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, 1997
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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
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Commission file number 1-6523
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NationsBank Corporation
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(Exact name of registrant as specified in its charter)
North Carolina 56-0906609
- ---------------------------------- -------------------
(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, 1997, there were 719,175,950 shares of NationsBank Corporation
Common Stock outstanding.
<PAGE>
NationsBank Corporation
March 31, 1997 Form 10-Q
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income for the Three Months Ended March 31,
1997 and 1996....................................................................................... 4
Consolidated Balance Sheet on March 31, 1997 and December 31, 1996.................................. 5
Consolidated Statement of Cash Flows for the Three Months Ended
March 31, 1997 and 1996............................................................................ 6
Consolidated Statement of Changes in Shareholders' Equity for
the Three Months Ended March 31, 1997 and 1996..................................................... 7
Notes to Consolidated Financial Statements......................................................... 8
Item 2. Management's Discussion and Analysis of Results of Operations and Financial
Condition.............................................................................................. 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.................................................................. 33
Signature....................................................................................................... 34
Index to Exhibits............................................................................................... 35
</TABLE>
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Income
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(Dollars in Millions Except Per-Share Information)
Three Months
Ended March 31
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1997 1996
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<S> <C> <C>
Income from Earning Assets
Interest and fees on loans $3,007 $2,573
Lease financing income 98 66
Interest and dividends on securities
Held for investment 22 58
Available for sale 351 356
Interest and fees on loans held for sale 17 25
Interest on time deposits placed and
other short-term investments 28 18
Federal funds sold 5 8
Securities purchased under agreements to resell 183 183
Trading account securities 316 286
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Total income from earning assets 4,027 3,573
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Interest Expense
Deposits 998 858
Borrowed funds 509 651
Trading account liabilities 165 191
Long-term debt 405 316
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Total interest expense 2,077 2,016
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Net interest income 1,950 1,557
Provision for credit losses 190 155
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Net credit income 1,760 1,402
Gains on sales of securities 43 14
Noninterest income 1,113 885
Other real estate owned income (2) 0
Merger-related charge 0 118
Other noninterest expense 1,810 1,394
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Income before income taxes 1,108 789
Income tax expense 399 276
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Net income $709 $513
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Net income available to common shareholders $705 $509
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Per-share information
Earnings per common share $0.97 $0.85
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Fully diluted earnings per common share $0.94 $0.84
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Dividends per common share $0.33 $0.29
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Average common shares issued (in thousands) 730,413 600,558
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</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NationsBank Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in Millions)
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
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<S> <C> <C>
Assets
Cash and cash equivalents $ 11,008 $ 8,933
Time deposits placed and other short-term investments 2,065 1,843
Securities
Held for investment, at cost (market value - $1,832 and $2,110) 1,836 2,110
Available for sale 20,010 12,277
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Total securities 21,846 14,387
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Loans held for sale 1,182 1,215
Federal funds sold 184 77
Securities purchased under agreements to resell 8,395 6,882
Trading account assets 25,545 18,689
Loans and leases, net of unearned income 147,508 121,583
Factored accounts receivable 1,208 1,047
Allowance for credit losses (2,785) (2,315)
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Loans, leases and factored accounts receivable, net of unearned income
and allowance for credit losses 145,931 120,315
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Premises, equipment and lease rights, net 3,467 2,712
Customers' acceptance liability 1,165 858
Interest receivable 1,399 1,159
Mortgage servicing rights 1,194 946
Goodwill 7,725 1,640
Core deposit and other intangibles 841 390
Other assets 7,011 5,748
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$ 238,958 $ 185,794
=========== ==========
Liabilities
Deposits
Noninterest-bearing $ 33,106 $ 25,738
Savings 10,289 8,498
NOW and money market deposit accounts 42,503 31,128
Time 42,585 33,081
Foreign time 8,324 8,053
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Total deposits 136,807 106,498
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Federal funds purchased 3,000 3,536
Securities sold under agreements to repurchase 26,119 15,842
Trading account liabilities 14,013 11,752
Commercial paper 3,023 2,787
Other short-term borrowings 2,384 1,836
Liability to factoring clients 672 597
Acceptances outstanding 1,165 858
Accrued expenses and other liabilities 4,572 4,429
Trust preferred securities 1,458 965
Long-term debt 25,086 22,985
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Total liabilities 218,299 172,085
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Contingent liabilities and other financial commitments (Note 6)
Shareholders' Equity
Preferred stock: authorized - 45,000,000 shares; issued - 5,229,801 and 5,220,459 shares 173 171
Common stock: authorized - 1,250,000,000 shares; issued - 727,575,263 and 573,492,308 shares 10,513 3,855
Retained earnings 10,135 9,673
Other, including loan to ESOP trust (162) 10
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Total shareholders' equity 20,659 13,709
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$ 238,958 $ 185,794
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</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Cash Flows
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(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31
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1997 1996
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<S> <C> <C>
Operating Activities
Net income $ 709 $ 513
Reconciliation of net income to net cash used in operating activities
Provision for credit losses 190 155
Gains on sales of securities (43) (14)
Depreciation and premises improvements amortization 111 75
Amortization of intangibles 101 26
Deferred income tax expense 98 43
Net change in trading instruments (4,567) (4,803)
Net decrease in interest receivable 52 190
Net decrease in interest payable (36) (410)
Net decrease (increase) in loans held for sale (557)
Net increase in liability to factoring clients 75 102
Other operating activities (882) 150
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Net cash used in operating activities (4,160) (4,530)
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Investing Activities
Proceeds from maturities of securities held for investment 385 332
Purchases of securities held for investment (107) (2)
Proceeds from sales and maturities of securities available for sale 11,736 9,757
Purchases of securities available for sale (8,243) (4,667)
Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell (1,173) 314
Net (increase) decrease in time deposits placed and other short-term investments (425) 252
Purchases and net originations of loans and leases (3,865) (3,828)
Proceeds from sales and securitizations of loans and leases 2,055 2,414
Purchases and originations of mortgage servicing rights (147) (107)
Purchases of factored accounts receivable (1,859) (1,844)
Collections of factored accounts receivable 1,694 1,655
Net purchases of premises and equipment (112) (79)
Proceeds from sales of other real estate owned 38 42
Sales / acquisitions of business activities, net of cash 2,461 (19)
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Net cash provided by investing activities 2,438 4,220
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Financing Activities
Net decrease in deposits (1,551) (10)
Net increase (decrease) in federal funds purchased and securities
sold under agreements to repurchase 6,719 (1,640)
Net decrease in other short-term borrowings and commercial paper (506) (19)
Proceeds from issuance of trust preferred securities 492 0
Proceeds from issuance of long-term debt 2,059 1,753
Retirement of long-term debt (325) (455)
Proceeds from issuance of common stock 423 35
Cash dividends paid (249) (178)
Common stock repurchased (3,312) (157)
Other financing activities 47 (2)
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Net cash provided by (used in) financing activities 3,797 (673)
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Net increase (decrease) in cash and cash equivalents 2,075 (983)
Cash and cash equivalents on January 1 8,933 8,448
-------- --------
Cash and cash equivalents on March 31 $ 11,008 $ 7,465
======== ========
</TABLE>
Loans transferred to other real estate owned amounted to $36 and $46 for the
three months ended March 31, 1997 and 1996, respectively. Mortgage loans
converted to mortgage-backed securities amounted to $232 for the three months
ended March 31, 1996.
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
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(Dollars in Millions, Shares in Thousands)
Total
Share-
Preferred Common Stock Retained Loan to holders'
Stock Shares Amount Earnings ESOP Trust Other Equity
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1995 $ 105 548,538 $ 4,655 $ 7,826 $ (63) $ 278 $ 12,801
Net income 513 513
Cash dividends
Common (174) (174)
Preferred (4) (4)
Common stock issued under dividend
reinvestment and employee plans 1,662 28 7 35
Stock issued in acquisitions 73 52,610 491 192 2 758
Common stock repurchased (4,220) (157) (157)
Net change in unrealized gains/(losses)
on securities available for sale and
marketable equity securities (215) (215)
Other (2) 46 3 (1) --
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Balance on March 31, 1996 $ 176 598,636 $ 5,020 $ 8,353 $ (63) $ 71 $ 13,557
=====================================================================================
Balance on December 31, 1996 $ 171 573,492 $ 3,855 $ 9,673 $ (48) $ 58 $ 13,709
Net income 709 709
Cash dividends
Common (245) (245)
Preferred (4) (4)
Common stock issued under dividend
reinvestment and employee plans 11,807 449 (26) 423
Stock issued in acquisitions 82 195,204 9,440 9,522
Common stock repurchased (56,574) (3,312) (3,312)
Conversion of preferred stock (81) 3,644 81 --
Net change in unrealized gains/(losses)
on securities available for sale and
marketable equity securities (201) (201)
Other 1 2 2 55 58
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Balance on March 31, 1997 $ 173 727,575 $ 10,513 $ 10,135 $ (48) $ (114) $ 20,659
=====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NationsBank Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Accounting Policies
On February 27, 1997, NationsBank completed a 2-for-1 split of its
common stock. All prior period financial data included in this Form 10-Q was
restated to reflect the impact of the stock split.
The consolidated financial statements include the accounts of
NationsBank Corporation and its majority-owned subsidiaries (the Corporation).
All significant intercompany accounts and transactions have been eliminated.
The information contained in the consolidated financial statements is
unaudited. In the opinion of management, all normal recurring adjustments
necessary for a fair presentation of the interim period results 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 53, 54 and 55 of the 1996 Annual Report to
Shareholders, incorporated by reference into the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1996, as updated by the following.
The recoverability of goodwill and other intangibles is evaluated
periodically if events or circumstances indicate a possible inability to realize
their carrying amount. Such evaluation is based on various analyses, including
undiscounted cash flow projections.
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement on Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128), which specifies the computation, presentation and disclosure
requirements for earnings per share. SFAS 128 requires the presentation of basic
earnings per share and diluted earnings per share, where appropriate, and is
effective for financial statements for periods ending after December 15, 1997.
Adoption of this standard will not have a material effect on the Corporation's
reported earnings per share.
Note 2 - Merger-Related Activity
On January 7, 1997, the Corporation completed the acquisition of
Boatmen's Bancshares, Inc. (Boatmen's), headquartered in St. Louis, Missouri.
Each outstanding share of Boatmen's common stock was converted into 1.305 shares
of the Corporation's common stock (adjusted for 2-for-1 stock split) or, at the
election of each holder of Boatmen's common stock, an amount in cash as
specified in the merger agreement, resulting in the issuance of approximately
195 million shares of the Corporation's common stock valued at $9.4 billion on
the date of the merger and aggregate cash payments of $371 million to Boatmen's
shareholders. The Corporation accounted for this acquisition as a purchase;
therefore, the results of operations of Boatmen's are included in the
consolidated financial statements of the Corporation from the date of
acquisition. Intangible assets resulting from the purchase of Boatmen's were
approximately $6.4 billion. The allocation of the purchase price for Boatmen's
is preliminary and may change as certain estimates and contingencies are
finalized, although any adjustments are not expected to be material. On the date
of the acquisition, Boatmen's unaudited total assets and total deposits were
approximately $41.2 billion and $32.0 billion, respectively.
The following table presents condensed pro forma consolidated results
of operations for the first quarter of 1996 as if the acquisition of Boatmen's
had occurred on January 1, 1996. This information combines the historical
results of operations of the Corporation and Boatmen's after the effect of
estimated preliminary purchase accounting adjustments. A cash election of 40
percent in the Boatmen's acquisition has been assumed since the Corporation
expects to repurchase shares of its common stock from time to time so that the
pro forma impact of the Boatmen's acquisition will be the issuance of
approximately 60 percent of the aggregate consideration in the Corporation's
common stock and 40 percent of the aggregate consideration in cash. The actual
cash election in the transaction was approximately 4 percent. The pro forma
information does not purport to be indicative of the results that would have
been obtained if the
<PAGE>
operations had actually been combined during the period presented and is not
necessarily indicative of operating results to be expected in future periods.
Unaudited Pro Forma Results of Operations
For the three months ended March 31, 1996
(Dollars in millions, except per-share information)
Net interest income $1,860
Net income 493
Net income available to common shareholders 487
Earnings per common share .68
Fully diluted earnings per common share .67
Note 3 - Trading Account Assets and Liabilities
The fair values of the components of trading account assets and
liabilities on March 31, 1997 and December 31, 1996 and the average fair values
for the three months ended March 31, 1997 were (dollars in millions):
<TABLE>
<CAPTION>
First Quarter
March 31 December 31 1997
1997 1996 Average
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<S> <C> <C> <C>
Securities owned
U.S. Treasury securities $10,898 $6,914 $10,143
Securities of other U.S. Government agencies and corporations 1,598 2,096 1,923
Certificates of deposit, bankers' acceptances and commercial paper 501 501 478
Corporate debt 2,919 1,552 1,628
Foreign sovereign instruments 4,407 3,396 7,370
Other securities 1,384 932 1,306
-------- -------- --------
Total securities owned 21,707 15,391 22,848
Derivatives-dealer positions 3,838 3,298 3,821
-------- -------- --------
Total trading account assets $25,545 $18,689 $26,669
======== ======== ========
Short sales
U.S. Treasury securities $8,392 $7,143 $7,986
Corporate debt 377 452 489
Other securities 1,373 309 1,474
-------- -------- --------
Total short sales 10,142 7,904 9,949
Derivatives-dealer positions 3,871 3,848 3,677
-------- -------- --------
Total trading account liabilities $14,013 $11,752 $13,626
======== ======== ========
</TABLE>
Derivatives-dealer positions presented in the table above represent the
fair values of interest rate, foreign exchange, equity and commodity-related
products, including financial futures, forward settlement and option contracts
and swap agreements associated with the Corporation's derivative trading
activities.
<PAGE>
Note 4 - Loans, Leases and Factored Accounts Receivable
The distribution of loans, leases and factored accounts receivable on
March 31, 1997 and December 31, 1996 was as follows (dollars in millions):
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
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Amount Percent Amount Percent
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<S> <C> <C> <C> <C>
Domestic
Commercial $60,590 40.8% $50,270 41.0%
Real estate commercial 8,604 5.8 5,445 4.4
Real estate construction 3,760 2.5 2,863 2.3
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Total commercial 72,954 49.1 58,578 47.7
---------------------------------------------
Residential mortgage 33,258 22.4 27,963 22.8
Credit card 7,039 4.7 6,747 5.5
Other consumer 25,908 17.4 20,595 16.8
---------------------------------------------
Total consumer 66,205 44.5 55,305 45.1
---------------------------------------------
Lease financing 4,713 3.2 4,198 3.4
Factored accounts receivable 1,208 0.8 1,047 0.9
---------------------------------------------
145,080 97.6 119,128 97.1
Foreign 3,636 2.4 3,502 2.9
---------------------------------------------
Total loans, leases and factored
accounts receivable, net
of unearned income $148,716 100.0% $122,630 100.0%
==============================================
</TABLE>
On March 31, 1997, the recorded investment in certain loans that were
considered to be impaired was $594 million, all of which were classified as
nonperforming. Impaired loans on March 31, 1997 were comprised of commercial
loans of $398 million, real estate commercial loans of $162 million and real
estate construction loans of $34 million. Of these impaired loans, $216 million
had a valuation allowance of $41 million and $378 million did not have a
valuation allowance primarily due to the application of interest payments
against book balances or write-downs previously made with respect to these
loans.
On March 31, 1997 and December 31, 1996, nonperforming loans, including
certain loans which are considered to be impaired, totaled $1.1 billion and $890
million, respectively. Other real estate owned amounted to $168 million and $153
million on March 31, 1997 and December 31, 1996, respectively.
Note 5 - Debt
In the first quarter of 1997, the Corporation issued $428 million in
long-term debt, including $378 million of senior notes and $50 million of
subordinated notes, with maturities ranging from 2002 to 2037. Of the $428
million issued, $68 million of fixed rate debt was converted to floating rates
through interest rate swaps at spreads ranging from 5 to 13 basis points over
the three-month London interbank offered rate (LIBOR). The remaining $360
million of debt issued bears interest at spreads ranging from 17.5 to 20 basis
points over three-month LIBOR.
As a result of the merger with Boatmen's during the first quarter of
1997, the Corporation and its banking subsidiaries assumed payment obligations
on $608 million in long-term debt with interest rates ranging from 5.19 percent
to 12.0 percent and maturities ranging from 1998 to 2016.
On February 3, 1997, one of the Corporation's grantor trust
subsidiaries (Capital Trust III) issued $500 million of trust preferred
securities (Preferred Securities) representing undivided beneficial interests in
the assets of the respective grantor trust subsidiary, which constitutes $516
million aggregate principal amount
<PAGE>
of the Corporation's Junior Subordinated Deferrable Interest Notes bearing
interest at 3-month LIBOR plus 55 basis points due 2027. Such notes and
Preferred Securities are redeemable beginning in 2007.
On March 18, 1997, Main Place Real Estate Investment Trust, an indirect
subsidiary of NationsBank, N.A., issued, under its shelf registration statement,
$1.0 billion of Mortgage-Backed Bonds, Series 1997-1, due 2000, bearing interest
at three-month LIBOR plus 5 basis points. The series was initially
collateralized by approximately $2.0 billion of mortgage loans.
On April 22, 1997, one of the Corporation's grantor trust subsidiaries
(Capital Trust IV) issued $500 million of Preferred Securities representing
undivided beneficial interests in the assets of the respective grantor trust
subsidiary, which constitutes $516 million aggregate principal amount of the
Corporation's Junior Subordinated Deferrable Interest Notes bearing interest at
8.25 percent due 2027. Such notes and Preferred Securities are redeemable
beginning in 2007.
Under the bank note program jointly maintained by NationsBank, N.A.,
NationsBank, N.A. (South) and NationsBank of Texas, N.A., up to $9.0 billion of
bank notes may be offered from time to time with fixed or floating rates and
maturities from 30 days to 15 years from date of issue. On March 31, 1997, there
were short-term bank notes outstanding of $522 million. In addition, NationsBank
of Texas, N.A. and NationsBank, N.A. had outstanding bank notes of $4.1 billion
on March 31, 1997 that were classified as long-term debt.
On March 31, 1997 and December 31, 1996, the Corporation had unused
commercial paper back-up lines of credit totaling $1.5 billion which expire in
1997. These lines were supported by fees paid directly by the Corporation to
unaffiliated banks.
From April 1 through May 7, 1997, the Corporation issued an
additional $170 million in long term debt, including $120 million of senior
notes and $50 million of subordinated notes with maturities ranging from
2000 to 2012. Of the additional $170 million issued, $120 million bear
interest at floating rates and $50 million bear interest at fixed rates.
As of May 7, the Corporation had the authority to issue approximately
$4.8 billion of corporate debt securities and preferred and common stock under
its existing shelf registration statements and $3.3 billion of corporate debt
securities under the Euro medium-term note program.
Note 6 - Commitments and Contingencies
The Corporation enters into commitments to extend credit, standby
letters of credit and commercial letters of credit to meet the financing needs
of its customers. The commitments shown below have been reduced by amounts
collateralized by cash and participated to other financial institutions. The
following summarizes commitments outstanding (dollars in millions):
March 31 December 31
1997 1996
---------------------------------------------------------
Commitments to extend credit
Credit card commitments $28,060 $24,255
Other loan commitments 90,302 82,506
Standby letters of credit and
financial guarantees 10,891 10,060
Commercial letters of credit 923 761
On March 31, 1997 and December 31, 1996, indemnified securities lending
transactions totaled $7.5 billion and $7.1 billion, respectively. Collateral,
with a market value of $7.7 billion on March 31, 1997 and $7.2 billion on
December 31, 1996, was obtained by the Corporation in support of these
transactions.
On March 31, 1997, the Corporation had commitments to purchase and sell
when-issued securities of $6.3 billion and $7.6 billion, respectively. This
compares to commitments to purchase and sell when-issued securities of $7.4
billion each on December 31, 1996.
See Tables 6 and 7 and the accompanying discussion in Item 2 regarding
the Corporation's derivatives used for risk management purposes. See Table 8 and
the accompanying discussion in Item 2 regarding the Corporation's derivative
trading activities.
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
<PAGE>
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, environmental, banking and other laws.
Management believes, based upon the advice of counsel, that the 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.
Note 7 - Employee Benefit Plans
On March 26, 1997, the Corporation's Board of Directors approved an
amendment to the 1996 Associates Stock Option Award Plan. Under the amendment,
all active benefits-eligible associates through the vice president level who had
not previously received an award under the 1996 Associates Stock Option Award
Plan received a one-time award of a predetermined number of stock options
entitling them to purchase shares of the Corporation's common stock at the
closing price of $56 1/8 per share on April 1, 1997. Rehired associates who
previously received an award under this plan and did not exercise any portion of
the award also were eligible for the award. Options to purchase approximately 4
million shares of the Corporation's common stock were granted on April 1, 1997.
One-half of the options are vested and exercisable after the Corporation's
common stock closes at or above $68 per share for ten consecutive trading days
and no earlier than April 1, 1998. The remainder of the options are vested and
exercisable after the Corporation's common stock closes at or above $80 per
share for ten consecutive trading days and no earlier than April 1, 1998. In any
event, the options vest and are exercisable on July 1, 2000. The options expire
on July 1, 2001.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Earnings Review
Table 1 presents a comparison of selected operating results for the
three months ended March 31, 1997 and 1996.
Net income for the first quarter of 1997 increased 38 percent to $709
million from $513 million in the first quarter of 1996. Earnings per common
share and fully diluted earnings per common share were $.97 and $.94,
respectively, for the first quarter of 1997, compared to $.85 and $.84 in the
comparable prior year period. Excluding a merger-related charge of $118 million
($77 million, net of tax), net income for the first quarter of 1996 was $590
million, earnings per common share were $.98 and fully diluted earnings per
common share were $.96.
The acquisition of Boatmen's caused most of the increases in income and
expense categories in the first three months of 1997 compared to the same period
in 1996. Most increases in the categories on the balance sheets when comparing
December 31, 1996 and March 31, 1997 are also attributable to the acquisition.
Other significant changes in the Corporation's results of operations and
financial position are discussed in the sections that follow.
Key performance highlights for the first quarter of 1997 were:
o Taxable-equivalent net interest income increased 25 percent to $2.0 billion
in the first quarter of 1997. The net interest yield increased to 3.83
percent compared to 3.43 percent in the first quarter of 1996.
o Provision for credit losses covered net charge-offs and totaled $190
million in the first quarter of 1997 compared to $155 million in the same
period of 1996. Net charge-offs totaled $184 million compared to $155
million in the first quarter of 1996. Net charge-offs as a percentage of
average loans, leases and factored accounts receivable remained unchanged
at .50 percent in the first three months of 1997 compared to the same
period in 1996. Nonperforming assets increased to $1.2 billion on March 31,
1997 compared to $1.0 billion on December 31, 1996.
o Noninterest income increased 26 percent to $1.1 billion in the first
quarter of 1997, driven primarily by higher deposit account service
charges, asset management and fiduciary service fees, trading profits and
fees and mortgage servicing and mortgage-related fees.
o Noninterest expense increased 30 percent to $1.8 billion. Excluding the
Boatmen's acquisition, noninterest expense increased approximately 3
percent.
o The return on average common shareholders' equity decreased to 13.96
percent in the first quarter of 1997.
o Cash basis ratios, which measure operating performance excluding intangible
assets and the related amortization expense, improved with cash basis fully
diluted earnings per share rising 22 percent to $1.07 and return on average
tangible common shareholders' equity increasing over 700 basis points to
26.38 percent. The cash basis efficiency ratio was 55.3 percent. When
compared to the first quarter of 1996 operating cash basis ratios, cash
basis fully diluted earnings per share for the first quarter of 1997
increased 7 percent and return on average tangible common shareholders'
equity increased approximately 450 basis points.
Business Unit Operations
The Corporation provides a diversified range of banking and certain
nonbanking financial services and products through its various subsidiaries. The
Corporation manages its business activities through three major Business Units:
the General Bank, Global Finance and Financial Services. The Business Units are
managed with a focus on numerous performance objectives including return on
equity, operating efficiency and net income. Table 2 summarizes key performance
measures for each of the Business Units.
The net interest income of the Business Units reflects a funds transfer
pricing process which derives net interest income by matching assets and
liabilities with similar interest rate sensitivity and maturity characteristics.
Equity capital is allocated to each Business Unit based on an assessment of its
inherent risk.
<PAGE>
Table 1
Selected Operating Results
(Dollars in Millions Except Per-Share Information)
<TABLE>
<CAPTION>
Three Months
Ended March 31
------------------------------------------------
1997 1996
------------------------------------------------
<S> <C> <C>
Income Statement
Income from earning assets $ 4,027 $ 3,573
Interest expense 2,077 2,016
Net interest income (taxable-equivalent) 1,978 1,584
Net interest income 1,950 1,557
Provision for credit losses 190 155
Gains on sales of securities 43 14
Noninterest income 1,113 885
Other real estate owned income 2 0
Merger-related charge 0 118
Other noninterest expense 1,810 1,394
Income before income taxes 1,108 789
Income tax expense 399 276
Net income 709 513
Net income applicable to common shareholders 705 509
Net income (excluding merger-related charge) 709 590
Average common shares issued (in thousands) 730,413 600,558
Per common share
Earnings $ 0.97 $ 0.85
Earnings (excluding merger-related charge) 0.97 0.98
Fully diluted earnings 0.94 0.84
Fully diluted earnings (excluding merger-related charge) 0.94 0.96
Cash dividends paid 0.33 0.29
Common shareholders' equity (period-end) 28.22 22.46
Balance sheet (period-end)
Total assets 238,958 194,375
Total loans, leases and factored accounts receivable,
net of unearned income 148,716 124,344
Total deposits 136,807 109,622
Long-term debt 25,086 18,659
Common shareholders' equity 20,534 13,444
Total shareholders' equity 20,659 13,557
Performance ratios
Return on average assets 1.19% 0.99%
Return on average assets (excluding merger-related charge) 1.19 1.14
Return on average common shareholders' equity (1) 13.96 15.71
Return on average common shareholders' equity (excluding merger-related charge) (1) 13.96 18.07
Risk-based capital ratios
Tier 1 7.06 7.35
Total 11.58 11.71
Leverage capital ratio 6.19 6.19
Total equity to total assets 8.65 6.97
Cash basis financial data (2)
Cash basis earnings per common share $ 1.10 $ 0.89
Cash basis earnings per common share (excluding merger-related charge) 1.10 1.02
Cash basis fully diluted earnings per common share 1.07 0.88
Cash basis fully diluted earnings per common share (excluding merger-related charge) 1.07 1.00
Return on average tangible assets 1.40% 1.05%
Return on average tangible assets (excluding merger-related charge) 1.40 1.20
Return on average tangible common shareholders' equity (1) 26.38 19.14
Return on average tangible common shareholders' equity (excluding merger-related charge) (1) 26.38 21.85
Market price per share of common stock
Close at the end of the period $ 55.5 $ 40.0625
High for the period 65 40.6875
Low for the period 48 32.1875
</TABLE>
(1) Average common shareholders' equity does not include the effect of market
value adjustments to securities available for sale and marketable equity
securities.
(2) Cash basis calculations exclude intangible assets and the related
amortization expense.
<PAGE>
Table 2
Business Unit Summary
For the Three Months Ended March 31
(Dollars in Millions)
<TABLE>
<CAPTION>
General Bank Global Finance Financial Services
----------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income (taxable-equivalent) $1,464 $1,152 $329 $278 $141 $144
Noninterest income 781 580 274 277 57 27
----------------------------------------------------------------------------------
Total revenue 2,245 1,732 603 555 198 171
Provision for credit losses 118 114 32 8 39 33
Gains on sale of securities 0 6 0 0 0 0
Other real estate owned expense (income) 3 1 (7) (3) 2 3
Noninterest expense 1,408 1,011 322 286 80 78
----------------------------------------------------------------------------------
Income before income taxes 716 612 256 264 77 57
Income tax expense 276 226 94 97 26 21
----------------------------------------------------------------------------------
Net income (1) $440 $386 $162 $167 $51 $36
==================================================================================
Cash basis earnings (4) $526 $404 $174 $171 $55 $39
Net interest yield 4.62% 4.87% 2.83%(2) 2.98%(2) 6.83% 7.45%
Average equity to average assets 8.36 6.91 5.15 4.89 13.95 14.13
Return on average equity 15 22 14 18 17 13
Tangible return on average tangible equity (4) 26 26 17 18 22 16
Efficiency ratio 62.7 58.4 53.4 51.7 40.5 45.5
Cash basis efficiency ratio (4) 58.8 57.3 51.6 50.7 38.8 43.6
Average (3)
Total loans and leases, net of unearned income $96,855 $81,056 $41,706 $35,207 $8,303 $7,734
Total deposits 117,193 87,059 9,214 7,648 0 0
Total assets 139,045 102,571 88,612 78,151 8,854 8,286
Period end (3)
Total loans and leases, net of unearned income 97,293 80,220 42,645 36,520 8,464 7,720
Total deposits 118,135 88,625 11,258 7,758 0 0
</TABLE>
(1) Business Unit results are presented on a fully allocated basis but do not
include $56 million net income for 1997 and $76 million net expense for
1996, which represent earnings associated with unassigned capital, gains
on sales of certain securities, merger-related charges and other
corporate activities.
(2) Global Finance's net interest yield excludes the impact of
trading-related activities. Including trading-related activities, the net
interest yield was 1.73 percent and 1.67 percent for the first three
months of 1997 and 1996, respectively.
(3) The sums of balance sheet amounts differ from consolidated amounts due to
activities between the Business Units.
(4) Cash basis calculations exclude intangible assets and the related
amortization expense.
- ------------------------------------------------------------------------------
The General Bank and Global Finance business unit results reflect the
impact of the purchase of Boatmen's, which resulted in an increase in goodwill
of approximately $5.8 billion and approximately $57 million of related
amortization expense on a consolidated basis for the first quarter of 1997. As a
result, the returns on average equity and efficiency ratios compare unfavorably
to the first three months of 1996. Accordingly, business unit earnings, the
return on average equity and the efficiency ratio excluding the impact of
intangibles and related amortization expense are presented in Table 2 along with
information based on actual operating results.
The General Bank includes the Banking Group, which contains the retail
banking network and is the service provider of banking services to the consumer
sector as well as small and medium-size companies. Within the General Bank,
specialized services, such as the origination and servicing of home mortgage
loans, the issuance and servicing of credit cards, indirect lending, dealer
finance and certain insurance services, are provided throughout the
Corporation's franchise, and on a nationwide basis for certain products, through
the Financial Products Group. The General Bank also contains the Asset
Management Group, which includes businesses that provide full-service and
discount brokerage, investment advisory and investment management services. The
Private Client Group is part of the Asset Management Group as well and offers
banking, fiduciary and investment management services.
The General Bank earned $440 million in the first three months of 1997,
an increase of 14 percent over the same period in 1996. The acquisition of
Boatmen's accounted for most of the General Bank's increased earnings over the
same period last year. Taxable-equivalent net interest income in the General
<PAGE>
Bank increased $312 million primarily reflecting the impact of the Boatmen's
acquisition and deposit cost containment efforts. The net interest yield
decreased 25 basis points due to changes in the earning asset mix related to the
Boatmen's acquisition. Excluding the impact of acquisitions, securitizations and
loan sales, loans grew $3.4 billion due to higher mortgage loans, up $5.2
billion, and credit card loans, up $1.1 billion, partly offset by a slight
decline in the commercial portfolio.
Noninterest income rose 35 percent in the first three months of 1997 to
$781 million due primarily to the Boatmen's acquisition. Excluding the impact of
Boatmen's, deposit account service charges and credit card income increased
approximately 15 percent and 12 percent, respectively. Noninterest expense
increased 39 percent to $1.4 billion due primarily to acquisition-related
personnel expenses, which accounted for half of the increase year over year,
with the remaining increase across most major categories. Excluding
acquisitions, noninterest expense was unchanged. The cash basis efficiency ratio
increased to 58.8 percent for the first quarter of 1997 compared to the same
period in 1996 due to the inclusion of Boatmen's less efficient expense base and
incremental funding costs related to the acquisition. The tangible return on
average tangible equity remained unchanged at 26 percent, the result of revenue
growth offset by a proportionate increase in operating expenses and higher
equity levels resulting from the Boatmen's acquisition.
Global Finance provides comprehensive corporate and investment banking,
as well as trading and distribution services to domestic and international
customers through its Corporate Finance/Capital Markets, Real Estate and
Specialized Lending units. The group serves as a principal lender and investor
as well as an advisor, arranger and underwriter and manages treasury and trade
transactions for clients and customers. Loan origination and syndication,
asset-backed lending, leasing, factoring, project finance and mergers and
acquisitions are representative of the services provided. The Corporate
Finance/Capital Markets group underwrites, trades and distributes a wide range
of securities (including bank-eligible securities and, to a limited extent,
bank-ineligible securities as authorized by the Board of Governors of the
Federal Reserve System under Section 20 of the Glass-Steagall Act) and trades
and distributes financial futures, forward settlement contracts, option
contracts, swap agreements and other derivative products in certain interest
rate, foreign exchange, commodity and equity markets and spot and forward
foreign exchange contracts through two principal units, NationsBanc - CRT (CRT)
and NationsBanc Capital Markets, Inc. (NCMI).
Global Finance earned $162 million in the first three months of 1997
compared to $167 million in the first three months of 1996, the result of higher
levels of noninterest and provision expenses due in part to the Boatmen's
acquisition. Taxable-equivalent net interest income for the first three months
of 1997 was $329 million compared to $278 million in the first three months of
1996 reflecting loan growth due primarily to the Boatmen's acquisition partially
offset by narrower commercial loan spreads resulting from increased competitive
pressure on commercial loan pricing.
Noninterest income in the first three months of 1997 declined slightly
over the same period last year driven by a decline in investment banking fees,
partly offset by increases in most other categories. Noninterest expense for the
period rose 13 percent to $322 million across most major categories, the result
of the acquisition of Boatmen's. The cash basis efficiency ratio increased to
51.6 percent due to the higher level of expenses associated with the
Boatmen's acquisition. The tangible return on average tangible equity decreased
to 17 percent, the result of a 9-percent increase in total revenue
more than offset by higher operating expenses and higher equity levels
resulting from the Boatmen's acquisition.
Financial Services is composed of a holding company, NationsCredit
Corporation, which includes NationsCredit Consumer Corporation, primarily a
consumer finance operation, and NationsCredit Commercial Corporation, primarily
a commercial finance operation. NationsCredit Consumer Corporation provides
personal, mortgage and automobile loans to consumers and retail finance programs
to dealers. NationsCredit Commercial Corporation consists of divisions that
specialize in one or more of the following commercial financing areas: equipment
loans and leasing; loans for debt restructuring, mergers and acquisitions and
working capital; real estate, golf/recreational and health care financing; and
inventory financing to manufacturers, distributors and dealers.
Financial Services' earnings of $51 million in the first three months
of 1997 increased 42 percent over the same period in 1996. Taxable-equivalent
net interest income decreased $3 million resulting from lower yields partly
offset by a 7-percent growth in average loans and leases. The increase in
provision for credit losses was driven mainly by loan growth and partly offset
by lower loss rates. The net interest yield of 6.83 percent was down 62 basis
points from 1996, due principally to increased competitive pressure.
<PAGE>
Noninterest income more than doubled to $57 million in the first three months in
1997, reflecting gains associated with the sale of 29 branches during the first
quarter of 1997. Noninterest expense increased 3 percent to $80 million for the
first three months of 1997. Revenue growth more than offset expense growth due
to the gains on branch sales, resulting in a cash basis efficiency ratio of 38.8
percent for the first quarter of 1997. The tangible return on average tangible
equity rose approximately 600 basis points to 22 percent, primarily attributable
to the aforementioned gains on branch sales.
Results of Operations
Net Interest Income
An analysis of the Corporation's taxable-equivalent net interest income
and average balance sheet levels for the last five quarters is presented in
Table 3.
Taxable-equivalent net interest income increased 25 percent to nearly
$2 billion in the first quarter of 1997 compared to $1.6 billion in the first
quarter of 1996 due to the acquisition of Boatmen's, the reinvestment of
proceeds from the sale of low-yielding securities into higher-spread products
and core loan growth, partially offset by the impact of the sale of certain
consumer loans in the third quarter of 1996. While securitizations lowered net
interest income by $41 million in the first quarter of 1997 compared to the
first quarter of 1996, they do not significantly affect the Corporation's
earnings. As the Corporation continues to securitize loans, its role becomes
that of a servicer and the income related to securitized loans is reflected in
noninterest income.
Of the $455-million increase in interest income for the first three
months of 1997 compared to the same period in 1996, $452 million was due to
higher average earning assets with $3 million resulting from higher yields on
average earning assets. Interest expense increased $61 million with $200 million
resulting from higher levels of average interest-bearing liabilities offset by a
$139 million favorable impact of lower rates paid on average interest-bearing
liabilities.
The net interest yield increased 40 basis points to 3.83 percent in the
first quarter of 1997 compared to the same period of 1996 primarily reflecting
the reinvestment of proceeds from the sale of low-yielding securities into
higher-spread products.
Loan growth is dependent on economic conditions as well as various
discretionary factors, such as decisions to securitize certain loan portfolios,
the retention of residential mortgage loans generated by the Corporation's
mortgage subsidiary and the management of borrower, industry, product and
geographic concentrations.
Provision for Credit Losses
The provision for credit losses covered net charge-offs and was $190
million in the first quarter of 1997 compared to $155 million in the comparable
prior year quarter, reflecting the impact of the acquisition of Boatmen's. As
presented in the analysis of the allowance for credit losses in Table 9, net
charge-offs increased $29 million to $184 million in the first quarter of 1997
compared to the first quarter of 1996 due primarily to increases in credit card
and other consumer charge-offs partially offset by a decrease in total
commercial charge-offs. The increase in net charge-offs in the first quarter of
1997 was primarily due to the acquisition of Boatmen's. Total net charge-offs
remained unchanged at .50 percent of average loans, leases and factored accounts
receivable during the first quarter of 1997 versus 1996. Excluding increases
that resulted from the acquisition of Boatmen's, management expects charge-offs
to grow as the Corporation maintains its efforts to shift the mix of the loan
portfolio to a higher consumer concentration.
The allowance for credit losses was $2.8 billion, or 1.87 percent of
net loans, leases and factored accounts receivable, on March 31, 1997 compared
to $2.3 billion, or 1.89 percent, at the end of 1996 with the increase in the
allowance attributable to the acquisition of Boatmen's. The allowance for credit
losses was 265 percent of nonperforming loans on March 31, 1997 compared to 260
percent on December 31, 1996. Future economic conditions will impact credit
quality and may result in increased net charge-offs and higher provisions for
credit losses.
<PAGE>
Table 3
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
<TABLE>
<CAPTION>
First Quarter 1997 Fourth Quarter 1996
-----------------------------------------------------------------
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>
Earnings assets
Loans and leases, net of unearned income (1)
Commercial (2) $59,542 $1,229 8.38% $49,987 $1,044 8.30%
Real estate commercial 8,646 190 8.90 5,388 122 9.00
Real estate construction 3,778 84 8.98 3,084 67 8.74
---------------------------------------------------------------
Total commercial 71,966 1,503 8.47 58,459 1,233 8.39
---------------------------------------------------------------
Residential mortgage 32,072 621 7.78 28,174 548 7.77
Credit card 7,170 205 11.60 6,363 185 11.58
Other consumer 26,872 632 9.54 20,581 503 9.69
---------------------------------------------------------------
Total consumer 66,114 1,458 8.91 55,118 1,236 8.93
---------------------------------------------------------------
Foreign 3,283 56 6.86 2,701 47 6.89
Lease financing 5,316 103 7.79 4,614 87 7.66
---------------------------------------------------------------
Total loans and leases, net 146,679 3,120 8.61 120,892 2,603 8.57
---------------------------------------------------------------
Securities
Held for investment 1,920 29 6.05 2,585 36 5.55
Available for sale (3) 20,740 356 6.89 11,540 205 7.10
---------------------------------------------------------------
Total securities 22,660 385 6.82 14,125 241 6.82
---------------------------------------------------------------
Loans held for sale 1,062 17 6.49 802 15 7.31
Federal funds sold 343 5 5.70 273 4 5.79
Securities purchased under agreements to resell 13,027 183 5.70 12,018 158 5.21
Time deposits placed and other
short-term investments 2,228 28 5.11 1,991 25 4.86
Trading account securities (4) 22,848 317 5.60 21,148 334 6.32
---------------------------------------------------------------
Total earning assets (5) 208,847 4,055 7.85 171,249 3,380 7.86
Cash and cash equivalents 9,178 7,720
Factored accounts receivable 1,078 1,256
Other assets, less allowance for credit losses 23,103 14,096
---------------------------------------------------------------
Total assets $242,206 $194,321
===============================================================
Interest-bearing liabilities
Savings $ 10,220 53 2.10 $ 8,607 46 2.12
NOW and money market deposit accounts 42,138 273 2.64 30,634 191 2.47
Consumer CDs and IRAs (6) 39,458 507 5.21 30,870 405 5.22
Negotiated CDs, public funds and other time deposits 3,555 47 5.31 2,544 35 5.53
Foreign time deposits 9,278 118 5.14 9,139 117 5.10
Federal funds purchased 4,469 59 5.35 3,915 51 5.21
Securities sold under agreements to repurchase (6) 29,607 358 4.90 25,192 330 5.22
Commercial paper 3,041 41 5.53 2,850 40 5.59
Other short-term borrowings (6) 2,711 51 n/m 1,971 34 6.99
Trading account liabilities (4) 9,949 165 6.73 9,314 152 6.48
Long-term debt (7) 25,244 405 6.50 22,702 367 6.53
---------------------------------------------------------------
Total interest-bearing liabilities 179,670 2,077 4.68 147,738 1,768 4.77
---------------------------------------------------------------
Noninterest-bearing sources
Noninterest-bearing deposits 30,327 23,971
Other liabilities 11,555 9,388
Shareholders' equity 20,654 13,224
---------------------------------------------------------------
Total liabilities and shareholders' equity $242,206 $194,321
===============================================================
Net interest spread 3.17 3.09
Impact of noninterest-bearing sources .66 .66
---------------------------------------------------------------
Net interest income/yield on earning assets $ 1,978 3.83% $ 1,612 3.75%
===============================================================
</TABLE>
n/m-not meaningful
(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.
Interest rate swaps increased (decreased) interest income $50 in the first
quarter of 1997 and $31, $11, $3 and ($19) in the fourth, third, second and
first quarters of 1996, 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) The fair values of derivatives-dealer positions are reported in other assets
and liabilities, respectively.
(5) Interest income includes taxable-equivalent adjustments of $28 in the first
quarter of 1997 and $22, $21, $24 and $27 in the fourth, third, second and
first quarters of 1996, respectively.
(6) Securities sold under agreements to repurchase, other short-term borrowings
and consumer CDs interest expense includes net interest rate swap expense
related to swaps fixing the cost of certain of these liabilities. Interest
rate swaps increased (decreased) interest expense ($1) in the first quarter
of 1997 and $3, $16, $26 and $21 in the fourth, third, second and first
quarters of 1996, respectively.
(7) Long-term debt interest expense includes net interest rate swap expense
related to swaps primarily converting the cost of certain fixed-rate debt to
variable rate. Interest rate swaps decreased interest expense $9 in the
first quarter of 1997 and $4, $3, $2 and $3 in the fourth, third, second and
first quarter of 1996, respectively. Long-term debt includes trust preferred
securities.
<PAGE>
<TABLE>
<CAPTION>
Third Quarter 1996 Second Quarter 1996 First Quarter 1996
- --------------------------------------------------------------------------------------------
Average Average Average
Balance Income Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates Amounts Expense Rates
- ------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$48,920 $1,011 $8.23% $49,983 $1,000 8.04% $49,319 $987 8.05%
5,921 138 9.25 6,288 141 9.07 6,774 149 8.82
3,195 74 9.15 3,229 71 8.83 3,154 69 8.85
- --------------------------------------------------------------------------------------------
58,036 1,223 8.38 59,500 1,212 8.19 59,247 1,205 8.18
- --------------------------------------------------------------------------------------------
27,990 545 7.77 27,728 542 7.82 27,352 534 7.83
5,903 169 11.38 6,057 173 11.45 6,590 206 12.59
22,026 544 9.84 23,441 578 9.93 23,850 593 9.99
- --------------------------------------------------------------------------------------------
55,919 1,258 8.97 57,226 1,293 9.07 57,792 1,333 9.26
- --------------------------------------------------------------------------------------------
2,813 46 6.59 2,746 45 6.56 2,392 45 7.54
4,429 85 7.60 4,254 80 7.59 3,851 72 7.46
- --------------------------------------------------------------------------------------------
121,197 2,612 8.58 123,726 2,630 8.54 123,282 2,655 8.65
- --------------------------------------------------------------------------------------------
3,173 46 5.73 3,731 51 5.45 4,292 60 5.62
16,388 273 6.66 18,328 303 6.64 22,997 365 6.37
- --------------------------------------------------------------------------------------------
19,561 319 6.51 22,059 354 6.44 27,289 425 6.25
- --------------------------------------------------------------------------------------------
1,025 20 7.87 1,156 19 6.49 1,331 25 7.55
361 6 6.39 397 5 5.75 525 8 5.89
11,828 153 5.14 12,075 149 4.99 13,870 183 5.29
1,430 20 5.74 1,263 17 5.28 1,056 18 6.90
18,897 314 6.60 17,912 292 6.53 18,213 286 6.33
- --------------------------------------------------------------------------------------------
174,299 3,444 7.87 178,588 3,466 7.80 185,566 3,600 7.80
7,597 7,928 7,998
1,150 1,124 1,010
14,877 15,156 14,043
- --------------------------------------------------------------------------------------------
$197,923 $202,796 $208,617
============================================================================================
$ 8,798 48 2.15 $ 9,336 52 2.27 $ 9,361 55 2.35
30,485 189 2.49 30,155 191 2.52 29,692 192 2.61
30,092 394 5.21 29,698 389 5.28 29,469 397 5.42
3,314 46 5.50 3,331 46 5.53 3,273 44 5.42
10,836 145 5.31 12,867 170 5.34 11,902 170 5.73
3,631 49 5.39 4,433 59 5.37 6,817 92 5.41
26,309 355 5.36 28,924 391 5.44 33,705 455 5.43
3,129 44 5.59 3,064 42 5.49 2,821 39 5.62
2,999 51 6.76 3,968 58 5.80 4,455 65 5.89
9,848 163 6.57 8,912 147 6.63 12,485 191 6.16
21,067 344 6.53 19,730 310 6.30 18,885 316 6.68
- --------------------------------------------------------------------------------------------
150,508 1,828 4.84 154,418 1,855 4.83 162,865 2,016 4.97
- --------------------------------------------------------------------------------------------
24,190 24,601 23,209
10,092 10,225 9,399
13,133 13,552 13,144
- --------------------------------------------------------------------------------------------
$197,923 $202,796 $208,617
============================================================================================
3.03 2.97 2.83
.66 .65 .60
- --------------------------------------------------------------------------------------------
$1,616 3.69% $1,611 3.62% $1,584 3.43%
============================================================================================
</TABLE>
<PAGE>
Gains on Sales of Securities
Gains on the sales of securities were $43 million in the first quarter
of 1997 compared to $14 million in the first quarter of 1996. The increase
reflects the Corporation's sale of a significant portion of the Boatmen's
portfolio subsequent to the acquisition date. The increase also reflects the
sale of low-yielding securities and the reinvestment of the proceeds from such
sales into higher-yielding assets.
Noninterest Income
Table 4
Noninterest Income
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31 Change
--------------------------------------------
1997 1996 Amount Percent
--------------------------------------------
<S> <C> <C> <C> <C>
Service charges on deposit accounts $360 $259 $101 39.0%
--------------------------------------------
Nondeposit-related service fees
Safe deposit rent 11 9 2 22.2
Mortgage servicing and mortgage-related fees 70 47 23 48.9
Fees on factored accounts receivable 15 16 (1) (6.3)
Investment banking income 83 99 (16) (16.2)
Other service fees 51 45 6 13.3
--------------------------------------------
Total nondeposit-related service fees 230 216 14 6.5
--------------------------------------------
Asset management and fiduciary service fees 166 105 61 58.1
--------------------------------------------
Credit card income
Merchant discount fees 0 4 (4) (100.0)
Annual credit card fees 7 7 0 0.0
Other credit card fees 77 58 19 32.8
--------------------------------------------
Total credit card income 84 69 15 21.7
--------------------------------------------
Other income
Brokerage income 33 28 5 17.9
Trading account profits and fees 97 68 29 42.6
Bankers' acceptances and letters of credit fees 20 18 2 11.1
Insurance commissions and earnings 25 19 6 31.6
Miscellaneous 98 103 (5) (4.9)
--------------------------------------------
Total other income 273 236 37 15.7
--------------------------------------------
$1,113 $885 $228 25.8
============================================
</TABLE>
As presented in Table 4, noninterest income increased 26 percent to
$1.1 billion in the first quarter of 1997, primarily reflecting the acquisition
of Boatmen's as described below:
o Service charges on deposit accounts increased 39 percent over the same
period of 1996, due primarily to the acquisition of Boatmen's. Excluding
the impact of the Boatmen's acquisition, service charges increased
approximately 11 percent.
o Mortgage servicing and related fees increased 49 percent to $70 million in
the first quarter of 1997 due primarily to the acquisition of the Boatmen's
mortgage portfolio. Including acquisitions, the average portfolio of loans
serviced increased 41 percent from $83.1 billion in the first quarter of
1996 to $117.0 billion in the first quarter of 1997. Mortgage loan
originations through the Corporation's mortgage subsidiary were unchanged
at $3.1 billion in the first quarters of 1997 and 1996. Lower levels of
mortgage loan originations due to changes in the interest rate environment
were offset by Boatmen's mortgage activity. Origination volume in the first
quarter of 1997 consisted of approximately $2.0 billion of correspondent
and wholesale loan volume and $1.1 billion of retail loan volume.
<PAGE>
In conducting its mortgage banking activities, the Corporation is
exposed to interest rate risk for the period between loan commitment date and
subsequent delivery date. The value of the Corporation's mortgage servicing
rights is also affected by changes in prepayment rates. To manage risks
associated with mortgage banking activities, the Corporation enters into various
financial instruments including option contracts, forward delivery contracts and
certain rate swaps. The contract notional amount of these instruments
approximated $8.9 billion on March 31, 1997. Net unrealized losses associated
with these contracts were $25 million on March 31, 1997.
o Investment banking income decreased 16 percent to $83 million in the first
quarter of 1997, reflecting lower gains on principal investing activity
(investing in equity or equity-related transactions on behalf of clients).
An analysis of investment banking income by major business activity
follows (in millions):
Three Months Ended
March 31
-------------------
1997 1996
-------------------
Syndications $19 $17
Securities underwriting 25 19
Principal investment activities 23 50
Other 16 13
-------------------
$83 $99
===================
o Asset management and fiduciary service fees increased $61
million to $166 million in the first quarter of 1997, reflecting the impact
of the Boatmen's acquisition.
o Credit card income increased 22 percent to $84 million in the first quarter
of 1997, primarily due to the acquisition of Boatmen's. Credit card income
includes $8 million from credit card securitizations.
o Trading account profits and fees totaled $97 million in the first quarter
of 1997, an increase of $29 million from $68 million in the first quarter
of 1996.
An analysis of trading account profits and fees by major business
activity follows (in millions):
Three Months Ended
March 31
--------------------
1997 1996
--------------------
Securities trading $19 $10
Interest rate contracts 41 56
Foreign exchange contracts 17 (7)
Other 20 9
---------------------
$97 $68
=====================
o Miscellaneous income totaled $98 million in the first quarter of 1997, a
decrease of $5 million compared to the same period of 1996. Miscellaneous
income includes certain prepayment fees and other fees such as net gains on
sales of miscellaneous investments, business activities, premises, venture
capital investments and other similar items.
Noninterest Expense
As presented in Table 5, the Corporation's noninterest expense
increased 30 percent to $1.8 billion in the first quarter of 1997 from $1.4
billion in the same period of 1996. Excluding the impact of the Boatmen's
acquisition, noninterest expense increased approximately 3 percent.
A discussion of the significant components of noninterest expense in
the first quarter of 1997 compared to the first quarter of 1996 follows:
<PAGE>
o Personnel expense increased $219 million over 1996, primarily due to the
impact of the acquisition of Boatmen's. On March 31, 1996, the Corporation
had approximately 81,000 full-time equivalent employees compared to
approximately 63,000 full-time equivalent employees on December 31, 1996.
o Occupancy expense increased 19 percent to $151 million in the first quarter
of 1997 compared to the same period of 1996 due to the acquisition of
Boatmen's.
o Equipment expense increased approximately $49 million in the first quarter
of 1997 over the same period of 1996, reflecting the acquisition of
Boatmen's as well as enhancements to computer resources throughout the
Corporation and to product delivery systems, such as the Model Banking
initiative, PC banking, direct banking and data base management.
o Professional fees increased $26 million, reflecting higher consulting and
technical support fees for projects to enhance revenue growth and for the
development and installation of infrastructure enhancements.
o Intangibles amortization expense increased $75 million in the first quarter
of 1997 compared to the first quarter of 1996, reflecting the impact of the
Boatmen's acquisition.
o Other general operating expenses decreased $22 million to $126 million in
the first quarter of 1997. Included in the first quarter 1996 expense was a
$40 million pre-tax charge reflecting the estimated loss associated with
fraudulent commercial loan transactions.
Table 5
Noninterest Expense
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31 Change
-----------------------------------------
1997 1996 Amount Percent
-----------------------------------------
<S> <C> <C> <C> <C>
Personnel $881 $662 $219 33.1%
Occupancy, net 151 127 24 18.9
Equipment 155 106 49 46.2
Marketing 75 67 8 11.9
Professional fees 75 49 26 53.1
Amortization of intangibles 101 26 75 288.5
Credit card 15 17 (2) (11.8)
Deposit insurance 7 7 0 0.0
Data processing 70 61 9 14.8
Telecommunications 54 41 13 31.7
Postage and courier 49 38 11 28.9
Other general operating 126 148 (22) (14.9)
General administrative and miscellaneous 51 45 6 13.3
-----------------------------------------
$1,810 $1,394 $416 29.8
=========================================
</TABLE>
Income Taxes
The Corporation's income tax expense for the first quarter of 1997 was
$399 million, for an effective tax rate of 36.0 percent of pretax income. Income
tax expense for the first quarter of 1996 was $276 million, for an effective
rate of 35.0 percent. The increase in the effective tax rate was due to the
increase in non-deductible goodwill amortization resulting from the acquisition
of Boatmen's.
Balance Sheet Review and Liquidity Risk Management
The Corporation utilizes an integrated approach in managing its balance
sheet which includes management of interest rate sensitivity, credit risk,
liquidity risk and capital position.
Average customer-based funds increased $30.7 billion in the first three
months of 1997 over the same period in 1996 primarily due to deposits obtained
in acquisitions over the past year. As a percentage
<PAGE>
of total sources, average customer-based funds represented 52 percent in the
first three months of 1997 compared to 46 percent in the first three months of
1996.
Average market-based funds decreased $13.1 billion in the first three
months of 1997 compared to the same period in 1996 and comprised a smaller
portion of total sources of funds at 24 percent for the first three months of
1997 compared to 35 percent during the same period of 1996, the result of
increases in customer-based funds from the Boatmen's acquisition and term debt.
Average long-term debt increased $6.4 billion in the first three months of 1997
over 1996 levels for the comparable period and represented 10 percent of total
sources of funds compared to 9 percent during the first three months of 1996.
The increase in long-term debt is the result of borrowings to fund the cash
portion of the Boatmen's purchase price.
Average loans and leases, the Corporation's primary use of funds,
increased $23.4 billion during the first three months of 1997 despite higher
levels of securitized loans compared to the same period of 1996 due to the
impact of acquisitions and core loan growth, comprising 61 percent of total uses
of funds compared to 59 percent during the same period of 1996. The ratio of
average loans and leases to customer-based funds was 117 percent in the first
three months of 1997 compared to 130 percent in the first three months of 1996.
The average securities portfolio as a percentage of total uses
decreased to 9 percent in the first three months of 1997 from 13 percent in the
first three months of 1996, the result of management's focus on the reduction of
low-yielding assets.
Cash and cash equivalents were $11.0 billion on March 31, 1997, an
increase of $2.1 billion from December 31, 1996. During the first three months
of 1997, net cash used in operating activities was $4.2 billion, net cash
provided by investing activities was $2.4 billion and net cash provided by
financing activities was $3.8 billion. For further information on cash flows,
see the Consolidated Statement of Cash Flows in the consolidated financial
statements.
Liquidity is a measure of the Corporation's ability to fulfill its cash
requirements and is managed by the Corporation through its asset and liability
management process. The Corporation assesses the level of liquidity necessary to
meet its cash requirements by monitoring its assets and liabilities and
modifying these positions as liquidity requirements change. This process,
coupled with the Corporation's ability to raise capital and debt financing, is
designed to cover the liquidity needs of the Corporation. The following
discussion provides an overview of significant on- and off-balance sheet
components.
Securities
The securities portfolio on March 31, 1997 consisted of securities held
for investment totaling $1.8 billion and securities available for sale totaling
$20.0 billion compared to $2.1 billion and $12.3 billion, respectively, on
December 31, 1996. The increase in the available for sale portfolio from
December 31, 1996 to March 31, 1997 was due to the addition of higher-yielding
mortgage-backed securities in the first quarter.
On March 31, 1997, the market value of the Corporation's portfolio of
securities held for investment reflected net unrealized depreciation of $4
million. On December 31, 1996, the market value of securities held for
investment approximated the book value of the portfolio.
The valuation reserve for securities available for sale and marketable
equity securities decreased shareholders' equity by $115 million on March 31,
1997, reflecting pretax depreciation of $294 million on securities available for
sale and pretax appreciation of $102 million on marketable equity securities.
The valuation reserve increased shareholders' equity by $86 million on December
31, 1996. The decrease in the valuation reserve was primarily attributable to an
increase in interest rates when comparing March 31, 1997 to December 31, 1996.
The estimated average maturities of securities held for investment and
securities available for sale portfolios were 1.53 years and 6.13 years,
respectively, on March 31, 1997 compared with 1.47 years and 6.91 years,
respectively, on December 31, 1996.
Off-Balance Sheet
Derivatives - Asset and Liability Management Positions
The Corporation utilizes interest rate and foreign exchange contracts
in its asset and liability management (ALM) process.
<PAGE>
Interest rate contracts allow the Corporation to efficiently manage its
interest rate risk position. The Corporation primarily uses non-leveraged
generic and basis swaps. Generic swaps involve the exchange of fixed-rate and
variable-rate interest payments based on the contractual underlying notional
amounts. Basis swaps involve the exchange of interest payments based on the
contractual underlying notional amounts, where both the pay rate and the receive
rate are floating rates based on different indices. As presented in the
footnotes to Table 3, net interest receipts and payments on these contracts have
been included in interest income and expense on the underlying instruments.
Table 6 summarizes the notional amounts and the activity of ALM
interest rate contracts for the three months ended March 31, 1997. As reflected
in the table, the gross notional amount of the Corporation's ALM swap program on
March 31, 1997 was $38.1 billion, with the Corporation receiving fixed on $36.0
billion, primarily converting variable-rate commercial loans to fixed-rate, and
receiving variable on $422 million. The net receive fixed position of $35.6
billion increased from the net receive fixed position of $26.7 billion on
December 31, 1996 as a result of the Corporation modifying the interest rate
characteristics of certain variable-rate assets in order to maintain the
Corporation's relatively neutral posture to changes in interest rates.
Table 6
Asset and Liability Management Interest Rate Notional Contracts
(Dollars in Millions)
<TABLE>
<CAPTION>
Total
Generic Interest
--------------------------------------
Receive Pay Total Option Rate
Fixed Fixed Basis Swaps Products Contracts
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1996 $ 27,740 $ 1,035 $ 1,346 $ 30,121 $ 6,395 36,516
Additions 9,968 187 290 10,445 3,075 13,520
Maturities, Terminations and Other (1,684) (800) - (2,484) - (2,484)
----------------------------------------------------------------------------------------
Balance on March 31, 1997 $ 6,024 $ 422 $ 1,636 $ 38,082 $ 9,470 47,552
========================================================================================
</TABLE>
Table 7 summarizes the expected maturities, weighted average pay and
receive rates and the unrealized loss on March 31, 1997 of the Corporation's ALM
swaps. Floating rates represent the last repricing and will change in the future
primarily based on movements in one-, three- and six-month LIBOR rates. The net
unrealized depreciation of the ALM swap portfolio on March 31, 1997 was $530
million compared to unrealized appreciation of $69 million on December 31, 1996,
reflecting the increase in interest rates during the first quarter. The amount
of net realized deferred losses associated with terminated ALM swaps was $39
million on March 31, 1997.
In its ALM process, the Corporation also utilizes interest rate option
products, primarily caps and floors. Interest rate caps and floors are
agreements where, for a fee, the purchaser obtains the right to receive interest
payments when a variable interest rate moves above or below a specified cap or
floor rate, respectively. Table 6 also includes a summary of the notional amount
and the activity of ALM interest rate option contracts for the three months
ended March 31, 1997. At March 31, 1997, the Corporation had a gross notional
amount of $9.5 billion in outstanding interest rate option contracts used for
ALM purposes. Such instruments are primarily linked to term debt, short-term
borrowings and pools of residential mortgages. Table 7 also includes a summary
of the expected maturities and the net unrealized loss of the Corporation's ALM
options contracts. On March 31, 1997, the net unrealized depreciation of ALM
option products was $7 million.
The Corporation uses foreign currency swaps to manage the foreign
exchange risk associated with foreign-denominated liabilities. At March 31,
1997, these contracts had a notional value of $540 million and reflected
unrealized depreciation of $47 million. Unrealized gains and losses
associated with ALM foreign currency swaps are included as adjustments to income
or expense on the linked asset or liability.
The net unrealized depreciation in the estimated value of the ALM
interest rate and foreign exchange contract 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 positions should not be viewed in isolation.
For a discussion of the Corporation's management of risk associated
with mortgage banking activities, see Noninterest Income.
<PAGE>
Table 7
Asset and Liability Management Interest Rate Contracts
March 31, 1997
(Dollars in Millions, Average Expected Maturity in Years)
<TABLE>
<CAPTION>
Expected Maturity
---------------------------------------------------------------------------------------
Average
Unrealized After Expected
Gain/(Loss) Total 1997 1998 1999 2000 2001 2001 Maturity
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Conversion Swaps
Receive fixed generic $ (366) 3.44
Notional amount $ 30,246 $ 36 $ 2,680 $ 7,135 $ 7,810 $ 8,400 $ 4,185
Weighted average receive rate 6.46% 6.50% 5.96% 6.44% 6.47% 6.57% 6.57%
Weighted average pay rate 5.54
Pay fixed generic (1) 4.52
----------
Notional amount $ 10 $ 1 $ 1 $ 1 $ 1 $ 1 $ 5
Weighted average pay rate 9.78% 9.78% 9.78% 9.78% 9.78% 9.78% 9.78%
Weighted average receive rate 6.80
Total asset conversion swaps $ (367)
==========
Notional amount $ 30,256 $ 37 $ 2,681 $ 7,136 $ 7,811 $8,401 $ 4,190
Liability Conversion Swaps
Receive fixed generic $ (156) 6.61
Notional amount $ 5,778 $ 75 $ 28 $ 702 $ 308 $1,429 $ 3,236
Weighted average receive rate 6.82% 8.27% 6.32% 7.27% 6.79% 6.40% 6.87%
Weighted average pay rate 5.80
Pay fixed generic (6) 1.73
----------
Notional amount $ 412 $ 125 $ 100 $ 110 $ 66 $ - $ 11
Weighted average pay rate 8.18% 10.35% 9.31% 6.05% 6.20% -% 6.60%
Weighted average receive rate 5.43
Total liability conversion swaps $ (162)
==========
Notional amount $ 6,190 $ 200 $ 128 $ 812 $ 374 $1,429 $ 3,247
- -------------------------------------------------------------------------------------------------------------------------
Total receive fixed swaps $ (522) 3.95
Notional amount $ 36,024 $ 111 $ 2,708 $ 7,837 $ 8,118 $9,829 $ 7,421
Weighted average receive rate 6.52% 7.69% 5.96% 6.51% 6.48% 6.54% 6.70%
Weighted average pay rate 5.58
Total pay fixed swaps (7) 1.79
Notional amount $ 422 $ 126 $ 101 $ 111 $ 67 $ 1 $ 16
Weighted average pay rate 8.22% 10.34% 9.31% 6.08% 6.25% 9.78% 7.60%
Weighted average receive rate 5.46%
Basis Swaps $ (1) 1.53
----------
Notional amount $ 1,636 $ 371 $ 700 $ 350 $ 90 $ 25 $ 100
Weighted average receive rate 5.52%
Weighted average pay rate 5.54
Total Swaps $(530)
==========
Notional amount $ 38,082 $ 608 $ 3,509 $ 8,298 $ 8,275 $9,855 $ 7,537
- -------------------------------------------------------------------------------------------------------------------------
Option Products
Notional amount (7) $ 9,470 $ 600 $ 2,425 $ 3,575 $ 25 $1,086 $ 1,759
- -------------------------------------------------------------------------------------------------------------------------
Total Interest Rate Contracts $(537)
==========
Notional amount $ 47,552 $1,208 $ 5,934 $11,873 $ 8,300 $10,941 $ 9,296
</TABLE>
On March 31, 1997, in addition to the above interest rate swaps, the Corporation
had a $500 million notional receive fixed generic interest rate swap associated
with a credit card securitization. On March 31, 1997, this position had an
unrealized market value of negative $37 million, a weighted average receive rate
of 5.96 percent, a pay rate of 5.61 percent and an expected maturity of 6.71
years.
Derivatives - Dealer Positions
Credit risk associated with derivative positions is measured as the net
replacement cost the Corporation could incur should counterparties with
contracts in a gain position 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. In managing derivative credit risk, the Corporation
considers both the current exposure, which is the replacement cost of contracts
on the measurement date, as well as an estimate of the potential change in value
of contracts over their remaining lives.
Table 8 presents the notional or contract amounts on March 31, 1997 and
December 31, 1996 and the current credit risk amounts (the net replacement cost
of contracts in a gain position on March 31, 1997 and December 31, 1996) of the
Corporation's derivatives-dealer positions which are primarily executed in the
over-the-counter market. 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
<PAGE>
instruments. The credit risk amounts presented in Table 8 do not consider the
value of any collateral, but generally take into consideration the effects of
legally enforceable master netting agreements. On March 31, 1997, the credit
risk associated with the Corporation's asset and liability management positions
was not significant.
In managing credit risk associated with its derivatives activities, the
Corporation deals with creditworthy counterparties, primarily U.S. and foreign
commercial banks, broker-dealers and corporates.
Table 8
Derivatives - Dealer Positions
(Dollars in Millions)
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
---------------------------------------------------------
Contract/ Credit Risk Contract/ Credit Risk
Notional Amount (1) Notional Amount (1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate Contracts
Swaps $274,417 $ 1,568 $252,187 $ 927
Futures and forwards 197,350 7 186,333 5
Written options 335,247 - 298,594 -
Purchased options 324,632 555 294,591 561
Foreign Exchange Contracts
Swaps 1,174 172 1,303 24
Spot, futures and forwards 78,661 1,089 94,028 1,137
Written options 57,816 - 63,081 -
Purchased options 55,776 415 61,716 352
Commodity and Other Contracts
Swaps 681 37 812 81
Futures and forwards 1,862 3 2,728 -
Written options 14,857 - 14,064 -
Purchased options 15,195 363 13,828 357
------ -------
Total before cross product netting 4,209 3,444
------ -------
Cross product netting 298 286
------ -------
Net replacement cost $ 3,911 $ 3,158
====== =======
</TABLE>
(1) Represents the net 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. Amounts
include accrued interest.
A portion of the Corporation's derivatives-dealer activity involves
exchange-traded instruments. 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.
During 1997, there were no credit losses associated with derivative
transactions. In addition, on March 31, 1997, there were no nonperforming
derivative positions.
Allowance for Credit Losses
The Corporation's allowance for credit losses was $2.8 billion on March
31, 1997 compared to $2.3 billion on December 31, 1996. Table 9 provides an
analysis of the changes in the allowance for credit losses. The provision for
credit losses of $190 million in the first quarter of 1997 was $35 million
higher than in the first quarter of 1996, primarily as a result of the Boatmen's
acquisition and higher charge-offs in the consumer loan portfolios. Total net
charge-offs remained unchanged at .50 percent of average loans, leases and
factored accounts receivable during the first quarter of 1997 versus 1996.
Increases in credit
<PAGE>
Table 9
Allowance For Credit Losses
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31
-------------------------
1997 1996
-------------------------
<S> <C> <C>
Balance on January 1 $ 2,315 $ 2,163
-------------------------
Loans, leases and factored accounts receivable charged off
Commercial (27) (34)
Real estate commercial (4) (13)
Real estate construction 0 0
-------------------------
Total commercial (31) (47)
-------------------------
Residential mortgage (4) (4)
Credit card (108) (65)
Other consumer (100) (87)
-------------------------
Total consumer (212) (156)
-------------------------
Lease financing (4) (1)
Factored accounts receivable (4) (6)
-------------------------
Total loans, leases and factored accounts
receivable charged off (251) (210)
-------------------------
Recoveries of loans, leases and factored accounts
receivable previously charged off
Commercial 18 14
Real estate commercial 2 3
Real estate construction 1 0
-------------------------
Total commercial 21 17
-------------------------
Residential mortgage 1 1
Credit card 19 12
Other consumer 25 22
-------------------------
Total consumer 45 35
-------------------------
Factored accounts receivable 1 3
-------------------------
Total recoveries of loans, leases and
factored accounts receivable previously charged off 67 55
-------------------------
Net charge-offs (184) (155)
-------------------------
Provision for credit losses 190 155
Allowance applicable to loans of purchased companies and other 464 90
-------------------------
Balance on March 31 $ 2,785 $ 2,253
=========================
Loans, leases and factored accounts receivable,
net of unearned income, outstanding end of period $ 148,716 $ 124,344
Allowance for credit losses as a percentage of
loans, leases and factored accounts receivable,
net of unearned income, outstanding end of period 1.87% 1.81%
Average loans, leases and factored accounts receivable,
net of unearned income, outstanding during the period $ 147,757 $ 124,292
Net charge-offs as a percentage of average loans, leases and
factored accounts receivable, net of unearned income,
outstanding during the period 0.50% 0.50%
Allowance for credit losses as a percentage of nonperforming loans 264.82 267.71
</TABLE>
<PAGE>
card and other consumer net charge-offs of $36 million and $10 million,
respectively, were partially offset by a decrease of $20 million in commercial
net charge-offs. Industry-wide deterioration in consumer credit quality was the
primary reason for higher credit card net charge-offs in the first quarter of
1997. Higher other consumer net charge-offs in the first quarter of 1997 were
primarily attributable to the Boatmen's acquisition.
Excluding increases that resulted from the acquisition of Boatmen's,
management expects charge-offs to grow as the Corporation maintains its efforts
to shift the mix of the loan portfolio to a higher consumer concentration.
Furthermore, future economic conditions also will impact credit quality and may
result in increased net charge-offs and higher provisions for credit losses.
Nonperforming Assets
As presented in Table 10, on March 31, 1997, nonperforming assets were
$1.2 billion, or .82 percent of net loans, leases, factored accounts receivable
and other real estate owned, compared to $1.0 billion, or .85 percent, on
December 31, 1996. Nonperforming loans increased to $1.1 billion on March 31,
1997 from $890 million on December 31, 1996. The increase in nonperforming loans
was primarily due to the acquisition of Boatmen's. The allowance coverage of
nonperforming loans was 265 percent on March 31, 1997 compared to 260 percent on
December 31, 1996.
Table 10
Nonperforming Assets
(Dollars in Millions)
<TABLE>
<CAPTION>
March 31 December 31 September 30 June 30 March 31
1997 1996 1996 1996 1996
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial $398 $342 $413 $388 $359
Real estate commercial 162 145 165 119 180
Real estate construction 34 28 36 15 15
----------------------------------------------------------
Total commercial 594 515 614 522 554
----------------------------------------------------------
Residential mortgage 256 215 203 174 138
Other consumer 156 135 135 135 136
----------------------------------------------------------
Total consumer 412 350 338 309 274
----------------------------------------------------------
Lease financing 45 25 32 23 13
----------------------------------------------------------
Total nonperforming loans 1,051 890 984 854 841
----------------------------------------------------------
Other real estate owned 168 153 151 138 144
----------------------------------------------------------
Total nonperforming assets $1,219 $1,043 $1,135 $992 $985
==========================================================
Nonperforming assets as a percentage of
Total assets 0.51% 0.56% 0.61% 0.52% 0.51%
Loans, leases and factored accounts
receivable, net of unearned income,
and other real estate owned 0.82 0.85 0.93 0.80 0.79
Loans past due 90 days or more and not
classified as nonperforming $320 $245 $201 $153 $173
</TABLE>
Concentrations of Credit Risk
In an effort to minimize the adverse impact of any single event or set
of occurrences, the Corporation strives to maintain a diverse credit portfolio.
Summarized below are areas of significant credit risk.
Real Estate - Total nonresidential real estate commercial and
construction loans, the portion of such loans which are nonperforming, OREO and
other credit exposures are presented in Table 11. The exposures presented
represent credit extensions for real estate-related purposes to borrowers or
counterparties who are primarily in the real estate development or investment
business and for which the ultimate repayment of the credit is dependent on the
sale, lease, rental or refinancing of the real estate.
<PAGE>
Total nonresidential real estate commercial and construction loans
totaled $12.4 billion, or 8 percent of net loans, leases and factored accounts
receivable, on March 31, 1997 compared to $8.3 billion, or 7 percent, at the end
of 1996. During the first quarter of 1997, the Corporation recorded real estate
net charge-offs of $1 million, or .04 percent of average real estate loans,
compared to net charge-offs of $10 million, or .39 percent, in the first quarter
of 1996. Nonperforming real estate commercial and construction loans were $196
million on March 31, 1997 compared to $173 million on December 31, 1996 due
primarily to the acquisition of Boatmen's.
The exposures included in Table 11 do not include credit extensions
which were made on the general creditworthiness of the borrower for which real
estate was obtained as security or as an abundance of caution and for which the
ultimate repayment of the credit is not dependent on the sale, lease, rental or
refinancing of the real estate. Accordingly, the exposures presented do not
include commercial loans secured by owner-occupied real estate, except where the
borrower is a real estate developer. In addition to the amounts presented in the
tables, on March 31, 1997, the Corporation had approximately $8.3 billion of
commercial loans which were not real estate dependent but for which the
Corporation had obtained real estate as secondary repayment security.
Table 11
Real Estate Commercial and Construction Loans, Other Real Estate Owned and
Other Real Estate Credit Exposures
March 31, 1997
(Dollars in Millions)
<TABLE>
<CAPTION>
Loans (1)
------------------------------ Other
Credit
Outstanding Nonperforming OREO Exposures (2)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
By Geographic Region (3):
Missouri, Kansas, Illinois, Iowa and Arkansas $2,842 $30 $18 $116
Florida and Georgia 2,659 72 45 261
Texas, Oklahoma and New Mexico 2,243 16 7 131
Maryland, District of Columbia and Virginia 1,575 38 27 356
North Carolina and South Carolina 1,478 35 8 62
Other states 1,567 5 2 323
---------------------------------------------------------------
$12,364 $196 $107 $1,249
===============================================================
By Property Type:
Apartments $2,000 $24 $1 $447
Residential 1,875 17 2 36
Shopping centers/retail 1,852 15 5 242
Office buildings 1,687 13 32 13
Hotels 1,058 16 0 47
Industrial/warehouse 922 17 2 18
Land and land development 862 26 46 79
Commercial-other 415 20 11 107
Resorts/golf courses 297 0 0 0
Unsecured 179 4 0 144
Multiple use 112 5 1 0
Other 1,105 39 7 116
---------------------------------------------------------------
$12,364 $196 $107 $1,249
===============================================================
</TABLE>
(1) On March 31, 1997, the Corporation had unfunded binding real estate
commercial and construction loan commitments.
(2) Other credit exposures include letters of credit and loans held for sale.
(3) Distribution based on geographic location of collateral.
Other Industries - Table 12 presents selected industry credit
exposures. Commercial loans, factored accounts receivable and lease financings
are included in the table. Other credit exposures as presented include loans
held for sale, letters of credit, bankers' acceptances and derivatives exposures
in a
<PAGE>
gain position. Commercial loan outstandings totaled $60.6 billion and $50.3
billion on March 31, 1997 and December 31, 1996, respectively, or 41 percent of
net loans, leases and factored accounts receivable. Net charge-offs of
commercial loans totaled $9 million, or .07 percent of average commercial loans,
in the first quarter of 1997, versus $20 million, or .16 percent, in the first
quarter of 1996. Commercial loans past due 90 days or more and still accruing
interest were $82 million, or .14 percent of commercial loans, on March 31, 1997
and $38 million, or .08 percent, on December 31, 1996 with the increase
due in part to the acquisition of Boatmen's. Nonperforming commercial loans were
$398 million and $342 million on March 31, 1997 and December 31, 1996,
respectively. The increase was primarily attributable to the acquisition of
Boatmen's.
Table 12
Selected Industry Credit Exposures
March 31, 1997
(Dollars in Millions)
<TABLE>
<CAPTION>
Loans, Leases and Factored Accounts
Receivable, Net of Unearned Income
-------------------------------------- Other
Unfunded Credit
Outstanding Nonperforming Commitments Exposures (1)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Communications $5,029 $19 $5,714 $369
Health care 4,631 12 3,625 910
Food, including agribusiness 3,962 31 2,941 368
Leisure and sports 3,576 41 2,360 221
Retail 3,305 24 3,642 541
Automotive, excluding trucking 3,268 7 2,250 97
Machinery and equipment, excluding defense 3,083 16 3,179 312
Oil and gas 2,969 34 4,032 715
Textiles and apparel 2,782 34 1,564 465
Construction 2,031 28 1,548 191
Forest products and paper 1,842 13 1,995 283
Computers and electronics 1,801 3 2,524 168
Transportation, excluding air and trucking 1,775 5 1,451 72
Utilities 1,680 3 3,956 251
Professional services 1,468 6 1,647 107
Chemicals and plastics 1,398 2 1,850 177
Finance companies 1,150 1 4,899 172
Education and government 1,085 5 910 1,022
Banks 1,010 0 1,991 2,845
Brokers and dealers 399 0 1,349 1,102
</TABLE>
(1) Other credit exposures include loans held for sale, letters of credit,
bankers' acceptances and derivatives exposures in a gain position.
Consumer - On March 31, 1997 and December 31, 1996, total consumer loan
outstandings were $66.2 billion and $55.3 billion, respectively, representing 45
percent of net loans, leases and factored accounts receivable. Net charge-offs
in the consumer portfolio were $167 million in the first quarter of 1997
compared to $121 million in the first quarter of 1996, reflecting the impact of
the Boatmen's acquisition and loan growth. Note 4 to the unaudited consolidated
financial statements details the components of the Corporation's consumer loan
portfolio. In addition to the credit card and other consumer loans reported in
the financial statements, the Corporation manages credit card and consumer
receivables which have been sold. Accordingly, the average managed portfolio
information discussed below includes both on-balance sheet and securitized
loans.
Total average credit card receivables managed by the Card Services
group (excluding private label credit cards) increased to $9.4 billion in the
first quarter of 1997 compared to $7.6 billion in the first quarter of 1996 as
the Corporation maintains its efforts to shift the loan portfolio mix to a
higher consumer concentration. Average securitized credit card loans totaled
$2.6 billion during the first quarter of 1997. During the first quarter of 1996,
average securitized credit card loans were $1.2 billion. Net charge-off ratios
for the managed credit card portfolio were 6.09 percent for the first quarter of
1997 and 3.79 percent for the first quarter of 1996 due to industry-wide
deterioration in consumer credit quality.
Total average managed other consumer loans, including direct and
indirect consumer loans and home equity lines, were $29.9 billion in the first
quarter of 1997 compared to total average managed other consumer loans of $25.4
billion in the first quarter of 1996. The consumer managed portfolio, which
includes indirect auto loan and consumer finance securitizations,
<PAGE>
experienced net charge-offs as a percentage of average managed consumer loans of
1.15 percent in the first quarter of 1997 and 1.08 percent in the first quarter
of 1996.
Total consumer loans past due 90 days or more and still accruing
interest were $217 million on March 31, 1997 compared to $180 million on
December 31, 1996, or .33 percent of total consumer loans for both periods.
The increase was primarily attributable to the acquisition of Boatmen's. Total
consumer nonperforming loans were $412 million and $350 million on March 31,
1997 and December 31, 1996, respectively, with the increase due partially to the
acquisition of Boatmen's as well as the industry-wide deterioration in consumer
credit quality.
Market Risk Management
In the normal course of conducting business activities, the Corporation
is exposed to market risk which includes both price and liquidity risk. Price
risk arises from fluctuations in interest rates, foreign exchange rates and
commodity and equity prices that may result in changes in the values of
financial instruments. Liquidity risk arises from the possibility that the
Corporation may not be able to satisfy current and future financial commitments
or that the Corporation may not be able to liquidate financial instruments at
market prices. Risk management procedures and policies have been established and
are utilized to manage the Corporation's exposure to market risk. The strategy
of the Corporation with respect to market risk is to maximize net income while
maintaining an acceptable level of risk to changes in market rates. While
achievement of this goal requires a balance between profitability, liquidity and
market price risk, there are opportunities to enhance revenues through
controlled risks. In implementing strategies to manage interest rate risk, the
primary tools used by the Corporation are the securities portfolio, interest
rate swaps, and management of the mix, yields and rates and maturities of assets
and the wholesale and retail funding sources of the Corporation.
On March 31, 1997, the interest rate risk position of the Corporation
was relatively neutral as the impact of a gradual parallel 100 basis-point rise
or fall in interest rates over the next 12 months was estimated to be less than
2 percent of net income when compared to stable rates.
To estimate potential losses that could result from adverse market
movements, the Corporation uses a daily earnings at risk methodology. Earnings
at risk represents a one-day measurement of pre-tax earnings at risk from
movements in market prices using the assumption that positions cannot be
rehedged during the period of any prescribed price and volatility change. A
99-percent confidence level is utilized, which indicates that actual trading
profits and losses may deviate from expected levels and exceed estimates
approximately one day out of every 100 days of trading activity.
Earnings at risk is measured on both a gross and uncorrelated basis.
The gross measure assumes that adverse market movements occur simultaneously
across all segments of the trading portfolio, an unlikely assumption. On March
31, 1997, the gross estimates for aggregate interest rate, foreign exchange and
equity and commodity trading activities were $52 million, $2 million and $3
million, respectively. Alternately, using a statistical measure which is more
likely to capture the effects of market movements, the uncorrelated estimate on
March 31, 1997 for aggregate trading activities was $21 million.
Average daily trading-related revenues in the first quarter of 1997
approximated $2 million. During the first quarter of 1997, the Corporation's
trading-related activities resulted in positive daily revenues for approximately
83 percent of total trading days. In the first quarter of 1997, the standard
deviation of trading-related revenues was $3 million. Using this data, one can
conclude that the aggregate trading activities should not result in exposure of
more than $4 million for any one day, assuming 99-percent confidence. When
comparing daily earnings at risk to trading-related revenues, daily earnings at
risk will average considerably more due to the assumption of no evasive actions
as well as the assumption that adverse market movements occur simultaneously
across all segments of the trading portfolio.
<PAGE>
Capital
Shareholders' equity was $20.7 billion on March 31, 1997 compared to
$13.7 billion on December 31, 1996. The acquisition of Boatmen's, which resulted
in the issuance of approximately 195 million shares of common stock and an
increase of $9.5 billion in shareholders' equity, was the primary reason for the
increase. The increase was partially offset by the repurchase of approximately
57 million shares of common stock for approximately $3.3 billion.
Presented below are the Corporation's regulatory capital ratios on
March 31, 1997 and December 31, 1996:
March 31 December 31
1997 1996
- -------------------------------------------------------------------------------
Risk-Based Capital Ratios
Tier 1 Capital 7.06% 7.76%
Total Capital 11.58 12.66
Leverage Captial Ratio 6.19 7.09
<PAGE>
The Corporation's and its significant banking subsidiaries' regulatory
capital ratios on March 31, 1997 compare favorably with the regulatory minimums
of 4 percent for Tier 1, 8 percent for total risk-based capital and the leverage
guidelines of 100 to 200 basis points above the minimum ratio of 3 percent. The
Corporation and its significant banking subsidiaries were considered
well-capitalized on March 31, 1997.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 3 (ii) - Bylaws of NationsBank Corporation
Exhibit 11 - Earnings Per Common 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, 1997:
Current Report on Form 8-K dated December 31, 1996, and filed
January 16, 1997, Items 2, 5 & 7.
Current Report on Form 8-K dated January 22, 1997, and filed
February 3, 1997, Items 5 & 7.
Current Report on Form 8-K dated January 7, 1997, and filed
March 28, 1997, Items 5 & 7. Item 5(a) Consolidated financial
statements of Boatmen's Bancshares, Inc. for the year ended
December 31, 1996. Item 5(b) Pro Forma Condensed Financial
Information as of December 31, 1996 and for the year then
ended and explanatory notes.
<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, 1997 /s/ Marc D. Oken
------------ ---------------------
Marc D. Oken
Executive Vice President
and Chief Accounting Officer
(Duly Authorized Officer and
Principal Accounting Officer)
<PAGE>
NationsBank Corporation
Form 10-Q
Index to Exhibits
Exhibit Description
- ------- -----------
3 (ii) Bylaws of NationsBank Corporation
11 Earnings Per Common Share Computation
12(a) Ratio of Earnings to Fixed Charges
12(b) Ratio of Earnings to Fixed Charges and Preferred
Dividends
27 Financial Data Schedule
<PAGE>
BYLAWS
OF
NATIONSBANK CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1. Definitions 1
Section 2. Cross-Reference to the Act 2
ARTICLE II
OFFICES
Section 1. Principal Office 2
Section 2. Other Offices 2
Section 3. Registered Office 2
ARTICLE III
SHAREHOLDERS
Section 1. Annual Meeting 2
Section 2. Substitute Annual Meeting 2
Section 3. Special Meetings 2
Section 4. Place of Meeting 3
Section 5. Notice of Meeting 3
Section 6. Fixing of Record Date 3
Section 7. Shareholders List 4
Section 8. Quorum 4
Section 9. Proxies 4
Section 10. Voting of Shares 5
Section 11. Voting for Directors 5
Section 12. Conduct of Meetings 5
Section 13. Inapplicability of the North Carolina 5
Shareholder Protection Act and the North
Carolina Control Share Acquisition Act
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Powers 6
Section 2. Number and Qualifications 6
Section 3. Terms of Directors 6
Section 4. Removal 6
Section 5. Vacancies 6
<PAGE>
Section 6. Compensation 7
Section 7. Executive Committee 7
Section 8. Compensation Committee 7
Section 9. Management Compensation Committee 8
Section 10. Audit Committee 9
Section 11. Other Committees 10
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Regular Meetings 10
Section 2. Special Meetings 10
Section 3. Notice 10
Section 4. Waiver of Notice 11
Section 5. Quorum 11
Section 6. Manner of Acting 11
Section 7. Presumption of Assent 11
Section 8. Conduct of Meetings 12
Section 9. Action Without a Meeting 12
Section 10. Participation Other Than in Person 12
ARTICLE VI
OFFICERS
Section 1. Officer of the Corporation 12
Section 2. Appointment and Term 13
Section 3. Compensation 13
Section 4. Resignation and Removal of Officers 13
Section 5. Contract Rights of Officers 13
Section 6. Bonds 13
Section 7. Chief Executive Officer 13
Section 8. Chairman of the Board 14
Section 9. President 14
Section 10. Vice Chairman 14
Section 11. Executive Vice Presidents 14
Section 12. Senior Vice President 14
Section 13. Vice Presidents 14
Section 14. Secretary 15
Section 15. Treasurer 15
Section 16. Assistant Vice Presidents, Secretaries
and Assistant Treasurers 15
<PAGE>
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 1. Shares 15
Section 2. Stock Transfer Books and Transfer of Shares 16
Section 3. Lost Certificates 17
Section 4. Holder of Record 17
Section 5. Transfer Agent and Registrar; Regulations 17
ARTICLE VIII
INDEMNIFICATION
Section 1. Definitions 17
Section 2. Indemnification 18
Section 3. Determination 19
Section 4. Advance for Expenses 19
Section 5. Reliance and Consideration 19
Section 6. Insurance 20
ARTICLE IX
GENERAL PROVISIONS
Section 1. Execution of Instruments 20
Section2. Voting of Shares 20
Section3. Distributions 21
Section4. Seal 21
Section5. Amendments 21
<PAGE>
ARTICLE I
DEFINITIONS
Section 1. Definitions. In these Bylaws, unless otherwise specifically
provided:
(a) "Act" means the North Carolina Business Corporation
Act, as contained in Chapter 55 of the North Carolina
General Statutes, as the same now exists or may
hereafter be amended.
(b) "Articles of Incorporation" means the Articles of
Incorporation of the Corporation, as amended and
restated from time to time, including any amendments
or statements of classification adopted in connection
with the Corporation's outstanding shares of
preferred stock.
(c) "Common Stock" means the common stock of the
Corporation.
(d) "Corporation" means NationsBank Corporation, a North
Carolina corporation, and any successor thereto.
(e) "Principal office" means the office (in or out of the
State of North Carolina) so designated in the
Corporation's annual report filed pursuant to the Act
where the principal executive offices of the
Corporation are located.
(f) "Public corporation" means any corporation that has a
class of shares registered under Section 12 of the
Securities Exchange Act of 1934, as amended (15
U.S.C. ss.781).
(g) "Shares" means the Common Stock and other units into
which the proprietary interests in the Corporation
are divided.
(h) "Shareholder" means the person in whose name shares
are registered in the records of the Corporation or
the beneficial owner of shares to the extent of the
rights granted by a nominee certificate on file with
the Corporation.
(i) "Voting group" means all shares of one or more
classes or series that under the Articles of
Incorporation or the Act are entitled to vote and be
counted together collectively on a
1
<PAGE>
matter at a meeting of shareholders. All shares
entitled by the Articles of Incorporation or the Act
to vote generally on a matter are for that purpose a
single voting group.
Section 2. Cross-Reference to the Act. If any term used in these Bylaws
and not otherwise defined herein is defined for purposes of the Act, such
definition shall apply for purposes of these Bylaws, unless the context shall
otherwise clearly require.
ARTICLE II
OFFICES
Section 1. Principal Office. The principal office of the Corporation
shall be located in the City of Charlotte, County of Mecklenburg, State of North
Carolina.
Section 2. Other Offices. The Corporation may have offices at such
other places, either within or without the State of North Carolina, as the Board
of Directors may from time to time determine or as the affairs of the
Corporation may require from time to time.
Section 3. Registered Office. The registered office of the Corporation
required by the Act to be maintained in the State of North Carolina may be, but
need not be, identical with the principal office of the Corporation, and the
address of the registered office may be changed from time to time as provided in
the Act.
ARTICLE III
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held during the month of April of each year at a date and an hour fixed by
the Board of Directors for the purpose of electing directors and for the
transaction of such other business as may come before the meeting.
Section 2. Substitute Annual Meeting. If the annual meeting shall not
be held within the period designated by these Bylaws, a substitute annual
meeting may be called in accordance with the provisions of Section 3 of this
Article III. A meeting so called shall be designated and treated for all
purposes as the annual meeting.
Section 3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by the Act, may be called
by the Chairman of the Board, the Chief Executive Officer, the President or by
the Secretary
2
<PAGE>
acting under instructions of the Chairman of the Board or the Chief Executive
Officer, or by the Board of Directors.
Section 4. Place of Meeting. The Board of Directors or the Chairman of
the Board, the Chief Executive Officer or the President of the Corporation, or
the Secretary acting under instructions of the Chairman of the Board, the Chief
Executive Officer or President may designate any place, either within or without
the State of North Carolina, as the place of meeting for any annual meeting of
shareholders or for any special meeting of shareholders called by the Board of
Directors or the Chairman of the Board, the Chief Executive Officer or President
or Secretary. If no designation is made, or if a special meeting of shareholders
is otherwise called, the place of meeting shall be the principal office of the
Corporation in the State of North Carolina.
Section 5. Notice of Meeting. Written or printed notice stating the
date, time and place of the meeting shall be delivered not less than 10 nor more
than 60 days before the date of the meeting, either personally or by mail, to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be effective when deposited in the United States mail
with postage thereon prepaid and correctly addressed to the shareholder at such
shareholder's address as shown in the Corporation's current record of
shareholders.
In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
it is a matter, other than election of directors, on which the vote of
shareholders is expressly required by the provisions of the Act. In the case of
a special meeting, the notice of meeting shall state the purpose or purposes for
which the meeting is called.
If a meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting, or if a new record date is fixed for the
adjourned meeting, or if the new date, time or place for an adjourned meeting is
not announced at the meeting before adjournment, notice of the adjourned meeting
shall be given as in the case of an original meeting. Otherwise, it is not
necessary to give any notice of the adjourned meeting other than by announcement
at the meeting at which the adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment of any
dividend or other distribution, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may fix in
advance a date for any such determination of shareholders, such date in any case
to be not more than 60 days and, in case of a meeting of shareholders, not less
than 10 days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
3
<PAGE>
of shareholders, or for determination of the shareholders entitled to receive
payment of a dividend or other distribution, the close of business on the day
before the first notice is delivered to shareholders or the date on which the
resolution of the Board of Directors declaring or authorizing such dividend or
distribution is adopted, as the case may be, shall be the record date for such
determination. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the Board of
Directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
Section 7. Shareholders List. After the record date for a meeting of
shareholders is fixed or determined, the officer or agent having charge of the
stock transfer books for shares of the Corporation shall prepare an alphabetical
list of the names of all shareholders of the Corporation who are entitled to
notice of such shareholders meeting. The list will be arranged by voting group
(and within each voting group by class or series of shares) and show the address
of and number of shares held by each shareholder. Such shareholders list will be
available for inspection by any shareholder, beginning two business days after
notice of the meeting is given for which the list was prepared and continuing
through the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, or a shareholder's agent or attorney, is entitled on written demand
to inspect and, subject to compliance with the applicable provisions of the Act,
to copy the list, during regular business hours and at the shareholder's
expense, during the period it is available for inspection. Such list shall also
be available at the meeting of shareholders, and any shareholder, or such
shareholder's agent or attorney, is entitled to inspect the list at any time
during the meeting or any adjournment thereof.
Section 8. Quorum. A majority of the votes entitled to be cast on a
particular matter by a voting group constitutes a quorum of that voting group
for action on that matter unless the Act provides otherwise. Shares entitled to
vote as a separate voting group may take action on a matter at a meeting of
shareholders only if a quorum of those shares exists with respect to that
matter, except that, in the absence of a quorum at the opening of any meeting of
shareholders, such meeting may be adjourned from time to time by the vote of a
majority of the shares voting on the motion to adjourn. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
Section 9. Proxies. A shareholder may vote his or her shares in person
or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the
shareholder by signing an appointment form, either personally or by such
shareholder's attorney-in-fact. A telegram, telex, facsimile or other form of
wire or wireless communication appearing to have been transmitted by a
shareholder, or a photocopy or equivalent
4
<PAGE>
reproduction of a writing appointing one or more proxies, shall be deemed a
valid appointment form within the meaning of these Bylaws.
An appointment of a proxy is effective when received by the Secretary
or other officer or agent authorized to tabulate votes. An appointment is valid
for 11 months unless a different period is expressly provided in the appointment
form. An appointment of a proxy is revocable by the shareholder unless the
appointment from conspicuously states that it is irrevocable and the appointment
is coupled with an interest, which may include any such interest specified in
the Act.
Section 10. Voting of Shares. Each outstanding share of Common Stock is
entitled to one vote on each matter voted on at a shareholders meeting. Other
shares are entitled to vote only as provided in the Articles of Incorporation or
the Act. If a quorum exists, action on a matter (other than election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
Articles of Incorporation or the Act requires a greater number of affirmative
votes. Classes or series of shares shall not be entitled to vote separately by
voting group unless expressly required by the Articles of Incorporation or as
otherwise provided in the Act.
Section 11. Voting for Directors. The directors of the Corporation
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at the meeting at which a quorum is present unless otherwise
provided in the Articles of Incorporation. The shareholders do not have a right
to cumulate their votes for directors.
Section 12. Conduct of Meetings. The Chairman of the Board shall
preside at each meeting of shareholders or, in the Chairman's absence, the Chief
Executive Officer shall preside. At the request of the Chairman of the Board or
the Chief Executive Officer, in both their absences, such other officer as the
Board of Directors shall designate shall preside at any such meeting. In the
absence of a presiding officer determined in accordance with the preceding
sentence, any person may be designated to preside at a shareholders meeting by a
plurality vote of the shares represented and entitled to vote at the meeting.
The Secretary or, in the absence or at the request of the Secretary, any person
designated by the person presiding at a shareholders meeting shall act as
secretary of such meeting.
Section 13. Inapplicability of the North Carolina Shareholder
Protection Act and the North Carolina Control Share Acquisition Act. The
provisions of Article 9 of Chapter 55 of the General Statutes of North Carolina,
or such other successor statute, entitled "The North Carolina Shareholder
Protection Act," shall not apply to the Corporation. The provisions of Article
9A of Chapter 55 of the General Statutes of North Carolina, or such other
successor statute, entitled "The North Carolina Control Share Acquisition Act,"
shall not apply to the Corporation.
5
<PAGE>
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the Corporation shall
be managed under the direction of, its Board of Directors, except as otherwise
provided in the Articles of Incorporation or permitted under the Act.
Section 2. Number and Qualifications. The number of directors of the
Corporation shall be not less than 5 nor more than 30, which number may be fixed
or changed from time to time, within the minimum and maximum, by the Board of
Directors. Directors need not be residents of the State of North Carolina or
shareholders of the Corporation. A director of the Corporation shall at all
times meet all statutory and regulatory qualifications for a director of a
publicly held bank holding company.
Section 3. Terms of Directors. The terms of all directors shall expire
at the next annual shareholders meeting following their election. A decrease in
the number of directors does not shorten an incumbent director's term. The term
of a director elected to fill a vacancy shall expire at the next shareholders
meeting at which directors are elected. Despite the expiration of a director's
term, however, such director shall continue to serve until the director's
successor is elected and qualified.
Section 4. Removal. Any director may be removed at any time with or
without cause by a vote of the shareholders if the number of votes cast to
remove such director exceeds the number of votes cast not to remove him or her
unless otherwise provided in the Articles of Incorporation. A director may not
be removed by the shareholders at a meeting unless the notice of the meeting
states that the purpose, or one of the purposes, of the meeting is removal of
the director. If any directors are so removed, new directors may be elected at
the same meeting.
Any director may be removed by the Board of Directors if a director no
longer meets the qualification requirements of Section 2 of this Article IV or
as otherwise prescribed by law.
Section 5. Vacancies. Except in those instances where the Articles of
Incorporation provide otherwise, the Board of Directors may fill a vacancy on
the Board of Directors. A vacancy that will occur at a specific later date (by
reason of a resignation effective at a later date or otherwise) may be filled
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.
6
<PAGE>
Section 6. Compensation. The Board of Directors may provide for the
compensation of directors for their services as such and may provide for the
payment or reimbursement of any or all expenses reasonably incurred by them in
attending meetings of the Board or of any committee of the Board or in the
performance of their other duties as directors. Nothing herein contained,
however, shall prevent any director from serving the Corporation in any other
capacity or receiving compensation therefor.
Section 7. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the number of directors fixed in the manner provided in
Section 2 of this Article IV, may designate five or more directors who shall
constitute the Executive Committee of the Corporation. The Executive Committee,
between meetings of the Board of Directors and subject to such limitations as
may be required by law or imposed by resolution of the Board of Directors, shall
have and may exercise all of the authority of the Board of Directors in the
management of the Corporation. The designation of the Executive Committee and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility or liability imposed
upon it or such director by law.
Meetings of the Executive Committee may be held at any time on call of
its Chairman or any two members of the Committee. A majority of the members
shall constitute a quorum at all meetings. The Executive Committee shall keep
minutes of its proceedings and shall report its actions to the next succeeding
meeting of the Board of Directors.
Section 8. Compensation Committee. The Board of Directors, by
resolution adopted by a majority of the number of Directors fixed in the manner
provided in Section 2 of this Article IV, may designate three or more directors
who shall not be otherwise employed by the Corporation or its subsidiaries who
shall constitute the Compensation Committee of the Corporation.
The Compensation Committee shall provide overall guidance with respect
to the establishment, maintenance and administration of the Corporation's
compensation programs and employee benefit plans.
The Compensation Committee shall review and approve the annual
compensation, including salary, incentive compensation and other benefits,
direct and indirect, for officers who serve as executive officers of the
Corporation. The Compensation Committee shall also approve and adopt proposals
related to any employee benefit plan of the Corporation or its subsidiaries in
which any officer participates who also serves as an executive officer of the
Corporation, including proposals for the adoption, amendment, modification or
termination of such plans. As to the salary, incentive compensation and other
benefits, direct and indirect, for the Chief Executive Officer of the
Corporation and of all other officers of the Corporation
7
<PAGE>
who are also Directors of the Corporation, the Compensation Committee shall
submit recommendations to the Executive Committee for review and concurrence
prior to their submission to the Board of Directors for approval.
The Compensation Committee shall have such other purposes and such
other powers as the Board of Directors may from time to time determine.
Meetings of the Compensation Committee shall be held quarterly or at
any time on call of the Chairman of the Compensation Committee. A majority of
the members shall constitute a quorum at all meetings. The Compensation
Committee shall keep minutes of its proceedings and shall report its actions in
writing to the next succeeding meeting of the Board of Directors.
As used herein, the term "executive officer" means those officers of
the Corporation who are designated as such from time to time.
The Compensation Committee may in its discretion delegate to the
Management Compensation Committee any of its powers and authority set forth in
this Section 8 with respect to any executive officer of the Corporation who is
not a "named executive officer" of the Corporation within the meaning of Item
402 of Regulation S-K promulgated under the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Section 9. Management Compensation Committee. The Board of Directors,
by resolution adopted by a majority of the Directors fixed in the manner
provided in Section 2 of this Article IV, may designate the Chief Executive
Officer and such other officers as it deems appropriate to constitute the
members of a Management Compensation Committee. The Chief Executive Officer
shall be the Chairman of the Management Compensation Committee.
The Management Compensation Committee shall have the authority to
establish the titles and the compensation, including salaries, incentive
compensation and other benefits, direct and indirect, for all employees of the
Corporation and its subsidiaries who are not officers and for all officers of
the Corporation and its subsidiaries who do not serve as executive officers of
the Corporation. In connection with its duties, the Management Compensation
Committee shall approve all annual compensation budgets, all employee benefits
plans, the salary guidelines for positions and all incentive compensation plans
for such employees and officers of the Corporation and its subsidiaries.
The Management Compensation Committee may allocate to a member of the
Management Compensation Committee the authority to establish titles and the
compensation, including salaries, incentive compensation awards pursuant to
incentive compensation plans previously approved by the Management Compensation
Committee, and other benefits for all personnel within such member's area of
8
<PAGE>
functional responsibility except with respect to promotions to the title of
Executive Vice President or its equivalent and except with respect to actions
related to officers in Job Band I. A member of the Management Compensation
Committee may delegate such member's authority with respect to such matters to
one or more officers within such member's area of functional responsibility
pursuant to procedures established by such member from time to time; provided,
however, any such action taken pursuant to any such delegation of authority
shall be subject to ratification by such member of the Management Compensation
Committee.
The Management Compensation Committee shall make recommendations from
time to time to the Compensation Committee regarding the establishment,
amendment, modification and termination of any employee benefit plans sponsored
by the Corporation and its subsidiaries in which any officer of the Corporation
or its subsidiaries participates who also serves as an executive officer of the
Corporation.
The Management Compensation Committee shall have such other purposes
and such other powers as the Board of Directors may from time to time determine.
Meetings of the Management Compensation Committee shall be held
quarterly or any time on call of the Chairman of the Management Compensation
Committee. A majority of the members shall constitute a quorum at all meetings.
The Management Compensation Committee shall keep minutes of its proceedings and
shall report its actions to the Compensation Committee.
As used herein, the term "executive officer" means those officers of
the Corporation who are designated as such from time to time.
In accordance with Section 8, the Management Compensation Committee may
be delegated by the Compensation Committee certain of the powers and authority
of the Compensation Committee set forth in Section 8 with respect to any
executive officer of the Corporation who is not a "named executive officer" of
the Corporation within the meaning of Item 402 of Regulation S-K promulgated
under the Securities Act of 1933 and the Securities Exchange Act of 1934.
Section 10. Audit Committee. The Board of Directors, by resolution
adopted by a majority of the number of directors fixed in the manner provided in
Section 2 of this Article IV, shall designate three or more directors who shall
not be otherwise employed by the Corporation or its subsidiaries to constitute
the Audit Committee of the Board.
The Audit Committee shall have such powers and duties as described from
time to time by resolutions of the Board of Directors. The Audit Committee shall
keep minutes of its proceedings and shall report its actions to the next
succeeding meeting of the Board of Directors.
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Section 11. Other Committees. The Board of Directors may create one or
more other committees and appoint members of the Board of Directors to serve on
them. Each committee must have two or more members, who serve at the pleasure of
the Board of Directors. The creation of a committee and appointment of members
of the Board of Directors to it must be approved by the greater of a majority of
all of the directors in office when the action is taken or the number of
directors required by the Articles of Incorporation for the taking of action by
the Board of Directors. The provisions of the Act and these Bylaws that govern
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board of Directors, shall apply to committees and
their members as well. To the extent specified by the Board of Directors, each
committee may exercise the authority of the Board of Directors, except as to the
matters which the Act specifically excepts from the authority of such
committees. Nothing contained in this Section shall preclude the Board o
Directors from establishing and appointing any committee, whether of directors
or otherwise, not having or exercising the authority of the Board of Directors.
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw provision
immediately after, and at the same place as, the annual meeting of the
shareholders. In addition, the Board of Directors may provide, by resolution,
the date, time and place, either within or without the State of North Carolina,
for the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors
may be held at any date, time and place upon the call of the Chairman of the
Board, the Chief Executive Officer or the President or of the Secretary acting
under instructions from the Chairman of the Board or the Chief Executive Officer
or the President, or upon the call of any three directors. Special meetings may
be held at any date, time and place and without special notice by unanimous
consent of the directors.
Section 3. Notice. The person or persons calling a special meeting of
the Board of Directors shall, at least two days before the meeting, give notice
thereof by any usual means of communication. Such notice may be communicated,
without limitation, in person; by telephone, telegraph, teletype or other form
of wire or wireless communication, or by facsimile transmission; or by mail or
private carrier. Written notice of a directors meeting is effective at the
earliest of the following:
(a) When received;
(b) Upon its deposit in the United States mail, as evidenced by
the postmark, if mailed with postage thereon prepaid and
correctly addressed;
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(c) If by facsimile, by acknowledgment of the facsimile; or
(d) On the date shown on the confirmation of delivery issued by a
private carrier, if sent by private carrier to the address of
the director last known to the Corporation.
Oral notice is effective when actually communicated to the director. Notice of
an adjourned meeting of directors need not be given if the time and place are
fixed at the meeting adjourning and if the period of adjournment does not exceed
ten days in any one adjournment. The notice of any meeting of directors need not
describe the purpose of the meeting unless otherwise required by the Act.
Section 4. Waiver of Notice. A director may waive any notice required
by the Act, the Articles of Incorporation or these Bylaws before or after the
date and time stated in the notice. The waiver must be in writing, signed by the
director entitled to the notice, and filed with the minutes or corporate
records, except that, notwithstanding the foregoing requirement of written
notice, a director's attendance at or participation in a meeting waives any
required notice to the director of the meeting unless the director at the
beginning of the meeting (or promptly upon the director's arrival) expressly
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
Section 5. Quorum. A majority of the number of directors in office
immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at a meeting, a majority of directors present may
adjourn the meeting from time to time without further notice.
Section 6. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, except as otherwise provided by the Act. The vote of a majority of
all of the directors in office when the action is taken shall be required for
the creation of a committee and the appointment of members of the Board of
Directors to it.
Section 7. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors or a committee of the Board of
Directors when corporate action is taken shall be deemed to have assented to the
action taken unless the director expressly objects at the beginning of the
meeting (or promptly upon the director's arrival) to holding it or transacting
business at the meeting, unless the director's contrary vote is recorded or such
director's dissent or abstention from the action shall be entered in the minutes
of the meeting or unless the director shall file written notice of dissent or
abstention to such action with the person acting as secretary of the meeting
before the adjournment thereof or shall forward such dissent by
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registered mail to the Secretary of the Corporation immediately after
adjournment of the meeting. Such right of dissent or abstention shall not apply
to a director who voted in favor of the action taken.
Section 8. Conduct of Meetings. The Chairman or the Chief Executive
Officer shall preside at all meetings of the Board of Directors; provided,
however, that in the absence or at the request of the Chairman of the Board, or
if there shall not be a person holding such offices, the person selected to
preside at a meeting of directors by a vote of a majority of the directors
present shall preside at such meeting. The Secretary, or in the absence or at
the request of the Secretary, any person designated by the person presiding at a
meeting of the Board of Directors, shall act as secretary of such meeting.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken at a Board of Directors meeting may be taken without a meeting if
the action is taken by all members of the Board. The action must be evidenced by
one or more written consents signed by each director before or after such
action, describing the action taken, which consent or consents shall be included
in the minutes or filed with the corporate records. Action taken as provided in
this Section is effective when the last director signs the consent, unless the
consent specifies a different effective date. A consent signed pursuant to this
Section has the effect of a meeting vote and may be described as such in any
document.
Section 10. Participation Other Than in Person. The Board of Directors
may permit any or all directors to participate in a regular or special meeting
by, or conduct the meeting through the use of, any means of communication by
which all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting by this means is deemed to be
present in person at such meeting.
ARTICLE VI
OFFICERS
Section 1. Officers of the Corporation. The officers of the Corporation
may include a Chairman of the Board, a Chief Executive Officer, one or more Vice
Chairmen, a President, one or more Executive Vice Presidents, one or more Senior
Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, and such
other officers, assistant officers and agents, as may be appointed from time to
time by or under the authority of the Board of Directors including that
authority vested under Sections 8 or 9 of Article IV hereof. The same individual
may simultaneously hold more than one office in the Corporation, but no
individual may act in more than one capacity where action of two or more
officers is required. The title of any officer may include any additional
designation descriptive of such officer's duties as the Board of Directors may
prescribe.
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Section 2. Appointment and Term. The officers of the Corporation shall
be appointed by the Board of Directors or by a committee or an officer
authorized by the Board of Directors to appoint one or more officers or
assistant officers; provided, however, that no officer may be authorized to
appoint the Chairman of the Board, the Chief Executive Officer or the President.
Each officer shall hold office until his or her death, resignation, retirement,
removal or disqualification or until such officer's successor is elected and
qualified.
Section 3. Compensation. The compensation of all officers of the
Corporation shall be fixed by or under the authority of the Board of Directors
or in accordance with Sections 8 and 9 of Article IV hereof. No officer shall be
prevented from receiving such salary by reason of the fact that such officer is
also a director.
Section 4. Resignation and Removal of Officers. An officer may resign
at any time by communicating such officer's resignation to the Corporation. A
resignation is effective when it is communicated unless it specifies in writing
a later effective date. If a resignation is made effective at a later date and
the Corporation accepts the future effective date, the Board of Directors may
fill the pending vacancy before the effective date if the Board of Directors
provides that the successor does not take office until the effective date. The
Board of Directors, by the affirmative vote of a majority of its members, may
remove the Chairman of the Board, the Chief Executive Officer or the President
whenever in its judgment the best interest of the Corporation would be served
thereby. In addition, the Board of Directors or a committee or an officer
authorized by the Board of Directors may remove any other officer at any time
with or without cause. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the directors or in
accordance with Sections 8 or 9 of Article IV hereof for the unexpired portion
of the term.
Section 5. Contract Rights of Officers. The appointment of an officer
does not itself create contract rights. An officer's removal does not itself
affect the officer's contract rights, if any, with the Corporation, and an
officer's resignation does not itself affect the Corporation's contract rights,
if any, with the officer.
Section 6. Bonds. The Board of Directors may by resolution require any
officer, agent or employee of the Corporation to give bond to the Corporation,
with sufficient sureties, conditioned on the faithful performance of the duties
of the applicable office or position, and to comply with such other conditions
as may from time to time be required by the Board of Directors. Such bonds may
be scheduled or blanket form and the premiums shall be paid by the Corporation.
Section 7. Chief Executive Officer. The Board of Directors may appoint
a Chief Executive Officer. The Chief Executive Officer shall, subject to the
direction and control of the Board of Directors, supervise and control the
business and affairs of the
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Corporation. In general the Chief Executive Officer shall perform all duties
incident to the position of chief executive officer or as may be prescribed by
the Board of Directors or these Bylaws from time to time.
Section 8. Chairman of the Board. The Board of Directors may appoint
from among its members an officer designated as the Chairman of the Board, but
the appointment of a Chairman of the Board shall not be required. If a Chairman
of the Board shall be appointed, then the Chairman of the Board shall have such
other duties and authority as may be prescribed by the Board of Directors from
time to time. In general the Chairman of the Board shall perform all duties
incident to the position of chairman of the board or as may be prescribed by the
Board of Directors or these Bylaws from time to time.
Section 9. President. The Board of Directors may appoint a President.
The President shall perform the duties and exercise the powers of that office
and, in addition, the President shall perform such other duties and shall have
such other authority as the Board of Directors shall prescribe. In general the
President shall perform all duties incident to the position of president and or
as may be prescribed by the Board of Directors or these Bylaws from time to
time. The Board of Directors shall, if it deems such action necessary or
desirable, designate the officer of the Corporation who is to perform the duties
of the President in the event of such officer's absence or inability to act.
Section 10. Vice Chairman. The Board of Directors may appoint one or
more officers designated as the Vice Chairman, but the appointment of one or
more Vice Chairmen shall not be required. If one or more Vice Chairmen shall be
appointed, then one or more Vice Chairmen shall have such duties and authority
as may be prescribed by the Board of Directors from time to time.
Section 11. Executive Vice Presidents. Each Executive Vice President
shall perform duties and shall have such powers as are normally incident to such
office or as shall otherwise be prescribed by the Chief Executive Officer, the
Board of Directors or a committee established under these Bylaws.
Section 12. Senior Vice President. Each Senior Vice President shall
perform duties and shall have such powers as are normally incident to such
office or as shall otherwise be prescribed by the Chief Executive Officer, the
Board of Directors or a committee under these Bylaws.
Section 13. Vice Presidents. Each Vice President shall perform duties
and shall have such powers as are normally incident to such office or as shall
otherwise be prescribed by the Chief Executive Officer, the Board of Directors
or a committee under these Bylaws.
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Section 14. Secretary. The Secretary shall: (a) keep the minutes of
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) have the responsibility and authority to maintain
and authenticate the records of the Corporation; (c) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (d) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized; (e) keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder; (f) sign with the
Chairman of the Board, Chief Executive Officer or President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (g) have general charge of the stock
transfer books of the Corporation; and (h) in general perform all duties
incident to the office of the Secretary and such other duties as from time to
time may be assigned to the Secretary by the Chief Executive Officer of the
Corporation, the Board of Directors or a committee under these Bylaws.
Section 15. Treasurer. The Treasurer shall: (a) have charge and custody
of all funds and securities of the Corporation; receive and give receipts for
moneys due and payable to the Corporation from any source whatsoever, and
deposit all such moneys in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected in accordance with the
provisions of Section 4 of Article VII; and (b) in general perform all of the
duties incident to the office of Treasurer and such other duties as from time to
time may be assigned to the Treasurer by the Chief Executive Officer of the
Corporation, the Board of Directors or a committee under these Bylaws.
Section 16. Assistant Vice Presidents, Secretaries and Assistant
Treasurers. The Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers, if any, shall, in the event of the death or inability or refusal to
act of the Secretary or the Treasurer, respectively, have all the powers and
perform all of the duties of those offices, and they shall, in general, perform
such duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the Chief Executive Officer of the Corporation or the Board
of Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 1. Shares. Shares of the Corporation may but need not be
represented by certificates.
When shares are represented by certificates, the Corporation shall
issue such certificates in such form as shall be required by the Act and as
determined by the Board of Directors, to every shareholder for the fully paid
shares owned by such shareholder.
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Each certificate shall be signed by, or shall bear the facsimile signature of,
the Chairman of the Board, the Chief Executive Officer or the President and the
Secretary or an Assistant Secretary of the Corporation and may bear the
corporate seal of the Corporation or its facsimile. All certificates for the
Corporation's shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented by a
certificate are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Corporation. Such information may be
stored or retained on discs, tapes, cards or any other approved storage device
relating to data processing equipment; provided that such device is capable of
reproducing all information contained therein in legible and understandable
form, for inspection by shareholders or for any other corporate purpose.
When shares are not represented by certificates, then within a
reasonable time after the issuance or transfer of such shares, the Corporation
shall send the shareholder to whom such shares have been issued or transferred a
written statement of the information required by the Act to be on certificates.
Section 2. Stock Transfer Books and Transfer of Shares. The
Corporation, or its agent, shall keep a book or set of books to be known as the
stock transfer books of the Corporation, containing the name of each shareholder
of record, together with such shareholder's address and the number and class or
series of shares held by such shareholder. Transfer of shares of the Corporation
represented by certificates shall be made on the stock transfer books of the
Corporation only upon surrender of the certificates for the shares sought to be
transferred by the holder of record thereof or by such holder's duly authorized
agent, transferee or legal representative, who shall furnish proper evidence of
authority to transfer with the Secretary. All certificates surrendered for
transfer shall be canceled before new certificates for the transferred shares
shall be issued.
If shares of the Corporation
(1) are in custody of a clearing corporation or of a custodian
bank or a nominee of either subject to the instructions of the
clearing corporation; and
(2) are in bearer form or endorsed in blank by an appropriate
person or registered in the name of the clearing corporation
or custodian bank or a nominee of either; and
(3) are shown on the account of a transferor or pledgor on the
books of the clearing corporation;
then in addition to other methods, a transfer or pledge of the shares or any
interest therein may be effected by the making of appropriate entries on the
books of the
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clearing corporation reducing the account of the transferor or pledgor and
increasing the account of the transferee or pledgee by the number of shares
transferred or pledged.
Section 3. Lost Certificates. The Board of Directors or an officer so
authorized by the Board may authorize the issuance of a new certificate in place
of a certificate claimed to have been lost, destroyed or mutilated, upon receipt
of an affidavit of such fact from the persons claiming the loss or destruction
and any other documentation satisfactory to the Board of Directors or such
officer. At the discretion of the party reviewing such claim, any such claimant
may be required to give the Corporation a bond in such sum as it may direct to
indemnify the against loss from any claim with respect to the certificate
claimed to have been lost or destroyed.
Section 4. Holder of Record. Except as otherwise required by the Act,
the Corporation may treat the person in whose name the shares stand of record on
its books as the absolute owner of the shares and the person exclusively
entitled to receive notification and distributions, to vote, and to otherwise
exercise the rights, powers and privileges of ownership of such shares.
Section 5. Transfer Agent and Registrar; Regulations. The Corporation
may, if and whenever the Board of Directors so determines, maintain in the State
of North Carolina or any other state of the United States, one or more transfer
offices or agencies and also one or more registry offices which officers and
agencies may establish rules and regulations for the issue, transfer and
registration of certificates. No certificates for shares of stock of the
Corporation in respect of which a Transfer Agent and Registrar shall have been
designated shall be valid unless countersigned by such Transfer Agent and
registered by such Registrar. The Board may also make such additional rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of certificates.
ARTICLE VIII
INDEMNIFICATION
Section 1. Definitions. For purposes of this Article VIII, the
following definitions shall apply:
(a) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the
Corporation, is or was serving at the Corporation's request as
a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise. A
director is considered to be serving an employee benefit plan
at the Corporation's request if such director's duties to the
Corporation also impose duties on, or otherwise involve
services by, the director to the plan or to participants
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in or beneficiaries of the plan. "Director" includes, unless
the context requires otherwise, the estate or personal
representative of a director.
(b) "Expenses" means expenses of every kind incurred in defending
a proceeding, including counsel fees.
(c) "Indemnified Officer" shall mean each officer of the
Corporation who is also a director of the Corporation and each
other officer of the Corporation who is designated by the
Board of Directors from time to time as an Indemnified
Officer. An Indemnified Officer shall be entitled to
indemnification hereunder to the same extent as a director,
including, without limitation, indemnification with respect to
service by the Indemnified Officer at the Corporation's
request as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other
enterprise.
(d) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan) or reasonable
expenses incurred with respect to a proceeding.
(e) "Proceeding" means any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, whether formal or informal,
and any appeal therein (and any inquiry or investigation that
could lead to such a proceeding).
Section 2. Indemnification. In addition to the indemnification
otherwise provided by law, the Corporation shall indemnify and hold harmless its
directors and Indemnified Officers (as defined herein) against all liability and
expenses, including reasonable attorney's fees, in any proceeding (including
without limitation a proceeding brought by or on behalf of the Corporation
itself) arising out of their status as directors or officers, or their service
at the Corporation's request as a director, officer, partner, trustee, employee
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, or their activities in any
such capacity; provided; however, that the Corporation shall not indemnify a
director or Indemnified Officer against liability or litigation expense that
such person may incur on account of activities of such person which at the time
taken were known or believed by him or her to be clearly in conflict with the
best interests of the Corporation. The Corporation shall also indemnify each
director and Indemnified Officer for reasonable costs, expenses and attorneys'
fees incurred in connection with the enforcement of the rights to
indemnification granted herein, if it is determined in accordance with Section 3
of this Article VIII that the director or Indemnified Officer is entitled to
indemnification hereunder.
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Section 3. Determination. Any indemnification under Section 2 of this
Article IX shall be paid by the Corporation in a specific case only after a
determination that the director or Indemnified Officer has met the standard of
conduct set forth in such Section 2. Such determination shall be made:
(a) by the Board of Directors by a majority vote of a quorum
consisting of directors not at the time parties to the
proceeding;
(b) if a quorum cannot be obtained under subparagraph (a), by a
majority vote of a committee duly designated by the Board of
Directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not
at the time parties to the proceeding;
(c) by special legal counsel (i) selected by the Board of
Directors or its committee in the manner prescribed in
subparagraphs (a) or (b); or (ii) if a quorum of the Board of
Directors cannot be obtained under subparagraph (a) and a
committee cannot be designated under subparagraph (b),
selected by a majority vote of the full Board of Directors (in
which selection directors who are parties may participate); or
(d) by the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the
proceeding may not be voted on the determination.
The Board of Directors shall take all such action as may be necessary
and appropriate to enable the Corporation to pay the indemnification required by
this Article VIII.
Section 4. Advance for Expenses. The expenses incurred by a director or
Indemnified Officer in defending a proceeding may be paid by the Corporation in
advance of the final disposition of such proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on behalf
of the director or Indemnified Officer to repay such amount unless it shall
ultimately be determined that such person is entitled to be indemnified by the
Corporation against such expenses. Subject to receipt of such undertaking, the
Corporation shall make reasonable periodic advances for expenses pursuant to
this Section, unless the Board of Directors shall determine, in the manner
provided in Section 3 of this Article VIII and based on the facts then known,
that indemnification under this Article is or will be precluded.
Section 5. Reliance and Consideration. Any director or Indemnified
Officer who at any time after the adoption of this Article VIII serves or has
served in any of the aforesaid capacities for or on behalf of the Corporation
shall be deemed to be doing or to have done so in reliance upon, and as
consideration for, the right of indemnification
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provided herein. Such right, however, shall not be exclusive of any other rights
to which such person may be entitled apart from the provisions of this Article
VIII. No amendment, modification or repeal of this Article VIII shall adversely
affect the right of any director or Indemnified Officer to indemnification
hereunder with respect to any activities occurring prior to the time of such
amendment, modification or repeal.
Section 6. Insurance. The Corporation may purchase and maintain
insurance on behalf of its directors, officers, employees and agents and those
persons who were serving at the request of the Corporation in any capacity in
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against or incurred by such
person in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article VIII or otherwise.
Any full or partial payment made by an insurance company under any insurance
policy covering any director, officer, employee or agent made to or on behalf of
a person entitled to indemnification under this Article VIII shall relieve the
Corporation of its liability for indemnification provided for in this Article or
otherwise to the extent of such payment, and no insurer shall have a right of
subrogation against the Corporation with respect to such payment.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances transfers, contracts, checks, notes, drafts, loan
documents, letters of credit, master agreements, swap agreements, guarantees,
certificates, declarations, receipts, discharges, releases, satisfactions,
settlements, petitions, schedules, accounts, affidavits, bonds, undertakings,
proxies and other instruments or documents may be signed, executed,
acknowledged, verified, attested, delivered or accepted on behalf of the
Corporation by the Chairman of the Board, the Chief Executive Officer, any Vice
Chairman of the Board, the President, any Vice President, any Assistant Vice
President, or any individual who is listed on the Corporation's Officer's
payroll file in a position equal to any of the aforementioned officer positions,
or such other officers, employees or agents as the Board of Directors or any of
such designated officers or individuals may direct. The provisions of this
Section 1 are supplementary to any other provision of these Bylaws and shall not
be construed to authorize execution of instruments otherwise dictated by law.
Section 2. Voting of Shares. The Chairman of the Board, the Chief
Executive Officer, any Vice Chairman of the Board, President, any Executive Vice
President, the Secretary, the Treasurer, or such other officers, employees or
agents as the Board of Directors or such designated officers may direct are
authorized to vote, represent and
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exercise on behalf of the Corporation all rights incident to any and all shares
of any other corporations or associations standing in the name of the
Corporation. The authority herein granted to said individual to vote or
represent on behalf of the Corporation any and all shares held by the
Corporation in any other corporations or associations may be exercised either by
the individual in person or by any duly executed proxy or power of attorney.
Section 3. Distributions. The Board of Directors may from time to time
authorize, and the Corporation may pay or distribute, dividends or other
distributions on its outstanding shares in such manner and upon such terms and
conditions as are permitted by the Articles of Incorporation or the Act.
Section 4. Seal. The Board of Directors shall provide a corporate seal
which shall be circular in form and shall have inscribed thereon the name of the
Corporation and the words "corporate seal".
Section 5. Amendments. The Board of Directors may amend or repeal these
Bylaws and may adopt new Bylaws by the affirmative vote of a majority of the
directors then holding office at any regular or special meeting of the Board of
Directors. The shareholders of the Corporation may also amend or repeal these
Bylaws and may adopt new Bylaws.
Adopted 4/23/97
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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. 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):
Three Months Ended
March 31
----------------------
1997 1996
------- -------
Average common shares outstanding 730,413 600,558
Dilutive effect of
Convertible preferred stock 3,896 4,526
Stock options 18,082 5,861
------- -------
Total fully dilutive shares 752,391 610,945
======= =======
Income available to common shareholders $ 705 $ 509
Preferred dividends paid on dilutive convertible
preferred stock 2 2
-------------------
Total net income available for common shareholders
adjusted for full dilution $ 707 $ 511
======== ========
Fully diluted earnings per share $ 0.94 $ 0.84
======== ========
<PAGE>
NationsBank Corporation and Subsidiaries Exhibit 12(a)
Ratio of Earnings to Fixed Charges
- -------------------------------------------------------------------------------
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Year ended December 31
Ended ------------------------------------------------------------
March 31,1997 1996 1995 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
- ------------------------------
Income before taxes $1,108 $3,634 $2,991 $2,555 $1,991 $1,396
Equity in undistributed (earnings) losses
of unconsolidated subsidiaries - 2 (7) (3) (5) (1)
Fixed charges:
Interest expense (including
capitalized interest) 1,075 4,125 4,480 2,896 1,421 916
Amortization of debt discount and
appropriate issuance costs 4 20 12 8 6 3
1/3 of net rent expense 35 126 125 114 96 91
----------------------------------------------------------------------------
Total fixed charges 1,114 4,271 4,617 3,018 1,523 1,010
Earnings (excluding capitalized interest) $2,222 $7,907 $7,601 $5,570 $3,509 $2,398
============================================================================
Fixed charges $1,114 $4,271 $4,617 $3,018 $1,523 $1,010
============================================================================
Ratio of earnings to fixed charges 1.99 1.85 1.65 1.85 2.30 2.38
Including Interest on Deposits
- ------------------------------
Income before taxes $1,108 $3,634 $2,991 $2,555 $1,991 $1,396
Equity in undistributed (earnings) losses
of unconsolidated subsidiaries - 2 (7) (3) (5) (1)
Fixed charges:
Interest expense (including
capitalized interest) 2,073 7,447 7,761 5,310 3,570 3,688
Amortization of debt discount and
appropriate issuance costs 4 20 12 8 6 3
1/3 of net rent expense 35 126 125 114 96 91
----------------------------------------------------------------------------
Total fixed charges 2,112 7,593 7,898 5,432 3,672 3,782
Earnings (excluding capitalized interest) $3,220 $11,229 $10,882 $7,984 $5,658 $5,170
============================================================================
Fixed charges $2,112 $7,593 $7,898 $5,432 $3,672 $3,782
============================================================================
Ratio of Earnings to Fixed Charges 1.52 1.48 1.38 1.47 1.54 1.37
</TABLE>
<PAGE>
NationsBank Corporation and Subsidiaries Exhibit 12(b)
Ratio of Earnings to Fixed Charges and Preferred Dividends
- -------------------------------------------------------------------------------
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Year Ended December 31
Ended --------------------------------------------------------------
March 31,1997 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
- ------------------------------
Income before taxes $1,108 $3,634 $2,991 $2,555 $1,991 $1,396
Equity in undistributed (earnings) losses
of unconsolidated subsidiaries 0 2 (7) (3) (5) (1)
Fixed charges:
Interest expense (including
capitalized interest) 1,075 4,125 4,480 2,896 1,421 916
Amortization of debt discount and
appropriate issuance costs 4 20 12 8 6 3
1/3 of net rent expense 35 126 125 114 96 91
------------------------------------------------------------------------------
Total fixed charges 1,114 4,271 4,617 3,018 1,523 1,010
Preferred dividend requirements 7 22 13 15 16 29
Earnings (excluding capitalized interest) $2,222 $7,907 $7,601 $5,570 $3,509 $2,398
==============================================================================
Fixed charges $1,121 $4,293 $4,630 $3,033 $1,539 $1,039
==============================================================================
Ratio of earnings to fixed charges 1.98 1.84 1.64 1.84 2.28 2.31
Including Interest on Deposits
- ------------------------------
Income before taxes $1,108 $3,634 $2,991 $2,555 $1,991 $1,396
Equity in undistributed (earnings) losses
of unconsolidated subsidiaries 0 2 (7) (3) (5) (1)
Fixed charges:
Interest expense (including
capitalized interest) 2,073 7,447 7,761 5,310 3,570 3,688
Amortization of debt discount and
appropriate issuance costs 4 20 12 8 6 3
1/3 of net rent expense 35 126 125 114 96 91
------------------------------------------------------------------------------
Total fixed charges 2,112 7,593 7,898 5,432 3,672 3,782
Preferred dividend requirements 7 22 13 15 16 29
Earnings (excluding capitalized interest) $3,220 $11,229 $10,882 $7,984 $5,658 $5,170
==============================================================================
Fixed charges $2,119 $7,615 $7,911 $5,447 $3,688 $3,811
==============================================================================
Ratio of Earnings to Fixed Charges 1.52 1.47 1.38 1.47 1.53 1.36
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary information extracted from the March 31,
1997 Form 10-Q for NationsBank Corporation and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,008
<INT-BEARING-DEPOSITS> 2,065
<FED-FUNDS-SOLD> 8,579
<TRADING-ASSETS> 25,545
<INVESTMENTS-HELD-FOR-SALE> 20,010
<INVESTMENTS-CARRYING> 1,836
<INVESTMENTS-MARKET> 1,832
<LOANS> 148,716
<ALLOWANCE> (2,785)
<TOTAL-ASSETS> 238,958
<DEPOSITS> 136,807
<SHORT-TERM> 48,539
<LIABILITIES-OTHER> 7,867
<LONG-TERM> 25,086
0
173
<COMMON> 10,513
<OTHER-SE> 9,973
<TOTAL-LIABILITIES-AND-EQUITY> 238,958
<INTEREST-LOAN> 3,007
<INTEREST-INVEST> 373
<INTEREST-OTHER> 647
<INTEREST-TOTAL> 4,027
<INTEREST-DEPOSIT> 998
<INTEREST-EXPENSE> 2,077
<INTEREST-INCOME-NET> 1,950
<LOAN-LOSSES> 190
<SECURITIES-GAINS> 43
<EXPENSE-OTHER> 1,808
<INCOME-PRETAX> 1,108
<INCOME-PRE-EXTRAORDINARY> 1,108
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 709
<EPS-PRIMARY> .97
<EPS-DILUTED> .94
<YIELD-ACTUAL> 3.83
<LOANS-NON> 1,051
<LOANS-PAST> 320
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,315
<CHARGE-OFFS> 251
<RECOVERIES> 67
<ALLOWANCE-CLOSE> 2,785
<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.
The schedule contains summary information extracted from the March 31, 1997
Form 10-Q for NationsBank Corporation and is qualified in its entirety by
reference to such financial statements.
</FN>
</TABLE>