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1995 FORM 10-K
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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, 1995
Commission File Number 1-9021
WACHOVIA CORPORATION
Incorporated in the State of North Carolina
IRS Employer Identification Number 56-1473727
Address and Telephone:
100 North Main Street, Winston-Salem, North Carolina 27101, (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 6, 1996, Wachovia Corporation had 169,612,091 shares
of common stock outstanding. The aggregate market value of Wachovia
Corporation common stock held by nonaffiliates on February 6, 1996 was
approximately $7.629 billion and the number of shares held by
nonaffiliates was 169,524,175.
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 1996
Annual Shareholders' Meeting, which will be filed with the Commission by
April 30, 1996 are incorporated by reference into Part III of this report.
Portions of the annual report to shareholders for the year ended December
31, 1995 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.
PART I PAGE
Item 1 Business
Description of Business....... 3, 14-42, 72-74
Subsidiaries of Wachovia
Corporation............................... 2
Average Balance Sheets/
Interest/Rates.............. 64-65, 68-69, 70
Volume and Rate
Variance Analysis .................... 17, 40
Securities........................... 19, 50-51
Loans........................ 18, 26, 51-52, 71
Allowance for Loan Losses
and Loan Loss Experience.......... 27, 28, 40
Deposits................. 20-21, 24, 64-65, 70
Return on Equity and Assets ................ 70
Short-Term Borrowed Funds .................. 24
Item 2 Properties.................................... 2
Item 3 Legal Proceedings............................. 58
Item 4 Submission of Matters to a Vote
of Security Holders -- None
PART II
Item 5 Market for Registrant's Common
Equity and Related
Stockholder Matters ..................... 72-73
Item 6 Selected Financial Data................ 66-67, 71
Item 7 Management's Discussion and
Analysis of Financial
Condition and Results
of Operations............................ 14-42
Item 8 Financial Statements and
Supplementary Data....................... 35-63
Item 9 Changes in and Disagreements
with Accountants on
Accounting and Financial
Disclosure -- None
PART III
Item 10 Directors and Executive
Officers of the Registrant..... Proxy Statement
Item 11 Executive Compensation........... Proxy Statement
Item 12 Security Ownership of
Certain Beneficial Owners
and Management................. Proxy Statement
Item 13 Certain Relationships
and Related Transactions....... Proxy Statement
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K .............................. 3, 7-11
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SUBSIDIARIES OF WACHOVIA CORPORATION
The following table sets forth the subsidiaries of Wachovia Corporation on
December 31, 1995. 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.
Organized under the
laws of the state of:
Wachovia Bank of North Carolina, N.A. the United States
Wachovia International
Banking Corporation the United States*
Wachovia Leasing Corporation North Carolina
Wachovia Auto Leasing Company
of North Carolina North Carolina
Wachovia Insurance Services of
North Carolina, Inc. North Carolina
Greenville Agricultural Credit
Corporation North Carolina
City Loans, Inc. North Carolina
WOC Company North Carolina
Wachovia Bank of Georgia, N.A. the United States
First Bank Building Corporation Georgia
First Atlanta Services Corporation Delaware
Wachovia Auto Leasing Company
of Georgia Georgia
WMCS, Inc. Georgia
Wachovia Bank of South Carolina, N.A. the United States
Wachovia Insurance Services of
South Carolina, Inc. South Carolina
First National Properties, Inc. South Carolina
South Carolina National OREO, Inc. South Carolina
Southern Provident Life
Insurance Company Arizona
Atlantic Savings Bank, FSB the United States
Atlantic Mortgage Corporation
of South Carolina, Inc. South Carolina
Wachovia Mortgage Company North Carolina
New Salem, Inc. North Carolina
Wachovia Investments, Inc. North Carolina
Wachovia Corporate Services, Inc. North Carolina
Wachovia Operational Services
Corporation North Carolina
Wachovia Trust Services, Inc. North Carolina
The First National Bank of
Atlanta (Delaware) the United States
Wachovia Bank Card Services, Inc. Delaware
First Atlanta Corporation Georgia
FA Investment Company Georgia
Financial Life Insurance Company
of Georgia Georgia
The Wachovia Insurance Agency
of Georgia, Inc. Georgia
FAIRCO Properties, Inc. Georgia
First Atlanta Lease Liquidating
Corporation Georgia
Wachovia Corporation of Florida Florida
Wachovia Corporation of Alabama Alabama
Wachovia Corporation of Tennessee Tennessee
Wachovia Capital Markets, Inc. Georgia
* Organized under Chapter 25(a) of the Federal Reserve Act of the United
States
PROPERTIES
The principal offices of the Corporation and Wachovia Bank of North Carolina,
N.A., are located at 100 North Main Street, Winston-Salem, North Carolina,
where the company owns and occupies approximately 535,000 square feet of office
space.
Wachovia Bank of Georgia, N.A., occupies approximately 380,000 square feet of
an office tower at 191 Peachtree Street, N.E., Atlanta, Georgia, under a lease
expiring December 2008.
Wachovia Bank of South Carolina, N.A., occupies approximately 12,000 square
feet of office space in the Palmetto Center at 1426 Main Street, Columbia,
South Carolina, 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 339 offices while the others are leased or are
located on leased land. The approximate lease terms range from one to fifty
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
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Exhibits -- The index of exhibits has been filed as separate pages of the 1995
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 the
required information is shown in the Financial Statements or the Notes thereto.
Reports on Form 8-K: A Current Report on Form 8-K dated October 3, 1995 was
filed with the Securities and Exchange Commission setting forth the computation
of Ratios of Earnings to Fixed Charges to be incorporated into Wachovia
Corporation's Registration Statement on Form S-3 (Registration No. 33-55839).
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 13, 1996.
WACHOVIA CORPORATION
ROBERT S. McCOY, JR.
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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 13, 1996.
L.M. BAKER, JR.
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L.M. Baker, Jr.
President and Chief Executive Officer
ROBERT S. McCOY, JR.
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Robert S. McCoy, Jr.
Executive Vice President and
Chief Financial Officer
JOHN C. McLEAN, JR.
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John C. McLean, Jr.
Comptroller
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:
John G. Medlin, Jr. Donald R. Hughes
Rufus C. Barkley, Jr. E. Kenneth Iverson
Crandall C. Bowles James W. Johnston
John L. Clendenin Wyndham Robertson
Lawrence M. Gressette, Jr. Herman J. Russell
Thomas K. Hearn, Jr. Sherwood H. Smith, Jr.
W. Hayne Hipp Charles McKenzie Taylor
Robert M. Holder, Jr.
KENNETH W. McALLISTER
---------------------
Kenneth W. McAllister
Attorney-in-Fact
3
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PART III
ITEM 10. Directors and Executive Officers of the Registrant
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The names, ages and positions of the executive officers of Wachovia as
of January 31, 1996 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.
Name, Age Business Experience During Past
and Position Five Years and Year Employed
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L. M. Baker, Jr., 53 Chief Executive Officer of Wachovia
President and Chief Corporation since January 1994;
Executive Officer Wachovia President of Wachovia Corporation
Corporation; Chairman of since 1993; Chief Operating Officer of
the Board Wachovia Bank Wachovia Corporation, February -
of North Carolina, N.A.; December 1993; Executive Vice
Director of Wachovia President of Wachovia Corporation
Corporation, Wachovia Bank until January 1993; President and
of Georgia, N.A., and Chief Executive Officer of Wachovia
Wachovia Bank of South Corporation of North Carolina, January
Carolina, N.A. 1990 - March 1993; President and Chief
Executive Officer of Wachovia Bank
of North Carolina, N.A., January 1990 -
May 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, 56 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 since 1994; President of
Wachovia Corporation, Wachovia Corporate Services, Inc. since
Wachovia Bank of North July 1994; President of Wachovia Trust
Carolina, N.A., President Services, Inc. January-June 1994;
Wachovia Corporate Services, Executive Vice President of Wachovia
Inc. Bank of North Carolina, N.A.; Western
Division Executive, Wachovia Bank of
North Carolina, N.A., 1991-1994; Regional
Vice President, Southern Region, Wachovia
Bank of North Carolina, N.A., 1989-1991.
Employed in 1972.
4
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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, 57 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. 50 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, 47 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., 57 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., 47 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.
5
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Item 10. Directors and Executive Officers of the Registrant (Continued)
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Name, Age Business Experience DuringPast
and Position Five Years and Year Employed
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G. Joseph Prendergast, 50 Executive Vice President of Wachovia
Executive Vice President Corporation since October 1988;
Wachovia Corporation; Chairman of Wachovia Bank of Georgia,
Chairman Wachovia Bank of N.A. since January 1994; Chairman
Georgia, N.A. and Wachovia of Wachovia Bank of South Carolina,
Bank of South Carolina, N.A.; N.A. since July 1995. President and
Director Wachovia Bank Chief Executive Officer of Wachovia
of Georgia, N.A., Wachovia Bank of Georgia, N.A. January 1993-
Bank of North Carolina, N.A., January 1995; President and Chief
and Wachovia Bank of South Executive Officer of Wachovia
Carolina, N.A. Corporate Services, Inc. until
July 1994; President and Chief
Executive Officer of Wachovia
Corporation of Georgia, January 1993-
March 1993; Executive Vice President
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, 52 Executive Vice President and
Executive Vice President and Treasurer of Wachovia Corporation
Treasurer Wachovia since April 1990; Executive Vice
Corporation; Executive Vice President of Wachovia Bank of
President Wachovia Bank of North Carolina, N.A.
North Carolina, N.A. Employed in 1967.
During the past five years, there have been no events under any
bankruptcy act, no criminal proceedings and no judgments 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.
6
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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 as amended (Exhibit 3.2
to Quarterly Report on Form 10-Q of Wachovia Corporation
for the quarter ended June 30, 1995, 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*).
7
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Item 14. Exhibits (Continued)
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4.9 Indenture dated as of March 1, 1993 between
Wachovia Corporation and CoreStates Bank, National Association, as
Trustee, relating to subordinated debt securities (Exhibit 4(a) to
S-3 (Shelf) Registration Statement of Wachovia Corporation, File
No. 33-59206*).
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 No. 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 Savings and Profit-Sharing Benefit Equalization Plan of
Wachovia Corporation (Exhibit 10.3 to Quarterly Report on Form 10-Q
Wachovia Corporation for the quarter ended June 30, 1995,
File No. 1-9021*).
10.10 Employment Agreements between Wachovia Corporation and Messrs. L. M.
Baker, Jr., Robert S. McCoy, Jr., G. Joseph Prendergast, Hugh M.
Durden 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*).
10.11 Amendment to Employment Agreements described in Exhibit 10.10 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*).
8
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Item 14. Exhibits (Continued)
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10.12 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*).
10.13 Amendment to Agreement between Wachovia Corporation
and Mr. John G. Medlin, Jr. described in Exhibit 10.12
hereto (Exhibit 10.4 to Quarterly Report on Form 10-Q of Wachovia
Corporation for the quarter ended June 30, 1995, File No.
1-9021*).
10.14 Executive Retirement Agreement between Wachovia
Corporation and Mr. John G. Medlin, 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*).
10.15 Amendment to Executive Retirement Agreement described in
Exhibit 10.14 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*).
10.16 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*).
10.17 Amendment to Executive Retirement Agreement between Wachovia
Corporation and Mr. John G. Medlin, Jr. (Exhibit 10.4 to Quarterly
Report on Form 10-Q of Wachovia Corporation for the quarter ended
September 30, 1993, File No. 1-9021*).
10.18 Executive Retirement Agreements between Wachovia Corporation and
Messrs. L.M. Baker, Jr., G. Joseph Prendergast, Walter E. Leonard,
Jr., and Hugh M. Durden, dated as of January 27, 1995 (Exhibit
10.1 to Quarterly Report on Form 10-Q of Wachovia Corporation for
the quarter ended June 30, 1995, File No. 1-9021*).
10.19 Executive Retirement Agreement between Wachovia Corporation and
Mr. Robert S. McCoy, Jr. (Exhibit 10.2 to Quarterly Report on
Form 10-Q of Wachovia Corporation for the quarter ended
June 30, 1995, File No. 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 10.20 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 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*).
9
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Item 14. Exhibits (Continued)
- ------------------------------
10.25 Amendment to Management Restricted Stock Award Plan described in
Exhibit 10.24 hereto (Exhibit 10.1 to Quarterly Report on Form
10-Q of Wachovia Corporation for the quarter ended September
30, 1993, File No. 1-9021*).
10.26 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*).
10.27 Amendment to Incentive Stock Option Plan described in Exhibit 10.26
hereto (Exhibit 10.2 to Quarterly Report on Form 10-Q of Wachovia
Corporation for the quarter ended September 30, 1993, File No.
1-9021*).
10.28 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*).
10.29 Amendment to Deferred Compensation Plan described in Exhibit 10.28
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*).
10.30 Amendment to Deferred Compensation Plan described in Exhibit 10.28
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*).
10.31 Amendment to Deferred Compensation Plan described in Exhibit 10.28
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*).
10.32 Agreement for Deferral of Directors' Fees (Exhibit 10(b) to S-14
Registration Statement of South Carolina National Corporation,
No. 2-89011*).
10.33 Amendment to Agreement for Deferral of Directors' Fees described in
Exhibit 10.32 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*).
10.34 Wachovia Corporation Stock Plan (Exhibit 4.1 to S-8 Registration
Statement No. 033-53325*).
10.35 Wachovia Corporation Incentive Plan Deferral Arrangement.
10.36 Wachovia Corporation Executive Insurance Plan.
10.37 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, 1995.
11 Computation of Earnings Per Share (Note O to 1995 Consolidated
Financial Statements of Wachovia Corporation and Subsidiaries, page
61 of 1995 Annual Report to Shareholders*).
13 Wachovia Corporation 1995 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).
10
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Item 14. Exhibits (Continued)
- ------------------------------
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, 1995*).
23 Consent of Ernst & Young LLP.
24 Power of Attorney.
27 Financial Data Schedule (for SEC purposes only).
* Incorporated by reference.
11
<PAGE> 1
EXHIBIT 10.35
WACHOVIA CORPORATION
INCENTIVE PLAN DEFERRAL ARRANGEMENT
PREAMBLE
Pursuant to the terms of an Incentive Plan as hereinafter defined, a select
group of management employees of Wachovia Corporation (the "Corporation") and
its affiliates may become eligible to receive incentive compensation. The
Corporation desires to permit each such employee to elect to defer receipt of a
portion of such incentive compensation, if deferral is deemed by such employee
to be desirable.
NOW, THEREFORE, the Corporation hereby adopts this Wachovia Corporation
Incentive Plan Deferral Arrangement (the "Plan") as follows:
ARTICLE I -- DEFINITIONS
1.1 "Account" means the book-entry account established by the
Corporation for each Participant as described in Article IV.
1.2 "Committee" means the Management Resources and Compensation
Committee of the Board of Directors of the Corporation, or any successor
thereto. The Committee is responsible for the administration and
interpretation of the Plan in accordance with its terms, and its
determinations shall be binding and conclusive on all persons affected
thereby.
1.3 "Deferred Compensation" means the portion of a Participant's award
(if any) under an Incentive Plan that is deferred pursuant to the Plan.
1.4 "Deferring Participant" means, with respect to any Plan Year, an
Eligible Employee who files the election described in Article III.
1.5 "Effective Date" means July 1, 1995. An election made by a
Deferring Participant prior to the Effective Date to defer compensation
under an Incentive Plan shall remain in effect following the Effective
Date until terminated by the Deferring Participant as provided in Article
III. Any reference in such prior election to a deferral arrangement under
an Incentive Plan shall be deemed as of the Effective Date to refer to
this Plan.
1.6 "Eligible Employee" means an employee who complies with the
eligibility criteria in Article II.
1.7 "Incentive Plan" means any one or more of the Wachovia Corporation
Senior Management Incentive Plan, the Wachovia Corporation Bond and Money
Market Group Variable Compensation Plan, the Trust Investment Management
Incentive Plan, the South Carolina National Corporation Executive
Incentive Compensation Plan, and any other similar incentive compensation
arrangement as may be adopted or amended by the Committee and which
permits deferral of compensation pursuant to this Plan.
1.8 "Participant" means any present or Deferring Participant who has a
balance in his or her Account under the Plan.
<PAGE> 2
1.9 "Plan Year" means the twelve-month period ending on December 31
of each year, commencing with December 31, 1995.
ARTICLE II -- ELIGIBILITY
Any management employee of the Corporation or any of its affiliates who is
potentially eligible to receive a payment under an Incentive Plan for any
calendar year is an Eligible Employee for the Plan year coinciding with such
calendar year.
ARTICLE III -- ELECTION TO DEFER INCENTIVE COMPENSATION
Any Eligible Employee with respect to any Plan Year may become a Deferring
Participant for such Plan Year by filing an election to defer receipt of a
percentage (not to exceed 50%) of the incentive pay, if any, earned by him for
such Plan Year under an Incentive Plan. Such election shall be filed in writing
with the Committee on a form provided by the Committee prior to the first day of
the Plan Year for which such election is to be effective. An election, once
filed, shall continue in effect until the first day of the Plan Year next
following receipt by the Committee of a written revocation of such election, or
until the Deferring Participant's earlier termination of employment or
termination of participation in an Incentive Plan. No amount shall be deferred
with respect to any Eligible Employee for any Plan Year for which there is no
election in effect, and no election for any Plan Year may be revoked after the
beginning of such Plan Year. The amount of the incentive pay which can be
deferred for any Plan Year pursuant to the Plan shall not be less than $1,000.
If the amount to be deferred pursuant to any election for a Plan Year shall be
less than $1,000, such election shall be null and void and of no force and
effect. An Eligible Employee who has revoked an election to defer may file a new
election for any Plan Year (including the first Plan Year for which such
election would have been effective) at any time prior to such Plan Year.
ARTICLE IV -- ACCOUNTS
4.1 The Committee shall establish an Account for each Deferring
Participant to which shall be credited Deferred Compensation hereunder
and amounts equivalent to interest as provided in Section 4.2, and to
which shall be debited all distributions pursuant to Article V. Amounts
of Deferred Compensation shall be credited to the Account of a Deferring
Participant as of the date that such amounts would have been paid to the
Deferring Participant were it not for the deferral.
4.2 As of the last day of each calendar month (including after payments
commence as provided in Article V), there shall be credited to the
Account of each Participant an amount equivalent to interest at the rate
determined as of such last day pursuant to Exhibit A. Such rate shall be
applied to the average daily balance in the Account for such month.
ARTICLE V -- DISTRIBUTION OF ACCOUNTS
A Participant's Account shall be paid in cash 180 substantially equal
consecutive monthly installments on the first day of each calendar month
commencing with the month next following the Participant's termination of
employment for any reason; provided, that the Participant may
- 2 -
<PAGE> 3
elect prior to the date the Participant terminates employment, with the consent
of the Committee, for the Participant's Account to be distributed in a lump sum
or in substantially equal consecutive monthly installments for a period of less
than 180 months.
ARTICLE VI -- DEATH
6.1 Each Participant may designate a beneficiary (which may include
more than one person, natural or otherwise, and one or more secondary or
contingent beneficiaries) to receive the amount in the Account, if any,
following death of the Participant. In the event that a Participant shall
die without any designated beneficiary surviving or then in existence,
the beneficiary shall be the Participant's surviving spouse, if any. If
there shall be no surviving spouse, the beneficiary shall be the
Participant's estate.
6.2 If a Participant shall die while employed by the Corporation, the
Corporation shall distribute the Account to the Participant's beneficiary
in cash in 180 substantially equal consecutive monthly installments on
the first day of each calendar month commencing with the month next
following the Participant's death; provided, that the Committee may, with
the consent of the beneficiary, distribute the Participant's Account in a
lump sum or in a lesser number of consecutive monthly installments than
would have been made to the Participant.
6.3 If a Participant shall die while receiving payments pursuant to
Article V, but before receiving all such payments to which he is
entitled, the Account will continue to be distributed to the
Participant's beneficiary in the same manner as such payments would have
been made to the Participant.
6.4 If a beneficiary shall commence receiving payments hereunder, and
shall die or otherwise cease to exist before receiving distribution of
the full amount in the Account, the then amount in the Account shall be
paid as soon as practicable in a lump sum to the person or persons then
in existence who would receive the property of the Participant under the
intestate succession laws then in effect in the state in which the
Participant was a resident at the time of death.
ARTICLE VII -- ASSIGNMENT
No rights of a Participant or any other person in the Account or to the
payment of benefits hereunder shall be assigned, transferred, pledged or
encumbered, except for transfers on account of death of the recipient thereof.
ARTICLE VIII -- NO TRUST; UNSECURED INTEREST
Nothing contained in the Plan and no action taken pursuant to the provisions of
the Plan shall create or be construed as creating a trust of any kind, or a
fiduciary relationship between the Corporation and any Participant or other
person. Any funds which are or may be set aside under the provisions of the
Plan shall continue for all purposes to be a part of the general funds of the
Corporation and no person other than the Corporation shall, by virtue of the
provisions of the Plan, have any interest in such funds. To the extent that any
person acquires a right to
- 3 -
<PAGE> 4
receive payments from the Corporation under the Plan, such rights shall be
no greater than the right of any unsecured general creditor of the Corporation.
ARTICLE IX -- FACILITY OF PAYMENT
Notwithstanding any other provisions hereof, if a Participant or any other
person entitled to receive payments under the Plan shall be physically or
mentally or legally incapable of receiving or acknowledging receipt of any
benefit payable hereunder, the Corporation, upon the receipt of satisfactory
evidence that another person or institution is maintaining the recipient and
that no guardian or committee has been appointed for the recipient, may cause
such benefit otherwise payable to the recipient to be made to such person or
institution so maintaining the recipient.
ARTICLE X -- CLAIMS PROCEDURE
In the event any Participant or other person shall file a claim for
payments hereunder which shall be denied by the Corporation, the Corporation
shall comply with the claims procedure set forth in Section 503 of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder. The Committee shall act as the named fiduciary
responsible for review of any decision denying a claim.
ARTICLE XI -- AMENDMENT; TERMINATION
The Committee may amend the Plan from time to time in any respect, or may
terminate the Plan, except that no amendment or termination shall affect rights
to payments hereunder with respect to any Participant to the extent of amounts
in the Account of the Participant, unless the Participant shall consent thereto
in writing.
ARTICLE XII -- MISCELLANEOUS
12.1 Neither this Plan, nor any action of the Corporation or Committee,
or any election hereunder, shall be held or construed to confer on any
person any legal right to be continued as an employee of the Corporation
or of any affiliate of the Corporation.
12.2 The Corporation shall deduct from any amounts payable under the
Plan all payroll taxes and withholdings as may be required by law.
12.3 The provisions of the Plan shall be construed and enforced
according to the laws of the State of North Carolina.
- 4 -
<PAGE> 5
EXHIBIT A
WACHOVIA CORPORATION
INCENTIVE PLAN DEFERRAL ARRANGEMENT
COMPUTATION OF AMOUNTS EQUIVALENT TO INTEREST
---------------------------------------------
With respect to each calendar month during which a deferred compensation
account balance exists, the Long-Term Applicable Federal Rate for the month
shall be the rate used to compute the amount equivalent to interest credited for
the month. The computed equivalent to interest shall be equal to the Long-Term
Applicable Federal Rate for the month applied to the average daily balance in
the account for the month multiplied by a ratio, the numerator of which is the
number of days in the month and the denominator of which is the number of days
in the year.
LONG-TERM APPLICABLE FEDERAL RATE
---------------------------------
The Long-Term Applicable Federal Rate shall be the rate as defined by
Internal Revenue Code Section 1274(d) which is published each month in a Revenue
Ruling issued by the Internal Revenue Service. The Long-Term Applicable Federal
Rate is determined monthly by the Internal Revenue Service on the basis of the
average market yield on outstanding marketable long-term obligations of the
United States.
<PAGE> 1
EXHIBIT 10.36
WACHOVIA CORPORATION
EXECUTIVE INSURANCE PLAN
GENERAL OVERVIEW
o The purpose of the Executive Insurance Plan is to provide permanent life
insurance coverage more commensurate with the pay levels of the eligible
executives.
o Eligible executives who elect to participate under the Executive Insurance
Plan will be afforded with an individual universal life insurance policy
currently issued by New York Life Insurance Company. The amount of
pre-retirement coverage provided to an executive who participates under
the plan will be based on the base pay of the individual as indicated on
the accompanying schedule. The amount of post-retirement coverage paid
for by Wachovia will equal 25% of the amount of pre-retirement coverage,
with the exception of the coverage for the Chief Executive Officer, which
will be 50%.
o The executive may elect additional post-retirement coverage in increments
of 25% of pre-retirement coverage at his/her expense. This election may
be made at any time, but will be available on a guaranteed issue basis
only if the post-retirement coverage does not exceed the pre-retirement
coverage.
o Eligible executives who elect to participate in the plan will be provided
with $50,000 life insurance coverage under the Choice Benefits Plan and be
provided with Choice credits to purchase the $50,000 worth of coverage.
If an executive chooses not to participate, then his/her participation
with respect to life insurance under the Choice Benefits Plan will
continue as before. Should an individual decline to participate, he/she
will only be able to join the plan at the next enrollment date, which may
occur as frequent as annually, and may be subject to some underwriting
requirements.
SPECIFIC INFORMATION
o ELIGIBILITY
- Executives whose base pay rate equals or exceeds $100,000 for the first
time will be presented for eligibility consideration to the Management
Resources and Compensation Committee (the "Committee") periodically for
confirmation. It is anticipated that this periodic review will occur
annually, but the Committee reserves the right to request less frequent
updates.
- Executives who are offered participation and elect to participate would
be eligible to participate effective the first of the next calendar
year. At that time, the executive's term life insurance coverage under
the Choice Benefits Plan would be reduced to $50,000 along with a
corresponding reduction in Choice credits. The Committee reserves the
right to permit an earlier effective date for participation under the
plan; however, any changes to Choice Benefits Plan participation must
occur as of the beginning of the next calendar year.
- If an executive declines to participate, his/her Choice Benefits life
insurance coverage will continue unchanged. If at a future time the
executive wishes to participate, he/she will have to wait until the next
enrollment opportunity.
<PAGE> 2
o COVERAGE
- Pursuant to the attached schedule, executives who elect to participate
under the Executive Insurance Plan will be afforded a fixed dollar
amount of pre-retirement coverage predicated on the current base pay
rate. In addition, Wachovia will provide for 25% of this pre-retirement
coverage as a post-retirement death benefit within the policy.
- The executive may elect to purchase additional post-retirement coverage,
on a guaranteed issue basis, in increments of 25% of pre-retirement
coverage provided the post-retirement coverage does not exceed the
pre-retirement coverage. Also, the executive may elect additional
pre-retirement coverage subject to the underwriting requirements of the
policy. Any additional coverage elected by the participant will be at
his/her expense.
- If an executive's base pay would warrant the movement into a category
with a higher amount of coverage, such a change would be considered at
the next enrollment opportunity, but only with the confirmation of the
Committee.
- For executives who are provided coverage within the Category I indicated
on the attached, an additional option exists to reconfigure the policy
death benefit into a death benefit payable on a joint and last survivor
basis provided the level of premiums payable by Wachovia on behalf of
the executive remains the same.
o PREMIUM PAYMENTS
- Wachovia is scheduled to pay premiums on behalf of the executive for the
amount of coverage indicated on the attached schedule. These annual
premiums would be payable while the executive is employed by Wachovia
and are scheduled to be payable until the executive reaches insurance age
62 or for at least 10 years if the executive is older than insurance
age 53.
- The scheduled coverage and corresponding premiums are based on the
assumption of retirement at age 62. If the executive retires prior to
that time, he/she would be responsible for the payment of premiums at
the same level for the same amount of coverage as illustrated or could
lower the premiums corresponding to a reduction in coverage. If the
executive works beyond age 62, additional premiums may be necessary to
continue the same pre-retirement level of coverage.
-The premium amounts are also predicated on conservative illustrations of
future policy performance. Should actual policy performance be worse
than that illustrated, the premiums, which are scheduled to vanish after
insurance age 62 or 10 policy years (if longer), may not in fact vanish.
Wachovia has currently made no commitment to pay additional premiums
beyond those illustrated should actual performance warrant additional
premiums. However, the Committee reserves the right to consider the
additional payment of premiums if circumstances warrant such
consideration.
-If an executive leaves Wachovia, he/she will be responsible for the
ongoing payment of premiums. Wachovia's commitment will cease at
that time. However, the Committee reserves the right to consider the
payment of premiums for individuals who retire (under the provision of
the Wachovia Corporation Retirement Income Plan), prior to insurance
age 62 or 10 policy years, if longer.
-All premiums paid by Wachovia will be considered as taxable income, and
as such, will be subject to withholding throughout the executive's tax
year. The premiums associated with any additional coverage elected by the
executive can be paid on a payroll deduction basis.
<PAGE> 3
o POLICY OWNERSHIP
- The executive will be the owner of the policy and may select any
beneficiary he/she chooses.
- As a result of this ownership, the executive may exercise all options
afforded him/her under the policy, inclusive of a policy loan or
withdrawal.
- However, if any action taken by the executive causes the policy to be
suspended or terminated due to failure to pay any additional premiums
due, failure to pay any interest on a policy loan or withdrawal of too
much cash value (which will cause the policy to violate its cash value
requirements to be deemed life insurance), Wachovia reserves the right to
suspend or cease its premium payments.
o UNDERWRITING
- The plan, as designed, is configured for guaranteed issue on a
unisex, smoker distinct basis. Provided the executive's elections
remain within the confines of the plan design, guaranteed issue will be
available. If the executive wishes to increase pre-retirement coverage,
the underwriting requirements of the policy would need to be satisfied.
- However, if an executive declines coverage and later wishes to
participate, it is possible that guaranteed issue may not be available
and some underwriting may be required. If any additional cost is
incurred, as a result of such circumstances, Wachovia reserves the right
to only pay for the cost of the policy on a guaranteed issue basis.
o LIBERTY LIFE COVERAGE
- Any executive, who becomes eligible to participate in the Executive
Insurance Plan and who also has a Liberty Life Insurance Company policy
paid for by Wachovia, will only be able to participate in the Executive
Insurance Plan if he/she elects to relinquish Wachovia from the
continued payment of premiums.
- A variety of options exist on behalf of the Liberty Life policy,
including the executive's continued payment of the full or a reduced
premium amount, the cashing-in of the policy, the conversion to a lesser
death benefit within the policy whose premium is illustrated to vanish,
or the tax-free exchange with the New York Life policy.
o PLAN CHANGES
- The commmittee reserves the right to amend, modify or terminate the
commitment by Wachovia to continue payment of premiums as described
above with at least 30 days notice to the affected participants.
Effective Date - June 1, 1995.
<PAGE> 1
EXHIBIT 13
- ----------------------------------------------------------------------
1995
ANNUAL REPORT
AND FORM 10-K
WACHOVIA
- ----------------------------------------------------------------------
<PAGE> 2
CONTENTS
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
Financial Highlights ............................... 2
Wachovia Corporation ............................... 3
Selected Year-End Data ............................. 3
Letter to Shareholders ............................. 4
Wachovia Corporation Strategic Review - An Update .. 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations .. 14
Results of Operations -- 1995 vs. 1994 ............ 15
Shareholders' Equity and Capital Ratios ........... 32
Fourth Quarter Analysis ........................... 35
Results of Operations -- 1994 vs. 1993 ............ 39
Supervision and Regulation ......................... 41
Management's Responsibility for Financial Reporting. 43
Report of Independent Auditors ..................... 43
Financial Statements ............................... 44
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
<PAGE> 3
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Percent
1995 1994 Change
------- -------- --------
<S> <C> <C> <C>
EARNINGS AND DIVIDENDS
(thousands, except per share data)
Net income .................................................. $602,543 $539,058 11.8
Cash dividends paid on common stock ......................... 235,495 210,503 11.9
Payout ratio (total cash dividends / net income) ............ 39.1% 39.1%
Net income per common share:
Primary .................................................... $ 3.50 $ 3.13 11.9
Fully diluted .............................................. $ 3.49 $ 3.12 11.7
Cash dividends paid per common share ........................ $ 1.38 $ 1.23 12.2
Average primary shares outstanding .......................... 172,089 172,339 (.1)
Average fully diluted shares outstanding .................... 172,957 172,951 --
Return on average assets* ................................... 1.45% 1.46%
Return on average shareholders' equity* ..................... 17.67 17.41
Excluding average unrealized gains (losses) on
securities available-for-sale, net of tax:
Return on average assets ................................... 1.45 1.46
Return on average shareholders' equity .................... 17.78 17.37
BALANCE SHEET DATA AT YEAR-END
(millions, except per share data)
Total assets ................................................ $ 44,981 $ 39,188 14.8
Interest-earning assets ..................................... 40,001 34,712 15.2
Loans -- net of unearned income ............................. 29,261 25,891 13.0
Deposits .................................................... 26,369 23,069 14.3
Interest-bearing liabilities ................................ 34,001 29,485 15.3
Shareholders' equity** ...................................... 3,774 3,287 14.8
Shareholders' equity to total assets ........................ 8.39% 8.39%
Risk-based capital ratios:
Tier I capital ............................................. 9.43 9.26
Total capital .............................................. 13.64 12.73
Per share:
Book value ................................................. $ 22.15 $ 19.23 15.2
Common stock closing price (NYSE) .......................... 45.75 32.25 41.9
Price/earnings ratio ....................................... 13.1x 10.3x
*Includes average unrealized gains (losses) on securities available-for-sale
of $21 million and ($8) million net of tax, respectively
**Includes unrealized gains (losses) on securities available-for-sale of $116
million and ($38) million net of tax, respectively
</TABLE>
2
<PAGE> 4
WACHOVIA CORPORATION
- ------------------------------------------------------------------------------
Wachovia Corporation (Wachovia or the Corporation) 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 and Wachovia Bank Card Services, Inc., in Wilmington,
Delaware, provide credit card services for Wachovia's affiliated banks. Page 76
provides a complete listing of the Corporation's subsidiaries and member
companies.
Major corporate and institutional relationships are managed by Wachovia
Corporate Services, Inc., through banking offices in Georgia, North Carolina
and South Carolina and through representative offices in Chicago, London, New
York City and Tokyo. The Corporation maintains foreign branches at Grand Cayman
through its banking subsidiaries 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.
Discount brokerage and investment advisory services are provided by Wachovia
Investments, Inc., to customers primarily in Georgia, North Carolina and South
Carolina. Wachovia Operational Services Corporation provides information
processing and systems development for Wachovia's subsidiaries. The Corporation
is involved in other financial services activities including residential
mortgage origination, state and local government securities underwriting, sales
and trading, foreign exchange, corporate finance and other money market
services.
<TABLE>
SELECTED YEAR-END DATA
- -----------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Trust assets (millions):
Discretionary management ............... $20,226 $17,084 $17,950 $16,147 $14,302 $12,777
Total ................................... $90,144 $78,972 $92,287 $85,806 $78,214 $68,423
Banking offices:
North Carolina .......................... 219 216 223 222 224 222
Georgia ................................. 124 127 129 134 135 142
South Carolina .......................... 146 150 157 158 160 153
--- --- --- --- --- ---
Total ................................ 489 493 509 514 519 517
=== === === === === ===
Automated banking machines:
North Carolina ......................... 328 297 251 221 210 200
Georgia ................................ 204 189 180 173 164 162
South Carolina ......................... 180 166 167 164 163 156
--- --- --- --- --- ---
Total ................................ 712 652 598 558 537 518
=== === === === === ===
Employees (full time equivalent) .......... 15,996 15,602 15,531 16,164 16,886 16,864
Common stock shareholders ................. 28,027 28,779 28,079 26,706 29,806 28,195
Common shares outstanding (thousands) ..... 170,359 170,934 171,376 171,471 85,323 84,276
</TABLE>
3
<PAGE> 5
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Wachovia Shareholder:
Wachovia completed a very productive year in 1995, achieving good earnings
growth while moving forward with the implementation of major strategic
initiatives. Net income per fully diluted share was $3.49, up 11.7 percent from
$3.12 in 1994. Net income totaled $602.5 million compared with $539.1 million,
a gain of 11.8 percent. Strong loan expansion and good growth in other
operating revenue, particularly from more nontraditional sources, accounted for
the earnings increase. A higher credit loss provision and a rise in noninterest
expense tempered the results.
Profitability remained strong with returns of 17.7 percent on shareholders'
equity and 1.45 percent on assets compared with longer-term five-year averages
of 15.6 percent and 1.29 percent, respectively. The total return on Wachovia
common stock, including price appreciation and reinvested dividends, was 47.1
percent for the year compared with 60.2 percent for the Keefe, Bruyette & Woods
Index of 50 money center and regional banks and 37.6 percent for the S&P 500
Index.
The results for 1995 and the corporation's financial condition at year-end
compare most favorably with other banking peers. Return on common shareholders'
equity ranked seventh among the nation's 25 largest bank holding companies.
Return on assets was sixth although the corporation ranked 20th in asset size
at December 31. Average common equity to assets of 8.22 percent was fifth
strongest among the top 25 banking companies.
At year-end, nonperforming assets of .24 percent of loans and foreclosed
property represented the lowest level of problem assets among this peer group,
while the corporation had the second strongest reserve coverage of
nonperforming loans at 763 percent. Expense management remained excellent with
an overhead cost ratio of 54.2 percent, second best among these large banking
companies. Graphs depicting several comparative measures for Wachovia and
industry peers since 1990 are on page 74 of this report.
The banking industry's financial condition improved during the first half of
this decade. A nicely growing economy, favorable interest rates and a healthier
credit cycle were the principal factors elevating results of other banks closer
to Wachovia's traditional long-term performance. Conditions for the financial
services industry in the remainder of the decade will be more challenging.
The economy is likely to be slower growing. Traditional and nontraditional
banking competition will be more intense. Profitability pressures will be
evident as loan growth moderates, margins remain under pressure, easy expense
savings have been achieved, loan losses rise and technology investing becomes
more strategically critical. Despite these complexities, excellent
opportunities exist for good companies in this business to succeed and generate
high performance over time.
Addressing the reality of the financial services marketplace, Wachovia's
management conducted an unrestrained strategic assessment of the corporation.
The findings of this comprehensive review were outlined in the 1994 Annual
Report. A considerable portion of my time and that of other managers during
1995 was spent with groups of employees across our franchise. These sessions
were designed to heighten understanding of the need for change, solicit
comments and suggestions, express appreciation for the extra effort required by
Wachovians and encourage dedicated implementation of these initiatives.
I met with thousands of employees and was impressed by how well they are
embracing these changes. Past investments are producing dividends as evidenced
by our stronger sales force, broader product inventory and robust technology.
Business volumes are increasing and revenue sources are becoming more
diversified. I encourage you to read the "Strategic Review - An Update"
beginning on page 6 which profiles some of the progress made so far. More
changes will occur as investment spending and organizational refinements
continue at a deliberate pace.
The convergence of environmental forces and the resulting impact on banking
performance has been a major impetus for recent banking consolidation. Wachovia
remains open to mergers with or acquisitions of other banks. Mergers
4
<PAGE> 6
in 1985 with First Atlanta and in 1991 with South Carolina National created a
stronger franchise and demonstrated the corporation's commitment to seek
combinations which contribute to solid long-term performance. Wachovia will
continue to look for opportunities which enhance business growth and build
shareholder value over time. Additional information about Wachovia's merger,
acquisition and alliance strategy is included in the special section following
this letter.
During 1995, Wachovia continued to be a dependable partner with the communities
it is privileged to serve. Mortgage lending providing affordable housing for
low income and minority customers grew, substantial contributions were made for
community economic development and educational improvement, and thousands of
Wachovians served as volunteers in nonprofit organizations. I was particularly
pleased that all Wachovia subsidiaries subject to the Community Reinvestment
Act of 1977 received "outstanding" ratings, the highest available from federal
regulators.
As 1996 got under way, the economy's rate of growth continued to moderate. In
this environment, Wachovia is fortunate to have the three southeastern states
of Georgia, North Carolina and South Carolina as our primary market. The
states' combined population totals 17.8 million and has been growing faster
than both the nation and southeast as a whole. Other economic measures such as
personal income, retail sales, residential building and corporate investment
compare exceptionally well with other states and regions. Wachovia's market
penetration in these states is complemented by our attractive national book of
business principally in corporate banking services.
As Wachovia moves ahead, we will not lose sight of the foundation for past
accomplishments. There is in our organization an unwavering dedication to the
time-honored priorities of being a sound, profitable and growing organization.
In today's difficult earnings climate, banks can little afford to hamper
performance as a result of poor credit risk management, unanticipated risks
associated with operations or unbridled expense growth.
As we enter 1996, the challenges confronting banking and financial services
providers remain great. However, for strong institutions with a clear vision of
the future, aggressive strategies and ample resources, the future is bright.
Wachovia is committed to maintaining and building shareholder value in the
challenging environment which lies ahead. Your continued confidence and support
are appreciated.
Sincerely,
/s/ L. M. Baker, Jr.
- ----------------------- (PICTURE)
L. M. Baker, Jr.
Chief Executive Officer
February 21, 1996
5
<PAGE> 7
- -------------------------------------------------------------------------------
(PICTURE - ARTIST'S SKETCH OF WACHOVIA CENTER)
WACHOVIA
CORPORATION
STRATEGIC
REVIEW
AN
UPDATE
6
<PAGE> 8
- --------------------------------------------------------------------------------
During 1995, Wachovia moved forward with a major strengthening of the
organization based on the findings of a strategic assessment conducted in 1994.
Management teams have been implementing actions in five critical and
interrelated areas designed to build shareholder value. These areas are:
- - Raising Wachovia's effectiveness as a growth culture which includes selling
products and services through a variety of traditional and nontraditional
delivery channels
- - Redirecting technology investment to support sales and service efforts
- - More effectively managing key lines of businesses to achieve profitable
growth
- - Using mergers, acquisitions and alliances to complement business
development strategies
- - Assessing and managing the prudent use of capital
This process is designed to take what has been an historically successful
organization and make it even more effective. Significant progress has been
made and this section presents a summary of the major developments.
Initiatives moving Wachovia's growth culture to a higher level were well under
way during 1995 in the General Banking and Corporate Services divisions.
General Banking is responsible for a strategic direction for Wachovia's banks
and coordination of consumer market products including investment services and
personal trust activities. The Corporate Services Division manages, sells and
delivers all credit and noncredit corporate banking services in addition to
corporate trust, employee benefit and charitable trust services.
The primary marketing and service distribution channel for the consumer market
has been the branch network. Careful customer analysis demonstrates that
Wachovia's customer base is more upscale than might be expected for a
traditional branch distribution system. This reflects the effectiveness of
Wachovia's relationship-based Personal Banker program. Introduced in 1973, it
has served Wachovia well, continues to be fine-tuned and future strategies will
include significant leveraging of this resource.
PROFITABLE CUSTOMER SEGMENTS
The analysis also indicated the major product offerings sold to each meaningful
customer segment through branches currently are profitable. This is true despite
earnings challenges branches have faced with the onset of deposit deregulation
in the early 1980s. This knowledge suggests product line development and
distribution initiatives can be accomplished at Wachovia without severe pressure
to prematurely dismantle the existing delivery system.
The branch system is undergoing tremendous change. A branch standardization
project spanning 18 months resulted in the redeployment of about 700 positions.
Most of these were assigned more profitably in card services, investment sales
and telephone banking. Surveys indicate the standardization project was
completed without sacrificing customer service.
The year-end network of 489 banking offices was down from its peak of 519 at
the end of 1991. An in-depth analysis of Wachovia's markets is under way to
develop specific recommendations for each city's optimum distribution network.
The review is expected to be completed in 1996.
An experiment in March 1995 showed how effectively
Plans for the construction of Wachovia Corporation's North Carolina
headquarters building in Winston-Salem were announced in July 1992.
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7
<PAGE> 9
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customers can be served in a downsized network as long as they perceive real
value. On a Saturday, 200 branches were opened, about 41 percent of the
three-state total, for a special one-day sale on 10-month and three-year CDs.
Additionally, the Wachovia Premiere money market account was actively promoted.
It was a successful marketing event, demonstrating the power of Wachovia's
franchise. More than $1 billion in CDs was generated, 86 percent of which was
new money. About 77,000 accounts were opened, 28,000 of which represented new
relationships. The Premiere account enjoyed strong growth during 1995 with
deposits totaling $3 billion at December 31, 1995.
SALES FORCE INCREASED
In addition to branch-based bankers, Wachovia has been expanding its consumer
sales force throughout the three states. During 1995, Wachovia increased the
number of investment counselors deployed in its primary markets to 150, up from
115 at the end of 1994. These Series 7 registered representatives sell a full
range of investment products and handled sales volume in excess of $2 billion
during the year. Net assets of one of their major product lines, Wachovia's
Biltmore family of 15 mutual funds, grew to $2.9 billion from $2.2 billion at
the end of 1994.
Investment counselors, who employ a needs-oriented sales strategy, are equipped
with laptop personal computers. Additionally, a telephone-based sales and
service delivery channel for investment services, Wachovia Investor Center, was
opened in Columbia, South Carolina. With the consolidation of investment
counselors, Wachovia Brokerage and personal trust services into one area known
as Personal Financial Services, Wachovia is fully organized to focus on
increasing its share of the affluent market.
Wachovia has approximately 165 mortgage loan originators who handled 13,000
home mortgage loans totaling about $1.3 billion in 1995. Wachovia Mortgage
Origination System (WMOS), the corporation's automated mortgage application
system introduced in late 1994, is delivered through laptop personal computers.
The system has been enhanced to accommodate FHA and VA loans in addition to
conventional loans. The increased functionality of WMOS strengthens the
mortgage bankers' ability to provide a broad range of mortgage loan financing
options and meet with customers and prospects where they want to be served.
Sales Finance, the area responsible for Wachovia's participation in indirect
automobile and consumer goods financing, had a very productive year. During
1995, Sales Finance received and made credit decisions on about a quarter of a
million loan applications. Loans purchased increased 19 percent from the
year-earlier volume in an automobile financing market which grew only
moderately. It has completed the consolidation of all contract buying offices
into one center at Greenville, North Carolina, where 28 credit managers do
buying for the three states. Sales management activity is conducted by 36
territory managers.
Sales Finance celebrated its 50th anniversary in 1995. At December 31, it was
doing business with more than 1,000 active dealers, primarily located in North
Carolina, South Carolina and Georgia with approximately 275,000 active consumer
loans and leases totaling $2.5 billion.
Wachovia's consumer market is growing nationally through the continued
attractiveness of Bank Card Services' competitively priced Visa(R) and
MasterCard(R)
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8
<PAGE> 10
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CONSUMER MARKET GROWING
credit cards. At the end of 1995, the number of active accounts totaled 1.8
million, an increase of 7.2 percent, and managed loans outstanding reached $4.5
billion, up 11 percent from a year earlier. Approximately 61 percent of the
accounts and 66 percent of loans were to customers outside the corporation's
three home states.
During 1995, Bank Card Services added a no annual fee product to its low rate
product line, further enhancing consumer value. Also, a commercial card
division was established to support the offering of business, purchasing and
travel and entertainment cards for corporate customers broadening Wachovia's
cash management product line.
In the fourth quarter of 1995, $500 million of credit card loans were removed
from the corporation's balance sheet and sold to investors through a
securitization. With this activity, Wachovia creates additional funding
diversification to support increased loan growth. Information about this
program is included in the Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Excellent sales potential also exists among the 400,000 businesses in the three
home states with revenues of $10 million or less. To help increase an
approximately 25 percent penetration of this market, The Wachovia Business
Choice Account(SM) was created and has been selling well. The product packages
commonly used business services with optional features. Pricing is based on a
point system which makes customer bank charges more predictable and easier to
understand.
To deliver even better marketing, servicing and productivity tools to bankers,
Wachovia is investing $53 million in Next Generation Branch Automation (NGBA).
It is the most significant technology investment in the branch system since the
early 1980s when Wachovia introduced its first branch on-line information
system. Three initial phases are involved.
The first phase, completed in December, was the rollout of new hardware and a
software enhancement on a six-branch per night basis. The initial software
release is helping bankers streamline deposit account openings with
electronically stored forms.
Phase II focuses on loan processing, enabling 90 percent of consumer loans to
be originated on line. This should shave 30 to 50 percent off the processing
time required to make a loan. The system will help bankers make better lending
decisions by evaluating and scoring many credit applications or by analyzing
and summarizing debt ratios, disposable income and liquidity for complex loan
requests. Loan processing documents will be maintained electronically, along
with financial statements and credit procedures. The system is so effective at
automating compliance with Wachovia's credit standards, customer sales
representatives will open many credit services without referral to a banker,
effectively increasing the sales force without adding staff. Deployment of this
phase is expected to begin during the first half of 1996.
NGBA's phase III will provide a comprehensive sales automation system organized
around relationship information and customer needs. Bankers will work with
customer-friendly sales screens, multimedia sales presentations, "what-if"
product comparisons and an automated tickler file to follow up on future
customer needs. The sales staff will be alerted to cross-sell opportunities
through prompts suggesting possible product
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9
<PAGE> 11
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needs based on an automated review of a customer's profile. Release dates for
various components of this phase are expected to begin in late 1996.
ALTERNATIVE CHANNELS EXPANDED
Nontraditional channels for financial services also are being expanded.
Wachovia On-Call(SM), reached by calling 1-800-WACHOVIA, is promising to become
an important one. The 24-hour, 7-days-a-week telephone sales and service center
is staffed by about 300 experienced bankers. It opened in June 1994 and handled
more than 4 million calls in 1995. On-Call complements the automated Wachovia
Phone Access(R) system, which accommodated an additional 17 million calls
during 1995.
As branch standardization was implemented in the three states, On-Call was
helping to displace branch-based service delivery. However, the menu of
products available through On-Call's telephone bankers is growing and includes
loan origination and deposit account opening. Plans call for greater marketing
of the telephone center in 1996 now that its functionality compares favorably
with branch-based delivery. Wachovia On-Call's servicing proficiency also is
giving branch-based bankers additional time to sell.
Another successful alternative delivery strategy is the workplace deployment of
ATMs. Out of 712 ATMs at the end of 1995, Wachovia had installed 104 in
workplace sites for 84 corporate clients. This has encouraged the movement of
customer relationships to Wachovia. With growing and relevant functionality,
ATM deployment will become even more aggressive.
Wachovia will participate with Visa in a stored-value card pilot program during
the 1996 Summer Olympic Games in Atlanta. These cards can be used in place of
cash at participating merchants and discarded when their value is depleted.
Wachovia's long-term strategy for smart cards also includes the use of this
technology with proprietary debit and credit cards to provide reloading
capability for cards with a stored value feature.
Wachovia is an investor in Security First Network Bank, which made history on
October 18 by becoming the first bank to open on the Internet. Customers can
balance checkbooks, get account information, view images of canceled checks and
pay bills by computer. Through this investment, Wachovia can learn more about
security issues regarding banking on the Internet and gauge customer acceptance
of on-line banking. Wachovia employees also are helping to pilot a home banking
product. Testing with a limited group of customers will occur before offering
the service more widely.
COMPREHENSIVE PRODUCT ARSENAL
In the corporate market, Wachovia also has been aggressive in building sales
through its relationship-based strategy. Corporate Services' arsenal of
products, deployed by 1,450 Wachovians, is comprehensive and growing. For
example, a major corporate banking capability is the integration of information
delivery products so customers can receive extensive on-line information from
Wachovia through a single electronic channel called Wachovia Connection(SM).
This Microsoft Windows(TM)-based system is being strengthened to give access to
document images and traditional cash management products on the same platform.
Combined with improved electronic funds transfer capabilities, information and
service delivery products will provide highly integrated, effective solutions
accessed by large and small corporate customers through personal computers,
phone, fax and e-mail.
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In 1995, Wachovia introduced CD-ROM delivery of check images. This innovative
product has been a major success with customers who find the Windows-based
check archive service boosts efficiency and saves cost. On-line access to
intramonth check images, as well as a number of other refinements, are expected
during 1996 to make this attractive product more valuable to customers.
A new wholesale lockbox system will enhance Treasury Services' receivable
processing capabilities. The new system incorporates image technology and a
reengineered work flow to improve service offerings quality and reduce costs.
Customer conversion is under way and should be completed in late 1996. For two
consecutive years, a nationally recognized cash management research
organization has given Wachovia its highest rating in all facets of wholesale
lockbox processing and ranked the corporation's overall treasury services
number one in quality among banks.
An expanded Capital Markets Division is offering a wide array of specialized
corporate finance, international banking, financial institutions and foreign
exchange services. During 1995, Wachovia bankers arranged structured leveraged
lease transactions for municipalities as part of a growing leasing program.
Wachovia is the leading bank distributor of small-issue variable rate demand
bonds and has the largest foreign exchange trading room in the Southeast.
To further bolster marketing and sales efforts and provide management with
comprehensive and precise performance information, Wachovia is redirecting
technology investments into three other critical initiatives. They are the $30
million Consolidated Customer Information File (CCIF), a $20 million new trust
system and the $15 million Performance Measurement System.
ROBUST CUSTOMER FILE
Wachovia regularly has been improving a customer information file it introduced
in the 1970s. Looking forward, it was evident that to gain full marketing and
sales value a much different structure and a more robust engine was needed to
help analyze and understand market segments. The assessment led to the
development of the Consolidated Customer Information File.
Good progress has been made in the design of massive relational data bases,
high speed search approaches and data base content capability. This new system
will provide critical information for market segmentation analysis and will be
updated and available continuously for bankers. Real time information will
allow each contact with Wachovia to be tailored to each customer based on all
the institutional knowledge available.
The prospects for this new capability are exciting. An important step toward
developing CCIF and Next Generation Branch Automation was a "share of wallet"
pilot project conducted in Cobb County, Georgia, a fast-growing market in north
Atlanta. In this project, a manual review of customer wallet share information
was correlated to likely product needs. Bankers then met with customers and
through a relationship review process identified and sold appropriate services.
Of the customers contacted, 82 percent agreed to a relationship review with 54
percent purchasing additional services. Wallet share for this group increased
from 10 to 40 percent. These results confirmed the attractive revenue
opportunities available from existing customers through improved automation,
more focused marketing and sales and better use of information. Wachovia plans
to mine its expanded customer data warehouse to better anticipate consumer
demand
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for financial services and maximize its effectiveness with targeted segments.
The trust system project is designed to help Wachovia compete more effectively
in wealth management as more Americans move into age groups which tend to save.
Wachovia has been working with Financial Technologies, Inc., and a group of
banks to develop a powerful system to better serve customers and prospects and
the benefit plans offered by employers. Conversion is expected to begin in late
1996.
PERFORMANCE MEASUREMENT ENHANCEMENT
The corporate wide performance measurement system will provide enhanced
customer, product and organization profitability information. This will assist
business units and product managers in making effective decisions. Both
financial and nonfinancial measures will be utilized to support new and
changing strategies, delivery channels and customer trends.
In addition, investments are being made in Wachovia's credit card technology
platform. Advanced fraud detection and a new payment processing system have
been installed and conversion to new software for basic accounting and
reporting functions is planned.
While Wachovia has an attractive business franchise, it will be alert for
strategic acquisitions, alliances or combinations which broaden product
capability, increase the scale of existing businesses, provide access to a
larger base of customers and increase shareholder value. For example, in
December, Wachovia announced strategic alliances involving its credit card and
corporate trust operations.
Wachovia Bank Card Services and First Data Corporation's Card Establishment
Services consummated a joint venture through which Wachovia will provide
merchant processing services using First Data's advanced technology and greater
product offerings. An alliance with Boston EquiServe Limited Partnership will
give stock transfer customers access to strong operating systems, software and
more service features. Wachovia will continue to maintain all contact with its
trust clients and their shareholders.
Alliances also were formed with two highly regarded international banking
institutions -- The Hongkong and Shanghai Banking Corporation and Bank Mendes
Gans of Amsterdam -- increasing services worldwide for Wachovia's global trade
customers.
At the same time, Wachovia will exit businesses which are not a strategic fit.
In December, Wachovia announced the sale of its bond trustee business to The
Bank of New York with the transaction to be completed in the 1996 second
quarter. The $9 billion residential mortgage loan servicing portfolio was sold
in April 1995 to GE Capital Mortgage Services with proceeds being invested in
various corporate initiatives.
Mergers with other banks have been used by Wachovia in the past as an
opportunity for growth. This option will continue to be carefully evaluated.
STRONG CAPITAL POSITION
The ability to grow is directly related to capital. Wachovia remains committed
to the maintenance of a strong capital position which is one of the
organization's greatest strengths. As Wachovia moves ahead with its corporate
strategies and planned investments, the internal capital generation rate may
exceed the needs of its business activities.
Wachovia has authorization to repurchase up to 5
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million shares of its common stock not to exceed an investment of $200 million.
As of January 31, 1996, slightly more than one million shares had been
repurchased under this authorization. Repurchase activity is likely to increase
depending on market conditions and other factors related to the corporation's
capital management strategy. Wachovia is dedicated to managing and deploying
capital in a prudent, competent manner designed to enhance shareholder value
over time.
Banking companies face sobering issues and exciting prospects as the financial
services industry continues to evolve. Wachovia is committed to embracing this
period of change, making it work to its advantage and to remaining among the
ranks of leading financial companies. Adjusting to the shifting realities of
the marketplace is not new to Wachovia. Throughout its 116-year history of
excellence, Wachovia has trod new ground while adhering to its fundamental
values and high principles. The people of Wachovia approach the future with
considerable optimism bolstered by a proud history, tactical flexibility,
enviable financial strength, modern technology and strong leadership.
The 28-story Wachovia Center opened in October 1995. The building has
approximately 535,000 square feet of office space and is located within a block
from where Wachovia Bank was founded in 1879.
(PICTURE - WACHOVIA CENTER AT NIGHT)
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<PAGE> 15
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SUMMARY TABLE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Five-Year
Compound
1995 1994 1993 1992 1991 1990 Growth Rate
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent.......... $3,118,503 $2,462,454 $2,221,738 $2,301,325 $2,731,925 $2,856,318 1.8%
Interest expense.............................. 1,579,107 1,038,388 839,012 967,028 1,467,849 1,684,114 (1.3)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income--taxable equivalent....... 1,539,396 1,424,066 1,382,726 1,334,297 1,264,076 1,172,204 5.6
Taxable equivalent adjustment*................ 98,773 100,160 98,901 79,247 94,910 107,674 (1.7)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income........................... 1,440,623 1,323,906 1,283,825 1,255,050 1,169,166 1,064,530 6.2
Provision for loan losses..................... 103,791 71,763 92,652 119,420 293,000 142,992 (6.2)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses............................. 1,336,832 1,252,143 1,191,173 1,135,630 876,166 921,538 7.7
Other operating revenue....................... 680,101 604,432 600,179 535,242 490,178 458,852 8.2
Gain on sale of mortgage servicing portfolio.. 79,025 -- -- -- -- --
Gain on sale of subsidiary.................... -- -- 8,030 19,486 -- --
Investment securities gains (losses).......... (23,494) 3,320 19,394 1,497 11,091 6,218
---------- ---------- ---------- ---------- ---------- ----------
Total other income........................... 735,632 607,752 627,603 556,225 501,269 465,070 9.6
Personnel expense............................. 600,326 563,507 568,680 539,823 524,489 487,473 4.3
Other expense................................. 603,270 534,906 562,556 555,829 572,028 464,811 5.4
---------- ---------- ---------- ---------- ---------- ----------
Total other expense.......................... 1,203,596 1,098,413 1,131,236 1,095,652 1,096,517 952,284 4.8
Income before income taxes.................... 868,868 761,482 687,540 596,203 280,918 434,324 14.9
Applicable income taxes**..................... 266,325 222,424 195,445 162,978 51,378 88,647 24.6
---------- ---------- ---------- ---------- ---------- ----------
Net income.................................... $ 602,543 $ 539,058 $ 492,095 $ 433,225 $ 229,540 $ 345,677 11.8
========== ========== ========== ========== ========== ==========
Net income per common share:
Primary..................................... $ 3.50 $ 3.13 $ 2.83 $ 2.51 $ 1.34 $ 2.05 11.3
Fully diluted............................... $ 3.49 $ 3.12 $ 2.81 $ 2.48 $ 1.32 $ 2.02 11.6
Cash dividends paid per common share.......... $ 1.38 $ 1.23 $ 1.11 $ 1.00 $ .92 $ .82 11.0
Cash dividends paid on common stock........... $ 235,495 $ 210,503 $ 191,488 $ 170,756 $ 146,404 $ 130,797 12.5
Cash dividend payout ratio.................... 39.1% 39.1% 38.9% 39.4% 63.8% 37.8%
Average primary shares outstanding............ 172,089 172,339 173,941 172,641 171,481 168,888 .4
Average fully diluted shares outstanding...... 172,957 172,951 175,198 175,512 175,218 172,722
SELECTED AVERAGE BALANCES (millions)
Total assets.................................. $ 41,473 $ 37,029 $ 33,629 $ 31,832 $ 32,045 $ 30,469 6.4
Loans--net of unearned income................. 27,505 24,213 21,546 20,032 20,589 20,080 6.5
Investment securities......................... 8,340 7,683 7,039 6,201 5,783 4,879 11.3
Other interest-earning assets................. 1,152 898 1,195 1,864 1,988 1,823 (8.8)
Total interest-earning assets................. 36,997 32,794 29,780 28,097 28,360 26,782 6.7
Interest-bearing deposits..................... 18,960 16,931 17,019 17,884 17,924 16,583 2.7
Short-term borrowed funds..................... 7,798 6,230 5,403 4,961 6,080 6,231 4.6
Long-term debt................................ 4,902 4,350 2,073 449 178 177 94.3
Total interest-bearing liabilities............ 31,660 27,511 24,495 23,294 24,182 22,991 6.6
Noninterest-bearing deposits.................. 5,302 5,384 5,354 4,947 4,595 4,620 2.8
Total deposits................................ 24,262 22,315 22,373 22,831 22,519 21,203 2.7
Shareholders' equity.......................... 3,410 3,096 2,872 2,596 2,462 2,237 8.8
RATIOS (averages)
Net loan losses to loans...................... .37% .29% .31% .48% .99% .47%
Net yield on interest-earning assets.......... 4.16 4.34 4.64 4.75 4.46 4.38
Shareholders' equity to:
Total assets................................ 8.22 8.36 8.54 8.16 7.68 7.34
Net loans................................... 12.58 13.01 13.58 13.21 12.13 11.28
Return on assets.............................. 1.45 1.46 1.46 1.36 .72 1.13
Return on shareholders' equity................ 17.67 17.41 17.13 16.69 9.33 15.45
*Taxable equivalent adjustments reflect federal income tax rates of 35% in 1995, 1994 and 1993 and 34% in 1992, 1991 and 1990
**Income taxes applicable to securities transactions were ($8,576), $1,328, $7,472, $470, $3,997 and $2,379, respectively
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</TABLE>
14
<PAGE> 16
Results of Operations
1995 vs. 1994
Overview
The economy grew at a modest pace in 1995, with
inflationary pressures remaining low while consumer
spending softened, particularly in the final quarter of
the year. Short-term interest rates were reduced twice by
Federal Reserve actions in response to the low
inflationary environment and slower economic growth.
Unemployment for the nation, based on preliminary data,
fell to 5.6 percent from 6.1 percent in 1994. Within
Wachovia Corporation's primary operating states of
Georgia, North Carolina and South Carolina, economic
activity continued to remain relatively strong. Based on
preliminary data, unemployment rates for the year were 4.8
percent in Georgia, 4.4 percent in North Carolina and 5.1
percent in South Carolina.
Wachovia Corporation's consolidated net income for
1995 totaled $602.543 million or $3.49 per fully diluted
share compared with $539.058 million or $3.12 per fully
diluted share in 1994. Good growth in net interest income,
along with solid gains in other operating revenue,
accounted for the earnings increase which was tempered by
a higher credit loss provision and a rise in noninterest
expense. Net income represented returns of 17.67 percent
on shareholders' equity and 1.45 percent on assets
compared with 17.41 percent and 1.46 percent,
respectively, in 1994. The equity and assets used in
calculating these ratios include unrealized gains or
losses, net of taxes, 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 balances unless
otherwise noted. The narrative should be read in
conjunction with the Consolidated Financial Statements and
Notes on pages 44 through 63. Expanded six-year financial
data appears on pages 64 through 71.
<TABLE>
<CAPTION>
NET INCOME PER SHARE NET INCOME
(FULLY DILUTED) (MILLIONS)
<S> <C> <C> <C>
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
1995 $3.49 1995 $602.5
</TABLE>
15
<PAGE> 17
Net Interest Income
Taxable equivalent net interest income, the primary
source of the corporation's earnings, rose $115.330
million or 8.1 percent in 1995 compared with a $41.340
million or 3 percent increase in 1994. Strong growth in
interest-earning assets, primarily loans, and a higher
average rate earned accounted for the earnings gain which
was moderated principally by an increase in the average
rate paid on interest-bearing liabilities. The average
rate earned on loans, while up in 1995, remained
constrained by competitive pricing pressures, particularly
in the latter half of the year.
The net yield on interest-earning assets (taxable
equivalent net interest income as a percentage of average
interest-earning assets) declined 18 basis points to 4.16
percent, principally reflecting pricing pressure on loan
yields as the year progressed, as well as a higher average
rate paid on funds. The corporation anticipates pricing
pressure on loans to continue in 1996.
NET INTEREST INCOME*
(MILLIONS)
Interest Interest Net interest
income* expense income*
------- ------- ------------
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
1995 $3118.5 $1579.1 $1539
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Change Change
1995 1994 1993 1995/1994 1994/1993
------- ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Interest income - taxable equivalent ...................... $18.12 $14.29 $12.77 $3.83 $1.52
Interest expense .......................................... 9.18 6.03 4.82 3.15 1.21
------ ------ ------ ----- -----
Net interest income - taxable equivalent .................. 8.94 8.26 7.95 .68 .31
Taxable equivalent adjustment ............................. .57 .58 .57 (.01) .01
------ ------ ------ ----- -----
Net interest income ....................................... 8.37 7.68 7.38 .69 .30
Provision for loan losses ................................. .60 .42 .53 .18 (.11)
------ ------ ------ ----- -----
Net interest income after provision for loan losses ....... 7.77 7.26 6.85 .51 .41
Other operating revenue ................................... 3.95 3.51 3.45 .44 .06
Gain on sale of mortgage servicing portfolio .............. .46 -- -- .46 --
Gain on sale of subsidiary ................................ -- -- .05 -- (.05)
Investment securities gains (losses) ...................... (.14) .02 .11 (.16) (.09)
------ ------ ------ ----- -----
Total other income ........................................ 4.27 3.53 3.61 .74 (.08)
Personnel expense ......................................... 3.49 3.27 3.27 .22 --
Other expense ............................................. 3.50 3.10 3.24 .40 (.14)
------ ------ ------ ----- -----
Total other expense ....................................... 6.99 6.37 6.51 .62 (.14)
Income before income taxes ................................ 5.05 4.42 3.95 .63 .47
Applicable income taxes ................................... 1.55 1.29 1.12 .26 .17
------ ------ ------ ----- -----
Net income ................................................ $ 3.50 $ 3.13 $ 2.83 $ .37 .30
====== ====== ====== ===== =====
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</TABLE>
16
<PAGE> 18
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS* TABLE 3
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
- -------------------- ------------ ------------------ -----------------
1995 1994 1995 1994 1995 1994 Variance Rate Volume
- ------ ------ ---- ---- ------- ------ ----------- ------- ---------
(Millions) (Thousands)
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans:
$ 9,154 $ 7,367 7.44 6.03 Commercial...................... $ 681,206 $ 444,395 $236,811 $116,186 $120,625
1,968 1,966 9.81 8.99 Tax-exempt...................... 193,080 176,701 16,379 16,182 197
------- ------- ---------- ---------- --------
11,122 9,333 7.86 6.66 Total commercial............ 874,286 621,096 253,190 123,025 130,165
734 735 9.23 8.30 Direct retail................... 67,803 61,054 6,749 6,834 (85)
2,444 2,450 8.22 7.77 Indirect retail................. 200,818 190,444 10,374 10,831 (457)
3,952 3,529 12.35 11.05 Credit card..................... 488,158 389,763 98,395 48,869 49,526
344 334 12.61 11.55 Other revolving credit.......... 43,390 38,556 4,834 3,614 1,220
------- ------- ---------- ---------- --------
7,474 7,048 10.71 9.65 Total retail................. 800,169 679,817 120,352 77,598 42,754
640 496 9.82 9.26 Construction.................... 62,823 45,988 16,835 2,873 13,962
3,676 3,356 8.62 7.72 Commercial mortgages............ 316,956 259,077 57,879 31,877 26,002
4,018 3,699 8.36 7.78 Residential mortgages........... 335,907 287,922 47,985 22,123 25,862
------- ------- ---------- ---------- --------
8,334 7,551 8.59 7.85 Total real estate........... 715,686 592,987 122,699 58,177 64,522
271 173 8.73 7.83 Lease financing................. 23,598 13,563 10,035 1,699 8,336
304 108 7.43 5.70 Foreign......................... 22,610 6,162 16,448 2,348 14,100
------- ------- ---------- ---------- --------
27,505 24,213 8.86 7.90 Total loans................. 2,436,349 1,913,625 522,724 245,875 276,849
Investment securities:
Held-to-maturity:
2,275 2,290 6.79 6.61 U.S. Government and agency.... 154,571 151,355 3,216 4,165 (949)
1,446 1,069 8.01 7.72 Mortgage backed securities.... 115,889 82,584 33,305 3,210 30,095
424 599 11.84 12.53 State and municipal........... 50,192 75,069 (24,877) (3,907) (20,970)
15 12 5.77 5.04 Other......................... 832 618 214 97 117
------- ------- ---------- ---------- --------
Total securities
4,160 3,970 7.73 7.80 held-to-maturity........... 321,484 309,626 11,858 (2,794) 14,652
Available-for-sale:**
3,078 2,504 6.88 5.51 U.S. Government and agency...... 211,766 137,984 73,782 38,385 35,397
901 942 6.61 4.58 Mortgage backed securities...... 59,570 43,193 16,377 18,334 (1,957)
201 267 6.29 5.02 Other........................... 12,653 13,399 (746) 2,967 (3,713)
------- ------- ---------- ---------- --------
Total securities
4,180 3,713 6.79 5.24 available-for-sale........... 283,989 194,576 89,413 62,782 26,631
------- ------- ---------- ---------- --------
8,340 7,683 7.26 6.56 Total investment securities.... 605,473 504,202 101,271 56,165 45,106
115 13 7.93 4.58 Interest-bearing bank balances.... 9,121 597 8,524 731 7,793
Federal funds sold and
securities purchased under
122 196 5.93 3.91 resale agreements............... 7,234 7,682 (448) 3,111 (3,559)
915 689 6.59 5.28 Trading account assets............ 60,326 36,348 23,978 10,336 13,642
------- ------- ---------- ---------- --------
$36,997 $32,794 8.43 7.51 Total interest-earning assets. 3,118,503 2,462,454 656,049 320,749 335,300
======= =======
INTEREST EXPENSE
$ 3,264 $ 3,384 1.81 1.63 Interest-bearing demand........... 59,016 55,088 3,928 5,935 (2,007)
6,540 6,122 3.67 2.69 Savings and money market savings.. 240,329 164,461 75,868 64,004 11,864
6,492 5,336 5.70 4.26 Savings certificates.............. 370,289 227,060 143,229 87,505 55,724
1,915 1,573 5.85 4.47 Large denomination certificates... 111,944 70,305 41,639 24,397 17,242
------- ------- ---------- ---------- --------
Total time deposits in
18,211 16,415 4.29 3.15 domestic offices.......... 781,578 516,914 264,664 203,351 61,313
749 516 5.59 4.32 Time deposits in foreign offices.. 41,876 22,318 19,558 7,678 11,880
------- ------- ---------- ---------- --------
18,960 16,931 4.34 3.18 Total time deposits.......... 823,454 539,232 284,222 213,762 70,460
Federal funds purchased and
securities sold under
5,264 5,050 6.02 4.44 repurchase agreements........ 316,759 224,089 92,670 82,866 9,804
505 505 5.51 3.94 Commercial paper.................. 27,807 19,880 7,927 7,945 (18)
2,029 675 6.03 4.24 Other short-term borrowed funds... 122,441 28,603 93,838 16,334 77,504
------- ------- ---------- ---------- --------
Total short-term
7,798 6,230 5.99 4.37 borrowed funds.............. 467,007 272,572 194,435 115,633 78,802
3,864 3,523 5.67 4.88 Bank notes........................ 219,035 171,968 47,067 29,421 17,646
1,038 827 6.70 6.60 Other long-term debt.............. 69,611 54,616 14,995 851 14,144
------- ------- ---------- ---------- --------
4,902 4,350 5.89 5.21 Total long-term debt........ 288,646 226,584 62,062 31,458 30,604
------- ------- ---------- ---------- --------
Total interest-bearing
$31,660 $27,511 4.99 3.77 liabilities............... 1,579,107 1,038,388 540,719 368,072 172,647
======= ======= ----- ----- ---------- ---------- --------
3.44 3.74 Interest rate spread
===== =====
Net yield on interest-earning
4.16 4.34 assets and net interest income... $1,539,396 $1,424,066 $115,330 (61,395) 176,725
===== ===== ========== ========== ========
- ------------------------------------------------------------------------------------------------------------------------------------
*Interest income and yields are presented on a fully taxable equivalent basis
using the federal income tax rate and state tax rates, as applicable, reduced
by the nondeductible portion of interest expense
**Volume amounts are reported at amortized cost; excludes pretax unrealized
gains (losses) of $34 million in 1995 and $(12) million in 1994
</TABLE>
17
<PAGE> 19
Interest Income
Taxable equivalent interest income increased $656.049
million or 26.6 percent, fueled by strong gains in
interest-earning assets, as well as by a higher average rate
earned. Average interest-earning assets were up $4.203 billion
or 12.8 percent, led principally by loans, while the average
yield rose 92 basis points. In 1994, average interest-earning
assets increased $3.014 billion or 10.1 percent with the average
rate earned higher by 5 basis points.
Loan growth accelerated in 1995, rising $3.292 billion or
13.6 percent compared with a gain of $2.667 billion or 12.4
percent in 1994. Loans were up in both the commercial and retail
portfolios with commercial activity continuing to account for
the majority of the increase. Offsetting loan growth for the
year in the retail sector was the securitization of $500 million
in credit card receivables in the fourth quarter.
Commercial loans, including related real estate categories,
grew $2.547 billion or 18.9 percent. Gains were led by regular
commercial loans, associated largely with capital spending and
inventory building, and by commercial mortgages, with increases
of $1.787 billion or 24.3 percent and $320 million or 9.5
percent, respectively. Good gains also occurred in foreign
loans, reflecting short-term trade financing in Latin America,
in construction loans for apartments, shopping centers and
office buildings primarily in Georgia, North Carolina and South
Carolina, and in lease financing, reflecting some structured
leverage lease transactions for municipalities.
Based on regulatory definitions, commercial real estate
loans totaled $4.601 billion at December 31, 1995, representing
15.7 percent of the corporation's loan portfolio. Regulatory
definitions for commercial real estate include loans which have
real estate as the collateral but not the primary consideration
in a credit risk evaluation. Commercial mortgages were $3.855
billion or 13.2 percent of total loans, and construction loans
were $746 million or 2.5 percent. Comparable amounts a year
earlier were $4.037 billion in commercial real estate loans,
representing 15.6 percent of the loan portfolio, with $3.484
billion in commercial mortgages and $553 million in construction
loans, representing 13.5 percent and 2.1 percent, respectively,
of total loans at year-end 1994. The corporation also had
cross-border commitments, consisting primarily of loans, of
$406 million or .9 percent of total assets at December 31, 1995
versus $275 million or .7 percent a year earlier. Included in
the corporation's cross-border commitments were loans and
commitments to foreign financial institutions and corporations.
There were no loans and commitments to foreign governments at
year-end 1995 or 1994.
Retail loans, including residential mortgages, expanded
$745 million or 6.9 percent from 1994 with credit card loans and
residential mortgages accounting for substantially all the
increase. Credit card loans were up $423 million or 12 percent.
Good growth occurred particularly in Wachovia's no annual fee
credit cards following a national solicitation in the fourth
quarter. Residential mortgages were higher by $319 million or
8.6 percent, largely reflecting increased demand in variable
rate financing. Indirect retail loans,
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
SELECTED LOAN MATURITIES AND INTEREST SENSITIVITY TABLE 4
December 31, 1995 (thousands)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
One Year One to Over
Total or Less Five Years Five Years
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Commercial, financial and other..................... $ 9,753,450 $ 8,875,502 $ 591,457 $ 286,491
Industrial revenue and other tax-exempt financing... 2,238,538 1,224,550 352,346 661,642
Construction and land development................... 745,776 490,249 255,527 --
Commercial mortgages................................ 3,855,095 2,068,327 843,863 942,905
----------- ----------- ---------- ----------
Loans to domestic borrowers...................... 16,592,859 12,658,628 2,043,193 1,891,038
Loans to foreign borrowers......................... 390,112 250,654 139,458 --
----------- ----------- ---------- ----------
Selected loans, net.............................. $16,982,971 $12,909,282 $2,182,651 $1,891,038
=========== =========== ========== ==========
Interest sensitivity:
Loans with predetermined interest rates........... $ 7,926,688 $ 4,573,793 $1,794,872 $1,558,023
Loans with floating interest rates................ 9,056,283 8,335,489 387,779 333,015
----------- ----------- ---------- ----------
Total............................................ $16,982,971 $12,909,282 $2,182,651 $1,891,038
=========== =========== ========== ==========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 20
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES TABLE 5
December 31 (thousands)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995
------------------------------------------------------------------------------------
Taxable
Amortized Unrealized Unrealized Fair Average Equivalent
Cost Gain Loss Value Maturity Yield*
--------- ---------- ---------- ---------- --------- ----------
(Yrs./Mos.)
<S> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY
U.S. Treasury and other
U.S. Government agencies:
Within one year........... $ -- $ -- $ -- $ -- --
One to five years......... -- -- -- -- --
Five to ten years......... -- -- -- -- --
Over ten years............ -- -- -- -- --
---------- -------- ------ ---------- --
Total................... -- -- -- -- --
State and municipal:
Within one year.......... 54,702 652 11 55,343 11.95%
One to five years........ 99,231 6,578 14 105,795 11.90
Five to ten years........ 103,983 16,487 21 120,449 12.60
Over ten years........... 63,129 9,878 166 72,841 12.17
---------- -------- ------ ----------
Total.................. 321,045 33,595 212 354,428 5/10 12.18
Mortgage backed:
Within one year............ -- -- -- --
One to five years.......... -- -- -- --
Five to ten years.......... 192,917 4,896 471 197,342 6.94
Over ten years............. 1,105,018 63,995 61 1,168,952 8.43
---------- -------- ------ ---------- 8.21
Total.................... 1,297,935 68,891 532 1,366,294 19/4
Other interest-earning
investments:
Within one year........... -- -- -- --
One to five years......... 250 -- -- 250 9.01
Five to ten years......... 250 -- -- 250 8.50
Over ten years............ -- -- -- --
---------- -------- ------ ----------
Total................... 500 -- -- 500 4/0 8.76
---------- -------- ------ ----------
Total held-to-maturity..... 1,619,480 102,486 744 1,721,222 16/7 9.03
AVAILABLE-FOR-SALE
U.S. Treasury and other
U.S. Government agencies:
Within one year............ 571,027 5,396 31 576,392 7.50
One to five years.......... 4,999,499 135,918 6,202 5,129,215 6.97
Five to ten years.......... 251 15 -- 266 7.43
Over ten years............. 16,188 7,084 -- 23,272 13.09
---------- -------- ------ ----------
Total.................... 5,586,965 148,413 6,233 5,729,145 2/0 7.05
Mortgage backed:
Within one year............ 12,526 49 1 12,574 7.27
One to five years.......... 121,869 956 105 122,720 6.85
Five to ten years.......... 244,326 5,645 -- 249,971 7.73
Over ten years............. 1,093,040 28,429 345 1,121,124 7.21
---------- -------- ------ ----------
Total.................... 1,471,761 35,079 451 1,506,389 17/6 7.26
Other interest-earning
investments:
Within one year........... 10 -- -- 10 8.18
One to five years......... 25,525 40 -- 25,565 2.79
Five to ten years......... 248 8 -- 256 8.12
Over ten years............ 73,200 -- -- 73,200 5.82
---------- -------- ------ ----------
Total................... 98,983 48 -- 99,031 10/3 5.04
---------- -------- ------ ----------
Total available-for-sale
interest-earning
investments.................. 7,157,709 183,540 6,684 7,334,565 5/6 7.06
Federal Reserve Bank
stock and other
investments................... 62,004 13,365 109 75,260
---------- -------- ------ ----------
Total available-for-sale. 7,219,713 196,905 6,793 7,409,825
---------- -------- ------ ----------
Total portfolio.......... $8,839,193 $299,391 7,537 $9,131,047
========== ======== ====== ==========
<CAPTION>
1994 1993
---------------------------- --------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
U.S. Treasury and other
U.S. Government agencies:
Within one year........... $ 3,486 $ 3,481 $ 611,434 $ 620,018
One to five years......... 2,387,449 2,296,620 3,828,687 3,925,789
Five to ten years......... 84,469 88,910 116,665 137,324
Over ten years............ 16,072 20,165 15,950 23,340
---------- ---------- ---------- ----------
Total................... 2,491,476 2,409,176 4,572,736 4,706,471
State and municipal:
Within one year.......... 190,528 193,693 75,501 77,254
One to five years........ 155,436 161,733 309,939 337,197
Five to ten years........ 123,316 133,342 151,253 172,827
Over ten years........... 85,085 90,396 118,464 140,456
Total.................. ---------- ---------- ---------- ----------
554,365 579,164 655,157 727,734
Mortgage backed:
Within one year............ 1,709 1,689 44,500 44,510
One to five years.......... 158,964 153,913 539,315 546,467
Five to ten years.......... 212,624 201,934 559,029 560,130
Over ten years............. 751,253 754,798 1,165,890 1,217,385
---------- ---------- ---------- ----------
Total.................... 1,124,550 1,112,334 2,308,734 2,368,492
Other interest-earning
investments:
Within one year........... -- -- 34,426 34,420
One to five years......... 13,721 13,484 85,713 85,779
Five to ten years......... 498 486 11,980 11,987
Over ten years............ -- -- 101,192 101,261
---------- ---------- ---------- ----------
Total................... 14,219 13,970 233,311 233,447
---------- ---------- ---------- ----------
Total held-to-maturity..... 4,184,610 4,114,644 7,769,938 8,036,144
AVAILABLE-FOR-SALE
U.S. Treasury and other
U.S. Government agencies:
Within one year............ 861,302 853,695
One to five years.......... 1,652,408 1,607,213
Five to ten years.......... -- --
Over ten years............. -- --
---------- ----------
Total.................... 2,513,710 2,460,908
Mortgage backed:
Within one year............ -- --
One to five years.......... 228,181 223,207
Five to ten years.......... 264,416 259,869
Over ten years............. 339,770 332,971
---------- ----------
Total.................... 832,367 816,047
Other interest-earning
investments:
Within one year........... 6,770 6,810
One to five years......... 64,826 64,837
Five to ten years......... 495 515
Over ten years............ 91,900 91,913
---------- ----------
Total................... 163,991 164,075
---------- ----------
Total available-for-sale
interest-earning
investments..................
3,510,068 3,441,030
Federal Reserve Bank
stock and other
investments................... 90,026 97,217 108,718 120,546
---------- ---------- ---------- ----------
Total available-for-sale. 3,600,094 3,538,247
---------- ----------
Total portfolio.......... $7,784,704 $7,652,891 $7,878,656 $8,156,690
========== ========== ========== ==========
- -------------------------------------------------------------------------------------------------------
*Yields are presented on a fully taxable equivalent basis using the federal
income tax rate and state tax rates, as applicable
</TABLE>
19
<PAGE> 21
which consists primarily of automobile sales financing,
remained largely unchanged for the year, although moderate gains
occurred in the latter half of 1995.
In the fourth quarter, the corporation securitized $500
million in credit card receivables. The action was taken to
further diversify funding sources and as part of overall balance
sheet management for the corporation. Securitization involves
the transfer of a pool of assets from the balance sheet to a
master trust which then issues and sells to investors
certificates representing a pro rata interest in the underlying
assets. Interest income is reduced by the removal of the
securitized receivables from the balance sheet, while interest
expense associated with their funding also is lowered. The
provision for loan losses no longer includes amounts associated
with potential charge-offs for the securitized loans, while
noninterest income is increased in the form of servicing fees
and other excess revenue associated with the securitized assets.
See Note D to the Consolidated Financial Statements for
additional information.
At December 31, 1995, the corporation's managed credit card
receivables totaled $4.543 billion, including $625 million in
net securitized loans. Approximately 91 percent of the portfolio
was variable rate. At year-end 1994, managed credit card
outstandings were $4.094 billion, which included $125 million in
net securitized loans, with approximately 90 percent of the
portfolio variable rate. Managed credit card receivables
averaged $4.168 billion for the year versus $3.549 billion in
1994.
Investment securities, the second largest category of
interest-earning assets, increased $657 million or 8.5 percent.
In the second quarter, the corporation sold $1.950 billion of
securities available-for-sale at a loss, reinvesting the
proceeds in higher-yielding investments to enhance the overall
yield of the portfolio. Also in the fourth quarter, securities
held-to-maturity with a book value of $2.720 billion and a
market value of $2.774 billion were reclassified as securities
available-for-sale following issuance by the Financial
Accounting Standards Board of "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities." Under the implementation guide,
business entities were allowed a one-time opportunity
to reclassify investment securities effective for year-end 1995
financial statements. The corporation took the reclassification
action primarily to provide additional flexibility in managing
the investment securities portfolio.
At December 31, 1995, securities available-for-sale totaled
$7.410 billion and securities held-to-maturity were $1.619
billion. Average securities available-for-sale marked to fair
market value had an unrealized gain of $34.248 million, pretax,
and $21.021 million, net of tax, from changes in market value.
The unrealized gain is reported, net of tax, as part of
shareholders' equity. The investment grade of the corporation's
municipal portfolio remained good with 94.7 percent of the
portfolio rated A or better by Moody's at year-end 1995 compared
with 96.6 percent at the close of 1994.
Interest Expense
Interest expense for the year was higher by $540.719
million or 52.1 percent, principally reflecting the impact of a
122 basis point rise in the average cost of funds. Higher levels
of interest-bearing liabilities, up $4.149 billion or 15.1
percent, also contributed to the expense increase. Growth in
interest-bearing liabilities occurred primarily in
interest-bearing time deposits and in short-term bank notes,
which are classified as part of other short-term borrowings.
Largely reflecting this growth, funding from additional
short-term sources and from long-term debt rose more moderately
in 1995.
Interest-bearing time deposits expanded $2.029 billion or
12 percent. Savings certificates led the increase, rising $1.156
billion or 21.7 percent. Good growth, particularly in the latter
half of the year, also occurred in savings and money market
savings, in foreign time deposits and in large denomination
certificates, which partially reflected more attractive pricing
due to a reduction in associated deposit insurance premiums.
The increase in savings certificates and in savings and money
market savings reflected both the success of a sale in March of
10-month and three-year certificates of deposit and of growth
in Wachovia's Premier money market account. The one-day
certificate sale, offered at limited branches in the
corporation's primary markets, attracted over $1 billion in
deposits, with approximately 86 percent representing new money.
About 28,000 new account relationships were generated from the
approximately 77,000 accounts participating in the sale.
Short-term borrowings for the year increased $1.568 billion
or 25.1 percent with other short-term borrowings, principally
short-term bank notes, accounting for most of the growth.
Federal funds purchased
20
<PAGE> 22
and securities sold under repurchase agreements expanded
modestly, while commercial paper borrowings were unchanged.
Short-term bank notes are part of Wachovia Bank of North
Carolina's ongoing bank note program. Under the program, which
was revised in the fourth quarter of 1995, the bank can issue
and have outstanding an aggregate principal amount of up to $6
billion of notes with maturities of 270 days or less and can
issue an aggregate principal amount of up to $10 billion of
notes with maturities longer than 270 days. Note terms may range
from 30 days to 15 years. Bank notes with original maturities of
one year or less are included in other short-term borrowings and
were issued beginning in the fourth quarter of 1994. Notes with
maturities greater than one year are medium-term bank notes,
classified as part of long-term debt. At December 31, 1995,
short-term bank notes outstanding totaled $1.413 billion with an
average cost of 5.86 percent and an average maturity of 1.04
months. This compared with outstandings of $456 million with an
average cost of 6.13 percent and an average maturity of 4.15
months at fourth quarter-close 1994.
Long-term debt rose $552 million or 12.7 percent.
Medium-term bank notes were higher by $341 million or 9.7
percent, while other long-term debt increased $211 million or
25.5 percent. Medium-term bank notes totaled $4.088 billion at
December 31, 1995 with an average cost of 5.77 percent and an
average maturity of 1.23 years versus $3.953 billion in
outstandings with an average cost of 5.31 percent and an average
maturity of 1.73 years at year-end 1994. Other long-term debt
includes the issuance in the fourth quarter of $250 million in
30-year subordinated debentures. The notes have a 10-year put
option and were priced at par to yield 6.605 percent or 47.5
basis points above comparable 10-year Treasuries.
Gross deposits averaged $24.262 billion versus $22.315
billion in 1994, an increase of $1.947 billion or 8.7 percent.
Collected deposits, net of float, averaged $22.498 billion, up
$1.807 billion or 8.7 percent from $20.691 billion in 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 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 is reviewed quarterly by the Board
Finance Committee. Interim oversight of the asset and liability
function is provided through regular bimonthly meetings of Funds
Management managers 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 present value of the asset and
liability portfolios under various rate scenarios and simulating
net interest income under the same rate scenarios. The rate
sensitivity gap table on page 22 sets forth the volume of
interest-earning assets and interest-bearing liabilities
outstanding as of year-ends 1995 and 1994, which mature or are
projected to reprice in 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. The sensitivity assumptions for
these two deposit accounts were reduced somewhat in 1995
compared with 1994. 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 $447 million in 1995 and $404 million in
1994, savings balances of $850 million in 1995 and $676 million
in 1994 and interest-bearing checking balances of $2.399
billion in 1995 and $2.115 billion in 1994.
21
<PAGE> 23
<TABLE>
<CAPTION>
Interest Rate Sensitivity Gap Analysis
- --------------------------------------
Interest Sensitive Period
-----------------------------------------------------------
$in millions Total Over One
0 to 3 4 to 6 7 to 12 Within Year and
December 31, 1995 Months Months Months One Year Nonsensitive Total
- ----------------- ------- ------ ------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Loans and net leases, net of unearned income ....................... $18,226 $ 1,162 $ 1,492 $20,880 $ 8,381 $29,261
Investment securities............................................... 416 316 681 1,413 7,617 9,030
Interest-bearing bank balances...................................... - - 446 446 5 451
Federal funds sold and securities purchased under resale agreements. 144 - - 144 - 144
Trading account assets.............................................. 1,115 - - 1,115 - 1,115
------- ------- ------- ------- ------- -------
Total earning assets.......................................... 19,901 1,478 2,619 23,998 16,003 40,001
Interest-bearing demand............................................. 625 150 300 1,075 2,399 3,474
Savings and money market savings.................................... 5,504 212 425 6,141 850 6,991
Savings certificates................................................ 2,053 1,308 1,088 4,449 2,164 6,613
Large denomination certificates..................................... 1,402 279 641 2,322 350 2,672
Time deposits in foreign offices.................................... 748 6 1 755 - 755
Federal funds purchased and securities sold under repurchase
agreements ....................................................... 5,850 - - 5,850 - 5,850
Commercial paper.................................................... 502 - - 502 - 502
Other short-term borrowed funds..................................... 1,674 1 18 1,693 28 1,721
Bank notes.......................................................... 2,332 115 503 2,950 1,138 4,088
Other long-term debt................................................ - - - - 1,335 1,335
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities 20,690 2,071 2,976 25,737 8,264 34,001
Interest rate swaps................................................. (202) 59 (31) (174) 174 -
------- ------- ------- ------- ------- -------
Interest sensitivity gap...................................... (991) (534) (388) $(1,913) 7,913 $ 6,000
------- ------- ------- ======= ------- =======
Cumulative interest sensitivity gap .......................... $ (991) $(1,525) $(1,913) $ 6,000
======= ======= ======= =======
December 31, 1994
- -----------------
Loans and net leases, net of unearned income........................ $16,265 $ 902 $ 1,379 $18,546 $ 7,345 $25,891
Investment securities............................................... 869 531 797 2,197 5,526 7,723
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
======= ======= ======= =======
Note: Refer to page 21 for details on management's assumptions of the repricing
characteristics of certain accounts without contractual maturity dates.
</TABLE>
Management believes that rate risk is best measured by
simulation modeling which calculates expected net interest
income based on projected interest-earning assets,
interest-bearing liabilities, off-balance sheet financial
instruments and interest rates. The
corporation monitors exposure to a gradual change in rates of
200 basis points up or down over a rolling 12-month period and
an interest rate shock of 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
corporation policy limit for the maximum negative impact on net
interest income from a gradual change in interest rates of 2
percentage 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, 1995, the model indicated
the impact of a 2 percentage point gradual rise in rates over 12
months would approximate a .25 percent increase in net interest
income, while a 2 percentage point decline in rates over the
same period would approximate a .55 percent decrease from an
unchanged rate environment.
In addition to on-balance sheet instruments such as
investment securities and purchased funds, the corporation uses
off-balance sheet derivative instruments to manage interest rate
risk, liquidity and net interest
22
<PAGE> 24
income. Off-balance sheet instruments include interest rate
swaps, futures and options with indices that directly correlate
to on-balance sheet instruments. The corporation has used
off-balance sheet financial instruments, principally interest
rate swaps, over a number of years and believes their use on a
sound basis enhances the effectiveness of asset and liability
and interest rate sensitivity management.
Off-balance sheet asset and liability derivative
transactions are based on referenced or notional amounts.
Statement of Financial Accounting Standards No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of
Financial Instruments" (FASB 119), distinguishes between
derivative financial instruments held or issued for trading
purposes and those held or issued for purposes other than
trading, including risk management. Note J in Notes to
Consolidated Financial Statements contains disclosures regarding
off-balance sheet financial instruments held for risk management
purposes, while disclosures regarding instruments held for
trading are included in Note I.
At December 31, 1995, the corporation had $2.345 billion
notional amount of derivatives outstanding for asset and
liability management purposes. Interest rate swaps were $1.320
billion or 56 percent of the total notional amount, while
futures represented the remaining amount. Details on the
maturity schedule on asset and liability management derivatives
including notional amounts and average maturities are contained
in the following table.
<TABLE>
<CAPTION>
Maturity Schedule of Asset and Liability Management Derivatives
---------------------------------------------------------------
December 31, 1995
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.................. $ 431 $ 15 $ 16 $ 18 $ 12 $ 45 $ 537 1.37
Weighted average rates received.. 4.90% 5.99% 6.02% 5.95% 6.01% 5.89% 5.11%
Weighted average rates paid...... 7.55 6.64 6.95 6.93 6.96 7.77 7.49
Receive fixed/pay floating:
Notional amount.................. $ 110 $ 79 $ 90 $ 1 $ 2 $ 137 $ 419 4.80
Weighted average rates received.. 5.11% 6.79% 7.57% 9.77% 10.49% 6.73% 6.52%
Weighted average rates paid...... 6.19 5.94 5.95 8.68 8.54 5.92 6.02
Index amortizing swaps:*
Receive fixed/pay floating:
Notional amount.................. $ 75 $ 125 $ 125 - - - $ 325 1.59
Weighted average rates received.. 7.14% 7.88% 8.48% - - - 7.94%
Weighted average rates paid...... 5.90 6.00 5.94 - - - 5.95
Total:
Notional amount.................. $ 616 $ 219 $ 231 $ 19 $ 14 $ 182 $1,281 2.55
Weighted average rates received.. 5.21% 7.36% 7.95% 6.12% 6.80% 6.52% 6.29%
Weighted average rates paid...... 7.11 6.02 6.01 7.01 7.24 6.38 6.62
Forward starting interest rate swaps:
Notional amount.................. - - - - - $ 39 $ 39 8.53
Weighted average rates paid...... - - - - - 8.03% 8.03%
TOTAL INTEREST RATE SWAPS............. $ 616 $ 219 $ 231 $ 19 $ 14 $ 221 $1,320 2.72
Futures............................... 1,025 - - - - - 1,025 .08
(Total derivatives (notional amount).. $1,641 $ 219 $ 231 $ 19 $ 14 $ 221 $2,345 1.57
*Maturity is based upon expected average lives rather than contractual lives.
</TABLE>
Credit risk of off-balance sheet derivative financial
instruments 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 or 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
23
<PAGE> 25
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 $21.284 million at December 31, 1995. The
fair value of all asset and liability derivative positions for
which counterparties were exposed to the corporation amounted to
$14.411 million on the same date. Details of the net fair value
gain of $6.873 million are included in Note J of Notes to
Consolidated Financial Statements.
Asset and liability derivative transactions are accounted
for following hedge accounting rules. Accordingly, gains and
losses related to the fair value of derivative contracts used
for asset and liability management purposes are not immediately
recognized in earnings. If the hedged or altered balance sheet
amounts were marked to market, the resulting unrealized balance
sheet gains or losses could be expected to offset unrealized
derivatives gains and losses.
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; (3)
hedge the interest rate spread between assets and liabilities;
and (4) hedge the yield or rate on future transactions. 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.
----------------------------------------
LARGE DENOMINATION DEPOSITS* TABLE 6
December 31, 1995 (thousands)
----------------------------------------
REMAINING MATURITIES
Three months or less..... $1,413,895
Over three through
six months.............. 276,292
Over six through
twelve months........... 643,627
Over twelve months....... 337,945
----------
Total.................. $2,671,759
==========
*Includes domestic office
certificates of deposit of
$100 or more
----------------------------------------
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM BORROWED FUNDS (thousands) TABLE 7
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
---------------- ---------------- --------------------
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 ...................... $5,850,540 5.01% $5,898,398 5.33% $4,741,283 2.88%
Commercial paper ....................................... 502,136 4.26 406,706 5.09 589,178 2.92
Other borrowed funds ................................... 1,720,592 5.79 1,007,340 5.30 1,091,123 3.24
---------- ---------- ----------
Total ............................................... $8,073,268 5.13 $7,312,444 5.32 $6,421,584 2.94
========== ========== ==========
Average for the year:
Federal funds purchased and securities
sold under repurchase agreements ...................... $5,264,072 6.02 $5,051,124 4.44 $3,944,864 3.23
Commercial paper* ...................................... 504,669 5.51 505,117 3.94 485,889 3.02
Other borrowed funds ................................... 2,029,094 6.03 674,593 4.24 972,008 3.25
---------- ---------- ----------
Total ................................................ $7,797,835 5.99 $6,230,834 4.37 $5,402,761 3.22
========== ========== ==========
Maximum month-end balance:
Federal funds purchased and securities
sold under repurchase agreements ...................... $6,642,662 $5,898,398 $5,307,332
Commercial paper ....................................... 563,779 571,347 613,375
Other borrowed funds ................................... 2,910,246 1,007,340 1,525,017
*Average interest rate for each year includes effect of fees paid on back-up lines of credit
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 26
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. 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 and floors. Changes in the
yield or rate on anticipated future transactions can be hedged
by purchasing or selling futures contracts on which change in
price is highly correlated with the anticipated transaction. The
corporation has used both futures contracts and options
contracts to hedge spreads and anticipated transactions.
The objective of liquidity management is to ensure 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 or
securitizable assets, along with liabilities which are readily
accepted in the marketplace. Asset liquidity is provided by
securities which, by their maturity structure or marketability,
can produce cash flows that result in enhanced liquidity and by
loans which may be securitized. 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, high quality assets and diverse statewide banking
networks. At December 31, 1995, Wachovia's common equity
represented 8.39 percent of assets, 5th 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
1995, 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 currently are
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 also is available from loan assets which are
readily securitizable.
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.
25
<PAGE> 27
Nonperforming Assets
Nonperforming assets were $69.364 million or .24 percent of
loans and foreclosed property at December 31, 1995. The total
was lower by $31.153 million or 31 percent from a year earlier.
Declines occurred in each quarter throughout the year primarily
due to paydowns by borrowers, the return of cash-basis assets to
accrual status and sales of foreclosed property. The corporation
historically has maintained relatively low levels of problem
assets reflecting its strong underwriting standards, consistent
credit reviews and aggressive loan charge-off policy.
Real estate nonperforming assets, the largest category of
total nonperforming assets, were $55.181 million or .63 percent
of real estate loans and foreclosed real estate at December 31,
1995. This compared with $68.353 million or .87 percent at
year-end 1994, a decrease of $13.172 million or 19.3 percent.
The total at December 31, 1995 included $43.576 million of real
estate nonperforming loans versus $49.479 million at fourth
quarter-close 1994.
Commercial real estate nonperforming assets were $30.910
million or .67 percent of related loans and foreclosed real
estate, down $12.489 million or 28.8 percent from $43.399
million or 1.07 percent at year-end 1994. Commercial real estate
nonperforming loans included in these totals were $27.163
million at December 31, 1995 and $35.885 million a year earlier.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 8
December 31 (thousands)
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NONPERFORMING ASSETS
Cash-basis assets:
Domestic borrowers................................. $53,547* $ 78,712 $108,882 $173,977 $240,578 $199,480
Foreign borrowers -- less developed countries...... -- -- -- -- -- 1,437
------- -------- -------- -------- -------- --------
Total cash-basis assets........................ 53,547 78,712 108,882 173,977 240,578 200,917
Restructured loans -- domestic ...................... --** -- 80 117 604 2,629
------- -------- -------- -------- -------- --------
Total nonperforming loans...................... 53,547 78,712 108,962 174,094 241,182 203,546
Foreclosed property:
Foreclosed real estate............................. 14,468 22,900 51,701 93,555 69,957 41,139
Less valuation allowance........................... 2,863 4,026 9,168 5,082 2,837 4,012
Other foreclosed assets............................ 4,212 2,931 3,406 2,842 2,609 5,106
------- -------- -------- -------- -------- --------
Total foreclosed property...................... 15,817 21,805 45,939 91,315 69,729 42,233
------- -------- -------- -------- -------- --------
Total nonperforming assets..................... $69,364*** $100,517 $154,901 $265,409 $310,911 $245,779
======= ======== ======== ======== ======== ========
Nonperforming loans to year-end loans................ .18% .30 .47% .83% 1.17% .96%
Nonperforming assets to year-end loans
and foreclosed property ........................... .24 .39 .67 1.25 1.50 1.16
Year-end allowance for loan losses
times nonperforming loans.......................... 7.63x 5.16x 3.72x 2.18x 1.49x 1.33x
Year-end allowance for loan losses
times nonperforming assets......................... 5.89 4.04 2.61 1.43 1.16 1.10
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers................................... $48,970 $ 37,010 $ 44,897 $ 49,277 $ 88,158 $ 66,202
======= ======== ======== ======== ======== ========
*Includes $12,260 of loans which have been defined as impaired
per Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (FASB 114)
**Excludes $199 of loans which have been renegotiated at market
rates and have been reclassified to performing status
***Net of cumulative corporate and commercial real estate charge-offs
and foreclosed real estate write-downs totaling $23,134; includes
$3,429 of nonperforming assets on which interest and principal
are paid current
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 28
Provision and Allowance for Loan Losses
The provision for loan losses was $103.791 million, higher
by $32.028 million or 44.6 percent from $71.763 million in 1994.
The provision reflects management's assessment of the adequacy
of the allowance for loan losses to absorb potential write-offs
in the loan portfolio due to a deterioration in credit
conditions or change in risk profile. Factors considered in this
assessment include growth and mix of the loan portfolio, current
and anticipated economic conditions, historical credit loss
experience and changes in borrowers' financial positions. The
provision for loan losses exceeded net charge-offs in 1995 by
$2.676 million.
Net loan losses for the year totaled $101.115 million or
.37 percent of average loans, an increase of $30.686 million or
43.6 percent from $70.429 million or .29 percent of average
loans in 1994. The rise primarily reflected higher charge-offs
in consumer lending, particularly credit cards and other retail
loans, as well as a more moderate increase in loan recoveries.
Loan recoveries represented 24.8 percent of gross charge-offs
versus 31.4 percent in 1994. Excluding credit cards, net loan
losses totaled $12.100 million or .05 percent of average related
loans for the year compared with $11.995 million or .06 percent
in 1994, an increase of $105 thousand or less than 1 percent.
Credit card net charge-offs were $89.015 million or 2.25
percent of average credit card loans, higher by $30.581 million
or 52.3 percent from $58.434 million or 1.66 percent of average
loans in 1994. Managed credit card loan losses, including
securitized credit card outstandings, totaled $93.372 million or
2.24 percent of average managed receivables. This compared with
$58.485 million in managed net charge-offs or 1.65 percent of
average managed outstandings in 1994.
Other retail loans, consisting of direct and indirect
retail lending, had net loan losses of $11.336 million or .36
percent of average related loans, an increase of $3.883 million
or 52.1 percent from $7.453 million or .23 percent a year
earlier. Real estate loans had net recoveries of $1.875 million
or .02 percent of average real estate loans compared with net
recoveries of $5.310 million or .07 percent in 1994, a decrease
of $3.435 million or 64.7 percent.
At December 31, 1995, the allowance for loan losses totaled
$408.808 million, representing 1.40 percent of year-end loans
and 763 percent coverage of nonperforming loans. Comparable
amounts a year earlier were $406.132 million, 1.57 percent and
516 percent, respectively.
The corporation prospectively adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (FASB 114) on January 1, 1995. The
standard requires that a loan meeting 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. At December 31, 1995, the portion of the
allowance for loan losses relating to impaired loans as defined
by FASB 114 was $916 thousand.
ALLOWANCE FOR LOAN LOSSES
Year-end loan loss X Allowance times
allowance (millions) nonperforming loans
-------------------- -------------------
1990 $269.0 1.33x
1991 $360.2 1.49x
1992 $379.6 2.18x
1993 $404.8 3.72x
1994 $406.1 5.16x
1995 $408.8 7.63x
EARNING COVERAGE OF NET LOAN LOSSES
(EXCLUDING MORTGAGE SERVICING PORTFOLIO SALE, SUBSIDIARY SALE AND SECURITIES
TRANSACTIONS)
Earnings before income
taxes and provision for X Number of times earnings
loan losses (millions) coverned net loan losses
----------------------- --------------------------
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
1995 $917.1 9.07x
LOAN LOSS EXPERIENCE
(MILLIONS)
<TABLE>
<CAPTION> Net loan
Credit Real losses to
Card Commercial Subtotal Estate Subtotal Other Total avg loans
------ ---------- -------- ------ -------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990 $41.821 $16.278 $ 58.099 $ 13.584 $ 71.683 $22.122 $ 93.805 .47%
1991 $65.359 $56.490 $121.849 $ 55.463 $177.312 $25.687 $202.999 .99%
1992 $56.795 $ .559 $ 57.354 $ 21.249 $ 78.603 $16.642 $ 95.245 .48%
1993 $52.675 $ 1.220 $ 53.895 $ 5.821 $ 59.716 $ 7.695 $ 67.411 .31%
1994 $58.434 $ 7.206 $ 65.640 $ (5.310) $ 60.330 $10.099 $ 70.429 .29%
1995 $89.015 $(1.267) $ 87.748 $ (1.875) $ 85.873 $15.242 $101.115 .37%
</TABLE>
27
<PAGE> 29
<TABLE>
- --------------------------------------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 9
- --------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of year .............. $406,132 $404,798 $379,557 $360,193 $269,916 $219,219
Additions from acquisitions ............... -- -- -- -- 276 1,510
Allowance of company sold ................. -- -- -- (4,811) -- --
Provision for loan losses ................. 103,791 71,763 92,652 119,420 293,000 142,992
Deduct net loan losses:
Loans charged off:
Commercial ............................. 4,283 12,883 6,792 13,153 61,089 22,982
Credit card ............................ 101,976 69,728 62,991 67,863 72,386 48,150
Other revolving credit ................. 4,304 3,715 3,922 4,627 5,154 3,680
Other retail ........................... 15,296 11,409 8,431 17,221 26,251 23,625
Real estate ............................ 7,748 4,705 14,514 27,041 58,089 16,241
Lease financing ........................ 892 226 458 668 1,614 1,497
Foreign ................................ -- -- -- 960 675 --
-------- -------- -------- -------- -------- --------
Total ................................ 134,499 102,666 97,108 131,533 225,258 116,175
Recoveries:
Commercial ............................. 5,550 5,677 5,572 12,594 4,599 6,704
Credit card ............................ 12,961 11,294 10,316 11,068 7,027 6,329
Other revolving credit ................. 1,140 1,059 1,029 1,024 721 747
Other retail ........................... 3,960 3,956 3,791 5,481 6,545 5,368
Real estate ............................ 9,623 10,015 8,693 5,792 2,626 2,657
Lease financing ........................ 142 204 264 322 263 246
Foreign ................................ 8 32 32 7 478 319
Total ................................ 33,384 32,237 29,697 36,288 22,259 22,370
-------- -------- -------- -------- -------- --------
Net loan losses ......................... 101,115 70,429 67,411 95,245 202,999 93,805
-------- -------- -------- -------- -------- --------
Balance at end of year .................... $408,808* $406,132 $404,798 $379,557 $360,193 $269,916
======== ======== ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial ................................ $ (1,267) $ 7,206 $ 1,220 $ 559 $ 56,490 $ 16,278
Credit card ............................... 89,015 58,434 52,675 56,795 65,359 41,821
Other revolving credit .................... 3,164 2,656 2,893 3,603 4,433 2,933
Other retail .............................. 11,336 7,453 4,640 11,740 19,706 18,257
Real estate ............................... (1,875) (5,310) 5,821 21,249 55,463 13,584
Lease financing ........................... 750 22 194 346 1,351 1,251
Foreign ................................... (8) (32) (32) 953 197 (319)
-------- ------- ------- ------- -------- -------
Total ................................ $101,115 $ 70,429 $67,411 $95,245 $202,999 $93,805
======== ======= ======= ======= ======== =======
Net loan losses -- excluding credit cards .. $ 12,100 $11,995 $14,736 $38,450 $137,640 $51,984
NET LOAN LOSSES (RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial ................................ (.01%) .08% .02% .01% .69% .20%
Credit card ............................... 2.25 1.66 2.03 3.20 4.19 2.94
Other revolving credit .................... .92 .80 .88 1.12 1.48 1.02
Other retail .............................. .36 .23 .16 .44 .72 .64
Real estate ............................... (.02) (.07) .08 .30 .73 .19
Lease financing ........................... .28 .01 .14 .29 1.08 .87
Foreign ................................... -- (.03) (.04) 1.32 .23 (.40)
Total loans ............................... .37 .29 .31 .48 .99 .47
Total loans -- excluding credit cards ..... .05 .06 .08 .21 .72 .28
Year-end allowance to outstanding loans ... 1.40% 1.57% 1.76% 1.80% 1.75% 1.27%
Earnings coverage of net loan losses** .... 9.07x 11.78x 11.17x 7.29x 2.77x 6.09x
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES***
Commercial ............................... $ 87,765* $ 88,682 $ 89,431 $ 92,279 $ 89,055 $ 73,636
Credit card ............................... 110,400 109,615 78,264 54,584 44,655 39,255
Other revolving credit .................... 5,544 5,368 4,958 4,718 6,193 3,545
Other retail .............................. 27,816 32,084 33,748 28,113 25,303 44,233
Real estate ............................... 101,335 108,354 111,960 113,996 128,216 76,534
Lease financing ........................... 1,666 2,211 2,018 1,994 2,159 3,114
Foreign ................................... 3,697 3,830 931 715 1,382 2,296
Unallocated ............................... 70,585 55,988 83,488 83,158 63,230 27,303
-------- -------- -------- -------- -------- --------
Total ............................... $408,808 $406,132 $404,798 $379,557 $360,193 $269,916
======== ======== ======== ======== ======== ========
- --------------------------------------------------------------------------------------------------------
*Includes the related allowance for credit losses for impaired loans as defined in FASB 114, "Accounting
by Creditors for Impairment of a Loan," of $916 at December 31, 1995
**Earnings before income taxes and provision for loan losses excluding mortgage servicing portfolio sale,
subsidiary sale 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>
28
<PAGE> 30
Noninterest Income
Total other operating revenue, which excludes the gain from
the sale of the corporation's mortgage servicing portfolio as
well as sales of investment securities and subsidiaries, rose
$75.669 million or 12.5 percent for the year. The increase was
fueled primarily by good gains in deposit account service
charges and credit card fee income, expanded trading account
profits and solid growth in investment fee income, electronic
banking services and other income, including revenues from the
Capital Markets Group. In the fourth quarter of 1995, the
corporation reclassified foreign exchange income from other
income to trading account profits. The corporation also restated
other service charges and fees to separately identify revenues
generated from electronic banking services and investment fee
income. Prior period amounts have been restated to reflect the
reclassifications.
Service charges on deposit accounts were up $12.964 million
or 6.6 percent. Higher revenues from overdraft and insufficient
fund charges largely accounted for the increase. Gains also
occurred in savings account service charges and in commercial
account analysis fees, particularly in the closing months of the
year. The level of corporate service activities expanded in
1995, however, most of the gains were compensated by increased
credit given for commercial deposit account balances.
Credit card fee income rose $12.357 million or 11 percent.
Gains reflected excess revenues received from cardholder
payments on the corporation's securitized loans along with
higher levels of cardholder interchange income, net merchant
discount income and overlimit charges. At year-end 1995,
Wachovia had 1.805 million active credit card accounts,
including those under management, an increase of 122 thousand or
7.2 percent from 1.683 million a year earlier.
Trading account profits were up $16.196 million. Gains
reflected stronger profits from foreign exchange trading as well
as improved bond market conditions with lower yields on
government and municipal securities resulting in favorable
pricing. For the year 1995, trading account profits were
comprised of trading profits of $11.209 million,
foreign exchange income of $12.416 million and derivatives
valuation of $2.073 million.
Investment fee income, consisting primarily of fees from
mutual funds, variable rate demand bonds, brokerage commissions,
private placements and loan syndications, rose $12.861 million
or 91.3 percent. Good gains in mutual fund activities, loan
syndications, brokerage commissions and public finance fees
largely accounted for the increase. At December 31, 1995, the
corporation's Biltmore family of mutual funds totaled $2.905
billion compared with $2.209 billion at year-end 1994.
Electronic banking service revenues, comprised principally
of fees from ATM and debit card usage, expanded $9.796 million
or 39.7 percent, reflecting greater usage of these cards.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 10
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts .................... $209,113 $196,149 $202,885 $189,537 $170,827 $155,808
Fees for trust services ................................ 130,521 128,100 120,030 109,504 102,665 99,572
Credit card income -- net of interchange payments ...... 124,282 111,925 101,780 78,068 62,814 55,202
Electronic banking ..................................... 34,479 24,683 14,840 12,936 10,590 8,522
Investment fee income .................................. 26,953 14,092 16,619 13,013 13,302 8,265
Mortgage fee income .................................... 23,320 33,224 39,101 40,078 28,608 20,741
Trading account profits (losses) -- excluding interest.. 25,698 9,502 22,445 (2,916) 17,846 17,321
Insurance premiums and commissions ..................... 13,164 11,679 11,847 15,002 12,819 14,232
Bankers' acceptance and letter of credit fees........... 23,190 23,168 19,668 20,141 14,232 11,605
Student loan servicing ................................. -- -- 5,535 33,250 31,470 29,841
Other service charges and fees ......................... 24,682 18,109 17,456 18,636 18,216 18,132
Other income ........................................... 44,699 33,801 27,973 7,993 6,789 19,611
Total other operating revenue .................... 680,101 604,432 600,179 535,242 490,178 458,852
Gain on sale of mortgage servicing portfolio ........... 79,025 -- -- -- -- --
Gain on sale of subsidiary ............................. -- -- 8,030 19,486 -- --
Investment securities gains (losses) ................... (23,494) 3,320 19,394 1,497 11,091 6,218
Total ............................................ $735,632 $607,752 $627,603 $556,225 $501,269 $465,070
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 31
Trust service fees rose modestly by $2.421 million or
slightly under 2 percent for the year. Moderate gains in
personal trust fees helped to offset softness in corporate trust
revenues. Trust assets at December 31, 1995 totaled $90.144
billion, including $20.226 billion under management. At year-end
1994, total trust assets were $78.972 billion, including $17.084
billion under management.
Mortgage fee income decreased $9.904 million or 29.8
percent, principally reflecting the loss of servicing fee income
due to the sale of the corporation's $9 billion residential
mortgage servicing portfolio in April. The corporation sold its
mortgage servicing portfolio based on a strategic analysis of
the future of the servicing business, competitive industry
trends and the long-term needs for technology investments.
Proceeds from the sale are being invested in programs to enhance
future growth and productivity including the corporation's Next
Generation Branch Automation, upgrades to customer information
databases and major refinements to financial systems for
performance measurement. Lower origination fees also accounted
for the decline in mortgage fee income. Loan originations in
1995 totaled $1.316 billion compared with $1.429 billion in
1994.
Remaining combined categories of other operating revenue
increased $18.978 million or 21.9 percent. Insurance premiums
and commissions were higher by $1.485 million or 12.7 percent,
while bankers' acceptance and letter of credit fees remained
largely unchanged. Other income rose $10.898 million or 32.2
percent, largely reflecting higher revenues from Wachovia's
Capital Markets Group. Other income also included contractual
servicing revenue from the corporation's securitized credit card
portfolio of $3.350 million in 1995 versus $257 thousand in
1994.
Including the sale of the corporation's mortgage servicing
portfolio and sales of investment securities, total noninterest
income was up $127.880 million or 21 percent. The second quarter
sale of the mortgage servicing portfolio resulted in a pretax
gain of $79.025 million or $47.385 million, aftertax. Investment
securities sales had a net loss of $23.494 million for the year,
resulting largely from the corporation's decision to restructure
its securities portfolio in the second quarter by selling $1.950
billion of securities available-for-sale at a loss and
reinvesting the proceeds in higher yielding investments.
Noninterest Expense
Total noninterest expense was up $105.183 million or 9.6
percent for the year, reflecting moderate increases in personnel
expense and combined net occupancy and equipment expense along
with higher spending associated primarily with the corporation's
ongoing strategic initiatives. Measured as a percentage of total
adjusted revenues (taxable equivalent net interest income and
total other operating revenue), noninterest spending in 1995
remained essentially flat with 1994 with an overhead ratio of
54.2 percent versus 54.1 percent in the prior year.
Total personnel expense grew $36.819 million or 6.5
percent. Salaries expense increased $33.940 million or 7.3
percent due largely to higher base salaries and greater use of
incentive pay for increased sales efforts, as well as to
severance compensation for continued consolidation efforts.
Employee benefits expense was up $2.879 million or 2.9 percent,
with increases in line with growth in salaries.
Combined net occupancy and equipment expense climbed $9.387
million or 5 percent. Net occupancy expense was up $6.194
million or 7.7 percent due largely to higher maintenance,
renovation and operating premise lease expenses. Equipment
expense grew $3.193 million or 3 percent, in large part
reflecting increases in depreciation expense for the rollout of
the corporation's Next Generation Branch Automation equipment.
Remaining combined categories of noninterest expense rose
$58.977 million or 17 percent. Expenses for professional
services increased $18.990 million or 92.7 percent, driven
principally by consulting fees associated
30
<PAGE> 32
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 11
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Salaries................................... $ 498,730 $ 464,790 $ 455,621 $ 451,193 $ 443,273 $413,592
Employee benefits.......................... 101,596 98,717 113,059 88,630 81,216 73,881
---------- ---------- ---------- ---------- ---------- --------
Total personnel expense............... 600,326 563,507 568,680 539,823 524,489 487,473
Net occupancy expense...................... 87,105 80,911 82,070 80,673 75,729 71,402
Equipment expense.......................... 109,701 106,508 102,246 100,916 99,569 98,042
Postage and delivery....................... 37,962 35,163 38,160 37,036 38,188 33,655
Outside data processing,
programming and software................. 42,486 35,211 38,613 33,082 30,671 27,684
Stationery and supplies.................... 26,805 24,558 25,344 26,342 28,507 23,289
Advertising and sales promotion............ 50,362 34,067 38,141 27,911 22,139 30,010
Professional services...................... 39,483 20,493 17,144 18,412 25,786 18,887
Travel and business promotion.............. 19,694 16,254 15,563 13,578 13,641 13,637
FDIC insurance and regulatory examinations. 40,389 53,451 53,663 53,970 49,629 27,377
Check clearing and other bank services..... 9,195 8,894 10,159 10,391 11,334 10,310
Amortization of intangible assets.......... 8,587 18,693 28,001 34,423 51,756 19,815
Foreclosed property expense................ 920 (4,288) 7,654 9,755 15,655 4,845
Other expense.............................. 130,581 104,991 105,798 109,340 109,424 85,858
---------- ---------- ---------- ---------- ---------- --------
Total................................. $1,203,596 $1,098,413 $1,131,236 $1,095,652 $1,096,517 $952,284
========== ========== ========== ========== ========== ========
Overhead ratio.............................. 54.2% 54.1% 57.0% 58.6% 62.5% 58.4%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
with the corporation's strategic initiatives. Advertising
and sales promotion expense was up $16.295 million or 47.8
percent primarily reflecting costs for expanded credit card
solicitations. Outside data processing, programming and software
expense grew $7.275 million or 20.7 percent due largely to
increased costs for external programming services, higher volume
of treasury cash services operations and amortization of
externally purchased software. The corporation's foreclosed
property expense totaled $920 thousand for the year versus a net
gain of $4.288 million in 1994.
In the third quarter of 1995, the Federal Deposit Insurance
Corporation reduced deposit insurance premiums paid by banking
companies retroactive to June 1, 1995. The rate assessed for
well-capitalized banks decreased from $.23 to $.04 per $100 of
deposits resulting in a refund of $13.173 million to the
corporation. In the same quarter, the corporation made an
accrual of $8.581 million for a probable one-time Savings
Association Insurance Fund assessment.
Income Taxes
Applicable income taxes for the year were up $43.901
million or 19.7 percent. Income taxes computed at the statutory
rate are reduced primarily by the interest earned on state and
municipal debt securities and industrial revenue obligations.
Also, within certain limitations, one-half of the interest
income 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.
31
<PAGE> 33
Shareholders' Equity and Capital Ratios
At December 31, 1995, shareholders' equity was $3.774
billion, higher by $487 million or 14.8 percent from $3.287
billion at year-end 1994. Included in the December 31, 1995
total was $116.113 million, net of tax, of unrealized gains on
securities available-for-sale marked to fair market value under
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (FASB
115) versus $37.635 million, net of tax, of unrealized losses at
year-end 1994. Shareholders' equity for the year averaged $3.410
billion compared with $3.096 billion in 1994, an increase of
$314 million or 10.1 percent with unrealized gains of $21.021
million, net of tax, included in the 1995 average versus
unrealized losses of $7.561 million, net of tax, for 1994.
Wachovia's book value at December 31, 1995 was $22.15, an
increase of 15.2 percent from $19.23 per share at year-end 1994.
The corporation's internal capital generation rate (net income
less dividends as a percentage of average equity) increased to
10.8 percent from 10.6 percent in 1994.
The corporation was authorized by the board of directors on
July 28, 1995 to repurchase up to 5 million shares of its common
stock. The authorization replaced an earlier action on July 22,
1994 to repurchase the same number of shares. Repurchased shares
will be used for various corporate purposes, including share
issuance for the corporation's employee stock plans and dividend
reinvestment plan. In 1995, the corporation repurchased a total
of 1,755,500 shares under the new and previous authorizations at
an average price of $36.745 per share for a total cost of
$64.506 million. As of December 31, 1995, a total of 4,600,000
shares remained available for repurchase under the new
authorization. On January 26, 1996, the corporation announced
that, depending on market conditions and other factors related
to management of its capital, share repurchase activity may
increase significantly in 1996. This possibly could result in
approximately 3 million fewer average shares outstanding for the
year than in 1995. Share repurchase activity will remain
governed by the corporation's capital management strategy to
deploy capital in a prudent and competent manner designed to
enhance shareholder value over the long-term.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL COMPONENTS AND RATIOS TABLE 12
December 31 (thousands)
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tier I capital:
Common shareholders' equity............. $ 3,773,757 $ 3,286,507 $ 3,017,947 $ 2,774,767 $ 2,484,414 $ 2,370,928
Less ineligible intangible assets....... 29,472 30,961 32,451 33,941 33,198 34,727
Unrealized (gains) losses on securities
available-for-sale, net of tax........ (116,113) 37,635 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------
Total Tier I capital................ 3,628,172 3,293,181 2,985,496 2,740,826 2,451,216 2,336,201
Tier II capital:
Allowable allowance for loan losses..... 408,808 406,132 384,032 348,887 332,528 266,898
Allowable long-term debt................ 1,208,479 830,782 583,738 344,983 136,682 143,477
----------- ----------- ----------- ----------- ----------- ----------
Tier II capital additions........... 1,617,287 1,236,914 967,770 693,870 469,210 410,375
----------- ----------- ----------- ----------- ----------- ----------
Total capital....................... $ 5,245,459 $ 4,530,095 $ 3,953,266 $ 3,434,696 $ 2,920,426 $2,746,576
=========== =========== =========== =========== =========== ==========
Risk-adjusted assets..................... $38,469,866 $35,573,896 $30,701,782 $27,880,304 $26,583,836 $26,056,745
Quarterly average assets.................. $43,477,038 $38,146,370 $35,419,829 $32,518,351 $32,180,449 $31,760,373
Risk-based capital ratios:
Tier I capital.......................... 9.43% 9.26% 9.72% 9.83% 9.22% 8.97%
Total capital........................... 13.64 12.73 12.88 12.32 10.99 10.54
Tier I leverage ratio*.................... 8.36% 8.63% 8.44% 8.44% 7.62% 7.36%
Shareholders' equity to total assets...... 8.39% 8.39% 8.26% 8.32% 7.49% 7.12%
*Ratio excludes the average unrealized gains (losses) on
securities available-for-sale, net of tax, of $63,884 and
($26,581), respectively
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 34
Intangible assets totaled $39.093 million at
December 31, 1995, consisting of $29.472 million in
goodwill, $6.932 million in deposit base intangibles,
$1.422 million in purchased credit card intangibles and
$1.267 million in other intangible assets. In April, the
corporation sold its mortgage servicing portfolio with
associated mortgage servicing rights of $31.903 million at
March 31, 1995. At year-end 1994, intangible assets were
$78.408 million, with $34.477 million in mortgage
servicing rights, $30.961 million in goodwill, $8.574
million in deposit base intangibles, $2.712 million in
purchased credit card intangibles and $1.684 million in
other intangibles.
Regulatory agencies divide capital into Tier I
(consisting of shareholders' equity less ineligible
intangible assets) and Tier II (consisting of the
allowable portion of the reserve for loan losses and
certain long-term debt) and measure capital adequacy by
applying both capital levels to a banking company's
risk-adjusted assets and off-balance sheet items.
Regulatory requirements presently specify that Tier I
capital should exclude the market appreciation 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, 1995, Wachovia's Tier I to
risk-adjusted assets ratio was 9.43 percent with total
capital 13.64 percent of risk-adjusted assets. The
corporation's Tier I leverage ratio was 8.36 percent.
Dividends
Cash dividends paid in 1995 totaled $235.495
million, an increase of $24.992 million or 11.9 percent
from $210.503 million paid in 1994. The payout ratio of
cash dividends paid to net income was 39.1 percent in both
1995 and 1994. Cash dividends paid per common share
totaled $1.38, up 12.2 percent from $1.23 per common share
paid in 1994.
At its meeting on January 26, 1996, the
corporation's board of directors declared a first quarter
dividend of $.36 per share, payable March 1 to
shareholders of record on February 6, 1996. The dividend
represents an increase of 9.1 percent from $.33 per share
paid in the same period of 1995.
Pages 72 and 73 present additional dividend
information.
YEAR-END SHAREHOLDERS'
EQUITY PER SHARE
FIVE-YEAR COMPOUND GROWTH RATE = 9.5%
1990 $14.07
1991 $14.56
1992 $16.18
1993 $17.61
1994 $19.23
1995 $22.15
33
<PAGE> 35
<TABLE>
- -----------------------------------------------------------------------------------------------
QUARTERLY FINANCIAL SUMMARY TABLE 13
- -----------------------------------------------------------------------------------------------
<CAPTION>
1995
-----------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent ............. $815,894 $813,117 $774,078 $715,414
Interest expense ................................. 424,624 418,917 392,970 342,596
-------- -------- -------- --------
Net interest income -- taxable equivalent ......... 391,270 394,200 381,108 372,818
Taxable equivalent adjustment .................... 24,531 26,633 23,987 23,622
-------- -------- -------- --------
Net interest income .............................. 366,739 367,567 357,121 349,196
Provision for loan losses ........................ 30,172 23,179 28,652 21,788
-------- -------- -------- --------
Net interest income after provision
for loan losses ................................ 336,567 344,388 328,469 327,408
Other operating revenue .......................... 186,289 170,415 166,304 157,093
Gain on sale of mortgage servicing
portfolio ...................................... -- -- 79,025 --
Investment securities gains (losses) ............. 2,554 317 (26,236) (129)
-------- -------- -------- --------
Total other income ................................ 188,843 170,732 219,093 156,964
Personnel expense ................................. 152,078 153,298 149,987 144,963
Other expense ..................................... 162,987 145,584 156,630 138,069
-------- -------- -------- --------
Total other expense ............................... 315,065 298,882 306,617 283,032
Income before income taxes ........................ 210,345 216,238 240,945 201,340
Applicable income taxes* .......................... 64,147 64,958 78,036 59,184
-------- -------- -------- --------
Net income ........................................ $146,198 $151,280 $162,909 $142,156
======== ======== ======== ========
Net income per common share:
Primary ......................................... $ .85 $ .88 $ .94 $ .83
Fully diluted ................................... $ .85 $ .87 $ .95 $ .82
Cash dividends paid per common share .............. $ .36 $ .36 $ .33 $ .33
Cash dividends paid on common stock ............... $ 61,423 $ 61,312 $ 56,302 $ 56,458
Cash dividend payout ratio ........................ 42.0% 40.5% 34.6% 39.7%
Average primary shares outstanding ................ 172,372 171,793 171,986 172,205
Average fully diluted shares outstanding .......... 172,705 172,512 172,446 172,760
SELECTED AVERAGE BALANCES (millions)
Total assets ...................................... $ 43,477 $ 42,573 $ 40,876 $ 38,902
Loans -- net of unearned income .................... 28,470 28,097 27,203 26,219
Investment securities** ........................... 8,676 8,778 8,276 7,612
Other interest-earning assets ..................... 1,562 1,210 1,012 815
Total interest-earning assets ..................... 38,708 38,085 36,491 34,646
Interest-bearing deposits ......................... 20,705 19,352 18,388 17,354
Short-term borrowed funds ......................... 7,332 8,593 7,869 7,390
Long-term debt .................................... 5,213 4,851 4,863 4,674
Total interest-bearing liabilities ................ 33,250 32,796 31,120 29,418
Noninterest-bearing deposits ...................... 5,361 5,212 5,333 5,302
Total deposits .................................... 26,066 24,564 23,721 22,656
Shareholders' equity .............................. 3,576 3,463 3,345 3,253
RATIOS (averages)
Annualized net loan losses to loans ............... .42% .33% .42% .30%
Annualized net yield on
interest-earning assets ......................... 4.01 4.11 4.19 4.36
Shareholders' equity to:
Total assets .................................... 8.22 8.13 8.18 8.36
Net loans ....................................... 12.74 12.51 12.48 12.60
Annualized return on assets*** .................... 1.35 1.42 1.59 1.46
Annualized return on shareholders'
equity*** ....................................... 16.36 17.47 19.48 17.48
- -----------------------------------------------------------------------------------------------
<CAPTION>
1994
-----------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
-------- -------- --------- --------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income-- taxable equivalent ............. $677,097 $632,359 $594,669 $558,329
Interest expense ................................. 305,564 274,329 242,488 216,007
-------- -------- -------- --------
Net interest income-- taxable equivalent ......... 371,533 358,030 352,181 342,322
Taxable equivalent adjustment .................... 25,893 24,909 24,882 24,476
-------- -------- -------- --------
Net interest income .............................. 345,640 333,121 327,299 317,846
Provision for loan losses ........................ 19,539 18,123 16,342 17,759
-------- -------- -------- --------
Net interest income after provision
for loan losses ................................ 326,101 314,998 310,957 300,087
Other operating revenue .......................... 154,723 151,541 153,299 144,869
Gain on sale of mortgage servicing
portfolio ...................................... -- -- -- --
Investment securities gains (losses) ............. 2,094 433 221 572
-------- -------- -------- --------
Total other income ................................ 156,817 151,974 153,520 145,441
Personnel expense ................................. 141,566 139,695 141,232 141,014
Other expense ..................................... 140,959 131,598 133,313 129,036
-------- -------- -------- --------
Total other expense ............................... 282,525 271,293 274,545 270,050
Income before income taxes ........................ 200,393 195,679 189,932 175,478
Applicable income taxes* .......................... 58,267 57,687 55,791 50,679
-------- -------- -------- --------
Net income ........................................ $142,126 $137,992 $134,141 $124,799
======== ======== ======== ========
Net income per common share:
Primary ......................................... $ .83 $ .80 $ .78 $ .72
Fully diluted ................................... $ .82 $ .80 $ .78 $ .72
Cash dividends paid per common share .............. $ .33 $ .30 $ .30 $ .30
Cash dividends paid on common stock ............... $ 56,420 $ 51,241 $ 51,399 $ 51,443
Cash dividend payout ratio ........................ 39.7% 37.1% 38.3% 41.2%
Average primary shares outstanding ................ 171,973 172,097 172,558 172,739
Average fully diluted shares outstanding .......... 172,552 172,701 173,197 173,378
SELECTED AVERAGE BALANCES (MILLIONS)
Total assets ...................................... $ 38,146 $ 37,409 $ 36,753 $ 35,778
Loans-- net of unearned income .................... 25,290 24,553 23,969 23,010
Investment securities** ........................... 7,582 7,695 7,767 7,690
Other interest-earning assets ..................... 877 809 829 1,083
Total interest-earning assets ..................... 33,749 33,057 32,565 31,783
Interest-bearing deposits ......................... 17,040 17,020 16,964 16,694
Short-term borrowed funds ......................... 6,619 6,115 6,038 6,148
Long-term debt .................................... 4,795 4,637 4,281 3,670
Total interest-bearing liabilities ................ 28,454 27,772 27,283 26,512
Noninterest-bearing deposits ...................... 5,471 5,364 5,333 5,366
Total deposits .................................... 22,511 22,384 22,297 22,060
Shareholders' equity .............................. 3,186 3,114 3,063 3,021
RATIOS (averages)
Annualized net loan losses to loans ............... .31% .29% .26% .30%
Annualized net yield on
interest-earning assets ......................... 4.37 4.30 4.34 4.37
Shareholders' equity to:
Total assets .................................... 8.35 8.32 8.33 8.44
Net loans ....................................... 12.80 12.89 13.00 13.36
Annualized return on assets*** .................... 1.49 1.48 1.46 1.40
Annualized return on shareholders'
equity*** ....................................... 17.84 17.73 17.52 16.53
- ------------------------------------------------------------------------------------------------
* Income taxes applicable to securities transactions were $980, $91,
($9,580), ($67), $840, $173, $89 and $226, respectively
** Reported at amortized cost; excludes pretax unrealized gains (losses) on
securities available-for-sale of $104, $65, $15, ($49), ($44), ($28), ($14)
and $37, respectively
*** Includes average unrealized gains (losses) on securities available-for-sale
of $64, $40, $9, ($30), ($27), ($17), ($9) and $22 net of tax, respectively
</TABLE>
34
<PAGE> 36
Fourth Quarter Analysis
The corporation's net income per fully diluted share
was $.85 in the fourth quarter of 1995, a gain of 2.7
percent from $.82 in the same three months a year earlier.
Net income totaled $146.198 million, up $4.072 million or
2.9 percent from $142.126 million, and represented
annualized returns of 16.36 percent on shareholders'
equity and 1.35 percent on assets.
Taxable equivalent net interest income rose $19.737
million or 5.3 percent largely reflecting good gains in
interest-earning assets moderated by increased funding
costs and higher levels of interest-bearing liabilities.
Average loans grew $3.180 billion or 12.6 percent and
included the impact of a $500 million credit card
securitization. Gains were led by regular commercial
loans, up $1.469 billion or 18.6 percent, residential
mortgages, higher by $406 million or 10.8 percent, and
commercial mortgages, which increased $342 million or 9.9
percent. Average investment securities expanded $1.094
billion or 14.4 percent. The corporation
QUARTERLY NET INCOME QUARTERLY NET INCOME
PER SHARE, 1994 PER SHARE, 1995
(FULLY DILUTED) (FULLY DILUTED)
1st Quarter .72 1st Quarter .82
2nd Quarter .78 2nd Quarter .95
3rd Quarter .80 3rd Quarter .87
4th Quarter .82 4th Quarter .85
<TABLE>
- -------------------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 14
- -------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994
Fourth Fourth
Quarter Quarter Change
-------- -------- --------
<S> <C> <C> <C>
Interest income -- taxable equivalent ........................... $ 4.73 $ 3.94 $ .79
Interest expense ............................................... 2.46 1.78 .68
-------- -------- -------
Net interest income -- taxable equivalent ....................... 2.27 2.16 .11
Taxable equivalent adjustment .................................. .14 .15 (.01)
-------- -------- -------
Net interest income ............................................ 2.13 2.01 .12
Provision for loan losses ...................................... .18 .12 .06
-------- -------- -------
Net interest income after provision for loan losses ............ 1.95 1.89 .06
Other operating revenue ........................................ 1.08 .90 .18
Investment securities gains .................................... .02 .02 --
-------- -------- -------
Total other income ............................................. 1.10 .92 .18
Personnel expense .............................................. .88 .82 .06
Other expense .................................................. .95 .82 .13
-------- -------- -------
Total other expense ............................................ 1.83 1.64 .19
Income before income taxes ..................................... 1.22 1.17 .05
Applicable income taxes ........................................ .37 .34 .03
-------- -------- -------
Net income ..................................................... $ .85 $ .83 $ .02
======== ======== =======
- -------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS - FOURTH QUARTER* TABLE 15
- ------------------------------------------------------------------------------------------------------------------------------------
Variance
Average Volume Average Rate Interest Attributable to
----------------- ------------ --------------------- -------------------
1995 1994 1995 1994 1995 1994 Variance Rate Volume
-------- ------- ----- ----- -------- -------- --------- ------- --------
(Millions) (Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans:
$ 9,365 $ 7,896 7.30 6.86 Commerical....................... $172,285 $136,600 $ 35,685 $ 9,057 $ 26,628
2,204 1,945 9.35 9.91 Tax-exempt....................... 51,934 48,582 3,352 (2,858) 6,210
------- ------- -------- -------- --------
11,569 9,841 7.69 7.47 Total commercial............. 224,219 185,182 39,037 5,677 33,360
742 752 9.40 8.56 Direct retail.................... 17,593 16,229 1,364 1,571 (207)
2,532 2,442 8.20 7.85 Indirect retail.................. 52,305 48,310 3,995 2,197 1,798
3,797 3,812 12.33 11.44 Credit card...................... 118,019 109,926 8,093 8,524 (431)
349 339 12.50 12.05 Other revolving credit........... 11,011 10,297 714 390 324
------- ------- -------- -------- --------
7,420 7,345 10.64 9.98 Total retail................. 198,928 184,762 14,166 12,257 1,909
725 524 9.77 10.87 Construction..................... 17,857 14,358 3,499 (1,569) 5,068
3,789 3,447 8.60 8.23 Commercial mortgages............. 82,129 71,507 10,622 3,318 7,304
4,167 3,761 8.48 7.89 Residential mortgages............ 89,073 74,770 14,303 5,868 8,435
------- ------- -------- -------- --------
8,681 7,732 8.64 8.24 Total real estate............. 189,059 160,635 28,424 8,028 20,396
452 185 9.44 7.75 Lease financing.................. 10,749 3,615 7,134 940 6,194
348 187 7.29 6.32 Foreign.......................... 6,393 2,987 3,406 517 2,889
------- ------- -------- -------- --------
28,470 25,290 8.77 8.42 Total loans................... 629,348 537,181 92,167 22,550 69,617
Investment Securities:
Held-to-maturity:
1,637 2,414 6.80 6.65 U.S. Government and agency..... 28,038 40,487 (12,449) 846 (13,295)
1,474 1,103 7.96 7.79 Mortgage backed securities..... 29,561 21,640 7,921 490 7,431
338 566 11.33 12.32 State and municipal............ 9,657 17,579 (7,922) (1,312) (6,610)
12 14 5.12 5.71 Other.......................... 160 209 (49) (20) (29)
------- ------- -------- -------- --------
Total securities
3,461 4,097 7.73 7.74 held-to-maturity............ 67,416 79,915 (12,499) (100) (12,399)
Available-for-sale:**
3,954 2,389 7.08 5.47 U.S. Government and agency..... 70,545 32,922 37,623 11,686 25,937
1,106 855 7.20 4.50 Mortgage backed securities..... 20,067 9,694 10,373 6,971 3,402
155 241 6.00 6.22 Other.......................... 2,353 3,773 (1,420) (131) (1,289)
------- ------- -------- -------- --------
Total securities
5,215 3,485 7.07 5.28 available-for-sale.......... 92,965 46,389 46,576 18,908 27,668
------- ------- -------- -------- --------
8,676 7,582 7.33 6.61 Total investment securities... 160,381 126,304 34,077 14,726 19,351
421 7 7.95 6.62 Interest-bearing bank balances..... 8,442 110 8,332 26 8,306
Federal funds sold and
securities purchased under
225 100 5.84 5.46 resale agreements................ 3,310 1,382 1,928 103 1,825
916 770 6.25 6.25 Trading account assets............. 14,413 12,120 2,293 (1) 2,294
------- ------- -------- -------- --------
$38,708 $33,749 8.36 7.96 Total interest-earning assets. 815,894 677,097 138,797 35,578 103,219
======= =======
INTEREST EXPENSE
$ 3,317 $ 3,364 1.84 1.70 Interest-bearing demand............ 15,392 14,443 949 1,150 (201)
6,985 6,114 3.73 3.08 Savings and money market savings... 65,731 47,438 18,293 10,954 7,339
6,631 5,457 5.90 4.61 Savings certificates............... 98,647 63,416 35,231 19,935 15,296
2,797 1,493 6.10 4.86 Large denomination certificates.... 43,028 18,288 24,740 5,609 19,131
------- ------- -------- -------- --------
Total time deposits in
19,730 16,428 4.48 3.47 domestic offices............ 222,798 143,585 79,213 46,914 32,299
975 612 5.52 5.12 Time deposits in foreign offices... 13,567 7,898 5,669 667 5,002
------- ------- -------- -------- --------
20,705 17,040 4.53 3.53 Total time deposits........... 236,365 151,483 84,882 48,314 36,568
Federal funds purchased and
securities sold under
4,686 5,478 6.01 5.34 repurchase agreements............ 70,970 73,723 (2,753) 8,624 (11,377)
561 466 5.39 4.87 Commercial paper................... 7,625 5,725 1,900 645 1,255
2,085 675 5.92 5.09 Other short-term borrowed funds.... 31,126 8,667 22,459 1,625 20,834
------- ------- -------- -------- --------
Total short-term
7,332 6,619 5.94 5.28 borrowed funds.............. 109,721 88,115 21,606 11,564 10,042
3,889 3,956 5.77 5.20 Bank notes......................... 56,589 51,868 4,721 5,618 (897)
1,324 839 6.58 6.67 Other long-term debt............... 21,949 14,098 7,851 (193) 8,044
------- ------- -------- -------- --------
5,213 4,795 5.98 5.46 Total long-term debt.......... 78,538 65,966 12,572 6,566 6,006
------- ------- -------- -------- --------
Total interest-bearing
$33,250 $28,454 5.07 4.26 liabilities................. 424,624 305,564 119,060 62,971 56,089
======= ======= ----- ----- -------- -------- --------
3.29 3.70 Interest rate spread
===== =====
Net yield on interest-earning
4.01 4.37 assets and net interest income... $391,270 $371,533 $ 19,737 (31,976) 51,713
===== ===== ======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</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
gains (losses) of $104 million in 1995 and $(44) million in 1994
36
<PAGE> 38
<TABLE>
- -----------------------------------------------------------------------------------------------
QUARTERLY ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 16
- -----------------------------------------------------------------------------------------------
<CAPTION>
1995
--------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period .......... $ 408,684 $ 408,633 $ 408,500 $ 406,132
Provision for loan losses ............... 30,172 23,179 28,652 21,788
Deduct net loan losses:
Loans charged off:
Commercial .......................... 1,662 431 1,872 318
Credit card ......................... 29,292 27,424 23,829 21,431
Other revolving credit .............. 1,239 1,202 1,058 805
Other retail ........................ 4,747 3,609 3,528 3,412
Real estate ......................... 1,332 526 5,499 391
Lease financing ..................... 56 99 636 101
Foreign ............................. -- -- -- --
--------- --------- --------- ---------
Total ............................. 38,328 33,291 36,422 26,458
Recoveries:
Commercial .......................... 894 2,561 1,400 695
Credit card ......................... 3,365 3,207 3,186 3,203
Other revolving credit .............. 278 273 267 322
Other retail ........................ 913 1,056 972 1,019
Real estate ......................... 2,804 3,021 2,037 1,761
Lease financing ..................... 26 45 41 30
Foreign ............................. -- -- -- 8
--------- --------- --------- ---------
Total ............................. 8,280 10,163 7,903 7,038
--------- --------- --------- ---------
Net loan losses ....................... 30,048 23,128 28,519 19,420
--------- --------- --------- ---------
Balance at end of period ................ $ 408,808* $ 408,684* $ 408,633* $ 408,500*
========= ========= ========= =========
NET LOAN LOSSES (RECOVERIES)
BY CATEGORY
Commercial .............................. 768 (2,130) 472 (377)
Credit card ............................. 25,927 24,217 20,643 18,228
Other revolving credit .................. 961 929 791 483
Other retail ............................ 3,834 2,553 2,556 2,393
Real estate ............................. (1,472) (2,495) 3,462 (1,370)
Lease financing ......................... 30 54 595 71
Foreign ................................. -- -- -- (8)
--------- --------- --------- ---------
Total ............................. 30,048 23,128 28,519 19,420
========= ========= ========= =========
Net loan losses -- excluding
credit cards .......................... $ 4,121 $ (1,089) $ 7,876 $ 1,192
ANNUALIZED NET LOAN LOSSES
(RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial .............................. .03% (.07%) .02% (.01%)
Credit card ............................. 2.73 2.38 2.07 1.84
Other revolving credit .................. 1.10 1.08 .93 .57
Other retail ............................ .47 .32 .33 .31
Real estate ............................. (.07) (.12) .17 (.07)
Lease financing ......................... .03 .09 1.19 .15
Foreign ................................. -- -- -- (.01)
Total loans ............................. .42 .33 .42 .30
Total loans -- excluding credit cards ... .07 (.02) .14 .02
Period-end allowance to
outstanding loans ..................... 1.40% 1.41% 1.45% 1.53%
<CAPTION>
1994
---------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period .......... $ 406,005 $ 405,942 $ 405,474 $ 404,798
Provision for loan losses ............... 19,539 18,123 16,342 17,759
Deduct net loan losses:
Loans charged off:
Commercial .......................... 1,793 3,063 2,947 5,080
Credit card ......................... 19,682 17,310 16,808 15,928
Other revolving credit .............. 1,000 908 902 905
Other retail ........................ 3,216 2,504 2,605 3,084
Real estate ......................... 1,785 749 1,352 819
Lease financing ..................... 57 28 80 61
Foreign ............................. -- -- -- --
--------- --------- --------- ---------
Total ............................. 27,533 24,562 24,694 25,877
Recoveries:
Commercial .......................... 1,382 915 1,423 1,957
Credit card ......................... 2,926 2,837 2,760 2,771
Other revolving credit .............. 224 285 303 247
Other retail ........................ 927 1,159 749 1,121
Real estate ......................... 2,624 1,273 3,506 2,612
Lease financing ..................... 31 25 70 78
Foreign ............................. 7 8 9 8
--------- --------- --------- ---------
Total ............................. 8,121 6,502 8,820 8,794
--------- --------- --------- ---------
Net loan losses ....................... 19,412 18,060 15,874 17,083
--------- --------- --------- ---------
Balance at end of period ................ $ 406,132 $ 406,005 $ 405,942 $ 405,474
========= ========= ========= =========
NET LOAN LOSSES (RECOVERIES)
BY CATEGORY
Commercial .............................. $ 411 $ 2,148 $ 1,524 $ 3,123
Credit card ............................. 16,756 14,473 14,048 13,157
Other revolving credit .................. 776 623 599 658
Other retail ............................ 2,289 1,345 1,856 1,963
Real estate ............................. (839) (524) (2,154) (1,793)
Lease financing ......................... 26 3 10 (17)
Foreign ................................. (7) (8) (9) (8)
--------- --------- --------- ---------
Total ............................. $ 19,412 $ 18,060 $ 15,874 $ 17,083
========= ========= ========= =========
Net loan losses -- excluding
credit cards .......................... $ 2,656 $ 3,587 $ 1,826 $ 3,926
ANNUALIZED NET LOAN LOSSES
(RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial .............................. .02% .09% .07% .14%
Credit card ............................. 1.76 1.57 1.63 1.67
Other revolving credit .................. .92 .74 .72 .80
Other retail ............................ .29 .17 .23 .25
Real estate ............................. (.04) (.03) (.12) (.10)
Lease financing ......................... .06 .01 .02 (.04)
Foreign ................................. (.01) (.04) (.04) (.04)
Total loans ............................. .31 .29 .26 .30
Total loans -- excluding credit cards ... .05 .07 .04 .08
Period-end allowance to
outstanding loans ..................... 1.57% 1.63% 1.67% 1.71%
- ------------------------------------------------------------------------------------------------
</TABLE>
*Includes the related allowance for credit losses for impaired loans as
defined in FASB 114, "Accounting by Creditors for Impairment of a Loan," of
$916 at December 31, 1995, $916 at September 30, 1995, $0 at June 30, 1995
and $2,070 at March 31, 1995
37
<PAGE> 39
reclassified $2.720 billion of securities held-to-maturity
as securities available-for-sale under a one-time
allowance permitted by the Financial Accounting Standards
Board for year-end 1995 financial statements.
The provision for loan losses was $30.172 million,
an increase of $10.633 million or 54.4 percent from
$19.539 million a year earlier. Net loan loses were
$30.048 million or .42 percent of average loans annualized
compared with $19.412 million or .31 percent in the same
three months of 1994. The rise reflected higher
charge-offs, principally in credit cards and other retail
loans, as well as more moderate loan recoveries. Excluding
credit cards, net charge-offs for the fourth period
totaled $4.121 million or .07 percent of average related
loans compared with $2.656 million or .05 percent in 1994.
Credit card net loan losses were $25.927 million or
2.73 percent of average credit card loans for the period
versus $16.756 million or 1.76 percent in the 1994 fourth
quarter. On a managed basis credit card net charge-offs,
including securitized loans, were $29.164 million or 2.72
percent compared with $16.799 million or 1.73 percent a
year earlier. Other retail loans, consisting of direct and
indirect retail lending, had net loan losses of $3.834
million or .47 percent of average related loans versus
$2.289 million or .29 percent in the same three months of
1994.
Other operating revenue expanded $31.566 million or
20.4 percent. Solid growth occurred in all major
categories except mortgage fee income which declined from
the prior year primarily due to the April sale of the
corporation's mortgage servicing portfolio and loss of
associated servicing income. Deposit account service
charges were up $6.958 million or 14.4 percent, while
trust fee revenues increased $3.404 million or 10.9
percent. Credit card fee income was higher by $2.091
million or 6.9 percent and included excess revenues
received from cardholder payments on the corporation's
securitized loan portfolio. Investment fee income,
consisting of fees from mutual funds, loan syndications,
brokerage commissions, variable rate demand bonds and
private placements, rose $4.127 million or 116.1 percent.
Electronic banking service revenues, associated
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 17
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994
----------------------------------------- -----------------------------------------
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 ..... $ 55,371 $ 52,409 $ 52,452 $ 48,881 $ 48,413 $ 48,940 $ 50,646 $ 48,150
Fees for trust services ................. 34,689 31,740 33,211 30,881 31,285 32,151 32,983 31,681
Credit card income -- net of
interchange payments .................. 32,291 31,180 31,867 28,944 30,200 28,271 28,120 25,334
Electronic banking ...................... 9,412 8,962 8,860 7,245 7,513 6,353 6,072 4,745
Investment fee income ................... 7,682 8,690 5,404 5,177 3,555 3,911 2,785 3,841
Mortgage fee income ..................... 4,050 4,269 6,547 8,454 8,886 8,590 7,715 8,033
Trading account profits (losses) --
excluding interest .................... 8,238 5,646 5,608 6,206 1,669 3,464 1,133 3,236
Insurance premiums and commissions ...... 3,422 3,044 3,385 3,313 3,189 2,425 3,379 2,686
Bankers' acceptance and letter
of credit fees ........................ 6,003 5,885 5,743 5,559 5,365 5,827 5,689 6,287
Other service charges and fees .......... 7,054 5,609 5,624 6,395 4,462 4,307 4,299 5,041
Other income ............................ 18,077 12,981 7,603 6,038 186 7,302 10,478 5,835
-------- -------- -------- -------- -------- -------- -------- --------
Total other operating revenue ..... 186,289 170,415 166,304 157,093 154,723 151,541 153,299 144,869
Gain on sale of mortgage servicing
portfolio ............................. -- -- 79,025 -- -- -- -- --
Investment securities gains (losses) .... 2,554 317 (26,236) (129) 2,094 433 221 572
-------- -------- -------- -------- -------- -------- -------- --------
Total ............................. $188,843 $170,732 $219,093 $156,964 $156,817 $151,974 $153,520 $145,441
======== ======== ======== ======== ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 18
- -----------------------------------------------------------------------------------------------
1995
-------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Salaries ................................. $ 129,673 $ 127,152 $ 123,720 $ 118,185
Employee benefits ........................ 22,405 26,146 26,267 26,778
--------- --------- --------- ---------
Total personnel expense ............ 152,078 153,298 149,987 144,963
Net occupancy expense .................... 24,551 21,424 20,940 20,190
Equipment expense ........................ 27,753 25,750 27,935 28,263
Postage and delivery ..................... 9,801 9,379 9,190 9,592
Outside data processing,
programming and software ............... 11,966 9,959 10,664 9,897
Stationery and supplies .................. 7,604 6,374 6,619 6,208
Advertising and sales promotion .......... 16,869 14,334 9,747 9,412
Professional services .................... 14,922 9,721 9,149 5,691
Travel and business promotion ............ 6,051 4,474 5,110 4,059
FDIC insurance and regulatory
examinations ........................... 4,242 9,464 13,344 13,339
Check clearing and other bank services ... 2,334 2,374 2,337 2,150
Amortization of intangible assets ........ 1,190 1,210 2,116 4,071
Foreclosed property expense .............. 813 (146) 408 (155)
Other expense ............................ 34,891 31,267 39,071 25,352
--------- --------- --------- ---------
Total .............................. $ 315,065 $ 298,882 $ 306,617 $ 283,032
========= ========= ========= =========
Overhead ratio ........................... 54.6% 52.9% 56.0% 53.4%
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1994
-------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Salaries ................................. $ 117,904 $ 116,793 $ 114,882 $ 115,211
Employee benefits ........................ 23,662 22,902 26,350 25,803
--------- --------- --------- ---------
Total personnel expense ............ 141,566 139,695 141,232 141,014
Net occupancy expense .................... 21,261 20,026 20,196 19,428
Equipment expense ........................ 27,197 26,789 26,010 26,512
Postage and delivery ..................... 8,650 8,645 8,816 9,052
Outside data processing,
programming and software ............... 10,773 7,834 8,119 8,485
Stationery and supplies .................. 6,182 6,578 5,836 5,962
Advertising and sales promotion .......... 6,949 8,019 9,316 9,783
Professional services .................... 6,539 4,617 5,385 3,952
Travel and business promotion ............ 4,650 3,757 4,343 3,504
FDIC insurance and regulatory
examinations ........................... 13,188 13,294 13,589 13,380
Check clearing and other bank services ... 2,204 2,475 1,920 2,295
Amortization of intangible assets ........ 4,430 4,524 4,602 5,137
Foreclosed property expense .............. 9 (452) (404) (3,441)
Other expense ............................ 28,927 25,492 25,585 24,987
--------- --------- --------- ---------
Total .............................. $ 282,525 $ 271,293 $ 274,545 $ 270,050
========= ========= ========= =========
Overhead ratio ........................... 53.7% 53.2% 54.3% 55.4%
- ------------------------------------------------------------------------------------------------
</TABLE>
with ATM and debit card usage, grew $1.899 million or
25.3 percent. Trading account profits were up $6.569
million and include foreign exchange revenue, classified
prior to year-end 1995 financial statements as part of
other income. Prior period amounts have been restated for
the reclassification.
Total noninterest expense was higher by $32.540
million or 11.5 percent, primarily reflecting investment
spending associated with the corporation's ongoing
strategic initiatives. Total personnel expense rose
$10.512 million or 7.4 percent with increases in salaries
expense moderated by lower employee benefit costs.
Combined net occupancy and equipment expense was up $3.846
million or 7.9 percent, principally due to renovations and
continued rollout of Next Generation Branch Automation
equipment. Remaining combined categories of noninterest
expense grew $18.182 million or 19.7 percent. Advertising
and sales promotion expense increased $9.920 million or
142.8 percent, reflecting costs for expanded national
credit card solicitations in the period. Expenses for
professional services were higher by $8.383 million or
128.2 percent, primarily due to consulting fees for
ongoing strategic initiatives.
RESULTS OF OPERATIONS
1994 vs. 1993
Consolidated net income for 1994 was $539.058
million or $3.12 per fully diluted share compared with
$492.095 million or $2.81 per fully diluted share in 1993.
The earnings gain reflected strong loan growth, good
expense control and lower credit loss costs, along with a
modest increase in other operating revenue. Net income
represented returns of 17.41 percent on shareholders'
equity and 1.46 percent on assets versus 17.13 percent and
1.46 percent, respectively, in 1993.
Taxable equivalent net interest income increased
$41.340 million or 3 percent. Growth in interest-earning
assets primarily fueled the gain which was offset
partially by higher levels of interest-bearing liabilities
and an increase in the average cost of funds. The net
yield on interest-earning assets declined 30 basis points.
Taxable equivalent interest income rose $240.716
million or 10.8 percent. Average interest-earning assets
were higher by $3.014 billion or 10.1 percent led by
loans, which expanded $2.667 billion or 12.4 percent for
the year. The commercial loan portfolio, including related
real estate categories, grew $1.549 billion or 13 percent,
reflecting gains largely in regular commercial loans and
commercial mortgages. Retail loans,
39
<PAGE> 41
including residential mortgages, were higher by
$1.118 billion or 11.6 percent, with credit cards and
indirect retail loans accounting for the majority of the
growth.
Interest expense increased $199.376 million or 23.8
percent. Average interest-bearing liabilities were up
$3.016 billion or 12.3 percent while the average rate paid
rose 34 basis points. Growth in interest-bearing
liabilities occurred primarily in long-term debt and in
short-term borrowings, up $2.277 billion or 109.8 percent
and $827 million or 15.3 percent, respectively. Total
interest-bearing time deposits were largely unchanged. The
increase in long-term debt principally was due to
continued expansion of medium-term bank notes. The notes
are part of Wachovia Bank of North Carolina's ongoing bank
note program, consisting of short- and medium-term bank
notes, which provide additional funding for the
corporation at attractive rates.
The following table summarizes the changes in
taxable equivalent interest income and interest expense
due to changes in rates and volumes between 1994 and 1993.
Changes which are not solely due to rate or volume are
allocated proportionately to rate and volume.
<TABLE>
<CAPTION>
1994 over 1993
-----------------------------------
Attributable to
----------------------
Rate Volume Total
--------- --------- ---------
$ in thousands
<S> <C> <C> <C>
Increase (decrease) in interest income:
Loans .................................................. $ 25,589 $ 210,408 $ 235,997
Investment securities:
Held-to-maturity:
State and municipal ................................. 438 (11,223) (10,785)
Other investments ................................... 24,422 (204,350) (179,928)
Available-for-sale:
Other investments ................................... -- 194,576 194,576
Interest-bearing bank balances ......................... 555 (2,863) (2,308)
Federal funds sold and securities purchased under
resale agreements .................................... 2,508 (7,259) (4,751)
Trading account assets ................................. 9,245 (1,330) 7,915
---------
Total interest-earning assets ....................... 14,458 226,258 240,716
Increase (decrease) in interest expense:
Total deposits in domestic offices ..................... (21,681) (4,482) (26,163)
Time deposits in foreign offices ....................... 6,144 1,671 7,815
Short-term borrowed funds .............................. 69,217 29,508 98,725
Long-term debt ......................................... 437 118,562 118,999
---------
Total interest-bearing liabilities .................. 90,306 109,070 199,376
---------
Increase in net interest income ........................... $ 41,340
=========
</TABLE>
At December 31, 1994, nonperforming assets were
$100.517 million or .39 percent of loans and foreclosed
property, down $54.384 million or 35.1 percent from a year
earlier. The provision for loan losses totaled $71.763
million in 1994, lower by $20.889 million or 22.5 percent
from $92.652 million in 1993, but exceeded net loan losses
by $1.334 million. Net charge-offs were $70.429 million or
.29 percent of average loans compared with $67.411 million
or .31 percent in 1993. The allowance for loan losses at
December 31, 1994 was $406.132 million, representing 1.57
percent of loans and 516 percent coverage of nonperforming
loans versus $404.798 million, 1.76 percent and 372
percent, respectively, at year-end 1993.
Total other operating revenue rose $4.253 million or
slightly under 1 percent. Good gains in credit card fee
income, trust service fees, and electronic banking service
revenues largely were offset by reduced levels of deposit
account service charges, mortgage fee income and trading
account profits. Credit card fee income increased $10.145
million or 10 percent, while trust service fees were
higher by $8.070 million or 6.7 percent. Electronic
banking service revenues grew $9.843 million or 66.3
percent. Service charges on deposit accounts were lower by
$6.736 million or 3.3 percent, with mortgage fee income
decreasing $5.877 million or 15 percent. Trading account
profits were down $12.943 million or 57.7 percent.
Total noninterest expense decreased $32.823 million
or 2.9 percent. Total personnel expense was lower by
$5.173 million or under 1 percent with increases in
salaries expense offset by reduced employee benefits
expense. Combined net occupancy and equipment expense rose
$3.103 million or 1.7 percent, reflecting a rise in
equipment expense moderated partially by lower net
occupancy expense. Remaining combined categories of
noninterest expense spending were down $30.753 million or
8.1 percent.
40
<PAGE> 42
SUPERVISION AND REGULATION
---------------------------------------------------------
Wachovia Corporation is a registered bank holding
company under the Bank Holding Company Act of 1956 (BHC
Act) 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 BHC Act, 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. On December 1,
1995, South Carolina National, the mid-tier holding
company remaining after Wachovia's 1991 acquisition of
South Carolina National Corporation, was merged into
Wachovia Corporation to simplify organizational structure.
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 examination, audit and reporting
requirements on insured depository institutions. Among
other requirements, the regulation requires a revision of
risk-based capital standards. These 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 Shareholders' Equity and
Capital Ratios on pages 32 and 33.
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. Effective
September 29, 1995, the bill allows adequately capitalized
and managed bank holding companies to acquire control of a
bank in any state subject to concentration limits.
Beginning June 1, 1997,
41
<PAGE> 43
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 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. The 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.
Separately the Act also permits bank subsidiaries to
act as agents for certain purposes for each other across
state lines. These agency powers became available on
September 29, 1995. Effective January 2, 1996, Wachovia
Bank of Georgia, Wachovia Bank of North Carolina and
Wachovia Bank of South Carolina entered into a mutual
agreement to act as agents for each other, thereby making
significant interstate banking services available to all
customers in their three states.
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.
42
<PAGE> 44
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, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, 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 A 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 11, 1996
43
<PAGE> 45
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31
1995 1994
----------- -----------
<S> <C> <C>
$ in thousands
ASSETS
Cash and due from banks ........................................ $ 2,692,318 $ 2,670,115
Interest-bearing bank balances ................................. 451,279 6,763
Federal funds sold and securities
purchased under resale agreements ............................ 144,105 201,606
Trading account assets ......................................... 1,114,926 889,958
Securities available-for-sale .................................. 7,409,825 3,538,247
Securities held-to-maturity (market value of $1,721,222
in 1995 and $4,114,644 in 1994) .............................. 1,619,480 4,184,610
Loans and net leases ........................................... 29,269,825 25,898,774
Less unearned income on loans .................................. 8,672 7,970
----------- -----------
Total loans .............................................. 29,261,153 25,890,804
Less allowance for loan losses ................................. 408,808 406,132
----------- -----------
Net loans ................................................ 28,852,345 25,484,672
Premises and equipment ......................................... 628,153 543,548
Due from customers on acceptances .............................. 883,825 416,591
Other assets ................................................... 1,185,058 1,251,848
----------- -----------
Total assets ............................................. $44,981,314 $39,187,958
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand ....................................................... $ 5,855,286 $ 5,657,579
Interest-bearing demand ...................................... 3,473,607 3,524,857
Savings and money market savings ............................. 6,991,133 6,065,966
Savings certificates ......................................... 6,613,238 5,464,532
Large denomination certificates .............................. 2,671,759 1,416,318
Noninterest-bearing time ..................................... 3,334 24,121
----------- ----------
Total deposits in domestic offices ....................... 25,608,357 22,153,373
Deposits in foreign offices:
Demand ....................................................... 5,766 5,540
Time ......................................................... 754,634 910,345
----------- -----------
Total deposits in foreign offices ........................ 760,400 915,885
----------- -----------
Total deposits ........................................... 26,368,757 23,069,258
Federal funds purchased and securities
sold under repurchase agreements ............................. 5,850,540 5,898,398
Commercial paper ............................................... 502,136 406,706
Other short-term borrowed funds ................................ 1,720,592 1,007,340
Long-term debt:
Bank notes ................................................... 4,088,326 3,953,318
Other long-term debt ......................................... 1,334,702 837,146
----------- -----------
Total long-term debt ..................................... 5,423,028 4,790,464
Acceptances outstanding ........................................ 883,825 416,591
Other liabilities .............................................. 458,679 312,694
----------- -----------
Total liabilities ........................................ 41,207,557 35,901,451
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 170,358,504 shares in 1995
and 170,933,749 shares in 1994 ............................. 851,793 854,669
Capital surplus ................................................ 713,120 741,946
Retained earnings .............................................. 2,208,844 1,689,892
----------- -----------
Total shareholders' equity ............................... 3,773,757 3,286,507
----------- -----------
Total liabilities and shareholders' equity ............... $44,981,314 $39,187,958
=========== ===========
</TABLE>
See notes to consolidated financial statements
44
<PAGE> 46
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
$ in thousands, except per share ---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans ................................................................ $2,384,919 $1,864,082 $1,627,450
Securities available-for-sale:
Other investments .................................................. 268,106 182,440 --
Securities held-to-maturity:
State and municipal ................................................ 34,023 50,122 57,670
Other investments .................................................. 260,218 223,691 396,056
Interest-bearing bank balances ....................................... 9,121 597 2,905
Federal funds sold and securities
purchased under resale agreements .................................. 7,234 7,682 12,433
Trading account assets ............................................... 56,109 33,680 26,323
---------- ---------- ----------
Total interest income .......................................... 3,019,730 2,362,294 2,122,837
INTEREST EXPENSE
Deposits:
Domestic offices ................................................... 781,578 516,914 543,077
Foreign offices .................................................... 41,876 22,318 14,503
---------- ---------- ----------
Total interest on deposits ..................................... 823,454 539,232 557,580
Short-term borrowed funds ............................................ 467,007 272,572 173,847
Long-term debt ....................................................... 288,646 226,584 107,585
---------- ---------- ----------
Total interest expense ......................................... 1,579,107 1,038,388 839,012
NET INTEREST INCOME .................................................. 1,440,623 1,323,906 1,283,825
Provision for loan losses ............................................ 103,791 71,763 92,652
---------- ---------- ----------
Net interest income after provision for loan losses .................. 1,336,832 1,252,143 1,191,173
OTHER INCOME
Service charges on deposit accounts .................................. 209,113 196,149 202,885
Fees for trust services .............................................. 130,521 128,100 120,030
Credit card income ................................................... 124,282 111,925 101,780
Mortgage fee income .................................................. 23,320 33,224 39,101
Trading account profits .............................................. 25,698 9,502 22,445
Student loan servicing ............................................... -- -- 5,535
Other operating income ............................................... 167,167 125,532 108,403
---------- ---------- ----------
Total other operating revenue .................................. 680,101 604,432 600,179
Gain on sale of mortgage servicing portfolio ......................... 79,025 -- --
Gain on sale of subsidiary ........................................... -- -- 8,030
Investment securities gains (losses) ................................. (23,494) 3,320 19,394
---------- ---------- ----------
Total other income ............................................. 735,632 607,752 627,603
OTHER EXPENSE
Salaries ............................................................. 498,730 464,790 455,621
Employee benefits .................................................... 101,596 98,717 113,059
---------- ---------- ----------
Total personnel expense ........................................ 600,326 563,507 568,680
Net occupancy expense ................................................ 87,105 80,911 82,070
Equipment expense .................................................... 109,701 106,508 102,246
Other operating expense .............................................. 406,464 347,487 378,240
---------- ---------- ----------
Total other expense ............................................ 1,203,596 1,098,413 1,131,236
Income before income taxes ........................................... 868,868 761,482 687,540
Applicable income taxes .............................................. 266,325 222,424 195,445
---------- ---------- ----------
NET INCOME ........................................................... $ 602,543 $ 539,058 $ 492,095
========== ========== ==========
Net income per common share:
Primary ............................................................ $ 3.50 $ 3.13 $ 2.83
Fully diluted ...................................................... $ 3.49 $ 3.12 $ 2.81
Average shares outstanding:
Primary ............................................................ 172,089 172,339 173,941
Fully diluted ...................................................... 172,957 172,951 175,198
</TABLE>
See notes to consolidated financial statements
45
<PAGE> 47
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
---------------------------- Capital Retained
Shares Amount Surplus Earnings
$ in thousands, except per share ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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 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
=========== ========= ========= ===========
YEAR ENDED DECEMBER 31, 1995
Balance at beginning of year ....................... 170,933,749 $ 854,669 $ 741,946 $ 1,689,892
Net income ......................................... 602,543
Cash dividends declared on common
stock -- $1.38 a share ........................... (235,495)
Common stock issued pursuant to:
Stock option and employee benefit plans .......... 800,751 4,004 16,023
Dividend reinvestment plan ....................... 349,310 1,747 11,719
Conversion of debentures ......................... 165,885 829 2,355
Common stock acquired .............................. (1,890,517) (9,453) (60,026)
Unrealized gains on securities
available-for-sale, net of tax ................... 153,748
Miscellaneous ...................................... (674) (3) 1,103 (1,844)
----------- --------- --------- -----------
Balance at end of year ............................. 170,358,504 $ 851,793 $ 713,120 $ 2,208,844
=========== ========= ========= ===========
</TABLE>
See notes to consolidated financial statements
46
<PAGE> 48
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
$ in thousands ----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .................................................................... $ 602,543 $ 539,058 $ 492,095
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses ................................................... 103,791 71,763 92,652
Depreciation and amortization ............................................... 90,547 107,502 108,085
Deferred income taxes (benefit) ............................................. 3,919 12,440 (26,663)
Investment securities (gains) losses ........................................ 23,494 (3,320) (19,394)
Gain on sale of mortgage servicing portfolio ................................ (79,025) -- --
Gain on sale of subsidiary .................................................. -- -- (8,030)
Gain on sale of noninterest-earning assets .................................. (5,699) (5,316) (1,517)
Increase (decrease) in accrued income taxes ................................. 6,995 (1,059) 6,207
Increase in accrued interest receivable ..................................... (64,872) (31,041) (38,968)
Increase (decrease) in accrued interest payable ............................. 67,061 11,509 (43,116)
Net change in other accrued and deferred income and expense ................. 44,195 (19,337) (2,818)
Net change in trading account activities .................................... (224,968) (101,179) 107,189
Net change in loans held for resale ......................................... (333,075) 259,083 (377,994)
----------- ----------- -----------
Net cash provided by operating activities ............................... 234,906 840,103 287,728
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing bank balances ..................... (444,516) 5,715 177,075
Net decrease (increase) in federal funds sold and securities
purchased under resale agreements ........................................... 57,501 489,500 (212,134)
Purchases of securities available-for-sale .................................... (4,035,218) (1,131,114) --
Purchases of securities held-to-maturity ...................................... (665,727) (588,873) (3,287,189)
Sales of securities available-for-sale ........................................ 2,398,468 73,062 --
Sales of securities held-to-maturity .......................................... -- -- 76,224
Calls, maturities and prepayments of securities available-for-sale ............ 715,181 1,185,413 --
Calls, maturities and prepayments of securities held-to-maturity .............. 508,830 544,099 1,819,801
Net increase in loans made to customers ....................................... (3,143,478) (3,255,879) (1,621,508)
Capital expenditures .......................................................... (185,796) (147,870) (152,061)
Proceeds from sales of premises and equipment ................................. 31,433 36,789 14,457
Proceeds from sales of mortgage servicing portfolio ........................... 142,011 -- --
Net increase in other assets .................................................. (46,431) (128,411) (188,376)
Business combinations and dispositions ........................................ -- -- 20,000
----------- ----------- -----------
Net cash used by investing activities ................................... (4,667,742) (2,917,569) (3,353,711)
FINANCING ACTIVITIES
Net increase (decrease) in demand, savings and money market accounts .......... 1,051,063 (621,400) 752,659
Net increase (decrease) in certificates of deposit ............................ 2,248,436 338,260 (775,722)
Net (decrease) increase in federal funds purchased and securities
sold under repurchase agreements ............................................ (47,858) 1,157,115 1,027,791
Net increase (decrease) in commercial paper ................................... 95,430 (182,472) 202,560
Net increase (decrease) in other short-term borrowings ........................ 713,252 (83,783) 242,300
Proceeds from issuance of bank notes .......................................... 1,349,812 2,095,479 1,861,010
Maturities of bank notes ...................................................... (1,216,044) (515,425) (250,000)
Proceeds from issuance of other long-term debt ................................ 496,387 247,887 248,075
Payments on other long-term debt .............................................. (491) (352) (80,579)
Common stock issued ........................................................... 24,115 25,339 24,961
Dividend payments ............................................................. (235,495) (210,503) (191,488)
Common stock repurchased ...................................................... (65,032) (52,908) (98,804)
Other equity transactions ..................................................... -- -- (19)
Net increase in other liabilities ............................................. 41,464 20,816 4,908
----------- ----------- -----------
Net cash provided by financing activities ............................... 4,455,039 2,218,053 2,967,652
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............................. 22,203 140,587 (98,331)
Cash and cash equivalents at beginning of year ................................ 2,670,115 2,529,528 2,627,859
----------- ----------- -----------
Cash and cash equivalents at end of year ...................................... $ 2,692,318 $ 2,670,115 $ 2,529,528
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Unrealized appreciation in securities available-for-sale:
Increase (decrease) in securities available-for-sale ........................ $ 251,958 $ (61,847) $ --
(Decrease) increase in deferred taxes ....................................... (98,210) 24,212 --
Increase (decrease) in shareholders' equity ................................. 153,748 (37,635) --
</TABLE>
See notes to consolidated financial statements
47
<PAGE> 49
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$ in thousands
- --------------------------------------------------------------------------------
NOTE A -- ACCOUNTING POLICIES
Nature of Operations -- The Corporation 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. In addition to general commercial banking, the
Corporation and its subsidiaries are engaged in trust and investment
management, residential mortgage origination, leasing, state and local
government securities underwriting, foreign exchange, corporate finance and
other money market services.
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.
Use of Estimates -- The financial statements are prepared in accordance with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
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).
Interest revenue arising from cash financial instruments is included in
interest income-trading account assets. 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 and foreign exchange
activities are included in trading account profits (losses), while gains and
losses from interest rate derivatives are included in other operating income.
Investment Securities Held-to-Maturity and Available-for-Sale -- Management
determines the appropriate classification of debt securities at the time of
purchase. 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 and are stated at fair
value. Unrealized gains and losses, net of tax, on available-for-sale
securities are recorded in 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 specific identification method is used to
determine realized gains and losses on sales of securities, which are reported
as investment securities gains and losses.
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 interest 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 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 loans is accrued and recorded as interest
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, the balance of 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 and the loan is in the process of
collection. Interest is accrued on revolving credit loans until payments become
120 days delinquent, at which time the outstanding principal balance and
accrued unpaid interest is charged off. See Note D for the discussion of the
adoption of Statement of Financial Accounting Standard No. 114, "Accounting by
Creditors for Impairment of a Loan."
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 -- 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.
Premiums paid to purchase servicing rights of mortgage loans are amortized over
the aggregate estimated remaining servicing life of the loans.
- --------------------------------------------------------------------------------
48
<PAGE> 50
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE A -- ACCOUNTING POLICIES -- Concluded
Impairment of Long-Lived Assets -- Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" was issued in March 1995. This standard will be
adopted as of January 1, 1996 and is not expected to have a material impact on
financial position or results of operations.
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. 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. 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. 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.
Stock-Based Compensation -- Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" was issued in October 1995 and
encourages, but does not require, adoption of a fair value method of accounting
for employee stock-based compensation plans. As permitted by the new standard,
management intends to elect disclosure of the Corporation's pro forma net
income and net income per share as if the fair value method had been applied in
measuring compensation cost.
Reclassifications -- Certain prior year balances have been reclassified to
conform to the current year presentation.
- --------------------------------------------------------------------------------
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, 1995 and 1994. 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.
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.
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 values of residential mortgage loans are estimated using quoted market
prices for securities backed by similar loans, adjusted for differences between
the market for the securities and the loans being valued and an estimate of
credit losses in the portfolio. 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.
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.
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
- --------------------------------------------------------------------------------
49
<PAGE> 51
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE B -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- Concluded
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>
1995
-------------------------
Estimated
Book Value Fair Value
----------- -----------
<S> <C> <C>
Financial assets:
Trading account assets ......................... $ 1,114,926 $ 1,114,926
Investment securities .......................... 9,029,305 9,131,047
Loans, net of allowance for loan losses ........ 28,852,345 29,148,815
Financial liabilities:
Deposits ....................................... 26,368,757 26,532,636
Long-term debt ................................. 5,423,028 5,582,409
<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>
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. See Notes I and J for additional information
about off-balance sheet financial instruments.
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.
<TABLE>
<CAPTION>
1995 1994
Estimated Estimated
Fair Value Fair Value
------------ ------------
<S> <C> <C>
Unfunded commitments to
extend credit .................................. $ (62,291) $ (70,534)
Letters of credit ................................ (31,239) (29,664)
Interest rate contracts issued
for trading purposes ........................... 4,063 2,533
Interest rate contracts held for
purposes other than trading .................... 6,873 (25,528)
Other off-balance sheet financial
instruments issued or held for
trading or lending purposes .................... 2,601 (28,728)
</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. 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 amortized cost, fair value, and gross unrealized gains and losses
of investment securities as of December 31 were as follows:
<TABLE>
<CAPTION>
1995
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Held-to-Maturity
- ----------------
U.S. Treasury and other agencies ... $ -- $ -- $ -- $ --
State and municipal ................ 321,045 33,595 212 354,428
Mortgage backed .................... 1,297,935 68,891 532 1,366,294
Other .............................. 500 -- -- 500
---------- ---------- ---------- ----------
$1,619,480 $ 102,486 $ 744 $1,721,222
========== ========== ========== ==========
Available-for-Sale
- ------------------
U.S. Treasury and other agencies ... $5,586,965 $ 148,413 $ 6,233 $5,729,145
Mortgage backed .................... 1,471,761 35,079 451 1,506,389
Other .............................. 98,983 48 -- 99,031
Equity ............................. 62,004 13,365 109 75,260
---------- ---------- ---------- ----------
$7,219,713 $ 196,905 $ 6,793 $7,409,825
========== ========== ========== ==========
<CAPTION>
1994
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Held-to-Maturity
- ----------------
U.S. Treasury and other agencies ... $2,491,476 $ 21,080 $ 103,380 $2,409,176
State and municipal ................ 554,365 26,596 1,797 579,164
Mortgage backed .................... 1,124,550 12,114 24,330 1,112,334
Other .............................. 14,219 -- 249 13,970
---------- ---------- ---------- ----------
$4,184,610 $ 59,790 $ 129,756 $4,114,644
========== ========== ========== ==========
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
---------- ---------- ---------- ----------
$3,600,094 $ 9,880 $ 71,727 $3,538,247
========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
50
<PAGE> 52
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE C -- INVESTMENT SECURITIES -- Concluded
The amortized cost and estimated fair value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ----------
<S> <C> <C>
Held-to-Maturity
- ----------------
Due in one year or less ..................... $ 54,702 $ 55,343
Due after one year through five years ....... 99,481 106,045
Due after five years through ten years ...... 297,150 318,041
Due after ten years ......................... 1,168,147 1,241,793
---------- ----------
Total ................................. 1,619,480 1,721,222
Available-for-Sale
- ------------------
Due in one year or less ..................... 583,563 588,976
Due after one year through five years ....... 5,146,893 5,277,500
Due after five years through ten years ...... 244,825 250,493
Due after ten years ......................... 1,182,428 1,217,596
---------- ----------
Total ................................. 7,157,709 7,334,565
No contractual maturity ..................... 62,004 75,260
---------- ----------
Total ................................. 7,219,713 7,409,825
---------- ----------
Total investment securities ........... $8,839,193 $9,131,047
========== ==========
</TABLE>
Proceeds, gross gains and gross losses realized from the sales, calls and
prepayments of available-for-sale securities for December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Proceeds .................................... $2,398,468 $ 73,062
Gross gains ................................. 3,790 3,361
Gross losses ................................ 27,284 41
</TABLE>
Trading account assets are reported at fair value with unrealized gains and
losses of ($63), ($177) and $1,079 included in earnings during 1995, 1994 and
1993, respectively.
At December 31, 1995 and 1994, investment securities with a carrying value of
$4,360,792 and $4,011,111, 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, 1995.
On December 1, 1995, the Corporation reclassified securities with an amortized
cost of $2,720,000 (fair value $2,774,000) from held-to-maturity to
available-for-sale. The reclassification was made pursuant to a reassessment of
the investment securities portfolio based on the issuance of a special report
by the Financial Accounting Standards Board "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities." In accordance with the report, business entities were allowed a
one time reclassification of the investment securities portfolio between
November 15, 1995 and December 31, 1995. There were no transfers of
held-to-maturity securities during 1994, nor were there any sales of
held-to-maturity securities in 1995 or 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).
- --------------------------------------------------------------------------------
NOTE D -- LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial:
Commercial, financial and other ........... $ 9,753,450 $ 8,377,878
Tax-exempt ................................ 2,238,538 1,809,600
Retail:
Direct .................................... 755,375 750,228
Indirect .................................. 2,543,771 2,339,889
Credit card ............................... 3,917,997 3,969,369
Other revolving credit .................... 353,727 343,140
Real estate:
Construction .............................. 745,776 553,105
Commercial mortgages ...................... 3,855,095 3,483,452
Residential mortgages ..................... 4,213,556 3,821,207
Lease financing-- net ....................... 493,756 188,521
Foreign ..................................... 390,112 254,415
----------- -----------
Total loans-- net ..................... $29,261,153 $25,890,804
=========== ===========
</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>
1995 1994
---------- ----------
<S> <C> <C>
Cash-basis assets-- domestic ................ $ 53,547 $ 78,712
Restructured loans .......................... -- --
---------- ----------
Total nonperforming loans ............. $ 53,547 $ 78,712
========== ==========
Interest income which would have been
recorded pursuant to original terms:
Domestic .................................. $ 6,280 $ 7,929
========== ==========
Interest income recorded:
Domestic .................................. $ 3,430 $ 3,391
========== ==========
</TABLE>
Loans totaling $199 at December 31, 1995, 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, 1995, the Corporation had no significant outstanding
commitments to lend additional funds to borrowers owing cash-basis and
restructured loans.
- --------------------------------------------------------------------------------
51
<PAGE> 53
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE D -- LOANS AND ALLOWANCE FOR LOAN LOSSES -- Concluded
Changes in the allowance for loan losses for the three years ended December 31,
1995 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year .......... $406,132 $404,798 $379,557
Provision for loan losses ............. 103,791 71,763 92,652
Recoveries on loans previously
charged off ......................... 33,384 32,237 29,697
Loans charged off ..................... (134,499) (102,666) (97,108)
-------- -------- --------
Balance at end of year ................ $408,808 $406,132 $404,798
======== ======== ========
</TABLE>
Loans totaling $4,678, $13,051 and $42,256 were transferred to foreclosed real
estate during 1995, 1994 and 1993, 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. See Note I for discussion of
off-balance sheet credit risk.
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
$489,303 and $399,023 at December 31, 1995 and 1994, respectively. During 1995,
$824,461 in new loans were made, and repayments totaled $734,181. Outstanding
standby letters of credit to related parties totaled $22,531 and $34,934 at
December 31, 1995 and 1994, 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>
1995 1994
----------- -----------
<S> <C> <C>
Balance at beginning of year ................ $ 429,745 $ 688,828
Originations/purchases ...................... 19,800,424 20,197,006
Sales/transfers ............................. (19,467,349) (20,456,089)
----------- -----------
Balance at end of year ...................... $ 762,820 $ 429,745
=========== ===========
</TABLE>
At December 31, 1995, impaired loans totaled $12,260, comprised of $9,014 of
loans with no allowance for loan losses and $3,246 of loans with a related
allowance of $916. The average recorded investment in impaired loans during the
year ended December 31, 1995 was approximately $7,228. The Corporation
recognized $58 of cash-basis interest income on impaired loans during 1995.
Effective January 1, 1995, the Corporation prospectively adopted Statement of
Financial Accounting Standard No. 114, "Accounting by Creditors for Impairment
of a Loan" (FASB 114). This standard defines a loan as 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. Impaired loans are measured at the present value of expected future
cash flows using the loan's initial effective interest rate or the fair value
of the collateral for certain collateral dependent loans. The adoption of FASB
114 did not have a material impact on the Corporation's financial position or
results of operations.
During 1995, the Corporation securitized $500 million of credit card
receivables. A securitization involves the transfer of a pool of assets to a
master trust which issues and sells certificates to investors representing a
pro rata interest in the underlying assets. The securitization has been
recorded as a sale in accordance with Statement of Financial Accounting
Standards No. 77, "Reporting by Transferors for Transfers of Receivables with
Recourse." The Corporation recorded no gain or loss at the time of sale, due to
the relatively short average life of the credit card loans. As a result of this
transaction, amounts that would have been a component of net interest income
and the provision for loan losses are instead recorded, net of the interest
expense on the trust certificates, as credit card income.
- --------------------------------------------------------------------------------
NOTE E -- PREMISES, EQUIPMENT AND LEASES
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land ........................................ $ 88,168 $ 88,098
Premises .................................... 404,045 352,159
Equipment ................................... 636,100 562,845
Leasehold improvements ...................... 70,917 67,755
---------- ----------
1,199,230 1,070,857
Less accumulated depreciation
and amortization .......................... 571,077 527,309
---------- ----------
Total premises and equipment .......... $ 628,153 $ 543,548
========== ==========
</TABLE>
The annual minimum rentals under the terms of the Corporation's noncancelable
operating leases as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................... $ 40,952
1997............................................... 37,916
1998............................................... 30,675
1999............................................... 28,550
2000............................................... 29,248
Thereafter......................................... 167,289
--------
Total minimum lease payments................. $334,630
========
</TABLE>
The net rental expense for all operating leases amounted to $43,137 in 1995,
$43,491 in 1994 and $47,579 in 1993. Certain leases have various renewal
options and require increased rentals under cost of living escalation clauses.
- --------------------------------------------------------------------------------
52
<PAGE> 54
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE F -- CREDIT ARRANGEMENTS
At December 31, 1995 and 1994, lines of credit arrangements aggregating
$200,000 were available to the Corporation from unaffiliated banks. Commitment
fees were 10 basis points in 1995 and 15 basis points in 1994; 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, 1995 or 1994.
- --------------------------------------------------------------------------------
NOTE G -- LONG-TERM DEBT
Long-term debt at December 31 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Bank notes, net of discount of $3,473 and $6,132 in 1995 and 1994, respectively (a) ............ $4,088,326 $3,953,318
Other long-term debt:
7.0% subordinated debt securities due in 1999, net of discount of $1,741
and $2,112 in 1995 and 1994, respectively (b) ............................................... 298,259 297,888
6.375% subordinated debt securities due in 2003, net of discount of $1,518
and $1,679 in 1995 and 1994, respectively (b) ............................................... 248,482 248,321
9.65% subordinated capital notes due in 2001 (b) ............................................. 25,488 25,486
6.5% convertible subordinated debentures due in 2001 (b) (c) ................................. 6,200 9,400
6.8% subordinated notes due in 2005, net of discount of $347 (b) ............................. 249,653 --
6.375% subordinated notes due in 2009, net of discount of $299
and $313 in 1995 and 1994, respectively (b) ................................................. 249,701 249,687
6.605% subordinated notes due in 2025 (b) .................................................... 250,000 --
Capitalized lease obligations ................................................................ 6,873 6,210
Other ........................................................................................ 46 154
---------- ----------
Total other long-term debt ............................................................... 1,334,702 837,146
---------- ----------
Total long-term debt ..................................................................... $5,423,028 $4,790,464
========== ==========
</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 $16 billion
at any one time ($7 billion at December 31, 1994). 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 greater than one year are classified as
long-term debt. Interest rates on the long-term notes ranged from 4.44% to
7.75% and 4.0% to 7.50% with maturities ranging from 1996 to 2002 and 1995
to 1999 at December 31, 1995 and 1994, respectively. The average rates were
5.77% and 5.31% with average maturities of 1.23 years and 1.73 years at
December 31, 1995 and 1994, 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, 1995, $28,800 of these notes had been converted.
The principal maturities of long-term debt for the next five years subsequent
to December 31, 1995 are $2,246,577 in 1996, $1,167,743 in 1997, $205,366 in
1998, $669,070 in 1999 and $695 in 2000. Interest paid on deposits and other
borrowings was $1,512,046 in 1995, $1,026,879 in 1994 and $882,128 in 1993.
- --------------------------------------------------------------------------------
NOTE H -- CAPITAL STOCK
The authorized capital stock of the Corporation consists of 500,000,000 common
shares and 50,000,000 preferred shares. At December 31, 1995, 24,314,246 common
shares were reserved for the conversion of notes and issuance for employee
benefit plans and the dividend reinvestment plan.
On July 28, 1995, the Corporation's Board of Directors authorized the
repurchase of up to 5 million shares of common stock. Repurchased shares will
be used for various corporate purposes including the issuance of shares for
employee benefit plans and the dividend reinvestment plan. During the year, the
Corporation repurchased 1,755,500 shares pursuant to stock repurchase
authorizations. At December 31, 1995, the number of shares available for
possible repurchase totaled 4,600,000.
During 1994, the new Wachovia Corporation Stock Plan was approved, authorizing
up to 6 million shares of common stock to be granted to selected key employees
and nonemployee directors in the form of incentive and nonqualified stock
options, stock appreciation rights, restricted stock awards and restricted
units. Since the inception of the new plan, a total of 1,845,620 options and
173,750 awards were granted.
In the aggregate, the Corporation's stock option and incentive plans provide
for the granting of options or awards for the purchase or issuance of 9,758,493
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 such times options and awards
shall be granted and exercised and the term of the exercise
- -------------------------------------------------------------------------------
53
<PAGE> 55
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE H -- CAPITAL STOCK -- Concluded
period (not to exceed ten years). The 1994 officer plan awards shares of stock
earned contingent upon both a performance requirement and time period
requirement (5 years). Under the 1994 Plan, newly elected nonemployee directors
are granted a one-time award of 1,000 shares of restricted stock to be earned
over a three year period. Additionally, nonemployee directors are awarded 250
shares of restricted stock annually which are earned over a one year period.
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 $72 in
1995, $86 in 1994, and $54 in 1993. At December 31, 1995, and 1994, deferred
compensation related to director and management awards was $4,781 and $3,025,
respectively. Compensation expense related to stock awards was $1,975 for 1995,
$1,397 for 1994 and $1,864 for 1993.
Activity in the option and award plans during 1995 and 1994 is summarized as
follows:
<TABLE>
A<CAPTION>
Options and Awards
--------------------------------------------
Outstanding
Available ----------------------------- Option Price
for Grant Awards Options Per Share
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
January 1, 1994 ....... 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
========== ======= =========
Granted ............. (1,098,770) 109,750 989,020 33.75-36.875
Exercised ........... -- (60,898) (750,651) 5.41-34.625
Forfeited ........... 22,700 (1,674) (75,988) 18.3855-34.625
---------- ------- ---------
Total December 31,
1995................. 4,862,930 272,766 4,622,797 12.50-36.875
========== ======= =========
</TABLE>
At December 31, 1995, options for 2,306,901 shares were exercisable at option
prices ranging from $12.50 to $34.625.
- --------------------------------------------------------------------------------
NOTE I -- OFF-BALANCE SHEET TRADING AND LENDING ACTIVITIES
The Corporation maintains positions in a variety of financial instruments with
off-balance sheet risk 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 dealer trading activities 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 necessary to support financial instrument credit
risk, the Corporation assures its ability to access borrower's collateral, in
the event of 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 year end fair value of derivative
financial instruments held or issued for trading purposes and the average fair
value during the year. 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.
- --------------------------------------------------------------------------------
54
<PAGE> 56
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE I -- OFF-BALANCE SHEET TRADING AND LENDING ACTIVITIES -- Continued
<TABLE>
<CAPTION>
1995
--------------------------------------------------
Notional Fair Value Fair Value Average
Value Gains (Losses) Fair Value
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
U.S. dollar interest rate contracts
as intermediary:
Interest rate swaps-pay fixed .............. $2,081,318 $ 4,501 $ (33,553) $ 9,650
Interest rate swaps-pay floating ........... 2,087,317 36,290 (2,920) (6,344)
Interest rate caps and floors written ...... 761,947 461 (3,403) (2,161)
Interest rate caps and floors purchased .... 761,947 2,923 (236) 2,085
Securities trading activities:
Commitments to purchase securities,
futures and forward contracts ............ 409,238 2,749 (229) 1,367
Commitments to sell securities,
futures and forward contracts ............ 326,259 396 (2,671) (1,096)
Net options written to purchase
or sell securities ....................... 81,000 -- (44) (5)
Foreign exchange trading activities:
Commitments to purchase
foreign exchange ......................... 791,502 6,391 (7,818) 7,639
Commitments to sell foreign exchange ....... 778,582 9,550 (5,773) (4,721)
Foreign exchange options written ........... 2,462 21 -- 32
Foreign exchange options purchased ......... 2,462 -- (20) (29)
<CAPTION>
1994
---------------------------------------------------
Notional Fair Value Fair Value Average
Value Gains (Losses) Fair Value
---------- ---------- ---------- ----------
<S> <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
Interest rate swaps-pay floating ........... 1,243,223 2,062 (55,557) (24,410)
Interest rate caps and floors written ...... 258,540 585 (2,309) (797)
Interest rate caps and floors purchased .... 258,540 2,309 (524) 664
Securities trading activities:
Commitments to purchase securities,
futures and forward contracts ............ 409,029 349 (221) (11,193)
Commitments to sell securities,
futures and forward contracts ............ 222,728 311 (312) 11,510
Net options written to purchase
or sell securities ....................... 94,000 -- (27) (3)
Foreign exchange trading activities:
Commitments to purchase
foreign exchange ......................... 524,180 6,529 (2,304) 15,866
Commitments to sell foreign exchange ....... 519,472 3,387 (6,303) (14,878)
Foreign exchange options written ........... 3,016 10 -- (1,311)
Foreign exchange options purchased ......... 3,014 -- (9) 1,021
</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
based on contractual terms and are reported as other operating income. The
related accrued amounts receivable or payable to customers or counterparties
are included in other assets or liabilities. 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 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, 1995, the weighted average maturity of pay-fixed swaps held in
the customer portfolio was .39 years and .37 years for receive-fixed swaps.
Under pay-fixed swap agreements, the Corporation paid interest at a weighted
average fixed rate of 6.53% and received interest at a weighted average
floating rate of 5.02% (based on year-end rates). Under receive-fixed swap
agreements, the Corporation received interest at a weighted average fixed rate
of 6.56% and paid interest at a weighted average floating rate of 5.07% (based
on year-end rates).
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 based on contractual terms and are reported as other
operating 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 deliver a specified instrument
at a specified price or yield at a specified date. Commitments to purchase and
sell securities, futures and forward contracts used in securities trading
operations are recognized currently at market value and are reported as trading
account profits (losses). 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 mitigated 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 reported as other operating 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
- --------------------------------------------------------------------------------
55
<PAGE> 57
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -----------------------------------------------------------------------------
NOTE I -- OFF-BALANCE SHEET TRADING AND LENDING ACTIVITIES -- Concluded
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>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest rate contracts ......... $ 4,332 $ 1,411 $ 514
Securities activities ........... (7,569) 7,219 (489)
Foreign exchange activities ..... 11,834 5,827 8,610
-------- -------- --------
Total ..................... $ 8,597 $ 14,457 $ 8,635
======== ======== ========
</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>
1995 1994
----------- -----------
<S> <C> <C>
Commercial and consumer
lending activities:
Unfunded commitments to
extend credit ..................... $26,145,025 $27,919,542
Standby letters of credit ........... 4,139,181 3,751,314
Commercial and similar
letters of credit ................. 149,006 139,753
Securities lent ..................... -- 39,550
Participations in bankers'
acceptances ....................... 5,625 4,909
Mortgage loans sold with recourse ... -- 30,234
</TABLE>
Commitments to Extend Credit -- These are legally binding contracts to lend to
a customer, provided there is no contract violation. 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 and in some instances collateral is obtained to support the
borrowing. At December 31, 1995 and 1994, approximately 13% and 12%,
respectively, of unfunded commitments to extend credit were supported by
collateral. Of the total unfunded commitment amounts presented, approximately
27% in 1995 and 22% in 1994 were comprised of cancelable credit card
commitments, and approximately 5% in 1995 and 9% in 1994 were represented by
real estate commitments. Also included in total unfunded commitments were
securities underwriting commitments of $0 in 1995 and $880 in 1994.
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 underwriting process.
At December 31, 1995 and 1994, approximately 3% and 4%, 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.
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 risk
the Corporation evaluates the credit worthiness of the borrower, and obtains
collateral with a market value exceeding 100% of the contract amount.
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 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 and option contracts with financial
institution counterparties. The Corporation's operations are subject to a risk
in interest rate fluctuations to the extent of a difference between the amount
of its interest-earning assets and interest-bearing liabilities that mature or
reprice in specified periods. The Corporation's principal objective of
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 Corporation's funding needs. Accordingly,
the Corporation uses a combination of derivative financial instruments,
including interest rate swaps, futures and options with indices that correlate
to on-balance sheet instruments to modify the repricing characteristics of
interest-earning assets and interest-bearing liabilities.
- ------------------------------------------------------------------------------
56
<PAGE> 58
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE J -- OFF-BALANCE SHEET RISK MANAGEMENT ACTIVITIES -- Concluded
In anticipation of the maturity of certificiates of deposit that were issued in
connection with a one-day sale held in 1995, the Corporation offered customers
favorable renewal terms. The Corporation entered into financial futures
contracts to mitigate the risk of falling interest rates during the term of the
renewal offer (October 1995 through January 1996). These futures contracts are
accounted for as a hedge of anticipated transactions; accordingly, the
resulting gain or loss is deferred and recognized as an adjustment of interest
expense over the term of the renewed certificates.
The amounts disclosed below represent the end of period notional and fair value
of derivative financial instruments held for risk management 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>
1995 1994
------------------------------------- ------------------------------------
Notional Fair Value Fair Value Notional Fair Value Fair Value
Value Gains (Losses) Value Gains (Losses)
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Convert floating rate liabilities to fixed:
Swaps -- pay fixed/receive floating.......... $ 119,719 $ 232 $ (3,519) $ 233,282 $ 3,668 $ (2,690)
Caps purchased -- pay fixed/receive floating. -- -- -- 15,000 14 --
Convert fixed rate assets to floating:
Swaps -- pay fixed/receive floating.......... 418,430 -- (5,958) 17,460 132 --
Forward starting swaps -- pay fixed/
receive floating........................... 38,570 -- (4,284) 57,540 434 --
Convert fixed rate liabilities to floating:
Swaps -- receive fixed/pay floating ......... 200,000 4,889 -- 100,000 -- (16,337)
Convert floating rate assets to fixed:
Swaps -- receive fixed/pay floating.......... 218,750 1,597 (643) 120,105 112 (4,005)
Index amortizing swaps -- receive fixed/
pay floating............................... 325,000 14,426 -- 175,000 -- (6,776)
Hedge spread between prime and fed funds:
Interest rate caps........................... -- -- -- 400,000 10,552 (10,632)
---------- ------- -------- ---------- ------- --------
Total interest rate swaps and options.... 1,320,469 21,144 (14,404) 1,118,387 14,912 (40,440)
Financial futures contracts -- anticipatory
hedge of certificate of deposit renewal...... 1,025,000 140 (7) -- -- --
---------- ------- -------- ---------- ------- --------
Total derivatives........................ $2,345,469 $21,284 ($14,411) $1,118,387 $14,912 ($40,440)
========== ======= ======== ========== ======= ========
</TABLE>
Deferred losses resulting from terminated swap contracts of $6,020 and $15,117
at December 31, 1995 and 1994, respectively, are included in other assets.
- --------------------------------------------------------------------------------
NOTE K -- INCOME TAXES
The provision for income taxes is summarized below. Included in these amounts
are income taxes (benefits) related to securities transactions of $(8,576),
$1,328 and $7,472 in 1995, 1994 and 1993, respectively. The Corporation made
income tax payments totaling $254,866 in 1995, $211,345 in 1994 and $217,716 in
1993.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal...................... $250,086 $202,685 $209,853
Foreign...................... 288 147 289
State and local.............. 12,032 7,152 11,966
-------- -------- --------
Total currently payable ... 262,406 209,984 222,108
Deferred:
Federal...................... 11,607 13,241 (25,828)
State........................ (7,688) (801) (835)
-------- -------- --------
Total deferred............ 3,919 12,440 (26,663)
-------- -------- --------
Total tax expense......... $266,325 $222,424 $195,445
======== ======== ========
</TABLE>
The reasons for the difference between consolidated income tax expense and the
amount computed by applying the statutory federal income tax rate of 35% to
income before taxes were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes............. $868,868 $761,482 $687,540
======== ======== ========
Federal income taxes at
statutory rate....................... $304,104 $266,519 $240,639
State and local income taxes,
net of federal benefit............... 2,824 4,128 7,235
Effect of tax-exempt securities
interest and other income............ (46,398) (48,217) (50,817)
Effect of tax rate change on
beginning net deferred tax assets.... -- -- (2,683)
Other items............................ 5,795 (6) 1,071
-------- -------- --------
Total tax expense................ $266,325 $222,424 $195,445
======== ======== ========
</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
- -------------------------------------------------------------------------------
57
<PAGE> 59
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE K -- INCOME TAXES -- Concluded
Corporation's deferred tax assets and liabilities at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
Deferred Tax Assets
--------------------
1995 1994
-------- --------
<S> <C> <C>
Allowance for loan losses ................... $156,531 $147,894
Unrealized losses on securities
available-for-sale ........................ -- 24,212
Other........................................ 39,672 26,145
-------- --------
Gross deferred tax assets .............. $196,203 $198,251
======== ========
<CAPTION>
Deferred Tax Liabilities
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Unrealized gains on securities
available-for-sale ........................ $ 73,998 $ --
Depreciation ................................ 36,586 34,941
Lease financing.............................. 45,913 21,508
Accretion of discounts on securities......... 12,429 12,888
Other........................................ 2,871 2,379
Gross deferred tax liabilities.......... $171,797 $ 71,716
======== ========
Net deferred tax asset.................. $ 24,406 $126,535
</TABLE> ======== ========
Management believes that the Corporation will fully realize the net deferred
tax asset as of December 31, 1995 based on the Corporation's refundable taxes
from carryback years, as well as its current level of operating income.
- --------------------------------------------------------------------------------
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, 1995 was approximately $374,119.
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 the bank's capital, surplus and undivided
profits plus the allowance for loan losses. Based on these limitations,
approximately $343,898 was available for loans to the Corporation at December
31, 1995.
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 cannot distribute as dividends to the Corporation in 1996,
without the approval of the Comptroller of the Currency, more than $532,099
plus an additional amount equal to the banks' retained net profits for 1996 up
to the date of any dividend declaration.
As a result of the above dividend and loan restrictions, approximately
$2,746,813 of consolidated net assets of the Corporation's banking subsidiaries
at December 31, 1995 was restricted from transfer to the Corporation in the
form of cash dividends, loans or advances.
The Corporation and its subsidiaries 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.
58
<PAGE> 60
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
$ in thousands
- --------------------------------------------------------------------------------
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
on 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>
1995 1994
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested .................................... $ 364,059 $ 288,732
Nonvested.................................. 30,186 30,373
--------- ---------
Total.................................. $ 394,245 $ 319,105
========= =========
Actuarial present value of projected
benefit obligation for service
rendered to date .......................... ($444,786) ($353,443)
Plan assets at fair value -- primarily listed
stocks, fixed income securities and
collective funds........................... 491,760 422,333
--------- ---------
Plan assets in excess of projected
benefit obligation ........................ 46,974 68,890
Unrecognized net loss from past
experience different from that assumed..... 38,005 24,675
Unrecognized prior service cost.............. (19,097) (21,594)
Unrecognized transition asset................ (39,716) (45,921)
--------- ---------
Pension asset recorded in Consolidated
Statements of Condition ................... $ 26,166 $ 26,050
========= =========
</TABLE>
Net pension benefit included the following components.
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period .............. $12,746 $14,486 $12,714
Interest cost on projected
benefit obligation ............. 29,018 26,477 24,647
Actual (return) loss on
plan assets .................... (98,474) 3,466 (39,227)
Net amortization and deferral .... 56,594 (47,587) (3,577)
------- ------- -------
Net periodic pension benefit ..... $ (116) $(3,158) $(5,443)
======= ======= =======
</TABLE>
The rates used in determining the actuarial present value of the projected
benefit obligation were as follows:
<TABLE>
<CAPTION>
1995 1994
----- ----
<S> <C> <C>
Discount rates.................................. 7.25% 8.5%
Rates of increase in compensation levels........ 5% 5%
</TABLE>
The expected long-term rate of return on plan assets used to determine the net
periodic pension benefit was 8% for 1995, 1994 and 1993.
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>
1995 1994
-------- --------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested .................................. $ 29,865 $ 24,098
Nonvested................................ 4,504 4,713
-------- --------
Total................................ $ 34,369 $ 28,811
======== ========
Actuarial present value of projected
benefit obligation for service
rendered to date......................... ($44,352) ($34,061)
Unrecognized actuarial losses.............. 14,039 13,168
Unrecognized transition obligation......... 391 440
Unrecognized prior service cost............ 6,760 (264)
-------- --------
Pension liability recorded in Consolidated
Statements of Condition.................. ($23,162) ($20,717)
======== ========
</TABLE>
Net pension cost included the following components.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period ................... $ 769 $ 576 $ 526
Interest cost on projected
benefit obligation................... 3,035 2,523 2,612
Net amortization and deferral.......... 1,528 1,178 520
------ ------ ------
Net periodic pension cost.............. $5,332 $4,277 $3,658
====== ====== ======
</TABLE>
The rates used in determining the actuarial present value of the projected
benefit obligation were as follows:
<TABLE>
<CAPTION>
1995 1994
----- ----
<S> <C> <C>
Discount rates ............................... 7.25% 8.5%
Rates of increase in compensation levels...... 5% 5%
</TABLE>
- --------------------------------------------------------------------------------
59
<PAGE> 61
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- Concluded
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 $16,478 in 1995, $16,131 in 1994 and $22,767 in 1993.
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.
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.
During 1995, the Corporation contributed assets to fund the postretirement
benefit obligation. The following table presents the status of the plan as of
December 31.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................... ($32,517) ($22,813)
Fully eligible active plan participants..... (10,249) (9,774)
Other active plan participants.............. (12,156) (9,214)
-------- --------
Total................................... (54,922) (41,801)
Plan assets at fair value -- primarily
insurance contracts......................... 11,000 --
Unrecognized net gain ........................ (14,293) (21,944)
Unrecognized transition obligation............ 53,585 56,737
Unrecognized prior service cost............... 740 --
-------- --------
Accrued postretirement benefit cost........... $ (3,890) $ (7,008)
======== ========
</TABLE>
Net periodic postretirement benefit cost included the following components.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost.......................... $ 724 $ 851 $ 738
Interest cost......................... 3,954 3,494 4,953
Amortization of gain ................. (707) (646) --
Amortization of transition obligation
over 20 years ...................... 3,152 3,152 3,152
Amortization of prior service cost.... 57 -- --
------ ------ ------
Net periodic postretirement
benefit cost........................ $7,180 $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 costs for 1995 and 1994 were 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 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, 1995 and 1994
by $1,372 and $1,746, respectively, and the aggregate of the service and
interest cost of the net periodic postretirement benefit cost for 1995, 1994
and 1993 by $117, $131 and $291, respectively. The discount rates used in
determining the accumulated postretirement benefit obligations at December 31,
1995 and 1994 were 7.25% and 8.5%, respectively.
- -------------------------------------------------------------------------------
60
<PAGE> 62
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, 1995 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Other operating income:
Electronic banking..................................................................... $ 34,479 $ 24,683 $ 14,840
Investment fee income.................................................................. 26,953 14,092 16,619
Insurance premiums and commissions..................................................... 13,164 11,679 11,847
Bankers' acceptance and letter of credit fees.......................................... 23,190 23,168 19,668
Other service charges and fees......................................................... 24,682 18,109 17,456
Other income........................................................................... 44,699 33,801 27,973
-------- -------- --------
Total other operating income....................................................... $167,167 $125,532 $108,403
======== ======== ========
Other operating expense:
Postage and delivery................................................................... $ 37,962 $ 35,163 $ 38,160
Outside data processing, programming and software...................................... 42,486 35,211 38,613
Stationery and supplies................................................................ 26,805 24,558 25,344
Advertising and sales promotion........................................................ 50,362 34,067 38,141
Professional services.................................................................. 39,483 20,493 17,144
Travel and business promotion.......................................................... 19,694 16,254 15,563
FDIC insurance and regulatory examinations............................................. 40,389 53,451 53,663
Check clearing and other bank services................................................. 9,195 8,894 10,159
Amortization of intangible assets...................................................... 8,587 18,693 28,001
Foreclosed property expense............................................................ 920 (4,288) 7,654
Other expense.......................................................................... 130,581 104,991 105,798
-------- -------- --------
Total other operating expense...................................................... $406,464 $347,487 $378,240
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE O -- EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Primary (thousands, except per share)
- -------
Average common shares outstanding ...................................................... 170,635 171,110 172,273
Dilutive common stock options -- based on treasury stock method
using average market price............................................................ 1,366 1,152 1,594
Dilutive common stock awards -- based on treasury stock method
using average market price ........................................................... 88 77 74
-------- -------- --------
Average primary shares outstanding...................................................... 172,089 172,339 173,941
======== ======== ========
Net income.............................................................................. $602,543 $539,058 $492,095
======== ======== ========
Per share amount ....................................................................... $ 3.50 $ 3.13 $ 2.83
Fully Diluted (thousands, except per share)
- -------------
Average common shares outstanding ...................................................... 170,635 171,110 172,273
Dilutive common stock options -- based on treasury stock method
using period-end market price if higher than average market price .................... 1,802 1,152 1,594
Dilutive common stock awards -- based on treasury stock method
using period-end market price if higher than average market price .................... 115 77 77
Convertible long-term debt assumed converted ........................................... 405 612 1,254
-------- -------- --------
Average fully diluted shares outstanding................................................ 172,957 172,951 175,198
======== ======== ========
Net income.............................................................................. $602,543 $539,058 $492,095
Add interest on convertible long-term debt, net of tax ................................. 330 513 937
-------- -------- --------
Adjusted net income..................................................................... $602,873 $539,571 $493,032
======== ======== ========
Per share amount........................................................................ $ 3.49 $ 3.12 $ 2.81
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE> 63
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ 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.
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Assets
- ------
Cash on demand deposit with bank subsidiary........... $ 3 $ 27
Interest-bearing bank balances
with bank subsidiaries............................... 713,765 331,766
Securities available-for-sale......................... 42,139 15,279
Securities held-to-maturity........................... -- 2,000
Demand loans to nonbank subsidiaries.................. 324,900 372,608
Capital notes receivable from
bank subsidiaries ................................... 776,980 525,000
Loan participation with nonbank subsidiary ........... 75,000 25,000
Current amount due from subsidiaries ................. 8,922 6,878
Investments in:
Bank and bank holding company subsidiaries........... 3,622,267 3,226,834
Nonbank subsidiaries................................. 105,009 61,791
Other assets.......................................... 42,480 36,701
---------- ----------
Total assets..................................... $5,711,465 $4,603,884
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Parent company commercial paper....................... $ 502,136 $ 406,706
Subordinated capital notes, net of
discount of $3,917 and $4,103 in
1995 and 1994, respectively ......................... 1,327,783 795,897
Demand loans from bank and bank
holding company subsidiaries......................... 58,746 86,426
Other liabilities..................................... 49,043 28,348
Shareholders' equity ................................. 3,773,757 3,286,507
---------- ----------
Total liabilities and shareholders' equity....... $5,711,465 $4,603,884
========== ==========
</TABLE>
The operating results of the parent company for the three years ended December
31, 1995 are shown below.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income
- ------
Dividends from:
Bank and bank holding company
subsidiaries........................... $233,700 $306,770 $186,493
Nonbank subsidiaries .................... 52,075 3,902 5,218
Interest from subsidiaries................ 89,278 61,089 39,968
Other interest income..................... 571 468 152
Other income ............................. 33,589 30,382 21,243
-------- -------- --------
Total income ........................ 409,213 402,611 253,074
Expense
- -------
Interest on short-term
borrowed funds .......................... 27,807 19,880 14,692
Interest on long-term debt ............... 67,309 52,586 32,580
Interest paid to subsidiaries............. 4,781 2,419 1,096
Other expense............................. 25,823 23,218 21,367
-------- -------- --------
Total expense........................ 125,720 98,103 69,735
Income before income taxes and
equity in undistributed net
income of subsidiaries .................. 283,493 304,508 183,339
Applicable income taxes (benefit)......... (1,177) (2,527) (3,423)
-------- -------- --------
Income before equity in
undistributed net income
of subsidiaries ......................... 284,670 307,035 186,762
Equity in undistributed
net income of subsidiaries............... 317,873 232,023 305,333
-------- -------- --------
Net income........................... $602,543 $539,058 $492,095
======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
62
<PAGE> 64
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Concluded
$ in thousands
- --------------------------------------------------------------------------------
NOTE P -- WACHOVIA CORPORATION (PARENT COMPANY ONLY) INFORMATION -- Concluded
The cash flows for the parent company for the three years ended December 31,
1995 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Operating Activities
- --------------------
Net income ................................................................ $602,543 $539,058 $492,095
Adjustments to reconcile
net income:
Deferred income taxes (benefit) ........................................... 1,056 (927) (3,491)
(Decrease) increase in
accrued income taxes .................................................. (449) 2,456 (7,517)
Increase in accrued
interest receivable ................................................... (1,915) (4,792) (266)
Increase in accrued
interest payable ...................................................... 5,714 6,983 2,735
Net change in other accrued and
deferred income and expense ........................................... 3,245 (2,631) 1,739
Equity in undistributed
net income of subsidiaries ............................................ (317,873) (232,023) (305,333)
-------- -------- --------
Net cash provided
by operations ....................................................... 292,321 308,124 179,962
Investing Activities
- --------------------
Net increase in interest-bearing
bank balances ........................................................... (381,999) (253,883) (54,033)
Purchases of securities
available-for-sale ...................................................... (4,128) (8,287) --
Sales of securities available-for-sale .................................... 7,538 2,429 --
Purchases of securities
held-to-maturity......................................................... -- -- (712)
Sales and maturities of
securities held-to-maturity ............................................. -- -- 49
Investment in loan participation .......................................... (50,000) -- --
Net decrease (increase) in
demand loans to nonbank
subsidiaries ............................................................ 47,708 298,894 (249,557)
Capital notes issued to
bank subsidiaries ....................................................... (250,000) (150,000) (100,000)
Capital notes repaid by
bank subsidiaries ....................................................... 30,000 -- --
Net (increase) decrease
in other assets ......................................................... (4,137) 1,486 (4,991)
Equity investment in subsidiaries ......................................... (55,551) (80,000) (1,940)
-------- ------- -------
Net cash used by
investing activities ................................................ (660,569) (189,361) (411,184)
Financing Activities
- --------------------
Net increase in demand loans
from subsidiaries ....................................................... 52,873 52,855 53,239
Net (decrease) increase in
commercial paper ........................................................ 95,430 (182,472) 202,560
Proceeds from long-term debt .............................................. 496,387 247,800 248,075
Payments on long-term debt................................................. -- -- (335)
(Decrease) increase in other
liabilities ............................................................. (54) 1,140 (7,000)
Issuance of stock.......................................................... 24,115 25,339 24,961
Dividend payments ......................................................... (235,495) (210,503) (191,488)
Common stock repurchased .................................................. (65,032) (52,908) (98,804)
Other equity transactions -- -- (19)
-------- -------- ---------
Net cash provided (used)
by financing activities ............................................. 368,224 (118,749) 231,189
-------- -------- ---------
(Decrease) increase in cash ............................................... (24) 14 (33)
Cash at beginning of year ................................................. 27 13 46
-------- -------- ---------
Cash at end of year ....................................................... $ 3 $ 27 $ 13
======== ======== =========
Noncash investing and financing
activities:
Common stock issued upon
conversion of long-term debt........................................... $ 3,184 $ 3,104 $ 16,437
</TABLE>
On December 1, 1995, South Carolina National Corporation was merged into
Wachovia Corporation. The assets and liabilities of this second tier holding
company which were merged into the Wachovia Corporation parent company totaled
$54,664 and $45,506, respectively.
- --------------------------------------------------------------------------------
63
<PAGE> 65
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES (thousands)
<TABLE>
<CAPTION>
1995 1994
--------------------- --------------------
Amount % Amount %
ASSETS ------------ ----- ----------- -----
<S> <C> <C> <C> <C>
Loans -- net of unearned income:
Commercial ........................................................... $ 9,153,970 22.1 $ 7,366,981 19.9
Tax-exempt ........................................................... 1,967,749 4.7 1,965,555 5.3
----------- ----- ----------- -----
Total commercial ................................................. 11,121,719 26.8 9,332,536 25.2
Direct retail......................................................... 734,305 1.8 735,335 2.0
Indirect retail....................................................... 2,444,309 5.9 2,450,181 6.6
Credit card .......................................................... 3,951,789 9.5 3,528,617 9.5
Other revolving credit................................................ 344,178 .8 333,853 .9
----------- ----- ----------- -----
Total retail ..................................................... 7,474,581 18.0 7,047,986 19.0
Construction ......................................................... 640,013 1.5 496,401 1.3
Commercial mortgages ................................................. 3,675,903 8.9 3,355,898 9.1
Residential mortgages ................................................ 4,018,377 9.7 3,698,864 10.0
----------- ----- ----------- -----
Total real estate ................................................ 8,334,293 20.1 7,551,163 20.4
Lease financing ...................................................... 270,389 .7 173,185 .5
Foreign............................................................... 304,277 .7 108,028 .3
----------- ----- ----------- -----
Total loans ...................................................... 27,505,259 66.3 24,212,898 65.4
Investment securities:
Held-to-maturity:
State and municipal ................................................ 423,747 1.0 599,206 1.6
Other investments .................................................. 3,735,893 9.0 3,371,132 9.1
----------- ----- ----------- -----
Total securities held-to-maturity ................................ 4,159,640 10.0 3,970,338 10.7
Available-for-sale:
Other investments*.................................................. 4,214,082 10.2 3,700,477 10.0
----------- ----- ----------- -----
Total investment securities ...................................... 8,373,722 20.2 7,670,815 20.7
Interest-bearing bank balances ......................................... 114,962 .3 13,037 .0
Federal funds sold and securities purchased under resale agreements..... 121,924 .3 196,651 .5
Trading account assets ................................................. 915,065 2.2 688,669 1.9
----------- ----- ----------- -----
Total interest-earning assets..................................... 37,030,932 89.3 32,782,070 88.5
Cash and due from banks ................................................ 2,519,900 6.1 2,407,387 6.5
Premises and equipment ................................................. 573,386 1.4 518,030 1.4
Other assets ........................................................... 1,755,773 4.2 1,728,399 4.7
Allowance for loan losses .............................................. (407,430) (1.0) (406,702) (1.1)
----------- ----- ----------- -----
Total assets ..................................................... $41,472,561 100.0 $37,029,184 100.0
=========== ===== =========== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Time deposits in domestic offices:
Interest-bearing demand .............................................. $ 3,263,852 7.9 $ 3,383,902 9.1
Savings and money market savings ..................................... 6,539,852 15.8 6,122,283 16.5
Savings certificates.................................................. 6,491,879 15.7 5,335,541 14.4
Large denomination certificates ...................................... 1,915,097 4.6 1,572,948 4.3
----------- ----- ----------- -----
Total time deposits in domestic offices .......................... 18,210,680 44.0 16,414,674 44.3
Time deposits in foreign offices ....................................... 749,511 1.8 516,157 1.4
----------- ----- ----------- -----
Total interest-bearing deposits................................... 18,960,191 45.8 16,930,831 45.7
Federal funds purchased and securities sold under repurchase agreements. 5,264,072 12.7 5,051,124 13.7
Commercial paper........................................................ 504,668 1.2 505,117 1.4
Other short-term borrowed funds ........................................ 2,029,095 4.9 674,593 1.8
----------- ----- ----------- -----
Total short-term borrowed funds................................... 7,797,835 18.8 6,230,834 16.9
Bank notes ............................................................. 3,863,398 9.3 3,522,540 9.5
Other long-term debt.................................................... 1,038,210 2.5 827,077 2.2
----------- ----- ----------- -----
Total long-term debt ............................................. 4,901,608 11.8 4,349,617 11.7
----------- ----- ----------- -----
Total interest-bearing liabilities ............................... 31,659,634 76.4 27,511,282 74.3
Other deposits:
Demand in domestic offices............................................ 5,284,722 12.7 5,312,255 14.3
Demand in foreign offices ............................................ 6,823 .0 5,380 .0
Noninterest-bearing time in domestic offices.......................... 10,119 .0 66,458 .2
Other liabilities ...................................................... 1,101,094 2.7 1,037,556 2.8
Shareholders' equity ................................................... 3,410,169 8.2 3,096,253 8.4
----------- ----- ----------- -----
Total liabilities and shareholders' equity........................ $41,472,561 100.0 $37,029,184 100.0
=========== ===== =========== =====
TOTAL DEPOSITS ......................................................... $24,261,855 $22,314,924
</TABLE>
*Includes unrealized gain of $34,248 in 1995
64
<PAGE> 66
<TABLE>
<CAPTION>
1993 1992 1991 1990 Five-Year
- ------------------- ------------------ -------------------- -------------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ------------ ----- ----------- ----- ----------- ---- ----------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,198,159 18.5 $ 5,867,310 18.4 $ 6,112,621 19.1 $ 6,023,033 19.8 8.7%
1,890,337 5.6 1,997,998 6.3 2,070,612 6.4 2,114,022 6.9 (1.4)
----------- ----- ----------- ----- ----------- ----- ----------- -----
8,088,496 24.1 7,865,308 24.7 8,183,233 25.5 8,137,055 26.7 6.4
684,679 2.0 687,556 2.2 757,865 2.4 830,280 2.7 (2.4)
2,245,115 6.7 2,006,442 6.3 1,991,185 6.2 2,000,545 6.6 4.1
2,591,207 7.7 1,774,342 5.6 1,558,929 4.9 1,422,072 4.7 22.7
328,075 1.0 322,768 1.0 299,301 .9 288,156 .9 3.6
----------- ----- ----------- ----- ----------- ----- ----------- -----
5,849,076 17.4 4,791,108 15.1 4,607,280 14.4 4,541,053 14.9 10.5
470,465 1.4 519,971 1.7 1,020,690 3.2 1,225,283 4.0 (12.2)
3,147,293 9.4 3,063,395 9.6 2,912,517 9.1 2,740,395 9.0 6.0
3,779,444 11.2 3,602,157 11.3 3,653,410 11.4 3,212,427 10.5 4.6
----------- ----- ----------- ----- ----------- ----- ----------- -----
7,397,202 22.0 7,185,523 22.6 7,586,617 23.7 7,178,105 23.5 3.0
135,355 .4 118,209 .3 124,519 .4 144,041 .5 13.4
76,212 .2 72,347 .2 86,968 .2 80,223 .3 30.6
----------- ----- ----------- ----- ----------- ----- ----------- -----
21,546,341 64.1 20,032,495 62.9 20,588,617 64.2 20,080,477 65.9 6.5
688,799 2.1 780,426 2.5 877,991 2.7 948,192 3.1 (14.9)
6,350,557 18.9 5,420,655 17.0 4,904,993 15.3 3,930,476 12.9 (1.0)
----------- ----- ----------- ----- ----------- ----- ----------- -----
7,039,356 21.0 6,201,081 19.5 5,782,984 18.0 4,878,668 16.0 (3.1)
-- -- -- -- -- -- -- --
----------- ----- ----------- ----- ----------- ----- ----------- -----
7,039,356 21.0 6,201,081 19.5 5,782,984 18.0 4,878,668 16.0 11.4
78,297 .2 301,568 1.0 416,103 1.3 604,162 2.0 (28.2)
394,959 1.2 483,679 1.5 597,354 1.9 479,735 1.6 (24.0)
721,111 2.1 1,078,370 3.4 974,621 3.0 739,268 2.4 4.4
----------- ----- ----------- ----- ----------- ----- ----------- -----
29,780,064 88.6 28,097,193 88.3 28,359,679 88.4 26,782,310 87.9 6.7
2,368,237 7.0 2,370,379 7.4 2,486,267 7.8 2,702,272 8.9 (1.4)
468,218 1.4 444,957 1.4 432,908 1.4 419,958 1.4 6.4
1,411,152 4.2 1,294,825 4.1 1,061,906 3.3 807,485 2.6 16.8
(398,697) (1.2) (375,762) (1.2) (295,891) (.9) (243,069) (.8) 10.9
----------- ----- ----------- ----- ----------- ----- ----------- -----
$33,628,974 100.0 $31,831,592 100.0 $32,044,869 100.0 $30,468,956 100.0 6.4
=========== ===== =========== ===== =========== ===== =========== =====
$ 3,219,413 9.6 $ 2,842,853 8.9 $ 2,354,780 7.3 $ 2,092,729 6.9 9.3
5,997,750 17.8 5,826,317 18.3 5,314,432 16.6 4,876,599 16.0 6.0
5,595,225 16.6 6,197,779 19.5 6,862,392 21.4 5,998,805 19.7 1.6
1,739,831 5.2 2,593,675 8.2 3,102,496 9.7 3,126,103 10.2 (9.3)
----------- ----- ----------- ----- ----------- ----- ----------- -----
16,552,219 49.2 17,460,624 54.9 17,634,100 55.0 16,094,236 52.8 2.5
466,571 1.4 423,069 1.3 289,722 .9 489,044 1.6 8.9
----------- ----- ----------- ----- ----------- ----- ----------- -----
17,018,790 50.6 17,883,693 56.2 17,923,822 55.9 16,583,280 54.4 2.7
3,944,864 11.7 3,110,737 9.8 3,498,869 10.9 3,876,762 12.7 6.3
485,889 1.5 469,120 1.5 348,125 1.1 365,369 1.2 6.7
972,008 2.9 1,381,713 4.3 2,233,271 7.0 1,988,614 6.6 .4
----------- ----- ----------- ----- ----------- ----- ----------- -----
5,402,761 16.1 4,961,570 15.6 6,080,265 19.0 6,230,745 20.5 4.6
1,535,750 4.6 272,688 .9 -- -- -- --
537,852 1.6 175,940 .5 177,623 .6 177,436 .6 42.4
----------- ----- ----------- ----- ----------- ----- ----------- -----
2,073,602 6.2 448,628 1.4 177,623 .6 177,436 .6 94.2
----------- ----- ----------- ----- ----------- ----- ----------- -----
24,495,153 72.9 23,293,891 73.2 24,181,710 75.5 22,991,461 75.5 6.6
5,277,509 15.7 4,853,925 15.2 4,519,407 14.1 4,562,568 15.0 3.0
5,516 .0 5,759 .0 7,213 .0 7,208 .0 (1.1)
71,577 .2 87,358 .3 68,801 .2 49,698 .2 (27.3)
907,111 2.7 994,263 3.1 806,206 2.5 620,568 2.0 12.2
2,872,108 8.5 2,596,396 8.2 2,461,532 7.7 2,237,453 7.3 8.8
----------- ----- ----------- ----- ----------- ----- ----------- -----
$33,628,974 100.0 $31,831,592 100.0 $32,044,869 100.0 $30,468,956 100.0 6.4
=========== ===== =========== ===== =========== ===== =========== =====
$22,373,392 $22,830,735 $22,519,243 $21,202,754 2.7
</TABLE>
65
<PAGE> 67
WACHOVIA CORPORATION AND SUBSIDIARIES
SUMMARY OF OPERATIONS (thousands)
<TABLE>
<CAPTION>
1995 1994
------------------- ------------------
Amount % Amount %
----------- ------ ---------- -----
<S> <C> <C> <C> <C>
INTEREST INCOME....................................... $ 3,019,730 80.4 $2,362,294 79.5
INTEREST EXPENSE...................................... 1,579,107 42.0 1,038,388 34.9
----------- ------ ---------- -----
NET INTEREST INCOME................................... 1,440,623 38.4 1,323,906 44.6
Provision for loan losses............................. 103,791 2.8 71,763 2.4
----------- ------ ---------- -----
Net interest income after provision for loan losses... 1,336,832 35.6 1,252,143 42.2
OTHER INCOME
Service charges on deposit accounts................... 209,113 5.6 196,149 6.7
Fees for trust services............................... 130,521 3.5 128,100 4.3
Credit card income.................................... 124,282 3.3 111,925 3.8
Mortgage fee income................................... 23,320 .6 33,224 1.1
Trading account profits (losses)...................... 25,698 .7 9,502 .3
Student loan servicing................................ -- -- -- --
Other operating income................................ 167,167 4.4 125,532 4.2
----------- ------ ---------- -----
Total other operating revenue.................... 680,101 18.1 604,432 20.4
Gain on sale of mortgage servicing portfolio.......... 79,025 2.1 -- --
Gain on sale of subsidiary............................ -- -- -- --
Investment securities gains (losses).................. (23,494) (.6) 3,320 .1
----------- ------ ---------- -----
Total other income............................... 735,632 19.6 607,752 20.5
OTHER EXPENSE
Salaries.............................................. 498,730 13.3 464,790 15.7
Employee benefits..................................... 101,596 2.7 98,717 3.3
----------- ------ ---------- -----
Total personnel expense......................... 600,326 16.0 563,507 19.0
Net occupancy expense................................ 87,105 2.3 80,911 2.7
Equipment expense.................................... 109,701 2.9 106,508 3.6
Other operating expense.............................. 406,464 10.9 347,487 11.7
----------- ------ ---------- -----
Total other expense............................. 1,203,596 32.1 1,098,413 37.0
Income before income taxes........................... 868,868 23.1 761,482 25.7
Applicable income taxes (2).......................... 266,325 7.1 222,424 7.5
----------- ------ ---------- -----
NET INCOME........................................... $ 602,543 16.0 $ 539,058 18.2
=========== ====== ========== =====
Net income per common share:
Primary............................................. $ 3.50 $ 3.13
Fully diluted....................................... $ 3.49 $ 3.12
Cash dividends paid per common share................. $ 1.38 $ 1.23
Average shares outstanding:
Primary (3)......................................... 172,089 172,339
Fully diluted (4)................................... 172,957 172,951
(1) Percentages reflected above are based on total income (interest plus
other).
(2) Income taxes applicable to securities transactions were as follows:
1995 -- ($8,576); 1994 -- $1,328; 1993 -- $7,472; 1992 -- $470;
1991 -- $3,997; and 1990 -- $2,379.
(3) Average primary shares outstanding include common equivalent shares as
follows:
1995 -- 1,454; 1994 -- 1,229; 1993 -- 1,668; 1992 -- 1,878; 1991 -- 1,640;
and 1990 -- 828.
(4) Average fully diluted shares outstanding include dilutive common stock
options and awards and convertible debentures and notes as follows:
1995 -- 2,322; 1994 -- 1,841; 1993 -- 2,925; 1992 -- 4,749; 1991 -- 5,377;
and 1990 -- 4,662.
</TABLE>
66
<PAGE> 68
<TABLE>
<CAPTION>
1993 1992 1991 1990 Five-Year
- ---------------- ---------------- ---------------- ---------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ---------- ---- ---------- ---- ---------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,122,837 77.2 $2,222,078 80.0 $2,637,015 84.0 $2,748,644 85.5 1.9%
839,012 30.5 967,028 34.8 1,467,849 46.8 1,684,114 52.4 (1.3)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,283,825 46.7 1,255,050 45.2 1,169,166 37.2 1,064,530 33.1 6.2
92,652 3.4 119,420 4.3 293,000 9.3 142,992 4.4 (6.2)
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,191,173 43.3 1,135,630 40.9 876,166 27.9 921,538 28.7 7.7
202,885 7.4 189,537 6.8 170,827 5.4 155,808 4.8 6.1
120,030 4.4 109,504 3.9 102,665 3.3 99,572 3.1 5.6
101,780 3.7 78,068 2.8 62,814 2.0 55,202 1.7 17.6
39,101 1.4 40,078 1.5 28,608 .9 20,741 .6 2.4
22,445 .8 (2,916) (.1) 17,846 .6 17,321 .6 8.2
5,535 .2 33,250 1.2 31,470 1.0 29,841 .9 (100.0)
108,403 3.9 87,721 3.2 75,948 2.4 80,367 2.6 15.8
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
600,179 21.8 535,242 19.3 490,178 15.6 458,852 14.3 8.2
-- -- -- -- -- -- -- --
8,030 .3 19,486 .7 -- -- -- --
19,394 .7 1,497 .0 11,091 .4 6,218 .2
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
627,603 22.8 556,225 20.0 501,269 16.0 465,070 14.5 9.6
455,621 16.6 451,193 16.2 443,273 14.1 413,592 12.9 3.8
113,059 4.1 88,630 3.2 81,216 2.6 73,881 2.3 6.6
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
568,680 20.7 539,823 19.4 524,489 16.7 487,473 15.2 4.3
82,070 3.0 80,673 2.9 75,729 2.4 71,402 2.2 4.1
102,246 3.7 100,916 3.6 99,569 3.2 98,042 3.0 2.3
378,240 13.7 374,240 13.5 396,730 12.7 295,367 9.3 6.6
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
1,131,236 41.1 1,095,652 39.4 1,096,517 35.0 952,284 29.7 4.8
687,540 25.0 596,203 21.5 280,918 8.9 434,324 13.5 14.9
195,445 7.1 162,978 5.9 51,378 1.6 88,647 2.7 24.6
- ---------- ---- ---------- ---- ---------- ---- ---------- ----
$ 492,095 17.9 $ 433,225 15.6 $ 229,540 7.3 $ 345,677 10.8 11.8
========== ==== ========== ==== ========== ==== ========== ====
$ 2.83 $ 2.51 $ 1.34 $ 2.05 11.3
$ 2.81 $ 2.48 $ 1.32 $ 2.02 11.6
$ 1.11 $ 1.00 $ .92 $ .82 11.0
173,941 172,641 171,481 168,888 .4
175,198 175,512 175,218 172,722 .0
</TABLE>
67
<PAGE> 69
WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME -- TAXABLE EQUIVALENT (thousands)
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
Amount % Amount %
---------- ---- ---------- ------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans:
Commercial............................................................... $ 681,206 21.8 $ 444,395 18.0
Tax-exempt............................................................... 193,080 6.2 176,701 7.2
---------- ----- ---------- ------
Total commercial..................................................... 874,286 28.0 621,096 25.2
Direct retail............................................................ 67,803 2.2 61,054 2.5
Indirect retail.......................................................... 200,818 6.4 190,444 7.7
Credit card.............................................................. 488,158 15.7 389,763 15.8
Other revolving credit................................................... 43,390 1.4 38,556 1.6
---------- ----- ---------- ------
Total retail......................................................... 800,169 25.7 679,817 27.6
Construction............................................................. 62,823 2.0 45,988 1.9
Commercial mortgages..................................................... 316,956 10.2 259,077 10.5
Residential mortgages.................................................... 335,907 10.8 287,922 11.7
---------- ----- ---------- ------
Total real estate.................................................... 715,686 23.0 592,987 24.1
Lease financing.......................................................... 23,598 .8 13,563 .6
Foreign.................................................................. 22,610 .7 6,162 .2
---------- ----- ---------- ------
Total loans.......................................................... 2,436,349 78.2 1,913,625 77.7
Investment securities:
Held-to-maturity:
State and municipal.................................................... 50,192 1.6 75,069 3.1
Other investments...................................................... 271,292 8.7 234,557 9.5
---------- ----- ---------- ------
Total securities held-to-maturity.................................... 321,484 10.3 309,626 12.6
Available-for-sale:
Other investments...................................................... 283,989 9.1 194,576 7.9
---------- ----- ---------- ------
Total investment securities.......................................... 605,473 19.4 504,202 20.5
Interest-bearing bank balances............................................ 9,121 .3 597 .0
Federal funds sold and securities purchased under resale agreements....... 7,234 .2 7,682 .3
Trading account assets.................................................... 60,326 1.9 36,348 1.5
---------- ----- ---------- ------
Total interest income................................................ 3,118,503 100.0 2,462,454 100.0
INTEREST EXPENSE
Interest-bearing demand................................................... 59,016 1.9 55,088 2.2
Savings and money market savings.......................................... 240,328 7.7 164,461 6.7
Savings certificates...................................................... 370,290 11.9 227,060 9.2
Large denomination certificates........................................... 111,944 3.6 70,305 2.9
---------- ----- ---------- ------
Total time deposits in domestic offices.............................. 781,578 25.1 516,914 21.0
Time deposits in foreign offices.......................................... 41,876 1.3 22,318 .9
---------- ----- ---------- ------
Total time deposits.................................................. 823,454 26.4 539,232 21.9
Federal funds purchased and securities sold under repurchase agreements... 316,759 10.2 224,089 9.1
Commercial paper.......................................................... 27,807 .9 19,880 .8
Other short-term borrowed funds........................................... 122,441 3.9 28,603 1.2
---------- ----- ---------- ------
Total short-term borrowed funds...................................... 467,007 15.0 272,572 11.1
Bank notes................................................................ 219,035 7.0 171,968 7.0
Other long-term debt...................................................... 69,611 2.2 54,616 2.2
---------- ----- ---------- ------
Total long-term debt................................................. 288,646 9.2 226,584 9.2
---------- ----- ---------- ------
Total interest expense............................................... 1,579,107 50.6 1,038,388 42.2
---------- ----- ---------- ------
NET INTEREST INCOME....................................................... $1,539,396 49.4 $1,424,066 57.8
========== ===== ========== ======
Percentage of interest-earning assets:
Interest income.......................................................... 8.43% 7.51%
Interest expense......................................................... 4.27 3.17
---- ----
Net interest income.................................................. 4.16% 4.34%
==== ====
Taxable equivalent adjustment included in interest income:
Loans.................................................................... $ 51,430 $ 49,543
Investment securities.................................................... 43,126 47,949
Trading account assets................................................... 4,217 2,668
---------- ----------
Total (2)............................................................ $ 98,773 $ 100,160
========== ==========
(1) Percentages reflected above are based on total interest income.
(2) The taxable equivalent adjustment for 1995, 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%.
</TABLE>
68
<PAGE> 70
<TABLE>
<CAPTION>
1993 1992 1991 1990 Five-Year
- ------------------ ------------------ ------------------ ----------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ---------- ----- ---------- ----- ---------- ----- ---------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 327,729 14.8 $ 349,868 15.2 $ 502,100 18.4 $ 596,227 20.9 2.7%
171,163 7.7 173,158 7.5 206,099 7.5 230,049 8.0 (3.4)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
498,892 22.5 523,026 22.7 708,199 25.9 826,276 28.9 1.1
59,455 2.7 77,850 3.4 97,655 3.6 110,423 3.9 (9.3)
189,143 8.5 191,594 8.3 209,985 7.7 225,582 7.9 (2.3)
304,502 13.7 257,885 11.2 259,773 9.5 240,709 8.4 15.2
36,580 1.6 37,538 1.6 38,106 1.4 39,567 1.4 1.9
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
589,680 26.5 564,867 24.5 605,519 22.2 616,281 21.6 5.4
35,034 1.6 40,441 1.8 95,503 3.5 126,754 4.4 (13.1)
232,688 10.5 243,861 10.6 273,371 10.0 290,390 10.2 1.8
305,965 13.8 320,363 13.9 370,733 13.6 347,730 12.2 (.7)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
573,687 25.9 604,665 26.3 739,607 27.1 764,874 26.8 (1.3)
12,051 .5 11,830 .5 12,990 .5 15,407 .5 8.9
3,318 .1 3,760 .2 6,775 .2 7,745 .3 23.9
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
1,677,628 75.5 1,708,148 74.2 2,073,090 75.9 2,230,583 78.1 1.8
85,854 3.8 96,649 4.2 109,607 4.0 119,799 4.2 (16.0)
414,485 18.7 406,274 17.7 416,668 15.3 353,199 12.4 (5.1)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
500,339 22.5 502,923 21.9 526,275 19.3 472,998 16.6 (7.4)
-- -- -- -- -- -- -- -- --
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
500,339 22.5 502,923 21.9 526,275 19.3 472,998 16.6 5.1
2,905 .1 12,772 .6 26,974 1.0 50,855 1.7 (29.1)
12,433 .6 17,038 .7 35,537 1.3 39,496 1.4 (28.8)
28,433 1.3 60,444 2.6 70,049 2.5 62,386 2.2 (.7)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
2,221,738 100.0 2,301,325 100.0 2,731,925 100.0 2,856,318 100.0 1.8
60,433 2.7 72,548 3.1 95,809 3.5 93,564 3.3 (8.8)
151,748 6.8 189,699 8.2 275,951 10.1 301,248 10.5 (4.4)
240,795 10.8 324,063 14.1 475,012 17.4 473,150 16.5 (4.8)
90,101 4.1 148,931 6.5 221,992 8.1 256,243 9.0 (15.3)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
543,077 24.4 735,241 31.9 1,068,764 39.1 1,124,205 39.3 (7.0)
14,503 .7 15,646 .7 16,834 .6 39,147 1.4 1.4
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
557,580 25.1 750,887 32.6 1,085,598 39.7 1,163,352 40.7 (6.7)
127,580 5.8 115,939 5.1 202,299 7.4 309,846 10.9 .4
14,693 .7 16,629 .7 19,985 .7 29,416 1.0 (1.1)
31,574 1.4 58,420 2.5 146,918 5.4 166,251 5.8 (5.9)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
173,847 7.9 190,988 8.3 369,202 13.5 505,513 17.7 (1.6)
69,785 3.1 13,183 .6 -- -- -- --
37,800 1.7 11,970 .5 13,049 .5 15,249 .6 35.5
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
107,585 4.8 25,153 1.1 13,049 .5 15,249 .6 80.1
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
839,012 37.8 967,028 42.0 1,467,849 53.7 1,684,114 59.0 (1.3)
- ---------- ----- ---------- ----- ---------- ----- ---------- -----
$1,382,726 62.2 $1,334,297 58.0 $1,264,076 46.3 $1,172,204 41.0 5.6
========== ===== ========== ===== ========== ===== ========== =====
7.46% 8.19% 9.63% 10.66%
2.82 3.44 5.17 6.28
- ---------- ---------- ---------- ----------
4.64% 4.75% 4.46% 4.38%
========== ========== ========== ==========
$ 50,178 $ 44,760 $ 54,882 $ 62,415
46,613 33,787 39,245 44,635
2,110 700 783 624
- ---------- ---------- ---------- ----------
$ 98,901 $ 79,247 $ 94,910 $ 107,674
========== ========== ========== ==========
</TABLE>
69
<PAGE> 71
WACHOVIA CORPORATION AND SUBSIDIARIES
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AVERAGE YIELDS EARNED (taxable equivalent)
Loans:
Commercial ............................................................... 7.44% 6.03% 5.29% 5.96% 8.21% 9.90%
Tax-exempt ............................................................... 9.81 8.99 9.05 8.67 9.95 10.88
Total commercial ...................................................... 7.86 6.66 6.17 6.65 8.65 10.15
Direct retail ............................................................ 9.23 8.30 8.68 11.32 12.89 13.30
Indirect retail .......................................................... 8.22 7.77 8.42 9.55 10.55 11.28
Credit card .............................................................. 12.35 11.05 11.75 14.53 16.66 16.93
Other revolving credit.................................................... 12.61 11.55 11.15 11.63 12.73 13.73
Total retail .......................................................... 10.71 9.65 10.08 11.79 13.14 13.57
Construction ............................................................. 9.82 9.26 7.45 7.78 9.36 10.34
Commercial mortgages ..................................................... 8.62 7.72 7.39 7.96 9.39 10.60
Residential mortgages ................................................... 8.36 7.78 8.10 8.89 10.15 10.82
Total real estate ..................................................... 8.59 7.85 7.76 8.42 9.75 10.66
Lease financing .......................................................... 8.73 7.83 8.90 10.01 10.43 10.70
Foreign .................................................................. 7.43 5.70 4.35 5.20 7.79 9.66
Total loans ........................................................... 8.86 7.90 7.79 8.53 10.07 11.11
Held-to-maturity securities:
State and municipal securities ........................................... 11.84 12.53 12.46 12.38 12.48 12.63
Other investments ........................................................ 7.26 6.96 6.53 7.50 8.49 8.99
Available-for-sale securities:
Other investments ........................................................ 6.79 5.24 -- -- -- --
Total investment securities ........................................... 7.26 6.56 7.11 8.11 9.10 9.70
Interest-bearing bank balances ............................................. 7.93 4.58 3.71 4.24 6.48 8.42
Federal funds sold and securities
purchased under resale agreements ........................................ 5.93 3.91 3.15 3.52 5.95 8.23
Trading account assets ..................................................... 6.59 5.28 3.94 5.61 7.19 8.44
Total interest-earning assets ......................................... 8.43 7.51 7.46 8.19 9.63 10.66
AVERAGE RATES PAID
Interest-bearing demand .................................................... 1.81% 1.63% 1.88% 2.55% 4.07% 4.47%
Savings and money market savings ........................................... 3.67 2.69 2.53 3.26 5.19 6.18
Savings certificates ....................................................... 5.70 4.26 4.30 5.23 6.92 7.89
Large denomination certificates ............................................ 5.85 4.47 5.18 5.74 7.16 8.20
Total time deposits in domestic offices................................ 4.29 3.15 3.28 4.21 6.06 6.99
Time deposits in foreign offices .......................................... 5.59 4.32 3.11 3.70 5.81 8.00
Total time deposits ................................................... 4.34 3.18 3.28 4.20 6.06 7.02
Federal funds purchased and securities
sold under repurchase agreements ......................................... 6.02 4.44 3.23 3.73 5.78 7.99
Commercial paper ........................................................... 5.51 3.94 3.02 3.54 5.74 8.05
Other short-term borrowed funds............................................. 6.03 4.24 3.25 4.23 6.58 8.36
Total short-term borrowed funds ....................................... 5.99 4.37 3.22 3.85 6.07 8.11
Bank notes.................................................................. 5.67 4.88 4.54 4.83 -- --
Other long-term debt ....................................................... 6.70 6.60 7.03 6.80 7.35 8.59
Total long-term debt................................................... 5.89 5.21 5.19 5.61 7.35 8.59
Total interest-bearing liabilities .................................... 4.99 3.77 3.43 4.15 6.07 7.32
Interest rate spread ....................................................... 3.44% 3.74% 4.03% 4.04% 3.56% 3.34%
Net yield on interest-earning assets........................................ 4.16% 4.34% 4.64% 4.75% 4.46% 4.38%
RATIOS (averages)
Shareholders' equity to:
Total assets ............................................................. 8.22% 8.36% 8.54% 8.16% 7.68% 7.34%
Net loans ................................................................ 12.58 13.01 13.58 13.21 12.13 11.28
Deposits.................................................................. 14.06 13.88 12.84 11.37 10.93 10.55
Equity and long-term debt................................................. 41.03 41.58 58.07 85.27 93.27 92.65
Return on assets............................................................ 1.45 1.46 1.46 1.36 .72 1.13
Return on shareholders' equity ............................................. 17.67 17.41 17.13 16.69 9.33 15.45
Return on deposits ......................................................... 2.48 2.42 2.20 1.90 1.02 1.63
Dividends paid as a percentage of net income ............................... 39.08 39.05 38.91 39.42 63.78 37.84
</TABLE>
70
<PAGE> 72
WACHOVIA CORPORATION AND SUBSIDIARIES
YEAR-END INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONDENSED BALANCE SHEET (millions)
Cash and due from banks .................................................... $ 2,692 $ 2,670 $ 2,529 $ 2,628 $ 2,475 $ 3,586
Interest-bearing bank balances ............................................. 451 7 13 189 408 565
Federal funds sold and securities
purchased under resale agreements ......................................... 144 202 691 479 546 591
Trading account assets ..................................................... 1,115 890 789 896 1,445 793
Investment securities:
Available-for-sale......................................................... 7,410 3,538 -- -- -- --
Held-to-maturity........................................................... 1,620 4,185 7,879 6,486 6,265 5,273
Loans and net leases ....................................................... 29,270 25,899 22,986 21,097 20,643 21,255
Less unearned income on loans .............................................. 9 8 9 11 26 48
------- ------- ------- ------- ------- -------
Total loans ........................................................... 29,261 25,891 22,977 21,086 20,617 21,207
Less allowance for loan losses ............................................. 409 406 405 380 360 270
------- ------- ------- ------- ------- -------
Net loans ............................................................. 28,852 25,485 22,572 20,706 20,257 20,937
Premises and equipment...................................................... 628 543 503 444 435 429
Other assets ............................................................... 2,069 1,668 1,550 1,539 1,327 1,141
------- ------- ------- ------- ------- -------
Total assets........................................................... $44,981 $39,188 $36,526 $33,367 $33,158 $33,315
======= ======= ======= ======= ======= =======
Deposits in domestic offices ............................................... $25,608 $22,153 $22,545 $22,856 $22,602 $22,736
Deposits in foreign offices ................................................ 761 916 807 519 404 499
------- ------- ------- ------- ------- -------
Total deposits ........................................................ 26,369 23,069 23,352 23,375 23,006 23,235
Federal funds purchased and securities
sold under repurchase agreements .......................................... 5,850 5,898 4,741 3,714 4,002 3,867
Commercial paper ........................................................... 502 407 589 387 398 331
Other short-term borrowed funds ............................................ 1,721 1,007 1,091 849 2,201 2,473
Bank notes ................................................................. 4,088 3,953 2,370 758 -- --
Other long-term debt ....................................................... 1,335 838 591 439 171 164
Other liabilities .......................................................... 1,342 729 774 1,070 896 874
Shareholders' equity ....................................................... 3,774 3,287 3,018 2,775 2,484 2,371
------- ------- ------- ------- ------- -------
Total liabilities and shareholders' equity ............................ $44,981 $39,188 $36,526 $33,367 $33,158 $33,315
======= ======= ======= ======= ======= =======
LOAN PORTFOLIO (millions)
Domestic borrowers:
Commercial ................................................................ $ 9,753 $ 8,378 $ 6,727 $ 6,365 $ 6,396 $ 6,627
Tax exempt ................................................................ 2,238 1,810 1,959 1,952 1,993 2,065
Direct retail ............................................................. 755 750 716 673 723 796
Indirect retail............................................................ 2,544 2,340 2,429 2,109 1,983 2,022
Credit card ............................................................... 3,918 3,969 3,123 2,216 1,671 1,598
Other revolving credit .................................................... 354 343 333 327 302 297
Construction .............................................................. 746 553 494 464 637 1,197
Commercial mortgages ...................................................... 3,855 3,484 3,199 3,119 3,066 2,860
Residential mortgages...................................................... 4,214 3,821 3,767 3,663 3,660 3,506
Lease financing, net ...................................................... 494 189 157 125 116 138
------- ------- ------- ------- ------- -------
Total ................................................................. 28,871 25,637 22,904 21,013 20,547 21,106
Foreign borrowers:
Commercial and industrial ................................................. 390 254 73 73 56 92
Banks and other financial institutions .................................... -- -- -- -- 7 --
Governments and official institutions ..................................... -- -- -- -- 7 9
------- ------- ------- ------- ------- -------
Total ................................................................. 390 254 73 73 70 101
------- ------- ------- ------- ------- -------
Total loans ........................................................... $29,261 $25,891 $22,977 $21,086 $20,617 $21,207
======= ======= ======= ======= ======= =======
LOAN PORTFOLIO (percentages)
Commercial.................................................................. 41.0 39.4 37.8 39.4 40.7 41.0
Credit card ................................................................ 13.4 15.3 13.6 10.5 8.1 7.5
Other revolving credit ..................................................... 1.2 1.3 1.4 1.6 1.5 1.4
Other retail................................................................ 11.3 11.9 13.7 13.2 13.1 13.3
Real estate ................................................................ 30.1 30.4 32.5 34.4 35.7 35.7
Lease financing ............................................................ 1.7 .7 .7 .6 .6 .6
Foreign..................................................................... 1.3 1.0 .3 .3 .3 .5
------- ------- ------- ------- ------- -------
Total ................................................................. 100.0 100.0 100.0 100.0 100.0 100.0
======= ======= ======= ======= ======= =======
</TABLE>
71
<PAGE> 73
STOCK DATA
- --------------------------------------------------------------------------------
The following charts present high and low trading ranges for
the corporation's common stock, price to earnings ratios and data
on cash dividends per share and cash dividend payouts for the most
recent six years. Stock price trading ranges and price to earnings
ratios for the most recent eight quarters also are provided.
The Five-Year Total Return chart compares Wachovia, the S&P
500 Index and the Keefe, Bruyette & Woods (KBW) 50 Total Return
Index in stock price appreciation and dividends, assuming
quarterly reinvestment, from the base period December 31, 1990
through year-end 1995. The KBW 50 Index is a market
<TABLE>
COMMON STOCK PRICE RANGE* NYSE SYMBOL: WB CASH DIVIDENDS PER SHARE*
Five-year compound growth rate = 11.0%
<CAPTION>
High Low
---- ---
<S> <C> <C> <C> <C>
1990 22 3/8 16 1/8 1990 $ .82
1991 30 20 1/4 1991 $ .92
1992 34 3/4 28 1/4 1992 $1.00
1993 40 1/2 31 7/8 1993 $1.11
1994 35 3/8 30 1/8 1994 $1.23
1995 48 1/4 32 1995 $1.38
*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>
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%
1995 13.8 x 9.1 x 1995 $235.5 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 TABLE 19
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Market value:*
End of year................. $ 45 3/4 $ 32 1/4 $ 33 1/2 $ 34 1/8 $ 29 $ 20 7/8
High........................ 48 1/4 35 3/8 40 1/2 34 3/4 30 22 3/8
Low......................... 32 30 1/8 31 7/8 28 1/4 20 1/4 16 1/8
Book value.................... 22.15 19.23 17.61 16.18 14.56 14.07
Dividend*..................... 1.38 1.23 1.11 1.00 .92 .82
Price/earnings ratio**........ 13.1x 10.3x 11.8x 13.6x 21.7x 9.9x
</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
capitalization weighted measure of total return for 50 of the
largest U.S. banking companies including all money-center and most
regional banks.
Wachovia'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.
<TABLE>
<CAPTION>
QUARTERLY COMMON STOCK PRICE RANGE
1994 1995
-------------- --------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1st Q 35 1/8 30 1/8 36 1/2 32
2nd Q 35 3/8 30 3/4 37 7/8 34 1/4
3rd Q 35 1/4 31 3/8 45 35 3/8
4th Q 34 1/2 31 1/2 48 1/4 43 1/8
QUARTERLY COMMON STOCK PRICE/EARNINGS RATIOS*
1994 1995
--------------- ---------------
High Low High Low
---- --- ---- ---
1st Q 12.3 x 10.6 x 11.3 x 9.9 x
2nd Q 12.1 x 10.5 x 11.1 x 10.1 x
3rd Q 11.7 x 10.4 x 12.9 x 10.2 x
4th Q 11.0 x 10.1 x 13.8 x 12.3 x
*Figures based on hiigh 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.
</TABLE>
FIVE YEAR TOTAL RETURN*
<TABLE>
Wachovia S&P 500 KWB 50 Index
-------- ------- ------------
<S> <C> <C> <C>
1990 100 100 100
1991 143.69 130.48 158.27
1992 174.21 140.41 201.68
1993 176.44 154.56 212.85
1994 176.35 156.60 201.99
1995 259.45 215.45 323.52
*Base period 12/31/90 = 100. Dividends reinvested. Data
for the KBW 50 Index is weighted by market capitalization.
</TABLE>
73
<PAGE> 75
HISTORICAL COMPARATIVE DATA
- --------------------------------------------------------------------------------
Six-year historical comparative data for Wachovia Corporation
and the median of the 25 largest U.S. bank holding companies based
on assets as of each year-end is presented in the following
charts. 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 1990.
<TABLE>
<CAPTION>
RETURN ON ASSETS RETURN ON COMMON EQUITY
(average) (average)
25 Largest 25 Largest
Wachovia US Banks Wachovia US Banks
-------- ---------- -------- ----------
<S> <C> <C> <S> <C> <C>
1990 1.23 % .57 % 1990 16.36 % 9.56 %
1991 .72 % .72 % 1991 9.33 % 10.49 %
1992 1.36 % .90 % 1992 16.69 % 14.18 %
1993 1.46 % 1.20 % 1993 17.13 % 16.94 %
1994 1.46 % 1.21 % 1994 17.41 % 16.10 %
1995 1.45 % 1.21 % 1995 17.67 % 16.77 %
COMMON EQUITY TO ASSETS NET INTEREST INCOME* AS A PERCENTAGE
(average) OF AVERAGE EARNING ASSETS
25 Largest 25 Largest
Wachovia US Banks Wachovia US Banks
-------- ---------- -------- ----------
<S> <C> <C> <S> <C> <C>
1990 7.55 % 4.82 % 1990 4.33 % 3.51 %
1991 7.68 % 5.13 % 1991 4.46 % 3.93 %
1992 8.16 % 6.16 % 1992 4.75 % 4.44 %
1993 8.54 % 6.57 % 1993 4.64 % 4.48 %
1994 8.36 % 6.86 % 1994 4.34 % 4.34 %
1995 8.22 % 7.00 % 1995 4.16 % 4.45 %
*Taxable Equivalent
NONINTEREST EXPENSE AS A PERCENTAGE NET LOAN LOSSES TO AVERAGE LOANS
OF TOTAL ADJUSTED REVENUES*
25 Largest 25 Largest
Wachovia US Banks Wachovia US Banks
-------- ---------- -------- ----------
<S> <C> <C> <S> <C> <C>
1990 57.67 % 65.79 % 1990 .43 % 1.45 %
1991 62.51 % 67.40 % 1991 .99 % 1.55 %
1992 58.61 % 64.85 % 1992 .48 % 1.25 %
1993 57.05 % 62.54 % 1993 .31 % .75 %
1994 54.15 % 61.88 % 1994 .29 % .39 %
1995 54.23 % 61.72 % 1995 .37 % .44 %
*Excluding mortgage servicing portfolio sale,
subsidiary sale and securities transactions.
NONPERFORMING ASSETS TO YEAR-END
LOANS AND FORECLOSED PROPERTY
25 Largest
Wachovia US Banks
-------- ----------
<S> <C> <C>
1990 .91 4.14
1991 1.50 4.78
1992 1.25 3.09
1993 .67 1.90
1994 .39 1.03
1995 .24 .80
</TABLE>
74
<PAGE> 76
MEMBER COMPANY DIRECTORS
- -------------------------------------------------------------------------------
WACHOVIA BANK OF GEORGIA, N.A.
D. GARY THOMPSON BRYAN D. LANGTON
President and (Advisory Director)
Chief Executive Officer Chairman of the Board and
Chief Executive Officer
G. JOSEPH PRENDERGAST Holiday Inn Worldwide
Chairman of the Board
BERNARD MARCUS
F. DUANE ACKERMAN Chairman of the Board and
Vice Chairman and Chief Executive Officer
Chief Operating Officer The Home Depot, Inc.
BellSouth Corporation
JAMES F. MCDONALD
L. M. BAKER, JR. President and
President and Chief Executive Officer
Chief Executive Officer Scientific-Atlanta, Inc.
Wachovia Corporation
DANIEL W. MCGLAUGHLIN
CARL BOLCH, JR. President and
Chairman of the Board and Chief Operating Officer
Chief Executive Officer Equifax Inc.
Racetrac Petroleum, Inc.
D. RAYMOND RIDDLE
JAMES E. BOSTIC, JR. Retired Chairman of the Board
Senior Vice President National Service Industries, Inc.
Environmental, Government Affairs
and Communications S. STEPHEN SELIG III
Georgia-Pacific Corporation Chairman of the Board
and President
MICHAEL C. CARLOS Selig Enterprises, Inc.
Chairman of the Board and ALANA S. SHEPHERD
Chief Executive Officer Secretary of the Board
National Distributing Co., Inc. Shepherd Center, Inc.
DAN T. CATHY
President
Chick-Fil-A International
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.
ANDREW J. SCHINDLER
H. C. BISSELL President and
Chairman of the Board and Chief Executive Officer
Chief Executive Officer R.J. Reynolds Tobacco Company
The Bissell Companies, Inc.
ROBERT L. TILLMAN
FELTON J. CAPEL Chief Operating Officer
Chairman of the Board Lowe's Companies, Inc.
and President
Century Associates of JOHN F. WARD
North Carolina Senior Vice President
Sara Lee Corporation
WILLIAM CAVANAUGH, III Chief Executive Officer
President and Hanes Group
Chief Operating Officer
Carolina Power & Light Company ANDERSON D. WARLICK
President and
BERT COLLINS Chief Operating Officer
President and Parkdale Mills, Inc.
Chief Executive Officer
North Carolina Mutual DAVID J. WHICHARD, II
Life Insurance Company Chairman
The Daily Reflector
RICHARD L. DAUGHERTY
North Carolina Senior JOHN C. WHITAKER, JR.
State Executive, Chairman of the Board and
Vice President Worldwide Chief Executive Officer
Manufacturing Inmar Enterprises, Inc.
IBM PC Company
IBM Corporation
(Retired/Consultant)
GEORGE W. HENDERSON
President and
Chief Executive Officer
Burlington Industries, Inc.
WACHOVIA BANK OF SOUTH CAROLINA, N.A.
WILL B. SPENCE, JR. JAMES G. LINDLEY
President and Chairman Emeritus
Chief Executive Officer
JOE A. PADGETT
G. JOSEPH PRENDERGAST Retired Executive Vice President
Chairman of the Board Wachovia Bank of South Carolina,N.A.
L. M. BAKER, JR. W. M. SELF
President and President and
Chief Executive Officer Chief Executive Officer
Wachovia Corporation Greenwood Mills, Inc.
CHARLES J. BRADSHAW ROBERT S. SMALL, JR.
President President
Bradshaw Investments, Inc. AVTEX Properties, Inc.
FRANK W. BRUMLEY J. GUY STEENROD
President President
The Brumley Company Roche Carolina Inc.
W. T. CASSELS, JR. WILLIAM G. TAYLOR
Chairman of the Board President
Southeastern Freight Lines, Inc. The Springs Company
THOMAS C. COXE, III BEATRICE R. THOMPSON, PH.D.
Executive Vice President Coordinator of Psychological Services
Sonoco Products Company Anderson School District Five
FREDERICK B. DENT, JR.
President
Mayfair Mills, Inc.
75
<PAGE> 77
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
- -------------------------------------------------------------------------------
DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C>
L.M. BAKER, JR. THOMAS K.HEARN, JR. JAMES W. JOHNSTON
President and President Vice Chairman
Chief Executive Officer Wake Forest University RJR Nabisco, Inc.
Chairman of the Board
R.J. Reynolds Tobacco Company
JOHN G. MEDLIN, JR. W. HAYNE HIPP WYNDHAM ROBERTSON
Chairman of the Board President and Vice President, Communications
Chief Executive Officer University of North Carolina
The Liberty Corporation
RUFUS C. BARKLEY, JR. ROBERT M. HOLDER, JR. HERMAN J. RUSSELL
Chairman Chairman of the Board Chairman and
Cameron & Barkley Company Holder Corporation Chief Executive Officer
H.J. Russell & Company
CRANDALL C. BOWLES DONALD R. HUGHES SHERWOOD H. SMITH, JR.
Executive Vice President Consultant and Retired Chairman of the Board and
Springs Industries, Inc. Vice Chairman of the Board Chief Executive Officer
Burlington Industries, Inc. Carolina Power & Light Company
JOHN L. CLENDENIN F. KENNETH IVERSON CHARLES MCKENZIE TAYLOR
Chairman, President Chairman and Chairman of the Board
and Chief Executive Officer Chief Executive Officer Taylor & Mathis, Inc.
BellSouth Corporation Nucor Corporation Taylor & Mathis Properties
LAWRENCE M. GRESSETTE, JR.
Chairman, President and
Chief Executive Officer
SCANA Corporation
PRINCIPAL CORPORATE OFFICERS
L.M. BAKER, JR. W. DOUG KING ROBERT S. MCCOY, JR.
President and Executive Vice President Executive Vice President
Chief Executive Officer Consumer Services Chief Financial Officer
MICKEY W. DRY WALTER E. LEONARD, JR. G. JOSEPH PRENDERGAST
Executive Vice President Executive Vice President Executive Vice President
Chief Credit Officer Operations/Technology General Banking
HUGH M. DURDEN KENNETH W. MCALLISTER RICHARD B. ROBERTS
Executive Vice President Executive Vice President Executive Vice President
Corporate Services General Counsel/Administrative Treasurer
</TABLE>
76
<PAGE> 78
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
CORPORATE HEADQUARTERS
Wachovia Corporation
100 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 26, 1996 at 10:30 a.m., in the
North Raleigh Hilton, 3415 Wake Forest Road, Raleigh,
NC. 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 account 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
910-732-5787 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
910-732-5926 910-732-5788
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; Form S-4:
No 333-1033) of Wachovia Corporation and in the related prospectuses of our
report dated January 11, 1996, with respect to the consolidated financial
statements of Wachovia Corporation incorporated by reference in this Annual
Report (Form 10-K) for the year ended December 31, 1995.
Ernst & Young LLP
Winston-Salem, North Carolina
March 21, 1996
<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 Washington
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, 1995 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 8th day of February, 1996.
/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 /s/Robert M. Holder, Jr.
----------------------------- ------------------------
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/John G. Medlin, Jr.
----------------------------- ------------------------
James W. Johnston John G. Medlin, Jr.
/s/Wyndham Robertson /s/Herman J. Russell
----------------------------- ------------------------
Wyndham Robertson Herman J. Russell
/s/Sherwood H. Smith, Jr. /s/Charles McKenzie Taylor
----------------------------- ------------------------
Sherwood H. Smith, Jr. Charles McKenzie Taylor
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 2,692,318
<INT-BEARING-DEPOSITS> 451,279
<FED-FUNDS-SOLD> 144,105
<TRADING-ASSETS> 1,114,926
<INVESTMENTS-HELD-FOR-SALE> 7,409,825
<INVESTMENTS-CARRYING> 1,619,480
<INVESTMENTS-MARKET> 1,721,222
<LOANS> 29,261,153
<ALLOWANCE> 408,808
<TOTAL-ASSETS> 44,981,314
<DEPOSITS> 26,368,757
<SHORT-TERM> 8,073,268
<LIABILITIES-OTHER> 1,342,504
<LONG-TERM> 5,423,028
0
0
<COMMON> 851,793
<OTHER-SE> 2,921,964
<TOTAL-LIABILITIES-AND-EQUITY> 44,981,314
<INTEREST-LOAN> 2,384,919
<INTEREST-INVEST> 562,347
<INTEREST-OTHER> 72,464
<INTEREST-TOTAL> 3,019,730
<INTEREST-DEPOSIT> 823,454
<INTEREST-EXPENSE> 1,579,107
<INTEREST-INCOME-NET> 1,440,623
<LOAN-LOSSES> 103,791
<SECURITIES-GAINS> (23,494)
<EXPENSE-OTHER> 1,203,596
<INCOME-PRETAX> 868,868
<INCOME-PRE-EXTRAORDINARY> 602,543
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 602,543
<EPS-PRIMARY> 3.50
<EPS-DILUTED> 3.49
<YIELD-ACTUAL> 4.16
<LOANS-NON> 53,547
<LOANS-PAST> 48,970
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 406,132
<CHARGE-OFFS> 134,499
<RECOVERIES> 33,384
<ALLOWANCE-CLOSE> 408,808
<ALLOWANCE-DOMESTIC> 334,526
<ALLOWANCE-FOREIGN> 3,697
<ALLOWANCE-UNALLOCATED> 70,585
</TABLE>
