UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-8829
CENTRAL FIDELITY BANKS, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1091649
(State of incorporation) (I.R.S. Employer
Identification No.)
1021 East Cary Street
Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
(804) 782-4000
(Registrant's telephone number, including area code)
Central Fidelity Banks, Inc. (1) has filed all reports require
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
As of August 6, 1997, the latest practicable date, Central Fidelity
Banks, Inc. had 56,953,962 shares of its Common Stock outstanding.
This is the only class of outstanding shares.
1
<PAGE>
<TABLE>
CENTRAL FIDELITY BANKS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30,1997
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements 3-4
Consolidated Balance Sheet 5-6
Statement of Consolidated Income 7
Statement of Consolidated Cash Flows 8
Statement of Changes in Consolidated Shareholders' Equity 9
Supplemental Data to Financial Statements:
Consolidated Financial Highlights 10
Average Balances and Interest Rates (Taxable Equivalent Basis) 11-14
Selected Loan Loss Data 15
Nonperforming Assets and Past-due Loans 16
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations 17-25
PART II. OTHER INFORMATION
Item 4.Submission of Matters to a Vote of Security Holders 26
Item 6.Exhibits and Reports on Form 8-K 27
SIGNATURES 28
EXHIBIT INDEX 29
</TABLE>
2
<PAGE>
PART I
-----------
FINANCIAL INFORMATION
-----------------------------------------
CENTRAL FIDELITY BANKS, INC.
ITEM 1. FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1997, the statement of
consolidated income, the statement of consolidated cash flow and the
statement of changes in consolidated shareholders' equity for the
six-month period ended June 30, 1997 and 1996 are unaudited and do not
include all of the information included in the Company's annual financial
statements filed on Form 10-K with the Securities and Exchange
Commission. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month
and six-month periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 which is the
source of the Company's balance sheet as of that date.
ACCOUNTING CHANGE
- ------------------------------------
Change in Accounting Principles
- ----------------------------------------------
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income" in June, 1997. SFAS 130 establishes standards
for reporting and display of "comprehensive income", as defined, and its
components in a full set of general-purpose financial statements.
Also in June, 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosure about Segments of an Enterprise and Related Information."
This Statement requires that public business enterprises report certain
information about operating segments, products and services, the
geographic areas in which they operate, and their major customers.
3
Both of these Statements of Financial Accounting Standards are
effective for fiscal years beginning after December 15, 1997. As stated
elsewhere in this report that the Company has entered into an Agreement
and Plan of Merger with Wachovia, under which the Company will be
merged with and into Wachovia. Subject to regulatory and shareholders'
approval, the merger will be consummated prior to the end of 1997. In
such event implementation of the aforementioned Statements of Financial
Accounting Standards by the Company will not occur.
4
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
Central Fidelity Banks, Inc. and Subsidiaries
- ------------------------------------------------------------------
(In thousands, except share data)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
- ------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------
Cash and due from banks $312,192 $304,661
Temporary investments:
Federal funds sold and securities purchased
under agreements to resell 96,369 96,515
Other money market investments 50,000 50,000
Trading account securities 3,491 4,061
- ------------------------------------------------------------------
Total temporary investments 149,860 150,576
- ------------------------------------------------------------------
Assets available for sale:
Securities 2,954,154 3,069,624
Loans 13,072 26,085
- ------------------------------------------------------------------
Total assets available for sale 2,967,226 3,095,709
- ------------------------------------------------------------------
Loans 6,926,376 6,690,751
Allowance for loan losses (110,000) (110,000)
- ------------------------------------------------------------------
Net loans 6,816,376 6,580,751
- ------------------------------------------------------------------
Accrued interest receivable 62,658 61,819
Premises and equipment, net 164,496 157,119
Due from customers on acceptances 10,664 11,009
Other assets 185,226 178,716
- ------------------------------------------------------------------
Total assets $10,668,698 $10,540,360
- ------------------------------------------ ========== ==========
</TABLE>
5
<TABLE>
<CAPTION> June 30, December 31,
LIABILITIES 1997 1996
<S> <C> <C>
- ------------------------------------------------------------------
Deposits:
Demand $1,288,662 $1,189,808
Savings and other time 6,285,178 6,393,420
Certificates of deposit $100,000 and over 502,780 488,226
- ------------------------------------------------------------------
Total deposits 8,076,620 8,071,454
- ------------------------------------------------------------------
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 1,065,467 907,875
Other short-term borrowings 68,232 72,274
Federal Home Loan Bank borrowings 316,986 400,080
Long-term debt 249,425 150,324
Capitalized lease obligations 7,111 7,334
- ------------------------------------------------------------------
Total borrowings 1,707,221 1,537,887
- ------------------------------------------------------------------
Dividends payable 13,608 13,059
Accrued interest payable 31,399 29,160
Bank acceptances outstanding 10,664 11,009
Accounts payable and accrued liabilities 25,621 31,292
- ------------------------------------------------------------------
Total liabilities 9,865,133 9,693,861
- ------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------
Preferred stock, none issued -- --
Common stock, par value $5 per share, authorized
100,000,000 shares, shares issued: 56,724,684
and 59,378,319, respectively 283,623 296,892
Capital surplus 108,484 171,926
Unamortized deferred compensation (682) --
Retained earnings 403,526 368,457
Unrealized gains on securities available
for sale, net of income taxes 8,614 9,224
- ------------------------------------------------------------------
Total shareholders' equity 803,565 846,499
- ------------------------------------------------------------------
Total liabilities and shareholders' equity $10,668,698 $10,540,360
- ------------------------------------------ ========== ==========
- ------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
Central Fidelity Banks, Inc. and Subsidiaries
------------------------------------------------------------------------------------------
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
(In thousands, except share and per share data) 1997 1996 1997 1996
------------------------------------------------------------------------------------------
Income From Earning Assets
------------------------------------------------------------------------------------------
Interest and fees on loans $152,318 $139,374 $300,376 $278,535
Interest on securities available for sale:
U.S. Government and agencies 29,280 33,806 59,880 70,017
States and political subdivisions 1,266 1,397 2,600 2,898
Other 16,853 18,675 32,823 37,477
Interest on loans available for sale 240 300 548 542
Interest on money market investments 1,290 1,312 2,281 2,880
Interest on trading account securities 67 21 134 34
------------------------------------------------------------------------------------------
Total income from earning assets 201,314 194,885 398,642 392,383
------------------------------------------------------------------------------------------
Interest Expense
------------------------------------------------------------------------------------------
Interest on deposits 78,358 79,398 155,868 160,734
Interest on federal funds purchased and securities
sold under agreements to repurchase 12,099 12,170 23,323 24,871
Interest on other short-term borrowings 772 955 1,531 1,932
Interest on medium-term notes -- 1,341 -- 3,841
Interest on Federal Home Loan Bank borrowings 5,764 6,292 11,740 12,429
Interest on long-term debt 3,895 2,533 6,405 5,035
Interest on capitalized lease obligations 171 168 318 338
------------------------------------------------------------------------------------------
Total interest expense 101,059 102,857 199,185 209,180
------------------------------------------------------------------------------------------
Net interest income 100,255 92,028 199,457 183,203
Provision for loan losses 13,332 10,644 27,565 20,951
------------------------------------------------------------------------------------------
Net income from earning assets 86,923 81,384 171,892 162,252
------------------------------------------------------------------------------------------
Noninterest Income
------------------------------------------------------------------------------------------
Trust income 4,797 4,473 9,292 8,768
Deposit fees and charges 10,754 9,458 20,691 18,821
Profits (losses) on securities available for sale and
trading account securities 416 (157) 1,881 (1)
Other income 9,271 7,166 17,904 13,991
------------------------------------------------------------------------------------------
Total noninterest income 25,238 20,940 49,768 41,579
------------------------------------------------------------------------------------------
Noninterest Expense
------------------------------------------------------------------------------------------
Personnel expense 37,384 34,523 74,924 68,839
Occupancy and equipment expense 12,684 11,320 24,672 22,866
FDIC insurance expense 400 680 794 1,334
Other real estate expense 449 421 630 1,308
Other expense 14,966 13,122 29,350 26,187
------------------------------------------------------------------------------------------
Total noninterest expense 65,883 60,066 130,370 120,534
------------------------------------------------------------------------------------------
Earnings
------------------------------------------------------------------------------------------
Income before income taxes 46,278 42,258 91,290 83,297
Income tax expense 15,096 13,449 29,715 26,507
------------------------------------------------------------------------------------------
Net income $31,182 $28,809 $61,575 $56,790
------------------------------------------ ======= ======= ======= =======
Earnings Per Share
------------------------------------------------------------------------------------------
Net income $0.54 $0.48 $1.06 $0.95
Average shares outstanding 57,281,069 59,791,822 58,068,245 60,041,921
------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
Central Fidelity Banks, Inc. and Subsidiaries
- ----------------------------------------------------------------------
(In thousands) For the six months ended June 30,
<CAPTION>
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------
OPERATING ACTIVITIES
- ----------------------------------------------------------------------
Net income $61,575 $56,790
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 27,565 20,951
Depreciation of premises and equipment 8,760 7,974
Net amortization of premium and accretion of discount
on securities available for sale (622) (357)
Gains on securities available for sale (1,396) (367)
Deferred income taxes (1,387) (932)
(Increase) decrease in trading account securities 570 (782)
Originations of loans available for sale (59,661) (69,658)
Purchases of loans available for sale (37,765) (54,864)
Proceeds from sales of loans available for sale 110,605 125,735
(Increase) decrease in accrued interest receivable (839) 1,901
Increase (decrease) in accrued interest payable 2,239 (6,411)
Other, net (12,013) (13,632)
- ----------------------------------------------------------------------
Net cash provided by operating activities 97,631 66,348
- ----------------------------------------------------------------------
INVESTING ACTIVITIES
- ----------------------------------------------------------------------
Purchases of securities available for sale (439,867) (212,296)
Proceeds from sales of securities available for sale 221,773 190,744
Proceeds from maturities and repayments of securities
available for sale 334,644 346,492
Net increase in loans (268,741) (183,715)
Purchases of premises and equipment (16,204) (11,478)
Proceeds from the disposition of premises and equipment 207 1,595
Proceeds from the disposition of foreclosed properties 7,010 6,494
- ----------------------------------------------------------------------
Net cash provided (used) by investing activities (161,178) 137,836
- ----------------------------------------------------------------------
FINANCING ACTIVITIES
- ----------------------------------------------------------------------
Net increase (decrease) in demand, interest checking and
regular savings deposits 70,078 (565,122)
Net increase in money market accounts 40,580 587,699
Net decrease in consumer certificates (120,046) (72,347)
Net increase in certificates of deposit $100,000 and over 14,554 27,932
Net increase (decrease) in short-term borrowings 153,550 (74,274)
Proceeds from FHLB borrowings 41,206 101,000
Payments on FHLB borrowings (124,300) (299,950)
Proceeds from long-term debt 99,134 --
Payments on long-term debt and capitalized lease obligations (338) (239)
Proceeds from issuance of common stock 6,025 8,162
Common stock purchased (83,554) (24,287)
Cash in lieu of fractional shares for stock split -- (78)
Cash dividends (25,957) (24,080)
- ----------------------------------------------------------------------
Net cash provided (used) by financing activities 70,932 (335,584)
- ----------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 7,385 (131,400)
Cash and cash equivalents at beginning of year 451,176 571,314
- ----------------------------------------------------------------------
Cash and cash equivalents at end of period $458,561 $439,914
- -------------------------------------------------- ======== ========
- ----------------------------------------------------------------------
</TABLE>
8
<PAGE
<TABLE>
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
Central Fidelity Banks, Inc. and Subsidiaries
----------------------------------------------------------------------------------------------------------------
- -
<CAPTION> Unrealized
Gains (Losses)
Unamortized on Securities Total
(In thousands) Common Stock Capital Deferred Retained Available
Shareholders'
For the six months ended June 30, 1996 Shares Amount Surplus Compensation Earnings
for Sale Equity
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
- -
Balance at beginning of period 40,193 $200,964 $195,151 $-- $406,567
$23,865 $826,547
Net income -- -- -- -- 56,790 -- 56,790
Common stock issued under Plans 339 1,696 6,466 -- -- --
8,162
Common stock purchased (713) (3,569) (20,718) -- -- --
(24,287)
Cash dividends declared on common stock -- -- -- -- (25,163) --
(25,163)
Common stock issued for 3-for-2 stock split 19,890 99,452 -- -- (99,530) --
(78)
Change in unrealized gains on securities available
for sale, net of income taxes of $18,010 -- -- -- -- -- (33,447)
(33,447)
----------------------------------------------------------------------------------------------------------------
- -
Balance at end of period 59,709 $298,543 $180,899 $-- $338,664 ($9,582)
$808,524
--------------------------------------- ======= ================== =========
========= ========= =========
For the six months ended June 30, 1997
----------------------------------------------------------------------------------------------------------------
- -
Balance at beginning of period 59,378 $296,892 $171,926 $-- $368,457
$9,224 $846,499
Net income -- -- -- -- 61,575 -- 61,575
Common stock issued under Plans 304 1,519 4,506 -- -- --
6,025
Grant of shares of restricted stock awards 32 158 660 (818) -- --
- --
Amortization of deferred compensation -- -- -- 136 -- -- 136
Common stock purchased (2,989) (14,946) (68,608) -- -- --
(83,554)
Cash dividends declared on common stock -- -- -- -- (26,506) --
(26,506)
Change in unrealized gains on securities available
for sale, net of income taxes of $328 -- -- -- -- -- (610) (610)
----------------------------------------------------------------------------------------------------------------
- -
Balance at end of period 56,725 $283,623 $108,484 ($682)$403,526
$8,614 $803,565
--------------------------------------- ======= ================== =========
========= ========= =========
----------------------------------------------------------------------------------------------------------------
- -
</TABLE>
9
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
Central Fidelity Banks, Inc. and Subsidiaries
- -------------------------------------------------------------------------------------------------------------------
- -------
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------
(In thousands, except share and per share data) 1997 1996 Change 1997
1996 Change
- -------------------------------------------------------------------------------------------------------------------
- -------
Results Of Operations
- -------------------------------------------------------------------------------------------------------------------
- -------
Net interest income (tax-equivalent basis) $101,903 $93,848 8.6 % $202,786
$186,784 8.6 %
Provision for loan losses 13,332 10,644 25.3 27,565 20,951
31.6
Noninterest income 25,238 20,940 20.5 49,768 41,579
19.7
Noninterest expense 65,883 60,066 9.7 130,370 120,534
8.2
Net income 31,182 28,809 8.2 61,575 56,790 8.4
Per Share Data
- -------------------------------------------------------------------------------------------------------------------
- -------
Net income $0.54 $0.48 12.5 % $1.06 $0.95 11.6
%
Book value 14.17 13.54 4.7 14.17 13.54 4.7
Average Daily Balance
- -------------------------------------------------------------------------------------------------------------------
- -------
Assets $10,389,095 $10,354,771 0.3 % $10,351,088 $10,411,632
(0.6)%
Loans 6,844,610 6,430,354 6.4 6,790,174 6,383,111
6.4
Earning assets 9,852,683 9,849,691 0.0 9,825,753 9,892,947
(0.7)
Deposits 7,966,824 7,809,802 2.0 7,942,223 7,814,721
1.6
Shareholders' equity 808,495 806,493 0.2 816,128 814,471
0.2
Common shares 57,281,069 59,791,822 (4.2) 58,068,245 60,041,921
(3.3)
Balance At Quarter-End
- -------------------------------------------------------------------------------------------------------------------
- -------
Assets $10,668,698 $10,491,529 1.7 % $10,668,698 $10,491,529
1.7 %
Loans 6,939,448 6,474,293 7.2 6,939,448 6,474,293
7.2
Earning assets 10,043,462 9,913,528 1.3 10,043,462 9,913,528
1.3
Deposits 8,076,620 7,964,060 1.4 8,076,620 7,964,060
1.4
Shareholders' equity 803,565 808,524 (0.6) 803,565 808,524
(0.6)
Common shares 56,724,684 59,708,622 (5.0) 56,724,684 59,708,622
(5.0)
Key Performance Ratios (Basis point change)
- -------------------------------------------------------------------------------------------------------------------
- -------
Return on average assets 1.20 % 1.11 % 0.09 1.19 % 1.09 %
0.10
Return on average shareholders' equity 15.43 14.29 1.14 15.09 13.95
1.14
Net interest margin (tax-equivalent basis) 4.15 3.83 0.32 4.16 3.80
0.36
Efficiency 51.63 51.89 (0.26) 51.76 52.21 (0.45)
Allowance for loan losses as a percentage of loans 1.59 1.70 (0.11) 1.59
1.70 (0.11)
Equity to total assets 7.53 7.71 (0.18) 7.53 7.71 (0.18)
Risk-based capital 13.65 13.18 0.47 13.65 13.18 0.47
- -------------------------------------------------------------------------------------------------------------------
- -------
Common Stock Performance and Dividends
- -------------------------------------------------------------------------------------------------------------------
- -------
Common Stock Prices
----------------------------------------------------- Dividends
1997 1996 Per Share
- ------------------------------------------------------------------ ------------------------- ---------------------
- ----
High Low High Low 1997 1996
- ---------------------------------------------------- ------------ ----------- ------------ ------------ --------
- ---
First Quarter $30.25 $25.13 $23.00 $21.09 $.22 $.20
Second Quarter 39.50 27.25 23.67 22.00 .24 .22
Third Quarter 25.38 21.50 .22
Fourth Quarter 27.50 24.00 .22
- -------------------------------------------------------------------------------------------------------------------
- -------
</TABLE>
10
<PAGE>
<TABLE>
AVERAGE BALANCES AND INTEREST RATES
(TAXABLE EQUIVALENT BASIS)
Central Fidelity Banks, Inc. and Subsidiaries
-------------------------------------------------------------------------------------------------------------
<CAPTION>
(In thousands) For the three months ended June 30, 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------------------------------
Interest-earning assets:
Loans:
Commercial and commercial real estate $2,216,497 $46,088 8.34 % $2,050,472
$41,768 8.19 %
Construction 326,471 8,061 9.90 289,195 7,055 9.81
Residential real estate 1,630,264 30,682 7.55 1,603,913 29,246 7.33
Consumer second mortgage 830,344 19,729 9.53 652,335 15,775
9.73
Installment 1,002,404 21,335 8.54 1,027,479 21,736 8.51
Bank card 828,919 27,134 13.13 790,534 24,610 12.52
----------------------------------------------------------------- ------------------------
6,834,899 153,029 8.98 6,413,928 140,190 8.79
Assets available for sale:
Securities:
U.S. Government and agencies 1,808,381 29,280 6.49 2,095,747 33,806
6.49
States and political subdivisions 91,723 1,935 8.44 103,353 2,150 8.32
Other 1,014,130 17,112 6.77 1,116,839 18,839 6.78
----------------------------------------------------------------- ------------------------
2,914,234 48,327 6.65 3,315,939 54,795 6.65
Loans 9,711 240 9.90 16,426 300 7.33
----------------------------------------------------------------- ------------------------
2,923,945 48,567 6.66 3,332,365 55,095 6.65
Money market investments 91,412 1,290 5.66 101,866 1,392
5.50
Trading account securities 2,427 76 12.55 1,532 28 7.40
----------------------------------------------------------------- ------------------------
Total interest-earning assets 9,852,683 $202,962 8.26 % 9,849,691 $196,705
8.03 %
--------------------------------------------------- ======== ------------ ========
Noninterest-earning assets:
Cash and due from banks 265,710 237,764
Premises and equipment, net 162,300 154,547
Other assets 218,402 222,769
Allowance for loan losses (110,000) (110,000)
--------------------------------------------------- ------------
Total assets $10,389,095 $10,354,771
--------------------------------------- ========== ==========
</TABLE>
11
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking $722,829 $3,640 2.02 % $687,025 $3,452 2.02
%
Regular savings 729,394 4,808 2.64 741,120 4,904 2.66
Consumer certificates 3,846,160 53,201 5.55 4,077,137 57,813
5.70
Money market accounts 1,031,958 10,228 3.98 1,030,805 10,048
3.92
Certificates of deposit $100,000 and over 478,135 6,481 5.44 240,118 3,181
5.33
Federal funds purchased and repos 916,885 12,099 5.29 961,981 12,170
5.09
Other short-term borrowings 56,854 772 5.44 78,825 955 4.87
Medium-term notes -- -- -- 86,519 1,341 6.23
Federal Home Loan Bank borrowings 380,205 5,764 6.08 403,446 6,292
6.27
Long-term debt 225,461 3,895 6.93 150,357 2,533 6.78
Capitalized lease obligations 7,153 171 9.63 7,592 168 8.90
----------------------------------------------------------------- ------------------------
Total interest-bearing liabilities 8,395,034 $101,059 4.83 % 8,464,925
$102,857 4.89 %
--------------------------------------------------- ======== ------------ ========
Noninterest-bearing liabilities:
Demand deposits 1,158,348 1,033,597
Other 27,218 49,756
--------------------------------------------------- ------------------
Total noninterest-bearing liabilities 1,185,566 1,083,353
Shareholders' equity 808,495 806,493
--------------------------------------------------- ------------------
Total liabilities and shareholders' equity $10,389,095 $10,354,771
--------------------------------------- ========== ==========
Net interest earnings $101,903 $93,848
--------------------------------------- ======== ========
Net interest spread 3.43 % 3.14 %
--------------------------------------- ==== ====
Net interest margin 4.15 % 3.83 %
--------------------------------------- ==== ====
-------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
AVERAGE BALANCES AND INTEREST RATES
(TAXABLE EQUIVALENT BASIS)
Central Fidelity Banks, Inc. and Subsidiaries
-------------------------------------------------------------------------------------------------------------
<CAPTION>
(In thousands) For the six months ended June 30, 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------------------------------
Interest-earning assets:
Loans:
Commercial and commercial real estate $2,176,767 $89,456 8.29 % $2,022,268
$83,858 8.34 %
Construction 322,404 15,367 9.61 287,182 13,550 9.49
Residential real estate 1,624,007 61,028 7.58 1,605,683 58,609 7.34
Consumer second mortgage 804,354 38,077 9.55 637,183 30,897
9.75
Installment 1,017,589 43,463 8.61 1,036,005 43,996 8.54
Bank card 832,486 54,410 13.18 780,071 49,269 12.70
----------------------------------------------------------------- ------------------------
6,777,607 301,801 8.98 6,368,392 280,179 8.85
Assets available for sale:
Securities:
U.S. Government and agencies 1,854,948 59,880 6.51 2,164,734 70,017
6.50
States and political subdivisions 94,310 3,971 8.42 108,029 4,459 8.26
Other 1,001,834 33,340 6.71 1,125,833 37,681 6.73
----------------------------------------------------------------- ------------------------
2,951,092 97,191 6.64 3,398,596 112,157 6.64
Loans 12,567 548 8.80 14,719 542 7.40
----------------------------------------------------------------- --------------------------
2,963,659 97,739 6.65 3,413,315 112,699 6.64
Money market investments 82,035 2,281 5.61 110,000 3,041
5.56
Trading account securities 2,452 150 12.34 1,240 45 7.28
----------------------------------------------------------------- --------------------------
Total interest-earning assets 9,825,753 $401,971 8.25 % 9,892,947 $395,964
8.05 %
--------------------------------------------------- ======== ------------ ========
Noninterest-earning assets:
Cash and due from banks 257,050 252,657
Premises and equipment, net 160,638 153,762
Other assets 217,647 222,266
Allowance for loan losses (110,000) (110,000)
--------------------------------------------------- ------------
Total assets $10,351,088 $10,411,632
--------------------------------------- ========== ==========
</TABLE>
13
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest checking $722,002 $7,242 2.02 % $685,736 $6,885 2.02
%
Regular savings 728,557 9,560 2.65 737,278 9,886 2.70
Consumer certificates 3,877,426 106,633 5.55 4,099,262 116,749
5.73
Money market accounts 1,027,577 20,136 3.95 1,043,716 20,547
3.96
Certificates of deposit $100,000 and over 460,297 12,297 5.39 246,664
6,667 5.44
Federal funds purchased and repos 907,029 23,323 5.19 974,605 24,871
5.13
Other short-term borrowings 58,997 1,531 5.23 79,310 1,932 4.90
Medium-term notes -- -- -- 131,473 3,841 5.87
Federal Home Loan Bank borrowings 389,011 11,740 6.09 394,952
12,429 6.33
Long-term debt 188,094 6,405 6.87 150,366 5,035 6.73
Capitalized lease obligations 7,209 318 8.91 7,639 338 8.90
----------------------------------------------------------------- --------------------------
Total interest-bearing liabilities 8,366,199 $199,185 4.80 % 8,551,001
$209,180 4.92 %
--------------------------------------------------- ======== ------------ ========
Noninterest-bearing liabilities:
Demand deposits 1,126,364 1,002,065
Other 42,397 44,095
--------------------------------------------------- ------------
Total noninterest-bearing liabilities 1,168,761 1,046,160
Shareholders' equity 816,128 814,471
--------------------------------------------------- ------------------
Total liabilities and shareholders' equity $10,351,088 $10,411,632
--------------------------------------- ========== ==========
Net interest earnings $202,786 $186,784
--------------------------------------- ======== ========
Net interest spread 3.45 % 3.13 %
--------------------------------------- ==== ====
Net interest margin 4.16 % 3.80 %
--------------------------------------- ==== ====
-------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
SELECTED LOAN LOSS DATA
Central Fidelity Banks, Inc. and Subsidiaries
---------------------------------------------------------------------------------------------
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
---------------------------------------------------------------------------------------------
(In thousands) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
Balance at beginning of period $110,000 $110,000 $110,000 $110,000
Provision charged to expense 13,332 10,644 27,565 20,951
---------------------------------------------------------------------------------------------
123,332 120,644 137,565 130,951
Loans charged off:
Commercial and commercial real estate 1,898 893 4,817 2,432
Construction -- 120 92 620
Residential real estate 196 153 289 291
Installment 4,039 5,215 8,969 9,861
Bank card 11,354 8,668 21,815 16,248
---------------------------------------------------------------------------------------------
Total charge-offs 17,487 15,049 35,982 29,452
---------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial and commercial real estate 929 679 1,782 1,349
Construction 403 431 534 1,133
Residential real estate 2 2 4 4
Installment 1,849 2,436 4,078 4,336
Bank card 972 857 2,019 1,679
---------------------------------------------------------------------------------------------
Total recoveries 4,155 4,405 8,417 8,501
---------------------------------------------------------------------------------------------
Net charge-offs 13,332 10,644 27,565 20,951
---------------------------------------------------------------------------------------------
Balance at end of period $110,000 $110,000 $110,000 $110,000
--------------------------------------------- ======== ======== ========
========
Average loans $6,844,610 $6,430,354 $6,790,174 $6,383,111
Loans at period-end $6,939,448 $6,474,293 $6,939,448 $6,474,293
Ratio of provision for loan losses to average loans 0.78% 0.66% 0.81%
0.66%
Ratio of net charge-offs to average loans 0.78% 0.66% 0.81% 0.66%
Ratio of allowance for loan losses to loans at period-end 1.59% 1.70%
1.59% 1.70%
---------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
NONPERFORMING ASSETS AND PAST-DUE LOANS
Central Fidelity Banks, Inc. and Subsidiaries
- ---------------------------------------------------------------------------------
(In thousands)
<CAPTION> June 30, December 31,
1997 1996 1996
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
Nonperforming Assets
- ---------------------------------------------------------------------------------
Nonaccrual loans:
Land acquisition, land development
or construction:
Commercial $3,597 $5,975 $3,912
Residential 9,561 14,802 12,060
Residential real estate 7,102 5,909 6,100
Commercial real estate 12,859 10,370 8,480
Commercial and industrial 9,857 9,576 8,020
- ---------------------------------------------------------------------------------
Total nonaccrual loans 42,976 46,632 38,572
- ---------------------------------------------------------------------------------
Restructured loans -- -- --
- ---------------------------------------------------------------------------------
Total nonperforming loans 42,976 46,632 38,572
- ---------------------------------------------------------------------------------
Foreclosed properties:
Land and developed lots:
Commercial 1,934 2,556 2,010
Residential 9,390 8,077 7,917
Residential real estate 3,104 3,072 4,448
Commercial real estate 244 568 1,081
- ---------------------------------------------------------------------------------
Total foreclosed properties 14,672 14,273 15,456
- ---------------------------------------------------------------------------------
Total nonperforming assets $57,648 $60,905 $54,028
- --------------------------------------------- ======= ======= =======
Ratio of nonperforming assets to
loans and foreclosed properties 0.83% 0.94% 0.80%
- ---------------------------------------------------------------------------------
Past-due Loans (90 days or more and still accruing)
- ---------------------------------------------------------------------------------
Commercial and construction $1,892 $3,348 $2,451
Residential real estate 8,458 5,787 7,508
Installment 4,036 4,734 5,795
Bank card 11,049 7,446 10,192
- ---------------------------------------------------------------------------------
Total past-due loans $25,435 $21,315 $25,946
- --------------------------------------------- ======= ======= =======
- ---------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
CENTRAL FIDELITY BANKS, INC.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion is intended to provide information about the
Company's financial condition and results of operations which may not be
readily apparent from the consolidated financial statements and tables
included in this report. Reference should be made to those statements
and tables and other selected financial data presented elsewhere in this
report for an understanding of the following discussion and analysis.
Results of Operations
- -----------------------------
Net income for the first six months ended June 30, 1997 was $61.6
million, 8.4% higher than the $56.8 million earned in the first six months of
1996. On a per share basis, net income increased 11.6% to $1.06 from
$.95.
On a tax-equivalent basis, net interest income for the six months ended
June 30, 1997 was $202.8 million, an 8.6% increase from the net interest
income earned in the corresponding 1996 period. The net interest margin
was 4.16% for the six months ended June 30, 1997, up 36 basis points
from 3.80% during the same period in 1996. The growth in net interest
income and net interest margin during the first six months of 1997 were
the result of the higher yield on earning assets and a reduced cost of
interest-bearing liabilities. For the first six months of 1997, average
earning assets declined $67.2 million and interest earned on earning
assets increased $6.0 million from the level recorded in the first six
months of 1996. The decline in average earning assets was due
primarily to the lower levels in securities available for sale and money
market investments during the first six months of 1997. The yield on
average earning assets increased 20 basis points. The average
interest-bearing liabilities declined $184.8 million, or 2.2% from the six
months ended June 30, 1996. Interest expense on interest-bearing
liabilities declined $10.0 million to $199.2 million, or 4.8%, from the
corresponding 1996 period, and the rate of interest-bearing liabilities
declined 12 basis points.
17
For the six-month period ended June 30, 1997, the Company's interest
rate swap activities resulted in declines in interest income of $409,000
and interest expense of $901,000 compared to declines of $1,020,000 in
interest income and $616,000 in interest expense for the corresponding
period in 1996. The Company's interest rate swap activities produced an
increase in net interest income of $492,000 for the six months ended June
30, 1997 and reduction in net interest income of $404,000 for the same
period in 1996.
The provision for loan losses was $27.6 million for the six months
ended June 30, 1997 compared with $21.0 million recorded for the
corresponding period in 1996. The increase in the provision was
prompted by a higher level of net charge-offs. The higher levels of net
charge-offs for the first six months of 1997 resulted principally from
continued losses in consumer portfolios and a $3.7 million nonrecurring
loss in the commercial loan portfolio.
Noninterest income totaled $49.8 million for the six months ended June
30, 1997 compared with $41.6 million for the same period in 1996,
representing an increase of 19.7%. The increase resulted from growth in
deposit fees and other charges, increases in mutual funds and annuity
sales as well as increased ATM charges.
Noninterest expense grew 8.2% to $130.4 million for the first six months
of 1997 compared with the same period in 1996. The growth in noninterest
expense was due primarily to higher personnel, occupancy and
equipment costs.
Balance Sheet
- --------------------
Total assets as of June 30, 1997 were $10.7 billion, a modest increase
from $10.5 billion at the end of 1996. Total loans at June 30, 1997 were
$6.9 billion, an increase of 3.3% from the balance at December 31, 1996,
as a result of the increase in the commercial and consumer mortgage
loan portfolios. Total deposits were $8.1 billion at June 30, 1997, flat from
the level of total deposits at Decmber 31, 1996. At June 30, 1997,
long-term debt increased $99.1 million to $249.4 million, as a result of the
issuance of $100 million of Trust Preferred Stock . The Trust Preferred
Stock was sold in an institutional private placement through Central
Fidelity Trust I, a statutory business trust. Shareholders' equity at June 30,
1997 was $803.6 million, or 7.5% of total assets, as compared to $846.5
million, or 8.0% of total assets, at December 31, 1996. The decline in
shareholders' equity was due primarily to the acquisition and retirement
of shares under the Company's Stock Repurchase Program. Book value
per share declined from $14.26 at December 31, 1996 to $14.17 at June
30, 1997, this decline was also due to the acquisition and retirement of
shares under the Company's Stock Repurchase Program.
18
The return on average total assets during the first six months of 1997
was 1.19% compared to 1.09% for the comparable 1996 period. The return
on average shareholders' equity was 15.09% versus 13.95% in 1996.
Asset Quality
- -----------------
Nonperforming assets as of June 30, 1997 were $57.6 million, or .54%
of total assets, compared to $54.0 million or .51% of total assets at
December 31, 1996 and $60.9 million or .58% of total assets at June 30,
1996. At June 30, 1997, nonperforming assets were .83% of loans and
foreclosed properties, compared to .80% at December 31, 1996 and
.94% at June 30, 1996.
The allowance for loan losses was $110.0 million at June 30, 1997,
December 31, 1996 and June 30, 1996. At June 30, 1997, the allowance for
loan losses was 1.59% of loans, compared to 1.64% at December 31,
1996 and 1.70% at June 30, 1996. At June 30, 1997, the allowance for loan
losses was 1.91x to nonperforming assets, compared to 2.04x at
December 31, 1996 and 1.81x at June 30, 1996. Net loan charge-offs for
the three months ended June 30, 1997 were $13.3 million, representing
.78% of average loans on an annualized basis. Net loan charge-offs were
$11.9 million or .71% of average loans for the three months ended
December 31, 1996 and $10.6 million or .66% of average loans for the
three months ended June 30, 1996.
The allowance for loan losses represents management's estimate of
an amount adequate to absorb potential losses inherent in the loan
portfolio. In assessing the adequacy of the allowance, management
relies predominately on its ongoing review of the lending process and the
risk characteristics of the portfolio in the aggregate. Among other factors,
management considers the Company's loan loss experience, the amount
of past-due and nonperforming loans, current and anticipated economic
conditions, and the estimated current values of collateral securing loans
in assessing the level of the allowance for loan losses.
While it is the Company's policy to charge off in the current period
loans for which a loss is considered probable, there are additional risks
of future losses which cannot be quantified precisely or attributed to
particular loans or classes of loans. Because these risks include the
state of the economy as well as conditions affecting individual
borrowers, management's judgment of the allowance is necessarily
approximate and imprecise. It is also subject to regulatory examinations
and determinations as to its adequacy.
19
Capital Resources
- -------------------------
At June 30, 1997, the Company's risk-based capital and leverage
ratios exceeded the Federal Reserve's minimum guidelines. At June 30,
1997, the Company's Tier 1 and total risk-based capital were $837.5
million and $1.1 billion, as compared to $778.2 million and $1.0 billion at
December 31, 1996, and $756.7 million and $1.0 billion at June 30, 1996,
respectively. The ratios of Tier 1 and total risk-based capital to
risk-weighted assets were 10.51% and 13.65% at June 30, 1997,
compared to 10.09% and 13.29% at year-end 1996, and 9.95% and
13.18% at June 30, 1996, respectively. At June 30, 1997, the Company's
leverage ratio was 8.11%, compared to 7.57% at December 31, 1996 and
7.35% at June 30, 1996. At June 30, 1997, the Bank's total risk-based
capital and leverage ratios were 12.67 and 7.39%, respective
Based upon the risk-based capital and leverage requirements,
Central Fidelity's capital structure places it well above the Federal
Reserve Board's minimum guidelines and in the well capitalized
category when measured against FDIC criteria. The Company will
continue to review and monitor the asset mix and pricing, and other areas
determined to be most affected by these capital requirements.
During the six months ended June 30, 1997, the Company purchased
and retired 2,989,000 shares of its common stock for a total of
$83,554,000. 2,000,000 of these shares were acquired through an
accelerated stock repurchase program entered on May 1, 1997 for an
initial amount of $55,810,000. Final settlement on this transaction is
expected to occur in the third quarter of 1997.
On June 24, 1997, the Company announced that it had terminated its
Stock Repurchase Program to repurchase its Common Stock.
Off-Balance-Sheet Derivatives
- ------------------------------------------
In the context of its asset/liability management, the Company is a
limited end-user of off-balance-sheet financial derivatives as a
cost-efficient vehicle for managing interest rate sensitivity. Interest rate
swaps have been the main derivative instrument used to modify the
repricing characteristics of various balance sheet assets and liabilities.
The interest rate swaps entered into by the Company are essentially
commitments to participate in cash settlements with a counterparty at
various future dates as agreed to in the swap contract. These cash
settlements result from movements in interest rates and are based on
differences in specific rate indexes as applied to the notional principal
amount of the contract.
20
Market values of derivatives transactions fluctuate based upon
movements in the underlying financial indices such as interest rates.
Market values are monitored on a monthly basis through external pricing
mechanisms and then tested by using internal calculations. The
Company's objective measurement system together with risk limits and
timely reporting to senior management help to mitigate the possibility of
any gain or loss recognition on the Company's interest rate swaps. Any
change in market value fluctuation generally corresponds to market
fluctuation in the underlying asset or liability being hedged. In the event
that a derivative product is terminated prior to its contractual maturity, it is
the Company's policy to recognize the resulting gain or loss over the
remaining life of the underlying hedged asset or liability.
Financial derivatives may expose the Company to credit risk to the
extent of the fair value gain of an instrument should the counterparty
default on its obligation to perform. The Company seeks to reduce credit
risk by dealing only with highly rated counterparties and by setting
exposure limits based on independent industry ratings from the major
rating agencies and other relevant criteria. Furthermore, the Company
uses bilateral netting agreements and collateral arrangements to reduce
credit risk. Collateral is delivered by either party when the fair value of
the transaction exceeds established thresholds of credit risk.
The Company has also entered into a limited number of interest rate
swap agreements to accommodate the needs of commercial customers.
In order to offset the interest rate risk of customer swaps, the Company
has executed offsetting transactions with third parties.
The Company intends to continue using off-balance-sheet financial
derivatives as a limited end-user in the prudent management of interest
rate sensitivity.
Recent Developments
- ------------------------------
On June 23, 1997, Central Fidelity entered into a definitive Agreement
and Plan of Merger with Wachovia Corporation ("Wachovia"), providing
for the merger, of Central Fidelity with, and into, Wachovia. Wachovia is
the 20th largest banking company in the United States based on total
assets with dual headquarters in Winston-Salem, North Carolina and
Atlanta, Georgia. The agreement has been approved by the boards of
directors of both companies and is subject to the approval of the
shareholders of the Company and appropriate regulatory agencies. The
merger is expected to be accounted for as a pooling of interests and will
result in a tax-free exchange of .63 shares of Wachovia's common stock
for each share of common stock of Central Fidelity. In addition, the
Company entered into a stock option agreement granting Wachovia the
option to purchase approximately 19.9% of the Company's outstanding
shares of common stock under certain circumstances.
21
In addition, on June 10, 1997, Wachovia announced that it had reached
a definitive agreement to merge with Jefferson Bankshares, Inc., a
Virginia corporation, headquartered in Charlottesville, Virginia, which
operates principally in the Charlottesville, Tidewater, Richmond,
Fredericksburg and Shenandoah Valley markets of Virginia.
22
<PAGE>
<TABLE>
SUMMARY OF INTEREST RATE SWAPS
Central Fidelity Banks, Inc. and Subsidiaries
- --------------------------------------------------------------------------------------------------------
The weighted average variable rates are based upon the contractual rates in effect at June 30,
1997:
(In thousands) June 30, 1997
<CAPTION>
Average Year-To-Date
Notional Weighted Average Rate Maturity Interest Unrecognized
Amount Receive Pay In Year Income/(Expense)Gains (Losses)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Company Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Variable rate medium-term borrowings -- -- -- -- ($183) --
Securities available for sale -- -- -- -- (263) --
Fixed rate commercial loans -- -- -- -- (92) --
- ------------------------------------------------ -------------- -------------
Total pay fixed/receive variable -- -- -- -- (538) --
- ------------------------------------------------ -------------- -------------
Receive fixed/pay variable:
Fixed rate subordinated debt $150,000 7.10 % 5.81 % (1) 5.38 1,084 $2,939
Variable rate commercial loans -- -- -- -- (54) --
- ------------------------------------------------ -------------- -------------
Total receive fixed/pay variable 150,000 7.10 5.81 5.38 1,030 2,939
- ------------------------------------------------ -------------- -------------
Total company hedging swaps $150,000 7.10 % 5.81 % 5.38 $492
$2,939
- ----------------------------------======== ======== ========
- --------------------------------------------------------------------------------------------------------
Customer Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable $4,500 5.68 % (1) 9.11 % 0.81 $333 ($269)
Receive fixed/pay variable 4,500 9.20 5.68 (1) 0.81 (331) 274
- ------------------------------------------------ -------------- -------------
Total customer hedging swaps $9,000 7.44 % 7.39 % 0.81 $2 $5
- ----------------------------------======== ======== ========
The weighted average variable rates are based upon the contractual rates in effect at June 30,
1996:
(In thousands) June 30, 1996
- --------------------------------------------------------------------------------------------------------
Company Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Variable rate medium-term borrowings $50,000 5.55 % (1) 6.42 % 0.96 ($101)
($244)
Securities available for sale 14,422 5.77 (2) 9.00 2.24 (545) (438)
Fixed rate commercial loans 22,655 5.52 (1) 6.84 3.19 (135) (228)
- ------------------------------------------------ -------------- -------------
Total pay fixed/receive variable 87,077 5.58 6.96 1.75 (781) (910)
- ------------------------------------------------ -------------- -------------
Receive fixed/pay variable:
Fixed rate subordinated debt 150,000 7.10 5.50 (1) 6.38 1,144 2,167
Fixed rate medium-term borrowings -- -- -- -- (427) --
Variable rate commercial loans 100,000 4.77 5.82 (1) 0.56 (340) (857)
- ------------------------------------------------ -------------- -------------
Total receive fixed/pay variable 250,000 6.17 5.63 4.05 377 1,310
- ------------------------------------------------ -------------- -------------
Total company hedging swaps $337,077 6.01 % 5.97 % 3.46 ($404)
$400
- ----------------------------------======== ======== ========
- --------------------------------------------------------------------------------------------------------
Customer Hedging Swaps
- --------------------------------------------------------------------------------------------------------
Pay fixed/receive variable $4,500 5.45 % (1) 9.11 % 1.81 $328 ($256)
Receive fixed/pay variable 4,500 9.20 5.45 (1) 1.81 (326) 263
- ------------------------------------------------ -------------- -------------
Total customer hedging swaps $9,000 7.32 % 7.28 % 1.81 $2 $7
- ----------------------------------======== ======== ========
- --------------------------------------------------------------------------------------------------------
(1) Variable rate is tied to London Inter-Bank Offered Rate (LIBOR) with designated 3-month
maturity.
(2) Variable rate is tied to London Inter-Bank Offered Rate (LIBOR) with designated 1-month
maturity plus 60 basis points.
</TABLE>
23
<PAGE>
<TABLE>
INTEREST RATE SWAPS - NOTIONAL AMOUNT ROLLFORWARD
Central Fidelity Banks, Inc. and Subsidiaries
- -------------------------------------------------------------------
Pay fixed/ Pay variable Total
(In thousands) receive receive All
<CAPTION> variable fixed Swaps
<S> <C> <C> <C>
- -------------------------------------------------------------------
Notional Amount
- -------------------------------------------------------------------
Company Swaps:
Beginning balance, January 1, 1997 $72,150 $250,000 $322,150
New swaps -- -- --
Terminated swaps (21,886) -- (21,886)
Matured swaps (50,000) (100,000) (150,000)
Amortization of swaps (264) -- (264)
- -------------------------------------------------------------------
Ending balance, June 30, 1997 $-- $150,000 $150,000
- ------------------------------- ======== ======== ========
Customer Swaps:
Beginning balance, January 1, 1997 $4,500 $4,500 $9,000
New swaps -- -- --
Terminated swaps -- -- --
Matured swaps -- -- --
Amortization of swaps -- -- --
- -------------------------------------------------------------------
Ending balance, June 30, 1997 $4,500 $4,500 $9,000
- ------------------------------- ======== ======== ========
- -------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
EXPECTED MATURITIES OF INTEREST RATE SWAPS
Central Fidelity Banks, Inc. and Subsidiaries
- ----------------------------------------------------------------------------------------------------
<CAPTION>
Due After One After Two After Three After Four
Within Through Through Through Through After
(In Thousands) June 30, 1997 One Year Two Years Three Years Four Years Five Years Five
Years Total
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Company Hedging Swaps
- ----------------------------------------------------------------------------------------------------
Receive fixed/pay variable:
Notional amount -- -- -- -- -- $150,000 $150,000
Weighted average pay rate:
Contractual rate* -- -- -- -- -- 5.81% 5.81%
Forward yield curve** -- -- -- -- -- 6.66% 6.66%
Weighted average receive rate -- -- -- -- -- 7.10% 7.10%
- ----------------------------------------------------------------------------------------------------
Customer Hedging Swaps
- ----------------------------------------------------------------------------------------------------
Pay fixed/receive variable:
Notional amount -- $4,500 -- -- -- -- $4,500
Weighted average pay rate -- 9.11% -- -- -- -- 9.11%
Weighted average receive rate:
Contractual rate* -- 5.81% -- -- -- -- 5.81%
Forward yield curve** -- 6.03% -- -- -- -- 6.03%
Receive fixed/pay variable:
Notional amount -- $4,500 -- -- -- -- $4,500
Weighted average pay rate:
Contractual rate* -- 5.81% -- -- -- -- 5.81%
Forward yield curve** -- 6.03% -- -- -- -- 6.03%
Weighted average receive rate -- 9.20% -- -- -- -- 9.20%
- ----------------------------------------------------------------------------------------------------
* The weighted average variable rates are based upon the contractual rates in effect at June 30,
1997.
** The weighted average variable rates are projected based upon the implied forward yield
curve from
date of analysis through maturity.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PART II
OTHER INFORMATION
CENTRAL FIDELITY BANKS, INC.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders was held on May 14, 1997. At the meeting,
as set forth in the registrant's definitive proxy material for the meeting,
four directors in Class 3 were elected to serve until the 2000 Annual Meeting
of Shareholders, and until their successors are elected and qualified.
The results of the voting were as follows:
<S> <C> <C>
Nominees for Class 3 to serve until 2000:
VOTES
FOR
VOTES
WITHHEL
D
James F. Betts
51,223,027
327,353
Phyllis L. Cothran
51,203,733
346,647
G. Bruce Miller
51,223,024
327,356
Kenneth S. White
50,674,685
875,695
The results of the voting by brokers were as follows:
Nominees for Class 3 to serve until 2000:
PROXIES
VOTES
VOTES
NOT
FOR
WITHHELD
RECEIVED
James F. Betts
34,160,568
169,890
3,095,911
Phyllis L. Cothran
34,151,209
179,249
3,095,911
G. Bruce Miller
34,149,111
181,347
3,095,911
Kenneth S. White
33,597,029
733,429
3,095,911
Mr. Robert L. Freeman, age 70, a director of the Registrant or one of its
predecessor constituent companies since 1969, did not stand for re-election,
but retired under the Registrant's age 70 retirement policy for its directors.
The continuing Class1 Directors serving until the 1998 Annual Meeting are
Jack H. Ferguson, Lewis N. Miller, Jr., Richard L. Morrill, Lloyd U. Noland,
III and William G. Reynolds, Jr. The continuing Class 2 Directors serving
until the 1999 Annual Meeting are: Alvin R. Clements, Thomas R. Glass, George
R. Lewis and T. Justin Moore, III.
</TABLE>
26
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
Exhibit 11 - Statement re computation of per share earnings
27 - Financial data schedule
B. Reports on Form 8-K:
A report on Form 8-K was filed on April 24, 1997
announcing that the Company sold $100 million of Trust Preferred Stock
through Central Fidelity Trust I, a statutory business trust, in an
institutional private placement. The Trust Preferred Stock is considered
to be Tier 1 Capital for the Company under the Federal Reserve's guidelines.
A report on Form 8-K was filed on June 25, 1997 announcing
the signing of a definitive agreement for a merger of Central Fidelity Banks,
Inc. and Wachovia. The agreement has been approved by the boards of
directors of both companies and is subject to the approval of Central
Fidelity's shareholders and appropriate regulatory agencies. The
merger is expected to close in the fourth quarter.
27
<PAGE>
SIGNATURES
--------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CENTRAL FIDELITY BANKS, INC.
- -----------------------------------------------
(Registrant)
/s/ Charles W. Tysinger
Charles W. Tysinger
Corporate Executive Vice President and Treasurer
(Principal Financial Officer)
/s/ James F. Campbell
James F. Campbell
Senior Vice President & Controller
(Principal Accounting Officer)
Date: August 8, 1997
<PAGE>
28
<PAGE>
EXHIBIT INDEX
------------------------
Exhibit No. Description
- ----------- ------------------
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
29
<PAGE>
<TABLE>
EXHIBIT 11
CENTRAL FIDELITY BANKS, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(In thousands)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1997 1996 1997 1996
------ ------ ---- ----
<S> <C> <C> <C> <C>
Earnings:
Net income $31,182 $28,809 $61,575 $56,790
======= ======= ======= =======
Shares:
Weighted average number of common shares used
in computing primary earnings per share 57,281 59,792 58,068 60,042
Dilutive stock options - based on treasury stock
method 1,736 931 1,489 962
------------------------------------------
Weighted average number of common shares used
in computing fully diluted earnings per share 59,017 60,723 59,557 61,004
======= ======= ======= =======
Earnings per share:
Primary earnings per share $0.54 $0.48 $1.06 $0.95
Fully diluted earnings per share $0.53 $0.47 $1.03 $0.93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000276235
<NAME> CENTRAL FIDELITY BANKS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 312,192
<INT-BEARING-DEPOSITS> 50,000
<FED-FUNDS-SOLD> 96,369
<TRADING-ASSETS> 3,491
<INVESTMENTS-HELD-FOR-SALE> 2,954,154
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,939,448
<ALLOWANCE> 110,000
<TOTAL-ASSETS> 10,668,698
<DEPOSITS> 8,076,620
<SHORT-TERM> 1,133,699
<LIABILITIES-OTHER> 81,292
<LONG-TERM> 573,522
0
0
<COMMON> 283,623
<OTHER-SE> 519,942
<TOTAL-LIABILITIES-AND-EQUITY> 10,668,698
<INTEREST-LOAN> 300,924
<INTEREST-INVEST> 95,303
<INTEREST-OTHER> 2,415
<INTEREST-TOTAL> 398,642
<INTEREST-DEPOSIT> 155,868
<INTEREST-EXPENSE> 199,185
<INTEREST-INCOME-NET> 199,457
<LOAN-LOSSES> 27,565
<SECURITIES-GAINS> 1,881
<EXPENSE-OTHER> 130,370
<INCOME-PRETAX> 91,290
<INCOME-PRE-EXTRAORDINARY> 91,290
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,575
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.03
<YIELD-ACTUAL> 4.00
<LOANS-NON> 42,976
<LOANS-PAST> 25,435
<LOANS-TROUBLED> 144
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 110,000
<CHARGE-OFFS> 35,982
<RECOVERIES> 8,417
<ALLOWANCE-CLOSE> 110,000
<ALLOWANCE-DOMESTIC> 110,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
