engaged Aston
Associates, a financial services consulting firm specializing in process
redesign, to assist Signet employees in the effort. Aston has recently completed
successful redesign engagements for two other large banking organizations. The
results of this project are expected to be announced late in the 1997 second
quarter.
The following discussion of the operating results and financial condition
at March 31, 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 three months ended March 31, 1997 are not
necessarily indicative of results to be attained for any other period.
Forward-Looking Statements
This report contains certain forward-looking statements which are provided to
assist the reader to understand anticipated future financial performance. These
statements are made pursuant to the safe harbor provisions of the Private
Litigation Reform Act of 1995. Forward-looking statements are subject to
significant risks and uncertainties many of which are beyond the Company's
control. The Company cautions readers not to place undue reliance on any
11
<PAGE>
forward-looking statements, which speak only as of the date made. Although the
Company believes that the assumptions underlying the forward-looking statements
contained herein 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; significant changes in the economic scenario
from the current anticipated scenario which could materially change anticipated
credit quality trends and the ability to generate loans; significant delay in or
inability to grow revenues and/or control expenses to improve the efficiency
ratio; and significant changes in accounting, tax, or governmental and
regulatory practices or requirements.
Earnings Analysis
Signet reported consolidated net income for the first quarter of 1997 of $33.1
million, or $.54 per share, compared with $31.2 million, or $.52 per share, in
the first quarter of 1996. Net income rose 6% and earnings per share rose 4%
from the first quarter of 1996. The return on assets ("ROA") and the return on
common stockholders' equity ("ROE") for the first quarter of 1997 were 1.18% and
14.44%, respectively, compared with 1.13% and 14.60% for the same ratios for the
first quarter of 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Table 3
Analysis of Change in Net Yield Margin
Fourth Quarter 1996 Versus First Quarter 1997
- -------------------------------------------------------------------------------------
<S> <C>
Net Yield Margin for Fourth Quarter 1996 4.56%
Higher average on Federal funds and
resale agreements (0.07)
Higher average and yield on consumer loans 0.06
Lower funding rate (excluding increase in
derivative income) 0.06
Increase in derivative income 0.04
First Quarter 1997 had two less days than
Fourth Quarter 1996 0.04
Impact of December student loan securitization 0.04
Other (net) - Primarily change in mix and yield
on remaining earning assets (0.01)
- ---------------------------------------------------------------------------------------------------------------------------
Net Yield Margin for First Quarter 1997 4.72%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net Interest Income
Taxable equivalent net interest income, a primary contributor to earnings,
totaled $119.0 million for the first quarter of 1997, level with $119.0 million
for the fourth quarter of 1996 and up slightly from $118.4 million for the first
quarter of 1996. The net yield margin for the first quarter of 1997 was 4.72%, a
16 basis point increase over the fourth quarter of 1996 primarily the result of
lower funding rates and an improvement in the yield and mix of earning assets.
Table 3 analyzes the change in the net yield margin from the fourth quarter of
1996 to the first quarter of 1997. The net yield margin decreased 19 basis
points in the first quarter of 1997 from the net yield margin of 4.91% in the
first quarter of 1996. The decline in the net yield margin was the result of
lower yields on earning assets combined with higher funding rates.
The net interest spread of 4.08% for the first quarter of 1997 increased 15
basis points from the fourth quarter of 1996 and declined 24 basis points from
the first quarter of 1996 level of 4.32%. The decline from the 1996 first
quarter resulted from a rise in funding rates as well as a decline in 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 first
quarter of 1997 was 8.29%, down 15 basis points from the 1996 first quarter,
while the rate paid for interest bearing liabilities amounted to 4.21%, up 9
basis points from the previous year.
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 $1.1 million, $1.7 million and
$1.8 million and decreased borrowing costs by $5.0 million, $4.5 million and
$3.8 million for the first quarter of 1997, the fourth quarter of 1996 and the
first quarter of 1996, respectively. The overall increase in the net yield
margin as a result of these instruments amounted to 15, 11 and 8 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 $16.4 million for the first quarter of
1997 up from $11.3 million in the first quarter of 1996. The increase resulted
primarily from growth and increased losses in the loan-by-check portfolio,
primarily from loans from 1995 and early 1996 solicitations as they seasoned.
Table 4 provides a quarterly comparison of activity in the allowance for loan
losses along with details by loan category of the charge-offs and recoveries.
Net charge-offs rose to $14.9 million for the first quarter of 1997,
compared with $14.5 million for the same quarter in the prior year.
Loan-by-check risk test charge-offs improved from $7.2 million in the first
quarter of 1996 to $2.7 million in the current quarter. The loan-by-check risk
test loans 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
12
<PAGE>
<TABLE>
<CAPTION>
Table 4
Statement of Changes in Allowance for Loan Losses
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31 December 31
(dollars in thousands) 1997 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance at beginning of period $136,707 $129,702 $128,459
Additions to allowance charged to expense 16,400 11,257 29,800
Transfer to loans held for sale (17,010)
Loans charged off:
Consumer (1) 15,023 11,281 16,326
Commercial 167 2,881 233
Real estate-construction 914 839 1,540
Real estate-mortgage (2) 1,737 603 4,622
- ---------------------------------------------------------------------------------------------------------------------------
Total loans charged off 17,841 15,604 22,721
Recoveries of loans previously charged off:
Consumer (1) 961 354 746
Commercial 1,910 391 328
Real estate-construction 71 48 32
Real estate-mortgage (2) 34 285 63
- ---------------------------------------------------------------------------------------------------------------------------
Total recoveries 2,976 1,078 1,169
Net loans charged off 14,865 14,526 21,552
Balance at end of period $121,232 $126,433 $136,707
Net loan losses (annualized) as a percentage of average loans:
Consumer 2.39% 2.29% 2.71%
Commercial (0.22) 0.34 (0.01)
Real estate 1.33 0.58 2.82
- ---------------------------------------------------------------------------------------------------------------------------
Total 0.95% 1.04% 1.36%
- ---------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses to net loans at end of period 1.95% 2.18% 2.15%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consumer includes loan-by-check as noted below:
<TABLE>
<S> <C>
Net charge-offs:
Loan-by-check risk tests $ 2,732 $ 7,233 $ 4,946
Other loan-by-check 10,261 2,672 9,845
- ---------------------------------------------------------------------------------------------------------------------------
Total loan-by-check net charge-offs $ 12,993 $ 9,905 $ 14,791
Average loan-by-check:
Loan-by-check risk tests $ 55,383 $158,523 $ 96,608
Other loan-by-check 912,404 515,743 849,972
- ---------------------------------------------------------------------------------------------------------------------------
Total loan-by-check $967,787 $674,266 $946,580
Net loan losses (annualized) as a percentage of average loan-by-check:
Loan-by-check risk tests 19.73% 18.25% 20.48%
Other loan-by-check 4.50 2.07 4.63
- ---------------------------------------------------------------------------------------------------------------------------
Total loan-by-check 5.37% 5.88% 6.25%
</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.
13
<PAGE>
for more detailed information on the loan-by-check charge-offs.
The allowance for loan losses at March 31, 1997 was $121.2 million, or
1.95% of period-end loans, compared with the March 31, 1996 allowance of $126.4
million, or 2.18% of loans. The March 31, 1997 allowance for loan losses equated
to 4.5 times quarter-end non-performing loans and 3.0 times quarter-end
non-performing assets, up from March 31, 1996 when the allowance for loan losses
amounted to 4.0 times non-performing loans and 2.7 times non-performing assets.
The decline in the level of the allowance reflected the 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.
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 first quarter of 1997 compared with the first and fourth quarters
of 1996.
Non-interest income for the first quarter of 1997 was $64.1 million, up 11%
from $58.0 million for the first quarter of 1996. Several factors contributed to
the increase. Service charges on deposit accounts as well as consumer loan
servicing and service charge income remained relatively level from first quarter
to first quarter. Trust and other financial services income, which totaled $10.8
million, was up 12% from last year's first quarter primarily due to a rise in
annuity product commissions and mutual fund investment management fees. Mortgage
servicing and origination income totaled $4.8 million for the first quarter of
1997 compared with $7.7 million in the first quarter of 1996, a decrease of 37%,
as a result of a decline in the volume of mortgage loans originated as Signet
sold its residential mortgage loan production offices in December, 1996. The
Company retained its mortgage servicing activities. The Company's mortgage
servicing portfolio grew to $7.8 billion at March 31, 1997, up from $7.3 billion
at December 31, 1996. Other service charges and fees, which consisted primarily
of ATM fees ($1.8 million), fees related to commercial and standby letters of
credit ($1.1 million), checkbooks ($0.7 million) and safe deposit box rentals
($0.6 million) totaled $4.8 million, up 23% versus the first quarter of 1996.
Trading profits derived from services performed as a dealer bank for customers
and from profits and losses earned on securities trading and securities
arbitrage positions improved to $6.8 million for the first quarter of 1997 up
from $0.8 million in the same period of 1996. The remaining portion of
non-interest operating income, which included a modest gain on the sale of the
loan-by-check risk test portfolio, venture capital income and miscellaneous
income from other sources, amounted to $5.8 million for the first quarter of
1997, up significantly from the same period of the prior year.
Non-interest income decreased $25.4 million, or 28%, in the first quarter
of 1997 compared with the fourth quarter of 1996. The decline was caused
primarily by three factors. Trading profits dropped $10.9 million from their
exceptionally high level in the fourth quarter. Also, during the fourth quarter
of 1996, Signet recorded a $9.3 million gain on the securitization of a portion
of its student loan portfolio. In addition, the fourth quarter benefited from
$4.9 million of gains from sales of securities available for sale.
Non-Interest Expense
Non-interest expense for the first quarter of 1997 totaled $114.8 million,
relatively unchanged from the first quarter of 1996, but an 8% improvement from
the fourth quarter of 1996.
Staff expense (salaries and employee benefits), the largest component of
non-interest expense, totaled $59.6 million in the first quarter of 1997, a 2.5%
decline from the first quarter of 1996. From March 31, 1996 to March 31, 1997,
the number of full-time employees declined 11% as a result of Signet selling its
mortgage production offices in December 1996 and the hiring freeze implemented
with ADVANCE. For the same period, the number of part-time employees declined
9%.
Certain of the non-interest expense categories reflected the costs
associated with increased business volume. The $1.1 million increase in supplies
and equipment expense as well as the $1.7 million rise in external data
processing expense were attributable to servicing the expanded consumer loan
base. Public relations, sales and advertising expense remained relatively level
at $4.7 million as Signet continued 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 $3.4
billion at March 31, 1997. Since year-end 1996, Signet's managed consumer loan
portfolio grew $49 million. This slower growth rate is attributable to the March
1997 sale of the loan-by-check risk test portfolio which amounted to $76
million. Occupancy expenses declined $1.2 million, or 12%, year-to-year. The
decrease resulted largely from selling the mortgage origination business in
December 1996 and completion of the new operations center. Several departments
moved into the new building from rented space. As a result, Signet is benefiting
from lower rent expense.
The $10.5 million drop in non-interest expense from the fourth quarter was
primarily due to lower staff
14
<PAGE>
<TABLE>
<CAPTION>
Table 5
Non-Interest Income and Expense
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- ---------------------------------------------------------------------------------------------------------------------------
March 31 December 31
(in thousands) 1997 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-interest income:
Service charges on deposit accounts $ 17,180 $ 16,231 $ 17,198
Consumer loan servicing and service charge income 12,285 12,156 12,056
Trust and other financial services income 10,795 9,605 10,708
Gain on securitization of loans 9,254
Trading profits 6,727 767 17,635
Mortgage servicing and origination 4,798 7,668 7,502
Other service charges and fees 4,786 3,882 3,787
Gain on sale of mortgage loans 1,677 1,576 930
Gain on sale of mortgage servicing 3,426
Other 5,764 2,113 5,597
- ---------------------------------------------------------------------------------------------------------------------------
Non-interest operating income 64,012 57,424 84,667
Securities available for sale gains 103 592 4,894
- ---------------------------------------------------------------------------------------------------------------------------
Total non-interest income $ 64,115 $ 58,016 $ 89,561
Non-interest expense:
Salaries $ 47,356 $ 48,700 $ 57,513
Employee benefits 12,221 12,401 10,129
- ---------------------------------------------------------------------------------------------------------------------------
Total staff expense 59,577 61,101 67,642
Supplies and equipment 10,718 9,605 10,654
Occupancy 8,992 10,194 9,576
External data processing services 8,804 7,146 9,002
Travel and communications 5,668 5,920 5,645
Public relations, sales and advertising 4,662 4,889 4,747
Professional services 3,846 3,313 4,348
Credit and collection 893 1,347 1,257
Foreclosed property - net 874 (820) (1,562)
FDIC assessment 189 170 168
Other 10,607 12,750 13,860
- ---------------------------------------------------------------------------------------------------------------------------
Total non-interest expense $114,830 $115,615 $125,337
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
expenses. The lower staff expenses resulted from the sale of mortgage
production offices in December 1996, a hiring freeze implemented with ADVANCE
and lower incentive accruals associated with trading.
Signet's efficiency ratio (the ratio of non-interest expense to taxable
equivalent operating income) was 62% for the first quarter of 1997, an
improvement from 66% for the first quarter of 1996 and flat with the fourth
quarter. As a result of ADVANCE, management expects further improvement in the
efficiency ratio with an increase in revenues and a decline in expenses. The
Company anticipates taking a restructuring charge in the second quarter of 1997
related to ADVANCE.
Income Taxes
Income tax expense for the first quarter of 1997 was $17.0 million as compared
with $16.2 million for the first quarter of 1996, and fourth quarter 1996
expense of $17.5 million. This represented an effective tax rate of 34% for all
three quarters.
Financial Condition
Average earning assets totaled $10.2 billion for the first quarter of 1997, as
shown in Table 6--Average Balance Sheet, a 5% increase from the 1996 level for
the same quarter. The portfolios experiencing the largest declines were loans
held for securitization ($331 million) and loans held for sale ($286 million),
while loans, interest bearing deposits with other banks, federal funds sold and
resale agreements and securities available for sale increased by $723 million,
$43 million, $221 million and $196 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 $735 million, or
11%, from the first 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. Adjusting for these sales, the annualized
15
<PAGE>
growth rate in managed loans was 5 percent for the first quarter of 1997.
Average balances increased in the consumer, commercial and real
estate-residential mortgage loan categories, while the real estate-construction
and real estate-commercial mortgage loan average balances declined. Consumer
loans averaged $2.4 billion for the first quarter of 1997, a 23% increase from
the first 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 first quarter of 1997, an
increase of 10% from last year, as Signet successfully grew its leasing
portfolio and targeted certain specialized industries. Real estate-commercial
mortgage loans averaged $237 million, a 34% decline from the 1996 first 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 increased $126 million, or 77%, from the first
quarter 1996 to average $290 million even though 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 $450 million
for the first quarter of 1997, down 11% from the $506 million level for the same
period last year. Securities available for sale for the first quarter of 1997
averaged $2.5 billion, an increase of $196 million over the first quarter of
1996 level. Loans held for securitization averaged $331 million in the first
quarter of 1996, as certain student and credit card loans were classified in
this category in anticipation of their securitization.
Interest bearing liabilities averaged $8.7 billion in the first quarter of
1997, up $331 million, or 4%, from the first quarter of 1996. Average deposits
totaled $7.7 billion for the first quarter of 1997 up 2% from the first quarter
of 1996. Core deposits averaged $7.5 billion for the 1997 first quarter,
relatively level with the 1996 first quarter. The core deposit categories which
experienced declines were savings accounts and demand deposits, which fell $598
million and $131 million, respectively. Until the end of June, 1996, savings
accounts included deposits held on behalf of Capital One Bank (the successor to
the Company's credit card operations) 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 decline in average savings
accounts. Interest bearing demand deposits increased $546 million and savings
certificates were up $287 million. Signet is using its direct mail expertise to
grow core deposits. At March 31, 1997, a total of approximately $738 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
<TABLE>
<CAPTION>
Table 6
Average Balance Sheet
- --------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- --------------------------------------------------------------------------------------------------------------------------------
March 31
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 $ 55,596 $ 731 5.26% $ 12,633 $ 154 4.82%
Federal funds and resale agreements 812,797 10,953 5.39 591,396 8,188 5.48
Trading account securities 450,428 7,080 6.37 506,040 8,122 6.46
Loans held for securitization 330,557 7,419 9.03
Loans held for sale 103,956 1,587 6.11 389,569 10,086 10.24
Securities available for sale 2,505,700 46,251 7.38 2,309,330 42,233 7.32
Loans (net of unearned income):
Consumer 2,354,234 63,725 10.98 1,906,768 53,062 11.19
Commercial 3,172,472 62,330 7.97 2,892,389 56,506 7.86
Real estate-construction 236,034 5,565 9.43 245,237 6,062 9.78
Real estate-commercial mortgage 237,069 5,117 8.75 357,989 8,690 9.76
Real estate-residential mortgage 289,850 5,590 7.71 164,087 3,204 7.81
- --------------------------------------------------------------------------------------------------------------------------------
Total loans 6,289,659 142,327 9.18 5,566,470 127,524 9.21
Total earning assets 10,218,136 $208,929 8.29% 9,705,995 $203,726 8.44%
Non-rate related assets:
Cash and due from banks 403,811 529,040
Allowance for loan losses (133,705) (128,503)
Premises and equipment (net) 184,130 196,314
Other assets 718,355 764,784
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $11,390,727 $11,067,630
Liabilities and Stockholders'
Equity Interest bearing
liabilities:
Deposits:
Interest bearing demand $ 3,020,159 $ 26,569 3.57% $ 2,474,573 $ 18,080 2.94%
Savings accounts 650,507 4,215 2.63 1,248,406 11,495 3.70
Savings certificates 2,236,645 25,821 4.68 1,949,398 22,535 4.65
Large denomination certificates 202,435 2,851 5.63 111,194 1,525 5.43
Foreign 80,758 1,075 5.32 93,435 1,279 5.42
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 6,190,504 60,531 3.97 5,877,006 54,914 3.76
Federal funds and repurchase agreements 2,076,387 23,599 4.55 2,205,733 26,320 4.72
Long-term borrowings 400,013 5,803 5.80 252,991 4,114 6.43
- --------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 8,666,904 $ 89,933 4.21% 8,335,730 $ 85,348 4.12%
Non-interest bearing liabilities:
Demand deposits 1,543,353 1,674,258
Other liabilities 252,088 198,254
Common stockholders' equity 928,382 859,388
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $11,390,727 $11,067,630
Net interest income/spread $118,996 4.08% $118,378 4.32%
Interest income to average earning assets 8.29% 8.44%
Interest expense to average earning assets 3.57 3.54
- --------------------------------------------------------------------------------------------------------------------------------
Net yield margin 4.72% 4.91%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Table 6
Average Balance Sheet
- -----------------------------------------------------------------------------------------------
Three Months Ended
- -----------------------------------------------------------------------------------------------
December 31
1996
- -----------------------------------------------------------------------------------------------
Average Income\ Yield\
(dollars in thousands) Balance Expense Rate
- -----------------------------------------------------------------------------------------------
<S> <C>
Assets
Earning assets (tax equivalent basis):*
Interest bearing deposits with other banks $ 14,779 $ 183 4.85%
Federal funds and resale agreements 621,548 8,648 5.44
Trading account securities 516,477 8,090 6.23
Loans held for securitization 283,696 5,611 7.87
Loans held for sale 145,687 2,525 6.78
Securities available for sale 2,488,683 45,989 7.39
Loans (net of unearned income):
Consumer 2,298,475 62,188 10.76
Commercial 3,161,213 63,161 7.95
Real estate-construction 248,339 5,991 9.44
Real estate-commercial mortgage 272,376 5,952 8.69
Real estate-residential mortgage 339,652 6,496 7.65
- ------------------------------------------------------------------------------------------------
Total loans 6,320,055 143,788 9.05
Total earning assets 10,390,925 $214,834 8.23%
Non-rate related assets:
Cash and due from banks 469,854
Allowance for loan losses (132,385)
Premises and equipment (net) 189,320
Other assets 692,199
- ------------------------------------------------------------------------------------------------
Total assets $11,609,913
Liabilities and Stockholders' Equity Interest
bearing liabilities:
Deposits:
Interest bearing demand $ 2,830,942 $ 24,688 3.47%
Savings accounts 658,926 4,399 2.66
Savings certificates 2,269,278 27,047 4.74
Large denomination certificates 227,394 3,261 5.61
Foreign 144,797 1,961 5.30
- ------------------------------------------------------------------------------------------------
Total interest bearing deposits 6,131,337 61,356 3.98
Federal funds and repurchase agreements 2,335,823 28,323 4.74
Long-term borrowings 400,016 6,163 6.03
- ------------------------------------------------------------------------------------------------
Total interest bearing liabilities 8,867,176 $ 95,842 4.30%
Non-interest bearing liabilities:
Demand deposits 1,577,660
Other liabilities 253,806
Common stockholders' equity 911,271
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $11,609,913
Net interest income/spread $118,992 3.93%
Interest income to average earning assets 8.23%
Interest expense to average earning assets 3.67
- ------------------------------------------------------------------------------------------------
Net yield margin 4.56%
- ------------------------------------------------------------------------------------------------
</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>
<PAGE>
effectively increased the relative cost of and reduced
the overall benefits received from these deposits.
Consumer Loan Growth
Consumer loans averaged $2.4 billion for the first quarter of 1997, a 23%
increase from the first 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 March 31, 1996 to March 31, 1997, the installment loan portfolio (primarily
loan-by-check) grew $93 million and the closed-end second mortgage loan
portfolio was up $85 million. In addition, the student loan portfolio (including
securitized loans) increased $116 million. During the first quarter of 1997, the
<TABLE>
<CAPTION>
Table 7
Managed Consumer Loan Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- ---------------------------------------------------------------------------------------------------------------------------
March 31 December 31 September 30 June 30 March 31
(in thousands) 1997 1996 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Average balances:
Installment loans $1,191,192 $1,172,210 $1,015,639 $1,035,592 $ 921,869
Student loans 801,276 829,001 788,904 776,326 746,038
Home equity loans 184,960 171,865 147,376 122,649 101,404
Credit card 65,754 55,954 48,845 60,792 73,166
Other loans 111,052 69,445 60,968 60,159 64,291
- ---------------------------------------------------------------------------------------------------------------------------
Sub-total average consumer loan portfolio 2,354,234 2,298,475 2,061,732 2,055,518 1,906,768
- ---------------------------------------------------------------------------------------------------------------------------
Consumer loans held for sale 2,035 161,860 202,029 231,968
Credit card loans held for securitization 30,557
Student loans held for securitization 283,696 300,000 300,000 300,000
- ---------------------------------------------------------------------------------------------------------------------------
Total average on-balance sheet portfolio 2,356,269 2,582,171 2,523,592 2,557,547 2,469,293
Securitized home equity loans 400,729 414,176 429,728 451,118 469,593
Securitized student loans 389,321 21,412
Securitized credit card loans 263,889 269,324 275,000 275,000 244,341
- ---------------------------------------------------------------------------------------------------------------------------
Total securitized consumer loans 1,053,939 704,912 704,728 726,118 713,934
Less loans to be sold to Capital One (161,860) (202,029) (231,968)
- ---------------------------------------------------------------------------------------------------------------------------
Total average managed consumer loan portfolio $3,410,208 $3,287,083 $3,066,460 $3,081,636 $2,951,259
- ---------------------------------------------------------------------------------------------------------------------------
Period-end balances:
Installment loans $1,165,886 $1,212,492 $1,128,607 $ 994,243 $1,072,831
Student loans 808,222 756,340 820,319 773,196 776,663
Home equity loans 193,155 181,879 164,805 135,064 111,579
Credit card 65,949 69,287 47,524 49,630 64,261
Other loans 141,116 80,560 59,989 64,230 61,185
- ---------------------------------------------------------------------------------------------------------------------------
Sub-total period-end consumer loan portfolio 2,374,328 2,300,558 2,221,244 2,016,363 2,086,519
- ---------------------------------------------------------------------------------------------------------------------------
Consumer loans held for sale 194,097 215,961
Student loans held for securitization 300,000 300,000 300,000
- ---------------------------------------------------------------------------------------------------------------------------
Total period-end on-balance sheet portfolio 2,374,328 2,300,558 2,521,244 2,510,460 2,602,480
Securitized home equity loans 393,141 406,776 420,446 438,368 459,949
Securitized student loans 384,002 394,691
Securitized credit card loans 263,889 263,889 275,000 275,000 275,000
- ---------------------------------------------------------------------------------------------------------------------------
Total securitized consumer loans 1,041,032 1,065,356 695,446 713,368 734,949
Less loans to be sold to Capital One (194,097) (215,961)
- ---------------------------------------------------------------------------------------------------------------------------
Total period-end managed consumer loan portfolio $3,415,360 $3,365,914 $3,216,690 $3,029,731 $3,121,468
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Table 8
Impact of Consumer Loan Securitizations
- ---------------------------------------------------------------------------------------------------------------------------
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
(dollars in thousands) 1997 1996 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Statement of Income
Net interest income $ 117,156 $ 116,719 $ 118,434 $ 117,373 $ 116,234
Provision for loan losses 16,400 29,800 19,000 13,794 11,257
Non-interest income 64,115 89,561 68,129 63,871 58,016
Non-interest expense 114,830 125,337 122,855 121,511 115,615
- ---------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 50,041 $ 51,143 $ 44,708 $ 45,939 $ 47,378
- ---------------------------------------------------------------------------------------------------------------------------
Adjustments for Securitizations
Net interest income $ 12,401 $ 11,862 $ 12,206 $ 12,484 $ 11,849
Provision for loan losses 2,828 2,682 3,276 2,322 2,011
Non-interest income (8,593) (17,330) (7,575) (11,750) (9,061)
Non-interest expense
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) to income before
income taxes $ 980 $ (8,150) $ 1,355 $ (1,588) $ 777
- ---------------------------------------------------------------------------------------------------------------------------
Adjustments for Loans To Be Sold
to Capital One
Net interest income $ (2,333) $ (3,322) $ (2,724)
Provision for loan losses
Non-interest income 2,333 3,322 2,724
Non-interest expense
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) to income before income taxes
- ---------------------------------------------------------------------------------------------------------------------------
Managed Statement of Income (adjusted)
Net interest income $ 129,557 $ 128,581 $ 128,307 $ 126,535 $ 125,359
Provision for loan losses 19,228 32,482 22,276 16,116 13,268
Non-interest income 55,522 72,231 62,887 55,443 51,679
Non-interest expense 114,830 125,337 122,855 121,511 115,615
- ---------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 51,021 $ 42,993 $ 46,063 $ 44,351 $ 48,155
- ---------------------------------------------------------------------------------------------------------------------------
As reported:
Average earning assets $10,218,136 $10,390,925 $10,203,525 $10,075,496 $ 9,705,995
Return on assets 1.18% 1.15% 1.03% 1.08% 1.13%
Net yield margin 4.72 4.56 4.70 4.75 4.91
On a managed basis:
Average earning assets $11,272,075 $11,095,837 $10,746,393 $10,599,585 $10,187,961
Return on assets 1.10% 0.92% 1.01% 1.00% 1.10%
Net yield margin 4.73 4.69 4.83 4.87 5.03
Yield on managed consumer loan portfolio 11.03% 10.87% 10.86% 10.89% 11.21%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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. The Company
continues to test a variety of loan-by-check products using different credit
criteria. The risk-test sale resulted in a modest gain and will help future
periods' earnings because the assets were not profitable. 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 $294 million, or 9%, from
March 31, 1996 to March 31, 1997 as indicated in Table 7.
Interest Rate Sensitivity
Signet's interest rate sensitivity position is managed by the Asset and
Liability Committee ("ALCO") 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. ALCO
routinely uses derivatives such as interest rate swaps to manage the Company's
interest rate risk. At March 31, 1997, the notional value of the Company's
derivative products for the purpose of managing interest rate risk were $2.0
billion of interest rate swaps and $650 million of interest rate floors.
ALCO, in managing interest rate sensitivity, also uses simulations to
measure the impact that market changes and alternative strategies might have on
net interest income
19
<PAGE>
<TABLE>
<CAPTION>
Table 9
Non-Performing Assets
- ---------------------------------------------------------------------------------------------------------------------------
March 31 December 31 September 30 June 30 March 31
(dollars in thousands) 1997 1996 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Non-accrual loans:
Commercial $10,230 $ 8,850 $10,672 $ 7,552 $ 5,873
Consumer 2,729 2,404 2,374 1,694 1,684
Real estate - construction 2,577 2,842 1,206 9,596 1,820
Real estate - mortgage * 11,415 14,207 14,866 15,172 22,580
- ---------------------------------------------------------------------------------------------------------------------------
Total non-accrual loans 26,951 28,303 29,118 34,014 31,957
Foreclosed properties 13,718 10,497 14,733 20,850 15,246
- ---------------------------------------------------------------------------------------------------------------------------
Total non-performing assets $40,669 $38,800 $43,851 $54,864 $47,203
- ---------------------------------------------------------------------------------------------------------------------------
Percentage to loans (net of unearned) 0.65% 0.61% 0.71% 0.92% 0.81%
and foreclosed properties
Allowance for loan losses to:
Non-performing loans 449.83 483.02 441.17 371.73 395.64
Non-performing assets 298.09 352.34 292.95 230.46 267.85
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Real estate-mortgage includes real estate-commercial mortgage and real
estate-residential mortgage. Real estate-residential mortgage non-accrual
loans were not significant for the periods presented.
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 2% impact on rate sensitive
income over the next twelve months, reflecting Signet's conservative balance
sheet strategy. ALCO 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.
Risk Elements
Non-performing assets at March 31, 1997 totaled $40.7 million, or .65% of loans
and foreclosed properties. This compares with $47.2 million, or .81%,
respectively, at March 31, 1996. Overall non-performing real estate assets
declined $11.9 million from March 31, 1996 to March 31, 1997, including a $1.5
million decline in foreclosed properties. Foreclosed properties totaled $13.7
million at the end of the first quarter of 1997, and were equal to 34% of total
non-performing assets and 50% of non-performing real estate assets. Signet sold
$1.5 million of foreclosed properties during the first quarter of 1997.
Accruing loans past due 90 days or more as to principal or interest
payments totaled $59.6 million, $71.5 million and $65.2 million as of March 31,
1997, December 31, 1996 and March 31, 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 $28.7 million,
or 48%, of all the past due loans. Of the past due student loans, more than 99%
were indirectly government guaranteed and do not represent material loss
exposure to Signet.
<TABLE>
<CAPTION>
Table 10
Accruing Loans Past Due 90 Days or More
- ---------------------------------------------------------------------------------------------------------------------------
March 31 December 31 September 30 June 30 March 31
(in thousands) 1997 1996 1996 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Commercial $10,164 $ 6,334 $ 6,969 $ 5,308 $ 5,679
Consumer:
Student loans 28,705 35,763 45,159 37,374 35,056
Credit card 1,917 2,180 1,950 3,396 3,171
Loan-by-check-risk tests 5,890 6,865 7,530 7,969
Loan-by-check other 10,803 9,272 8,321 5,666 3,617
Other consumer 2,397 2,356 2,320 2,286 2,366
- ---------------------------------------------------------------------------------------------------------------------------
Total consumer 43,822 55,461 64,615 56,252 52,179
Mortgage 5,547 7,508 6,083 6,197 6,953
Construction 71 2,181 366 3,005 388
- ---------------------------------------------------------------------------------------------------------------------------
Total $59,604 $71,484 $78,033 $70,762 $65,199
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Table 11
Selected Capital Data
- ---------------------------------------------------------------------------------------------------------------------------
March 31 December 31
- ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1997 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Qualifying common stockholders' equity $ 932,174 $ 839,856 $ 908,982
Less goodwill and other disallowed intangibles (50,482) (57,208) (52,163)
- ---------------------------------------------------------------------------------------------------------------------------
Total Tier I capital 881,692 782,648 856,819
Qualifying debt 210,667 113,734 211,667
Qualifying allowance for loan losses 98,945 101,844 99,793
- ---------------------------------------------------------------------------------------------------------------------------
Total Tier II capital 309,612 215,578 311,460
- ---------------------------------------------------------------------------------------------------------------------------
Total risked-based capital $1,191,304 $ 998,226 $1,168,279
- ---------------------------------------------------------------------------------------------------------------------------
Total risk-adjusted assets $7,893,277 $8,122,928 $7,946,546
- ---------------------------------------------------------------------------------------------------------------------------
Ratios:
Tier I capital 11.17% 9.64% 10.78%
Total risk-based capital 15.09 12.29 14.70
Tier I leverage 7.78 7.14 7.43
Tangible Tier I leverage 7.03 6.50 6.72
Common equity to assets 7.91 7.19 7.88
Common dividend payout ratio (year-to-date) 38.89 38.46 39.32
Book value per share $ 15.37 $ 14.39 $ 15.38
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stockholders' Equity
Stockholders' equity provides a source of permanent funding, allows for
future growth and assists the Company in withstanding unforeseen adverse
developments. At March 31, 1997, stockholders' equity totaled $926 million, an
increase of $71 million, or 8%, from the March 31, 1996 level of $855 million.
Since December 31, 1996, stockholders' equity increased modestly as net income
and the issuance of common stock narrowly exceeded net unrealized losses on
securities available for sale and dividends declared. During the first quarter
of 1997, the change in net unrealized gains and losses on securities available
for sale, net of tax, decreased equity by $21 million. At March 31, 1997, the
net unrealized losses, net of tax, related to securities available for sale,
totaled $6.3 million. Dividends declared during the first quarter of 1997 were
$12.6 million or $0.21 per common share. At March 31, 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 March 31, 1997 were 15.09% and 11.17% for Total Capital and Tier I
Capital, respectively. Signet's leverage ratio at March 31, 1997 was 7.78%. The
Company's total stockholders' equity to assets ratio improved to 7.91% at March
31, 1997 up from 7.19% at March 31, 1996.
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 quarter of 1997 maintained the Company's
strong liquidity position. Signet's first quarter 1997 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. The parent company has $50 million
principal amount of Floating Rate Subordinated Notes due in the second quarter
of 1997 which will be paid off with existing cash. 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 March
31, 1997.
For the first quarter of 1997, cash and cash equivalents increased $284
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
used by operations was $101 million for this time period resulting mainly from a
decrease in other liabilities. Cash provided by investing activities amounted to
$184 million principally due to sales and maturities of securities available for
sale. Cash provided by financing activities amounted to $201 million primarily
due to an increase in short-term borrowings.
21
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(Incorporated by reference to Part II., Item 1 of the Form
10-Q for the quarter ended June 30, 1996.)
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Registrant was held
on April 29, 1997. At the meeting, the following individuals were elected
directors of the Registrant:
<TABLE>
<CAPTION>
Vote Against
Name of Director In Favor or Withheld
<S> <C>
Macon F. Brock, Jr. 50,251,686 406,099
Norwood H. Davis, Jr. 50,068,749 588,781
William C. DeRusha 50,244,473 413,312
Robert M. Freeman 50,041,863 615,922
C. Stephenson Gillispie, Jr. 50,237,403 420,382
Bruce C. Gottwald, Jr. 47,451,073 3,206,712
William R. Harvey 50,198,893 458,892
Elizabeth G. Helm 50,247,305 410,480
T. Gaylon Layfield, III 50,133,024 524,761
Malcolm S. McDonald 50,077,031 580,754
Wallace B. Millner, III 50,142,676 515,109
Louis B. Thalheimer 50,145,535 512,250
</TABLE>
The shareholders also approved: (i) an amendment of the
Corporation's 1994 Stock Incentive Plan to increase by 500,000 the number of
authorized but unissued shares of the Corporation's common stock available for
issuance under the Plan. 47,739,198 shares voted for, 2,549,229 shares voted
against and 423,098 abstained from approval of the Plan and (ii) ratification of
the selection of Ernst & Young LLP as independent auditors to audit the
financial statements of the Corporation for 1997. 50,411,945 shares voted for,
132,468 shares voted against and 174,127 abstained from ratification.
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:
none
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: May 8, 1997 /s/ Wallace B. Millner III
-----------------------------------------
Wallace B. Millner III
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
Date: May 8, 1997 /s/ W. H. Catlett, Jr.
-----------------------------------------
W. H. Catlett, Jr.
Executive Vice President and Controller
(Principal Accounting Officer)
22
SIGNET BANKING CORPORATION AND SUBSIDIARIES
FORM 10-Q
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31
- ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands--except per share) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common and common equivalent:
Average shares outstanding 60,149,616 59,295,073
Dilutive stock options--based on the treasury stock method using average market price 1,131,714 1,051,629
- ---------------------------------------------------------------------------------------------------------------------------
Shares used 61,281,330 60,346,702
- ---------------------------------------------------------------------------------------------------------------------------
Net income applicable to Common Stock $ 33,050 $ 31,195
- ---------------------------------------------------------------------------------------------------------------------------
Per share amount $ 0.54 $ 0.52
- ---------------------------------------------------------------------------------------------------------------------------
Assuming full dilution:
Average shares outstanding 60,149,616 59,295,073
Dilutive stock options--based on the treasury stock method using the
period end market price, if higher than the average market price 1,131,714 1,061,582
- ---------------------------------------------------------------------------------------------------------------------------
Shares used 61,281,330 60,356,655
Net income applicable to Common Stock $ 33,050 $ 31,195
- ---------------------------------------------------------------------------------------------------------------------------
Per share amount $ 0.54 $ 0.52
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The calculations of common and common equivalent earnings per share and fully
diluted earnings per share are submitted in accordance with Securities Exchange
Act of 1934 Release No. 9083 although both calculations are not required by
footnote 2 to paragraph 14 of APB Opinion No. 15 because there is dilution of
less than 3%. The Registrant has elected to show fully diluted earnings per
share in its financial statements.
23
<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
MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 542,141
<INT-BEARING-DEPOSITS> 123,499
<FED-FUNDS-SOLD> 966,079
<TRADING-ASSETS> 614,725
<INVESTMENTS-HELD-FOR-SALE> 34,864
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,454,340
<ALLOWANCE> 121,232
<TOTAL-ASSETS> 11,712,278
<DEPOSITS> 7,895,589
<SHORT-TERM> 2,165,236
<LIABILITIES-OTHER> 325,537
<LONG-TERM> 400,011
0
0
<COMMON> 301,132
<OTHER-SE> 624,773
<TOTAL-LIABILITIES-AND-EQUITY> 11,712,278
<INTEREST-LOAN> 140,643
<INTEREST-INVEST> 0
<INTEREST-OTHER> 66,446
<INTEREST-TOTAL> 207,089
<INTEREST-DEPOSIT> 60,531
<INTEREST-EXPENSE> 89,933
<INTEREST-INCOME-NET> 117,156
<LOAN-LOSSES> 16,400
<SECURITIES-GAINS> 103
<EXPENSE-OTHER> 114,830
<INCOME-PRETAX> 50,041
<INCOME-PRE-EXTRAORDINARY> 50,041
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,050
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
<YIELD-ACTUAL> 4.72
<LOANS-NON> 26,951
<LOANS-PAST> 59,604
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 136,707
<CHARGE-OFFS> 17,841
<RECOVERIES> 2,976
<ALLOWANCE-CLOSE> 121,232
<ALLOWANCE-DOMESTIC> 110,194
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,038
</TABLE>
