<PAGE>
1997 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 March 31, 1997
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 March 31, 1997, Wachovia Corporation had 161,558,786 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 March
31, 1997 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.
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
1997 FORM 10-Q-CONTINUED
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a) 3.2 Bylaws of the Registrant as amended.
4 Instruments defining the rights of security holders,
including indentures.*
4.1 Indenture between Wachovia Corporation, Wachovia
Capital Trust II and First National Bank of Chicago,
as Trustee, relating to Floating Rate Junior
Subordinated Deferrable Interest Debentures (Junior
Subordinated Debentures). (Exhibit 4 (c) of Amendment
No. 1 to Form S-3 Registration Statement of Wachovia
Corporation and Wachovia Capital Trust II dated
January 22, 1997, File No. 333-19365.)
4.2 Amended and Restated Declaration of Trust of Wachovia
Capital Trust II, relating to Preferred Securities
(Exhibit 4 (b) (iv) of Amendment No. 1 to Form S-3
Registration Statement of Wachovia Corporation and
Wachovia Capital Trust II dated January 22, 1997, File
No. 333-19365).
4.3 Preferred Securities Guarantee Agreement of Wachovia
Corporation (Exhibit 4 (g) of Amendment No. 1 to Form
S-3 Registration Statement of Wachovia Corporation and
Wachovia Capital Trust II dated January 22, 1997, File
No. 333-19365).
10 Amended and Restated Employment Agreements with L.M.
Baker, Jr., G. Joseph Prendergast, Walter E. Leonard,
Jr., and Robert S. McCoy, Jr.
11 "Computation of Earnings per Common Share" is
presented as Table 3 on page 6 of the first quarter
1997 financial supplement.
12 Statement setting forth computation of ratio of
earnings to fixed charges.
19 "Unaudited Consolidated Financial Statements," listed
in Part I, Item 1 do not include all information and
footnotes required under generally accepted accounting
principles. However, in the opinion of management, the
profit and loss information presented in the interim
financial statements reflects all adjustments
necessary to present fairly the results of operations
for the periods presented. Adjustments reflected in
the first quarter of 1997 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 March 31, 1997.
*Wachovia Corporation hereby agrees to furnish to the Commission, upon request,
a copy of any instruments defining the rights of security holders that are not
required to be filed.
SIGNATURES
Pursuant to the requirements to Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WACHOVIA CORPORATION
May 14, 1997 ROBERT S. McCOY, JR.
Robert S. McCoy, Jr.
Executive Vice President
and Chief Financial Officer
May 14, 1997 DONALD K. TRUSLOW
Donald K. Truslow
Comptroller
<PAGE>
(WACHOVIA LOGO APPEARS HERE)
FINANCIAL SUPPLEMENT
AND FORM 10-Q
FIRST QUARTER 1997
<PAGE>
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
DIRECTORS
L. M. BAKER, JR.
President and
Chief Executive Officer
JOHN G. MEDLIN, JR.
Chairman of the Board
JOHN L. CLENDENIN
Chairman of the Board
BellSouth Corporation
LAWRENCE M. GRESSETTE, JR.
Chairman of the
Executive Committee
SCANA Corporation
THOMAS K. HEARN, JR.
President
Wake Forest University
GEORGE W. HENDERSON III
President and
Chief Executive Officer
Burlington Industries, Inc.
W. HAYNE HIPP
President and
Chief Executive Officer
The Liberty Corporation
ROBERT M. HOLDER, JR.
Chairman
RMH Group, LLC
ROBERT A. INGRAM
President and
Chief Executive Officer
Glaxo Wellcome Inc.
JAMES W. JOHNSTON
President and
Chief Executive Officer
Stonemarker Enterprises, Inc.
WYNDHAM ROBERTSON
Writer and Retired
Vice President, Communications
University of North Carolina
HERMAN J. RUSSELL
Chairman of the Board
H.J. Russell & Company
SHERWOOD H. SMITH, JR.
Chairman of the Board
Carolina Power & Light Company
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
<PAGE>
SELECTED PERIOD-END DATA
<TABLE>
<CAPTION>
March 31 March 31
1997 1996
<S> <C> <C>
Banking offices:
North Carolina..................................................................................... 219 219
Georgia............................................................................................ 123 123
South Carolina..................................................................................... 131 144
Total........................................................................................... 473 486
Automated banking machines:
North Carolina..................................................................................... 374 331
Georgia............................................................................................ 232 208
South Carolina..................................................................................... 224 190
Total........................................................................................... 830 729
Employees (full-time equivalent)..................................................................... 16,433 16,191
Common stock shareholders of record.................................................................. 32,402 27,833
Common shares outstanding (thousands)................................................................ 161,559 168,968
</TABLE>
COMMON STOCK DATA -- PER SHARE
<TABLE>
<CAPTION>
1997 1996
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Market value:
Period-end............................................................ $54 1/2 $56 1/2 $49 1/2 $43 3/4 $44 3/4
High.................................................................. 64 5/8 60 1/4 49 7/8 46 1/4 48 3/8
Low................................................................... 54 1/2 48 3/4 39 5/8 40 7/8 41 1/4
Book value at period-end................................................ 22.75 22.96 22.57 22.18 22.07
Dividend................................................................ .40 .40 .40 .36 .36
Price/earnings ratio*................................................... 13.9 X 14.8 x 13.6 x 12.4 x 12.6 x
</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 1997 1996
March 31 First Fourth Third Second
1997 Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent...... $3,332,121 $837,010 $842,365 $842,109 $810,637
Interest expense........................... 1,677,229 417,955 421,079 426,723 411,472
Net interest income -- taxable
equivalent............................... 1,654,892 419,055 421,286 415,386 399,165
Taxable equivalent adjustment.............. 65,126 14,086 16,246 16,880 17,914
Net interest income........................ 1,589,766 404,969 405,040 398,506 381,251
Provision for loan losses.................. 170,575 47,998 47,443 40,730 34,404
Net interest income after provision for
loan losses.............................. 1,419,191 356,971 357,597 357,776 346,847
Other operating revenue.................... 801,474 201,665 203,436 197,778 198,595
Investment securities gains (losses)....... 3,373 335 2,864 393 (219)
Total other income......................... 804,847 202,000 206,300 198,171 198,376
Personnel expense.......................... 667,011 174,104 167,236 165,509 160,162
Other expense.............................. 606,429 150,032 155,502 150,970 149,925
Total other expense........................ 1,273,440 324,136 322,738 316,479 310,087
Income before income taxes................. 950,598 234,835 241,159 239,468 235,136
Applicable income taxes*................... 292,829 71,753 70,431 74,872 75,773
Net income................................. $ 657,769 $163,082 $170,728 $164,596 $159,363
Net income per common share:
Primary.................................. $ 3.93 $ .99 $ 1.02 $ .98 $ .94
Fully diluted............................ $ 3.92 $ .99 $ 1.02 $ .97 $ .94
Cash dividends paid per common share....... $ 1.56 $ .40 $ .40 $ .40 $ .36
Cash dividends paid on common stock........ $ 258,777 $ 65,408 $ 66,016 $ 66,669 $ 60,684
Cash dividend payout ratio................. 39.3% 40.1% 38.7% 40.5% 38.1%
Average primary shares outstanding......... 167,600 165,432 167,118 167,966 169,861
Average fully diluted shares outstanding... 167,769 165,441 167,281 168,354 169,972
SELECTED AVERAGE BALANCES (millions)
Total assets............................... $ 45,614 $ 45,984 $ 45,737 $ 45,778 $ 44,956
Loans -- net of unearned income............ 30,810 31,481 31,101 30,660 30,004
Investment securities**.................... 8,495 8,327 8,251 8,734 8,668
Other interest-earning assets.............. 1,447 1,242 1,409 1,611 1,519
Total interest-earning assets.............. 40,752 41,050 40,761 41,005 40,191
Interest-bearing deposits.................. 21,111 22,034 21,211 20,873 20,335
Short-term borrowed funds.................. 7,858 7,444 7,668 8,099 8,216
Long-term debt............................. 6,176 5,910 6,206 6,454 6,129
Total interest-bearing liabilities......... 35,145 35,388 35,085 35,426 34,680
Noninterest-bearing deposits............... 5,489 5,518 5,604 5,408 5,426
Total deposits............................. 26,599 27,552 26,815 26,281 25,761
Shareholders' equity....................... 3,650 3,653 3,671 3,631 3,644
RATIOS (averages)
Annualized net loan losses to loans........ .55% .61% .61% .53% .46%
Annualized net yield on interest-earning
assets................................... 4.06 4.14 4.11 4.03 3.99
Shareholders' equity to:
Total assets............................. 8.00 7.94 8.03 7.93 8.11
Net loans................................ 12.00 11.75 11.96 12.00 12.31
Annualized return on assets................ 1.44 1.42 1.49 1.44 1.42
Annualized return on shareholders'
equity................................... 18.02 17.86 18.60 18.13 17.49
<CAPTION>
1996
First
Quarter
<S> <C>
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent...... $802,120
Interest expense........................... 413,328
Net interest income -- taxable
equivalent............................... 388,792
Taxable equivalent adjustment.............. 18,877
Net interest income........................ 369,915
Provision for loan losses.................. 27,334
Net interest income after provision for
loan losses.............................. 342,581
Other operating revenue.................... 184,105
Investment securities gains (losses)....... 698
Total other income......................... 184,803
Personnel expense.......................... 161,618
Other expense.............................. 146,627
Total other expense........................ 308,245
Income before income taxes................. 219,139
Applicable income taxes*................... 69,269
Net income................................. $149,870
Net income per common share:
Primary.................................. $ .87
Fully diluted............................ $ .87
Cash dividends paid per common share....... $ .36
Cash dividends paid on common stock........ $ 61,089
Cash dividend payout ratio................. 40.8%
Average primary shares outstanding......... 171,467
Average fully diluted shares outstanding... 171,653
SELECTED AVERAGE BALANCES (millions)
Total assets............................... $ 44,435
Loans -- net of unearned income............ 29,218
Investment securities**.................... 8,795
Other interest-earning assets.............. 1,594
Total interest-earning assets.............. 39,607
Interest-bearing deposits.................. 20,666
Short-term borrowed funds.................. 8,055
Long-term debt............................. 5,487
Total interest-bearing liabilities......... 34,208
Noninterest-bearing deposits............... 5,372
Total deposits............................. 26,038
Shareholders' equity....................... 3,687
RATIOS (averages)
Annualized net loan losses to loans........ .37%
Annualized net yield on interest-earning
assets................................... 3.95
Shareholders' equity to:
Total assets............................. 8.30
Net loans................................ 12.80
Annualized return on assets................ 1.35
Annualized return on shareholders'
equity................................... 16.26
</TABLE>
*Income taxes applicable to securities transactions were $1,378, $134, $1,181,
$149, ($86) and $278, respectively
**Reported at amortized cost; excludes pretax unrealized gains on securities
available-for-sale of $62, $60, $74, $40, $74 and $188, 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. Pending regulatory approval, the
corporation plans to merge its three principal banks under a
single charter with the surviving entity being Wachovia Bank, N.A.
Regulatory approval is expected on or after June 1, 1997.
During the first quarter of 1997, the economy continued to
expand, rising at a strong annualized rate of 5.6 percent from the
preceding three-month period. Concerns over the sustained pace of
economic growth led the Federal Reserve to lift short-term
interest rates one-quarter of a percent. Within Wachovia's three
primary operating states of Georgia, North Carolina and South
Carolina, economic conditions remained generally favorable.
Unemployment for the period averaged 4.7 percent in Georgia, 3.7
percent in North Carolina and 5.4 percent in South Carolina
compared with 5.3 percent for the U.S.
Wachovia's net income for the first quarter was $163.082
million or $.99 per fully diluted share versus $149.870 million or
$.87 per fully diluted share in the same three months of 1996. The
increase in earnings reflected good growth in both net interest
income and other operating revenue, with fewer shares outstanding
also contributing to the rise on a per share basis. Net income
represented annualized returns of 17.86 percent on shareholders'
equity and 1.42 percent on assets compared with 16.26 percent and
1.35 percent, respectively, a year earlier.
Expanded discussion of operating results and the corporation's
financial condition is presented in the following narrative with
accompanying 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>
1997 1996
First First
Quarter Quarter Change
<S> <C> <C> <C>
Interest income -- taxable equivalent.................................. $5.06 $4.68 $.38
Interest expense....................................................... 2.53 2.41 .12
Net interest income -- taxable equivalent.............................. 2.53 2.27 .26
Taxable equivalent adjustment.......................................... .08 .11 (.03)
Net interest income.................................................... 2.45 2.16 .29
Provision for loan losses.............................................. .29 .16 .13
Net interest income after provision
for loan losses...................................................... 2.16 2.00 .16
Other operating revenue................................................ 1.22 1.07 .15
Investment securities gains (losses)................................... -- -- --
Total other income..................................................... 1.22 1.07 .15
Personnel expense...................................................... 1.05 .94 .11
Other expense.......................................................... .91 .86 .05
Total other expense.................................................... 1.96 1.80 .16
Income before income taxes............................................. 1.42 1.27 .15
Applicable income taxes................................................ .43 .40 .03
Net income............................................................. $ .99 $ .87 $.12
</TABLE>
COMPUTATION OF EARNINGS PER COMMON SHARE TABLE 3
(thousands, except per share)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31 March 31
1997 1996
<S> <C> <C>
PRIMARY
Average common shares outstanding.......................................... 163,026 169,710
Dilutive common stock options -- based on treasury
stock method using average market price.................................. 2,237 1,650
Dilutive common stock awards -- based on treasury
stock method using average market price.................................. 169 107
Average primary shares outstanding......................................... 165,432 171,467
Net income................................................................. $163,082 $149,870
Net income per common share -- primary..................................... $ .99 $ .87
FULLY DILUTED
Average common shares outstanding.......................................... 163,026 169,710
Dilutive common stock options -- based on treasury
stock method using higher of period-end
market price or average market price..................................... 2,237 1,650
Dilutive common stock awards -- based on treasury
stock method using higher of period-end
market price or average market price..................................... 169 107
Convertible notes assumed converted........................................ 9 186
Average fully diluted shares outstanding................................... 165,441 171,653
Net income................................................................. $163,082 $149,870
Add interest on convertible notes after taxes.............................. 2 23
Adjusted net income........................................................ $163,084 $149,893
Net income per common share -- fully diluted............................... $ .99 $ .87
</TABLE>
6
<PAGE>
NET INTEREST INCOME
Taxable equivalent net interest income for the first quarter
of 1997 rose $30.263 million or 7.8 percent from the same period a
year earlier. The increase reflected good loan growth, a higher
average earning yield and a more favorable funding mix, with time
deposits continuing to expand while short-term borrowings
moderated. Compared with the fourth quarter of 1996, taxable
equivalent net interest income decreased $2.231 million or less
than 1 percent largely due to the impact of two fewer accrual days
in the first quarter. The net yield on interest-earning assets
(taxable equivalent net interest income as a percentage of average
interest-earning assets) improved 19 basis points year over year
and was higher by 3 basis points from the preceding three months.
Taxable equivalent interest income was up $34.890 million or
4.3 percent from the year-earlier quarter. The rise was driven by
greater loan volume, including increases in the higher-yielding
consumer portfolio. Loans expanded $2.263 billion or 7.7 percent
with the average rate earned improving 16 basis points compared
with total interest-earning asset growth of $1.443 billion or 3.6
percent and an increase of 12 basis points in the average rate
earned. Taxable equivalent interest income was lower by $5.355
million or under 1 percent from the fourth quarter of 1996,
reflecting the shorter accrual period in the first three months of
the year. Growth of interest-earning assets, particularly loans,
remained good, however, with loans increasing $380 million or an
annualized 4.8 percent from the prior quarter and the average rate
earned on loans higher by 6 basis points.
Consumer loans, including residential mortgages, rose $1.193
billion or 10.1 percent year over year. Gains were paced primarily
by credit cards, up $837 million or 21.1 percent, and by
residential mortgages, which increased $431 million or 10.2
percent, reflecting growth in bank equity loans and adjustable
rate mortgages. Direct retail loans and other revolving credit
expanded modestly, while indirect retail loans, consisting
primarily of automobile sales financing, decreased $109 million or
4.2 percent. At March 31, 1997, managed credit card outstandings
totaled $5.428 billion compared with $4.593 billion one year
earlier and $5.444 billion at December 31, 1996. Managed credit
card outstandings at each period-end included $625 million of net
securitized loans.
Commercial loans, including related real estate categories,
were up $1.070 billion or 6.2 percent, led by continued strong
demand in the real estate portfolio. Commercial mortgages
increased $480 million or 12.1 percent. Construction loans grew
$344 million or 49.6 percent. Good gains also occurred in lease
financing and in regular commercial loans, while tax-exempt loans
declined due to the reduced availability of tax-exempt borrowing
and lending at acceptable yields. At March 31, 1997, commercial
real estate loans, based on regulatory definitions, were $5.550
billion or 17 percent of total loans versus $4.714 billion or 15.8
percent one year earlier and $5.329 billion or 17 percent at
fourth quarter-end 1996. Regulatory definitions for commercial
real estate loans include loans which have real estate as the
collateral but not the primary consideration in a credit risk
evaluation.
Period-end loans by category as of March 31, 1997 and the
preceding four quarters are presented in the following table.
<TABLE>
<CAPTION>
March 31 Dec. 31 Sept. 30 June 30
$ THOUSANDS 1997 1996 1996 1996
<S> <C> <C> <C> <C>
Commercial................ $10,903,268 $ 9,661,757 $10,517,396 $10,280,931
Tax-exempt................ 1,752,655 1,936,785 1,998,718 2,047,475
Total commercial..... 12,655,923 11,598,542 12,516,114 12,328,406
Direct retail............. 752,091 782,478 772,947 767,154
Indirect retail........... 2,438,554 2,491,029 2,562,665 2,582,142
Credit card............... 4,802,836 4,819,197 4,377,293 4,180,440
Other revolving credit.... 355,699 359,594 355,254 358,636
Total retail......... 8,349,180 8,452,298 8,068,159 7,888,372
Construction.............. 1,075,005 979,649 874,928 808,866
Commercial mortgages...... 4,474,620 4,349,438 4,296,306 4,130,537
Residential mortgages..... 4,657,805 4,644,858 4,546,274 4,405,219
Total real estate.... 10,207,430 9,973,945 9,717,508 9,344,622
Lease financing........... 840,833 822,703 745,673 644,087
Foreign................... 516,890 435,704 501,349 467,154
Total loans.......... $32,570,256 $31,283,192 $31,548,803 $30,672,641
<CAPTION>
March 31
$ THOUSANDS 1996
<S> <C>
Commercial................ $10,077,465
Tax-exempt................ 2,135,806
Total commercial..... 12,213,271
Direct retail............. 730,804
Indirect retail........... 2,612,568
Credit card............... 3,967,603
Other revolving credit.... 349,897
Total retail......... 7,660,872
Construction.............. 731,630
Commercial mortgages...... 3,982,332
Residential mortgages..... 4,256,396
Total real estate.... 8,970,358
Lease financing........... 583,403
Foreign................... 441,087
Total loans.......... $29,868,991
</TABLE>
7
<PAGE>
NET INTEREST INCOME AND AVERAGE BALANCES TABLE 4
<TABLE>
<CAPTION>
Twelve
Months
Ended 1997 1996
March 31 First Fourth Third Second
1997 Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME -- TAXABLE
EQUIVALENT (thousands)
Interest income:
Loans................................... $2,642,844 $674,907 $674,328 $661,220 $632,389
Investment securities................... 602,960 146,060 147,020 155,485 154,395
Interest-bearing bank balances.......... 24,448 360 5,501 9,329 9,258
Federal funds sold and securities
purchased under resale agreements..... 10,526 2,203 1,893 3,275 3,155
Trading account assets.................. 51,343 13,480 13,623 12,800 11,440
Total................................ 3,332,121 837,010 842,365 842,109 810,637
Interest expense:
Interest-bearing demand................. 45,929 11,432 12,044 11,537 10,916
Savings and money market savings........ 288,203 79,351 75,359 68,561 64,932
Savings certificates.................... 367,509 89,091 92,584 94,149 91,685
Large denomination certificates......... 130,992 34,889 29,470 33,770 32,863
Time deposits in foreign offices........ 59,198 17,357 17,132 13,676 11,033
Short-term borrowed funds............... 415,773 95,069 100,949 109,725 110,030
Long-term debt.......................... 369,625 90,766 93,541 95,305 90,013
Total................................ 1,677,229 417,955 421,079 426,723 411,472
Net interest income....................... $1,654,892 $419,055 $421,286 $415,386 $399,165
Annualized net yield on
interest-earning assets................. 4.06% 4.14% 4.11% 4.03% 3.99%
AVERAGE BALANCES (millions)
Assets:
Loans -- net of unearned income......... $ 30,810 $ 31,481 $ 31,101 $ 30,660 $ 30,004
Investment securities................... 8,495 8,327 8,251 8,734 8,668
Interest-bearing bank balances.......... 312 28 276 478 462
Federal funds sold and securities
purchased under resale agreements..... 194 164 138 240 232
Trading account assets.................. 941 1,050 995 893 825
Total interest-earning assets........ 40,752 41,050 40,761 41,005 40,191
Cash and due from banks................. 2,522 2,558 2,576 2,434 2,521
Premises and equipment.................. 639 639 632 642 643
Other assets............................ 2,041 2,079 2,095 2,059 1,931
Unrealized gains (losses) on securities
available-for-sale.................... 62 60 74 40 74
Allowance for loan losses............... (402) (402) (401) (402) (404)
Total assets......................... $ 45,614 $ 45,984 $ 45,737 $ 45,778 $ 44,956
Liabilities and shareholders' equity:
Interest-bearing demand................. $ 3,294 $ 3,297 $ 3,354 $ 3,253 $ 3,272
Savings and money market savings........ 7,924 8,394 8,072 7,733 7,505
Savings certificates.................... 6,506 6,426 6,510 6,598 6,487
Large denomination certificates......... 2,262 2,586 1,989 2,256 2,222
Time deposits in foreign offices........ 1,125 1,331 1,286 1,033 849
Short-term borrowed funds............... 7,858 7,444 7,668 8,099 8,216
Long-term debt.......................... 6,176 5,910 6,206 6,454 6,129
Total interest-bearing liabilities... 35,145 35,388 35,085 35,426 34,680
Demand deposits in domestic offices....... 5,484 5,515 5,599 5,402 5,419
Demand deposits in foreign offices........ 1 -- -- 1 2
Noninterest-bearing time deposits in
domestic offices........................ 4 3 5 5 5
Other liabilities......................... 1,330 1,425 1,377 1,313 1,206
Shareholders' equity...................... 3,650 3,653 3,671 3,631 3,644
Total liabilities and shareholders'
equity............................... $ 45,614 $ 45,984 $ 45,737 $ 45,778 $ 44,956
Total deposits............................ $ 26,600 $ 27,552 $ 26,815 $ 26,281 $ 25,761
<CAPTION>
1996
First
Quarter
<S> <C>
NET INTEREST INCOME -- TAXABLE
EQUIVALENT (thousands)
Interest income:
Loans................................... $619,722
Investment securities................... 157,631
Interest-bearing bank balances.......... 9,018
Federal funds sold and securities
purchased under resale agreements..... 3,250
Trading account assets.................. 12,499
Total................................ 802,120
Interest expense:
Interest-bearing demand................. 12,669
Savings and money market savings........ 64,980
Savings certificates.................... 91,467
Large denomination certificates......... 39,634
Time deposits in foreign offices........ 13,101
Short-term borrowed funds............... 110,390
Long-term debt.......................... 81,087
Total................................ 413,328
Net interest income....................... $388,792
Annualized net yield on
interest-earning assets................. 3.95%
AVERAGE BALANCES (millions)
Assets:
Loans -- net of unearned income......... $ 29,218
Investment securities................... 8,795
Interest-bearing bank balances.......... 456
Federal funds sold and securities
purchased under resale agreements..... 241
Trading account assets.................. 897
Total interest-earning assets........ 39,607
Cash and due from banks................. 2,612
Premises and equipment.................. 633
Other assets............................ 1,802
Unrealized gains (losses) on securities
available-for-sale.................... 188
Allowance for loan losses............... (407)
Total assets......................... $ 44,435
Liabilities and shareholders' equity:
Interest-bearing demand................. $ 3,314
Savings and money market savings........ 7,285
Savings certificates.................... 6,401
Large denomination certificates......... 2,675
Time deposits in foreign offices........ 991
Short-term borrowed funds............... 8,055
Long-term debt.......................... 5,487
Total interest-bearing liabilities... 34,208
Demand deposits in domestic offices....... 5,365
Demand deposits in foreign offices........ 4
Noninterest-bearing time deposits in
domestic offices........................ 3
Other liabilities......................... 1,168
Shareholders' equity...................... 3,687
Total liabilities and shareholders'
equity............................... $ 44,435
Total deposits............................ $ 26,038
</TABLE>
8
<PAGE>
Reflecting continued good loan growth and ongoing balance
sheet management, investment securities decreased $468 million or
5.3 percent from the year-earlier quarter. Held-to-maturity
securities were lower by $236 million or 14.9 percent and
available-for-sale securities declined $232 million or 3.2
percent. Investment securities were up modestly from the fourth
quarter of 1996 with management increasing the portfolio in
anticipation of additional future runoff. At March 31, 1997,
securities available-for-sale totaled $7.144 billion and
securities held-to-maturity were $1.326 billion as shown below.
<TABLE>
<S> <C>
$ IN THOUSANDS
Securities available-for-sale at market value:
U.S. Government and agency......................................................................$5,291,719
Mortgage-backed securities...................................................................... 1,452,111
Other........................................................................................... 400,345
Total securities available-for-sale.......................................................... 7,144,175
Securities held-to-maturity:
Mortgage-backed securities...................................................................... 1,097,808
State and municipal............................................................................. 225,523
Other........................................................................................... 2,225
Total securities held-to-maturity............................................................ 1,325,556
Total investment securities..................................................................$8,469,731
</TABLE>
Securities held-to-maturity had a market value of $1.378
billion at March 31, 1997, representing a $52 million appreciation
over book value. Securities available-for-sale marked to fair
market value had an unrealized gain of $12.536 million, pretax,
and $8.170 million, net of tax, on the same date. Average
securities available-for-sale for the first quarter of 1997 had an
unrealized gain of $60.643 million, pretax, and $37.350 million,
net of tax.
Interest expense for the quarter increased $4.627 million or
1.1 percent from a year earlier. The modest rise reflected higher
levels of interest-bearing liabilities moderated by a more
favorable mix of funding sources. Interest-bearing liabilities
increased $1.180 billion or 3.4 percent while the average rate
paid declined 7 basis points. Compared with the fourth quarter of
1996, interest expense was lower by $3.124 million or less than 1
percent due to two fewer accrual days, with interest-bearing
liabilities rising $303 million or an annualized 3.6 percent and
the average rate paid up 2 basis points.
To further broaden its funding base, the corporation is
issuing a variety of debt and equity instruments while continuing
innovative marketing for traditional funding sources. This
includes a global bank note program, the issuance of senior debt
and trust capital securities and greater reliance on money market
instruments, such as the corporation's Premiere account.
Management believes that continued flexibility and innovation will
be required by financial institutions to attract future funding
through deposit products and alternative sources.
Time deposits grew $1.368 billion or 6.6 percent year over
year and represented 62.3 percent of total interest-bearing
liabilities versus 60.4 percent in the year-earlier quarter and
60.5 percent in the fourth period of 1996. Gains were led
principally by savings and money market savings, which rose $1.109
billion or 15.2 percent, and by foreign time deposits, up $340
million or 34.3 percent. Growth in savings and money market
savings reflected continued good increases in the corporation's
Premiere account, a federally insured savings account offering
interest rates competitive with money market rates. Time deposits
were higher by $823 million or 3.9 percent from the preceding
quarter, with growth occurring primarily in large denomination
certificates and in savings and money market savings.
Short-term borrowings declined $611 million or 7.6 percent
from the year-earlier period and were lower by $224 million or 2.9
percent from the preceding three months. Decreases from both
periods reflected lower levels of federal funds purchased and
securities sold under repurchase agreements and of other
short-term borrowings, which consist mainly of short-term bank
notes.
Long-term debt rose $423 million or 7.7 percent year over
year, reflecting growth in other long-term debt as medium-term
bank note borrowings moderated. Compared with the fourth quarter
of 1996, long-term debt was lower by $296 million or 4.8 percent.
9
<PAGE>
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- FIRST QUARTER* TABLE 5
<TABLE>
<CAPTION>
Variance
Attributable
Average Volume Average Rate Interest to
1997 1996 1997 1996 1997 1996 Variance Rate
<C> <C> <C> <C> <S> <C> <C> <C> <C>
(Millions) INTEREST INCOME (Thousands)
Loans:
$ 9,866 $ 9,609 7.17 7.12 Commercial..................... $174,509 $170,217 $ 4,292 $ 885
1,779 2,149 8.96 8.95 Tax-exempt..................... 39,318 47,829 (8,511) 51
11,645 11,758 7.45 7.46 Total commercial............... 213,827 218,046 (4,219) (514)
763 734 9.39 9.36 Direct retail.................. 17,679 17,068 611 45
2,479 2,588 8.56 8.27 Indirect retail................ 52,354 53,193 (839) 1,643
4,795 3,958 12.59 11.57 Credit card.................... 148,865 113,856 35,009 10,240
358 353 12.17 12.37 Other revolving credit......... 10,730 10,857 (127) (226)
8,395 7,633 11.09 10.27 Total retail................... 229,628 194,974 34,654 15,319
1,037 693 9.23 9.19 Construction................... 23,575 15,848 7,727 67
4,443 3,963 8.19 8.30 Commercial mortgages........... 89,784 81,807 7,977 (1,160)
4,662 4,231 7.98 8.48 Residential mortgages.......... 91,749 89,204 2,545 (5,702)
10,142 8,887 8.20 8.46 Total real estate.............. 205,108 186,859 18,249 (6,131)
831 530 8.98 9.57 Lease financing................ 18,406 12,614 5,792 (829)
468 410 6.88 7.09 Foreign........................ 7,938 7,229 709 (229)
31,481 29,218 8.69 8.53 Total loans.................... 674,907 619,722 55,185 10,685
Investment securities:
Held-to-maturity:
-- -- -- -- U.S. Government and agency..... -- -- -- --
1,105 1,269 8.08 8.06 Mortgage-backed securities..... 22,012 25,442 (3,430) 59
236 308 11.22 11.15 State and municipal............ 6,529 8,538 (2,009) 51
2 2 12.98 9.89 Other.......................... 60 57 3 15
Total securities
1,343 1,579 8.64 8.67 held-to-maturity....... 28,601 34,037 (5,436) (122)
Available-for-sale:**
5,096 5,553 6.73 6.87 U.S. Government and agency..... 84,617 94,790 (10,173) (2,005)
1,493 1,499 7.20 7.07 Mortgage-backed securities..... 26,498 26,340 158 292
395 164 6.52 6.04 Other.......................... 6,344 2,464 3,880 206
Total securities
6,984 7,216 6.82 6.89 available-for-sale..... 117,459 123,594 (6,135) (1,461)
8,327 8,795 7.11 7.21 Total investment securities.... 146,060 157,631 (11,571) (2,372)
Interest-bearing bank
28 456 5.18 7.95 balances....................... 360 9,018 (8,658) (2,330)
Federal funds sold and
securities purchased under
164 241 5.43 5.43 resale agreements............ 2,203 3,250 (1,047) --
1,050 897 5.20 5.60 Trading account assets......... 13,480 12,499 981 (963)
Total interest-earning
$41,050 $39,607 8.27 8.15 assets......................... 837,010 802,120 34,890 9,987
INTEREST EXPENSE
$ 3,297 $ 3,314 1.41 1.54 Interest-bearing demand........ 11,432 12,669 (1,237) (1,166)
Savings and money market
8,394 7,285 3.67 3.59 savings........................ 79,351 64,980 14,371 4,362
6,426 6,401 5.62 5.75 Savings certificates........... 89,091 91,467 (2,376) (2,635)
Large denomination
2,586 2,675 5.47 5.96 certificates................... 34,889 39,634 (4,745) (3,373)
Total time deposits in
20,703 19,675 4.13 4.27 domestic offices....... 214,763 208,750 6,013 (3,329)
Time deposits in foreign
1,331 991 5.29 5.31 offices........................ 17,357 13,101 4,256 (51)
22,034 20,666 4.20 4.32 Total time deposits...... 232,120 221,851 10,269 (2,825)
Federal funds purchased and
securities sold under
5,841 5,960 5.18 5.55 repurchase agreements........ 74,553 82,301 (7,748) (5,943)
680 554 4.88 4.93 Commercial paper............... 8,183 6,790 1,393 (72)
Other short-term borrowed
923 1,541 5.41 5.56 funds.......................... 12,333 21,299 (8,966) (561)
Total short-term
7,444 8,055 5.18 5.51 borrowed funds......... 95,069 110,390 (15,321) (6,726)
3,558 4,155 6.03 5.73 Bank notes..................... 52,905 59,158 (6,253) 2,853
2,352 1,332 6.53 6.62 Other long-term debt........... 37,861 21,929 15,932 (305)
5,910 5,487 6.23 5.94 Total long-term debt..... 90,766 81,087 9,679 3,732
Total interest-bearing
$35,388 $34,208 4.74 4.86 liabilities............ 417,955 413,328 4,627 (6,996)
3.53 3.29 INTEREST RATE SPREAD
NET YIELD ON INTEREST-EARNING
ASSETS AND NET INTEREST
4.14 3.95 INCOME......................... $419,055 $388,792 $30,263 17,162
<CAPTION>
Variance
Attributable
to
Volume
<S> <C>
INTEREST INCOME
Loans:
Commercial..................... $ 3,407
Tax-exempt..................... (8,562)
Total commercial............... (3,705)
Direct retail.................. 566
Indirect retail................ (2,482)
Credit card.................... 24,769
Other revolving credit......... 99
Total retail................... 19,335
Construction................... 7,660
Commercial mortgages........... 9,137
Residential mortgages.......... 8,247
Total real estate.............. 24,380
Lease financing................ 6,621
Foreign........................ 938
Total loans.................... 44,500
Investment securities:
Held-to-maturity:
U.S. Government and agency..... --
Mortgage-backed securities..... (3,489)
State and municipal............ (2,060)
Other.......................... (12)
Total securities
held-to-maturity....... (5,314)
Available-for-sale:**
U.S. Government and agency..... (8,168)
Mortgage-backed securities..... (134)
Other.......................... 3,674
Total securities
available-for-sale..... (4,674)
Total investment securities.... (9,199)
Interest-bearing bank
balances....................... (6,328)
Federal funds sold and
securities purchased under
resale agreements............ (1,047)
Trading account assets......... 1,944
Total interest-earning
assets......................... 24,903
INTEREST EXPENSE
Interest-bearing demand........ (71)
Savings and money market
savings........................ 10,009
Savings certificates........... 259
Large denomination
certificates................... (1,372)
Total time deposits in
domestic offices....... 9,342
Time deposits in foreign
offices........................ 4,307
Total time deposits...... 13,094
Federal funds purchased and
securities sold under
repurchase agreements........ (1,805)
Commercial paper............... 1,465
Other short-term borrowed
funds.......................... (8,405)
Total short-term
borrowed funds......... (8,595)
Bank notes..................... (9,106)
Other long-term debt........... 16,237
Total long-term debt..... 5,947
Total interest-bearing
liabilities............ 11,623
INTEREST RATE SPREAD
NET YIELD ON INTEREST-EARNING
ASSETS AND NET INTEREST
INCOME......................... 13,101
</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 $60 million in 1997 and $188 million in 1996
10
<PAGE>
Other long-term debt at March 31, 1997 included a total of
$600 million of 30-year trust capital securities issued in
December 1996 and January 1997 and $200 million of 10-year senior
debt fixed-rate notes issued in November 1996. The January 1997
issuance of trust capital securities was made by Wachovia Capital
Trust II (WCTII), a consolidated subsidiary, for $300 million of
floating rate capital securities due in 2027. WCTII invested the
proceeds of the capital securities, together with $9.280 million
paid by the corporation for WCTII's common securities, in $305.692
million, net of discount of $3.588 million, of the corporation's
floating rate junior subordinated deferrable interest debentures.
WCTII's sole asset is the junior subordinated deferrable interest
debentures which mature in 2027. The corporation has fully and
unconditionally guaranteed all of WCTII's obligations under the
capital securities. Additionally, the capital securities qualify
for inclusion in Tier I capital under the risk-based capital
guidelines. The trust capital securities are rated Aa3 by Moody's
and A+ by Standard & Poor's.
Medium-term bank notes are part of Wachovia Bank of North
Carolina's $16 billion global bank note program consisting of
short-term issues of 7 days to one year and medium-term issues of
greater than one year. Included in medium-term bank notes at March
31, 1997 were three issues placed in Europe in 1996: $500 million
of five-year floating rate notes issued in May; $100 million of
two-year fixed-rate notes issued in August; and $250 million of
12-year fixed-rate notes issued in October. All of the medium-term
bank notes are rated Aa2 by Moody's and AA+ by Standard & Poor's.
Gross deposits averaged $27.552 billion for the quarter, up
$1.514 billion or 5.8 percent from $26.038 billion a year earlier.
Collected deposits, net of float, averaged $25.675 billion, higher
by $1.477 billion or 6.1 percent from $24.198 billion in the same
three months of 1996.
ASSET AND LIABILITY MANAGEMENT, INTEREST RATE SENSITIVITY AND LIQUIDITY
MANAGEMENT
The corporation uses a number of tools to measure interest
rate risk, including simulating net interest income under various
rate scenarios, monitoring the change in present value of the
asset and liability portfolios under the same rate scenarios and
monitoring the difference or gap between rate sensitive assets and
liabilities over various time periods. 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 March 31, 1997, the model indicated the impact of a
200 basis point gradual rise in rates over 12 months would
approximate a 1.5 percent decrease in net interest income, while a
200 basis point decline in rates over the same period would
approximate a 1.3 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 March
31, 1997, the corporation had $2.360 billion notional amount of
derivatives outstanding for asset and liability management
purposes. 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.
11
<PAGE>
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 transactions
under International Swaps and Derivatives Association Master
Agreements and by using collateral instruments to reduce exposure
where appropriate. Collateral is delivered by either party when
the fair value of a particular transaction or group of
transactions with the same counterparty on a net basis exceeds an
acceptable threshold of exposure. The threshold level is
determined based on the strength of the individual counterparty.
The fair value of all asset and liability derivative positions
for which the corporation was exposed to counterparties totaled $6
million at March 31, 1997. The fair value of all asset and
liability derivative positions for which counterparties were
exposed to the corporation amounted to $27 million on the same
date. Fair value details and additional asset and liability
derivative information are included in the following tables.
Estimated Fair Value of Asset and Liability Management Derivatives
by Purpose
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
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.... $ 164 $ 2 $ (2) $-- $ 116 $ (3)
Convert fixed rate assets to floating:
Swaps-pay fixed/receive floating.... 368 -- (4) (4) 387 (5)
Forward starting swaps-pay
fixed/receive floating............ 18 -- (1) (1) 39 (3)
Convert fixed rate liabilities to
floating:
Swaps-receive fixed/pay floating.... 950 1 (19) (18) 300 (1)
Convert liabilities with quarterly
rate resets to monthly:
Swaps-receive floating/pay
floating.......................... 300 -- -- -- -- --
Convert floating rate assets to fixed:
Swaps-receive fixed/pay floating.... 310 -- (1) (1) 167 1
Index amortizing swaps-receive
fixed/pay floating................ 250 3 -- 3 325 11
Total derivatives............... $2,360 $ 6 ($27) ($21) $1,334 $--
</TABLE>
12
<PAGE>
Maturity Schedule of Asset and Liability Management Derivatives
March 31, 1997
<TABLE>
<CAPTION>
Within Over Average
One Two Three Four Five Five Life
Year Years Years Years Years Years Total (Years)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ IN MILLIONS
Interest rate swaps:
Pay fixed/receive floating:
Notional amount.......................... $307 $ 116 $ 39 $ 4 $ 2 $ 64 $ 532 1.73
Weighted average rates received.......... 4.39% 5.55% 5.60 % 5.90% 6.24% 5.55% 4.90%
Weighted average rates paid.............. 7.22 6.15 6.48 9.01 9.06 7.87 7.04
Receive fixed/pay floating:
Notional amount.......................... $125 $ 152 $251 $ 103 $ 102 $ 527 $1,260 10.81
Weighted average rates received.......... 7.05% 6.57% 7.08 % 6.48% 7.12% 5.69% 6.39%
Weighted average rates paid.............. 5.59 5.65 5.52 5.51 5.58 5.83 5.68
Receive floating/pay floating:
Notional amount.......................... -- -- -- -- $ 300 -- $ 300 4.18
Weighted average rates received.......... -- -- -- -- 5.52% -- 5.52%
Weighted average rates paid.............. -- -- -- -- 5.44 -- 5.44
Index amortizing swaps:*
Receive fixed/pay floating:
Notional amount.......................... $196 $ 27 $ 7 $ 20 -- -- $ 250 1.09
Weighted average rates received.......... 8.13% 8.56% 8.56 % 8.56% -- -- 8.22%
Weighted average rates paid.............. 5.56 5.56 5.56 5.56 -- -- 5.56
Total interest rate swaps:
Notional amount............................ $628 $ 295 $297 $ 127 $ 404 $ 591 $2,342 6.86
Weighted average rates received............ 6.10% 6.35% 6.91 % 6.78% 5.93% 5.68% 6.14%
Weighted average rates paid................ 6.37 5.84 5.65 5.64 5.50 6.05 5.94
Forward starting interest rate swaps:
Notional amount............................ -- -- -- -- -- $ 18 $ 18 7.05
Weighted average rates paid................ -- -- -- -- -- 8.04% 8.04%
Total derivatives (notional amount).... $628 $ 295 $297 $ 127 $ 404 $ 609 $2,360 6.86
</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 approximately offset unrealized
derivatives gains and losses.
To ensure the corporation is positioned to meet immediate and
future cash demands, management relies on liquidity analysis,
knowledge of business trends over past economic cycles and
forecasts of future conditions. Liquidity is maintained through a
strong balance sheet and operating performance that assures market
acceptance as well as through policy guidelines which limit the
level, maturity and concentration of noncore funding sources.
Through its balance sheet, the corporation generates liquidity
on the asset side by maintaining significant amounts of
available-for-sale investment securities, which may be sold at any
time, and by loans which may be securitized or sold. Additionally,
the corporation generates cash through deposit growth, the
issuance of bank notes, the availability of unused lines of credit
and through other forms of debt and equity instruments.
Through policy guidelines, the corporation limits net
purchased funds to 50 percent of long-term assets, which include
net loans and leases, investment securities with remaining
maturities over one year and net foreclosed real estate. Policy
guidelines insure against concentrations by maturity of noncore
funding sources by limiting the cumulative percentage of purchased
funds that mature overnight, within 30 days and within 90 days.
Guidelines also require the monitoring of significant
concentrations of funds by single sources and by type of borrowing
category.
13
<PAGE>
NONPERFORMING ASSETS
Nonperforming assets at March 31, 1997 were $73.431 million or
.23 percent of period-end loans and foreclosed property. The total
was down $4.121 million or 5.3 percent from one year earlier and
decreased $4.059 million or 5.2 percent from December 31, 1996.
Declines from both periods principally reflected lower levels of
foreclosed property.
Included in total nonperforming assets at March 31, 1997 were
real estate nonperforming assets of $55.966 million or .55 percent
of real estate loans and foreclosed real estate. This compared
with $63.937 million or .71 percent at first quarter-close 1996
and with $59.109 million or .59 percent at December 31, 1996. Real
estate nonperforming loans were $45.752 million at March 31, 1997,
$49.547 million one year earlier and $49.898 million at year-end
1996.
Commercial real estate nonperforming assets were $29.766
million or .54 percent of related loans and foreclosed real estate
versus $33.370 million or .71 percent at March 31, 1996 and
$30.556 million or .57 percent at December 31, 1996. Included in
these totals were commercial real estate nonperforming loans of
$26.525 million at March 31, 1997, $29.815 million one year
earlier and $27.080 million at year-end 1996.
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 6
(thousands)
<TABLE>
<CAPTION>
March 31 Dec. 31 Sept. 30 June 30
1997 1996 1996 1996
<S> <C> <C> <C> <C>
NONPERFORMING ASSETS
Cash-basis assets -- domestic borrowers....................... $57,934 * $60,066 $61,283 $55,219
Restructured loans -- domestic................................ -- ** -- -- --
Total nonperforming loans............................... 57,934 60,066 61,283 55,219
Foreclosed property:
Foreclosed real estate...................................... 12,189 11,326 12,852 15,162
Less valuation allowance.................................... 1,975 2,115 2,165 2,656
Other foreclosed assets..................................... 5,283 8,213 6,180 4,920
Total foreclosed property............................... 15,497 17,424 16,867 17,426
Total nonperforming assets.............................. $73,431 *** $77,490 $78,150 $72,645
Nonperforming loans to period-end loans....................... .18% .19% .19% .18%
Nonperforming assets to period-end loans
and foreclosed property..................................... .23 .25 .25 .24
Period-end allowance for loan losses
times nonperforming loans................................... 7.07 X 6.81x 6.68 x 7.41x
Period-end allowance for loan losses
times nonperforming assets.................................. 5.57 5.28 5.24 5.63
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers............................................ $54,717 $58,842 $53,304 $63,317
<CAPTION>
March 31
1996
<S> <C>
NONPERFORMING ASSETS
Cash-basis assets -- domestic borrowers....................... $57,867
Restructured loans -- domestic................................ --
Total nonperforming loans............................... 57,867
Foreclosed property:
Foreclosed real estate...................................... 17,209
Less valuation allowance.................................... 2,819
Other foreclosed assets..................................... 5,295
Total foreclosed property............................... 19,685
Total nonperforming assets.............................. $77,552
Nonperforming loans to period-end loans....................... .19%
Nonperforming assets to period-end loans
and foreclosed property..................................... .26
Period-end allowance for loan losses
times nonperforming loans................................... 7.07 x
Period-end allowance for loan losses
times nonperforming assets.................................. 5.27
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers............................................ $57,415
</TABLE>
*Includes $16,251 of loans which have been defined as impaired per Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" (FASB 114)
**Excludes $197 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 $13,430; includes $2,865 of
nonperforming assets on which interest and principal are paid current
14
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses for the first quarter was
$47.998 million, slightly exceeding net loan losses and higher by
$20.664 million or 75.6 percent from $27.334 million in the same
period a year earlier. Compared with the fourth quarter of 1996,
the provision was up $555 thousand or 1.2 percent. The provision
reflects management's assessment of the adequacy of the allowance
for loan losses to absorb potential write-offs in the loan
portfolio due to a deterioration in credit conditions or change in
risk profile. Factors considered in this assessment include growth
and mix of the loan portfolio, current and anticipated economic
conditions, historical credit loss experience and changes in
borrowers' financial positions. The adequacy of the allowance also
is assessed by management based on the corporation's practice to
aggressively recognize problem credits and generally match
charge-offs through the provision.
Net loan losses were $47.983 million or .61 percent annualized
of average loans, an increase of $20.769 million or 76.3 percent
from the same three months in 1996. The rise reflected both higher
losses in consumer loans, principally credit cards, and lower but
more normalized recoveries of real estate loans previously charged
off. Net loan losses rose $566 thousand or 1.2 percent from the
preceding quarter, primarily due to reduced recoveries of
commercial loan charge-offs. Excluding credit cards, net loan
losses for the first quarter totaled $7.901 million or .12 percent
annualized of average loans versus net recoveries of $664 thousand
or .01 percent a year earlier and net loan losses of $7.759
million or .12 percent of loans in the fourth quarter of 1996.
Credit card net charge-offs were $40.082 million or 3.34
percent annualized of average credit card loans, up $12.204
million or 43.8 percent from $27.878 million or 2.82 percent of
average receivables in the year-earlier period. Other retail net
charge-offs, associated with direct and indirect retail loans,
rose $1.531 million or 34.5 percent to $5.974 million or .74
percent of related average receivables. Real estate loans had net
recoveries of $277 thousand or .01 percent of average real estate
loans, down $5.167 million or 94.9 percent from net recoveries of
$5.444 million or .25 percent of real estate loans in the same
three months of 1996.
Selected data on the corporation's managed credit card
portfolio, which includes securitized loans, is presented in the
following table.
Managed Credit and Data
<TABLE>
<CAPTION>
1997 1996
First Fourth Third Second First
$ IN THOUSANDS Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Average credit card outstandings............ $5,420,000 $5,167,000 $4,895,000 $4,670,000 $4,583,000
Net loan losses............................. 45,444 45,162 39,370 36,733 32,359
Annualized net loan losses to average
loans..................................... 3.35% 3.50% 3.22% 3.15% 2.82%
Delinquencies (30 days or more) to
period-end loans.......................... 2.27 2.14 2.26 2.01 2.29
</TABLE>
At March 31, 1997, the allowance for loan losses was $409.312
million, representing 1.26 percent of period-end loans and 707
percent of nonperforming loans. Comparable amounts were $408.928
million, 1.37 percent and 707 percent, respectively, one year
earlier and $409.297 million, 1.31 percent and 681 percent,
respectively, at fourth quarter-close 1996.
15
<PAGE>
ALLOWANCE FOR LOAN LOSSES TABLE 7
(thousands)
<TABLE>
<CAPTION>
1997 1996
First Fourth Third Second
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period............................. $409,297 $409,271 $409,205 $408,928
Additions from acquisitions................................ -- -- -- 200
Provision for loan losses.................................. 47,998 47,443 40,730 34,404
Deduct net loan losses:
Loans charged off:
Commercial............................................. 268 451 2,748 324
Credit card............................................ 46,101 44,640 38,783 36,343
Other revolving credit................................. 1,637 2,834 1,790 1,346
Other retail........................................... 7,675 7,057 5,556 4,840
Real estate............................................ 1,455 814 191 1,371
Lease financing........................................ 1,366 675 348 235
Foreign................................................ -- -- -- --
Total................................................ 58,502 56,471 49,416 44,459
Recoveries:
Commercial............................................. 476 1,689 666 1,198
Credit card............................................ 6,019 4,982 4,579 4,599
Other revolving credit................................. 532 384 495 290
Other retail........................................... 1,701 1,336 1,379 1,138
Real estate............................................ 1,732 633 1,575 2,866
Lease financing........................................ 59 30 58 41
Foreign................................................ -- -- -- --
Total................................................ 10,519 9,054 8,752 10,132
Net loan losses.......................................... 47,983 47,417 40,664 34,327
Balance at end of period*.................................. $409,312 $409,297 $409,271 $409,205
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial................................................. $ (208) $ (1,238) $ 2,082 $ (874)
Credit card................................................ 40,082 39,658 34,204 31,744
Other revolving credit..................................... 1,105 2,450 1,295 1,056
Other retail............................................... 5,974 5,721 4,177 3,702
Real estate................................................ (277) 181 (1,384) (1,495)
Lease financing............................................ 1,307 645 290 194
Foreign.................................................... -- -- -- --
Total................................................ $ 47,983 $ 47,417 $ 40,664 $ 34,327
Net loan losses -- excluding credit cards.................. $ 7,901 $ 7,759 $ 6,460 $ 2,583
ANNUALIZED NET LOAN LOSSES (RECOVERIES)
TO AVERAGE LOANS BY CATEGORY
Commercial................................................. (.01%) (.04%) .07% (.03%)
Credit card................................................ 3.34 3.49 3.20 3.14
Other revolving credit..................................... 1.24 2.76 1.46 1.19
Other retail............................................... .74 .69 .50 .44
Real estate................................................ (.01) .01 (.06) (.07)
Lease financing............................................ .63 .34 .17 .13
Foreign.................................................... -- -- -- --
Total loans................................................ .61 .61 .53 .46
Total loans -- excluding credit cards...................... .12 .12 .10 .04
Period-end allowance to outstanding loans.................. 1.26 1.31 1.30 1.33
<CAPTION>
1996
First
Quarter
<S> <C>
SUMMARY OF TRANSACTIONS
Balance at beginning of period............................. $408,808
Additions from acquisitions................................ --
Provision for loan losses.................................. 27,334
Deduct net loan losses:
Loans charged off:
Commercial............................................. 65
Credit card............................................ 31,902
Other revolving credit................................. 1,092
Other retail........................................... 5,495
Real estate............................................ 134
Lease financing........................................ 377
Foreign................................................ --
Total................................................ 39,065
Recoveries:
Commercial............................................. 860
Credit card............................................ 4,024
Other revolving credit................................. 283
Other retail........................................... 1,052
Real estate............................................ 5,578
Lease financing........................................ 54
Foreign................................................ --
Total................................................ 11,851
Net loan losses.......................................... 27,214
Balance at end of period*.................................. $408,928
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial................................................. $ (795)
Credit card................................................ 27,878
Other revolving credit..................................... 809
Other retail............................................... 4,443
Real estate................................................ (5,444)
Lease financing............................................ 323
Foreign.................................................... --
Total................................................ $ 27,214
Net loan losses -- excluding credit cards.................. $ (664)
ANNUALIZED NET LOAN LOSSES (RECOVERIES)
TO AVERAGE LOANS BY CATEGORY
Commercial................................................. (.03%)
Credit card................................................ 2.82
Other revolving credit..................................... .92
Other retail............................................... .54
Real estate................................................ (.25)
Lease financing............................................ .24
Foreign.................................................... --
Total loans................................................ .37
Total loans -- excluding credit cards...................... (.01)
Period-end allowance to outstanding loans.................. 1.37
</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
$792, $1,960, $1,453, $791 and $883, respectively
16
<PAGE>
NONINTEREST INCOME
Total other operating revenue for the quarter increased
$17.560 million or 9.5 percent from a year earlier. Gains were led
by deposit account service charge revenues, credit card fee
income, electronic banking and trust service fees. Compared with
the fourth quarter of 1996, total other operating revenue was
lower by $1.771 million or slightly less than 1 percent, primarily
due to reduced trading account profits and to softer growth in
capital markets fees which are classified as part of other income.
Deposit account service charge revenues rose $7.344 million or
13 percent year over year, reflecting growth largely in commercial
analysis fees, overdraft charges and insufficient fund charges.
Credit card fee income expanded $3.172 million or 9.8 percent
driven by higher interchange income and increased overlimit charge
activity.
Electronic banking revenues, consisting of fees from debit
card and ATM usage, were up $3.170 million or 33.9 percent. Growth
reflected higher levels of debit card interchange income as well
as the assessment of ATM foreign access fees. The access fees were
implemented in all three of the corporation's operating states
effective with the second quarter of 1996.
Trust service fees rose $2.009 million or 5.8 percent,
reflecting growth largely in personal trust services and in
advisory fees earned on the corporation's proprietary Biltmore
funds.
Trading account profits were higher by $828 thousand or 24
percent due principally to improved bond market conditions
compared with the year-earlier quarter. Trading account profits
consist of profit and losses on securities in the corporation's
trading account portfolio, income earned on foreign exchange
transactions and income from derivatives valuation.
Investment fee income increased $591 thousand or 5.8 percent.
Higher income occurred in mutual fund business, loan syndication
activity and brokerage commissions.
Mortgage fee income decreased $916 thousand or 20.8 percent.
The decline reflected lower mortgage loan production due to a
higher interest rate environment.
Remaining combined categories of total other operating revenue
rose $1.362 million or 4.1 percent. Insurance premiums and
commissions were up $1.844 million or 49.2 percent, and bankers'
acceptance and letter of credit fees increased $1.273 million or
21.6 percent. Other service charges and fees declined modestly,
and other income was lower by $1.667 million or 11.1 percent,
reflecting softer growth largely in capital markets fee income.
Including gains on investment securities sales, total
noninterest income for the first quarter increased $17.197 million
or 9.3 percent from a year earlier. Gains on investment securities
sales totaled $335 thousand in the first three months of 1997
compared with $698 thousand in the same period of 1996.
NONINTEREST INCOME TABLE 8
(thousands)
<TABLE>
<CAPTION>
1997 1996
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts....................... $ 63,942 $ 62,564 $ 62,278 $ 60,928 $ 56,598
Fees for trust services................................... 36,354 35,116 33,872 34,508 34,345
Credit card income -- net of interchange payments......... 35,694 35,679 37,089 33,848 32,522
Electronic banking........................................ 12,510 13,274 12,910 12,582 9,340
Investment fee income..................................... 10,820 11,262 10,145 10,842 10,229
Mortgage fee income....................................... 3,485 4,195 4,099 4,289 4,401
Trading account profits -- excluding interest............. 4,280 7,593 6,076 5,698 3,452
Insurance premiums and commissions........................ 5,592 4,584 4,666 4,032 3,748
Bankers' acceptance and letter of credit fees............. 7,171 6,656 6,684 6,109 5,898
Other service charges and fees............................ 8,502 7,641 8,373 7,985 8,590
Other income.............................................. 13,315 14,872 11,586 17,774 14,982
Total other operating revenue....................... 201,665 203,436 197,778 198,595 184,105
Investment securities gains (losses)...................... 335 2,864 393 (219) 698
Total............................................... $202,000 $206,300 $198,171 $198,376 $184,803
</TABLE>
17
<PAGE>
NONINTEREST EXPENSE
Total noninterest expense was up $15.891 million or 5.2
percent year over year. Growth was driven primarily by higher
personnel costs, largely salaries. Compared with the fourth
quarter of 1996, total noninterest expense grew $1.398 million or
under 1 percent, principally due to higher social security tax
payments in the first quarter. The corporation's overhead ratio
measuring noninterest expense as a percentage of total adjusted
revenues (taxable equivalent net interest income and total other
operating revenue) improved to 52.2 percent from 53.8 percent a
year earlier and compared with 51.7 percent in the preceding
quarter.
Total personnel expense grew $12.486 million or 7.7 percent.
Salaries expense rose $10.435 million or 7.9 percent, reflecting
increased employee headcount in growing business lines and in
salesforce personnel. At March 31, 1997, full-time equivalent
employees were 16,433 versus 16,191 one year earlier and 16,208 at
the end of the 1996 fourth quarter. Employee benefits expense was
up $2.051 million or 6.9 percent due to an increase in flexible
benefit costs and payroll taxes associated with a larger personnel
base.
Combined net occupancy and equipment expense was down a modest
$543 thousand or 1.1 percent. Net occupancy expense accounted for
substantially all the decrease as building maintenance and
renovation costs declined from the year-earlier quarter.
Remaining combined categories of noninterest expense rose
$3.948 million or 4.2 percent, due in large part to higher costs
for outside data processing, programming and software expense.
Included in this expense category are contract programming costs
for systems investments largely in support of corporate growth
initiatives.
The corporation anticipates spending between $40 million to
$50 million in 1997 for systems conversions related to making its
computer systems year 2000 compliant. The majority of this expense
will be incurred in the remaining three quarters of the year.
NONINTEREST EXPENSE TABLE 9
(thousands)
<TABLE>
<CAPTION>
1997 1996
First Fourth Third Second
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Salaries................................................... $142,255 $141,342 $137,627 $132,438
Employee benefits.......................................... 31,849 25,894 27,882 27,724
Total personnel expense.............................. 174,104 167,236 165,509 160,162
Net occupancy expense...................................... 22,193 21,559 23,161 22,184
Equipment expense.......................................... 28,873 29,032 28,844 28,054
Postage and delivery....................................... 10,483 9,813 9,973 9,780
Outside data processing, programming and software.......... 12,890 11,477 11,339 11,179
Stationery and supplies.................................... 6,203 6,131 6,012 6,951
Advertising and sales promotion............................ 13,648 13,289 14,442 15,502
Professional services...................................... 8,554 9,662 8,173 10,743
Travel and business promotion.............................. 5,321 5,959 4,929 5,335
Regulatory agency fees and other bank services............. 2,988 2,576 3,781 1,320
Amortization of intangible assets.......................... 1,063 1,091 1,095 1,098
Foreclosed property expense................................ (235) 225 (370) 175
Other expense.............................................. 38,051 44,688 39,591 37,604
Total................................................ $324,136 $322,738 $316,479 $310,087
Overhead ratio............................................. 52.2% 51.7% 51.6% 51.9%
<CAPTION>
1996
First
Quarter
<S> <C>
Salaries................................................... $131,820
Employee benefits.......................................... 29,798
Total personnel expense.............................. 161,618
Net occupancy expense...................................... 22,678
Equipment expense.......................................... 28,931
Postage and delivery....................................... 10,452
Outside data processing, programming and software.......... 10,704
Stationery and supplies.................................... 7,006
Advertising and sales promotion............................ 17,071
Professional services...................................... 9,707
Travel and business promotion.............................. 4,237
Regulatory agency fees and other bank services............. 1,053
Amortization of intangible assets.......................... 1,078
Foreclosed property expense................................ (126)
Other expense.............................................. 33,836
Total................................................ $308,245
Overhead ratio............................................. 53.8%
</TABLE>
18
<PAGE>
INCOME TAXES
Applicable income taxes for the quarter were up $2.484 million
or 3.6 percent. Income taxes computed at the statutory rate are
reduced primarily by the interest earned on state and municipal
loans and debt securities. 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. The tax-exempt nature of
these assets provides both an attractive return for the
corporation and substantial interest savings for local governments
and their constituents.
INCOME TAXES TABLE 10
(thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31 March 31
1997 1996
<S> <C> <C>
Income before income taxes................................................. $234,835 $219,139
Federal income taxes at statutory rate..................................... $ 82,192 $ 76,699
State and local income taxes -- net of
federal benefit.......................................................... 3,709 2,890
Effect of tax-exempt securities
interest and other income................................................ (11,322) (10,392)
Other items................................................................ (2,826) 72
Total tax expense..................................................... $ 71,753 $ 69,269
Currently payable:
Federal.................................................................. $ 52,798 $ 50,178
Foreign.................................................................. 59 96
State and local.......................................................... 1,878 2,205
Total................................................................. 54,735 52,479
Deferred:
Federal.................................................................. 13,194 14,566
State and local.......................................................... 3,824 2,224
Total................................................................. 17,018 16,790
Total tax expense..................................................... $ 71,753 $ 69,269
</TABLE>
19
<PAGE>
NEW ACCOUNTING STANDARDS
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, securitizations, and
servicing of receivables and other financial assets and
extinguishments of liabilities. FASB 125 is effective for
transactions occurring after December 31, 1996, except for the
provisions relating to repurchase agreements, securities lending
and other similar transactions and pledged collateral, which have
been delayed until after December 31, 1997 by FASB 127, "Deferral
of the Effective Date of Certain Provisions of FASB Statement No.
125, an amendment of FASB Statement No. 125." Adoption of FASB 125
was not material; FASB 127 will be adopted as required in 1998 and
is not expected to be material.
In February 1997, Statement of Financial Accounting Standards
No. 128, "Earnings per Share" (FASB 128), was issued and
establishes new standards for computing and presenting earnings
per share. FASB 128 is effective for the corporation's December
31, 1997 financial statements, including restatement of interim
periods; earlier application is not permitted. The effect of the
new standard will not be material.
FINANCIAL CONDITION AND CAPITAL RATIOS
Total assets at March 31, 1997 were $47.491 billion, including
$42.260 billion of interest-earning assets and $32.570 billion of
loans. Comparable amounts one year earlier were $45.425 billion of
assets, $40.527 billion of interest-earning assets and $29.869
billion of loans. At December 31, 1996, assets totaled $46.905
billion, interest-earning assets were $40.789 billion and loans
were $31.283 billion.
Deposits at the end of the first quarter of 1997 were $28.832
billion, including $22.340 billion of time deposits, representing
77.5 percent of the total. Deposits one year earlier were $25.909
billion with time deposits of $20.384 billion or 78.7 percent of
the total, and at December 31, 1996, deposits were $27.250
billion, including $21.135 billion of time deposits or 77.6
percent of the total.
Shareholders' equity at March 31, 1997 was $3.676 billion
compared with $3.729 billion one year earlier. The reduction in
shareholders' equity primarily reflected the impact of the
corporation's increased share repurchase activity. On January 24,
1997, the corporation was authorized by the board of directors to
repurchase up to 10 million additional shares of its common stock
replacing the most recent authorization approved on April 26, 1996
to repurchase up to 8 million shares. During the first quarter of
1997, the corporation repurchased a total of 2,665,100 shares of
its common stock at an average price of $60.273 per share for a
total cost of $160.634 million. This compared with a total of
1,955,700 shares that were repurchased in the same three months of
1996. Shareholders' equity at March 31, 1997 also included $8.170
million, net of tax, of unrealized gains on securities available-
for-sale marked to fair market value versus $57.338 million, net
of tax, one year earlier.
Intangible assets totaled $38.297 million at March 31, 1997,
consisting of $32.056 million in goodwill, $5.095 million in
deposit base intangibles, $401 thousand in purchased credit card
intangibles and $745 thousand in other intangibles. Comparable
amounts one year earlier were $38.015 million of total intangible
assets, with $29.099 million in goodwill, $6.559 million in
deposit base intangibles, $1.194 million in purchased credit card
intangibles and $1.163 million in other intangible assets.
Regulatory agencies divide capital into Tier I (consisting of
shareholders' equity and certain cumulative preferred stock
instruments 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 marking the securities portfolio to market value. 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.
20
<PAGE>
Regulatory guidelines require a minimum of total capital to
risk-adjusted assets ratio of 8 percent with at least one-half
consisting of tangible common shareholders' equity and a minimum
Tier I leverage ratio of 3 percent. Banks which meet or exceed a
Tier I ratio of 6 percent, a total capital ratio of 10 percent and
a Tier I leverage ratio of 5 percent are considered
well-capitalized by regulatory standards.
At March 31, 1997, the corporation's Tier I to risk-adjusted
assets ratio was 9.81 percent and total capital to risk-adjusted
assets was 13.40 percent. The Tier I leverage ratio was 9.22
percent. The capital ratios at first quarter-close 1997 included a
total of $600 million of trust capital securities issued in
December 1996 and January 1997. All of the corporation's banks are
well-capitalized.
CAPITAL COMPONENTS AND RATIOS TABLE 11
(thousands)
<TABLE>
<CAPTION>
1997 1996
First Fourth Third Second
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Tier I capital:
Common shareholders' equity......................... $ 3,676,080 $ 3,761,832 $ 3,729,194 $ 3,699,612
Trust capital securities............................ 596,578 300,000 -- --
Less ineligible intangible assets................... 32,056 32,474 32,893 33,312
Unrealized gains on securities
available-for-sale, net of tax.................... (8,170) (42,462) (32,924) (24,066)
Total Tier I capital............................ 4,232,432 3,986,896 3,663,377 3,642,234
Tier II capital:
Allowable allowance for loan losses................. 409,312 409,297 409,271 409,205
Allowable long-term debt............................ 1,138,138 1,138,041 1,198,177 1,198,837
Tier II capital additions....................... 1,547,450 1,547,338 1,607,448 1,608,042
Total capital................................... $ 5,779,882 $ 5,534,234 $ 5,270,825 $ 5,250,276
Risk-adjusted assets.................................. $43,126,886 $42,669,628 $41,047,310 $40,249,143
Quarterly average assets.............................. $45,983,826 $45,737,397 $45,777,699 $44,956,032
Risk-based capital ratios:
Tier I capital...................................... 9.81% 9.34% 8.92% 9.05%
Total capital....................................... 13.40 12.97 12.84 13.04
Tier I leverage ratio*................................ 9.22 8.73 8.01 8.12
Shareholders' equity to total assets.................. 7.74 8.02 7.85 8.03
<CAPTION>
1996
First
Quarter
<S> <C>
Tier I capital:
Common shareholders' equity......................... $ 3,729,349
Trust capital securities............................ --
Less ineligible intangible assets................... 29,099
Unrealized gains on securities
available-for-sale, net of tax.................... (57,338)
Total Tier I capital............................ 3,642,912
Tier II capital:
Allowable allowance for loan losses................. 408,928
Allowable long-term debt............................ 1,204,191
Tier II capital additions....................... 1,613,119
Total capital................................... $ 5,256,031
Risk-adjusted assets.................................. $38,803,497
Quarterly average assets.............................. $44,434,973
Risk-based capital ratios:
Tier I capital...................................... 9.39%
Total capital....................................... 13.55
Tier I leverage ratio*................................ 8.22
Shareholders' equity to total assets.................. 8.21
</TABLE>
*Ratio excludes the average unrealized gains (losses) on securities
available-for-sale, net of tax, of $37,350, $45,135, $24,358, $44,957 and
$114,386, respectively
21
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
March 31 December 31 March 31
$ IN THOUSANDS 1997 1996 1996
<S> <C> <C> <C>
ASSETS
Cash and due from banks..................................................... $ 3,001,027 $3,367,673 $ 2,661,486
Interest-bearing bank balances.............................................. 36,581 27,871 460,481
Federal funds sold and securities
purchased under resale agreements......................................... 126,055 179,426 398,560
Trading account assets...................................................... 1,056,922 1,185,688 856,077
Securities available-for-sale............................................... 7,144,175 6,760,486 7,407,370
Securities held-to-maturity (fair value of $1,377,812,
$1,423,555 and $1,615,807, respectively).................................. 1,325,556 1,352,091 1,535,660
Loans and net leases........................................................ 32,578,613 31,290,905 29,877,059
Less unearned income on loans............................................... 8,357 7,713 8,068
Total loans............................................................ 32,570,256 31,283,192 29,868,991
Less allowance for loan losses.............................................. 409,312 409,297 408,928
Net loans.............................................................. 32,160,944 30,873,895 29,460,063
Premises and equipment...................................................... 640,861 644,000 643,412
Due from customers on acceptances........................................... 631,242 957,109 707,239
Other assets................................................................ 1,367,786 1,556,276 1,294,767
Total assets........................................................... $47,491,149 $46,904,515 $45,425,115
LIABILITIES
Deposits in domestic offices:
Demand.................................................................... $ 6,491,504 $6,115,540 $ 5,522,490
Interest-bearing demand................................................... 3,350,544 3,462,952 3,352,894
Savings and money market savings.......................................... 8,611,879 8,337,329 7,451,042
Savings certificates...................................................... 6,421,058 6,436,437 6,418,985
Large denomination certificates........................................... 2,791,697 1,710,061 2,239,966
Noninterest-bearing time.................................................. 4,067 2,974 4,030
Total deposits in domestic offices..................................... 27,670,749 26,065,293 24,989,407
Deposits in foreign offices:
Demand.................................................................... -- -- 2,353
Time...................................................................... 1,160,977 1,184,829 916,803
Total deposits in foreign offices...................................... 1,160,977 1,184,829 919,156
Total deposits......................................................... 28,831,726 27,250,122 25,908,563
Federal funds purchased and securities
sold under repurchase agreements.......................................... 6,255,895 6,298,130 6,983,025
Commercial paper............................................................ 663,524 706,226 549,034
Other short-term borrowed funds............................................. 1,340,838 967,097 909,311
Long-term debt:
Bank notes................................................................ 3,065,344 4,307,802 4,823,147
Other long-term debt...................................................... 2,445,631 2,159,099 1,330,346
Total long-term debt................................................... 5,510,975 6,466,901 6,153,493
Acceptances outstanding..................................................... 631,242 957,109 707,239
Other liabilities........................................................... 580,869 497,098 485,101
Total liabilities...................................................... 43,815,069 43,142,683 41,695,766
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding............................ -- -- --
Common stock, par value $5 per share:
Issued 161,558,786, 163,844,198 and 168,968,164, respectively............. 807,794 819,221 844,841
Capital surplus............................................................. 301,854 424,873 656,050
Retained earnings........................................................... 2,558,262 2,475,276 2,171,120
Unrealized gains on securities available-for-sale, net of tax............... 8,170 42,462 57,338
Total shareholders' equity............................................. 3,676,080 3,761,832 3,729,349
Total liabilities and shareholders' equity............................. $47,491,149 $46,904,515 $45,425,115
</TABLE>
22
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31
$ IN THOUSANDS, EXCEPT PER SHARE 1997 1996
<S> <C> <C>
INTEREST INCOME
Loans.............................................................................................. $665,577 $608,285
Securities available-for-sale:
Other investments................................................................................ 115,081 119,274
Securities held-to-maturity:
State and municipal.............................................................................. 4,496 5,883
Other investments................................................................................ 22,072 25,499
Interest-bearing bank balances..................................................................... 360 9,018
Federal funds sold and securities
purchased under resale agreements................................................................ 2,203 3,250
Trading account assets............................................................................. 13,135 12,034
Total interest income....................................................................... 822,924 783,243
INTEREST EXPENSE
Deposits:
Domestic offices................................................................................. 214,763 208,750
Foreign offices.................................................................................. 17,357 13,101
Total interest on deposits.................................................................. 232,120 221,851
Short-term borrowed funds.......................................................................... 95,069 110,390
Long-term debt..................................................................................... 90,766 81,087
Total interest expense...................................................................... 417,955 413,328
NET INTEREST INCOME................................................................................ 404,969 369,915
Provision for loan losses.......................................................................... 47,998 27,334
Net interest income after provision for loan losses................................................ 356,971 342,581
OTHER INCOME
Service charges on deposit accounts................................................................ 63,942 56,598
Fees for trust services............................................................................ 36,354 34,345
Credit card income................................................................................. 35,694 32,522
Electronic banking................................................................................. 12,510 9,340
Investment fee income.............................................................................. 10,820 10,229
Mortgage fee income................................................................................ 3,485 4,401
Trading account profits............................................................................ 4,280 3,452
Other operating income............................................................................. 34,580 33,218
Total other operating revenue............................................................... 201,665 184,105
Investment securities gains........................................................................ 335 698
Total other income.......................................................................... 202,000 184,803
OTHER EXPENSE
Salaries........................................................................................... 142,255 131,820
Employee benefits.................................................................................. 31,849 29,798
Total personnel expense..................................................................... 174,104 161,618
Net occupancy expense.............................................................................. 22,193 22,678
Equipment expense.................................................................................. 28,873 28,931
Other operating expense............................................................................ 98,966 95,018
Total other expense......................................................................... 324,136 308,245
Income before income taxes......................................................................... 234,835 219,139
Applicable income taxes............................................................................ 71,753 69,269
NET INCOME......................................................................................... $163,082 $149,870
Net income per common share:
Primary.......................................................................................... $ .99 $ .87
Fully diluted.................................................................................... $ .99 $ .87
Average shares outstanding:
Primary.......................................................................................... 165,432 171,467
Fully diluted.................................................................................... 165,441 171,653
</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)
<S> <C> <C> <C> <C> <C>
PERIOD ENDED MARCH 31, 1996
Balance at beginning of year....................... 170,358,504 $851,793 $713,120 $2,092,731 $116,113
Net income......................................... 149,870
Cash dividends declared on common
stock -- $.36 a share............................ (61,089)
Common stock issued pursuant to:
Stock option and employee benefit plans.......... 320,441 1,602 17,091
Dividend reinvestment plan....................... 75,843 379 3,149
Conversion of debentures......................... 228,096 1,141 3,244
Common stock acquired.............................. (2,014,720) (10,074) (80,553)
Unrealized losses on securities
available-for-sale, net of tax................... (58,775)
Miscellaneous...................................... (1) (10,392)
Balance at end of period........................... 168,968,164 $844,841 $656,050 $2,171,120 $ 57,338
PERIOD ENDED MARCH 31, 1997
Balance at beginning of year....................... 163,844,198 $819,221 $424,873 $2,475,276 $ 42,462
Net income......................................... 163,082
Cash dividends declared on common
stock -- $.40 a share............................ (65,408)
Common stock issued pursuant to:
Stock option and employee benefit plans.......... 386,892 1,934 23,890
Dividend reinvestment plan....................... 58,328 292 3,231
Common stock acquired.............................. (2,730,632) (13,653) (150,818)
Unrealized losses on securities
available-for-sale, net of tax................... (34,292)
Miscellaneous...................................... 678 (14,688)
Balance at end of period........................... 161,558,786 $807,794 $301,854 $2,558,262 $ 8,170
</TABLE>
24
<PAGE>
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
$ IN THOUSANDS 1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................................... $ 163,082 $ 149,870
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses..................................................................... 47,998 27,334
Depreciation and amortization................................................................. 21,847 22,263
Deferred income taxes......................................................................... 17,018 16,790
Investment securities gains................................................................... (335) (698)
Gain on sale of noninterest-earning assets.................................................... (28) (448)
Increase in accrued income taxes.............................................................. 54,179 59,271
Increase in accrued interest receivable....................................................... (9,853) (6,378)
Increase (decrease) in accrued interest payable............................................... 50,300 (1,984)
Net change in other accrued and deferred income and expense................................... (54,246) (41,544)
Net trading account activities................................................................ 128,766 258,849
Net change in loans held for resale........................................................... (297,120) 5,436
Net cash provided by operating activities................................................... 121,608 488,761
INVESTING ACTIVITIES
Net increase in interest-bearing bank balances.................................................. (8,710) (9,202)
Net decrease (increase) in federal funds sold and securities
purchased under resale agreements............................................................. 53,371 (254,455)
Purchases of securities available-for-sale...................................................... (850,111) (405,217)
Purchases of securities held-to-maturity........................................................ (35,152) (505)
Sales of securities available-for-sale.......................................................... 123,163 790
Calls, maturities and prepayments of securities available-for-sale.............................. 278,167 310,636
Calls, maturities and prepayments of securities held-to-maturity................................ 62,719 85,792
Net increase in loans made to customers......................................................... (1,039,839) (641,194)
Capital expenditures............................................................................ (23,154) (40,297)
Proceeds from sales of premises and equipment................................................... 865 5,257
Net decrease (increase) in other assets......................................................... 252,500 (65,629)
Net cash used by investing activities....................................................... (1,186,181) (1,014,024)
FINANCING ACTIVITIES
Net increase in demand, savings and money market accounts....................................... 539,199 3,683
Net increase (decrease) in certificates of deposit.............................................. 1,042,405 (463,877)
Net (decrease) increase in federal funds purchased and securities
sold under repurchase agreements.............................................................. (42,235) 1,132,485
Net (decrease) increase in commercial paper..................................................... (42,702) 46,898
Net increase (decrease) in other short-term borrowings.......................................... 373,741 (811,281)
Proceeds from issuance of bank notes............................................................ -- 1,349,236
Maturities of bank notes........................................................................ (1,241,283) (614,328)
Proceeds from issuance of other long-term debt.................................................. 293,252 --
Payments on other long-term debt................................................................ (122) (106)
Common stock issued............................................................................. 9,583 7,799
Dividend payments............................................................................... (65,408) (61,089)
Common stock repurchased........................................................................ (161,155) (88,319)
Net decrease in other liabilities............................................................... (7,348) (6,670)
Net cash provided by financing activities................................................... 697,927 494,431
DECREASE IN CASH AND CASH EQUIVALENTS........................................................... (366,646) (30,832)
Cash and cash equivalents at beginning of year.................................................. 3,367,673 2,692,318
Cash and cash equivalents at end of period...................................................... $3,001,027 $2,661,486
SUPPLEMENTAL DISCLOSURES
Unrealized losses on securities available-for-sale:
Decrease in securities available-for-sale..................................................... $ (56,778) $ (95,566)
Increase in deferred taxes.................................................................... 22,486 36,791
Decrease in shareholders' equity.............................................................. (34,292) (58,775)
</TABLE>
25
<PAGE>
(WACHOVIA LOGO APPEARS HERE)
Wachovia Corporation Bulk Rate
P.O. Box 3099 U.S. POSTAGE PAID
Winston-Salem, NC 27150 WACHOVIA
CORPORATION
<PAGE>
BYLAWS
OF
WACHOVIA CORPORATION
Effective October 23, 1992
Amended through January 24, 1997
<PAGE>
TABLE OF CONTENTS TO BYLAWS
OF
WACHOVIA CORPORATION
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
MEETINGS OF SHAREHOLDERS........................................................................................ 1
Section 1.1. Place of Meeting................................................................ 1
Section 1.2. Annual Meeting.................................................................. 1
Section 1.3. Substitute Annual Meeting....................................................... 1
Section 1.4. Special Meetings................................................................ 1
Section 1.5. Notice of Meetings.............................................................. 1
Section 1.6. Quorum.......................................................................... 2
Section 1.7. Shareholders' List.............................................................. 2
Section 1.8. Voting of Shares................................................................ 2
Section 1.9. Conduct of Meeting and Order of Business........................................ 2
ARTICLE 2
BOARD OF DIRECTORS.............................................................................................. 3
Section 2.1. General Powers.................................................................. 3
Section 2.2. Number, Term, Qualification and Nomination...................................... 3
Section 2.3. Removal......................................................................... 4
Section 2.4. Vacancies....................................................................... 4
Section 2.5. Compensation.................................................................... 4
Section 2.6. Directors Emeritus.............................................................. 5
ARTICLE 3
MEETINGS OF DIRECTORS........................................................................................... 5
Section 3.1. Regular Meetings................................................................ 5
Section 3.2. Special Meetings................................................................ 5
Section 3.3. Notice of Meetings.............................................................. 5
Section 3.4. Quorum.......................................................................... 5
Section 3.5. Manner of Acting................................................................ 5
Section 3.6. Presumption of Assent........................................................... 6
Section 3.7. Action Without Meeting.......................................................... 6
Section 3.8. Meeting by Communications Device................................................ 6
ARTICLE 4
COMMITTEES...................................................................................................... 6
Section 4.1. Election and Powers............................................................. 6
Section 4.2. Removal; Vacancies.............................................................. 7
Section 4.3. Meetings........................................................................ 7
Section 4.4. Minutes......................................................................... 7
Section 4.5. Standing Committees............................................................. 7
i
<PAGE>
ARTICLE 5
OFFICERS........................................................................................................ 7
Section 5.1. Titles.......................................................................... 7
Section 5.2. Election; Appointment........................................................... 8
Section 5.3. Removal......................................................................... 8
Section 5.4. Vacancies....................................................................... 8
Section 5.5. Compensation.................................................................... 8
Section 5.6. Chief Executive Officer......................................................... 8
Section 5.7. Chairman of the Board of Directors.............................................. 9
Section 5.8. President....................................................................... 9
Section 5.9. Vice Chairmen.................................................................... 9
Section 5.10. Vice Presidents.................................................................. 9
Section 5.11. Secretary........................................................................ 9
Section 5.12. Assistant Secretaries............................................................ 9
Section 5.13. Voting Upon Stocks............................................................... 9
ARTICLE 6
CAPITAL STOCK................................................................................................... 10
Section 6.1. Certificates.................................................................... 10
Section 6.2. Transfer of Shares.............................................................. 10
Section 6.3. Transfer Agent and Registrar.................................................... 10
Section 6.4. Regulations..................................................................... 10
Section 6.5. Fixing Record Date.............................................................. 10
Section 6.6. Lost Certificates............................................................... 10
ARTICLE 7
INDEMNIFICATION OF DIRECTORS AND OFFICERS....................................................................... 11
Section 7.1. Indemnification Provisions...................................................... 11
Section 7.2. Definitions..................................................................... 11
Section 7.3. Settlements..................................................................... 11
Section 7.4. Litigation Expense Advances..................................................... 11
Section 7.5. Approval of Indemnification Payments............................................ 12
Section 7.6. Suits by Claimant............................................................... 13
Section 7.7. Consideration; Personal Representatives and Other Remedies...................... 13
Section 7.8. Scope of Indemnification Rights................................................. 13
ARTICLE 8
GENERAL PROVISIONS.............................................................................................. 13
Section 8.1. Dividends and other Distributions............................................... 14
Section 8.2. Seal............................................................................ 14
Section 8.3. Waiver of Notice................................................................ 14
Section 8.4. Checks.......................................................................... 14
Section 8.5. Fiscal Year..................................................................... 14
Section 8.6. Amendments...................................................................... 14
Section 8.7. Applicability of Antitakeover Statutes.......................................... 14
</TABLE>
ii
<PAGE>
BYLAWS
OF
WACHOVIA CORPORATION
ARTICLE 1
MEETINGS OF SHAREHOLDERS
Section 1.1. Place of Meeting. Meetings of shareholders shall
be held at the principal office of the corporation in Winston-Salem, North
Carolina or Atlanta, Georgia, or at such other place, either within or without
the States of Georgia, North Carolina and South Carolina, as shall be fixed by
the board of directors or the chief executive officer and designated in the
notice of the meeting.
Section 1.2. Annual Meeting. The annual meeting of
shareholders shall be held at 10:30 a.m. on the fourth Friday in April of each
year, if not a legal holiday, but if a legal holiday, then on the preceding
business day which is not a legal holiday, or at such other hour and date as the
board of directors, the chief executive officer or secretary may designate, for
the purpose of electing directors of the corporation and the transaction of such
other business as may be properly brought before the meeting.
Section 1.3. Substitute Annual Meeting. If the annual meeting
is not held on the day designated or provided for in these bylaws, a substitute
annual meeting may be called in accordance with Section 1.4. A meeting so called
shall be designated and treated for all purposes as the annual meeting.
Section 1.4. Special Meetings. Special meetings of the
shareholders may be called at any time by the chief executive officer or the
board of directors.
Section 1.5. Notice of Meetings. At least 10 and no more than
60 days prior to any annual or special meeting of shareholders, the corporation
shall notify shareholders of the date, time and place of the meeting and, in the
case of a special or substitute annual meeting or where otherwise required by
law, shall briefly describe the purpose or purposes of the meeting. Only
business within the purpose or purposes described in the notice may be conducted
at a special meeting. Unless otherwise required by law or by the articles of
incorporation (including, but not limited to, in the event of a meeting to
consider the adoption of a plan of merger or share exchange, a sale of assets
other than in the ordinary course of business or a voluntary dissolution), the
corporation shall be required to give notice only to shareholders entitled to
vote at the meeting. If an annual or special shareholders' meeting is adjourned
to a different date, time or place, notice thereof need not be given if the new
date, time or place is announced at the meeting before adjournment. If a new
record date for the adjourned meeting is fixed pursuant to Section 6.5 hereof,
notice of the adjourned meeting shall be given to persons who are shareholders
as of the new record date. It shall be the primary responsibility of the
secretary to give the notice, but notice may be given by or at the direction of
the chief executive officer or other person or persons calling the meeting. If
mailed, such notice shall be deemed to be effective when deposited in the United
States mail with postage thereon prepaid, correctly addressed to the
shareholder's address shown in the corporation's current record of shareholders.
<PAGE>
Section 1.6. Quorum. A majority of the votes entitled to be
cast by a voting group on a matter, represented in person or by proxy at a
meeting of shareholders, shall constitute a quorum for that voting group for any
action on that matter, unless the articles of incorporation provide otherwise or
other quorum requirements are fixed by law, including by a court of competent
jurisdiction acting pursuant to Section 55-7-03 of the General Statutes of North
Carolina. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and any adjournment
thereof, unless a new record date is or must be set for the adjournment. Action
may be taken by a voting group at any meeting at which a quorum of that voting
group is represented, regardless of whether action is taken at that meeting by
any other voting group. In the absence of a quorum at the opening of any meeting
of shareholders, such meeting may be adjourned from time to time, subject to
Section 6.5, by a vote of the majority of the shares voting on the motion to
adjourn.
Section 1.7. Shareholders' List. After a record date is fixed
for a meeting, the secretary of the corporation shall prepare an alphabetical
list of the names of all its shareholders who are entitled to notice of the
shareholders' meeting. Such list shall be arranged by voting group (and within
each voting group by class or series of shares) and shall show the address of
and number of shares held by each shareholder. The shareholders' list shall be
made available for inspection by any shareholder beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, at the corporation's principal office or at such
other place identified in the meeting notice in the city where the meeting will
be held. The corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
Section 1.8. Voting of Shares. Except as otherwise provided by
the articles of incorporation or by law, each outstanding share of voting
capital stock of the corporation shall be entitled to one vote on each matter
submitted to a vote at a meeting of the shareholders. Unless otherwise provided
in the articles of incorporation, cumulative voting for directors shall not be
allowed. Action on a matter by a voting group for which a quorum is present is
approved if the votes cast within the voting group favoring the action exceed
the votes cast opposing the action, unless the vote of a greater number is
required by law or by the articles of incorporation. Absent special
circumstances, the shares of the corporation are not entitled to vote if they
are owned, directly or indirectly, by a second corporation, domestic or foreign,
and the corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors of the second corporation, except that this
provision shall not limit the power of the corporation to vote shares held by it
in a fiduciary capacity.
Section 1.9. Conduct of Meeting and Order of Business. The
chairman of the board of directors shall act as chairman at all meetings of
shareholders and the secretary of the corporation or, in his absence, an
assistant secretary, shall act as secretary at all meetings of shareholders. The
chairman shall have the right and authority to determine and maintain the rules,
regulations and procedures for the proper conduct of the meeting, including but
not limited to restricting entry to the meeting after it has commenced,
maintaining order and the safety of those in attendance, opening and closing the
polls for voting, dismissing business not properly submitted, and limiting time
allowed for discussion of the business of the meeting.
Business to be conducted at meetings of shareholders shall be
limited to that properly submitted to the meeting either by or at the direction
of the board of directors or by any holder of voting securities of the
corporation who shall be entitled to vote at such meeting and who complies with
the
-2-
<PAGE>
notice requirements of applicable law or as otherwise set forth in the articles
of incorporation or the bylaws of the corporation. If the chairman of the
meeting shall determine that any business was not properly submitted, he shall
declare to the meeting that such business was not properly submitted and would
not be transacted at that meeting.
ARTICLE 2
BOARD OF DIRECTORS
Section 2.1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of directors.
Section 2.2. Number, Term, Qualification and Nomination. The
number of directors constituting the board of directors shall be not less than
nine nor more than 25 as may be fixed by resolution duly adopted by the board of
directors prior to the annual meeting at which such directors are to be elected
or by the shareholders, but in the absence of such resolution, the number of
directors elected at the meeting shall constitute the number of directors of the
corporation until the next annual meeting of shareholders.
The board of directors shall be divided into three classes as
equal in number as may be feasible, with the term of office of one class
expiring each year. The members of the initial board of directors shall be
divided into three classes as hereinafter provided, with directors of the first
class to hold office for a term expiring at the first annual meeting of
shareholders, directors of the second class to hold office for a term expiring
at the second annual meeting of shareholders and directors of the third class to
hold office for a term expiring at the third annual meeting of shareholders. At
each annual meeting of shareholders, successors to the directors whose terms
shall then expire shall be elected to hold office for terms expiring at the
third succeeding annual meeting. In case of any vacancies, by reason of an
increase in the number of directors or otherwise, each additional director may
be elected by the board of directors to hold office until the end of the term he
is elected to fill and until his successor shall have been elected and qualified
in the class to which such director is assigned and for the term or remainder of
the term of such class. Directors shall continue in office until others are
chosen and qualified in their stead. When the number of directors is changed,
any newly created directorships or any decrease in directorships shall be so
assigned among the classes by a majority of the directors then in office, though
less than a quorum, as to make all classes as equal in number as may be
feasible. No decrease in the number of directors shall shorten the term of any
incumbent director.
No person shall be elected a director nor shall continue to
serve an unexpired term as a director past the annual meeting of the corporation
if such person has, as of the date of the annual meeting, reached the age of 67
years. No person shall be elected as a director who has retired from active
participation in the person's principal business or from the active practice of
the person's principal profession; however, a director who retires from active
participation in his or her principal business or profession during the course
of an unexpired term as director may complete such unexpired term subject to the
above age 67 limitation. Notwithstanding the foregoing, a person who has served
for five or more years as Chief Executive Officer of the corporation may
complete, after retirement as an employee
-3-
<PAGE>
of the corporation, an unexpired term and may be elected and serve thereafter as
a director, provided, however, that such person's service as a director shall
not extend beyond the annual meeting of the corporation immediately following
the date on which he or she reaches 66 years of age. Each director nominee must
be the owner in his or her own right of shares of stock of the corporation
having a par value of not less than $1,000. Other qualifications which shall be
considered in the selection of director nominees are the extent of experience in
business, finance or management; the extent of knowledge in regional, national
or international business and finance; and the overall capacity to advise and
govern the corporation in fulfilling its mission and meeting its
responsibilities to shareholders, customers, employees and the public.
Nominations for election as a director by the board of
directors in connection with any annual meeting or substitute annual meeting of
shareholders shall include the chairman and the president if such person is not
then a director or if his term as a director will expire at such meeting.
Nominations for election as a director by a holder of any outstanding class of
shares of the corporation entitled to vote for the election of directors shall
specify the class of directors to which each person is nominated, be made in
writing and be delivered or mailed to the chief executive officer of the
corporation not less than 14 days or more than 50 days prior to any meeting of
shareholders called for the election of directors; provided, if less than 21
days' notice of the meeting is given to shareholders, such notification of
nomination shall be mailed or delivered to the chief executive officer of the
corporation not later than the close of business on the seventh day following
the day on which the notice of meeting was mailed. Such notification shall
contain the following information to the extent known by the notifying
shareholder: (a) the name, age and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the total number of shares
that will be voted for each proposed nominee; (d) the name and residence address
of the notifying shareholder; (e) the number of shares owned by the notifying
shareholder; and (f) a biographical profile of the individual with a statement
of his or her qualifications. Nominations not made in accordance herewith may be
disregarded by the chairman of the meeting in his discretion, and upon his
instructions the voting inspectors or tabulators may disregard all votes cast
for each such nominee.
Section 2.3. Removal. Any director may be removed from office
as a director, but only for cause, by the affirmative vote at a meeting called
as provided herein for that purpose, of at least 66- 2/3% in interest of the
holders of voting stock of the corporation issued and outstanding, including a
majority in interest of the holders of issued and outstanding voting stock of
the corporation held by persons other than any person who is an "Interested
Shareholder" as defined in paragraph (3) of Article X.D of the corporation's
articles of incorporation; provided, the notice of the shareholders' meeting at
which such action is to be taken states that a purpose of the meeting is removal
of the director and the number of votes cast to remove the director exceeds the
number of votes cast not to remove him.
Section 2.4. Vacancies. Except as otherwise provided in the
articles of incorporation or these bylaws, a vacancy occurring in the board of
directors, including, without limitation, a vacancy resulting from an increase
in the number of directors or from the failure by the shareholders to elect the
full authorized number of directors, may be filled by a majority of the
remaining directors or by the sole director remaining in office. The
shareholders may elect a director at any time to fill a vacancy not filled by
the directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
-4-
<PAGE>
Section 2.5. Compensation. The directors shall have authority
to vote themselves reasonable compensation for their services as directors. The
directors may provide for their own indemnification and for the indemnification
of others, in accordance with these bylaws or as otherwise authorized by law,
and the directors may authorize the purchase of insurance in connection
therewith. Any director may serve the corporation in any other capacity and
receive compensation therefor.
Section 2.6. Directors Emeritus. Upon retiring from the board
of directors, a director may be elected a director emeritus by the board of
directors. A director emeritus shall not have the right to vote and shall not be
charged with the responsibilities or be subject to the liabilities of directors.
A director emeritus may attend meetings of the board only upon invitation of the
directors.
ARTICLE 3
MEETINGS OF DIRECTORS
Section 3.1. Regular Meetings. Regular meetings of the board
of directors shall be held on the fourth Friday of January, April, July and
October of each year at the principal offices of the Company in Winston-Salem,
North Carolina or Atlanta, Georgia, unless the board of directors fixes some
other place or time for the holding of such meetings. If any date for which a
regular meeting is scheduled shall be a legal holiday, the meeting shall be held
on such other date as is designated in a notice of the meeting.
If possible, the directors, including directors-elect, shall
meet following each annual meeting of shareholders for the purpose of organizing
the board and electing officers for the succeeding year; provided, in any event
the new board shall be organized and officers elected no later than at the next
regular meeting of the directors.
Section 3.2. Special Meetings. Special meetings of the board
of directors may be called by or at the request of the chief executive officer
or any three directors. Such meetings may be held at the time and place
designated in the notice of the meeting.
Section 3.3. Notice of Meetings. Unless the articles of
incorporation provide otherwise, regular meetings of the board of directors held
on a date specified in or pursuant to the first sentence of Section 3.1 may be
held without notice of the date, time, place or purpose of the meeting. The
secretary giving notice of a regular meeting to be held on a date other than a
date specified in or pursuant to the first sentence of Section 3.1, and the
secretary or other person calling a special meeting, shall give notice by any
usual means of communication to be sent at least 24 hours before the meeting if
notice is sent by means of telephone, telecopy or personal delivery and at least
five days before the meeting if notice is sent by mail.
Section 3.4. Quorum. Except as otherwise provided in the
articles of incorporation, a majority of the directors in office shall
constitute a quorum for the transaction of business at a meeting of the board of
directors, provided a majority of the directors present are not also officers of
the corporation. Less than a quorum may adjourn any meeting from time to time,
and the meeting as adjourned may be held without further notice. In the event of
the death, disability or other absence of
-5-
<PAGE>
directors due to war or other catastrophe, reducing the number of directors able
to attend a meeting to less than that required for a quorum, a majority of the
remaining directors shall constitute a quorum.
Section 3.5. Manner of Acting. Except as otherwise provided in
the articles of incorporation, the affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors.
Section 3.6. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors at which
action on any corporate matter is taken is deemed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon
arrival) to holding, or transacting business at, the meeting, or unless his
dissent or abstention is entered in the minutes of the meeting or unless he
shall file written notice of his dissent or abstention to such action with the
presiding officer of the meeting before its adjournment or with the corporation
immediately after adjournment of the meeting. The right of dissent or abstention
shall not apply to a director who voted in favor of such action.
Section 3.7. Action Without Meeting. Unless otherwise provided
in the articles of incorporation, action required or permitted to be taken at a
meeting of the board of directors may be taken without a meeting if the action
is taken by all members of the board. The action must be evidenced by one or
more written consents signed by each director before or after such action,
describing the action taken, and included in the minutes or filed with the
corporate records. Action taken without a meeting is effective when the last
director signs the consent, unless the consent specifies a different effective
date.
Section 3.8. Meeting by Communications Device. Unless
otherwise provided in the articles of incorporation, the board of directors may
permit any or all directors to participate in a regular or special meeting by,
or conduct the meeting through the use of, any means of communication by which
all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE 4
COMMITTEES
Section 4.1. Election and Powers. Unless otherwise provided by
the articles of incorporation, a majority of the board of directors may create
one or more committees and appoint two or more directors to serve at the
pleasure of the board on each such committee. To the extent specified by the
board of directors or in the articles of incorporation or the bylaws, each
committee shall have and may exercise the powers of the board in the management
of the business and affairs of the corporation, except that no committee shall
have authority to do the following:
(a) Authorize distributions.
(b) Approve or propose to shareholders action required to be
approved by shareholders.
-6-
<PAGE>
(c) Fill vacancies on the board of directors or on any of its
committees.
(d) Amend the articles of incorporation.
(e) Adopt, amend or repeal the bylaws.
(f) Approve a plan of merger not requiring shareholder approval.
(g) Authorize or approve the reacquisition of shares, except
according to a formula or method prescribed by the board of
directors.
(h) Authorize or approve the issuance, sale or contract for sale
of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares,
except that the board of directors may authorize the executive
committee (or a senior executive officer of the corporation)
to do so within limits specifically prescribed by the board of
directors.
The board of directors or the chief executive officer may establish nonboard
committees composed of directors, employees or others to deal with corporate
powers not required to be exercised by the board of directors.
Section 4.2. Removal; Vacancies. Any member of a committee may
be removed at any time with or without cause, and vacancies in the membership of
a committee by means of death, resignation, disqualification or removal shall be
filled by a majority of the whole board of directors.
Section 4.3. Meetings. The provisions of Article 3 governing
meetings of the board of directors, action without meeting, notice, waiver of
notice and quorum and voting requirements shall apply to the committees of the
board and its members.
Section 4.4. Minutes. Each committee shall keep minutes of its
proceedings and shall report thereon to the board of directors at or before the
next meeting of the board.
Section 4.5. Standing Committees. The directors annually shall
appoint the chairman and members of and establish the charter, responsibilities
and authority of the following standing committees: Audit, Compliance, Corporate
Governance and Nominating, Credit, Executive, Finance, and Management Resources
and Compensation. Each committee shall consist entirely of directors. No active
or former officer or employee of the corporation shall serve on the Audit,
Compliance, Corporate Governance and Nominating, or Management Resources and
Compensation Committee.
-7-
<PAGE>
ARTICLE 5
OFFICERS
Section 5.1. Titles. The officers of the corporation shall be
a chief executive officer, a chairman of the board of directors, a president,
one or more vice presidents and a secretary and may include one or more vice
chairmen of the board of directors, one or more executive vice presidents, a
treasurer, a controller, a general auditor, one or more assistant secretaries,
one or more assistant treasurers, one or more assistant controllers, and such
other officers as shall be deemed necessary. The officers shall have the
authority and perform the duties as set forth herein or as from time to time may
be prescribed by the board of directors or by the chief executive officer (to
the extent that the chief executive officer is authorized by the board of
directors to prescribe the authority and duties of officers). Any two or more
offices may be held by the same individual, but no officer may act in more than
one capacity where action of two or more officers is required.
Section 5.2. Election; Appointment. The officers of the
corporation shall be elected from time to time by the board of directors or
appointed from time to time by the chief executive officer to the extent that
the chief executive officer is authorized by the board to appoint officers;
provided, the chief executive officer may from time to time elect one or more
assistant secretaries notwithstanding the absence of such authorization.
Section 5.3. Removal. Any officer may be removed by the board
at any time with or without cause whenever in its judgment the best interests of
the corporation will be served, but removal shall not itself affect the
officer's contract rights, if any, with the corporation.
Section 5.4. Vacancies. Vacancies among the officers may be
filled and new offices may be created and filled by the board of directors, or
by the chief executive officer to the extent authorized by the board.
Section 5.5. Compensation. Except as provided by Section 5.6,
the compensation of the officers shall be fixed by, or under the direction of,
the Compensation, Nominating and Organization Committee or by such person or
persons to whom authority to fix compensation has been delegated by the board or
such Committee.
Section 5.6. Chief Executive Officer. The chief executive
officer of the corporation shall be elected annually by the directors and may
hold either or both of the titles of chairman and president. The chief executive
officer shall have overall responsibility and authority for administering the
affairs of the corporation and of all its subsidiary banks and companies. He
shall exercise all of the powers customarily exercised by a chief executive
officer of any corporation by whatever name called unless expressly limited by
the directors. All officers of the corporation shall report to him to the extent
he may require.
In the interim between meetings of the directors or meetings
of the Executive Committee, the chief executive officer may make appointments
pro tem to any office below the level of executive vice president, either for
the purpose of filling a vacancy or increasing the number of officers, such
appointees pro tem to hold office until the next succeeding regular or special
meeting of the directors, who may in their discretion approve, confirm or revoke
any such appointments. The compensation of
-8-
<PAGE>
all agents and employees of the corporation other than senior officers shall be
fixed by the chief executive officer or by senior officers or committees
appointed by the chief executive officer. The compensation of all committee
members shall also be fixed by the chief executive officer. He shall have the
power to execute in the name and on behalf of the corporation, or to delegate
such power to others, all contracts or instruments of every character relating
to real or personal property without express authority of the directors unless
such authority is expressly limited by the directors.
It shall be the duty of the chief executive officer or his
designee to make a report of the corporation's performance and condition to the
shareholders at their annual meeting and to the directors at their regular
meetings including therein such recommendations as to the policy and conduct of
the business of the corporation as he may deem advisable. He shall be ex officio
a member of all committees of the board and shall preside at meetings of
shareholders; provided, that if the chief executive officer also has the title
of president, he may designate the chairman of the board to preside at meetings
of shareholders.
Section 5.7. Chairman of the Board of Directors. The chairman
of the board of directors shall preside at all meetings of the board of
directors. The chairman of the board may but need not be an employee of the
corporation. If not elected chief executive officer, the chairman shall have
such other authority and shall perform such other duties as may from time to
time be conferred upon him herein or by the directors or by the chief executive
officer, and in the event of the disability or death of the chief executive
officer or president, he shall perform the duties of the chief executive officer
or president unless and until a new chief executive officer or president is
elected by the directors.
Section 5.8. President. If not elected chief executive
officer, the president shall have such authority and shall perform such duties
as may from time to time be conferred upon him by the directors or by the chief
executive officer, and in the event of disability of the chief executive officer
or chairman, he shall perform the duties of the chief executive officer or
chairman unless and until the Compensation, Nominating and Organization
Committee shall appoint an acting chief executive officer or chairman or until a
new chief executive officer or chairman is elected by the directors.
Section 5.9. Vice Chairmen. Vice chairmen shall have such
authority and shall perform such duties as may from time to time be conferred
upon them by the directors or by the chief executive officer.
Section 5.10. Vice Presidents. Vice presidents may be
designated as senior executive vice presidents, executive vice presidents,
regional vice presidents, group vice presidents, senior vice presidents, first
vice presidents, vice presidents and assistant vice presidents. The board of
directors shall annually elect such number of each designation as it may deem
proper. Each category of vice presidents shall have such responsibilities and
duties as shall be specifically assigned to them by the directors or by the
chief executive officer.
Section 5.11. Secretary. The secretary shall act as secretary
at all meetings of the shareholders and at all meetings of the directors. He
shall issue notices for such meetings in accordance with the requirements of the
bylaws. He shall have custody of the corporate seal and, upon request of an
officer authorized by the board of directors to execute on behalf of the
corporation an instrument relating to real or personal property, shall attest
any such instrument and shall perform such other duties as from time to time
shall be assigned to him by the directors or by the chief executive officer.
-9-
<PAGE>
Section 5.12. Assistant Secretaries. Each assistant secretary,
if such officer is elected, shall have such powers and perform such duties as
may be assigned by the board of directors or the chief executive officer
(notwithstanding the absence of any authorization by the board of directors to
prescribe the authority and duties of officers), and the assistant secretaries
shall exercise the powers of the secretary during that officer's absence or
inability to act.
Section 5.13. Voting Upon Stocks. Unless otherwise ordered by
the board of directors, the chief executive officer (or such officer as the
chief executive officer shall designate) shall have full power and authority on
behalf of the corporation to attend, act and vote at meetings of the
shareholders of any corporation in which this corporation may hold stock, and at
such meetings shall possess and may exercise any and all rights and powers
incident to the ownership of such stock and which, as the owner, the corporation
might have possessed and exercised if present. The board of directors may by
resolution from time to time confer such power and authority upon any other
person or persons.
ARTICLE 6
CAPITAL STOCK
Section 6.1. Certificates. Shares of the capital stock of the
corporation shall be represented by certificates. The name and address of the
persons to whom shares of capital stock of the corporation are issued, with the
number of shares and date of issue, shall be entered on the stock transfer
records of the corporation. Certificates for shares of the capital stock of the
corporation shall be in such form not inconsistent with the articles of
incorporation of the corporation as shall be approved by the board of directors.
Each certificate shall be signed (either manually or by facsimile) by the chief
executive officer, the chairman or the president and by the secretary or an
assistant secretary. Each certificate may be sealed with the seal of the
corporation or a facsimile thereof.
Section 6.2. Transfer of Shares. Transfer of shares shall be
made on the stock transfer records of the corporation, and transfers shall be
made only upon surrender of the certificate for the shares sought to be
transferred by the recordholder or by a duly authorized agent, transferee or
legal representative. All certificates surrendered for transfer or reissue shall
be cancelled before new certificates for the shares shall be issued.
Section 6.3. Transfer Agent and Registrar. The board of
directors may appoint one or more transfer agents and one or more registrars of
transfers and may require all stock certificates to be signed or countersigned
by the transfer agent and registered by the registrar of transfers.
Section 6.4. Regulations. The board of directors may make
rules and regulations as it deems expedient concerning the issue, transfer and
registration of shares of capital stock of the corporation.
Section 6.5. Fixing Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or entitled to receive payment of any dividend, or in order to
make a determination of shareholders for any other purpose, the board of
directors or the chief executive officer may fix in advance a date as the record
date for the determination of
-10-
<PAGE>
shareholders. The record date shall be not more than 70 days before the meeting
or action requiring a determination of shareholders. A determination of
shareholders entitled to notice of or to vote at a shareholders' meeting shall
be effective for any adjournment of the meeting unless the board of directors
fixes a new record date, which it shall do if the meeting is adjourned to a date
more than 120 days after the date fixed for the original meeting. If no record
date is fixed for the determination of shareholders, the record date shall be
the day the notice of the meeting is mailed or the day the action requiring a
determination of shareholders is taken.
Section 6.6. Lost Certificates. The corporation must authorize
the issuance of a new certificate in place of a certificate claimed to have been
lost, destroyed or wrongfully taken, upon receipt of (a) an affidavit from the
person explaining the loss, destruction or wrongful taking, and (b) a bond from
the claimant in such sum and with such surety or other security and in such form
acceptable to the corporation as the corporation may reasonably direct to
indemnify the corporation against loss from any claim with respect to the
certificate claimed to have been lost, destroyed or wrongfully taken. The
corporation may, in its discretion, waive the affidavit and bond and authorize
the issuance of a new certificate in place of a certificate claimed to have been
lost, destroyed or wrongfully taken.
ARTICLE 7
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 7.1. Indemnification Provisions. Any person who at any
time serves or has served as a director, officer or employee of the corporation
or of any wholly owned subsidiary or affiliate of the corporation, or in such
capacity at the request of the corporation for any other foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or as a
trustee or administrator under any employee benefit plan of the corporation or
of any wholly owned subsidiary thereof (a "Claimant"), shall have the right to
be indemnified and held harmless by the corporation to the fullest extent from
time to time permitted by law against all liabilities and litigation expenses
(as hereinafter defined) in the event a claim shall be made or threatened
against that person in, or that person is made or threatened to be made a party
to, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, and whether or not brought by
or on behalf of the corporation, including all appeals therefrom (a
"proceeding"), seeking to hold the Claimant liable by reason of the fact that he
or she is or was serving in such capacity (whether the basis of such proceeding
is alleged action in such official capacity or in any other capacity while
serving in such official capacity); provided, such indemnification shall not be
effective with respect to (a) that portion of any liabilities or litigation
expenses with respect to which the Claimant is entitled to receive payment under
any insurance policy other than a directors' and officers' insurance policy
maintained by the Company or (b) any liabilities or litigation expenses incurred
on account of any of the Claimant's activities which were at the time taken
known or believed by the Claimant to be clearly in conflict with the best
interests of the corporation.
Section 7.2. Definitions. As used in this Article, (a)
"liabilities" shall include, without limitation, (1) payments in satisfaction of
any judgment, money decree, excise tax, fine or penalty for which the Claimant
had become liable in any proceeding and (2) payments in settlement of any such
proceeding subject, however, to Section 7.3; (b) "litigation expenses" shall
include, without limitation, (1) reasonable costs and expenses and attorneys'
fees and expenses actually and necessarily incurred by
-11-
<PAGE>
the Claimant in connection with any proceeding and (2) reasonable costs and
expenses and attorneys' fees and expenses in connection with the enforcement of
rights to the indemnification granted hereby or by applicable law, if such
enforcement is successful in whole or in part; and (c) "disinterested directors"
shall mean directors who are not party to the proceeding in question.
Section 7.3. Settlements. The corporation shall not be liable
to indemnify the Claimant for any amounts paid in settlement of any proceeding
effected without the corporation's written consent. The corporation will not
unreasonably withhold its consent to any proposed settlement.
Section 7.4. Litigation Expense Advances.
(a) Subject to the provisions of subsections (b) and (c)
below, any litigation expenses shall be advanced to any Claimant within 60 days
of receipt by the General Counsel or secretary of the corporation of a demand
therefor, together with an undertaking (in such form as the corporation may
prescribe from time to time) by or on behalf of the Claimant to repay to the
corporation such amount unless it is ultimately determined that the Claimant is
entitled to be indemnified by the corporation against such expenses. The
Claimant shall also forward to the General Counsel or secretary a statement as
to any insurance in effect of the type described in Section 7.1, together with
any information which the Claimant wishes to have considered in determining
whether the standards set forth below have been met. The General Counsel or
secretary shall promptly forward notice of the demand and undertaking
immediately to all directors of the corporation.
(b) In the event a demand for an advance of litigation
expenses is received from a Claimant who is or was a director or the chief
executive of the corporation, the General Counsel or secretary shall call a
meeting of a special committee (the "Special Committee"), the membership of
which shall include only disinterested directors, and such Special Committee
shall determine within 30 days thereafter, based upon the facts and information
then available to them, whether the Claimant's activities were at the time taken
known or believed by the Claimant to be clearly in conflict with the best
interests of the corporation. In making such determination, the Special
Committee shall consult with representatives of any insurance carrier having a
directors' and officers' liability policy in effect which covers the Claimant,
where such insurance has been purchased by the corporation. No such advance
shall be made if a majority of the Special Committee determines that the
litigation expenses have been incurred on account of activities which at the
time taken by such Claimant were known or believed by him to be clearly in
conflict with the best interests of the corporation. To the extent that any
Claimant shall be entitled to an advance under this Section, it shall be a
further condition to such advance that counsel selected by a Claimant be
approved by the corporation and to the extent deemed necessary by the
corporation the selection of such counsel shall also be approved by the carrier
of any directors' and officer's liability insurance then in effect. The
corporation also reserves the right, in the instance of multiple Claimants, to
require, if appropriate, the consolidation of the defense of Claimants with
counsel chosen by the corporation. No such advance of any particular items of
litigation expenses shall be made if a majority of the Special Committee
affirmatively determines that such particular items are unreasonable and/or
excessive. In any such case, the Special Committee must determine the
unreasonable or excessive amount, and the Company shall withhold advances of
expenses only in the dollar amount so determined as excessive and/or
unreasonable.
(c) In the discretion of the chief executive officer or his
designee, the Special Committee procedures set forth in Section 7.4(b) may be
deemed to apply to a demand for an advance
-12-
<PAGE>
of litigation expenses received from a Claimant not referred to in the first
sentence of Section 7.4(b) (including but not limited to a Claimant who is or
was an officer (other than the chief executive officer) or employee of the
corporation or a director, officer or employee of a subsidiary of the
corporation). Alternatively, the chief executive officer or his designee may
cause the Special Committee procedures set forth in subsection (b) to be waived
and, in lieu thereof, the chief executive officer or his designee may determine
whether the applicable standard of conduct required by Section 7.4(b) has been
met, whether the amount of such expenses is reasonable and the amount of such
expenses, if any, that are unreasonable or excessive and consequently are to be
withheld.
Section 7.5. Approval of Indemnification Payments. Except as
may be determined in an action brought pursuant to Section 7.6 below,
indemnification payments by the corporation for liabilities and litigation
expenses (or a termination of the undertaking required under Section 7.4 above
with respect to advanced expenses) may be made only following a determination
that the activities of the Claimant (if the Claimant is or was a director of the
corporation) were not of the kind described in Section 7.4(b), which
determination shall be made (a) by a majority of the disinterested directors (if
there are at least two such directors), or (b) if there are not two such
directors, or if a majority of the disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by a majority of the
shareholders or (d) in accordance with any other reasonable procedures
prescribed by the board of directors prior to the assertion of the claim for
which indemnification is sought. The reasonableness of amounts of settlements
and litigation expenses may be approved by a majority of the disinterested
members of the board of directors. If the Claimant is an officer or employee of
the corporation, the determination required by this paragraph may be made by the
chief executive officer of the corporation or his designee.
Section 7.6. Suits by Claimant. If a claim under Section 7.1
is not paid in full by the corporation within 60 days after a written claim has
been received by the corporation, or a demand for advances is not paid within 60
days of receipt by the corporation of such demand accompanied by an undertaking
as described in Section 7.4, the Claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim or demand. It
shall be a defense to any such action that the Claimant's liabilities or
litigation expenses were incurred on account of activities which were at the
time taken known or believed by the Claimant to be clearly in conflict with the
best interests of the corporation, or were unreasonable, but the burden of
proving such defense shall be on the corporation. Neither the failure of the
corporation (including its disinterested directors, independent legal counsel,
shareholders or the chief executive officer or his designee, if applicable) to
have made a determination prior to the commencement of such action that
indemnification of the Claimant is proper in the circumstances, nor an actual
determination by the corporation (including its disinterested directors,
independent legal counsel, shareholders or the chief executive officer or his
designee, if applicable) that the Claimant had not met such applicable standard
of conduct shall be a defense to the action or create a presumption that
Claimant has not met the applicable standard of conduct.
Section 7.7. Consideration; Personal Representatives and Other
Remedies. Any Claimant who during such time as this Article or corresponding
provisions of predecessor bylaws is or has been in effect serves or has served
in any of the capacities described in Section 7.1 shall be deemed to be doing so
or to have done so in reliance upon, and as consideration for, the right of
indemnification provided herein or therein. The right of indemnification
provided herein or therein shall inure to the benefit of the legal
representatives of any Claimant hereunder, and the right shall not be exclusive
of any other rights to which the Claimant or legal representative may be
entitled apart from this Article.
-13-
<PAGE>
Section 7.8. Scope of Indemnification Rights. The rights
granted herein shall not be limited by the provisions of Section 55-8-51 of the
General Statutes of North Carolina or any successor statute.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1. Dividends and other Distributions. The board of
directors may from time to time declare and the corporation may pay dividends or
make other distributions with respect to its outstanding shares in the manner
and upon the terms and conditions provided by law. If the board of directors
does not fix the record date for determining shareholders entitled to a
distribution, the record date shall be the date the board of directors
authorizes the distribution (other than a distribution involving a purchase,
redemption or other acquisition of the corporation's shares, for which no record
date is required to be fixed).
Section 8.2. Seal. The seal of the corporation shall be any
form approved from time to time or at any time by the board of directors.
Section 8.3. Waiver of Notice. Whenever notice is required to
be given to a shareholder, director or other person under the provisions of
these bylaws, the articles of incorporation or applicable law, a waiver in
writing signed by the person or persons entitled to the notice, whether before
or after the date and time stated in the notice, and delivered to the
corporation shall be equivalent to giving the notice.
Section 8.4. Checks. All checks, drafts or orders for the
payment of money shall be signed by the officer or officers or other individuals
that the board of directors or chief executive officer may from time to time
authorize.
Section 8.5. Fiscal Year. The fiscal year of the corporation
shall be the calendar year or such other period fixed by the board of directors.
Section 8.6. Amendments. Unless otherwise provided in the
articles of incorporation or a bylaw adopted by the shareholders or by law,
these bylaws may be amended or repealed by the board of directors, except that a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. These bylaws may be amended or repealed by the shareholders even
though the bylaws may also be amended or repealed by the board of directors. A
bylaw that fixes a greater quorum or voting requirement for the board of
directors may be amended or repealed (a) if originally adopted by the
shareholders, only by the shareholders, unless such bylaw as originally adopted
by the shareholders provides that such bylaw may be amended or repealed by the
board of directors or (b) if originally adopted by the board of directors,
either by the shareholders or by the board of directors. A bylaw that fixes a
greater quorum or voting requirement may not be adopted by the board of
directors by a vote less than a majority of the directors then in office and may
not itself be amended by a quorum or vote of the directors less than the quorum
or vote prescribed in such bylaw or prescribed by the shareholders.
-14-
<PAGE>
Section 8.7. Applicability of Antitakeover Statutes. The
provisions of Article 9 of the North Carolina Business Corporation Act, entitled
"Shareholder Protection Act," shall not be applicable to the corporation.
-15-
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of the 24th day of January,
1997, by and between WACHOVIA CORPORATION (the "Corporation") and
______________________ (the "Executive");
R E C I T A L S:
The Corporation desires to secure the services of the
Executive in its behalf or in behalf of one or more of its subsidiaries for
which the Executive may render services hereunder from time to time, in
accordance with the terms and conditions set forth herein. In addition, the
Corporation desires to provide the Executive with an incentive to remain in the
service of the Corporation or one or more of its subsidiaries by granting to the
Executive compensation security as set forth herein should his employment be
terminated by the Corporation without cause during the term of this Agreement.
NOW, THEREFORE, the Corporation and the Executive hereby
mutually agree as follows:
1. Employment. The Executive shall devote his working time
exclusively to the performance of such services for the Corporation or
one or more of its subsidiaries as may be assigned to him by the
Corporation from time to time, and shall perform such services
faithfully and to the best of his ability. Such services shall be
rendered in a senior management or executive capacity and shall be of a
type for which the Executive is suited by background and training. In
no event shall the nature of the services require the Executive to
relocate his residence from Winston-Salem, North Carolina, unless the
Executive shall agree to such relocation. References herein to services
rendered for the Corporation and compensation and benefits payable or
provided by the Corporation shall include services rendered for and
compensation and benefits payable or provided by any subsidiary of the
Corporation.
2. Term of Agreement. The term of this Agreement shall
commence on the date hereof and shall continue in effect until December
31, 1999; provided, however, that commencing on the first anniversary
of this Agreement, and each anniversary thereafter, the term of this
Agreement shall automatically be extended for one additional year
unless at least 90 days prior to any such anniversary date either party
shall notify the other in writing that it does not wish to extend the
term of this Agreement beyond the then applicable expiration date. In
no event, however, may the term of this Agreement extend beyond the
Executive's sixtieth birthday. References herein to the "term" of this
Agreement shall mean the original term plus any continuation as
provided in this Section 2. The "term" shall not be deemed to refer to
the Compensation Period described in Section 4.
<PAGE>
3. Termination of Employment by the Corporation. The
Corporation may terminate the employment of the Executive at any time
for any reason; provided, that except as set forth in Sections 6 and 7,
the Corporation will provide the Executive with Compensation
Continuance to the extent described in Section 4 if the Executive's
employment is involuntarily terminated. The Executive's employment
shall be deemed to be involuntarily terminated if he is terminated by
the Corporation for any reason other than for "cause" as defined in
Section 6, or if he voluntarily terminates employment within six months
after: (a) his base salary is reduced below its level in effect on the
date hereof without the Executive's consent, or (b) the Corporation
amends the Executive Retirement Agreement between the Corporation and
the Executive dated January 27, 1995 (the "Retirement Agreement"),
without the Executive's consent, and such amendment reduces benefits to
which the Executive would have been entitled had such amendment not
been made, or (c) the duties assigned to the Executive are not of the
status and type described in Section 1 and the Executive has not
consented thereto. The Executive shall be deemed to have consented to
any reduction described in (a) or (b), or assignment described in (c),
unless he shall object thereto in writing within thirty days after he
receives notice thereof.
4. Compensation Continuance. If the Executive's employment
hereunder is involuntarily terminated as described in Section 3, he
will be entitled to receive the cash compensation and benefits
described in (a), (b) and (c) below (herein, "Compensation
Continuance") for the period beginning with the date of such
involuntary termination and ending with the earlier of (i) the third
anniversary of the date of such termination, or (ii) the Normal
Retirement Date of the Executive as defined in the Retirement Agreement
(such period is referred to herein as the "Compensation Period"). The
duration of the Compensation Period shall not be affected by the fact
that the term of this Agreement otherwise would end before such Period
expires. The cash compensation and benefits are as follows:
(a) Cash Compensation. The amount of cash
compensation to be received monthly during the Compensation Period
shall equal one-twelfth of the sum of (i) the Executive's highest
annual rate of salary from the Corporation in effect during the
12-month period prior to his involuntary termination, plus (ii) an
amount equal to the average of the annual amounts, if any, awarded to
the Executive under the Corporation's Senior Management Incentive Plan
for the three consecutive calendar years next preceding the year of
such termination, plus (iii) the average of any annual contributions by
the Corporation (excluding participant contributions) in behalf of the
Executive under the Retirement Savings and Profit-Sharing Plan of
Wachovia Corporation and the Wachovia Corporation Retirement Savings
and Profit-Sharing Benefit Equalization Plan for the three consecutive
calendar years preceding the year of such termination. Each monthly
payment of such cash compensation shall have deducted therefrom all
payroll taxes and withholdings required by law.
-2-
<PAGE>
(b) Employee Benefits. During the Compensation Period
the Executive shall be carried on the payroll of the Corporation, and
shall be deemed to be continuing in the employment of the Corporation
for the purpose of applying and administering employee benefit plans of
the Corporation (other than any tax-qualified retirement plans) and
individual contracts between the Corporation and the Executive
providing supplemental or equalization payments or benefits with
respect to the Executive. The Executive shall participate in any
changes during the Compensation Period in benefit plans or programs
applicable generally to employees of the Corporation, or to a class of
employees which includes senior executives of the Corporation, but
shall not have any right or option to participate in any such plan or
program in which he was not a participant immediately prior to his
involuntary termination of employment. Any individual contract between
the Corporation and the Executive in effect at the time of his
involuntary termination of employment may be terminated or amended by
the Corporation to the extent permitted by the terms of such contract;
provided, that during the Compensation Period the Corporation shall
not, without the written consent of the Executive or except to the
extent required by law, make any amendment to or terminate any one or
more of the following individual contracts or plans as applied to the
Executive: (i) the Retirement Agreement; (ii) the Wachovia Corporation
Retirement Savings and Profit-Sharing Benefit Equalization Plan; and
(iii) the Wachovia Corporation Retirement Income Benefit Enhancement
Plan. The Corporation shall have no obligation to the Executive to make
any change or improvement in any such contract during the Compensation
Period even if the Corporation shall make changes or improvements
during such period in similar contracts, if any, with other senior
executives of the Corporation.
(c) Acceleration of Stock Options and Restricted
Awards. Immediately upon termination of the Executive's employment, all
options previously granted to the Executive and outstanding on the date
of termination to acquire shares of common stock of the Corporation
shall become fully vested and exercisable (or subject to surrender) in
full and all restricted awards shall be deemed to be earned in full;
provided, that restricted awards based upon performance criteria or a
combination of performance criteria and continued service shall be
deemed to be earned in accordance with the terms, conditions and
procedures of the plan or plans pursuant to which any such restricted
awards were granted.
In the event that the Executive shall engage in full-time employment
permitted hereunder for another employer or on a self-employed basis
during the Compensation Period, his employment with the Corporation
shall be deemed to have terminated for purposes of Section 4(b) as of
the date he begins such full-time employment, but the payments in
Section 4(a) shall continue for the remainder of the Compensation
Period and the rights under Section 4(c) shall be applicable, in each
case subject to the provisions of Section 7.
-3-
<PAGE>
5. Voluntary Termination of Employment by the Executive. The
Executive reserves the right to terminate his employment voluntarily at
any time for any reason following at least six months' notice to the
Corporation. If such notice shall be given, this Agreement shall
terminate as of the effective date of termination as set forth in such
notice (or the date six months from the date of receipt by the
Corporation of such notice, if no effective date shall be set forth
therein), unless sooner terminated as provided in Section 3, 6 or 8.
The Executive shall not be entitled to any form of Compensation
Continuance as a result of such voluntary termination.
6. Termination for Cause. This Agreement shall immediately be
terminated and neither party shall have any obligation hereunder
(including but not limited to any obligation on the part of the
Corporation to provide Compensation Continuance) if the Executive's
employment is terminated for "cause." Termination for cause shall occur
when termination results from the Executive's (a) criminal dishonesty,
(b) refusal to perform his duties hereunder on substantially a
full-time basis, (c) refusal to act in accordance with any specific
substantive instructions of the Board of Directors of the Corporation,
or (d) engaging in conduct which could be materially damaging to the
Corporation without a reasonable good faith belief that such conduct
was in the best interests of the Corporation. The determination of
whether a termination is for cause shall be made by the Management
Resources and Compensation Committee of the Board of Directors of the
Corporation (the "Committee"), and such determination shall be final
and conclusive on the Executive and all other persons affected thereby.
7. Executive's Obligations; Early Termination of Compensation
Period.
(a) During the Compensation Period, the Executive
shall provide consulting services to the Corporation at such time or
times as the Corporation shall reasonably request, subject to
appropriate notice and to reimbursement by the Corporation of all
reasonable travel and other expenses incurred and paid by the
Executive. In the event the Executive shall engage in full-time
employment permitted hereunder during the Compensation Period for
another employer or on a self-employed basis, his obligation to provide
the consulting services hereunder shall be limited by the requirements
of such employment.
(b) The Executive shall not disclose to any other
person any material information or trade secrets concerning the
Corporation or any of its subsidiaries at any time during or after the
Compensation Period. The Executive will at all times refrain from
taking any action or making any statements, written or oral, which are
intended to and do disparage the business, goodwill or reputation of
the Corporation or any of its subsidiaries, or their respective
directors, officers, executives or other employees, or which could
adversely affect the morale of employees of the Corporation or any
subsidiaries.
-4-
<PAGE>
(c) The Executive shall not, without the
Corporation's written consent, engage in competitive employment at any
time during the Compensation Period. The Executive shall be deemed to
engage in competitive employment if he shall render services as an
employee, officer, director, consultant or otherwise, for any employer
which conducts a principal business or enterprise that competes
directly with the Corporation or affiliate of the Corporation.
(d) In the event that the Executive shall refuse to
provide consulting services in accordance with paragraph (a), or shall
materially violate the terms and conditions of paragraph (b) or (c),
the Corporation may, at its election, terminate the Compensation Period
and Compensation Continuance to the Executive. The Corporation may also
initiate any form of legal action it may deem appropriate seeking
damages or injunctive relief with respect to any material violations of
paragraph (a), (b) or (c).
(e) The Committee shall be responsible for
determining whether the Executive shall have violated this Section 7,
and all such determinations shall be final and conclusive. Upon the
request of the Executive, the Committee will provide an advance opinion
as to whether a proposed activity would violate the provisions of
paragraph (c).
8. Death and Disability. In the event that, during the term of
this Agreement or during the Compensation Period, the Executive shall
die or shall become entitled to benefits under the Corporation's
Long-Term Disability Plan, this Agreement shall thereupon terminate and
neither the Executive nor any other person shall have any further
rights or benefits hereunder (including any rights to Compensation
Continuance).
9. Other Severance Benefits. Except as otherwise provided in
this Agreement, the Executive shall not be entitled to any form of
severance benefits, including benefits otherwise payable under any of
the Corporation's regular severance plans or policies, irrespective of
the circumstances of his termination of employment. The Executive
agrees that the payments and benefit provided hereunder, subject to the
terms and conditions hereof, shall be in full satisfaction of any
rights which he might otherwise have or claim by operation of law, by
implied contract or otherwise, except for rights which he may have
under employee benefit plans of the Corporation or individual written
contracts with the Corporation.
10. Change of Control.
(a) Notwithstanding any other provision of this
Agreement, the Executive will be entitled to receive the Compensation
Continuance described in Section 4 in the event the Executive
voluntarily terminates his employment during
-5-
<PAGE>
the period beginning on the date of a Change of Control (as defined in
Section 10(b) herein) and ending on the third anniversary of such date.
(b) For the purposes herein, a "Change of Control" shall be
deemed to have occurred on the earliest of the following dates:
(i) The date any entity or person shall have
become the beneficial owner of, or shall have obtained voting
control over, twenty-five percent or more of the outstanding
Common Stock of the Corporation;
(ii) The date the shareholders of the
Corporation approve a definitive agreement (A) to merge or
consolidate the Corporation with or into another corporation,
in which the Corporation is not the continuing or surviving
corporation or pursuant to which any shares of Common Stock of
the Corporation would be converted into cash, securities or
other property of another corporation, other than a merger of
the Corporation in which holders of Common Stock immediately
prior to the merger have the same proportionate ownership of
Common Stock of the surviving corporation immediately after
the merger as immediately before, or (B) to sell or otherwise
dispose of substantially all the assets of the Corporation; or
(iii) The date there shall have been a
change in a majority of the Board of Directors of the
Corporation within a twelve month period unless the nomination
for election by the Corporation's shareholders of each new
director was approved by the vote of two-thirds of the
directors then still in office who were in office at the
beginning of the twelve month period.
For the purposes herein, the term "person" shall mean any individual,
corporation, partnership, group, association or other person, as such
term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act, other than the Corporation, a subsidiary of the Corporation or any
employee benefit plan(s) sponsored or maintained by the Corporation or
any subsidiary thereof, and the term "beneficial owner" shall have the
meaning given the term in Rule 13d-3 under the Exchange Act.
(c) (i) In the event it shall be determined that any
payment, benefit or distribution (or combination thereof) by
the Corporation or one or more trusts established by the
Corporation for the benefit of its employees, to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement, or otherwise) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code of 1996, as amended (the "Code"), or any interest or
penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest
and penalties, hereinafter collectively referred to as the
"Excise Tax"), the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
-6-
<PAGE>
that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
(ii) Subject to the provisions of Section
10(c)(iii), all determinations required to be made under this
Section 10, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination,
shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting
Firm") which shall provide detailed supporting calculations
both to the Corporation and the Executive within fifteen
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by the Corporation. In the event that the Accounting Firm is
serving as accountant or auditor for an individual, entity or
group effecting the change in ownership or effective control
(within the meaning of Section 280G of the Code), the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Corporation. Any
Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Corporation to the Executive within five
days after the receipt of the Accounting Firm's determination.
If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall so indicate to the
Executive in writing. Any determination by the Accounting Firm
shall be binding upon the Corporation and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Corporation
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Corporation exhausts its remedies pursuant to Section
10(c)(iii) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or
for the benefit of the Executive.
(iii) The Executive shall notify the
Corporation in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the
Corporation of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten
-7-
<PAGE>
business days after the Executive is informed in writing of
such claim and shall apprise the Corporation of the nature of
such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Corporation (or such shorter period
ending on the date that any payment of taxes with respect to
such claim is due). If the Corporation notifies the Executive
in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(A) give the Corporation any
information reasonably requested by the Corporation relating
to such claim;
(B) take such action in connection
with contesting such claim as the Corporation shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the
Corporation;
(C) cooperate with the Corporation
in good faith in order to effectively contest such claim; and
(D) permit the Corporation to
participate in any proceedings relating to such claim;
provided, however, that the Corporation shall bear
and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this Section 10(c)(iii), the Corporation shall
control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more
appellate courts, as the Corporation shall determine;
provided, however, that if the Corporation directs the
Executive to pay such claim and sue for a refund, the
Corporation shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance;
-8-
<PAGE>
and provided, further, that if the Executive is required to
extend the statute of limitations to enable the Corporation to
contest such claim, the Executive may limit this extension
solely to such contested amount. The Corporation's control of
the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any
other taxing authority.
(iv) If, after the receipt by the
Executive of an amount advanced by the Corporation pursuant to
Section 10(c)(iii), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall
(subject to the Corporation's complying with the requirements
of Section 10(c)(iii)) promptly pay to the Corporation the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by Company
pursuant to Section 10(c)(iii), a determination is made that
the Executive shall not be entitled to any refund with respect
to such claim and the Corporation does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
11. Waiver of Claims. In consideration of the obligations of
the Corporation hereunder, the Executive unconditionally releases the
Corporation, its directors, officers, employees and shareholders, from
any and all claims, liabilities and obligations of any nature
pertaining to termination of the Executive's employment by the
Corporation, including but not limited to (a) any claims under federal,
state or local laws prohibiting discrimination, including without
limitation the Age Discrimination in Employment Act of 1967, as
amended, or (b) any claims growing out of any alleged legal
restrictions on the Corporation's right to terminate the Executive's
employment, such as any alleged implied contract of employment or
termination contrary to public policy. The Executive acknowledges that
he has been advised to consult with an attorney prior to signing this
Agreement, that he has had no less than twenty-one days to consider
this Agreement prior to the execution hereof, and that he may revoke
this Agreement at any time within seven days following the execution
hereof.
12. Notices. All notices hereunder shall be in writing and
deemed properly given if delivered by hand and receipted or if mailed
by registered mail, return receipt requested. Notices to the
Corporation shall be directed to the Secretary of the Corporation with
a copy directed to the Chairman of the Board of Directors of the
Corporation. Notices to the Executive shall be directed to his last
known address.
-9-
<PAGE>
13. Miscellaneous.
(a) The waiver, whether express or implied, by either
party of a violation of any of the provisions of this Agreement shall
not operate or be construed as a waiver of any subsequent violation of
any such provision.
(b) No right, benefit or interest hereunder shall be
subject to assignment, encumbrance, charge, pledge, hypothecation or
set off in respect of any claim, debt or obligation, or similar
process.
(c) This Agreement may not be amended, modified or
canceled except by written agreement of the parties.
(d) In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
(e) This Agreement shall be binding upon and inure to
the benefit of the Executive and the Corporation, and their respective
heirs, successors and assigns.
(f) No benefit or promise hereunder shall be secured
by any specific assets of the Corporation. The Executive shall have
only the rights of an unsecured general creditor of the Corporation in
seeking satisfaction of such benefits or promises.
(g) This Agreement shall be governed by the construed
in accordance with the laws of the State of North Carolina.
(h) This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters
covered hereby, and amends and supersedes any predecessor Employment
Agreement between the parties hereto.
-10
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or in
behalf of the parties hereto as of the date first above written.
WACHOVIA CORPORATION
By:
Donald R. Hughes
Chairman, Management Resources and
Compensation Committee
Attest:
Secretary
[Corporate Seal]
EXECUTIVE
(Seal)
-11-
<PAGE>
<PAGE>
WACHOVIA CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
March 31 December 31
(A) EXCLUDING INTEREST ON DEPOSITS 1997 1996
----------------- ----------------
<S> <C> <C>
Earnings:
Income before income taxes $234,835 $934,902
Less capitalized interest - -
Fixed charges 189,193 804,019
----------------- ----------------
Earnings as adjusted $424,028 $1,738,921
================= ================
Fixed charges:
Interest on purchased and other
short term borrowed funds $95,069 $431,094
Interest on long-term debt 90,766 359,946
Portion of rents representative of the
interest factor (1/3) of rental expense 3,358 12,979
----------------- ----------------
Fixed charges $189,193 $804,019
================= ================
Ratio of earnings to fixed charges 2.24X 2.16X
(B) INCLUDING INTEREST ON DEPOSITS:
Adjusted earnings from (A) above $424,028 $1,738,921
Add interest on deposits 232,120 881,562
----------------- ----------------
Earnings as adjusted $656,148 $2,620,483
================= ================
Fixed charges:
Fixed charges from (A) above $189,193 $804,019
Interest on deposits 232,120 881,562
----------------- ----------------
Adjusted fixed charges $421,313 $1,685,581
================= ================
Adjusted earnings to adjusted fixed 1.56X 1.55X
charges
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,001,027
<INT-BEARING-DEPOSITS> 36,581
<FED-FUNDS-SOLD> 126,055
<TRADING-ASSETS> 1,056,922
<INVESTMENTS-HELD-FOR-SALE> 7,144,175
<INVESTMENTS-CARRYING> 1,325,556
<INVESTMENTS-MARKET> 1,377,812
<LOANS> 32,570,256
<ALLOWANCE> 409,312
<TOTAL-ASSETS> 47,491,149
<DEPOSITS> 28,831,726
<SHORT-TERM> 8,260,257
<LIABILITIES-OTHER> 1,212,111
<LONG-TERM> 5,510,975
0
0
<COMMON> 807,794
<OTHER-SE> 2,868,286
<TOTAL-LIABILITIES-AND-EQUITY> 47,491,149
<INTEREST-LOAN> 665,577
<INTEREST-INVEST> 141,649
<INTEREST-OTHER> 15,698
<INTEREST-TOTAL> 822,924
<INTEREST-DEPOSIT> 232,120
<INTEREST-EXPENSE> 417,955
<INTEREST-INCOME-NET> 404,969
<LOAN-LOSSES> 47,998
<SECURITIES-GAINS> 335
<EXPENSE-OTHER> 324,136
<INCOME-PRETAX> 234,835
<INCOME-PRE-EXTRAORDINARY> 163,082
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,082
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
<YIELD-ACTUAL> 4.14
<LOANS-NON> 57,934
<LOANS-PAST> 54,717
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 409,297
<CHARGE-OFFS> 58,502
<RECOVERIES> 10,519
<ALLOWANCE-CLOSE> 409,312
<ALLOWANCE-DOMESTIC> 0<F1>
<ALLOWANCE-FOREIGN> 0<F1>
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Available at year end only.
</FN>
</TABLE>
