<PAGE> 1
1994 FORM 10-K
United States Securities and Exchange Commission
Washington, DC 20549
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1994
Commission File Number 1-9021
WACHOVIA CORPORATION
Incorporated in the State of North Carolina
IRS Employer Identification Number 56-1473727
Address and Telephone:
301 North Main Street, Winston-Salem, North Carolina 27150,
(910) 770-5000
191 Peachtree Street NE, Atlanta, Georgia 30303, (404) 332-5000
Securities registered pursuant to Section 12(b) of the Act: Common
Stock -- $5.00 par value, which is registered on the New York Stock
Exchange.
As of February 8, 1995, Wachovia Corporation had 171,074,139
shares of common stock outstanding. The aggregate market value of
Wachovia Corporation common stock held by nonaffiliates on February 8,
1995 was approximately $5.814 billion and the number of shares held by
nonaffiliates was 170,998,826.
Wachovia Corporation has (1) 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.
Indicate by check mark if disclosure of delinquent filers pursuant
to item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X].
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Wachovia Corporation's Proxy Statement for its
1995 Annual Shareholders' Meeting, which will be filed with the
Commission by April 30, 1995 are incorporated by reference into Part
III of this report. Portions of the annual report to shareholders for
the year ended December 31, 1994 are incorporated by reference into
Parts I and II as indicated in the table below. Except for parts of
the Wachovia Corporation Annual Report expressly incorporated herein
by reference, this Annual Report is not to be deemed filed with the
Securities and Exchange Commission.
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PART I PAGE PART II -- Continued PAGE
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Item 1 Business Item 7 Management's Discussion and
Analysis of Financial
Description of Business...........3, 16-44, 72-74 Condition and Results
Subsidiaries of Wachovia of Operations..............................16-44
Corporation...................................2
Average Balance Sheets/ Item 8 Financial Statements and
Interest/Rates.................64-65, 68-69, 70 Supplementary Data..............37-44, 45, 46-63
Volume and Rate
Variance Analysis........................19, 42 Item 9 Changes in and Disagreements
Securities.................................21, 52 with Accountants on
Loans..........................20, 28, 50, 53, 71 Accounting and Financial
Allowance for Loan Losses Disclosure -- None
and Loan Loss Experience............. 30, 42, 50
Deposits........................22, 26, 64-65, 70 PART III
Return on Equity and Assets....................70
Short-Term Borrowed Funds......................26 Item 10 Directors and Executive
Officers of the Registrant.......Proxy Statement
Item 2 Properties........................................2
Item 11 Executive Compensation..............Proxy Statement
Item 3 Legal Proceedings................................59
Item 12 Security Ownership of
Item 4 Submission of Matters to a Vote Certain Beneficial Owners
of Security Holders -- None and Management...................Proxy Statement
PART II Item 13 Certain Relationships
and Related Transactions.........Proxy Statement
Item 5 Market for Registrant's Common
Equity and Related PART IV
Stockholder
Matters....................................72-73 Item 14 Exhibits, Financial Statement
Schedules and Reports on
Item 6 Selected Financial Data...................66-67, 71 Form 8-K..................................3,7-11
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<PAGE> 2
SUBSIDIARIES OF WACHOVIA CORPORATION
The following table sets forth the subsidiaries of Wachovia Corporation on
December 31, 1994. The common stock of each of these subsidiaries is 100
percent owned by its parent. The financial statements of all subsidiaries are
included in the consolidated statements of Wachovia Corporation and
subsidiaries.
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Organized under the Organized under the
laws of the state of: laws of the state of
Wachovia Bank of North Carolina, N.A. the United States Wachovia Mortgage Company North Carolina
Wachovia International New Salem, Inc. North Carolina
Banking Corporation the United States* Wachovia Investments, Inc. North Carolina
Wachovia Leasing Corporation North Carolina Wachovia Corporate Services, Inc. North Carolina
Wachovia Auto Leasing Company Wachovia Operational Services
of North Carolina North Carolina Corporation North Carolina
Wachovia Insurance Services, Inc. North Carolina Wachovia Trust Services, Inc. North Carolina
Greenville Agricultural Credit The First National Bank of
Corporation North Carolina Atlanta (Delaware) the United States
City Loans, Inc. North Carolina Wachovia Bank Card Services, Inc. Delaware
Wachovia Bank of Georgia, N.A. the United States First Atlanta Corporation Georgia
First Bank Building Corporation Georgia FA Investment Company Georgia
First Atlanta Services Corporation Delaware Financial Life Insurance Company
Wachovia Auto Leasing Company of Georgia Georgia
of Georgia Georgia KATWO, Ltd. Georgia
South Carolina National Corporation South Carolina The Wachovia Insurance Agency
Wachovia Bank of South Carolina, N.A. the United States of Georgia, Inc. Georgia
Wachovia Insurance Services of FAIRCO Properties, Inc. Georgia
South Carolina, Inc. South Carolina First Atlanta Lease Liquidating Corporation Georgia
First National Properties, Inc. South Carolina Wachovia Corporation of Florida Florida
South Carolina National OREO, Inc. South Carolina Wachovia Corporation of Alabama Alabama
Southern Provident Life Wachovia Corporation of Tennessee Tennessee
Insurance Company Arizona
Atlantic Savings Bank, FSB the United States
Atlantic Mortgage Corporation * Organized under Chapter 25(a) of the Federal Reserve Act
of South Carolina, Inc. South Carolina of the United States
</TABLE>
PROPERTIES
The principal offices of the Corporation and Wachovia Bank of North Carolina,
N.A., are located at 301 North Main Street, Winston-Salem, North Carolina,
where the company occupies approximately 401,000 square feet of office space
under a lease expiring December 1995. The Corporation is constructing an office
building in Winston-Salem which will serve as the new North Carolina
headquarters for the Corporation and the principal offices of Wachovia Bank of
North Carolina, N.A. The building will be a 28-story office tower with 525,000
usable square feet, all or most of which is expected to be occupied by the
Corporation. Construction is expected to be completed by late 1995. As of
December 31, 1994, expenditures related to the headquarters project amounted to
$23.850 million. Total cost of the office building and adjoining parking
facility is estimated at $79 million.
Wachovia Bank of Georgia, N.A., occupies approximately 378,000 square feet of
an office tower at 191 Peachtree Street, N.E., Atlanta, Georgia, under a lease
expiring December 2008.
South Carolina National Corporation and Wachovia Bank of South Carolina, N.A.,
have their main offices located in the Palmetto Center, 1426 Main Street,
Columbia, South Carolina, where they occupy approximately 16,000 square feet of
the office building under a lease expiring November 2003.
The table on page 3 lists the number of banking offices. The Corporation's
banking subsidiaries own in fee 353 of offices while the others are leased or
are located on leased land. The approximate lease terms range from one to
thirty years on these properties. In addition, the Corporation's banking
subsidiaries own in fee or lease a number of multistory office buildings which
house supporting services. Other subsidiaries of the Corporation maintain
leased office space in cities in which they conduct their respective
operations.
2
<PAGE> 3
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Exhibits -- The index of exhibits has been filed as separate pages of the 1994
Form 10-K. Copies of the exhibit list or of Exhibits are available upon request
to: Corporate Reporting, Wachovia Corporation, P.O. Box 3099, Winston-Salem,
North Carolina 27150. A copying fee will be charged for the Exhibits.
Financial Statement Schedules -- Omitted due to inapplicability or because
required information is shown in the Financial Statements or the Notes thereto.
No reports on Form 8-K were filed during the three months ended December 31,
1994.
SIGNATURES
Pursuant to the requirements to Section 13 or 15(d) 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 on March 8, 1995.
WACHOVIA CORPORATION
ROBERT S. McCOY, JR.
- --------------------
Robert S. McCoy, Jr.
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 8,1995.
The Directors of Wachovia Corporation
(listed below) have executed a power
of attorney appointing Kenneth W.
McAllister, their attorney-in-fact,
empowering him to sign this report on
their behalf:
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L.M. BAKER, JR. L.M. Baker, Jr. Robert M. Holder, Jr.
- --------------- John G. Medlin, Jr. Donald R. Hughes
L.M. Baker, Jr. Rufus C. Barkley, Jr. E. Kenneth Iverson
President and Chief Executive Officer Crandall C. Bowles James W. Johnston
John L. Clendenin W. Duke Kimbrell
Lawrence M. Gressette, Jr. Herman J. Russell
ROBERT S. McCOY, JR. Thomas K. Hearn, Jr. Sherwood H. Smith, Jr.
- -------------------- W. Hayne Hipp Charles McKenzie Taylor
Robert S. McCoy, Jr.
Executive Vice President and
Chief Financial Officer
KENNETH W. McALLISTER
---------------------
JOHN C. McLEAN, JR. Kenneth W. McAllister
- ------------------- Attorney-in-Fact
John C. McLean, Jr.
Comptroller
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<PAGE> 4
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The names, ages and positions of the executive officers of Wachovia as of
January 31, 1995 are shown below along with their business experience during
the past five years and the year of their employment with Wachovia and
subsidiaries. Officers are elected annually by the Board of Directors and hold
office for one year or until their successors are chosen and qualified. There
are no family relationships between any of them, nor is there any arrangement
or understanding between any officer and any other person pursuant to which the
officer was selected.
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Name, Age Business Experience During Past
and Position Five Years and Year Employed
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L. M. Baker, Jr., 52 Chief Executive Officer of Wachovia
President and Chief Corporation since January 1994; President
Executive Officer Wachovia of Wachovia Corporation since 1993; Chief
Corporation; Chairman of Operating Officer of Wachovia Corporation,
the Board Wachovia Bank February - December 1993; Executive Vice
of North Carolina, N.A.; President of Wachovia Corporation until
Director of Wachovia January 1993; President and Chief
Corporation, Wachovia Bank Executive Officer of Wachovia Corporation
of Georgia, N.A., South of North Carolina, January 1990 - March
Carolina National Corporation 1993; President and Chief Executive
and Wachovia Bank of South Officer of Wachovia Bank of North
Carolina, N.A. Carolina, N.A., January 1990 - April 1993;
Executive Vice President of Wachovia
Corporation of North Carolina until
December 1989; Executive Vice President of
Wachovia Bank of North Carolina, N.A. until December 1989.
Employed in 1969.
Mickey W. Dry, 55 Executive Vice President and Chief Credit
Executive Vice President Officer of Wachovia Corporation since
and Chief Credit Officer November 1989; Executive Vice President of
Wachovia Corporation; Wachovia Bank of North Carolina, N.A.
Executive Vice President since October 1989; Senior Vice President/
Wachovia Bank of North Group Executive of Wachovia Bank of North
Carolina, N.A. Carolina, N.A. until 1989. Employed in 1961.
Hugh M. Durden, 52 Executive Vice President of Wachovia
Executive Vice President Corporation and President of Wachovia
Wachovia Corporation, Trust Services, Inc. since 1994; President
Wachovia Bank of North of Wachovia Corporate Services, Inc. since
Carolina, N.A.; President July 1994; Executive Vice President of
Wachovia Trust Services, Inc.; Wachovia Bank of North Carolina, N.A.;
President Wachovia Corporate Western Division Executive, Wachovia Bank
Services, Inc. of North Carolina, N.A., 1991 - 1994;
Regional Vice President, Southern Region,
Wachovia Bank of North Carolina, N.A., 1989
- 1991. Employed in 1972.
</TABLE>
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<PAGE> 5
Item 10. Directors and Executive Officers of the Registrant (continued)
- ------------------------------------------------------------------------
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Name, Age Business Experience During Past
and Position Five Years and Year Employed
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W. Doug King, 56 Executive Vice President of Wachovia
Executive Vice President Corporation since July 1994; Senior
Wachovia Corporation Vice President of Wachovia Corporation,
October 1992 - July 1994. President
of Wachovia Bank of South Carolina, N.A.,
January 1992 - October 1992; Vice Chairman
of Wachovia Bank of South Carolina, N.A.,
September 1990 - January 1992.
Employed in 1963.
Walter E. Leonard, Jr. 49 Executive Vice President of Wachovia
Executive Vice President Corporation since October 1988;
Wachovia Corporation, Executive Vice President of Wachovia
Wachovia Bank of Georgia, Bank of Georgia, N.A.; President of
N.A.; President Wachovia Wachovia Operational Services Corporation.
Operational Services Employed in 1965.
Corporation
Kenneth W. McAllister, 46 Executive Vice President of Wachovia
Executive Vice President Corporation since January 1994; General
and General Counsel Counsel of Wachovia Corporation;
Wachovia Corporation Secretary of Wachovia Corporation
until October 1992. Employed in 1988.
Robert S. McCoy, Jr., 56 Executive Vice President of Wachovia
Executive Vice President and Corporation since January 1992; Chief
Chief Financial Officer Financial Officer of Wachovia Corporation
Wachovia Corporation since September 1992; Comptroller of
Wachovia Corporation, January 1992 - August
1992; President of South Carolina National
Corporation until 1992; Vice Chairman and
Chief Financial Officer of Wachovia Bank
of South Carolina, N.A., 1990 - 1992;
Executive Vice President and Chief Financial
Officer of Wachovia Bank of South Carolina,
N.A., until 1990. Employed in 1984.
John C. McLean, Jr., 46 Comptroller of Wachovia Corporation since
Comptroller July 1993; Senior Vice President of Wachovia
Bank of North Carolina, N.A. from April
1990 - July 1993. Employed in 1975.
</TABLE>
5
<PAGE> 6
Item 10. Directors and Executive Officers of the Registrant (continued)
- -------------------------------------------------------------------------
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<CAPTION>
Name, Age Business Experience During Past
and Position Five Years and Year Employed
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G. Joseph Prendergast, 49 Executive Vice President of Wachovia
Executive Vice President Corporation since October 1988; Chairman
Wachovia Corporation; of Wachovia Bank of Georgia, N.A. since
Chairman Wachovia Bank of January 1994; President and Chief Executive
Georgia, N.A.; President Officer of Wachovia Bank of Georgia, N.A.,
and Chief Executive Officer January 1993 - January 1995; President and
Wachovia Corporate Services, Chief Executive Officer of Wachovia
Inc.; Director Wachovia Bank Corporate Services, Inc. until July 1994;
of Georgia, N.A., Wachovia Bank President and Chief Executive Officer of
of North Carolina, N.A., and Wachovia Corporation of Georgia, January
Wachovia Bank of South 1993 - March 1993; Executive Vice President
Carolina, N.A. of Wachovia Bank of Georgia, N.A., 1989 -
1993; Executive Vice President of Wachovia
Bank of North Carolina, N.A. until 1989.
Employed in 1973.
Richard B. Roberts, 51 Executive Vice President and Treasurer
Executive Vice President and of Wachovia Corporation since April
Treasurer Wachovia 1990; Executive Vice President of Wachovia
Corporation; Executive Vice Bank of North Carolina, N.A.
President Wachovia Bank of Employed in 1967.
North Carolina, N.A.
</TABLE>
During the past five years, there have been no events under any bankruptcy act,
no criminal proceedings and no judgements or injunctions material to an
evaluation of the ability or integrity of any of Wachovia's executive officers,
directors, or any persons nominated to become directors.
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<PAGE> 7
PART IV
Item 14. Exhibits
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3.1 Amended and Restated Articles of Incorporation of the
registrant (Exhibit 3.1 to Report on Form 10-K of Wachovia
Corporation for the fiscal year ended December 31, 1993, File
No. 1-9021*).
3.2 Bylaws of the registrant (Exhibit 3.2 to Report on Form 10-K
of Wachovia Corporation for the fiscal year ended December
31, 1993, File No. 1-9021*).
4.1 Articles IV, VII, IX, X and XI of the registrant's Amended and
Restated Articles of Incorporation (Included in Exhibit 3.1
hereto).
4.2 Article 1, Section 1.8, and Article 6 of the registrant's
Bylaws (included in Exhibit 3.2 hereto).
4.3 Indenture dated as of May 15, 1986 between South Carolina
National Corporation and Morgan Guaranty Trust Company of
New York, as Trustee, relating to $35,000,000 principal
amount of 6 1/2% Convertible Subordinated Debentures due in
2001 (Exhibit 28 to S-3 Registration Statement of South
Carolina National Corporation, File No. 33-7710*).
4.4 First Supplemental Indenture dated as of November 26, 1991 by
and among South Carolina National Corporation, Wachovia
Corporation and Morgan Guaranty Trust Company of New York,
as Trustee, amending the Indenture described in Exhibit 4.3
hereto (Exhibit 4.10 to Report on Form 10-K of Wachovia
Corporation for the fiscal year ended December 31, 1991,
File No. 1-9021*).
4.5 Indenture dated as of March 15, 1991 between South Carolina
National Corporation and Bankers Trust Company, as Trustee,
relating to certain unsecured subordinated securities
(Exhibit 4(a) to S-3 Registration Statement of South
Carolina National Corporation, File No. 33-39754*).
4.6 First Supplemental Indenture dated as of January 24, 1992 by
and among South Carolina National Corporation, Wachovia
Corporation and Bankers Trust Company, as Trustee, amending
the Indenture described in Exhibit 4.5 hereto (Exhibit
4.12 to Report on Form 10-K of Wachovia Corporation for the
fiscal year ended December 31, 1991, File No. 1-9021*).
4.7 Indenture dated as of August 22, 1989 between First Wachovia
Corporation and The Philadelphia National Bank, as Trustee,
relating to $300,000,000 principal amount of subordinated
debt securities (Exhibit 4(c) to S-3 (Shelf) Registration
Statement of First Wachovia Corporation, File No.
33-30721*).
4.8 First Supplemental Indenture, dated as of September 15, 1992
between Wachovia Corporation and CoreStates Bank, National
Association, as Trustee, amending the Indenture described
in Exhibit 4.7 hereto (Exhibit 4(d) to Report on Form 8 of
Wachovia Corporation, filed on October 15, 1992, File No.
1-9021*).
4.9 Indenture dated as of March 1, 1993 between Wachovia
Corporation and CoreStates Bank, National Association, as
Trustee, relating to $500,000,000 principal amount of
subordinated debt securities (Exhibit 4(a) to S-3 (Shelf)
Registration Statement of Wachovia Corporation, File No.
33-59206*).
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<PAGE> 8
Item 14. Exhibits (Continued)
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10.1 Deferred Compensation Plan of Wachovia Bank of North
Carolina, N.A. (Exhibit 10.1 to Report on Form 10-K of
Wachovia Corporation for the fiscal year ended December
31,1992, File No. 1-9021*).
10.2 1983 Amendment to Deferred Compensation Plan described in
Exhibit 10.1 hereto (Exhibit 10.2 to Report on Form 10-K
of Wachovia Corporation for the fiscal year ended December
31, 1992, File 1-9021*).
10.3 1986 Amendment to Deferred Compensation Plan described in
Exhibit 10.1 hereto (Exhibit 10.9 to Report on Form 10-K of
First Wachovia Corporation for the fiscal year ended
December 31, 1986, File No. 1-9021*).
10.4 1983 Senior Management Stock Option Plan of Wachovia
Corporation (Exhibit 4.2 to Post-Effective Amendment No. 1
to S-4 Registration Statement No. 2-99538*).
10.5 Stock Option and Stock Appreciation Rights Plan of Wachovia
Corporation (Exhibit 4.3 to Post-Effective Amendment No. l
to S-4 Registration Statement No. 2-99538*).
10.6 1986 Senior Management Stock Option Plan of Wachovia
Corporation (Exhibit 10.20 to Report on Form 10-K of First
Wachovia Corporation for the fiscal year ended December 31,
1986, File No. 1-9021*).
10.7 1987 Declaration of Amendment to 1986 Senior Management Stock
Option Plan described in Exhibit 10.6 hereto (Exhibit 10.21
to Report on Form 10-K of First Wachovia Corporation for
the fiscal year ended December 31, 1986, File No. 1-9021*).
10.8 Senior Management Incentive Plan of Wachovia Corporation as
amended through April 22, 1994 (Exhibit 10.2 to Quarterly
Report on Form 10-Q of Wachovia Corporation for the quarter
ended March 31, 1994, File No. 1-9021*)
10.9 Retirement Income Benefit Equalization Plan of Wachovia
Corporation (Exhibit 10.15 to Report on Form 10-K of First
Wachovia Corporation for the fiscal year ended December 31,
1987, File No. 1-9021*).
10.10 Retirement Savings and Profit-Sharing Benefit Equalization
Plan of Wachovia Corporation (Exhibit 10.16 to Report on
Form 10-K of First Wachovia Corporation for the fiscal year
ended December 31, 1987, File No. 1-9021*).
10.11 Amendment to Retirement Savings and Profit-Sharing Benefit
Equalization Plan described in Exhibit 10.10 hereto. (Exhibit
10.11 to Report on Form 10-K of Wachovia Corporation for the
fiscal year ended December 31, 1993, File No. 1-9021*).
10.12 Employment Agreements between Wachovia Corporation and
Messrs. L. M. Baker, Jr., Robert S. McCoy, Jr., G. Joseph
Prendergast, Anthony L. Furr and Walter E. Leonard, Jr.
(Exhibit 10.17 to Report on Form 10-K of First Wachovia
Corporation for the fiscal year ended December 31, 1987,
File No. 1-9021*).
10.13 Amendment to Employment Agreements described in Exhibits
10.12 hereto (Exhibit 10.14 to Report on Form 10-K of First
Wachovia Corporation for the fiscal year ended December 31,
1990, File No. 1-9021*).
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<PAGE> 9
Item 14. Exhibits (Continued)
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10.14 Employment Agreement between Wachovia Corporation and Mr.
James G. Lindley (Exhibit 10.15 to Report on Form 10-K of
Wachovia Corporation for the fiscal year ended December 31,
1991, File No. 1-9021*).
10.15 Agreement between Wachovia Corporation and Mr. John G. Medlin,
Jr. (Exhibit 10.16 to Report on Form 10-K of Wachovia
Corporation for the fiscal year ended December 31, 1993,
File No. 1-9021*).
10.16 Executive Retirement Agreements between Wachovia
Corporation and Messrs. John G. Medlin, Jr., L. M. Baker,
Jr., Robert S. McCoy, Jr., G. Joseph Prendergast,
Anthony L. Furr and Walter E. Leonard, Jr. (Exhibit 10.18 to
Report on Form 10-K of First Wachovia Corporation for the
fiscal year ended December 31, 1987, File No. 1-9021*).
10.17 Amendment to Executive Retirement Agreements described in
Exhibit 10.17 hereto (Exhibit 10.17 to Report on Form 10-K
of Wachovia Corporation for the fiscal year ended December
31, 1991, File No. 1-9021*).
10.18 Amendment to Executive Retirement Agreement between Wachovia
Corporation and Mr. John G. Medlin, Jr. (Exhibit 10.3 to
Quarterly Report on Form 10-Q of Wachovia Corporation for
the quarter ended September 30, 1993, File 1-9021*).
10.19 Amendment to Executive Retirement Agreements between Wachovia
Corporation and Messrs. John G. Medlin, Jr., L. M. Baker,
Jr., Robert S. McCoy, Jr., G. Joseph Prendergast,
Anthony L. Furr and Walter E. Leonard, Jr. (Exhibit 10.4 to
Quarterly Report on Form 10-Q of Wachovia Corporation for the
quarter ended September 30, 1993, File 1-9021*).
10.20 Senior Management and Director Stock Plan of Wachovia
Corporation (Exhibit 10 to Quarterly Report on Form 10-Q of
First Wachovia Corporation for the quarter ended March 31,
1989, File No. 1-9021*).
10.21 1990 Declaration of Amendment to Senior Management and
Director Stock Plan as described in Exhibit 10.21 hereto
(Exhibit 10.17 to Report on Form 10-K of First Wachovia
Corporation for fiscal year ended December 31, 1989,
File No. 1-9021*).
10.22 Deferred Compensation Plan for the Board of Directors
of Wachovia Corporation (Exhibit 10.19 to Report on Form
10-K of First Wachovia Corporation for the fiscal year
ended December 31, 1990, File No. 1-9021*).
10.23 Retirement Pay Plan for Directors of Wachovia Corporation
(Exhibit 10.21 to Report on Form 10-K of First Wachovia
Corporation for the fiscal year ended December 31, 1990,
File No. 1-9021*).
10.24 Supplemental Executive Retirement Plan of South Carolina
National Corporation (Exhibit 10(a) to Report on Form 10-K
of South Carolina National Corporation for the fiscal year
ended December 31, 1988, File No. 0-7042*).
10.25 Amendment to Supplemental Executive Retirement Plan described
in Exhibit 10.25 hereto (Exhibit 10(a) to Report on Form
10-K of South Carolina National Corporation for the fiscal
year ended December 31, 1990, File No. 0-7042*).
10.26 Amendment to Supplemental Executive Retirement Plan described
in exhibit 10.25 hereto (Exhibit 10.27 to Report on Form 10-K
of Wachovia Corporation for the fiscal year ended December
31, 1993, File No. 1-9021*).
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<PAGE> 10
Item 14. Exhibits (Continued)
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10.27 Management Restricted Stock Award Plan of South Carolina
National Corporation, as amended (Exhibit 10(b) to Report
on Form 10-K of South Carolina National Corporation for the
fiscal year ended December 31, 1990, File No. 0-7042*).
10.28 Amendment to Management Restricted Stock Award Plan described
in Exhibit 10.28 hereto (Exhibit 10.1 to Quarterly Report
on Form 10-Q of Wachovia Corporation for the quarter ended
September 30, 1993, File 1-9021*).
10.29 Incentive Stock Option Plan of South Carolina National
Corporation, as amended (Exhibit 10(c) to Report on Form
10-K of South Carolina National Corporation for the fiscal
year ended December 31, 1990, File No. 0-7042*).
10.30 Amendment to Incentive Stock Option Plan described in Exhibit
10.30 hereto (Exhibit 10.2 to Quarterly Report on Form 10-Q
of Wachovia Corporation for the quarter ended September 30,
1993, File 1-9021*).
10.31 Deferred Compensation Plan dated as of January 19, 1987, as
amended (Exhibit 10(c) to Report on Form 10-K of South
Carolina National Corporation for the fiscal year ended
December 31, 1986, File No. 0-7042*).
10.32 Amendment to Deferred Compensation Plan described in Exhibit
10.32 hereto (Exhibit 19(b) to Quarterly Report on Form
10-Q of South Carolina National Corporation for the quarter
ended September 30, 1987, File No. 0-7042*).
10.33 Amendment to Deferred Compensation Plan described in Exhibit
10.32 hereto (Exhibit 10(d) to Report on Form 10-K of South
Carolina National Corporation for the fiscal year ended
December 31, 1988, File No. 0-7042*).
10.34 Amendment to Deferred Compensation Plan described in Exhibit
10.32 hereto (Exhibit 10.35 to Report on Form 10-K of
Wachovia Corporation for the fiscal year ended December 31,
1993, File No. 1-9021*).
10.35 Summary and specimen policy of Executive Universal Life
Program (Exhibit 10(d) to Report on Form 10-K of South
Carolina National Corporation for the fiscal year ended
December 31, 1986, File No. 0-7042*).
10.36 Agreement for Deferral of Directors' Fees (Exhibit 10(b) to
S-14 Registration Statement of South Carolina National
Corporation, No. 2-89011*).
10.37 Amendment to Agreement for Deferral of Directors' Fees
described in Exhibit 10.37 hereto (Exhibit 10.39 to Report
on Form 10-K of Wachovia Corporation for the fiscal year
ended December 31, 1991, File No. 1-9021*).
10.38 Form 11-K of the Wachovia Corporation Retirement Savings and
Profit-Sharing Plan, to be filed as an amendment to Form 10-K
for the year ended December 31, 1994.
10.39 Wachovia Corporation Stock Plan (Exhibit 4.1 to S-8
Registration Statement No. 033-53325*).
11 Computation of Earnings Per Share (Note O to 1994
Consolidated Financial Statements of Wachovia Corporation
and Subsidaries, page 62 of 1994 Annual Report to
Shareholders*).
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Item 14. Exhibits (Continued)
--------------------
<TABLE>
<S> <C>
13 Wachovia Corporation 1994 Annual Report to Shareholders, with
the Report of Independent Auditors therein being manually
signed in one copy by Ernst & Young LLP. (Except for those
portions thereof which are expressly incorporated by
reference herein, this report is not "filed" as a part of
this Report on Form 10-K).
21 Subsidiaries of the Registrant (listed under "Subsidiaries of
Wachovia Corporation" and included on page 2 of Report on
Form 10-K for the fiscal year ended December 31, 1994*).
23 Consent of Ernst & Young LLP.
24 Power of Attorney.
27 Financial Data Schedule (for SEC purposes only).
</TABLE>
* Incorporated by reference.
11
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EXHIBIT 13
1994
ANNUAL REPORT
WACHOVIA
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<PAGE> 2
<TABLE>
---------------------------------------------------------
CONTENTS
<S> <C>
Financial Highlights .............................. 2
Wachovia Corporation .............................. 3
Selected Year-End Data ............................ 3
Letter to Shareholders ............................ 4
Wachovia Corporation Strategic Review ............. 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations 16
Results of Operations-- 1994 vs. 1993 ........... 17
Shareholders' Equity and Capital Ratios ......... 34
Fourth Quarter Analysis ......................... 36
Results of Operations-- 1993 vs. 1992 ........... 41
Supervision and Regulation ........................ 43
Management's Responsibility for Financial Reporting 45
Report of Independent Auditors .................... 45
Financial Statements .............................. 46
Six-Year Financial Summaries ...................... 64
Stock Data ........................................ 72
Historical Comparative Data ....................... 74
Member Company Directors .......................... 75
Wachovia Corporation Directors and Officers ....... 76
Shareholder Information ........................... 77
</TABLE>
1
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<TABLE>
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FINANCIAL HIGHLIGHTS
<CAPTION>
Percent
1994 1993 Change
-------- -------- -------
<S> <C> <C> <C>
EARNINGS AND DIVIDENDS
(thousands, except per share data)
Net income ............................................................ $539,058 $492,095 9.5
Cash dividends paid on common stock ................................... 210,503 191,488 9.9
Payout ratio (total cash dividends / net income) 39.1% 38.9%
Net income per common share:
Primary ............................................................. $ 3.13 $ 2.83 10.6
Fully diluted ....................................................... $ 3.12 $ 2.81 10.9
Cash dividends paid per common share .................................. $ 1.23 $ 1.11 10.8
Average primary shares outstanding .................................... 172,339 173,941 (.9)
Average fully diluted shares outstanding .............................. 172,951 175,198 (1.3)
Return on average assets .............................................. 1.46% 1.46%
Return on average shareholders' equity ................................ 17.37 17.13
Including average unrealized losses on
securities available-for-sale, net of tax:*
Return on average assets ............................................ 1.46 --
Return on average shareholders' equity .............................. 17.41 --
BALANCE SHEET DATA AT YEAR-END
(millions, except per share data)
Total assets .......................................................... $ 39,188 $ 36,526 7.3
Interest-earning assets ............................................... 34,712 32,349 7.3
Loans--net of unearned income ......................................... 25,891 22,977 12.7
Deposits .............................................................. 23,069 23,352 (1.2)
Interest-bearing liabilities .......................................... 29,485 26,545 11.1
Shareholders' equity .................................................. 3,287** 3,018 8.9
Shareholders' equity to total assets .................................. 8.39% 8.26%
Risk-based capital ratios:
Tier I capital ...................................................... 9.26 9.72
Total capital ....................................................... 12.73 12.88
Per share:
Book value .......................................................... $ 19.23 $ 17.61 9.2
Common stock closing price (NYSE) ................................... 32.25 33.50 (3.7)
Price/earnings ratio ................................................ 10.3x 11.8x
* Includes average unrealized losses on securities available-for-sale
of ($8) million, net of tax
** Includes unrealized losses on securities available-for-sale of ($38)
million, net of tax
</TABLE>
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WACHOVIA CORPORATION
Wachovia Corporation (the Corporation or Wachovia) is a southeastern interstate
bank holding company maintaining dual headquarters in Atlanta, Georgia, and
Winston-Salem, North Carolina. Principal banking subsidiaries are Wachovia Bank
of Georgia, N.A., Atlanta; Wachovia Bank of North Carolina, N.A.,
Winston-Salem; and Wachovia Bank of South Carolina, N.A., Columbia. The First
National Bank of Atlanta in Wilmington, Delaware, provides credit card services
for Wachovia's affiliated banks. A complete listing of the subsidiaries of
Wachovia and its member companies is on page 76.
Major corporate and institutional relationships of the Corporation's banks
outside the southeast are managed by Wachovia Corporate Services, Inc., with
representative offices in Chicago, London, New York City and Tokyo. Banking
offices throughout the Corporation's three home states also serve both national
and international markets. Through its banking subsidiaries, Wachovia also has
foreign branches at Grand Cayman and an Edge Act subsidiary in New York City.
Wachovia Trust Services, Inc., provides fiduciary, investment management and
related financial services for corporate, institutional and individual clients.
Wachovia Operational Services Corporation provides information processing and
systems development services for Wachovia's subsidiaries. Wachovia Investments,
Inc., provides discount brokerage and investment advisory services to customers
primarily in Georgia, North Carolina and South Carolina. Financial Life
Insurance Company of Georgia acts principally as a reinsurer of credit life and
accident and health insurance on extensions of credit made by subsidiaries of
Wachovia Bank of Georgia, N.A. Wachovia Leasing Corporation provides equipment
leasing for commercial and industrial clients of Wachovia's banks. The
Corporation is involved in several other financial service activities including
state and local government securities underwriting, sales and trading, foreign
exchange, corporate finance and other money market services.
Mortgage banking operations are conducted through Wachovia Mortgage Company's
residential loan offices in North Carolina, South Carolina, Florida and
Georgia. In February 1995, Wachovia announced it is offering its residential
mortgage loan servicing portfolio for sale. Bids are being solicited from
mortgage loan servicers and if a satisfactory offer is received, the sale is
expected to close by late March or early April. The corporation will continue
to offer a full line of mortgage products through its retail origination
network, selling the servicing rights for most newly originated loans on an
ongoing basis.
<TABLE>
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SELECTED YEAR-END DATA
<CAPTION>
1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Trust assets (millions):
Discretionary management .............................. $ 17,084 $ 17,950 $ 16,147 $ 14,302 $ 12,777 $ 12,881
Total ................................................. 78,972 92,287 85,806 78,214 68,423 65,137
Banking offices:
North Carolina ........................................ 216 223 222 224 222 218
Georgia ............................................... 127 129 134 135 142 133
South Carolina ........................................ 150 157 158 160 153 148
-------- -------- -------- -------- -------- --------
Total ............................................. 493 509 514 519 517 499
======== ======== ======== ======== ======== ========
Automated banking machines:
North Carolina ........................................ 297 251 221 210 200 189
Georgia ............................................... 189 180 173 164 162 152
South Carolina ........................................ 166 167 164 163 156 142
-------- -------- -------- -------- -------- --------
Total ............................................. 652 598 558 537 518 483
======== ======== ======== ======== ======== ========
Mortgage servicing portfolio (millions)................... $ 9,465 $ 9,007 $ 8,591 $ 8,024 $ 6,146 $ 4,446
Mortgages serviced (thousands) ........................... 139 136 135 131 108 88
Employees (full time equivalent) ......................... 15,602 15,531 16,164 16,886 16,864 17,000
Common stock shareholders ................................ 28,779 28,079 26,706 29,806 28,195 27,710
Common shares outstanding (thousands) .................... 170,934 171,376 171,471 85,323 84,276 83,998
</TABLE>
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LETTER TO SHAREHOLDERS
Dear Wachovia Shareholder:
Wachovia produced excellent earnings during 1994, performing well in a highly
complex, competitive business environment. At the same time, the corporation
continued to assess its corporate strategies, implement organizational changes
and make investments designed to enhance our capabilities for the future.
Net income per fully diluted share was $3.12 in 1994, higher by 10.9 percent
from $2.81 in 1993. Net income for the year totaled $539.1 million, an increase
of 9.5 percent from $492.1 million, with gains primarily reflecting strong loan
growth, continued good expense control and reduced credit costs. Earnings also
were enhanced by a modest increase in other operating revenues. Returns were
17.4 percent on shareholders' equity and 1.46 percent on assets comparing
favorably with five-year averages of 15.2 percent and 1.23 percent,
respectively.
Although Wachovia's stock market price in relation to its earnings and book
value continues to represent a premium compared with peer banks, the good
earnings gains achieved in 1994 did not translate into stock price appreciation
for the year. Wachovia's total return for 1994, including dividend
reinvestment, was a negative .05 percent versus a negative 5.10 percent for the
Keefe Bruyette & Woods Index of 50 money center and regional banks. The S&P 500
Index had a positive total return of 1.32 percent for the year.
Measured against the nation's other major bank holding companies, Wachovia's
operating results for 1994 and financial condition at year-end remained
excellent. While it ranked 23rd in asset size, the corporation's return on
common shareholders' equity was eighth and its return on assets was third among
the 25 largest U.S. banking companies. Wachovia's strong returns were achieved
without sacrificing credit quality which remained stellar. Non-performing
assets at December 31, 1994 represented .39 percent of loans and foreclosed
property, the best ratio of problem assets among the nation's major banking
companies, with reserve coverage of nonperforming loans fifth best at 516
percent. Expense management was commendable with an overhead cost ratio of 54.1
percent for the year, best among the nation's 25 largest banking companies.
Capital remained healthy with common equity at 8.39 percent of assets, third
strongest at year-end.
Although its financial performance and industry rankings are gratifying,
Wachovia recognizes that considerable change faces the financial services
business in the years to come. The economy is likely to grow more slowly. The
field of financial services providers will continue to be intensely
competitive. Customer needs and expectations will evolve at a quicker pace as
technology extends the capabilities and boundaries of communication.
Throughout its 115-year history, Wachovia has produced long-term profitable
growth, while adapting to change and maintaining its core philosophy of
operating in a sound and prudent manner. Examples of this include the expansion
across North Carolina through a series of mergers and branchings earlier in our
history; becoming the first bank in the Southeast in 1959 to install an
electronic computer; developing a cash management consulting expertise in the
late 1960s strengthening Wachovia's ability to build a national corporate
banking presence; implementation of a personal banker program to strengthen
retail banking relationships in the early 1970s; pioneering variable rate home
mortgages and credit cards and two major interstate banking mergers within the
last 10 years. The ability to consistently move forward while producing
superior shareholder returns has enabled the organization to remain one of the
premier banking institutions in the world.
A comprehensive strategic assessment conducted by Wachovia management during
1994 identified ingredients essential for success and growth in shareholder
value in the remainder of the decade. These elements range from the astute
management of business lines to the use of technology to support sales and
service capabilities. A special section beginning on page 6 of this report
provides a broad overview of how Wachovia is positioning itself to remain among
the premier financial service providers. I encourage you to read it and welcome
your observations and suggestions.
Undergirding these initiatives have been major organizational and management
realignments announced during 1994 and early 1995 including the formation of
two major divisions, Corporate Financial Services and General Banking.
General Banking is charged with implementing a single strategic direction for
Wachovia's community banks and more effective coordination of services aimed at
the consumer market. The division encompasses Wachovia's banks in North
Carolina, Georgia and South Carolina along with consumer credit and noncredit
services. The division also incorporates Wachovia's personal trust services and
a growing complement of highly trained investment counselors. It is headed by
G. Joseph Prendergast.
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To help accomplish its mission, General Banking now includes Wachovia Consumer
Services, managed by W. Doug King, and composed of credit card, residential
mortgage, sales finance and Wachovia On-Call sales and service telephone
center.
Joe Prendergast is 49 and has been with Wachovia since 1973. Doug King, 56,
began his banking career in 1963 and joined Wachovia through the December 1991
merger of South Carolina National Bank.
Hugh M. Durden is in charge of the Corporate Financial Services. This area
includes Wachovia Corporate Services, which provides all credit and noncredit
corporate banking services. It also embraces Wachovia's corporate trust,
employee benefit and charitable trust services. Combining all corporate related
activities in one division will enhance Wachovia's ability to grow
relationships domestically and abroad and to add new business. Hugh Durden, 52,
joined Wachovia in 1972.
Formation of the General and Corporate banking divisions should further improve
Wachovia's ability to lift the sales efforts and strengthen productivity
throughout our markets. The Administrative Services, Financial Management, Loan
Administration and Technology divisions are the other major functions
supporting the organization systemwide.
(Figure 1)
Picture: L.M. Baker, Jr.
The Administrative Services Division includes the corporation's audit,
corporate communications, legal, personnel and security functions. Kenneth W.
McAllister, 46, general counsel, who joined Wachovia in 1988, manages this
area.
The Financial Management Division is responsible for funds management,
financial reporting, investor relations and general services functions in
addition to bond, money market, brokerage and trust investment management
services. Robert S. McCoy, Jr., 56, chief financial officer, manages this area.
He joined South Carolina National in 1984 following ten years as a partner with
the accounting firm of Price Waterhouse.
General Loan Administration has overall responsibility for the corporation's
lending policies and credit quality. The division is headed by Mickey W. Dry,
55, chief credit officer, who has been with Wachovia since 1961.
The organization's technology function, including banking, credit and trust
operations, information services, systems development, remittance processing
and telecommunications, is in Wachovia Operational Services. Walter E. Leonard,
Jr., 49, manages this activity. He joined Wachovia in 1965.
The executive vice presidents responsible for these areas are exceptional
banking leaders. They are joined by thousands of professionally capable, highly
motivated and smart working Wachovians committed to providing outstanding
service to customers and dedicated to building shareholder value. Our
organizational structure, which will continue to be modified as necessary, will
enhance Wachovia's ability to be a superior, customer-focused financial
services provider in the exciting environment leading to the next century.
As 1995 gets under way, Wachovia is proud of its past performance and the
industry recognition it has received. However, we are not beguiled by history.
We will not rest on any laurels. The challenges confronting the entire
financial services arena are immensely sobering. At the same time, the people
of Wachovia approach the future with considerable optimism bolstered by
strategic preparation, tactical flexibility, enviable financial strength,
leading technology and strong leadership.
Your continued support and confidence are appreciated.
Sincerely,
L. M. Baker, Jr.
Chief Executive Officer
February 21, 1995
5
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Picture: Greystone Building in Columbia, South Carolina
location of Wachovia On-Call. Inset: Two Wachovia
On-Call sales and service center bankers.
6
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WACHOVIA
CORPORATION
STRATEGIC
REVIEW
Early in 1994 Wachovia began a strategic assessment process designed to take an
unrestrained look at the corporation in the changing environment for financial
services providers. The assessment reviewed the economic outlook, competitive
landscape and regulatory trends confronting our business. The process focused
on growth in shareholder value and outlined an approach for keeping Wachovia
among the industry's leaders.
In the remainder of the decade the economy should grow modestly at around half
the pace experienced in the 1980s. As the population continues to age, the
proportion of savers and investors to spenders and borrowers will increase.
Both retail and corporate customers are more financially sophisticated and
their expectations are shifting rapidly. They have access to a variety of
service providers and increasingly are willing to embrace technology to satisfy
their financial and information needs.
An expanding assortment of participants is competing intensely to serve this
marketplace of astute individual, institutional and corporate customers. These
include traditionally broad-based financial servicers such as banks, finance
companies and credit unions, but also more specialized players such as mutual
funds, insurance companies, securities firms and communications and software
companies.
Industry consolidation, aided by the passage of interstate banking legislation,
will help shrink overcapacity. This likely will proceed at a measured pace over
the years ahead. The real stimulus to consolidation will come over time as
economic factors affect performance. Other legislative and regulatory actions
will offer new opportunities but also additional restrictions and burdens.
In this challenging environment, there will continue to be leaders in the
financial services industry. The performance of these companies will warrant
and should receive market valuations above those accorded less skilled
competitors. To continue meeting the expectations of its shareholders,
customers and employees, Wachovia must maintain its leadership position and
performance. It must offer exciting services and seek out new markets at home
and abroad. The organization must change the way it communicates with customers
and sell more products and services to them while effectively managing costs.
The key strategic ingredients necessary to accomplish these goals include the
following:
- - Managing the portfolio of businesses to achieve sound, profitable growth
- - Using mergers and acquisitions to complement business development strategies
- - Becoming more effective in selling products and services
- - Redirecting technology investment to support sales and service capabilities
- - Assessing and managing the prudent use of capital
This section reviews in more detail these critical components of our strategy.
BUSINESS PORTFOLIO MANAGEMENT
A fresh look is being taken at Wachovia's complete mix of interest and
fee-related products and services. While
Wachovia's commitment to accommodate customers when and how they want to be
served is exemplified by Wachovia On-Call. The sales and service center
bankers, available around the clock, seven days a week, can be reached by
calling 1-800-WACHOVIA.
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Picture: Wachovia mortgage banker and realtor
outside a newly constructed home.
Picture: Wachovia mortgage banker and
two customers reviewing the Wachovia
Mortgage Origination System.
Expediting the mortgage loan application process for customers is a major
benefit of the new Wachovia Mortgage Origination System (WMOS). During 1995,
Wachovia lenders also will use WMOS with laptop computers to work with realtors
in identifying financing alternatives.
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we believe that providing deposit and loan services will continue to be a good
business, revenue growth from these sources will be more subdued than in the
past. Our goal is to ensure that appropriate investment of resources is being
made in services and products which will allow the company to reach its
potential for growth and high returns. This process already is identifying
opportunities for new services and alternative delivery channels. Particularly
strong influences on Wachovia's lines of business will come from demographic
shifts and dramatic opportunities arising from the employment of technology.
This analysis of our lines of business has been ongoing. In February 1995,
Wachovia announced it is seeking bids on the sale of its $9 billion residential
mortgage loan servicing portfolio. Wachovia sold its student loan servicing
business and exited the retail lockbox service in 1993. The 1991 merger with
South Carolina National Bank (now Wachovia Bank of South Carolina, N.A.) helped
to launch an expanded debit card program and contained the nucleus for Wachovia
On-Call.SM Wachovia acquired a credit card franchise through its 1985 merger
with First National Bank of Atlanta (Wachovia Bank of Georgia, N.A.), a
business which had grown to become the 15th largest among bank credit card
issuers nationwide at December 31, 1994. This business appraisal process will
be a prominent part of the corporate strategy and can be modified substantially
based on changing internal or external conditions.
CORPORATE ACQUISITION STRATEGY
Targeted acquisitions are likely to have a role in supporting the growth of
strategic businesses and in helping provide access to new customers. Banks
traditionally have focused on acquisition of other commercial banks to expand
geographic reach or deepen consumer deposits or branch banking market share.
While these types of transactions may continue to have appeal, Wachovia is not
obsessed with size nor attracted to transactions which dilute shareholder
value. It believes strategic acquisitions or combinations should enhance
product capabilities, increase the scale of existing businesses, provide access
to a larger base of customers and increase shareholder value over time.
MORE EFFECTIVE SELLING
Wachovians have sold well in the past. The corporation's share of market in its
home states has outpaced branch share for some time. Wachovia's national
corporate presence belies the organization's asset size by a wide margin.
However, Wachovia intends to strengthen its ability to sell both through the
core branch network and by exploring new initiatives outside the traditional
branch structure. Here are some specific examples:
- - Wachovia On-Call, a 24-hour a day, seven-day a week central telephone sales
and service center opened in June 1994. Its first mission is to help
customers with routine transactions at any hour of the day. The center is
expected to handle about 3 million calls during 1995. While the majority of
this contact will be responding to customer inquiries, the center's bankers
have begun aggressively selling services. We believe Wachovia On-Call will be
an important source of sales and will give branch personnel additional time
to sell to customers directly.
- - During 1994, 115 investment counselors, approximately one for every four
branches, were deployed in the home states of Georgia, North Carolina and
South Carolina. All counselors are Series 7 registered representatives and
are able to sell a full range of investment products including the Biltmore
family of mutual funds. Investment counselors are trained and motivated to
seek the best investment option for customers. Their compensation is not
commission driven since the focus is on building relationships. Wachovia
believes this relatively smaller sales contingent can grow as justified by
the marketplace, and will enhance the ability to build relationships based on
careful identification and lasting satisfaction of customer needs. Tellers
and other retail employees are being
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Picture: A sales team meeting of ten Wachovia
employees around a conference table.
Inset: Computer screen showing a copy
of a check reproduced on CD-ROM.
In a sales team meeting, New England territory relationship managers explore
opportunities for building or enhancing customer relationships with loan
administration officers and specialists from Wachovia's capital markets,
treasury services and trust services areas. Image Workstation (inset), a
PC-based service which provides images of checks and paid item information on a
CD-ROM, is part of the Wachovia Connection family of services. Wachovia
Connection offers corporate customers electronic window access to more than 100
reports and transaction capabilities through Wachovia's mainframe computers.
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trained and motivated to assist in identifying prospects for investment
sales. The Wachovia On-Call center also will supplement this effort.
- - Although Wachovia is selling its residential mortgage loan servicing
portfolio, the corporation is committed to significantly enhancing its loan
origination position in a very fragmented mortgage lending business over the
next several years. A major resource to support this effort was the
introduction in late 1994 of the Wachovia Mortgage Origination System (WMOS),
a new, automated mortgage application system designed to support branches
and mortgage offices. WMOS provides mortgage loan product comparisons,
significantly reduces application processing time and gives lenders immediate
cross-sell opportunities. The product also has remote communication
capabilities for use outside of branches with additional features planned
over time. This process is being received enthusiastically by our customers.
- - Wachovia was among the leaders in developing a low-rate credit card strategy
and has been very successful in marketing its Visa(R) and MasterCard(R) Prime
Plus credit card in and out of home markets. At the end of 1994,
approximately 1.5 million of our 2.5 million credit card accounts was outside
the three home states. The credit card is expected to continue to grow, and
its prospects are being enhanced with the launching of new features, such as
the February 1995 announcement of the Prime For LifeSM card, the nation's
first guaranteed prime rate option. At the same time, the organization is
looking closely for ways to use telemarketing and direct mail capabilities to
sell other services including car loans, mortgages, banklines and investment
products to out-of-area customers.
- - Corporate banking also is building its sales capability. Wachovia has been
ranked among the top 10 banks nationally in corporate market share. A
national survey ranked the quality of Wachovia's treasury services
capabilities number one among banks in 1994. However, this area is far from
complacent with the enormous success of its relationship banking strategy. A
65-member Sales Team Productivity (STP) task force was in place throughout
1994 developing recommendations and plans to increase selling effectiveness
by positioning bankers to bring the best talent to each customer
relationship. With the shifting of responsibilities under the STP sales
program, expectations are to double the time available to bankers for
selling. Wachovia believes the STP initiative will help provide value to
companies who not only are choosing and using fewer banks but also are
demanding more from banking partners.
REDIRECTING TECHNOLOGY INVESTMENT
Technology has been one of the proudest strengths of Wachovia. Following
interstate mergers in 1985 and 1991, technology investment focused on
infrastructure improvement designed to create common systems across the three
states and support back office consolidations. This work is largely complete
and results have been excellent. Continuing initiatives in this area are
providing substantial savings.
Today, all of Wachovia's banking operations are on a unified, interactive
branch automation system. A sophisticated general ledger system is common
throughout the corporation. By the end of 1995, 19 credit operations areas in
the three states will be consolidated into one location in Winston-Salem. The
three-state mortgage processing functions were combined in Columbia in January
1995. The automobile sales finance group has consolidated 27 contract-buying
branches in three states into two centers and quadrupled from 12 to over 50 the
average number of loan decisions a credit officer makes each day. Also, a new
automated sales finance application processing system will be installed during
the first quarter of 1995 which will accelerate our response time regarding
credit decisions.
In the future, technology investment will be directed toward growth enhancing
initiatives designed to create value-added
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products, facilitate marketing and sales efforts and provide management with
more comprehensive performance measurement information. Many of these
activities are already in various stages of deployment and use, including an
enhanced trust system, image processing-based products, next generation branch
automation providing interactive personal computer systems to better serve
customers and Wachovia Connection,SM a PC-based gateway to bank information for
corporate treasurers.
Other technology will develop a more sophisticated systems architecture for
Wachovia's banking card, strengthen automated teller machine capabilities,
consolidate customer information data bases and expand Wachovia's brokerage
capability. In the future, organizations lacking a strong commitment to
technology investment will face complications as serious as those brought on by
troublesome loans. Investing in appropriate technology will remain among the
highest priorities at Wachovia.
PRUDENT CAPITAL PHILOSOPHY
A cornerstone of Wachovia's philosophy has been the maintenance of a strong
capital position while generating above average returns on shareholders'
equity. At December 31, 1994,
Picture: Wachovia investment counselor discussing
investment options with a customer at
a Wachovia branch office.
During 1994, Wachovia deployed throughout its three home states 115 investment
counselors, who are extensively trained Series 7 registered representatives.
Their goal is to help customers select the most appropriate investment vehicle
from a full range of product alternatives. More counselors will be added in
1995.
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Wachovia's common equity to assets ratio of 8.39 percent ranked third among the
25 largest U.S. banking companies and has averaged 7.92 percent for the past
five years. Wachovia is committed to the maintenance of a strong and impressive
capital position.
As Wachovia moves ahead with its corporate strategies and planned investments,
its internal capital generation rate may exceed the needs of its business
activities. As in the past, Wachovia will manage and deploy capital in a
prudent, competent manner designed to enhance shareholder value over the
long-term.
While pursuing the core objectives of its strategic assessment, Wachovia will
remain focused on preserving its exemplary credit and risk management policies
and expense management practices.
COMPREHENSIVE RISK PRACTICES
Wachovia has long been recognized for its credit quality. While there are some
who believe credit issues are now less important, Wachovia's commitment to
being a sound bank is unwavering. But risk management today encompasses
practices which go well beyond sound credit administration. It includes the
operational, service delivery and general market risks associated with all
aspects of our business. For example:
- - Wachovia has been using interest rate swaps and other off-balance sheet
derivative instruments for a number of years. These instruments are used
principally to help manage interest rate risk and are generally designed to
neutralize the balance sheet from the adverse impact of external forces.
- - Wachovia is one of the leaders in addressing the growing issue of check
fraud. Our check fraud task force, with representatives from operations,
product management, legal and security, is helping bring industry
associations together to focus on common loss prevention initiatives,
conducting seminars to educate companies on risks and prevention measures and
seeking ways to leverage image processing and other technology capabilities
to combat the problem.
Risk management practices similar to these are in place throughout Wachovia and
should serve the organization well in the future.
SUPERIOR COST MANAGEMENT
Wachovia's overhead ratio of 54.1 percent for 1994 ranked the best among the 25
largest U. S. banks. The organization is committed to moving that ratio lower
over time and growing fee income will be vital to this strategy. However,
Wachovia remains dedicated to superior cost management. One major initiative
underway is to ensure procedures and staffing are standard throughout the three
states. The program is based on interviews with over 140 retail line and
support Wachovians who assessed the impact of their day to day activities on
the quality of service delivery. The results of this project will lower
Wachovia's costs and dramatically increase the time available for bankers and
other branch personnel to sell.
ATTRACTIVE GEOGRAPHIC MARKETS
The organization is fortunate to have extensive branch banking networks in
three of the nation's most vibrant states. By several economic measures, the
Southeast is growing faster than the nation and our three home states are
outpacing the region. Wachovia's markets within each state are expected to
accelerate more quickly than the states as a whole. The combined three-state
population is 17.8 million with 6.6 million total households. We now have
relationships with about 2.1 million of them.
Business growth continues to be strong within the three states. North Carolina,
Georgia and South Carolina are among the top 15 states nationally in the
announcement of new and expanded manufacturing facilities. In these fine
markets, Wachovia covers a broad business spectrum
- --------------------------------------------------------------------------------
13
<PAGE> 15
- --------------------------------------------------------------------------------
serving over 7,000 corporate clients, in addition to approximately 130,000
small and medium-size businesses within primary markets and contiguous states.
Wachovia intends to have a larger share of this market particularly in smaller
and medium-size business companies.
The corporation has a sizeable book of corporate and consumer business
generated away from home markets. For example, corporate lending outside the
three states represented approximately 36 percent of the total commercial loan
portfolio and about $2.569 billion in credit card loans was not in the primary
markets as of December 31, 1994.
Significant resources are in place within our home markets with approximately
1,300 consumer bankers, investment counselors and personal trust sales
personnel, 500 corporate relationship sales managers including market
specialists for capital markets, trust and treasury services, 493 branches and
652 ATMs . Increased attention also is being directed to finding ways to expand
the customer base outside home markets by employing nontraditional methods
minimizing the need to invest in on-site facilities.
STRONG COMMUNITY COMMITMENT
Wachovia also recognizes that its ability to remain a profitable and growing
institution is directly dependent on the economic and social well-being of the
communities it serves. The organization is committed to meeting legitimate
credit needs and providing other appropriate resources. One example of this
dedication is the Wachovia Advantage Affordable Home Loan program with two
recently introduced mortgage loan options offering low-cost home loan packages
with favorable lending terms.
In January 1995, Wachovia introduced in its home markets a low-rate secured
credit card which will help meet the needs of individuals wishing to establish
a credit history, those seeking to repair a damaged credit history and foreign
nationals wanting to establish credit in the United States. The card, with
credit limits from $500 to $5,000, generally will be secured by a deposit in an
interest-bearing Wachovia savings account.
Wachovia is actively involved in efforts to expand small and minority-owned
business lending through formation of a Business Banking Group, introduction of
a special small business loan program and Wachovia's partnership with the
Entrepreneurial Development Loan Fund lending consortium. Wachovia Bank of
North Carolina's Community Reinvestment Act (CRA) rating is "outstanding" and a
"satisfactory" CRA rating has been accorded the Georgia and South Carolina
banks.
Across our three states, the people of Wachovia recognize that good citizenship
is an integral part of regular business activities. Wachovians help neighbors
and communities by participating in hundreds of meaningful programs ranging
from building Habitat for Humanity houses to helping clean up flood-stricken
areas of Georgia last July.
UNDERSTAND BUSINESS CHALLENGES
Recent decades have witnessed formidable challenges to the performance of
financial services companies. The remainder of the nineties promises to provide
even greater tests of the industry's management competence, technological
expertise, product delivery skills and ability to acquire and retain good
customers.
At Wachovia we understand the critical challenges affecting our business. The
organization is fortunate to have outstanding people, good markets, top
products, modern technology, exceptional service, a strong balance sheet and a
dependable and growing stream of earnings. These elements should position
Wachovia well to capitalize on opportunity and to cope with adversity in the
times ahead.
Technology is a major factor in Wachovia's ability to be a premier provider of
financial services. To maintain a position of leadership, Wachovia is
redirecting its technology investment from infrastructure improvements
to strengthening its product lines and enhancing its ability to
deliver services to customers in its home markets, across
the nation and abroad.
- --------------------------------------------------------------------------------
14
<PAGE> 16
Picture: Collage of images: Wachovia ATM, telephone receiver,
Wachovia Visa and Mastercard, CD-ROM disks, outline
map of southeastern U.S. with North Carolina, South
Carolina and Georgia highlighted, screens from
Wachovia Connection PC program, net asset balances
from Biltmore Funds, and lazer beams of light
spreading overall.
15
<PAGE> 17
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SUMMARY TABLE 1
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Five-Year
Compound
1994 1993 1992 1991 1990 1989 Growth Rate
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income-- taxable equivalent...... $2,462,454 $2,221,738 $2,301,325 $2,731,925 $2,856,318 $2,773,970 (2.4%)
Interest expense.......................... 1,038,388 839,012 967,028 1,467,849 1,684,114 1,672,856 (9.1)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income--taxable equivalent... 1,424,066 1,382,726 1,334,297 1,264,076 1,172,204 1,101,114 5.3
Taxable equivalent adjustment*............ 100,160 98,901 79,247 94,910 107,674 101,317 (.2)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income....................... 1,323,906 1,283,825 1,255,050 1,169,166 1,064,530 999,797 5.8
Provision for loan losses................. 71,763 92,652 119,420 293,000 142,992 86,531 (3.7)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses......................... 1,252,143 1,191,173 1,135,630 876,166 921,538 913,266 6.5
Other operating revenue................... 604,432 600,179 535,242 490,178 458,852 411,817 8.0
Gain on sale of subsidiary................ -- 8,030 19,486 -- -- --
Investment securities gains............... 3,320 19,394 1,497 11,091 6,218 7,625 (15.3)
---------- ---------- ---------- ---------- ---------- ----------
Total other income........................ 607,752 627,603 556,225 501,269 465,070 419,442 7.7
Personnel expense......................... 563,507 568,680 539,823 524,489 487,473 484,998 3.0
Other expense............................. 534,906 562,556 555,829 572,028 464,811 431,892 4.4
---------- ---------- ---------- ---------- ---------- ----------
Total other expense....................... 1,098,413 1,131,236 1,095,652 1,096,517 952,284 916,890 3.7
Income before income taxes................ 761,482 687,540 596,203 280,918 434,324 415,818 12.9
Applicable income taxes**................. 222,424 195,445 162,978 51,378 88,647 87,669 20.5
---------- ---------- ---------- ---------- ---------- ----------
Net income................................ $ 539,058 $ 492,095 $ 433,225 $ 229,540 $ 345,677 $ 328,149 10.4
========== ========== ========== ========== ========== ==========
Net income per common share:
Primary................................. $ 3.13 $ 2.83 $ 2.51 $ 1.34 $ 2.05 $ 1.95 9.9
Fully diluted........................... $ 3.12 $ 2.81 $ 2.48 $ 1.32 $ 2.02 $ 1.92 10.2
Cash dividends paid per common share...... $ 1.23 $ 1.11 $ 1.00 $ .92 $ .82 $ .697 12.0
Average primary shares outstanding........ 172,339 173,941 172,641 171,481 168,888 168,268 .5
Average fully diluted shares outstanding.. 172,951 175,198 175,512 175,218 172,722 172,586
SELECTED AVERAGE BALANCES (millions)
Total assets.............................. $ 37,029 $ 33,629 $ 31,832 $ 32,045 $ 30,469 $ 28,347 5.5
Loans -- net of unearned income........... 24,213 21,546 20,032 20,589 20,080 18,604 5.4
Investment securities..................... 7,683 7,039 6,201 5,783 4,879 4,301 12.3
Other interest-earning assets............. 898 1,195 1,864 1,988 1,823 1,810 (13.1)
Total interest-earning assets............. 32,794 29,780 28,097 28,360 26,782 24,715 5.8
Interest-bearing deposits................. 16,931 17,019 17,884 17,924 16,583 16,610 .4
Short-term borrowed funds................. 6,230 5,403 4,961 6,080 6,231 4,276 7.8
Long-term debt............................ 4,350 2,073 449 178 177 230 80.0
Total interest-bearing liabilities........ 27,511 24,495 23,294 24,182 22,991 21,116 5.4
Noninterest-bearing deposits.............. 5,384 5,354 4,947 4,595 4,620 4,586 3.3
Total deposits............................ 22,315 22,373 22,831 22,519 21,203 21,196 1.0
Shareholders' equity...................... 3,096 2,872 2,596 2,462 2,237 2,043 8.7
RATIOS (averages)
Net loan losses to loans.................. .29% .31% .48% .99% .47% .37%
Net yield on interest-earning assets...... 4.34 4.64 4.75 4.46 4.38 4.46
Shareholders' equity to:
Total assets............................ 8.36 8.54 8.16 7.68 7.34 7.21
Net loans............................... 13.01 13.58 13.21 12.13 11.28 11.11
Return on assets.......................... 1.46 1.46 1.36 .72 1.13 1.16
Return on shareholders' equity............ 17.41 17.13 16.69 9.33 15.45 16.06
*Taxable equivalent adjustments reflect federal income tax rates of 35% in 1994 and 1993 and 34% in 1992, 1991, 1990 and 1989
**Income taxes applicable to securities transactions were $1,328, $7,472, $470, $3,997, $2,379 and $2,903, respectively
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 18
RESULTS OF OPERATIONS
1994 vs. 1993
Overview
Overall economic growth remained good in 1994 with the national
unemployment rate dropping to 6.1 percent. Concerns over the
continued pace of expansion led to Federal Reserve actions raising
short-term interest rates six times throughout the year. Wachovia
Corporation's primary operating states of Georgia, North Carolina and
South Carolina continued to enjoy generally favorable economic
conditions in 1994. Based on preliminary data, statewide unemployment
rates for the year averaged 5.5 percent in Georgia, 4.4 percent in
North Carolina and 6.1 percent in South Carolina, while
nonagricultural employment in the three states grew 5 percent, 3.6
percent and 1.7 percent, respectively.
Wachovia Corporation's consolidated net income for 1994 totaled
$539.058 million or $3.12 per fully diluted share compared with
$492.095 million or $2.81 per fully diluted share in 1993. Increased
operating results for the year reflected strong loan growth, good
expense control and reduced credit costs, along with a modest
contribution from other operating revenue. Net income represented
returns of 17.4 percent on shareholders' equity and 1.46 percent on
assets versus 17.1 percent and 1.46 percent, respectively, in 1993.
The equity and assets used in calculating returns for 1994 include
unrealized gains or losses, net of tax, on securities
available-for-sale.
Expanded discussion of operating results and the corporation's
financial condition are presented in the following narrative, tables
and charts. 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.
The narrative should be read in conjunction with the Consolidated
Financial Statements and Notes on pages 46 through 63. Expanded
six-year financial data appears on pages 64 through 71.
NET INCOME PER SHARE NET INCOME
(FULLY DILUTED) (MILLIONS)
1989 $1.92 1989 $328.1
1990 $2.02 1990 $345.7
1991 $1.32 1991 $229.5
1992 $2.48 1992 $433.2
1993 $2.81 1993 $492.1
1994 $3.12 1994 $539.1
17
<PAGE> 19
Net Interest Income
Taxable equivalent net interest income, the primary source of
the corporation's earnings, grew $41.340 million or 3 percent in
1994. The increase reflected strong gains in interest-earning assets,
principally loans, as well as a modestly improving average earning
asset yield. Greater levels of interest-bearing liabilities and a
higher average cost of funds partially reduced the increase. A
portion of the increase in the average cost of funds resulted from a
decision to lengthen the maturity of wholesale funding in order to
somewhat insulate the corporation's net interest margin from a rising
rate environment.
The net yield on interest-earning assets (net interest income as
a percentage of average interest-earning assets) declined 30 basis
points for the year as increased rates on funding sources offset
gains in earning asset yields. The average rate paid rose 34 basis
points, led by short-term borrowing costs which increased in response
to Federal Reserve actions. The average yield on interest-earning
assets was up a more modest 5 basis points for the year, although the
increase accelerated in the second half of 1994.
NET INTEREST INCOME*
(MILLIONS)
Interest Interest Net interest
income* expense income*
------- ------- ------------
1989 $2774.0 $1672.9 $1101
1990 $2856.3 $1684.1 $1172
1991 $2731.9 $1467.8 $1264
1992 $2301.3 $ 967.0 $1334
1993 $2221.7 $ 839.0 $1383
1994 $2462.5 $1038.4 $1424
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Change Change
1994 1993 1992 1994/1993 1993/1992
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest income -- taxable equivalent ............. $ 14.29 $ 12.77 $ 13.33 $ 1.52 ($.56)
Interest expense .................................. 6.03 4.82 5.60 1.21 (.78)
------- ------- ------- ------ -----
Net interest income -- taxable equivalent ......... 8.26 7.95 7.73 .31 .22
Taxable equivalent adjustment ..................... .58 .57 .46 .01 .11
------- ------- ------- ------ -----
Net interest income ............................... 7.68 7.38 7.27 .30 .11
Provision for loan losses ......................... .42 .53 .69 (.11) (.16)
------- ------- ------- ------ -----
Net interest income after provision for loan losses 7.26 6.85 6.58 .41 .27
Other operating revenue ........................... 3.51 3.45 3.10 .06 .35
Gain on sale of subsidiary ........................ -- .05 .11 (.05) (.06)
Investment securities gains ....................... .02 .11 .01 (.09) .10
------- ------- ------- ------ -----
Total other income ................................ 3.53 3.61 3.22 (.08) .39
Personnel expense ................................. 3.27 3.27 3.13 -- .14
Other expense ..................................... 3.10 3.24 3.22 (.14) .02
------- ------- ------- ------ -----
Total other expense ............................... 6.37 6.51 6.35 (.14) .16
Income before income taxes ........................ 4.42 3.95 3.45 .47 .50
Applicable income taxes ........................... 1.29 1.12 .94 .17 .18
------- ------- ------- ------ -----
Net income ........................................ $ 3.13 $ 2.83 $ 2.51 $ .30 $ .32
======= ======= ======= ====== =====
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 20
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS* TABLE 3
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
- ---------------- -------------- ---------------------- ----------------------
1994 1993 1994 1993 1994 1993 Variance Rate Volume
- ------- ------- ------ ------ ---------- ---------- -------- ---------- ----------
(Millions) INTEREST INCOME (Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans:
$ 7,367 $ 6,198 6.03 5.29 Commercial ..................... $ 444,395 $ 327,729 $116,666 $49,881 $ 66,785
1,966 1,891 8.99 9.05 Tax-exempt ..................... 176,701 171,163 5,538 (1,232) 6,770
- ------- ------- ---------- ---------- --------
9,333 8,089 6.66 6.17 Total commercial ............ 621,096 498,892 122,204 41,467 80,737
735 685 8.30 8.68 Direct retail .................. 61,054 59,455 1,599 (2,678) 4,277
2,450 2,245 7.77 8.42 Indirect retail ................ 190,444 189,143 1,301 (15,252) 16,553
3,529 2,591 11.05 11.75 Credit card .................... 389,763 304,502 85,261 (19,225) 104,486
334 328 11.55 11.15 Other revolving credit ......... 38,556 36,580 1,976 1,324 652
- ------- ------- ---------- ---------- --------
7,048 5,849 9.65 10.08 Total retail ................ 679,817 589,680 90,137 (26,415) 116,552
496 470 9.26 7.45 Construction ................... 45,988 35,034 10,954 8,936 2,018
3,356 3,147 7.72 7.39 Commercial mortgages ........... 259,077 232,688 26,389 10,557 15,832
3,699 3,780 7.78 8.10 Residential mortgages .......... 287,922 305,965 (18,043) (11,609) (6,434)
- ------- ------- ---------- ---------- --------
7,551 7,397 7.85 7.76 Total real estate .......... 592,987 573,687 19,300 7,266 12,034
173 135 7.83 8.90 Lease financing ................ 13,563 12,051 1,512 (1,573) 3,085
108 76 5.70 4.35 Foreign ........................ 6,162 3,318 2,844 1,213 1,631
- ------- ------- ---------- ---------- --------
24,213 21,546 7.90 7.79 Total loans ................ 1,913,625 1,677,628 235,997 25,589 210,408
Investment securities:
Held-to-maturity:
2,290 3,647 6.61 6.27 U.S. Government and agency ... 151,355 228,538 (77,183) 11,984 (89,167)
1,069 2,352 7.72 7.25 Mortgage backed securities ... 82,584 170,640 (88,056) 10,399 (98,455)
599 689 12.53 12.46 State and municipal .......... 75,069 85,854 (10,785) 438 (11,223)
12 351 5.04 4.37 Other ........................ 618 15,307 (14,689) 2,039 (16,728)
- ------- ------- ---------- ---------- --------
Total securities
3,970 7,039 7.80 7.11 held-to-maturity .......... 309,626 500,339 (190,713) 44,760 (235,473)
Available-for-sale:**
2,504 -- 5.51 -- U.S. Government and agency ... 137,984 -- 137,984 -- 137,984
942 -- 4.58 -- Mortgage backed securities ... 43,193 -- 43,193 -- 43,193
267 -- 5.02 -- Other ........................ 13,399 -- 13,399 -- 13,399
- ------- ------- ---------- ---------- --------
Total securities
3,713 -- 5.24 -- available-for-sale ........ 194,576 -- 194,576 -- 194,576
- ------- ------- ---------- ---------- --------
7,683 7,039 6.56 7.11 Total investment securities.. 504,202 500,339 3,863 (39,992) 43,855
13 79 4.58 3.71 Interest-bearing bank balances ... 597 2,905 (2,308) 555 (2,863)
Federal funds sold and
securities purchased under
196 395 3.91 3.15 resale agreements............... 7,682 12,433 (4,751) 2,508 (7,259)
689 721 5.28 3.94 Trading account assets............ 36,348 28,433 7,915 9,245 (1,330)
- ------- ------- ---------- ---------- --------
$32,794 $29,780 7.51 7.46 Total interest-earning assets 2,462,454 2,221,738 240,716 14,458 226,258
======= =======
INTEREST EXPENSE
$ 3,384 $ 3,219 1.63 1.88 Interest-bearing demand .......... 55,088 60,433 (5,345) (8,319) 2,974
6,122 5,998 2.69 2.53 Savings and money market savings.. 164,461 151,748 12,713 9,514 3,199
5,336 5,595 4.26 4.30 Savings certificates ............. 227,060 240,795 (13,735) (2,660) (11,075)
1,573 1,740 4.47 5.18 Large denomination certificate ... 70,305 90,101 (19,796) (11,642) (8,154)
- ------- ------- ---------- ---------- --------
Total time deposits in
16,415 16,552 3.15 3.28 domestic offices .......... 516,914 543,077 (26,163) (21,681) (4,482)
516 467 4.32 3.11 Time deposits in foreign offices.. 22,318 14,503 7,815 6,144 1,671
- ------- ------- ---------- ---------- --------
16,931 17,019 3.18 3.28 Total time deposits.......... 539,232 557,580 (18,348) (15,479) (2,869)
Federal funds purchased and
securities sold under
5,050 3,945 4.44 3.23 repurchase agreements .......... 224,089 127,580 96,509 55,012 41,497
505 486 3.94 3.02 Commercial paper.................. 19,880 14,693 5,187 4,586 601
675 972 4.24 3.25 Other short-term borrowed funds... 28,603 31,574 (2,971) 8,166 (11,137)
- ------- ------- ---------- ---------- --------
Total short-term
6,230 5,403 4.37 3.22 borrowed funds ............ 272,572 173,847 98,725 69,217 29,508
3,523 1,535 4.88 4.54 Bank notes........................ 171,968 69,785 102,183 5,554 96,629
827 538 6.60 7.03 Other long-term debt ............. 54,616 37,800 16,816 (2,407) 19,223
- ------- ------- ---------- ---------- --------
4,350 2,073 5.21 5.19 Total long-term debt......... 226,584 107,585 118,999 437 118,562
- ------- ------- ---------- ---------- --------
Total interest-bearing
$27,511 $24,495 3.77 3.43 liabilities ............... 1,038,388 839,012 199,376 90,306 109,070
======= ======= ----- ----- ---------- ---------- --------
3.74 4.03 Interest rate spread
===== =====
Net yield on interest-earning
4.34 4.64 assets and net interest income $1,424,066 $1,382,726 $ 41,340 (93,096) 134,436
===== ===== ========== ========== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*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
losses of $12 million
19
<PAGE> 21
Interest Income
Taxable equivalent interest income rose $240.716 million or 10.8
percent, primarily the result of good growth in average
interest-earning assets supplemented by a higher average yield.
Average interest-earning assets expanded $3.014 billion or 10.1
percent for the year with the average rate earned up 5 basis points.
Strong loan demand paced overall interest-earning asset growth,
with average loans rising $2.667 billion or 12.4 percent for the year
versus $1.514 billion or 7.6 percent in 1993. Both commercial and
retail loans were up, with growth stronger for the year in the
commercial portfolio.
Commercial loans, including related real estate categories,
expanded $1.549 billion or 13 percent compared with an increase of
$278 million or 2.4 percent in 1993. All categories were up for the
year with gains concentrated in regular commercial loans, which rose
$1.169 billion or 18.9 percent. Commercial mortgages were higher by
$209 million or 6.6 percent, while construction loans increased $26
million or 5.5 percent, the first yearly gain since 1990. Based on
regulatory definitions, commercial mortgages were $3.484 billion or
13.5 percent of total loans at December 31, 1994, and construction
loans were $553 million or 2.1 percent. These compared with $3.199
billion or 13.9 percent and $494 million or 2.2 percent,
respectively, at year-end 1993.
Retail loans, including residential mortgages, grew $1.118
billion or 11.6 percent versus a gain of $1.236 billion or 14.7
percent in 1993. The increase was led by credit card loans, up $938
million or 36.2 percent, and by indirect retail loans, which rose
$205 million or 9.1 percent and primarily consists of automobile
sales financing. Credit cards have remained a particularly strong
area of retail loan growth with demand fueled largely by Wachovia's
variable rate pricing options. At December 31, 1994, managed credit
card outstandings totaled $4.094 billion, including $125 million of
net securitized loans. Approximately 90 percent of the portfolio was
variable rate. This compared with $3.123 billion in outstandings with
approximately 84 percent variable rate a year earlier. At year-end
1992, approximately 61 percent of the credit card portfolio was
variable rate.
Direct retail loans and other revolving credit also were higher
for the year, with the gain in direct retail loans reversing several
consecutive yearly declines. Reflecting, in part, the impact of
higher interest rates and lower demand, residential mortgages
decreased $81 million or 2.1 percent. Although lower for the full
year, residential mortgages have increased modestly on a sequential
monthly basis since July.
The corporation has a modest commitment of loans and other
outstandings to foreign countries. Cross border commitments,
primarily consisting of loans, were $275 million or .7 percent of
total assets at December 31, 1994, down $77 million or 22 percent
from $352 million or 1 percent at year-end 1993.
Continued good loan growth throughout 1994 moderated the need
for increases in investment securities which were up $644 million or
9.1 percent for the year compared with an increase of $838 million or
13.5 percent in 1993. Effective January 1, 1994, investment
securities were classified by the corporation as either securities
held-to-maturity or securities available-for-sale under Statement of
Financial Accounting
<TABLE>
- ---------------------------------------------------------------------------------------------------------
SELECTED LOAN MATURITIES AND INTEREST SENSITIVITY TABLE 4
December 31, 1994 (thousands)
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
One Year One to Over
Total or Less Five Years Five Years
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial, financial and other ................ $ 8,377,878 $ 7,669,434 $ 426,933 $ 281,511
Industrial revenue and other tax-exempt financing 1,809,600 728,998 364,512 716,090
Construction and land development .............. 553,105 500,027 53,078 --
Commercial mortgages ........................... 3,483,452 2,093,698 773,738 616,016
----------- ----------- ----------- -----------
Loans to domestic borrowers .............. 14,224,035 10,992,157 1,618,261 1,613,617
Loans to foreign borrowers ..................... 254,415 129,415 125,000 --
----------- ----------- ----------- -----------
Selected loans, net ....................... $14,478,450 $11,121,572 $ 1,743,261 $ 1,613,617
=========== =========== =========== ===========
Interest sensitivity:
Loans with predetermined interest rates ...... $ 7,411,293 $ 4,449,258 $ 1,599,210 $ 1,362,825
Loans with floating interest rates ........... 7,067,157 6,672,314 144,051 250,792
----------- ----------- ----------- -----------
Total .................................... $14,478,450 $11,121,572 $ 1,743,261 $ 1,613,617
=========== =========== =========== ===========
- ---------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 22
<TABLE>
INVESTMENT SECURITIES TABLE 5
December 31 (thousands)
<CAPTION>
1994
-----------------------------------------------------------------
Taxable
Book Unrealized Unrealized Market Average Equivalent
Value Gain Loss Value Maturity Yield*
----- ---------- ---------- ------ -------- ----------
HELD-TO-MATURITY (Yrs./Mos.)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies:
Within one year.................. $ 3,486 $ -- $ 5 $ 3,481 4.43%
One to five years................ 2,387,449 12,544 103,373 2,296,620 6.73
Five to ten years................ 84,469 4,441 -- 88,910 9.71
Over ten years................... 16,072 4,095 2 20,165 12.81
---------- ------- -------- ----------
Total.......................... 2,491,476 21,080 103,380 2,409,176 3/2 6.86
State and municipal:
Within one year.................. 190,528 3,258 93 193,693 13.38
One to five years................ 155,436 6,420 123 161,733 11.81
Five to ten years................ 123,316 10,165 139 133,342 12.23
Over ten years................... 85,085 6,753 1,442 90,396 12.61
---------- ------- -------- ----------
Total.......................... 554,365 26,596 1,797 579,164 4/6 12.57
Mortgage backed:
Within one year.................. 1,709 -- 20 1,689 6.09
One to five years................ 158,964 436 5,487 153,913 6.35
Five to ten years................ 212,624 402 11,092 201,934 6.76
Over ten years................... 751,253 11,276 7,731 754,798 8.50
---------- ------- -------- ----------
Total.......................... 1,124,550 12,114 24,330 1,112,334 16/9 7.86
Other interest-earning
investments:
Within one year.................. -- -- -- --
One to five years................ 13,721 -- 237 13,484 5.44
Five to ten years................ 498 -- 12 486 7.19
Over ten years................... -- -- -- --
---------- ------- -------- ----------
Total.......................... 14,219 -- 249 13,970 4/1 5.50
---------- ------- -------- ----------
Total held-to-maturity 4,184,610 59,790 129,756 4,114,644 7/0 7.88
AVAILABLE-FOR-SALE
U.S. Treasury and other
U.S. Government agencies:
Within one year.................. 861,302 200 7,807 853,695 5.11
One to five years................ 1,652,408 1,618 46,813 1,607,213 6.05
Five to ten years................ -- -- -- --
Over ten years................... -- -- -- --
---------- ------- -------- ----------
Total.......................... 2,513,710 1,818 54,620 2,460,908 1/3 5.73
Mortgage backed:
Within one year.................. -- -- -- --
One to five years................ 228,181 2 4,976 223,207 4.71
Five to ten years................ 264,416 -- 4,547 259,869 5.40
Over ten years................... 339,770 689 7,488 332,971 5.45
---------- ------- -------- ----------
Total ......................... 832,367 691 17,011 816,047 9/10 5.23
Other interest-earning
investments:
Within one year.................. 6,770 40 -- 6,810 6.15
One to five years................ 64,826 11 -- 64,837 6.20
Five to ten years................ 495 20 -- 515 10.90
Over ten years................... 91,900 13 -- 91,913 6.38
---------- ------- -------- ----------
Total.......................... 163,991 84 -- 164,075 9/0 6.31
---------- ------- -------- ----------
Total available-for-sale
interest-earning
investments........................ 3,510,068 2,593 71,631 3,441,030 3/8 5.64
Federal Reserve Bank
stock and other
investments........................ 90,026 7,287 96 97,217
---------- ------- -------- ----------
Total available-
for-sale....................... 3,600,094 9,880 71,727 3,538,247
---------- ------- -------- ----------
Total portfolio................ $7,784,704 $69,670 $ 201,483 $7,652,891
========== ======= ========= ==========
<CAPTION>
1993 1992
----------------- -----------------
Book Market Book Market
Value Value Value Value
----- ------ ----- ------
HELD-TO-MATURITY
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies:
Within one year.................. $ 611,434 $ 620,018 $ 258,729 $ 263,276
One to five years................ 3,828,687 3,925,789 2,045,605 2,096,611
Five to ten years................ 116,665 137,324 414,559 464,696
Over ten years................... 15,950 23,340 16,581 22,588
---------- ---------- ---------- ----------
Total ......................... 4,572,736 4,706,471 2,735,474 2,847,171
State and municipal:
Within one year.................. 75,501 77,254 62,837 63,673
One to five years................ 309,939 337,197 337,815 369,395
Five to ten years................ 151,253 172,827 192,030 214,277
Over ten years................... 118,464 140,456 155,335 177,842
---------- ---------- ---------- ----------
Total.......................... 655,157 727,734 748,017 825,187
Mortgage backed:
Within one year.................. 44,500 44,510 9,168 8,604
One to five years................ 539,315 546,467 134,209 139,350
Five to ten years................ 559,029 560,130 427,596 439,879
Over ten years................... 1,165,890 1,217,385 1,893,389 1,971,476
---------- ---------- ---------- ----------
Total.......................... 2,308,734 2,368,492 2,464,362 2,559,309
Other interest-earning
investments:
Within one year.................. 34,426 34,420 11,423 11,446
One to five years................ 85,713 85,779 96,090 97,361
Five to ten years................ 11,980 11,987 80,737 80,757
Over ten years................... 101,192 101,261 216,358 219,270
---------- ---------- ---------- ----------
Total ......................... 233,311 233,447 404,608 408,834
---------- ---------- ---------- ----------
Total held-to-maturity......... 7,769,938 8,036,144 6,352,461 6,640,501
AVAILABLE-FOR-SALE
U.S. Treasury and other
U.S. Government agencies:
Within one year
One to five years
Five to ten years
Over ten years
Total
Mortgage backed:
Within one year
One to five years
Five to ten years
Over ten years
Total
Other interest-earning
investments:
Within one year
One to five years
Five to ten years
Over ten years
Total
Total available-for-sale
interest-earning
investments
Federal Reserve Bank
stock and other
investments........................ $ 108,718 $ 120,546 $ 133,710 152,542
---------- ---------- ---------- ----------
Total available-
for-sale.......................
Total portfolio................ $7,878,656 $8,156,690 $6,486,171 $6,793,043
========== ========== ========== ==========
* Yields are presented on a fully taxable equivalent basis using the federal income tax
rate and state tax rates, as applicable
</TABLE>
21
<PAGE> 23
Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (FASB 115), which the corporation
prospectively adopted on that date. Securities held-to-maturity are
debt securities which management can demonstrate positive intent and
ability to hold to maturity. They are reported at amortized cost.
Securities available-for-sale are debt and equity securities not
classified as either held-to-maturity or trading. Securities
available-for-sale are reported at fair market value with unrealized
gains and losses resulting from changes in market value included, net
of tax, in shareholders' equity.
At December 31, 1994, securities available-for-sale were $3.538
billion and securities held-to-maturity were $4.185 billion. For the
full year, there was an unrealized loss of $12.405 million, pretax,
and $7.561 million, net of tax, on average securities
available-for-sale. The municipal portfolio remains of good
investment grade with 96.6 percent rated A or higher by Moody's at
December 31, 1994 compared with 95.6 percent a year earlier.
Interest Expense
Interest expense grew $199.376 million or 23.8 percent,
reflecting expanded average interest-bearing liabilities and a higher
average cost of funds. Average interest-bearing liabilities increased
$3.016 billion or 12.3 percent, primarily in long-term debt and
short-term borrowings. The average rate paid rose 34 basis points for
the year, principally due to higher short-term borrowing costs
pressed upward by the shift in Federal Reserve policy during the
year.
Total interest-bearing time deposits were relatively unchanged,
declining $88 million or under 1 percent. Savings certificates and
large denomination certificates declined while interest-bearing
demand, savings and money market savings and foreign time deposits
grew moderately. The majority of the deposits in foreign offices were
in denominations of greater than $100,000.
Short-term borrowings were higher by $827 million or 15.3
percent. Federal funds sold and repurchase agreements accounted for
almost all of the growth, rising $1.105 billion or 28 percent.
Commercial paper borrowings increased $19 million or 3.9 percent,
while other short-term borrowings, primarily consisting of term
federal funds, were down $297 million or 30.6 percent.
Wachovia Bank of North Carolina has an ongoing bank note program
under which the bank may offer an aggregate principal amount of up to
$7 billion outstanding at any one time. Notes can be issued with
terms of 30 days to 15 years. Bank notes with original maturities of
one year or less were issued beginning in the fourth quarter of 1994
and are included in other short-term borrowed funds. At year-end
1994, short-term bank notes totaled $456 million with an average cost
of 6.13 percent and an average maturity of 4.15 months. Bank notes
with original maturities of greater than one year are medium-term
notes and are classified as long-term debt. Medium-term bank notes at
December 31, 1994 were $3.953 billion with an average cost of 5.31
percent and an average maturity of 1.73 years versus $2.370 billion
outstanding a year earlier, with an average cost of 4.54 percent and
an average maturity of 1.8 years. The bank note program provides
additional funding at attractive rates, reflective of the issuing
bank's strong credit ratings.
Long-term debt increased $2.277 billion or 109.8 percent,
principally driven by expansion of the medium-term bank note program.
Medium-term bank notes were up $1.988 billion or 129.4 percent, while
other long-term debt rose $289 million or 53.8 percent.
Gross deposits for the year averaged $22.315 billion, lower by
$58 million or less than 1 percent from $22.373 billion in 1993.
Collected deposits, net of float, averaged $20.691 billion compared
with $20.762 billion in the prior year, a decrease of $71 million or
under 1 percent. Demand and noninterest-bearing time deposits in 1994
averaged $5.384 billion versus $5.354 billion the year earlier.
Asset and Liability Management, Interest Rate Sensitivity and Liquidity
Management
The goal of asset and liability management is to maintain high
quality and consistent growth of net interest income with acceptable
levels of risk to changes in interest rates. The corporation seeks to
meet this goal by influencing the maturity and repricing
characteristics of the various lending and deposit taking lines of
business, by managing discretionary balance sheet asset and liability
portfolios and by utilizing off-balance sheet financial instruments.
Interest rate risk management is carried out by Funds Management
which operates under policies
22
<PAGE> 24
established by the Finance Committee of the corporation's board
of directors and the guidance of the Management Finance Committee.
Rate risk, liquidity, capital positions and discretionary on and
off-balance sheet activity are reviewed quarterly by the Board
Finance Committee. Interim oversight of the asset and liability
function is provided through regular bimonthly meetings of Funds
Management and the Chief Financial Officer. Funds Management
personnel carry out day-to-day activity within approved risk
management guidelines and strategies.
The corporation uses a number of tools to measure interest rate
risk, including monitoring the difference or gap between rate
sensitive assets and liabilities over various time periods,
monitoring the change in the net present value of the asset and
liability portfolios under various rate scenarios and income
simulation modeling. The rate sensitivity gap table on this page sets
forth the volume of interest-earning assets and interest-bearing
liabilities outstanding as of year-ends 1994 and 1993, which mature
or are projected to reprice in
Interest Rate Sensitivity Gap Analysis
- --------------------------------------
<TABLE>
<CAPTION>
Interest Sensitive Period
-------------------------------------------------------------------
$ in millions Over One
0 to 3 4 to 6 7 to 12 Total Within Year and
December 31, 1994 Months Months Months One Year Nonsensitive Total
- ----------------- -------- -------- -------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Loans and net leases, net of unearned income $ 16,265 $ 902 $ 1,379 $ 18,546 $ 7,345 $ 25,891
State and municipal investment securities .. 56 50 111 217 339 556
Other investment securities ................ 813 481 686 1,980 5,187 7,167
Interest-bearing bank balances ............. 7 -- -- 7 -- 7
Federal funds sold and securities purchased
under resale agreements .................. 202 -- -- 202 -- 202
Trading account assets ..................... 890 -- -- 890 -- 890
-------- -------- -------- -------- -------- --------
Total earning assets ................. 18,233 1,433 2,176 21,842 12,871 34,713
Interest-bearing demand .................... 617 264 529 1,410 2,115 3,525
Savings and money market savings ........... 4,376 338 676 5,390 676 6,066
Savings certificates ....................... 1,741 1,135 966 3,842 1,623 5,465
Large denomination certificates ............ 610 227 210 1,047 369 1,416
Time deposits in foreign offices ........... 879 31 -- 910 -- 910
Federal funds purchased and securities sold
under repurchase agreements .............. 5,895 3 -- 5,898 -- 5,898
Commercial paper ........................... 404 2 1 407 -- 407
Other short-term borrowed funds ............ 850 2 155 1,007 -- 1,007
Bank notes ................................. 1,114 156 815 2,085 1,868 3,953
Other long-term debt ....................... -- -- -- -- 838 838
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities ... 16,486 2,158 3,352 21,996 7,489 29,485
Interest rate swaps ........................ (248) 14 (11) (245) 260 15
-------- -------- -------- -------- -------- --------
Interest sensitivity gap ............. 1,499 (711) (1,187) $ (399) 5,642 $ 5,243
-------- -------- -------- ======== -------- ========
Cumulative interest sensitivity gap .. $ 1,499 $ 788 $ (399) $ 5,243
======== ======== ======== ========
December 31, 1993
- -----------------
Loans and net leases, net of unearned income $ 14,094 $ 683 $ 1,035 $ 15,812 $ 7,165 $ 22,977
State and municipal investment securities .. 30 16 36 82 573 655
Other investment securities ................ 1,025 277 693 1,995 5,229 7,224
Interest-bearing bank balances ............. 13 -- -- 13 -- 13
Federal funds sold and securities purchased
under resale agreements .................. 691 -- -- 691 -- 691
Trading account assets ..................... 789 -- -- 789 -- 789
-------- -------- -------- -------- -------- --------
Total earning assets ................. 16,642 976 1,764 19,382 12,967 32,349
Interest-bearing demand .................... 460 278 556 1,294 2,222 3,516
Savings and money market savings ........... 4,750 289 578 5,617 577 6,194
Savings certificates ....................... 1,828 1,280 762 3,870 1,272 5,142
Large denomination certificates ............ 826 243 191 1,260 247 1,507
Time deposits in foreign offices ........... 761 16 -- 777 27 804
Federal funds purchased and securities sold
under repurchase agreements .............. 4,741 -- -- 4,741 -- 4,741
Commercial paper ........................... 589 -- -- 589 -- 589
Other short-term borrowed funds ............ 1,033 56 2 1,091 -- 1,091
Bank notes ................................. 150 180 186 516 1,854 2,370
Other long-term debt ....................... -- -- -- -- 591 591
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities ... 15,138 2,342 2,275 19,755 6,790 26,545
Interest rate swaps ........................ (58) (63) (47) (168) 168 --
-------- -------- -------- -------- -------- --------
Interest sensitivity gap ............. 1,446 (1,429) (558) $ (541) 6,345 $ 5,804
-------- -------- -------- ======== -------- ========
Cumulative interest sensitivity gap .. $ 1,446 $ 17 $ (541) $ 5,804
======== ======== ======== ========
Note: Management's assumptions of the repricing characteristics of certain accounts without contractual maturity dates are
detailed above. The December 31, 1993 gap sensitivity table has been restated to reclassify $1.018 billion in loans from over one
year and nonsensitive to 0-3 months sensitive and $100 million in long-term debt from 0-3 months sensitive to over one year and
nonsensitive.
</TABLE>
23
<PAGE> 25
each of the future time periods shown. The projected asset repricing
volumes include management assumptions of prepayments of mortgage
related assets and automobile financing. Also, the projected interest
checking and savings repricing volumes are based on management's
assumptions of the expected rate sensitivity of these accounts in
relationship to the prime rate. Inclusion of the impact of these
management assumptions in the gap analysis table presents a more
accurate view of the corporation's rate risk position. The section on
nonsensitive and maturities beyond one year includes bank credit card
loans of $404 million in 1994 and $499 million in 1993, savings
balances of $676 million in 1994 and $577 million in 1993 and
interest-bearing checking balances of $2.115 billion in 1994 and
$2.222 billion in 1993.
Management believes that rate risk is best measured by
simulation modeling which can incorporate changes in asset and
liability volumes and changes in interest rates, as well as the
associated timing of the rate of change in interest rates of various
categories of assets and liabilities. The model used captures
interest-earning assets, interest-bearing liabilities and off-balance
sheet financial instruments and projects net interest income on a
continuous rolling 12-month basis. The model also incorporates
projections of noninterest income and expense including loan loss
provision expense so management can view projected net income on a
per share basis under simulated interest rate environments. The
corporation monitors exposure to a gradual change in rates of 200
basis points up or down over the rolling 12-month period and an
instantaneous change in rates of 200 basis points up or down over the
same period. From time to time, the model horizon is expanded to a
24-month period. The results of these simulations are monitored for
compliance with policy and analyzed with the objective of identifying
potential adverse performance situations. If conditions indicate an
adverse situation is likely, management's immediate goal is to
construct a strategy to alter the balance sheet or enter into
off-balance sheet financial instruments to neutralize, as much as
possible, the adverse impact.
The corporation policy limit for the maximum negative impact on
net interest revenue from a gradual change in interest rates of 200
basis points over 12 months is 7.5 percent. Management generally has
maintained a risk position well within the policy guideline level.
As of December 31, 1994, the current impact for a 200 basis point
gradual increase in rates over 12 months would be a reduction of less
than one half of one percent in net interest income from an unchanged
rate environment.
The corporation uses both on-balance sheet instruments such as
investment securities and purchased funds and off-balance sheet
derivative instruments to provide growth of net interest income,
stability to the corporation's interest rate sensitivity and enhance
liquidity. Off-balance sheet instruments used for asset and liability
management purposes include interest rate swaps, futures and options
with indices that directly correlate to on-balance sheet instruments.
These financial instruments, principally interest rate swaps, have
been used by the corporation over a number of years, and management
believes the use of such instruments enhances the effectiveness of
asset and liability management on a sound basis.
The Financial Accounting Standards Board has issued Statement
No. 119, "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments" (FASB 119), which is effective for
this year's financial statements. FASB119 requires increased
disclosures about derivatives and other financial instruments. The
statement distinguishes between financial instruments held or issued
for trading purposes and financial instruments held or issued for
purposes other than trading, such as for risk management purposes.
Specific disclosures required by FASB 119 regarding off-balance sheet
financial instruments held for risk management purposes is provided
in Note J to the consolidated financial statements and disclosures
regarding instruments held for trading are included in Note I.
Off-balance sheet asset and liability derivative transactions,
on a stand-alone basis, resulted in additional interest expense of
$9.910 million in 1994. However, this effect was more than offset by
net interest income from related on-balance sheet instruments.
At December 31, 1994, the corporation had $1.118 billion
notional amount of derivatives outstanding for asset and liability
management purposes. Interest rate swaps were $703 million or 63
percent of the total notional amount. Details on the maturity
schedule of asset and liability management derivatives including
notional amounts and average maturities are contained in the
following table.
24
<PAGE> 26
<TABLE>
Maturity Schedule of Asset and Liability Management Derivatives
---------------------------------------------------------------
December 31, 1994
<CAPTION>
Within Over Average
One Two Three Four Five Five Life
Year Years Years Years Years Years Total (Years)
------ ----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ in millions
Interest rate swaps:
Pay fixed/receive floating:
Notional amount ..................... $ 123 $ 50 $ 14 $ 15 $ 17 $ 31 $ 250 2.16
Weighted average rates received ..... 5.87% 5.96% 5.46% 5.62% 5.91% 5.98% 5.86%
Weighted average rates paid ......... 8.15 8.91 6.56 6.89 6.85 7.10 7.91
Receive fixed/pay floating:
Notional amount ..................... $ 7 $ 110 $ 1 $ 2 -- $ 100 $ 220 7.14
Weighted average rates received ..... 9.79% 5.10% 9.79% 10.70% -- 6.31% 5.87%
Weighted average rates paid ......... 8.25 6.17 8.24 8.41 -- 5.31 5.88
Index amortizing swaps:*
Notional amount ..................... -- $ 7 $ 116 $ 12 $ 40 -- $ 175 2.92
Weighted average rates received ..... -- 7.07% 6.08% 7.15% 7.15% -- 6.44%
Weighted average rates paid ......... -- 5.83 5.95 5.86 5.86 -- 5.92
Total interest rate swaps:
Notional amount ..................... $ 130 $ 167 $ 131 $ 29 $ 57 $ 131 $ 645 4.06
Weighted average rates received ..... 6.09% 5.44% 6.03% 6.54% 6.79% 6.23% 6.02%
Weighted average rates paid ......... 8.16 6.97 6.03 6.56 6.17 5.74 6.68
Forward starting interest rate swaps:
Notional amount ..................... -- -- -- -- -- $ 58 $ 58 9.27
Weighted average rates paid ......... -- -- -- -- -- 8.03% 8.03%
Interest rate caps (notional amount)** .. $ 15 $ 400 -- -- -- -- $ 415 1.25
Total derivatives (notional amount) $ 145 $ 567 $ 131 $ 29 $ 57 $ 189 $1,118 3.28
*Maturity is based upon expected average lives rather than contractual lives.
**Average rates are not meaningful.
</TABLE>
Off-balance sheet derivative financial instruments do not expose
the corporation to credit risk equal to the notional amount, but
instead credit risk is equal to the fair value gain of the instrument
if a counterparty fails to perform. The credit risk is normally a
small percentage of the notional amount and fluctuates as interest
rates move up and down. The corporation mitigates this risk by
subjecting the transactions to the same rigorous approval and
monitoring process as is used for on-balance sheet credit
transactions, by dealing in the national market with highly rated
counterparties, by executing all transactions under International
Swaps and Derivatives Association Master Agreements and by using
collateral instruments to reduce exposure. Collateral is delivered by
either party when the fair value of a particular transaction or group
of transactions with the same counterparty on a net basis exceeds an
acceptable threshold of exposure. The threshold level is determined
based on the strength of the individual counterparty.
The fair value of all asset and liability derivative positions
for which the corporation was exposed to counterparties totaled
$14.912 million as of December 31, 1994. The fair value of all asset
and liability derivative positions for which counterparties were
exposed to the corporation amounted to $40.440 million on the same
date. Details of the net fair value loss of $25.528 million are
included in Note J of Notes to Consolidated Financial Statements.
The corporation uses derivative financial contracts to (1) swap
floating rate assets or liabilities to fixed rate; (2) convert fixed
rate assets or liabilities to floating rate; and (3) hedge the
interest rate spread between assets and liabilities. These
transactions serve to better match the repricing characteristics of
various assets and liabilities, reduce spread risk, adjust overall
rate sensitivity and enhance net interest income.
Changing the repricing characteristics of liabilities to match
the assets they support generally is accomplished through an interest
rate swap whereby the corporation pays a fixed rate and receives a
floating rate.
25
<PAGE> 27
This allows the corporation to acquire fixed rate assets without
increasing exposure to rising interest rates. Converting fixed rate
debt to a floating rate is accomplished generally by receiving fixed
on an interest rate swap and paying floating. The corporation has
used this type of transaction to convert long-term subordinated debt
to a floating rate. This transaction increases liquidity by allowing
a long-term liability to replace a short-term liability, yet have a
rate that is consistent with and fluctuates with short-term rates.
Receiving a fixed rate on an interest rate swap and paying a floating
rate has the effect of converting floating rate assets to fixed rate
assets. The results are essentially the same as acquiring a fixed
rate security funded with a floating rate liability. Both
transactions reduce asset sensitivity. The corporation has used this
type of transaction to convert a portion of the floating rate credit
card portfolio to fixed rates.
Hedging the spread between the rate received and the rate paid
on certain assets and liabilities can be achieved by the use of
options contracts such as caps. The corporation has entered into
simultaneous transactions purchasing and selling caps to protect
against a narrowing in the spread between the prime
------------------------------------------
LARGE DENOMINATION DEPOSITS* TABLE 6
December 31, 1994 (thousands)
------------------------------------------
REMAINING MATURITIES
Three months or less... $ 674,514
Over three through
six months .......... 246,551
Over six through
twelve months ....... 204,898
Over twelve months .... $ 290,355
----------
Total ............. $1,416,318
==========
*Includes domestic office
certificates of deposit of
$100 or more
------------------------------------------
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BORROWED FUNDS (Thousands) TABLE 7
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992
------------------- ------------------- -------------------
Amount Rate Amount Rate Amount Rate
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
At year-end:
Federal funds purchased and securities
sold under repurchase agreements ............. $5,898,398 5.33% $4,741,283 2.88% $3,713,492 2.82%
Commercial paper ............................... 406,706 5.09 589,178 2.92 386,618 2.99
Other borrowed funds ........................... $1,007,340 5.30 $1,091,123 3.24 848,823 3.21
---------- ---------- ----------
Total ...................................... $7,312,444 5.32 $6,421,584 2.94 $4,948,933 2.90
========== ========== ==========
Average for the year:
Federal funds purchased and securities
sold under repurchase agreements ............. $5,051,124 4.44 $3,944,864 3.23 $3,110,737 3.73
Commercial paper* .............................. 505,117 3.94 485,889 3.02 469,120 3.54
Other borrowed funds ........................... 674,593 4.24 972,008 3.25 1,381,713 4.23
---------- ---------- ----------
Total ...................................... $6,230,834 4.37 $5,402,761 3.22 $4,961,570 3.85
========== ========== ==========
Maximum month-end balance:
Federal funds purchased and securities
sold under repurchase agreements .............. $5,898,398 $5,307,332 $4,058,560
Commercial paper ................................ 571,347 613,375 597,934
Other borrowed funds ............................ 1,007,340 1,525,017 2,260,089
*Average interest rate for each year includes effect of fees paid on back-up
lines of credit
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 28
rate and federal funds for a portion of the prime floating assets.
The caps also would prevent the corporation from benefiting from a
widening in the spread between prime and federal funds for the assets
covered by the transactions.
The objective of liquidity management is to ensure that the
corporation is positioned to meet all immediate and future demands
for cash. Liquidity management relies upon liquidity analysis,
knowledge of historical trends over past credit and business cycles
and forecasts of future conditions to achieve its objectives. The two
broad-based sources of liquidity which exist for the corporation are
its high quality marketable assets and liabilities which are readily
accepted in the marketplace. Asset liquidity primarily is provided by
securities which, by their maturity structure or marketability, can
produce cash flows that result in enhanced liquidity. The corporation
generates additional cash through the liability side of the balance
sheet from the growth of deposits and the issuance of bank notes and
other forms of debt securities.
Wachovia's ability to attract a variety of funds rests on the
corporation's strength of capital, reputation, credit ratings and
diverse statewide banking networks. At December 31, 1994, Wachovia's
common equity represented 8.39 percent of assets, third highest among
the 25 largest U.S. banking companies. Wachovia's strong capital
position is reflected in its credit ratings and remains central to
its ability to raise additional funds at attractive rates through
short-term borrowings and long-term debt. At year-end 1994, the
corporation's senior debt was rated (P)Aa3 by Moody's and (P)AA by
Standard & Poor's. Subordinated debt was rated A1 and AA- by Moody's
and Standard & Poor's, respectively. Commercial paper was rated P-1
by Moody's and A-1+ by Standard & Poor's.
In addition to seeking to maintain liquidity through a strong
balance sheet and performance that assures market acceptance, the
corporation limits, through policy and internal guidelines which are
subject to periodic review and revision, the total amount of
purchased funds used to support the balance sheet and the
concentrations of funding from noncore sources. Purchased funds
currently are limited to 40 percent of total assets by policy.
Internal management guidelines are currently substantially below the
policy limit. To insure against concentrations by maturity or type of
funding source, the corporation also has established policy limits
for the percentage of purchased funds from individual categories of
liabilities to no more than 20 percent of assets. The percentage of
purchased funds maturing overnight, within 30 days, within 90 days
and within 180 days also are limited by policy. In addition,
management monitors significant concentrations of funds from single
deposit or borrowing sources. Asset liquidity is assured through
maintaining significant amounts of investment securities in the
available-for-sale portfolio. These securities may be sold at any
time to provide needed liquidity or for other reasons. Liquidity for
unusual circumstances also is available from the held-to-maturity
investment securities account.
Management regularly reviews the liquidity position under normal
business conditions and under significant market disruption or stress
conditions. Results of these reviews are presented to the Management
Finance Committee and Board Finance Committee quarterly.
27
<PAGE> 29
Nonperforming Assets
Nonperforming assets at December 31, 1994 were $100.517 million
or .39 percent of loans and foreclosed property. The total decreased
$54.384 million or 35.1 percent from a year earlier, primarily due to
improvement in borrowers' credit positions, which resulted in
paydowns and the return of cash-basis assets to accrual status, and
to sales of foreclosed property. The corporation's problem asset
levels historically have remained relatively low as a result of its
sound underwriting standards, consistent credit reviews and an
aggressive loan charge-off policy.
The largest category of nonperforming assets is real estate. At
year-end 1994, real estate nonperforming assets totaled $68.353
million, representing .87 percent of real estate loans and foreclosed
real estate. This was down $55.242 million or 44.7 percent from
$123.595 million or 1.65 percent a year earlier. The total at
December 31, 1994 included $49.479 million in real estate
nonperforming loans compared with $81.062 million at year-end 1993.
Commercial real estate nonperforming assets were $43.399 million
or 1.07 percent of related loans and foreclosed real estate. The
total decreased $54.615 million or 55.7 percent from $98.014 million
or 2.63 percent at December 31, 1993 and included $35.885 million of
commercial real estate nonperforming loans versus $64.056 million a
year earlier.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 8
December 31 (thousands)
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NONPERFORMING ASSETS
Cash-basis assets:
Domestic borrowers ......................... $ 78,712 $108,882 $173,977 $240,578 $199,480 $110,165
Foreign borrowers -- less developed countries -- -- -- -- 1,437 1,437
-------- -------- -------- -------- -------- --------
Total cash-basis assets ................ 78,712 108,882 173,977 240,578 200,917 111,602
Restructured loans -- domestic ................ --* 80 117 604 2,629 4,693
-------- -------- -------- -------- -------- --------
Total nonperforming loans .............. 78,712** 108,962 174,094 241,182 203,546 116,295
Foreclosed property:
Foreclosed real estate ..................... 22,900 51,701 93,555 69,957 41,139 17,964
Less valuation allowance ................... 4,026 9,168 5,082 2,837 4,012 820
Other foreclosed assets .................... 2,931 3,406 2,842 2,609 5,106 5,267
-------- -------- -------- -------- -------- --------
Total foreclosed property .............. 21,805 45,939 91,315 69,729 42,233 22,411
-------- -------- -------- -------- -------- --------
Total nonperforming assets............. $100,517*** $154,901 $265,409 $310,911 $245,779 $138,706
======== ======== ======== ======== ======== ========
Nonperforming loans to year-end loans ........ .30% .47% .83% 1.17% .96% .60%
Nonperforming assets to year-end loans
and foreclosed property .................... .39 .67 1.25 1.50 1.16 .71
Year-end allowance for loan losses
times nonperforming loans .................. 5.16x 3.72x 2.18x 1.49x 1.33x 1.89x
Year-end allowance for loan losses
times nonperforming assets ................. 4.04 2.61 1.43 1.16 1.10 1.58
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers........................... $ 37,010 $ 44,897 $ 49,277 $ 88,158 $ 66,202 $ 55,489
======== ======== ======== ======== ======== ========
* Excludes $10,842 of loans which have been renegotiated at market rates
and have been reclassified to performing status
** See Note D for interest income foregone on loans that had been placed on
a cash basis or on which the contractual rate of interest has been reduced
below market
*** Net of cumulative corporate and commercial real estate charge-offs and
foreclosed real estate write-downs totaling $34,354; includes $7,165 of
nonperforming assets on which interest and principal are paid current
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 30
Provision and Allowance for Loan Losses
The provision for loan losses was $71.763 million in 1994,
exceeding net charge-offs by $1.334 million but lower by $20.889
million or 22.5 percent from $92.652 million in 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.
Factors considered in this assessment include growth and composition
of the loan portfolio, historical credit loss experience, current and
anticipated economic conditions and changes in borrowers' financial
positions.
Net loan losses for the year totaled $70.429 million or .29
percent of average loans compared with $67.411 million or .31 percent
in 1993. Loan recoveries represented 31.4 percent of gross
charge-offs, up from 30.6 percent in the prior year, with recoveries
increasing primarily in real estate and credit cards. Real estate
loans had net recoveries of $5.310 million, largely in commercial
mortgages, versus net loan losses of $5.821 million in 1993. Credit
card net charge-offs totaled $58.434 million or 1.66 percent of
average credit card loans compared with $52.675 million or 2.03
percent in the prior year.
The allowance for loan losses at December 31, 1994 was $406.132
million, representing 1.57 percent of year-end loans and 516 percent
coverage of nonperforming loans. Comparable amounts a year earlier
were $404.798 million, 1.76 percent and 372 percent coverage,
respectively.
The corporation prospectively will adopt Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" (FASB 114), as of January 1, 1995. This new accounting
standard requires that a loan which meets the definition of
impairment be measured at the present value of expected future cash
flows using the loan's effective interest rate, or as a practical
expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. A loan is
impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. The
corporation does not expect the adoption of the standard to have a
material impact on its financial position or results of operations.
ALLOWANCE FOR LOAN LOSSES
Year-end loan loss X Allowance times
allowance (millions) nonperforming loans
-------------------- -------------------
1989 $219.2 1.89x
1990 $269.9 1.33x
1991 $360.2 1.49x
1992 $379.6 2.18x
1993 $404.8 3.72x
1994 $406.1 5.16x
EARNINGS COVERAGE OF NET LOAN LOSSES
(EXCLUDING SUBSIDIARY SALE AND SECURITIES TRANSACTIONS)
Earnings before income
taxes and provision for X Number of times earnings
loan losses (millions) covered net loan losses
---------------------- --------------------------
1989 $494.7 7.24x
1990 $571.1 6.09x
1991 $562.8 2.77x
1992 $694.6 7.29x
1993 $752.8 11.17x
1994 $829.9 11.78x
LOAN LOSS EXPERIENCE
(MILLIONS)
<TABLE>
<CAPTION>
Net loan
Credit losses to
card Commercial Subtotal Foreign Subtotal Other Total avg loans
------- ---------- -------- ------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989 $32.838 $ 9.418 $ 42.256 $ .055 $ 42.311 $26.026 $ 68.337 .37%
1990 $41.821 $16.278 $ 58.099 $(.319) $ 57.780 $36.025 $ 93.805 .47%
1991 $65.359 $56.490 $121.849 $ .197 $122.046 $80.953 $202.999 .99%
1992 $56.795 $ .559 $ 57.354 $ .953 $ 58.307 $36.938 $ 95.245 .48%
1993 $52.675 $ 1.220 $ 53.895 $(.032) $ 53.863 $13.548 $ 67.411 .31%
1994 $58.434 $ 7.206 $ 65.640 $(.032) $ 65.608 $ 4.821 $ 70.429 .29%
</TABLE>
29
<PAGE> 31
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES (Thousands) TABLE 9
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of year ........... $404,798 $379,557 $360,193 $269,916 $219,219 $200,698
Additions from acquisitions ............ -- -- -- 276 1,510 327
Allowance of company sold .............. -- -- (4,811) -- -- --
Provision for loan losses .............. 71,763 92,652 119,420 293,000 142,992 86,531
Deduct net loan losses:
Loans charged off:
Commercial ......................... 12,883 6,792 13,153 61,089 22,982 14,219
Credit card ........................ 69,728 62,991 67,863 72,386 48,150 40,069
Other revolving credit ............. 3,715 3,922 4,627 5,154 3,680 2,690
Other retail ....................... 11,409 8,431 17,221 26,251 23,625 23,945
Real estate ........................ 4,705 14,514 27,041 58,089 16,241 7,907
Lease financing .................... 226 458 668 1,614 1,497 1,351
Foreign ............................ -- -- 960 675 -- 452
-------- -------- -------- -------- -------- --------
Total ............................ 102,666 97,108 131,533 225,258 116,175 90,633
Recoveries:
Commercial ......................... 5,677 5,572 12,594 4,599 6,704 4,801
Credit card ........................ 11,294 10,316 11,068 7,027 6,329 7,231
Other revolving credit ............. 1,059 1,029 1,024 721 747 707
Other retail ....................... 3,956 3,791 5,481 6,545 5,368 5,899
Real estate ........................ 10,015 8,693 5,792 2,626 2,657 1,170
Lease financing .................... 204 264 322 263 246 2,091
Foreign ............................ 32 32 7 478 319 397
-------- -------- -------- -------- -------- --------
Total ............................ 32,237 29,697 36,288 22,259 22,370 22,296
-------- -------- -------- -------- -------- --------
Net loan losses ...................... 70,429 67,411 95,245 202,999 93,805 68,337
-------- -------- -------- -------- -------- --------
Balance at end of year................. $406,132 $404,798 $379,557 $360,193 $269,916 $219,219
======== ======== ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial ............................. $ 7,206 $ 1,220 $ 559 $ 56,490 $ 16,278 $ 9,418
Credit card ............................ 58,434 52,675 56,795 65,359 41,821 32,838
Other revolving credit ................. 2,656 2,893 3,603 4,433 2,933 1,983
Other retail ........................... 7,453 4,640 11,740 19,706 18,257 18,046
Real estate ............................ (5,310) 5,821 21,249 55,463 13,584 6,737
Lease financing ........................ 22 194 346 1,351 1,251 (740)
Foreign ................................ (32) (32) 953 197 (319) 55
--------- --------- -------- -------- -------- --------
Total............................. $ 70,429 $ 67,411 $ 95,245 $202,999 $ 93,805 $ 68,337
========= ========= ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial ............................. .08% .02% .01% .69% .20% .12%
Credit card ............................ 1.66 2.03 3.20 4.19 2.94 2.64
Other revolving credit ................. .80 .88 1.12 1.48 1.02 .74
Other retail ........................... .23 .16 .44 .72 .64 .64
Real estate ............................ (.07) .08 .30 .73 .19 .11
Lease financing ........................ .01 .14 .29 1.08 .87 (.47)
Foreign ................................ (.03) (.04) 1.32 .23 (.40) .06
Total loans ............................ .29 .31 .48 .99 .47 .37
Year-end allowance to outstanding loans. 1.57% 1.76% 1.80% 1.75% 1.27% 1.12%
Earnings coverage of net loan losses* .. 11.78x 11.17x 7.29x 2.77x 6.09x 7.24x
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES**
Commercial ............................. $ 88,682 $ 89,431 $ 92,279 $ 89,055 $ 73,636 $ 65,591
Credit card............................. 109,615 78,264 54,584 44,655 39,255 39,918
Other revolving credit ................. 5,368 4,958 4,718 6,193 3,545 2,860
Other retail............................ 32,084 33,748 28,113 25,303 44,233 41,399
Real estate............................. 108,354 111,960 113,996 128,216 76,534 42,610
Lease financing ........................ 2,211 2,018 1,994 2,159 3,114 3,032
Foreign................................. 3,830 931 715 1,382 2,296 2,933
Unallocated............................. 55,988 83,488 83,158 63,230 27,303 20,876
--------- --------- -------- -------- -------- --------
Total ............................ $406,132 $404,798 $379,557 $360,193 $269,916 $219,219
======== ======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
*Earnings before income taxes and provisions for loan losses excluding
subsidiary sales and securities transactions
**The allocation of the allowance for loan losses above represents an estimate
based on historical loss experience, individual credits, economic conditions
and other judgmental factors. Since any allocation is judgmental and involves
consideration of many factors, the allocation may be more or less than the
charge-offs that may ultimately occur. The entire allowance is available for
charge-offs in any category of loans. See page 71 for percentages of loan
categories to total loans.
</TABLE>
30
<PAGE> 32
Noninterest Income
Total other operating revenue was higher by $4.253 million or
slightly under 1 percent for the year. The modest increase was the
mixed result of good gains in credit card income, trust service fees
and a broad array of other fee categories largely offset by reduced
levels of deposit service charges, mortgage fee income and trading
account profits.
Credit card income grew $10.145 million or 10 percent. Higher
levels of cardholder interchange income and membership fees primarily
accounted for the increase. Cardholder purchase volume totaled $3.358
billion in 1994 compared with $2.796 billion in 1993. Membership fee
gains reflected both growth in new cardholder accounts and a strong
renewal rate among existing accounts.
Trust service fees increased $8.070 million or 6.7 percent.
Growth occurred largely in personal financial services fees and in
revenues associated with Wachovia's proprietary Biltmore Funds.
Corporate trust fees were modestly higher for the year. During the
fourth quarter of 1994, the corporation expanded its Biltmore mutual
funds through the addition of two state municipal bond funds and an
emerging markets equity fund. At December 31, 1994, assets of the
Biltmore Funds totaled $2.209 billion versus $1.285 billion a year
earlier. Total trust assets were $78.972 billion, including $17.084
billion under management, compared with $92.287 billion in total
assets, including $17.950 billion under management, at year-end 1993.
The decline in custodial assets largely reflected the loss of a
single major account while managed assets were lower, particularly
the fixed income portfolio, due to market valuations in 1994.
Service charges on deposit accounts decreased $6.736 million or
3.3 percent. The lower level largely reflected a drop in commercial
account analysis fees due, in part, to closing of the corporation's
retail lockbox in late 1993 and to the impact of rising interest
rates, which increased the value of corporate deposit balances.
Partially offsetting this decline was a modest increase in overdraft
and NSF charges.
Mortgage fee income was lower by $5.877 million or 15 percent.
Although servicing fees, the largest component of total mortgage fee
income, were up modestly in 1994, the gain was more than offset by
reduced origination fees and losses on loan sales due to rising
interest rates. Loan originations for the year totaled $1.429 billion
versus $2.220 billion in 1993. At December 31, 1994, the mortgage
portfolio serviced was $9.465 billion, representing 138,949 loans.
This compared with $9.007 billion and 135,637 loans a year earlier.
In February of 1995, the corporation announced it is offering for
sale its residential mortgage loan servicing portfolio based on a
strategic analysis of the future of the servicing business,
competitive trends in the industry and the long-term need for
investments in technology. The transaction is expected to close in
late March or early April. The corporation will continue, however, to
offer a full line of mortgage loan services.
Increasing interest rates throughout the year negatively
impacted bond values, lowering trading account profits. In 1994,
trading account activity resulted in profits of $3.099 million
compared with $13.103 million in 1993, a decrease of $10.004 million
or 76.3 percent.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 10
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts .................. $196,149 $202,885 $189,537 $170,827 $155,808 $136,620
Fees for trust services .............................. 128,100 120,030 109,504 102,665 99,572 101,072
Credit card income -- net of interchange payments .... 111,925 101,780 78,068 62,814 55,202 50,092
Mortgage fee income .................................. 33,224 39,101 40,078 28,608 20,741 16,003
Trading account profits (losses) -- excluding interest 3,099 13,103 (11,542) 11,541 11,637 7,510
Insurance premiums and commissions ................... 11,679 11,847 15,002 12,819 14,232 15,387
Bankers' acceptance and letter of credit fees ........ 23,168 19,668 20,141 14,232 11,605 11,655
Student loan servicing ............................... -- 5,535 33,250 31,470 29,841 27,230
Other service charges and fees ....................... 56,884 48,915 44,585 42,108 34,919 30,883
Other income ......................................... 40,204 37,315 16,619 13,094 25,295 15,365
-------- -------- -------- -------- -------- --------
Total other operating revenue .................. 604,432 600,179 535,242 490,178 458,852 411,817
Gain on sale of subsidiary ........................... -- 8,030 19,486 -- -- --
Investment securities gains .......................... 3,320 19,394 1,497 11,091 6,218 7,625
-------- -------- -------- -------- -------- --------
Total .......................................... $607,752 $627,603 $556,225 $501,269 $465,070 $419,442
======== ======== ======== ======== ======== ========
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 33
Excluding income from student loan servicing, which the
corporation sold as a subsidiary in February 1993, remaining combined
categories of total other operating revenue grew $14.190 million or
12.1 percent. Bankers' acceptance and letter of credit fees increased
$3.500 million or 17.8 percent. Other service charges and fees, which
include net ATM fees, mutual fund fees, safe deposit fees, brokerage
commissions and debit card interchange fees, were up $7.969 million
or 16.3 percent, while other income rose $2.889 million or 7.7
percent.
Revenues from Wachovia's off-balance sheet trading and lending
activities totaled $14.457 million in 1994 versus $8.635 million in
1993 and are included in other operating income. Note I in the Notes
to Consolidated Financial Statements contains additional information
on this activity.
Including gains on securities and subsidiary sales, total
noninterest income was lower by $19.851 million or 3.2 percent.
Investment securities gains totaled $3.320 million in 1994 compared
with $19.394 million in 1993. Total noninterest income in 1993 also
included a pretax gain of $8.030 million from the sale of Wachovia
Student Financial Services, Inc.
Noninterest Expense
Total noninterest expense was down $32.823 million or 2.9
percent for the year. The reduction reflected a slight decrease in
total personnel expense, modestly higher combined net occupancy and
equipment expense and lower spending levels in remaining combined
categories of noninterest expense. The overhead ratio, which measures
noninterest expense as a percent of total adjusted revenues (taxable
equivalent net interest income and total other operating revenue),
declined to 54.1 percent for the year from 57 percent in 1993.
Total personnel expense edged down $5.173 million or slightly
under 1 percent. Salaries expense grew $9.169 million or 2 percent,
largely reflecting higher base salaries. Increases in relocation
costs and temporary help, reflecting moves by the corporation to
consolidate several loan processing and other operations, also
contributed to the rise. Employee benefits expense decreased $14.342
million or 12.7 percent. The decline largely was due to lower
accruals for anticipated medical benefits costs, as well as reduced
employee retirement savings and profit-sharing plan expenses,
reflective of a special contribution made to the plan in 1993 but not
in 1994.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 11
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Salaries ................................. $ 464,790 $ 455,621 $ 451,193 $ 443,273 $413,592 $403,888
Employee benefits ........................ 98,717 113,059 88,630 81,216 73,881 81,110
---------- ---------- ---------- ---------- -------- --------
Total personnel expense ............ 563,507 568,680 539,823 524,489 487,473 484,998
Net occupancy expense .................... 80,911 82,070 80,673 75,729 71,402 64,044
Equipment expense ........................ 106,508 102,246 100,916 99,569 98,042 101,101
Postage and delivery ..................... 35,163 38,160 37,036 38,188 33,655 32,888
Outside data processing, programming
and software ........................... 35,211 38,613 33,082 30,671 27,684 28,027
Stationery and supplies .................. 24,558 25,344 26,342 28,507 23,289 24,949
Advertising and sales promotion .......... 34,067 38,141 27,911 22,139 30,010 24,753
Professional services .................... 20,493 17,144 18,412 25,786 18,887 15,536
Travel and business promotion ............ 16,254 15,563 13,578 13,641 13,637 13,393
FDIC insurance and regulatory examinations 53,451 53,663 53,970 49,629 27,377 18,736
Check clearing and other bank services ... 8,894 10,159 10,391 11,334 10,310 9,187
Amortization of intangible assets ........ 18,693 28,001 34,423 51,756 19,815 14,816
Foreclosed property expense .............. (4,288) 7,654 9,755 15,655 4,845 2,100
Other expense ............................ 104,991 105,798 109,340 109,424 85,858 82,362
---------- ---------- ---------- ---------- -------- --------
Total .............................. $1,098,413 $1,131,236 $1,095,652 $1,096,517 $952,284 $916,890
========== ========== ========== ========== ======== ========
Overhead ratio........................... 54.1% 57.0% 58.6% 62.5% 58.4% 60.6%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 34
Combined net occupancy and equipment expense increased $3.103
million or 1.7 percent. Net occupancy expense was down $1.159 million
or 1.4 percent due, in part, to lower lease and renovation expenses.
Equipment expense rose $4.262 million or 4.2 percent, primarily
driven by increased depreciation expense and by higher equipment
installation and relocation expenses associated with capital
expenditures in 1993 and 1994 for new technology.
Remaining combined categories of noninterest expense were down
$30.753 million or 8.1 percent, led by a net gain in foreclosed
property expense and by lower levels of amortization expense and
advertising and sales promotion expense. The net gain in foreclosed
property expense totaled $4.288 million in 1994 compared with net
expense of $7.654 million in 1993.
Income Taxes
Applicable income taxes increased $26.979 million or 13.8
percent for the year. 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 on 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 Georgia and North
Carolina taxes as well, and results in substantial interest savings
for local governments and their constituents.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
INCOME TAXES (thousands) TABLE 12
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992
----------------- ----------------- -----------------
Amount % Amount % Amount %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes .............................. $761,482 $687,540 $596,203
======== ======== ========
Federal income taxes at statutory rate .................. $266,519 35.0 $240,639 35.0 $202,709 34.0
State and local income taxes -- net of federal tax benefit 4,128 .5 7,235 1.1 8,290 1.4
Effect of tax-exempt securities interest and other income (48,217) (6.3) (50,817) (7.4) (49,783) (8.4)
Other items ............................................. (6) -- (1,612) (.3) 1,762 .3
-------- ----- -------- ----- -------- -----
Total tax expense ................................. $222,424 29.2 $195,445 28.4 $162,978 27.3
======== ===== ======== ===== ======== =====
Currently payable:
Federal ............................................... $202,685 91.1 $209,853 107.4 $159,787 98.0
Foreign ............................................... 147 .1 289 .1 261 .2
State and local ....................................... 7,152 3.2 11,966 6.1 14,667 9.0
--------- ----- -------- ----- -------- -----
Total ............................................. 209,984 94.4 222,108 113.6 174,715 107.2
-------- ----- -------- ----- -------- -----
Deferred:
Federal ............................................... 13,241 6.0 (25,828) (13.2) (9,631) (5.9)
State ................................................. (801) (.4) (835) (.4) (2,106) (1.3)
-------- ----- -------- ----- -------- -----
Total ............................................. 12,440 5.6 (26,663) (13.6) (11,737) (7.2)
-------- ----- -------- ----- -------- -----
Total tax expense ................................. $222,424 100.0 $195,445 100.0 $162,978 100.0
======== ===== ======== ===== ======== =====
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 35
SHAREHOLDERS' EQUITY AND CAPITAL RATIOS
Shareholders' equity was $3.287 billion at December 31, 1994, a
gain of $269 million or 8.9 percent from $3.018 billion at year-end
1993. The total at December 31, 1994 included $37.635 million, net of
tax, of unrealized losses on securities available-for-sale marked to
fair market value under FASB 115. Equity for the year averaged $3.096
billion, an increase of $224 million or 7.8 percent from $2.872
billion in 1993 and included unrealized losses of $7.561 million, net
of tax, on securities available-for-sale. At year-end 1994,
Wachovia's book value was $19.23 per share, up 9.2 percent from
$17.61 per share a year earlier. The corporation's internal capital
generation rate (net income less dividends as a percentage of average
equity) was 10.6 percent for the year compared with 10.5 percent in
1993.
On July 22, 1994, the corporation's board of directors
authorized the repurchase of up to 5 million shares of common stock.
The authorization replaces an earlier one for the repurchase of the
same number of shares. Repurchased shares will be used for various
corporate purposes, including the issuance of shares for the
corporation's employee stock plans and dividend reinvestment plan. In
1994, a total of 1,620,900 shares were repurchased under the new and
earlier authorizations at an average price of $32.55 per share for a
total cost of $52.760 million. Shares available for possible
repurchase at year-end 1994 totaled 4,324,500.
Intangible assets were $78.408 million at December 31, 1994,
down $11.710 million or 13 percent from $90.118 million a year
earlier. The total consisted of $34.477 million in mortgage servicing
rights, $30.961 million in goodwill, $8.574 million in deposit base
intangibles and $4.396 million in other intangible assets, primarily
purchased credit card intangibles. At year-end 1993, mortgage
servicing rights were $40.875 million, goodwill totaled $32.451
million, deposit base intangibles were $10.647 million and other
intangibles were $6.145 million.
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-
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL COMPONENTS AND RATIOS TABLE 13
December 31 (thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tier I capital:
Common shareholders' equity ........... $ 3,286,507 $ 3,017,947 $ 2,774,767 $ 2,484,414 $ 2,370,928 $ 2,176,503
Less ineligible intangible assets ..... 30,961 32,451 33,941 33,198 34,727 36,315
Unrealized (gains) losses on securities
available-for-sale, net of tax ...... 37,635 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Tier I capital .............. 3,293,181 2,985,496 2,740,826 2,451,216 2,336,201 2,140,188
Tier II capital:
Allowable allowance for loan losses ... 406,132 384,032 348,887 332,528 266,898 219,219
Allowable long-term debt .............. 830,782 583,738 344,983 136,682 143,477 177,402
----------- ----------- ----------- ----------- ----------- -----------
Tier II capital additions ......... 1,236,914 967,770 693,870 469,210 410,375 396,621
----------- ----------- ----------- ----------- ----------- -----------
Total capital ..................... $ 4,530,095 $ 3,953,266 $ 3,434,696 $ 2,920,426 $ 2,746,576 $ 2,536,809
=========== =========== =========== =========== =========== ===========
Risk-adjusted assets .................... $35,573,896 $30,701,782 $27,880,304 $26,583,836 $26,056,745 $25,095,027
Quarterly average assets ................ $38,146,370 $35,419,829 $32,518,351 $32,180,449 $31,760,373 $29,478,233
Risk-based capital ratios:
Tier I capital........................ 9.26% 9.72% 9.83% 9.22% 8.97% 8.53%
Total capital......................... 12.73 12.88 12.32 10.99 10.54 10.11
Tier I leverage ratio*.................. 8.63% 8.44% 8.44% 7.62% 7.36% 7.27%
Shareholders' equity to total assets.... 8.39% 8.26% 8.32% 7.49% 7.12% 7.19%
* Ratio excludes the average unrealized losses on securities
available-for-sale, net of tax, of ($26,581) for 1994
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 36
adjusted assets and off-balance sheet items. Regulatory requirements
presently specify that Tier I capital should exclude the market
appreciation or depreciation 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 of total capital 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 December 31, 1994, Wachovia's Tier I to risk-adjusted assets
ratio was 9.26 percent with total capital 12.73 percent of
risk-adjusted assets. The corporation's Tier I leverage ratio was
8.63 percent.
Dividends
Cash dividends paid totaled $210.503 million in 1994 versus
$191.488 million in 1993, an increase of $19.015 million or 9.9
percent. For 1994, cash dividends paid represented a payout of 39.1
percent of net income compared with 38.9 percent in 1993. Cash
dividends paid per common share were $1.23, higher by 10.8 percent
from $1.11 paid per common share a year earlier.
The corporation's board of directors declared a first quarter
dividend of $.33 per share at its meeting on January 27, 1995. The
dividend represents an increase of 10 percent from $.30 per share
paid in the same period of 1994 and is payable on March 1 to
shareholders of record on February 8, 1995.
Additional dividend information is presented on pages 72 and 73.
YEAR-END SHAREHOLDERS'
EQUITY PER SHARE
FIVE-YEAR COMPOUND GROWTH RATE = 8.2%
1989 $12.96
1990 $14.07
1991 $14.56
1992 $16.18
1993 $17.61
1994 $19.23
35
<PAGE> 37
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
QUARTERLY FINANCIAL SUMMARY TABLE 14
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
------------------------------------------ --------------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
---------- -------- ------- -------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent... $677,097 $632,359 $594,669 $558,329 $568,749 $558,418 $549,446 $545,125
Interest expense ....................... 305,564 274,329 242,488 216,007 217,832 211,145 203,377 206,658
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income -- taxable equivalent 371,533 358,030 352,181 342,322 350,917 347,273 346,069 338,467
Taxable equivalent adjustment .......... 25,893 24,909 24,882 24,476 24,732 26,487 24,423 23,259
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income .................... 345,640 333,121 327,299 317,846 326,185 320,786 321,646 315,208
Provision for loan losses .............. 19,539 18,123 16,342 17,759 18,013 23,483 26,084 25,072
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses ...................... 326,101 314,998 310,957 300,087 308,172 297,303 295,562 290,136
Other operating revenue ................ 154,723 151,541 153,299 144,869 152,441 149,761 148,593 149,384
Gain on sale of subsidiary ............. -- -- -- -- -- -- -- 8,030
Investment securities gains ............ 2,094 433 221 572 7,216 702 1,254 10,222
-------- -------- -------- -------- -------- -------- -------- --------
Total other income ..................... 156,817 151,974 153,520 145,441 159,657 150,463 149,847 167,636
Personnel expense ...................... 141,566 139,695 141,232 141,014 147,709 142,393 138,234 140,344
Other expense .......................... 140,959 131,598 133,313 129,036 152,031 131,153 134,600 144,772
-------- -------- -------- -------- -------- -------- -------- --------
Total other expense .................... 282,525 271,293 274,545 270,050 299,740 273,546 272,834 285,116
Income before income taxes ............. 200,393 195,679 189,932 175,478 168,089 174,220 172,575 172,656
Applicable income taxes* ............... 58,267 57,687 55,791 50,679 45,092 49,813 49,452 51,088
-------- -------- -------- -------- -------- -------- -------- --------
Net income ............................. $142,126 $137,992 $134,141 $124,799 $122,997 $124,407 $123,123 $121,568
======== ======== ======== ======== ======== ======== ======== ========
Net income per common share:
Primary ............................. $ .83 $ .80 $ .78 $ .72 $ .71 $ .71 $ .71 $ .70
Fully diluted ....................... $ .82 $ .80 $ .78 $ .72 $ .71 $ .71 $ .70 $ .69
Cash dividends paid per
common share ........................ $ .33 $ .30 $ .30 $ .30 $ .30 $ .27 $ .27 $ .27
Average primary shares outstanding .... 171,973 172,097 172,558 172,739 173,175 174,300 174,712 173,579
Average fully diluted shares
outstanding ......................... 172,552 172,701 173,197 173,378 173,943 175,414 176,004 175,904
SELECTED AVERAGE BALANCES (millions)
Total assets............................ $ 38,146 $ 37,409 $ 36,753 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473
Loans -- net of unearned income......... 25,290 24,553 23,969 23,010 22,165 21,656 21,268 21,082
Investment securities................... 7,582** 7,695** 7,767** 7,690** 7,992 7,072 6,615 6,462
Other interest-earning assets .......... 877 809 829 1,083 1,234 1,277 1,145 1,119
Total interest-earning assets .......... 33,749 33,057 32,565 31,783 31,391 30,005 29,028 28,663
Interest-bearing deposits .............. 17,040 17,020 16,964 16,694 17,030 16,835 16,986 17,228
Short-term borrowed funds .............. 6,619 6,115 6,038 6,148 6,218 5,432 4,998 4,950
Long-term debt ......................... 4,795 4,637 4,281 3,670 2,774 2,370 1,768 1,363
Total interest-bearing liabilities...... 28,454 27,772 27,283 26,512 26,022 24,637 23,752 23,541
Noninterest-bearing deposits ........... 5,471 5,364 5,333 5,366 5,544 5,410 5,253 5,208
Total deposits ......................... 22,511 22,384 22,297 22,060 22,574 22,245 22,239 22,436
Shareholders' equity ................... 3,186 3,114 3,063 3,021 2,934 2,907 2,852 2,794
RATIOS (averages)
Annualized net loan losses to loans .31% .29% .26% .30% .31% .35% .32% .27%
Annualized net yield on
interest-earning assets ......... 4.37 4.30 4.34 4.37 4.44 4.59 4.78 4.79
Shareholders' equity to:
Total assets .................... 8.35 8.32 8.33 8.44 8.28 8.58 8.72 8.60
Net loans ....................... 12.80 12.89 13.00 13.36 13.48 13.68 13.66 13.50
Annualized return on assets ....... 1.49 1.48 1.46 1.40 1.39 1.47 1.51 1.50
Annualized return on shareholders'
equity .......................... 17.84 17.73 17.52 16.53 16.77 17.12 17.27 17.41
*Income taxes applicable to securities transactions were $840, $173, $89,
$226, $2,846, $291, $371 and $3,964, respectively
**Reported at amortized cost; excludes pretax unrealized gains (losses) on
securities available-for-sale of ($44) for the fourth quarter of 1994, ($28)
for the third quarter of 1994, ($14) for the second quarter of 1994 and $37
for the first quarter of 1994
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 38
FOURTH QUARTER ANALYSIS
Net income per fully diluted share for the fourth quarter of
1994 was $.82, up 16.4 percent from $.71 per share in the same period
a year earlier. Net income totaled $142.126 million, higher by
$19.129 million or 15.6 percent, and represented returns of 17.8
percent on shareholders' equity and 1.49 percent on assets.
Taxable equivalent net interest income rose $20.616 million or
5.9 percent on strong loan growth and a higher earning asset yield.
Average loans increased $3.125 billion or 14.1 percent, led by
regular commercial loans, up $1.623 million or 25.9 percent, credit
cards, which were higher by $885 million or 30.2 percent, and
commercial mortgages, which grew $290 million or 9.2 percent. The
average loan yield increased 77 basis points from the year-earlier
period.
The provision for loan losses was $19.539 million, higher by
$1.526 million or 8.5 percent from $18.013 million in the fourth
quarter of 1993. Net loan losses totaled $19.412 million or .31
percent of average loans on an annualized basis compared with $17.306
million or .31 percent in the year-earlier quarter. The majority of
the increase in net loan losses was due to higher credit card net
charge-offs, which largely reflected growth in the credit card
portfolio. Credit card net loan losses totaled $16.756 million or
QUARTERLY NET INCOME PER SHARE, QUARTERLY NET INCOME PER SHARE,
1993 1994
(FULLY DILUTED) (FULLY DILUTED)
1st Q $.69 1st Q $.72
2nd Q $.70 2nd Q $.78
3rd Q $.71 3rd Q $.80
4th Q $.71 4th Q $.82
<TABLE>
- ---------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 15
- ---------------------------------------------------------------------------------------
<CAPTION>
1994 1993
Fourth Fourth
Quarter Quarter Change
------- ------- ------
<S> <C> <C> <C>
Interest income -- taxable equivalent ................. $3.94 $3.28 $ .66
Interest expense ...................................... 1.78 1.25 .53
----- ----- -----
Net interest income -- taxable equivalent.............. 2.16 2.03 .13
Taxable equivalent adjustment ......................... .15 .15 --
----- ----- -----
Net interest income ................................... 2.01 1.88 .13
Provision for loan losses ............................. .12 .10 .02
----- ----- -----
Net interest income after provision for loan losses.... 1.89 1.78 .11
Other operating revenue ............................... .90 .88 .02
Investment securities gains ........................... .02 .04 (.02)
----- ----- -----
Total other income .................................... .92 .92 --
Personnel expense ..................................... .82 .85 (.03)
Other expense ......................................... .82 .88 (.06)
----- ----- -----
Total other expense ................................... 1.64 1.73 (.09)
Income before income taxes ............................ 1.17 .97 .20
Applicable income taxes ............................... .34 .26 .08
----- ----- -----
Net income ............................................ $ .83 $ .71 $ .12
===== ===== =====
- ---------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 39
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS-- FOURTH QUARTER* TABLE 16
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
- ------------------- ------------- --------------------- ----------------------
1994 1993 1994 1993 1994 1993 Variance Rate Volume
- -------- -------- ---- ---- --------- --------- --------- --------- --------
(Millions) INTEREST INCOME (Thousands)
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
Loans:
$ 7,896 $ 6,273 6.86 5.22 Commercial.................... $136,600 $ 82,541 $ 54,059 $29,682 $24,377
1,945 1,908 9.91 8.82 Tax-exempt.................... 48,582 42,414 6,168 5,328 840
------- ------- -------- -------- --------
9,841 8,181 7.47 6.05 Total commercial........... 185,182 124,955 60,227 32,136 28,091
752 706 8.56 8.33 Direct retail................. 16,229 14,820 1,409 431 978
2,442 2,389 7.85 8.02 Indirect retail............... 48,310 48,283 27 (1,048) 1,075
3,812 2,927 11.44 11.17 Credit card................... 109,926 82,439 27,487 2,007 25,480
339 329 12.05 11.15 Other revolving credit........ 10,297 9,266 1,031 762 269
------- ------- -------- -------- --------
7,345 6,351 9.98 9.67 Total retail............... 184,762 154,808 29,954 5,084 24,870
524 471 10.87 7.69 Construction.................. 14,358 9,116 5,242 4,113 1,129
3,447 3,157 8.23 7.55 Commercial mortgages.......... 71,507 60,103 11,404 5,634 5,770
3,761 3,787 7.89 7.84 Residential mortgages......... 74,770 74,787 (17) 504 (521)
------- ------- -------- -------- --------
7,732 7,415 8.24 7.71 Total real estate.......... 160,635 144,006 16,629 10,305 6,324
185 147 7.75 8.40 Lease financing............... 3,615 3,113 502 (256) 758
187 71 6.32 4.08 Foreign....................... 2,987 735 2,252 568 1,684
------- ------- -------- -------- --------
25,290 22,165 8.42 7.65 Total loans................ 537,181 427,617 109,564 45,732 63,832
Investment securities:
Held-to-maturity:
2,414 4,523 6.65 5.98 U.S. Government and agency.. 40,487 68,130 (27,643) 7,027 (34,670)
1,103 2,468 7.79 6.15 Mortgage backed securities.. 21,640 38,271 (16,631) 8,336 (24,967)
566 660 12.32 12.14 State and municipal......... 17,579 20,190 (2,611) 302 (2,913)
14 341 5.71 3.79 Other....................... 209 3,254 (3,045) 1,102 (4,147)
------- ------- -------- -------- --------
Total securities
4,097 7,992 7.74 6.45 held-to-maturity......... 79,915 129,845 (49,930) 22,332 (72,262)
Available-for-sale:**
2,389 -- 5.47 -- U.S. Government and agency.. 32,922 -- 32,922 -- 32,922
855 -- 4.50 -- Mortgage backed securities.. 9,694 -- 9,694 -- 9,694
241 -- 6.22 -- Other....................... 3,773 -- 3,773 -- 3,773
------- ------- -------- -------- --------
Total securities
3,485 -- 5.28 -- available-for-sale....... 46,389 -- 46,389 -- 46,389
------- ------- -------- -------- --------
7,582 7,992 6.61 6.45 Total investment securities 126,304 129,845 (3,541) 3,222 (6,763)
7 11 6.62 4.08 Interest-bearing bank balances.. 110 116 (6) 54 (60)
Federal funds sold and
securities purchased under
100 513 5.46 3.16 resale agreements............. 1,382 4,089 (2,707) 1,839 (4,546)
770 710 6.25 3.96 Trading account assets 12,120 7,082 5,038 4,392 646
------- ------- -------- -------- --------
$33,749 $31,391 7.96 7.19 Total interest-earning assets 677,097 568,749 108,348 63,734 44,614
======= =======
INTEREST EXPENSE
$ 3,364 $ 3,319 1.70 1.79 Interest-bearing demand......... 14,443 14,976 (533) (735) 202
6,114 6,080 3.08 2.40 Savings and money market savings 47,438 36,774 10,664 10,464 200
5,457 5,426 4.61 4.12 Savings certificates............ 63,416 56,393 7,023 6,692 331
1,493 1,550 4.86 4.95 Large denomination certificates. 18,288 19,338 (1,050) (349) (701)
------- ------- -------- -------- --------
Total time deposits in
16,428 16,375 3.47 3.09 domestic offices......... 143,585 127,481 16,104 15,691 413
612 655 5.12 3.13 Time deposits in foreign offices 7,898 5,170 2,728 3,088 (360)
------- ------- -------- -------- --------
17,040 17,030 3.53 3.09 Total time deposits........ 151,483 132,651 18,832 18,756 76
Federal funds purchased and
securities sold under
5,478 4,604 5.34 3.19 repurchase agreements........ 73,723 37,017 36,706 28,638 8,068
466 595 4.87 3.05 Commercial paper............... 5,725 4,584 1,141 2,295 (1,154)
675 1,019 5.09 3.22 Other short-term borrowed funds 8,667 8,276 391 3,776 (3,385)
------- ------- -------- -------- --------
Total short-term
6,619 6,218 5.28 3.18 borrowed funds.......... 88,115 49,877 38,238 34,829 3,409
3,956 2,181 5.20 4.53 Bank notes..................... 51,868 24,913 26,955 4,139 22,816
839 593 6.67 6.96 Other long-term debt........... 14,098 10,391 3,707 (445) 4,152
------- ------- -------- -------- --------
4,795 2,774 5.46 5.05 Total long-term debt...... 65,966 35,304 30,662 3,060 27,602
------- ------- -------- -------- --------
Total interest-bearing
$28,454 $26,022 4.26 3.32 liabilities............. 305,564 217,832 87,732 65,938 21,794
======= ======= ---- ----
3.70 3.87 Interest rate spread
==== ====
Net yield on interest-earning
4.37 4.44 assets and net interest income $371,533 $350,917 $ 20,616 (5,413) 26,029
==== ==== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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
losses of $44 million
38
<PAGE> 40
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
QUARTERLY ALLOWANCE FOR LOAN LOSSES (Thousands) TABLE 17
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
----------------------------------------- -----------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period.... $406,005 $405,942 $405,474 $404,798 $404,091 $399,480 $390,621 $379,557
Provision for loan losses ........ 19,539 18,123 16,342 17,759 18,013 23,483 26,084 25,072
Deduct net loan losses:
Loans charged off:
Commercial ................... 1,793 3,063 2,947 5,080 1,418 1,875 2,129 1,370
Credit card .................. 19,682 17,310 16,808 15,928 15,392 17,147 15,650 14,802
Other revolving credit ....... 1,000 908 902 905 1,375 758 943 846
Other retail ................. 3,216 2,504 2,605 3,084 2,754 1,853 1,904 1,920
Real estate .................. 1,785 749 1,352 819 4,899 3,706 3,384 2,525
Lease financing .............. 57 28 80 61 81 110 63 204
Foreign ...................... -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total ...................... 27,533 24,562 24,694 25,877 25,919 25,449 24,073 21,667
Recoveries:
Commercial ................... 1,382 915 1,423 1,957 971 1,354 1,382 1,865
Credit card .................. 2,926 2,837 2,760 2,771 2,625 2,566 2,645 2,480
Other revolving credit ....... 224 285 303 247 270 228 316 215
Other retail ................. 927 1,159 749 1,121 942 842 996 1,011
Real estate .................. 2,624 1,273 3,506 2,612 3,743 1,525 1,445 1,980
Lease financing .............. 31 25 70 78 53 54 55 102
Foreign ...................... 7 8 9 8 9 8 9 6
-------- -------- -------- -------- -------- -------- -------- --------
Total ...................... 8,121 6,502 8,820 8,794 8,613 6,577 6,848 7,659
-------- -------- -------- -------- -------- -------- -------- --------
Net loan losses ................ 19,412 18,060 15,874 17,083 17,306 18,872 17,225 14,008
-------- -------- -------- -------- -------- -------- -------- --------
Balance at end of period ......... $406,132 $406,005 $405,942 $405,474 $404,798 $404,091 $399,480 $390,621
======== ======== ======== ======== ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES)
BY CATEGORY
Commercial ....................... $ 411 $ 2,148 $ 1,524 $ 3,123 $ 447 $ 521 $ 747 $ (495)
Credit card ...................... 16,756 14,473 14,048 13,157 12,767 14,581 13,005 12,322
Other revolving credit ........... 776 623 599 658 1,105 530 627 631
Other retail ..................... 2,289 1,345 1,856 1,963 1,812 1,011 908 909
Real estate ...................... (839) (524) (2,154) (1,793) 1,156 2,181 1,939 545
Lease financing .................. 26 3 10 (17) 28 56 8 102
Foreign .......................... (7) (8) (9) (8) (9) (8) (9) (6)
-------- -------- -------- -------- -------- -------- -------- --------
Total ...................... $ 19,412 $ 18,060 $ 15,874 $ 17,083 $ 17,306 $ 18,872 $ 17,225 $ 14,008
======== ======== ======== ======== ======== ======== ======== ========
ANNUALIZED NET LOAN LOSSES
(RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial ....................... .02% .09% .07% .14% .02% .03% .04% (.02%)
Credit card ...................... 1.76 1.57 1.63 1.67 1.74 2.16 2.11 2.18
Other revolving credit ........... .92 .74 .72 .80 1.34 .64 .76 .78
Other retail ..................... .29 .17 .23 .25 .23 .14 .13 .13
Real estate ...................... (.04) (.03) (.12) (.10) .06 .12 .10 .03
Lease financing .................. .06 .01 .02 (.04) .08 .16 .02 .33
Foreign .......................... (.01) (.04) (.04) (.04) (.05) (.04) (.04) (.03)
Total loans ...................... .31 .29 .26 .30 .31 .35 .32 .27
Period-end allowance to
outstanding loans .............. 1.57% 1.63% 1.67% 1.71% 1.76% 1.83% 1.84% 1.80%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 41
1.76 percent of average credit card loans for the period versus
$12.767 million or 1.74 percent a year earlier. Other retail net
charge-offs were $2.289 million or .29 percent of average direct and
indirect retail loans compared with $1.812 million or .23 percent in
the final period of 1993. Real estate loans had net recoveries of
$839 thousand versus net loan losses of $1.156 million in the prior
year period.
Other operating revenue was higher by $2.282 million or 1.5
percent. Credit card income grew $2.366 million or 8.5 percent and
trust service fees increased $933 thousand or 3.1 percent. These
gains were offset by a trading account loss of $582 thousand as well
as by lower levels of mortgage fee income and deposit account service
charges, down $1.244 million or 12.3 percent and $569 thousand or 1.2
percent, respectively. Other remaining categories of total other
operating revenue were up $3.475 million or 10.5 percent, led by
gains in other service charges and fees, insurance premiums and
commissions, and bankers acceptance and letter of credit fees.
Total noninterest expense declined $17.215 million or 5.7
percent. Total personnel expense decreased $6.143 million or 4.2
percent with salaries expense dropping $4.301 million or 3.5 percent
and employee benefits expense down $1.842 million or 7.2 percent.
Combined net occupancy and equipment expense declined $2.412 million
or 4.7 percent, with lower net occupancy expenses primarily
accounting for the decrease. Remaining combined categories of
noninterest expense were down $8.660 million or 8.6 percent.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 18
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
--------------------------------------- -----------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 48,413 $ 48,940 $ 50,646 $ 48,150 $ 48,982 $ 51,909 $ 51,622 $ 50,372
Fees for trust services ........... 31,285 32,151 32,983 31,681 30,352 29,697 29,614 30,367
Credit card income -- net of
interchange payments ............ 30,200 28,271 28,120 25,334 27,834 26,009 25,629 22,308
Mortgage fee income ............... 8,886 8,590 7,715 8,033 10,130 9,699 10,102 9,170
Trading account profits (losses) --
excluding interest .............. (582) 1,576 598 1,507 2,097 3,521 2,746 4,739
Insurance premiums and commissions 3,189 2,425 3,379 2,686 2,167 2,897 3,764 3,019
Bankers' acceptance and letter
of credit fees .................. 5,365 5,827 5,689 6,287 4,633 4,925 5,276 4,834
Student loan servicing ............ -- -- -- -- -- -- -- 5,535
Other service charges and fees .... 15,530 14,571 13,156 13,627 11,948 12,248 11,907 12,812
Other income ...................... 12,437 9,190 11,013 7,564 14,298 8,856 7,933 6,228
-------- -------- -------- -------- -------- -------- -------- --------
Total other operating revenue 154,723 151,541 153,299 144,869 152,441 149,761 148,593 149,384
Gain on sale of subsidiary ........ -- -- -- -- -- -- -- 8,030
Investment securities gains ....... 2,094 433 221 572 7,216 702 1,254 10,222
-------- -------- -------- -------- -------- -------- -------- --------
Total ....................... $156,817 $151,974 $153,520 $145,441 $159,657 $150,463 $149,847 $167,636
======== ======== ======== ======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 42
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 19
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
---------------------------------------- --------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries ............................. $117,904 $116,793 $114,882 $115,211 $122,205 $112,982 $110,119 $110,315
Employee benefits .................... 23,662 22,902 26,350 25,803 25,504 29,411 28,115 30,029
-------- -------- -------- -------- -------- -------- -------- --------
Total personnel expense ........ 141,566 139,695 141,232 141,014 147,709 142,393 138,234 140,344
Net occupancy expense ................ 21,261 20,026 20,196 19,428 23,587 18,950 19,660 19,873
Equipment expense .................... 27,197 26,789 26,010 26,512 27,283 24,856 25,633 24,474
Postage and delivery ................. 8,650 8,645 8,816 9,052 9,315 8,921 11,643 8,281
Outside data processing,
programming and software ........... 10,773 7,834 8,119 8,485 12,494 9,194 8,198 8,727
Stationery and supplies .............. 6,182 6,578 5,836 5,962 7,018 6,353 5,572 6,401
Advertising and sales promotion ...... 6,949 8,019 9,316 9,783 11,435 7,681 7,805 11,220
Professional services ................ 6,539 4,617 5,385 3,952 6,381 4,120 3,771 2,872
Travel and business promotion ........ 4,650 3,757 4,343 3,504 4,706 3,668 3,905 3,284
FDIC insurance and regulatory
examinations ....................... 13,188 13,294 13,589 13,380 13,122 13,274 13,084 14,183
Check clearing and other bank services 2,204 2,475 1,920 2,295 2,348 2,563 2,586 2,662
Amortization of intangible assets .... 4,430 4,524 4,602 5,137 6,844 7,502 6,540 7,115
Foreclosed property expense .......... 9 (452) (404) (3,441) 2,630 1,737 1,226 2,061
Other expense ........................ 28,927 25,492 25,585 24,987 24,868 22,334 24,977 33,619
-------- -------- -------- -------- -------- -------- -------- --------
Total ......................... $282,525 $271,293 $274,545 $270,050 $299,740 $273,546 $272,834 $285,116
======== ======== ======== ======== ======== ======== ======== ========
Overhead ratio....................... 53.7% 53.2% 54.3% 55.4% 59.5% 55.0% 55.2% 58.4%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS
1993 vs. 1992
The corporation's net income in 1993 totaled $492.095 million or
$2.81 per fully diluted share compared with $433.225 million or $2.48
per fully diluted share in 1992. The higher earnings reflected
expanded net interest income, healthy gains in other operating
revenue, reduced credit costs and good expense control, with net
income for the year representing returns of 17.1 percent on
shareholders' equity and 1.46 percent on assets.
Taxable equivalent net interest income increased $48.429 million
or 3.6 percent. Growth in interest-earning assets and a reduced
average funding cost accounted for the increase which was moderated
by a lower average earning asset yield and higher levels of
interest-bearing liabilities. The net yield on interest-earning
assets decreased 11 basis points.
Taxable equivalent interest income was lower by $79.587 million
or 3.5 percent. Average interest-earning assets increased $1.683
billion or 6 percent, but gains in income were more than offset by
the impact of a 73 basis point drop in the average rate earned. Loans
grew $1.514 billion or 7.6 percent with retail loans, including
residential mortgages, up $1.236 billion or 14.7 percent. Commercial
loans, including commercial mortgages and construction loans, were
higher by $278 million or 2.4 percent. Investment securities rose
$838 million or 13.5 percent for the year.
Interest expense decreased $128.016 million or 13.2 percent as
the average funding cost dropped 72 basis points to 3.43 percent
versus 4.15 percent in 1992. Average interest-bearing liabilities
were higher by $1.201 billion or 5.2 percent, led by expansion in the
corporation's medium-term bank notes, which increased by $1.262
billion. Total interest-bearing time deposits were down $865 million
or 4.8 percent with decreases in savings certificates and large
denomination certificates softened by growth in interest-bearing
demand and savings and money market savings deposits. Total
short-term borrowings rose $442 million or 8.9 percent.
41
<PAGE> 43
The table below summarizes the changes in interest income
(taxable equivalent) and interest expense resulting from changes in
rates and volume between 1993 and 1992. Changes which are not solely
due to rate or to volume are allocated proportionately to rate and
volume. Information on changes in rates and volume between 1994 and
1993 can be found on page 19.
<TABLE>
<CAPTION>
1993 over 1992
----------------------------------
Attributable to
---------------------
$ in thousands Rate Volume Total
---------- -------- --------
<S> <C> <C> <C>
Increase (decrease) in interest income:
Loans ............................................................................. ($154,387) $123,867 $(30,520)
Investment securities held-to-maturity:
State and municipal ............................................................. 621 (11,416) (10,795)
Other investments ............................................................... (58,200) 66,411 8,211
Interest-bearing bank balances .................................................... (1,415) (8,452) (9,867)
Federal funds sold and securities purchased under resale agreements ............... (1,690) (2,915) (4,605)
Trading account assets ............................................................ (15,119) (16,892) (32,011)
--------
Total interest-earning assets ................................................ (212,486) 132,899 (79,587)
Increase (decrease) in interest expense:
Time deposits in domestic offices ................................................. (155,523) (36,641) (192,164)
Time deposits in foreign offices .................................................. (2,651) 1,508 (1,143)
Short-term borrowed funds ......................................................... (33,145) 16,004 (17,141)
Long-term debt .................................................................... (2,014) 84,446 82,432
--------
Total interest-bearing liabilities ........................................... (175,899) 47,883 (128,016)
--------
Increase in net interest income ...................................................... $ 48,429
========
</TABLE>
Nonperforming assets at December 31, 1993 decreased $110.508
million or 41.6 percent to $154.901 million or .67 percent of loans
and foreclosed property. The decline largely reflected paydowns,
property sales and the return of cash-basis assets to accrual status
as real estate market conditions generally improved and declining
interest rates helped borrowers' credit positions. Net loan losses
were lower by $27.834 million or 29.2 percent, and totaled $67.411
million or .31 percent of average loans for the year. The provision
for loan losses was $92.652 million, a decrease of $26.768 million or
22.4 percent from the 1992 level and exceeded net charge-offs by
$25.241 million. At December 31, 1993, the allowance for loan losses
was $404.798 million, representing 1.76 percent of loans and 372
percent coverage of nonperforming loans compared with $379.557
million, 1.80 percent and 218 percent coverage, respectively, at
year-end 1992.
Total other operating revenue grew $64.937 million or 12.1
percent. Credit card fee income was up $23.712 million or 30.4
percent, service charges on deposit accounts rose $13.348 million or
7 percent, and trust service fees were higher by $10.526 million or
9.6 percent. Trading account profits totaled $13.103 million for the
year compared with a loss of $11.542 million in 1992 due to hedging
in mortgage backed securities. Mortgage fee income declined $977
thousand or 2.4 percent. Remaining combined categories of total other
operating revenue, excluding student loan servicing which was sold as
a subsidiary in the second month of 1993, increased $21.398 million
or 22.2 percent.
Total noninterest expense was higher by $35.584 million or 3.2
percent. Total personnel expense rose $28.857 million or 5.3 percent
with higher employee benefits expense acccounting for the majority of
the increase. Increased benefits expense largely reflected both a
special contribution by the corporation to its employee retirement
savings and profit-sharing plan and the impact of a new accounting
change for post-retirement expenses adopted at the beginning of 1993.
Combined net occupancy and equipment expense was up $2.727 million or
1.5 percent, while remaining combined categories of noninterest
expense rose a modest $4 million or 1.1 percent. The corporation's
overhead ratio measuring noninterest expense as a percent of taxable
equivalent net interest income and total other operating revenue was
57 percent for the year compared with 58.6 percent in 1992.
42
<PAGE> 44
- --------------------------------------------------------------------------------
SUPERVISION AND REGULATION
Wachovia Corporation is a registered bank holding company under
the Bank Holding Company Act of 1956 (BHCAct) and is subject to the
supervision of, and regulation by, the Board of Governors of the
Federal Reserve System (FRB). South Carolina National Corporation is
likewise subject to the requirements of the BHCAct, which requires
prior Board approval for bank acquisitions and prohibits a bank
holding company from engaging in any business other than banking or
bank-related activities. In addition to the provisions of the BHC
Act, state banking commissions serve in a supervisory and regulatory
capacity with respect to the bank holding company activities.
Wachovia Corporation is also a savings and loan holding company
registered under the Home Owners' Loan Act of 1933 (HOLA), as amended
by the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (FIRREA), and is subject to examination, supervision and
reporting requirements of the Office of Thrift Supervision (OTS).
Various state and federal laws govern the activities of the
Corporation's banking affiliates. As federally insured national
banks, Wachovia Bank of North Carolina, N.A., Wachovia Bank of
Georgia, N.A., Wachovia Bank of South Carolina, N.A., and The First
National Bank of Atlanta are subject to the regulation, supervision
and reporting requirements of the Office of the Comptroller of the
Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).
The banking subsidiaries are directly affected by the actions of the
FRB as it attempts to manage the money supply and credit availability
in the economy.
The Corporation's nonbanking subsidiaries are subject to a
variety of state and federal laws. For example, the Corporation's
discount brokerage and investment advisory subsidiary is subject to
supervision and regulation by the Securities and Exchange Commission
(SEC), the National Association of Securities Dealers, Inc., state
securities regulators and the various exchanges through which it
conducts business. The Corporation's insurance subsidiaries are
subject to the insurance laws of the states in which they are active.
All nonbanking subsidiaries are supervised by the FRB.
Federal law regulates transactions among Wachovia Corporation
and its affiliates, including the amount of banking affiliates' loans
to or investments in, nonbank affiliates and the amount of advances
to third parties collateralized by securities of the affiliate. In
addition, various requirements and restrictions under federal and
state laws regulate the operations of the Corporation's banking
affiliates, requiring the maintenance of reserves against deposits,
limiting the nature of loans and interest that may be charged
thereon, restricting investments, and other activities.
Under FRB policy, the Corporation is expected to act as a source
of financial strength to, and commit resources to support, each of
its subsidiary banks. In addition, FIRREA provides that a depository
institution insured by the FDIC can be held liable by the FDIC for
any loss incurred or reasonably expected to be incurred in connection
with the default of a commonly controlled FDIC insured depository
institution. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) federal banking regulators are
required to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements.
FDICIA also imposes substantial new examination, audit and reporting
requirements on insured depository institutions. Among other
requirements, the regulation requires a revision of risk-based
capital standards. The new standards are required to incorporate
interest rate risk, concentration of credit risk and the risks of
nontraditional activities and to reflect the actual performance and
expected risk of loss of multifamily mortgages. See Equity and
Capital Ratios on pages 34 and 35.
The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the Act) has introduced a process that will enable
nationwide interstate banking through bank subsidiaries and
interstate bank mergers. Separately the Act will also permit bank
subsidiaries to act as agents for each other across state lines.
Effective September 29, 1995, the bill will allow adequately
capitalized and managed bank holding companies to acquire control of
a bank in any state. Any acquisitions will be subject to
concentration limits. Beginning June 1, 1997, banks will be permitted
to merge with one another across state lines. A state could authorize
such mergers earlier than June 1, 1997. In contrast, a state also
could choose to
43
<PAGE> 45
opt-out of interstate branching by enacting legislation before
June 1, 1997. The legislation preserves state laws which require that
a bank must be in existence for a minimum period of time before being
acquired as long as the requirement is five years or less. This
legislation has immediate relevance for the banking industry due to
increased competitive forces from institutions which may consolidate
through mergers and those which may move into new markets through
enhanced opportunities to branch across state lines.
The FDIC has proposed a reduction in the rates charged for
deposit insurance premiums. The reduction as proposed will
significantly reduce the amount of premiums assessed against well
managed banks. Several issues are outstanding regarding the impact of
premium reductions by the bank insurance fund on the related but
currently separate Savings Institution Insurance Fund. At the
earliest, any premium reductions will not be realized until midyear,
when the Bank Insurance fund is expected to reach its required
capitalization level.
There have been a number of legislative and regulatory proposals
that would have an impact on the operation of bank holding companies
and their banks. Due to continued changes in the regulatory
environment, additional legislation aimed at banking industry reform
is likely to continue. While the potential effects of legislation
currently under consideration cannot be measured with any degree of
certainty, the Corporation is unaware of any pending legislative
reforms or regulatory activities which would materially affect its
financial position or operating results in the foreseeable future.
44
<PAGE> 46
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Wachovia Corporation is responsible for the preparation of
the financial statements, related financial data and other information in this
annual report. The financial statements are prepared in accordance with
generally accepted accounting principles and include amounts based on
management's estimates and judgment where appropriate. Financial information
appearing throughout this annual report is consistent with the financial
statements.
In meeting its responsibility both for the integrity and fairness of these
statements and information, management depends on the accounting system and
related internal control structures that are designed to provide reasonable
assurances that transactions are authorized and recorded in accordance with
established procedures and that assets are safeguarded and proper and reliable
records are maintained.
The concept of reasonable assurance is based on the recognition that the cost
of an internal control structure should not exceed the related benefits. As an
integral part of the internal control structure, the corporation maintains a
professional staff of internal auditors who monitor compliance with and assess
the effectiveness of the internal control structure and coordinate audit
coverage with the independent auditors.
The Audit Committee of Wachovia's Board of Directors, composed solely of
outside directors, meets regularly with the corporation's management, internal
auditors, independent auditors and regulatory examiners to review matters
relating to financial reporting, internal control structure and the nature,
extent and results of the audit effort. The independent auditors, internal
auditors and banking regulators have direct access to the Audit Committee with
or without management present.
The financial statements have been audited by Ernst & Young LLP, independent
auditors, who render an independent professional opinion on management's
financial statements. Their appointment was recommended by the Audit Committee,
approved by the Board of Directors and ratified by the shareholders. Their
examination provides an objective assessment of the degree to which the
corporation's management meets its responsibility for financial reporting.
Their opinion on the financial statements is based on auditing procedures which
include reviewing internal control structures and performing selected tests of
transactions and records as they deem appropriate. These auditing procedures
are designed to provide a reasonable level of assurance that the financial
statements are fairly presented in all material respects.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Wachovia Corporation
We have audited the consolidated statements of condition of Wachovia
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Wachovia
Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note C to the financial statements, in 1994, the Corporation
changed its method of accounting for certain investment securities. As
discussed in Notes K and M to the financial statements, in 1993, the company
changed its methods of accounting for income taxes and postretirement benefits.
/s/ Ernst & Young LLP
----------------------------
Ernst & Young LLP
Winston-Salem, North Carolina
January 12, 1995
45
<PAGE> 47
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31
$ in thousands 1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks .......................................... $ 2,670,115 $ 2,529,528
Interest-bearing bank balances ................................... 6,763 12,478
Federal funds sold and securities
purchased under resale agreements .............................. 201,606 691,106
Trading account assets ........................................... 889,958 788,779
Securities available-for-sale .................................... 3,538,247 --
Securities held-to-maturity (market value of $4,114,644
in 1994 and $8,156,690 in 1993) ................................ 4,184,610 7,878,656
Loans and net leases ............................................. 25,898,774 22,986,307
Less unearned income on loans .................................... 7,970 8,819
----------- -----------
Total loans ................................................ 25,890,804 22,977,488
Less allowance for loan losses ................................... 406,132 404,798
----------- -----------
Net loans .................................................. 25,484,672 22,572,690
Premises and equipment ........................................... 543,548 502,699
Due from customers on acceptances ................................ 416,591 434,584
Other assets ..................................................... 1,251,848 1,115,252
----------- -----------
Total assets ............................................... $39,187,958 $36,525,772
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand ......................................................... $ 5,657,579 $ 6,140,884
Interest-bearing demand ........................................ 3,524,857 3,515,680
Savings and money market savings ............................... 6,065,966 6,194,086
Savings certificates ........................................... 5,464,532 5,141,410
Large denomination certificates ................................ 1,416,318 1,507,461
Noninterest-bearing time ....................................... 24,121 45,802
----------- -----------
Total deposits in domestic offices ......................... 22,153,373 22,545,323
Deposits in foreign offices:
Demand ......................................................... 5,540 3,011
Time ........................................................... 910,345 804,064
----------- -----------
Total deposits in foreign offices .......................... 915,885 807,075
----------- -----------
Total deposits ............................................. 23,069,258 23,352,398
Federal funds purchased and securities
sold under repurchase agreements ............................... 5,898,398 4,741,283
Commercial paper ................................................. 406,706 589,178
Other short-term borrowed funds .................................. 1,007,340 1,091,123
Long-term debt:
Bank notes ..................................................... 3,953,318 2,370,091
Other long-term debt ........................................... 837,146 590,365
----------- -----------
Total long-term debt ....................................... 4,790,464 2,960,456
Acceptances outstanding .......................................... 416,591 434,584
Other liabilities ................................................ 312,694 338,803
----------- -----------
Total liabilities .......................................... 35,901,451 33,507,825
Off-balance sheet items, commitments and contingent liabilities --
Notes I, J and L
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding ................. -- --
Common stock, par value $5 per share:
Issued 170,933,749 shares in 1994
and 171,375,772 shares in 1993 ................................. 854,669 856,879
Capital surplus .................................................. 741,946 761,573
Retained earnings ................................................ 1,689,892 1,399,495
----------- -----------
Total shareholders' equity ................................. 3,286,507 3,017,947
----------- -----------
Total liabilities and shareholders' equity ................. $39,187,958 $36,525,772
=========== ===========
</TABLE>
See notes to consolidated financial statements
46
<PAGE> 48
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
$ in thousands, except per share 1994 1993 1992
---------- ---------------------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans ......................................................... $1,864,082 $1,627,450 $1,663,388
Securities available-for-sale:
Other investments............................................ 182,440 -- --
Securities held-to-maturity:
State and municipal.......................................... 50,122 57,670 65,154
Other investments............................................ 223,691 396,056 403,982
Interest-bearing bank balances................................. 597 2,905 12,772
Federal funds sold and securities
purchased under resale agreements............................ 7,682 12,433 17,038
Trading account assets......................................... 33,680 26,323 59,744
---------- ---------- ----------
Total interest income.................................... 2,362,294 2,122,837 2,222,078
INTEREST EXPENSE
Deposits:
Domestic offices............................................. 516,914 543,077 735,241
Foreign offices.............................................. 22,318 14,503 15,646
---------- ---------- ----------
Total interest on deposits............................... 539,232 557,580 750,887
Short-term borrowed funds...................................... 272,572 173,847 190,988
Long-term debt................................................. 226,584 107,585 25,153
---------- ---------- ----------
Total interest expense................................... 1,038,388 839,012 967,028
NET INTEREST INCOME............................................ 1,323,906 1,283,825 1,255,050
Provision for loan losses...................................... 71,763 92,652 119,420
---------- ---------- ----------
Net interest income after provision for loan losses............ 1,252,143 1,191,173 1,135,630
OTHER INCOME
Service charges on deposit accounts............................ 196,149 202,885 189,537
Fees for trust services........................................ 128,100 120,030 109,504
Credit card income............................................. 111,925 101,780 78,068
Mortgage fee income............................................ 33,224 39,101 40,078
Trading account profits (losses)............................... 3,099 13,103 (11,542)
Student loan servicing......................................... -- 5,535 33,250
Other operating income......................................... 131,935 117,745 96,347
---------- ---------- ----------
Total other operating revenue............................ 604,432 600,179 535,242
Gain on sale of subsidiary..................................... -- 8,030 19,486
Investment securities gains.................................... 3,320 19,394 1,497
---------- ---------- ----------
Total other income....................................... 607,752 627,603 556,225
OTHER EXPENSE
Salaries....................................................... 464,790 455,621 451,193
Employee benefits.............................................. 98,717 113,059 88,630
---------- ---------- ----------
Total personnel expense.................................. 563,507 568,680 539,823
Net occupancy expense.......................................... 80,911 82,070 80,673
Equipment expense.............................................. 106,508 102,246 100,916
Other operating expense........................................ 347,487 378,240 374,240
---------- ---------- ----------
Total other expense...................................... 1,098,413 1,131,236 1,095,652
Income before income taxes..................................... 761,482 687,540 596,203
Applicable income taxes........................................ 222,424 195,445 162,978
---------- ---------- ----------
NET INCOME..................................................... $ 539,058 $ 492,095 $ 433,225
========== ========== ==========
Net income per common share:
Primary...................................................... $ 3.13 $ 2.83 $ 2.51
Fully diluted................................................ $ 3.12 $ 2.81 $ 2.48
Average shares outstanding:
Primary...................................................... 172,339 173,941 172,641
Fully diluted................................................ 172,951 175,198 175,512
</TABLE>
See notes to consolidated financial statements
47
<PAGE> 49
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
----------------------- Capital Loan to Retained
$ in thousands, except per share Shares Amount Surplus ESOP Earnings
----------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1992
Balance at beginning of year ............ 85,323,214 $426,616 $818,404 ($25,000) $1,264,394
Net income .............................. 433,225
Cash dividends declared on common
stock -- $1.00 a share................. (170,756)
Common stock issued pursuant to:
Stock option and employee benefit plans 602,152 3,011 16,179
Dividend reinvestment plan ............ 149,323 747 8,444
Conversion of notes and debentures .... 193,675 968 3,581
Common stock acquired ................... (528,086) (2,640) (28,557)
Repayment of loan to ESOP ............... $ 25,000
Miscellaneous ........................... (4,689) (24) (162) 1,337
Two-for-one common stock split .......... 85,735,589 428,678 (428,678)
----------- -------- -------- ----------
Balance at end of year .................. 171,471,178 $857,356 $817,889 $ -- $1,099,522
=========== ======== ======== ======== ==========
YEAR ENDED DECEMBER 31, 1993
Balance at beginning of year ............ 171,471,178 $857,356 $817,889 $ -- $1,099,522
Net income .............................. 492,095
Cash dividends declared on common
stock -- $1.11 a share................. (191,488)
Common stock issued pursuant to:
Stock option and employee benefit plans 645,539 3,228 11,347 (41)
Dividend reinvestment plan ............ 318,655 1,593 9,375 (15)
Conversion of notes and debentures .... 1,738,533 8,693 7,802 (60)
Common stock acquired ................... (2,797,232) (13,986) (84,826) 8
Miscellaneous ........................... (901) (5) (14) (526)
----------- -------- -------- ----------
Balance at end of year .................. 171,375,772 $856,879 $761,573 $ -- $1,399,495
=========== ======== ======== ======== ==========
YEAR ENDED DECEMBER 31, 1994
Balance at beginning of year ............ 171,375,772 $856,879 $761,573 $ -- $1,399,495
Net income .............................. 539,058
Cash dividends declared on common
stock -- $1.23 a share................. (210,503)
Common stock issued pursuant to:
Stock option and employee benefit plans 714,648 3,573 14,560
Dividend reinvestment plan ............ 357,015 1,785 9,895
Conversion of debentures .............. 162,777 814 2,290
Common stock acquired ................... (1,676,463) (8,382) (46,178)
Unrealized losses on securities
available-for-sale, net of tax ........ (37,635)
Miscellaneous ........................... (194) (523)
----------- -------- -------- ----------
Balance at end of year .................. 170,933,749 $854,669 $741,946 $ -- $1,689,892
=========== ======== ======== ======== ==========
</TABLE>
See notes to consolidated financial statements
48
<PAGE> 50
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
$ in thousands 1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ......................................................... $ 539,058 $ 492,095 $ 433,225
Adjustments to reconcile net income to net cash
provided by operations:
Provision for loan losses ........................................ 71,763 92,652 119,420
Depreciation and amortization .................................... 107,502 108,085 94,678
Deferred income taxes (benefit) .................................. 12,440 (26,663) (11,737)
Investment securities gains ...................................... (3,320) (19,394) (1,497)
Gain on sale of subsidiary ....................................... -- (8,030) (19,486)
(Gain) loss on sale of noninterest-earning assets ................ (5,316) (1,517) 2,002
(Decrease) increase in accrued income taxes ...................... (1,059) 6,207 29,234
(Increase) decrease in accrued interest receivable ............... (31,041) (38,968) 28,250
Increase (decrease) in accrued interest payable .................. 11,509 (43,116) (55,260)
Net change in other accrued and deferred income and expense ...... (19,337) (2,818) (66,628)
Net trading account activities ................................... (101,179) 107,189 548,840
Net loans held for resale ........................................ 259,083 (377,994) 81,552
----------- ----------- -----------
Net cash provided by operating activities .................... 840,103 287,728 1,182,593
INVESTING ACTIVITIES
Net decrease in interest-bearing bank balances ..................... 5,715 177,075 218,475
Net decrease (increase) in federal funds sold and securities
purchased under resale agreements ................................ 489,500 (212,134) 67,001
Purchases of securities available-for-sale ......................... (1,131,114) -- --
Purchases of securities held-to-maturity ........................... (588,873) (3,287,189) (2,969,876)
Sales of securities available-for-sale ............................. 73,062 -- --
Sales of securities held-to-maturity ............................... -- 76,224 260,568
Calls, maturities and prepayments of securities available-for-sale.. 1,185,413 -- --
Calls, maturities and prepayments of securities held-to-maturity ... 544,099 1,819,801 2,489,917
Net increase in loans made to customers ............................ (3,255,879) (1,621,508) (751,325)
Capital expenditures ............................................... (147,870) (152,061) (100,526)
Proceeds from sales of premises and equipment ...................... 36,789 14,457 25,479
Net (increase) decrease in other assets ............................ (128,411) (188,376) 64,418
Business combinations and dispositions ............................. -- 20,000 44,834
----------- ----------- -----------
Net cash used by investing activities ........................ (2,917,569) (3,353,711) (651,035)
FINANCING ACTIVITIES
Net (decrease) increase in demand,
savings and money market accounts ................................ (621,400) 752,659 2,184,766
Net increase (decrease) in certificates of deposit ................. 338,260 (775,722) (1,815,595)
Net increase (decrease) in federal funds purchased and securities
sold under repurchase agreements ................................. 1,157,115 1,027,791 (288,594)
Net (decrease) increase in commercial paper ........................ (182,472) 202,560 (11,102)
Net (decrease) increase in other short-term borrowings ............. (83,783) 242,300 (1,352,039)
Proceeds from issuance of bank notes ............................... 2,095,479 1,861,010 757,893
Maturities of bank notes ........................................... (515,425) (250,000) --
Proceeds from issuance of other long-term debt ..................... 247,887 248,075 297,266
Payments on other long-term debt ................................... (352) (80,579) (24,249)
Repayment of loan to ESOP .......................................... -- -- 25,000
Common stock issued ................................................ 25,339 24,961 29,717
Dividend payments .................................................. (210,503) (191,488) (170,756)
Common stock repurchased ........................................... (52,908) (98,804) (31,197)
Other equity transactions .......................................... -- (19) (186)
Net increase in other liabilities .................................. 20,816 4,908 19,790
----------- ----------- -----------
Net cash provided (used) by financing activities ............. 2,218,053 2,967,652 (379,286)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... 140,587 (98,331) 152,272
Cash and cash equivalents at beginning of year ..................... $ 2,529,528 $ 2,627,859 $ 2,475,587
----------- ----------- -----------
Cash and cash equivalents at end of year ........................... $ 2,670,115 $ 2,529,528 $ 2,627,859
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Unrealized losses on securities available-for-sale:
Decrease in securities available-for-sale ........................ $ (61,847) $ -- $ --
Increase in deferred taxes ....................................... 24,212 -- --
Decrease in shareholders' equity ................................. (37,635) -- --
</TABLE>
See notes to consolidated financial statements
49
<PAGE> 51
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$ in thousands
- -------------------------------------------------------------------------------
Note A -- Accounting Policies
The accounting and reporting policies of Wachovia Corporation and subsidiaries
(the Corporation) follow generally accepted accounting principles and policies
within the financial services industry. The following is a summary of the more
significant policies:
Principles of Consolidation -- The consolidated financial statements include
the accounts of Wachovia Corporation and its subsidiaries after elimination of
all material intercompany balances and transactions.
Cash and Due From Banks -- The Corporation considers cash and due from banks,
all of which are maintained in financial institutions, as cash and cash
equivalents for purposes of the Consolidated Statements of Cash Flows.
Trading Instruments -- The Corporation maintains trading positions in both
derivative and nonderivative (or cash) financial instruments. Trading cash
instruments are held for distribution through retail sales or in anticipation
of market movements and are carried at fair value. Gains and losses, both
realized and unrealized, are included in "trading account profits (losses)" in
the Consolidated Statements of Income. Interest revenue arising from cash
financial instruments is included in "interest income-trading account assets"
in the Consolidated Statements of Income. Trading cash instruments are
comprised primarily of securities backed by the U.S. Treasury and various
federal agencies and state and local governmental bodies.
Trading derivative financial instruments are customer oriented, and trading
positions are established as necessary to accommodate customers' requirements.
Gains and losses from securities trading derivatives are included in "trading
account profits (losses)," while gains and losses from interest rate
derivatives and foreign exchange activities are included in "other operating
income" in the Consolidated Statements of Income.
Investment Securities Held-to-Maturity and Available-for-Sale -- Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date. Debt
securities are classified as held-to-maturity when the Corporation has the
positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
Debt securities not classified as held-to-maturity or trading and marketable
equity securities are classified as available-for-sale. Available-for-sale
securities are stated at fair value and their unrealized gains and losses, net
of tax, are reported in a separate component of shareholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage backed securities, over the
estimated life of the security. Such amortization is included in interest
income from investments. The adjusted cost of the specific security sold is
used to compute "investment securities gains or losses" reported in the
Consolidated Statements of Income. Investment securities are concentrated in a
variety of state and municipal, U.S. Treasury and federal agency securities.
Risk Management Instruments -- Interest rate swaps and options (caps and
floors) are used as part of the Corporation's overall interest rate risk
management and are designated as hedges of interest-bearing assets and
liabilities. Amounts receivable or payable under interest rate swap and option
agreements are recognized in "net interest income" in the Consolidated
Statements of Income. If a derivative financial instrument designated as a
hedge is terminated early, any resulting gain or loss is deferred and amortized
to net interest income over the remaining periods originally covered by the
derivative financial instrument.
Loans and Allowance for Loan Losses -- Loans are carried at their principal
amount outstanding, except for loans held for resale which are carried at the
lower of cost or market. Interest on commercial mortgage and installment loans
is accrued and credited to operating income based upon the principal amount
outstanding. Except for revolving credit loans, the recognition of interest
income is discontinued when a loan becomes 90 days past due as to principal and
interest or when, in management's judgment, the interest will not be
collectible in the normal course of business. When interest accruals are
discontinued, prior accrued interest is reversed. Management may elect to
continue the accrual of interest when the estimated net realizable value of
collateral is sufficient to cover the principal balance and accrued interest.
Interest is accrued on revolving credit retail loans until payments become 120
days delinquent, at which time the outstanding principal balance and accrued
unpaid interest is charged off.
The allowance is maintained at a level believed to be adequate by management to
absorb potential losses in the loan portfolio. Management's determination of
the adequacy of the allowance is based on an evaluation of the portfolio, past
loan loss experience, current domestic and international economic conditions,
volume, growth and composition of the loan portfolio, and other risks inherent
in the portfolio.
Premises and Equipment -- Premises, equipment and leasehold improvements are
stated at cost less accumulated depreciation and amortization. For financial
reporting purposes, the provision for depreciation is computed by the
straight-line method based upon the estimated useful lives of the assets.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the life of the leasehold asset or the lease term.
Intangible Assets -- Premiums paid to purchase servicing rights of mortgage
loans are amortized over the aggregate estimated remaining servicing life of
the loans. The excess of cost over net assets and identifiable intangible
assets, including deposit base intangibles, of acquired businesses is amortized
on the straight-line method over the estimated periods benefited.
Income Taxes -- Effective January 1, 1993, the Corporation prospectively
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (FASB 109), which requires an asset and liability approach to
accounting for income taxes. Under FASB 109, deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Financial statements for prior years reflect income taxes
recorded under the deferred method required under previous accounting
standards.
The Corporation and its subsidiaries file a consolidated tax return. Each
subsidiary provides for income taxes based on its contribution to income taxes
(benefit) of the consolidated group.
Reclassifications -- Certain of the prior years' balances have been
reclassified to conform to current year presentation.
- -----------------------------------------------------------------------------
50
<PAGE> 52
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -----------------------------------------------------------------------------
NOTE B -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments. In cases where
quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rates
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
The use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts. Also, the fair
value estimates presented herein are based on pertinent information available
to management as of December 31, 1994 and 1993. Such amounts have not been
comprehensively revalued for purposes of these financial statements since those
dates and therefore, current estimates of fair value may differ significantly
from the amounts presented herein.
Trading Account Assets -- Fair values for the Corporation's trading account
assets, which also are the amounts recognized in the statements of condition,
are based on quoted market prices. These assets are those which are held for
trading purposes.
Investment Securities -- Fair values for investment securities are based on
quoted market prices. If a quoted market price is not available, fair value is
estimated using market prices for similar securities. Investment securities are
classified as held-to-maturity or available-for-sale based upon management's
determination at the time of purchase and periodic reevaluation. Securities
held for trading purposes are not included in these classifications, but rather
are included in Trading Account Assets described above.
Loans -- For credit card, equity lines and other loans with short-term or
variable rate characteristics, the carrying value reduced by an estimate of
credit losses inherent in the portfolio is a reasonable estimate of fair value.
The fair value of all other loans is estimated by discounting their future cash
flows using interest rates currently being offered for loans with similar
terms, reduced by an estimate of credit losses inherent in the portfolio. The
discount rates used are commensurate with the interest rate and prepayment
risks involved for the various types of loans. Loans are held for purposes
other than trading.
Deposits -- The fair values disclosed for demand deposits (e.g., interest- and
noninterest-bearing demand, savings and money market savings) are equal to the
amounts payable on demand at the reporting date (i.e., their carrying amounts).
Fair values for certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated monthly maturities.
Long-Term Debt -- Fair values of long-term debt are based on market prices
where available. When quoted market prices are not available, fair values are
estimated using discounted cash flow analyses, based on the Corporation's
current incremental borrowing rates for similar types of borrowing
arrangements.
Off-Balance Sheet Instruments -- Fair values for the Corporation's off-balance
sheet instruments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing for loan commitments and letters of credit, and
the estimated amount the Corporation would receive or pay to terminate or
replace the contract at current market rates for the remainder of the
off-balance sheet instruments. Off-balance sheet instruments classified as held
for trading purposes are described further in Note I, and those classified as
held for other than trading purposes are described further in Note J.
Many of the Corporation's assets and liabilities are short-term financial
instruments whose carrying amounts reported in the statement of condition
approximate fair value. These items include cash and due from banks,
interest-bearing bank balances, federal funds sold and securities purchased
under resale agreements, due from customers on acceptances, short-term
borrowed funds, acceptances outstanding, and the financial instruments included
in other assets and liabilities. The estimated fair values of the Corporation's
remaining on-balance sheet financial instruments as of December 31 are
summarized below.
<TABLE>
<CAPTION>
1994
------------------------
Estimated
Book Value Fair Value
----------- ----------
<S> <C> <C>
Financial assets:
Trading account assets ................ $ 889,958 $ 889,958
Investment securities ................. 7,772,857 7,652,891
Loans, net of allowance for loan losses 25,484,672 25,882,744
Financial liabilities:
Deposits .............................. 23,069,258 23,171,818
Long-term debt ........................ 4,790,464 4,796,299
</TABLE>
<TABLE>
<CAPTION>
1993
------------------------
Estimated
Book Value Fair Value
---------- ----------
<S> <C> <C>
Financial assets:
Trading account assets ................ $ 788,779 $ 788,779
Investment securities ................. 7,878,656 8,156,690
Loans, net of allowance for loan losses 22,572,690 23,156,885
Financial liabilities:
Deposits .............................. 23,352,398 23,433,622
Long-term debt ........................ 2,960,456 3,012,852
</TABLE>
The estimated fair values of the Corporation's off-balance sheet financial
instruments as of December 31 are summarized below. The amounts for commitments
and letters of credit are presented negative in order to represent the
approximate cost the Corporation would incur to pay third parties to assume
these commitments. Interest rate contract fair values and other off-balance
sheet financial instruments represent the fair value gain or loss of the
contracts. Additional information about off-balance sheet financial instruments
is located in Note I and Note J.
<TABLE>
<CAPTION>
1994 1993
Estimated Estimated
Fair Value Fair Value
---------- ----------
<S> <C> <C>
Unfunded commitments to
extend credit ................. ($70,534) ($46,165)
Letters of credit ............... (29,664) (23,536)
Interest rate contracts issued
for trading purposes .......... 2,533 2,682
Interest rate contracts held for
purposes other than trading ... (25,528) (22,096)
Other off-balance sheet financial
instruments issued or held for
trading or lending purposes ... (28,728) (42,548)
</TABLE>
This presentation excludes certain financial instruments and all nonfinancial
instruments. The disclosures also do not include certain intangible assets,
such as customer relationships, mortgage servicing rights, deposit base
intangibles and goodwill.
- --------------------------------------------------------------------------------
51
<PAGE> 53
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE B -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- Concluded
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Corporation.
The financial information presented over periods of years which encompass
various economic and interest rate conditions and cycles provides a means of
evaluating the effectiveness of the Corporation in dealing with changing market
conditions and in managing the controllable aspects of its business.
- -------------------------------------------------------------------------------
NOTE C -- INVESTMENT SECURITIES
The aggregate book and market values of investment securities as of December
31, as well as gross unrealized gains and losses of investment securities were
as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------- -----------------------------------------------
Book Unrealized Unrealized Market Book Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
- ----------------
U.S. Treasury and other agencies.. $2,491,476 $21,080 $103,380 $2,409,176 $4,572,736 $139,761 $ 6,026 $4,706,471
State and municipal .............. 554,365 26,596 1,797 579,164 655,157 72,754 177 727,734
Mortgage backed .................. 1,124,550 12,114 24,330 1,112,334 2,308,734 65,707 5,949 2,368,492
Other ............................ 14,219 -- 249 13,970 342,029 12,011 47 353,993
---------- ------- -------- ---------- ---------- -------- ------- ----------
Total held-to-maturity ..... $4,184,610 $59,790 $129,756 $4,114,644 $7,878,656 $290,233 $12,199 $8,156,690
========== ======= ======== ========== ========== ======== ======= ==========
Available-for-Sale
- ------------------
U.S. Treasury and other agencies.. $2,513,710 $ 1,818 $ 54,620 $2,460,908
Mortgage backed .................. 832,367 691 17,011 816,047
Other ............................ 163,991 84 -- 164,075
Equity ........................... 90,026 7,287 96 97,217
---------- ------- -------- ----------
Total available-for-sale ... $3,600,094 $ 9,880 $ 71,727 $3,538,247
========== ======= ======== ==========
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Book Market
Value Value
---------- ----------
<S> <C> <C>
Held-to-Maturity
- ----------------
Due in one year or less .............. $ 195,723 $ 198,863
Due after one year through five years 2,715,570 2,625,750
Due after five years through ten years 420,907 424,672
Due after ten years .................. 852,410 865,359
---------- ----------
Total held-to-maturity ......... 4,184,610 4,114,644
Available-for-Sale
- ------------------
Due in one year or less .............. 868,072 860,505
Due after one year through five years 1,945,415 1,895,257
Due after five years through ten years 264,911 260,384
Due after ten years .................. 431,670 424,884
---------- ----------
Total ........................... 3,510,068 3,441,030
No contractual maturity .............. 90,026 97,217
---------- ----------
Total available-for-sale ........ 3,600,094 3,538,247
---------- ----------
Total investment securities ..... $7,784,704 $7,652,891
========== ==========
</TABLE>
During 1994, there were no sales or transfers of held-to-maturity securities.
Proceeds from the sales of available-for-sale securities for the year ended
December 31, 1994, as well as gross gains and losses realized on these sales
were as follows:
<TABLE>
<S> <C>
Proceeds ...................... $73,062
Gross gains.................... 2,079
Gross losses................... --
</TABLE>
At December 31, 1994 and 1993, investment securities with a carrying value of
$4,011,111 and $3,543,263, respectively, were pledged as collateral to secure
public deposits and for other purposes. There were no obligations of any one
issuer exceeding 10 percent of consolidated shareholders' equity at December
31, 1994.
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). FASB 115 requires that investments in
equity securities having readily determinable fair values and all investments
in debt securities be classified and accounted for in three categories.
Debt securities that management has the positive intent to hold to maturity are
classified as securities held-to-maturity. Held-to-maturity securities are
reported at amortized cost. Debt and equity securities that are held
principally for the purpose of selling them in the near future are classified
as trading securities. Trading securities are reported at fair value with
unrealized gains and losses included in earnings of ($177), $1,079 and
($13,792) in 1994, 1993 and 1992, respectively. Debt and equity securities not
classified as either held-to-maturity or trading are classified as
available-for-sale. Available-for-sale securities are reported at fair value
with unrealized gains and losses reported in a separate component of
shareholders' equity, net of tax.
- -------------------------------------------------------------------------------
52
<PAGE> 54
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE D -- LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Commercial:
Commercial, financial and other.. $ 8,377,878 $ 6,727,207
Tax-exempt ...................... 1,809,600 1,959,266
Retail:
Direct .......................... 750,228 715,418
Indirect ........................ 2,339,889 2,429,497
Credit card ..................... 3,969,369 3,122,732
Other revolving credit .......... 343,140 333,405
Real estate:
Construction .................... 553,105 494,148
Commercial mortgages ............ 3,483,452 3,199,434
Residential mortgages ........... 3,821,207 3,766,600
Lease financing -- net............. 188,521 156,726
Foreign ........................... 254,415 73,055
----------- -----------
Total loans -- net .......... $25,890,804 $22,977,488
=========== ===========
</TABLE>
Loans at December 31 that had been placed on a cash basis and those on which
the contractual rate of interest had been reduced below market are summarized
below.
<TABLE>
<CAPTION>
1994 1993
------- --------
<S> <C> <C>
Cash-basis assets -- domestic......... $78,712 $108,882
Restructured loans ................... -- 80
------- --------
Total nonperforming loans ...... $78,712 $108,962
======= ========
Interest income which would have been
recorded pursuant to original terms:
Domestic ........................... $ 7,929 $ 11,140
======= ========
Interest income recorded:
Domestic ........................... $ 3,391 $ 4,456
</TABLE> ======= ========
Loans totaling $10,842 at December 31, 1994, which have been restructured at
market rates and have been returned to accrual status are not included in the
nonperforming loan total. Foregone interest on these balances is included in
the above presentation.
At December 31, 1994, the Corporation had no significant outstanding
commitments to lend additional funds to borrowers owing cash-basis and
restructured loans.
Changes in the allowance for loan losses for the three years ended December 31,
1994 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year . $ 404,798 $379,557 $ 360,193
Allowance of company sold .... -- -- (4,811)
Provision for loan losses .... 71,763 92,652 119,420
Recoveries on loans previously
charged off ................ 32,237 29,697 36,288
Loans charged off ............ (102,666) (97,108) (131,533)
--------- -------- ---------
Balance at end of year ....... $ 406,132 $404,798 $ 379,557
========= ======== =========
</TABLE>
Loans totaling $13,051, $42,256 and $81,592 were transferred to foreclosed real
estate during 1994, 1993 and 1992, respectively.
It is the policy of the Corporation to review each prospective credit in order
to determine an adequate level of security or collateral to obtain prior to
making the loan. The type of collateral will vary and ranges from liquid assets
to real estate. The Corporation's access to collateral, in the event of
borrower default, is assured through adherence to state lending laws and the
Corporation's sound lending standards and credit monitoring procedures. The
Corporation regularly monitors its credit concentrations on loan purpose,
industry and customer bases. At year-end, there were no significant credit
concentrations within these categories. For additional discussion related to
off-balance sheet credit issues, refer to Note I.
The Corporation's subsidiaries have granted loans and extended letters of
credit to certain directors and executive officers of the Corporation and its
subsidiaries and to their associates. The aggregate amount of loans was
$399,023 and $219,623 at December 31, 1994 and 1993, respectively. During 1994,
$557,328 in new loans was made, and repayments totaled $377,928. Outstanding
standby letters of credit to related parties totaled $34,934 and $28,183 at
December 31, 1994 and 1993, respectively. Related party loans are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated transactions
with unrelated persons and do not involve more than the normal risk of
collectibility.
Loans held for sale at December 31 along with activity during the period are
summarized as follows:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Balance at beginning of year $ 688,828 $ 310,834
Originations/purchases ..... 20,197,006 23,069,853
Sales/transfers ............ (20,456,089) (22,691,859)
------------ ------------
Balance at end of year ..... $ 429,745 $ 688,828
============ ============
</TABLE>
The Corporation will adopt Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (FASB 114), as of January 1,
1995. This standard modifies the accounting for impaired loans, defined as
those loans where, based on current information and events, it is probable that
a creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The Corporation believes the adoption
of FASB 114 will not have a material impact on its financial position or
results of operations.
- --------------------------------------------------------------------------------
53
<PAGE> 55
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE E -- PREMISES, EQUIPMENT AND LEASES
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---------- --------
<S> <C> <C>
Land ............................. $ 88,098 $ 87,947
Premises ......................... 352,159 318,911
Equipment ........................ 562,845 514,482
Leasehold improvements ........... 67,755 66,470
---------- --------
1,070,857 987,810
Less accumulated depreciation
and amortization ............... 527,309 485,111
---------- --------
Total premises and equipment $ 543,548 $502,699
========== ========
</TABLE>
The annual minimum rentals under the terms of the Corporation's noncancelable
operating leases as of December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995............................................. $ 35,175
1996............................................. 33,291
1997............................................. 30,134
1998............................................. 26,149
1999............................................. 25,499
Thereafter....................................... 176,704
--------
Total minimum lease payments............... $326,952
========
</TABLE>
The net rental expense for all operating leases amounted to $43,491 in 1994,
$47,579 in 1993 and $48,254 in 1992. Certain leases have various renewal
options and require increased rentals under cost of living escalation clauses.
- --------------------------------------------------------------------------------
NOTE F -- CREDIT ARRANGEMENTS
At December 31, 1994 and 1993, lines of credit arrangements aggregating
$200,000 and $160,000, respectively, were available to the Corporation from
unaffiliated banks. Commitment fees were 15 basis points in 1994 and 1993;
compensating balances are not required. The unused portion of these banking
arrangements principally serves as commercial paper back-up lines. There were
no borrowings outstanding under credit arrangements at December 31, 1994 or
1993.
- --------------------------------------------------------------------------------
NOTE G -- LONG-TERM DEBT
Long-term debt at December 31 is summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Bank notes, net of discount of $6,132 and $3,859 in 1994 and 1993, respectively (a) ... $3,953,318 $2,370,091
Other long-term debt:
7.0% subordinated debt securities due in 1999, net of discount of $2,112 and $2,457
in 1994 and 1993, respectively (b) ................................................ 297,888 297,543
6.375% subordinated debt securities due in 2003, net of discount of $1,679 and $1,830
in 1994 and 1993, respectively (b) ................................................ 248,321 248,170
9.67% subordinated capital notes due in 2001 (b) .................................... 25,486 25,484
6.5% convertible subordinated debentures due in 2001 (b) (c) ........................ 9,400 12,540
6.735% subordinated notes due in 2009, net of discount of $313 (b) .................. 249,687 --
Capitalized lease obligations ....................................................... 6,210 6,549
Other ............................................................................... 154 79
---------- ----------
Total other long-term debt ...................................................... 837,146 590,365
---------- ----------
Total long-term debt ............................................................ $4,790,464 $2,960,456
========== ==========
</TABLE>
(a) Wachovia Bank of North Carolina has an ongoing bank note program under
which the bank may offer an aggregate principal amount of up to $7 billion
outstanding at any one time. The notes can be issued as fixed or floating
rate notes and with terms of 30 days to 15 years. Bank notes with original
maturities of one year or less are included in other short-term borrowed
funds in the Consolidated Statements of Condition. Bank notes with original
maturities of greater than one year are classified as long-term debt.
Interest rates on the long-term notes ranged from 4.0% to 7.50% and 3.30%
to 6.10% with maturities ranging from 1995 to 1999 and 1994 to 1998 at
December 31, 1994 and 1993, respectively. The average rates were 5.31% and
4.54% with average maturities of 1.73 years and 1.8 years at December 31,
1994 and 1993, respectively.
(b) Debt qualifies for inclusion in the determination of total capital under
the Risk-Based Capital guidelines.
(c) The debentures are redeemable under certain conditions and are convertible
into common stock of the Corporation at a conversion price of $19.29 per
share. At December 31, 1994, $25,600 of these notes had been converted.
The principal maturities of long-term debt for the next five years subsequent
to December 31, 1994 are $1,216,224 in 1995, $1,399,275 in 1996, $764,509 in
1997, $205,180 in 1998 and $370,507 in 1999. Interest paid on deposits and
other borrowings was $1,026,879 in 1994, $882,128 in 1993 and $1,022,288 in
1992.
- --------------------------------------------------------------------------------
54
<PAGE> 56
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
$ in thousands
- --------------------------------------------------------------------------------
Note H -- Capital Stock
On April 1, 1993, a two-for-one common stock split, effected in the form of a
stock dividend, was paid to the Corporation's shareholders. Unless otherwise
noted, information in this note, as well as share and per share information
presented throughout the financial statements, has been restated to reflect the
effect of the stock split.
The authorized capital stock of the Corporation consists of 500,000,000 common
shares and 50,000,000 preferred shares. At December 31, 1994, 25,685,158 common
shares were reserved for the conversion of notes and for stock issuable in
connection with employee benefit plans and the dividend reinvestment plan.
On July 22, 1994, the Corporation's Board of Directors authorized the
repurchase of up to 5 million shares of common stock, replacing an earlier
authorization for the same number of shares. Repurchased shares will be used
for various corporate purposes including the issuance of shares for the
corporation's employee benefit plans and dividend reinvestment plan. During the
year, the Corporation repurchased 1,620,900 shares pursuant to this and prior
year authorizations. At December 31, 1994, the number of shares available for
possible repurchase totaled 4,324,500.
At the Annual Meeting of Shareholders held on April 22, 1994, a new Wachovia
Corporation Stock Plan was approved. The 1994 officer plan awards 60,500 shares
of stock contingent upon the corporation's return on equity (ROE) over the
five-year period, 1994-1998. The 1994 director plan granting 3,500 shares is
not performance based and vests April 22, 1995.
The various stock option and incentive plans of the Corporation provide for the
granting of options or awards for the purchase or issuance of 10,625,004 shares
at 100% of the fair market value of the stock at the date of the grant. A
committee of the Board of Directors determines the number of shares subject to
each option and the time or times when options shall be granted and exercised
and the duration of the exercise period, which in no case shall exceed ten
years. The committee also determines the number of awards to be granted and the
time or times when awards shall be granted and the period when awards are
deemed to be earned, with the exception of the 1994 officer plan in which
awards are earned based on the Corporation's ROE. Awards are exercised at no
cost to the participant. Under the 1994 plan, newly elected nonemployee
directors of the Corporation are granted a one-time award of 1,000 shares of
restricted stock to be earned over a period of three years. Also, an annual
award of 250 shares of restricted stock is granted to all nonemployee directors
to be earned over a period of one year.
At the time the options are exercised, the par value of all shares issued is
credited to common stock and the excess of the proceeds over the par value is
credited to capital surplus. At the time awards are granted, capital surplus is
credited and retained earnings debited for the fair market value of the awards.
When the stock awarded is issued, common stock is credited and capital surplus
is debited for the par value of the shares issued. Recipients of awards under
the predecessor plan are entitled to compensation equivalent to the dividends
that would have been payable on the proportion of the awards reserved but not
yet fully earned based on the years of service since the date of grant divided
by the number of years over which the award is deemed to be fully earned.
Compensation equivalent to dividends totaled $86 in 1994, $54 in 1993 and $86
in 1992. At December 31, 1994 and 1993, deferred compensation related to
director and management awards was $3,025 and $2,614, respectively.
Compensation expense related to stock awards was $1,397 for 1994, $1,864 for
1993 and $4,050 for 1992.
Activity in the option and award plans during 1994 and 1993 is summarized as
follows:
<TABLE>
<CAPTION>
Options and Awards
-------------------------------------
Outstanding
Available ---------------------- Option Price
for Grant Awards Options Per Share
--------- ------- --------- ------------
<S> <C> <C> <C> <C>
January 1, 1993 .. 1,703,038 192,518 4,000,894 $ 5.41-31.125
Granted ........ (841,860) 67,400 774,460 33.125-37.00
Exercised ...... -- (52,701) (582,320) 5.41-33.125
Forfeited ...... 30,890 (901) (31,226) 12.50-33.125
--------- ------- ---------
Total December 31,
1993 892,068 206,316 4,161,808 5.41-37.00
Authorized under
1994 plan .... 6,000,000 -- --
Granted ........ (920,600) 64,000 856,600 31.25-34.625
Exercised ...... -- (36,728) (483,212) 5.41-33.125
Canceled ....... (35,468) -- --
Forfeited ...... 3,000 (8,000) (74,780) 19.75-34.625
--------- ------- ---------
Total December 31,
1994 5,939,000 225,588 4,460,416 5.41-37.00
========= ======= =========
</TABLE>
Of the above options outstanding at December 31, 1994, options for 1,915,459
shares were exercisable at option prices ranging from $5.41 to $33.125.
- --------------------------------------------------------------------------------
55
<PAGE> 57
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
$ in thousands
- --------------------------------------------------------------------------------
Note I -- Off-Balance Sheet Trading and Lending Activities
The Corporation maintains positions in a variety of financial instruments with
off-balance sheet risk in order to meet the financing needs of its customers.
Financial instruments issued or held to accommodate customer lending activities
include unfunded commitments to extend credit, standby, commercial and similar
letters of credit, securities lending, participations in bankers' acceptances
and mortgage loans sold with recourse. In order to accommodate customer capital
management, interest rate risk management and international transaction
requirements, the Corporation engages in trading activities as a dealer by
structuring and executing over-the-counter interest rate contracts, commitments
to purchase or sell securities, and foreign exchange contracts. The Corporation
maintains active trading positions in foreign exchange forward contracts and
manages credit risk through the establishment of offsetting sell positions, as
well as standard limit and monitoring procedures. The Corporation maintains a
trading portfolio of interest rate swap and option (caps and floors) contracts
and foreign exchange options consisting of generally matched, offsetting
contracts with customers and market counterparties.
Off-balance sheet financial instruments involve, in varying degrees, exposure
to credit and interest rate risk in excess of the amount recognized in the
statements of financial condition. The Corporation follows the same credit
policies and careful underwriting practices in making commitments and
conditional obligations as it does for on-balance sheet instruments. In those
instances where collateral is deemed necessary to support financial instruments
with credit risk, the Corporation ensures its ability to access the collateral,
in the event of borrower default, through strict adherence to corporate lending
policy and applicable state lending laws.
Derivative Financial Instruments Held or Issued for Trading Purposes -- The
amounts disclosed below represent the end of period fair value of derivative
financial instruments held or issued for trading purposes and the average
aggregate fair values during the year of those instruments. The Corporation's
credit exposure to off-balance sheet derivative financial instruments is
represented by the fair value gain of the instrument if a counterparty fails to
perform. Options written do not expose the Corporation to credit risk, except
to the extent of the underlying risk in the debt instrument that the
Corporation may be obligated to acquire under certain written put options. Caps
and floors written do not expose the Corporation to credit risk.
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------- ---------------------------
Notional Fair Value Fair Value Average Notional Net Fair Value
Value Gains (Losses) Fair Value Value Gains (Losses)
-------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
U.S. dollar interest rate contracts as intermediary:
Interest rate swaps-pay fixed .................... $1,212,223 $57,686 $ (1,719) $ 27,432 $ 878,915 ($13,951)
Interest rate swaps-pay floating ................. 1,243,223 2,062 (55,557) (24,410) 911,674 16,633
Interest rate caps and floors written ............ 258,540 585 (2,309) (797) 169,499 (268)
Interest rate caps and floors purchased .......... 258,540 2,309 (524) 664 169,499 268
Securities trading activities:
Commitments to purchase securities,
futures and forward contracts .................. 409,029 349 (221) (11,193) 996,833 (17,264)
Commitments to sell securities,
futures, and forward contracts ................. 222,728 311 (312) 11,510 1,059,041 17,828
Net options written to purchase
or sell securities ............................. 94,000 -- (27) (3) 71,000 (10)
Foreign exchange trading activities:
Commitments to purchase foreign exchange ......... 524,180 6,529 (2,304) 15,866 597,593 (7,921)
Commitments to sell foreign exchange ............. 519,472 3,387 (6,303) (14,878) 585,854 9,090
Foreign exchange options written ................. 3,016 10 -- (1,311) 12,000 (406)
Foreign exchange options purchased ............... 3,014 -- (9) 1,021 12,000 406
</TABLE>
Interest Rate Swaps -- These transactions generally involve the exchange of
fixed and floating rate payments without the exchange of the underlying
principal amounts. Payments made or received under swap contracts are accrued
on the basis of their contractual terms and are included in "other operating
income" in the Consolidated Statements of Income. The related accrued amounts
receivable or payable to customers and counterparties are recorded as "other
assets or liabilities" in the Consolidated Statements of Condition. Revenues
from the customer portfolio represent a small profit margin on intermediated
transactions. The difference in the fair value of the offsetting contracts is
not material.
The Corporation acts as principal in the exchange of interest payments between
parties, and therefore, is exposed to loss should one of the parties default.
The Corporation controls the credit risk of these instruments through adherence
to credit approval policies, monetary limits and monitoring procedures.
Entering into interest rate swap agreements involves not only credit risk but
also interest rate risk associated with unmatched positions. Notional principal
amounts are often used to express the volume of these transactions but do not
represent the much smaller amounts potentially subject to credit risk. These
amounts are derived by estimating the cost, on a present value basis, of
replacing outstanding agreements at current market rates. Contracts whose
present value estimates indicate fair value gains are those which customers and
market counterparties are exposed to the Corporation and for which the
Corporation has potential credit risk. The Corporation controls interest rate
risk inherent in the derivative trading portfolio by entering into offsetting
swap positions or by using other hedging techniques to manage risk.
At December 31, 1994, the weighted average maturity of pay-fixed swaps held in
the customer portfolio was 2.63 years and 2.66 years for receive-fixed swaps.
Under pay-fixed swap agreements, the Corporation was paying interest at a
weighted average fixed rate of 5.24% and was receiving interest at a weighted
average floating rate of 5.17% (based on year-end rates). Under receive-fixed
swap agreements, the Corporation was receiving interest at a weighted average
fixed rate of 5.48% and was paying interest at a weighted average floating rate
of 5.40% (based on year-end rates).
- --------------------------------------------------------------------------------
56
<PAGE> 58
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
$ in thousands
- --------------------------------------------------------------------------------
NOTE I -- OFF-BALANCE SHEET TRADING AND LENDING ACTIVITIES -- Continued
Interest Rate Caps and Floors -- These instruments are written by the
Corporation to enable its customers to transfer, modify, or reduce their
interest rate risk exposure. In a cap or floor contract, the purchaser pays a
premium at the initiation of the contract for the right to receive payments if
market interest rates are greater than the strike price of a cap or less than
the strike price of a floor. Payments made or received under cap or floor
contracts are accrued on the basis of their contractual terms and are included
in "other operating income" in the Consolidated Statements of Income. Credit
risk and interest rate risk are managed through the oversight procedures
applied to other interest rate contracts, as well as through the purchase of
offsetting cap and floor positions. The present value of purchased caps and
floors in a gain position represent the potential credit risk to the
Corporation.
Commitments to Purchase and Sell Securities, Futures and Forward Contracts --
These instruments are contracts for delayed delivery of securities or money
market instruments in which the seller agrees to make delivery at a specified
future date of a specified instrument, at a specified price or yield.
Commitments to purchase and sell securities, futures and forward contracts used
in securities trading operations are recognized currently at market value and
are included in "trading account profits (losses)" in the Consolidated
Statements of Income. Risks arise in these transactions through the possible
inability of one of the counterparties to meet the terms of the contracts and
from movements in interest rates or securities values. Risks associated with
these instruments are controlled through offsetting purchase and sell
positions, as well as oversight provided by organized exchanges, which
determine who may buy and sell such instruments.
Net Options Written to Purchase and Sell Foreign Exchange -- Forward
commitments involve the purchase or sale of foreign currency amounts for
delivery at a specified future date. Payments on forward commitments are
exchanged on the delivery date based upon the exchange rate in the contract.
Forward commitments to purchase and sell foreign exchange are recognized at
market value and are included in "other operating income" in the Consolidated
Statements of Income. The potential risks associated with these obligations
arise from fluctuations in foreign exchange rates, as well as potential
inability of the counterparty to perform under the contract. These risks are
mitigated through the establishment of offsetting sell positions, as well as
standard limit and monitoring procedures.
Foreign Exchange Options -- These agreements represent rights to purchase or
sell foreign currency at a predetermined price at a future date. The purchaser
pays a premium at the initiation of the contract for the right to exchange a
specified amount at the contract's exchange rate at the maturity of the option.
The Corporation maintains a portfolio of generally matched offsetting foreign
exchange options. Fluctuations in foreign currency markets, as well as the
potential default of the counterparty to an option contract, represent the
risks associated with these instruments. Limit and monitoring procedures along
with offsetting positions serve to control the risk associated with these
items. The fair value of foreign exchange options purchased serves to offset
the fair value of written options.
Revenues from the derivative trading portfolio are shown below.
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Interest rate contracts ... $ 1,411 $ 514 ($2,048)
Securities activities ..... 7,219 (489) (6,286)
Foreign exchange activities 5,827 8,610 8,030
------- ------ ------
Total ............... $14,457 $8,635 $ (304)
======= ====== ======
</TABLE>
Off-Balance Sheet Financial Instruments Issued for Lending Activities -- The
Corporation issues off-balance sheet financial instruments as part of its
commercial and consumer lending activities. The contract amounts of these
instruments represent potential credit risk at December 31 as shown below.
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Commercial and consumer
lending activities:
Unfunded commitments to
extend credit ................. $27,919,542 $19,664,000
Standby letters of credit ....... 3,751,314 3,155,601
Commercial and similar
letters of credit ............. 139,753 133,899
Securities lent ................. 39,550 61,210
Participations in bankers'
acceptances ................... 4,909 6,055
Mortgage loans sold with recourse 30,234 44,284
</TABLE>
Commitments to Extend Credit -- These are legally binding contracts to lend to
a customer, so long as there is no violation of any condition established in
the contract. These commitments have fixed termination dates and generally
require payment of a fee. As most commitments expire prior to being drawn, the
amounts shown do not necessarily represent the future cash requirements of the
contracts. Credit worthiness is evaluated on a case by case basis, and in some
instances, collateral is obtained to support the borrowing. The collateral held
may vary from liquid assets to real estate. At December 31, 1994 and 1993,
approximately 12% and 15%, respectively, of unfunded commitments to extend
credit were supported by collateral. Of the total unfunded commitment amounts
presented, approximately 22% in 1994 and 29% in 1993 were comprised of
cancelable credit card commitments, and approximately 9% in 1994 and 9% in 1993
were represented by real estate commitments. Also included in total unfunded
commitments were securities underwriting commitments of $880 in 1994 and $2,766
in 1993.
Standby, Commercial and Similar Letters of Credit -- These instruments are
conditional commitments issued by the Corporation guaranteeing the performance
of a customer to a third party. These guarantees are issued primarily to
support public and private borrowing arrangements. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
credit to customers and is subject to the Corporation's normal sound
underwriting process. At December 31, 1994 and 1993, approximately 4% and 6%,
respectively, of these instruments were supported by collateral. There were no
significant concentrations of letters of credit to any one group of borrowers
at either year-end.
- --------------------------------------------------------------------------------
57
<PAGE> 59
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE I -- OFF-BALANCE SHEET TRADING AND LENDING ACTIVITIES -- Concluded
Securities Lent -- These are securities of the Corporation and its customers
lent to third parties. Credit risk arises in these transactions through the
possible failure of the borrower to return the securities. To minimize this
risk, the Corporation evaluates the credit worthiness of the borrower on a case
by case basis, and collateral with a market value exceeding 100% of the
contract amount of securities lent is obtained.
Participation in Bankers' Acceptances -- These instruments represent risk
participation in time drafts drawn by customers under a committed multibank
credit facility. These drafts have been accepted and remarketed by other
financial institutions. Under the terms of these arrangements, the Corporation
may be required to reimburse the accepting financial institution for the
Corporation's pro rata share of any payment default by the customer. The
Corporation applies the same underwriting standards in evaluating the credit
risk associated with these instruments as it does in evaluating on-balance
sheet instruments.
Mortgage Loans Sold with Recourse -- The Corporation is obligated under
recourse provisions related to the sale of certain residential mortgages to the
Federal National Mortgage Association. These mortgages are collateralized by
1-4 family residential homes. All mortgage loans with original loan-to-value
ratios exceeding 80% (up to a maximum of 95%) have private mortgage insurance
coverage.
- --------------------------------------------------------------------------------
NOTE J -- OFF-BALANCE SHEET RISK MANAGEMENT ACTIVITIES
The Corporation manages its exposure to fluctuation in interest rates by
entering into interest rate swap, cap and floor contracts with financial
institution counterparties. The operations of the Corporation are subject to a
risk in interest rate fluctuations to the extent that there is a difference
between the amount of the Corporation's interest-earning assets and the amount
of interest-bearing liabilities that mature or reprice in specified periods.
The principal objective of the Corporation's asset/liability management
activities is to provide maximum levels of net interest income while
maintaining acceptable levels of interest rate and liquidity risk and
facilitating the funding needs of the Corporation. To achieve that objective,
the Corporation uses a combination of derivative financial instruments,
including interest rate swaps and options with indices that correlate to
on-balance sheet instruments to modify the repricing characteristics of
interest-earning assets and interest-bearing liabilities.
The amounts disclosed below represent the end of period notional and fair value
of derivative financial instruments held for risk managment purposes. The
Corporation's credit exposure to off-balance sheet derivative financial
instruments is represented by the fair value gain of the instrument if a
counterparty fails to perform.
<TABLE>
<CAPTION>
1994 1993
--------------------------------- ---------------------------
Notional Fair Value Fair Value Notional Net Fair Value
Value Gains (Losses) Value Gains (Losses)
---------- ---------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Convert floating rate liabilities to fixed:
Swaps--pay fixed/receive floating ................ $ 233,282 $ 3,668 $ (2,690) $ 451,863 ($22,897)
Caps purchased--pay fixed/receive floating ....... 15,000 14 -- 15,000 125
Convert fixed rate assets to floating:
Swaps--pay fixed/receive floating ................ 17,460 132 -- -- --
Forward starting swaps--pay fixed/receive floating 57,540 434 -- -- --
Convert fixed rate liabilities to floating:
Swaps--receive fixed/pay floating ................ 100,000 -- (16,337) -- --
Convert floating rate assets to fixed:
Swaps--receive fixed/pay floating ................ 120,105 112 (4,005) 390,216 (770)
Index amortizing swaps--receive fixed/pay floating 175,000 -- (6,776) -- --
Hedge spread between prime and fed funds:
Interest rate caps ............................... 400,000 10,552 (10,632) 400,000 1,446
---------- ------- -------- ---------- --------
Total derivatives ............................ $1,118,387 $14,912 ($40,440) $1,257,079 ($22,096)
========== ======= ======== ========== ========
</TABLE>
Deferred losses totaling $15,117 at December 31, 1994, resulting from
terminated swap contracts are included in other assets; $9,097 will be
amortized to interest expense in 1995 and $6,020 in 1996.
- --------------------------------------------------------------------------------
58
<PAGE> 60
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
$ in thousands
- --------------------------------------------------------------------------------
NOTE K -- INCOME TAXES
As of January 1, 1993, the Corporation prospectively adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FASB
109), which requires an asset and liability approach to accounting for income
taxes. As permitted under FASB 109, prior years' financial statements have not
been restated.
The cumulative impact of adopting FASB 109 was a tax benefit of $2,700 or $.02
per fully diluted share, which is reflected in income tax expense for the year
ended December 31, 1993.
The provision for income taxes is summarized below. Included in these amounts
are income taxes related to securities transactions of $1,328, $7,472 and $470
in 1994, 1993 and 1992, respectively. The Corporation made income tax payments
totaling $211,345 in 1994, $217,716 in 1993 and $151,948 in 1992.
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Currently payable:
Federal ................... $202,685 $209,853 $159,787
Foreign ................... 147 289 261
State and local ........... 7,152 11,966 14,667
-------- -------- --------
Total currently payable 209,984 222,108 174,715
Deferred:
Federal ................... 13,241 (25,828) (9,631)
State ..................... (801) (835) (2,106)
-------- -------- --------
Total deferred ........ 12,440 (26,663) (11,737)
-------- -------- --------
Total tax expense ..... $222,424 $195,445 $162,978
======== ======== ========
</TABLE>
The deferred tax provision for 1993 includes a benefit of $2,683 related to the
revaluation of the Corporation's net deferred tax asset for the increase in the
federal corporate tax rate from 34% to 35% effective January 1, 1993.
The reasons for the difference between consolidated income tax expense and the
amount computed by applying the statutory federal income tax rate of 35% in
1994 and 1993 and 34% in 1992 to income before taxes were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Federal income taxes at
statutory rate .............. $266,519 $240,639 $202,709
State and local income taxes,
net of federal benefit ...... 4,128 7,235 8,290
Effect of tax-exempt securities
interest and other income ... (48,217) (50,817) (49,783)
Other items ................... (6) (1,612) 1,762
-------- -------- --------
Total tax expense ....... $222,424 $195,445 $162,978
======== ======== ========
</TABLE>
Under FASB 109, deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Corporation's deferred tax assets and liabilities
at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Deferred Tax Assets
-------------------
1994 1993
-------- --------
<S> <C> <C>
Allowance for loan losses ........................ $147,894 $146,305
Unrealized losses on securities available-for-sale 24,212 --
Other ............................................ 26,145 43,493
-------- --------
Gross deferred tax assets .................. $198,251 $189,798
======== ========
</TABLE>
<TABLE>
<CAPTION>
Deferred Tax Liabilities
------------------------
1994 1993
-------- --------
<S> <C> <C>
Depreciation ....................... $ 34,941 $ 34,674
Lease financing .................... 21,508 15,998
Accretion of discounts on securities 12,888 13,981
Other .............................. 2,379 10,382
-------- --------
Gross deferred tax liabilities $ 71,716 $ 75,035
======== ========
Net deferred tax asset ....... $126,535 $114,763
======== ========
</TABLE>
Management believes that the Corporation will fully realize the net deferred
tax asset as of December 31, 1994 based on the Corporation's refundable taxes
from carryback years, as well as its current level of operating income.
The consolidated net deferred income tax asset amounted to $88,877 at December
31, 1992. The components of the provision for deferred income taxes for the
year ended December 31, 1992 are as follows:
<TABLE>
<CAPTION>
1992
----------
<S> <C>
Provision for loan losses .......... $(7,953)
Bond trading revaluations .......... (7,957)
Deposit base intangible amortization 1,361
Other .............................. 2,812
-------
Total deferred income taxes .. ($11,737)
=======
</TABLE>
- --------------------------------------------------------------------------------
NOTE L -- CASH, DIVIDEND, LOAN RESTRICTIONS AND CONTINGENT LIABILITIES
In the normal course of business, the Corporation and its subsidiaries enter
into agreements, or are subject to regulatory requirements, that result in
cash, debt and dividend restrictions. A summary of the most restrictive items
follows.
The Corporation's banking subsidiaries are required to maintain average reserve
balances with the Federal Reserve Bank. The average amount of those reserve
balances for the year ended December 31, 1994 was approximately $428,507.
Under current Federal Reserve regulations, the banking subsidiaries also are
limited in the amount they may loan to their affiliates, including the
Corporation. Loans to a single affiliate may not exceed 10% and loans to all
affiliates may not exceed 20% of
- --------------------------------------------------------------------------------
59
<PAGE> 61
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE L -- CASH, DIVIDEND, LOAN RESTRICTIONS AND CONTINGENT LIABILITIES --
Concluded
the bank's capital, surplus and undivided profits (net assets) after adding
back the allowance for loan losses. Based on these limitations, approximately
$333,968 was available for loans to the Corporation at December 31, 1994.
The approval of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the bank's
net profits, as defined, for that year combined with its retained net profits
for the preceding two calendar years. Under this formula, the banking
subsidiaries can distribute as dividends to the Corporation in 1995, without
the approval of the Comptroller of the Currency, more than $495,813 plus an
additional amount equal to the banks' retained net profits for 1995 up to the
date of any dividend declaration.
As a result of the above dividend and loan restrictions, approximately
$2,283,072 of consolidated net assets of the Corporation's banking subsidiaries
at December 31, 1994 was restricted from transfer to the Corporation in the
form of cash dividends, loans or advances.
The subsidiaries of the Corporation are defendants in certain legal proceedings
arising in connection with their business. In the opinion of management and
general counsel, the ultimate resolution of those proceedings will result in no
material adverse effect on the Corporation's financial position and results of
operations. There are no known situations where the Corporation has an
environmental liability that will materially affect the financial position or
results of operations.
- --------------------------------------------------------------------------------
NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS
The Corporation maintains a defined benefit pension plan which covers
substantially all employees. The plan provides pension benefits that are based
upon the employee's length of credited service and final average compensation
as defined in the plan. The pension expense of the plan is determined using the
projected unit credit method. The Corporation's policy is to fund amounts
allowable for federal income tax purposes. The following table sets forth the
funded status of the Corporation's defined benefit pension plan and the amounts
recognized in the Consolidated Statements of Condition at December 31.
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested .................................... $288,732 $303,288
Nonvested ................................. 30,373 2,765
-------- --------
Total ................................. $319,105 $306,053
======== ========
Actuarial present value of projected
benefit obligation for service
rendered to date .......................... ($353,443) ($360,428)
Plan assets at fair value -- primarily listed
stocks, fixed income securities and
collective funds .......................... 422,333 449,853
-------- --------
Plan assets in excess of projected
benefit obligation ........................ 68,890 89,425
Unrecognized net loss from past
experience different from that assumed .... 24,675 9,685
Unrecognized prior service cost ............. (21,594) (24,091)
Unrecognized transition asset ............... (45,921) (52,126)
-------- --------
Pension asset recorded in Consolidated
Statements of Condition ................... $ 26,050 $ 22,893
======== ========
</TABLE>
Net pension benefit included the following components.
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period ........... $14,486 $12,714 $12,502
Interest cost on projected
benefit obligation .......... 26,477 24,647 22,411
Actual (return) loss on
plan assets ................. 3,466 (39,227) (25,337)
Net amortization and deferral . (47,587) (3,577) (16,532)
------- ------- -------
Net periodic pension benefit .. $(3,158) $(5,443) $(6,956)
======= ======= =======
</TABLE>
The rates used in determining the actuarial present value of the projected
benefit obligation were as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Discount rates ........................... 8.5% 7.5%
Rates of increase in compensation levels.. 5% 5.25%
</TABLE>
The expected long-term rate of return on plan assets used to determine the net
periodic pension benefit was 8% for 1994, 1993 and 1992.
The Corporation also sponsors separate unfunded nonqualified pension plans that
provide certain officers with defined pension benefits in excess of limits
imposed on qualified plans by federal tax law and for certain compensation not
covered in the qualified plans. The following table summarizes the plans at
December 31.
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested ................................................. $24,098 $14,287
Nonvested .............................................. 4,713 10,544
------- -------
Total .............................................. $28,811 $24,831
======= =======
Actuarial present value of projected
benefit obligation for service
rendered to date ....................................... ($34,061) ($32,129)
Unrecognized actuarial losses ............................ 13,168 6,129
Unrecognized transition obligation ....................... 440 489
Unrecognized prior service cost .......................... (264) (261)
------- -------
Pension liability recorded in Consolidated
Statements of Condition ................................ ($20,717) ($25,772)
======= =======
</TABLE>
Net pension cost included the following components.
<TABLE>
<CAPTION>
1994 1993 1992
------ ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period ........... $ 576 $ 526 $ 504
Interest cost on projected
benefit obligation .......... 2,523 2,612 2,704
Net amortization and deferral . 1,178 520 1,073
------ ------ ------
Net periodic pension cost ..... $4,277 $3,658 $4,281
====== ====== ======
</TABLE>
- --------------------------------------------------------------------------------
60
<PAGE> 62
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- Concluded
The rates used in determining the actuarial present value of the projected
benefit obligation were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Discount rates ........................... 8.5% 7.5%
Rates of increase in compensation levels.. 5% 5%
</TABLE>
The Corporation also provides supplemental benefits to substantially all
employees through defined contribution plans designed to encourage participants
to save on a regular basis and to provide such participants with deferred
compensation and additional performance incentive. Total expense relating to
these plans, which represented the Corporation's matching and discretionary
contributions, was $16,131 in 1994, $22,767 in 1993 and $11,043 in 1992.
Employee participants may elect to contribute from 1% to 10% of base salary,
with the Corporation matching 50% of each participant's contribution up to a
maximum employer contribution of 3% of base salary. The plans provide for
additional contributions of up to 3% of salary in accordance with a
preestablished formula based on certain earnings performance criteria and also
for special discretionary employer contributions of up to 4% of each eligible
employee's base salary as approved annually by the Board of Directors.
During 1992, the employee stock ownership plan (ESOP) of South Carolina
National Corporation repaid its outstanding indebtedness of $25,000 with
proceeds received from the sale of Wachovia common stock held by the ESOP.
Company contributions to the ESOP have been discontinued, and all remaining
shares of Wachovia common stock have been allocated to the ESOP participants.
Dividends paid on shares held by the ESOP totaled $443 in 1992. Interest
expense on ESOP debt amounted to $625 in 1992.
The Corporation and its subsidiaries provide certain health care benefits for
retired employees. Substantially all of the employees may become eligible for
these benefits if they reach normal retirement age while working for the
Corporation or its subsidiaries. The benefits are provided through self-insured
plans administered by insurance companies whose premiums are based on the
claims paid during the year.
On January 1, 1993, the Corporation prospectively adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (FASB 106), which requires the
accrual of nonpension benefits as employees render service. Adoption of FASB
106 increased postretirement benefits expense in 1993 by $5,210 and, on an
after-tax basis, reduced net income by $3,235 or $.02 per fully diluted share.
Prior to 1993, the Corporation recognized the cost of providing these
retirement benefits by expensing the annual premiums or claims which were
$3,005 in 1992.
The liability for postretirement benefits is unfunded. The following table
presents the status of the plan as of December 31.
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees ................................... ($22,813) ($50,043)
Fully eligible active plan participants .... (9,774) (6,864)
Other active plan participants ............. (9,214) (11,646)
------- -------
Total .................................. (41,801) (68,553)
Unrecognized net (gain) loss ................. (21,944) 3,454
Unrecognized transition obligation ........... 56,737 59,889
------- -------
Accrued postretirement benefit cost .......... $(7,008) $(5,210)
======= =======
</TABLE>
Net periodic postretirement benefit cost included the following components.
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Service cost ................................. $ 851 $ 738
Interest cost ................................ 3,494 4,953
Amortization of gain ......................... (646) --
Amortization of transition obligation
over 20 years .............................. 3,152 3,152
------ ------
Net periodic postretirement benefit cost $6,851 $8,843
====== ======
</TABLE>
The annual assumed rate of increase in health care costs used in determining
the accumulated postretirement benefit obligation and net periodic
postretirement benefit cost for 1994 is 8% for retirees under age 65 and 6% for
retirees age 65 and over. These rates are assumed to remain constant for each
of these categories of retirees for 1995 and thereafter. For 1993 reported
figures, the annual rate of increase in health care costs was assumed to be 16%
initially, decreasing to 14% for 1994, and gradually to 7% by 2007 and
remaining at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. Increasing the assumed health
care cost trend rates by one percentage point would increase the accumulated
postretirement benefit obligation for the plan as of December 31, 1994 and 1993
by $1,746 and $3,637, respectively, and the aggregate of the service and
interest cost of the net periodic postretirement benefit cost for 1994 and 1993
by $131 and $291, respectively. The discount rates used in determining the
accumulated postretirement benefit obligations at December 31, 1994 and 1993
were 8.5% and 7.5%, respectively.
- --------------------------------------------------------------------------------
61
<PAGE> 63
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE N -- SELECTED INCOME STATEMENT INfORMATION
The components of other operating income and expense for the three years ended
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Other operating income:
Insurance premiums and commissions ......................................................... $ 11,679 $ 11,847 $ 15,002
Bankers' acceptance and letter of credit fees .............................................. 23,168 19,668 20,141
Other service charges and fees ............................................................. 56,884 48,915 44,585
Other income ............................................................................... 40,204 37,315 16,619
-------- -------- --------
Total other operating income ............................................................ $131,935 $117,745 $ 96,347
======== ======== ========
Other operating expense:
Postage and delivery ....................................................................... $ 35,163 $ 38,160 $ 37,036
Outside data processing, programming and software........................................... 35,211 38,613 33,082
Stationery and supplies .................................................................... 24,558 25,344 26,342
Advertising and sales promotion ............................................................ 34,067 38,141 27,911
Professional services ...................................................................... 20,493 17,144 18,412
Travel and business promotion .............................................................. 16,254 15,563 13,578
FDIC insurance and regulatory examinations ................................................. 53,451 53,663 53,970
Check clearing and other bank services ..................................................... 8,894 10,159 10,391
Amortization of intangible assets .......................................................... 18,693 28,001 34,423
Foreclosed property expense ................................................................ (4,288) 7,654 9,755
Other expense .............................................................................. 104,991 105,798 109,340
-------- -------- --------
Total other operating expense ........................................................... $347,487 $378,240 $374,240
======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
NOTE O -- EARNINGS PER SHARE
<CAPTION>
Year Ended December 31
-------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Primary (thousands, except per share)
- -------
Average common shares outstanding ............................................................ 171,110 172,273 170,763
Dilutive common stock options -- based on treasury stock method using average market price.... 1,152 1,594 1,738
Dilutive common stock awards -- based on treasury stock method using average market price..... 77 74 140
-------- -------- --------
Average primary shares outstanding ........................................................... 172,339 173,941 172,641
======== ======== ========
Net income ................................................................................... $539,058 $492,095 $433,225
======== ======== ========
Per share amount ............................................................................. $ 3.13 $ 2.83 $ 2.51
Fully Diluted (thousands, except per share)
- -------------
Average common shares outstanding ............................................................ 171,110 172,273 170,763
Dilutive common stock options -- based on treasury stock method using period-end market
price if higher than average market price .................................................. 1,152 1,594 1,975
Dilutive common stock awards-- based on treasury stock method using period-end market
price if higher than average market price .................................................. 77 77 140
Convertible long-term debt assumed converted ................................................. 612 1,254 2,634
-------- -------- --------
Average fully diluted shares outstanding ..................................................... 172,951 175,198 175,512
======== ======== ========
Net income ................................................................................... $539,058 $492,095 $433,225
Add interest on convertible long-term debt, after taxes....................................... 513 937 1,777
-------- -------- --------
Adjusted net income .......................................................................... $539,571 $493,032 $435,002
======== ======== ========
Per share amount ............................................................................. $ 3.12 $ 2.81 $ 2.48
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE> 64
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Concluded
<TABLE>
$ in thousands
- -------------------------------------------------------------------------------
NOTE P -- WACHOVIA CORPORATION (PARENT COMPANY ONLY) INFORMATION
The following is a condensed statement of financial condition of the parent
company at December 31.
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Assets
- ------
Cash on demand deposit with bank subsidiary .... $ 27 $ 13
Interest-bearing bank balances
with bank subsidiaries ....................... 331,766 77,883
Securities available-for-sale .................. 15,279 --
Securities held-to-maturity .................... 2,000 8,510
Demand loans to nonbank subsidiaries ........... 372,608 671,502
Capital notes receivable from
bank subsidiaries ............................ 525,000 375,000
Loan participation with nonbank subsidiary ..... 25,000 25,000
Current amount due from subsidiaries ........... 6,878 2,086
Investments in:
Bank and bank holding company subsidiaries ... 3,226,834 2,953,323
Nonbank subsidiaries ......................... 61,791 58,872
Other assets ................................... 36,701 35,149
---------- ----------
Total assets ............................. $4,603,884 $4,207,338
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Parent company commercial paper ................ $ 406,706 $ 589,178
Subordinated capital notes, net of
discount of $4,103 and $4,286 in
1994 and 1993, respectively .................. 795,897 545,714
Demand loans from bank and bank
holding company subsidiaries ................. 86,426 33,571
Other liabilities .............................. 28,348 20,928
Shareholders' equity ........................... 3,286,507 3,017,947
---------- ----------
Total liabilities and shareholders' equity $4,603,884 $4,207,338
========== ==========
</TABLE>
The operating results of the parent company for the three years ended December
31, 1994 are shown below.
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Income
- ------
Dividends from:
Bank and bank holding company
subsidiaries ................ $306,770 $186,493 $302,267
Nonbank subsidiaries .......... 3,902 5,218 --
Interest from subsidiaries ...... 61,089 39,968 14,461
Other interest income ........... 468 152 54
Other income .................... 30,382 21,243 16,833
-------- -------- --------
Total income .............. 402,611 253,074 333,615
Expense
- -------
Interest on short-term
borrowed funds ................ 19,880 14,692 14,096
Interest on long-term debt ...... 52,586 32,580 1,167
Interest paid to subsidiaries ... 2,419 1,096 914
Other expense ................... 23,218 21,367 14,246
-------- -------- --------
Total expense ............. 98,103 69,735 30,423
Income before income taxes and
equity in undistributed net
income of subsidiaries ........ 304,508 183,339 303,192
Applicable income taxes (benefit) (2,527) (3,423) 253
-------- -------- --------
Income before equity in
undistributed net income
of subsidiaries ............... 307,035 186,762 302,939
Equity in undistributed
net income of subsidiaries .... 232,023 305,333 130,286
-------- -------- --------
Net income ................ $539,058 $492,095 $433,225
======== ======== ========
</TABLE>
The cash flows for the parent company for the three years ended December 31,
1994 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Operating Activities
- --------------------
Net income ...................... $539,058 $492,095 $433,225
Adjustments to reconcile
net income:
Deferred income taxes ......... (927) (3,491) 98
Net change in refundable
or accrued income taxes ..... 2,456 (7,517) 70
Increase in accrued
interest receivable ......... (4,792) (266) (595)
Increase in accrued
interest payable ............ 6,983 2,735 984
Net change in other accrued
and deferred income and
expense ..................... (2,631) 1,739 (2,868)
Equity in undistributed
net income of subsidiaries .. (232,023) (305,333) (130,286)
-------- -------- --------
Net cash provided
by operations ............ 308,124 179,962 300,628
Investing Activities
- --------------------
Net increase in interest-bearing
bank balances ................. (253,883) (54,033) (4,873)
Purchases of securities
available-for-sale ............ (8,287) -- --
Sales of securities
available-for-sale ............ 2,429 -- --
Purchases of securities
held-to-maturity .............. -- (712) (385)
Sales and maturities of
securities held-to-maturity ... -- 49 --
Net decrease (increase) in
demand loans to nonbank
subsidiaries .................. 298,894 (249,557) (86,675)
Capital notes issued to
bank subsidiaries ............. (150,000) (100,000) (275,000)
Net decrease (increase)
in other assets ............... 1,486 (4,991) (638)
Equity investment in subsidiaries (80,000) (1,940) (134,046)
-------- -------- --------
Net cash used by
investing activities ..... (189,361) (411,184) (501,617)
Financing Activities
- --------------------
Net increase (decrease) in
demand loans from subsidiaries 52,855 53,239 (9,279)
Net (decrease) increase in
commercial paper .............. (182,472) 202,560 78,453
Proceeds from long-term debt .... 247,800 248,075 297,222
Payments on long-term debt ...... -- (335) --
Increase (decrease) in other
liabilities ................... 1,140 (7,000) 7,000
Issuance of stock ............... 25,339 24,961 29,717
Dividend payments ............... (210,503) (191,488) (170,756)
Common stock repurchased ........ (52,908) (98,804) (31,197)
Other equity transactions ....... -- (19) (186)
-------- -------- --------
Net cash (used) provided
by financing activities .. (118,749) 231,189 200,974
-------- -------- --------
Increase (decrease) in cash ..... 14 (33) (15)
Cash at beginning of year ....... 13 46 61
-------- -------- --------
Cash at end of year ............. $ 27 $ 13 $ 46
======== ======== ========
Noncash investing and financing
activities:
Common stock issued upon
conversion of long-term debt .. $ 3,104 $ 16,437 $ 4,551
</TABLE>
- --------------------------------------------------------------------------------
63
<PAGE> 65
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES (thousands)
<TABLE>
<CAPTION>
1994 1993
-------------------- ------------------------
Amount % Amount %
------------ ----- ------------ -----
<S> <C> <C> <C> <C>
ASSETS
Loans -- net of unearned income:
Commercial .......................................................... $ 7,366,981 19.9 $ 6,198,159 18.5
Tax-exempt .......................................................... 1,965,555 5.3 1,890,337 5.6
----------- ----- ----------- -----
Total commercial ................................................ 9,332,536 25.2 8,088,496 24.1
Direct retail ....................................................... 735,335 2.0 684,679 2.0
Indirect retail ..................................................... 2,450,181 6.6 2,245,115 6.7
Credit card ......................................................... 3,528,617 9.5 2,591,207 7.7
Other revolving credit .............................................. 333,853 .9 328,075 1.0
----------- ----- ----------- -----
Total retail .................................................... 7,047,986 19.0 5,849,076 17.4
Construction ........................................................ 496,401 1.3 470,465 1.4
Commercial mortgages ................................................ 3,355,898 9.1 3,147,293 9.4
Residential mortgages ............................................... 3,698,864 10.0 3,779,444 11.2
----------- ----- ----------- -----
Total real estate ............................................... 7,551,163 20.4 7,397,202 22.0
Lease financing ..................................................... 173,185 .5 135,355 .4
Foreign ............................................................. 108,028 .3 76,212 .2
----------- ----- ----------- -----
Total loans ..................................................... 24,212,898 65.4 21,546,341 64.1
Investment securities:
Held-to-maturity:
State and municipal ................................................ 599,206 1.6 688,799 2.1
Other investments .................................................. 3,371,132 9.1 6,350,557 18.9
----------- ----- ----------- -----
Total securities held-to-maturity ............................... 3,970,338 10.7 7,039,356 21.0
Available-for-sale:
Other investments* ................................................. 3,700,477 10.0 -- --
----------- ----- ----------- -----
Total investment securities ..................................... 7,670,815 20.7 7,039,356 21.0
Interest-bearing bank balances ........................................ 13,037 .0 78,297 .2
Federal funds sold and securities purchased under resale agreements ... 196,651 .5 394,959 1.2
Trading account assets ................................................ 688,669 1.9 721,111 2.1
----------- ----- ----------- -----
Total interest-earning assets ................................... 32,782,070 88.5 29,780,064 88.6
Cash and due from banks ............................................... 2,407,387 6.5 2,368,237 7.0
Premises and equipment ................................................ 518,030 1.4 468,218 1.4
Other assets .......................................................... 1,728,399 4.7 1,411,152 4.2
Allowance for loan losses ............................................. (406,702) (1.1) (398,697) (1.2)
----------- ----- ----------- -----
Total assets .................................................... $37,029,184 100.0 $33,628,974 100.0
=========== ===== =========== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Time deposits in domestic offices:
Interest-bearing demand ............................................. $ 3,383,902 9.1 $ 3,219,413 9.6
Savings and money market savings .................................... 6,122,283 16.5 5,997,750 17.8
Savings certificates ................................................ 5,335,541 14.4 5,595,225 16.6
Large denomination certificates ..................................... 1,572,948 4.3 1,739,831 5.2
----------- ----- ----------- -----
Total time deposits in domestic offices ......................... 16,414,674 44.3 16,552,219 49.2
Time deposits in foreign offices ...................................... 516,157 1.4 466,571 1.4
----------- ----- ----------- -----
Total interest-bearing deposits ................................. 16,930,831 45.7 17,018,790 50.6
Federal funds purchased and securities sold under repurchase agreements 5,051,124 13.7 3,944,864 11.7
Commercial paper ...................................................... 505,117 1.4 485,889 1.5
Other short-term borrowed funds ....................................... 674,593 1.8 972,008 2.9
----------- ----- ----------- -----
Total short-term borrowed funds ................................. 6,230,834 16.9 5,402,761 16.1
Bank notes ............................................................ 3,522,540 9.5 1,535,750 4.6
Other long-term debt .................................................. 827,077 2.2 537,852 1.6
----------- ----- ----------- -----
Total long-term debt ............................................ 4,349,617 11.7 2,073,602 6.2
----------- ----- ----------- -----
Total interest-bearing liabilities .............................. 27,511,282 74.3 24,495,153 72.9
Other deposits:
Demand in domestic offices .......................................... 5,312,255 14.3 5,277,509 15.7
Demand in foreign offices ........................................... 5,380 .0 5,516 .0
Noninterest-bearing time in domestic offices ........................ 66,458 .2 71,577 .2
Other liabilities ..................................................... 1,037,556 2.8 907,111 2.7
Shareholders' equity .................................................. 3,096,253 8.4 2,872,108 8.5
----------- ----- ----------- -----
Total liabilities and shareholders' equity ...................... $37,029,184 100.0 $33,628,974 100.0
=========== ===== =========== =====
TOTAL DEPOSITS ........................................................ $22,314,924 $22,373,392
</TABLE>
*Includes unrealized loss of $12,405 in 1994
64
<PAGE> 66
<TABLE>
<CAPTION>
1992 1991 1990 1989 Five-Year
- ------------------- ------------------- ------------------- ------------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ----------- ----- ----------- ----- ----------- ----- ----------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 5,867,310 18.4 $ 6,112,621 19.1 $ 6,023,033 19.8 $ 6,247,505 22.0 3.4%
1,997,998 6.3 2,070,612 6.4 2,114,022 6.9 1,662,497 5.9 3.4
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
7,865,308 24.7 8,183,233 25.5 8,137,055 26.7 7,910,002 27.9 3.4
687,556 2.2 757,865 2.4 830,280 2.7 907,513 3.2 (4.1)
2,006,442 6.3 1,991,185 6.2 2,000,545 6.6 1,913,786 6.8 5.1
1,774,342 5.6 1,558,929 4.9 1,422,072 4.7 1,242,990 4.4 23.2
322,768 1.0 299,301 .9 288,156 .9 268,283 .9 4.5
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
4,791,108 15.1 4,607,280 14.4 4,541,053 14.9 4,332,572 15.3 10.2
519,971 1.7 1,020,690 3.2 1,225,283 4.0 1,213,174 4.3 (16.4)
3,063,395 9.6 2,912,517 9.1 2,740,395 9.0 2,275,530 8.0 8.1
3,602,157 11.3 3,653,410 11.4 3,212,427 10.5 2,617,306 9.2 7.2
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
7,185,523 22.6 7,586,617 23.7 7,178,105 23.5 6,106,010 21.5 4.3
118,209 .3 124,519 .4 144,041 .5 157,820 .6 1.9
72,347 .2 86,968 .2 80,223 .3 97,202 .3 2.1
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
20,032,495 62.9 20,588,617 64.2 20,080,477 65.9 18,603,606 65.6 5.4
780,426 2.5 877,991 2.7 948,192 3.1 994,475 3.5 (9.6)
5,420,655 17.0 4,904,993 15.3 3,930,476 12.9 3,306,723 11.7 .4
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
6,201,081 19.5 5,782,984 18.0 4,878,668 16.0 4,301,198 15.2 (1.6)
-- -- -- -- -- -- -- --
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
6,201,081 19.5 5,782,984 18.0 4,878,668 16.0 4,301,198 15.2 12.3
301,568 1.0 416,103 1.3 604,162 2.0 617,461 2.2 (53.8)
483,679 1.5 597,354 1.9 479,735 1.6 717,746 2.5 (22.8)
1,078,370 3.4 974,621 3.0 739,268 2.4 474,634 1.7 7.7
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
28,097,193 88.3 28,359,679 88.4 26,782,310 87.9 24,714,645 87.2 5.8
2,370,379 7.4 2,486,267 7.8 2,702,272 8.9 2,680,681 9.4 (2.1)
444,957 1.4 432,908 1.4 419,958 1.4 409,614 1.4 4.8
1,294,825 4.1 1,061,906 3.3 807,485 2.6 752,362 2.7 18.1
(375,762) (1.2) (295,891) (.9) (243,069) (.8) (210,390) (.7) 14.1
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
$31,831,592 100.0 $32,044,869 100.0 $30,468,956 100.0 $28,346,912 100.0 5.5
=========== ===== =========== ===== =========== ===== =========== =====
$ 2,842,853 8.9 $ 2,354,780 7.3 $ 2,092,729 6.9 $ 1,840,259 6.5 13.0
5,826,317 18.3 5,314,432 16.6 4,876,599 16.0 4,508,380 15.9 6.3
6,197,779 19.5 6,862,392 21.4 5,998,805 19.7 5,248,099 18.5 .3
2,593,675 8.2 3,102,496 9.7 3,126,103 10.2 4,465,825 15.8 (18.8)
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
17,460,624 54.9 17,634,100 55.0 16,094,236 52.8 16,062,563 56.7 .4
423,069 1.3 289,722 .9 489,044 1.6 547,517 1.9 (1.2)
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
17,883,693 56.2 17,923,822 55.9 16,583,280 54.4 16,610,080 58.6 .4
3,110,737 9.8 3,498,869 10.9 3,876,762 12.7 3,655,028 12.9 6.7
469,120 1.5 348,125 1.1 365,369 1.2 284,677 1.0 12.2
1,381,713 4.3 2,233,271 7.0 1,988,614 6.6 336,666 1.2 14.9
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
4,961,570 15.6 6,080,265 19.0 6,230,745 20.5 4,276,371 15.1 7.8
272,688 .9 -- -- -- -- -- --
175,940 .5 177,623 .6 177,436 .6 229,588 .8 29.2
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
448,628 1.4 177,623 .6 177,436 .6 229,588 .8 80.1
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
23,293,891 73.2 24,181,710 75.5 22,991,461 75.5 21,116,039 74.5 5.4
4,853,925 15.2 4,519,407 14.1 4,562,568 15.0 4,539,305 16.0 3.2
5,759 .0 7,213 .0 7,208 .0 7,219 .0 (5.7)
87,358 .3 68,801 .2 49,698 .2 39,149 .2 11.2
994,263 3.1 806,206 2.5 620,568 2.0 602,537 2.1 11.5
2,596,396 8.2 2,461,532 7.7 2,237,453 7.3 2,042,663 7.2 8.7
- ----------- ----- ----------- ----- ----------- ----- ----------- -----
$31,831,592 100.0 $32,044,869 100.0 $30,468,956 100.0 $28,346,912 100.0 5.5
=========== ===== =========== ===== =========== ===== =========== =====
$22,830,735 $22,519,243 $21,202,754 $21,195,753 1.0
</TABLE>
65
<PAGE> 67
WACHOVIA CORPORATION AND SUBSIDIARIES
SUMMARY OF OPERATIONS (thousands)
<TABLE>
<CAPTION>
1994 1993
------------------- ------------------
Amount % Amount %
---------- ----- ----------- ----
<S> <C> <C> <C> <C>
INTEREST INCOME ................................... $2,362,294 79.5 $2,122,837 77.2
INTEREST EXPENSE .................................. 1,038,388 34.9 839,012 30.5
---------- ---- ---------- ----
NET INTEREST INCOME ............................... 1,323,906 44.6 1,283,825 46.7
Provision for loan losses ......................... 71,763 2.4 92,652 3.4
---------- ---- ---------- ----
Net interest income after provision for loan losses 1,252,143 42.2 1,191,173 43.3
OTHER INCOME
Service charges on deposit accounts ............... 196,149 6.7 202,885 7.4
Fees for trust services ........................... 128,100 4.3 120,030 4.4
Credit card income ................................ 111,925 3.8 101,780 3.7
Mortgage fee income ............................... 33,224 1.1 39,101 1.4
Trading account profits (losses) .................. 3,099 .1 13,103 .5
Student loan servicing ............................ -- -- 5,535 .2
Other operating income ............................ 131,935 4.4 117,745 4.2
---------- ---- ---------- ----
Total other operating revenue ............... 604,432 20.4 600,179 21.8
Gain on sale of subsidiary ........................ -- -- 8,030 .3
Investment securities gains ....................... 3,320 .1 19,394 .7
---------- ---- ---------- ----
Total other income .......................... 607,752 20.5 627,603 22.8
OTHER EXPENSE
Salaries .......................................... 464,790 15.7 455,621 16.6
Employee benefits ................................. 98,717 3.3 113,059 4.1
---------- ---- ---------- ----
Total personnel expense ..................... 563,507 19.0 568,680 20.7
Net occupancy expense ............................. 80,911 2.7 82,070 3.0
Equipment expense ................................. 106,508 3.6 102,246 3.7
Other operating expense ........................... 347,487 11.7 378,240 13.7
---------- ---- ---------- ----
Total other expense ......................... 1,098,413 37.0 1,131,236 41.1
Income before income taxes ........................ 761,482 25.7 687,540 25.0
Applicable income taxes (2) ....................... 222,424 7.5 195,445 7.1
---------- ---- ---------- ----
NET INCOME ........................................ $ 539,058 18.2 $ 492,095 17.9
========== ==== ========== ====
Net income per common share:
Primary ......................................... $ 3.13 $ 2.83
Fully diluted ................................... $ 3.12 $ 2.81
Cash dividends paid per common share .............. $ 1.230 $ 1.110
Average shares outstanding:
Primary (3) ..................................... 172,339 173,941
Fully diluted (4) ............................... 172,951 175,198
</TABLE>
(1) Percentages reflected above are based on total income (interest plus
other).
(2) Income taxes applicable to securities transactions were as follows:
1994 -- $1,328; 1993 -- $7,472; 1992 -- $470; 1991 -- $3,997; 1990 --
$2,379; and 1989 -- $2,903.
(3) Average primary shares outstanding include common equivalent shares as
follows: 1994 -- 1,229; 1993 -- 1,668; 1992 -- 1,878; 1991 -- 1,640; 1990
-- 828; and 1989 -- 860.
(4) Average fully diluted shares outstanding include dilutive common stock
options and awards and convertible debentures and notes as follows: 1994 --
1,841; 1993 -- 2,925; 1992 -- 4,749; 1991 -- 5,377; 1990 -- 4,662; and 1989
-- 5,178.
66
<PAGE> 68
<TABLE>
<CAPTION>
1992 1991 1990 1989 Five-Year
- ------------------ ----------------- ----------------- ----------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ---------- ---- ---------- ---- ---------- ---- ---------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,222,078 80.0 $2,637,015 84.0 $2,748,644 85.5 $2,672,653 86.4 (2.4%)
967,028 34.8 1,467,849 46.8 1,684,114 52.4 1,672,856 54.1 (9.1)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,255,050 45.2 1,169,166 37.2 1,064,530 33.1 999,797 32.3 5.8
119,420 4.3 293,000 9.3 142,992 4.4 86,531 2.8 (3.7)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,135,630 40.9 876,166 27.9 921,538 28.7 913,266 29.5 6.5
189,537 6.8 170,827 5.4 155,808 4.8 136,620 4.4 7.5
109,504 3.9 102,665 3.3 99,572 3.1 101,072 3.3 4.9
78,068 2.8 62,814 2.0 55,202 1.7 50,092 1.6 17.4
40,078 1.5 28,608 .9 20,741 .6 16,003 .5 15.7
(11,542) (.4) 11,541 .4 11,637 .4 7,510 .2 (16.2)
33,250 1.2 31,470 1.0 29,841 .9 27,230 .9 (100.0)
96,347 3.5 82,253 2.6 86,051 2.8 73,290 2.4 12.5
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
535,242 19.3 490,178 15.6 458,852 14.3 411,817 13.3 8.0
19,486 .7 -- -- -- -- -- --
1,497 .0 11,091 .4 6,218 .2 7,625 .3 (15.3)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
556,225 20.0 501,269 16.0 465,070 14.5 419,442 13.6 7.7
451,193 16.2 443,273 14.1 413,592 12.9 403,888 13.1 2.8
88,630 3.2 81,216 2.6 73,881 2.3 81,110 2.6 4.0
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
539,823 19.4 524,489 16.7 487,473 15.2 484,998 15.7 3.0
80,673 2.9 75,729 2.4 71,402 2.2 64,044 2.1 4.8
100,916 3.6 99,569 3.2 98,042 3.0 101,101 3.3 1.0
374,240 13.5 396,730 12.7 295,367 9.3 266,747 8.6 5.4
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,095,652 39.4 1,096,517 35.0 952,284 29.7 916,890 29.7 3.7
596,203 21.5 280,918 8.9 434,324 13.5 415,818 13.4 12.9
162,978 5.9 51,378 1.6 88,647 2.7 87,669 2.8 20.5
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
$ 433,225 15.6 $ 229,540 7.3 $ 345,677 10.8 $ 328,149 10.6 10.4
========== ==== ========== ==== ========== ==== ========== ====
$ 2.51 $ 1.34 $ 2.05 $ 1.95 9.9
$ 2.48 $ 1.32 $ 2.02 $ 1.92 10.2
$ 1.000 $ .920 $ .820 $ .697 12.0
172,641 171,481 168,888 168,268 .5
175,512 175,218 172,722 172,586 .0
</TABLE>
67
<PAGE> 69
WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME -- TAXABLE EQUIVALENT (thousands)
<TABLE>
<CAPTION>
1994 1993
------------------- -----------------
Amount % Amount %
---------- ----- --------- -----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans:
Commercial .......................................................... $ 444,395 18.0 $ 327,729 14.8
Tax-exempt .......................................................... 176,701 7.2 171,163 7.7
---------- ---- ---------- ----
Total commercial ................................................ 621,096 25.2 498,892 22.5
Direct retail ....................................................... 61,054 2.5 59,455 2.7
Indirect retail ..................................................... 190,444 7.7 189,143 8.5
Credit card ......................................................... 389,763 15.8 304,502 13.7
Other revolving credit .............................................. 38,556 1.6 36,580 1.6
---------- ---- ---------- ----
Total retail .................................................... 679,817 27.6 589,680 26.5
Construction ........................................................ 45,988 1.9 35,034 1.6
Commercial mortgages ................................................ 259,077 10.5 232,688 10.5
Residential mortgages ............................................... 287,922 11.7 305,965 13.8
---------- ---- ---------- ----
Total real estate ............................................... 592,987 24.1 573,687 25.9
Lease financing ..................................................... 13,563 .6 12,051 .5
Foreign ............................................................. 6,162 .2 3,318 .1
---------- ---- ---------- ----
Total loans ..................................................... 1,913,625 77.7 1,677,628 75.5
Investment securities:
Held-to-maturity:
State and municipal ................................................ 75,069 3.1 85,854 3.8
Other investments .................................................. 234,557 9.5 414,485 18.7
---------- ---- ---------- ----
Total securities held-to-maturity ............................... 309,626 12.6 500,339 22.5
Available-for-sale:
Other investments .................................................. 194,576 7.9 -- --
---------- ---- ---------- ----
Total investment securities ..................................... 504,202 20.5 500,339 22.5
Interest-bearing bank balances ........................................ 597 .0 2,905 .1
Federal funds sold and securities purchased under resale agreements ... 7,682 .3 12,433 .6
Trading account assets ................................................ 36,348 1.5 28,433 1.3
---------- ---- ---------- ----
Total interest income ........................................... 2,462,454 100.0 2,221,738 100.0
INTEREST EXPENSE
Interest-bearing demand ............................................... 55,088 2.2 60,433 2.7
Savings and money market savings ...................................... 164,461 6.7 151,748 6.8
Savings certificates .................................................. 227,060 9.2 240,795 10.8
Large denomination certificates ....................................... 70,305 2.9 90,101 4.1
---------- ---- ---------- ----
Total time deposits in domestic offices ......................... 516,914 21.0 543,077 24.4
Time deposits in foreign offices ...................................... 22,318 .9 14,503 .7
---------- ---- ---------- ----
Total time deposits ............................................. 539,232 21.9 557,580 25.1
Federal funds purchased and securities sold under repurchase agreements 224,089 9.1 127,580 5.8
Commercial paper ...................................................... 19,880 .8 14,693 .7
Other short-term borrowed funds ....................................... 28,603 1.2 31,574 1.4
---------- ---- ---------- ----
Total short-term borrowed funds ................................. 272,572 11.1 173,847 7.9
Bank notes ............................................................ 171,968 7.0 69,785 3.1
Other long-term debt .................................................. 54,616 2.2 37,800 1.7
---------- ---- ---------- ----
Total long-term debt ............................................ 226,584 9.2 107,585 4.8
---------- ---- ---------- ----
Total interest expense .......................................... 1,038,388 42.2 839,012 37.8
---------- ---- ---------- ----
NET INTEREST INCOME ................................................... $1,424,066 57.8 $1,382,726 62.2
========== ==== ========== ====
Percentage of interest-earning assets:
Interest income ..................................................... 7.51% 7.46%
Interest expense .................................................... 3.17 2.82
---- ----
Net interest income ............................................. 4.34% 4.64%
==== ====
Taxable equivalent adjustment included in interest income:
Loans ............................................................... $ 49,543 $ 50,178
Investment securities ............................................... 47,949 46,613
Trading account assets .............................................. 2,668 2,110
---------- ----------
Total (2) ....................................................... $ 100,160 $ 98,901
========== ==========
</TABLE>
(1) Percentages reflected above are based on total interest income.
(2) The taxable equivalent adjustment for 1994 and 1993 reflects the federal
income tax rate of 35% and state tax rates, as applicable, reduced by the
nondeductible portion of interest expense; the taxable equivalent adjustment
for prior years reflects the federal income tax rate of 34%.
68
<PAGE> 70
<TABLE>
<CAPTION>
1992 1991 1990 1989 Five-Year
- -------------------- ------------------- ----------------- ----------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ---------- ----- ---------- ------ --------- ----- ---------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 349,868 15.2 $ 502,100 18.4 $ 596,227 20.9 $ 674,211 24.3 (8.0%)
173,158 7.5 206,099 7.5 230,049 8.0 197,015 7.1 (2.2)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
523,026 22.7 708,199 25.9 826,276 28.9 871,226 31.4 (6.5)
77,850 3.4 97,655 3.6 110,423 3.9 122,358 4.4 (13.0)
191,594 8.3 209,985 7.7 225,582 7.9 221,218 8.0 (3.0)
257,885 11.2 259,773 9.5 240,709 8.4 213,320 7.7 12.8
37,538 1.6 38,106 1.4 39,567 1.4 37,713 1.4 .4
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
564,867 24.5 605,519 22.2 616,281 21.6 594,609 21.5 2.7
40,441 1.8 95,503 3.5 126,754 4.4 136,802 4.9 (19.6)
243,861 10.6 273,371 10.0 290,390 10.2 255,919 9.2 .2
320,363 13.9 370,733 13.6 347,730 12.2 293,531 10.6 (.4)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
604,665 26.3 739,607 27.1 764,874 26.8 686,252 24.7 (2.9)
11,830 .5 12,990 .5 15,407 .5 17,068 .6 (4.5)
3,760 .2 6,775 .2 7,745 .3 11,285 .4 (11.4)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,708,148 74.2 2,073,090 75.9 2,230,583 78.1 2,180,440 78.6 (2.6)
96,649 4.2 109,607 4.0 119,799 4.2 126,074 4.5 (9.8)
406,274 17.7 416,668 15.3 353,199 12.4 298,997 10.8 (4.7)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
502,923 21.9 526,275 19.3 472,998 16.6 425,071 15.3 (6.1)
-- -- -- -- -- -- -- --
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
502,923 21.9 526,275 19.3 472,998 16.6 425,071 15.3 3.5
12,772 .6 26,974 1.0 50,855 1.7 58,454 2.1 (60.0)
17,038 .7 35,537 1.3 39,496 1.4 66,464 2.4 (35.1)
60,444 2.6 70,049 2.5 62,386 2.2 43,541 1.6 (3.5)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
2,301,325 100.0 2,731,925 100.0 2,856,318 100.0 2,773,970 100.0 (2.4)
72,548 3.1 95,809 3.5 93,564 3.3 86,107 3.1 (8.5)
189,699 8.2 275,951 10.1 301,248 10.5 297,522 10.7 (11.2)
324,063 14.1 475,012 17.4 473,150 16.5 437,119 15.8 (12.3)
148,931 6.5 221,992 8.1 256,243 9.0 399,471 14.4 (29.4)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
735,241 31.9 1,068,764 39.1 1,124,205 39.3 1,220,219 44.0 (15.8)
15,646 .7 16,834 .6 39,147 1.4 50,260 1.8 (15.0)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
750,887 32.6 1,085,598 39.7 1,163,352 40.7 1,270,479 45.8 (15.8)
115,939 5.1 202,299 7.4 309,846 10.9 325,192 11.7 (7.2)
16,629 .7 19,985 .7 29,416 1.0 25,330 .9 (4.7)
58,420 2.5 146,918 5.4 166,251 5.8 29,920 1.1 (.9)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
190,988 8.3 369,202 13.5 505,513 17.7 380,442 13.7 (6.5)
13,183 .6 -- -- -- -- --
11,970 .5 13,049 .5 15,249 .6 21,935 .8 20.0
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
25,153 1.1 13,049 .5 15,249 .6 21,935 .8 59.5
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
967,028 42.0 1,467,849 53.7 1,684,114 59.0 1,672,856 60.3 (9.1)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
$1,334,297 58.0 $1,264,076 46.3 $1,172,204 41.0 $1,101,114 39.7 5.3
========== ==== ========== ==== ========== ==== ========== ====
8.19% 9.63% 10.66% 11.22%
3.44 5.17 6.28 6.76
---- ---- ---- ----
4.75% 4.46% 4.38% 4.46%
==== ==== ==== ====
$ 44,760 $ 54,882 $ 62,415 $ 56,213
33,787 39,245 44,635 44,371
700 783 624 733
- ---------- ---------- ---------- ----------
$ 79,247 $ 94,910 $ 107,674 $ 101,317
========== ========== ========== ==========
</TABLE>
69
<PAGE> 71
WACHOVIA CORPORATION AND SUBSIDIARIES
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE YIELDS EARNED (taxable equivalent)
Loans:
Commercial ................................ 6.03% 5.29% 5.96% 8.21% 9.90% 10.79%
Tax-exempt ................................ 8.99 9.05 8.67 9.95 10.88 11.85
Total commercial ...................... 6.66 6.17 6.65 8.65 10.15 11.01
Direct retail ............................. 8.30 8.68 11.32 12.89 13.30 13.48
Indirect retail ........................... 7.77 8.42 9.55 10.55 11.28 11.56
Credit card ............................... 11.05 11.75 14.53 16.66 16.93 17.16
Other revolving credit .................... 11.55 11.15 11.63 12.73 13.73 14.06
Total retail .......................... 9.65 10.08 11.79 13.14 13.57 13.72
Construction .............................. 9.26 7.45 7.78 9.36 10.34 11.28
Commercial mortgages ...................... 7.72 7.39 7.96 9.39 10.60 11.25
Residential mortgages ..................... 7.78 8.10 8.89 10.15 10.82 11.22
Total real estate ..................... 7.85 7.76 8.42 9.75 10.66 11.24
Lease financing ........................... 7.83 8.90 10.01 10.43 10.70 10.81
Foreign ................................... 5.70 4.35 5.20 7.79 9.66 11.61
Total loans ........................... 7.90 7.79 8.53 10.07 11.11 11.72
Held-to-maturity securities:
State and municipal securities ............ 12.53 12.46 12.38 12.48 12.63 12.68
Other investments ......................... 6.96 6.53 7.50 8.49 8.99 9.04
Available-for-sale securities:
Other investments ......................... 5.24 -- -- -- -- --
Total investment securities ........... 6.56 7.11 8.11 9.10 9.70 9.88
Interest-bearing bank balances ............... 4.58 3.71 4.24 6.48 8.42 9.47
Federal funds sold and securities
purchased under resale agreements ......... 3.91 3.15 3.52 5.95 8.23 9.26
Trading account assets ....................... 5.28 3.94 5.61 7.19 8.44 9.17
Total interest-earning assets ......... 7.51 7.46 8.19 9.63 10.66 11.22
AVERAGE RATES PAID
Interest-bearing demand ...................... 1.63% 1.88% 2.55% 4.07% 4.47% 4.68%
Savings and money market savings ............. 2.69 2.53 3.26 5.19 6.18 6.60
Savings certificates ......................... 4.26 4.30 5.23 6.92 7.89 8.33
Large denomination certificates .............. 4.47 5.18 5.74 7.16 8.20 8.95
Total time deposits in domestic offices 3.15 3.28 4.21 6.06 6.99 7.60
Time deposits in foreign offices ............. 4.32 3.11 3.70 5.81 8.00 9.18
Total time deposits ................... 3.18 3.28 4.20 6.06 7.02 7.65
Federal funds purchased and securities
sold under repurchase agreements .......... 4.44 3.23 3.73 5.78 7.99 8.90
Commercial paper ............................. 3.94 3.02 3.54 5.74 8.05 8.90
Other short-term borrowed funds .............. 4.24 3.25 4.23 6.58 8.36 8.89
Total short-term borrowed funds ....... 4.37 3.22 3.85 6.07 8.11 8.90
Bank notes ................................... 4.88 4.54 4.83 -- -- --
Other long-term debt ......................... 6.60 7.03 6.80 7.35 8.59 9.55
Total long-term debt .................. 5.21 5.19 5.61 7.35 8.59 9.55
Total interest-bearing liabilities .... 3.77 3.43 4.15 6.07 7.32 7.92
Interest rate spread ......................... 3.74% 4.03% 4.04% 3.56% 3.34% 3.30%
Net yield on interest-earning assets ......... 4.34% 4.64% 4.75% 4.46% 4.38% 4.46%
RATIOS (averages)
Shareholders' equity to:
Total assets .............................. 8.36% 8.54% 8.16% 7.68% 7.34% 7.21%
Net loans ................................. 13.01 13.58 13.21 12.13 11.28 11.11
Deposits .................................. 13.88 12.84 11.37 10.93 10.55 9.64
Equity and long-term debt ................. 41.58 58.07 85.27 93.27 92.65 89.90
Return on assets ............................. 1.46 1.46 1.36 .72 1.13 1.16
Return on shareholders' equity ............... 17.41 17.13 16.69 9.33 15.45 16.06
Return on deposits ........................... 2.42 2.20 1.90 1.02 1.63 1.55
Dividends paid as a percentage of net income . 39.05 38.91 39.42 63.78 37.84 33.97
</TABLE>
70
<PAGE> 72
WACHOVIA CORPORATION AND SUBSIDIARIES
YEAR-END INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONDENSED BALANCE SHEET (millions)
Cash and due from banks ........................ $ 2,670 $ 2,529 $ 2,628 $ 2,475 $ 3,586 $ 3,291
Interest-bearing bank balances ................. 7 13 189 408 565 593
Federal funds sold and securities
purchased under resale agreements ............ 202 691 479 546 591 646
Trading account assets ......................... 890 789 896 1,445 793 648
Investment securities:
Available-for-sale ........................... 3,538 -- -- -- -- --
Held-to-maturity ............................. 4,185 7,879 6,486 6,265 5,273 4,629
Loans and net leases ........................... 25,899 22,986 21,097 20,643 21,255 19,626
Less unearned income on loans .................. 8 9 11 26 48 94
------- ------- ------- ------- ------- -------
Total loans .............................. 25,891 22,977 21,086 20,617 21,207 19,532
Less allowance for loan losses ................. 406 405 380 360 270 219
------- ------- ------- ------- ------- -------
Net loans ................................ 25,485 22,572 20,706 20,257 20,937 19,313
Premises and equipment ......................... 543 503 444 435 429 412
Other assets ................................... 1,668 1,550 1,539 1,327 1,141 733
------- ------- ------- ------- ------- -------
Total assets ............................. $39,188 $36,526 $33,367 $33,158 $33,315 $30,265
======= ======= ======= ======= ======= =======
Deposits in domestic offices ................... $22,153 $22,545 $22,856 $22,602 $22,736 $21,578
Deposits in foreign offices .................... 916 807 519 404 499 476
------- ------- ------- ------- ------- -------
Total deposits ........................... 23,069 23,352 23,375 23,006 23,235 22,054
Federal funds purchased and securities
sold under repurchase agreements ............. 5,898 4,741 3,714 4,002 3,867 3,857
Commercial paper ............................... 407 589 387 398 331 310
Other short-term borrowed funds ................ 1,007 1,091 849 2,201 2,473 1,163
Bank notes ..................................... 3,953 2,370 758 -- -- --
Other long-term debt ........................... 838 591 439 171 164 224
Other liabilities .............................. 729 774 1,070 896 874 480
Shareholders' equity ........................... 3,287 3,018 2,775 2,484 2,371 2,177
------- ------- ------- ------- ------- -------
Total liabilities and shareholders' equity $39,188 $36,526 $33,367 $33,158 $33,315 $30,265
======= ======= ======= ======= ======= =======
Equity at year-end to year-end assets .......... 8.39% 8.26% 8.32% 7.49% 7.12% 7.19%
LOAN PORTFOLIO (millions)
Domestic borrowers:
Commercial ................................... $ 8,378 $ 6,727 $ 6,365 $ 6,396 $ 6,627 $ 6,182
Tax exempt ................................... 1,810 1,959 1,952 1,993 2,065 2,089
Direct retail ................................ 750 716 673 723 796 909
Indirect retail .............................. 2,340 2,429 2,109 1,983 2,022 1,930
Credit card .................................. 3,969 3,123 2,216 1,671 1,598 1,391
Other revolving credit ....................... 343 333 327 302 297 283
Construction ................................. 553 494 464 637 1,197 1,148
Commercial mortgages ......................... 3,484 3,199 3,119 3,066 2,860 2,484
Residential mortgages ........................ 3,821 3,767 3,663 3,660 3,506 2,882
Lease financing, net ......................... 189 157 125 116 138 151
------- ------- ------- ------- ------- -------
Total .................................... 25,637 22,904 21,013 20,547 21,106 19,449
Foreign borrowers:
Commercial and industrial .................... 254 73 73 56 92 74
Banks and other financial institutions ....... -- -- -- 7 -- 1
Governments and official institutions ........ -- -- -- 7 9 8
------- ------- ------- ------- ------- -------
Total .................................... 254 73 73 70 101 83
------- ------- ------- ------- ------- -------
Total loans .............................. $25,891 $22,977 $21,086 $20,617 $21,207 $19,532
======= ======= ======= ======= ======= =======
LOAN PORTFOLIO (percentages)
Commercial ..................................... 39.4 37.8 39.4 40.7 41.0 42.3
Credit card .................................... 15.3 13.6 10.5 8.1 7.5 7.1
Other revolving credit ......................... 1.3 1.4 1.6 1.5 1.4 1.5
Other retail ................................... 11.9 13.7 13.2 13.1 13.3 14.5
Real estate .................................... 30.4 32.5 34.4 35.7 35.7 33.4
Lease financing ................................ .7 .7 .6 .6 .6 .8
Foreign ........................................ 1.0 .3 .3 .3 .5 .4
------- ------- ------- ------- ------- -------
Total .................................... 100.0 100.0 100.0 100.0 100.0 100.0
======= ======= ======= ======= ======= =======
</TABLE>
71
<PAGE> 73
STOCK DATA
Wachovia Corporation's common stock is listed on the New York
Stock Exchange under the trading symbol of WB. The corporation is a
member of the Standard & Poor's 500 Index of stocks and the S&P 500
Major Regional Banks Industry Group.
The following charts present the high and low stock price
trading ranges for Wachovia common shares, price to earnings ratios,
cash dividends per share data and cash dividend payout ratios over
the most recent six years. Share price trading ranges and price to
earnings ratios for the past eight quarters also are provided, as
well as a comparative measurement of the corporation's five-year
total return.
<TABLE>
COMMON STOCK PRICE RANGE *NYSE SYMBOL: WB CASH DIVIDENDS PER SHARE*
Five-year compound growth rate = 12.0%
<CAPTION>
High Low
---- ---
<S> <C> <C> <C> <C>
1989 22 5/8 15 1/2 1989 $ .697
1990 22 3/8 16 1/8 1990 $ .820
1991 30 20 1/4 1991 $ .920
1992 34 3/4 28 1/4 1992 $1.000
1993 40 1/2 31 7/8 1993 $1.110
1994 35 3/8 30 1/8 1994 $1.230
*Prices represent those of Wachovia Corporation *Dividends per share represent those paid by Wachovia
prior to merger. Corporation prior to merger.
</TABLE>
<TABLE>
COMMON STOCK PRICE/EARNINGS RATIOS* CASH DIVIDEND PAYOUT*
(millions)
<CAPTION>
Cash
dividends
High Low paid % Payout ratio
---- --- ------ --------------
<S> <C> <C> <C> <C> <C>
1989 11.7 x 8.0 x 1989 $111.5 34.0 %
1990 10.5 x 7.6 x 1990 $130.8 37.8 %
1991 22.4 x 15.1 x 1991 $146.4 63.8 %
1992 13.8 x 11.3 x 1992 $170.8 39.4 %
1993 14.3 x 11.3 x 1993 $191.5 38.9 %
1994 11.3 x 9.6 x 1994 $210.5 39.1 %
*Figures based on high and low common stock prices % Payout ratio (total dividends as a percentage
for each year and annual net income per primary of net income)
share as originally reported by Wachovia Corporation *Dividends include amounts paid by pooled companies
prior to merger.
</TABLE>
<TABLE>
COMMON STOCK DATA-- PER SHARE
<CAPTION>
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Market value:*
End of year ........ $32 1/4 $33 1/2 $34 1/8 $ 29 $20 7/8 $20 3/8
High ............... 35 3/8 40 1/2 34 3/4 30 22 3/8 22 5/8
Low ................ 30 1/8 31 7/8 28 1/4 20 1/4 16 1/8 15 1/2
Book value ........... 19.23 17.61 16.18 14.56 14.07 12.96
Dividend* ............ 1.230 1.110 1.000 .920 .820 .697
Price/earnings ratio** 10.3x 11.8x 13.6x 21.7x 9.9x 10.6x
</TABLE>
*Information for years before 1991 represents that of Wachovia Corporation
prior to merger
**Based on end-of-year stock price and net income per primary
share as originally reported by Wachovia Corporation prior to merger
72
<PAGE> 74
In 1991, Wachovia Corporation merged with South Carolina
National Corporation under an agreement providing for a tax-free
exchange of .675 of a share of Wachovia Corporation common stock for
each share of South Carolina National. As a result of the merger and
special charges taken in the fourth quarter of 1991 to complete it,
the corporation's net income per primary share was $1.34 in 1991
compared with $2.05 in 1990.
The Five-Year Total Return chart compares Wachovia, the S&P 500
Index and the Keefe, Bruyette & Woods (KBW) 50 Index in stock price
appreciation and dividends, assuming quarterly reinvestment, from the
base period of year-end 1989 through December 31, 1994. The KBW 50
Index is a market capitalization weighted measure of total return for
50 money center and major regional banks. Wachovia's total return is
based on stock prices and dividends per share of Wachovia Corporation
prior to its merger with South Carolina National.
QUARTERLY COMMON STOCK PRICE RANGE
1993 1994
------------------- -----------------
High Low High Low
---- --- ---- ---
1st Q 36 7/8 32 1/2 35 1/8 30 1/8
2nd Q 40 1/2 32 3/8 35 3/8 30 3/4
3rd Q 40 3/8 33 3/8 35 1/4 31 3/8
4th Q 39 3/4 31 7/8 34 1/2 31 1/2
QUARTERLY COMMON STOCK PRICE/EARNINGS RATIOS*
1993 1994
------------------- -----------------
High Low High Low
---- --- ---- ---
1st Q 14.2 x 12.5 x 12.3 x 10.6 x
2nd Q 15.1 x 12.1 x 12.1 x 10.5 x
3rd Q 14.6 x 12.1 x 11.7 x 10.4 x
4th Q 14.0 x 11.3 x 11.0 x 10.1 x
*Figures based on high and low common stock prices for each period and net
income per primary share for the 12 months ended on the last day of each
period.
FIVE-YEAR TOTAL RETURN*
Wachovia S&P 500 KBW 50 Index
-------- ------- ------------
1989 100 100 100
1990 106.89 96.89 71.81
1991 153.58 126.41 113.66
1992 186.21 136.04 144.84
1993 188.59 149.75 152.86
1994 188.50 151.73 145.06
*Base period 12/31/89 = 100. Dividends reinvested. Data for KBW 50 Index is
weighted by market capitalization.
73
<PAGE> 75
HISTORICAL COMPARATIVE DATA
The seven charts below present comparative data on Wachovia
Corporation and the median of the 25 largest U.S. bank holding
companies based on assets as of each year-end. The median is
representative of the typical bank holding company within the
comparison group. All data is as originally reported, not restated
for pooling-of-interest mergers or acquisitions. The 25 largest U.S.
banking companies is used as a current peer comparison for Wachovia
although the corporation was not among this group in 1989 and 1990.
<TABLE>
<CAPTION>
RETURN ON ASSETS RETURN ON COMMON EQUITY COMMON EQUITY TO ASSETS
(average) (average) (average)
25 Largest 25 Largest 25 Largest
Wachovia US Banks Wachovia US Banks Wachovia US Banks
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1.19 % .52 % 1989 16.48 % 8.62 % 1989 7.25 % 4.90 %
1990 1.23 % .57 % 1990 16.36 % 9.56 % 1990 7.55 % 4.82 %
1991 .72 % .72 % 1991 9.93 % 10.49 % 1991 7.68 % 5.13 %
1992 1.36 % .90 % 1992 16.69 % 14.18 % 1992 8.16 % 6.16 %
1993 1.46 % 1.20 % 1993 17.13 % 16.94 % 1993 8.54 % 6.57 %
1994 1.46 % 1.21 % 1994 17.41 % 16.10 % 1994 8.36 % 6.86 %
NET INTEREST INCOME* AS A PERCENTAGE NONINTEREST EXPENSE AS A PERCENTAGE OF
OF AVERAGE EARNING ASSETS TOTAL ADJUSTED REVENUES*
25 Largest 25 Largest
Wachovia US Banks Wachovia US Banks
-------- ---------- -------- ----------
1989 4.39 % 3.64 % 1989 59.73 % 65.14 %
1990 4.33 % 3.51 % 1990 57.67 % 65.79 %
1991 4.46 % 3.93 % 1991 62.51 % 67.40 %
1992 4.75 % 4.44 % 1992 58.61 % 64.85 %
1993 4.64 % 4.48 % 1993 57.05 % 62.54 %
1994 4.34 % 4.34 % 1994 54.15 % 61.88 %
* Taxable equivalent *Excludes securities and subsidiary
sales gains
NET LOAN LOSSES TO AVERAGE LOANS NONPERFORMING ASSETS TO YEAR-END
LOANS AND FORECLOSED PROPERTY
25 Largest 25 Largest
Wachovia US Banks Wachovia US Banks
-------- ---------- -------- ----------
1989 .37 % 1.29 % 1989 .54 % 3.77 %
1990 .43 % 1.45% 1990 .91 % 4.14 %
1991 .99 % 1.55 % 1991 1.50 % 4.78 %
1992 .48 % 1.25 % 1992 1.25 % 3.09 %
1993 .31 % .75 % 1993 .67 % 1.90 %
1994 .29 % .39 % 1994 .39 % 1.03 %
</TABLE>
74
<PAGE> 76
- --------------------------------------------------------------------------------
MEMBER COMPANY DIRECTORS
WACHOVIA BANK OF GEORGIA, N.A.
G. JOSEPH PRENDERGAST BRYAN D. LANGTON
Chairman of the Board (Advisory Director)
Chairman of the Board and
F. DUANE ACKERMAN Chief Executive Officer
Vice Chairman and Holiday Inn Worldwide
Chief Operating Officer
BellSouth Corporation BERNARD MARCUS
Chairman of the Board and
EDWARD L. ADDISON Chief Executive Officer
Chairman of the Board and The Home Depot, Inc.
Chief Executive Officer
The Southern Company DANIEL W. MCGLAUGHLIN
President and
L. M. BAKER, JR. Chief Operating Officer
President and Equifax Inc.
Chief Executive Officer
Wachovia Corporation D. RAYMOND RIDDLE
Chairman of the Board and
THOMAS E. BOLAND Chief Executive Officer
Retired Chairman of the Board National Service Industries, Inc.
CARL BOLCH, JR. S. STEPHEN SELIG III
Chairman of the Board and Chairman of the Board
Chief Executive Officer and President
Racetrac Petroleum, Inc. Selig Enterprises, Inc.
JAMES E. BOSTIC, JR. ALANA S. SHEPHERD
Senior Vice President Secretary of the Board
Environmental, Government Affairs Shepherd Spinal Center
and Communications
Georgia-Pacific Corporation J. V. WHITE
Chairman of the
MICHAEL C. CARLOS Executive Committee
Chairman of the Board and Equifax Inc.
Chief Executive Officer
National Distributing Co., Inc.
G. STEPHEN FELKER
Chairman of the Board and
Chief Executive Officer
Avondale Mills, Inc.
WACHOVIA BANK OF NORTH CAROLINA, N.A.
J. WALTER MCDOWELL ESTELL C. LEE
President and Chairman of the Board
Chief Executive Officer and President
The Lee Company
L. M. BAKER, JR.
Chairman of the Board G. JOSEPH PRENDERGAST
Executive Vice President
THOMAS M. BELK, JR. Wachovia Corporation
Senior Vice President
Belk Stores Services, Inc. WYNDHAM ROBERTSON
Vice President, Communications
H. C. BISSELL University of North Carolina
Chairman of the Board and
Chief Executive Officer ROBERT L. TILLMAN
The Bissell Companies, Inc. Chief Operating Officer
Lowe's Companies, Inc.
FELTON J. CAPEL
Chairman of the Board JOHN F. WARD
and President Senior Vice President
Century Associates of Sara Lee Corporation
North Carolina Chief Executive Officer
Hanes Group
WILLIAM CAVANAUGH, III
President and ANDERSON D. WARLICK
Chief Operating Officer President and
Carolina Power & Light Company Chief Operating Officer
Parkdale Mills, Inc.
BERT COLLINS
President and DAVID J. WHICHARD, II
Chief Executive Officer Chairman
North Carolina Mutual The Daily Reflector
Life Insurance Company
JOHN C. WHITAKER, JR.
RICHARD L. DAUGHERTY Chairman of the Board and
North Carolina Senior Chief Executive Officer
State Executive, Inmar Enterprises, Inc.
Vice President Worldwide
Manufacturing
IBM PC Company
IBM Corporation
(Retired/Consultant)
SOUTH CAROLINA NATIONAL CORPORATION
WACHOVIA BANK OF SOUTH CAROLINA, N.A.
ANTHONY L. FURR JAMES G. LINDLEY
Chairman of the Board, Chairman Emeritus
President and
Chief Executive Officer JOE A. PADGETT
Retired Executive Vice President
L. M. BAKER, JR. Wachovia Bank of South Carolina, N.A.
President and
Chief Executive Officer G. JOSEPH PRENDERGAST
Wachovia Corporation Executive Vice President
Wachovia Corporation
CHARLES J. BRADSHAW
President W. M. SELF
Bradshaw Investments, Inc. President and
Chief Executive Officer
FRANK W. BRUMLEY Greenwood Mills, Inc.
President
The Brumley Company ROBERT S. SMALL, JR.
President
W. T. CASSELS, JR. AVTEX Properties, Inc.
Chairman of the Board
Southeastern Freight Lines, Inc. J. GUY STEENROD
President
THOMAS C. COXE, III Roche Carolina Inc.
Executive Vice President
Sonoco Products Company WILLIAM G. TAYLOR
President
FREDERICK B. DENT, JR. The Springs Company
President
Mayfair Mills, Inc. BEATRICE R. THOMPSON, PH.D.
Coordinator of Psychological Services
JAMES B. EDWARDS, D.M.D. Anderson School District Five
President
Medical University of South Carolina
75
<PAGE> 77
- --------------------------------------------------------------------------------
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
DIRECTORS
L. M. BAKER, JR. DONALD R. HUGHES
President and Consultant and Retired
Chief Executive Officer Vice Chairman of the Board
Burlington Industries, Inc.
JOHN G. MEDLIN, JR.
Chairman of the Board F. KENNETH IVERSON
Chairman and
RUFUS C. BARKLEY, JR. Chief Executive Officer
Chairman of the Board Nucor Corporation
Cameron & Barkley Company
JAMES W. JOHNSTON
CRANDALL C. BOWLES Chairman and
Executive Vice President Chief Executive Officer
Springs Industries, Inc. R.J. Reynolds Tobacco Company
JOHN L. CLENDENIN W. DUKE KIMBRELL
Chairman of the Board Chairman of the Board and
and Chief Executive Officer Chief Executive Officer
BellSouth Corporation Parkdale Mills, Inc.
LAWRENCE M. GRESSETTE, JR. HERMAN J. RUSSELL
Chairman of the Board, Chairman of the Board and
President and Chief Executive Officer
Chief Executive Officer H.J. Russell & Company
SCANA Corporation
SHERWOOD H. SMITH, JR.
THOMAS K. HEARN, JR. Chairman of the Board and
President Chief Executive Officer
Wake Forest University Carolina Power & Light Company
W. HAYNE HIPP CHARLES MCKENZIE TAYLOR
President and Chairman of the Board
Chief Executive Officer Taylor & Mathis, Inc.
The Liberty Corporation
ROBERT M. HOLDER, JR.
Chairman of the Board
Holder Corporation
PRINCIPAL CORPORATE OFFICERS
L. M. BAKER, JR. KENNETH W. MCALLISTER
President and Executive Vice President
Chief Executive Officer General Counsel/Administrative
MICKEY W. DRY ROBERT S. MCCOY, JR.
Executive Vice President Executive Vice President
Chief Credit Officer Chief Financial Officer
HUGH M. DURDEN G. JOSEPH PRENDERGAST
Executive Vice President Executive Vice President
Corporate Banking General Banking
W. DOUG KING RICHARD B. ROBERTS
Executive Vice President Executive Vice President
Consumer Services Treasurer
WALTER E. LEONARD, JR.
Executive Vice President
Operations/Technology
76
<PAGE> 78
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
Wachovia Corporation
301 North Main Street 191 Peachtree Street, NE
Winston-Salem, NC 27150 Atlanta, GA 30303
CORPORATE MAILING ADDRESSES AND TELEPHONE NUMBERS
Wachovia Corporation
P. O. Box 3099 P. O. Box 4148
Winston-Salem, NC 27150 Atlanta, GA 30302
910-770-5000 404-332-5000
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of Wachovia Corporation will be
held Friday, April 28, 1995 at 10:30 a.m., in the Omni Hotel,
130 Market Street, Charleston, SC. All shareholders are invited to
attend.
COMMON STOCK
The common stock of the Corporation is traded on the New York Stock
Exchange with a ticker symbol of WB.
TRANSFER AGENT
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P. O. Box 3001
Winston-Salem, NC 27102
1-800-633-4236
SHAREHOLDER ACCOUNT ASSISTANCE
Shareholders who wish to change the name, address or ownership of
stock, report lost certificates, eliminate duplicate mailings of
financial material or for other account reregistration procedures
and assistance should contact the Transfer Agent at the address or
phone number above. Use of your shareholder account number and a
daytime phone number in all correspondence will be appreciated.
DIVIDEND 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 the date of payment to a checking, savings or
money market at any financial institution which participates in an
Automated Clearing House.
Information regarding these services can be obtained by contacting
the Transfer Agent or Wachovia Shareholder Services at the address
or phone number below.
WACHOVIA SHAREHOLDER SERVICES CONTACT
H. Jo Barlow Wachovia Corporation
Shareholder Services P. O. Box 3099
910-770-5787 Winston-Salem, NC 27150
FINANCIAL INFORMATION
Analysts, investors and others seeking financial information should
contact the following either by phone or in writing to the
corporate mailing address in Winston-Salem.
Robert S. McCoy, Jr. James C. Mabry
Chief Financial Officer Investor Relations
910-770-5926 910-770-5788
INDEPENDENT AUDITORS
Ernst & Young LLP, Winston-Salem, NC
77
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8: Nos. 33-34386, 33-15706, 2-99538, 33-44191, 33-44386, 33-44394,
33-54094, 33-53325; Form S-3: Nos. 33-6280, 33-2232, 33-55839) of Wachovia
Corporation and in the related prospectuses of our report dated January 12,
1995, with respect to the consolidated financial statements of Wachovia
Corporation included in this Annual Report (Form 10-K) for the year ended
December 31, 1994.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Winston-Salem, North Carolina
March 8, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
We, the undersigned directors of Wachovia Corporation, and each of us, do
hereby make, constitute and appoint Kenneth W. McAllister and Alice W. Grogan,
and each of them (either of whom may act without the consent or joinder of the
other), our attorneys-in-fact and agents with full power of substitution for us
and in our name, place and stead, in any and all capacities, to execute for us
and in our behalf the Annual Report on Form 10-K of Wachovia Corporation for
the year ended December 31, 1994 and any and all amendments to the foregoing
Report and any other documents and instruments incidental thereto, and to file
the same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as we might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents and/or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, we the undersigned have executed this Power of
Attorney this 27th day of January, 1995.
<TABLE>
<S> <C>
/s/ L. M. Baker, Jr. /s/ Rufus C. Barkley, Jr.
- ---------------------------------- ----------------------------------
L. M. Baker, Jr. Rufus C. Barkley, Jr.
/s/ Crandall C. Bowles /s/ John L. Clendenin
- ---------------------------------- ----------------------------------
Crandall C. Bowles John L. Clendenin
/s/ Lawrence M. Gressette, Jr. /s/ Thomas K. Hearn, Jr.
- ---------------------------------- ----------------------------------
Lawrence M. Gressette, Jr. Thomas K. Hearn, Jr.
/s/ W. Hayne Hipp
- ---------------------------------- ----------------------------------
W. Hayne Hipp Robert M. Holder, Jr.
/s/ Donald R. Hughes /s/ F. Kenneth Iverson
- ---------------------------------- ----------------------------------
Donald R. Hughes F. Kenneth Iverson
/s/ James W. Johnston /s/ W. Duke Kimbrell
- ---------------------------------- ----------------------------------
James W. Johnston W. Duke Kimbrell
/s/ John G. Medlin, Jr. /s/ Herman J. Russell
- ---------------------------------- ----------------------------------
John G. Medlin, Jr. Herman J. Russell
/s/ Sherwood H. Smith, Jr. /s/ Charles McKenzie Taylor
- ---------------------------------- ----------------------------------
Sherwood H. Smith, Jr. Charles McKenzie Taylor
</TABLE>
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned director of Wachovia Corporation, do hereby make,
constitute and appoint Kenneth W. McAllister and Alice W. Grogan, and each of
them (either of whom may act without the consent or joinder of the other), my
attorneys-in-fact and agents with full power of substitution for me and in my
name, place and stead, in any and all capacities, to execute for me and in my
behalf the Annual Report on Form 10-K of Wachovia Corporation for the year
ended December 31, 1994 and any and all amendments to the foregoing Report and
any other documents and instruments incidental thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents and/or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I the undersigned have executed this Power of
Attorney this 30th day of January, 1995.
/s/ Robert M. Holder, Jr.
-------------------------
Robert M. Holder, Jr.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,670,115
<INT-BEARING-DEPOSITS> 6,763
<FED-FUNDS-SOLD> 201,606
<TRADING-ASSETS> 889,958
<INVESTMENTS-HELD-FOR-SALE> 3,538,247
<INVESTMENTS-CARRYING> 4,184,610
<INVESTMENTS-MARKET> 4,114,644
<LOANS> 25,890,804
<ALLOWANCE> 406,132
<TOTAL-ASSETS> 39,187,958
<DEPOSITS> 23,069,258
<SHORT-TERM> 7,312,444
<LIABILITIES-OTHER> 729,285
<LONG-TERM> 4,790,464
<COMMON> 854,669
0
0
<OTHER-SE> 2,431,838
<TOTAL-LIABILITIES-AND-EQUITY> 39,187,958
<INTEREST-LOAN> 1,864,082
<INTEREST-INVEST> 456,253
<INTEREST-OTHER> 41,959
<INTEREST-TOTAL> 2,362,294
<INTEREST-DEPOSIT> 539,232
<INTEREST-EXPENSE> 1,038,388
<INTEREST-INCOME-NET> 1,323,906
<LOAN-LOSSES> 71,763
<SECURITIES-GAINS> 3,320
<EXPENSE-OTHER> 1,098,413
<INCOME-PRETAX> 761,482
<INCOME-PRE-EXTRAORDINARY> 539,058
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 539,058
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.12
<YIELD-ACTUAL> 4.34
<LOANS-NON> 78,712
<LOANS-PAST> 37,010
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 404,798
<CHARGE-OFFS> 102,666
<RECOVERIES> 32,237
<ALLOWANCE-CLOSE> 406,132
<ALLOWANCE-DOMESTIC> 346,314
<ALLOWANCE-FOREIGN> 3,830
<ALLOWANCE-UNALLOCATED> 55,988
</TABLE>
