<PAGE>
(WACHOVIA logo appears here)
FINANCIAL SUPPLEMENT
AND FORM 10-Q
SECOND QUARTER 1996
<PAGE>
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
DIRECTORS
L. M. BAKER, JR.
President and
Chief Executive Officer
JOHN G. MEDLIN, JR.
Chairman of the Board
RUFUS C. BARKLEY, JR.
Chairman
Cameron & Barkley Company
CRANDALL C. BOWLES
Executive Vice President
Springs Industries, Inc.
JOHN L. CLENDENIN
Chairman, President
and Chief Executive Officer
BellSouth Corporation
LAWRENCE M. GRESSETTE, JR.
Chairman and
Chief Executive Officer
SCANA Corporation
THOMAS K. HEARN, JR.
President
Wake Forest University
W. HAYNE HIPP
President and
Chief Executive Officer
The Liberty Corporation
ROBERT M. HOLDER, JR.
Chairman of the Board
Holder Corporation
DONALD R. HUGHES
Consultant and Retired
Vice Chairman of the Board
Burlington Industries, Inc.
JAMES W. JOHNSTON
Retired Vice Chairman
RJR Nabisco, Inc.
Retired Chairman of the Board
R.J. Reynolds Tobacco Company
WYNDHAM ROBERTSON
Writer and Retired
Vice President, Communications
University of North Carolina
HERMAN J. RUSSELL
Chairman and
Chief Executive Officer
H.J. Russell & Company
SHERWOOD H. SMITH, JR.
Chairman of the Board and
Chief Executive Officer
Carolina Power & Light Company
CHARLES MCKENZIE TAYLOR
Chairman of the Board
Taylor & Mathis, Inc.
Taylor & Mathis Properties
JOHN C. WHITAKER, JR.
Chairman and
Chief Executive Officer
Inmar Enterprises, Inc.
PRINCIPAL CORPORATE OFFICERS
L. M. BAKER, JR.
President and
Chief Executive Officer
MICKEY W. DRY
Executive Vice President
Chief Credit Officer
HUGH M. DURDEN
Executive Vice President
Corporate Services
WALTER E. LEONARD, JR.
Executive Vice President
Operations/Technology
KENNETH W. MCALLISTER
Executive Vice President
General Counsel/Administrative
ROBERT S. MCCOY, JR.
Executive Vice President
Chief Financial Officer
G. JOSEPH PRENDERGAST
Executive Vice President
General Banking
RICHARD B. ROBERTS
Executive Vice President
Treasurer
2
<PAGE>
SELECTED PERIOD-END DATA
June 30 June 30
1996 1995
Banking offices:
North Carolina........................ 219 218
Georgia............................... 126 127
South Carolina........................ 143 146
Total................................ 488 491
Automated banking machines:
North Carolina........................ 342 314
Georgia............................... 215 196
South Carolina........................ 196 164
Total................................ 753 674
Employees (full-time equivalent)........ 16,150 15,707
Common stock shareholders of record..... 28,058 28,220
Common shares outstanding (thousands)... 166,798 170,400
COMMON STOCK DATA - PER SHARE
<TABLE>
<CAPTION>
1996 1995
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Market value:
Period-end............... $ 43 3/4 $ 44 3/4 $ 45 3/4 $ 43 1/8 $ 35 3/4
High..................... 46 1/4 48 3/8 48 1/4 45 37 7/8
Low...................... 40 7/8 41 1/4 43 1/8 35 3/8 34 1/4
Book value at period-end... 22.18 22.07 22.15 21.24 20.75
Dividend................... .36 .36 .36 .36 .33
Price/earnings ratio*...... 12.4X 12.6x 13.1x 12.4x 10.5x
</TABLE>
*Based on most recent twelve months net income
per primary share and period-end stock price
FINANCIAL INFORMATION
Analysts, investors and others seeking additional financial information about
Wachovia Corporation or its member companies should contact the following
either by phone or in writing.
Robert S. McCoy, Jr., Chief Financial Officer, (910) 732-5926
James C. Mabry, Investor Relations Manager, (910) 732-5788
Wachovia Corporation
P. O. Box 3099
Winston-Salem, NC 27150
Common Stock Listing - New York Stock Exchange, ticker symbol - WB
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL SUMMARY TABLE 1
<TABLE>
<CAPTION>
Twelve
Months
Ended 1996 1995 Six Months Ended
June 30 Second First Fourth Third Second June 30
1996 Quarter Quarter Quarter Quarter Quarter 1996 1995
SUMMARY OF OPERATIONS
(thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income - taxable equivalent ........$3,241,768 $810,637 $802,120 $815,894 $813,117 $774,078 $1,612,757 $1,489,492
Interest expense ............................ 1,668,341 411,472 413,328 424,624 418,917 392,970 824,800 735,566
Net interest income - taxable equivalent .... 1,573,427 399,165 388,792 391,270 394,200 381,108 787,957 753,926
Taxable equivalent adjustment ............... 87,955 17,914 18,877 24,531 26,633 23,987 36,791 47,609
Net interest income ......................... 1,485,472 381,251 369,915 366,739 367,567 357,121 751,166 706,317
Provision for loan losses ................... 115,089 34,404 27,334 30,172 23,179 28,652 61,738 50,440
Net interest income after
provision for loan losses .................. 1,370,383 346,847 342,581 336,567 344,388 328,469 689,428 655,877
Other operating revenue ..................... 739,404 198,595 184,105 186,289 170,415 166,304 382,700 323,397
Gain on sale of mortgage servicing
portfolio .................................. -- -- -- -- -- 79,025 -- 79,025
Investment securities gains (losses) ....... 3,350 (219) 698 2,554 317 (26,236) 479 (26,365)
Total other income .......................... 742,754 198,376 184,803 188,843 170,732 219,093 383,179 376,057
Personnel expense ........................... 627,156 160,162 161,618 152,078 153,298 149,987 321,780 294,950
Other expense ............................... 605,123 149,925 146,627 162,987 145,584 156,630 296,552 294,699
Total other expense ......................... 1,232,279 310,087 308,245 315,065 298,882 306,617 618,332 589,649
Income before income taxes .................. 880,858 235,136 219,139 210,345 216,238 240,945 454,275 442,285
Applicable income taxes* .................... 274,147 75,773 69,269 64,147 64,958 78,036 145,042 137,220
Net income ..................................$ 606,711 $159,363 $149,870 $146,198 $151,280 $162,909 $ 309,233 $ 305,065
Net income per common share:
Primary .....................................$ 3.54 $ .94 $ .87 $ .85 $ .88 $ .94 $ 1.81 $ 1.77
Fully diluted ...............................$ 3.53 $ .94 $ .87 $ .85 $ .87 $ .95 $ 1.81 $ 1.77
Cash dividends paid per common share ........$ 1.44 $ .36 $ .36 $ .36 $ .36 $ .33 $ .72 $ .66
Cash dividends paid on common stock .........$ 244,508 $ 60,684 $ 61,089 $ 61,423 $ 61,312 $ 56,302 $ 121,773 $ 112,760
Cash dividend payout ratio .................. 40.3% 38.1% 40.8% 42.0% 40.5% 34.6% 39.4% 37.0%
Average primary shares outstanding .......... 171,377 169,861 171,467 172,372 171,793 171,986 170,664 172,095
Average fully diluted shares outstanding .... 171,716 169,972 171,653 172,705 172,512 172,446 170,808 172,589
SELECTED AVERAGE BALANCES (millions)
Total assets ................................$ 43,856 $ 44,956 $ 44,435 $ 43,477 $ 42,573 $ 40,876 $ 44,696 $ 39,894
Loans - net of unearned income .............. 28,943 30,004 29,218 28,470 28,097 27,203 29,611 26,714
Investment securities** .................... 8,729 8,668 8,795 8,676 8,778 8,276 8,732 7,946
Other interest-earning assets ............... 1,471 1,519 1,594 1,562 1,210 1,012 1,556 914
Total interest-earning assets ............... 39,143 40,191 39,607 38,708 38,085 36,491 39,899 35,574
Interest-bearing deposits ................... 20,263 20,335 20,666 20,705 19,352 18,388 20,500 17,874
Short-term borrowed funds ................... 8,049 8,216 8,055 7,332 8,593 7,869 8,136 7,631
Long-term debt .............................. 5,418 6,129 5,487 5,213 4,851 4,863 5,808 4,769
Total interest-bearing liabilities .......... 33,730 34,680 34,208 33,250 32,796 31,120 34,444 30,274
Noninterest-bearing deposits ................ 5,342 5,426 5,372 5,361 5,212 5,333 5,399 5,317
Total deposits .............................. 25,605 25,761 26,038 26,066 24,564 23,721 25,899 23,191
Shareholders' equity ........................ 3,592 3,644 3,687 3,576 3,463 3,345 3,666 3,299
RATIOS (averages)
Annualized net loan losses to loans ......... .44% .46% .37% .42% .33% .42% .42% .36%
Annualized net yield on
interest-earning assets .................... 4.02 3.99 3.95 4.01 4.11 4.19 3.97 4.27
Shareholders' equity to:
Total assets ................................ 8.19 8.11 8.30 8.22 8.13 8.18 8.20 8.27
Net loans ................................... 12.59 12.31 12.80 12.74 12.51 12.48 12.55 12.54
Annualized return on assets*** ............. 1.39 1.42 1.35 1.35 1.42 1.59 1.38 1.53
Annualized return on
shareholders' equity*** .................... 17.01 17.49 16.26 16.36 17.47 19.48 16.87 18.49
</TABLE>
* Income taxes applicable to securities transactions were $1,263, ($86), $278,
$980, $91, ($9,580), $192 and ($9,647), respectively
** Reported at amortized cost; excludes pretax unrealized gains (losses) on
securities available-for-sale of $108, $74, $188, $104, $65, $15, $131 and
($17), respectively
***Includes average unrealized gains (losses) on securities available-for-
sale, net of tax, of $66, $45, $114, $64, $40, $9, $80 and ($10) million,
respectively
4
<PAGE>
RESULTS OF OPERATIONS
OVERVIEW
Wachovia Corporation ("Wachovia") is a southeastern interstate bank holding
company with dual headquarters in Atlanta, Georgia, and Winston-Salem, North
Carolina. Principal banking subsidiaries are Wachovia Bank of Georgia, N.A.,
Wachovia Bank of North Carolina, N.A., and Wachovia Bank of South Carolina,
N.A. The First National Bank of Atlanta provides credit card services
for Wachovia's affiliated banks.
During the second quarter of 1996, the economy showed signs of improved but
still moderate growth, on balance, with little evidence of inflation. While
consumer and business spending strengthened, fresh concerns over consumer credit
weakness appeared. Within the corporation's three primary operating states of
Georgia, North Carolina and South Carolina, business conditions remained
generally favorable. Seasonally adjusted unemployment rates for the quarter
averaged 4.6 percent in Georgia, 4.3 percent in North Carolina and 5.6 percent
in South Carolina compared with 5.4 percent for the nation.
Wachovia's net income for the second quarter totaled $159.363 million or
$.94 per fully diluted share. This compared with net income of $162.909 million
or $.95 per fully diluted share in the same period of 1995 which included an
after-tax gain of $47.385 million or $.27 per share from the sale of the
corporation's mortgage servicing portfolio, an after-tax loss of $16.656 million
or $.10 per share from restructuring of the investment securities portfolio to
improve yields and after-tax expenses totaling $11.291 million or $.07 per share
for other expenses related to severance costs, higher consulting fees and
charitable contributions. For the first six months of 1996, net income totaled
$309.233 million or $1.81 per fully diluted share versus $305.065 million or
$1.77 per fully diluted share a year earlier. Annualized returns were 17.49
percent on shareholders' equity and 1.42 percent on assets for the quarter and
16.87 percent and 1.38 percent, respectively, for the first half. The equity and
assets used in calculating returns include unrealized gains or losses, net of
tax, on securities available-for-sale.
Expanded discussion of operating results and the corporation's financial
condition is presented in the following narrative and tables. Interest income is
stated on a taxable equivalent basis which is adjusted for the tax-favored
status of earnings from certain loans and investments. References to changes in
assets and liabilities represent daily average levels unless otherwise noted.
5
<PAGE>
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Interest income - taxable equivalent ....................... $4.77 $4.50 $.27 $9.45 $8.65 $.80
Interest expense ........................................... 2.42 2.28 .14 4.83 4.27 .56
Net interest income - taxable equivalent ................... 2.35 2.22 .13 4.62 4.38 .24
Taxable equivalent adjustment .............................. .11 .14 (.03) .22 .28 (.06)
Net interest income ........................................ 2.24 2.08 .16 4.40 4.10 .30
Provision for loan losses .................................. .20 .17 .03 .36 .29 .07
Net interest income after provision
for loan losses ........................................... 2.04 1.91 .13 4.04 3.81 .23
Other operating revenue .................................... 1.17 .96 .21 2.24 1.88 .36
Gain on sale of mortgage servicing portfolio ............... -- .46 (.46) -- .46 (.46)
Investment securities losses ............................... -- (.15) .15 -- (.15) .15
Total other income ......................................... 1.17 1.27 (.10) 2.24 2.19 .05
Personnel expense .......................................... .94 .87 .07 1.88 1.72 .16
Other expense .............................................. .88 .91 (.03) 1.74 1.71 .03
Total other expense ........................................ 1.82 1.78 .04 3.62 3.43 .19
Income before income taxes ................................. 1.39 1.40 (.01) 2.66 2.57 .09
Applicable income taxes .................................... .45 .46 (.01) .85 .80 .05
Net income ................................................. $ .94 $ .94 $ -- $1.81 $1.77 $.04
</TABLE>
COMPUTATION OF EARNINGS PER COMMON SHARE TABLE 3
(thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY
Average common shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,298 170,734 169,004 170,901
Dilutive common stock options - based on treasury
stock method using average market price. . . . . . . . . . . . . . . . . . . . . . . . . 1,462 1,176 1,556 1,118
Dilutive common stock awards - based on treasury
stock method using average market price. . . . . . . . . . . . . . . . . . . . . . . . . 101 76 104 76
Average primary shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,861 171,986 170,664 172,095
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $159,363 $162,909 $309,233 $305,065
Net income per common share - primary . . . . . . . . . . . . . . . . . . . . . . . . . $ .94 $ .94 $ 1.81 $ 1.77
FULLY DILUTED
Average common shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,298 170,734 169,004 170,901
Dilutive common stock options - based on treasury
stock method using higher of period-end
market price or average market price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,473 1,176 1,556 1,145
Dilutive common stock awards - based on treasury
stock method using higher of period-end
market price or average market price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 83 108 83
Convertible notes assumed converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 453 140 460
Average fully diluted shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . 169,972 172,446 170,808 172,589
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $159,363 162,909 $309,233 $305,065
Add interest on convertible notes after taxes . . . . . . . . . . . . . . . . . . . . . . . . 20 96 43 192
Adjusted net income. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . $159,383 $163,005 $309,276 $305,257
Net income per common share - fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . $ .94 $ .95 $ 1.81 $ 1.77
</TABLE>
6
<PAGE>
NET INTEREST INCOME
Taxable equivalent net interest income for the second quarter rose $18.057
million or 4.7 percent year over year and increased $34.031 million or 4.5
percent for the first six months of 1996. Higher levels of interest-earning
assets, primarily loans, fueled the gains in both periods which were moderated
by a lower average earning yield and by increases in interest-bearing
liabilities to support asset growth. Compared with the first quarter of 1996,
taxable equivalent net interest income in the second quarter was up $10.373
million or 2.7 percent, reflecting solid loan growth and lower funding costs.
The net yield on interest-earning assets (taxable equivalent net interest
income as a percentage of average interest-earning assets) decreased 20 basis
points for the second period versus a year earlier and 30 basis points for the
first half but improved 4 basis points from the first three months of 1996.
Taxable equivalent interest income rose $36.559 million or 4.7 percent for
the second period and $123.265 million or 8.3 percent year to date. Interest-
earning assets expanded $3.700 billion or 10.1 percent for the quarter and
$4.325 billion or 12.2 percent for the first half, more than offsetting the
effects of a 40 basis point and 31 basis point decline, respectively, in the
average rate earned. Taxable equivalent interest income increased $8.517 million
or 1.1 percent from the first quarter, pushed higher by a $584 million or 1.5
percent rise in interest-earning assets but moderated by a 4 basis point
decrease in the average rate earned.
Loan demand remained good. Loans expanded $2.801 billion or 10.3 percent for
the quarter and $2.897 billion or 10.8 percent for the first six months. Gains
were led by the commercial portfolio with retail loan growth masked partially by
the transfer of $500 million in credit card receivables off the balance sheet
through a securitization in the fourth quarter of 1995. Loans were up $786
million or 2.7 percent from the first three months of 1996.
Commercial loans, including related real estate categories, increased $2.144
billion or 13.6 percent for the second quarter compared with a year earlier and
$2.252 billion or 14.6 percent year to date. Growth in both periods was broad
based, led by commercial loans made primarily to small business and middle-
market companies, by commercial mortgages and by lease financing. The gains in
lease financing reflected structured leverage lease transactions for
municipalities. At June 30, 1996, commercial real estate loans, based on
regulatory definitions, totaled $4.939 billion, representing 16.1 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 $4.130
billion, representing 13.5 percent of total loans, and construction loans were
$809 million or 2.6 percent of the total. Comparable amounts one year earlier
were $4.348 billion in commercial real estate, representing 15.4 percent of
total loans, with $3.673 billion in commercial mortgages and $675 million in
construction loans.
Retail loans, including residential mortgages, expanded $657 million or 5.8
percent and $645 million or 5.7 percent for the second quarter and first six
months, respectively. Increases were driven primarily by residential mortgages,
particularly adjustable rate mortgages, and by indirect retail loans, which
consists largely of automobile sales financing. Credit card outstandings were up
modestly for both the quarter and
7
<PAGE>
NET INTEREST INCOME AND AVERAGE BALANCES TABLE 4
<TABLE>
<CAPTION>
Twelve
Months
Ended 1996 1995 Six Months Ended
June 30 Second First Fourth Third Second June 30
1996 Quarter Quarter Quarter Quarter Quarter 1996 1995
NET INTEREST INCOME - TAXABLE
EQUIVALENT (thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans ................................. $2,511,658 $632,389 $619,722 $629,348 $630,199 $605,468 $1,252,111 $1,176,802
Investment securities .................. 635,594 154,395 157,631 160,381 163,187 151,695 312,026 281,905
Interest-bearing bank balances ......... 27,191 9,258 9,018 8,442 473 105 18,276 206
Federal funds sold and securities
purchased under resale agreements ...... 11,674 3,155 3,250 3,310 1,959 763 6,405 1,965
Trading account assets ................. 55,651 11,440 12,499 14,413 17,299 16,047 23,939 28,614
Total ................................ 3,241,768 810,637 802,120 815,894 813,117 774,078 1,612,757 1,489,492
Interest expense:
Interest-bearing demand ................ 53,822 10,916 12,669 15,392 14,845 14,412 23,585 28,779
Savings and money market savings ....... 258,068 64,932 64,980 65,731 62,425 61,595 129,912 112,173
Savings certificates ................... 381,798 91,685 91,467 98,647 99,999 96,773 183,152 171,643
Large denomination certificates ........ 144,204 32,863 39,634 43,028 28,679 20,226 72,497 40,237
Time deposits in foreign offices ....... 49,000 11,033 13,101 13,567 11,299 9,503 24,134 17,010
Short-term borrowed funds .............. 459,552 110,030 110,390 109,721 129,411 119,486 220,420 227,875
Long-term debt ......................... 321,897 90,013 81,087 78,538 72,259 70,975 171,100 137,849
Total ................................ 1,668,341 411,472 413,328 424,624 418,917 392,970 824,800 735,566
Net interest income .................... $1,573,427 $ 399,165 $ 388,792 $ 391,270 $394,200 $381,108 $787,957 $ 753,926
Annualized net yield on
interest-earning assets ................ 4.02% 3.99% 3.95% 4.01% 4.11% 4.19% 3.97% 4.27%
AVERAGE BALANCES (millions)
Assets:
Loans - net of unearned income ........$ 28,943 $ 30,004 $ 29,218 $28,470 $ 28,097 27,203 $ 29,611 $ 26,714
Investment securities .................. 8,729 8,668 8,795 8,676 8,778 8,276 8,732 7,946
Interest-bearing bank balances ......... 340 462 456 421 23 6 459 6
Federal funds sold and securities
purchased under resale agreements ...... 208 232 241 225 133 51 236 64
Trading account assets ................. 923 825 897 916 1,054 955 861 844
Total interest-earning assets ......... 39,143 40,191 39,607 38,708 38,085 36,491 39,899 35,574
Cash and due from banks ............... 2,555 2,521 2,612 2,556 2,530 2,491 2,567 2,497
Premises and equipment ................ 615 643 633 606 578 563 638 555
Other assets .......................... 1,842 1,931 1,802 1,909 1,725 1,724 1,866 1,692
Unrealized gains (losses) on securities
available-for-sale .................... 108 74 188 104 65 15 131 (17)
Allowance for loan losses ............. (407) (404) (407) (406) (410) (408) (405) (407)
Total assets ....................... $ 43,856 $44,956 $44,435 $43,477 $42,573 $40,876 $44,696 $39,894
Liabilities and shareholders' equity:
Interest-bearing demand .............. $ 3,284 $ 3,272 $ 3,314 $ 3,317 $ 3,231 $3,218 $ 3,293 $ 3,253
Savings and money market savings ...... 7,114 7,505 7,285 6,985 6,689 6,415 7,395 6,238
Savings certificates .................. 6,555 6,487 6,401 6,631 6,698 6,712 6,444 6,317
Large denomination certificates ....... 2,408 2,222 2,675 2,797 1,939 1,407 2,448 1,455
Time deposits in foreign offices ...... 902 849 991 975 795 636 920 611
Short-term borrowed funds ............. 8,049 8,216 8,055 7,332 8,593 7,869 8,136 7,631
Long-term debt ........................ 5,418 6,129 5,487 5,213 4,851 4,863 5,808 4,769
Total interest-bearing liabilities ... 33,730 34,680 34,208 33,250 32,796 31,120 34,444 30,274
Demand deposits in domestic offices .... 5,333 5,419 5,365 5,349 5,199 5,316 5,392 5,296
Demand deposits in foreign offices ..... 5 2 4 7 8 7 3 6
Noninterest-bearing time deposits in
domestic offices ...................... 4 5 3 5 5 10 4 15
Other liabilities ...................... 1,192 1,206 1,168 1,290 1,102 1,078 1,187 1,004
Shareholders' equity ................... 3,592 3,644 3,687 3,576 3,463 3,345 3,666 3,299
Total liabilities and
shareholders' equity ............... $ 43,856 $44,956 $44,435 $43,477 $42,573 $40,876 $44,696 $39,894
Total deposits ........................ $ 25,605 $ 25,761 $26,038 $26,066 $24,564 $23,721 $25,899 $23,191
</TABLE>
8
<PAGE>
first half with underlying growth masked by the corporation's securitization of
$500 million in credit card receivables in the last quarter of 1995. At June
30, 1996, managed credit card outstandings were $4.805 billion, including $625
million in net securitized loans, versus $4.161 billion in outstandings one
year earlier, including $125 million in net securitized loans.
Period-end loans by category at June 30, 1996 and the preceding four
quarters are presented in the following table.
<TABLE>
<CAPTION>
June 30 March 31 Dec. 31 Sept. 30 June 30
$ IN THOUSANDS 1996 1996 1995 1995 1995
<S> <C> <C> <C> <C> <C>
Commercial ................................................... $10,280,931 $10,077,465 $ 9,753,450 $ 9,732,697 $ 9,899,670
Tax-exempt ................................................... 2,047,475 2,135,806 2,238,538 2,180,577 1,937,502
Total commercial ........................................... 12,328,406 12,213,271 11,991,988 11,913,274 11,837,172
Direct retail ................................................ 767,154 730,804 755,375 730,523 734,349
Indirect retail .............................................. 2,582,142 2,612,568 2,543,771 2,516,627 2,449,010
Credit card .................................................. 4,180,440 3,967,603 3,917,997 4,115,406 4,035,610
Other revolving credit ....................................... 358,636 349,897 353,727 350,918 345,197
Total retail ............................................... 7,888,372 7,660,872 7,570,870 7,713,474 7,564,166
Construction ................................................. 808,866 731,630 745,776 750,919 675,237
Commercial mortgages ......................................... 4,130,537 3,982,332 3,855,095 3,724,937 3,672,602
Residential mortgages ........................................ 4,405,219 4,256,396 4,213,556 4,165,402 3,987,349
Total real estate .......................................... 9,344,622 8,970,358 8,814,427 8,641,258 8,335,188
Lease financing .............................................. 644,087 583,403 493,756 421,878 199,781
Foreign ...................................................... 467,154 441,087 390,112 322,368 314,752
Total loans ............................................... $30,672,641 $29,868,991 $29,261,153 $29,012,252 $28,251,059
</TABLE>
Investment securities increased $392 million or 4.7 percent for the second
quarter and $786 million or 9.9 percent year to date but were modestly lower
from the first quarter. Gains from year-earlier periods reflected higher levels
of available-for-sale securities, with increases occurring both in U.S.
government and agency securities and in mortgage backed securities. In the
fourth quarter of 1995, the corporation reclassified held-to-maturity
securities with a book value of $2.720 billion to available-for-sale
securities, primarily contributing to the rise in available-for-sale
securities. The corporation made the one-time reclassification 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." At June 30, 1996, securities available-for-sale totaled
$7.171 billion and securities held-to-maturity were $1.482 billion.
$ IN THOUSANDS
Securities available-for-sale at market value:
U.S. Government and agency............................ $ 5,436,835
Mortgage backed securities............................ 1,618,649
Other................................................. 115,768
Total securities available-for-sale............. 7,171,252
Securities held-to-maturity:
Mortgage backed securities............................ 1,204,366
State and municipal................................... 276,001
Other................................................. 1,664
Total securities held-to-maturity.................... 1,482,031
Total investment securities ........................... $8,653,283
Securities held-to-maturity had a market value of $1.540 billion at June 30,
1996, representing a $58 million appreciation over book value. 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), had an unrealized gain of $39.651 million,
pretax, and $24.066 million, net of tax, on the same
9
<PAGE>
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS - SECOND QUARTER* TABLE 5
<TABLE>
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
1996 1995 1996 1995 1996 1995 Variance Rate Volume
(Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Millions) INTEREST INCOME
Loans:
$ 9,935 $ 9,247 6.97 7.60 Commercial . . . . . . . . . . . . . $ 172,156 $ 175,296 $ (3,140) ($ 15,315) $ 12,175
2,080 1,775 8.95 9.73 Tax-exempt . . . . . . . . . . . . . 46,281 43,061 3,220 (3,651) 6,871
12,015 11,022 7.31 7.95 Total commercial. . . . . . . . . . . 218,437 218,357 80 (18,418) 18,498
759 730 9.43 9.31 Direct retail. . . . . . . . . . . . 17,786 16,940 846 207 639
2,583 2,398 8.15 8.26 Indirect retail . . . . . . . . . . . 52,322 49,370 2,952 (680) 3,632
4,045 3,993 11.72 12.52 Credit card. . . . . . . . . . . . . 117,902 124,603 (6,701) (8,247) 1,546
354 342 12.13 12.75 Other revolving credit. . . . . . . . 10,688 10,853 (165) (553) 388
7,741 7,463 10.32 10.84 Total retail . . . . . . . . . . . . 198,698 201,766 (3,068) (10,145) 7,077
753 602 9.44 10.04 Construction . . . . . . . . . . . . 17,655 15,060 2,595 (944) 3,539
4,073 3,664 8.33 8.71 Commercial mortgages. . . . . . . . . 84,366 79,566 4,800 (3,614) 8,414
4,339 3,960 8.45 8.23 Residential mortgages . . . . . . . . 91,124 81,246 9,878 2,138 7,740
9,165 8,226 8.48 8.58 Total real estate. . . . . . . . . . 193,145 175,872 17,273 (2,099) 19,372
616 200 9.12 8.03 Lease financing. . . . . . . . . . . 13,974 4,013 9,961 606 9,355
467 292 7.01 7.51 Foreign . . . . . . . . . . . . . . . 8,135 5,460 2,675 (384) 3,059
30,004 27,203 8.48 8.93 Total loans. . . . . . . . . . . . . 632,389 605,468 26,921 (31,888) 58,809
Investment securities:
Held-to-maturity:
- 2,491 - 6.79 U.S. Government and agency. . . . . . - 42,167 (42,167) - (42,167)
1,215 1,506 8.13 8.09 Mortgage backed securities. . . . . . . 24,555 30,373 (5,818) 146 (5,964)
284 458 11.32 11.98 State and municipal. . . . . . . . . . 7,979 13,702 (5,723) (715) (5,008)
2 15 7.28 6.26 Other. . . . . . . . . . . . . . . . .. 42 236 (194) 33 (227)
1,501 4,470 8.73 7.76 Total securities held-to-maturity . . . 32,576 86,478 (53,902) 9,569 (63,471)
Available-for-sale:**
5,417 2,769 6.80 7.01 U.S. Government and agency. . . . . . . 91,596 48,371 43,225 (1,482) 44,707
1,627 800 7.03 6.58 Mortgage backed securities. . . . . . 28,426 13,120 15,306 938 14,368
123 237 5.87 6.29 Other. . . . . . . . . . . . . . . . .. 1,797 3,726 (1,929) (233) (1,696)
7,167 3,806 6.84 6.87 Total securities available-for-sale . .121,819 65,217 56,602 (285) 56,887
8,668 8,276 7.16 7.35 Total investment securities. . . . . . 154,395 151,695 2,700 (4,091) 6,791
462 6 8.06 7.33 Interest-bearing bank balances. . . . . 9,258 105 9,153 11 9,142
Federal funds sold and
securities purchased under
232 51 5.47 6.02 resale agreements. . . . . . . . . . 3,155 763 2,392 (75) 2,467
825 955 5.58 6.74 Trading account assets . . . . . . . . 11,440 16,047 (4,607) (2,560) (2,047)
$40,191 $36,491 8.11 8.51 Total interest-earning assets. . . . . 810,637 774,078 36,559 (37,856) 74,415
INTEREST EXPENSE
$ 3,272 $ 3,218 1.34 1.80 Interest-bearing demand. . . . . . . . 10,916 14,412 (3,496) (3,730) 234
7,505 6,415 3.48 3.85 Savings and money market savings. . . 64,932 61,595 3,337 (6,312) 9,649
6,487 6,712 5.68 5.78 Savings certificates. . . . . . . . . . 91,685 96,773 (5,088) (1,720) (3,368)
2,222 1,407 5.95 5.76 Large denomination certificates. . . . 32,863 20,226 12,637 674 11,963
Total time deposits in
19,486 17,752 4.14 4.36 domestic offices . . . . . . . . . . 200,396 193,006 7,390 (10,248) 17,638
849 636 5.23 5.99 Time deposits in foreign offices . . . 11,033 9,503 1,530 (1,316) 2,846
20,335 18,388 4.18 4.42 Total time deposits. . . . . . . . . . 211,429 202,509 8,920 (11,431) 20,351
Federal funds purchased and
securities sold under
6,465 5,230 5.40 6.10 repurchase agreements . . . . . . . . 86,863 79,571 7,292 (9,830) 17,122
556 480 4.87 5.72 Commercial paper. . . . . . . . . . . . 6,737 6,834 (97) (1,091) 994
1,195 2,159 5.53 6.15 Other short-term borrowed funds . . . . 16,430 33,081 (16,651) (3,042) (13,609)
Total short-term
8,216 7,869 5.39 6.09 borrowed funds . . . . . . . . . . . 110,030 119,486 (9,456) (14,415) 4,959
4,799 3,962 5.72 5.64 Bank notes . . . . . . . . . . . . . . 68,258 55,747 12,511 779 11,732
1,330 901 6.58 6.78 Other long-term debt . . . . . . . . . 21,755 15,228 6,527 (461) 6,988
6,129 4,863 5.91 5.85 Total long-term debt. . . . . . . . . . 90,013 70,975 19,038 713 18,325
$34,680 $31,120 4.77 5.06 Total interest-bearing liabilities . . 411,472 392,970 18,502 (23,645) 42,147
3.34 3.45 Interest rate spread
Net yield on interest-earning assets
3.99 4.19 and net interest income . . . . . . $399,165 $381,108 $18,057 (18,817) 36,874
</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 of $74 million in 1996 and $15 million in 1995
10
<PAGE>
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS - SIX MONTHS* TABLE 6
<TABLE>
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
1996 1995 1996 1995 1996 1995 Variance Rate Volume
(Millions) INTEREST INCOME (Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans:
$ 9,772 $ 8,971 7.05 7.58 Commercial . . . . . . . . . . . . . $ 342,373 $ 337,379 $ 4,994 ($23,954) $ 28,948
2,114 1,772 8.95 9.69 Tax-exempt . . . . . . . . . . . . . 94,110 85,138 8,972 (6,594) 15,566
11,886 10,743 7.38 7.93 Total commercial . . . . . . . . . . 436,483 422,517 13,966 (29,150) 43,116
746 731 9.39 9.10 Direct retail . . . . . . . . . . . . . 34,854 33,015 1,839 1,163 676
2,585 2,375 8.21 8.12 Indirect retail . . . . . . . . . . . 105,515 95,677 9,838 1,288 8,550
4,002 3,974 11.65 12.40 Credit card . . . . . . . . . . . . . 231,758 244,400 (12,642) (14,362) 1,720
354 341 12.25 12.64 Other revolving credit . . . . . . . 21,545 21,379 166 (620) 786
7,687 7,421 10.30 10.72 Total retail . . . . . . . . . . . . 393,672 394,471 (799) (14,658) 13,859
723 567 9.32 9.86 Construction . . . . . . . . . . . . 33,503 27,731 5,772 (1,509) 7,281
4,018 3,608 8.32 8.67 Commercial mortgages . . . . . . . . 166,173 155,154 11,019 (6,097) 17,116
4,285 3,906 8.46 8.20 Residential mortgages . . . . . . . . 180,328 158,900 21,428 5,613 15,815
9,026 8,081 8.47 8.53 Total real estate . . . . . . . . . . 380,004 341,785 38,219 (1,557) 39,776
573 196 9.33 7.99 Lease financing . . . . . . . . . . 26,588 7,754 18,834 1,532 17,302
439 273 7.05 7.61 Foreign . . . . . . . . . . . . . . . . 15,364 10,275 5,089 (777) 5,866
29,611 26,714 8.50 8.88 Total loans . . . . . . . . . . . . .1,252,111 1,176,802 75,309 (48,558) 123,867
Investment securities:
Held-to-maturity:
- 2,492 - 6.84 U.S. Government and agency . . . - 84,504 (84,504) - (84,504)
1,242 1,378 8.09 8.06 Mortgage backed securities . . . . . 49,997 55,097 (5,100) 378 (5,478)
296 482 11.23 12.10 State and municipal . . . . . . . . . 16,517 28,910 (12,393) (1,885) (10,508)
2 15 8.58 6.15 Other . . . . . . . . . . . . . . . 99 451 (352) 131 (483)
1,540 4,367 8.70 7.80 Total securities held-to-maturity . . . 66,613 168,962 (102,349) 17,896 (120,245)
Available-for-sale:**
5,485 2,546 6.83 6.54 U.S. Government and agency . . . . 186,386 82,590 103,796 4,116 99,680
1,563 793 7.05 5.79 Mortgage backed securities . . . . . . .54,766 22,742 32,024 5,943 26,081
144 240 5.96 6.40 Other . . . . . . . . . . . . . . . 4,261 7,611 (3,350) (476) (2,874)
7,192 3,579 6.86 6.36 Total securities available-for-sale 245,413 112,943 132,470 9,868 122,602
8,732 7,946 7.19 7.15 Total investment securities . . . . . 312,026 281,905 30,121 2,034 28,087
459 6 8.00 7.25 Interest-bearing bank balances . . . . 18,276 206 18,070 25 18,045
Federal funds sold and
securities purchased under
236 64 5.45 6.20 resale agreements . . . . . . . . . 6,405 1,965 4,440 (257) 4,697
861 844 5.59 6.83 Trading account assets . . . . . . . . 23,939 28,614 (4,675) (5,235) 560
$39,899 $35,574 8.13 8.44 Total interest-earning assets . . . 1,612,757 1,489,492 123,265 (52,966) 176,231
INTEREST EXPENSE
$ 3,293 $ 3,253 1.44 1.78 Interest-bearing demand . . . . . . . 23,585 28,779 (5,194) (5,543) 349
7,395 6,238 3.53 3.63 Savings and money market savings . . 129,912 112,173 17,739 (2,637) 20,376
6,444 6,317 5.72 5.48 Savings certificates. . . . . . . . . 183,152 171,643 11,509 7,995 3,514
2,448 1,455 5.96 5.58 Large denomination certificates . . .. 72,497 40,237 32,260 3,024 29,236
Total time deposits in
19,580 17,263 4.20 4.12 domestic offices . . . . . . . . . . .409,146 352,832 56,314 8,035 48,279
920 611 5.28 5.61 Time deposits in foreign offices . . . 24,134 17,010 7,124 (1,017) 8,141
20,500 17,874 4.25 4.17 Total time deposits . . . . . . . . .. 433,280 369,842 63,438 8,083 55,355
Federal funds purchased and
securities sold under
6,213 5,343 5.48 6.03 repurchase agreements . . . . . . . . 169,164 159,727 9,437 (15,070) 24,507
555 449 4.90 5.62 Commercial paper . . . . . . . . . .. 13,527 12,528 999 (1,708) 2,707
1,368 1,839 5.55 6.10 Other short-term borrowed funds . . . 37,729 55,620 (17,891) (4,607) (13,284)
Total short-term
8,136 7,631 5.45 6.02 borrowed funds . . . . . . . . . . . 220,420 227,875 (7,455) (21,973) 14,518
4,477 3,900 5.72 5.60 Bank notes . . . . . . . . . . . . . . 127,416 108,337 19,079 2,734 16,345
1,331 869 6.60 6.85 Other long-term debt . . . . . . . . . 43,684 29,512 14,172 (1,032) 15,204
5,808 4,769 5.92 5.83 Total long-term debt . . . . . . . . 171,100 137,849 33,251 2,700 30,551
$34,444 $30,274 4.82 4.90 Total interest-bearing liabilities . . 824,800 735,566 89,234 (10,770) 100,004
3.31 3.54 Interest rate spread
Net yield on interest-earning assets
3.97 4.27 and net interest income . . . . . . . $787,957 $753,926 $34,031 (53,636) 87,667
</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 $131 million in 1996 and ($17) million in 1995
11
<PAGE>
date. Average securities available-for-sale had an unrealized gain of $74.087
million, pretax, and $44.957 million, net of tax, for the second period and
$130.859 million, pretax, and $79.672 million, net of tax, for the first half
of 1996.
Interest expense rose $18.502 million or 4.7 percent for the quarter and
$89.234 million or 12.1 percent year to date. Higher levels of interest-bearing
liabilities accounted for the increases in both periods which were moderated by
a lower average rate paid, primarily in the second quarter. Average interest-
bearing liabilities were up $3.560 billion or 11.4 percent for the second period
and $4.170 billion or 13.8 percent for the first six months, while the average
rate paid declined 29 basis points and 8 basis points, respectively. Compared
with the first three months of 1996, interest expense in the second quarter
decreased $1.856 million or under 1 percent, reflecting a 9 basis point drop in
the average rate paid. Average interest-bearing liabilities were higher by $472
million or 1.4 percent from the first quarter.
Interest-bearing time deposits increased $1.947 billion or 10.6 percent for
the second period and $2.626 billion or 14.7 percent year to date. Growth in
both periods occurred primarily in savings and money market savings and in large
denomination certificates, with Wachovia's Premiere account, a federally insured
savings account offering money market rates, responsible for most of the gains
in savings and money market savings. Interest-bearing time deposits were lower
by $331 million or 1.6 percent compared with the first quarter of 1996,
primarily due to some runoff in large denomination certificates.
Short-term borrowings rose $347 million or 4.4 percent for the quarter and
$505 million or 6.6 percent for the first six months, reflecting higher levels
primarily of federal funds purchased and securities sold under repurchase
agreements. Commercial paper borrowings also expanded in both periods, while
funding from other short-term borrowings, largely short-term bank notes, was
reduced. Short-term borrowings were up $161 million or 2 percent from the first
quarter.
Short-term bank notes are part of Wachovia Bank of North Carolina's $16
billion bank note program, consisting of short- and medium-term bank notes.
Originally offered to domestic investors only, the bank note program was
replaced in April with a global note program as part of the corporation's long-
term funding strategy. At June 30, 1996, short-term bank notes totaled $698
million with an average cost of 5.32 percent and an average maturity of 10 days
versus $1.907 billion in outstandings with an average cost of 6.07 percent and
an average maturity of 2.2 months one year earlier. Medium-term bank notes,
classified in long-term debt, were $4.963 billion at second-quarter close 1996
and had an average cost of 5.62 percent and an average maturity of 1.2 years.
Comparable amounts a year earlier were $3.979 billion in outstandings with an
average cost of 5.54 percent and an average maturity of 1.5 years. Included in
the $4.963 billion of medium-term bank notes at June 30, 1996 were $500 million
of five-year floating rate bank notes issued in Europe in May. The notes were
priced to yield three-month LIBOR plus 4 basis points to the investor and were
rated Aa2 by Moody's and AA+ by Standard & Poor's.
Long-term debt was higher by $1.266 billion or 26 percent for the second
quarter and $1.039 billion or 21.8 percent year to date with increases occurring
in both medium-term bank notes and in other long-term debt. Included in other
long-term debt is $250 million in 30-year subordinated debentures with a 10-year
put option issued in the fourth quarter of 1995. Compared with the first three
months of 1996, long-term debt rose $642 million or 11.7 percent, reflecting
expansion of medium-term bank notes.
Gross deposits averaged $25.761 billion for the second period of 1996, up
$2.040 billion or 8.6 percent from a year earlier, and $25.899 billion for the
first half, higher by $2.708 billion or 11.7 percent. Collected deposits, net of
float, averaged $23.953 billion for the quarter and $24.075 billion year to
date, an increase of $1.968 billion or 8.9 percent and $2.606 billion or 12.1
percent, respectively, from the same periods in 1995.
12
<PAGE>
ASSET AND LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY
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. 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 200 basis points over 12
months is 7.5 percent. Management generally has maintained a risk position well
within the policy guideline level. As of June 30, 1996, the model indicated the
impact of a 200 basis point gradual rise in rates over 12 months would
approximate a .1 percent decrease in net interest income, while a 200 basis
point decline in rates over the same period would approximate a .05 percent
increase 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 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. At June 30, 1996, the corporation had $1.523
billion notional amount of derivatives outstanding for asset and liability
management purposes, all of which represent interest rate swaps. 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 group of transactions with the same
counter-party 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 $11 million at June 30, 1996.
The fair value of all asset and liability derivative positions
13
<PAGE>
for which counterparties were exposed to the corporation amounted to $19
million on the same date. Fair value details and additional asset and
liability derivative information are included in the accompanying tables.
Estimated Fair Value of Asset and Liability Management Derivatives by Purpose
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
Notional Fair Value Fair Value Net Fair Value Notional Net Fair Value
$ IN MILLIONS Value Gains (Losses) Gains (Losses) Value Gains (Losses)
<S> <C> <C> <C> <C> <C> <C>
Convert floating rate liabilities to fixed:
Swaps-pay fixed/receive floating................. $ 109 $ 1 $ (2) $ (1) $ 127 $ (3)
Caps purchased-pay fixed/receive floating........ - - - - 15 -
Convert fixed rate assets to floating:
Swaps-pay fixed/receive floating................. 384 - (4) (4) 140 (1)
Forward starting swaps-pay fixed/receive floating 39 - (2) (2) 284 (4)
Convert fixed rate liabilities to floating:
Swaps-receive fixed/pay floating................. 300 1 (11) (10) 200 (2)
Convert term liabilities with quarterly
rate resets to monthly:
Swaps-receive floating/pay floating.............. 300 - - - - -
Convert floating rate assets to fixed:
Swaps-receive fixed/pay floating................. 116 - - - 219 -
Index amortizing swaps-receive fixed/pay floating 275 9 - 9 410 13
Total derivatives ............................ $1,523 $11 ($19) $ (8) $1,395 $ 3
</TABLE>
Maturity Schedule of Asset and Liability Management Derivatives
June 30, 1996
<TABLE>
<CAPTION>
Within Over Average
One Two Three Four Five Five Life
$ IN MILLIONS Year Years Years Years Years Years Total (Years)
Interest rate swaps:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pay fixed/receive floating:
Notional amount ......................$ 394 $ 12 $ 17 $ 20 $ 6 $ 44 $ 493 1.32
Weighted average rates received ....... 4.50% 5.58% 5.63% 5.58% 5.93% 5.56% 4.72%
Weighted average rates paid ........... 7.48 6.04 6.95 6.79 9.08 7.78 7.44
Receive fixed/pay floating:
Notional amount ......................$ 8 $ 101 $ 2 $ 101 $ 102 $ 102 $ 416 5.58
Weighted average rates received ....... 9.11% 6.78% 10.53 7.76% 6.47% 6.37% 6.91%
Weighted average rates paid ........... 8.25 5.52 8.25 5.51 5.56 5.92 5.69
Receive floating/pay floating:
Notional amount ....................... -- -- -- -- $ 300 -- $ 300 4.93
Weighted average rates received ........ -- -- -- -- 5.48% -- 5.48%
Weighted average rates paid ............ -- -- -- -- 5.39 -- 5.39
Index amortizing swaps:*
Receive fixed/pay floating:
Notional amount ......................$ 26 $ 119 $ 83 $ 21 $ 26 -- $ 275 1.82
Weighted average rates received ....... 7.39% 8.10% 8.44% 8.42% 7.88% -- 8.14%
Weighted average rates paid ........... 5.25 5.28 5.43 5.42 5.18 -- 5.32
Total interest rate swaps:
Notional amount ........................$ 428 $ 232 $ 102 $ 142 $ 434 $ 146 $ 1,484 3.34
Weighted average rates received ........ 4.76% 7.40% 8.04% 7.56% 5.86% 6.12% 6.12%
Weighted average rates paid ............ 7.36 5.43 5.73 5.68 5.46 6.48 6.15
Forward starting interest rate swaps:
Notional amount ........................ -- -- -- -- -- $ 39 $ 39 7.77
Weighted average rates received ........ -- -- -- -- -- 8.03% 8.03%
Total derivatives (notional amount) ..$ 428 $ 232 $ 102 $ 142 $ 434 $ 185 $ 1,523 3.45
</TABLE>
* Maturity is based upon expected average lives rather than contractual lives.
Asset and liability 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.
14
<PAGE>
NONPERFORMING ASSETS
At June 30, 1996, nonperforming assets were $72.645 million or .24 percent
of period-end loans and foreclosed property. The total decreased $3.995 million
or 5.2 percent from one year earlier and was down $4.907 million or 6.3 percent
from March 31, 1996. Decreases from both periods reflected lower levels of both
nonperforming loans and foreclosed properties.
Included in the June 30, 1996 total were real estate nonperforming assets of
$57.897 million or .62 percent of real estate loans and foreclosed real estate
versus $53.558 million or .64 percent one year earlier and $63.937 million or
.71 percent at March 31, 1996. Real estate nonperforming loans were $45.391
million at the end of the 1996 second quarter, $37.783 million one year earlier
and $49.547 million at March 31, 1996.
Commercial real estate nonperforming assets were $34.498 million or .70
percent of related loans and foreclosed real estate compared with $29.837
million or .69 percent at June 30, 1995 and $33.370 million or .71 percent at
the end of the first quarter. Included in these totals were commercial real
estate nonperforming loans of $27.392 million at June 30, 1996, $23.721 million
one year earlier and $29.815 million at March 31, 1996.
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 7
(thousands)
<TABLE>
<CAPTION>
June 30 March 31 Dec. 31 Sept. 30 June 30
1996 1996 1995 1995 1995
<S> <C> <C> <C> <C> <C>
NONPERFORMING ASSETS
Cash-basis assets - domestic borrowers . . . . . $55,219* $57,867 $53,547 $57,524 $57,918
Restructured loans - domestic . . . . . . . . . . . . -** - - - -
Total nonperforming loans. . . . . . . . . . . . 55,219 57,867 53,547 57,524 57,918
Foreclosed property:
Foreclosed real estate . . . . . . . . . . . . . . 15,162 17,209 14,468 16,651 18,859
Less valuation allowance . . . . . . . . . . . . . 2,656 2,819 2,863 2,980 3,084
Other foreclosed assets. . . . . . . . . . . . . . 4,920 5,295 4,212 4,254 2,947
Total foreclosed property. . . . . . . . . . . . . 17,426 19,685 15,817 17,925 18,722
Total nonperforming assets . . . . . . . . . . . . $72,645*** $77,552 $69,364 $75,449 $76,640
Nonperforming loans to period-end loans . . . . . . . .18% .19% .18% .20% .21%
Nonperforming assets to period-end loans and
foreclosed property . . . . . . . . . . . . . . . . .24 .26 .24 .26 .27
Period-end allowance for loan losses times
nonperforming loans . . . . . . . . . . . . . . . . 7.41X 7.07x 7.63x 7.10x 7.06x
Period-end allowance for loan losses times
nonperforming assets. . . . . . . . . . . . . . . . 5.63 5.27 5.89 5.42 5.33
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers . . . . . . . . . . . . . . . . . $63,317 $57,415 $48,970 $47,058 $49,004
</TABLE>
*Includes $9,374 of loans which have been defined as impaired per FASB
Statement No. 114, Accounting for Impairment of a Loan
**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 $19,923; includes $2,698 of
nonperforming assets on which interest and principal are paid current
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $34.404 million for the second quarter
and $61.738 million for the first six months, up $5.752 million or 20.1 percent
and $11.298 million or 22.4 percent, respectively, from the same periods in
1995 and was higher by $7.070 million or 25.9 percent from the first quarter of
1996. 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.
15
<PAGE>
Net loan losses were $34.327 million or .46 percent annualized of average
loans for the quarter, up $5.808 million or 20.4 percent from $28.519 million
or .42 percent of average loans a year earlier. For the first half of 1996,
net loan losses totaled $61.541 million or .42 percent annualized of average
loans, an increase of $13.602 million or 28.4 percent from $47.939 million or
.36 percent in the same period of 1995. Higher consumer loan losses, primarily
credit cards, accounted for the increases in both periods. Compared
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 8
1996 1995 Six Months Ended
Second First Fourth Third Second June 30
Quarter Quarter Quarter Quarter Quarter 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period ................ $408,928 $408,808 $408,684 $408,633 $408,500 $408,808 $406,132
Additions from acquisitions .................... 200 -- -- -- -- 200 --
Provision for loan losses ...................... 34,404 27,334 30,172 23,179 28,652 61,738 50,440
Deduct net loan losses:
Loans charged off:
Commercial .................................... 324 65 1,662 431 1,872 389 2,190
Credit card .................................. 36,343 31,902 29,292 27,424 23,829 68,245 45,260
Other revolving credit ........................ 1,346 1,092 1,239 1,202 1,058 2,438 1,863
Other retail .................................. 4,840 5,495 4,747 3,609 3,528 10,335 6,940
Real estate ................................... 1,371 134 1,332 526 5,499 1,505 5,890
Lease financing ............................... 235 377 56 99 636 612 737
Foreign ....................................... -- -- -- -- -- -- --
Total ........................................ 44,459 39,065 38,328 33,291 36,422 83,524 62,880
Recoveries:
Commercial .................................... 1,198 860 894 2,561 1,400 2,058 2,095
Credit card ................................... 4,599 4,024 3,365 3,207 3,186 8,623 6,389
Other revolving credit ........................ 290 283 278 273 267 573 589
Other retail .................................. 1,138 1,052 913 1,056 972 2,190 1,991
Real estate ................................... 2,866 5,578 2,804 3,021 2,037 8,444 3,798
Lease financing ............................... 41 54 26 45 41 95 71
Foreign ....................................... -- -- -- -- -- -- 8
Total ........................................ 10,132 11,851 8,280 10,163 7,903 21,983 14,941
Net loan losses ............................... 34,327 27,214 30,048 23,128 28,519 61,541 47,939
Balance at end of period* ................... $409,205 $408,928 $408,808 $408,684 $408,633 $409,205 $408,633
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial .................................... $ (874) $ (795) $ 768 $ (2,130) $ 472 $ (1,669) $ 95
Credit card .................................... 31,744 27,878 25,927 24,217 20,643 59,622 38,871
Other revolving credit ......................... 1,056 809 961 929 791 1,865 1,274
Other retail ................................... 3,702 4,443 3,834 2,553 2,556 8,145 4,949
Real estate .................................... (1,495) (5,444) (1,472) (2,495) 3,462 (6,939) 2,092
Lease financing ................................ 194 323 30 54 595 517 666
Foreign ........................................ - - - - - - (8)
Total ....................................... $ 34,327 $ 27,214 $ 30,048 23,128 28,519 61,541 47,939
Net loan losses - excluding credit cards....... $ 2,583 $ (664) $ 4,121 $ (1,089) $ 7,876 $ 1,919 $ 9,068
ANNUALIZED NET LOAN LOSSES (RECOVERIES)
TO AVERAGE LOANS BY CATEGORY
Commercial...................................... (.03%) (.03%) .03% (.07%) .02% (.03%) -%
Credit card .................................... 3.14 2.82 2.73 2.38 2.07 2.98 1.96
Other revolving credit ......................... 1.19 .92 1.10 1.08 .93 1.05 .75
Other retail ................................... .44 .54 .47 .32 .33 .49 .32
Real estate .................................... (.07) (.25) (.07) (.12) .17 (.15) .05
Lease financing ................................ .13 .24 .03 .09 1.19 .18 .68
Foreign ........................................ - - - - - - (.01)
Total loans .................................... .46 .37 .42 .33 .42 .42 .36
Total loans - excluding credit cards ........... .04 (.01) .07 (.02) .14 .01 .08
Period-end allowance to outstanding loans..... 1.33 1.37 1.40 1.41 1.45 1.33 1.45
</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 $791
at June 30, 1996, $883 at March 31, 1996, $916 at December 31, 1995,
$916 at September 30, 1995 and $0 at June 30, 1995
16
<PAGE>
with the first three months of 1996, net charge-offs in the second quarter
were up $7.113 million or 26.1 percent, reflecting increased credit card
losses and a combination of higher charge-offs and lower recoveries in real
estate loans. Excluding credit cards, the loan portfolio had net losses of
$2.583 million or .04 percent annualized of average loans for the quarter
and $1.919 million or .01 percent year to date versus $7.876 million or
.14 percent and $9.068 million or .08 percent in the same respective
periods of 1995 and net recoveries of $664 thousand or .01 percent in
the first three months of 1996.
Credit card net loan losses for the quarter were $31.744 million or 3.14
percent annualized of average credit card receivables, up $11.101 million or
53.8 percent from a year earlier. For the first half, credit card net charge-
offs totaled $59.622 million or 2.98 percent of average related outstandings, an
increase of $20.751 million or 53.4 percent from the same period in 1995. Real
estate loans had net recoveries of $1.495 million or .07 percent of average
outstandings for the second period and $6.939 million or .15 percent year to
date versus net loan losses of $3.462 million or .17 percent and $2.092 million
or .05 percent, respectively, in 1995.
Selected data on the corporation's managed credit card portfolio, which
includes securitized loans, is presented in the following table.
Managed Credit Card Data
<TABLE>
<CAPTION>
1996 1995 Six Months Ended
Second First Fourth Third Second June 30
$ IN THOUSANDS Quarter Quarter Quarter Quarter Quarter 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Average credit card outstandings . . $4,670,000 $4,583,000 $4,286,000 $4,189,000 $4,118,000 $4,627,000 $4,099,000
Net loan losses. . . . . . . . . . . 36,733 32,359 29,164 24,832 20,955 69,092 39,376
Annualized net loan losses to
average loans. . . . . . . . . . . . 3.15% 2.82% 2.72% 2.37% 2.04% 2.99% 1.92%
Delinquencies (30 days or more)
to period-end loans. . . . . . . . . 2.01 2.30 1.93 1.74 1.46 2.01 1.46
</TABLE>
At June 30, 1996, the allowance for loan losses totaled $409.205 million,
representing 1.33 percent of period-end loans and 741 percent of nonperforming
loans. Comparable amounts were $408.633 million, 1.45 percent and 706 percent,
respectively, one year earlier and $408.928 million, 1.37 percent and 707
percent, respectively, at March 31, 1996.
NONINTEREST INCOME
Total other operating revenue grew $32.291 million or 19.4 percent for the
quarter and $59.303 million or 18.3 percent for the first six months. Gains in
both periods were led by deposit account service charge revenues, investment fee
income and electronic banking, with all categories increasing for both the
quarter and first half except mortgage fee income and trading account profits.
Included in the $17.774 million of other income for the second period is $9.575
million from the sale of the corporation's bond trustee business to The Bank of
New York. Excluding this gain, total other operating revenue rose $22.716
million or 13.7 percent for the quarter and $49.728 million or 15.4 percent year
to date and was higher by $4.915 million or 2.7 percent from the first three
months of 1996.
Deposit account service charge revenues increased $8.476 million or 16.2
percent for the second period and $16.193 million or 16 percent for the first
half. Gains occurred primarily in overdraft charges, largely reflecting improved
collections, and in commercial account analysis fees.
Investment fee income rose $5.438 million or 100.6 percent for the quarter
and $10.490 million or 99.1 percent year to date. Increases reflected growth
primarily in mutual fund activity, loan syndications and administrative agent
fees, along with higher levels of brokerage commissions.
Electronic banking revenues, consisting of fees from debit card and ATM
usage, grew $3.722 million or 42 percent for the quarter and $5.817 million or
36.1 percent for the first half. Gains were largely due to higher levels of
debit card interchange income, as well as to fees for ATM usage by noncustomers.
Credit card income was up $1.981 million or 6.2 percent for the three months
and $5.559 million or 9.1 percent for the first six months. Net revenues
received from cardholder payments on securitized loans, higher overlimit charge
activity and increased interchange income accounted for the growth in both
periods.
Trust service revenues rose $1.297 million or 3.9 percent for the quarter
and $4.761 million or 7.4 percent year to date. Growth occurred in the
corporation's proprietary Biltmore mutual funds and in personal
17
<PAGE>
trust services, reflecting stronger sales, higher market values for trust
assets and increased fee schedules. Corporate trust fees were moderately lower.
Trading account profits increased modestly for the second period but
declined $2.664 million or 22.5 percent for the first half of 1996. Results in
both periods primarily reflected unfavorable bond market conditions, driven by
concerns over higher interest rates, as well as lower profits in foreign
exchange trading.
Mortgage fee income was down $2.258 million or 34.5 percent for the quarter
and $6.311 million or 42.1 percent for the first six months, primarily due to
the loss of servicing fee income from the sale of the corporation's mortgage
servicing portfolio in June 1995. Declines were offset in part by higher levels
of residential mortgage origination fees for both the quarter and first half of
1996.
Remaining combined categories of total other operating revenue were up
$13.545 million or 60.6 percent for the second three months and $25.458 million
or 58.3 percent year to date. Insurance premiums and commissions grew $647
thousand or 19.1 percent for the quarter and $1.082 million or 16.2 percent for
the first half, while bankers' acceptance and letter of credit fees were higher
by $366 thousand or 6.4 percent and $705 thousand or 6.2 percent for the three-
and six-month periods, respectively. Other service charges and fees rose $2.361
million or 42 percent for the quarter and $4.556 million or 37.9 percent year to
date, primarily due to contractual revenues received for servicing the
corporation's securitized loan portfolios. Other income increased $10.171
million or 133.8 percent and $19.115 million or 140.1 percent for the second
quarter and first six months, respectively, principally reflecting the gain on
the sale of the bond trustee business.
Including investment securities sales and the sale of the corporation's
mortgage servicing portfolio in June 1995, total noninterest income was down
$20.717 million or 9.5 percent for the second quarter but was higher by $7.122
million or 1.9 percent year to date. Investment securities sales resulted in a
net loss of $219 thousand for the quarter versus a net loss of $26.236 million a
year earlier when the corporation sold $1.950 billion of securities available-
for-sale at a loss to improve portfolio yields. For the first half of 1996,
investment securities sales had a net gain of $479 thousand compared with a net
loss of $26.365 million in the same period of 1995.
NONINTEREST INCOME (thousands) TABLE 9
<TABLE>
<CAPTION>
1996 1995 Six Months Ended
Second First Fourth Third Second June 30
Quarter Quarter Quarter Quarter Quarter 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts . . . . . . . . . $ 60,928 $ 56,598 $ 55,371 $ 52,409 $ 52,452 $117,526 $101,333
Fees for trust services . . . . . . . . . . . . . . . . 34,508 34,345 34,689 31,740 33,211 68,853 64,092
Credit card income - net of interchange payments . . . 33,848 32,522 32,291 31,180 31,867 66,370 60,811
Electronic banking . . . . . . . . . . . . . . . . . . 12,582 9,340 9,412 8,962 8,860 21,922 16,105
Investment fee income . . . . . . . . . . . . . . . . . 10,842 10,229 7,682 8,690 5,404 21,071 10,581
Mortgage fee income . . . . . . . . . . . . . . . . . . 4,289 4,401 4,050 4,269 6,547 8,690 15,001
Trading account profits - excluding interest . . . . . 5,698 3,452 8,238 5,646 5,608 9,150 11,814
Insurance premiums and commissions . . . . . . . . . . 4,032 3,748 3,422 3,044 3,385 7,780 6,698
Bankers' acceptance and letter of credit fees . . . . 6,109 5,898 6,003 5,885 5,743 12,007 11,302
Other service charges and fees . . . . . . . . . . . . . 7,985 8,590 7,054 5,609 5,624 16,575 12,019
Other income . . . . . . . . . . . . . . . . . . . . . . 17,774 14,982 18,077 12,981 7,603 32,756 13,641
Total other operating revenue . . . . . . . . . . . . 198,595 184,105 186,289 170,415 166,304 382,700 323,397
Gain on sale of mortgage servicing portfolio . . . . . . . - - - - 79,025 - 79,025
Investment securities gains (losses) . . . . . . . . . . (219) 698 2,554 317 (26,236) 479 (26,365)
Total. . . . . . . . . . . . . . . . . . . . . . . . $198,376 $184,803 $188,843 $170,732 $219,093 $383,179 $376,057
</TABLE>
NONINTEREST EXPENSE
Total noninterest expense was up $3.470 million or 1.1
percent for the quarter and $28.683 million or 4.9 percent year to date.
Increases in both periods occurred primarily in personnel expense, with combined
net occupancy and equipment expense modestly higher and remaining other combined
categories of noninterest expense down. Included in noninterest expense for the
second quarter of 1995 was $18.100 million related to severance costs for
consolidation efforts, higher consulting fees associated with strategic
initiatives and charitable contributions. Compared with the first three months
of 1996, noninterest expense was higher by $1.842 million or less than 1
percent. Noninterest expense represented 51.9 percent of total adjusted
18
<PAGE>
revenues (taxable equivalent net interest income plus total other operating
revenue) for the quarter and 52.8 percent for the first six months versus 56
percent and 54.7 percent in the same respective periods of 1995 and 53.8
percent in the first quarter of 1996.
Total personnel expense rose $10.175 million or 6.8 percent for the second
three months and $26.830 million or 9.1 percent for the first half. Salaries
expense accounted for most of the growth in both periods, expanding $8.718
million or 7 percent for the quarter and $22.353 million or 9.2 percent year to
date, primarily due to higher salary levels and increased incentive pay to
compensate sales efforts. Employee benefits expense was up $1.457 million or 5.5
percent for the second period and $4.477 million or 8.4 percent for the first
six months.
Combined net occupancy and equipment expense increased $1.363 million or 2.8
percent and $4.519 million or 4.6 percent for the quarter and first half,
respectively. Net occupancy expense rose $1.244 million or 5.9 percent for the
three months and $3.732 million or 9.1 percent for the first six months, largely
reflecting higher building depreciation and operating premise lease expenses.
Equipment expense was up modestly for both the quarter and year to date.
Remaining other combined categories of noninterest expense decreased $8.068
million or 7.5 percent for the second three months and $2.666 million or 1.4
percent for the first half of the year. Advertising and sales promotion expense
grew $5.755 million or 59 percent for the quarter and $13.414 million or 70
percent year to date, largely due to increased credit card solicitation costs.
Professional services expense rose $1.594 million or 17.4 percent for the second
period and $5.610 million or 37.8 percent for the first six months, reflecting
expenditures for ongoing consulting services related to strategic initiatives.
Regulatory agency fees and other bank services expenses were down $14.361
million or 91.6 percent and $28.797 million or 92.4 percent for the quarter and
first half, respectively, due to the reduction and then elimination of insurance
premiums by the FDIC for well capitalized financial institutions.
NONINTEREST EXPENSE (thousands) TABLE 10
<TABLE>
<CAPTION>
1996 1995 Six Months Ended
Second First Fourth Third Second June 30
Quarter Quarter Quarter Quarter Quarter 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries . . . . . . . . . . . . . . . . . . . . . . $132,438 $131,820 $129,673 $127,152 $123,720 $264,258 $241,905
Employee benefits . . . . . . . . . . . . . . . . . . . 27,724 29,798 22,405 26,146 26,267 57,522 53,045
Total personnel expense . . . . . . . . . . . . . . . 160,162 161,618 152,078 153,298 149,987 321,780 294,950
Net occupancy expense . . . . . . . . . . . . . . . . . 22,184 22,678 24,551 21,424 20,940 44,862 41,130
Equipment expense . . . . . . . . . . . . . . . . . . . 28,054 28,931 27,753 25,750 27,935 56,985 56,198
Postage and delivery . . . . . . . . . . . . . . . . . . 9,780 10,452 9,801 9,379 9,190 20,232 18,782
Outside data processing, programming and software . . . 11,179 10,704 11,966 9,959 10,664 21,883 20,561
Stationery and supplies . . . . . . . . . . . . . . . . 6,951 7,006 7,604 6,374 6,619 13,957 12,827
Advertising and sales promotion . . . . . . . . . . . . 15,502 17,071 16,869 14,334 9,747 32,573 19,159
Professional services . . . . . . . . . . . . . . . . . . 10,743 9,707 14,922 9,721 9,149 20,450 14,840
Travel and business promotion . . . . . . . . . . . . . . 5,335 4,237 6,051 4,474 5,110 9,572 9,169
Regulatory agency fees and other bank services . . . . . . 1,320 1,053 6,576 11,838 15,681 2,373 31,170
Amortization of intangible assets . . . . . . . . . . . . . 1,098 1,078 1,190 1,210 2,116 2,176 6,187
Foreclosed property expense . . . . . . . . . . . . . . . . 175 (126) 813 (146) 408 49 253
Other expense . . . . . . . . . . . . . . . . . . . . . . 37,604 33,836 34,891 31,267 39,071 71,440 64,423
Total . . . . . . . . . . . . . . . . . . . . . . . . $310,087 $308,245 $315,065 $298,882 $306,617 $618,332 $589,649
Overhead ratio . . . . . . . . . . . . . . . . . . . . . 51.9% 53.8% 54.6% 52.9% 56.0% 52.8% 54.7%
</TABLE>
INCOME TAXES
Applicable income taxes were lower by $2.263 million or 2.9 percent
for the quarter and up $7.822 million or 5.7 percent for the first six months.
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
earned 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.
19
<PAGE>
INCOME TAXES (thousands) TABLE 11
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . $235,136 $ 240,945 $454,275 $442,285
Federal income taxes at statutory rate . . . . . . . . . . . . . . . . $ 82,297 $ 84,331 $158,996 $154,800
State and local income taxes - net of federal benefit . . . . . . . . . 3,365 (2,214) 6,255 (1,816)
Effect of tax-exempt securities interest and other income . . . . . . .(10,204) (10,756) (20,596) (21,605)
Other items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 6,675 387 5,841
Total tax expense . . . . . . . . . . . . . . . . . . . . . . . . . $75,773 $ 78,036 $145,042 $137,220
Currently payable:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,227 $ 90,228 $113,405 $152,745
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 57 264 124
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,524 8,778 5,729 10,713
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,919 99,063 119,398 163,582
Deferred:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,545 (8,843) 22,111 (12,855)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,309 (12,184) 3,533 (13,507)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,854 (21,027) 25,644 (26,362)
Total tax expense . . . . . . . . . . . . . . . . . . . . . . .. . . $ 75,773 $ 78,036 $145,042 $137,220
</TABLE>
FINANCIAL CONDITION AND CAPITAL RATIOS
Total assets at June 30, 1996 were $46.049 billion. Interest-earning assets
were $41.140 billion and loans were $30.673 billion. Comparable amounts one
year earlier were $42.867 billion of assets, $38.329 billion of interest-
earning assets and $28.251 billion of loans. At March 31, 1996, assets totaled
$45.425 billion with $40.527 billion of interest-earning assets and $29.869
billion of loans.
Deposits at second quarter close 1996 were $25.973 billion, including
$20.515 billion of time deposits, representing 79 percent of the total. Deposits
one year earlier were $23.892 billion with $18.530 billion of time deposits or
77.6 percent of the total, and at March 31, 1996 they were $25.909 billion,
including $20.384 billion of time deposits or 78.7 percent of the total.
Shareholders' equity at June 30, 1996 was $3.700 billion, an increase of
$165 million or 4.7 percent from $3.535 billion a year earlier but lower by $29
million or less than 1 percent from the end of the 1996 first quarter. The total
at June 30, 1996 included $24.066 million, net of tax, of unrealized gains on
securities available-for-sale marked to fair market value under FASB 115
compared with $44.556 million, net of tax, one year earlier and $57.338 million,
net of tax, at March 31, 1996. At its meeting on July 25, 1996, the
corporation's board of directors declared a third quarter dividend of $.40 per
share, payable September 3 to shareholders of record on August 6, 1996. The
dividend is higher by 11.1 percent from $.36 per share paid in the same three
months of 1995. For the year to date, the dividend will total $1.12 per share,
an increase of 9.8 percent from $1.02 per share paid in 1995.
The corporation was authorized by the board of directors on April 26, 1996
to repurchase up to 8 million shares of its common stock, replacing an earlier
action on July 28, 1995 to repurchase up to 5 million shares. Share repurchase
activity is part of the corporation's capital management strategy designed to
enhance shareholder value over the long-term. In addition, repurchased shares
will be used for various corporate purposes, including share issuance for the
corporation's employee stock plans and dividend reinvestment plan. In the second
quarter of 1996, the corporation repurchased a total of 2,577,400 shares of its
common stock under the current and prior authorization at an average price of
$43.521 per share for a cost of $112.172 million. As of June 30, 1996, 5,600,200
shares remained available for repurchase under the current authorization.
Intangible assets at June 30, 1996 were $41.546 million. The total consisted
of $33.312 million of goodwill, $6.186 million of deposit base intangibles, $990
thousand of purchased credit card intangibles and $1.058 million of other
intangibles. Comparable amounts one year earlier were $41.492 million of
intangible assets with $30.216 million of goodwill, $7.753 million of deposit
base intangibles, $2.048 million of purchased
20
<PAGE>
credit card intangibles and $1.475 million of other intangibles. On April 1,
1996, Wachovia Bank of Georgia, N.A., completed the acquisition of First
National Bankshares of Henry County, Inc., of Stockbridge, exchanging .4024
of a share of Wachovia common stock for every share of First National
Bankshares of Henry County, Inc., common stock. Wachovia issued 208,207
shares of common stock in the transaction.
Effective January 1, 1996, the corporation prospectively adopted Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of" (FASB 121). The
adoption of FASB 121 did not have a material impact on the corporation's
financial position or results of operations.
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (FASB 125), which
provides new accounting and reporting standards for sales, securitization, and
servicing of receivables and other financial assets and extinguishments of
liabilities. The corporation is presently evaluating the effect of the standard
which will be adopted, as required, for transactions occurring after December
31, 1996.
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 June 30, 1996, the corporation's Tier I to risk-adjusted assets ratio was
9.05 percent with total capital 13.04 percent of risk-adjusted assets. The Tier
I leverage ratio was 8.12 percent.
CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 12
<TABLE>
<CAPTION>
1996 1995
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Tier I capital:
Common shareholders' equity. . . . . . . . . . . $ 3,699,612 $ 3,729,349 $ 3,773,757 $ 3,617,642 $ 3,535,313
Less ineligible intangible assets . . . . . . . . 33,312 29,099 29,472 29,844 30,216
Unrealized gains on securities
available-for-sale, net of tax . . . . . . . . . . (24,066) (57,338) (116,113) (44,431) (44,556)
Total Tier I capital. . . . . . . . . . . . . . . 3,642,234 3,642,912 3,628,172 3,543,367 3,460,541
Tier II capital:
Allowable allowance for loan losses. . . . . . . . 409,205 408,928 408,808 408,684 408,633
Allowable long-term debt. . . . . . . . . . . . . . . 1,198,837 1,204,191 1,208,479 1,018,003 1,020,267
Tier II capital additions . . . . . . . . . . . . . 1,608,042 1,613,119 1,617,287 1,426,687 1,428,900
Total capital. . . . . . . . . . . . . . . . . . . $5,250,276 $5,256,031 $ 5,245,459 $4,970,054 $4,889,441
Risk-adjusted assets. . . . . . . . . . . . . . . . . $40,249,143 $38,803,497 $38,469,866 $38,011,712 $37,189,208
Quarterly average assets . . . . . . . . . . . . . . $44,956,032 $44,434,973 $43,477,038 $42,572,976 $40,875,958
Risk-based capital ratios:
Tier I capital. . . . . . . . . . . . . . . . . . . . 9.05% 9.39% 9.43% 9.32% 9.31%
Total capital . . . . . . . . . . . . . . . . . . . . 13.04 13.55 13.64 13.08 13.15
Tier I leverage ratio* . . . . . . . . . . . . . . . . 8.12 8.22 8.36 8.34 8.47
Shareholders' equity to total assets . . . . . . . . . 8.03 8.21 8.39 8.20 8.25
</TABLE>
*Ratio excludes the average unrealized gains on securities available-for-
sale, net of tax, of $44,957, $114,386, $63,884, $39,715 and $8,933,
respectively
21
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
June 30 December 31 June 30
$ IN THOUSANDS 1996 1995 1995
ASSETS
<S> <C> <C> <C>
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . .$ 2,606,453 $ 2,692,318 $ 2,629,502
Interest-bearing bank balances. . . . . . . . . . . . . . . . . . 473,037 451,279 5,893
Federal funds sold and securities
purchased under resale agreements . . . . . . . . . . . . . . . . 301,561 144,105 14,571
Trading account assets . . . . . . . . . . . . . . . . . . . . . . 1,039,284 1,114,926 1,086,599
Securities available-for-sale. . . . . . . . . . . . . . . . . . . 7,171,252 7,409,825 4,455,755
Securities held-to-maturity (market value of $1,539,624,
$1,721,222 and $4,651,867, respectively) . . . . . . . . . . . . 1,482,031 1,619,480 4,514,837
Loans and net leases . . . . . . . . . . . . . . . . . . . . . . . 30,680,028 29,269,825 28,258,874
Less unearned income on loans . . . . . . . . . . . . . . . . . . 7,387 8,672 7,815
Total loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 30,672,641 29,261,153 28,251,059
Less allowance for loan losses. . . . . . . . . . . . . . . . . . 409,205 408,808 408,633
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,263,436 28,852,345 27,842,426
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . 648,948 628,153 574,623
Due from customers on acceptances . . . . . . . . . . . . . . . . 685,389 883,825 565,785
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,377,705 1,185,058 1,177,488
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . $46,049,096 $44,981,314 $42,867,479
LIABILITIES
Deposits in domestic offices:
Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5,457,626 $ 5,855,286 $ 5,354,199
Interest-bearing demand. . . . . . . . . . . . . . . . . . . . . 3,273,053 3,473,607 3,215,348
Savings and money market savings. . . . . . . . . . . . . . . . . 7,575,143 6,991,133 6,486,959
Savings certificates. . . . . . . . . . . . . . . . . . . . . . . 6,545,807 6,613,238 6,529,708
Large denomination certificates . . . . . . . . . . . . . . . . . 2,234,372 2,671,759 1,540,760
Noninterest-bearing time . . . . . . . . . . . . . . . . . . . . . 4,768 3,334 4,884
Total deposits in domestic offices . . . . . . . . . . . . . . . 25,090,769 25,608,357 23,131,858
Deposits in foreign offices:
Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 5,766 7,221
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 882,339 754,634 752,733
Total deposits in foreign offices. . . . . . . . . . . . . . . . 882,580 760,400 759,954
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . .. 25,973,349 26,368,757 23,891,812
Federal funds purchased and securities
sold under repurchase agreements . . . . . . . . . . . . . . . . 7,358,020 5,850,540 6,642,662
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . .. 541,978 502,136 493,878
Other short-term borrowed funds . . . . . . . . . . . . . . . . . 1,054,813 1,720,592 2,256,661
Long-term debt:
Bank notes. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 4,963,154 4,088,326 3,978,718
Other long-term debt . . . . . . . . . . . . . . . . . . . . . . . 1,330,383 1,334,702 1,087,008
Total long-term debt . . . . . . . . . . . . . . . . . . . . . .. 6,293,537 5,423,028 5,065,726
Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . 685,389 883,825 565,785
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . .. 442,398 458,679 415,642
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . .. 42,349,484 41,207,557 39,332,166
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding . . . . . . . . . .. - - -
Common stock, par value $5 per share:
Issued 166,797,672, 170,358,504 and
170,400,054, respectively . . . . . . . . . . . . . . . . . . . .. 833,988 851,793 852,000
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . 570,724 713,120 721,806
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 2,270,834 2,092,731 1,916,951
Unrealized gains on securities available-for-sale, net of tax. . . 24,066 116,113 44,556
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . 3,699,612 3,773,757 3,535,313
Total liabilities and shareholders' equity. . . . . . . . . . . $46,049,096 $44,981,314 $42,867,479
</TABLE>
22
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
$ IN THOUSANDS, EXCEPT PER SHARE 1996 1995 1996 1995
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $621,346 $593,858 $1,229,631 $1,153,632
Securities available-for-sale:
Other investments . . . . . . . . . . . . . . . . . . . . . . . . 117,861 61,433 237,135 106,035
Securities held-to-maturity:
State and municipal . . . . . . . . . . . . . . . . . . . . . . . 5,531 9,269 11,414 19,475
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . 24,597 69,756 50,096 133,994
Interest-bearing bank balances . . . . . . . . . . . . . . . . . . 9,258 105 18,276 206
Federal funds sold and securities
purchased under resale agreements . . . . . . . . . . . . . . . . 3,155 763 6,405 1,965
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 10,975 14,907 23,009 26,576
Total interest income . . . . . . . . . . . . . . . . . . . . . . . 792,723 750,091 1,575,966 1,441,883
INTEREST EXPENSE
Deposits:
Domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . 200,396 193,006 409,146 352,832
Foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,033 9,503 24,134 17,010
Total interest on deposits . . . . . . . . . . . . . . . . . . . . .211,429 202,509 433,280 369,842
Short-term borrowed funds . . . . . . . . . . . . . . . . . . . . . . 110,030 119,486 220,420 227,875
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,013 70,975 171,100 137,849
Total interest expense . . . . . . . . . . . . . . . . . . . . . . .411,472 392,970 824,800 735,566
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 381,251 357,121 751,166 706,317
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . 34,404 28,652 61,738 50,440
Net interest income after
provision for loan losses . . . . . . . . . . . . . . . . . . . . . 346,847 328,469 689,428 655,877
OTHER INCOME
Service charges on deposit accounts . . . . . . . . . . . . . . . . . 60,928 52,452 117,526 101,333
Fees for trust services . . . . . . . . . . . . . . . . . . . . . . . 34,508 33,211 68,853 64,092
Credit card income . . . . . . . . . . . . . . . . . . . . . . . . . . 33,848 31,867 66,370 60,811
Electronic banking . . . . . . . . . . . . . . . . . . . . . . . . . . 12,582 8,860 21,922 16,105
Investment fee income . . . . . . . . . . . . . . . . . . . . . . . . 10,842 5,404 21,071 10,581
Mortgage fee income . . . . . . . . . . . . . . . . . . . . . . . . . 4,289 6,547 8,690 15,001
Trading account profits . . . . . . . . . . . . . . . . . . . . . . . 5,698 5,608 9,150 11,814
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . 35,900 22,355 69,118 43,660
Total other operating revenue . . . . . . . . . . . . . . . . . . . 198,595 166,304 382,700 323,397
Gain on sale of mortgage servicing portfolio . . . . . . . . . . . . . - 79,025 - 79,025
Investment securities gains (losses) . . . . . . . . . . . . . . . . (219) (26,236) 479 (26,365)
Total other income . . . . . . . . . . . . . . . . . . . . . . . . 198,376 219,093 383,179 376,057
OTHER EXPENSE
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,438 123,720 264,258 241,905
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 27,724 26,267 57,522 53,045
Total personnel expense . . . . . . . . . . . . . . . . . . . . . . 160,162 149,987 321,780 294,950
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . 22,184 20,940 44,862 41,130
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . 28,054 27,935 56,985 56,198
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . 99,687 107,755 194,705 197,371
Total other expense . . . . . . . . . . . . . . . . . . . . . . . . 310,087 306,617 618,332 589,649
Income before income taxes . . . . . . . . . . . . . . . . . . . . . 235,136 240,945 454,275 442,285
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . 75,773 78,036 145,042 137,220
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $159,363 $162,909 $309,233 $305,065
Net income per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .94 $ .94 $ 1.81 $ 1.77
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .94 $ .95 $ 1.81 $ 1.77
Average shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,861 171,986 170,664 172,095
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,972 172,446 170,808 172,589
</TABLE>
23
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Securities
Common Stock Capital Retained Gains
$ IN THOUSANDS, EXCEPT PER SHARE Shares Amount Surplus Earnings (Losses)
PERIOD ENDED JUNE 30, 1995
<S> <C> <C> <C> <C> <C>
Balance at beginning of year. . . . . . . . . . . . . . 170,933,749 $854,669 $741,946 $1,727,527 $(37,635)
Net income . . . . . . . . . . . . . . . . . . . . . . . 305,065
Cash dividends declared on common
stock - $.66 a share. . . . . . . . . . . . . . . . . . . (112,760)
Common stock issued pursuant to:
Stock option and employee benefit plans. . . . . . . . . 428,203 2,141 9,437
Dividend reinvestment plan . . . . . . . . . . . . . . . 181,855 909 5,542
Conversion of debentures . . . . . . . . . . . . . . . . 41,989 210 594
Common stock acquired . . . . . . . . . . . . . . . . . . (1,185,742) (5,929) (35,678)
Unrealized gains on securities
available-for-sale, net of tax. . . . . . . . . . . . . . 82,191
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . (35) (2,881)
Balance at end of period . . . . . . . . . . . . . . . . 170,400,054 $852,000 $721,806 $1,916,951 $44,556
PERIOD ENDED JUNE 30, 1996
Balance at beginning of year. . . . . . . . . . . . . . .170,358,504 $851,793 $713,120 $2,092,731 $116,113
Net income . . . . . . . . . . . . . . . . . . . . . . . 309,233
Cash dividends declared on common
stock - $.72 a share. . . . . . . . . . . . . . . . . . . (121,773)
Common stock issued pursuant to:
Stock option and employee benefit plans. . . . . . . . . . 450,412 2,252 19,426
Dividend reinvestment plan . . . . . . . . . . . . . . . . 158,637 793 6,318
Conversion of debentures . . . . . . . . . . . . . . . . . 228,614 1,143 3,251
Acquisition of bank. . . . . . . . . . . . . . . . . . . . 208,207 1,041 9,003
Common stock acquired . . . . . . . . . . . . . . . . . . (4,606,702) (23,034) (180,393)
Unrealized losses on securities
available-for-sale, net of tax. . . . . . . . . . . . . . (92,047)
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . (1) (9,357)
Balance at end of period. . . . . . . . . . . . . . . . .166,797,672 $833,988 $570,724 $2,270,834 $24,066
</TABLE>
24
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30
$ IN THOUSANDS 1996 1995
OPERATING ACTIVITIES
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . $ 309,233 $ 305,065
Adjustments to reconcile net income to net cash provided (used) by operations:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,738 50,440
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 45,193 36,125
Deferred income taxes (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,644 (26,362)
Investment securities (gains) losses. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . (479) 26,365
Gain on sale of noninterest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (661) (1,239)
Gain on sale of mortgage servicing portfolio. . . . . . . . . . . . . . . . . . . . . . . .. . . . . - (79,025)
Increase in accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,871 28,006
Increase in accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . (4,082) (36,672)
(Decrease) increase in accrued interest payable . . . . . . . . . . . . . . . . . . . . . .. . . . . (19,878) 37,120
Net change in other accrued and deferred income and expense . . . . . . . . . . . . . . . . . . . . . (35,581) 39,496
Net trading account activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,642 (196,641)
Net loans held for resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 141,684 (221,392)
Net cash provided (used) by operating activities . . . . . . . . . . . . . . . . . . . . .. . . . . 615,324 (38,714)
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing bank balances. . . . . . . . . . . . . . . . . .. . . . . (21,758) 870
Net (increase) decrease in federal funds sold and securities
purchased under resale agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (152,956) 187,035
Purchases of securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .(595,924) (3,554,684)
Purchases of securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . (45,679) (533,109)
Sales of securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 133,921 2,245,946
Calls, maturities and prepayments of securities available-for-sale. . . . . . . . . . . . . . . . . . 554,070 497,582
Calls, maturities and prepayments of securities held-to-maturity. . . . . . . . . . . . . . . . . . . . 185,916 201,599
Net increase in loans made to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,598,300) (2,189,945)
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(68,726) (74,148)
Proceeds from sales of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,756 7,890
Proceeds from sale of mortgage servicing portfolio . . . . . . . . . . . . . . . . . . . . .. . . . . . . - 142,011
Net (increase) decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143,860) 33,495
Business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 -
Net cash used by investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .(1,742,726) (3,035,458)
FINANCING ACTIVITIES
Net decrease in demand, savings and money market accounts. . . . . . . . . . . . . . . . . . . . . . (23,726) (209,452)
Net (decrease) increase in certificates of deposit . . . . . . . . . . . . . . . . . . . . .. . . . . .(400,856) 1,032,006
Net increase in federal funds purchased and securities sold under repurchase agreements. . . . . . . 1,507,480 744,264
Net increase in commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,842 87,172
Net (decrease) increase in other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . (665,779) 1,249,321
Proceeds from issuance of bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,047,429 424,930
Maturities of bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,172,552) (400,722)
Proceeds from issuance of other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . - 248,012
Payments on other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (211) (285)
Common stock issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,464 12,013
Dividend payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (121,773) (112,760)
Common stock repurchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200,745) (39,729)
Net increase (decrease) in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,964 (1,211)
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041,537 3,033,559
DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85,865) (40,613)
Cash and cash equivalents at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,692,318 2,670,115
Cash and cash equivalents at end of period . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .$2,606,453 $2,629,502
SUPPLEMENTAL DISCLOSURES
Unrealized (losses) gains on securities available-for-sale:
(Decrease) increase in securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . .$ (150,460) $ 134,504
Increase (decrease) in deferred taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,413 (52,313)
(Decrease) increase in shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92,047) 82,191
</TABLE>
25
<PAGE>
1996 FORM 10-Q
United States Securities and Exchange Commission
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
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 June 30, 1996, Wachovia Corporation had 166,797,672 shares of common
stock outstanding.
Wachovia Corporation (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing requirements for the past 90
days.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the financial supplement for the quarter ended June 30, 1996
are incorporated by reference into Parts I and II as indicated in the table
below. Except for parts of the Wachovia Corporation Financial Supplement
expressly incorporated herein by reference, this Financial Supplement is not to
be deemed filed with the Securities and Exchange Commission.
PART I FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS (UNAUDITED) PAGE
Selected Period-End Data . . . . . . . . . . . . . 3
Common Stock Data - Per Share . . . . . . . . . 3
Consolidated Statements of Condition. . . . . . 22
Consolidated Statements of Income . . . . . . . 23
Consolidated Statements of
Shareholders' Equity. . . . . . . . . . . . 24
Consolidated Statements of Cash Flows . . . . . 25
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . 4-21
26
<PAGE>
1996 FORM 10-Q - CONTINUED
PART II OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on April 26, 1996, five
directors were elected and the appointment of Ernst & Young LLP as
independent auditors for 1996 was ratified. The distribution of
shareholders' votes was as follows:
Shares Voted Shares
in Favor Withheld
ELECTION OF DIRECTORS
Leslie M. Baker, Jr. 141,406,528 1,098,767
Lawrence M. Gressette, Jr. 141,429,806 1,075,489
Thomas K. Hearn, Jr. 141,460,390 1,044,905
Herman J. Russell 141,102,916 1,402,379
John C. Whitaker, Jr. 141,307,190 1,198,105
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Shares Voted in Favor 141,659,814
Shares Voted Against 159,920
Abstentions 685,561
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a) 4 Indenture dated as of March 1, 1993 between Wachovia Corporation and
CoreStates Bank, National Association, as Trustee, relating to
subordinated debt securities (Exhibit 4 to S-3 (Shelf) Registration
Statement of Wachovia Corporation, File No. 333-06319).
11 "Computation of Earnings per Common Share" is presented as Table 3 on
page 6 of the second quarter 1996 financial supplement.
19 "Unaudited Consolidated Financial Statements," listed in Part I,
Item 1, do not include all information and footnootes
required under generally accepted accounting principles. However, in
the opinion of management, the profit and loss information presented
in the interim financial statements reflects all adjustments
necessary to present fairly the results of operations for the periods
presented. Adjustments reflected in the second quarter of 1996
figures are of a normal, recurring nature. The results of operations
shown in the interim statements are not necessarily indicative of the
results that may be expected for the entire year.
27 Financial Data Schedule (for SEC purposes only).
b) Reports on Form 8-K: No reports on Form 8-K were filed during the
three months ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of 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.
WACHOVIA CORPORATION
August 12, 1996 ROBERT S. McCOY, JR. August 12, 1996 DONALD K. TRUSLOW
Robert S. McCoy, Jr. Donald K. Truslow
Executive Vice President Comptroller
and Chief Financial Officer
27
<PAGE>
BULK RATE
U.S. POSTAGE PAID
Wachovia Corporation WACHOVIA
P.O. Box 3099 CORPORATION
Winston-Salem, NC 27150
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,606,453
<INT-BEARING-DEPOSITS> 473,037
<FED-FUNDS-SOLD> 301,561
<TRADING-ASSETS> 1,039,284
<INVESTMENTS-HELD-FOR-SALE> 7,171,252
<INVESTMENTS-CARRYING> 1,482,031
<INVESTMENTS-MARKET> 1,539,624
<LOANS> 30,672,641
<ALLOWANCE> 409,205
<TOTAL-ASSETS> 46,049,096
<DEPOSITS> 25,973,349
<SHORT-TERM> 8,954,811
<LIABILITIES-OTHER> 1,127,787
<LONG-TERM> 6,293,537
0
0
<COMMON> 833,988
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<INTEREST-TOTAL> 1,575,966
<INTEREST-DEPOSIT> 433,280
<INTEREST-EXPENSE> 824,800
<INTEREST-INCOME-NET> 751,166
<LOAN-LOSSES> 61,738
<SECURITIES-GAINS> 479
<EXPENSE-OTHER> 618,332
<INCOME-PRETAX> 454,275
<INCOME-PRE-EXTRAORDINARY> 309,233
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309,233
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
<YIELD-ACTUAL> 3.97
<LOANS-NON> 55,219
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