<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
For the quarterly period ended March 31, 1995
------------------
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
For the transition period from to
----------------- -----------------
Commission file number 1-6523
NationsBank Corporation
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(Exact name of registrant as specified in its charter)
North Carolina 56-0906609
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
NationsBank Corporate Center, Charlotte, North Carolina 28255
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(Address of principal executive offices and zip code)
(704) 386-5000
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(Registrant's telephone number, including area code)
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, as amended, 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
----- -----
On April 30, 1995, there were 271,404,569 shares of NationsBank Corporation
Common Stock outstanding.
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NationsBank Corporation
March 31, 1995 Form 10-Q
Index
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income for the Three Months Ended
March 31, 1995 and 1994..............................................3
Consolidated Balance Sheet on March 31, 1995, December 31, 1994
and March 31, 1994...................................................4
Consolidated Statement of Cash Flows for the Three Months Ended
March 31, 1995 and 1994..............................................5
Consolidated Statement of Changes in Shareholders' Equity for
the Three Months Ended March 31, 1995 and 1994.......................6
Notes to Consolidated Financial Statements...........................7
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.................................................12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K....................................36
Signature....................................................................37
Index to Exhibits............................................................38
2
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Part I. Financial Information
Item 1. Financial Statements
<TABLE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Income
(Dollars in Millions Except Per-Share Information)
<CAPTION>
Three Months
Ended March 31
------------------------
1995 1994
------------------------
<S> <C> <C>
Income from Earning Assets
Interest and fees on loans..................................... $ 2,176 $ 1,757
Lease financing income......................................... 50 30
Interest and dividends on securities
Held for investment.......................................... 234 151
Available for sale........................................... 106 179
Interest and fees on loans held for sale....................... 1 11
Time deposits placed and other short-term investments.......... 40 14
Federal funds sold............................................. 16 6
Securities purchased under agreements to resell................ 214 81
Trading account securities..................................... 233 169
------------------------
Total income from earning assets............................. 3,070 2,398
------------------------
Interest Expense
Deposits....................................................... 783 519
Borrowed funds................................................. 598 301
Trading account liabilities.................................... 222 153
Long-term debt and obligations under capital leases............ 160 137
------------------------
Total interest expense....................................... 1,763 1,110
------------------------
Net interest income.............................................. 1,307 1,288
Provision for credit losses...................................... 70 100
------------------------
Net credit income................................................ 1,237 1,188
Gains on sales of securities..................................... 1 14
Noninterest income............................................... 726 680
Other real estate owned expense.................................. 2 5
Noninterest expense.............................................. 1,288 1,219
------------------------
Income before income taxes....................................... 674 658
Income tax expense............................................... 231 241
------------------------
Net income....................................................... $ 443 $ 417
========================
Net income available to common shareholders...................... $ 441 $ 414
========================
Per-share information
Earnings per common share...................................... $ 1.60 $ 1.52
========================
Fully diluted earnings per common share........................ $ 1.58 $ 1.51
========================
Dividends per common share..................................... $ 0.50 $ 0.46
========================
Average common shares(in thousands).............................. 276,415 271,947
========================
</TABLE>
See accompanying notes to consolidated financial statements.
3
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<TABLE>
NationsBank Corporation and Subsidiaries
Consolidated Balance Sheet
- -----------------------------------------------------------------------------------------------------------------------------
(Dollars in Millions)
<CAPTION>
March 31 December 31 March 31
1995 1994 1994
--------------------------------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents........................................................... $ 7,975 $ 9,582 $ 8,178
Time deposits placed and other short-term investments............................... 2,750 2,159 1,148
Securities
Held for investment, at cost (market value - $17,208; $17,101 and $14,244)........ 17,546 17,800 14,442
Available for sale................................................................ 8,962 8,025 15,927
--------------------------------------
Total securities................................................................ 26,508 25,825 30,369
--------------------------------------
Loans held for sale................................................................. 286 318 595
Trading account assets.............................................................. 16,613 9,941 12,285
Federal funds sold.................................................................. 2,086 960 1,084
Securities purchased under agreements to resell..................................... 11,602 10,152 10,895
Loans and leases, net of unearned income............................................ 105,704 102,367 92,130
Factored accounts receivable........................................................ 1,224 1,004 1,637
--------------------------------------
Loans, leases and factored accounts receivable, net of unearned income............ 106,928 103,371 93,767
--------------------------------------
Allowance for credit losses......................................................... (2,174) (2,186) (2,187)
Premises, equipment and lease rights, net........................................... 2,451 2,439 2,258
Customers' acceptance liability..................................................... 821 684 718
Interest receivable................................................................. 1,256 1,408 1,002
Purchased mortgage servicing rights................................................. 705 195 104
Goodwill............................................................................ 1,054 1,047 825
Core deposit and other intangibles.................................................. 453 470 460
Other assets........................................................................ 4,540 3,239 3,570
--------------------------------------
$ 183,854 $ 169,604 $ 165,071
Liabilities ======================================
Deposits
Noninterest-bearing............................................................... $ 20,264 $ 21,380 $ 20,172
Savings........................................................................... 8,844 9,037 9,111
NOW and money market deposit accounts............................................. 28,124 29,752 30,155
Time.............................................................................. 28,214 27,698 26,785
Foreign time...................................................................... 15,297 12,603 4,533
--------------------------------------
Total deposits.................................................................. 100,743 100,470 90,756
--------------------------------------
Federal funds purchased............................................................. 5,084 3,993 6,934
Securities sold under agreements to repurchase...................................... 27,798 21,977 26,332
Commercial paper.................................................................... 2,786 2,519 2,046
Other short-term borrowings......................................................... 6,423 5,640 4,797
Trading account liabilities......................................................... 14,639 11,426 10,554
Liability to factoring clients...................................................... 682 586 824
Acceptances outstanding............................................................. 821 684 718
Accrued expenses and other liabilities.............................................. 3,716 2,810 3,763
Long-term debt and obligations under capital leases................................. 9,816 8,488 8,175
--------------------------------------
Total liabilities............................................................... 172,508 158,593 154,899
--------------------------------------
Shareholders' Equity
Preferred stock: authorized - 45,000,000 shares
ESOP Convertible, Series C: issued - 2,590,563; 2,606,657 and 2,673,406 shares.... 110 111 114
Common stock: authorized - 800,000,000; 800,000,000 and 500,000,000 shares;
issued - 275,418,276; 276,451,552 and 274,537,247 shares.......................... 4,684 4,740 4,655
Retained earnings................................................................... 6,753 6,451 5,575
Other, including loan to ESOP trust................................................. (201) (291) (172)
--------------------------------------
Total shareholders' equity...................................................... 11,346 11,011 10,172
--------------------------------------
$ 183,854 $ 169,604 $ 165,071
======================================
</TABLE>
See accompanying notes to consolidated financial statements
4
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<TABLE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Cash Flows
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(Dollars in Millions)
<CAPTION>
Three Months
Ended March 31
--------------------
1995 1994
--------------------
<S> <C> <C>
Operating Activities
Net income............................................................................ $ 443 $ 417
Reconciliation of net income to net cash (used) provided by operating activities
Provision for credit losses......................................................... 70 100
Gains on sales of securities........................................................ (1) (14)
Depreciation and premises improvements amortization................................. 68 64
Amortization of intangibles......................................................... 30 34
Deferred income tax expense......................................................... 60 52
Net change in trading instruments................................................... (3,459) 579
Net decrease in interest receivable................................................. 152 119
Net (increase) decrease in interest payable......................................... 81 (12)
Net decrease in loans held for sale................................................. 32 1,102
Net increase in liability to factoring clients...................................... 96 90
Other operating activities.......................................................... (507) 2,356
--------------------
Net cash (used) provided by operating activities................................... (2,935) 4,887
--------------------
Investing Activities
Proceeds from maturities of securities held for investment............................ 275 4,215
Purchases of securities held for investment........................................... (25) (5,082)
Proceeds from sales and maturities of securities available for sale................... 5,415 10,244
Purchases of securities available for sale............................................ (6,216) (10,751)
Net increase in federal funds sold and securities
purchased under agreements to resell................................................ (2,576) (4,712)
Net (increase) decrease in time deposits placed and other short-term investments...... (591) 334
Net originations of loans and leases.................................................. (2,873) (2,372)
Purchases of loans and leases......................................................... (793) (732)
Proceeds from sales and securitizations of loans...................................... 262 2,063
Purchases of mortgage servicing rights................................................ (517) (20)
Purchases of factored accounts receivable............................................. (1,963) (2,071)
Collections of factored accounts receivable........................................... 1,740 1,619
Net purchases of premises and equipment............................................... (80) (55)
Proceeds from sales of other real estate owned........................................ 56 86
Sales/(acquisitions) of subsidiaries, net of cash..................................... (155) 126
--------------------
Net cash used in investing activities.............................................. (8,041) (7,108)
--------------------
Financing Activities
Net increase (decrease) in deposits................................................... 273 (880)
Net increase in federal funds purchased and securities
sold under agreements to repurchase................................................. 6,912 4,793
Net increase (decrease) in other short-term borrowings and commercial paper........... 1,050 (809)
Proceeds from issuance of long-term debt.............................................. 1,503 -
Retirement of long-term debt.......................................................... (95) (163)
Preferred stock repurchased and redeemed.............................................. - (94)
Proceeds from issuance of common stock................................................ 28 43
Cash dividends paid................................................................... (140) (130)
Common stock repurchased.............................................................. (79) -
Other financing activities............................................................ (83) (10)
--------------------
Net cash provided by financing activities.......................................... 9,369 2,750
--------------------
Net increase (decrease) in cash and cash equivalents.................................... (1,607) 529
Cash and cash equivalents on January 1.................................................. 9,582 7,649
--------------------
Cash and cash equivalents on March 31................................................... $ 7,975 $ 8,178
====================
Loans transferred to other real estate owned amounted to $18 and $46 for the three months ended March 31,
1995 and 1994, respectively.
</TABLE>
See accompanying notes to consolidated financial statements.
5
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<TABLE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
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(Dollars in Millions, Shares in Thousands)
<CAPTION>
Total
Common Stock Share-
Preferred ----------------- Retained Loan to holders'
Stock Shares Amount Earnings ESOP Trust Other Equity
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1993................. $ 208 270,905 $ 4,594 $ 5,247 $ (88) $ 18 $ 9,979
Net income................................. 417 417
Cash dividends
Common................................... (127) (127)
Preferred................................ (3) (3)
Preferred stock repurchased and redeemed... (93) (1) (94)
Common stock issued under dividend
reinvestment and employee plans.......... 978 40 3 43
Common stock issued in acquisitions........ 2,629 21 41 62
Net change in valuation reserve for
securities available for sale and
marketable equity securities............. (109) (109)
Other...................................... (1) 25 1 4 4
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Balance on March 31, 1994.................... $ 114 274,537 $ 4,655 $ 5,575 $ (88) $ (84) $ 10,172
============================================================================
Balance on December 31, 1994................. $ 111 276,452 $ 4,740 $ 6,451 $ (76) $ (215) $ 11,011
Net income................................... 443 443
Cash dividends
Common..................................... (138) (138)
Preferred.................................. (2) (2)
Common stock issued under dividend
reinvestment and employee plans............ 517 23 5 28
Common stock repurchased..................... (1,551) (79) (79)
Net change in valuation reserve for
securities available for sale and
marketable equity securities............... 90 90
Other........................................ (1) (1) (5) (7)
----------------------------------------------------------------------------
Balance on March 31, 1995.................... $ 110 275,418 $ 4,684 $ 6,753 $ (76) $ (125) $ 11,346
============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
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NationsBank Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Accounting Policies
The consolidated financial statements include the accounts of NationsBank
Corporation and its subsidiaries (the Corporation). Significant intercompany
accounts and transactions have been eliminated in consolidation.
The information contained in the financial statements is unaudited. In the
opinion of management, all normal recurring adjustments necessary for a fair
presentation of the results of interim periods have been made. Certain prior
period amounts have been reclassified to conform to current period
classifications.
Accounting policies followed in the presentation of interim financial
results are presented on pages 62 and 63 of the 1994 Annual Report to
Shareholders as updated by the following.
Allowance for Credit Losses
The allowance for credit losses is available to absorb losses inherent in
the credit extension process. The entire allowance is available to absorb
losses related to the loan and lease portfolio and other extensions of credit,
including off-balance sheet credit exposures. Credit exposures deemed to be
uncollectible are charged against the allowance for credit losses. Recoveries
of previously charged-off amounts are credited to the allowance for credit
losses.
On January 1, 1995, the Corporation adopted Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" (SFAS 114) and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosure" (SFAS 118), an amendment of SFAS 114.
These standards address the accounting for impairment of certain loans when it
is probable that all amounts due pursuant to the contractual terms of the loan
will not be collected. Adoption of these standards entailed the identification
of commercial, real estate commercial, real estate construction and foreign
loans which were considered impaired under the provisions of SFAS 114. Adoption
did not have a material impact on the Corporation's financial position or
results of operations.
Under the provisions of these standards, individually identified impaired
loans are measured based on the present value of payments expected to be
received, using the historical effective loan rate as the discount rate.
Alternatively, measurement may also be based on observable market prices or for
loans that are solely dependent on the collateral for repayment, measurement
may be based on the fair value of the collateral. Loans that are to be
foreclosed are measured based on the fair value of the collateral. If the
recorded investment in the impaired loan exceeds the measure of fair value, a
valuation allowance is required as a component of the allowance for credit
losses. Changes to the valuation allowance are recorded as a component of the
provision for credit losses.
The adequacy of the allowance for credit losses is reviewed regularly by
management. Additions to the allowance for credit losses are made by charges to
the provision for credit losses. On a quarterly basis, a comprehensive review
of the adequacy of the allowance for credit losses is performed. This
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assessment is made in the context of historical losses, as well as existing
economic conditions.
Nonperforming Loans
Commercial loans and leases that are past due 90 days or more as to
principal or interest, or where reasonable doubt exists as to timely
collection, including loans that are individually identified as being impaired
under SFAS 114, are generally classified as nonperforming loans unless well
secured and in the process of collection. Generally, loans which are past due
180 days or more as to principal or interest are classified as nonperforming
regardless of collateral or collection status.
Interest collections on nonperforming loans and leases, including impaired
loans, for which the ultimate collectibility of principal and interest is
uncertain are applied as reductions in book value. Otherwise, such collections
are credited to income when received.
Consumer loans, including credit card loans, that are past due 90 days or
more are not generally classified as nonperforming assets. Generally, consumer
loans are liquidated or charged off soon after becoming 90 days past due or 180
days past due for credit card loans. Income is generally recognized on past-due
consumer and credit card loans until the loan is charged off.
Other Real Estate Owned
Other real estate owned includes foreclosed property and premises no
longer used for business operations.
Under SFAS 114, loans are classified as other real estate owned when the
Corporation forecloses on a property or when physical possession of the
collateral is taken regardless of whether foreclosure proceedings have taken
place. Prior to adoption of SFAS 114, other real estate owned included
in-substance foreclosed loans including certain loans for which the Corporation
had not taken physical possession of the collateral.
Other real estate owned is carried at the lower of (1) the recorded amount
of the loan or lease for which the property previously served as collateral, or
(2) the fair value of the property minus estimated costs to sell. Prior to
foreclosure, the recorded amount of the loan or lease is reduced, if necessary,
to the fair value, minus estimated costs to sell, of the real estate to be
acquired by charging the allowance for credit losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on
the periodic revaluation of other real estate owned are credited or charged to
expense. Net costs of maintaining and operating foreclosed properties are
expensed as incurred.
Note 2 - Acquisition Activity
On March 31, 1995, the Corporation's mortgage banking subsidiary completed
the acquisition of KeyCorp Mortgage Inc. from KeyCorp and Key Bank of New York.
The acquisition included a $25-billion residential mortgage servicing
portfolio, for which the Corporation's subsidiary paid approximately $339
million, a mortgage servicing operation employing approximately 430 associates
and other servicing-related assets.
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On March 31, 1995, the Corporation's mortgage banking subsidiary acquired
from Source One Mortgage Services Corporation a $10-billion residential
mortgage servicing portfolio at a purchase price of approximately $178 million.
As a result of the above transactions, the Corporation's mortgage
servicing portfolio totaled $75.4 billion on March 31, 1995, compared to $39.0
billion on December 31, 1994. Purchased mortgage servicing rights amounted to
$705 million on March 31, 1995, compared to $195 million on December 31, 1994.
Note 3 - Trading Account Assets and Liabilities
The market values on March 31, 1995 and on December 31, 1994 and the
average market values for the quarter ended March 31, 1995, of the components
of trading account assets and liabilities were (dollars in millions):
<TABLE>
<CAPTION>
First
March December Quarter
31 31 1995
1995 1994 Average
------------------------------------
<S> <C> <C> <C>
Securities owned
U.S. Treasury securities............. $ 10,530 $ 5,968 $ 8,938
Securities of other U.S. Government
agencies and corporations.......... 1,173 1,185 1,289
Certificates of deposit, bankers'
acceptances and commercial paper... 431 371 418
Corporate debt....................... 728 581 679
Other securities..................... 286 259 250
------------------------------------
Total securities owned............ 13,148 8,364 11,574
Derivatives-dealer positions........ 3,465 1,577 1,242
------------------------------------
Total trading account assets...... $ 16,613 $ 9,941 $ 12,816
====================================
Short sales
U.S. Treasury securities............ $ 11,017 $ 9,352 $ 10,973
Securities of other U.S. Government
agencies and corporations......... 189 182 221
Corporate debt...................... 213 278 228
Other securities.................... 2 - 5
------------------------------------
Total short sales 11,421 9,812 11,427
Derivatives-dealer positions........ 3,218 1,614 1,205
------------------------------------
Total trading account liabilities. $ 14,639 $ 11,426 $ 12,632
====================================
</TABLE>
Derivatives-dealer positions represent the market values of interest rate,
foreign exchange and commodity products including swap, futures, forward and
option contracts associated with the Corporation's derivatives trading
activities.
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Note 4 - Debt
During the first quarter of 1995, the Corporation issued $1.1 billion of
senior notes. The Corporation issued $550 million of medium-term notes at par,
which mature between January 1997 and February 2000. Of these notes, $500
million bear interest at a spread over the London interbank offered rate and
$50 million bear interest at a spread over the U.S. Treasury rate. The
Corporation also issued $250 million of 7 1/2-percent senior notes, due
February 1997, and $300 million of floating rate senior notes, due March 1998.
The floating rate notes bear interest at a spread over the London interbank
offered rate.
The Corporation filed a new shelf registration on February 1, 1995, for $3
billion, of which $2 billion has been designated as series D medium-term notes,
which may be senior debt securities, subordinated debt or any combination
thereof.
The short-term bank note program jointly maintained by the Carolinas,
Georgia, and Texas banking subsidiaries had short-term bank notes outstanding
of $5.4 billion as of March 31, 1995. On April 10, 1995, these banking
subsidiaries modified the terms of this program to increase the maximum amount
that may be offered from time to time to $9 billion with fixed or floating
rates and maturities from 30 days to 15 years from date of issue.
During the first quarter of 1995, the Corporation's Texas banking
subsidiary issued $400 million of 7.7 percent REMIC bonds. The source of
repayment of this obligation is a collateral pool of residential mortgage
loans. Based on estimated prepayments of this pool of loans, this obligation
will be paid in full by April 1996.
Subsequent to March 31, 1995 and through May 2, 1995, the Corporation
issued $150 million of senior medium-term notes, $50 million of which bear
interest at a spread over the London interbank offered rate and are due April
2000 and $100 million of 7.23 percent notes due May 1999. The Corporation also
issued $300 million of 7 5/8-percent subordinated notes, due April 2005. As of
May 2, 1995, approximately $2.5 billion of capacity remained available under
various shelf registrations.
Note 5 - Commitments and Contingencies
The Corporation's commitments to extend credit on March 31, 1995, were
$78.7 billion compared to $74.7 billion on December 31, 1994. Standby letters
of credit (SBLCs) and financial guarantees represent commitments by the
Corporation to meet the obligations of the account party if called upon.
Outstanding SBLCs and guarantees on March 31, 1995, were $7.3 billion compared
to $6.9 billion on December 31, 1994. Commercial letters of credit, issued
primarily to facilitate customer trade finance activities, were $1.3 billion on
March 31, 1995 and December 31, 1994. The above amounts have been reduced by
amounts collateralized by cash and amounts participated to other financial
institutions.
See Tables 4 and 5 and the accompanying discussion in Item 2 regarding the
Corporation's derivatives used for risk management purposes.
On March 31, 1995 and December 31, 1994, indemnified securities lending
transactions totaled $5.0 billion and $5.7 billion, respectively. Collateral
with a market value of $5.1 billion and $5.9 billion, for the respective
periods, was obtained by the Corporation in support of these transactions.
On March 31, 1995, the Corporation had commitments to purchase and sell
10
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when-issued securities of $3.3 billion and $2.6 billion, respectively. This
compares to commitments to purchase and sell when-issued securities of $2.2
billion and $2.5 billion, respectively, on December 31, 1994.
In the ordinary course of business, the Corporation and its subsidiaries
are routinely defendants in or parties to a number of pending and threatened
legal actions and proceedings, including several actions brought on behalf of
various classes of claimants. In certain of these actions and proceedings,
substantial money damages are asserted against the Corporation and its
subsidiaries and certain of these actions and proceedings are based on alleged
violations of consumer protection, securities, banking and other laws.
Management believes, based upon the advice of counsel, that these actions and
proceedings and losses, if any, resulting from the final outcome thereof, will
not be material in the aggregate to the Corporation's financial position or
results of operations.
11
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Earnings Review
A comparison of selected operating results for the three-month periods
ended March 31, 1995 and 1994, is presented in Table 1.
Net income for the first quarter of 1995 was $443 million, an increase of
$26 million, or six percent, over the first quarter of 1994. Earnings per
common share were $1.60 and $1.52 for the first quarters of 1995 and 1994,
respectively. The return on average common shareholders' equity was 16.03
percent for the first quarter of 1995, compared to 16.82 percent for the first
quarter of 1994.
Key performance highlights for the first quarter of 1995 were:
o Taxable-equivalent net interest income increased $25 million quarter
over quarter to $1.3 billion, primarily as a result of average loan
growth of 13 percent, partially offset by a narrowing of the spread
between investment securities and market-based funds.
o Improvement in credit quality led to provision expense of $70
million in the first quarter of 1995, consistent with the level of
provision expense in the previous three quarters and down from a
level of $100 million in the first quarter of 1994.
o Noninterest income rose $46 million, or 7 percent, to $726 million
primarily due to increased deposit service fee income, investment
banking income, acquisition-related mortgage servicing income and
the impact of reflecting the full ownership of NationsSecurities
throughout the Corporation's income statement, rather than the
netting of income and expense under the equity method of accounting
for the prior joint venture. These increases were partially offset
by a decline of $12 million in trading account profits and fees from
quarter to quarter, resulting from the difficult trading environment
that developed during the latter part of 1994 and continued into
1995. Trading account profits and fees of $83 million for the first
quarter of 1995 were $39 million higher than fourth quarter of 1994
levels.
o Noninterest expense increased $69 million, primarily related to 1994
acquisitions of several smaller banking organizations and mortgage
banking operations, the impact of the full ownership of
NationsSecurities, increased investment in personnel in selected
areas and expanded marketing efforts, primarily credit card
solicitations. The efficiency ratio, which measures the relationship
of noninterest expense to total revenue, was 62.49 percent in the
first three months of 1995, compared to 61.26 percent in the same
period in 1994.
Customer Group Review
The Corporation manages its business activities through three major
internal management units, or Customer Groups. These units, shown in Table 2,
are managed with a focus on numerous performance objectives including return on
equity, operating efficiency and net income.
The net income of the customer groups reflects a funds transfer pricing
system which derives net interest income by matching assets and liabilities
with similar interest rate sensitivity and maturity characteristics. Equity
capital is allocated to each customer group based on an assessment of its
inherent risk.
The General Bank includes the Banking Group, which contains the retail
banking network and is the service provider for the consumer sector as well as
small and medium size companies; Financial Products, which provides specialized
services such as credit cards, residential mortgages, indirect lending, dealer
finance and retail, full service and discount brokerage on a national basis;
Trust and Private Banking.
The General Bank earned $249 million in the first quarter of 1995, a 14-
percent increase over the same period in 1994 with the Banking Group and the
Financial Products' Card Services units primarily accounting for the increased
earnings over last year. Return on equity remained unchanged at 17 percent.
Taxable-equivalent net interest income in the General Bank declined $9 million
reflecting the rise in interest rates as more fully discussed in the net
interest income section. The negative impact of the rise in interest rates was
largely offset by broad-based loan growth and deposit cost containment efforts.
Average loans increased $8.3 billion, or 15 percent, with growth concentrated
in the Banking Group, primarily in residential mortgages, commercial loans and
other consumer loans and Financial Products, primarily credit cards. Improved
credit quality led to a $37-million reduction in the provision for credit
losses between the two quarters.
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Noninterest income rose 13 percent to $479 million led by increases in
deposit service fee income, acquisition-related mortgage servicing income and
the impact of reflecting the full ownership of NationsSecurities. Noninterest
expense increased $50 million, reflecting the acquisition of smaller banking
organizations in Florida and South Carolina and several mortgage banking
acquisitions, the full ownership of NationsSecurities and expanded marketing
efforts, primarily credit card solicitations.
The Global Finance Group (previously named the Institutional Group)
includes Corporate Finance, Specialized Finance and the Capital Markets Group.
Included under Specialized Finance are Real Estate, Specialized Lending
(includes Business Credit, Factoring and Leasing), Structured Finance (asset-
backed and project financing), Real Estate Finance, Leveraged Capital, and
International. The Capital Markets Group includes customer-related derivatives,
foreign exchange, securities trading and debt underwriting activities. Housed
in this group are NationsBanc-CRT and NationsBanc Capital Markets Inc., which
with its Section 20/Tier II powers, underwrites and deals in various types of
corporate debt and has the power to underwrite and deal in equity securities.
The Global Finance Group earned $163 million in the first quarter 1995, a
one-percent increase over the same period in 1994. Return on equity remained
unchanged at 17 percent. Taxable-equivalent net interest income for the first
quarter of 1995 increased $8 million over the same period a year ago. The
benefit to net interest income of the $2.6-billion increase in average loans
was offset by a narrowing of the spread between investment securities and
market-based funds. The loan growth was concentrated in the Corporate Finance
and Specialized Lending units, while the Real Estate unit reduced average
outstandings by $571 million, compared to last year. The increase in average
deposits consisted primarily of foreign time deposits which resulted from the
wholesale funding initiatives in the latter half of 1994 and the first quarter
in 1995. Continued improvement in asset quality of the Global Finance Group
contributed to the $7-million reduction in provision for credit losses in the
first quarter of 1995 compared to the same period in 1994.
Noninterest income declined three percent, primarily due to lower trading
account profits and fees and was offset by higher investment banking fees.
Investments to expand capital markets activities, primarily personnel-
related expenses, contributed to the $13-million increase in noninterest
expense and the change in the efficiency ratio.
Financial Services consists of NationsCredit and Greyrock Capital Group.
Financial Services contributed $26 million of net income in the first quarter
of 1995, a four-percent increase over the first quarter of 1994. The
favorable impact on net interest income of a $1.5-billion increase in average
loans was mostly offset by an increased level of provision expense to support
such growth. Higher funding costs also impacted results. Average loan growth
of 29 percent was fueled by demand in the consumer lending, commercial real
estate and inventory finance businesses. The net interest yield fell to 7.16
percent, down 15 basis points from the prior year's first quarter, due
primarily to higher funding costs. Noninterest expense increased nine
percent as new offices were opened to support additional consumer loan
originations. Refinement of consumer credit and collection operations, combined
with increased productivity of commercial portfolio administration and
increases in total revenues, led to a decline in the efficiency ratio to 44.05
percent for the first quarter of 1995, down from 47.67 percent for the same
period in 1994. Return on equity decreased from the prior year level of 14
percent due to the increased provision for credit losses supporting loan
growth. The return on equity in this unit is impacted by a higher equity to
asset ratio of 13 percent, necessary to posture this unit for raising funds in
the financial markets.
Net Interest Income
As presented in Table 3, taxable-equivalent net interest income increased
$25 million to $1.3 billion in the first quarter of 1995 compared to the same
period of 1994. The major factors contributing to the increase in taxable-
equivalent net interest income were 13-percent growth in average loans and
leases and deposit cost containment efforts. Average loans and leases rose
$12.2 billion to $103.8 billion in the first quarter of 1995 compared to the
same period of 1994. The factors which caused increases in net interest income
were largely offset by the impact of a narrowing of the spread between
investment securities and market-based funds.
13
<PAGE>
The net interest yield declined 28 basis points to 3.41 percent in the
first quarter of 1995, compared to 3.69 percent in the same period of 1994.
Excluding the impact of the Corporation's government securities dealer, for
which trading account revenues are recorded in noninterest income, the net
interest yield in the first quarter of 1995 declined 25 basis points to 3.91
percent, compared to 4.16 percent in the first quarter of 1994. The decline in
the net interest yield primarily reflected spread compression between fixed-
rate investment securities and market-based funds. The mix of funding sources
also contributed to the decline in the net interest yield. While average
customer-based funds were relatively flat between quarters, average market-
based funds between quarters increased 23 percent. A large portion of this
increase was in longer maturity liabilities, primarily foreign time deposits
and bank notes, consistent with interest rate risk management initiatives
undertaken in the latter half of 1994.
Taxable-equivalent interest income increased $678 million to $3.1 billion
in the first three months of 1995, compared to the same period of 1994. Growth
in average earning assets drove $258 million of the increase, while $420
million was related to a 112 basis point rise in the yield. Average earning
assets increased by $14.4 billion, or 10 percent, in the first quarter of 1995,
compared to the same period of 1994. As discussed earlier, this growth was led
by a 13-percent increase in average loans and leases which was broad-based
across loan categories and customer groups. In addition, the aggregate of
securities purchased under agreements to resell and trading account securities
increased $3.4 billion, primarily due to higher trading activity levels of the
Corporation's government securities dealer. The combined securities portfolio
declined $1.9 billion between the two quarters reflecting the timing of
reinvestment of proceeds from maturities and sales.
The yield on average earning assets increased 112 basis points to 7.93
percent from 6.81 percent between the two periods. The yield on total loans and
leases increased 79 basis points to 8.75 percent in the first quarter of 1995,
reflecting loan growth in a rising interest rate environment, the variable rate
nature of a significant portion of the loan portfolio and loan pricing which
has enabled the Corporation to maintain loan spreads. The Corporation's prime
interest rate rose from an average of 6.02 percent in the first quarter of 1994
to 8.83 percent in the first quarter of 1995. The yield on total securities
increased 58 basis points to 5.56 percent for the first quarter of 1995
compared to 4.98 percent for the same period of 1994. This increase resulted
from maturities and sales of lower-yielding securities coupled with
reinvestments at higher rates during the first quarter of 1995.
Interest expense increased $653 million period-over-period with growth in
average interest-bearing liabilities accounting for $125 million of the
increase and $528 million attributable to a 156 basis point rise in rates paid.
Average interest-bearing liabilities increased $13.2 billion, or 10 percent, in
the first quarter of 1995 compared to the first quarter of 1994. Interest-
bearing deposits grew $8.9 billion to $79.3 billion in the first quarter of
1995, compared to the same period of 1994. An increase in average foreign time
deposits of $9.5 billion as well as an increase of $3.4 billion in deposits
resulting from smaller banking organization acquisitions were the primary
factors in this growth. These increases were partially offset by declines in
consumer CDs and money market savings accounts, reflecting industry-wide trends
of customers seeking higher-yielding investment alternatives as well as
disciplined deposit pricing. Borrowed funds and trading account liabilities
increased $3.7 billion, to $51.0 billion, primarily to fund increased trading
activities.
The rate on average interest-bearing liabilities increased 156 basis
points to 5.13 percent in the first quarter of 1995, from 3.57 percent in the
first quarter of 1994, primarily due to a greater use of market-based funds and
the higher level of interest rates in general.
The Corporation's asset and liability management process is utilized to
manage the Corporation's interest rate risk through structuring the balance
sheet and off-balance sheet portfolios to maximize net interest income while
maintaining acceptable levels of risk to changes in market interest rates. In
implementing strategies to manage interest rate risk, the primary tools used by
the Corporation are the discretionary portfolio, which is comprised of the
securities portfolio and interest rate swaps, and management of the mix, rates
and maturities of the wholesale and retail funding sources of the Corporation.
During the rising interest rate environment of 1994, the Corporation
shifted its interest rate risk position from one postured to benefit modestly
from stable to declining interest rates to a more neutral position. The actions
taken by the Corporation to shift its position included reduction of the net
receive fixed swap position, reduction of investment securities, and extension
of maturities of fixed-rate deposits and borrowings.
Swaps allow the Corporation to adjust its interest rate risk position
without exposure to principal risk and funding requirements as swaps do not
involve the exchange of notional amounts, only net interest payments. The
Corporation uses non-leveraged generic, index amortizing and collateralized
mortgage obligation (CMO) swaps. Generic swaps involve the exchange of fixed
and variable interest rates based on the contractual underlying notional
amounts. Index amortizing and CMO swaps also involve the exchange of fixed and
variable interest rates, however, their notional amounts decline and their
maturities vary based on certain interest rate indices in the case of index
amortizing swaps, or mortgage prepayment rates in the case of CMO swaps.
14
<PAGE>
In early 1995, the Corporation entered into pay fixed interest rate swap
transactions with gross notional amounts totaling $1.6 billion. In addition,
$325 million of receive fixed interest rate swaps matured in the first quarter
of 1995. As reflected in Table 4, the gross notional amount of the
Corporation's asset and liability management interest rate swap position on
March 31, 1995, was $27.3 billion with the Corporation receiving fixed on $17.2
billion, converting variable-rate commercial loans to fixed rate and receiving
variable on $10.1 billion, fixing the cost of certain variable-rate
liabilities, primarily market-based borrowed funds. On March 31, 1995, the net
receive fixed position was $7.1 billion, representing a reduction from the net
receive fixed position of $8.9 billion on December 31, 1994, and $17.7 billion
on March 31, 1994.
Net interest income is impacted by the Corporation's asset and liability
management interest rate swap program. As reflected in Table 5, on March 31,
1995, the portfolio had a weighted average receive rate of 5.45 percent and a
pay rate of 6.40 percent. Net interest receipts and payments have been included
in interest income and expense on the underlying instruments. Asset and
liability management interest rate swaps resulted in a reduction of net
interest income of $74 million in the first quarter of 1995 compared to an
increase of $52 million in the first quarter of 1994. Deferred gains and losses
related to any terminated contracts are insignificant.
The net unrealized depreciation on March 31, 1995, was $486 million
compared to $726 million on December 31, 1994, primarily reflecting the
reduction in short-term interest rates. The net unrealized depreciation on
March 31, 1994, approximated $375 million.
Average securities for the quarter ended March 31, 1995, totaled $25.4
billion, a decrease of $1.2 billion from the fourth quarter of 1994 and a
decrease of $1.9 billion from the first quarter of 1994. Beginning in the
second quarter of 1994, the Corporation did not fully replace maturities and
sales of securities. During the first quarter of 1995, the Corporation added
slightly to securities levels in light of expected market conditions.
Approximately $6.2 billion of securities were purchased, with the Corporation
ending the first quarter of 1995 with a total securities portfolio of $26.5
billion, compared to a level of $25.8 billion on December 31, 1994. During the
remainder of 1995, approximately $5.2 billion of securities with an average
yield of approximately four percent will mature. See the Analysis of Financial
Condition - Securities for further details on the securities portfolio.
On March 31, 1995, the interest rate risk position of the Corporation
continued to be relatively neutral as the impact of a gradual 100-basis-point
rise in interest rates over the next 12 months was estimated to have an
insignificant impact on net income when compared to stable rates.
The unrealized depreciation in the estimated value of the ALM swap
portfolio and securities portfolio should be viewed in the context of the
overall balance sheet. The value of any single component of the balance sheet
or off-balance sheet position should not be viewed in isolation. For example,
the value of core deposits and other fixed-rate longer-term liabilities
increase as interest rates rise, offsetting the decline in value of swaps and
other fixed-rate assets. The overall impact of a 100-basis point parallel
increase in interest rates from March 31, 1995 levels is estimated to have an
insignificant impact on the market value of equity.
Table 6 represents the Corporation's interest rate gap position on March
31, 1995. Based on contractual maturities or repricing dates, or anticipated
dates where no contractual maturity or repricing date exists, interest-
sensitive assets and liabilities are placed in maturity categories. The
Corporation's negative cumulative interest rate gap position in the near term
reflects the strong customer-deposit gathering franchise which provides a
relatively stable core deposit base. These available funds have been deployed
in longer-term interest-earning assets including certain loans and securities.
A gap analysis is limited in its usefulness as it represents a one-day position
which is continually changing and not necessarily indicative of the
Corporation's position at any other time. Additionally, the gap analysis does
not consider the many factors accompanying interest rate movements.
Provision for Credit Losses
The provision for credit losses was $70 million in the first quarter of
1995 consistent with the provision levels in the previous three quarters. The
provision for credit losses was $100 million in the first quarter of 1994. The
lower provision level in the first quarter of 1995, compared to the first
quarter of 1994, reflects continued improvement in credit quality as evidenced
by decreases in net charge-offs and lower nonperforming asset levels.
Securities Gains
Gains from the sales of securities were $1 million in the first three
months of 1995 compared to $14 million in the same period of 1994.
15
<PAGE>
Noninterest Income
Table 7 compares the major categories of noninterest income for the first
quarters of 1995 and 1994. Noninterest income totaled $726 million in the first
quarter of 1995, an increase of $46 million, or 7 percent, from $680 million in
the same quarter of 1994.
Deposit account service charges totaled $207 million in the first quarter
of 1995, an $11-million increase compared to the first quarter of 1994. The
acquisition of several smaller banking organizations accounted for $3 million
of this increase. The remaining increase was the result of higher fees from
increased consumer account volumes and emphasis on fee collections, offset by
lower commercial account service charge fees.
Mortgage servicing and related fees totaled $21 million in the first
quarter of 1995, an increase of $5 million, or 31 percent, from $16 million in
the same quarter of 1994. The increase was primarily attributable to the
acquisition of mortgage servicing portfolios in 1994. As discussed more fully
in Note 2, on March 31, 1995, the Corporation acquired mortgage servicing
portfolios totaling $35.0 billion, bringing the total servicing portfolio to
$75.4 billion, compared to $39.0 billion on December 31, 1994 and $29.4 billion
on March 31, 1994. Mortgage loan originations through the Corporation's
mortgage subsidiary totaled $1.5 billion for the first quarter of 1995 compared
to $2.1 billion for the first quarter of 1994, primarily reflecting the rising
interest rate environment. First quarter 1995 origination volume consisted of
approximately $900 million of retail loan volume and $600 million of
correspondent loan volume.
The 53-percent increase in investment banking income was the result of
higher syndication fees and venture capital income. The Capital Markets
syndication group was agent or co-agent on 64 deals totaling $56.5 billion
during the first quarter of 1995, compared to 47 deals totaling $28.0 billion
during the same period in 1994.
First quarter 1995 General Bank trust fees were relatively flat compared
to first quarter of 1994. On March 31, 1995, discretionary assets under
management and total assets under administration by the Trust Group were $59.1
billion and $171.2 billion, respectively, compared to $57.4 billion and $163.6
billion, respectively, on December 31, 1994.
During the first quarter of 1995, the Corporation announced its decision
to sell a portion of its trust business that deals with bond servicing and
administration, known as Corporate Trust. This decision was based on
management's desire to focus on investment management, retirement and fiduciary
services. Historically, the Corporate Trust business has generated
approximately 10 percent of the Corporation's trust fees. Management does not
expect the sale of the Corporate Trust business to have a significant ongoing
impact on future net income.
Brokerage income increased $11 million, or 85 percent, to $24 million in
the first quarter of 1995 compared to $13 million in the same period of 1994.
This increase was due to the full ownership of NationsSecurities in the first
quarter of 1995. NationsSecurities was a joint venture arrangement prior to
November 15, 1994 and was accounted for under the equity method.
The Corporation maintains trading positions in a variety of cash and
derivative financial instruments. The Corporation offers a number of products
to customers, as well as enters into transactions for its own account. In
setting trading strategies, the Corporation manages these activities to
maximize trading revenues while at the same time taking controlled risks.
Trading revenues are dependent on a number of factors including interest
rate and currency movements, market liquidity and volatility, transaction
volume and diversity and outside political and industry forces. Trading account
profits and fees declined $12 million to $83 million in the first quarter of
1995 compared to the first quarter of 1994. Difficult market conditions, which
persisted throughout the latter part of 1994 as interest rates rose, continued
into 1995. Trading profits and fees of $83 million for the first quarter of
1995, were $39 million higher than the fourth quarter of 1994 levels. An
analysis of trading account profits and fees by major business activity for the
three months ended March 31 is as follows (dollars in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
------------------
<S> <C> <C>
Securities trading..................... $ 35 $ 54
Interest rate contracts................ 24 14
Foreign exchange contracts............. 9 8
Other.................................. 15 19
------------------
$ 83 $ 95
==================
</TABLE>
16
<PAGE>
Miscellaneous other income totaled $77 million in the first quarter of
1995 compared to $72 million in the first quarter of 1994. This category of
miscellaneous income includes certain prepayment and other fees as well as net
gains on sales of miscellaneous investments, business units, premises, venture
capital investments, mortgage servicing and other similar items.
On April 3, 1995, the Corporation and First Financial Management
Corporation (FFMC) announced that FFMC's subsidiary NaBANCO and the Card
Services unit agreed to form a joint venture to market merchant credit card
authorization, processing and settlement services to regional and local
merchants throughout the Corporation's service area of the Southeast and
Southwest. The Corporation contributed its merchant discount unit in exchange
for consideration including an equity investment position in the newly formed
joint venture. The venture will be called Unified Merchant Services, a NaBANCO
- - NationsBank Venture and will begin operations in the second quarter of 1995.
Accordingly, merchant discount fee income and the related expense of the
contributed unit will be reduced in future periods. However, the Corporation
will receive equity earnings from the operations of the venture.
Other Real Estate Owned Expense
OREO expense was $2 million in the first quarter of 1995, a decline from
$5 million in the same period of 1994, primarily resulting from lower levels of
OREO and improvement in asset quality. Improved real estate markets resulted in
lower OREO write-downs offset by declines in operating income.
Noninterest Expense
The Corporation's noninterest expense as shown in Table 8 increased $69
million, or six percent, in the current quarter compared to the same quarter in
1994, to a total of $1.29 billion. Approximately 60 percent of this increase
from quarter to quarter results from several smaller banking organization and
mortgage banking acquisitions during the latter portion of 1994 and the full
ownership of NationsSecurities.
Personnel expense, which accounts for 49 percent of noninterest expense,
increased $61 million in the first quarter of 1995 compared to the first
quarter of 1994. This increase was primarily due to acquisitions. Continued
investment in personnel for the Capital Markets and Financial Products groups
also contributed to the increase in personnel expense.
Marketing expense increased $21 million, or 57 percent, from $37 million
in the first quarter of 1994 to $58 million in the first quarter of 1995. This
increase was driven primarily by increased credit card solicitations in the
Financial Products group.
Other general operating expense decreased 17 percent in the first quarter
of 1995 compared to the first quarter of 1994. This $18-million decrease was
primarily due to lower loan and collection expenses.
Income Taxes
The Corporation's income tax expense was $231 million in the first quarter
of 1995. The effective tax rate was 34.3 percent of pretax income in the first
quarter of 1995, compared to 33.9 percent for the full year 1994 and 36.6
percent in the first quarter of 1994.
Analysis of Financial Condition
- -------------------------------
Liquidity, a measure of the Corporation's ability to fulfill its cash
requirements, is managed by the Corporation through its asset and liability
management process. This entails measuring and managing the relative balance
between asset, liability and off-balance sheet positions. The Corporation's
continuation of this process, coupled with its ability to raise capital and
debt financing and to securitize certain assets, ensures the maintenance of
sufficient funds to meet the liquidity needs of the Corporation.
Period-end assets were $183.9 billion, $169.6 billion and $165.1 billion
on March 31, 1995, December 31, 1994 and March 31, 1994, respectively. Average
total assets were $177.5 billion for the first three months of 1995 compared to
$161.3 billion for the first three months of 1994. The following discussion
analyzes the major components of the period-end and average balance sheets.
Cash and cash equivalents decreased $1.6 billion from December 31, 1994,
to March 31, 1995, due to $2.9 billion in cash used by operating activities and
$8.1 billion in cash used in investing activities, offset by $9.4 billion in
cash provided by financing activities.
Net cash used in investing activities totaled $8.1 billion primarily
reflecting a $2.6-billion increase in federal funds sold and securities
purchased under agreements to resell, $2.9 billion in net originations of loans
and leases, $6.2 billion in purchases of securities, $793 million in purchases
of loans and leases, partially offset by $5.7 billion in proceeds from sales
and maturities of securities.
17
<PAGE>
Net cash provided by financing activities totaled $9.4 billion due to
increases of $6.9 billion in federal funds purchased and securities sold under
agreements to repurchase, $1.1 billion in other short-term borrowings and
commercial paper, and $1.5 billion in proceeds from issuances of long-term
debt.
Table 9 presents an analysis of the major sources and uses of funds for
the two three-month periods based on average levels.
Market-based funds increased 23 percent to an average of $66.5 billion in
the first quarter of 1995 from $54.0 billion in the same period of 1994 due to
increases in foreign deposits and increased use of market-based funds related
to trading account activities primarily associated with the Corporation's
government securities dealer. Customer-based funds, which represent 47.2
percent of total sources of funds, averaged $83.8 billion in the first quarter
of 1995 compared to $83.6 billion, or 51.9 percent of total sources of funds,
in the same period of 1994.
The composition of uses of funds reflected a 13-percent increase in
average loans and leases to $103.8 billion in the first quarter of 1995
compared to the same period one year ago. Average other earning assets rose
$3.8 billion to $26.6 billion in the first three months of 1995 compared to the
same period in 1994 principally due to higher levels of securities purchased
under agreements to resell reflecting increased trading activities primarily of
the Corporation's government securities dealer and higher levels of federal
funds sold.
The Corporation's ratio of average loans to customer-based funds was 124
percent for the first three months of 1995 compared to 110 percent for the
first three months of 1994. The higher loan to deposit ratio was driven by a
high level of loan growth, a decline in customer-based deposit levels resulting
from disciplined deposit pricing and increased use of market-based funds
consistent with interest rate risk management initiatives.
Securities
The securities portfolio on March 31, 1995, consisted of securities held
for investment totaling $17.5 billion and securities available for sale
totaling $9.0 billion compared to $17.8 billion and $8.0 billion, respectively,
on December 31, 1994. On March 31, 1994, securities held for investment were
$14.4 billion and securities available for sale were $15.9 billion.
Due to uncertainty of interest rate movements, during the latter half of
1994 and early 1995, the Corporation did not fully replace maturities and sales
of securities resulting in a decline in the average securities portfolio to
$25.4 billion for the first three months in 1995 compared to $26.5 billion for
the last three months of 1994. During the first quarter the Corporation added
slightly to securities levels in light of expected market conditions by
purchasing approximately $6.2 billion of securities, bringing the ending
portfolio balance to $26.5 billion on March 31, 1995.
The Corporation's portfolio of securities held for investment reflected
unrealized net depreciation of $338 million, $699 million and $198 million on
March 31, 1995, December 31, 1994, and March 31, 1994, respectively. The
valuation reserve for securities available for sale and marketable equity
securities decreased shareholders' equity by $47 million on March 31, 1995,
reflecting $132 million of pretax depreciation on securities available for
sale, offset by $57 million of pretax appreciation on marketable equity
securities. The valuation amount reduced shareholders' equity by $136 million
and $5 million on December 31, 1994 and March 31, 1994, respectively. The
changes in the unrealized net depreciation of securities held for investment
and the valuation reserve for securities available for sale are primarily due
to changes in the levels of market interest rates and the maturity of lower-
yielding securities in these portfolios.
The estimated average maturity of the combined securities portfolios was
2.53 years, 2.56 years and 2.02 years on March 31, 1995, December 31, 1994, and
March 31, 1994, respectively. Approximately $5.2 billion of the total
securities portfolio, with an average yield of approximately four percent, will
mature over the remainder of 1995. No significant liquidations other than
scheduled maturities are currently anticipated. As such, no significant
securities losses are currently expected to result from the net unrealized
depreciation in the securities portfolios on March 31, 1995.
Loans
Loans and leases, net of unearned income on March 31, 1995, December 31,
1994 and March 31, 1994 were $105.7 billion, $102.4 billion and $92.1 billion,
respectively.
Average loans and leases increased 13 percent to $103.8 billion in the
first quarter of 1995, compared to $91.6 billion in the same period of 1994.
18
<PAGE>
Commercial loans increased $4.8 billion, or 12 percent, to an average of
$45.2 billion in the first quarter of 1995. The General Bank contributed $3.1
billion, or 65 percent of the increase, Global Finance accounted for $1.3
billion, or 27 percent of the increase, and Financial Services produced $395
million, or 8 percent of the increase.
Total nonresidential real estate commercial and construction average loans
outstanding declined $942 million, or eight percent, during the first quarter
of 1995 compared to the same period in 1994. The Corporation's geographic and
property-type distribution on March 31, 1995, for these loans was comparable to
distributions on December 31, 1994.
Residential mortgage loans for the first quarter of 1995 averaged $17.8
billion, a $4.4-billion, or 33-percent, increase in average levels from the
first quarter of 1994. The growth was primarily due to increased origination of
residential mortgages through the Corporation's vast banking center network
coupled with retention of a portion of the loans originated in the
Corporation's mortgage subsidiary.
Average credit card portfolio levels for the first quarter of 1995
increased $870 million, or 24 percent, over 1994 same period levels. Of the
$870-million increase, 77 percent, or approximately $670 million was
attributable to new accounts and 23 percent, or approximately $200 million was
attributable to increases in average outstanding balances of existing accounts.
Other average consumer loans increased $1.1 billion to $17.9 billion in the
first quarter of 1995, compared to $16.8 billion in the first quarter of 1994.
Nonperforming Assets
On March 31, 1995, nonperforming assets, presented in Table 10, were $1.08
billion, or 1.00 percent of net loans, leases, factored accounts receivable and
other real estate owned, compared to $1.14 billion, or 1.10 percent, on
December 31, 1994, and $1.64 billion, or 1.73 percent, on March 31, 1994.
Nonperforming loans totaled $854 million at the end of the first quarter
of 1995, compared to $801 million on December 31, 1994 and $1.07 billion on
March 31, 1994. The net increase in nonperforming loans from December 31, 1994
primarily reflects $80 million of in-substance foreclosed loans previously
reported as other real estate owned. The decrease from March 31, 1994 to March
31, 1995 was centered in real estate commercial and construction loans which
declined $163 million, or 37 percent, and in commercial loans which declined
$26 million, or six percent. This reduction in nonperforming loans primarily
reflected increased payments, the improved financial condition of borrowers and
the results of the Corporation's continuing loan workout activities.
Other real estate owned, which represents real estate acquired through
foreclosure totaled $221 million on March 31, 1995, a net decline of $348
million, or 61 percent, from March 31, 1994 and a net decline of $116 million,
or 34 percent, from December 31, 1994.
As discussed in Note 1 to the consolidated financial statements, on
January 1, 1995, the Corporation adopted SFAS 114. See Table 10 and Allowance
for Credit Losses.
Allowance for Credit Losses
On March 31, 1995, December 31, 1994 and March 31, 1994, the allowance for
credit losses was $2.2 billion and represented 2.03 percent, 2.11 percent and
2.33 percent, respectively, of loans, leases and factored accounts receivable.
The allowance for credit losses as a percentage of nonperforming loans was
254 percent on March 31, 1995, compared to 273 percent at year-end 1994 and 205
percent on March 31, 1994.
Table 11 provides an analysis of the changes in the allowance for credit
losses for the quarter ended March 31, 1995 and 1994. Total net charge-offs for
the first quarter of 1995 were $83 million, or .32 percent of average loans,
leases and factored accounts receivable, versus $90 million, or .39 percent, in
the comparable three-month period in 1994. The decline in net charge-offs was
primarily centered in commercial loans. The reduction in charge-offs is due to
the strengthened financial condition of borrowers.
The ratio of net charge-offs to average loans outstanding for commercial
and commercial real estate loans for the first quarter of 1995 decreased as
compared to the first quarter of 1994 from .15 and .43 percent, respectively,
to .06 and .21 percent, respectively. real estate construction loans
experienced net recoveries quarter to quarter. Offsetting these positive trends
were slight increases in the net charge-off ratios for credit card and other
consumer loans which were 2.94 and .81 percent, respectively, for the first
quarter of 1995 compared to 2.87 and .77 percent, respectively, for same period
in 1994.
19
<PAGE>
As previously discussed, on March 31, 1995, the recorded investment in
certain loans that are considered to be impaired under SFAS 114 was $692
million, all of which was classified as nonperforming. Of these impaired loans,
$441 million has a related valuation allowance of $62 million and $251 million
does not have a related valuation allowance primarily due to application of
interest payments against book balances or write-downs previously taken on
these loans. Provision expense associated with impaired loans for the first
quarter of 1995 approximated $9 million. The average recorded investment in
certain impaired loans during the quarter ended March 31, 1995, was
approximately $702 million. During the quarter ended March 31, 1995, interest
income recognized on impaired loans totaled $6.3 million, all of which was
recognized on a cash basis.
Other Earning Assets
As presented in Table 3, average other earning assets, including loans
held for sale, federal funds sold, securities purchased under agreements to
resell, trading account securities and time deposits placed and other short-
term investments increased $4.0 billion to $28.9 billion in the first quarter
of 1995, compared to $24.9 billion in the first quarter of 1994. Higher trading
related assets of the Corporation's government securities dealer was the major
factor in this increase.
Deposits
Average deposits were $99.3 billion during the first quarter of 1995,
compared to $90.3 billion during the same period of 1994. An increase in
average foreign time deposits of $9.5 billion as well as an increase of $3.4
billion in deposits resulting from smaller banking organization acquisitions
were the primary factors in this growth. The increase in foreign time deposits
is due to the extension of liability maturities consistent with interest rate
risk management initiatives. These increases were offset by a decrease of $1.8
billion in money market savings from $16.4 billion in the first quarter of 1994
to $14.6 billion in the first quarter of 1995, and a decrease of $1.1 billion
in consumer CDs from $17.7 billion in the first quarter of 1994 to $16.6
billion in the first quarter of 1995. These decreases reflect industry-wide
trends as customers continued to seek higher-yielding investment alternatives
and the Corporation's disciplined deposit pricing.
Short-Term Borrowings
Average short-term borrowings were $39.6 billion during the first quarter
of 1995, compared to $36.5 billion during the same period in 1994. This
increase in average outstandings is primarily due to an increase in securities
sold under agreements to repurchase of $3.1 billion to fund trading account
activities and increased short-term bank notes of $2.1 billion. These increases
were partially offset by a decrease in average levels of federal funds
purchased of $2.5 billion between the quarters. Commercial paper average
outstandings also increased $376 million. Commercial paper is used to partially
fund loan growth of the Financial Services Group as well as for other general
corporate purposes.
Capital
Shareholders' equity totaled $11.3 billion on March 31, 1995, compared to
$11.0 billion on December 31, 1994, and $10.2 billion on March 31, 1994. Under
previously announced common stock repurchase programs, the Corporation
repurchased and retired 1.6 million common shares at a cost of $79 million,
including approximately 500 thousand shares to offset shares issued through
dividend reinvestment and stock option and grant programs. The Corporation
plans to continue share repurchases under these programs.
The Corporation's Tier 1 ratios were 7.25 percent, 7.43 percent and 7.50
percent on March 31, 1995, December 31, 1994, and March 31, 1994, respectively.
The total risk-based capital ratios were 11.06 percent, 11.47 percent and 11.66
percent on March 31, 1995, December 31, 1994, and March 31, 1994, respectively.
Both of these measures compare favorably with the regulatory minimums.
Decreases in these ratios result primarily from increases in the level of the
Corporation's risk weighted assets, primarily loans. The Corporation's leverage
ratios were 6.15 percent, 6.18 percent and 6.11 percent on March 31, 1995,
December 31, 1994 and March 31, 1994, respectively.
Derivatives - Dealer Positions
Within the Corporation's Credit Policy organization, a group is dedicated
to managing credit risks associated with trading activities. The Corporation
maintains trading positions in a number of markets and with a variety of
counterparties or obligors ("counterparties"). To limit credit exposure arising
from such transactions, the Corporation evaluates the credit standing of
counterparties, establishes limits for the total exposure to any one
counterparty, monitors exposure against the established limits and monitors
trading portfolio composition to manage concentrations.
20
<PAGE>
Counterparties are subject to the credit approval and credit monitoring
policies and procedures of the Corporation. Certain instruments require the
Corporation or the counterparty to maintain collateral for all or part of the
exposure. Generally, such collateral is in the form of cash or other highly
liquid instruments. Limits for exposure to any particular counterparty are
established and monitored. In certain jurisdictions, counterparty risk is also
reduced through the use of legally enforceable master netting arrangements
which allow the Corporation to settle positions with the same counterparty on a
net basis. The contract or notional amounts associated with the Corporation's
derivative-dealer positions are reflected in Table 12. The notional or contract
amounts indicate the total volume of transactions and significantly exceed the
amount of the Corporation's credit or market risk associated with these
instruments. The Corporation's exposure to credit risk from derivative
financial instruments is represented by the fair value of the instruments.
Credit risk represents the replacement cost the Corporation could incur should
counterparties with contracts in a gain position to the Corporation completely
fail to perform under the terms of those contracts and any collateral
underlying the contracts proves to be of no value to the Corporation. Such
aggregate amounts measured by the Corporation as the gross positive replacement
cost on March 31, 1995 and December 31, 1994, were $3.7 billion and $1.8
billion, respectively. Of these credit risk amounts, $858 million and $354
million relates to exchange-traded instruments for 1995 and 1994, respectively.
Because exchange-traded instruments conform to standard terms and are subject
to policies set by the exchange involved, including counterparty approval,
margin requirements and security deposit requirements, the credit risk to the
Corporation is minimal. The $1.9-billion increase in the credit risk amount
from December 31, 1994 is driven primarily by an increase in foreign exchange
trading volume coupled with the continued decline in the value of the U.S.
dollar against major currencies in which the Corporation trades.
21
<PAGE>
<TABLE>
Table 1
Selected Operating Results
(Dollars in Millions Except Per-Share Information)
<CAPTION>
Three Months
Ended March 31
----------------------
1995 1994
----------------------
<S> <C> <C>
Income from earning assets................................................. $ 3,070 $ 2,398
Interest expense........................................................... 1,763 1,110
Net interest income (taxable-equivalent)................................... 1,335 1,310
Net interest income........................................................ 1,307 1,288
Provision for credit losses................................................ 70 100
Gains on sales of securities............................................... 1 14
Noninterest income......................................................... 726 680
Other real estate owned expense............................................ 2 5
Noninterest expense........................................................ 1,288 1,219
Income before income taxes................................................. 674 658
Income tax expense......................................................... 231 241
Net income................................................................. 443 417
Earnings per common share.................................................. 1.60 1.52
Yield on average earning assets............................................ 7.93 % 6.81 %
Rate on average interest-bearing liabilities............................... 5.13 3.57
Net interest spread........................................................ 2.80 3.24
Net interest yield......................................................... 3.41 3.69
Return on average common shareholders' equity (1).......................... 16.03 16.82
Market price per share of common stock
High for the period...................................................... $ 51 3/4 $ 50 7/8
Low for the period....................................................... 44 5/8 44 3/8
Closing price............................................................ 50 3/4 45 3/4
Risk-based capital ratios
Tier 1................................................................... 7.25 % 7.50 %
Total.................................................................... 11.06 11.66
(1) Average common shareholders' equity does not include the effect of fair value adjustments
to securities available for sale and marketable equity securities.
</TABLE>
22
<PAGE>
<TABLE>
Table 2
Customer Group Summary
For the Three Months Ended March 31
(Dollars in Millions)
<CAPTION>
General Bank Global Finance Financial Services
1995 1994 1995 1994 1995 1994
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income
(taxable-equivalent)...................... $ 907 $ 916 $ 304 $ 296 $ 117 $ 93
Noninterest income.......................... 479 423 231 239 16 18
------------------------------------------------------------------
Total revenue............................... 1,386 1,339 535 535 133 111
Provision for credit losses................. 41 78 - 7 29 15
Other real estate owned
expense (income).......................... 1 4 (2) - 3 1
Noninterest expense......................... 951 901 279 266 58 53
------------------------------------------------------------------
Income before taxes......................... 393 356 258 262 43 42
Income tax expense.......................... 144 137 95 101 17 17
------------------------------------------------------------------
Net income (1).............................. $ 249 $ 219 $ 163 $ 161 $ 26 $ 25
==================================================================
Net interest yield.......................... 4.43 % 4.77 % 2.55 %(2) 2.83 %(2) 7.16 % 7.31 %
Return on equity............................ 17 % 17 % 17 % 17 % 12 % 14 %
Efficiency ratio............................ 68.63 67.30 52.05 49.63 44.05 47.67
Average (3)
Total loans and leases,
net of unearned income.................. $ 64,123 $ 55,857 $ 33,478 $ 30,839 $ 6,617 $ 5,131
Total deposits............................ 77,541 77,017 15,000 9,697 - -
Total assets.............................. 88,353 82,859 76,795 65,393 7,111 5,728
Period end (3)
Total loans and leases,
net of unearned income.................. 65,319 56,532 34,113 30,587 6,988 5,283
Total deposits............................ 77,914 77,819 15,017 9,069 - -
(1) Customer Group results are presented on a fully allocated basis but do not include $5 million and $12
million of net income for 1995 and 1994, respectively, which represents earnings associated with
unassigned capital, gains on securities and other corporate activities.
(2) Global Finance's net interest yield excludes the impact of the primary government securities dealer.
Including the primary government securities dealer, the net interest yield was 1.80 percent in 1995 and
and 2.04 percent in 1994.
(3) The sums of balance sheet and income statement amounts differ from consolidated amounts due to activities
between the Customer Groups.
</TABLE>
23
<PAGE>
<TABLE>
Table 3
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
<CAPTION>
First Quarter 1995 Fourth Quarter 1994
-------------------------------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 45,238 $ 919 8.24 % $ 43,587 $ 855 7.78 %
Real estate commercial................................ 7,630 173 9.16 7,289 162 8.86
Real estate construction.............................. 3,100 77 10.07 3,038 72 9.33
----------------- -----------------
Total commercial.................................... 55,968 1,169 8.47 53,914 1,089 8.01
----------------- -----------------
Residential mortgage.................................. 17,780 343 7.76 16,680 321 7.68
Home equity........................................... 2,675 62 9.33 2,580 56 8.71
Credit card........................................... 4,543 139 12.36 4,357 141 12.80
Other consumer........................................ 17,949 439 9.91 17,714 430 9.63
----------------- -----------------
Total consumer...................................... 42,947 983 9.24 41,331 948 9.12
----------------- -----------------
Foreign............................................... 1,961 36 7.50 1,764 30 6.79
Lease financing....................................... 2,951 58 7.86 2,755 53 7.71
----------------- -----------------
Total loans and leases, net......................... 103,827 2,246 8.75 99,764 2,120 8.44
----------------- -----------------
Securities
Held for investment................................... 17,648 238 5.45 17,966 245 5.40
Available for sale (3)................................ 7,728 110 5.80 8,560 117 5.44
----------------- -----------------
Total securities.................................... 25,376 348 5.56 26,526 362 5.42
----------------- -----------------
Loans held for sale..................................... 61 1 9.10 109 3 7.65
Federal funds sold and securities purchased
under agreements to resell............................ 15,014 230 6.22 16,159 203 5.00
Time deposits placed and other short-term investments... 2,297 40 7.01 2,231 32 5.75
Trading account securities (4).......................... 11,574 233 8.16 10,318 224 8.64
----------------- -----------------
Total earning assets (5)............................ 158,149 3,098 7.93 155,107 2,944 7.54
Cash and cash equivalents................................. 8,321 8,674
Factored accounts receivable.............................. 1,048 1,235
Other assets, less allowance for credit losses............ 9,997 9,538
-------- --------
Total assets........................................ $177,515 $174,554
======== ========
Interest-bearing liabilities
Savings................................................. $ 8,911 53 2.39 $ 9,143 54 2.37
NOW and money market deposit accounts................... 28,577 187 2.66 29,442 190 2.53
Consumer CDs and IRAs................................... 24,818 291 4.76 25,136 277 4.40
Negotiated CDs, public funds and other time deposits.... 3,151 41 5.30 2,825 35 4.80
Foreign time deposits................................... 13,844 211 6.18 11,576 162 5.57
Borrowed funds and trading account liabilities (4)(6)... 50,993 820 6.52 50,110 756 5.99
Long-term debt and obligations under capital leases..... 8,888 160 7.22 8,147 144 7.08
----------------- -----------------
Total interest-bearing liabilities.................. 139,182 1,763 5.13 136,379 1,618 4.71
Noninterest-bearing sources
Noninterest-bearing deposits............................ 19,984 20,452
Other liabilities....................................... 7,157 6,817
Shareholders' equity.................................... 11,192 10,906
-------- --------
Total liabilities and shareholders' equity.......... $177,515 $174,554
======== ========
Net interest spread....................................... 2.80 2.83
Impact of noninterest-bearing sources..................... .61 .57
Net interest income/yield on earning assets............... $ 1,335 3.41 % $ 1,326 3.40 %
======= =======
(1) Nonperforming loans are included in the respective average loan balances. Income on such nonperforming loans
is recognized on a cash basis.
(2) Commercial loan interest income includes net interest rate swap revenues related to swaps converting
variable-rate commercial loans to fixed rate. Such increases (decreases) in interest income were $(61) in
the first quarter of 1995 and $(32), $0, $38 and $56 in the fourth, third, second and first quarters of 1994,
respectively.
(3) The average balance sheet amounts and yields on securities available for sale are based on the average of
historical amortized cost balances.
(4) Gross unrealized gains and losses on off-balance sheet trading positions are reported in other assets and
liabilities, respectively.
(5) Interest income includes taxable-equivalent adjustments of $28 in the first quarter of 1995 and $26, $24, $22
and $22 in the fourth, third, second and first quarters of 1994, respectively.
(6) Borrowed funds and trading account liabilities interest expense includes net interest rate swap expense related
to swaps fixing the cost of certain variable-rate liabilities, primarily market-based funds. Such increases
(decreases) in interest expense were $12 in the first quarter of 1995 and $20, $9, $(1) and $3 in the fourth,
third, second and first quarters of 1994, respectively.
</TABLE>
24
<PAGE>
<TABLE>
Table 3
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
<CAPTION>
Third Quarter 1994 Second Quarter 1994
-------------------------------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 42,037 $ 805 7.60 % $ 40,339 $ 765 7.61 %
Real estate commercial................................ 7,473 159 8.43 7,955 157 7.92
Real estate construction.............................. 3,106 66 8.50 3,226 68 8.42
----------------- -----------------
Total commercial.................................... 52,616 1,030 7.77 51,520 990 7.71
----------------- -----------------
Residential mortgage.................................. 15,528 296 7.60 14,329 270 7.54
Home equity........................................... 2,516 55 8.72 2,480 46 7.41
Credit card........................................... 4,003 131 12.96 3,783 115 12.27
Other consumer........................................ 17,357 412 9.42 17,060 397 9.33
----------------- -----------------
Total consumer...................................... 39,404 894 9.02 37,652 828 8.82
----------------- -----------------
Foreign............................................... 1,453 23 6.34 1,287 18 5.73
Lease financing....................................... 2,474 49 7.90 2,146 38 7.08
----------------- -----------------
Total loans and leases, net......................... 95,947 1,996 8.27 92,605 1,874 8.12
----------------- -----------------
Securities
Held for investment................................... 15,443 197 5.08 14,009 167 4.79
Available for sale (3)................................ 11,683 152 5.17 14,829 191 5.16
----------------- -----------------
Total securities.................................... 27,126 349 5.12 28,838 358 4.98
----------------- -----------------
Loans held for sale..................................... 183 3 6.69 392 6 6.49
Federal funds sold and securities purchased
under agreements to resell............................ 13,495 149 4.38 11,780 108 3.64
Time deposits placed and other short-term investments... 2,216 29 5.16 1,211 15 4.96
Trading account securities (4).......................... 10,488 199 7.52 10,265 173 6.75
----------------- -----------------
Total earning assets (5)............................ 149,455 2,725 7.24 145,091 2,534 7.00
----------------- -----------------
Cash and cash equivalents................................. 8,372 8,051
Factored accounts receivable.............................. 1,156 1,599
Other assets, less allowance for credit losses............ 8,300 7,248
-------- --------
Total assets........................................ $167,283 $161,989
======== ========
Interest-bearing liabilities
Savings................................................. $ 9,255 54 2.31 $ 9,181 53 2.30
NOW and money market deposit accounts................... 29,507 179 2.41 29,816 166 2.24
Consumer CDs and IRAs................................... 24,439 257 4.17 22,855 231 4.02
Negotiated CDs, public funds and other time deposits.... 3,223 34 4.23 3,574 33 3.80
Foreign time deposits................................... 8,436 108 5.06 5,691 63 4.49
Borrowed funds and trading account liabilities (4)(6)... 48,688 629 5.13 47,122 514 4.38
Long-term debt and obligations under capital leases..... 7,731 134 6.95 7,952 135 6.75
----------------- -----------------
Total interest-bearing liabilities.................. 131,279 1,395 4.22 126,191 1,195 3.80
Noninterest-bearing sources ----------------- -----------------
Noninterest-bearing deposits............................ 19,796 20,241
Other liabilities....................................... 5,543 5,285
Shareholders' equity.................................... 10,665 10,272
-------- --------
Total liabilities and shareholders' equity.......... $167,283 $161,989
======== ========
Net interest spread....................................... 3.02 3.20
Impact of noninterest-bearing sources..................... .52 .50
Net interest income/yield on earning assets............... $ 1,330 3.54 % $ 1,339 3.70 %
======= =======
</TABLE>
25
<PAGE>
<TABLE>
Table 3
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
<CAPTION>
First Quarter 1994
---------------------------
Average
Balance Income
Sheet or Yields/
Amounts Expense Rates
---------------------------
<S> <C> <C> <C>
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 40,421 $ 722 7.24 %
Real estate commercial................................ 8,419 158 7.61
Real estate construction.............................. 3,253 62 7.73
-----------------
Total commercial.................................... 52,093 942 7.33
-----------------
Residential mortgage.................................. 13,340 254 7.67
Home equity........................................... 2,547 45 7.11
Credit card........................................... 3,673 121 13.32
Other consumer........................................ 16,806 390 9.41
-----------------
Total consumer...................................... 36,366 810 9.00
-----------------
Foreign............................................... 1,157 15 5.15
Lease financing....................................... 1,992 36 7.19
-----------------
Total loans and leases, net......................... 91,608 1,803 7.96
-----------------
Securities
Held for investment................................... 12,714 152 4.82
Available for sale (3)................................ 14,545 184 5.12
-----------------
Total securities.................................... 27,259 336 4.98
-----------------
Loans held for sale..................................... 681 11 6.46
Federal funds sold and securities purchased
under agreements to resell............................ 12,073 87 2.95
Time deposits placed and other short-term investments... 1,375 14 4.12
Trading account securities (4).......................... 10,738 169 6.39
-----------------
Total earning assets (5)............................ 143,734 2,420 6.81
Cash and cash equivalents................................. 7,976
Factored accounts receivable.............................. 1,016
Other assets, less allowance for credit losses............ 8,568
--------
Total assets........................................ $161,294
========
Interest-bearing liabilities
Savings................................................. $ 8,879 51 2.33
NOW and money market deposit accounts................... 30,140 161 2.17
Consumer CDs and IRAs................................... 23,295 234 4.09
Negotiated CDs, public funds and other time deposits.... 3,664 31 3.44
Foreign time deposits................................... 4,385 42 3.86
Borrowed funds and trading account liabilities (4)(6)... 47,336 454 3.89
Long-term debt and obligations under capital leases..... 8,308 137 6.61
-----------------
Total interest-bearing liabilities.................. 126,007 1,110 3.57
Noninterest-bearing sources
Noninterest-bearing deposits............................ 19,897
Other liabilities....................................... 5,310
Shareholders' equity.................................... 10,080
--------
Total liabilities and shareholders' equity.......... $161,294
========
Net interest spread....................................... 3.24
Impact of noninterest-bearing sources..................... .45
Net interest income/yield on earning assets............... $ 1,310 3.69 %
=======
</TABLE>
26
<PAGE>
<TABLE>
Table 4
Asset and Liability Management Interest Rate Swaps
Notional Contracts
(Dollars in Millions)
<CAPTION>
Index
Generic Amortizing CMO Total
----------------------------------------------------------------------------
Receive Pay Receive Receive Pay Receive Pay
Fixed Fixed Fixed Fixed Fixed Fixed Fixed Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1994... $ 6,528 $ 8,446 $ 8,450 $ 2,504 $ 97 $ 17,482 $ 8,543 $ 26,025
Additions.................... - 1,561 - - - - 1,561 1,561
Maturities................... (205) - (87) (33) (2) (325) (2) (327)
---------------------------------------------------------------------------------------
Balance on March 31, 1995...... $ 6,323 $ 10,007 $ 8,363 $ 2,471 $ 95 $ 17,157 $ 10,102 $ 27,259
=======================================================================================
</TABLE>
27
<PAGE>
<TABLE>
Table 5
Asset and Liability Management Interest Rate Swaps
March 31, 1995
(Dollars in Millions, Average Maturity in Years)
<CAPTION>
Maturities
-----------------------------------------------------------------
Market After Average
Value Total 1995 1996 1997 1998 1999 1999 Maturity
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Conversion Swaps
- ----------------------
Receive fixed generic.............. $(101) .91
Notional value.................... $ 6,323 $2,932 $ 2,705 $ 575 $ 3 - $ 108
Weighted average receive rate..... 4.53 % 4.30 % 4.63 % 4.45 % 6.58 % - 8.55 %
Weighted average pay rate......... 6.39
Receive fixed amortizing........... (362) 2.17
Notional value.................... $ 8,363 $ 590 $ 460 $ 5,649 $1,664 - -
Weighted average receive rate..... 4.91 % 5.20 % 5.11 % 4.84 % 4.99 % - -
Weighted average pay rate......... 6.29
Receive fixed CMO.................. (94) 1.98
------
Notional value.................... $ 2,471 $ 659 $ 559 $ 369 $ 451 $ 433 -
Weighted average receive rate..... 5.12 % 5.10 % 5.10 % 5.11 % 5.08 % 5.21 % -
Weighted average pay rate......... 6.13
Total asset conversion swaps....... $(557) 1.68
======
Notional value.................... $17,157 $4,181 $ 3,724 $ 6,593 $2,118 $ 433 $ 108
Weighted average receive rate..... 4.80 % 4.56 % 4.76 % 4.82 % 5.01 % 5.21 % 8.55 %
Weighted average pay rate......... 6.30
Liability Conversion Swaps
- --------------------------
Pay fixed generic.................. $ 67 1.46
Notional value.................... $10,007 $ 110 $ 8,787 $ 925 $ 100 - $ 85
Weighted average pay rate......... 6.58 % 6.64 % 6.52 % 7.34 % 5.02 % - 5.82 %
Weighted average receive rate..... 6.55
Pay fixed CMO...................... 4 1.87
------
Notional value.................... $ 95 $ 21 $ 21 $ 15 $ 38 - -
Weighted average pay rate......... 4.44 % 4.44 % 4.44 % 4.44 % 4.44 % - -
Weighted average receive rate..... 6.13
Total liability conversion swaps... $ 71 1.47
======
Notional value.................... $10,102 $ 131 $ 8,808 $ 940 $ 138 - $ 85
Weighted average pay rate......... 6.56 % 6.29 % 6.52 % 7.29 % 4.86 % - 5.82 %
Weighted average receive rate..... 6.55
Total.............................. $(486)
======
Notional value.................... $27,259 $4,312 $12,532 $ 7,533 $2,256 $ 433 $ 193
Weighted average receive rate..... 5.45 %
Weighted average pay rate......... 6.40
Floating rates represent the last repricing and will change in the future based on movements in one, three or six
month LIBOR rates.
Maturities are based on interest rates implied by the forward curve on March 31, 1995, and may differ from actual
maturities, depending on future interest rate movements and resultant prepayment patterns.
In addition to the above asset and liability management interest rate swaps, on March 31, 1995, the Corporation had
approximately $1.2 billion notional of net receive fixed generic interest rate swaps associated primarily with a
credit card securitization. On March 31, 1995, these positions had an unrealized market value of negative $77
million. On March 31, 1995, the weighted average receive rate was 5.19 percent and the pay rate was 6.94 percent.
</TABLE>
28
<PAGE>
<TABLE>
Table 6
Interest Rate Gap Analysis
March 31, 1995
(Dollars in Millions)
<CAPTION>
Over 12
Months and
Interest-Sensitive Noninterest-
30-Day 3-Month 6-Month 12-Month Total Sensitive Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets
Loans and leases, net of
unearned income........................ $ 46,257 $ 10,955 $ 3,883 $ 6,731 $ 67,826 $ 37,878 $ 105,704
Securities held for investment........... 34 79 3,805 2,991 6,909 10,637 17,546
Securities available for sale............ 8 408 46 1,278 1,740 7,222 8,962
Loans held for sale...................... 286 - - - 286 - 286
Time deposits placed and other
short-term investments................. 1,314 744 438 252 2,748 2 2,750
Trading account securities............... 13,148 - - - 13,148 - 13,148
Other earning assets..................... 13,688 - - - 13,688 - 13,688
------------------------------------------------------------------------------
Total.................................. 74,735 12,186 8,172 11,252 106,345 55,739 $ 162,084
------------------------------------------------------------------------------
Interest-bearing liabilities
Savings.................................. 8,844 - - - 8,844 - $ 8,844
NOW and money market deposit
accounts............................... 20,573 - - - 20,573 7,551 28,124
Consumer CDs and IRAs.................... 3,150 3,738 4,535 4,958 16,381 8,559 24,940
Negotiated CDs, public funds and
other time deposits.................... 955 981 715 320 2,971 303 3,274
Foreign time deposits.................... 6,496 3,198 2,410 3,193 15,297 - 15,297
Borrowed funds........................... 34,276 2,754 3,302 1,759 42,091 - 42,091
Short sales.............................. 11,422 - - - 11,422 - 11,422
Long-term debt and obligations under
capital leases......................... 432 1,956 260 599 3,247 6,569 9,816
------------------------------------------------------------------------------
Total.................................. 86,148 12,627 11,222 10,829 120,826 22,982 143,808
Noninterest-bearing, net................... - - - - - 18,276 18,276
------------------------------------------------------------------------------
Total.................................. 86,148 12,627 11,222 10,829 120,826 41,258 $ 162,084
------------------------------------------------------------------------------
Interest rate gap.......................... (11,413) (441) (3,050) 423 (14,481) 14,481
Effect of asset and liability management
interest rate swaps, futures and
other off-balance sheet items............ (7,347) (6,809) 8,651 2,515 (2,990) 2,990
-------------------------------------------------------------------
Adjusted interest rate gap................. $ (18,760) $ (7,250) $ 5,601 $ 2,938 $ (17,471) $ 17,471
===================================================================
Cumulative adjusted interest rate gap...... $ (18,760) $ (26,010) $ (20,409) $ (17,471)
===========================================
</TABLE>
29
<PAGE>
<TABLE>
Table 7
Noninterest Income
(Dollars in Millions)
<CAPTION>
Three Months
Ended March 31 Change
-----------------------------------
1995 1994 Amount Percent
-----------------------------------
<S> <C> <C> <C> <C>
Service charges on deposit accounts............ $ 207 $ 196 $ 11 5.6 %
----------------------------------
Nondeposit-related service fees
Safe deposit rent............................ 9 8 1 12.5
Mortgage servicing and related fees.......... 21 16 5 31.3
Fees on factored accounts receivable......... 17 18 (1) (5.6)
Investment banking income.................... 49 32 17 53.1
Other service fees........................... 29 27 2 7.4
----------------------------------
Total nondeposit-related service fees...... 125 101 24 23.8
----------------------------------
Trust fees..................................... 110 109 1 0.9
----------------------------------
Credit card income
Merchant discount fees....................... 7 7 - -
Annual credit card fees...................... 6 6 - -
Other credit card fees....................... 54 52 2 3.8
----------------------------------
Total credit card income................... 67 65 2 3.1
----------------------------------
Other income
Brokerage income............................. 24 13 11 84.6
Trading account profits and fees............. 83 95 (12) (12.6)
Bankers' acceptances and letters of credit... 18 17 1 5.9
Insurance commissions and earnings........... 15 12 3 25.0
Miscellaneous................................ 77 72 5 6.9
----------------------------------
Total other income......................... 217 209 8 3.8
----------------------------------
$ 726 $ 680 $ 46 6.8
==================================
</TABLE>
30
<PAGE>
<TABLE>
Table 8
Noninterest Expense
(Dollars in Millions)
<CAPTION>
Three Months
Ended March 31 Change
-------------------------------------------
1995 1994 Amount Percent
-------------------------------------------
<S> <C> <C> <C> <C>
Personnel.................................. $ 625 $ 564 $ 61 10.8 %
Occupancy, net............................. 121 120 1 0.8
Equipment.................................. 93 86 7 8.1
Marketing.................................. 58 37 21 56.8
Professional fees.......................... 37 43 (6) (14.0)
Amortization of intangibles................ 30 34 (4) (11.8)
Credit card................................ 14 19 (5) (26.3)
FDIC insurance............................. 51 53 (2) (3.8)
Processing................................. 63 58 5 8.6
Telecommunications......................... 36 32 4 12.5
Postage and courier........................ 34 33 1 3.0
Other general operating.................... 89 107 (18) (16.8)
General administrative and miscellaneous... 37 33 4 12.1
------------------------------------------
$ 1,288 $ 1,219 $ 69 5.7
==========================================
</TABLE>
31
<PAGE>
<TABLE>
Table 9
Sources and Uses of Funds
(Average Dollars in Millions)
<CAPTION>
Three Months Ended March 31
-------------------------------------------
1995 1994
-------------------------------------------
Amount Percent Amount Percent
-------------------------------------------
<S> <C> <C> <C> <C>
Composition of sources
Savings, NOW, money market deposit accounts,
and consumer CDs and IRAs............................. $ 62,306 35.1 % $ 62,314 38.7 %
Noninterest-bearing funds................................. 19,984 11.3 19,897 12.3
Customer-based portion of negotiated CDs.................. 1,502 0.8 1,435 0.9
------------------------------------------
Customer-based funds.................................. 83,792 47.2 83,646 51.9
Market-based funds........................................ 66,486 37.5 53,950 33.4
Long-term debt and obligations under capital leases....... 8,888 5.0 8,308 5.2
Other liabilities......................................... 7,157 4.0 5,310 3.3
Shareholders' equity...................................... 11,192 6.3 10,080 6.2
------------------------------------------
Total sources......................................... $ 177,515 100.0 % $ 161,294 100.0 %
==========================================
Composition of uses
Loans and leases, net of unearned income.................. $ 103,827 58.5 % $ 91,608 56.8 %
Securities held for investment............................ 17,648 9.9 12,714 7.9
Securities available for sale............................. 7,728 4.4 14,545 9.0
Loans held for sale....................................... 61 - 681 0.4
Time deposits placed and other short-term investments..... 2,297 1.3 1,375 0.9
Other earning assets...................................... 26,588 15.0 22,811 14.1
------------------------------------------
Total earning assets.................................. 158,149 89.1 143,734 89.1
Factored accounts receivable.............................. 1,048 0.6 1,016 0.6
Other assets.............................................. 18,318 10.3 16,544 10.3
------------------------------------------
Total uses............................................ $ 177,515 100.0 % $ 161,294 100.0 %
==========================================
</TABLE>
32
<PAGE>
<TABLE>
Table 10
Nonperforming Assets
(Dollars in Millions)
<CAPTION>
March 31 December 31 September 30 June 30 March 31
1995 1994 1994 1994 1994
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial........................................... $ 406 $ 362 $ 411 $ 425 $ 432
Real estate commercial............................... 209 201 198 248 282
Real estate construction............................. 71 66 82 90 161
-------------------------------------------------------------------------
Total commercial................................... 686 629 691 763 875
-------------------------------------------------------------------------
Residential mortgage................................. 66 66 71 69 71
Home equity.......................................... 9 10 8 9 8
Other consumer....................................... 79 84 82 82 99
-------------------------------------------------------------------------
Total consumer..................................... 154 160 161 160 178
-------------------------------------------------------------------------
Foreign.............................................. 6 3 4 5 5
Lease financing...................................... 8 9 6 8 9
-------------------------------------------------------------------------
Total nonperforming loans.......................... 854 801 862 936 1,067
Other real estate owned................................ 221 337 414 485 569
-------------------------------------------------------------------------
Total nonperforming assets......................... $ 1,075 $ 1,138 $ 1,276 $ 1,421 $ 1,636
=========================================================================
Nonperforming assets as a percentage of
Total assets......................................... .58 % .67 % .75 % .86 % .99 %
Loans, leases and factored accounts
receivable, net of unearned income,
and other real estate owned........................ 1.00 1.10 1.29 1.48 1.73
Loans past due 90 days or more and not
classified as nonperforming........................ $ 129 $ 146 $ 124 $ 90 $ 154
On January 1, 1995, the date of adoption of SFAS 114, the recorded investments in certain loans that are considered impaired
totaled $712 million (including $80 million of in-substance foreclosed loans previously reported as other real estate owned) and
included $390 million for commercial, $229 million for real estate commercial, $90 million for real estate construction and $3
million for foreign. On March 31, 1995 the recorded investments in certain loans that are considered impaired under SFAS 114
totaled $692 million and included $406 million for commercial, $209 million for real estate commercial, $71 million for real
estate construction and $6 million for foreign.
</TABLE>
33
<PAGE>
<TABLE>
Table 11
Allowance For Credit Losses
(Dollars in Millions)
<CAPTION>
Three Months
Ended March 31
-----------------------
1995 1994
-----------------------
<S> <C> <C>
Beginning balance (1)................................................ $ 2,186 $ 2,169
----------------------
Loans, leases and factored accounts receivable charged off
Commercial......................................................... (25) (29)
Real estate commercial............................................. (7) (12)
Real estate construction........................................... (3) (7)
----------------------
Total commercial................................................. (35) (48)
----------------------
Residential mortgage............................................... (2) (2)
Home equity........................................................ (1) -
Credit card........................................................ (39) (32)
Other consumer..................................................... (53) (48)
----------------------
Total consumer................................................... (95) (82)
----------------------
Factored accounts receivable....................................... (4) (16)
----------------------
Total loans, leases and factored accounts
receivable charged off......................................... (134) (146)
----------------------
Recoveries of loans, leases and factored accounts
receivable previously charged off
Commercial......................................................... 18 14
Real estate commercial............................................. 3 3
Real estate construction........................................... 4 11
----------------------
Total commercial................................................. 25 28
----------------------
Residential mortgage............................................... - 1
Credit card........................................................ 6 6
Other consumer..................................................... 17 16
----------------------
Total consumer................................................... 23 23
----------------------
Lease financing.................................................... 1 1
Factored accounts receivable....................................... 2 4
Total recoveries of loans, leases and ----------------------
factored accounts receivable previously charged off............ 51 56
----------------------
Net charge-offs.................................................. (83) (90)
----------------------
Provision for credit losses.......................................... 70 100
Allowance applicable to loans of purchased companies................. 1 8
----------------------
Ending balance (1)................................................... $ 2,174 $ 2,187
======================
Loans, leases and factored accounts receivable,
net of unearned income, outstanding on March 31.................... $ 106,928 $ 93,767
Allowance for credit losses as a percentage of
loans, leases and factored accounts receivable,
net of unearned income, outstanding on March 31.................... 2.03 % 2.33 %
Average loans, leases and factored accounts receivable,
net of unearned income, outstanding during the period.............. $ 104,875 $ 92,624
Net charge-offs as a percentage of average loans,
leases and factored accounts receivable,
net of unearned income, outstanding during the period.............. 0.32 % 0.39 %
Allowance for credit losses as a percentage of nonperforming loans... 254.49 205.04
(1) Reserves associated with loans that are considered to be impaired under SFAS 114
totaled approximately $64 million on January 1, 1995 and $62 million on March 31, 1995.
</TABLE>
34
<PAGE>
<TABLE>
Table 12
Derivatives - Dealer Positions
(Dollars in Millions)
<CAPTION>
March 31 December 31
1995 1994
Contract/ Contract/
Notional Notional
--------------------------
<S> <C> <C>
Interest Rate Contracts
Swaps.......................... $ 63,794 $ 45,179
Futures and forwards........... 204,573 124,620
Written options................ 113,830 114,928
Purchased options.............. 103,465 118,839
Foreign Exchange Contracts
Swaps.......................... 570 470
Spot, futures and forwards..... 43,269 26,987
Written options................ 20,152 13,398
Purchased options.............. 19,541 13,507
Commodity Contracts
Swaps.......................... 781 570
Futures and forwards........... 1,275 1,984
Written options................ 18,095 12,608
Purchased options.............. 20,549 11,591
</TABLE>
35
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 10 - NationsBank Corporation Key Employee Stock Plan
Exhibit 11 - Earnings Per Share Computation
Exhibit 12(a) - Ratio of Earnings to Fixed Charges
Exhibit 12(b) - Ratio of Earnings to Fixed Charges and Preferred
Dividends
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
The following reports on Form 8-K were filed by the Corporation
during the quarter ended March 31, 1995:
Current Report on Form 8-K dated January 17, 1995, and filed
January 26, 1995, Items 5 and 7.
Current Report on Form 8-K dated February 16, 1995, and filed
February 21, 1995, Items 5 and 7.
Current Report on Form 8-K dated February 22, 1995, and filed
March 2, 1995, Items 5 and 7.
Current Report on Form 8-K dated February 28, 1995, and filed
March 2, 1995, Items 5 and 7.
Current Report on Form 8-K, as amended, dated March 20, 1995, and
filed March 21, 1995, Items 5 and 7.
Current Report on Form 8-K dated March 20, 1995, and filed March
27, 1995, Items 5 and 7.
36
<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NationsBank Corporation
-------------------------------------
Registrant
Date: May 15, 1995 /s/ Marc D. Oken
------------------ -------------------------------------
Marc D. Oken
Executive Vice President
and Chief Accounting Officer
(Duly Authorized Officer and
Principal Accounting Officer)
37
<PAGE>
NationsBank Corporation
Form 10-Q
Index to Exhibits
Exhibit Description Page
- ------- ----------- ----
10 NationsBank Corporation Key Employee Stock Plan................. 39
11 Earnings Per Share Computation.................................. 60
12(a) Ratio of Earnings to Fixed Charges.............................. 61
12(b) Ratio of Earnings to Fixed Charges and Preferred Dividends...... 62
27 Financial Data Schedule......................................... 63
38
<PAGE>
Exhibit 10
NationsBank Corporation Key Employee Stock Plan
Contents Page
- -----------------------------------------------------------------------------
Article 1. Establishment, Purpose, and Duration 40
Article 2. Definitions 40
Article 3. Administration 45
Article 4. Shares Subject to the Plan 46
Article 5. Eligibility and Participation 47
Article 6. Stock Options 47
Article 7. Stock Appreciation Rights 49
Article 8. Restricted Stock 51
Article 9. Performance Shares 52
Article 10. Performance Measures 53
Article 11. Beneficiary Designation 54
Article 12. Deferrals 54
Article 13. Rights of Key Employees 54
Article 14. Change in Control 55
Article 15. Amendment, Modification, and Termination 57
Article 16. Withholding 58
Article 17. Indemnification 58
Article 18. Successors 58
Article 19. Legal Construction 58
39
<PAGE>
NationsBank Corporation
Key Employee Stock Plan
Article 1. Establishment, Purpose, and Duration
1.1 Establishment of the Plan. NationsBank Corporation, a North Carolina
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "NationsBank Corporation Key
Employee Stock Plan" (hereinafter referred to as the "Plan"), as set forth in
this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Shares.
Subject to approval by the Company's shareholders, the Plan shall
become effective as of January 1, 1995 (the "Effective Date") and shall remain
in effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the personal interests
of Participants to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon
whose judgment, interest and special effort the successful conduct of its
operation largely is dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan after December 31, 2004.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
2.1 "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock or Performance Shares.
2.2 "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.3 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
40
<PAGE>
2.4 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5 "Change in Control" of the Company means, and shall be deemed to have
occurred upon, any of the following events:
(a) The acquisition by any Person of Beneficial Ownership of twenty-five
percent (25%) or more of either:
(i) The then-outstanding Shares (the "Outstanding Shares"); or
(ii) The combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
Directors (the "Outstanding Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company or pursuant to a written agreement to
which the Company is a party, as such written agreement is more particularly
described in Section 55-9A-01(b)(3)f and g of the North Carolina Business
Corporation Act as ratified by the North Carolina General Assembly on June 8,
1989, (B) any acquisition by the Company or any of its Subsidiaries, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Subsidiaries, (D) any acquisition by
any corporation with respect to which, following such acquisition, more than
fifty percent (50%) of, respectively, the then-outstanding shares of common
stock of such corporation and the combined voting power of the then-outstanding
voting securities of such corporation entitled to vote generally in the
election of directors are then beneficially owned by all or substantially all
of the Persons who were the Beneficial Owners, respectively, of the Outstanding
Shares and Outstanding Voting Securities immediately prior to such acquisition
in substantially the same proportions as their Beneficial Ownership,
immediately prior to such acquisition, of the Outstanding Shares and
Outstanding Voting Securities, as the case may be; or
(b) Individuals who, as of the Effective Date, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any individual who
becomes a Director subsequent to the Effective Date and whose election, or
whose nomination for election by the Company's shareholders, to the Board of
Directors was either (i) approved by a vote of at least a majority of the
Directors then comprising the Incumbent Board or (ii) recommended by a
Nominating Committee comprised entirely of Directors who are then Incumbent
Board members shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act), other actual or threatened
solicitation of proxies or consents or an actual or threatened tender offer; or
41
<PAGE>
(c) Approval by the Company's shareholders of a reorganization, merger,
or consolidation, in each case, with respect to which all or substantially all
of the Persons who were the Beneficial Owners, respectively, of the Outstanding
Shares and Outstanding Voting Securities immediately prior to such
reorganization, merger, or consolidation do not, following such reorganization,
merger, or consolidation, beneficially own more than fifty percent (50%) of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger, or consolidation in substantially
the same proportions as their Beneficial Ownership, immediately prior to such
reorganization, merger, or consolidation, of the Outstanding Shares and
Outstanding Voting Securities, as the case may be; or
(d) Approval by the Company's shareholders of:
(i) A complete liquidation or dissolution of the Company; or
(ii) The sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect to which
following such sale or other disposition, more than fifty percent (50%) of,
respectively, the then-outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned by all or substantially all of the Persons who were the
Beneficial Owners, respectively, of the Outstanding Shares and Outstanding
Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their Beneficial Ownership, immediately
prior to such sale or other disposition, of the Outstanding Shares and
Outstanding Voting Securities, as the case may be.
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to the Code shall include the valid and binding
governmental regulations, court decisions and other regulatory and judicial
authority issued or rendered thereunder.
2.7 "Committee" means the Stock Option Committee of the Board, as
specified in Article 3 herein, appointed by the Board to administer the Plan
with respect to grants of Awards.
2.8 "Company" means NationsBank Corporation, a North Carolina
corporation, and any successor as provided in Article 18 herein.
42
<PAGE>
2.9 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.10 "Disability," with respect to a Participant, means "disability" as
defined from time to time under any long-term disability plan of the Company or
Subsidiary with which the Participant is employed.
2.11 "Earnings Per Share" means "earnings per common share" of the
Company determined in accordance with generally accepted accounting principles
that would be reported in the Company's Annual Report to Shareholders.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.14 "Fair Market Value" shall be determined on the basis of the closing
sale price on the New York Stock Exchange (or such other principal securities
exchange on which the Shares are traded if the Shares are no longer traded on
the New York Stock Exchange) or, if there is no such sale on the relevant date,
then on the last previous day on which a sale was reported.
2.15 "Freestanding SAR" means an SAR that is granted independently of any
Options.
2.16 "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 herein, and which is designated as an Incentive
Stock Option which is intended to meet the requirements of Section 422 of the
Code.
2.17 "Insider" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18 "Key Employee" means an employee of the Company, including an
officer of the Company, in a managerial or other important position who, by
virtue of such employee's ability, qualifications and performance, has made
important contributions to the Company, all as determined by the Committee in
its discretion.
2.19 "Named Executive Officer" means, for a calendar year, a Participant
who is one of the group of "covered employees" for such calendar year within
the meaning of Code Section 162(m) or any successor statute.
2.20 "Net Income" means "net income" of the Company determined in
accordance with generally accepted accounting principles that would be reported
in the Company's Annual Report to Shareholders.
43
<PAGE>
2.21 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted to Key Employees under Article 6 herein, and which is not
intended to meet the requirements of Code Section 422.
2.22 "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
2.23 "Option Price" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
2.24 "Participant" means a Key Employee who has outstanding an Award
granted under the Plan.
2.25 "Performance-Based Exception" means the performance-based exception
set forth in Code Section 162(m)(4)(C) from the deductibility limitations of
Code Section 162(m).
2.26 "Performance Share" means an Award granted to an Key Employee, as
described in Article 9 herein.
2.27 "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.28 "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
2.29 "Restricted Stock" means an Award granted to a Participant pursuant
to Article 8 herein.
2.30 "Retirement" of a Participant means the Participant's termination of
employment with the Company and Subsidiaries (other than by reason of death)
after the Participant has attained both (i) age fifty (50) and (ii) a combined
age and years of "Vesting Service" under the NationsBank Pension Plan equal to
at least seventy-five (75).
2.31 "Return on Assets" means "return on average assets" of the Company
determined in accordance with generally accepted accounting principles that
would be reported in the Company's Annual Report to Shareholders.
2.32 "Return on Equity" means "return on average common shareholders'
equity" of the Company determined in accordance with generally accepted
accounting principles that would be reported in the Company's Annual Report to
Shareholders.
2.33 "Shares" means the shares of Common Stock of the Company.
44
<PAGE>
2.34 "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 herein.
2.35 "Subsidiary" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Company has an ownership interest, and
which the Committee designates as a participating entity in the Plan.
2.36 "Tandem SAR" means an SAR that is granted in connection with a
related Option, the exercise of which shall require forfeiture of the right to
purchase a Share under the related Option (and when a Share is purchased under
the Option, the Tandem SAR shall similarly be canceled).
2.37 "Total Shareholder Return" means the percentage change of an initial
investment in Shares over a specified period assuming reinvestment of all
dividends during the period.
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the Stock Option
Committee of the Board or by any other Committee appointed by the Board
consisting of not less than two (2) Directors. All of the members of the
Committee shall comply with the "disinterested administration" rules of Rule
16b-3 under the Exchange Act. The members of the Committee shall be appointed
from time to time by, and shall serve at the discretion of, the Board of
Directors. In addition, any action taken with respect to Named Executive
Officers for purposes of meeting the Performance-Based Exception shall be taken
by the Committee only if all of the members of the Committee are "outside
directors" within the meaning of Code Section 162(m). If all of the members of
the Committee are not "outside directors," such action shall be taken by a
subcommittee of the Committee comprised of at least two (2) members who are
"outside directors."
3.2 Authority of the Committee. Except as limited by law, or by the
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Key Employees
who shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein),
amend the terms and conditions of any outstanding Award to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. Further, the Committee shall make all other determinations which may
be necessary or advisable for the administration of the Plan. As permitted by
law, the Committee may delegate its authority as identified herein.
45
<PAGE>
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its shareholders, employees, Participants, and their
estates and beneficiaries.
Article 4. Shares Subject to the Plan
4.1 Number of Shares Available for Grants. Beginning on the Effective
Date, there is hereby reserved for issuance under the Plan a number of shares
equal to:
(a) seventy-five one hundredths of a percent (0.75%) of the outstanding
Shares as of the first business day of each calendar year beginning with
calendar year 1995 and continuing through calendar year 2004; plus
(b) the Shares available for issuance under the Company's 1986 Restricted
Stock Award Plan (the "1986 Plan") as of January 31, 1995.
Such Shares available for grants of Awards in any year shall be increased
by the number of Shares available under this Section 4.1 in previous years but
not covered by Awards granted under this Plan in those years plus any Shares as
to which Awards granted under this Plan have lapsed, expired, terminated, or
been canceled. In addition, any Shares as to which Awards under the Company's
1986 Plan may lapse, expire, terminate, or be canceled, shall also be reserved
and available for issuance or reissuance under this Section 4.1 in any calendar
year. No further awards are to be granted under the 1986 Plan after January 31,
1995; provided that any outstanding awards under the 1986 Plan shall continue
to remain outstanding in accordance with the terms thereof. The number of
Shares reserved for issuance under this Section 4.1 shall be subject to
adjustment as provided in Section 4.3.
In no event shall a Participant receive an Award or Awards during any one
(1) calendar year covering in the aggregate more than Two Hundred Fifty
Thousand (250,000) Shares.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any change
in corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under the Plan, and in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, as may be determined to
be appropriate and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights; provided, however, that the number
of Shares subject to any Award shall always be a whole number.
46
<PAGE>
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan are all Key
Employees of the Company, as determined by the Committee, including Key
Employees who are Directors, but excluding Directors who are not Key Employees.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Key Employees those
to whom Awards shall be granted and shall determine the nature and amount of
each Award.
5.3 Foreign Employees. Notwithstanding any provision of the Plan to the
contrary, in order to foster and promote achievement of the purposes of the
Plan or to comply with provisions of laws in other countries in which the
Company operates or has employees, the Committee, in its sole discretion, shall
have the power and authority to (i) determine which Key Employees (if any)
employed outside the United States are eligible to participate in the Plan,
(ii) modify the terms and conditions of any Awards made to such Key Employees
and (iii) establish subplans, modified Option exercise and other terms and
procedures to the extent such actions may be necessary or advisable.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees in such number, and upon such terms,
and at any time and from time to time as shall be determined by the Committee.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Section 422 of the Code,
or an NQSO whose grant is intended not to fall under Code Section 422.
6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
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6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve and which shall be set forth in
the applicable Award Agreement, which need not be the same for each grant or
for each Participant.
6.6 Payment. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a combination of
(a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8 Termination of Employment. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company and its Subsidiaries. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination of employment. In that regard, if an Award Agreement permits
exercise of an Option following the death of the Participant, the Award
Agreement shall provide that such Option shall be exercisable to the extent
provided therein by any person that may be empowered to do so under the
Participant's will, or if the Participant shall fail to make a testamentary
disposition of the Option or shall have died intestate, by the Participant's
executor or other legal representative.
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6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
ISOs granted to a Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, except
as otherwise provided in a Participant's Award Agreement, all NQSOs granted to
a Participant under this Article 6 shall be exercisable during his or her
lifetime only by such Participant.
6.10 No Rights. A Participant granted an Option shall have no rights as a
shareholder of the Company with respect to the Shares covered by such Option
except to the extent that Shares are issued to the Participant upon the due
exercise of the Option.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Key Employees at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market
Value of a Share on the date of grant of the SAR. The grant price of Tandem
SARs shall equal the Option Price of the related Option.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the under-
lying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may
be exercised only when the Fair Market Value of the Shares subject to the ISO
exceeds the Option Price of the ISO.
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7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.
7.4 SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5 Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date
of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be
in cash, in Shares of equivalent value, or in some combination thereof.
7.7 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR
(including, without limitation, the right of the Committee to limit the time of
exercise to specified periods) as may be required to satisfy the requirements
of Section 16 (or any successor rule) of the Exchange Act.
7.8 Termination of Employment. Each SAR Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
employment. In that regard, if an Award Agreement permits exercise of an SAR
following the death of the Participant, the Award Agreement shall provide that
such SAR shall be exercisable to the extent provided therein by any person that
may be empowered to do so under the Participant's will, or if the Participant
shall fail to make a testamentary disposition of the SAR or shall have died
intestate, by the Participant's executor or other legal representative.
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7.9 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
7.10 No Rights. A Participant granted an SAR shall have no rights as a
shareholder of the Company with respect to the Shares covered by such SAR
except to the extent that Shares are issued to the Participant upon the due
exercise of the SAR.
Article 8. Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to eligible Key Employees in such amounts as the Committee
shall determine.
8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, or Periods, the number of Shares of Restricted Stock granted, and
such other provisions as the Committee shall determine.
8.3 Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
8.4 Other Restrictions. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted
Stock, restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of
Restricted Stock in the Company's possession until such time as all conditions
and/or restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the Period of
Restriction.
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8.5 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate.
In the event that any dividend constitutes a "derivative security" or an
"equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend
shall be subject to a vesting period equal to the remaining vesting period of
the Shares of Restricted Stock with respect to which the dividend is paid.
8.7 Termination of Employment. Each Restricted Stock Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unvested Restricted Shares following termination of the Participant's
employment with the Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with Participants, need not be uniform among all
Shares of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment. In
amplification but not limitation of the foregoing, in the case of an award of
Restricted Stock to a Named Executive Officer which is intended to qualify for
the Performance-Based Exception, the Award Agreement may provide that such
Restricted Stock may become payable in the event of a termination of employment
by reason of death, Disability or Change in Control, such payment not to occur
before attainment of the related performance goal.
Article 9. Performance Shares
9.1 Grant of Performance Shares. Subject to the terms of the Plan,
Performance Shares may be granted to eligible Key Employees in such amount and
upon such terms, and at any time and from time to time, as shall be determined
by the Committee. The number and/or vesting of Performance Shares granted, in
the Committee's discretion, shall be contingent upon the degree of attainment
of specified performance goals or other conditions over a specified period (the
"Performance Period"). The terms and conditions of an Award of Performance
Shares shall be evidenced by an appropriate Award Agreement.
9.2 Value of Performance Shares. The value of a Performance Share at any
time shall equal the Fair Market Value of a Share at such time.
9.3 Form and Timing of Payment of Performance Shares. During the course
of a Performance Period, the Committee shall determine the number of
Performance Shares as to which the Participant has earned a right to be paid
pursuant to the terms of the applicable Award Agreement. The Committee shall
pay any earned Performance Shares as soon as practical after they are earned in
the form of cash, Shares or a combination thereof (as determined by the
Committee) having an aggregate Fair Market Value equal to the value of the
earned Performance Shares as of the date they are earned. Any Shares used to
pay out earned Performance Shares may be granted subject to any restrictions
deemed appropriate by the Committee. In addition, the Committee, in its
discretion, may cancel any earned Performance Shares and grant Stock Options to
the Participant which the Committee determines to be of equivalent value based
on a conversion formula stated in the Performance Shares Award Agreement.
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The Committee, in its discretion, may also grant dividend equivalents
rights with respect to earned but unpaid Performance Shares as evidenced by the
applicable Award Agreement. Performance Shares shall not have any voting
rights.
Prior to the beginning of a Performance Period (or at such other time as
determined by the Committee), Participants may elect to defer the receipt of
payment of any Performance Shares or other amounts (e.g., dividend equivalents
rights) earned pursuant to the Award Agreement upon such terms as the Committee
deems appropriate and as set forth in the applicable Award Agreement.
9.4 Termination of Employment. Each Performance Share Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unearned Performance Shares following termination of the Participant's
employment with the Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreements entered into with Participants, need not be uniform among all
Performance Shares awarded pursuant to the Plan, and may reflect distinctions
based on the reasons of termination of employment. In amplification but not
limitation of the foregoing, in the case of an award of Performance Shares to a
Named Executive Officer which is intended to qualify for the Performance-Based
Exception, the Award Agreement may provide that such Performance Shares may
become payable in the event of a termination of employment by reason of death,
Disability or Change in Control, such payment not to occur before attainment of
the related performance goal.
9.5 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant.
Article 10. Performance Measures
The performance measure(s) to be used for purposes of Awards to Named
Executive Officers which are designed to qualify for the Performance-Based
Exception shall be chosen from among the following alternatives:
(a) Earnings Per Share;
(b) Net Income;
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(c) Return On Assets;
(d) Return On Equity; or
(e) Total Shareholder Return.
The Committee shall have the discretion to adjust the determinations of
the degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Named Executive Officers, may not be adjusted
upward (the Committee shall retain the discretion to adjust such Awards
downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval.
Article 11. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 12. Deferrals
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant by virtue of the exercise of an Option or SAR, the
lapse or waiver of restrictions with respect to Restricted Stock, or the satis-
faction of any requirements or goals with respect to Performance Shares. If any
such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment deferrals.
Article 13. Rights of Key Employees
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of
the Company.
For purposes of this Plan, a transfer of a Participant's employment
between the Company and a Subsidiary, or between Subsidiaries, shall not be
deemed to be a termination of employment. Upon such a transfer, the Committee
may make such adjustments to outstanding Awards as it deems appropriate to
reflect the changed reporting relationships.
13.2 Participation. No Key Employee shall have the right to be selected
to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
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Article 14. Change in Control
14.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their entire
term;
(b) Any restriction periods and restrictions imposed on shares of
Restricted Stock shall lapse;
(c) The target payout opportunities attainable under all outstanding
Awards of Restricted Stock and Performance Shares shall be deemed to have been
fully earned for the entire Performance Period(s) as of the effective date of
the Change in Control, and the vesting of all Awards shall be accelerated as of
the effective date of the Change in Control; and
(d) Subject to Article 15 herein, the Committee shall have the authority
to make any modifications to the Awards as determined by the Committee to be
appropriate before the effective date of the Change in Control.
14.2 Limitation on Change-in-Control Benefits. It is the intention of the
Company and the Participants to reduce the amounts payable or distributable to
a Participant hereunder if the aggregate Net After Tax Receipts (as defined
below) to the Participant would thereby be increased, as a result of the
application of the excise tax provisions of Section 4999 of the Code.
Accordingly, anything in this Plan to the contrary notwithstanding, in the
event that the certified public accountants regularly employed by the Company
immediately prior to any "change" described below (the "Accounting Firm") shall
determine that receipt of all Payments (as defined below) would subject the
Participant to tax under Section 4999 of the Code, it shall determine whether
some amount of Payments would meet the definition of a "Reduced Amount," (as
defined below). If the Accounting Firm determines that there is a Reduced
Amount, the aggregate Payments shall be reduced to such Reduced Amount in
accordance with the provisions of Section 14.2(b) below.
(a) For purposes of this Section 14.2(a):
(i) A "Payment" shall mean any payment or distribution in the nature
of compensation to or for the benefit of a Participant who is a "disqualified
individual" within the meaning of Section 280G(c) of the Code and which is
contingent on a "change" described in Section 280G(b)(2)(A)(i) of the Code with
respect to the Company, whether paid or payable pursuant to this Plan or
otherwise;
(ii) "Plan Payment" shall mean a Payment paid or payable pursuant to
this Plan (disregarding this Section 14.2);
(iii)"Net After Tax Receipt" shall mean the Present Value of a
Payment, net of all taxes imposed on the Participant with respect thereto under
Sections 1 and 4999 of the Code, determined by applying the highest marginal
rate under Section 1 of the Code which applied to the Participant's Federal
taxable income for the immediately preceding taxable year;
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(iv) "Present Value" shall mean such value determined in accordance
with Section 280G(d)(4) of the Code; and
(v) "Reduced Amount" shall mean the smallest aggregate amount of
Payments which (A) is less than the sum of all Payments and (B) results in
aggregate Net After Tax Receipts which are equal to or greater than the Net
After Tax Receipts which would result if all Payments were paid to or for the
benefit of the Participant.
(b) If the Accounting Firm determines that aggregate Payments should be
reduced to the Reduced Amount, the Committee shall promptly give the
Participant notice to that effect and a copy of the detailed calculation
thereof, and the Participant may then elect, in the Participant's sole
discretion, which and how much of the Payments, including without limitation
Plan Payments, shall be eliminated or reduced (as long as after such election
the Present Value of the aggregate Payments is equal to the Reduced Amount),
and shall advise the Committee in writing of such election within ten (10) days
of the Participant's receipt of notice. If no such election is made by the
Participant within such ten (10) day period, the Committee may elect
which of the Payments, including without limitation Plan Payments, shall be
eliminated or reduced (as long as after such election the Present Value of the
aggregate Payments is equal to the Reduced Amount) and shall notify the
Participant promptly of such election. All determinations made by the
Accounting Firm under this Section 14.2 shall be binding upon the Company and
the Participant and shall be made within sixty (60) days immediately following
the event constituting the "change" referred to above. As promptly as
practicable following such determination, the Company shall pay to or
distribute for the benefit of the Participant such Payments as are then due to
the Participant under this Plan.
(c) At the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by
the Company to or for the benefit of the Participant pursuant to this Plan
which should not have been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or distributed by the Company
to or for the benefit of the Participant pursuant to this Plan could have been
so paid or distributed ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that the Accounting
Firm, based either upon the assertion of a deficiency by the Internal Revenue
Service against the Company or the Participant which the Accounting Firm
believes has a high probability of success or controlling precedent or other
substantial authority, determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of the
Participant shall be treated for all purposes as a loan ab initio to the
Participant which the Participant shall repay to the Company together with
interest at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that no such loan shall be deemed to have been
made and no amount shall be payable by the Participant to the Company if and to
the extent such deemed loan and payment would not either reduce the amount on
which the Participant is subject to tax under Section 1 and Section 4999 of the
Code or generate a refund of such taxes.
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In the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Participant together with interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Code.
14.3 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards; provided, however, the Board of Directors, upon
recommendation of the Committee, may terminate, amend, or modify this Article
14 at any time and from time to prior to the date of a Change in Control.
Article 15. Amendment, Modification, and Termination
15.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
The Committee shall not have the authority to cancel outstanding Awards
and issue substitute Awards in replacement thereof.
15.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
15.3 Acceleration of Award Vesting; Waiver of Restrictions.
Notwithstanding any provision of this Plan or any Award Agreement provision to
the contrary, the Committee, in its sole and exclusive discretion, shall have
the power at any time to (i) accelerate the vesting of any Award granted under
the Plan, including without limitation, acceleration to such a date that would
result in said Awards becoming immediately vested, or (ii) waive any
restrictions of any Award granted under the Plan.
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Article 16. Withholding
16.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan.
16.2 Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the Committee, to
satisfy the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
Article 17. Indemnification
Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against
him or her, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation of Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
Article 18. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
Article 19. Legal Construction
19.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
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19.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
19.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
19.5 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of North Carolina.
59
<PAGE>
Exhibit 11
Fully Diluted Earnings Per Common Share and Fully Diluted Average Common Shares
Outstanding
For fully diluted earnings per common share, net income available to
common shareholders can be affected by the conversion of the registrant's
convertible preferred stock. Where the effect of this conversion would have
been dilutive, net income available to common shareholders is adjusted by the
associated preferred dividends and any resulting tax effect. This adjusted net
income is divided by the weighted average number of common shares outstanding
for each period plus amounts representing the dilutive effect of stock options
outstanding and the dilution resulting from the conversion of the registrant's
convertible preferred stock, if applicable. The effect of convertible
preferred stock is excluded from the computation of fully diluted earnings per
share in periods in which the effect would be antidilutive.
Fully diluted earnings per common share was determined as follows (shares
in thousands, dollars in millions except per-share information):
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1995 1994
--------------------
<S> <C> <C>
Average common shares outstanding.................. 276,415 271,947
Dilutive effect of
Convertible preferred stock...................... 2,358 2,488
Stock options.................................... 1,224 1,290
---------------------
Total fully dilutive shares........................ 279,997 275,725
=====================
Income available to common shareholders............ $ 441 $ 414
Preferred dividends paid on dilutive convertible
preferred stock.................................. 2 3
---------------------
Total net income available for common shareholders
adjusted for full dilution....................... $ 443 $ 417
=====================
Fully diluted earnings per common share............ $ 1.58 $ 1.51
=====================
</TABLE>
60
<PAGE>
<TABLE>
Exhibit 12(a)
NationsBank Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------
Three Months
Ended
March 31, 1995 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
- ------------------------------
Income before taxes......................... $ 443,157 $ 2,554,778 $ 1,991,103 $ 1,396,213 $ 108,524 $ 625,467
Equity in undistributed earnings
of unconsolidated subsidiaries............ (1,019) (2,604) (4,756) (1,426) (1,114) (668)
Fixed charges:
Interest expense (including
capitalized interest)................ 980,698 2,895,569 1,420,800 915,880 1,290,755 1,851,513
Amortization of debt discount and
appropriate issuance costs........... 2,055 8,194 6,377 3,000 2,093 2,872
1/3 of net rent expense................ 29,641 114,414 95,786 90,667 81,909 66,195
----------------------------------------------------------------------------------
Total fixed charges................. 1,012,394 3,018,177 1,522,963 1,009,547 1,374,757 1,920,580
Earnings (excluding capitalized interest)... $ 1,454,532 $ 5,570,351 $ 3,509,310 $ 2,398,329 $ 1,470,621 $ 2,533,093
==================================================================================
Fixed charges............................... $ 1,012,394 $ 3,018,177 $ 1,522,963 $ 1,009,547 $ 1,374,757 $ 1,920,580
==================================================================================
Ratio of Earnings to Fixed Charges.......... 1.44 1.85 2.30 2.38 1.07 1.32
Including Interest on Deposits
- ------------------------------
Income before taxes......................... $ 443,157 $ 2,554,778 $ 1,991,103 $ 1,396,213 $ 108,524 $ 625,467
Equity in undistributed earnings
of unconsolidated subsidiaries............ (1,019) (2,604) (4,756) (1,426) (1,114) (668)
Fixed charges:
Interest expense (including
capitalized interest)................ 1,763,518 5,310,419 3,570,079 3,687,650 5,611,057 6,683,262
Amortization of debt discount and
appropriate issuance costs........... 2,055 8,194 6,377 3,000 2,093 2,872
1/3 of net rent expense................ 29,641 114,414 95,786 90,667 81,909 66,195
----------------------------------------------------------------------------------
Total fixed charges................. 1,795,214 5,433,027 3,672,242 3,781,317 5,695,059 6,752,329
Earnings (excluding capitalized interest)... $ 2,237,352 $ 7,985,201 $ 5,658,589 $ 5,170,099 $ 5,790,923 $ 7,364,842
==================================================================================
Fixed charges............................... $ 1,795,214 $ 5,433,027 $ 3,672,242 $ 3,781,317 $ 5,695,059 $ 6,752,329
==================================================================================
Ratio of Earnings to Fixed Charges.......... 1.25 1.47 1.54 1.37 1.02 1.09
</TABLE>
61
<PAGE>
<TABLE>
Exhibit 12(b)
NationsBank Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges and Preferred Dividends
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------
Three Months
Ended
March 31, 1995 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
- ------------------------------
Income before taxes......................... $ 443,157 $ 2,554,778 $ 1,991,103 $ 1,396,213 $ 108,524 $ 625,467
Equity in undistributed earnings
of unconsolidated subsidiaries............ (1,019) (2,604) (4,756) (1,426) (1,114) (668)
Fixed charges:
Interest expense (including
capitalized interest)................ 980,698 2,895,569 1,420,800 915,880 1,290,755 1,851,513
Amortization of debt discount and
appropriate issuance costs........... 2,055 8,194 6,377 3,000 2,093 2,872
1/3 of net rent expense................ 29,641 114,414 95,786 90,667 81,909 66,195
----------------------------------------------------------------------------------
Total fixed charges................. 1,012,394 3,018,177 1,522,963 1,009,547 1,374,757 1,920,580
Preferred dividend requirements............. 3,260 14,796 15,737 29,260 30,775 37,979
Earnings (excluding capitalized interest)... $ 1,454,532 $ 5,570,351 $ 3,509,310 $ 2,398,329 $ 1,470,621 $ 2,533,093
==================================================================================
Fixed charges............................... $ 1,015,654 $ 3,032,973 $ 1,538,700 $ 1,038,807 $ 1,405,532 $ 1,958,559
==================================================================================
Ratio of Earnings to Fixed Charges.......... 1.43 1.84 2.28 2.31 1.05 1.29
Including Interest on Deposits
- ------------------------------
Income before taxes......................... $ 443,157 $ 2,554,778 $ 1,991,103 $ 1,396,213 $ 108,524 $ 625,467
Equity in undistributed earnings
of unconsolidated subsidiaries............ (1,019) (2,604) (4,756) (1,426) (1,114) (668)
Fixed charges:
Interest expense (including
capitalized interest)................ 1,763,518 5,310,419 3,570,079 3,687,650 5,611,057 6,683,262
Amortization of debt discount and
appropriate issuance costs........... 2,055 8,194 6,377 3,000 2,093 2,872
1/3 of net rent expense................ 29,641 114,414 95,786 90,667 81,909 66,195
----------------------------------------------------------------------------------
Total fixed charges................. 1,795,214 5,433,027 3,672,242 3,781,317 5,695,059 6,752,329
Preferred dividend requirements............. 3,260 14,796 15,737 29,260 30,775 37,979
Earnings (excluding capitalized interest)... $ 2,237,352 $ 7,985,201 $ 5,658,589 $ 5,170,099 $ 5,790,923 $ 7,364,842
==================================================================================
Fixed charges............................... $ 1,798,474 $ 5,447,823 $ 3,687,979 $ 3,810,577 $ 5,725,834 $ 6,790,308
==================================================================================
Ratio of Earnings to Fixed Charges.......... 1.24 1.47 1.53 1.36 1.01 1.08
</TABLE>
62
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary information extracted from the March 31,
1995, Form 10-Q for NationsBank Corporation and is qualified in its entirety
by reference to such financial statements.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 7,975
<INT-BEARING-DEPOSITS> 2,750
<FED-FUNDS-SOLD> 13,688
<TRADING-ASSETS> 16,613
<INVESTMENTS-HELD-FOR-SALE> 8,962
<INVESTMENTS-CARRYING> 17,546
<INVESTMENTS-MARKET> 17,208
<LOANS> 106,928
<ALLOWANCE> (2,174)
<TOTAL-ASSETS> 183,854
<DEPOSITS> 100,743
<SHORT-TERM> 56,730
<LIABILITIES-OTHER> 5,219
<LONG-TERM> 9,816
<COMMON> 4,684
0
110
<OTHER-SE> 6,552
<TOTAL-LIABILITIES-AND-EQUITY> 183,854
<INTEREST-LOAN> 2,176
<INTEREST-INVEST> 340
<INTEREST-OTHER> 554
<INTEREST-TOTAL> 3,070
<INTEREST-DEPOSIT> 783
<INTEREST-EXPENSE> 1,763
<INTEREST-INCOME-NET> 1,307
<LOAN-LOSSES> 70
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 1,290
<INCOME-PRETAX> 674
<INCOME-PRE-EXTRAORDINARY> 674
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 443
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 3.41
<LOANS-NON> 854
<LOANS-PAST> 129
<LOANS-TROUBLED> 159
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,186
<CHARGE-OFFS> 134
<RECOVERIES> 51
<ALLOWANCE-CLOSE> 2,174
<ALLOWANCE-DOMESTIC> 0<F1>
<ALLOWANCE-FOREIGN> 0<F1>
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1> Allowance-Domestic, Allowance-Foreign, and Allowance-Unallocated are only
disclosed on an annual basis in the Corporation's 10-K and are therefore not
included in this Financial Data Schedule.
</FN>
</TABLE>
