<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1994 Commission File Number 1-9021
WACHOVIA CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1473727
- - ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 North Main Street, Winston-Salem, North Carolina 27150
191 Peachtree Street, N.E., Atlanta, Georgia 30303
- - ---------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (910)770-5000, (404)332-5000
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Indicated below is the number of shares outstanding of each of the issuer's
classes of common stock as of April 30, 1994
Common Stock, $5.00 par value, 171,460,304 shares
<PAGE> 2
QUARTERLY REPORT ON FORM 10-Q
WACHOVIA CORPORATION
March 31, 1994
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- - -----------------------------
Wachovia Corporation ("Wachovia"), a North Carolina corporation, is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, and a savings and loan holding company within the meaning of the Home
Owners Loan Act of 1933, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989. Its member companies provide a wide
range of banking and bank-related services to customers throughout the United
States and abroad.
Wachovia's principal subsidiaries, Wachovia Bank of North Carolina, N.A.,
Wachovia Bank of Georgia, N.A., and The South Carolina National Bank provide
personal, commercial, trust and institutional banking services through 503
full-service banking offices located in North Carolina, South Carolina and
Georgia. In addition, The First National Bank of Atlanta, another subsidiary
of Wachovia Corporation, provides credit card services for Wachovia's
affiliated banks. National and international banking services are provided
through Wachovia's three Cayman Island branches, an Edge Act subsidiary located
in New York, and various offices located throughout the Southeast, the nation
and the world.
The following consolidated financial statements of Wachovia Corporation and
subsidiaries are included on pages 15 through 18 of the quarterly Report to
Shareholders of the Registrant (attached hereto as Exhibit 19) and are
incorporated herein by reference:
Consolidated Statement of Condition
Consolidated Statement of Income
Consolidated Statement of Shareholders' Equity
Consolidated Statement of Cash Flows
The accompanying unaudited consolidated financial statements in Exhibit 19 do
not include all information and footnotes required under generally accepted
accounting principles. However, in the opinion of management, the profit and
loss information presented in the interim financial statements reflects all
adjustments necessary to present fairly the results of operations for the
periods presented. Adjustments reflected in the first quarter 1994 figures are
of a normal, recurring nature. The results of operations shown in the interim
statements are not necessarily indicative of the results that may be expected
for the entire year.
Item 2. Management's Discussion and Analysis of Financial Condition and
- - ------------------------------------------------------------------------
Results of Operations
---------------------
Management's discussion and analysis included on pages 4 - 14 of the quarterly
Report to Shareholders of the Registrant (attached hereto as Exhibit 19) is
incorporated herein by reference.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
At the annual meeting of shareholders held on April 22, 1994, six directors
were elected and the appointment of Ernst and Young as independent auditors for
1994 was ratified. Shareholders also approved the Wachovia Corporation Stock
Plan and certain amendments to the Wachovia Corporation Senior Management
Incentive Plan to
<PAGE> 3
QUARTERLY REPORT ON FORM 10-Q
WACHOVIA CORPORATION
March 31, 1994
Item 4. Submission of Matters to a Vote of Security Holders (Continued)
- - ------------------------------------------------------------------------
preserve Wachovia's tax deduction for certain plan awards. The distribution
of shareholders' votes was as follows:
<TABLE>
<CAPTION>
Shares
Voted Shares
in Favor Withheld
-------- --------
<S> <C> <C>
Election of directors:
Leslie M. Baker, Jr. 145,786,270 522,709
Rufus C. Barkley, Jr. 145,226,391 1,082,588
John L. Clendenin 145,775,047 533,932
Robert M. Holder, Jr. 145,783,455 525,524
W. Duke Kimbrell 145,248,131 1,060,848
John G. Medlin, Jr. 145,766,763 542,216
Wachovia Corporation Stock Plan:
Shares Voted in Favor 138,124,303
Shares Voted Against 6,428,097
Abstentions 1,672,893
Broker Non-Votes 83,704
Amendments to the Wachovia Corporation
Senior Management Incentive Plan:
Shares Voted in Favor 140,818,901
Shares Voted Against 3,459,832
Abstentions 1,943,072
Broker Non-Votes 87,174
Ratification of the appointment
of independent auditors:
Shares Voted in Favor 145,344,222
Shares Voted Against 309,744
Abstentions 655,013
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
10.1 Wachovia Corporation Stock Plan (Exhibit 4.1 to S-8 Registration
Statement No. 033-53325*)
10.2 Wachovia Corporation Senior Management Incentive Plan
as amended through April 22, 1994
11 Computation of Earnings Per Common Share
19 Wachovia Corporation Report to Shareholders for the
period ending March 31, 1994
* Incorporated by reference
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated January 11, 1994, was filed so as to file
with the Securities and Exchange Commission a Statement setting forth the
computation of Ratios of Earnings to Fixed Charges to be incorporated into
Wachovia's Registration Statement on Form S-3 (Registration No. 33-59206).
<PAGE> 4
QUARTERLY REPORT ON FORM 10-Q
WACHOVIA CORPORATION
March 31, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WACHOVIA CORPORATION
May 11, 1994 By ROBERT S. McCOY, JR.
------------------------------
Robert S. McCoy, Jr.
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
May 11, 1994 By JOHN C. McLEAN, JR.
------------------------------
John C. McLean, Jr.
Comptroller
(Principal Accounting Officer)
<PAGE> 1
Exhibit 10.2
WACHOVIA CORPORATION
SENIOR MANAGEMENT INCENTIVE PLAN
<PAGE> 2
WACHOVIA CORPORATION
SENIOR MANAGEMENT INCENTIVE PLAN
1. Purpose.
-------
The purposes of the Wachovia Corporation Senior Management
Incentive Plan (the "Plan") are to motivate and reward a greater degree of
excellence and team work among the senior officers of Wachovia Corporation (the
"Corporation") and related corporations by providing incentive compensation
award opportunities; to provide attractive and competitive total cash
compensation opportunities for exceptional corporate, organizational unit and
personal performance; to reinforce the communication and achievement of the
mission, objectives and goals of the Corporation; and to enhance the
Corporation's ability to attract, retain and motivate the highest caliber
senior officers. The purposes of the Plan shall be carried out by payment to
eligible participants of annual incentive cash awards (individually, an "Award"
and collectively, "Awards"), subject to the terms and conditions of the Plan
and the discretion of the Committee.
2. Effective Date and Plan Year.
----------------------------
The Wachovia Corporation Senior Management Incentive Plan was
originally adopted by the Board of Directors of the Corporation (the "Board")
effective January 1, 1987. The Plan (as amended) was approved by the Board of
Directors on January 28, 1994, and by the Compensation Nominating and
Organization Committee effective March 10, 1994, and shall be effective as of
April 22, 1994. The plan year shall be the calendar year.
3. Administration of the Plan.
--------------------------
Subject to Section 11 herein, the Plan shall be administered
by the Compensation, Nominating and Organization Committee of the Board of
Directors (the "Committee"). The Committee has full authority and
responsibility for the establishment and administration of the Plan, including,
without limitation, the authority (i) to determine all matters relating to
Awards, including selection of individuals to be granted Awards and the terms,
conditions, restrictions and limitations of Awards; (ii) to establish, amend
and rescind rules and regulations for the administration of the Plan; and (iii)
to construe and interpret the Plan and any agreements related to Awards, to
establish and interpret rules and regulations for administering the Plan and to
make all other determinations deemed necessary or advisable for administering
the Plan. All determinations and decisions of the Committee must be made by a
majority of the members present and shall be final and binding on all persons,
except that no member of the Committee may at any time participate in any
decision affecting the bonus of such member. Should the Committee be unable to
render any decision by reason of a deadlock, the majority vote of the
<PAGE> 3
entire Board of Directors shall govern and be final and binding upon all
parties.
4. Eligibility.
-----------
An individual shall be eligible to become a participant in the
Plan (a "Participant") who satisfies the following requirements:
(a) The individual is an employee of the Corporation or a
related corporation. For this purpose, an individual shall be
considered to be an "employee" if there exists between the individual
and the Corporation or a related corporation the legal and bona fide
relationship of employer and employee.
(b) The individual is a senior officer of the Corporation
or a related corporation. For the purposes herein, a "senior officer"
of the Corporation or a related corporation shall mean an officer who
is deemed to have sufficient responsibility, ability and potential to
make significant contributions to the success of the Corporation or a
related corporation.
(c) The individual is recommended each year by the Chief
Executive Officer of the Corporation (the "Chief Executive Officer")
and considered and approved by the Committee as a Participant in the
Plan.
5. Participation.
-------------
Prior to the beginning of each Plan Year (or, with respect to
the 1994 Plan Year, prior to March 31, 1994), the Chief Executive Officer shall
recommend to the Committee each senior officer of the Corporation or a related
corporation who is eligible to become a Participant in the Plan with respect to
such Plan Year. Participants shall be approved by the Committee in its sole
and absolute discretion. In the event of the promotion of an employee or the
hiring of a new employee during the Plan Year, the Committee, upon the
recommendation of the Chief Executive Officer, may approve the entry of a
Participant into the Plan during the Plan Year. In such case, the Award
determined pursuant to the terms of the Plan with respect to such Participant
shall be multiplied by a fraction, the numerator of which is the number of full
calendar months during the Plan Year in which he is a Participant and the
denominator of which is twelve. Participation in the Plan shall be subject to
the provisions of the Plan and such other terms and conditions as the Committee
shall provide.
6. Performance Criteria and Evaluation.
-----------------------------------
2
<PAGE> 4
(a) Performance Goals. The performance goals upon which
-----------------
Awards shall be made shall be based upon business criteria applicable
to the Corporation, the business unit to which the Participant is
assigned and the Participant individually. The corporate business
criteria upon which such Awards shall be based shall include the
following earnings factors, weighted as indicated: net income per
share fully diluted (50%); return on assets (net income) (25%); and
return on equity (net income) (25%).
The three earnings measures will be combined to produce a
composite corporate performance evaluation percentage factor (the
"Composite Percentage Factor") to be used along with the individual
performance evaluation percentage factor (the "Individual Percentage
Factor") in calculating individual awards.
(b) Individual Performance Criteria and Evaluation. A
----------------------------------------------
Participant's Individual Percentage Factor will be based on a
composite rating of (i) relevant performance of the organizational
unit to which the Participant is assigned (the "Unit") as compared to
goals for the Plan Year and (ii) quantitative and qualitative elements
of personal performance of the Participant in relation to goals and
expectations established for the Plan Year. Each of these two
components will have a 50 percent weighing in determining a
Participant's Individual Percentage Factor.
(i) The evaluation of the performance of the Unit
will be based primarily on the degree of success in achieving
the Unit's annual profit and business plan. The assessment
will include, as applicable to the Unit, such factors as
business development, expense management, earnings growth,
credit quality, investment results, audit findings,
affirmative action goals, staff development, operational
efficiency and strategic planning. For purposes of this
evaluation, the Unit will be the assigned responsibility area
of the Participant. In the case of Participants in
administrative and support functions, the evaluation will
include the performance of line business units whose results
can be influenced significantly by such persons.
(ii) The evaluation of a Participant's personal
performance will be based on the Participant's success in
meeting expectations of subjective, qualitative and
quantitative goals for the Plan Year. A Participant's
personal performance evaluation will include an assessment of
performance relative to the Corporation's standards in such
areas as leadership, initiative, professional skills,
teamwork, problem solving, personal behavior and advancement
and achievement of the
3
<PAGE> 5
Corporation's mission and objectives. The following criteria shall
apply in measuring a Participant's personal performance:
(A) Performance Level IV -- Superior:
--------------------------------
Participants performing at this level would be rated
in the range of 90 percent to 100 percent. With
little guidance, a Participant at this level
consistently performs in the superior manner that
always exceeds normal requirements and expectations.
The Participant's performance clearly is a model of
excellence.
(B) Performance Level III --
------------------------
Exceptional: Participants performing at this level
-----------
would be rated in the range of 75 percent to 89
percent. A Participant at the level consistently
performs in an exceptional manner in which
requirements and expectations are always
accomplished. The Participant frequently
accomplishes more than is expected.
(C) Performance Level II - Satisfactory:
-----------------------------------
Participants performing at this level would be rated
in the range of 50 percent to 74 percent. The
Participant performs in an overall satisfactory
manner, generally accomplishing requirements and
expectations. The Participant does not always
perform in an exceptional manner and needs guidance
with certain tasks.
(D) Performance Level I - Meets Minimum
-----------------------------------
Level: No Award will be paid to Participants at this
performance level. The Participant generally meets
minimum levels of performance but sometimes has
difficulty in achieving requirements and
expectations. The Participant is capable of
satisfactory performance with additional effort,
guidance, training and experience.
7. Recommendation and Determination of Awards.
------------------------------------------
In December of each Plan Year, the responsible managers and
executives will evaluate each Participant's performance in meeting Unit and
personal goals and objectives for the Plan Year. A recommended composite
individual performance evaluation factor for each Participant with appropriate
supporting documentation will be submitted by Division Executives of the
Corporation to the Personnel Director of the Corporation for a review of
completeness and compliance with the Plan. The recommended composite
individual performance evaluation percentage factor to be used in calculating
Awards for Participants shall be subject to review and approval by
4
<PAGE> 6
the Chief Executive Officer and the Committee. The composite corporate
performance evaluation percentage factor will be calculated using net income
per share fully diluted, return on assets and return on equity as plotted in
the benchmark table. The resulting percentage representing the composite
corporate performance evaluation factor will be multiplied by the composite
individual performance evaluation percentage factor and the Participant's base
salary paid during the Plan Year to determine the amount of each Participant's
Award. Amounts that would otherwise have been payable to a Participant if the
composite corporate performance evaluation factor had been higher or if the
Participant had received a higher performance individual performance evaluation
percentage factor shall not be re-allocated to other Participants.
8. Payment of Awards; Deferral.
---------------------------
(a) Unless otherwise determined by the Committee, the
Committee will determine the Participants entitled to receive Awards
and the amount of such Awards in January following the end of the Plan
Year, and the Awards for a Plan Year shall be paid by the Corporation
to the Participant (or his beneficiary) on February 1 following the
end of the Plan Year. Payment of Awards shall be made by a deposit to
the Corporation's payroll system, with a written statement of the
amount of each Award provided to each Participant. The amount of each
Award shall be rounded to the nearest $100.
(b) Prior to the beginning of the Plan Year in which an
Award is earned, a Participant may make an irrevocable election to
defer receipt of a portion of the Award in an amount not less than
$1,000 nor greater than 50 percent of the Award. Such election shall
be set forth in, and governed by the terms of, the Wachovia
Corporation Senior Management Incentive Plan Deferral Arrangement.
9. Termination of Employment.
-------------------------
(a) Termination Due to Death, Disability or Retirement.
--------------------------------------------------
If termination of employment occurs during a Plan Year as the result
of death, disability or approved retirement, a proportional award
shall be paid to the Participant (or his estate in the event of
death), for the period of active employment during the Plan Year. In
such event, the Award determined pursuant to the terms of the Plan
with respect to such Participant shall be multiplied by a fraction,
the numerator of which is the number of full calendar months during
the Plan Year in which the employee is a Participant and the
denominator of which is twelve, and such Award shall be paid in
accordance with Section 8 herein. In the event of a Participant's
death, any Award payable under the Plan shall be paid to the
Participant's estate.
5
<PAGE> 7
(b) Other Termination. Except to the extent otherwise
-----------------
provided in Section 10, if termination occurs during the Plan Year for
any reason other than death, disability or approved retirement, no
Award shall be paid.
(c) Termination After End of Plan Year. If termination
----------------------------------
occurs between the end of the Plan Year and the date of payment of an
Award, the full amount of the Award shall be paid in accordance with
Section 8 herein unless the termination was the direct result of
dishonesty or misconduct.
(d) Certain Definitions. For the purposes herein:
-------------------
(i) "Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can
be expected to result in death, or which has lasted or can be
expected to last for a continuous period of not less than
twelve months.
(ii) "Approved retirement" shall mean early or
normal retirement as provided under the Retirement Incentive
Plan of Wachovia Corporation or any successor plan thereto
applicable to a Participant or the retirement date under a
contract, if any, between a Participant and the Corporation or
a related corporation providing for the Participant's
retirement from the employment of the Corporation or a related
corporation prior to the normal retirement date.
10. Change of Control.
-----------------
(a) In the event of a Change of Control (as defined in
Section 10(b) herein), all Awards made pursuant to the Plan shall be
deemed earned and shall become immediately due and payable for the
full Plan Year (notwithstanding the date of the Change of Control
event during the Plan Year), subject to the following: (i) the
corporate Composite Percentage Factor shall be based on corporate
performance on an annualized basis as of the date of the Change of
Control, and (ii) each Participant shall receive the highest Award
that may be granted based on the individual Participant's job
classification. Awards that become due and payable upon a Change of
Control shall be deemed earned, due and payable regardless of whether
the Participant continues service in the same position following the
change of control, has a change in position or responsibility, or is
terminated from employment with the Corporation or a related
corporation.
6
<PAGE> 8
(b) A "Change of Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person shall have
become the beneficial owner of, or shall have obtained voting
control over, thirty percent or more of the outstanding Common
Stock of the Corporation;
(ii) The date the shareholders of the Corporation
approve a definitive agreement (A) to merge or consolidate the
Corporation with or into another corporation, in which the
Corporation is not the continuing or surviving corporation or
pursuant to which any shares of Common Stock of the
Corporation would be converted into cash, securities or other
property of another corporation, other than a merger of the
Corporation in which holders of Common Stock immediately prior
to the merger have the same proportionate ownership of Common
Stock of the surviving corporation immediately after the
merger as immediately before, or (B) to sell or otherwise
dispose of substantially all the assets of the Corporation; or
(iii) The date there shall have been a change in a
majority of the Board of Directors of the Corporation within a
twelve month period unless the nomination for election by the
Corporation's shareholders of each new director was approved
by the vote of two-thirds of the directors then still in
office who were in office at the beginning of the twelve month
period.
(For the purposes herein, the term "person" shall mean any individual,
corporation, partnership, group, association or other person, as such
term is defined in Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than the Corporation, a subsidiary of the Corporation or any
employee benefit plan(s) sponsored or maintained by the Corporation or
any subsidiary thereof, and the term "beneficial owner" shall have the
meaning given the term in Rule 13d-3 under the Exchange Act.)
(c) Notwithstanding the foregoing, in the event of a
merger, share exchange, reorganization or other business combination
affecting the Corporation or a related corporation, the Committee may,
in its sole and absolute discretion, determine that any or all Awards
shall not be paid, if the Board of Directors or the surviving or
acquiring corporation, as the case may be, shall have taken such
action,
7
<PAGE> 9
including but not limited to the making of substitute awards, as in
the opinion of the Committee is equitable or appropriate to protect
the rights and interests of participants in the Plan.
11. Performance-Based Compensation. To the extent to
------------------------------
which it is necessary to comply with Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations thereunder, the
following provisions shall apply:
(a) Compliance with Code Section 162(m). It is the
-----------------------------------
intent of the Corporation that Awards conferred under the Plan to
Covered Employees, as such term is defined in Section 19(e) herein,
shall comply with the qualified performance-based compensation
exception to employer compensation deductions set forth in Section
162(m) of the Code, and the Plan shall be construed in favor of
meeting the requirements of Section 162(m) of the Code and the
regulations thereunder to the extent possible.
(b) Committee Authority and Composition. The Committee
-----------------------------------
shall be authorized to establish performance goals for Covered
Employees, certify satisfaction of performance goals and other
material terms for such Covered Employees, and to take such other
action as may be necessary in order to qualify for the
performance-based compensation exception. The Committee shall be
comprised of two or more outside directors (as such term is defined in
Section 162(m) of the Code and the regulations thereunder).
Notwithstanding the foregoing, the committee authorized to take such
actions may be comprised of a subcommittee of the Committee or other
directors who qualify as outside directors (as such term is defined in
Section 162(m) of the Code and the regulations thereunder), and the
actions taken by such subcommittee or other group of outside directors
shall be effective as the action of the Committee to the extent
permitted by the Plan, and Section 162(m) of the Code and the
regulations thereunder.
(c) The Committee shall not have discretion to increase
the amount of an Award payable to an employee over the amount that is
determined in accordance with Sections 6 and 7 herein. The Committee
shall in any event have the discretion to reduce or eliminate the
amount of an Award that would otherwise be payable to any Participant
in accordance with the terms of the Plan.
(d) The material terms of the performance goal or goals
pursuant to which Awards are to be made shall be disclosed to, and
subject to the approval of, the shareholders of the Corporation.
Material terms of a performance goal or goals, the targets of which
may be changed by the Committee, shall be disclosed to, and subject to
the reapproval of, the
8
<PAGE> 10
shareholders of the Corporation upon a change of the material terms of
a performance goal or goals by the Committee or as may be otherwise
required by Section 162(m) of the Code or the regulations thereunder.
12. Nonassignability of Incentive Awards.
------------------------------------
The right to receive payment of an Award shall not be
assignable or transferrable (including by pledge or hypothecation) other than
by will or the laws of intestate succession.
13. No Trust Fund; Unsecured Interest.
---------------------------------
A Participant shall have no interest in any fund or specified
asset of the Corporation. No trust fund shall be created in connection with
the Plan or any Award, and there shall be no required funding of amounts which
may become payable under the Plan. Any amounts which are or may be set aside
under the provisions of this Plan shall continue for all purposes to be a part
of the general assets of the Corporation, and no person or entity other than
the Corporation shall, by virtue of the provisions of this Plan, have any
interest in such assets. No right to receive payments from the Corporation
pursuant to this Plan shall be greater than the right of any unsecured creditor
of the Corporation.
14. No Right or Obligation of Continued Employment.
----------------------------------------------
Nothing contained in the Plan shall require the Corporation or
a related corporation to continue to employ a Participant, nor shall the
Participant be required to remain in the employment of the Corporation or a
related corporation.
15. Withholding.
-----------
The Corporation shall withhold all required local, state and
federal taxes from any amount of an Award.
16. Retirement Plans.
----------------
In no event shall any amounts accrued or payable under this
Plan be treated as compensation for the purpose of determining the amount of
contributions or benefits to which a Participant shall be entitled under any
retirement plan to which the Corporation or a related corporation may be a
party.
9
<PAGE> 11
17. Dilution or Other Adjustments.
-----------------------------
If there is any change in the Corporation because of a merger,
share exchange, reorganization or other business combinations affecting the
Corporation or a related corporation, or if extraordinary items of income or
expense of the Corporation or a related corporation occur, the Committee may
make such adjustments to any provisions of this Plan, including but not limited
to adjustments to determinations of performance and Awards, as the Committee
deems desirable to prevent the dilution or enlargement of rights granted
hereunder.
18. Amendment and Termination of the Plan.
-------------------------------------
The Plan may be amended or terminated at any time by the Board
or by the Committee as delegated by the Board, provided that such termination
or amendment shall not, without the consent of the Participant, affect such
Participant's rights with respect to Awards previously awarded to him. With
the consent of the Participant affected, the Board, or by delegation of
authority by the Board, the Committee, may amend outstanding Awards in a manner
not inconsistent with the Plan.
19. Certain Definitions.
-------------------
For purposes of the Plan, the following terms shall have the
meaning indicated:
(a) "Related corporation" means any parent, subsidiary or
predecessor of the Corporation.
(b) "Parent" or "parent corporation" shall mean any
corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation if each corporation other
than the Corporation owns stock possessing fifty percent or more of
the total combined voting power of all classes of stock in another
corporation in the chain.
(c) "Subsidiary" or "subsidiary corporation" means any
corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation if each corporation other
than the last corporation in the unbroken chain owns stock possessing
fifty percent or more of the total combined voting power of all
classes of stock in another corporation in the chain.
(d) "Predecessor" or "predecessor corporation" means a
corporation which was a party to a transaction described in Section
425(a) of the Code (or which would be so described if a substitution
or assumption under that Section had occurred) with the Corporation,
or a corporation which is a parent or
10
<PAGE> 12
subsidiary of the Corporation, or a predecessor of any such
corporation.
(e) "Covered Employee" shall mean any individual who, on
the last day of the taxable year, is (i) the Chief Executive Officer
or is acting in such capacity or (ii) among the four highest
compensated officers (other than the Chief Executive Officer), as
determined in accordance with the executive compensation disclosure
rules under the Exchange Act, unless otherwise provided in Section
162(m) of the Code or the regulations thereunder.
20. Binding on Successors.
---------------------
The obligations of the Corporation under the Plan shall be
binding upon any organization which shall succeed to all or substantially all
of the assets of the Corporation, and the term "Corporation," whenever used in
the Plan, shall mean and include any such organization after the succession.
21. Applicable Law.
--------------
The Plan shall be governed by and construed in accordance with
the laws of the State of North Carolina.
IN WITNESS WHEREOF, the Wachovia Corporation Senior Management
Incentive Plan, as amended, is, by the authority of the Board of Directors of
the Corporation, executed as of the 22nd day of April, 1994.
Attest: WACHOVIA CORPORATION
/s/ Alice Washington Grogan By: /s/ Leslie M. Baker, Jr.
- - ---------------------------------- --------------------------
Secretary Chief Executive Officer
[Corporate Seal]
11
<PAGE> 1
Wachovia Corporation
Computation of Earnings Per Common Share
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------
1994 1993
-------- --------
<S> <C> <C>
PRIMARY (in thousands,
except per share amount)
Average common shares outstanding 171,448 171,914
Dilutive common stock options -
based on treasury stock method
using average market price 1,222 1,603
Dilutive common stock awards -
based on treasury stock method
using average market price 69 62
-------- --------
Average primary shares outstanding 172,739 173,579
======== ========
Net income $124,799 $121,568
======== ========
Per share amount $ .72 $ .70
FULLY DILUTED (in thousands,
except per share amount)
Average common shares outstanding 171,448 171,914
Dilutive common stock options -
based on treasury stock method
using higher of period-end market
price or average market price 1,222 1,786
Dilutive common stock awards -
based on treasury stock method
using higher of period-end market
price or average market price 69 67
Convertible notes assumed converted 639 2,137
-------- --------
Average fully diluted
shares outstanding 173,378 175,904
======== ========
Net income $124,799 $121,568
Add interest on convertible
notes after taxes 133 360
-------- --------
Adjusted net income $124,932 $121,928
======== ========
Per share amount $ .72 $ .69
</TABLE>
<PAGE> 1
EXHIBIT 19
REPORT TO SHAREHOLDERS FOR THE PERIOD ENDING MARCH 31, 1994
Dear Wachovia Shareholder:
Following brisk expansion in the final period of last year, the economy grew at
a more moderate pace in the first three months of 1994. Short-term interest
rates rose, reversing an extended downward trend and dampening anticipated
inflationary pressures while roiling financial markets. Loan demand for banks
improved and credit problems further eased, but interest margins remained
compressed. In this environment, Wachovia's earnings grew moderately and a
sound financial position was maintained.
Net income per fully diluted share was $.72, an increase of 4 percent from
$.69 in the same quarter of 1993. Net income totaled $124.8 million versus
$121.6 million and represented annualized returns, excluding unrealized gains
on securities available-for-sale, net of tax, of 16.6 percent on shareholders'
equity and 1.40 percent on assets.
Average interest-earning assets grew $3.120 billion or 10.9 percent with
average loans up $1.928 billion or 9.1 percent. Retail loans led the increase,
advancing $1.285 billion or 14.1 percent. Growth in commercial loans
strengthened with average totals rising $644 million or 5.4 percent from the
year-earlier period and $613 million or 5.1 percent from the fourth quarter of
1993. Investment securities expanded $1.228 billion or 19 percent.
Average interest-bearing liabilities increased $2.971 billion or 12.6 percent,
largely due to the continued issuance of long-term debt under Wachovia Bank of
North Carolina's bank note program. Short-term borrowings also were higher
while interest-bearing deposits declined slightly.
Taxable equivalent net interest income rose modestly, the result of higher
volumes and narrower spreads. The net yield on interest-earning assets declined
42 basis points from the year-earlier period and was down 7 basis points from
the fourth quarter of 1993.
Other operating revenue was lower by $4.5 million or 3 percent. The decrease
reflected, in part, the absence of income from student loan servicing, which
was sold as a subsidiary in the first period of 1993, and reduced trading
account profits. Good gains were achieved in trust and credit card fee income.
Noninterest expense was modestly higher by $806 thousand or less than 1 percent
after excluding nonrecurring charges in the year-earlier period.
Excellent credit quality and capital standards were maintained. Nonperforming
assets at March 31, 1994 were $126 million or .53 percent of loans and
foreclosed property, down from $275 million or 1.26 percent a year earlier and
$155 million or .67 percent at year-end 1993. Net loan losses for the first
quarter were $17.1 million or .30 percent of average loans compared with $14
million or .27 percent of loans in the same three months of the preceding year.
The provision for loan losses was $17.8 million. At the end of the first
quarter, the allowance for loan losses totaled $405 million, representing 1.71
percent of loans and 405 percent coverage of nonperforming loans. Shareholders'
equity was 8.51 percent of assets, and the Tier I and total capital to
risk-adjusted assets ratios were 9.64 percent and 13.52 percent, respectively.
The economy should continue to progress in the second quarter despite the
prospect of higher interest rates and uncertainty created by political turmoil
domestically and abroad. Competitive pressures and an increasingly stringent
regulatory environment will continue to test banks' marketing and funding
strategies, credit skills and technological resources. Wachovia remains
committed to maintaining its leadership position among the nation's largest
financial institutions and to preserving and enhancing shareholder value over
time. Additional comments on Wachovia and the climate for banking may be found
in my annual shareholders' meeting remarks beginning on page 19.
Sincerely,
L. M. Baker, Jr.
Chief Executive Officer
April 29, 1994
1
<PAGE> 2
NEWS DEVELOPMENTS
- - - At the Annual Shareholders' Meeting of Wachovia Corporation on April 22, six
directors were elected, the appointment of Ernst & Young as independent
auditors for 1994 was ratified, and the Wachovia Corporation Stock Plan was
approved. Five directors elected for three-year terms expiring in 1997 were
Rufus C. Barkley, Jr., John L. Clendenin, Robert M. Holder, Jr., W. Duke
Kimbrell and John G. Medlin, Jr. Also, L. M. Baker, Jr., was elected for a
two-year term expiring in 1996. Retiring as directors after serving with
distinction were James G. Lindley, James H. Millis, Sr., and J. Mack Robinson.
- - - Also at the Shareholders' Meeting, the board of directors declared a second
quarter dividend of $.30 per share, payable June 1 to shareholders of record
on May 9, 1994. The dividend is higher by 11.1 percent from the $.27 per share
paid in the same quarter of 1993. For the year to date, dividends will total
$.60 per share, up 11.1 percent from $.54 per share paid in the first half of
last year.
- - - Wachovia announced plans to open a three-state customer service center in
Columbia, South Carolina, this summer. The service will be an extension of the
Flex Response Center already operational in South Carolina and will provide
retail banking customers in South Carolina, Georgia and North Carolina with a
central, toll-free location to speak directly with service representatives. The
customer service center is offered in addition to Wachovia's Phone Access which
enables customers in all three states to access their accounts through a
self-service phone system.
- - - In January, Wachovia Corporation issued $250 million of 6.375 percent
subordinated notes due February 1, 2009. The 15-year noncallable notes were
priced at 99.87 percent to yield 6.388 percent or 75 basis points above
comparable U.S. Treasuries and were rated A1 by Moody's and AA- by Standard &
Poor's.
- - - Wachovia Operational Services Corporation will consolidate its Savannah
Operations Center with the Piedmont Operations Center in Atlanta by the
beginning of June, eliminating the need to maintain check-processing equipment
in multiple locations. Also, Wachovia Mortgage Company announced plans in March
to consolidate its mortgage-processing functions in Columbia, South Carolina,
by the middle of 1995. The new mortgage center will be responsible for
residential mortgage processing, underwriting and closing operations currently
being performed in 14 locations in Georgia, North Carolina and South Carolina.
- - - Wachovia Treasury Services has announced the introduction of a new image
processing technology as part of its corporate cash management services. Called
Wachovia Connection Image Workstation, the service is part of a new system
designed in conjunction with several leading image technology vendors including
IBM, Check Solutions, Data/Ware Development and Micro View. The system will
provide corporate customers of any size and industry a cost-effective way to
store and retrieve check images from compact disk read-only memory media. In
addition, the system will enable companies to research paid items from their
permanent archives in minutes rather than hours or days.
- - - Wachovia Bank of North Carolina announced a $20 million partnership with the
Center for Community Self-Help to expand affordable home loans in North
Carolina. Under the partnership, the Center for Community Self-Help purchases
from Wachovia unconventional home loans made through Wachovia's Neighborhood
Revitalization Program for resale on the secondary mortgage market. The Center
for Community Self-Help guarantees loan repayment, and funds provided by the
home loan purchases are used by Wachovia to make additional mortgage loans to
North Carolina families on the same flexible basis. The partnership is expected
to serve as a model nationwide for community development banking and mortgage
lending.
<TABLE>
<CAPTION>
SELECTED PERIOD-END DATA
- - -------------------------------------------------------------------------------------------------
March 31 March 31
1994 1993
-------- --------
<S> <C> <C>
Full-service banking offices:
North Carolina ....................................................... 219 221
Georgia .............................................................. 128 132
South Carolina ....................................................... 156 158
--- ---
Total .............................................................. 503 511
=== ===
Automated banking machines:
North Carolina ...................................................... 260 226
Georgia ............................................................. 180 173
South Carolina ...................................................... 168 164
--- ---
Total ............................................................. 608 563
=== ===
Employees (full-time equivalent) ....................................... 15,492 15,721
Common stock shareholders of record .................................... 28,239 27,110
Common shares outstanding (thousands) .................................. 171,416 172,173
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- - ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31 Percent
1994 1993 Change
-------- -------- --------
<S> <C> <C> <C>
EARNINGS AND DIVIDENDS
(thousands, except per share data)
Net income ............................................................. $124,799 $121,568 2.7
Cash dividends paid on common stock .................................... 51,443 46,454 10.7
Payout ratio (total cash dividends/net income) ......................... 41.2% 38.2%
Net income per common share:
Primary .............................................................. $ .72 $ .70 3.2
Fully diluted ........................................................ $ .72 $ .69 4.0
Cash dividends paid per common share ................................... $ .30 $ .27 11.1
Average primary shares outstanding ..................................... 172,739 173,579 (.5)
Average fully diluted shares outstanding ............................... 173,378 175,904 (1.4)
Annualized return on average assets .................................... 1.40% 1.50%
Annualized return on average shareholders' equity ...................... 16.65 17.41
Including average unrealized gains on securities
available-for-sale, net of tax:*
Annualized return on average assets .................................. 1.40 --
Annualized return on average shareholders' equity .................... 16.53 --
BALANCE SHEET DATA AT PERIOD-END
(millions, except per share data)
Total assets ........................................................... $ 36,350** $ 33,567 8.3
Interest-earning assets ................................................ 32,370 29,709 9.0
Loans -- net of unearned income ........................................ 23,662 21,688 9.1
Deposits ............................................................... 22,279 22,140 .6
Interest-bearing liabilities ........................................... 26,853 24,804 8.3
Shareholders' equity ................................................... 3,094 2,859 8.2
Shareholders' equity to total assets ................................... 8.51% 8.52%
Risk-based capital ratios:
Tier I capital ....................................................... 9.64 9.99
Total capital ....................................................... 13.52 12.45
Per share:
Book value ........................................................... $ 18.05 $ 16.60 8.7
Common stock closing price (NYSE) .................................... 31.75 36.875 (13.9)
</TABLE>
* Based on inclusion of $22.399 million of average unrealized gains on
securities available-for-sale, net of tax
** Includes $4 of unrealized gains on securities available-for-sale, net of tax
<TABLE>
<CAPTION>
COMMON STOCK DATA -- PER SHARE
- - ------------------------------------------------------------------------------------------------------------------------------------
1994 1993
------- -------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Market value:
Period-end .............................................. $31 3/4 $33 1/2 $39 1/8 $34 3/8 $36 7/8
High .................................................... 35 1/8 40 1/2 40 3/8 40 1/2 36 7/8
Low .................................................... 30 1/8 31 7/8 33 3/8 32 3/8 32 1/2
Book value at period-end .................................. 18.05 17.61 17.29 17.01 16.60
Dividend .................................................. .30 .30 .27 .27 .27
Price/earnings ratio* ..................................... 11.1x 11.8x 14.2x 12.8x 14.2x
</TABLE>
* Based on most recent twelve months net income per
primary share and period-end stock price
3
<PAGE> 4
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SUMMARY TABLE 1
- - ------------------------------------------------------------------------------------------------------------------------------------
Twelve
Months 1994 1993
Ended ------- ----------------------------------------------
March 31 First Fourth Third Second First
1994 Quarter Quarter Quarter Quarter Quarter
---------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent ............... $2,234,942 $ 558,329 $ 568,749 $ 558,418 $549,446 $545,125
Interest expense .................................... 848,361 216,007 217,832 211,145 203,377 206,658
---------- --------- --------- --------- -------- --------
Net interest income -- taxable equivalent ........... 1,386,581 342,322 350,917 347,273 346,069 338,467
Taxable equivalent adjustment ....................... 100,118 24,476 24,732 26,487 24,423 23,259
---------- --------- --------- --------- -------- --------
Net interest income ................................. 1,286,463 317,846 326,185 320,786 321,646 315,208
Provision for loan losses ........................... 85,339 17,759 18,013 23,483 26,084 25,072
---------- --------- --------- --------- -------- --------
Net interest income after provision for loan losses.. 1,201,124 300,087 308,172 297,303 295,562 290,136
Other operating revenue ............................. 595,664 144,869 152,441 149,761 148,593 149,384
Gain on sale of subsidiary .......................... -- -- -- -- -- 8,030
Investment securities gains ......................... 9,744 572 7,216 702 1,254 10,222
---------- --------- --------- --------- -------- --------
Total other income .................................. 605,408 145,441 159,657 150,463 149,847 167,636
Personnel expense ................................... 569,350 141,014 147,709 142,393 138,234 140,344
Other expense ....................................... 546,820 129,036 152,031 131,153 134,600 144,772
---------- --------- --------- --------- -------- --------
Total other expense ................................. 1,116,170 270,050 299,740 273,546 272,834 285,116
Income before income taxes .......................... 690,362 175,478 168,089 174,220 172,575 172,656
Applicable income taxes* ............................ 195,036 50,679 45,092 49,813 49,452 51,088
---------- --------- --------- --------- -------- --------
Net income .......................................... $ 495,326 $ 124,799 $ 122,997 $ 124,407 $123,123 $121,568
========== ========= ========= ========= ======== ========
Net income per common share:
Primary ........................................... $ 2.85 $ .72 $ .71 $ .71 $ .71 $ .70
Fully diluted ...................................... $ 2.84 $ .72 $ .71 $ .71 $ .70 $ .69
Cash dividends paid per common share ................ $ 1.14 $ .30 $ .30 $ .27 $ .27 $ .27
Average primary shares outstanding .................. 173,734 172,739 173,175 174,300 174,712 173,579
Average fully diluted shares outstanding ............ 174,688 173,378 173,943 175,414 176,004 175,904
SELECTED AVERAGE BALANCES (MILLIONS)
Total assets ........................................ $ 34,444 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473
Loans -- net of unearned income ..................... 22,021 23,010 22,165 21,656 21,268 21,082
Investment securities ............................... 7,342** 7,690** 7,992 7,072 6,615 6,462
Other interest-earning assets ....................... 1,186 1,083 1,234 1,277 1,145 1,119
Total interest-earning assets ....................... 30,549 31,783 31,391 30,005 29,028 28,663
Interest-bearing deposits ........................... 16,888 16,694 17,030 16,835 16,986 17,228
Short-term borrowed funds ........................... 5,698 6,148 6,218 5,432 4,998 4,950
Long-term debt ...................................... 2,642 3,670 2,774 2,370 1,768 1,363
Total interest-bearing liabilities .................. 25,228 26,512 26,022 24,637 23,752 23,541
Noninterest-bearing deposits ........................ 5,393 5,366 5,544 5,410 5,253 5,208
Total deposits ...................................... 22,281 22,060 22,574 22,245 22,239 22,436
Shareholders' equity ................................ 2,928 3,021 2,934 2,907 2,852 2,794
Ratios (averages)
Loans to deposits ................................... 98.84% 104.31% 98.19% 97.35% 95.63% 93.97%
Annualized net loan losses to loans ................. .32 .30 .31 .35 .32 .27
Annualized net yield on interest-earning assets ..... 4.54 4.37 4.44 4.59 4.78 4.79
Shareholders' equity to:
Total assets ................................... 8.50 8.44 8.28 8.58 8.72 8.60
Net loans ...................................... 13.54 13.36 13.48 13.68 13.66 13.50
Annualized return on assets ......................... 1.44 1.40 1.39 1.47 1.51 1.50
Annualized return on shareholders' equity ........... 16.95 16.65 16.77 17.12 17.27 17.41
* Income taxes applicable to securities transactions
were $3,734, $226, $2,846, $291, $371 and $3,964, respectively
** Reported at amortized cost; excludes pretax unrealized
gains on securities available-for-sale of $9 for the twelve
months ended March 31, 1994 and $37 for the first quarter
of 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
RESULTS OF OPERATIONS
Overview
The economy grew at a moderate pace in the first quarter
of 1994 following strong gains in the last three months of
1993. Georgia, North Carolina and South Carolina, Wachovia
Corporation's three primary operating states, showed signs of
steady business activity with seasonably adjusted
unemployment averaging 6.6 percent, 4.5 percent and 6.3
percent, respectively, for the quarter.
Wachovia's net income for the first three months of 1994
was $124.799 million compared with $121.568 million in the
same period a year earlier. On a fully diluted basis, net
income per share was $.72 versus $.69 per share. Return on
shareholders' equity, excluding unrealized gains on
securities available-for-sale, net of tax, was 16.6 percent
and return on assets on a comparable basis was 1.40 percent
compared with 17.4 percent and 1.50 percent, respectively, in
the 1993 first quarter.
Expanded operating results and the corporation's
financial condition are presented in the following narrative
and tables. Interest income is stated on a taxable equivalent
basis which is adjusted for the tax-favored status of
earnings from certain loans and investments. References to
changes in assets and liabilities represent daily average
levels unless otherwise noted.
Net Interest Income
Taxable equivalent net interest income for the first
quarter of 1994 was higher by $3.855 million or 1.1 percent
from the same period of 1993. The gain primarily reflected
higher volumes of interest-earning assets with the effect on
net interest income partially offset by a narrowing of the
interest rate spread and by increased levels of
interest-bearing liabilities.
The net yield on interest-earning assets (net interest
income as a percentage of average interest-earning assets)
decreased 42 basis points as asset yields declined more
rapidly than funding rates and short-term borrowing costs
rose. The average rate earned dropped 59 basis points,
largely reflecting growth of earning assets at reduced yields
in a lower-rate environment and prepayments of
higher-yielding residential mortgage loans and investments.
The average rate paid on interest-bearing liabilities
decreased 26 basis points. Declines in funding rates slowed,
in part, due to lengthening of the corporation's debt market
maturities through the issuance of long-term debt. In
addition, short-term borrowing costs increased as the federal
funds rate rose during the quarter due to actions by the
Federal Reserve.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
- - ------------------------------------------------------------------------------------------------------------------------------------
1994 1993
First First
Quarter Quarter Change
------- ------- -------
<S> <C> <C> <C>
Interest income -- taxable equivalent............................. $3.23 $3.14 $ .09
Interest expense.................................................. 1.25 1.19 .06
----- ----- -----
Net interest income -- taxable equivalent......................... 1.98 1.95 .03
Taxable equivalent adjustment .................................... .14 .13 .01
----- ----- -----
Net interest income .............................................. 1.84 1.82 .02
Provision for loan losses......................................... .10 .15 (.05)
----- ----- -----
Net interest income after provision
for loan losses ................................................ 1.74 1.67 .07
Other operating revenue .......................................... .84 .86 (.02)
Gain on sale of subsidiary ....................................... -- .04 (.04)
Investment securities gains....................................... -- .06 (.06)
----- ----- -----
Total other income ............................................... .84 .96 (.12)
Personnel expense ................................................ .82 .81 .01
Other expense .................................................... .75 .83 (.08)
----- ----- -----
Total other expense .............................................. 1.57 1.64 (.07)
Income before income taxes ....................................... 1.01 .99 .02
Applicable income taxes .......................................... .29 .29 --
----- ----- -----
Net income ....................................................... $ .72 $ .70 $ .02
===== ===== =====
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
Taxable equivalent interest income rose $13.204 million
or 2.4 percent. Growth in average interest-earning assets of
$3.120 billion or 10.9 percent accounted for the increase
which was reduced partially by lower average yields.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND AVERAGE BALANCES TABLE 3
- - -----------------------------------------------------------------------------------------------------------------------------------
Twelve
Months 1994 1993
Ended ------- -----------------------------------------------
March 31 First Fourth Third Second First
1994 Quarter Quarter Quarter Quarter Quarter
--------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET INTEREST INCOME -- TAXABLE
EQUIVALENT (THOUSANDS)
Interest income:
Loans .......................................... $1,688,671 $422,388 $427,617 $422,248 $416,418 $411,345
Investment securities .......................... 502,914 125,663 129,845 124,627 122,779 123,088
Interest-bearing bank balances ................. 1,473 160 116 485 712 1,592
Federal funds sold and securities
purchased under resale agreements ............ 13,347 3,111 4,089 3,612 2,535 2,197
Trading account assets ........................ 28,537 7,007 7,082 7,446 7,002 6,903
---------- -------- -------- ------- -------- --------
Total ...................................... 2,234,942 558,329 568,749 558,418 549,446 545,125
Interest expense:
Interest-bearing demand ........................ 58,460 13,235 14,976 15,478 14,771 15,208
Savings and money market savings ............... 146,680 34,284 36,774 37,844 37,778 39,352
Savings certificates ........................... 230,142 53,465 56,393 59,063 61,221 64,118
Large denomination certificates ................ 79,265 15,057 19,338 21,177 23,693 25,893
Time deposits in foreign offices ............... 14,323 3,280 5,170 3,076 2,797 3,460
Short-term borrowed funds ...................... 185,071 51,625 49,877 43,910 39,659 40,401
Long-term debt ................................. 134,420 45,061 35,304 30,597 23,458 18,226
---------- -------- -------- -------- -------- --------
Total ...................................... 848,361 216,007 217,832 211,145 203,377 206,658
---------- -------- -------- -------- -------- --------
Net interest income ............................. $1,386,581 $342,322 $350,917 $347,273 $346,069 $338,467
========== ======== ======== ======== ======== ========
Annualized net yield on
interest-earning assets ........................ 4.54% 4.37% 4.44% 4.59% 4.78% 4.79%
AVERAGE BALANCES (MILLIONS)
Assets:
Loans -- net of unearned income ............... $ 22,021 $ 23,010 $ 22,165 $ 21,656 $ 21,268 $ 21,082
Investment securities .......................... 7,342 7,690 7,992 7,072 6,615 6,462
Interest-bearing bank balances ................. 44 17 11 59 88 157
Federal funds sold and securities
purchased under resale agreements ............ 423 394 513 454 329 280
Trading account assets ......................... 719 672 710 764 728 682
---------- -------- -------- -------- -------- --------
Total interest-earning assets .............. 30,549 31,783 31,391 30,005 29,028 28,663
Cash and due from banks ........................ 2,372 2,387 2,421 2,349 2,332 2,371
Premises and equipment ......................... 484 502 497 493 444 438
Other assets ................................... 1,433 1,476 1,520 1,427 1,310 1,387
Unrealized gains on securities
available-for-sale ........................... 9 37 -- -- -- --
Allowance for loan losses ...................... (403) (407) (409) (404) (396) (386)
---------- -------- -------- -------- -------- --------
Total assets ............................... $ 34,444 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473
========== ======== ======== ======== ======== ========
Liabilities and shareholders' equity:
Interest-bearing demand ........................ $ 3,283 $ 3,385 $ 3,319 $ 3,233 $ 3,196 $ 3,127
Savings and money market savings ............... 6,029 6,074 6,080 6,013 5,946 5,949
Savings certificates ........................... 5,495 5,355 5,426 5,551 5,648 5,761
Large denomination certificates ................ 1,619 1,463 1,550 1,637 1,825 1,954
Time deposits in foreign offices ............... 462 417 655 401 371 437
Short-term borrowed funds ...................... 5,698 6,148 6,218 5,432 4,998 4,950
Long-term debt ................................. 2,642 3,670 2,774 2,370 1,768 1,363
---------- -------- -------- -------- -------- --------
Total interest-bearing liabilities ......... 25,228 26,512 26,022 24,637 23,752 23,541
Demand deposits in domestic offices ............. 5,316 5,302 5,480 5,314 5,168 5,144
Demand deposits in foreign offices .............. 5 5 6 5 5 6
Noninterest-bearing time deposits in
domestic offices ............................... 72 59 58 91 80 58
Other liabilities ............................... 895 879 920 916 861 930
Shareholders' equity ............................ 2,928 3,021 2,934 2,907 2,852 2,794
---------- -------- -------- -------- -------- --------
Total liabilities and shareholders' equity.. $ 34,444 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473
========== ======== ======== ======== ======== ========
Total deposits .................................. $ 22,281 $ 22,060 $ 22,574 $ 22,245 $ 22,239 $ 22,436
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
Average loans were higher by $1.928 billion or 9.1
percent from the year-earlier period and $845 million or 3.8
percent from the fourth quarter of 1993. Retail loans,
including residential mortgages, rose $1.285 billion or 14.1
percent year over year and $232 million or 2.3 percent from
the final three months of 1993. Within the retail category,
credit card loans had the strongest gain from the
year-earlier quarter, increasing $901 million or 39.9
percent. Growth has been fueled by continued interest in
Wachovia's Prime Plus credit card as well as the First-Year
Prime Visa and MasterCard pricing option introduced in the
fall of 1993. At March 31, 1994, credit card outstandings
totaled $3.298 billion compared with $2.354 billion at the
end of the 1993 first quarter.
Indirect retail loans, which primarily consists of
automobile sales financing, rose $278 million or 13 percent.
Increased efficiency in operations, effected by consolidation
and employment of technology, combined with a resurgence in
cyclical demand accounted for the gain.
Other areas of growth in the retail portfolio were
residential mortgages, direct retail loans and other
revolving credit. Growth in direct retail loans followed an
increase begun in the third quarter of 1993, reversing an
extended decline in this lending category.
Commercial loans, including related real estate
categories, were higher by $644 million or 5.4 percent year
over year and were up $613 million or 5.1 percent from the
1993 fourth quarter. Regular commercial loans and commercial
mortgages led the growth over the first quarter of 1993,
increasing $396 million or 6.3 percent and $120 million or
3.8 percent, respectively. Gains also were recorded in
tax-exempt loans, lease financing and construction loans
which have increased gradually since the third quarter of
1993. Based on regulatory definitions, construction loans
totaled $477 million at March 31, 1994 compared with $485
million a year earlier. Commercial mortgages totaled $3.323
billion versus $3.125 billion at the end of the 1993 first
quarter.
Investment securities increased $1.228 billion or 19
percent. Effective January 1, 1994, the corporation
prospectively adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (FASB 115), pertaining to the
accounting and classification of all debt securities and
equity securities having a readily determinable fair value.
FASB 115 requires debt securities which management can
demonstrate positive intent and ability to hold to maturity
to be classified as held-to-maturity and reported at
amortized cost. Debt and equity securities acquired
principally to sell in the near term continue to be
classified as trading securities and reported at fair market
value. Unrealized gains and losses resulting from adjustments
to market value are included in earnings under trading
account profits or losses. Debt and equity securities not
classified as either held-to-maturity or trading are
classified as available-for-sale and reported at fair market
value. Unrealized gains and losses are included, net of tax,
in shareholders' equity.
At March 31, 1994, securities held-to-maturity totaled
$3.900 billion and securities available-for-sale were $3.921
billion. These compared with total investment securities at
amortized cost of $6.622 billion a year earlier. The market
value of the securities held-to-maturity at first
quarter-close was $4.033 billion, representing a $133 million
appreciation over book value.
The following summarizes securities available-for-sale
and securities held-to-maturity by type as of March 31, 1994.
<TABLE>
<CAPTION>
$ in thousands
<S> <C>
Securities available-for-sale at market value:
U.S. Government and agency .................................................................... $2,639,831
Mortgage backed securities .................................................................... 965,649
Other.......................................................................................... 315,805
----------
Total securities available-for-sale ......................................................... 3,921,285
Securities held-to-maturity:
U.S. Government and agency .................................................................... 2,209,253
Mortgage backed securities ................................................................... 1,060,320
State and municipal ........................................................................... 624,677
Other ......................................................................................... 6,062
----------
Total securities held-to-maturity ............................................................. 3,900,312
----------
Total investment securities.................................................................. $7,821,597
==========
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- FIRST QUARTER* TABLE 4
- - ------------------------------------------------------------------------------------------------------------------------------------
Variance
Average Volume Average Rate Interest Attributable to
----------------- ------------- ----------------- -------------------
1994 1993 1994 1993 1994 1993 Variance Rate Volume
------- ------ ------ ----- ------- -------- ----------- ------- --------
(Millions) (Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans:
$ 6,670 $ 6,274 5.04 5.30 Commercial ...................... $ 82,962 $ 81,954 $ 1,008 $ (4,027) $ 5,035
1,982 1,918 8.55 8.98 Tax-exempt ...................... 41,783 42,441 (658) (2,050) 1,392
------- ------- -------- -------- --------
8,652 8,192 5.85 6.16 Total commercial ............. 124,745 124,395 350 (6,456) 6,806
714 668 8.09 8.86 Direct retail ................... 14,258 14,584 (326) (1,307) 981
2,424 2,145 7.75 8.79 Indirect retail ................. 46,326 46,514 (188) (5,844) 5,656
3,161 2,260 10.89 12.75 Credit card ..................... 84,865 71,052 13,813 (11,487) 25,300
331 324 11.17 11.25 Other revolving credit .......... 9,117 8,995 122 (63) 185
------- ------- -------- -------- --------
6,630 5,397 9.46 10.61 Total retail ................. 154,566 141,145 13,421 (16,438) 29,859
501 473 8.03 7.25 Construction .................... 9,913 8,463 1,450 947 503
3,251 3,132 7.17 7.38 Commercial mortgages ............ 57,515 56,959 556 (1,586) 2,142
3,740 3,688 7.77 8.43 Residential mortgages............ 71,660 76,622 (4,962) (6,030) 1,068
------- ------- -------- -------- --------
7,492 7,293 7.53 7.90 Total real estate............. 139,088 142,044 (2,956) (6,762) 3,806
159 125 8.16 9.39 Lease financing ................. 3,205 2,902 303 (414) 717
77 75 4.11 4.64 Foreign.......................... 784 859 (75) (101) 26
------- ------- -------- -------- --------
23,010 21,082 7.44 7.91 Total loans................... 422,388 411,345 11,043 (25,222) 36,265
Investment securities:
Held-to-maturity:
2,208 2,847 6.70 7.15 U.S. Government and agency...... 36,488 50,201 (13,713) (2,988) (10,725)
1,159 2,488 7.58 7.59 Mortgage backed securities...... 21,662 46,592 (24,930) (94) (24,836)
631 730 12.64 12.26 State and municipal............. 19,663 22,068 (2,405) 658 (3,063)
14 397 6.09 4.32 Other........................... 210 4,227 (4,017) 1,231 (5,248)
------- ------- -------- -------- --------
4,012 6,462 7.89 7.73 Total securities held-to-maturity 78,023 123,088 (45,065) 2,535 (47,600)
Available-for-sale:**
2,358 -- 5.66 -- U.S. Government and agency...... 32,890 -- 32,890 -- 32,890
1,015 -- 4.67 -- Mortgage backed securities...... 11,694 -- 11,694 -- 11,694
305 -- 4.07 -- Other........................... 3,056 -- 3,056 -- 3,056
------- ------- -------- -------- --------
3,678 -- 5.25 -- Total securities available-for-sale 47,640 -- 47,640 -- 47,640
------- ------- -------- -------- --------
7,690 6,462 6.63 7.73 Total investment securities... 125,663 123,088 2,575 (18,913) 21,488
17 157 3.82 4.12 Interest-bearing bank balances..... 160 1,592 (1,432) (106) (1,326)
Federal funds sold and
securities purchased under
394 280 3.20 3.18 resale agreements................ 3,111 2,197 914 16 898
672 682 4.23 4.11 Trading account assets............. 7,007 6,903 104 201 (97)
------- ------- -------- -------- --------
$31,783 $28,663 7.12 7.71 Total interest-earning assets. 558,329 545,125 13,204 (43,476) 56,680
======= =======
INTEREST EXPENSE
$ 3,385 $ 3,127 1.59 1.97 Interest-bearing demand ........... 13,235 15,208 (1,973) (3,157) 1,184
6,074 5,949 2.29 2.68 Savings and money market savings... 34,284 39,352 (5,068) (5,878) 810
5,355 5,761 4.05 4.51 Savings certificates............... 53,465 64,118 (10,653) (6,325) (4,328)
1,463 1,954 4.17 5.38 Large denomination certificates.... 15,057 25,893 (10,836) (5,098) (5,738)
------- ------- -------- -------- --------
Total time deposits in
16,277 16,791 2.89 3.49 domestic offices ........... 116,041 144,571 (28,530) (24,222) (4,308)
417 437 3.19 3.21 Time deposits in foreign offices... 3,280 3,460 (180) (25) (155)
------- ------- -------- -------- --------
16,694 17,228 2.90 3.48 Total time deposits........... 119,321 148,031 (28,710) (24,246) (4,464)
Federal funds purchased and
securities sold under
4,857 3,657 3.46 3.32 repurchase agreements ........... 41,461 29,969 11,492 1,296 10,196
604 360 3.20 3.01 Commercial paper................... 4,758 2,674 2,084 173 1,911
687 932 3.19 3.38 Other short-term borrowed funds.... 5,406 7,758 (2,352) (402) (1,950)
------- ------- -------- -------- --------
Total short-term
6,148 4,949 3.41 3.31 borrowed funds ............. 51,625 40,401 11,224 1,191 10,033
2,880 952 4.53 4.63 Bank notes......................... 32,165 10,870 21,295 (246) 21,541
790 412 6.62 7.25 Other long-term debt............... 12,896 7,356 5,540 (686) 6,226
------- ------- -------- -------- --------
3,670 1,364 4.98 5.42 Total long-term debt.......... 45,061 18,226 26,835 (1,601) 28,436
------- ------- -------- -------- --------
$26,512 $23,541 3.30 3.56 Total interest-bearing liabilities 216,007 206,658 9,349 (15,544) 24,893
======= ======= ---- ---- -------- -------- --------
3.82 4.15 Interest rate spread
===== =====
Net yield on interest-earning assets
4.37 4.79 and net interest income ......... $342,322 $338,467 $ 3,855 (31,199) 35,054
===== ===== ======== ======== ========
*Interest income and yields are presented on a fully taxable equivalent
basis using the federal income tax rate and state tax rates, as applicable,
reduced by the nondeductible portion of interest expense
**Volume amounts are reported at amortized cost; excludes pretax unrealized
gains of $37 million
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
At March 31, 1994, the pretax unrealized gains on securities
available-for-sale were $6.291 million and for the quarter ended the
same period the average pretax unrealized gains on securities
available-for-sale were $36.507 million. The unrealized gains on
securities available-for-sale, net of tax, for the same periods were
$3.825 million on a period-end basis and $22.399 million on an average
basis.
Interest expense was up $9.349 million or 4.5 percent, the
result of higher levels of interest-bearing liabilities. Average
interest-bearing liabilities increased $2.971 billion or 12.6 percent
for the quarter.
Interest-bearing time deposits decreased $534 million or 3.1
percent. Both interest-bearing demand and savings and money market
savings rose for the period, increasing $258 million or 8.3 percent and
$124 million or 2.1 percent, respectively. These gains, however, were
offset by lower levels of savings certificates, down $406 million or 7
percent, and large denomination certificates which dropped $491 million
or 25.1 percent.
Short-term borrowings expanded $1.198 billion or 24.2 percent
with federal funds purchased and repurchase agreements higher by $1.200
billion or 32.8 percent and commercial paper borrowings up $244 million
or 67.8 percent. Other short-term borrowings, mainly consisting of term
federal funds, declined. During the quarter, the Federal Reserve
tightened monetary policy resulting in the federal funds rate rising
approximately 50 basis points to 3.50 percent.
Total long-term debt grew $2.307 billion, primarily due to the
continued issuance of bank notes by Wachovia Bank of North Carolina.
The bank note program began in the second quarter of 1992 and provides
long-term funding at attractive market rates reflective of the
corporation's favorable credit ratings. At March 31, 1994, $3.263
billion of these notes were outstanding with an average cost of 4.47
percent and an average maturity of 2.0 years. This compared with
$1.078 billion outstanding with an average cost of 4.47 percent and an
average maturity of 1.4 years at first quarter-close 1993. In January,
Wachovia issued $250 million of 6.375 percent subordinated notes due
February 1, 2009. The 15-year noncallable notes were priced at 99.87
percent to yield 6.388 percent or 75 basis points above comparable U.S.
Treasuries at the time of issue.
Gross deposits averaged $22.060 billion for the quarter, a
decrease of $376 million or 1.7 percent from $22.436 billion in the
same period of 1993. Collected deposits, net of float, averaged $20.482
billion, lower by $302 million or 1.5 percent from $20.784 billion a
year earlier.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 5
(thousands)
- - ----------------------------------------------------------------------------------------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
1994 1993 1993 1993 1993
-------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
NONPERFORMING ASSETS
Cash-basis assets -- domestic borrowers ..................... $100,126 $108,882 $126,474 $179,150 $185,447
Restructured loans -- domestic............................... --* 80 84 105 106
-------- -------- -------- -------- --------
Total nonperforming loans............................... 100,126 108,962 126,558 179,255 185,553
Foreclosed property:
Foreclosed real estate ..................................... 30,136 51,701 65,038 51,411 92,455
Less valuation allowance.................................... 6,977 9,168 7,264 6,518 5,530
Other foreclosed assets .................................... 2,982 3,406 3,746 2,360 2,981
-------- -------- -------- -------- --------
Total foreclosed property .............................. 26,141 45,939 61,520 47,253 89,906
-------- -------- -------- -------- --------
Total nonperforming assets ............................. $126,267** $154,901 $188,078 $226,508 $275,459
======== ======== ======== ======== ========
Nonperforming loans to period-end loans...................... .42% .47% .57% .83% .86%
Nonperforming assets to period-end loans and foreclosed property .53 .67 .85 1.04 1.26
Period-end allowance for loan losses times nonperforming loans 4.05x 3.72x 3.19x 2.23x 2.11x
Period-end allowance for loan losses times nonperforming assets 3.21 2.61 2.15 1.76 1.42
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers .......................................... $ 42,744 $ 44,897 $ 47,532 $ 49,515 $ 45,512
======== ======== ======== ======== ========
* Excludes $14,656 of loans which have been renegotiated at market rates and
have demonstrated performance at the renegotiated terms for at least one
year
** Net of cumulative corporate and commercial real estate
charge-offs and foreclosed real estate write-downs totaling $47,692;
includes $14,122 of nonperforming assets on which interest and principal
are paid current
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
Nonperforming Assets
Total nonperforming assets were $126.267 million or .53 percent
of loans and foreclosed property at March 31, 1994, down $149.192
million or 54.2 percent from a year earlier and $28.634 million or 18.5
percent from year-end 1993. Payments and sales of foreclosed property
largely accounted for the declines.
The majority of total nonperforming assets is real estate
related. Real estate nonperforming assets were $95.077 million or 1.28
percent of real estate loans and foreclosed real estate at March 31,
1994. This compared with $233.970 million or 3.19 percent a year
earlier, a decline of $138.893 million or 59.4 percent, and with
$123.595 million or 1.65 percent at year-end 1993, down $28.518 million
or 23.1 percent. The total at March 31, 1994 included $71.918 million
of nonperforming real estate loans versus $147.045 million a year
earlier and $81.062 million at December 31, 1993.
Commercial real estate nonperforming assets were $72.374 million
or 1.90 percent of related loans and foreclosed property versus
$200.471 million or 5.45 percent at the end of the 1993 first quarter
and $98.014
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 6
- - --------------------------------------------------------------------------------------------------------------------------
1994 1993
---------- ----------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period.............. $404,798 $404,091 $399,480 $390,621 $379,557
Provision for loan losses .................. 17,759 18,013 23,483 26,084 25,072
Deduct net loan losses:
Loans charged off:
Commercial .............................. 5,080 1,418 1,875 2,129 1,370
Credit card.............................. 15,928 15,392 17,147 15,650 14,802
Other revolving credit................... 905 1,375 758 943 846
Other retail ............................ 3,084 2,754 1,853 1,904 1,920
Real estate ............................ 819 4,899 3,706 3,384 2,525
Lease financing ......................... 61 81 110 63 204
Foreign ................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total ................................. 25,877 25,919 25,449 24,073 21,667
Recoveries:
Commercial .............................. 1,957 971 1,354 1,382 1,865
Credit card ............................. 2,771 2,625 2,566 2,645 2,480
Other revolving credit .................. 247 270 228 316 215
Other retail............................. 1,121 942 842 996 1,011
Real estate.............................. 2,612 3,743 1,525 1,445 1,980
Lease financing ......................... 78 53 54 55 102
Foreign ................................. 8 9 8 9 6
-------- -------- -------- -------- --------
Total.................................. 8,794 8,613 6,577 6,848 7,659
-------- -------- -------- -------- --------
Net loan losses............................ 17,083 17,306 18,872 17,225 14,008
-------- -------- -------- -------- --------
Balance at end of period.................... $405,474 $404,798 $404,091 $399,480 $390,621
======== ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial.................................. $ 3,123 $ 447 $ 521 $ 747 $ (495)
Credit card................................. 13,157 12,767 14,581 13,005 12,322
Other revolving credit...................... 658 1,105 530 627 631
Other retail................................ 1,963 1,812 1,011 908 909
Real estate ................................ (1,793) 1,156 2,181 1,939 545
Lease financing............................. (17) 28 56 8 102
Foreign .................................... (8) (9) (8) (9) (6)
-------- -------- -------- -------- --------
Total.................................. $ 17,083 $ 17,306 $ 18,872 $ 17,225 $ 14,008
======== ======== ======== ======== ========
ANNUALIZED NET LOAN LOSSES (RECOVERIES)
TO AVERAGE LOANS BY CATEGORY
Commercial ................................. .14% .02% .03% .04% (.02%)
Credit card ................................ 1.67 1.74 2.16 2.11 2.18
Other revolving credit...................... .80 1.34 .64 .76 .78
Other retail ............................... .25 .23 .14 .13 .13
Real estate................................. (.10) .06 .12 .10 .03
Lease financing ............................ (.04) .08 .16 .02 .33
Foreign .................................... (.04) (.05) (.04) (.04) (.03)
Total loans ................................ .30 .31 .35 .32 .27
Period-end allowance to outstanding loans .. 1.71% 1.76% 1.83% 1.84% 1.80%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
million or 2.63 percent at year-end 1993. The total included $58.354
million of commercial real estate non-performing loans at March 31,
1994 compared with $129.154 million and $64.136 million at the end
of the first and fourth quarters of 1993, respectively.
Provision and Allowance for Loan Losses
The provision for loan losses was $17.759 million for the first
quarter of 1994, down $7.313 million or 29.2 percent from $25.072
million taken in the same three months of 1993.
The provision reflects management's assessment of the adequacy
of the allowance for loan losses to absorb potential write-offs in the
loan portfolio. This assessment considers several factors, including
growth and composition of the portfolio, historical credit loss
experience, current and anticipated economic conditions, and changes
in borrowers' financial conditions.
Net loan losses for the first quarter of 1994 totaled $17.083
million or .30 percent on an annualized basis of average loans versus
$14.008 million or .27 percent of average loans in the year-earlier
period and $17.306 million or .31 percent in the final quarter of 1993.
Commercial net loan losses were $3.123 million or .14 percent
annualized of average commercial loans compared with net recoveries of
$495 thousand or .02 percent in the same three months of 1993. Credit
card net charge-offs were higher by $835 thousand or 6.8 percent but
represented 1.67 percent annualized of average credit card loans versus
2.18 percent in the 1993 first period. Other retail net charge-offs,
consisting of direct and indirect retail lending, increased $1.054
million to $1.963 million or .25 percent of average related loans. Real
estate loans had net recoveries of $1.793 million compared with net
loan losses of $545 thousand in the same three months of 1993.
At March 31, 1994, the allowance for loan losses totaled
$405.474 million, representing 1.71 percent of loans and 405 percent
coverage of nonperforming loans. Comparable amounts a year earlier were
$390.621 million, 1.80 percent and 211 percent, respectively, and at
year-end 1993 they were $404.798 million, 1.76 percent and 372 percent.
Noninterest Income
Other operating revenue for the quarter decreased $4.515 million
or 3 percent from the same three months of 1993. Factors contributing
to the decline included the absence of $5.535 million earned in the
year-earlier period from student loan servicing, as the corporation
sold its student loan servicing subsidiary in the first quarter of
1993, decreased trading account profits and lower deposit account
service charges.
Higher sales volume and growth in total active accounts
increased credit card fee income $3.026 million or 13.6 percent. Sales
volume rose $241.935 million or 29.7 percent from the year-earlier
quarter, including an increase of $111.527 million or 67.1 percent in
transfer check volume. The pace of growth in new accounts accelerated
during the quarter.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 7
- - ----------------------------------------------------------------------------------------------------------------------------------
1994 1993
---------- ----------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts................... $ 48,150 $ 48,982 $ 51,909 $ 51,622 $ 50,372
Fees for trust services............................... 31,681 30,352 29,697 29,614 30,367
Credit card income -- net of interchange payments..... 25,334 27,834 26,009 25,629 22,308
Mortgage fee income .................................. 8,033 10,130 9,699 10,102 9,170
Trading account profits -- excluding interest......... 1,507 2,097 3,521 2,746 4,739
Insurance premiums and commissions.................... 2,686 2,167 2,897 3,764 3,019
Bankers' acceptance and letter of credit fees ........ 6,287 4,633 4,925 5,276 4,834
Student loan servicing ............................... -- -- -- -- 5,535
Other service charges and fees ....................... 13,627 11,948 12,248 11,907 12,812
Other income ......................................... 7,564 14,298 8,856 7,933 6,228
-------- -------- -------- -------- --------
Total other operating revenue ................... 144,869 152,441 149,761 148,593 149,384
Gain on sale of subsidiary ........................... -- -- -- -- 8,030
Investment securities gains........................... 572 7,216 702 1,254 10,222
-------- -------- -------- -------- --------
Total............................................ $145,441 $159,657 $150,463 $149,847 $167,636
======== ======== ======== ======== ========
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
Trust fee income rose $1.314 million or 4.3 percent. The
increase primarily reflected growth in personal and institutional
business combined with increasing sales of the Biltmore Funds, a
proprietary family of mutual funds.
Service charges on deposit accounts were lower by $2.222 million
or 4.4 percent due, in part, to reduced commercial account analysis
fees, consumer NSF and overdraft fees, and discontinuation of the
retail lockbox product.
Mortgage fee income, which primarily consists of servicing and
origination fees and gains/losses from mortgage loans held for sale,
decreased $1.137 million or 12.4 percent. The decline was largely due
to losses on mortgage sales and reduced portfolio market evaluations.
At March 31, 1994, the mortgage portfolio serviced totaled $9.095
billion, representing 135,981 loans compared with $8.647 billion and
135,186 loans a year earlier.
Trading account profits were lower by $3.232 million or 68.2
percent, primarily as a result of the Federal Reserve raising
short-term interest rates in February and March. Remaining combined
categories of other operating revenue were down $2.264 million or 7
percent.
Including gains on securities and subsidiary sales, total
noninterest income was $145.441 million, down $22.195 million or 13.2
percent from $167.636 million in the year-earlier period. Gains on
securities sales totaled $572 thousand compared with $10.222 million in
the same three months of 1993 which included $9.835 million in pretax
equity securities gains. The first quarter of 1993 also included $8.030
million from the sale of Wachovia Student Financial Services, Inc.
Noninterest Expense
Noninterest expense for the quarter declined $15.066 million or
5.3 percent. As a percent of total adjusted revenues (taxable
equivalent net interest income and other operating revenue),
noninterest expense decreased to 55.4 percent versus 58.4 percent in
the 1993 first quarter. The year-earlier period included $15.872
million of nonrecurring charges related, in part, to write-downs of
intangibles and fixed assets, additions to legal reserves and expenses
for closing the corporation's retail lockbox operation. Excluding these
charges from the first quarter of 1993, noninterest expense for the
first three months of 1994 was higher by $806 thousand or less than 1
percent.
Total personnel expense increased $670 thousand or under 1
percent. Salaries expense was up $4.896 million or 4.4 percent, while
employee benefits expense dropped $4.226 million or 14.1 percent. At
March 31, 1994, full-time equivalent employees totaled 15,492 versus
15,721 a year earlier.
Combined net occupancy and equipment expense was higher by
$1.593 million or 3.6 percent. Other
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 8
- - ---------------------------------------------------------------------------------------------------------------------------
1994 1993
--------- -----------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Salaries.................................................. $115,211 $122,205 $112,982 $110,119 $110,315
Employee benefits......................................... 25,803 25,504 29,411 28,115 30,029
-------- -------- -------- -------- --------
Total personnel expense ............................. 141,014 147,709 142,393 138,234 140,344
Net occupancy expense .................................... 19,428 23,587 18,950 19,660 19,873
Equipment expense ........................................ 26,512 27,283 24,856 25,633 24,474
Postage and delivery ..................................... 9,052 9,315 8,921 11,643 8,281
Outside data processing, programming and software......... 8,485 12,494 9,194 8,198 8,727
Stationery and supplies................................... 5,962 7,018 6,353 5,572 6,401
Advertising and sales promotion........................... 9,783 11,435 7,681 7,805 11,220
Professional services..................................... 3,952 6,381 4,120 3,771 2,872
Travel and business promotion............................. 3,504 4,706 3,668 3,905 3,284
FDIC insurance and regulatory examinations................ 13,380 13,122 13,274 13,084 14,183
Check clearing and other bank services.................... 2,295 2,348 2,563 2,586 2,662
Amortization of intangible assets......................... 5,137 6,844 7,502 6,540 7,115
Foreclosed property expense............................... (3,441) 2,630 1,737 1,226 2,061
Other expense............................................. 24,987 24,868 22,334 24,977 33,619
-------- -------- -------- -------- --------
Total ............................................... $270,050 $299,740 $273,546 $272,834 $285,116
======== ======== ======== ======== ========
Overhead ratio............................................ 55.4% 59.5% 55.0% 55.2% 58.4%
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
combined categories of noninterest expense were down $17.329 million
or 17.3 percent. Expenses associated with foreclosed property had net
gains of $3.441 million and included write-downs totaling $97
thousand. This compared with foreclosed property expenses of $2.061
million, including write-downs of $1.631 million in the first three
months of 1993.
Income Taxes
Applicable income taxes for the quarter were lower by $409
thousand or less than 1 percent. Income taxes computed at the statutory
rate are reduced primarily by the interest earned on state and
municipal debt securities and industrial revenue obligations. Also,
within certain limitations, one-half of the interest income of
qualifying employee stock ownership plan loans is exempt from federal
taxes. The interest earned on state and municipal debt instruments is
exempt from federal taxes and, except for out-of-state issues, from
North Carolina and Georgia taxes as well, and results in substantial
interest savings for local governments and their constituents.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
INCOME TAXES (thousands) TABLE 9
-----------------------------------------------------------------------------------------------
Three Months Three Months
Ended Ended
March 31 March 31
1994 1993
------------ ------------
<S> <C> <C>
Income before income taxes ................................. $175,478 $172,656
======== ========
Federal income taxes at statutory rate* .................... $ 61,417 $ 58,703
State and local income taxes -- net of
federal benefit........................................... 1,221 2,216
Effect of tax-exempt securities
interest and other income ................................ (12,420) (12,949)
Tax cost to carry tax-exempt assets......................... 453 545
Other items ................................................ 8 2,573
-------- --------
Total tax expense ..................................... $ 50,679 $ 51,088
======== ========
Currently payable:
Federal................................................... $ 43,259 $ 60,521
Foreign .................................................. 34 102
State and local........................................... 2,413 4,989
-------- --------
Total.................................................. 45,706 65,612
Deferred:
Federal .................................................. 5,508 (12,893)
State and local........................................... (535) (1,631)
-------- --------
Total.................................................. 4,973 (14,524)
-------- --------
Total tax expense ..................................... $ 50,679 $ 51,088
======== ========
* An increase in the federal income tax statutory rate from 34% to 35% was
enacted during the third quarter of 1993 retroactive to January 1, 1993.
The tax amount for 1993 of $58,703 represents the 34% rate originally
reported for the first quarter of 1993 prior to enactment of the tax rate
increase. A cumulative adjustment related to the increase in the tax rate
was reported in the third quarter of 1993.
-----------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL CONDITION AND CAPITAL RATIOS
At March 31, 1994, total assets were $36.350 billion, including
$32.370 billion of interest-earning assets and $23.662 billion of
loans. Comparable amounts a year earlier were $33.567 billion, $29.709
billion and $21.688 billion, respectively, and at year-end 1993 totals
were $36.526 billion of assets, including $32.349 billion of earning
assets and $22.977 billion of loans.
Deposits constitute the primary source of funding for the
corporation. At March 31, 1994, deposits totaled $22.279 billion. Time
deposits were $16.914 billion, representing 75.9 percent of total
deposits. This compared with total deposits of $22.140 billion,
including time deposits of $17.114 billion or 77.3 percent at first
quarter-close 1993. At December 31, 1993, deposits were $23.352 billion
and time deposits were $17.209 billion, representing 73.7 percent of
the total.
Shareholders' equity at March 31, 1994 was $3.094 billion, an
increase of $235 million or 8.2 percent from $2.859 billion a year
earlier and higher by $76 million or 2.5 percent from December 31,
1993. Included
13
<PAGE> 14
in the $3.094 billion at first quarter-close were unrealized gains of
$4 million, net of tax, on securities available-for-sale marked to
fair market value under FASB 115. Average shareholders' equity for
the first quarter of 1994 included $22 million, net of tax, of
unrealized gains on securities available-for-sale under FASB 115.
Wachovia's board of directors has authorized the repurchase of
up to 5 million shares of common stock to be used for various corporate
purposes, including the issuance of shares for the corporation's
employee stock plans and dividend reinvestment plan. Share repurchase
began on July 1, 1993. During the first quarter of 1994, the
corporation repurchased 422,000 shares at an average price of $33.111
per share for a total cost of $13.973 million. At March 31, 1994, a
total of 1,847,800 shares remained available for possible repurchase.
Intangible assets at first quarter-close 1994 were $88.423
million. The total consisted of $40.493 million in mortgage servicing
rights, $32.095 million in goodwill, $10.127 million in deposit base
intangibles and $5.708 million in other intangible assets. This
compared with $97.945 million in total intangibles, $43.942 million in
mortgage servicing rights, $33.569 million in goodwill, $12.978 million
in deposit base intangibles and $7.456 million in other intangibles a
year earlier.
Regulatory agencies divide capital into Tier I (consisting of
shareholders' equity less ineligible intangible assets) and Tier II
(consisting of the allowable portion of the reserve for loan losses and
certain long-term debt) and measure capital adequacy by applying both
capital levels to a banking company's risk-adjusted assets and
off-balance sheet items. Regulatory requirements presently specify that
Tier I capital should exclude the market appreciation of securities
available-for-sale arising from valuation adjustments under FASB 115.
In addition to these capital ratios, regulatory agencies have
established a Tier I leverage ratio which measures Tier I capital to
average assets less ineligible intangible assets.
Regulatory guidelines require a minimum total capital ratio to
risk-adjusted assets ratio of 8 percent with one-half consisting of
tangible common shareholders' equity and a minimum Tier I leverage
ratio of 3 percent. Banks which meet or exceed a Tier I ratio of 6
percent, a total capital ratio of 10 percent and a Tier I leverage
ratio of 5 percent are considered well capitalized by regulatory
standards.
At March 31, 1994, Wachovia's Tier I to risk-adjusted assets
ratio was 9.64 percent and including Tier II was 13.52 percent. The
corporation's Tier I leverage ratio was 8.56 percent. These capital
ratios remain well in excess of minimum regulatory requirements.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 10
- - -------------------------------------------------------------------------------------------------------------------------
1994 1993
------- -------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Tier I capital:
Common shareholders' equity........................... $ 3,093,593 $ 3,017,947 $ 2,974,699 $ 2,950,413 $ 2,858,896
Less ineligible intangible assets..................... 32,095 32,451 36,039 33,196 33,569
Less unrealized gain on securities available-for-sale. 3,825 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Tier I capital.............................. 3,057,673 2,985,496 2,938,660 2,917,217 2,825,327
Tier II capital:
Allowable allowance for loan losses .................. 396,449 384,032 370,017 362,867 354,000
Allowable long-term debt ............................. 833,125 583,738 587,158 587,321 343,002
----------- ----------- ----------- ----------- -----------
Tier II capital additions ........................ 1,229,574 967,770 957,175 950,188 697,002
----------- ----------- ----------- ----------- -----------
Total capital..................................... $ 4,287,247 $ 3,953,266 $ 3,895,835 $ 3,867,405 $ 3,522,329
=========== =========== =========== =========== ===========
Risk-adjusted assets................................... $31,706,868 $30,701,782 $29,567,305 $28,992,768 $28,283,418
Quarterly average assets............................... $35,778,460 $35,419,829 $33,869,607 $32,718,390 $32,473,044
Risk-based capital ratios:
Tier I capital ....................................... 9.64% 9.72% 9.94% 10.06% 9.99%
Total capital ....................................... 13.52 12.88 13.18 13.34 12.45
Tier I leverage ratio* ................................ 8.56% 8.44% 8.69% 8.93% 8.71%
Shareholders' equity to total assets................... 8.51% 8.26% 8.42% 8.87% 8.52%
*Ratio excludes the average unrealized gain on securities
available-for-sale, net of tax, of $22,399 for the first quarter of 1994
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
<TABLE>
<CAPTION>
March 31 December 31 March 31
$ in thousands 1994 1993 1993
-------- ----------- --------
<S> <C> <C> <C>
ASSETS
Cash and due from banks............................................ $ 2,220,126 $ 2,529,528 $ 2,477,505
Interest-bearing bank balances..................................... 24,169 12,478 106,711
Federal funds sold and securities
purchased under resale agreements................................ 284,447 691,106 599,130
Trading account assets............................................. 577,362 788,779 692,788
Securities available-for-sale...................................... 3,921,285 -- --
Securities held-to-maturity (Market value of $4,033,333,
$8,156,690 and $6,992,575, respectively)......................... 3,900,312 7,878,656 6,621,827
Loans and net leases............................................... 23,670,041 22,986,307 21,697,054
Less unearned income on loans...................................... 7,652 8,819 8,582
----------- ----------- -----------
Total loans ............................................... 23,662,389 22,977,488 21,688,472
Less allowance for loan losses .................................... 405,474 404,798 390,621
----------- ----------- -----------
Net loans.................................................. 23,256,915 22,572,690 21,297,851
Premises and equipment ............................................ 507,770 502,699 435,466
Due from customers on acceptances ................................ 609,149 434,584 388,353
Other assets ...................................................... 1,048,413 1,115,252 947,864
----------- ----------- -----------
Total assets .............................................. $36,349,948 $36,525,772 $33,567,495
=========== =========== ===========
LIABILITIES
Deposits in domestic offices:
Demand .......................................................... $ 5,358,943 $ 6,140,884 $ 5,022,239
Interest-bearing demand ......................................... 3,453,505 3,515,680 3,159,473
Savings and money market savings................................. 6,295,721 6,194,086 6,161,861
Savings certificates ............................................ 5,037,319 5,141,410 5,459,656
Large denomination certificates.................................. 1,465,016 1,507,461 1,914,831
Noninterest-bearing time ........................................ 72,164 45,802 65,597
----------- ----------- -----------
Total deposits in domestic offices ........................ 21,682,668 22,545,323 21,783,657
Deposits in foreign offices:
Demand .......................................................... 6,417 3,011 4,040
Time ........................................................... 590,166 804,064 352,443
----------- ----------- -----------
Total deposits in foreign offices ......................... 596,583 807,075 356,483
----------- ----------- -----------
Total deposits ........................................... 22,279,251 23,352,398 22,140,140
Federal funds purchased and securities
sold under repurchase agreements................................. 4,901,139 4,741,283 4,521,915
Commercial paper................................................... 499,426 589,178 275,779
Other short-term borrowed funds ................................... 508,570 1,091,123 1,525,016
Long-term debt:
Bank notes....................................................... 3,262,912 2,370,091 1,077,665
Other long-term debt............................................. 839,669 590,365 355,700
----------- ----------- -----------
Total long-term debt....................................... 4,102,581 2,960,456 1,433,365
Acceptances outstanding ........................................... 609,149 434,584 388,353
Other liabilities ................................................. 356,239 338,803 424,031
----------- ----------- -----------
Total liabilities ......................................... 33,256,355 33,507,825 30,708,599
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding .................. -- -- --
Common stock, par value $5 per share:
issued 171,416,491, 171,375,772 and
172,172,636, respectively........................................ 857,082 856,879 860,863
Capital surplus ................................................... 759,389 761,573 825,307
Retained earnings ................................................. 1,477,122 1,399,495 1,172,726
----------- ----------- -----------
Total shareholders' equity ................................ 3,093,593 3,017,947 2,858,896
----------- ----------- -----------
Total liabilities and shareholders' equity ................ $36,349,948 $36,525,772 $33,567,495
=========== =========== ===========
</TABLE>
15
<PAGE> 16
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31
$ in thousands, except per share 1994 1993
-------- --------
<S> <C> <C>
INTEREST INCOME
Loans ............................................................................. $410,452 $399,256
Securities available-for-sale:
State and municipal.............................................................. 14 --
Other investments ............................................................... 44,798 --
Securities held-to-maturity:
State and municipal.............................................................. 13,024 15,358
Other investments................................................................ 55,776 97,094
Interest-bearing bank balances .................................................... 160 1,592
Federal funds sold and securities
purchased under resale agreements................................................ 3,111 2,197
Trading account assets ............................................................ 6,518 6,369
-------- --------
Total interest income ......................................................... 533,853 521,866
INTEREST EXPENSE
Deposits:
Domestic offices ................................................................ 116,041 144,571
Foreign offices ................................................................ 3,280 3,460
-------- --------
Total interest on deposits..................................................... 119,321 148,031
Short-term borrowed funds.......................................................... 51,625 40,401
Long-term debt..................................................................... 45,061 18,226
-------- --------
Total interest expense......................................................... 216,007 206,658
NET INTEREST INCOME .............................................................. 317,846 315,208
Provision for loan losses ......................................................... 17,759 25,072
-------- --------
Net interest income after
provision for loan losses........................................................ 300,087 290,136
OTHER INCOME
Service charges on deposit accounts ............................................... 48,150 50,372
Fees for trust services............................................................ 31,681 30,367
Credit card income ................................................................ 25,334 22,308
Mortgage fee income................................................................ 8,033 9,170
Trading account profits ........................................................... 1,507 4,739
Student loan servicing ............................................................ -- 5,535
Other operating income ........................................................... 30,164 26,893
-------- --------
Total other operating revenue ................................................. 144,869 149,384
Gain on sale of subsidiary ........................................................ -- 8,030
Investment securities gains........................................................ 572 10,222
-------- --------
Total other income ............................................................ 145,441 167,636
OTHER EXPENSE
Salaries .......................................................................... 115,211 110,315
Employee benefits ................................................................. 25,803 30,029
-------- --------
Total personnel expense ....................................................... 141,014 140,344
Net occupancy expense.............................................................. 19,428 19,873
Equipment expense.................................................................. 26,512 24,474
Other operating expense ........................................................... 83,096 100,425
-------- --------
Total other expense............................................................ 270,050 285,116
Income before income taxes......................................................... 175,478 172,656
Applicable income taxes ........................................................... 50,679 51,088
-------- --------
NET INCOME......................................................................... $124,799 $121,568
======== ========
Net income per common share:
Primary.......................................................................... $ .72 $ .70
Fully diluted ................................................................... $ .72 $ .69
Average shares outstanding:
Primary ......................................................................... 172,739 173,579
Fully diluted.................................................................... 173,378 175,904
</TABLE>
16
<PAGE> 17
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------- Capital Retained
$ in thousands, except per share Shares Amount Surplus Earnings
----------- -------- -------- ----------
<S> <C> <C> <C> <C>
PERIOD ENDED MARCH 31, 1993
Balance at beginning of year .......................... 171,471,178 $857,356 $817,889 $1,099,522
Net income............................................. 121,568
Cash dividends declared on
common stock -- $.27 a share ........................ (46,454)
Common stock issued pursuant to:
Stock option and employee benefit plans ............. 180,450 902 3,986 (41)
Dividend reinvestment plan .......................... 77,416 387 2,229 (15)
Conversion of notes.................................. 462,164 2,311 1,751 (60)
Common stock acquired.................................. (18,572) (93) (547) 8
Miscellaneous ......................................... (1) (1,802)
----------- -------- -------- ----------
Balance at end of period .............................. 172,172,636 $860,863 $825,307 $1,172,726
=========== ======== ======== ==========
PERIOD ENDED MARCH 31, 1994
Balance at beginning of year .......................... 171,375,772 $856,879 $761,573 $1,399,495
Net income ............................................ 124,799
Cash dividends declared on
common stock -- $.30 a share......................... (51,443)
Common stock issued pursuant to:
Stock option and employee benefit plans.............. 374,715 1,873 7,622
Dividend reinvestment plan .......................... 88,357 442 2,368
Conversion of notes ................................. 21,254 106 300
Common stock acquired ................................. (443,607) (2,218) (12,473)
Unrealized gains on securities available-
for-sale -- net of tax .............................. 3,825
Miscellaneous ......................................... (1) 446
----------- -------- -------- ----------
Balance at end of period .............................. 171,416,491 $857,082 $759,389 $1,477,122
=========== ======== ======== ==========
</TABLE>
17
<PAGE> 18
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
$ in thousands 1994 1993
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 124,799 $ 121,568
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses .................................................... 17,759 25,072
Depreciation and amortization ................................................ 28,899 24,599
Deferred income taxes (benefit)............................................... 4,973 (14,524)
Investment securities gains .................................................. (572) (10,222)
Gain on sale of subsidiary .................................................. -- (8,030)
Gain on sale of noninterest-earning assets.................................... (3,111) (486)
Increase in accrued income taxes ............................................. 40,504 67,140
(Increase) decrease in accrued interest receivable ........................... 24,293 (6,143)
Increase in accrued interest payable ......................................... 26,940 9,481
Net change in other accrued and deferred income and expense .................. (47,128) (10,415)
Net trading account activities ............................................... 211,417 203,180
Net loans held for resale .................................................... 72,035 (163,737)
---------- ----------
Net cash provided by operating activities .................................... 500,808 237,483
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing bank balances ...................... (11,691) 82,842
Net (increase) decrease in federal funds sold and securities
purchased under resale agreements ............................................ 406,659 (120,158)
Purchases of securities available-for-sale...................................... (512,416) --
Purchases of securities held-to-maturity ....................................... (2,004) (588,040)
Sales of securities available-for-sale ......................................... 23,648 --
Sales of securities held-to-maturity ........................................... -- 29,727
Calls, maturities and prepayments of securities available-for-sale.............. 303,596 --
Calls, maturities and prepayments of securities held-to-maturity ............... 245,248 428,539
Net increase in loans made to customers......................................... (777,875) (454,637)
Capital expenditures ........................................................... (24,718) (11,723)
Proceeds from sales of premises and equipment .................................. 2,205 2,947
Net (increase) decrease in other assets ........................................ 39,140 (115,069)
Business combinations and dispositions.......................................... -- 20,000
---------- ----------
Net cash used by investing activities ........................................ (308,208) (725,572)
FINANCING ACTIVITIES
Net decrease in demand, savings and money market accounts....................... (712,713) (733,594)
Net decrease in certificates of deposit......................................... (360,434) (501,727)
Net increase in federal funds purchased and securities sold under repurchase
agreements.................................................................... 159,856 808,423
Net decrease in commercial paper................................................ (89,752) (110,839)
Net increase (decrease) in other short-term borrowings ......................... (582,553) 676,193
Proceeds from issuance of bank notes............................................ 1,042,193 319,772
Maturities of bank notes ....................................................... (150,000) --
Proceeds from issuance of other long-term debt.................................. 247,800 --
Payments on other long-term debt................................................ (85) (79,503)
Common stock issued............................................................. 11,702 5,646
Common stock repurchased........................................................ (14,147) (633)
Dividend payments............................................................... (51,443) (46,454)
Net increase (decrease) in other liabilities.................................... (2,426) 451
---------- ----------
Net cash provided (used) by financing activities ........................... (502,002) 337,735
DECREASE IN CASH AND CASH EQUIVALENTS .......................................... (309,402) (150,354)
Cash and cash equivalents at beginning of year.................................. 2,529,528 2,627,859
---------- ----------
Cash and cash equivalents at end of period ..................................... $2,220,126 $2,477,505
========== ==========
SUPPLEMENTAL DISCLOSURES
Unrealized appreciation in securities available-for-sale:
Securities available-for-sale ................................................ $ 6,291 $ --
Shareholders' equity ......................................................... 3,825 --
Deferred taxes ............................................................... 2,466 --
</TABLE>
18
<PAGE> 19
ANNUAL SHAREHOLDERS' MEETING Friday, April 22, 1994
Remarks by L. M. Baker, Jr.
Chief Executive Officer
Welcome to the Annual Shareholders' Meeting of Wachovia Corporation. It is a
pleasure to conduct this important event in Winston-Salem, the birthplace of
Wachovia.
About a mile south of here is Old Salem, the Moravian community established in
the middle of the 18th century. The Moravians came to this country seeking
religious freedom and brought with them a creative spirit, a commitment to
education, and a dedication to hard work. They constructed a thriving center of
commerce and a prosperous life in North Carolina, they also built the
foundation for a bank called Wachovia. Now, I am privileged to sit at the desk
used by one of their most successful and enterprising sons, Col. Francis H.
Fries.
It is also fitting at this meeting of shareholders to recognize the outstanding
leadership of John G. Medlin, Jr., who sat at that same desk and served with
distinction as chief executive officer of this corporation for 17 years,
retiring on December 31 after 34 years of service. Wachovia avoided most of the
problems experienced by banks during this period, substantially expanded its
operations, maintained exceptional profitability, and faces the remainder of
this decade from an enviable position of strength. This is a direct reflection
of his great leadership and passion for excellence. We are fortunate that John
continues as a director and as Chairman.
Details of Wachovia's financial performance for 1993 and the first quarter of
this year have been mailed earlier to shareholders. Therefore, this morning I
will cover only the highlights of these periods before reviewing important
strategies which have been developed to address the slowly growing economy,
intensely competitive marketplace, and stringent regulatory climate confronting
banking in the nineties.
Wachovia Corporation Selected Financial Information
<TABLE>
<CAPTION>
First Quarter
--------------
1994 1993
---- ----
<S> <C> <C>
Net Income Per Share (FD) $ .72 $ .69
Percent Change from 1993 4.0% --
Return on Assets 1.40 1.50%
Return on Common Equity 16.6 17.4
Equity/Assets (period-end) 8.51 8.52
Net Loan Losses/Loans .30 .27
Nonperforming Assets/Loans
+ Foreclosed Property .53 1.26
Loan Loss Reserve/
Nonperforming Loans 405 211
</TABLE>
Wachovia Corporation Selected Financial Information 1993
<TABLE>
<CAPTION>
25 Largest U.S. Banks
---------------------
Wachovia
($ millions) Wachovia Median Rank
--------- ------ -------
<S> <C> <C> <C>
Assets $36,526 $51,461 22
Market Capitalization
(April 11, 1994) 5,912 5,912 13
Net Income* 492 626 16
Return on Assets 1.46% 1.16% 3
Return on Common
Equity 17.1 16.7 11
Common Equity/
Assets (period-end) 8.26 6.93 4
Net Loan Losses/Loans .31 .76 2
Nonperforming Assets/
Loans + Foreclosed
Property .67 1.76 1
Loan Loss Reserve/
Nonperforming Loans 372 186 4
* Applicable to common shareholders
</TABLE>
Wachovia Corporation Selected Financial Information
Five-Year Average (1993-1989)
<TABLE>
<CAPTION>
25 Largest U.S. Banks
---------------------
Wachovia
($ millions) Wachovia Median Rank
--------- ------ -------
<S> <C> <C> <C>
Return on Assets 1.17% .73% 3
Return on Common
Equity 14.9 12.2 6
Common Equity/
Assets 7.79 5.61 2
Nonperforming Assets/
Loans + Foreclosed
Property 1.06 3.33 1
Net Loan Losses/Loans .52 1.24 1
Loan Loss Reserve/
Nonperforming Loans 212 125 4
</TABLE>
Wachovia Corporation Selected Financial Information
Compound Annual Growth Rates
<TABLE>
<CAPTION>
5 Years 1 Year 1st Qtr
1993-1989 1993 1994
--------- ----- ------
<S> <C> <C> <C>
Net Income Per Share (FD) 9.7% 13.5% 4.0%
Dividends Per Share 13.7 11.0 11.1
Total Return*
Wachovia 20.4 1.3 (4.4)
S&P 500 14.5 10.1 (3.8)
KBW 50 Index 12.7 5.5 (1.8)
* Dividends reinvested quarterly
</TABLE>
19
<PAGE> 20
(Graph - See Graphics Appendix)
Wachovia's impressive results were achieved during difficult times and while
investing heavily in technology, the integration of internal operations, new
products and services, and our people. A careful and orderly transition has
put in place a new management team deeply committed to keeping Wachovia among
the leaders in banking. The organization is keenly aware of the challenges
ahead, but is also optimistic about Wachovia's ability to perform in an
exceptional manner. The following characteristics support this optimism.
Wachovia's guiding principles and beliefs, forged over more than a century,
remain the same in good or hard times. We embrace progressive strategies within
the discipline of strong financial and credit principles. Our dedication to
soundness, profitability, and growth remains intact.
Wachovia enjoys an ample balance sheet and strong profits. Wachovia's capital
strength and credit quality are among the best in the country. We have the
ability to attract funds from a variety of sources. Revenues are growing from
diverse areas. Expenses are very well managed.
Since banking grows with the overall economy, it is imperative to be in markets
which will outpace national averages. In the years to come, Wachovia's three
home states should continue to outperform the nation, with the cities and
communities in which we are located doing better than the states as a whole. In
these good markets, business must be taken from strong competitors to achieve
the corporation's growth objectives.
Wachovia's menu of consumer, corporate, trust, investment, and operational
services is contemporary and competitive. Substantial investment of human,
financial, and technological resources will be made to ensure they remain so.
Our Personal Banker program, introduced in 1973, continues to build broad
relationships with customers. Personal bankers are well trained in general
banking and credit needs and sufficiently knowledgeable of other services to
make referrals to specialized product areas when appropriate. These bankers
provide an excellent human balance to Wachovia's extensive and developing array
of "high tech" service capabilities.
However, Wachovia's retail bank is not resting. A comprehensive review of
products, service delivery, technological capabilities, and the interests of
our customers has brought forth new ideas for better, more profitable service
and aggressive, low-cost penetration of consumer markets. Here are a few
examples:
- - - In 1990, when the prime rate was 10 percent and many other cards were
charging 20 percent for revolving debt, the organization began a reassessment
of credit card pricing. Consequently, in April 1991, Wachovia introduced a
prime plus 2.9 percent variable rate option with a $39 annual fee. In October
of 1993, Wachovia offered another pricing option which lets new customers pay
a prime only interest rate for the first year after which the rate is prime
plus 3.9 percent with an $18 annual fee. Prime Plus has been an excellent
generator of new accounts and loan balances from more creditworthy cardholders.
At the end of the 1994 first quarter, outstandings exceeded $3 billion.
- - - Specific projects to identify redundancy and work flow refinement and
centralization opportunities will produce several million dollars of cost
savings. For example, our automobile sales finance group has consolidated
twenty-seven contract-buying branches in the three states into three centers
which has resulted in the quadrupling from twelve to fifty the number of loans
a credit officer could make each day. The volume of loans generated has grown
to record highs with fewer people, better service, and lower cost of product
delivery. Also, Wachovia's multistate mortgage processing functions will be
combined in Columbia, South Carolina, by mid-1995.
- - - Capitalizing on the successful debit card experience achieved by South
Carolina National, Wachovia's North Carolina and Georgia banks rolled out Visa
Check last summer. Combined with the South Carolina customer base, this gives
the corporation approximately 750,000 Visa Check customers. Wachovia receives
about 45 cents from each transaction, which totaled in excess of 3.5 million
during the fourth quarter. Many of these cards now carry a monthly fee of one
dollar.
20
<PAGE> 21
- - - Following completion of an intensive training program in individual
securities and packaged investments, an expanded investment sales force will be
deployed in Georgia and North Carolina, joining the existing South Carolina
sales effort. These investment counselors will be part of the retail bank and
fully dedicated to selling a broad range of high quality investment products
including Wachovia's Biltmore Funds. By year-end, approximately 120 counselors
will be serving customers and prospects in three states.
- - - A telephone customer service center already in operation in Columbia, South
Carolina, is being upgraded and expanded. By year-end, it will be available to
Georgia and North Carolina customers. The 200-person center is expected to
handle 3.8 million calls annually for the three banks and increase the time
available for branch personnel to serve customers and sell banking services. An
automated mortgage application processing system providing product comparisons
and cross-sell prompting for bankers will be introduced in our branches over
the next several weeks. The new Wachovia Investor's Account is available.
Products beneficial to small and emerging businesses are on the way.
Corporate business outside the southeastern United States is the responsibility
of Wachovia Corporate Services. In addition to the U. S. corporate banking
division, it houses core business lines such as treasury services, corporate
finance and capital markets, financial institutions, and international
banking. Wachovia ranks among the top ten banks in share of relationships with
the nation's largest corporations. Our revenue-producing strategy has been
strongly focused on selling more than ninety state-of-the-art, fee-based
banking and trust services.
Nationally, the company's cash management and treasury services rank number one
in operational quality and among the top five in market share. Disbursing
services are delivered to over 1,000 corporate customers, and more than 1,200
customers use our wholesale lockbox service. Wachovia continues to be an
innovator in corporate disbursing functions through development of new products
and technological capabilities such as the recently announced Wachovia
Connection Image Workstation. This service will help corporate customers of any
size find, retrieve, examine, and print images of checks that have been drawn
on their accounts. Wachovia's Corporate Finance and Capital Markets Group over
the past three years has consistently ranked among the top four U.S. banks
originating letter of credit enhanced variable rate demand bond transactions.
During 1993, this group facilitated loan syndications and private placements of
senior debt.
Wachovia has been a leader for 100 years in trust services. Today, 1,200 trust
specialists sell an outstanding array of employee benefit, personal financial,
corporate trust, charitable funds, and investment management services to
customers in more than thirty states. Investment opportunities range from the
Biltmore Funds to the specialized, nontraditional Timberland investment for
employee benefit accounts. Total assets under investment management approximate
$18 billion. Trust has significant potential to increase its contribution to
fee income.
Streamlined and conformed systems are essential to allow Wachovia to realize
economies, provide better service, and generate marketing information to build
a growing, competitive, and profitable interstate banking network. South
Carolina, Georgia, and North Carolina are on a unified, interactive branch
automation system. A new, sophisticated general ledger system is common to all
three banks, and an enhanced trust system is being developed. Plans are under
way to consolidate the credit operations from 12 cities in the three states
into a single location in Winston-Salem by mid-1995. Image processing soon will
be a reality in Wachovia operations. Investing in appropriate technology
remains a major priority.
This is just a little taste of the good things happening at Wachovia. Over the
years we have shifted with the economy, the reality of the marketplace, and the
needs and desires of our customers. Our people are dedicated to excellence,
high performance, and unparalleled service in serving millions of customers in
three home states, across the nation, and abroad. We are confident that this
great franchise offers substantial opportunities for Wachovia to achieve its
goals. At the same time, the organization has significant flexibility for
service line and geographic expansion. We will be alert to such opportunities,
but careful not to waste or misdirect this precious advantage.
From this vantage point, we remember the ingredients of past success, and our
deep and abiding commitment to excellence and soundness remains intact.
Wachovia has historically enjoyed a premium price-to-earnings multiple. We
cherish this recognition and the trust inherent in it. Today, you have our
pledge that whatever the future may bring, we will be ready, armed with a
passionate commitment to providing exceptional protection and growth for your
investment.
21
<PAGE> 22
MEMBER COMPANY DIRECTORS
WACHOVIA BANK OF GEORGIA, N.A.
<TABLE>
<S> <C> <C> <C>
G. JOSEPH PRENDERGAST CARL BOLCH, JR. BRYAN D. LANGTON D. RAYMOND RIDDLE
Chairman of the Board, Chairman of the Board and (Advisory Director) President and
President and Chief Executive Officer Chairman of the Board and Chief Executive Officer
Chief Executive Officer Racetrac Petroleum, Inc. Chief Executive Officer National Service Industries, Inc.
Holiday Inn Worldwide
F. DUANE ACKERMAN JAMES E. BOSTIC, JR.
President and Group Vice President BERNARD MARCUS S. STEPHEN SELIG III
Chief Executive Officer Communication Papers Division Chairman of the Board and Chairman of the Board
BellSouth Telecommunications, Georgia-Pacific Corporation Chief Executive Officer and President
Inc. The Home Depot, Inc. Selig Enterprises, Inc.
MICHAEL C. CARLOS
EDWARD L. ADDISON Chairman of the Board and DANIEL W. MCGLAUGHLIN ALANA S. SHEPHERD
Chairman of the Board and Chief Executive Officer President and Secretary of the Board
Chief Executive Officer National Distributing Co., Inc. Chief Operating Officer Shepherd Spinal Center
The Southern Company Equifax, Inc.
G. STEPHEN FELKER J. V. WHITE
L. M. BAKER, JR. Chairman of the Board and Chairman of the
President and Chief Executive Officer Executive Committee
Chief Executive Officer Avondale Mills, Inc. Equifax, Inc.
Wachovia Corporation
THOMAS E. BOLAND
Retired Chairman of the Board
</TABLE>
WACHOVIA BANK OF NORTH CAROLINA, N.A.
<TABLE>
<S> <C> <C> <C>
J. WALTER MCDOWELL FELTON J. CAPEL RICHARD L. DAUGHERTY JOHN F. WARD
President and Chairman of the Board North Carolina Senior Chief Executive Officer
Chief Executive Officer and President State Executive, Hanes Group
Century Associates of Vice President Worldwide Senior Vice President
L. M. BAKER, JR. North Carolina Manufacturing Sara Lee Corporation
Chairman of the Board IBM PC Company
WILLIAM CAVANAUGH, III IBM Corporation ANDERSON D. WARLICK
THOMAS M. BELK, JR. President and President and
Senior Vice President Chief Operating Officer ESTELL C. LEE Chief Operating Officer
Belk Stores Services, Inc. Carolina Power & Light Company Chairman of the Board Parkdale Mills, Inc.
and President
H. C. BISSELL BERT COLLINS The Lee Company DAVID J. WHICHARD, II
Chairman of the Board and President and Chairman
Chief Executive Officer Chief Executive Officer WYNDHAM ROBERTSON The Daily Reflector
The Bissell Companies, Inc. North Carolina Mutual Vice President, Communications
Life Insurance Company University of North Carolina JOHN C. WHITAKER, JR.
Chairman of the Board and
Chief Executive Officer
Inmar Enterprises, Inc.
</TABLE>
SOUTH CAROLINA NATIONAL CORPORATION
THE SOUTH CAROLINA NATIONAL BANK
<TABLE>
<S> <C> <C> <C>
ANTHONY L. FURR FRANK W. BRUMLEY JAMES B. EDWARDS, D.M.D. ROBERT S. SMALL, JR.
Chairman of the Board, President President President
President and The Brumley Company Medical University of South Carolina AVTEX Properties, Inc.
Chief Executive Officer
W. T. CASSELS, JR. JAMES G. LINDLEY WILLIAM G. TAYLOR
L. M. BAKER, JR. Chairman of the Board Chairman Emeritus President
President and Southeastern Freight Lines, Inc. The Springs Company
Chief Executive Officer JOE A. PADGETT
Wachovia Corporation THOMAS C. COXE, III Executive Vice President BEATRICE R. THOMPSON, PH.D.
Executive Vice President The South Carolina National Bank Coordinator of Psychological
CHARLES J. BRADSHAW Sonoco Products Company Services
President W. M. SELF Anderson School District Five
Bradshaw Investments, Inc. FREDERICK B. DENT, JR. President and
President Chief Executive Officer
Mayfair Mills, Inc. Greenwood Mills, Inc.
</TABLE>
22
<PAGE> 23
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
DIRECTORS
<TABLE>
<S> <C> <C>
L. M. BAKER, JR. THOMAS K. HEARN, JR. JAMES W. JOHNSTON
President and President Chairman and
Chief Executive Officer Wake Forest University Chief Executive Officer
R.J. Reynolds Tobacco Worldwide
JOHN G. MEDLIN, JR. W. HAYNE HIPP
Chairman of the Board President and W. DUKE KIMBRELL
Chief Executive Officer Chairman of the Board and
RUFUS C. BARKLEY, JR. The Liberty Corporation Chief Executive Officer
Chairman of the Board Parkdale Mills, Inc.
Cameron & Barkley Company ROBERT M. HOLDER, JR.
Chairman of the Board HERMAN J. RUSSELL
CRANDALL C. BOWLES Holder Corporation Chairman of the Board and
Executive Vice President Chief Executive Officer
Springs Industries, Inc. DONALD R. HUGHES H.J. Russell & Company
Vice Chairman of the Board
JOHN L. CLENDENIN and Chief Financial Officer SHERWOOD H. SMITH, JR.
Chairman of the Board, Burlington Industries, Inc. Chairman of the Board and
President and Chief Executive Officer
Chief Executive Officer F. KENNETH IVERSON Carolina Power & Light Company
BellSouth Corporation Chairman and
Chief Executive Officer CHARLES MCKENZIE TAYLOR
LAWRENCE M. GRESSETTE, JR. Nucor Corporation Chairman of the Board
Chairman of the Board, Taylor & Mathis, Inc.
President and
Chief Executive Officer
SCANA Corporation
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
L. M. BAKER, JR. ANTHONY L. FURR J. WALTER MCDOWELL
President and Executive Vice President Executive Vice President
Chief Executive Officer
WALTER E. LEONARD, JR. G. JOSEPH PRENDERGAST
JERRY D. CRAFT Executive Vice President Executive Vice President
Executive Vice President
KENNETH W. MCALLISTER RICHARD B. ROBERTS
MICKEY W. DRY Executive Vice President Executive Vice President
Executive Vice President General Counsel Treasurer
Chief Credit Officer
ROBERT S. MCCOY, JR.
HUGH M. DURDEN Executive Vice President
Executive Vice President Chief Financial Officer
</TABLE>
23
<PAGE> 24
BULK RATE
U.S. POSTAGE PAID
WACHOVIA
CORPORATION
(LOGO)
Wachovia Corporation
P.O. Box 3099
Winston-Salem, NC 27150
SHAREHOLDER INFORMATION
- - --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
Dividend Reinvestment and Common Stock Purchase Plan - The plan provides common
stockholders of record a regular way of investing cash dividends in additional
shares at an average market price and/or investing optional cash payments
without payment of brokerage commissions or service charges.
Direct Deposit of Cash Dividends - Direct deposit is a safe, fast and
timesaving method of receiving cash dividends through automatic deposit on date
of payment to a checking, savings or money market account at any financial
institution which participates in an Automated Clearing House.
Address Change and Account Assistance - To help ensure timely receipt of
shareholder mailings, please notify the corporation, in writing, immediately of
any address change or correction. Use of your shareholder account number and a
daytime phone number in all correspondence will be appreciated.
For information about these services, requests for address changes and account
assistance, please contact:
H. Jo Barlow Wachovia Corporation
Shareholder Services P.O. Box 3099
910-770-5787 Winston-Salem, NC 27150
OTHER INFORMATION
Additional information about Wachovia Corporation or its member companies may
be obtained by contacting:
Robert S. McCoy, Jr., Chief Financial Officer, 910-770-5926
James C. Mabry, Investor Relations, 910-770-5788
Wachovia Corporation
P.O. Box 3099
Winston-Salem, NC 27150
COMMON STOCK LISTING
New York Stock Exchange Symbol: WB
24
<PAGE> 25
GRAPHICS APPENDIX
1. TOTAL RETURN COMPARISON - The graph appearing on page 20 of the 1994 1st
Quarter Report plots total returns for Wachovia, the S&P 500 and the
KBW 50 Index. The base period of December 31, 1988 is equal to 100.
Dividends are assumed to be reinvested quarterly. The data for both the
S&P 500 and KBW 50 Index is weighted by market capitalization. The total
returns for the years ended 1988-1993 and the quarter ended March 31, 1994
are listed below:
<TABLE>
<CAPTION>
1st
QTR
1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Wachovia 100 134.34 143.59 206.31 250.14 253.34 242.29
S&P 500 100 131.68 127.58 166.46 179.14 197.19 189.71
KBW 50 100 118.91 85.40 135.17 172.23 181.77 178.53
</TABLE>
