- ----------------
1998 Form 10-Q
- --------------------------------------------------------------------------------
United States Securities and Exchange Commission
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended June 30, 1998
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,
(336) 770-5000
191 Peachtree Street NE, Atlanta, Georgia, 30303, (404) 332-5000
Securities registered pursuant to Section 12(b) of the Act: Common Stock --
$5.00 par value, which is registered on the New York Stock Exchange.
As of June 30, 1998, Wachovia Corporation had 206,622,903 shares of common
stock outstanding.
Wachovia Corporation (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements for the past 90
days.
Documents Incorporated by Reference
- --------------------------------------------------------------------------------
Portions of the financial supplement for the quarter ended June 30, 1998 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 (SEC).
<TABLE>
<S> <C> <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 ................... 26
Consolidated Statements of Income ...................... 27
Consolidated Statements of Shareholders' Equity ........ 28
Consolidated Statements of Cash Flows .................. 29
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 4-25
Item 3 Quantitative and Qualitative
Disclosures About Market Risk .......................... 13-15
</TABLE>
<TABLE>
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Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on April 24, 1998, eight
directors were elected, the articles of incorporation were amended to
increase the number of authorized shares of Common Stock to be issued
and the appointment of Ernst & Young LLP as independent auditors for
1998 was ratified. The distribution of shareholders' votes was as
follows:
</TABLE>
<TABLE>
<S> <C> <C>
Shares
Voted Shares
in Favor Withheld
------------- ---------
Election of Directors
James F. Betts 170,511,674 1,601,548
John T. Casteen III 170,341,993 1,771,229
George R. Lewis 170,424,287 1,688,934
James S. Balloun 170,483,470 1,629,752
Peter C. Browning 170,396,817 1,716,404
Hayne Hipp 170,491,327 1,621,894
Lloyd U. Noland, III 170,521,645 1,591,576
Sherwood H. Smith, Jr. 170,509,406 1,603,815
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Approval of the Amendment to the Articles of Incorporation
Shares Voted in Favor 156,514,908
Shares Voted Against 14,077,799
Abstentions 1,514,951
Broker Nonvotes 5,563
Ratification of the Appointment of Independent Auditors
Shares Voted in Favor 170,881,814
Shares Voted Against 339,740
Abstentions 886,103
</TABLE>
Item 5 Other Information--None
Item 6 Exhibits and Reports on Form 8-K
Exhibits
2.1 Agreement and Plan of Merger, dated as of November 17, 1997, by and
between Wachovia Corporation, The American Bank of Hollywood and
Ameribank Bancshares, Inc. (Exhibit 2.1 to Report on Form 10-K of
Wachovia Corporation for the fiscal year ended December 31, 1997, File
No. 1-9021*)
3.1 Amended and Restated Articles of Incorporation of the registrant.
3.2 Bylaws of the registrant as amended (Exhibit 3.2 to Quarterly Report on
Form 10-Q of Wachovia Corporation for the quarter ended September 30,
1997, File No. 1-9021*).
4 Instruments defining the rights of security holders, including
indentures -- Wachovia Corporation hereby agrees to furnish to the
Commission, upon request, a copy of any instruments defining the rights
of security hoders that are not required to be filed.
4.1 Articles IV, VII, IX, X and XI of the registrant's Amended and Restated
Articles of Incorporation (Included in Exhibit 3.1 hereto).
4.2 Article 1, Section 1.8, and Article 6 of the registrant's Bylaws
(Included in Exhibit 3.2 hereto).
4.3 Indenture dated as of May 15, 1986 between South Carolina National
Corporation and Morgan Guaranty Trust Company of New York, as Trustee,
relating to $35,000,000 principal amount of 6 1/2% Convertible
Subordinated Debentures due in 2001 (Exhibit 28 to S-3 Registration
Statement of South Carolina National Corporation, File No. 33-7710*).
4.4 First Supplemental Indenture dated as of November 26, 1991 by and among
South Carolina National Corporation, Wachovia Corporation and Morgan
Guaranty Trust Company of New York, Trustee, amending the Indenture
described in Exhibit 4.3 hereto (Exhibit 4.10 to Report on Form 10-K of
Wachovia Corporation for the fiscal year ended December 31, 1991, File
No. 1-9021*).
4.5 Indenture dated as of March 15, 1991 between South Carolina National
Corporation and Bankers Trust Company, as Trustee, relating to certain
unsecured subordinated securities (Exhibit 4(a) to S-3 Registration
Statement of South Carolina National Corporation, File No. 33-39754*).
4.6 First Supplemental Indenture dated as of January 24, 1992 by and among
South Carolina National Corporation, Wachovia Corporation and Bankers
Trust Company, as Trustee, amending the Indenture described in Exhibit
4.5 hereto (Exhibit 4.12 to Report on Form 10-K of Wachovia Corporation
for the fiscal year ended December 31, 1991, File No.
1-9021*).
4.7 Indenture dated as of March 1, 1993 between Wachovia Corporation and
CoreStates Bank, National Association, as Trustee (now succeeded as
trustee by Chase Manhattan Trust Company, N.A.), relating to
subordinated debt securities (Exhibit 4 to S-3 (Shelf) Registration
Statement of Wachovia Corporation, File No. 333-06319*).
1
<PAGE>
4.8 Indenture dated as of August 15, 1996 between Wachovia Corporation and
The Chase Manhattan Bank, as Trustee, relating to senior securities
(Exhibit 4(a) of Post-Effective Amendment No. 1 to Form S-3 (Shelf)
Registration Statement of Wachovia Corporation, File No. 33-6280*).
4.9 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.)
4.10 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).
4.11 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).
4.12 Indenture between Central Fidelity Banks, Inc. and Chemical Bank, as
Trustee, relating to $150,000,000 principal amount of subordinated debt
securities (Exhibit 4.1 to Form 8-K of Central Fidelity Banks, Inc.,
dated November 18, 1992, File No. 0-8829).
4.13 Indenture between Central Fidelity Banks, Inc., Central Fidelity
Capital Trust I and The Bank of New York, as Trustee, relating to
$100,000,000 Floating Rate Junior Subordinated Debentures (Exhibit 4.1
to Form S-3 Registration Statement of Central Fidelity Banks, Inc.,
dated April 23, 1997, File No. 333-28917).
4.14 Amended and Restated Declaration of Trust of Central Fidelity Capital
Trust I (Exhibit 4.4 to Form S-3 Registration Statement of Central
Fidelity Banks, Inc., dated April 23, 1997, File No. 333-28917).
4.15 Form of New Guarantee Agreement for the benefit of the holders of the
Trust Securities (Exhibit 4.6 to Form S-3 Registration Statement of
Central Fidelity Banks, Inc., dated as of April 23, 1997, File No.
333-28917).
10.1 Deferred Compensation Plan of Wachovia Bank of North Carolina, N.A.
(Exhibit 10.1 to Report on Form 10-K of Wachovia Corporation for the
fiscal year ended December 31,1992, File No. 1-9021*).
10.2 1983 Amendment to Deferred Compensation Plan described in Exhibit 10.1
hereto (Exhibit 10.2 to Report on Form 10-K Wachovia Corporation for
the fiscal year ended December 31, 1992, File No. 1-9021*).
2
<PAGE>
10.3 1986 Amendment to Deferred Compensation Plan described in Exhibit 10.1
hereto (Exhibit 10.9 to Report on Form 10-K of First Wachovia
Corporation for the fiscal year ended December 31, 1986, File No.
1-9021*).
10.4 1986 Senior Management Stock Option Plan of Wachovia Corporation
(Exhibit 10.20 to Report on Form 10-K of First Wachovia Corporation for
the fiscal year ended December 31, 1986, File No. 1-9021*).
10.5 1987 Declaration of Amendment to 1986 Senior Management Stock Option
Plan described in Exhibit 10.4 hereto (Exhibit 10.21 to Report on Form
10-K of First Wachovia Corporation for the fiscal year ended December
31, 1986, File No. 1-9021*).
10.6 1996 Declaration of Amendment to 1986 Senior Management Stock Option
Plan as described in Exhibit 10.4 hereto (Exhibit 10.6 to Report on
Form 10-K of Wachovia Corporation for the fiscal year ended December
31, 1996, File No. 1-9021*).
10.7 Senior Management Incentive Plan of Wachovia Corporation as amended
through April 22, 1994 (Exhibit 10.2 to Quarterly Report on Form 10-Q
of Wachovia Corporation for the quarter ended March 31, 1994, File No.
1-9021*).
10.8 Retirement Savings and Profit-Sharing Benefit Equalization Plan of
Wachovia Corporation (Exhibit 10.3 to Quarterly Report on Form 10-Q of
Wachovia Corporation for the quarter ended June 30, 1995, File No.
1-9021*).
10.9 Form of Employment Agreement between Wachovia Corporation an L.M.
Baker, Jr., Robert S. McCoy, Jr., G. Joseph Prendergast and Walter E.
Leonard, Jr. (Exhibit 10 to Quarterly Report on Form 10-Q of Wachovia
Corporation for the quarter ended March 31, 1997, File No. 1-9021*).
10.10 Form of Employment Agreement between Wachovia Corporation and Hugh M.
Durden (Exhibit 10.12 to Report on Form 10-K of Wachovia Corporation
for the fiscal year ended December 31, 1996, File No. 1-9021*).
10.11 Agreement between Wachovia Corporation and Mr. John G. Medlin, Jr.
(Exhibit 10.16 to Report on Form 10-K of Wachovia Corporation for the
fiscal year ended December 31, 1993, File No. 1-9021*).
10.12 Amendment to Agreement between Wachovia Corporation and Mr. John G.
Medlin, Jr. described in Exhibit 10.11 hereto (Exhibit 10.4 to
Quarterly Report on Form 10-Q of Wachovia Corporation for the quarter
ended June 30, 1995, File No. 1-9021*).
10.13 Consulting Agreement and Contract between Wachovia Corporation and
Mr. John G. Medlin, Jr. as of April 24, 1998.
3
<PAGE>
10.14 Executive Retirement Agreement between Wachovia Corporation and Mr.
John G. Medlin, Jr. (Exhibit 10.18 to Report on Form 10-K of First
Wachovia Corporation for the fiscal year ended December 31, 1987, File
No. 1-9021*).
10.15 Amendment to Executive Retirement Agreement described in Exhibit 10.14
hereto (Exhibit 10.17 to Report on Form 10-K of Wachovia Corporation
for the fiscal year ended December 31, 1991, File No. 1-9021*).
10.16 Amendment to Executive Retirement Agreement described in Exhibit 10.14
hereto (Exhibit 10.3 to Quarterly Report on Form 10-Q of Wachovia
Corporation for the quarter ended September 30, 1993, File No.
1-9021*).
10.17 Amendment to Executive Retirement Agreement described in Exhibit 10.14
hereto (Exhibit 10.4 to Quarterly Report on Form 10-Q of Wachovia
Corporation for the quarter ended September 30, 1993, File No.
1-9021*).
10.18 Form of Executive Retirement Agreements between Wachovia Corporation
and Messrs. L.M. Baker, Jr., G. Joseph Prendergast, Walter E. Leonard,
Jr., and Hugh M. Durden, dated as of January 27, 1995 (Exhibit 10.1 to
Quarterly Report on Form 10-Q of Wachovia Corporation for the quarter
ended June 30, 1995, File No. 1-9021*).
10.19 Executive Retirement Agreement between Wachovia Corporation and Mr.
Robert S. McCoy, Jr. (Exhibit 10.2 to Quarterly Report on Form 10-Q of
Wachovia Corporation for the quarter ended June 30, 1995, File No.
1-9021*).
10.20 Amendment to Executive Retirement Agreements described in Exhibits
10.18 and 10.19 hereto (Exhibit 10.21 to Report on Form 10-K of
Wachovia Corporation for the fiscal year ended December 31, 1996, File
No. 1-9021*).
10.21 Senior Management and Director Stock Plan of Wachovia Corporation
(Exhibit 10 to Quarterly Report on Form 10-Q of First Wachovia
Corporation for the quarter ended March 31, 1989, File No. 1-9021*).
10.22 1990 Declaration of Amendment to Senior Management and Director Stock
Plan as described in Exhibit 10.21 hereto (Exhibit 10.17 to Report on
Form 10-K of First Wachovia Corporation for fiscal year ended December
31, 1989, File No. 1-9021*).
10.23 1996 Declaration of Amendment to Senior Management and Director Stock
Plan as described in Exhibit 10.21 hereto (Exhibit 10.24 to Report on
Form 10-K of Wachovia Corporation for fiscal year ended December 31,
1996, File No. 1-9021*).
10.24 Deferred Compensation Plan dated as of January 19, 1987, as amended
(Exhibit 10(c) to Report on Form 10-K of South Carolina National
Corporation for the fiscal year ended December 31, 1986, File No.
0-7042*).
4
<PAGE>
10.25 Amendment to Deferred Compensation Plan described in Exhibit 10.24
hereto (Exhibit 19(b) to Quarterly Report on Form 10-Q of South
Carolina National Corporation for the quarter ended September 30, 1987,
File No. 0-7042*).
10.26 Amendment to Deferred Compensation Plan described in Exhibit 10.24
hereto (Exhibit 10(d) to Report on Form 10-K of South Carolina National
Corporation for the fiscal year ended December 31, 1988, File No.
0-7042*).
10.27 Amendment to Deferred Compensation Plan described in Exhibit 10.24
hereto (Exhibit 10.35 to Report on Form 10-K of Wachovia Corporation
for the fiscal year ended December 31, 1993, File No. 1-9021*).
10.28 Amended and Restated Wachovia Corporation Stock Plan (Exhibit 4.1 to
S-8 Registration Statement No. 033-53325*).
10.29 Wachovia Corporation Director Deferred Stock Unit Plan (Exhibit 10.37
to Report on Form 10-K of Wachovia Corporation for the fiscal year
ended December 31, 1996, File No. 1-9021*).
10.30 Wachovia Corporation Incentive Plan Deferral Arrangement (Exhibit 10.35
to Report on Form 10-K of Wachovia Corporation for the fiscal year
ended December 31, 1995, File No. 1-9021*).
10.31 Wachovia Corporation Executive Insurance Plan (Exhibit 10.36 to Report
on Form 10-K of Wachovia Corporation for the fiscal year ended December
31, 1995, File No. 1-9021*).
10.32 Executive Long Term Disability Income Plan. (Exhibit 10.34 to Report on
Form 10-K of Wachovia Corporation for the fiscal year ended December
31, 1997, File No. 1-9021*)
11 Computation of Earnings Per Common Share (Table 2 on page 6 of the
second quarter 1998 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 second quarter of 1998 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).
* Incorporated by reference.
Reports on Form 8-K -- No reports on Form 8-K were filed during the three months
ended June 30, 1998.
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
<TABLE>
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August 12, 1998 ROBERT S. McCOY, JR. August 12, 1998 DONALD K. TRUSLOW
----------------------------- ------------------
Robert S. McCoy, Jr. Donald K. Truslow
Executive Vice President Comptroller
and Chief Financial Officer
</TABLE>
5
<PAGE>
(Wachovia Logo appears here)
Financial Supplement
And Form 10-Q
Second Quarter 1998
<PAGE>
- ------------------------
Directors and Officers
- --------------------------------------------------------------------------------
Directors of Wachovia Corporation and Wachovia Bank, N.A.
L.M. Baker, Jr.
Chairman, President and
Chief Executive Officer
James S. Balloun
Chairman, President and
Chief Executive Officer
National Service Industries, Inc.
James F. Betts
Consultant and
Former President
USLIFE Corporation
Peter C. Browning
President and
Chief Executive Officer
Sonoco Products Company
John T. Casteen III
President
University of Virginia
John L. Clendenin
Chairman Emeritus
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 A. Ingram
Chief Executive Officer
Glaxo Wellcome plc
Chairman, Chief Executive
Officer and President
Glaxo Wellcome Inc.
George R. Lewis
President and
Chief Executive Officer
Philip Morris Capital Corporation
John G. Medlin, Jr.
Chairman Emeritus
Lloyd U. Noland, III
Chairman, President and
Chief Executive Officer
Noland 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 of Wachovia Corporation
L.M. Baker, Jr.
Chairman, President and
Chief Executive Officer
Mickey W. Dry
Senior Executive Vice President
Chief Credit Officer
Walter E. Leonard, Jr.
Senior Executive Vice President
Operations/Technology
Kenneth W. McAllister
Senior Executive Vice President
General Counsel/Administrative Services
Robert S. McCoy, Jr.
Senior Executive Vice President
Chief Financial Officer
G. Joseph Prendergast
Senior Executive Vice President
General Banking
2
<PAGE>
- --------------------------
Selected Period-End Data
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
June 30 June 30
1998 1997
------- -------
Banking offices:
North Carolina ............................... 199 202
Virginia ..................................... 264 243
Georgia ...................................... 132 121
South Carolina ............................... 122 128
Florida ...................................... 39 ----
------- --------
Total ....................................... 756 694
======= ========
Automated banking machines:
North Carolina ............................... 445 386
Virginia ..................................... 308 237
Georgia ...................................... 299 246
South Carolina ............................... 282 251
Florida ...................................... 30 ----
------- --------
Total ....................................... 1,364 1,120
======= ========
Employees (full-time equivalent) .............. 21,146 20,509
Common stock shareholders of record ........... 54,825 47,510
Common shares outstanding (thousands) ......... 206,623 195,276
</TABLE>
- --------------------------------
Common Stock Data -- Per Share
- --------------------------------------------------------------------------------
<TABLE>
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1998
----------------------
Second First
Quarter Quarter
-------- --------
Market value: (1)
Period-end ........................................................... $ 84.50 $ 84.81
High ................................................................. 90.19 85.75
Low .................................................................. 77.38 72.75
Book value at period-end (2) .......................................... 26.02 25.40
Dividend (1) .......................................................... .44 .44
Price/earnings ratio (1) (3) .......................................... 28.6x 28.9x
Price/earnings ratio without nonrecurring items (1), (3), (4) ......... 20.4 21.0
<S> <C> <C> <C>
1997
----------------------------------
Fourth Third Second
Quarter Quarter Quarter
---------- --------- --------
Market value: (1)
Period-end ........................................................... $ 81.13 $ 72.00 $ 58.31
High ................................................................. 83.94 72.38 66.88
Low .................................................................. 71.06 58.19 53.50
Book value at period-end (2) .......................................... 25.13 23.31 23.07
Dividend (1) .......................................................... .44 .44 .40
Price/earnings ratio (1) (3) .......................................... 27.6x 17.7x 14.5x
Price/earnings ratio without nonrecurring items (1), (3), (4) ......... 20.5 17.7 14.5
</TABLE>
(1) Information before the 1997 fourth quarter represents that of Wachovia
Corporation prior to merger with Central Fidelity Banks, Inc.
(2) Book value per share has been restated to reflect the merger with Central
Fidelity Banks, Inc., as a pooling-of-interests.
(3) Based on the most recent twelve months of net income per diluted share and
end of period stock price.
(4) Excludes the after-tax impact of nonrecurring charges as described in notes
(1), (2) and (3) of Table 1.
- -----------------------
Financial Information
- --------------------------------------------------------------------------------
Wachovia Shareholder Direct
Shareholders and other interested individuals can access timely corporate
information on Wachovia, such as earnings and dividend announcements, by
calling 1-888-4WB-NEWS (1-888-492-6397).
<TABLE>
<CAPTION>
Investor Contact Internet Address
<S> <C> <C>
Robert S. McCoy, Jr. James C. Mabry Wachovia's Internet address is: www.wachovia.com
Chief Financial Officer Senior Vice President
(336) 732-5926 Investor Relations
Winston-Salem, NC 27150 (336) 732-5788
Winston-Salem, NC 27150
</TABLE>
3
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
- ---------------------------
Financial Summary Table 1
- --------------------------------------------------------------------------------
<TABLE>
Twelve 1998 1997
Months ----------------------------- -----------
Ended
June 30 Second First Fourth
1998 Quarter Quarter Quarter
----------- ------------- ----------- -----------
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Summary of Operations
(thousands, except per share data)
Interest income .................................. $4,510,125 $ 1,169,758 $ 1,147,829 $1,119,617
Interest expense ................................. 2,279,162 587,054 578,686 564,145
----------- ------------- ----------- ------------
Net interest income .............................. 2,230,963 582,704 569,143 555,472
Provision for loan losses (1) .................... 282,238 68,441 74,126 76,915
----------- ------------- ----------- ------------
Net interest income after provision for loan
losses .......................................... 1,948,725 514,263 495,017 478,557
Other operating revenue .......................... 1,118,071 315,043 283,723 263,258
Securities gains (losses) (2) .................... 5,547 2,992 3,157 (1,693)
----------- ------------- ----------- ------------
Total other income ............................... 1,123,618 318,035 286,880 261,565
Personnel expense ................................ 996,732 262,406 259,724 244,250
Nonrecurring charges (3) ......................... 353,949 30,849 35,568 287,532
Other expense .................................... 818,281 223,739 198,957 200,636
----------- ------------- ----------- ------------
Total other expense .............................. 2,168,962 516,994 494,249 732,418
Income before income taxes ....................... 903,381 315,304 287,648 7,704
Applicable income taxes .......................... 295,618 105,388 92,327 4,100
----------- ------------- ----------- ------------
Net income ....................................... $ 607,763 $ 209,916 $ 195,321 $ 3,604
=========== ============= =========== ============
Net income per common share:
Basic ........................................... $ 3.01 $ 1.02 $ .95 $ .02
Diluted ......................................... $ 2.95 $ 1.00 $ .93 $ .02
Cash dividends paid per common share (4).......... $ 1.76 $ .44 $ .44 $ .44
Cash dividends paid on common stock (5)........... $ 352,559 $ 90,973 $ 90,589 $ 87,045
Cash dividend payout ratio (5) ................... 58.01% 43.34% 46.38% 2,415.23%
Average basic shares outstanding ................. 202,220 206,718 205,894 201,415
Average diluted shares outstanding ............... 206,294 210,662 210,158 205,934
Selected Average Balances
(millions)
Total assets ..................................... $ 60,997 $ 63,916 $ 63,133 $ 59,835
Loans -- net of unearned income .................. 42,293 43,974 43,749 41,770
Securities ....................................... 10,624 11,102 10,623 10,126
Other interest-earning assets .................... 1,570 1,558 1,630 1,637
Total interest-earning assets .................... 54,487 56,634 56,002 53,533
Interest-bearing deposits ........................ 31,150 32,182 32,455 30,706
Short-term borrowed funds ........................ 10,044 10,947 10,635 9,444
Long-term debt ................................... 6,041 6,092 6,107 5,935
Total interest-bearing liabilities ............... 47,235 49,221 49,197 46,085
Noninterest-bearing deposits ..................... 7,376 7,939 7,240 7,484
Total deposits ................................... 38,526 40,121 39,695 38,190
Shareholders' equity ............................. 4,897 5,211 5,109 4,884
Ratios (averages)
Annualized net loan losses to loans .............. .66% .62% .68% .73%
Annualized net yield on interest-earning
assets .......................................... 4.19 4.21 4.21 4.21
Shareholders' equity to:
Total assets .................................... 8.03 8.15 8.09 8.16
Net loans ....................................... 11.73 12.00 11.82 11.85
Annualized return on assets ...................... 1.00 1.31 1.24 .02
Annualized return on shareholders' equity......... 12.41 16.11 15.29 .30
Net Income and Ratios Excluding
the After-Tax Effect of
Nonrecurring Items Described
in (1), (2) and (3) (thousands,
except per share data)
Net income ....................................... $ 858,093 $ 230,276 $ 218,168 $ 210,727
Net income per diluted share ..................... $ 4.15 $ 1.09 $ 1.04 $ 1.02
Annualized return on assets ...................... 1.41% 1.44% 1.38% 1.41%
Annualized return on shareholders' equity......... 17.52 17.68 17.08 17.26
Cash dividend payout ratio (5) ................... 41.09 39.51 41.52 41.31
<CAPTION>
Six Months Ended
1997 June 30
--------------------------- -----------------------------
Third Second
Quarter Quarter 1998 1997
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Summary of Operations
(thousands, except per share data)
Interest income .................................. $ 1,072,921 $ 1,051,622 $ 2,317,587 $ 2,069,847
Interest expense ................................. 549,277 539,423 1,165,740 1,055,396
----------- ----------- ------------- -----------
Net interest income .............................. 523,644 512,199 1,151,847 1,014,451
Provision for loan losses (1) .................... 62,756 63,047 142,567 125,278
----------- ----------- ------------- -----------
Net interest income after provision for loan
losses .......................................... 460,888 449,152 1,009,280 889,173
Other operating revenue .......................... 256,047 259,594 598,766 486,463
Securities gains (losses) (2) .................... 1,091 498 6,149 2,056
----------- ----------- ------------- -----------
Total other income ............................... 257,138 260,092 604,915 488,519
Personnel expense ................................ 230,352 218,916 522,130 430,555
Nonrecurring charges (3) ......................... ---- ---- 66,417 ----
Other expense .................................... 194,949 201,485 422,696 378,447
----------- ----------- ------------- -----------
Total other expense .............................. 425,301 420,401 1,011,243 809,002
Income before income taxes ....................... 292,725 288,843 602,952 568,690
Applicable income taxes .......................... 93,803 92,038 197,715 178,410
----------- ----------- ------------- -----------
Net income ....................................... $ 198,922 $ 196,805 $ 405,237 $ 390,280
=========== =========== ============= ===========
Net income per common share:
Basic ........................................... $ 1.02 $ 1.00 $ 1.96 $ 1.97
Diluted ......................................... $ 1.00 $ .98 $ 1.93 $ 1.94
Cash dividends paid per common share (4).......... $ .44 $ .40 $ .88 $ .80
Cash dividends paid on common stock (5)........... $ 83,952 $ 78,001 $ 181,562 $ 156,306
Cash dividend payout ratio (5) ................... 42.20% 39.63% 44.80% 40.05%
Average basic shares outstanding ................. 194,981 196,676 206,308 198,384
Average diluted shares outstanding ............... 198,555 199,819 210,412 201,553
Selected Average Balances
(millions)
Total assets ..................................... $ 57,183 $ 57,044 $ 63,527 $ 56,690
Loans -- net of unearned income .................. 39,731 39,100 43,862 38,664
Securities ....................................... 10,649 11,102 10,864 11,205
Other interest-earning assets .................... 1,457 1,370 1,594 1,344
Total interest-earning assets .................... 51,837 51,572 56,320 51,213
Interest-bearing deposits ........................ 29,300 29,450 32,318 29,155
Short-term borrowed funds ........................ 9,172 8,917 10,795 8,661
Long-term debt ................................... 6,031 6,063 6,100 6,263
Total interest-bearing liabilities ............... 44,503 44,430 49,213 44,079
Noninterest-bearing deposits ..................... 6,843 6,789 7,591 6,701
Total deposits ................................... 36,143 36,239 39,909 35,856
Shareholders' equity ............................. 4,391 4,376 5,160 4,427
Ratios (averages)
Annualized net loan losses to loans .............. .63% .64% .65% .65%
Annualized net yield on interest-earning
assets .......................................... 4.12 4.10 4.21 4.12
Shareholders' equity to:
Total assets .................................... 7.68 7.67 8.12 7.81
Net loans ....................................... 11.20 11.34 11.91 11.60
Annualized return on assets ...................... 1.39 1.38 1.28 1.38
Annualized return on shareholders' equity......... 18.12 17.99 15.71 17.63
Net Income and Ratios Excluding
the After-Tax Effect of
Nonrecurring Items Described
in (1), (2) and (3) (thousands,
except per share data)
Net income ....................................... $ 198,922 $ 196,805 $ 448,444 $ 390,280
Net income per diluted share ..................... $ 1.00 $ .98 $ 2.13 $ 1.94
Annualized return on assets ...................... 1.39% 1.38% 1.41% 1.38%
Annualized return on shareholders' equity......... 18.12 17.99 17.38 17.63
Cash dividend payout ratio (5) ................... 42.20 39.63 40.49 40.05
</TABLE>
(1) Includes $10,845 in nonrecurring merger-related provision in the twelve
months ended June 30, 1998 and in the 1997 fourth quarter.
(2) Includes $4,639 of nonrecurring losses to restructure the
available-for-sale portfolio in the twelve months ended June 30, 1998 and
in the 1997 fourth quarter.
(3) Nonrecurring charges in the twelve months ended June 30, 1998 include
merger-related items of $286,747 and personal computer charges of $67,202.
Nonrecurring charges in the 1998 second and first quarters include
merger-related items of $30,849 and $35,568, respectively; nonrecurring
charges in the 1997 fourth quarter include merger-related charges of
$220,330 and personal computer impairment charge of $67,202.
(4) Cash dividends per common share are those of Wachovia Corporation prior to
the merger with Central Fidelity Banks, Inc.
(5) Includes amounts of pooled companies.
4
<PAGE>
--------------------------
Results of Operations
-----------------------------------------------------------------
Overview
The following narrative contains forward-looking statements as
encouraged by the Private Securities Litigation Reform Act of
1995. All forward-looking statements involve risks and uncertainty
and any number of factors could cause actual results to differ
materially from statements contained in this Financial Supplement
and Form 10-Q. Risks and uncertainties that may affect future
results include, but are not limited to, growth of the economy,
interest rate movements, timely development by Wachovia of
technology enhancements for its products and operating systems,
the ability of Wachovia and its customers and vendors to address
effectively Year 2000 issues, the impact of competitive products,
services and pricing, Congressional legislation and similar
matters. Management cautions readers of this Financial Supplement
and Form 10-Q not to place undue reliance on forward-looking
statements which are subject to influence by the named risk
factors and unanticipated future events.
Wachovia Corporation ("the corporation") is a southeastern
interstate bank holding company with dual headquarters in
Atlanta, Georgia, and Winston-Salem, North Carolina. The
corporation's principal banking subsidiaries are Wachovia Bank,
N. A., which maintains operations in Georgia, North Carolina,
South Carolina and Virginia, and The First National Bank of
Atlanta, which provides credit card services. On April 1, 1998,
Wachovia Corporation acquired Ameribank Bancshares, Inc., a $280
million asset Florida bank holding company and parent of American
Bank of Hollywood, Florida. The acquisition was accounted for as
a purchase transaction. Subsequent to the acquisition, American
Bank was merged into 1st United Bank, a former subsidiary of
Wachovia Corporation. First United Bank, which maintains
operations in Florida, was merged into Wachovia Bank on July 1,
1998.
Wachovia's growth strategies include using acquisitions to gain
access to additional customers in attractive markets and to
enhance product and service capabilities. The corporation
regularly evaluates acquisition opportunities and conducts due
diligence activities in connection with possible acquisitions. As
a result, acquisition discussions and, in some cases,
negotiations may take place and future acquisitions involving
cash, debt or equity securities may occur. Acquisitions typically
involve the payment of a premium over book values, and,
therefore, some dilution of the corporation's book value and net
income per share may occur in connection with any future
transactions.
The U.S. economy slowed in the second quarter of 1998 as the
impact of turmoil in Asian markets widened and industrial auto
production was hampered by strikes. Gross domestic product for
the period, based on advance estimates, grew at a 1.4 percent
annualized rate compared with a 5.5 percent growth rate in the
first quarter based on revised figures. The nation's seasonally
adjusted unemployment rate dropped in the period to 4.4 percent
from 4.7 percent in the preceding three months. Business
conditions within Wachovia's primary operating states remained
generally strong during the second quarter. Seasonally adjusted
unemployment for the period averaged 4.6 percent in Florida, 4
percent in Georgia, 3.3 percent in North Carolina, 3.2 percent in
South Carolina and 3 percent in Virginia.
Wachovia reported net income of $209.916 million or $1.00 per
diluted share for the second quarter of 1998 and $405.237 million
or $1.93 per diluted share for the first half of the year.
Results reflected strong revenue growth masked by merger-related
charges, principally for systems conversions and employee bene-
fits expenses in Virginia. The net after-tax impact of the
merger-related charges was $20.360 million or
5
<PAGE>
$.09 per diluted share for the second period and $43.207 million
or $.20 per diluted share year to date. Excluding merger-related
expenses, operating net income totaled $230.276 million or $1.09
per diluted share for the three months and $448.444 million or
$2.13 per diluted share for the first six months. Noninterest
income for the first half of 1998 included branch sale gains of
$17.155 million, all of which occurred in the first quarter,
versus gains of $18.659 million in the second quarter of 1997.
Management anticipates additional integration expenses of
approximately $10 million for the remainder of 1998, with the
majority of charges expected to be recognized in the third
quarter.
Expanded discussion of the corporation's operating results and
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 securities. References to changes
in assets and liabilities represent daily average levels unless
otherwise noted. Prior year financial results have been restated
to reflect the corporation's pooling-of-interests merger with
Central Fidelity Banks, Inc., effective December 15, 1997 but
have not been restated for the corporation's purchase
acquisitions of Jefferson Bankshares, Inc., and 1st United
Bancorp in the fourth quarter of 1997 and of Ameribank Bancshares
in the second quarter of 1998.
- ---------------------------------------------------
Computation of Earnings Per Common Share Table 2
- --------------------------------------------------------------------------------
(thousands, except per share)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
----------- --------- ----------- ---------
BASIC
Average common shares outstanding .............................. 206,718 196,676 206,308 198,384
=========== ======= =========== =======
Net income ..................................................... $ 209,916 $ 196,805 $ 405,237 $ 390,280
=========== ========= =========== =========
Per share amount ............................................... $ 1.02 $ 1.00 $ 1.96 $ 1.97
DILUTED
Average common shares outstanding .............................. 206,718 196,676 206,308 198,384
Dilutive common stock options at average market price .......... 3,684 2,964 3,835 2,990
Dilutive common stock awards at average market price ........... 248 171 260 171
Convertible long-term debt assumed converted ................... 12 8 9 8
----------- --------- ----------- ---------
Average diluted shares outstanding ............................. 210,662 199,819 210,412 201,553
=========== ========= =========== =========
Net income ..................................................... $ 209,916 $ 196,805 $ 405,237 $ 390,280
Add interest on convertible long-term debt, net of tax ......... 7 1 8 3
----------- --------- ----------- ---------
Adjusted net income ............................................ $ 209,923 $ 196,806 $ 405,245 $ 390,283
=========== ========= =========== =========
Per share amount ............................................... $ 1.00 $ .98 $ 1.93 $ 1.94
</TABLE>
6
<PAGE>
Net Interest
Income Taxable equivalent net interest income for the second quarter of
1998 rose $67.372 million or 12.8 percent year over year and
expanded $130.247 million or 12.5 percent for the first six
months. Gains in both periods were driven by good loan growth and
improvement in the net yield on interest-earning assets (defined
as taxable equivalent net interest income as a percentage of
average interest-earning assets). Compared with the first quarter
of 1998, taxable equivalent net interest income was up $13.638
million or 9.4 percent annualized, reflecting modest growth in
interest-earning assets and one additional accrual day. The net
yield on interest-earning assets increased 11 basis points for the
second period from a year earlier and 9 basis points year to date
and was unchanged from the first three months of the year.
Management expects taxable equivalent net interest income to rise
in the third quarter of 1998 from second quarter's level and the
net yield on interest-earning assets to moderate, based on
business trends as of the beginning of the third quarter.
Taxable equivalent interest income expanded $115.003 million or
10.8 percent and $240.591 million or 11.5 percent for the second
period and first half, respectively. Increased loan volume
primarily fueled the growth, with a higher average rate earned
also contributing to the rise. Loans advanced $4.874 billion or
12.5 percent for the three months and $5.198 billion or 13.4
percent for the first six months, with the average rate earned up
3 basis points and 7 basis points, respectively. The loan growth
was attributable partly to the purchase accounting transactions
consummated in 1997 and 1998. The mix of loans to total interest-
earning assets rose to 77.6 percent for the second quarter from
75.8 percent a year earlier and to 77.9 percent for the first
half versus 75.5 percent in 1997. Compared with the first quarter
of 1998, taxable equivalent interest income was higher by $22.006
million or 7.6 percent annualized, largely due to greater volume
of interest-earning assets.
Loan growth for both the quarter and first six months occurred
primarily in the commercial portfolio. Commercial loans,
including related real estate categories, rose $4.010 billion or
18.4 percent for the three months from a year earlier and $4.246
billion or 19.9 percent for the first six months. Taxable
commercial loans, commercial mortgages and construction loans led
the gains in both periods, expanding $2.642 billion or 23.5
percent, $854 million or 14.3 percent and $432 million or 30
percent, respectively, for the quarter, and $2.839 billion or
26.1 percent, $913 million or 15.5 percent and $486 million or
35.3 percent, respectively, for the first half. Good growth also
occurred in foreign loans, driven, in part, by originations in
the corporation's London office to companies operating in Europe,
and in lease financing, which primarily consists of commercial
leases and other structured corporate transactions. Based on
regulatory definitions, commercial real estate loans at June 30,
1998 were $8.632 billion or 19.4 percent of total loans compared
with $7.557 billion or 18.8 percent of loans one year earlier and
$8.699 billion or 19.5 percent at March 31, 1998. Regulatory
definitions for commercial real estate include loans which have
real estate as the collateral but not the primary consideration
in a credit risk evaluation. Foreign loans at June 30, 1998 were
$843 million, representing 1.9 percent of total loans, versus
$498 million or 1.2 percent of loans one year earlier and $548
million or 1.2 percent at the end of the first quarter of 1998.
Foreign loan exposure to Asia was insignificant.
Consumer loans, including residential mortgages, increased $864
million or 5 percent for the quarter and $952 million or 5.5
percent for the first half. Residential mortgages accounted for
most of the growth, rising $734 million or 10.1 percent for the
three months and $789 million or 11 percent for the first six
months including gains in equity bank lines. Good expansion also
occurred in other revolving credit, while indirect retail loans
and credit cards were up modestly. Credit card outstandings
decreased in the second quarter from the first quarter, primarily
reflecting lower new account openings. Managed credit card
outstandings at June 30, 1998 were $6.033 billion, representing
13.4 percent of total managed loans, compared with $6.173 billion
or 15.1 percent of managed loans one year earlier and $6.103
billion or 13.6 percent at
7
<PAGE>
- --------------------------------------------------
Net Interest Income and Average Balances Table 3
- --------------------------------------------------------------------------------
<TABLE>
Twelve 1998 1997
Months ---------------------------- -------------
Ended
June 30 Second First Fourth
1998 Quarter Quarter Quarter
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
NET INTEREST INCOME --
TAXABLE EQUIVALENT
(THOUSANDS)
Interest income:
Loans, including fees ..................$3,733,116 $ 967,461 $ 952,282 $ 930,055
Securities ............................. 740,363 191,666 185,655 179,283
Interest-bearing bank balances ......... 10,375 3,411 3,228 1,920
Federal funds sold and securities
purchased under resale
agreements ............................ 25,542 5,735 5,285 8,542
Trading account assets ................. 51,474 13,313 13,130 12,968
----------- ------------- ------------ -------------
Total ................................ 4,560,870 1,181,586 1,159,580 1,132,768
Interest expense:
Interest-bearing demand ................ 67,140 17,047 16,751 17,333
Savings and money market
savings ............................... 432,823 110,078 111,133 108,682
Savings certificates ................... 578,934 136,782 146,030 150,959
Large denomination certificates ........ 160,179 45,426 34,117 40,830
Interest-bearing deposits in
foreign offices ....................... 121,145 37,332 36,210 23,778
Short-term borrowed funds .............. 537,138 145,827 138,892 127,304
Long-term debt ......................... 381,802 94,562 95,553 95,259
----------- ------------- ------------ -------------
Total ................................ 2,279,161 587,054 578,686 564,145
----------- ------------- ------------ -------------
Net interest income .....................$2,281,709 $ 594,532 $ 580,894 $ 568,623
=========== ============= ============ =============
Annualized net yield on
interest-earning assets ................ 4.19% 4.21% 4.21% 4.21%
AVERAGE BALANCES (MILLIONS)
Assets:
Loans -- net of unearned income......... $ 42,293 $ 43,974 $ 43,749 $ 41,770
Securities ............................. 10,624 11,102 10,623 10,126
Interest-bearing bank balances ......... 142 139 189 116
Federal funds sold and securities
purchased under resale
agreements ............................ 451 411 374 594
Trading account assets ................. 977 1,008 1,067 927
----------- ------------- ------------ -------------
Total interest-earning assets......... 54,487 56,634 56,002 53,533
Cash and due from banks ................ 3,116 3,166 3,340 3,165
Premises and equipment ................. 824 845 819 844
Other assets ........................... 3,007 3,709 3,396 2,733
Unrealized gains on securities
available-for-sale .................... 96 96 114 99
Allowance for loan losses .............. (533) (534) (538) (539)
----------- ------------- ------------ -------------
Total assets ......................... $ 60,997 $ 63,916 $ 63,133 $ 59,835
=========== ============= ============ =============
Liabilities and shareholders' equity:
Interest-bearing demand ................ $ 4,753 $ 4,687 $ 5,984 $ 4,368
Savings and money market
savings ............................... 10,958 11,700 10,334 11,189
Savings certificates ................... 10,476 9,984 11,044 10,676
Large denomination certificates ........ 2,814 3,212 2,449 2,816
Interest-bearing deposits in
foreign offices ....................... 2,149 2,599 2,644 1,657
Short-term borrowed funds .............. 10,044 10,947 10,635 9,444
Long-term debt ......................... 6,041 6,092 6,107 5,935
----------- ------------- ------------ -------------
Total interest-bearing liabilities..... 47,235 49,221 49,197 46,085
Demand deposits ........................ 7,376 7,939 7,240 7,484
Other liabilities ...................... 1,489 1,545 1,587 1,382
Shareholders' equity ................... 4,897 5,211 5,109 4,884
----------- ------------- ------------ -------------
Total liabilities and
shareholders' equity ................ $ 60,997 $ 63,916 $ 63,133 $ 59,835
=========== ============= ============ =============
Total deposits .......................... $ 38,526 $ 40,121 $ 39,695 $ 38,190
<CAPTION>
1997 Six Months Ended
--------------------------- June 30
Third Second
Quarter Quarter 1998 1997
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
NET INTEREST INCOME --
TAXABLE EQUIVALENT
(THOUSANDS)
Interest income:
Loans, including fees .................. $ 883,318 $ 856,656 $ 1,919,743 $ 1,678,618
Securities ............................. 183,759 191,120 377,321 386,044
Interest-bearing bank balances ......... 1,816 818 6,639 1,494
Federal funds sold and securities
purchased under resale
agreements ............................ 5,980 4,919 11,020 7,797
Trading account assets ................. 12,063 13,070 26,443 26,622
------------ ------------ ------------- -----------
Total ................................ 1,086,936 1,066,583 2,341,166 2,100,575
Interest expense:
Interest-bearing demand ................ 16,009 15,886 33,798 30,907
Savings and money market
savings ............................... 102,930 99,671 221,211 193,832
Savings certificates ................... 145,163 143,650 282,812 286,022
Large denomination certificates ........ 39,806 43,050 79,543 83,755
Interest-bearing deposits in
foreign offices ....................... 23,825 22,348 73,542 39,718
Short-term borrowed funds .............. 125,115 118,781 284,719 225,742
Long-term debt ......................... 96,428 96,037 190,115 195,420
------------ ------------ ------------- -----------
Total ................................ 549,276 539,423 1,165,740 1,055,396
------------ ------------ ------------- -----------
Net interest income ..................... $ 537,660 $ 527,160 $ 1,175,426 $ 1,045,179
============ ============ ============= ===========
Annualized net yield on
interest-earning assets ................ 4.12% 4.10% 4.21% 4.12%
AVERAGE BALANCES (MILLIONS)
Assets:
Loans -- net of unearned income......... $ 39,731 $ 39,100 $ 43,862 $ 38,664
Securities ............................. 10,649 11,102 10,864 11,205
Interest-bearing bank balances ......... 126 62 164 56
Federal funds sold and securities
purchased under resale
agreements ............................ 423 352 392 284
Trading account assets ................. 908 956 1,038 1,004
------------ ------------ ------------- -----------
Total interest-earning assets......... 51,837 51,572 56,320 51,213
Cash and due from banks ................ 2,797 2,844 3,253 2,826
Premises and equipment ................. 790 788 832 789
Other assets ........................... 2,206 2,321 3,553 2,328
Unrealized gains on securities
available-for-sale .................... 76 28 105 44
Allowance for loan losses .............. (523) (509) (536) (510)
------------ ------------ ------------- -----------
Total assets ......................... $ 57,183 $ 57,044 $ 63,527 $ 56,690
============ ============ ============= ===========
Liabilities and shareholders' equity:
Interest-bearing demand ................ $ 4,000 $ 4,047 $ 5,332 $ 4,032
Savings and money market
savings ............................... 10,603 10,413 11,021 10,289
Savings certificates ................... 10,207 10,258 10,511 10,287
Large denomination certificates ........ 2,776 3,099 2,832 3,064
Interest-bearing deposits in
foreign offices ....................... 1,714 1,633 2,622 1,483
Short-term borrowed funds .............. 9,172 8,917 10,795 8,661
Long-term debt ......................... 6,031 6,063 6,100 6,263
------------ ------------ ------------- -----------
Total interest-bearing liabilities..... 44,503 44,430 49,213 44,079
Demand deposits ........................ 6,843 6,789 7,591 6,701
Other liabilities ...................... 1,446 1,449 1,563 1,483
Shareholders' equity ................... 4,391 4,376 5,160 4,427
------------ ------------ ------------- -----------
Total liabilities and
shareholders' equity ................ $ 57,183 $ 57,044 $ 63,527 $ 56,690
============ ============ ============= ===========
Total deposits .......................... $ 36,143 $ 36,239 $ 39,909 $ 35,856
</TABLE>
8
<PAGE>
March 31, 1998. Managed credit card amounts included $500 million
of securitized loans at June 30, 1998, $586 million one year
earlier and $500 million at the end of the first quarter of 1998.
Additional information on the corporation's managed credit card
portfolio is presented on page 17.
Period-end loans as of June 30, 1998 and the preceding four
quarters are shown in the following table.
<TABLE>
June 30 Mar. 31 Dec. 31 Sept. 30 June 30
$ in thousands 1998 1998 1997 1997 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Commercial .............................. $14,162,763 $14,519,889 $13,528,344 $12,133,710 $11,838,009
Tax-exempt .............................. 1,285,639 1,379,660 1,607,159 1,695,993 1,848,958
----------- ----------- ----------- ----------- -----------
Total commercial ........................ 15,448,402 15,899,549 15,135,503 13,829,703 13,686,967
Direct retail ........................... 1,125,885 1,160,162 1,249,612 1,161,279 1,177,404
Indirect retail ......................... 3,056,582 3,038,397 3,028,288 2,879,128 2,905,645
Credit card ............................. 5,533,435 5,603,381 5,919,098 5,693,563 5,587,343
Other revolving credit .................. 503,758 485,093 459,563 422,389 418,214
----------- ----------- ----------- ----------- -----------
Total retail ............................ 10,219,660 10,287,033 10,656,561 10,156,359 10,088,606
Construction ............................ 1,835,906 1,873,528 1,779,522 1,553,500 1,534,364
Commercial mortgages .................... 6,796,424 6,824,990 6,790,446 6,098,647 6,022,473
Residential mortgages ................... 7,893,928 7,959,185 8,098,794 7,563,967 7,357,546
----------- ----------- ----------- ----------- -----------
Total real estate ....................... 16,526,258 16,657,703 16,668,762 15,216,114 14,914,383
Lease financing ......................... 1,420,875 1,105,555 1,094,169 1,049,269 1,013,115
Foreign ................................. 843,353 548,441 639,387 496,164 497,905
----------- ----------- ----------- ----------- -----------
Total loans, net of unearned income ..... $44,458,548 $44,498,281 $44,194,382 $40,747,609 $40,200,976
=========== =========== =========== =========== ===========
</TABLE>
Securities, the second largest category of interest-earning
assets, were flat with the second quarter of 1997 and moderately
lower year to date. Compared with the preceding three months,
securities increased $479 million or 4.5 percent in the second
quarter, primarily reflecting higher levels of available-for-sale
mortgage-backed securities. At June 30, 1998, securities
available-for-sale were $9.524 billion and securities
held-to-maturity were $1.656 billion, as detailed in the following
table.
<TABLE>
<CAPTION>
$ in thousands
<S> <C>
Securities available-for-sale at market value:
U.S. Government and agency ........................... $ 4,130,559
Mortgage-backed securities ........................... 4,695,836
Other ................................................ 697,963
-----------
Total securities available-for-sale .................... 9,524,358
Securities held-to-maturity:
U.S. Government and agency ........................... 554,137
Mortgage-backed securities ........................... 805,336
State and municipal .................................. 194,623
Other ................................................ 101,421
-----------
Total securities held-to-maturity ...................... 1,655,517
-----------
Total securities ....................................... $11,179,875
===========
</TABLE>
Securities held-to-maturity had a fair value of $1.716 billion at
June 30, 1998, representing a $61 million appreciation over book
value. Marking the securities available-for-sale portfolio at June
30, 1998 to fair value resulted in an unrealized gain over
amortized cost of $121.947 million, pretax, and $74.990 million,
net of tax. Marking the average available-for-sale portfolio to
fair value resulted in unrealized gains of $95.969 million,
pretax, and $62.873 million, net of tax, for the second period and
$104.919 million, pretax, and $67.408 million, net of tax, year to
date. Unrealized gains are included, net of tax, in shareholders'
equity.
Interest expense for the quarter was up $47.631 million or 8.8
percent and rose $110.344 million or 10.5 percent for the first
half. Higher levels of interest-bearing liabilities, principally
interest-bearing deposits and short-term borrowings, accounted
for the growth, which was moderated by a lower average rate paid.
Interest-bearing liabilities rose $4.791 billion or 10.8 percent
for the three months and $5.134 billion or 11.6 percent for the
first six months, while the average rate paid decreased 9 basis
points and 5 basis points, respectively. A portion of the
increase in interest-bearing liabilities is attributable to the
effects of
9
<PAGE>
purchase accounting transactions consummated during 1997 and
1998. Interest expense increased $8.368 million or 5.8 percent
annualized from the first quarter of 1998, largely reflecting
growth in short-term borrowings and a slightly higher average
rate paid.
As part of its funding strategy, the corporation is marketing
traditional funding products while issuing a variety of debt
instruments. Traditional funding sources are being broadened
through marketing of the corporation's Premiere and Business
Premiere accounts, both of which are high-yield money market
deposit products; the introduction of PC Banking; and significant
enhancements to the corporation's basic checking products.
Wholesale funding sources include senior and subordinated debt,
trust capital securities and a global bank note program.
Management believes continued flexibility and innovation will be
required of financial institutions to attract future funding
through deposit products and alternative sources.
Interest-bearing deposits increased $2.732 billion or 9.3 percent
and $3.163 billion or 10.8 percent for the second quarter and
first half, respectively. Savings and money market savings grew
$1.287 billion or 12.4 percent for the three months and $732
million or 7.1 percent for the first six months, driven by gains
in the corporation's Premiere and Business Premiere accounts,
while interest-bearing demand deposits expanded $640 million or
15.8 percent and $1.300 billion or 32.2 percent, respectively.
Interest-bearing deposits in foreign offices increased $966
million or 59.2 percent for the quarter and $1.139 billion or
76.8 percent for the first half, reflecting their attractiveness
relative to other wholesale funding sources as well as new
deposit-taking capabilities at the corporation's London office.
Interest-bearing deposits were slightly lower from the first
quarter of 1998, reflecting, in part, the full impact in the
second quarter of the loss of deposits from branches divested in
Virginia during the first three months of the year. Gross
deposits averaged $40.121 billion for the three months and
$39.909 billion for the first six months, up $3.882 billion or
10.7 percent and $4.053 billion or 11.3 percent, respectively,
from a year earlier. Collected deposits, net of float, averaged
$37.855 billion for the second period and $37.640 billion year to
date, an increase of $3.550 billion or 10.3 percent and $3.712
billion or 10.9 percent, respectively, from the same periods in
1997.
Short-term borrowings increased $2.030 billion or 22.8 percent
for the three months and $2.134 billion or 24.6 percent for the
first six months, with all categories of short-term borrowings
expanding. Federal funds purchased and securities sold under
repurchase agreements rose $1.343 billion or 21 percent for the
quarter and $1.091 billion or 16.6 percent for the first half,
while commercial paper borrowings expanded $475 million or 64.7
percent and $421 million or 59.5 percent, respectively. Other
short-term borrowings, primarily consisting of short-term bank
notes, were higher by $212 million or 11.9 percent for the second
period and $622 million or 44.9 percent year to date. Short-term
borrowings grew $312 million or 2.9 percent from the first
quarter, reflecting increases in commercial paper, and in federal
funds purchased and securities sold under repurchase agreements.
Long-term debt for the second quarter was essentially unchanged
from a year earlier and was modestly lower year to date. Other
long-term debt, primarily trust capital securities, increased
$300 million or 9.5 percent for the three months and $263 million
or 8.7 percent for the first six months, largely offsetting
declines in medium-term bank notes. Long-term debt remained
essentially flat with the first quarter of 1998, as expansion in
other long-term debt was moderated by declines in medium-term
bank notes. At June 30, 1998, trust capital securities totaled
$996 million, reflecting issuances in December 1996 and in
January, April and June 1997. The corporation's trust capital
securities are rated aa3 by Moody's and A+ by Standard & Poor's
and qualify as part of Tier I capital under risk-based capital
guidelines. On July 15, the corporation filed a registration
statement with the Securities and Exchange Commission for a shelf
offering of up to $2.500 billion of debt securities. The
securities may consist of unsecured senior debt and/or unsecured
subordinated debt. On July 29, $350 million of 10-year
subordinated notes was issued as part of the debt securities. The
notes are rated A1 by Moody's and AA- by Standard & Poor's.
10
<PAGE>
- -----------------------------------------------------------------------------
Taxable Equivalent Rate/Volume Variance Analysis -- Second Quarter* Table 4
- --------------------------------------------------------------------------------
+ (millions)
++ (thousands)
<TABLE>
<CAPTION>
Average Volume+ Average Rate
----------------------- --------------------
1998 1997 1998 1997
--------- -------- ---------- -------
Interest Income
Loans:
<S> <C>
Commercial ....................................... $ 13,859 $ 11,217 7.41 7.29
Tax-exempt ....................................... 1,310 1,773 9.29 8.94
--------- --------
Total commercial ................................. 15,169 12,990 7.57 7.51
Direct retail .................................... 1,140 1,178 9.44 8.93
Indirect retail .................................. 3,027 2,939 8.36 8.58
Credit card ...................................... 5,557 5,550 13.39 12.98
Other revolving credit ........................... 493 420 11.63 12.24
--------- --------
Total retail ..................................... 10,217 10,087 11.37 11.19
Construction ..................................... 1,873 1,441 9.06 9.46
Commercial mortgages ............................. 6,809 5,955 8.54 8.33
Residential mortgages ............................ 7,967 7,233 7.97 8.06
--------- --------
Total real estate ................................ 16,649 14,629 8.32 8.31
Lease financing .................................. 1,261 899 11.17 9.12
Foreign .......................................... 678 495 6.40 6.81
--------- --------
Total loans ...................................... 43,974 39,100 8.82 8.79
Securities:
Held-to-maturity:
U.S. Government and agency ....................... 287 ---- 6.10 ----
Mortgage-backed securities ....................... 858 1,077 8.32 7.99
State and municipal .............................. 199 221 10.73 12.12
Other ............................................ 108 2 6.85 11.34
--------- --------
Total securities held-to-maturity ................ 1,452 1,300 8.10 8.70
Available-for-sale:**
U.S. Government and agency ....................... 4,210 5,452 6.78 6.55
Mortgage-backed securities ....................... 4,731 3,175 6.71 6.89
Other ............................................ 709 1,175 6.81 6.59
--------- --------
Total securities available-for-sale .............. 9,650 9,802 6.75 6.67
--------- --------
Total securities ................................. 11,102 11,102 6.92 6.90
Interest-bearing bank balances ................... 139 62 9.83 5.30
Federal funds sold and securities purchased
under resale agreements .......................... 411 352 5.60 5.60
Trading account assets ........................... 1,008 956 5.30 5.48
--------- --------
Total interest-earning assets .................... $ 56,634 $ 51,572 8.37 8.30
========= ========
Interest Expense
Interest-bearing demand .......................... $ 4,687 $ 4,047 1.46 1.57
Savings and money market savings ................. 11,700 10,413 3.77 3.84
Savings certificates ............................. 9,984 10,258 5.50 5.62
Large denomination certificates .................. 3,212 3,099 5.67 5.57
--------- --------
Total interest-bearing deposits in
domestic offices ................................. 29,583 27,817 4.19 4.36
Interest-bearing deposits in foreign offices ..... 2,599 1,633 5.76 5.49
--------- --------
Total interest-bearing deposits ................. 32,182 29,450 4.32 4.42
Federal funds purchased and securities
sold under repurchase agreements ................. 7,746 6,403 5.36 5.30
Commercial paper ................................. 1,209 734 5.18 5.13
Other short-term borrowed funds .................. 1,992 1,780 5.38 5.60
--------- --------
Total short-term borrowed funds .................. 10,947 8,917 5.34 5.34
Bank notes ....................................... 2,646 2,917 5.86 6.21
Other long-term debt ............................. 3,446 3,146 6.50 6.48
--------- --------
Total long-term debt ............................. 6,092 6,063 6.23 6.35
--------- --------
Total interest-bearing liabilities ............... $ 49,221 $ 44,430 4.78 4.87
========= ======== --------- -----
Interest rate spread 3.59 3.43
Net yield on interest-earning assets ========= =====
and net interest income .......................... 4.21 4.10
========= =====
</TABLE>
<TABLE>
<CAPTION>
Variance
Interest++ Attributable to++
------------------------ -------------------------
1998 1997 Variance++ Rate Volume
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Interest Income
Loans:
Commercial ....................................... $ 255,996 $ 203,793 $ 52,203 $ 3,411 $ 48,792
Tax-exempt ....................................... 30,346 39,501 (9,155) 1,496 (10,651)
---------- ---------- ----------
Total commercial ................................. 286,342 243,294 43,048 1,956 41,092
Direct retail .................................... 26,820 26,223 597 1,464 (867)
Indirect retail .................................. 63,082 62,899 183 (1,655) 1,838
Credit card ...................................... 185,542 179,564 5,978 5,745 233
Other revolving credit ........................... 14,297 12,809 1,488 (663) 2,151
---------- ---------- ----------
Total retail ..................................... 289,741 281,495 8,246 4,568 3,678
Construction ..................................... 42,289 33,994 8,295 (1,491) 9,786
Commercial mortgages ............................. 144,936 123,658 21,278 3,179 18,099
Residential mortgages ............................ 158,217 145,359 12,858 (1,650) 14,508
---------- ---------- ----------
Total real estate ................................ 345,442 303,011 42,431 367 42,064
Lease financing .................................. 35,114 20,442 14,672 5,260 9,412
Foreign .......................................... 10,822 8,414 2,408 (532) 2,940
---------- ---------- ----------
Total loans ...................................... 967,461 856,656 110,805 2,954 107,851
Securities:
Held-to-maturity:
U.S. Government and agency ....................... 4,359 ---- 4,359 ---- 4,359
Mortgage-backed securities ....................... 17,795 21,460 (3,665) 854 (4,519)
State and municipal .............................. 5,318 6,675 (1,357) (725) (632)
Other ............................................ 1,843 66 1,777 (37) 1,814
---------- ---------- ----------
Total securities held-to-maturity ................ 29,315 28,201 1,114 (2,028) 3,142
Available-for-sale:**
U.S. Government and agency ....................... 71,134 89,075 (17,941) 3,023 (20,964)
Mortgage-backed securities ....................... 79,171 54,529 24,642 (1,458) 26,100
Other ............................................ 12,046 19,315 (7,269) 625 (7,894)
---------- ---------- ----------
Total securities available-for-sale .............. 162,351 162,919 (568) 1,954 (2,522)
---------- ---------- ----------
Total securities ................................. 191,666 191,120 546 553 (7)
Interest-bearing bank balances ................... 3,411 818 2,593 1,053 1,540
Federal funds sold and securities purchased
under resale agreements .......................... 5,735 4,919 816 ---- 816
Trading account assets ........................... 13,313 13,070 243 (444) 687
---------- ---------- ----------
Total interest-earning assets .................... 1,181,586 1,066,583 115,003 9,105 105,898
Interest Expense
Interest-bearing demand .......................... 17,047 15,886 1,161 (1,184) 2,345
Savings and money market savings ................. 110,078 99,671 10,407 (1,830) 12,237
Savings certificates ............................. 136,782 143,650 (6,868) (3,049) (3,819)
Large denomination certificates .................. 45,426 43,050 2,376 784 1,592
---------- ---------- ----------
Total interest-bearing deposits in
domestic offices ................................. 309,333 302,257 7,076 (11,912) 18,988
Interest-bearing deposits in foreign offices ..... 37,332 22,348 14,984 1,149 13,835
---------- ---------- ----------
Total interest-bearing deposits .................. 346,665 324,605 22,060 (7,482) 29,542
Federal funds purchased and securities
sold under repurchase agreements ................. 103,464 84,550 18,914 970 17,944
Commercial paper ................................. 15,620 9,379 6,241 93 6,148
Other short-term borrowed funds .................. 26,743 24,852 1,891 (1,001) 2,892
---------- ---------- ----------
Total short-term borrowed funds .................. 145,827 118,781 27,046 ---- 27,046
Bank notes ....................................... 38,691 45,195 (6,504) (2,456) (4,048)
Other long-term debt ............................. 55,871 50,842 5,029 158 4,871
---------- ---------- ----------
Total long-term debt ............................. 94,562 96,037 (1,475) (1,912) 437
---------- ---------- ----------
Total interest-bearing liabilities ............... 587,054 539,423 47,631 (10,054) 57,685
---------- ---------- ----------
Interest rate spread
Net yield on interest-earning assets
and net interest income .......................... $ 594,532 $ 527,160 $ 67,372 14,463 52,909
========== ========== ==========
</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. Any variance
attributable jointly to volume and rate changes is allocated to volume and
rate in proportion to the relationship of the absolute dollar amount of the
change in each.
** Volume amounts are reported at amortized cost; excludes pretax unrealized
gains of $96 million in 1998 and $28 million in 1997.
11
<PAGE>
- ------------------------------------------------------------------------
Taxable Equivalent Rate/Volume Variance Analysis -- Six Months* Table 5
- --------------------------------------------------------------------------------
+ (millions)
++ (thousands)
<TABLE>
<CAPTION>
Average Volume+ Average Rate
------------------------ -------------------
1998 1997 1998 1997
Interest Income ----------- --------- -------- ------
Loans:
<S> <C> <C> <C> <C>
Commercial ....................................... $13,732 $ 10,893 7.32 7.26
Tax-exempt ....................................... 1,382 1,815 8.92 8.99
----------- ---------
Total commercial ................................. 15,114 12,708 7.46 7.51
Direct retail .................................... 1,174 1,185 9.31 8.94
Indirect retail .................................. 3,030 3,002 8.47 8.65
Credit card ...................................... 5,649 5,561 13.41 12.79
Other revolving credit ........................... 479 421 10.87 12.24
----------- ---------
Total retail ..................................... 10,332 10,169 11.38 11.10
Construction ..................................... 1,862 1,376 9.11 9.49
Commercial mortgages ............................. 6,790 5,877 8.68 8.25
Residential mortgages ............................ 7,972 7,183 8.06 8.00
----------- ---------
Total real estate ................................ 16,624 14,436 8.43 8.25
Lease financing .................................. 1,178 870 10.52 9.05
Foreign .......................................... 614 481 6.85 6.85
----------- ---------
Total loans ...................................... 43,862 38,664 8.83 8.76
Securities:
Held-to-maturity:
U.S. Government and agency ....................... 224 ---- 6.18 ----
Mortgage-backed securities ....................... 887 1,091 8.32 8.04
State and municipal .............................. 204 228 10.77 12.27
Other ............................................ 113 2 6.76 12.07
----------- ---------
Total securities held-to-maturity ................ 1,428 1,321 8.21 8.78
Available-for-sale:**
U.S. Government and agency ....................... 4,336 5,459 6.81 6.61
Mortgage-backed securities ....................... 4,379 3,253 6.80 6.90
Other ............................................ 721 1,172 7.05 6.57
----------- ---------
Total securities available-for-sale .............. 9,436 9,884 6.82 6.70
----------- ---------
Total securities ................................. 10,864 11,205 7.00 6.95
Interest-bearing bank balances ................... 164 56 8.16 5.37
Federal funds sold and securities purchased
under resale agreements .......................... 392 284 5.66 5.53
Trading account assets ........................... 1,038 1,004 5.14 5.35
----------- ---------
Total interest-earning assets .................... $56,320 $ 51,213 8.38 8.27
=========== =========
Interest Expense
Interest-bearing demand .......................... $ 5,332 $ 4,032 1.28 1.55
Savings and money market savings ................. 11,021 10,289 4.05 3.80
Savings certificates ............................. 10,511 10,287 5.43 5.61
Large denomination certificates .................. 2,832 3,064 5.66 5.51
----------- ---------
Total interest-bearing deposits in
domestic offices ................................. 29,696 27,672 4.19 4.33
Interest-bearing deposits in foreign offices ..... 2,622 1,483 5.66 5.40
----------- ---------
Total interest-bearing deposits .................. 32,318 29,155 4.31 4.39
Federal funds purchased and securities sold
under repurchase agreements ...................... 7,661 6,570 5.36 5.23
Commercial paper ................................. 1,128 707 5.16 5.01
Other short-term borrowed funds .................. 2,006 1,384 5.27 5.53
----------- ---------
Total short-term borrowed funds .................. 10,795 8,661 5.32 5.26
Bank notes ....................................... 2,810 3,236 6.16 6.11
Other long-term debt ............................. 3,290 3,027 6.39 6.48
----------- ---------
Total long-term debt ............................. 6,100 6,263 6.29 6.29
----------- ---------
Total interest-bearing liabilities ............... $49,213 $ 44,079 4.78 4.83
=========== ========= -------- -----
Interest rate spread 3.60 3.44
Net yield on interest-earning assets and net ======== =====
interest income .................................. 4.21 4.12
======== =====
<CAPTION>
Interest++ Variance
--------------------------- Attributable
to++
-----------------------
1998 1997 Variance++ Rate Volume
------------ ------------ ---------- ----------- ------
<S> <C> <C> <C> <C> <C>
Interest Income
Loans:
Commercial ....................................... $ 498,304 $ 392,284 $ 106,020 $ 3,025 $ 102,995
Tax-exempt ....................................... 61,110 80,860 (19,750) (625) (19,125)
------------ ------------ ----------
Total commercial ................................. 559,414 473,144 86,270 (2,812) 89,082
Direct retail .................................... 54,181 52,548 1,633 2,123 (490)
Indirect retail .................................. 127,272 128,735 (1,463) (2,650) 1,187
Credit card ...................................... 375,770 352,793 22,977 17,328 5,649
Other revolving credit ........................... 25,824 25,549 275 (3,049) 3,324
------------ ------------ ----------
Total retail ..................................... 583,047 559,625 23,422 14,349 9,073
Construction ..................................... 84,098 64,798 19,300 (2,707) 22,007
Commercial mortgages ............................. 292,338 240,568 51,770 12,918 38,852
Residential mortgages ............................ 318,492 285,122 33,370 1,856 31,514
------------ ------------ ----------
Total real estate ................................ 694,928 590,488 104,440 13,233 91,207
Lease financing .................................. 61,484 39,009 22,475 7,080 15,395
Foreign .......................................... 20,870 16,352 4,518 17 4,501
------------ ------------ ----------
Total loans ...................................... 1,919,743 1,678,618 241,125 13,708 227,417
Securities:
Held-to-maturity:
U.S. Government and agency ....................... 6,848 ---- 6,848 ---- 6,848
Mortgage-backed securities ....................... 36,610 43,472 (6,862) 1,480 (8,342)
State and municipal .............................. 10,875 13,906 (3,031) (1,607) (1,424)
Other ............................................ 3,780 127 3,653 (80) 3,733
------------ ------------ ----------
Total securities held-to-maturity ................ 58,113 57,505 608 (3,839) 4,447
Available-for-sale:**
U.S. Government and agency ....................... 146,398 179,019 (32,621) 5,155 (37,776)
Mortgage-backed securities ....................... 147,585 111,339 36,246 (1,748) 37,994
Other ............................................ 25,225 38,181 (12,956) 2,645 (15,601)
------------ ------------ ----------
Total securities available-for-sale .............. 319,208 328,539 (9,331) 5,730 (15,061)
------------ ------------ ----------
Total securities ................................. 377,321 386,044 (8,723) 3,116 (11,839)
Interest-bearing bank balances ................... 6,639 1,494 5,145 1,091 4,054
Federal funds sold and securities purchased
under resale agreements .......................... 11,020 7,797 3,223 185 3,038
Trading account assets ........................... 26,443 26,622 (179) (1,059) 880
------------ ------------ ----------
Total interest-earning assets .................... 2,341,166 2,100,575 240,591 28,631 211,960
Interest Expense
Interest-bearing demand .......................... 33,798 30,907 2,891 (5,953) 8,844
Savings and money market savings ................. 221,211 193,832 27,379 13,113 14,266
Savings certificates ............................. 282,812 286,022 (3,210) (9,349) 6,139
Large denomination certificates .................. 79,543 83,755 (4,212) 2,244 (6,456)
------------ ------------ ----------
Total interest-bearing deposits in
domestic offices ................................. 617,364 594,516 22,848 (19,673) 42,521
Interest-bearing deposits in foreign offices ..... 73,542 39,718 33,824 1,979 31,845
------------ ------------ ----------
Total interest-bearing deposits .................. 690,906 634,234 56,672 (11,108) 67,780
Federal funds purchased and securities sold
under repurchase agreements ...................... 203,427 170,236 33,191 4,309 28,882
Commercial paper ................................. 28,894 17,563 11,331 560 10,771
Other short-term borrowed funds .................. 52,398 37,943 14,455 (1,864) 16,319
------------ ------------ ----------
Total short-term borrowed funds .................. 284,719 225,742 58,977 2,717 56,260
Bank notes ....................................... 85,833 98,100 (12,267) 739 (13,006)
Other long-term debt ............................. 104,282 97,320 6,962 (1,368) 8,330
------------ ------------ ----------
Total long-term debt ............................. 190,115 195,420 (5,305) (203) (5,102)
------------ ------------ ----------
Total interest-bearing liabilities ............... 1,165,740 1,055,396 110,344 (11,368) 121,712
------------ ------------ ----------
Interest rate spread
Net yield on interest-earning assets and net
interest income .................................. $ 1,175,426 $ 1,045,179 $ 130,247 24,097 106,150
============ ============ ==========
</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. Any variance attributable
jointly to volume and rate changes is allocated to volume and rate in
proportion to the relationship of the absolute dollar amount of the change in
each.
** Volume amounts are reported at amortized cost; excludes pretax unrealized
gains of $105 million in 1998 and $44 million in 1997.
12
<PAGE>
In July 1998, Wachovia Bank increased the amount of its global
bank note program from $16 billion to $21.557 billion, which
includes $3.557 billion of notes previously issued under the
program. The program consists of issuances with original
maturities beginning at 7 days. Bank notes with original
maturities of one year or less are included in other short-term
borrowed funds, and bank notes with original maturities greater
than one year are classified as medium-term bank notes under
long-term debt. At June 30, 1998, Wachovia Bank had short-term
bank notes outstanding of $913 million with an average cost of
5.55 percent and an average maturity of 3.2 months. Medium-term
bank notes were $2.461 billion and had an average cost of 5.96
percent and an average maturity of 2.8 years on the same date.
Short-term issues under the global bank note program are rated P-1
by Moody's and A-1+ by Standard & Poor's, while medium-term issues
are rated Aa2 by Moody's and AA+ by Standard & Poor's.
Asset and Liability
Management,
Interest Rate
Sensitivity
and Liquidity
Management The income stream of the corporation is subject to risk resulting
from interest rate fluctuations to the extent there is a
difference between the amount of interest-earning assets and the
amount of interest-bearing liabilities that are prepaid,
withdrawn, mature or reprice in specified periods. The goal of
asset and liability management is to maintain high quality and
consistent growth of net interest income with acceptable levels of
risk to changes in interest rates. The corporation seeks to meet
this goal by influencing the maturity and repricing
characteristics of the various lending and deposit-taking lines of
business, by managing discretionary balance sheet asset and
liability portfolios, and by utilizing off-balance sheet financial
instruments.
Interest rate risk management is carried out by Funds Management
which operates under the policies established by the Finance
Committee of the corporation's board of directors and the
guidance of the Management Finance Committee. Rate risk,
liquidity, capital position and discretionary on- and off-balance
sheet activity are reviewed quarterly by the Board Finance
Committee. Interim oversight of the asset and liability
management function is provided through regular meetings of Funds
Management managers and the Chief Financial Officer. Funds
Management personnel carry out day-to-day activity within
approved risk management guidelines and strategies.
The corporation uses a number of tools to measure interest rate
risk, including 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
model projections are based on historical trends and management's
expectations of balance sheet growth patterns, spreads to market
rates, and prepayment behavior for assets and liabilities. The
Management Finance Committee regularly reviews the assumptions
used in the model.
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. The corporation's
policy limit for the maximum negative impact on net interest
income from a gradual change in interest rates of 200 basis
points over 12 months is 7.5 percent. Management generally has
maintained a risk position well within the policy guideline
level. As of June 30, 1998, the model indicated that a 200 basis
point gradual rise in rates over 12 months would result in
approximately a .7 percent decrease in net interest income, while
a 200 basis point decline in rates over the same period would
result in essentially no change in net interest income as
compared with an unchanged rate environment. Actual results will
differ from simulated results due to timing, magnitude and
frequency of interest rate changes and changes in market
conditions and management strategies, among other factors. The
corporation maintains trading accounts primarily to facilitate
customer investment and risk management needs. The market risk
inherent in these portfolios was immaterial at June 30, 1998.
13
<PAGE>
In addition to on-balance sheet instruments such as securities
and purchased funds, the corporation uses off-balance sheet
derivative instruments to manage interest rate risk, liquidity
and net interest income. Off-balance sheet instruments include
interest rate swaps, futures and options with indices that
directly correlate to on-balance sheet instruments. The
corporation has used off-balance sheet financial instruments,
principally interest rate swaps, over a number of years and
believes their use on a sound basis enhances the effectiveness of
asset and liability and interest rate sensitivity management.
Off-balance sheet asset and liability derivative transactions are
based on referenced or notional amounts. At June 30, 1998, the
corporation had $2.705 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. 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
$88 million at June 30, 1998. The fair value of all asset and
liability derivative positions for which counterparties were
exposed to the corporation amounted to $12 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>
June 30, 1998
-----------------------------------------------
Net
Fair
Value
Notional Fair Value Fair Value Gains
$ in millions Value Gains (Losses) (Losses)
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Convert floating rate liabilities to
fixed:
Swaps -- pay fixed/receive
floating ................................. $ 451 $---- $ (2) $ (2)
Convert fixed rate assets to floating:
Swaps -- pay fixed/receive
floating ................................. 333 ---- (10) (10)
Forward starting swaps -- pay
fixed/receive floating ................... 37 ---- ---- ----
Convert fixed rate liabilities to
floating:
Swaps -- receive fixed/pay
floating ................................. 1,275 82 ---- 82
Convert term liabilities with
quarterly rate resets to monthly:
Swaps -- receive floating/pay
floating ................................. 300 ---- ---- ----
Convert floating rate assets to fixed:
Swaps -- receive fixed/pay
floating ................................. 309 6 ---- 6
Index amortizing swaps -- receive
fixed/pay floating ....................... ---- ---- ---- ----
--------- ----- ------- ----------
Total derivatives ........................ $ 2,705 $ 88 $ (12) $ 76
========= ===== ======= ==========
<CAPTION>
June 30, 1997
------------------------------------------------
Net
Fair
Fair Fair Value
Notional Value Value Gains
$ in millions Value Gains (Losses) (Losses)
--------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Convert floating rate liabilities to
fixed:
Swaps -- pay fixed/receive
floating ................................. $ 263 $ ---- $ (2) $ (2)
Convert fixed rate assets to floating:
Swaps -- pay fixed/receive
floating ................................. 366 ---- (5) (5)
Forward starting swaps -- pay
fixed/receive floating ................... 18 ---- (1) (1)
Convert fixed rate liabilities to
floating:
Swaps -- receive fixed/pay
floating ................................. 1,500 21 (5) 16
Convert term liabilities with
quarterly rate resets to monthly:
Swaps -- receive floating/pay
floating ................................. 300 ---- ---- ----
Convert floating rate assets to fixed:
Swaps -- receive fixed/pay
floating ................................. 410 5 ---- 5
Index amortizing swaps -- receive
fixed/pay floating ....................... 250 4 ---- 4
--------- ------ ----------- -----------
Total derivatives ........................ $ 3,107 $ 30 $ (13) $ 17
========= ====== =========== ===========
</TABLE>
14
<PAGE>
Maturity Schedule of Asset and Liability Management Derivatives
-----------------------------------------------------------------
June 30, 1998
<TABLE>
Within
One Two Three Four
$ in millions Year Years Years Years
------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest rate swaps:
Pay fixed/receive floating:
Notional amount ......................... $ 200 $ 113 $ 106 $ 4
Weighted average rates received ......... 5.11% 5.16% 5.74% 5.70%
Weighted average rates paid ............. 6.69 6.80 6.15 8.71
Receive fixed/pay floating:
Notional amount ......................... $ 151 $ 151 $ 103 $ 102
Weighted average rates received ......... 6.57% 6.63% 6.48% 7.12%
Weighted average rates paid ............. 5.68 5.70 5.76 5.73
Receive floating/pay floating:
Notional amount ......................... ---- ---- $ 300 ----
Weighted average rates received ......... ---- ---- 5.66% ----
Weighted average rates paid ............. ---- ---- 5.66 ----
Total interest rate swaps:
Notional amount ......................... $ 351 $ 264 $ 509 $ 106
Weighted average rates received ......... 5.74% 6.00% 5.84% 7.06%
Weighted average rates paid ............. 6.25 6.17 5.78 5.85
Forward starting interest rate swaps:
Notional amount ......................... $ 26 ---- ---- ----
Weighted average rates paid ............. 5.86 ---- ---- ----
Total Derivatives
(notional amount) ....................... $ 377 $ 264 $ 509 $ 106
<CAPTION>
Over Average
Five Five Life
$ in millions Years Years Total (Years)
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
Interest rate swaps:
Pay fixed/receive floating:
Notional amount ......................... $ 104 $ 257 $ 784 2.69
Weighted average rates received ......... 5.60% 5.42% 5.37%
Weighted average rates paid ............. 5.18 6.61 6.42
Receive fixed/pay floating:
Notional amount ......................... $ 152 $ 925 $1,584 11.13
Weighted average rates received ......... 7.13% 7.48% 7.19%
Weighted average rates paid ............. 5.72 5.89 5.82
Receive floating/pay floating:
Notional amount ......................... ---- ---- $ 300 2.93
Weighted average rates received ......... ---- ---- 5.66%
Weighted average rates paid ............. ---- ---- 5.66
Total interest rate swaps:
Notional amount ......................... $ 256 $1,182 $2,668 7.72
Weighted average rates received ......... 6.50% 7.03% 6.48%
Weighted average rates paid ............. 5.50 6.05 5.98
Forward starting interest rate swaps:
Notional amount ......................... ---- $ 11 $ 37 3.02
Weighted average rates paid ............. ---- 5.87 5.86
Total Derivatives
(notional amount) ....................... $ 256 $1,193 $2,705 7.66
</TABLE>
Note -- Maturity is based upon expected average lives rather than
contractual lives.
Asset and liability management derivatives transactions are
accounted for following existing hedge account ing rules. As
discussed under New Accounting Standards, an accounting standard
was issued in June 1998 that will change the existing hedge
accounting rules. Under the existing hedge accounting rules, 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 securities
available-for-sale, 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, 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.
Nonperforming
Assets Nonperforming assets totaled $152.228 million or .34 percent of
loans and foreclosed property at June 30, 1998. The amount was
higher by $23.640 million or 18.4 percent from one year earlier
and up $4.505 million or 3 percent from March 31, 1998 due to an
increase in cash-basis assets.
15
<PAGE>
Real estate nonperforming assets, the largest category of total
nonperforming assets, were $109.680 million or .66 percent of
real estate loans and foreclosed real estate at June 30, 1998
versus $106.217 million or .71 percent one year earlier and
$102.530 million or .61 percent at the end of the first quarter.
Included in real estate nonperforming assets were real estate
nonperforming loans of $89.533 million at June 30, 1998, $81.545
million one year earlier and $81.766 million at March 31, 1998.
Commercial real estate nonperforming assets totaled $53.168
million or .62 percent of related loans and foreclosed real
estate compared with $67.676 million or .89 percent at the end of
the second quarter of 1997 and with $47.125 million or .54
percent at March 31, 1998. Commercial real estate nonperforming
loans were $42.544 million at June 30, 1998, $53.111 million one
year earlier and $40.981 million at the close of the first
quarter of 1998.
- -----------------------------------------------------------------
Nonperforming Assets and Contractually Past Due Loans Table 6
- --------------------------------------------------------------------------------
(thousands)
<TABLE>
June 30 Mar. 31 Dec. 31 Sept. 30 June 30
1998 1998 1997 1997 1997
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Nonperforming assets:
Cash-basis assets ............................... $127,376 $121,734 $101,156 $95,580 $97,813
Restructured loans .............................. ---- ---- ---- ---- ----
-------- -------- ---------- -------- --------
Total nonperforming loans ................... 127,376 121,734 101,156 95,580 97,813
Foreclosed property:
Foreclosed real estate ......................... 33,604 35,518 38,071 33,930 35,710
Less valuation allowance ....................... 13,457 14,754 16,625 10,983 11,038
Other foreclosed assets ........................ 4,705 5,225 6,893 5,534 6,103
-------- -------- ---------- -------- --------
Total foreclosed property ................... 24,852 25,989 28,339 28,481 30,775
-------- -------- ---------- -------- --------
Total nonperforming assets .................. $152,228 $147,723 $129,495 $124,061 $128,588
======== ======== ========== ======== ========
Nonperforming loans to period-end loans ......... .29% .27% .23% .23% .24%
Nonperforming assets to period-end loans and
foreclosed property ............................ .34 .33 .29 .30 .32
Period-end allowance for loan losses times
nonperforming loans ............................ 4.30x 4.47x 5.38x 5.43x 5.31x
Period-end allowance for loan losses times
nonperforming assets ........................... 3.60 3.69 4.21 4.19 4.04
Contractually past due loans (accruing loans
past due 90 days or more) ....................... $112,720 $87,569 $114,343 $81,931 $86,084
======== ======== ========== ======== ========
</TABLE>
Provision and
Allowance for
Loan Losses The provision for loan losses was $68.441 million for the second
quarter and $142.567 million for the first half of the year,
higher by $5.394 million or 8.6 percent and $17.289 million or
13.8 percent, respectively, from the same periods in 1997. The
provision in the second quarter decreased $5.685 million or 7.7
percent from the preceding three months.
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 credit deterioration or changes in risk
profile. Factors considered in this assessment include the
strength and consistency of the corporation's underwriting
standards and charge-off policy, current and anticipated economic
conditions, historical credit loss experience, and the
composition of the loan portfolio. Credit evaluations are made on
a cash flow analysis basis with follow-up credit reviews
consistently maintained. In addition, the corporation enforces an
aggressive loan loss policy of early recognition and charge-off
of troubled credits. Effective with the first quarter of 1998,
management began implementing as part of its overall credit
review process assessments of Year 2000 compliance among
borrowers.
Net loan losses for the quarter were $68.223 million or .62
percent of average loans, up $5.199 million or 8.2 percent from
the same three months of 1997. Year to date, net charge-offs
totaled $142.331 million or .65 percent of average loans, a rise
of $17.091 million or 13.6 percent from a year earlier. Increases
in both periods reflected higher credit card net losses,
partially offset by lower net charge-offs in other retail loans
and by a rise in real estate net recoveries. Net loan losses
declined $5.885 million or 7.9 percent from the
16
<PAGE>
first quarter of 1998 due to lower net charge-offs in credit
cards and other retail loans and to higher net recoveries in real
estate loans. Excluding credit cards, net loan losses totaled
$5.478 million or .06 percent of average loans for the quarter
and $14.464 million or .08 percent for the first half compared
with $9.662 million or .12 percent and $22.834 million or .14
percent, respectively, in 1997 and $8.986 million or .09 percent
in the first three months of 1998. Net loan losses are expected
to increase in the third quarter of 1998 from the second quarter,
reflecting higher losses anticipated in the credit card
portfolio.
Credit card net loan losses were $62.745 million or 4.52 percent
of average credit card loans for the second period and $127.867
million or 4.53 percent year to date, higher by $9.383 million or
17.6 percent and $25.461 million or 24.9 percent, respectively,
from a year earlier. Net charge-offs associated with other retail
loans declined $3.544 million or 49.9 percent for the quarter and
$4.443 million or 28.9 percent for the first half, largely
reflecting decreased losses in automobile sales financing. Net
recoveries in real estate loans previously charged-off rose to
$2.944 million for the three months from $701 thousand a year
earlier and to $4.272 million for the first six months of 1998
from $912 thousand in 1997.
Selected data on the corporation's managed credit card portfolio,
which includes securitized loans, appears in the following table.
Managed Credit Card Data
-----------------------------------------------------------------
<TABLE>
1998 1997
--------------------------- ----------
$ in thousands Second First Fourth
Quarter Quarter Quarter
---------- ------ ----------
<S> <C> <C> <C>
Average credit card outstandings ......... $6,056,770 $6,246,315 $6,281,488
Net loan losses .......................... 67,978 69,409 67,735
Annualized net loan losses to
average loans ............................ 4.49% 4.44% 4.31%
Delinquencies (30 days or
more) to period-end loans ................ 2.69 2.68 2.75
1997 Six Months Ended
$ in thousands -------------------------- June 30
Third Second
Quarter Quarter 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average credit card outstandings ......... $6,221,174 $6,154,577 $6,151,018 $6,175,984
Net loan losses .......................... 59,595 58,762 137,387 113,058
Annualized net loan losses to
average loans ............................ 3.83% 3.82% 4.47% 3.66%
Delinquencies (30 days or
more) to period-end loans ................ 2.77 2.44 2.69 2.44
</TABLE>
At June 30, 1998, the allowance for loan losses was $547.572
million, representing 1.23 percent of loans and 430 percent of
nonperforming loans. This compared with $519.335 million,
representing 1.29 percent of loans and 531 percent of
nonperforming loans one year earlier, and $544.741 million,
representing 1.22 percent of loans and 447 percent of
nonperforming loans at March 31, 1998.
17
<PAGE>
- -----------------------------------
Allowance for Loan Losses Table 7
- --------------------------------------------------------------------------------
(thousands)
<TABLE>
1998 1997
--------------------- ----------
Second First Fourth
Quarter Quarter Quarter
--------- ------- ----------
<S> <C> <C> <C>
Summary of Transactions
Balance at beginning of period ................ $544,741 $544,723 $ 519,356
Additions from acquisitions ................... 2,613 ---- 24,641
Provision for loan losses ..................... 68,441 74,126 76,915
Deduct net loan losses:
Loans charged off:
Commercial .................................. 3,252 2,662 3,801
Credit card ................................. 70,015 72,061 68,796
Other revolving credit ...................... 2,927 2,089 3,659
Other retail ................................ 6,624 10,388 9,032
Real estate ................................. 634 1,209 5,786
Lease financing ............................. 726 886 916
Foreign ..................................... ---- ---- ----
--------- -------- -----------
Total ..................................... 84,178 89,295 91,990
Recoveries:
Commercial .................................. 1,271 1,900 1,184
Credit card ................................. 7,270 6,939 6,251
Other revolving credit ...................... 630 690 588
Other retail ................................ 3,070 3,015 2,577
Real estate ................................. 3,578 2,537 5,125
Lease financing ............................. 136 106 76
Foreign ..................................... ---- ---- ----
--------- -------- -----------
Total ..................................... 15,955 15,187 15,801
--------- -------- -----------
Net loan losses .............................. 68,223 74,108 76,189
--------- -------- -----------
Balance at end of period ...................... $547,572 $544,741 $ 544,723
========= ======== ===========
Net Loan Losses (Recoveries)
by Category
Commercial .................................... $ 1,981 $ 762 $ 2,617
Credit card ................................... 62,745 65,122 62,545
Other revolving credit ........................ 2,297 1,399 3,071
Other retail .................................. 3,554 7,373 6,455
Real estate ................................... (2,944) (1,328) 661
Lease financing ............................... 590 780 840
Foreign ....................................... ---- ---- ----
--------- -------- -----------
Total ..................................... $ 68,223 $ 74,108 $ 76,189
========= ======== ===========
Net loan losses -- excluding credit cards ..... $ 5,478 $ 8,986 $ 13,644
Annualized Net Loan Losses
(Recoveries) to Average Loans
by Category
Commercial .................................... .05% .02% .08%
Credit card ................................... 4.52 4.54 4.36
Other revolving credit ........................ 1.86 1.20 2.81
Other retail .................................. .34 .70 .61
Real estate ................................... (.07) (.03) .02
Lease financing ............................... .19 .29 .32
Foreign ....................................... ---- ---- ----
Total loans ................................... .62 .68 .73
Total loans -- excluding credit cards ......... .06 .09 .15
Period-end allowance to outstanding loans ..... 1.23% 1.22% 1.23%
<CAPTION>
1997 Six Months Ended
--------------------- June 30
Third Second
Quarter Quarter 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Summary of Transactions
Balance at beginning of period ................ $519,335 $519,312 $544,723 $519,297
Additions from acquisitions ................... ---- ---- 2,613 ----
Provision for loan losses ..................... 62,756 63,047 142,567 125,278
Deduct net loan losses:
Loans charged off:
Commercial .................................. 686 1,772 5,914 4,767
Credit card ................................. 61,277 59,935 142,076 115,935
Other revolving credit ...................... 2,520 2,259 5,016 4,385
Other retail ................................ 8,777 10,027 17,012 21,992
Real estate ................................. 1,469 1,764 1,843 4,309
Lease financing ............................. 988 1,218 1,612 2,584
Foreign ..................................... ---- ---- ---- ----
--------- -------- ---------- --------
Total ..................................... 75,717 76,975 173,473 153,972
Recoveries:
Commercial .................................. 988 1,289 3,171 1,999
Credit card ................................. 6,894 6,573 14,209 13,529
Other revolving credit ...................... 575 591 1,320 1,198
Other retail ................................ 2,638 2,929 6,085 6,622
Real estate ................................. 1,787 2,465 6,115 5,221
Lease financing ............................. 100 104 242 163
Foreign ..................................... ---- ---- ---- ----
--------- -------- ---------- --------
Total ..................................... 12,982 13,951 31,142 28,732
--------- -------- ---------- --------
Net loan losses .............................. 62,735 63,024 142,331 125,240
--------- -------- ---------- --------
Balance at end of period ...................... $519,356 $519,335 $547,572 $519,335
========= ======== ========== ========
Net Loan Losses (Recoveries)
by Category
Commercial .................................... $ (302) $ 483 $ 2,743 $ 2,768
Credit card ................................... 54,383 53,362 127,867 102,406
Other revolving credit ........................ 1,945 1,668 3,696 3,187
Other retail .................................. 6,139 7,098 10,927 15,370
Real estate ................................... (318) (701) (4,272) (912)
Lease financing ............................... 888 1,114 1,370 2,421
Foreign ....................................... ---- ---- ---- ----
--------- -------- ---------- --------
Total ..................................... $62,735 $ 63,024 $142,331 $125,240
========= ======== ========== ========
Net loan losses -- excluding credit cards ..... $ 8,352 $ 9,662 $ 14,464 $ 22,834
Annualized Net Loan Losses
(Recoveries) to Average Loans
by Category
Commercial .................................... (.01%) .01% .04% .04%
Credit card ................................... 3.85 3.85 4.53 3.68
Other revolving credit ........................ 1.87 1.59 1.54 1.51
Other retail .................................. .61 .69 .52 .73
Real estate ................................... (.01) (.02) (.05) (.01)
Lease financing ............................... .35 .50 .23 .56
Foreign ....................................... ---- ---- ---- ----
Total loans ................................... .63 .64 .65 .65
Total loans -- excluding credit cards ......... .10 .12 .08 .14
Period-end allowance to outstanding loans ..... 1.27% 1.29% 1.23% 1.29%
</TABLE>
Noninterest
Income
Total other operating revenue, which excludes securities sales,
grew $55.449 million or 21.4 percent for the second quarter from a year earlier
and $112.303 million or 23.1 percent for the first half. Capital markets income,
deposit account service revenues, mortgage fees, fees for trust services and
investment fees led the gains in both periods. Total other operating revenue
included branch sale gains of $18.659 million in the second quarter of 1997 and
$17.155 million in the first three months of 1998. Excluding these gains, total
18
<PAGE>
other operating revenue rose $74.108 million or 30.8 percent for
the second period and $113.807 million or 24.3 percent year to
date and increased $48.475 million or 18.2 percent (72.7 percent
annualized) from the first quarter. Management anticipates a
slight moderation in total other operating revenue for the third
quarter of 1998 from the second quarter but still expects gains
in most categories, based on business trends in the initial part
of the quarter.
Capital markets income expanded $29.128 million or more than 250
percent for the quarter from a year earlier and increased $37.926
million or more than 200 percent for the first half of the year.
Growth was driven largely by good gains in consulting services,
corporate financing activities, foreign exchange transactions and
derivatives activities. In June, Wachovia received Tier I powers
for its Section 20 capital markets subsidiary. These powers
enable the subsidiary to engage in underwriting and dealing in
municipal revenue bonds, commercial paper, mortgage related
securities and consumer related receivables, all of investment
quality rating. Tier II powers permitting further expansion into
corporate debt and equity securities without investment grade
limitation are expected in 1999.
Deposit account service charge revenues rose $7.889 million or
10.6 percent for the three months and $14.669 million or 9.9
percent for the first six months. Increases in both periods
primarily occurred in overdraft charges and in commercial
analysis fees.
Mortgage fees grew $6.348 million or 123.2 percent for the second
period and $8.882 million or 86 percent year to date, reflecting
increased mortgage service premiums, gains on loans sold to the
secondary market and higher levels of mortgage origination fees.
Fees for trust services rose $5.134 million or 11.8 percent and
$10.337 million or 12.2 percent for the three and six months,
respectively. Growth in Personal Financial Services and in fees
associated with the Wachovia Funds, the corporation's proprietary
family of mutual funds, helped account for the gains. At June 30,
1998, the Wachovia Funds had assets of $6.178 billion compared
with $4.886 billion one year earlier. Total trust assets under
management increased approximately 25 percent from June 30, 1997.
In April, Wachovia completed its acquisition of Hunt, DuPree,
Rhine and Associates, Inc., a benefits consulting firm, and its
affiliate, Retirement Plan Securities, Inc., a registered
investment advisor. The acquisition enables the corporation to
offer expanded benefit consulting services to its middle market
corporate customers.
Investment fees increased $3.132 million or 36.7 percent for the
quarter and $5.867 million or 34.5 percent for the first half.
Growth occurred primarily in fees associated with customer mutual
fund trading, retirement plan commission income and brokerage
commissions.
Higher debit card transactions and increased foreign usage of
ATMs helped push electronic banking income up $2.989 million or
19.1 percent for the second period and $4.618 million or 15.2
percent year to date.
Credit card fee income declined modestly for the quarter but
remained slightly higher for the first half of the year.
Remaining combined categories of total other operating revenue,
excluding branch sale gains, rose $20.225 million or 52.8 percent
for the three months and $30.557 million or 39.3 percent year to
date. Insurance premiums and commissions decreased slightly for
the quarter but were moderately higher for the first half.
Bankers' acceptance and letter of credit fees expanded $892
thousand or 10 percent for the second period and $2.550 million
or 15.2 percent year to date. Other service charges and fees rose
moderately for both the quarter and first half, while other
income was up $18.865 million or 162.2 percent for the three
months and $26.721 million or 102.8 percent for the first six
months.
Including securities sales, total noninterest income rose $57.943
million or 22.3 percent for the second period and $116.396
million or 23.8 percent year to date. Net gains on securities
sales totaled $2.992
19
<PAGE>
million for the three months and $6.149 million for the first six
months versus $498 thousand and $2.056 million, respectively, in
1997.
- ----------------------------
Noninterest Income Table 8
- --------------------------------------------------------------------------------
(thousands)
<TABLE>
1998 1997
--------------------- --------
Second First Fourth
Quarter Quarter Quarter
-------- ------ --------
<S> <C> <C> <C>
Service charges on deposit accounts ............... $ 82,465 $ 80,874 $ 80,977
Fees for trust services ........................... 48,802 46,053 47,378
Credit card income -- net of interchange
payments ......................................... 43,077 38,544 38,382
Electronic banking ................................ 18,667 16,395 17,355
Capital markets income ............................ 40,304 16,110 16,040
Investment fees ................................... 11,665 11,191 9,541
Mortgage fees ..................................... 11,502 7,704 7,509
Insurance premiums and commissions ................ 8,135 7,568 7,169
Bankers' acceptance and letter of credit fees ..... 9,802 9,569 8,116
Other service charges and fees .................... 10,125 10,350 9,257
Other income ...................................... 30,499 39,365 21,534
---------- -------- ---------
Total other operating revenue ................. 315,043 283,723 263,258
Securities gains (losses) ......................... 2,992 3,157 (1,693)
---------- -------- ---------
Total ......................................... $ 318,035 $286,880 $261,565
========== ======== =========
1997 Six Months Ended
------------------- June 30
Third Second
Quarter Quarter 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Service charges on deposit accounts ............... $ 76,584 $ 74,576 $163,339 $148,670
Fees for trust services ........................... 43,653 43,668 94,855 84,518
Credit card income -- net of interchange
payments ......................................... 43,182 43,814 81,621 80,670
Electronic banking ................................ 16,841 15,678 35,062 30,444
Capital markets income ............................ 14,994 11,176 56,414 18,488
Investment fees ................................... 9,721 8,533 22,856 16,989
Mortgage fees ..................................... 5,711 5,154 19,206 10,324
Insurance premiums and commissions ................ 7,966 8,170 15,703 15,070
Bankers' acceptance and letter of credit fees ..... 9,589 8,910 19,371 16,821
Other service charges and fees .................... 9,671 9,622 20,475 19,822
Other income ...................................... 18,135 30,293 69,864 44,647
-------- -------- --------- ---------
Total other operating revenue ................. 256,047 259,594 598,766 486,463
Securities gains (losses) ......................... 1,091 498 6,149 2,056
-------- -------- --------- ---------
Total ......................................... $257,138 $260,092 $604,915 $488,519
======== ======== ========= =========
</TABLE>
Noninterest
Expense Total noninterest expense increased $96.593 million or 23 percent
for the second quarter and $202.241 million or 25 percent for the
first half. Included in total noninterest expense for 1998 were
merger-related charges of $30.849 million, pretax, for the second
period and $66.417 million, pretax, year to date, related to
systems conversions, signage changes and employee benefits
expenses principally in Virginia. Excluding integration-related
expenses, noninterest expense on a core operating basis rose
$65.744 million or 15.6 percent for the second quarter and
$135.824 million or 16.8 percent for the first half and was higher
by $27.464 million or 6 percent from the first three months of the
year. Management estimates integration charges for the remainder
of 1998 will total approximately $10 million, pretax, with the
majority of the charges expected to be taken in the third quarter
for the corporation's new Florida operations. Excluding
merger-related charges, noninterest expense in the third quarter
of 1998 is expected to decrease from the second quarter based on
lower anticipated incentive pay and other personnel expenses.
Total personnel expense rose $43.490 million or 19.9 percent for
the three months from a year earlier and $91.575 million or 21.3
percent for the first six months. Salaries expense grew $40.744
million or 22.8 percent and $81.676 million or 23.3 percent for
the quarter and first half, respectively, driven principally by
higher incentive pay for revenue generating businesses. Employee
benefits expense was up $2.746 million or 6.9 percent for the
second period and $9.899 million or 12.4 percent year to date,
reflecting increases in retirement benefits costs and in payroll
taxes associated with an expanded employee base.
Combined net occupancy and equipment expense was up $11.958
million or 18.8 percent for the quarter and $18.401 million or
14.7 percent for the first half. Net occupancy expense rose
$6.462 million or 23.4 percent for the three months and $11.751
million or 20.9 percent for the first six months, due to building
maintenance and operating expenses of acquired companies. Higher
depreciation, leasing and maintenance costs helped push equipment
expense up $5.496 million or 15.4 percent for the second period
and $6.650 million or 9.6 percent year to date.
Remaining combined categories of noninterest expense, excluding
merger-related charges, increased $10.296 million or 7.5 percent
for the quarter and $25.848 million or 10.2 percent for the first
half. Amortization of intangible assets accounted for the largest
portion of the growth, rising $6.962 million for the three months
and $13.815 million for the first six months, on higher levels of
goodwill and deposit base
20
<PAGE>
intangibles following the corporation's purchase acquisitions.
Advertising expense grew $2.206 million or 10.8 percent for the
second period and $4.370 million or 12.2 percent year to date,
while outside data processing, programming and software expense
declined $10.744 million or 39.8 percent for the quarter and
$12.584 million or 30.3 percent for the first half due, in part,
to reductions in Year 2000 spending.
The corporation has been working since late 1995 to identify and
remediate data recognition problems that will be caused in
computer systems and software by the change in date from the year
1999 to the year 2000. Management has identified all business and
operational functions that will be impacted by the date change
and has been moving aggressively to convert and test its
application systems for Year 2000 date recognition. Conversion of
all in-house application systems was substantially completed by
mid-year 1998, with in-house testing expected to be finished by
the end of the year. Wachovia's schedule for Year 2000 compliance
incorporates 21st century date testing as part of the conversion
process and encompasses all application systems, not simply those
considered critical to operations. Throughout 1999, the
corporation will conduct testing with external entities, such as
business partners and the Federal Reserve, as they become Year
2000 ready. The corporation also is working to assess Year 2000
readiness on the part of its current and future vendors,
particularly those vendors considered critical to the ongoing
operations and business of the corporation. Spending for Year
2000 testing and conversion was approximately $8 million for the
second quarter and $14 million year to date. Management estimates
that total Year 2000 project costs will be approximately $60
million, with $52 million having been spent through June 30,
1998. The total projected cost is up from $55 million estimated
earlier due to additional internal expenditures for testing. The
corporation's Year 2000 project costs are not expected to have a
material impact on its results of operations, liquidity or
capital resources. The impact of Year 2000 noncompliance by all
outside parties with whom the corporation may transact business
cannot be assessed fully at this time.
- -----------------------------
Noninterest Expense Table 9
- --------------------------------------------------------------------------------
(thousands)
<TABLE>
1998 1997
------------------------- -----------
Second First Fourth
Quarter Quarter Quarter
----------- -------- -----------
<S> <C> <C> <C>
Salaries ................................ $ 219,731 $ 212,758 $ 200,859
Employee benefits ....................... 42,675 46,966 43,391
----------- --------- -----------
Total personnel expense ............. 262,406 259,724 244,250
Net occupancy expense ................... 34,119 33,783 30,687
Equipment expense ....................... 41,288 34,687 36,619
Postage and delivery .................... 13,368 13,278 12,539
Outside data processing, programming
and software ........................... 16,244 12,737 22,952
Stationery and supplies ................. 7,233 7,506 7,637
Advertising and sales promotion ......... 22,555 17,738 15,768
Professional services ................... 14,522 11,304 16,348
Travel and business promotion ........... 7,638 6,439 7,433
Regulatory agency fees and other bank
services ............................... 4,075 4,485 3,523
Amortization of intangible assets ....... 9,226 9,117 6,433
Foreclosed property expense, net of
income ................................. 88 130 492
Personal computer impairment charge* ---- ---- 67,202
Merger-related charges* ................. 30,849 35,568 220,330
Other expense ........................... 53,383 47,753 40,205
----------- --------- -----------
Total ............................... $ 516,994 $ 494,249 $ 732,418
=========== ========= ===========
Overhead ratio .......................... 56.8% 57.2% 88.0%
Overhead ratio without nonrecurring
charges ................................ 53.4 53.1 53.5
1997 Six Months Ended
----------------------- June 30
Third Second
Quarter Quarter 1998 1997
--------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Salaries ................................ $ 190,434 $ 178,987 $ 432,489 $ 350,813
Employee benefits ....................... 39,918 39,929 89,641 79,742
--------- --------- ------------- ---------
Total personnel expense ............. 230,352 218,916 522,130 430,555
Net occupancy expense ................... 29,816 27,657 67,902 56,151
Equipment expense ....................... 36,283 35,792 75,975 69,325
Postage and delivery .................... 11,883 11,899 26,646 24,235
Outside data processing, programming
and software ........................... 21,980 26,988 28,981 41,565
Stationery and supplies ................. 8,415 7,676 14,739 14,908
Advertising and sales promotion ......... 20,355 20,349 40,293 35,923
Professional services ................... 14,102 14,385 25,826 23,663
Travel and business promotion ........... 6,120 6,154 14,077 11,662
Regulatory agency fees and other bank
services ............................... 3,458 3,791 8,560 7,619
Amortization of intangible assets ....... 2,347 2,264 18,343 4,528
Foreclosed property expense, net of
income ................................. 487 951 218 896
Personal computer impairment charge* ---- ---- ---- ----
Merger-related charges* ................. ---- ---- 66,417 ----
Other expense ........................... 39,703 43,579 101,136 87,972
--------- --------- ------------- ---------
Total ............................... $ 425,301 $ 420,401 $ 1,011,243 $ 809,002
========= ========= ============= =========
Overhead ratio .......................... 53.6% 53.4% 57.0% 52.8%
Overhead ratio without nonrecurring
charges ................................ 53.6 53.4 53.3 52.8
</TABLE>
* Nonrecurring charges.
21
<PAGE>
Income Taxes Applicable income taxes increased $13.350 million or 14.5 percent
for the quarter from a year earlier and were higher by $19.305
million or 10.8 percent for the first half. Income taxes computed
at the statutory rate are reduced primarily by the assumed tax
effect of interest income 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 certain
state and municipal debt instruments is exempt from federal taxes
and in some cases state taxes. 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>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Income before income taxes ........................................ $ 315,304 $ 288,843 $ 602,952 $ 568,690
========== ========== ========== ==========
Federal income taxes at statutory rate ............................ $ 110,356 $ 101,095 $ 211,033 $ 199,042
State and local income taxes -- net of federal benefit ............ 6,688 4,692 5,667 8,401
Effect of tax-exempt securities interest and other income ......... (13,144) (12,119) (25,526) (24,533)
Other items ....................................................... 1,488 (1,630) 6,541 (4,500)
---------- ---------- ---------- ----------
Total tax expense ............................................ $ 105,388 $ 92,038 $ 197,715 $ 178,410
========== ========== ========== ==========
Current:
Federal .......................................................... $ 27,652 $ 58,713 $ 96,416 $ 125,595
Foreign .......................................................... 246 106 361 165
State and local .................................................. 2,069 2,727 5,798 4,605
---------- ---------- ---------- ----------
Total ........................................................ 29,967 61,546 102,575 130,365
Deferred:
Federal .......................................................... 67,200 25,997 92,220 39,726
State and local .................................................. 8,221 4,495 2,920 8,319
---------- ---------- ---------- ----------
Total ........................................................ 75,421 30,492 95,140 48,045
---------- ---------- ---------- ----------
Total tax expense ............................................ $ 105,388 $ 92,038 $ 197,715 $ 178,410
========== ========== ========== ==========
</TABLE>
22
<PAGE>
New Accounting
Standards In December 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 127, "Deferral of
the Effective Date of Certain Provisions of FASB Statement No.
125, an amendment of FASB Statement No. 125" (FASB 127). FASB 127
delayed until 1998 certain provisions of FASB 125 that deal with
repurchase agreements, securities lending and other similar
transactions and pledged collateral. Adoption of FASB 127 was not
material.
In June 1997, Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (FASB 130), was issued and
establishes standards for reporting and displaying comprehensive
income and its components. FASB 130 requires comprehensive income
and its components, as recognized under the accounting standards,
to be displayed in a financial statement with the same prominence
as other financial statements. The disclosure requirements of
FASB 130 have been included in the corporation's consolidated
statements of shareholders' equity.
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (FASB
131), also issued in June 1997, establishes new standards for
reporting information about operating segments in annual and
interim financial statements. The standard also requires
descriptive information about the way the operating segments are
determined, the products and services provided by the segments
and the nature of differences between reportable segment
measurements and those used for the consolidated enterprise. This
standard is effective for years beginning after December 15,
1997. Adoption in interim financial statements is not required
until the year after initial adoption, however comparative prior
period information is required. FASB 131 will be adopted, as
required, beginning with year-end 1998. The disclosure
requirements will have no impact on the corporation's financial
position or results of operations.
In March 1998, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1),
which provides guidance as to when it is or is not appropriate to
capitalize the cost of software developed or obtained for
internal use. The corporation elected early adoption of SOP 98-1.
The effect of the adoption was not material.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (FASB 133).
FASB 133 establishes new accounting and reporting requirements
for derivative instruments, including certain derivative
instruments embedded in other contracts and hedging activities.
The standard requires all derivatives to be measured at fair
value and recognized as either assets or liabilities in the
statement of condition. Under certain conditions, a derivative
may be specifically designated as a hedge. Accounting for the
changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. Adoption of
the standard is required for the corporation's December 31, 2000
financial statements with early adoption allowed as of the
beginning of any quarter after June 30, 1998. Management is in
the process of assessing the impact and period of adoption of the
standard. Adoption is not expected to result in a material
financial impact.
23
<PAGE>
---------------------------------------------
Financial Condition and Capital Ratios
-----------------------------------------------------------------
Assets at June 30, 1998 were $64.727 billion, with $57.303 billion
of interest-earning assets and $44.459 billion of loans.
Comparable amounts one year earlier were $59.178 billion of
assets, $52.654 billion of interest-earning assets and $40.201
billion of loans. At March 31, 1998, assets totaled $65.125
billion, interest-earning assets were $57.464 billion and loans
were $44.498 billion.
Deposits were $39.915 billion at June 30, 1998, including $31.841
billion of interest-bearing deposits, representing 79.8 percent
of the total. Deposits one year earlier were $37.015 billion,
with interest-bearing deposits of $28.726 billion or 77.6 percent
of the total, and at March 31, 1998, deposits were $39.857
billion, including $31.331 billion of interest-bearing deposits
or 78.6 percent of the total. During the first quarter of 1998,
the corporation sold selected branches primarily for regulatory
purposes in connection with its Virginia mergers, impacting
deposit levels at the close of both the first and second
quarters.
Shareholders' equity at the end of the second quarter of 1998
totaled $5.376 billion, an increase of $892.333 million or 19.9
percent from $4.483 billion one year earlier. Included in
shareholders' equity at June 30, 1998 was $747.744 million from
common stock issued in connection with the corporation's fourth
quarter 1997 purchase acquisitions of Jefferson Bankshares and
1st United Bancorp. Purchase transactions consummated during the
second quarter of 1998 resulted in the issuance of 1.099 million
shares of common stock with a corresponding increase in
shareholders' equity of $83.313 million. Shareholders' equity at
June 30, 1998 also included unrealized gains of $74.990 million,
net of tax, on securities available-for-sale marked to fair
market value compared with $44.329 million, net of tax, one year
earlier. On June 23, the corporation's board of directors
authorized the repurchase of up to 12 million shares of the
corporation's common stock. The board's action to repurchase
shares is effective through January 28, 2000. During the second
quarter of 1998, the corporation repurchased a total of 1,245,800
shares of its common stock, including 320,800 shares under the
June 23 authorization. The shares were repurchased at an average
price of $83.694 per share for a total cost of $104.266 million.
At its meeting on July 24, 1998, the corporation's board of
directors declared a third quarter dividend of $.49 per share,
payable September 1 to shareholders of record on August 6. The
dividend is higher by 11.4 percent from $.44 per share paid in
the same quarter of 1997. For the year to date, the dividend will
total $1.37 per share, an increase of 10.5 percent from $1.24 per
share in 1997.
Intangible assets at June 30, 1998 totaled $657.891 million,
consisting of $543.057 million of goodwill, $100.729 million of
deposit base intangibles, $12.683 million of mortgage servicing
rights and $1.422 million of other intangibles, principally
purchased credit card premiums. Intangible assets one year
earlier were $113.707 million, with $46.464 million of goodwill,
$53.052 million of deposit base intangibles, $13.343 million of
mortgage servicing rights and $848 thousand of other intangibles.
The increase in goodwill and deposit base intangibles from the
end of the second quarter of 1997 resulted from the corporation's
purchase acquisitions of Jefferson Bankshares and 1st United
Bancorp in the fourth quarter of 1997 and of Ameribank Bancshares
in the second quarter of 1998.
24
<PAGE>
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 fair 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.
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. It is the policy of the
corporation that it and its banking subsidiaries be well
capitalized at all times.
At June 30, 1998, the corporation's Tier I to risk-adjusted
assets ratio was 8.81 percent and total capital to risk-adjusted
assets was 11.44 percent. The Tier I leverage ratio was 8.91
percent. Included in the capital ratios at June 30, 1998 was
$996.180 million of trust capital securities versus $995.804
million one year earlier.
- ----------------------------------------
Capital Components and Ratios Table 11
- --------------------------------------------------------------------------------
(thousands)
<TABLE>
1998
-----------------------------
Second First
Quarter Quarter
------------- ----------
<S> <C> <C>
Tier I capital:
Common shareholders' equity ....................................... $ 5,375,793 $ 5,236,700
Trust capital securities .......................................... 996,180 996,087
Less ineligible intangible assets ................................. 669,448 604,325
Unrealized gains on securities available-for-sale, net of tax ..... (74,990) (63,849)
------------- -----------
Total Tier I capital ........................................... 5,627,535 5,564,613
Tier II capital:
Allowable allowance for loan losses ............................... 547,572 544,741
Allowable long-term debt .......................................... 1,138,711 1,193,533
------------- -----------
Tier II capital additions ...................................... 1,686,283 1,738,274
------------- -----------
Total capital .................................................. $ 7,313,818 $ 7,302,887
============= ===========
Risk-adjusted assets ............................................... $63,906,411 $62,747,353
Quarterly average assets * ......................................... $63,184,419 $62,457,463
Risk-based capital ratios:
Tier I capital .................................................... 8.81% 8.87%
Total capital ..................................................... 11.44 11.64
Tier I leverage ratio .............................................. 8.91 8.91
<CAPTION>
1997
----------------------------------------------
Fourth Third Second
Quarter Quarter Quarter
------------- --------- ---------
<S> <C> <C> <C>
Tier I capital:
Common shareholders' equity ....................................... $ 5,174,301 $ 4,517,021 $ 4,483,461
Trust capital securities .......................................... 995,993 995,899 995,804
Less ineligible intangible assets ................................. 634,052 93,101 94,767
Unrealized gains on securities available-for-sale, net of tax ..... (71,098) (68,657) (44,329)
------------- ----------- -----------
Total Tier I capital ........................................... 5,465,144 5,351,162 5,340,169
Tier II capital:
Allowable allowance for loan losses ............................... 544,723 519,356 519,335
Allowable long-term debt .......................................... 1,193,451 1,283,165 1,283,093
------------- ----------- -----------
Tier II capital additions ...................................... 1,738,174 1,802,521 1,802,428
------------- ----------- -----------
Total capital .................................................. $ 7,203,318 $ 7,153,683 $ 7,142,597
============= =========== ===========
Risk-adjusted assets ............................................... $59,543,254 $56,481,076 $52,408,490
Quarterly average assets * ......................................... $59,139,712 $57,042,701 $56,931,778
Risk-based capital ratios:
Tier I capital .................................................... 9.18% 9.47% 10.19%
Total capital ..................................................... 12.10 12.67 13.63
Tier I leverage ratio .............................................. 9.24 9.38 9.38
</TABLE>
* Excludes ineligible intangible assets and average unrealized gains on
securities available-for-sale, net of tax.
25
<PAGE>
Wachovia Corporation and Subsidiaries
- --------------------------------------
Consolidated Statements of Condition
- --------------------------------------------------------------------------------
$ in thousands
<TABLE>
June 30 December 31 June 30
1998 1997 1997
<S> <C> <C> <C>
ASSETS
Cash and due from banks ..................................................... $3,425,987 $ 4,221,818 $3,707,049
Interest-bearing bank balances .............................................. 204,751 133,191 83,620
Federal funds sold and securities purchased under resale agreements ......... 326,075 1,589,234 320,519
Trading account assets ...................................................... 1,133,339 999,122 845,752
Securities available-for-sale ............................................... 9,524,358 8,909,537 9,932,421
Securities held-to-maturity (fair value of $1,716,374, $1,578,464 and
$1,333,211, respectively)................................................... 1,655,517 1,509,339 1,271,149
Loans, net of unearned income ............................................... 44,458,548 44,194,382 40,200,976
Less allowance for loan losses .............................................. 547,572 544,723 519,335
------------ ----------- ------------
Net loans ................................................................. 43,910,976 43,649,659 39,681,641
Premises and equipment ...................................................... 865,864 810,155 779,604
Due from customers on acceptances ........................................... 613,154 628,398 866,489
Other assets ................................................................ 3,066,621 2,946,616 1,689,614
------------ ----------- ------------
Total assets .............................................................. $ 64,726,642 $65,397,069 $ 59,177,858
============ =========== ============
LIABILITIES
Deposits in domestic offices:
Demand ..................................................................... $ 8,074,904 $ 8,598,055 $ 8,289,369
Interest-bearing demand .................................................... 4,684,288 4,654,172 4,051,071
Savings and money market savings ........................................... 11,639,530 11,679,432 10,397,600
Savings certificates ....................................................... 9,628,631 10,934,720 10,245,049
Large denomination certificates ............................................ 2,989,187 2,284,068 2,870,152
------------ ----------- ------------
Total deposits in domestic offices ........................................ 37,016,540 38,150,447 35,853,241
Interest-bearing deposits in foreign offices ................................ 2,898,888 4,503,396 1,161,690
------------ ----------- ------------
Total deposits ............................................................ 39,915,428 42,653,843 37,014,931
Federal funds purchased and securities sold under repurchase agreements ..... 8,354,912 8,322,716 7,319,154
Commercial paper ............................................................ 1,355,117 1,034,024 762,800
Other short-term borrowed funds ............................................. 2,472,728 752,874 1,791,268
Long-term debt:
Bank notes ................................................................. 2,460,872 2,939,952 3,014,233
Other long-term debt ....................................................... 3,445,931 2,994,181 3,330,779
------------ ----------- ------------
Total long-term debt ...................................................... 5,906,803 5,934,133 6,345,012
Acceptances outstanding ..................................................... 613,154 628,398 866,489
Other liabilities ........................................................... 732,706 896,780 594,743
------------ ----------- ------------
Total liabilities ......................................................... 59,350,848 60,222,768 54,694,397
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding ............................. ---- ---- ----
Common stock, par value $5 per share:
Authorized 1,000,000,000, 500,000,000 and 500,000,000 shares; issued and
outstanding 206,622,903, 205,926,632 and 195,276,111 shares,
respectively .............................................................. 1,033,115 1,029,633 976,381
Capital surplus ............................................................. 970,584 974,803 398,924
Retained earnings ........................................................... 3,297,105 3,098,767 3,063,827
Accumulated other comprehensive income ...................................... 74,990 71,098 44,329
------------ ----------- ------------
Total shareholders' equity ................................................ 5,375,794 5,174,301 4,483,461
------------ ----------- ------------
Total liabilities and shareholders' equity ................................ $64,726,642 $65,397,069 $59,177,858
============ =========== ============
</TABLE>
26
<PAGE>
Wachovia Corporation and Subsidiaries
- ------------------------------------
Consolidated Statements of Income
- --------------------------------------------------------------------------------
thousands, except per share
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees ....................................... $ 960,769 $ 847,175 $ 1,906,206 $ 1,659,092
Securities avaliable-for-sale ............................... 159,283 160,223 313,221 323,111
Securities held-to-maturity:
State and municipal ........................................ 3,739 4,150 7,675 8,646
Other investments .......................................... 23,925 21,625 47,166 43,795
Interest-bearing bank balances .............................. 3,411 818 6,639 1,494
Federal funds sold and securities purchased under resale
agreements ................................................. 5,735 4,919 11,020 7,797
Trading account assets ...................................... 12,896 12,712 25,660 25,912
------------ ----------- ------------- -----------
Total interest income ..................................... 1,169,758 1,051,622 2,317,587 2,069,847
INTEREST EXPENSE
Deposits:
Domestic offices ........................................... 309,333 302,257 617,364 594,516
Foreign offices ............................................ 37,332 22,348 73,542 39,718
------------ ----------- ------------- -----------
Total interest on deposits ................................ 346,665 324,605 690,906 634,234
Short-term borrowed funds ................................... 145,827 118,781 284,719 225,742
Long-term debt .............................................. 94,562 96,037 190,115 195,420
------------ ----------- ------------- -----------
Total interest expense .................................... 587,054 539,423 1,165,740 1,055,396
NET INTEREST INCOME ......................................... 582,704 512,199 1,151,847 1,014,451
Provision for loan losses ................................... 68,441 63,047 142,567 125,278
------------ ----------- ------------- -----------
Net interest income after provision for loan losses ......... 514,263 449,152 1,009,280 889,173
OTHER INCOME
Service charges on deposit accounts ......................... 82,465 74,576 163,339 148,670
Fees for trust services ..................................... 48,802 43,668 94,855 84,518
Credit card income .......................................... 43,077 43,814 81,621 80,670
Electronic banking .......................................... 18,667 15,678 35,062 30,444
Capital markets income ...................................... 40,304 11,176 56,414 18,488
Investment fees ............................................. 11,665 8,533 22,856 16,989
Mortgage fees ............................................... 11,502 5,154 19,206 10,324
Other operating income ...................................... 58,561 56,995 125,413 96,360
------------ ----------- ------------- -----------
Total other operating revenue ............................. 315,043 259,594 598,766 486,463
Securities gains ............................................ 2,992 498 6,149 2,056
------------ ----------- ------------- -----------
Total other income ........................................ 318,035 260,092 604,915 488,519
OTHER EXPENSE
Salaries .................................................... 219,731 178,987 432,489 350,813
Employee benefits ........................................... 42,675 39,929 89,641 79,742
------------ ----------- ------------- -----------
Total personnel expense ................................... 262,406 218,916 522,130 430,555
Net occupancy expense ....................................... 34,119 27,657 67,902 56,151
Equipment expense ........................................... 41,288 35,792 75,975 69,325
Merger-related charges ...................................... 30,849 ---- 66,417 ----
Other operating expense ..................................... 148,332 138,036 278,819 252,971
------------ ----------- ------------- -----------
Total other expense ....................................... 516,994 420,401 1,011,243 809,002
Income before income taxes .................................. 315,304 288,843 602,952 568,690
Applicable income taxes ..................................... 105,388 92,038 197,715 178,410
------------ ----------- ------------- -----------
NET INCOME .................................................. $ 209,916 $ 196,805 $ 405,237 $ 390,280
============ =========== ============= ===========
Net income per common share:
Basic ...................................................... $ 1.02 $ 1.00 $ 1.96 $ 1.97
Diluted .................................................... $ 1.00 $ .98 $ 1.93 $ 1.94
Average shares outstanding:
Basic ...................................................... 206,718 196,676 206,308 198,384
Diluted .................................................... 210,662 199,819 210,412 201,553
</TABLE>
27
<PAGE>
Wachovia Corporation and Subsidiaries
- --------------------------------------------------
Consolidated Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
$ in thousands, except per share
<TABLE>
Common Stock
Capital
Shares Amount Surplus
<S> <C> <C> <C>
PERIOD ENDED JUNE 30, 1997
Balance at beginning of year ..................... 201,252,539 $1,006,263 $ 706,649
Net income .......................................
Change in unrealized gains on securities
available-for-sale, net of tax and
reclassification adjustment .....................
Comprehensive income* ........................
Cash dividends declared by pooled companies:
Wachovia Corporation -- $.80 a share.............
Central Fidelity Banks, Inc. -- $.46 a share.....
Common stock issued pursuant to:
Stock option and employee benefit plans ......... 758,410 3,792 33,541
Dividend reinvestment plan ...................... 117,544 588 6,480
Conversion of debentures ........................ 1,036 5 15
Common stock acquired ............................ (6,853,418) (34,267) (348,438)
Miscellaneous .................................... 677
------------- ---------- -----------
Balance at end of period ......................... 195,276,111 $ 976,381 $ 398,924
============= ========== ===========
PERIOD ENDED JUNE 30, 1998
Balance at beginning of year ..................... 205,926,632 $1,029,633 $ 974,803
Net income .......................................
Change in unrealized gains on securities
available-for-sale, net of tax and
reclassification adjustment .....................
Comprehensive income* ........................
Cash dividends declared on common
stock -- $.88 a share............................
Common stock issued pursuant to:
Stock option and employee benefit plans ......... 1,672,232 8,361 77,314
Dividend reinvestment plan ...................... 153,501 768 11,528
Common stock acquired ............................ (2,228,912) (11,145) (170,285)
Acquisitions ..................................... 1,099,450 5,498 77,815
Miscellaneous .................................... (591)
------------- ---------- -----------
Balance at end of period ......................... 206,622,903 $1,033,115 $ 970,584
============= ========== ===========
<CAPTION>
Accumulated
Other Total
Retained Comprehensive Shareholders'
Earnings Income Equity
<S> <C> <C> <C>
PERIOD ENDED JUNE 30, 1997
Balance at beginning of year ..................... $2,843,803 $ 51,686 $ 4,608,401
Net income ....................................... 390,280 390,280
Change in unrealized gains on securities
available-for-sale, net of tax and
reclassification adjustment ..................... (7,357) (7,357)
-------------
Comprehensive income* ........................ 382,923
Cash dividends declared by pooled companies:
Wachovia Corporation -- $.80 a share............. (129,800) (129,800)
Central Fidelity Banks, Inc. -- $.46 a share..... (26,506) (26,506)
Common stock issued pursuant to:
Stock option and employee benefit plans ......... 37,333
Dividend reinvestment plan ...................... 7,068
Conversion of debentures ........................ 20
Common stock acquired ............................ (382,705)
Miscellaneous .................................... (13,950) (13,273)
---------- ------------- -------------
Balance at end of period ......................... $3,063,827 $ 44,329 $ 4,483,461
========== ============= =============
PERIOD ENDED JUNE 30, 1998
Balance at beginning of year ..................... $3,098,767 $ 71,098 $ 5,174,301
Net income ....................................... 405,237 405,237
Change in unrealized gains on securities
available-for-sale, net of tax and
reclassification adjustment ..................... 3,892 3,892
-------------
Comprehensive income* ........................ 409,129
Cash dividends declared on common
stock -- $.88 a share............................ (181,562) (181,562)
Common stock issued pursuant to:
Stock option and employee benefit plans ......... 85,675
Dividend reinvestment plan ...................... 12,296
Common stock acquired ............................ (181,430)
Acquisitions ..................................... 83,313
Miscellaneous .................................... (25,337) (25,928)
---------- ------------- -------------
Balance at end of period ......................... $3,297,105 $ 74,990 $ 5,375,794
========== ============= =============
</TABLE>
* Comprehensive income for the second quarters of 1998 and 1997 was $221,057
and $241,138, respectively.
28
<PAGE>
Wachovia Corporation and Subsidiaries
- -----------------------------------------
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
$ in thousands
<TABLE>
Six Months Ended
June 30
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income ............................................................... $ 405,237 $ 390,280
Adjustments to reconcile net income to
net cash provided by operations:
Provision for loan losses ............................................... 142,567 125,278
Depreciation and amortization ........................................... 71,395 59,438
Deferred income taxes ................................................... 95,140 48,045
Securities gains ........................................................ (6,149) (2,056)
Gain on sale of noninterest-earning assets .............................. (2,677) (1,374)
Decrease in accrued income taxes ........................................ (40,864) (8,635)
Decrease (increase) in accrued interest receivable ...................... 2,558 (16,327)
(Decrease) increase in accrued interest payable ......................... (8,594) 48,450
Net change in other accrued and deferred income and expense ............. (177,677) (86,613)
Net trading account activities .......................................... (134,217) 344,061
Net loans held for resale ............................................... (140,786) (95,043)
------------- -------------
Net cash provided by operating activities .............................. 205,933 805,504
INVESTING ACTIVITIES
Net increase in interest-bearing bank balances ........................... (71,560) (5,749)
Net decrease (increase) in federal funds sold and securities
purchased under resale agreements ....................................... 1,296,459 (44,578)
Purchases of securities available-for-sale ............................... (2,697,525) (1,837,035)
Purchases of securities held-to-maturity ................................. (393,114) (35,573)
Sales of securities available-for-sale ................................... 101,258 491,518
Calls, maturities and prepayments of securities available-for-sale ....... 2,073,536 1,225,267
Calls, maturities and prepayments of securities held-to-maturity ......... 255,017 117,922
Net increase in loans made to customers .................................. (134,021) (2,233,821)
Capital expenditures ..................................................... (146,289) (61,844)
Proceeds from sales of premises and equipment ............................ 29,124 3,390
Net (increase) decrease in other assets .................................. (167,993) 199,471
Business combinations .................................................... 16,108 (947)
------------- -------------
Net cash provided (used) by investing activities ....................... 161,000 (2,181,979)
FINANCING ACTIVITIES
Net (decrease) increase in demand, savings and money market accounts ..... (690,913) 1,162,151
Net (decrease) increase in certificates of deposit ....................... (2,279,420) 530,953
Net increase in federal funds purchased and securities sold
under repurchase agreements ............................................. 21,445 113,150
Net increase in commercial paper ......................................... 321,093 48,485
Net increase in other short-term borrowings .............................. 1,719,854 759,986
Proceeds from issuance of bank notes ..................................... 100,000 748,372
Maturities of bank notes ................................................. (579,568) (2,040,693)
Proceeds from issuance of other long-term debt ........................... 455,764 730,525
Payments on other long-term debt ......................................... (4,580) (124,880)
Common stock issued ...................................................... 52,291 21,735
Dividend payments ........................................................ (181,562) (155,757)
Common stock repurchased ................................................. (174,196) (377,980)
Net increase (decrease) in other liabilities ............................. 77,028 (6,715)
------------- -------------
Net cash (used) provided by financing activities ....................... (1,162,764) 1,409,332
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ......................... (795,831) 32,857
Cash and cash equivalents at beginning of year ........................... 4,221,818 3,674,192
------------- -------------
Cash and cash equivalents at end of period ............................... $ 3,425,987 $ 3,707,049
============= =============
SUPPLEMENTAL DISCLOSURES
Unrealized losses on securities available-for-sale:
Increase (decrease) in securities available-for-sale .................... $ 7,087 $ (14,685)
(Decrease) increase in deferred taxes ................................... (3,167) 5,868
Increase (decrease) in shareholders' equity ............................. 3,892 (7,357)
</TABLE>
29
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WACHOVIA CORPORATION
Pursuant to Section 55-10-07 of the General Statutes of North
Carolina, Wachovia Corporation hereby submits the following for the purpose of
amending and restating its articles of incorporation.
I.
The name of the corporation is Wachovia Corporation.
II.
The period of duration of the corporation shall be perpetual.
III.
The purpose or purposes for which the corporation is organized are:
(1) To exercise all of the powers of a general business corporation
under the laws of North Carolina, including but not limited to the powers
specifically described in (2) and (3) below.
(2) To operate as a one bank or multi-bank holding company and in
general to act as a holding company and to acquire and own stock or other
interests in other businesses of any lawful character and, as shareholder or as
owner of other interests in such businesses, to exercise all rights incident
thereto.
(3) In furtherance of any of these purposes, the corporation shall
have power to execute contracts of guaranty and to issue bonds or other
evidences of indebtedness which may be secured or unsecured and which may be
convertible into Common Stock of the corporation.
<PAGE>
IV.
The corporation shall have authority to issue One Billion
(1,000,000,000) shares of Common Stock with par value of Five Dollars ($5.00)
per share and Fifty Million (50,000,000) shares of Preferred Stock with par
value of Five Dollars ($5.00) per share.
The Board of Directors of the corporation shall have authority to
fix the preferences, limitations and relative rights of the Preferred Stock with
par value of Five Dollars ($5.00) per share, and to establish series of such
Preferred Stock and determine the variations between series.
V.
The address of the registered office of the corporation is Wachovia
Building, 301 North Main Street, Winston-Salem, Forsyth County, North Carolina
27101, and the name of its registered agent at such address is Kenneth W.
McAllister.
VI.
The name and address of the incorporator is John G. Medlin, Jr., 301
North Main Street, Winston-Salem, North Carolina 27101.
VII.
The number of the directors of the corporation may be fixed by the
bylaws but shall not be less than nine (9).
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 in Article VIII, with directors of the first
class to hold office for a term expiring at the first annual meeting
-2-
<PAGE>
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 the 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.
Any director may be removed from office as a director, but only for
cause, by the affirmative vote, at a meeting called as provided in the bylaws
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 Section D of Article X hereof).
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the corporation may have the
right, voting separately by
-3-
<PAGE>
class or series, to elect directors at an annual or special meeting of
shareholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of such Preferred
Stock applicable thereto, and such directors so elected shall not be divided
into classes pursuant to this Article unless expressly provided by such terms.
VIII.
The number of directors constituting the initial Board of Directors
shall be thirteen (13) and the names and addresses of the persons who are to
serve as directors until the first, second, and third annual meetings of
shareholders or until their successors are elected and qualified are:
First Class: Terms Expiring At First Annual Meeting
Albert L. Butler, Jr. Sherwood H. Smith, Jr.
2850 Galsworthy Drive 408 Drummond Drive
Winston-Salem, NC 27106 Raleigh, NC 27609
Donald R. Hughes Charles McKenzie Taylor
105 Kimberly Terrace 19 Muscogee Avenue, NW
Greensboro, NC 27408 Atlanta, GA 30305
Second Class: Term Expiring At Second Annual Meeting
John M. Belk J. Tylee Wilson
435 Hempstead Place 2585 Club Park Road
Charlotte, NC 28027 Winston-Salem, NC 27104
James K. Glenn Erwin Zaban
2403 Reynolda Drive 3374 Old Plantation Road, NW
Winston-Salem, NC 27104 Atlanta, GA 30327
J. Mack Robinson
3500 Tuxedo Road, NW
Atlanta, GA 30305
Third Class: Term Expiring At Third Annual Meeting
-4-
<PAGE>
John L. Clendenin John G. Medlin, Jr.
5290 North Powers Ferry Road 1056 Kenleigh Circle
Atlanta, GA 30327 Winston-Salem, NC 27106
Thomas H. Davis Thomas R. Williams
1190 Arbor Road 3200 Arden Road, NW
Winston-Salem, NC 27104 Atlanta, GA 30305
IX.
No holder of stock of the corporation shall be entitled as of right
to subscribe for or purchase any additional or increased stock of the
corporation of any class, whether now or hereafter authorized, including
obligations convertible into any class of stock, or stock of any class
convertible into stock of any other class, or obligations, stock or other
securities carrying warrants or rights to subscribe to stock of the corporation
of any class, whether now or hereafter authorized, but any and all shares of
stock, bonds, debentures or other securities or obligations, whether or not
convertible into stock or carrying warrants entitling the holders thereof to
subscribe to stock, may be issued, sold or disposed of from time to time by
authority of the Board of Directors of the corporation to such persons, firms or
corporations and for such consideration, as far as it may be permitted by law,
as the Board of Directors shall from time to time determine.
X.
A. Any Business Combination (as defined in paragraph (1) of Section
D of this Article) shall require only such affirmative vote as is required by
law and any other provision of these Articles if either all of the conditions
set forth in clauses (i), (ii) and (iii) have been satisfied or if the
conditions set forth in clause (iv) have been satisfied:
-5-
<PAGE>
(i) The consideration to be received by holders of Common
Stock shall be cash or in the same form as previously has been paid
by or on behalf of any Interested Shareholder (as defined in
paragraph (3) of Section D of this Article) in connection with its
direct or indirect acquisition of beneficial ownership of any shares
of Common Stock. If the consideration paid by or on behalf of the
Interested Shareholder for shares of Common Stock varied as to form,
the form of consideration to be received by holders of Common Stock
shall be either cash or the form used to acquire beneficial
ownership of the largest number of shares of Common Stock previously
acquired by the Interested Shareholder;
(ii) The aggregate amount of the cash and the Fair Market
Value (as defined in paragraph (9) of Section D of this Article) of
consideration other than cash to be received per share by holders of
Common Stock in any Business Combination shall be at least equal to
the greater of (a) the Fair Market Value per share of Common Stock
on the date of the first public announcement of the proposal of a
Business Combination (the "Announcement Date") or on the date on
which the Interested Shareholder became an Interested Shareholder,
whichever is higher, multiplied by the ratio of (1) the highest per
share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder for any
shares of Common Stock acquired by it within the two-year period
immediately prior to the Announcement Date to (2) the Fair Market
Value per share of Common Stock on the first day in such two-year
period on which the Interested Shareholder acquired any shares of
Common Stock
-6-
<PAGE>
or (b) the highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by such Interested
Shareholder in acquiring any of the corporation's Common Stock;
(iii) After becoming an Interested Shareholder and prior to
the consummation of any Business Combination, (A) such Interested
Shareholder shall not have acquired any newly issued shares of
capital stock, directly or indirectly, from the corporation (except
upon conversion of convertible securities acquired by it prior to
becoming an Interested Shareholder or upon compliance with the
provisions of this Article or as a result of a pro rata stock
dividend or stock split) and (B) such Interested Shareholder shall
not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits
provided by the corporation, or made any major changes in the
corporation's business or equity capital structure;
(iv) The Business Combination shall have been approved by at
least 66-2/3% of the Continuing Directors (as defined in paragraph
(8) of Section D of this Article) and, if deemed advisable by a
majority of the Continuing Directors, the Board of Directors shall
have obtained an opinion of a reputable investment banking firm to
the effect that the financial terms of such Business Combination are
fair from the point of view of the holders of Voting Shares (as
defined in paragraph (5) of Section D of this Article) other than
the Interested Shareholder (such investment banking firm to be
selected by a majority
-7-
<PAGE>
of the Continuing Directors, to be furnished with all information it
reasonably requests, and to be paid a reasonable fee for its
services upon receipt by the corporation of such opinion).
B. If the provisions of Section A of this Article have not been
satisfied, any Business Combination shall require the affirmative vote, in
person or by proxy, at any meeting called as provided in the bylaws, of the
holders of at least 66-2/3% in interest of the Voting Shares of the corporation
issued and outstanding, including a majority in interest of the holders of
issued and outstanding Voting Shares of the corporation held by persons other
than an Interested Shareholder or any Affiliate or Associate of any Interested
Shareholder. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that some lesser percentage may be specified by
law or in any agreement with any national securities exchange or otherwise.
C. The provisions of Sections A and B of this Article shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law and any
other provision of these Articles, if such Business Combination constitutes a
merger or consolidation of the corporation with, or any sale or lease to the
corporation or any Subsidiary (as defined in paragraph (7) of Section D of this
Article) of any assets of, or any sale or lease by the corporation or any
Subsidiary of any of its assets to, any corporation of which a majority of the
outstanding shares of all classes of stock entitled to vote in elections of
directors is owned of record or beneficially by the corporation or its
Subsidiaries, provided that this Section C shall not apply to any transaction to
which any
-8-
<PAGE>
Affiliate (as defined in paragraph (6) of Section D of this Article) of any
Interested Shareholder is a party.
D. For the purposes of this Article:
(1) The term "Business Combination" as used in this Article shall
mean any transaction which is referred to in any one or more of clauses
(a) through (f) of this paragraph (1);
(a) Any merger or consolidation of the corporation or any
Subsidiary with or into (A) any Interested Shareholder or (B) any
other corporation (whether or not itself an Interested Shareholder)
which immediately before is, or after such merger or consolidation
would be, an Affiliate of an Interested Shareholder, or
(b) Any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Shareholder or any Affiliate
of any Interested Shareholder of any assets of the corporation or
any subsidiary when such assets have an aggregate fair market value
of $25,000,000 or more, or
(c) The issuance or transfer to any Interested Shareholder or
any Affiliate of any Interested Shareholder by the corporation or
any Subsidiary (in one transaction or a series of related
transactions) of any equity securities of the corporation or any
Subsidiary where such equity securities have an aggregate fair
market value of $10,000,000 or more, or
(d) The adoption of any plan or proposal for the liquidation
or dissolution of the corporation, or
-9-
<PAGE>
(e) Any reclassification of securities (including any reverse
stock split), or recapitalization of the corporation, or any merger
or consolidation of the corporation with any of its Subsidiaries or
any similar transaction (whether or not with or into or otherwise
involving an Interested Shareholder) which has the effect, directly
or indirectly, of increasing the percentage of the outstanding
shares of any class of equity or convertible securities of the
corporation or any Subsidiary which is directly or indirectly owned
by any Interested Shareholder or any Affiliate of any Interested
Shareholder, or
(f) Any agreement, contract or other arrangement providing for
any of the transactions described in this definition of "Business
Combination."
(2) A "person" shall mean any individual, firm, corporation or other
entity.
(3) "Interested Shareholder" shall mean any person (other than the
corporation or any Subsidiary) who or which, along with its Affiliates and
Associates (as defined in paragraph (6) of this Section D) as of the
record date for the determination of shareholders entitled to notice of
and to vote on any Business Combination or any proposed amendment,
alteration or repeal of any provision of these Articles or any bylaw of
the corporation, or immediately prior to the consummation of any such
Business Combination:
(i) Is the beneficial owner (as defined in paragraph (4) of
this Section D), directly or indirectly, of more than 10% of the
Voting Shares of the corporation or a Subsidiary, or
-10-
<PAGE>
(ii) Is an assignee of or has otherwise succeeded to any share
of capital stock of the corporation or a Subsidiary which was at any
time within two years prior thereto beneficially owed by any
Interested Shareholder, and such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933.
(4) A person shall be the "beneficial owner" of any Voting Shares:
(a) Which such person or any of its Affiliates and
Associates beneficially own, directly or indirectly, or
(b) Which such person or any of its Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise or (B) the right to vote pursuant to any agreement,
arrangement or understanding, or
(c) Which are beneficially owned, directly or indirectly, by
any other person with which such first-mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the corporation or a
Subsidiary, as the case may be.
(5) "Voting Shares" when used with respect to the corporation or a
Subsidiary shall mean shares of such corporation having general voting
power. For the purpose of
-11-
<PAGE>
determining whether a person is an Interested Shareholder pursuant to
paragraph (3) of this Section D, the outstanding Voting Shares shall
include shares deemed owned by a beneficial owner through application of
paragraph (4) of this Section D but shall not include any other Voting
Shares which may be issuable to any other person pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise.
(6) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on December 31, 1984.
(7) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on December 31, 1984) is owned, directly or indirectly, by the
corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph (3) of this Section D, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
corporation.
(8) "Continuing Director" shall mean a person who was a member of
the Board of Directors of the corporation elected by the shareholders
prior to the date as of which an Interested Shareholder acquired in excess
of 10% of the Voting Shares of the corporation or a Subsidiary, or a
director who has been recommended to directly succeed a Continuing
Director or to join the Board of Directors by a majority of the remaining
Continuing Directors.
-12-
<PAGE>
(9) "Fair Market Value" shall mean (i) in the case of stock, the
highest closing sales price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for
New York Stock Exchange -- Listed Stocks, or, if such stock is not quoted
on the Composite Tape, on the New York Stock Exchange, or, if such stock
is not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
Systems or any system then in use, or, if such quotations are not
available, the fair market value on the date in question of a share of
such stock as determined in good faith by a majority of Continuing
Directors, and (ii) in the case of property other than cash or stock, the
fair market value of such property on the date in question as determined
in good faith by a majority of Continuing Directors.
E. The Continuing Directors, by a majority vote, shall have the
power and duty to determine for the purposes of this Article on the basis of
information known to them (a) the number of Voting Shares beneficially owned by
any person, (b) whether a person is an Affiliate or Associate of another, (c)
whether a person has an agreement, arrangement or understanding with another as
to the matters referred to in paragraph (4) of Section D of this Article, (d)
whether the assets of the corporation or any Subsidiary have an aggregate fair
market value of $25,000,000 or more, or (e) whether the consideration received
for the issuance or
-13-
<PAGE>
transfer of securities by the corporation or any Subsidiary has an aggregate
fair market value of $10,000,000 or more.
F. Nothing contained in this Article shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
XI.
Except as otherwise provided herein (and in addition to any other
vote that may be required by law, these Articles or the bylaws of the
corporation), the affirmative vote, in person or by proxy, at any meeting called
as provided in the bylaws, of the holders of at least 66-2/3% in interest of the
voting stock of the corporation issued and outstanding, including a majority in
interest of the holders of the issued and outstanding voting stock of the
corporation held by persons other than an Interested Shareholder, shall be
required to amend, alter or repeal Articles II, IV, VII, IX, X or XI or to adopt
any new provision inconsistent with such Articles, provided, however, that if at
the time of any such proposed amendment, alteration, repeal or adoption, (a)
there shall exist one or more Interested Shareholders and at least 66-2/3% of
the Continuing Directors approve such proposed amendment, alteration, repeal or
adoption, or (b) no such Interested Shareholder exists, and a majority of the
members of the Board of Directors approve such proposed amendment, alteration,
repeal or adoption, then the affirmative vote, in person or by proxy, at any
meeting called as provided in the bylaws, of the holders of a majority in
interest of the issued and outstanding voting stock of the corporation shall be
required to approve such amendment, alteration, repeal or adoption.
XII.
-14-
<PAGE>
To the full extent from time to time permitted by law, no person who is
serving or who has served as a director of the corporation shall be personally
liable in any action for monetary damages for breach of his or her duty as a
director, whether such action is brought by or in the right of the corporation
or otherwise. Neither the amendment or repeal of this Article, nor the adoption
of any provision of these Articles inconsistent with this Article, shall
eliminate or reduce the protection afforded by this Article to a director of the
corporation with respect to any matter which occurred, or any cause of action,
suit or claim which but for this Article would have accrued or arisen, prior to
such amendment, repeal or adoption.
-15-
STATE OF NORTH CAROLINA EXHIBIT 10.13
COUNTY OF FORSYTH
CONSULTING AGREEMENT AND CONTRACT
THIS AGREEMENT, made and entered into this 24th day of April, 1998, by
and between Wachovia Corporation ("Wachovia") and John G. Medlin, Jr. of
Forsyth County, North Carolina (the "Consultant").
RECITALS:
The Consultant is a former Chief Executive Officer and Chairman of the
Board of Wachovia who acquired special competency in and an intimate knowledge
of Wachovia's financial service activities, lines of business, markets and
customers. Consultant is one of the most highly regarded bankers in the United
States and has received national recognition on many occasions for his
management, professional, and financial skills. Wachovia desires to engage the
Consultant to render advisory consulting services to Wachovia, and such other
subsidiaries and affiliates of Wachovia as may be engaged from time to time in
the financial services business, as an independent businessman and professional
from April 24, 1998 through November 23, 2003. Wachovia and the Consultant deem
it in their best interests to execute this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Consultant and Wachovia mutually agree as follows:
ARTICLE 1. CONSULTATION SERVICES
Wachovia hereby engages the Consultant as an independent contractor to
render, as requested by Wachovia, and the Consultant hereby agrees to render
when so requested, consulting and advisory services for Wachovia during the term
of this Agreement. Such services shall be rendered by the Consultant with regard
to matters which are in the special competence, knowledge and experience of the
Consultant gained during the period of his former employment with Wachovia and
based upon his independent knowledge and expertise in the general area of public
policy and financial services. Wachovia and the Consultant mutually understand
and agree that such services shall not require the Consultant to be active in
the day-to-day operations of Wachovia, and that he shall be free to render said
services in such manner as he shall deem advisable; provided, however, that the
Consultant will be expected to render consulting and other professional services
for which he is uniquely qualified to Wachovia on an as-needed basis.
<PAGE>
ARTICLE 2. NATURE OF CONSULTING SERVICES AND NON-COMPETITION
The Consultant will perform consulting and advisory services on behalf of
and as may reasonably be requested by Wachovia with respect to matters relating
to new business, general banking matters, public policy, economics, and issues
related to the financial services industry.
It is anticipated that the specific projects or problems with regard to
which such advisory or consulting services are to be rendered by the Consultant
shall be determined by Wachovia, and that the Consultant shall devote reasonable
time to rendering such services for Wachovia and shall render such services in a
reasonably diligent and timely manner. Notwithstanding the immediately preceding
sentence, such services are to be rendered on a part-time basis at such time or
times as shall be convenient to the Consultant. In carrying out the foregoing
provisions of this Article 2, the following specific rules shall apply:
(A) The Consultant is being engaged as an independent professional for his
knowledge, talents, and specialized skills. Wachovia shall not issue any
formal or structured schedule of services to be rendered by the
Consultant, or of assignments for the Consultant;
(B) The Consultant shall be free to render services in such manner and
form as he shall deem advisable, and Wachovia shall not exert or attempt
to exert any control, direction, or supervision over the Consultant with
regard to the manner, details, or means through which he renders such
services, nor shall Wachovia issue detailed work orders or instruction
with regard to the services to be rendered;
(C) Wachovia shall not establish or attempt to establish any work schedule
for the Consultant, or otherwise prescribe or attempt to prescribe the
number of hours which the Consultant must work during any given period or
with regard to any project or problem referred to him;
(D) The Consultant cannot be discharged by Wachovia except in accordance
with the terms of this contract;
(E) In providing the independent professional services set forth herein,
Consultant shall have the sole responsibility for determining the
personnel resources required by him to provide the services set forth
herein. He may hire or employ the services of others at his discretion,
but he shall be solely responsible for assigning work to those individuals
and compensating them, and Wachovia shall not have any responsibility or
control over these individuals. Funds paid to the Consultant under the
terms of this Agreement may be utilized in any lawful manner he determines
to provide and fund the services required.
(F) Wachovia acknowledges that the Consultant may serve clients other than
Wachovia, and hold himself out to the public as generally available to
provide similar consulting services. Provided, however, that Consultant
shall not provide consulting services to any other financial institution
or engage in any business that competes with Wachovia as an officer,
employee, advisor, consultant, partner, or principal shareholder. Any work
performed under the terms of this Agreement by the Consultant for Wachovia
may involve
<PAGE>
confidential, sensitive and proprietary information, and it shall be
treated as such by the Consultant. The Consultant agrees that all such
confidential, sensitive and proprietary information will not be disclosed
by the Consultant to any third person or entity, or utilized in any other
manner by the Consultant except in the performance of the obligations
under this Agreement.
(G) The Consultant shall in no way be considered or act in such a manner
so that he might be considered to be an employee or an agent of Wachovia,
nor shall the Consultant have any direct or indirect or ostensible
authority to bind Wachovia in any legal relationship or matter.
ARTICLE 3. TERM
The term of this Agreement shall begin on April 24, 1998 and end on
November 23, 2003. This Agreement shall terminate on November 23, 2003, or in
the event of the death or disability of the Consultant prior to that date, on
the date of such death or disability. The term "disability" shall mean the
permanent and total inability of the Consultant, by reason of physical or mental
infirmity, or both, to render the advisory and consulting services specified
herein.
ARTICLE 4. CONSULTING FEE
Wachovia shall pay the Consultant for the services rendered pursuant to
this Contract on the following basis. From April 24, 1998 through and including
April 23, 2000, Wachovia shall pay to Consultant the sum of seventeen thousand
five hundred dollars ($17,500.) per month. From April 24, 2000 through and
including November 23, 2003, Wachovia shall pay to Consultant the sum of ten
thousand dollars ($10,000.) per month. All such monthly payments are payable at
the end of each calendar month during which this Agreement is in effect. In
addition, the Consultant will be reimbursed for all reasonable out-of-pocket
traveling and other expenses incurred by the Consultant in performing his
obligations under this Agreement upon presentation by him, from time to time, of
an itemized account of such expenditures. This itemized account shall be in such
form as is satisfactory to the Control Department of Wachovia. Such reimbursable
expenses shall be subject to approval of the Chief Executive Officer of Wachovia
Corporation.
ARTICLE 5. BENEFITS
The Consultant shall not be entitled to participate as an employee in any
retirement plans or other benefit plans provided by Wachovia for its employees,
except to the extent that such participation results from the Consultant's prior
services as an employee or as a former chief executive officer of Wachovia. The
Consultant will not be considered an employee of Wachovia for any purpose.
<PAGE>
ARTICLE 6. INCOME TAX WITHHOLDING
Wachovia shall not withhold federal or state income taxes or employment
taxes for payments made to the Consultant on account of the services to be
rendered hereunder.
ARTICLE 7. GENERAL PROVISIONS
(a) Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Consultant, his beneficiaries, or legal
representatives. However, the Consultant shall have the right to assign certain
work to his employees or agents as previously set forth herein.
(b) No Attachment. Except as required by law, no right to receive payments
under this Agreement shall be subject to alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation or to execution, attachment, levy
or similar process or assignment by operation of law, and an attempt, voluntary
or involuntary, to effect any such action shall be null, void and of no effect.
(c) Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the Consultant and Wachovia and their respective permitted
successors and assigns. This Agreement shall be binding upon any acquiror of
Wachovia.
ARTICLE 8. MODIFICATION AND WAIVER
(a) Amendment of Agreement. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto.
(b) Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provisions of this Agreement, except by written instrument of the party charged
with such waiver, and each such waiver shall operate only as to the specific
term or condition waived and shall not constitute a waiver of such term or
condition for the future or as to any act other than that specifically waived.
ARTICLE 9. SEVERABILITY
If, for any reason, any provision of this Agreement is held invalid, such
invalidity shall not affect any other provision of this Agreement not held so
invalid, and each such other provision shall to the full extent consistent with
law continue in full force and effect. If any provision of this Agreement shall
be held invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.
<PAGE>
ARTICLE 10. HEADINGS
The headings of Articles herein are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
ARTICLE 11. GOVERNING LAW
This Agreement has been executed and delivered in the State of North
Carolina and its validity, interpretation, performance and enforcement shall be
governed by the laws of said state.
IN WITNESS WHEREOF, Wachovia has caused this Agreement to be executed and
its seal to be affixed hereunto by its officers thereunto duly authorized, and
the Consultant has signed and sealed this Agreement, all on the day and year
first above written.
WACHOVIA CORPORATION
By ______________________________________
L. M. Baker, Jr. , Chairman of the Board
President, and Chief Executive Officer
Attest:
_____________________
Kenneth W. McAllister
Assistant Secretary
CONSULTANT
______________________________(SEAL)
John G. Medlin, Jr.
WACHOVIA CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
(A) EXCLUDING INTEREST ON DEPOSITS 1998 1997
------------ -------------
<S> <C> <C>
Earnings:
Income before income taxes $602,952 $869,119
Less capitalized interest (436) (167)
Fixed charges 486,214 884,806
------------ -----------
Earnings as adjusted $1,088,730 $1,753,758
============ ===========
Fixed charges:
Interest on purchased and other
short term borrowed funds $284,719 $478,162
Interest on long-term debt 190,115 387,107
Portion of rents representative of the
interest factor (1/3) of rental expense 11,380 19,537
------------ -----------
Fixed charges $486,214 $884,806
============ ===========
Ratio of earnings to fixed charges 2.24X 1.98X
(B) INCLUDING INTEREST ON DEPOSITS:
Adjusted earnings from (A) above $1,088,730 $1,753,758
Add interest on deposits 690,906 1,303,549
------------ -----------
Earnings as adjusted $1,779,636 $3,057,307
============ ===========
Fixed charges:
Fixed charges from (A) above $486,214 $884,806
Interest on deposits 690,906 1,303,549
------------ -----------
Adjusted fixed charges $1,177,120 $2,188,355
============ ===========
Adjusted earnings to adjusted fixed 1.51X 1.40X
charges
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,425,987
<INT-BEARING-DEPOSITS> 204,751
<FED-FUNDS-SOLD> 326,075
<TRADING-ASSETS> 1,133,339
<INVESTMENTS-HELD-FOR-SALE> 9,524,358
<INVESTMENTS-CARRYING> 1,655,517
<INVESTMENTS-MARKET> 1,716,374
<LOANS> 44,458,548
<ALLOWANCE> 547,572
<TOTAL-ASSETS> 64,726,642
<DEPOSITS> 39,915,428
<SHORT-TERM> 12,182,757
<LIABILITIES-OTHER> 1,345,860
<LONG-TERM> 5,906,803
0
0
<COMMON> 1,033,115
<OTHER-SE> 4,342,679
<TOTAL-LIABILITIES-AND-EQUITY> 64,726,642
<INTEREST-LOAN> 1,906,206
<INTEREST-INVEST> 368,062
<INTEREST-OTHER> 43,319
<INTEREST-TOTAL> 2,317,587
<INTEREST-DEPOSIT> 690,906
<INTEREST-EXPENSE> 1,165,740
<INTEREST-INCOME-NET> 1,157,847
<LOAN-LOSSES> 142,567
<SECURITIES-GAINS> 6,149
<EXPENSE-OTHER> 1,011,243
<INCOME-PRETAX> 602,952
<INCOME-PRE-EXTRAORDINARY> 405,237
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 405,237
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.93
<YIELD-ACTUAL> 4.21
<LOANS-NON> 127,376
<LOANS-PAST> 112,720
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 544,723
<CHARGE-OFFS> 173,473
<RECOVERIES> 31,142
<ALLOWANCE-CLOSE> 547,572
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
