SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 14, 1999
WACHOVIA CORPORATION
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(Exact Name of Registrant as specified in its charter)
NORTH CAROLINA No.1-9021 No. 56-1473727
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(State or other jurisdiction of (Commission (IRS employer
incorporation) File Number) Identification No.)
100 NORTH MAIN STREET, WINSTON-SALEM, NC 27101
191 PEACHTREE STREET NE, ATLANTA, GA 30303
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
WINSTON-SALEM 910-770-5000
ATLANTA 404-332-5000
Not applicable
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(Registrant's former address of principal executive offices)
<PAGE>
Item 5. Other Events.
On January 14, 1999, Wachovia Corporation, a North Carolina corporation
issued the following earnings release:
For Additional Information:
Robert S. McCoy, Jr.
Chief Financial Officer, 336-732-5926
James C. Mabry, Manager
Investor Relations, 336-732-5788 January 14, 1999
Wachovia Corporation reported operating earnings of $1.19 per diluted
share for the fourth quarter of 1998, a 16.7 percent gain from $1.02 per diluted
share a year earlier. Operating net income was $246.2 million, up 16.8 percent
from $210.7 million, and represented annualized returns of 19 percent on
shareholders' equity and 1.51 percent on assets. For the full year of 1998,
operating earnings were $4.45 per diluted share, higher by 12.4 percent from
$3.96 in 1997. Operating net income totaled $929.8 million, increasing 16.2
percent from $799.9 million, and represented annualized returns of 18 percent on
shareholders' equity and 1.45 percent on assets.
Operating earnings exclude merger-related expenses in 1998 of $7
million, pretax, in the fourth quarter and $85.3 million, pretax, for the full
year, and special charges in the fourth quarter of 1997 totaling $303 million,
pretax, primarily for merger integration expenses. Including these expenses and
special charges, Wachovia's net income per diluted share was $1.17 for the
fourth quarter of 1998 and $4.18 for the full year compared with $.02 and $2.94,
respectively, in 1997. Net income including the charges and expenses totaled
$241.6 million for the final three months of 1998 and $874.2 million for the
full year versus $3.6 million and $592.8 million in the same respective periods
of 1997.
"Strong revenue growth in fee income and net interest income
characterized Wachovia's core operating results for both the quarter and year,"
said L. M. Baker, Jr., chief executive officer. "During 1998, Wachovia
successfully completed mergers with strategic banking partners in Virginia and
Florida, moved forward with
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<PAGE>
technology enhancements and expanded consumer and corporate banking initiatives,
including PRO Banking, Financial Integrator and capital markets' capabilities.
These and other initiatives are creating excellent revenue growth."
Total revenues advanced $107.8 million or 13 percent for the three
months from a year earlier and $468.8 million or 14.8 percent for the full year,
with noninterest income sources excluding securities sales contributing 52
percent and 47 percent of the respective periods' gains. Taxable equivalent net
interest income increased $52.2 million or 9.2 percent for the quarter and
$246.4 million or 11.5 percent for the year, reflecting good loan growth and a
higher net yield on interest-earning assets. Average loans expanded $4.196
billion or 10 percent for the three months and $4.685 billion or 11.8 percent
for the twelve months, with the net yield on interest-earning assets up 7 basis
points and 10 basis points, respectively. Total other operating revenue rose
$55.6 million or 21.1 percent for the final three months and $222.4 million or
22.1 percent for the year led by capital markets income, trust service fees,
deposit account service charges, mortgage fees, credit card income and
electronic banking. Included in total other operating revenue for the year were
gains from branch sales of $17.2 million in the first quarter of 1998 versus a
total of $21.1 million in the second and third quarters of 1997.
The provision for loan losses was $84.1 million for the three months
and $299.5 million for the twelve months, up $7.2 million or 9.3 percent and
$34.5 million or 13 percent, respectively, from year-earlier periods. Included
in the provision for the fourth quarter of 1997 and as part of the total special
charges for the period was a $10.8 million charge to conform the credit policies
of merged companies to those of the corporation. Net loan losses were $83.8
million or .73 percent of average loans for the fourth period and $298.8 million
or .67 percent for 1998, higher by $7.6 million or 10 percent and $34.7 million
or 13.1 percent from the same respective periods in 1997. Excluding credit
cards, net loan losses totaled $15.5 million or .15 percent of loans for the
quarter and $41.1 million or .11 percent of loans for the year.
Noninterest expense excluding merger-related costs and special charges
in 1998 and 1997 rose $40.8 million or 9.2 percent for the three months and
$231.8 million
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or 13.8 percent for the year. Growth in both periods largely reflected increased
compensation in revenue-generating businesses and higher amortization expense
related to purchase acquisitions. The corporation's core overhead ratio improved
to 51.7 percent for the fourth period from 53.5 percent a year earlier and to
52.7 percent for the full year from 53.2 percent in 1997. During 1998, the
corporation completed its conversion of all information systems as part of its
Year 2000 readiness preparation and is in the final stages of systems testing
and implementation. Year 2000 conversion and testing costs were approximately $6
million for the quarter and $28.1 million for the full year.
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<TABLE>
<CAPTION>
WACHOVIA CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
1998
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FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
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(thousands, except per share data)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income-taxable equivalent $1,187,297 $1,183,656 $1,181,586 $1,159,580
Interest expense 566,443 582,030 587,054 578,686
Net interest income-taxable equivalent 620,854 601,626 594,532 580,894
Taxable equivalent adjustment 11,105 12,190 11,828 11,751
Net interest income 609,749 589,436 582,704 569,143
Provision for loan losses(1) 84,104 72,809 68,441 74,126
Net interest income after provision
for loan losses 525,645 516,627 514,263 495,017
Other operating revenue 318,812 310,541 315,043 283,723
Securities gains (losses)(2) 7,407 6,886 2,992 3,157
Total other income 326,219 317,427 318,035 286,880
Personnel expense 269,941 263,282 262,406 259,724
Nonrecurring charges 6,961 11,934 30,849 35,568
Other expense 215,784 217,187 223,739 198,957
Total other expense 492,686 492,403 516,994 494,249
Income before income taxes 359,178 341,651 315,304 287,648
Applicable income taxes 117,612 114,284 105,388 92,327
Net income $241,566 $227,367 $209,916 $195,321
Net income per common share:
Basic $1.19 $1.11 $1.02 $0.95
Diluted $1.17 $1.09 $1.00 $0.93
Cash dividends paid per common share(3) $0.49 $0.49 $0.44 $0.44
Average basic shares outstanding 202,824 204,832 206,718 205,894
Average diluted shares outstanding 206,991 208,837 210,662 210,158
PERFORMANCE RATIOS (AVERAGES)
Annualized net yield on interest-earning assets 4.28% 4.26% 4.21% 4.21%
Annualized return on assets 1.48 1.43 1.31 1.24
Annualized return on shareholders' equity 18.66 17.58 16.11 15.29
Overhead ratio 52.43 53.98 56.84 57.16
</TABLE>
<TABLE>
<CAPTION>
FOURTH
QUARTER
1997 1998-1997 YEAR ENDED
FOURTH PERCENT DECEMBER 31
QUARTER VARIANCE 1998 1997 PERCENT VARIANCE
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(thousands, except per share data)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income-taxable equivalent $1,132,768 4.8 $4,712,119 $4,320,279 9.1
Interest expense 564,145 .4 2,314,213 2,168,818 6.7
Net interest income-taxable equivalent 568,623 9.2 2,397,906 2,151,461 11.5
Taxable equivalent adjustment 13,151 (15.6) 46,874 57,894 (19.0)
Net interest income 555,472 9.8 2,351,032 2,093,567 12.3
Provision for loan losses(1) 76,915 9.3 299,480 264,949 13.0
Net interest income after provision
for loan losses 478,557 9.8 2,051,552 1,828,618 12.2
Other operating revenue 263,258 21.1 1,228,119 1,005,768 22.1
Securities gains (losses)(2) (1,693) 20,442 1,454
Total other income 261,565 24.7 1,248,561 1,007,222 24.0
Personnel expense 244,250 10.5 1,055,353 905,157 16.6
Nonrecurring charges 287,532 85,312 287,532
Other expense 200,636 7.5 855,667 774,032 10.5
Total other expense 732,418 (32.7) 1,996,332 1,966,721 1.5
Income before income taxes 7,704 1,303,781 869,119 50.0
Applicable income taxes 4,100 429,611 276,313 55.5
Net income $3,604 $874,170 $592,806 47.5
Net income per common share:
Basic $0.02 $4.26 $2.99 42.5
Diluted $0.02 $4.18 $2.94 42.2
Cash dividends paid per common share(3) $0.44 11.4 $1.86 $1.68 10.7
Average basic shares outstanding 201,415 .7 205,058 198,290 3.4
Average diluted shares outstanding 205,934 .5 209,153 201,901 3.6
PERFORMANCE RATIOS (AVERAGES)
Annualized net yield on interest-earning assets 4.21% 4.24% 4.14%
Annualized return on assets 0.02 1.37 1.03
Annualized return on shareholders' equity 0.30 16.92 13.08
Overhead ratio 88.04 55.06 62.29
</TABLE>
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<TABLE>
<CAPTION>
1998
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FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
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(thousands, except per share data)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE
Excluding Nonrecurring Items(4)
Net income $246,160 $235,243 $230,276 $218,168
Net income per diluted common share $1.19 $1.13 $1.09 $1.04
Annualized return on assets 1.51% 1.48% 1.44% 1.38%
Annualized return on shareholders' equity 19.02 18.19 17.68 17.08
Overhead ratio 51.69 52.67 53.45 53.05
SELECTED AVERAGE BALANCES (MILLIONS)
Total assets $65,298 $63,429 $63,916 $63,133
Loans-net of unearned income 45,966 43,894 43,974 43,749
Securities 9,952 10,664 11,102 10,623
Other interest-earning assets 1,622 1,508 1,558 1,630
Total interest-earning assets 57,540 56,066 56,634 56,002
Interest-bearing deposits 31,766 31,654 32,182 32,455
Short-term borrowed funds 11,135 10,858 10,947 10,635
Long-term debt 6,830 6,080 6,092 6,107
Total interest-bearing liabilities 49,731 48,592 49,221 49,197
Noninterest-bearing deposits 8,148 7,874 7,939 7,240
Total deposits 39,914 39,528 40,121 39,695
Shareholders' equity 5,178 5,173 5,211 5,109
CREDIT QUALITY DATA (THOUSANDS)
Nonperforming assets $181,303 $171,679 $152,228 $147,723
Nonperforming loans 157,118 144,654 127,376 121,734
Net loan losses 83,798 72,695 68,223 74,108
Net loan losses excluding credit cards 15,470 11,174 5,478 8,986
Allowance for loan losses 547,992 547,686 547,572 544,741
Nonperforming assets to total loans and
foreclosed property .40% .38% .34% .33%
Annualized net loan losses to average loans .73 .66 .62 .68
Annualized net loan losses to average loans
excluding credit cards .15 .12 .06 .09
Allowance for loan losses to total loans 1.20 1.20 1.23 1.22
Allowance for loan losses times
nonperforming loans 3.49x 3.79x 4.30x 4.47x
</TABLE>
<TABLE>
<CAPTION>
FOURTH
QUARTER
1997 1998-1997 YEAR ENDED
FOURTH PERCENT DECEMBER 31
QUARTER VARIANCE 1998 1997 PERCENT VARIANCE
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(thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE
Excluding Nonrecurring Items(4)
Net income $210,727 16.8 $929,847 $799,929 16.2
Net income per diluted common share $1.02 16.7 $4.45 $3.96 12.4
Annualized return on assets 1.41% 1.45% 1.39%
Annualized return on shareholders' equity 17.26 17.99 17.65
Overhead ratio 53.48 52.70 53.19
SELECTED AVERAGE BALANCES (MILLIONS)
Total assets $59,835 9.1 $63,949 $57,607 11.0
Loans-net of unearned income 41,770 10.0 44,401 39,716 11.8
Securities 10,126 (1.7) 10,582 10,793 (2.0)
Other interest-earning assets 1,637 (.9) 1,579 1,446 9.2
Total interest-earning assets 53,533 7.5 56,562 51,955 8.9
Interest-bearing deposits 30,706 3.5 32,011 29,582 8.2
Short-term borrowed funds 9,444 17.9 10,895 8,987 21.2
Long-term debt 5,935 15.1 6,279 6,122 2.6
Total interest-bearing liabilities 46,085 7.9 49,185 44,691 10.1
Noninterest-bearing deposits 7,484 8.9 7,803 6,934 12.5
Total deposits 38,190 4.5 39,814 36,516 9.0
Shareholders' equity 4,884 6.0 5,168 4,533 14.0
CREDIT QUALITY DATA (THOUSANDS)
Nonperforming assets $129,495 40.0 $181,303 $129,495 40.0
Nonperforming loans 101,156 55.3 157,118 101,156 55.3
Net loan losses 76,189 10.0 298,824 264,164 13.1
Net loan losses excluding credit cards 13,644 13.4 41,108 44,830 (8.3)
Allowance for loan losses 544,723 .6 547,992 544,723 .6
Nonperforming assets to total loans and
foreclosed property .29% .40% .29%
Annualized net loan losses to average loans .73 .67 .67
Annualized net loan losses to average loans
excluding credit cards .15 .11 .13
Allowance for loan losses to total loans 1.23 1.20 1.23
Allowance for loan losses times
nonperforming loans 5.38x 3.49x 5.38x
</TABLE>
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<TABLE>
<CAPTION>
1998
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FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
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(millions, except per share data)
<S> <C> <C> <C> <C>
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets
Interest-earning assets
Loans-net of unearned income
Deposits
Shareholders' equity
Shareholders' equity to total assets
Risk-based capital ratios:
Tier I capital
Total capital
Per share:
Book value
Common stock closing price (NYSE)
Common shares outstanding (thousands)
</TABLE>
<TABLE>
<CAPTION>
FOURTH
QUARTER
1997 1998-1997 YEAR ENDED
FOURTH PERCENT DECEMBER 31
QUARTER VARIANCE 1998 1997 PERCENT VARIANCE
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(thousands, except per share data)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA AT PERIOD-END
Total assets $ 64,123 $ 65,397 (1.9)
Interest-earning assets 56,537 57,335 (1.4)
Loans-net of unearned income 45,719 44,194 3.5
Deposits 40,995 42,654 (3.9)
Shareholders' equity 5,338 5,174 3.2
Shareholders' equity to total assets 8.32% 7.91%
Risk-based capital ratios:
Tier I capital 8.0(5) 9.2
Total capital 11.4(5) 12.1
Per share:
Book value $ 26.30 $ 25.13 4.7
Common stock closing price (NYSE) $ 87.44 $ 81.13 7.8
Common shares outstanding (thousands) 202,986 205,927 (1.4)
<FN>
(1) Includes $10,845 in nonrecurring merger-related provision in the 1997 fourth quarter.
(2) Includes $4,639 of nonrecurring losses to restructure the available-for-sale portfolio in the 1997 fourth quarter.
(3) Cash dividends per common share are those of Wachovia Corporation prior to merger with Central Fidelity Banks, Inc.
(4) Excludes the effects of nonrecurring merger related charges of $6,961, $11,934, $30,849, $35,568, and $220,330 for the
fourth, third, second and first quarters of 1998 and the fourth quarter of 1997, respectively, and a personal computer
impairment charge of $67,202 in the fourth quarter of 1997.
(5) Estimated
</FN>
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 21, 1999
WACHOVIA CORPORATION
By: /s/ Kenneth W. McAllister
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Name: Kenneth W. McAllister
Title: Executive Vice President
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