-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qMwRDvP2oR+U/weQIJp2haQUMpU2JbWSz4aXu1zK9kWkc4zkbQiO5iA1lfqh4OLy NXq3BS8jrPTgy8gZd33lEw== 0000950144-94-000722.txt : 19940331 0000950144-94-000722.hdr.sgml : 19940331 ACCESSION NUMBER: 0000950144-94-000722 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACHOVIA CORP/ NC CENTRAL INDEX KEY: 0000774203 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 561473727 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09021 FILM NUMBER: 94518359 BUSINESS ADDRESS: STREET 1: 301 N MAIN STREET CITY: WINSTON SALEM STATE: NC ZIP: 27150 BUSINESS PHONE: 9197705000 MAIL ADDRESS: STREET 1: 191 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30303 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WACHOVIA CORP DATE OF NAME CHANGE: 19910603 10-K 1 WACHOVIA FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1993 Commission File Number 1-9021 WACHOVIA CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) North Carolina 56-1473727 ------------------------------ ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 301 North Main Street, Winston-Salem, North Carolina 27150 191 Peachtree Street, N.E., Atlanta, Georgia 30303 - ---------------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 910/770-5000, 404/332-5000 ---------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - --------------------------------------- ----------------------- Common Stock, $5.00 par value per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Indicate by check mark whether the registrant (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. Yes x No --- --- The aggregate market value as of March 7, 1994 of the voting stock held by non-affiliates of the registrant was: Common Stock, $5.00 par value, 164,858,769 shares $5,110,621,839 As of March 7, 1994, Wachovia Corporation had 171,582,507 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual report to shareholders for the year ended December 31, 1993 are incorporated by reference into Parts I and II. Portions of the proxy statement dated March 18, 1994 are incorporated by reference into Part III. 2 WACHOVIA CORPORATION FORM 10-K INDEX
PART I Page Item 1. Business................................... 2 Item 2. Properties................................. 9 Item 3. Legal Proceedings.......................... 10 Item 4. Submission of Matters to a Vote of Security Holders......................... 10 Executive Officers of the Registrant................... 10 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...................... 13 Item 6. Selected Financial Data.................... 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................ 13 Item 8. Financial Statements and Supplementary Data....................... 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................... 13 PART III Item 10. Directors and Executive Officers of the Registrant........................ 13 Item 11. Executive Compensation..................... 14 Item 12. Security Ownership of Certain Beneficial Owners and Management......... 14 Item 13. Certain Relationships and Related Transactions..................... 14 Compliance with Section 16(a) of the Exchange Act...... 14 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........ 14 SIGNATURES.................................................. 19
1 3 PART I Item 1. Business - ----------------- GENERAL Wachovia Corporation ("Wachovia"), a North Carolina corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and a savings and loan holding company within the meaning of the Home Owners Loan Act of 1933, as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989. Its member companies provide a wide range of banking and bank-related services to customers throughout the United States and abroad. The subsidiaries of Wachovia and its member companies are listed on pages 6 and 7 of this report. On December 6, 1991, pursuant to the Agreement and Plan of Merger, which was approved by the shareholders of South Carolina National Corporation on October 25, 1991, South Carolina National Corporation became a wholly-owned subsidiary of Wachovia Corporation. Wachovia Bank of North Carolina, N.A., provides personal, commercial, trust and institutional banking services through 223 full-service banking offices in 96 North Carolina cities and communities. In addition, it has a foreign branch in Grand Cayman and an Edge Act subsidiary - Wachovia International Banking Corporation, with a branch in New York City. Retail banking is conducted primarily through the statewide branch network, but other services are provided to corporations and institutions across North Carolina, the Southeast, the nation and the world. Wachovia Bank of Georgia, N.A., provides a full range of banking services with a network of 129 offices in Georgia, including 90 in metropolitan Atlanta, and a foreign branch in Grand Cayman. The First National Bank of Atlanta in Wilmington, Delaware, provides credit card services for Wachovia's affiliated banks. South Carolina National Corporation, a bank and savings and loan holding company, provides full-service banking through its principal subsidiary, The South Carolina National Bank. The South Carolina National Bank has 157 offices in 70 South Carolina cities and communities and a foreign branch in Grand Cayman. The South Carolina National Bank plans to change its name to Wachovia Bank of South Carolina, N.A., in May 1994. The action was approved by its board of directors in October 1993. Wachovia Corporate Services, Inc., manages major corporate and institutional relationships in the national and international markets for Wachovia's member banks. Main offices are based in Atlanta, Winston-Salem and Columbia, with representative offices located in Chicago, London, New York City and Tokyo. Wachovia Trust Services, Inc., is the administrative framework for the trust function which offers fiduciary, investment management and related financial services for corporate, institutional and individual clients through Wachovia Bank of North Carolina, N.A., Wachovia Bank of Georgia, N.A., and The South Carolina National Bank. Wachovia Mortgage Company conducts mortgage banking operations in the southeastern United States and has 18 residential loan offices in the states of North Carolina, South Carolina, Florida and Georgia. The company originates and places permanent residential loans, makes interim residential construction loans and services residential and commercial mortgage portfolios for long-term investors including insurance companies, savings institutions and others. Wachovia Operational Services Corporation provides information processing and systems development services for Wachovia's subsidiaries. The company provides operational support for corporate and retail depository and cash management products, as well as information services corporate-wide. 2 4 Item 1. Business (Continued) - ----------------------------- Wachovia Securities, Inc., provides discount brokerage services to customers primarily in Georgia, North Carolina, and South Carolina. Financial Life Insurance Company of Georgia acts principally as a reinsurer of credit life and accident and health insurance on extensions of credit made by subsidiaries of Wachovia Bank of Georgia, N.A. Wachovia Leasing Corporation provides equipment leasing for commercial and industrial clients of Wachovia's banks. Wachovia Student Financial Services, Inc. was sold on February 3, 1993 to EduServ Technologies, Inc., of St. Paul, Minnesota. At December 31, 1993, Wachovia and its subsidiaries had 15,531 full-time equivalent employees. The financial condition and business growth of Wachovia and subsidiaries are indicated in the condensed balance sheet information presented on page 61 of the 1993 Annual Report to Shareholders (1993 Annual Report). The section of the 1993 Annual Report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 8 through 34 is incorporated herein by reference. DISTRIBUTION OF BALANCE SHEET; INTEREST RATES AND INTEREST DIFFERENTIAL The daily average statements of condition of Wachovia and subsidiaries for the six years ended December 31, 1993 and an analysis of net interest earnings are included in the 1993 Annual Report on the pages indicated and are herein incorporated by reference. Consolidated average balances 54 - 55 Interest income on earning assets, interest expense on interest-bearing liabilities and net interest income 58 - 59 Average yields earned, average rates paid and net yield on interest-earning assets 60
The tables below summarize the changes in interest income (taxable equivalent) and interest expense resulting from changes in rates and changes in volume for the years ended December 31, 1993 and 1992. Changes which are not solely due to rate or to volume are allocated proportionately to rate and volume. Nonaccrual loan balances are included in loans. Additional detail on the changes in interest income and interest expense between 1993 and 1992 is shown in Table 3 on page 11 of the 1993 Annual Report.
1993 over 1992 --------------------------------------- (thousands) Attributable to ------------------------ Rate Volume Total ---------- --------- ---------- Increase (decrease) in interest income: Loans ($154,387) $123,867 ($ 30,520) Investment securities: State and municipal 621 (11,416) (10,795) Other investments (58,200) 66,411 8,211 Interest-bearing bank balances (1,415) (8,452) (9,867) Federal funds sold and securities purchased under resale agreements (1,690) (2,915) (4,605) Trading account assets (15,119) (16,892) (32,011) ---------- Total interest-earning assets (212,486) 132,899 (79,587) Increase (decrease) in interest expense: Time deposits in domestic offices (155,523) (36,641) (192,164) Time deposits in foreign offices (2,651) 1,508 (1,143) Short-term borrowed funds (33,145) 16,004 (17,141) Long-term debt (2,014) 84,446 82,432 ---------- Total interest-bearing liabilities (175,899) 47,883 (128,016) ---------- Increase in net interest income $ 48,429 ==========
3 5 Item 1. Business (Continued) - -----------------------------
1992 over 1991 --------------------------------------- (thousands) Attributable to ------------------------ Rate Volume Total ---------- --------- ---------- Increase (decrease) in interest income: Loans ($310,231) ($54,711) ($364,942) Investment securities: State and municipal (869) (12,089) (12,958) Other investments (50,924) 40,530 (10,394) Interest-bearing bank balances (7,916) (6,286) (14,202) Federal funds sold and securities purchased under resale agreements (12,614) (5,885) (18,499) Trading account assets (16,527) 6,922 (9,605) ---------- Total interest-earning assets (405,535) (25,065) (430,600) Increase (decrease) in interest expense: Time deposits in domestic offices (323,110) (10,413) (333,523) Time deposits in foreign offices (7,362) 6,174 (1,188) Short-term borrowed funds (118,603) (59,611) (178,214) Long-term debt (3,724) 15,828 12,104 ---------- Total interest-bearing liabilities (448,703) (52,118) (500,821) ---------- Increase in net interest income $ 70,221 ==========
INVESTMENT PORTFOLIO A breakdown of the book and market values of investment securities by type at December 31, 1993, 1992 and 1991 is shown in Table 5 on page 14 of the 1993 Annual Report. This table also reflects the type and maturity with average maturities by type and weighted average yields for each range of maturities for 1993. The standard bond formula was employed in computing the yield at cost. Yields are adjusted to a fully taxable equivalent basis using a 35 percent tax rate for securities exempt from federal taxes for 1993 and a 34 percent tax rate for 1992 and 1991. Wachovia's investment securities portfolio is widely diversified as to the issuer of state, county and municipal securities. There were no obligations of any one issuer exceeding 10 percent of consolidated shareholders' equity at December 31, 1993. Additional data relating to the investment securities portfolio is given in Note D of the notes to consolidated financial statements on page 43 of the 1993 Annual Report. LOAN PORTFOLIO A breakdown of loans by type for the six years ended December 31, 1993 is shown on page 61 of the 1993 Annual Report. Table 4 on page 14 of the 1993 Annual Report shows the maturities and interest sensitivity of selected loans at December 31, 1993. Table 8 on page 20 of the 1993 Annual Report shows the loans on which interest was not being accrued; loans on which the rate had been renegotiated downward; and loans which were contractually past due as to interest or principal at the dates indicated. The interest income which would have been recorded pursuant to the original terms of these loans and the amount of interest income recorded in 1993 and 1992 are shown in Note E of the notes to consolidated financial statements on page 44 of the 1993 Annual Report. Wachovia's policy for placing loans on nonaccrual status is discussed in Note A of the notes to consolidated financial statements on page 40 of the 1993 Annual Report. 4 6 Item 1. Business (Continued) - ----------------------------- ALLOWANCE FOR LOAN LOSSES AND LOAN LOSS EXPERIENCE The allowance for loan losses is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loan loss experience, current domestic and international economic conditions, volume, growth and composition of the loan portfolio, and other risks inherent in the portfolio. A provision for loan losses is charged to operations based on management's periodic evaluation of these risks. A reconcilement of the allowance for loan losses and the net loan losses for the six years ended December 31, 1993 is shown in Table 9 on page 22 of the 1993 Annual Report. The allowance for loan losses is allocated among major loan categories based on management's best estimate of relevant risk factors from time to time. The allocation of the allowance for loan losses for the six years ended December 31, 1993 is shown on page 61 of the 1993 Annual Report. The allocation of the allowance for loan losses represents only an estimate for each category of loans based upon historical loss experience and management judgment. As of December 31, 1993, approximately 21 percent remains unallocated as a general valuation reserve for the entire portfolio to cover unpredictable variations from historical experience in individual loan categories. The table below shows the percentage of loans in each category to total loans outstanding at December 31 for the last six years. Percentage of Loans in Each Category to Total Loans
1993 1992 1991 1990 1989 1988 ----- ----- ----- ----- ----- ----- Commercial 37.8 39.4 40.7 41.0 42.3 42.0 Credit Card 13.6 10.5 8.1 7.5 7.1 7.2 Other retail 15.1 14.7 14.6 14.7 16.0 17.5 Real estate* 32.5 34.4 35.7 35.7 33.4 31.8 Lease financing .7 .6 .6 .6 .8 .9 Foreign .3 .4 .3 .5 .4 .6 ----- ----- ----- ----- ----- ----- Total 100.0 100.0 100.0 100.0 100.0 100.0 ===== ===== ===== ===== ===== =====
* See discussion of real estate loans on pages 12 and 13 of the 1993 Annual Report. DEPOSITS Details on average deposits for the six years ended December 31, 1993 are shown in the daily average statements of condition included in the 1993 Annual Report on pages 54 and 55. A statistical summary of average rates paid on deposits for the six years ended December 31, 1993 is presented in the 1993 Annual Report on page 60. Remaining maturities of domestic large denomination certificates of deposit in amounts of $100,000 or more at December 31, 1993 are shown in Table 6 on page 18 of the 1993 Annual Report. The majority of the deposits in foreign offices were in denominations of greater than $100,000. RETURN ON EQUITY AND ASSETS Rates of return on average assets and average equity, the dividend pay-out ratio and the ratio of shareholders' equity to total assets for the last six years are presented on page 60 of the 1993 Annual Report. 5 7 Item 1. Business (Continued) - ----------------------------- SHORT-TERM BORROWED FUNDS A three-year summary of short-term borrowed funds is shown in Table 7 on page 18 of the 1993 Annual Report. SUBSIDIARIES OF THE REGISTRANT The listings below set forth the subsidiaries of Wachovia Corporation on December 31, 1993. The common stock of each of these subsidiaries is 100 percent owned by its parent. The financial statements of all subsidiaries are included in the consolidated statements of Wachovia Corporation and subsidiaries (the Corporation) incorporated herein. Subsidiaries of Wachovia Corporation Wachovia Bank of North Carolina, N.A. (a) Wachovia International Banking Corporation (j) Wachovia Leasing Corporation (c) Wachovia Auto Leasing Company of North Carolina (c) Wachovia VideoFinancial Services Corporation (c) Greenville Agricultural Credit Corporation (c) City Loans, Inc. (c) Wachovia Bank of Georgia, N.A. (a) First Bank Building Corp. (b) First Atlanta Services Corporation (d) WWTP, Inc. (b) Wachovia Auto Leasing Company of Georgia (b) South Carolina National Corporation (h) The South Carolina National Bank (a) SCN Investment Services, Inc. (h) First National Properties, Inc. (h) Southern Provident Life Insurance Company (i) Atlantic Savings Bank, FSB (a) Atlantic Mortgage Corporation of South Carolina, Inc. (h) Wachovia Mortgage Company (c) ORE, Inc. (c) Wachovia Securities, Inc. (c) Wachovia Corporate Services, Inc. (c) Wachovia Operational Services Corporation (c) Wachovia Trust Services, Inc. (c) The First National Bank of Atlanta (Delaware) (a) First Atlanta Corporation (b) FA Investment Company (b) Financial Life Insurance Company of Georgia (b) KATWO, Ltd. (b) The Wachovia Insurance Agency of Georgia, Inc. (b) FAIRCO Properties, Inc. (b) First Atlanta Lease Liquidating Corporation (b) Wachovia Corporation of Florida (e) Wachovia Bank Card Services, Inc. (d) Wachovia Corporation of Alabama (f) Wachovia Corporation of Tennessee (g) 6 8 Item 1. Business (Continued) - ---------------------------- Notes to the listing of subsidiaries: (a) Organized under the laws of the United States. (b) Organized under the laws of the State of Georgia. (c) Organized under the laws of the State of North Carolina. (d) Organized under the laws of the State of Delaware. (e) Organized under the laws of the State of Florida. (f) Organized under the laws of the State of Alabama (for legal purposes). (g) Organized under the laws of the State of Tennessee (for legal purposes). (h) Organized under the laws of the State of South Carolina. (i) Organized under the laws of the State of Arizona. (j) Organized under Chapter 25(a) of the Federal Reserve Act of the United States. On March 31, 1993, Wachovia Corporation of North Carolina and Wachovia Corporation of Georgia were merged into Wachovia Corporation. The subsidiaries of these two second tier holding companies became direct subsidiaries of Wachovia Corporation, the surviving Corporation in the merger. SUPERVISION AND REGULATION As a bank holding company, Wachovia is subject to regulation under the Bank Holding Company Act of 1956, as amended (BHC Act), and its examination and reporting requirements. South Carolina National Corporation is likewise subject to the requirements of the BHC Act, which imposes certain limitations and restrictions on the level of interstate banking in which Wachovia may engage, the degree to which Wachovia may conduct non-banking related activities, and the extent to which Wachovia may engage in interstate merger and acquisition activities. In addition to the provisions of the BHC Act, state banking commissions serve in a supervisory and regulatory capacity with respect to bank holding company activities. Wachovia is a savings and loan holding company within the meaning of the Home Owners' Loan Act of 1933 (HOLA), as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). HOLA places certain restrictions on the conduct of unrelated business activities of the subsidiaries of savings and loan holding companies which are not themselves savings and loans. Wachovia is registered with the Office of Thrift Supervision (OTS) and is subject to the examination, supervision and reporting requirements of this agency. Various state and federal laws govern the activities of Wachovia's banking affiliates. As federally insured national banks, Wachovia Bank of North Carolina, N.A., Wachovia Bank of Georgia, N.A., The South Carolina National Bank and The First National Bank of Atlanta are subject to the regulation, supervision and reporting requirements of the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). As a whole, the banking industry is directly affected by the fiscal and monetary policies of government agencies, including the Federal Reserve System. 7 9 Item 1. Business (Continued) - ----------------------------- Through its conduct of open market securities transactions and control over the discount rate and reserve requirements, the Federal Reserve Board (FRB) exerts considerable influence on the cost and availability of funds used in lending and investment activities. Wachovia's non-banking subsidiaries are subject to a variety of state and federal laws. As mentioned previously, the savings and loan subsidiary is subject to the regulation and supervision of the OTS. Wachovia's brokerage subsidiary is regulated by the Securities and Exchange Commission, the National Association of Securities Dealers, and the various exchanges through which it conducts business. Additionally, it is registered in all states and is thus subject to corresponding state securities laws and regulations. Wachovia's insurance subsidiaries are subject to the insurance laws of the states in which they are active. All non-banking subsidiaries are supervised by the Federal Reserve System. Federal law regulates transactions among Wachovia and its affiliates, including the amount of banking affiliate's loans to, or investments in, nonbank affiliates and the amount of advances to third parties collateralized by securities of an affiliate. In addition, various requirements and restrictions under federal and state laws regulate the operations of Wachovia's banking affiliates, requiring the maintenance of reserves against deposits, limiting the nature of loans and interest that may be charged thereon, restricting investments and other activities, and subjecting the banking affiliates to regulation and examination by the OCC or state banking authorities and the FDIC. There are various legal and regulatory limits on the extent to which Wachovia's subsidiary banks may pay dividends or otherwise supply funds to Wachovia. In addition, federal and state regulatory agencies also have the authority to prevent a bank or bank holding company from paying a dividend or engaging in any other activity that, in the opinion of the agency, would constitute an unsafe or unsound practice. See Note L of the notes to consolidated financial statements on pages 49 and 50 of the 1993 Annual Report. Under FRB policy, Wachovia is expected to act as a source of financial strength to, and commit resources to support, each of its subsidiary banks. In addition, FIRREA provides that a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with the default of a commonly controlled FDIC insured depository institution. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) federal banking regulators are required to take prompt corrective action in respect of depository institutions that do not meet minimum capital requirements. FDICIA generally prohibits a depository institution from making any capital distribution or paying management fees to its holding company if the depository institution would thereafter be undercapitalized. In addition, undercapitalized institutions will be subject to restrictions on borrowing from the Federal Reserve System, to growth limitations and to obligations to submit capital restoration plans. In order for a capital restoration to be acceptable, the depository institution's parent holding company must guarantee the institution's compliance with the capital restoration plan up to an amount not exceeding 5% of the depository institution's total assets. Significantly undercapitalized institutions are subject to greater restrictions, and critically undercapitalized institutions are subject to appointment of a receiver. See Shareholder's Equity and Capital Ratios on pages 26 and 27 of the 1993 Annual Report. FDICIA also substantially revises the bank regulatory insurance coverage and funding provisions of the Federal Deposit Insurance Act and makes revisions to several other federal banking statutes. FDICIA imposes substantial new examination, audit and reporting requirements on insured depository institutions. Under FDICIA, each federal banking agency must prescribe 8 10 Item 1. Business (Continued) - ----------------------------- standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses and other standards as the agency deems appropriate. The FDIC has adopted or currently proposes to adopt rules pursuant to FDICIA that include: (a) real estate lending standards for banks; (b) revision to the risk-based capital rules; (c) rules requiring depository institutions to develop and implement internal procedures to evaluate and control credit and settlement exposure to their correspondent banks; (d) a rule restricting the ability of depository institutions that are not well capitalized from accepting brokered deposits; (e) rules addressing various "safety and soundness" issues, including operations and managerial standards for asset quality, earnings and stock valuations, and compensation standards for the officers, directors, employees and principal shareholders of the depository institution; and (f) rules mandating enhanced financial reporting and audit requirements. Due to continued changes in the regulatory environment, additional legislation aimed at banking industry reform is likely to continue. While the potential effects of legislation currently under consideration cannot be measured with any degree of certainty, Wachovia is unaware of any pending legislative reforms or regulatory activities which would materially affect its financial position or operating results in the foreseeable future. Item 2. Properties - ------------------- Wachovia's principal executive offices are located at 301 North Main Street, Winston-Salem, North Carolina and 191 Peachtree Street, N.E., Atlanta, Georgia in buildings leased by its subsidiaries. The principal offices of Wachovia and Wachovia Bank of North Carolina, N.A., are located in The Wachovia Building, 301 North Main Street, Winston-Salem, North Carolina, where the company occupies approximately 378,000 square feet of office space under a lease expiring December, 1995. Wachovia Bank of Georgia, N.A., occupies approximately 380,000 square feet of an office tower at 191 Peachtree Street, N.E., Atlanta, Georgia under a lease expiring December, 2008. South Carolina National Corporation and The South Carolina National Bank have their main offices located in the Palmetto Center, 1426 Main Street, Columbia, South Carolina, where they occupy approximately 18,000 square feet of the office building under a lease expiring November, 2003. At December 31, 1993, the Corporation had 509 banking offices with 223 of these located in North Carolina, 129 in Georgia and 157 in South Carolina. The Corporation's banking subsidiaries own in fee 341 of these offices while the others are leased or are located on leased land. The approximate lease terms range from one to thirty years on these properties. In addition, the Corporation's banking subsidiaries own in fee or lease a number of multi-story office buildings which house supporting services. The other subsidiaries of Wachovia maintain leased office space in cities in which they conduct their respective operations. Construction began in January 1994 on an office building in Winston-Salem, North Carolina, which will serve as the new North Carolina headquarters for the holding company and principal office of Wachovia Bank of North Carolina, N.A. The building will be a 28 story office tower with 525,000 usable square feet, all or most of which is expected to be occupied by the Corporation. Construction is expected to be completed by late 1995. 9 11 Item 2. Properties (Continued) - ------------------------------- For additional disclosure with respect to properties and lease commitments, see Note F of the notes to consolidated financial statements on page 45 of the 1993 Annual Report. Item 3. Legal Proceedings - -------------------------- Wachovia's subsidiaries are involved in ordinary and routine litigation incidental to their businesses. Management and general counsel believe that the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial position and results of operations. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ There were no matters submitted during the fourth quarter of 1993 to be brought to a vote of shareholders. Executive Officers of the Registrant - ------------------------------------ The names, ages and positions of the executive officers of Wachovia as of March 1, 1994 are shown below along with their business experience during the past five years and the year of their employment with Wachovia and subsidiaries. Officers are elected annually by the Board of Directors and hold office for one year or until their successors are chosen and qualified. There are no family relationships between any of them, nor is there any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. Name, Age Business Experience During Past and Position Five Years and Year Employed - ------------ -------------------------------- L. M. Baker, Jr., 51 Chief Executive Officer of Wachovia President and Chief Corporation since January 1994; President Executive Officer Wachovia of Wachovia Corporation since 1993; Chief Corporation; Chairman of Operating Officer of Wachovia Corporation, the Board Wachovia Bank February - December 1993; Executive Vice of North Carolina, N.A.; President of Wachovia Corporation until Director of Wachovia January 1993; President and Chief Corporation, Wachovia Bank Executive Officer of Wachovia Corporation of Georgia, N.A., South of North Carolina, January 1990 - March Carolina National Corporation 1993; President and Chief Executive and The South Carolina National Officer of Wachovia Bank of North Bank Carolina, N.A., January 1990 - April 1993; Executive Vice President of Wachovia Corporation of North Carolina until December 1989; Executive Vice President of Wachovia Bank of North Carolina, N.A. until December 1989. Employed in 1969. Jerry D. Craft, 46 Executive Vice President of Wachovia Executive Vice President Corporation since December 1993; Wachovia Corporation; Executive Vice President of Wachovia Executive Vice President Bank of Georgia, N.A.; President Wachovia Bank of Georgia, of The First National Bank of Atlanta; N.A.; President and Director President of Wachovia Bank Card of The First National Services, Inc. since 1991. Employed Bank of Atlanta; President in 1982. Wachovia Bank Card Services, Inc. 10 12 Executive Officers of the Registrant (Continued) - ------------------------------------------------ Name, Age Business Experience During Past and Position Five Years and Year Employed - ------------ ------------------------------- Mickey W. Dry, 54 Executive Vice President and Chief Credit Executive Vice President Officer of Wachovia Corporation since and Chief Credit Officer November 1989; Executive Vice President of Wachovia Corporation; Wachovia Bank of North Carolina, N.A. Executive Vice President since October 1989; Senior Vice President/ Wachovia Bank of North Group Executive of Wachovia Bank of North Carolina, N.A. Carolina, N.A. until 1989. Employed in 1961. Hugh M. Durden, 51 Executive Vice President of Wachovia Executive Vice President Corporation and President of Wachovia Wachovia Corporation, Trust Services, Inc. since 1994; Executive Wachovia Bank of North Vice President of Wachovia Bank of North Carolina, N.A.; President Carolina, N.A.; Western Division Wachovia Trust Services, Inc. Executive, Wachovia Bank of North Carolina, N.A., 1991 - 1994; Regional Vice President, Southern Region, Wachovia Bank of North Carolina, N.A., 1989 - 1991. Employed in 1972. Anthony L. Furr, 50 Executive Vice President of Wachovia Executive Vice President Corporation since July 1990; Chairman of Wachovia Corporation; the Board of South Carolina National Chairman of the Board, Corporation and The South Carolina National President and Chief Bank since July 1993; Chief Executive Executive Officer South Officer of South Carolina National Carolina National Corporation Corporation and The South Carolina National and The South Carolina Bank since January 1993; President of South National Bank Carolina National Corporation and The South Carolina National Bank since September 1992; Chief Operating Officer of South Carolina National Corporation and The South Carolina National Bank, September 1992 - January 1993; Chief Financial Officer of Wachovia Corporation, July 1990 - August 1992; Regional Vice President and Manager of Triad Region, Wachovia Bank of North Carolina, N.A., April 1988 - June 1990. Employed in 1969. Walter E. Leonard, Jr. 48 Executive Vice President and Chief Executive Vice President Operations Officer of Wachovia Wachovia Corporation, Corporation since October 1988; Wachovia Bank of Georgia, Executive Vice President of Wachovia N.A.; President Wachovia Bank of Georgia, N.A.; President of Operational Services Wachovia Operational Services Corporation. Corporation Employed in 1965. Kenneth W. McAllister, 45 Executive Vice President of Wachovia Executive Vice President Corporation since January 1994; General and General Counsel Counsel of Wachovia Corporation; Wachovia Corporation Secretary of Wachovia Corporation until October 1992. Employed in 1988. 11 13 Executive Officers of the Registrant (Continued) - ------------------------------------------------ Name, Age Business Experience During Past and Position Five Years and Year Employed - ------------ ---------------------------- Robert S. McCoy, Jr., 55 Executive Vice President of Wachovia Executive Vice President and Corporation since January 1992; Chief Chief Financial Officer Financial Officer of Wachovia Corporation Wachovia Corporation since September 1992; Comptroller of Wachovia Corporation, January 1992 - August 1992; President of South Carolina National Corporation until 1992; Vice Chairman and Chief Financial Officer of The South Carolina National Bank, 1990 - 1992; Executive Vice President and Chief Financial Officer of The South Carolina National Bank until 1990. Employed in 1984. J. Walter McDowell, 43 Executive Vice President of Wachovia Executive Vice President Corporation since April 1993; President Wachovia Corporation; President and Chief Executive Officer of Wachovia and Chief Executive Officer Bank of North Carolina, N.A. since 1993; Wachovia Bank of North Manager of Retail Support Services Carolina, N.A.; Director for Wachovia Corporation until November of Wachovia Bank of North 1992; Regional Executive for Piedmont Carolina, N.A. Triad Region, Wachovia Bank of North Carolina, N.A., June 1990 - January 1992. Employed in 1973. G. Joseph Prendergast, 48 Executive Vice President of Wachovia Executive Vice President Corporation since October 1988; President Wachovia Corporation; and Chief Executive Officer of Wachovia President and Chief Executive Bank of Georgia, N.A. since January Officer Wachovia Bank of 1993; President and Chief Executive Officer Georgia, N.A.; President of Wachovia Corporation of Georgia, and Chief Executive January 1993 - March 1993; President and Officer Wachovia Corporate Chief Executive Officer of Wachovia Services, Inc.; Director of Corporate Services, Inc.; Executive Vice Wachovia Bank of Georgia, N.A. President of Wachovia Bank of Georgia, N.A., 1989 - 1993; Executive Vice President of Wachovia Bank of North Carolina, N.A. until 1989. Employed in 1973. Richard B. Roberts, 50 Executive Vice President and Treasurer Executive Vice President and of Wachovia Corporation since April Treasurer Wachovia 1990; Executive Vice President of Wachovia Corporation; Executive Vice Bank of North Carolina, N.A. President Wachovia Bank of Employed in 1967. North Carolina, N.A. 12 14 PART II Item 5. Market for the Registrant's Common Equity and Related - -------------------------------------------------------------- Stockholder Matters ------------------- Wachovia's common stock is traded on the New York Stock Exchange. Dividends are declared quarterly by the Corporation. Market price and dividend information on pages 62 and 63 of the 1993 Annual Report is incorporated herein by reference. As of December 31, 1993, the number of common stock shareholders of record was 28,079. Item 6. Selected Financial Data - -------------------------------- The selected financial information included in the condensed balance sheet on page 61 of the 1993 Annual Report is incorporated herein by reference. Summarized results of operations may be found in the six-year Summary of Operations on pages 56 and 57 of the 1993 Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition - -------------------------------------------------------------------- and Results of Operations ------------------------- "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 8 through 34 of the 1993 Annual Report is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------- The report of independent auditors and consolidated financial statements are included on pages 35 through 53 of the 1993 Annual Report and are incorporated herein by reference. Quarterly results of operations in Table 16 on page 29 of the 1993 Annual Report are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting - -------------------------------------------------------------------- and Financial Disclosure ------------------------ None PART III Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------ The information required herein on the directors of Wachovia is included on pages 3 through 7 of the Proxy Statement dated March 18, 1994 and is incorporated herein by reference. Information on Wachovia's executive officers is included in Part I of this report. During the past five years, there have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to an evaluation of the ability or integrity of any of Wachovia's executive officers, directors, or any persons nominated to become directors. 13 15 Item 11. Executive Compensation - -------------------------------- The information required herein is included under the captions "Board Compensation Committee Report on Executive Compensation", "Five Year Stock Performance Comparison Graph", "Compensation", "Stock Options", "Other Executive Compensation Plans and Arrangements" and "Compensation Committee Interlocks and Insider Participation" on pages 20 through 33 of the Proxy Statement dated March 18, 1994 and is incorporated herein by reference in response to this item. Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ The information contained on pages 3, 8 and 9 of the Proxy Statement dated March 18, 1994, with respect to security ownership of certain beneficial owners and management, is incorporated herein by reference in response to this item. Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------- The information required herein is included under the subcaption "Certain Transactions Involving Members of the Committee" and the caption "Certain Transactions Involving Other Directors and Executive Officers" on pages 32 through 35 of the Proxy Statement dated March 18, 1994 and is incorporated herein by reference in response to this item. Compliance with Section 16(a) of the Exchange Act - ------------------------------------------------- The information required herein is included under the caption "Compliance with Stock Ownership Reporting Requirements" on page 35 of the Proxy Statement dated March 18, 1994 and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on - ---------------------------------------------------------------- Form 8-K -------- (a) 1. Financial Statements The following report of independent auditors and consolidated financial statements of Wachovia Corporation and subsidiaries, included in the 1993 Annual Report, are incorporated by reference in Item 8. Report of Independent Auditors Consolidated Statement of Condition Consolidated Statement of Income Consolidated Statement of Shareholders' Equity Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements 2. Financial Statement Schedules The schedules to the consolidated financial statements of Wachovia Corporation and subsidiaries required by Article 9 of Regulation S-X (Schedules I and II) are not required under the related instructions or are inapplicable and therefore have been omitted. 14 16 Item 14. Exhibits, Financial Statement Schedules and Reports on - ---------------------------------------------------------------- Form 8-K (Continued) --------------------
3. Exhibits 3.1 Amended and Restated Articles of Incorporation of the registrant. 3.2 Bylaws of the registrant. 4.1 Articles IV, VII, IX, X and XI of the registrant's Amended and Restated Articles of Incorporation (Included in Exhibit 3.1 hereto). 4.2 Article 1, Section 1.8, and Article 6 of the registrant's Bylaws (included in Exhibit 3.2 hereto). 4.3 Indenture dated as of May 15, 1986 between South Carolina National Corporation and Morgan Guaranty Trust Company of New York, as Trustee, relating to $35,000,000 principal amount of 6 1/2% Convertible Subordinated Debentures due in 2001 (Exhibit 28 to S-3 Registration Statement of South Carolina National Corporation, File No. 33-7710*). 4.4 First Supplemental Indenture dated as of November 26, 1991 by and among South Carolina National Corporation, Wachovia Corporation and Morgan Guaranty Trust Company of New York, as Trustee, amending the Indenture described in Exhibit 4.3 hereto (Exhibit 4.10 to Report on Form 10-K of Wachovia Corporation for the fiscal year ended December 31, 1991, File No. 1-9021*). 4.5 Indenture dated as of March 15, 1991 between South Carolina National Corporation and Bankers Trust Company, as Trustee, relating to certain unsecured subordinated securities (Exhibit 4(a) to S-3 Registration Statement of South Carolina National Corporation, File No. 33-39754*). 4.6 First Supplemental Indenture dated as of January 24, 1992 by and among South Carolina National Corporation, Wachovia Corporation and Bankers Trust Company, as Trustee, amending the Indenture described in Exhibit 4.5 hereto (Exhibit 4.12 to Report on Form 10-K of Wachovia Corporation for the fiscal year ended December 31, 1991, File No. 1-9021*). 4.7 Indenture dated as of August 22, 1989 between First Wachovia Corporation and The Philadelphia National Bank, as Trustee, relating to $300,000,000 principal amount of subordinated debt securities (Exhibit 4(c) to S-3 (Shelf) Registration Statement of First Wachovia Corporation, File No. 33-30721*). 4.8 First Supplemental Indenture, dated as of September 15, 1992 between Wachovia Corporation and CoreStates Bank, National Association, as Trustee, amending the Indenture described in Exhibit 4.7 hereto (Exhibit 4(d) to Report on Form 8 of Wachovia Corporation, filed on October 15, 1992, File No. 1-9021*). 4.9 Indenture dated as of March 1, 1993 between Wachovia Corporation and CoreStates Bank, National Association, as Trustee, relating to $500,000,000 principal amount of subordinated debt securities (Exhibit 4(a) to S-3 (Shelf) Registration Statement of Wachovia Corporation, File No. 33-59206*). 10.1 Deferred Compensation Plan of Wachovia Bank of North Carolina, N.A. (Exhibit 10.1 to Report on Form 10-K of Wachovia Corporation for the fiscal year ended December 31,1992, File No. 1-9021*). 10.2 1983 Amendment to Deferred Compensation Plan described in Exhibit 10.1 hereto (Exhibit 10.2 to Report on Form 10-K of Wachovia Corporation for the fiscal year ended December 31, 1992, File 1-9021*).
15 17 Item 14. Exhibits, Financial Statement Schedules and Reports on - ---------------------------------------------------------------- Form 8-K (Continued) -------------------- 10.3 1986 Amendment to Deferred Compensation Plan described in Exhibit 10.1 hereto (Exhibit 10.9 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1986, File No. 1-9021*). 10.4 1983 Senior Management Stock Option Plan of Wachovia Corporation (Exhibit 4.2 to Post-Effective Amendment No. 1 to S-4 Registration Statement No. 2-99538*). 10.5 Stock Option and Stock Appreciation Rights Plan of Wachovia Corporation (Exhibit 4.3 to Post-Effective Amendment No. 1 to S-4 Registration Statement No. 2-99538*). 10.6 1986 Senior Management Stock Option Plan of Wachovia Corporation (Exhibit 10.20 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1986, File No. 1-9021*). 10.7 1987 Declaration of Amendment to 1986 Senior Management Stock Option Plan described in Exhibit 10.6 hereto (Exhibit 10.21 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1986, File No. 1-9021*). 10.8 Senior Management Incentive Plan of Wachovia Corporation (Exhibit 10.14 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1987, File No. 1-9021*). 10.9 Retirement Income Benefit Equalization Plan of Wachovia Corporation (Exhibit 10.15 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1987, File No. 1-9021*). 10.10 Retirement Savings and Profit-Sharing Benefit Equalization Plan of Wachovia Corporation (Exhibit 10.16 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1987, File No. 1-9021*). 10.11 Amendment to Retirement Savings and Profit-Sharing Benefit Equalization Plan described in Exhibit 10.10 hereto. 10.12 Employment Agreements between Wachovia Corporation and Messrs. L. M. Baker, Jr., Robert S. McCoy, Jr., G. Joseph Prendergast and Anthony L. Furr (Exhibit 10.17 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1987, File No. 1-9021*). 10.13 Employment Agreement between Wachovia Corporation and Mr. John G. Medlin, Jr. (Exhibit 10.15 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1989, File No. 1-9021*). 10.14 Amendment to Employment Agreements described in Exhibits 10.12 and 10.13 hereto (Exhibit 10.14 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1990, File No. 1-9021*). 10.15 Employment Agreement between Wachovia Corporation and Mr. James G. Lindley (Exhibit 10.15 to Report on Form 10-K of Wachovia Corporation for the fiscal year ended December 31, 1991, File No. 1-9021*). 10.16 Agreement between Wachovia Corporation and Mr. John G. Medlin, Jr. 10.17 Executive Retirement Agreements between Wachovia Corporation and Messrs. John G. Medlin, Jr., L. M. Baker, Jr., Robert S. McCoy, Jr., G. Joseph Prendergast and Anthony L. Furr (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*). 10.18 Amendment to Executive Retirement Agreements described in Exhibit 10.17 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*).
16 18 Item 14. Exhibits, Financial Statement Schedules and Reports on - ---------------------------------------------------------------- Form 8-K (Continued) -------------------- 10.19 Amendment to Executive Retirement Agreement between Wachovia Corporation and Mr. John G. Medlin, Jr. (Exhibit 10.3 to Quarterly Report on Form 10-Q of Wachovia Corporation for the quarter ended September 30, 1993, File 1-9021*). 10.20 Amendment to Executive Retirement Agreements between Wachovia Corporation and Messrs. John G. Medlin, Jr., L. M. Baker, Jr., Robert S. McCoy, Jr., G. Joseph Prendergast and Anthony L. Furr (Exhibit 10.4 to Quarterly Report on Form 10-Q of Wachovia Corporation for the quarter ended September 30, 1993, File 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 Deferred Compensation Plan for the Board of Directors of Wachovia Corporation (Exhibit 10.19 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1990, File No. 1-9021*). 10.24 Retirement Pay Plan for Directors of Wachovia Corporation (Exhibit 10.21 to Report on Form 10-K of First Wachovia Corporation for the fiscal year ended December 31, 1990, File No. 1-9021*). 10.25 Supplemental Executive Retirement Plan of South Carolina National Corporation (Exhibit 10(a) to Report on Form 10-K of South Carolina National Corporation for the fiscal year ended December 31, 1988, File No. 0-7042*). 10.26 Amendment to Supplemental Executive Retirement Plan described in Exhibit 10.25 hereto (Exhibit 10(a) to Report on Form 10-K of South Carolina National Corporation for the fiscal year ended December 31, 1990, File No. 0-7042*). 10.27 Amendment to Supplemental Executive Retirement Plan described in exhibit 10.25 hereto. 10.28 Management Restricted Stock Award Plan of South Carolina National Corporation, as amended (Exhibit 10(b) to Report on Form 10-K of South Carolina National Corporation for the fiscal year ended December 31, 1990, File No. 0-7042*). 10.29 Amendment to Management Restricted Stock Award Plan described in Exhibit 10.28 hereto (Exhibit 10.1 to Quarterly Report on Form 10-Q of Wachovia Corporation for the quarter ended September 30, 1993, File 1-9021*). 10.30 Incentive Stock Option Plan of South Carolina National Corporation, as amended (Exhibit 10(c) to Report on Form 10-K of South Carolina National Corporation for the fiscal year ended December 31, 1990, File No. 0-7042*). 10.31 Amendment to Incentive Stock Option Plan described in Exhibit 10.30 hereto (Exhibit 10.2 to Quarterly Report on Form 10-Q of Wachovia Corporation for the quarter ended September 30, 1993, File 1-9021*). 10.32 Deferred Compensation Plan dated as of January 19,1987, as amended (Exhibit 10(c) to Report on Form 10-K of South Carolina National Corporation for the fiscal year ended December 31, 1986, File No. 0-7042*). 10.33 Amendment to Deferred Compensation Plan described in Exhibit 10.32 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*).
17 19 Item 14. Exhibits, Financial Statement Schedules and Reports on - ---------------------------------------------------------------- Form 8-K (Continued) -------------------- 10.34 Amendment to Deferred Compensation Plan described in Exhibit 10.32 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*). 10.35 Amendment to Deferred Compensation Plan described in Exhibit 10.32 hereto. 10.36 Summary and specimen policy of Executive Universal Life Program (Exhibit 10(d) to Report on Form 10-K of South Carolina National Corporation for the fiscal year ended December 31, 1986, File No. 0-7042*). 10.37 Agreement for Deferral of Directors' Fees (Exhibit 10(b) to S-14 Registration Statement of South Carolina National Corporation, No. 2-89011*). 10.38 Amendment to Agreement for Deferral of Directors' Fees described in Exhibit 10.37 hereto (Exhibit 10.39 to Report on Form 10-K of Wachovia Corporation for the fiscal year ended December 31, 1991, File No. 1-9021*). 10.39 Form 11-K of the Wachovia Corporation Retirement Savings and Profit-Sharing Plan, to be filed as an amendment to Form 10-K for the year ended December 31, 1993. 11 Computation of Earnings Per Share (Note O to 1993 Consolidated Financial Statements of Wachovia Corporation and Subsidiaries, page 52 of 1993 Annual Report to Shareholders*). 13 Wachovia Corporation 1993 Annual Report to Shareholders, with the Report of Independent Auditors therein being manually signed in one copy by Ernst & Young. (Except for those portions thereof which are expressly incorporated by reference herein, this report is not "filed" as a part of this Report on Form 10-K). 21 Subsidiaries of the Registrant (listed under "Subsidiaries of the Registrant" and included on pages 6 and 7 of Report on Form 10-K for the fiscal year ended December 31, 1993*). 23.1 Consent of Ernst & Young. 23.2 Consent of Price Waterhouse. 24 Power of Attorney. 99 Opinion of Price Waterhouse, Independent Accountants, on the financial statements of South Carolina National Corporation, a wholly-owned subsidiary of Wachovia Corporation, for the year ended December 31, 1991.
* Incorporated by reference. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended December 31, 1993. 18 20 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 March 28, 1994 By ROBERT S. McCOY, JR. --------------------------- Robert S. McCoy, Jr. Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 28, 1994. Signature Title - --------- ------ Principal Executive Officer and Director: L. M. BAKER, JR. - ------------------------------ President and L. M. Baker, Jr. Chief Executive Officer Principal Financial Officer: ROBERT S. McCOY, JR. - ----------------------------- Executive Vice President Robert S. McCoy, Jr. and Chief Financial Officer Principal Accounting Officer: JOHN C. McLEAN, JR. - ----------------------------- John C. McLean, Jr. Comptroller 19 21 SIGNATURES (Continued) A Majority of the Board of Directors: JOHN G. MEDLIN, JR.* Director RUFUS C. BARKLEY, JR.* Director CRANDALL C. BOWLES* Director JOHN L. CLENDENIN* Director LAWRENCE M. GRESSETTE, JR.* Director THOMAS K. HEARN, JR.* Director W. HAYNE HIPP* Director ROBERT M. HOLDER, JR.* Director DONALD R. HUGHES* Director F. KENNETH IVERSON* Director JAMES W. JOHNSTON* Director W. DUKE KIMBRELL* Director JAMES G. LINDLEY* Director JAMES H. MILLIS* Director J. MACK ROBINSON* Director HERMAN J. RUSSELL* Director SHERWOOD H. SMITH, JR.* Director CHARLES McKENZIE TAYLOR* Director *By KENNETH W. McALLISTER --------------------------------------- KENNETH W. McALLISTER, Attorney-in-Fact 20 EX-3.1 2 WACHOVIA ARTICLES OF INCORP 1 EXHIBIT 3.1 ARTICLES OF RESTATEMENT OF WACHOVIA CORPORATION -------------------- Pursuant to Section 55-10-07 of the General Statutes of North Carolina, Wachovia Corporation hereby submits these Articles of Restatement for the purpose of integrating into one document its original articles of incorporation and all amendments thereto and also for the purpose of amending its articles of incorporation. 1. The name of the corporation is Wachovia Corporation. 2. Attached hereto as an exhibit are the amended and restated articles of incorporation of the corporation, which contain amendments to the articles of incorporation requiring shareholder approval. 3. The amended and restated articles of incorporation of the corporation were adopted by the corporation's shareholders on April 23, 1993, as required by Chapter 55 of the General Statutes of North Carolina. This the 23rd day of April, 1993. WACHOVIA CORPORATION By:/s/ John G. Medlin, Jr. ---------------------------- John G. Medlin, Jr. Chairman of the Board and Chief Executive Officer 2 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. 3 IV. The corporation shall have authority to issue Five Hundred Million (500,000,000) 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 of shareholders, directors of the second class to hold office for a term expiring at the second -2- 4 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 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 -3- 5 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 --------------------------------------------------- John L. Clendenin John G. Medlin, Jr. 5290 North Powers 1056 Kenleigh Circle Ferry Road Winston-Salem, NC 27106 Atlanta, GA 30327 Thomas H. Davis Thomas R. Williams 1190 Arbor Road 3200 Arden Road, NW Winston-Salem, NC 27104 Atlanta, GA 30305 -4- 6 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: (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 -5- 7 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 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 -6- 8 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 of the Continuing Directors, to be furnished with all information it reasonably requests, and to be paid a reasonable fee or 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 -7- 9 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 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 -8- 10 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 (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 -9- 11 (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 (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 -10- 12 (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 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 -11- 13 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. (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 -12- 14 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 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 -13- 15 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. 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. -14- EX-3.2 3 WACHOVIA BYLAWS 1 EXHIBIT 3.2 BYLAWS OF WACHOVIA CORPORATION Effective October 23, 1992 Amended through July 23, 1993 2 TABLE OF CONTENTS TO BYLAWS OF WACHOVIA CORPORATION
Page ARTICLE 1 ---- MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1. Place of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.3. Substitute Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.5. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.7. Shareholders' List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.8. Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.9. Conduct of Meeting and Order of Business . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2.1. General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2.2. Number, Term, Qualification and Nomination . . . . . . . . . . . . . . . . . . 3 Section 2.3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.6. Directors Emeritus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 3 MEETINGS OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.1. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.4. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 3.5. Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 3.6. Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 3.7. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 3.8. Meeting by Communications Device . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 4 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.1. Election and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.2. Removal; Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4.3. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4.4. Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-i- 3 Section 4.5. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4.6. Audit Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4.7. Compensation, Nominating and Organization Committee . . . . . . . . . . . . 8 ARTICLE 5 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.1. Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.2. Election; Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.6. Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.7. Chairman of the Board of Directors . . . . . . . . . . . . . . . . . . . . . 10 Section 5.8. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 5.9. Vice Chairmen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 5.10. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5.11. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5.12. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5.13. Voting Upon Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 6 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 6.1. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 6.2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 6.3. Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 6.4. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 6.5. Fixing Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 6.6. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 7 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.1. Indemnification Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7.2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7.3. Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7.4. Litigation Expense Advances . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7.5. Approval of Indemnification Payments . . . . . . . . . . . . . . . . . . . . 14 Section 7.6. Suits by Claimant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 7.7. Consideration; Personal Representatives and Other Remedies . . . . . . . . . 15 Section 7.8. Scope of Indemnification Rights . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.1. Dividends and other Distributions . . . . . . . . . . . . . . . . . . . . . 16 Section 8.2. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.3. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.4. Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.5. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-ii- 4 Section 8.6. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 8.7. Applicability of Antitakeover Statutes . . . . . . . . . . . . . . . . . . . 17
-iii- 5 BYLAWS OF WACHOVIA CORPORATION ARTICLE 1 MEETINGS OF SHAREHOLDERS Section 1.1. Place of Meeting. Meetings of shareholders ----------- ---------------- shall be held at the principal office of the corporation in Winston-Salem, North Carolina or Atlanta, Georgia, or at such other place, either within or without the States of Georgia, North Carolina and South Carolina, as shall be fixed by the board of directors or the chief executive officer and designated in the notice of the meeting. Section 1.2. Annual Meeting. The annual meeting of ----------- -------------- shareholders shall be held at 10:30 a.m. on the fourth Friday in April of each year, if not a legal holiday, but if a legal holiday, then on the preceding business day which is not a legal holiday, or at such other hour and date as the board of directors, the chief executive officer or secretary may designate, for the purpose of electing directors of the corporation and the transaction of such other business as may be properly brought before the meeting. Section 1.3. Substitute Annual Meeting. If the annual ----------- ------------------------- meeting is not held on the day designated or provided for in these bylaws, a substitute annual meeting may be called in accordance with Section 1.4. A meeting so called shall be designated and treated for all purposes as the annual meeting. Section 1.4. Special Meetings. Special meetings of the ----------- ---------------- shareholders may be called at any time by the chief executive officer or the board of directors. Section 1.5. Notice of Meetings. At least 10 and no more ----------- ------------------ than 60 days prior to any annual or special meeting of shareholders, the corporation shall notify shareholders of the date, time and place of the meeting and, in the case of a special or substitute annual meeting or where otherwise required by law, shall briefly describe the purpose or purposes of the meeting. Only business within the purpose or purposes described in the notice may be conducted at a special meeting. Unless otherwise required by law or by the articles of incorporation (including, but not limited to, in the event of a meeting to consider the adoption of a plan of merger or share exchange, a sale of assets other than in the ordinary course of business or a voluntary dissolution), the corporation shall be required to give notice only to shareholders entitled to vote at the meeting. If an annual or special shareholders' meeting is adjourned to a different date, time or place, notice thereof need not be given if the new date, time or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is fixed pursuant to Section 6.5 hereof, notice of the adjourned meeting shall be given to persons who are shareholders as of the new record date. It shall be the primary responsibility of the secretary to give the notice, but notice may be given by or at the direction of the chief executive officer or other person or persons calling the meeting. If mailed, such notice shall be deemed to be effective when deposited in the United States mail with postage thereon prepaid, correctly addressed to the shareholder's address shown in the corporation's current record of shareholders. 6 Section 1.6. Quorum. A majority of the votes entitled to be ----------- ------ cast by a voting group on a matter, represented in person or by proxy at a meeting of shareholders, shall constitute a quorum for that voting group for any action on that matter, unless the articles of incorporation provide otherwise or other quorum requirements are fixed by law, including by a court of competent jurisdiction acting pursuant to Section 55-7-03 of the General Statutes of North Carolina. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof, unless a new record date is or must be set for the adjournment. Action may be taken by a voting group at any meeting at which a quorum of that voting group is represented, regardless of whether action is taken at that meeting by any other voting group. In the absence of a quorum at the opening of any meeting of shareholders, such meeting may be adjourned from time to time, subject to Section 6.5, by a vote of the majority of the shares voting on the motion to adjourn. Section 1.7. Shareholders' List. After a record date is ----------- ------------------ fixed for a meeting, the secretary of the corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of the shareholders' meeting. Such list shall be arranged by voting group (and within each voting group by class or series of shares) and shall show the address of and number of shares held by each shareholder. The shareholders' list shall be made available for inspection by any shareholder beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation's principal office or at such other place identified in the meeting notice in the city where the meeting will be held. The corporation shall make the shareholders' list available at the meeting, and any shareholder or his agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. Section 1.8. Voting of Shares. Except as otherwise provided ----------- ---------------- by the articles of incorporation or by law, each outstanding share of voting capital stock of the corporation shall be entitled to one vote on each matter submitted to a vote at a meeting of the shareholders. Unless otherwise provided in the articles of incorporation, cumulative voting for directors shall not be allowed. Action on a matter by a voting group for which a quorum is present is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the vote of a greater number is required by law or by the articles of incorporation. Absent special circumstances, the shares of the corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation, except that this provision shall not limit the power of the corporation to vote shares held by it in a fiduciary capacity. Section 1.9. Conduct of Meeting and Order of Business. The ----------- ---------------------------------------- chairman of the board of directors shall act as chairman at all meetings of shareholders and the secretary of the corporation or, in his absence, an assistant secretary, shall act as secretary at all meetings of shareholders. The chairman shall have the right and authority to determine and maintain the rules, regulations and procedures for the proper conduct of the meeting, including but not limited to restricting entry to the meeting after it has commenced, maintaining order and the safety of those in attendance, opening and closing the polls for voting, dismissing business not properly submitted, and limiting time allowed for discussion of the business of the meeting. Business to be conducted at meetings of shareholders shall be limited to that properly submitted to the meeting either by or at the direction of the board of directors or by any holder of voting securities of the corporation who shall be entitled to vote at such meeting and who complies with the -2- 7 notice requirements of applicable law or as otherwise set forth in the articles of incorporation or the bylaws of the corporation. If the chairman of the meeting shall determine that any business was not properly submitted, he shall declare to the meeting that such business was not properly submitted and would not be transacted at that meeting. ARTICLE 2 BOARD OF DIRECTORS Section 2.1. General Powers. All corporate powers shall be ----------- -------------- exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. Section 2.2. Number, Term, Qualification and Nomination. The ----------- ------------------------------------------ number of directors constituting the board of directors shall be not less than nine nor more than 25 as may be fixed by resolution duly adopted by the board of directors prior to the annual meeting at which such directors are to be elected or by the shareholders, but in the absence of such resolution, the number of directors elected at the meeting shall constitute the number of directors of the corporation until the next annual meeting of shareholders. The board of directors shall be divided into three classes as equal in number as may be feasible, with the term of office of one class expiring each year. The members of the initial board of directors shall be divided into three classes as hereinafter provided, with directors of the first class to hold office for a term expiring at the first annual meeting of shareholders, directors of the second class to hold office for a term expiring at the second annual meeting of shareholders and directors of the third class to hold office for a term expiring at the third annual meeting of shareholders. At each annual meeting of shareholders, successors to the directors whose terms shall then expire shall be elected to hold office for terms expiring at the third succeeding annual meeting. In case of any vacancies, by reason of an increase in the number of directors or otherwise, each additional director may be elected by the board of directors to hold office until the end of the term he is elected to fill and until his successor shall have been elected and qualified in the class to which such director is assigned and for the term or remainder of the term of such class. Directors shall continue in office until others are chosen and qualified in their stead. When the number of directors is changed, any newly created directorships or any decrease in directorships shall be so assigned among the classes by a majority of the directors then in office, though less than a quorum, as to make all classes as equal in number as may be feasible. No decrease in the number of directors shall shorten the term of any incumbent director. No person shall be elected nor shall continue to serve as a director past the annual meeting if such person has, as of the date of the annual meeting, reached the age of 70 years or has retired from active participation in his principal business or from the active practice of his principal profession; provided, however, that a person who has served for five or more years as Chief Executive Officer of the corporation may complete an unexpired term and may be re-elected a director for up to three years after retirement from active service with the corporation. Each director nominee must be the owner in his or her own right of shares of stock of the corporation having a par value of not less -3- 8 than $1,000. Other qualifications which shall be considered in the selection of director nominees are the extent of experience in business, finance or management; the extent of knowledge in regional, national or international business and finance; and the overall capacity to advise and direct the corporation in meeting its responsibilities to shareholders, customers, employees and the public. Nominations for election as a director by the board of directors in connection with any annual meeting or substitute annual meeting of shareholders shall include the chairman and the president if such person is not then a director or if his term as a director will expire at such meeting. Nominations for election as a director by a holder of any outstanding class of shares of the corporation entitled to vote for the election of directors shall specify the class of directors to which each person is nominated, be made in writing and be delivered or mailed to the chief executive officer of the corporation not less than 14 days or more than 50 days prior to any meeting of shareholders called for the election of directors; provided, if less than 21 days' notice of the meeting is given to shareholders, such notification of nomination shall be mailed or delivered to the chief executive officer of the corporation not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known by the notifying shareholder: (a) the name, age and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; (e) the number of shares owned by the notifying shareholder; and (f) a biographical profile of the individual with a statement of his or her qualifications. Nominations not made in accordance herewith may be disregarded by the chairman of the meeting in his discretion, and upon his instructions the voting inspectors or tabulators may disregard all votes cast for each such nominee. Section 2.3. Removal. Any director may be removed from ----------- ------- office as a director, but only for cause, by the affirmative vote at a meeting called as provided herein for that purpose, of at least 66-2/3% in interest of the holders of voting stock of the corporation issued and outstanding, including a majority in interest of the holders of issued and outstanding voting stock of the corporation held by persons other than any person who is an "Interested Shareholder" as defined in paragraph (3) of Article X.D of the corporation's articles of incorporation; provided, the notice of the shareholders' meeting at which such action is to be taken states that a purpose of the meeting is removal of the director and the number of votes cast to remove the director exceeds the number of votes cast not to remove him. Section 2.4. Vacancies. Except as otherwise provided in the ----------- --------- articles of incorporation or these bylaws, a vacancy occurring in the board of directors, including, without limitation, a vacancy resulting from an increase in the number of directors or from the failure by the shareholders to elect the full authorized number of directors, may be filled by a majority of the remaining directors or by the sole director remaining in office. The shareholders may elect a director at any time to fill a vacancy not filled by the directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Section 2.5. Compensation. The directors shall have ----------- ------------ authority to vote themselves reasonable compensation for their services as directors. The directors may provide for their own indemnification and for the indemnification of others, in accordance with these bylaws or as otherwise authorized by law, and the directors may authorize the purchase of insurance in connection therewith. Any director may serve the corporation in any other capacity and receive compensation therefor. -4- 9 Section 2.6. Directors Emeritus. Upon retiring from the ----------- ------------------ board of directors, a director may be elected a director emeritus by the board of directors. A director emeritus shall not have the right to vote and shall not be charged with the responsibilities or be subject to the liabilities of directors. A director emeritus may attend meetings of the board only upon invitation of the directors. ARTICLE 3 MEETINGS OF DIRECTORS Section 3.1. Regular Meetings. Regular meetings of the board ----------- ---------------- of directors shall be held on the fourth Friday of January, April, July and October of each year at the principal offices of the Company in Winston-Salem, North Carolina or Atlanta, Georgia, unless the board of directors fixes some other place or time for the holding of such meetings. If any date for which a regular meeting is scheduled shall be a legal holiday, the meeting shall be held on such other date as is designated in a notice of the meeting. If possible, the directors, including directors-elect, shall meet following each annual meeting of shareholders for the purpose of organizing the board and electing officers for the succeeding year; provided, in any event the new board shall be organized and officers elected no later than at the next regular meeting of the directors. Section 3.2. Special Meetings. Special meetings of the board ----------- ---------------- of directors may be called by or at the request of the chief executive officer or any three directors. Such meetings may be held at the time and place designated in the notice of the meeting. Section 3.3. Notice of Meetings. Unless the articles of ----------- ------------------ incorporation provide otherwise, regular meetings of the board of directors held on a date specified in or pursuant to the first sentence of Section 3.1 may be held without notice of the date, time, place or purpose of the meeting. The secretary giving notice of a regular meeting to be held on a date other than a date specified in or pursuant to the first sentence of Section 3.1, and the secretary or other person calling a special meeting, shall give notice by any usual means of communication to be sent at least 24 hours before the meeting if notice is sent by means of telephone, telecopy or personal delivery and at least five days before the meeting if notice is sent by mail. Section 3.4. Quorum. Except as otherwise provided in the ----------- ------ articles of incorporation, a majority of the directors in office shall constitute a quorum for the transaction of business at a meeting of the board of directors, provided a majority of the directors present are not also officers of the corporation. Less than a quorum may adjourn any meeting from time to time, and the meeting as adjourned may be held without further notice. In the event of the death, disability or other absence of directors due to war or other catastrophe, reducing the number of directors able to attend a meeting to less than that required for a quorum, a majority of the remaining directors shall constitute a quorum. Section 3.5. Manner of Acting. Except as otherwise provided ----------- ---------------- in the articles of incorporation, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. -5- 10 Section 3.6. Presumption of Assent. A director of the ----------- --------------------- corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken is deemed to have assented to the action taken unless he objects at the beginning of the meeting (or promptly upon arrival) to holding, or transacting business at, the meeting, or unless his dissent or abstention is entered in the minutes of the meeting or unless he shall file written notice of his dissent or abstention to such action with the presiding officer of the meeting before its adjournment or with the corporation immediately after adjournment of the meeting. The right of dissent or abstention shall not apply to a director who voted in favor of such action. Section 3.7. Action Without Meeting. Unless otherwise ----------- ---------------------- provided in the articles of incorporation, action required or permitted to be taken at a meeting of the board of directors may be taken without a meeting if the action is taken by all members of the board. The action must be evidenced by one or more written consents signed by each director before or after such action, describing the action taken, and included in the minutes or filed with the corporate records. Action taken without a meeting is effective when the last director signs the consent, unless the consent specifies a different effective date. Section 3.8. Meeting by Communications Device. Unless ----------- -------------------------------- otherwise provided in the articles of incorporation, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. ARTICLE 4 COMMITTEES Section 4.1. Election and Powers. Unless otherwise provided ----------- ------------------- by the articles of incorporation, a majority of the board of directors may create one or more committees and appoint two or more directors to serve at the pleasure of the board on each such committee. To the extent specified by the board of directors or in the articles of incorporation or the bylaws, each committee shall have and may exercise the powers of the board in the management of the business and affairs of the corporation, except that no committee shall have authority to do the following: (a) Authorize distributions. (b) Approve or propose to shareholders action required to be approved by shareholders. (c) Fill vacancies on the board of directors or on any of its committees. (d) Amend the articles of incorporation. (e) Adopt, amend or repeal the bylaws. (f) Approve a plan of merger not requiring shareholder approval. -6- 11 (g) Authorize or approve the reacquisition of shares, except according to a formula or method prescribed by the board of directors. (h) Authorize or approve the issuance, sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize the executive committee (or a senior executive officer of the corporation) to do so within limits specifically prescribed by the board of directors. The board of directors or the chief executive officer may establish nonboard committees composed of directors, employees or others to deal with corporate powers not required to be exercised by the board of directors. Section 4.2. Removal; Vacancies. Any member of a committee ----------- ------------------ may be removed at any time with or without cause, and vacancies in the membership of a committee by means of death, resignation, disqualification or removal shall be filled by a majority of the whole board of directors. Section 4.3. Meetings. The provisions of Article 3 governing ----------- -------- meetings of the board of directors, action without meeting, notice, waiver of notice and quorum and voting requirements shall apply to the committees of the board and its members. Section 4.4. Minutes. Each committee shall keep minutes of ----------- ------- its proceedings and shall report thereon to the board of directors at or before the next meeting of the board. Section 4.5. Executive Committee. The directors shall ----------- ------------------- annually appoint an Executive Committee which shall consist entirely of directors. A chairman of the Executive Committee shall be designated by the directors. Except as specifically provided by statute, the Executive Committee may exercise all of the powers of directors during intervals between meetings thereof, including the power to authorize the execution of contracts, deeds, leases, and other agreements respecting real or personal property. It may fill vacancies occurring in any offices between meetings of directors and, when deemed necessary, may create new offices and elect persons to fill such offices. It shall have general supervision over all expenditures of the corporation and shall consider and act upon any matter submitted to it by the directors or by the chief executive officer and shall advise the directors in regard to the policies of the corporation and the conduct of its affairs. The Executive Committee shall meet upon the call of the chairman of the Executive Committee, the chief executive officer or any two of its members. Section 4.6. Audit Committee. The directors shall annually ----------- --------------- appoint an Audit Committee which shall consist entirely of directors who are not active officers or employees of the corporation. A chairman of the Audit Committee shall be designated by the directors. The Audit Committee shall assure that there exist viable auditing processes, both internal and independent, for the corporation and its subsidiary or affiliated companies. In discharging its duties, the Audit Committee shall: (a) recommend to the board of directors the appointment of independent auditors; and (b) maintain open lines of communication with internal auditors, external auditors and regulatory examiners, for the purpose of satisfying the Audit Committee that audit scope and programs are not restricted short of need, that management takes appropriate and timely action on recommendations made by the auditors and/or examiners and that corporation personnel cooperate with auditors and examiners. The Audit Committee -7- 12 shall meet on call of the chairman of the Audit Committee as the nature of business warrants and shall review and consider reports of examination of the regulatory authorities, management letters or other comments of the external auditors, reports of the internal auditor and any other audit-related business it considers appropriate. The chairman of the Audit Committee shall report to the board of directors on any recommendations made by the Audit Committee and on action taken by management on such recommendations. Section 4.7. Compensation, Nominating and Organization ----------- ----------------------------------------- Committee. The directors shall annually appoint a Compensation, Nominating and - --------- Organization Committee which shall consist entirely of directors who are not active officers or employees of the corporation and who otherwise satisfy the disinterested administration requirements of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934 or any successor rule. A chairman of the committee shall be designated by the directors. The Compensation, Nominating and Organization Committee shall have authority for establishing and administering salary, incentive, benefit and stock option plans, including setting the compensation of any category of officers as such Committee deems appropriate (herein, "senior officers"), considering and recommending nominees for the board of directors of the corporation and reviewing and recommending assignment and succession of top executive management. ARTICLE 5 OFFICERS Section 5.1. Titles. The officers of the corporation shall ----------- ------ be a chief executive officer, a chairman of the board of directors, a president, one or more vice presidents and a secretary and may include one or more vice chairmen of the board of directors, one or more executive vice presidents, a treasurer, a controller, a general auditor, one or more assistant secretaries, one or more assistant treasurers, one or more assistant controllers, and such other officers as shall be deemed necessary. The officers shall have the authority and perform the duties as set forth herein or as from time to time may be prescribed by the board of directors or by the chief executive officer (to the extent that the chief executive officer is authorized by the board of directors to prescribe the authority and duties of officers). Any two or more offices may be held by the same individual, but no officer may act in more than one capacity where action of two or more officers is required. Section 5.2. Election; Appointment. The officers of the ----------- --------------------- corporation shall be elected from time to time by the board of directors or appointed from time to time by the chief executive officer to the extent that the chief executive officer is authorized by the board to appoint officers; provided, the chief executive officer may from time to time elect one or more assistant secretaries notwithstanding the absence of such authorization. Section 5.3. Removal. Any officer may be removed by the ----------- ------- board at any time with or without cause whenever in its judgment the best interests of the corporation will be served, but removal shall not itself affect the officer's contract rights, if any, with the corporation. Section 5.4. Vacancies. Vacancies among the officers may be ----------- --------- filled and new offices may be created and filled by the board of directors, or by the chief executive officer to the extent authorized by the board. -8- 13 Section 5.5. Compensation. Except as provided by Section ----------- ------------ 5.6, the compensation of the officers shall be fixed by, or under the direction of, the Compensation, Nominating and Organization Committee or by such person or persons to whom authority to fix compensation has been delegated by the board or such Committee. Section 5.6. Chief Executive Officer. The chief executive ----------- ----------------------- officer of the corporation shall be elected annually by the directors and may hold either or both of the titles of chairman and president. The chief executive officer shall have overall responsibility and authority for administering the affairs of the corporation and of all its subsidiary banks and companies. He shall exercise all of the powers customarily exercised by a chief executive officer of any corporation by whatever name called unless expressly limited by the directors. All officers of the corporation shall report to him to the extent he may require. In the interim between meetings of the directors or meetings of the Executive Committee, the chief executive officer may make appointments pro tem to any office below the level of executive vice president, either for the purpose of filling a vacancy or increasing the number of officers, such appointees pro tem to hold office until the next succeeding regular or special meeting of the directors, who may in their discretion approve, confirm or revoke any such appointments. The compensation of all agents and employees of the corporation other than senior officers shall be fixed by the chief executive officer or by senior officers or committees appointed by the chief executive officer. The compensation of all committee members shall also be fixed by the chief executive officer. He shall have the power to execute in the name and on behalf of the corporation, or to delegate such power to others, all contracts or instruments of every character relating to real or personal property without express authority of the directors unless such authority is expressly limited by the directors. It shall be the duty of the chief executive officer or his designee to make a report of the corporation's performance and condition to the shareholders at their annual meeting and to the directors at their regular meetings including therein such recommendations as to the policy and conduct of the business of the corporation as he may deem advisable. He shall be ex officio a member of all committees of the board and shall preside at meetings of shareholders; provided, that if the chief executive officer also has the title of president, he may designate the chairman of the board to preside at meetings of shareholders. Section 5.7. Chairman of the Board of Directors. The ----------- ---------------------------------- chairman of the board of directors shall preside at all meetings of the board of directors. The chairman of the board may but need not be an employee of the corporation. If not elected chief executive officer, the chairman shall have such other authority and shall perform such other duties as may from time to time be conferred upon him herein or by the directors or by the chief executive officer, and in the event of the disability or death of the chief executive officer or president, he shall perform the duties of the chief executive officer or president unless and until a new chief executive officer or president is elected by the directors. Section 5.8. President. If not elected chief executive ----------- --------- officer, the president shall have such authority and shall perform such duties as may from time to time be conferred upon him by the directors or by the chief executive officer, and in the event of disability of the chief executive officer or chairman, he shall perform the duties of the chief executive officer or chairman unless and until the Compensation, Nominating and Organization Committee shall appoint an acting chief executive officer or chairman or until a new chief executive officer or chairman is elected by the directors. -9- 14 Section 5.9. Vice Chairmen. Vice chairmen shall have such ----------- ------------- authority and shall perform such duties as may from time to time be conferred upon them by the directors or by the chief executive officer. Section 5.10. Vice Presidents. Vice presidents may be ------------ --------------- designated as senior executive vice presidents, executive vice presidents, regional vice presidents, group vice presidents, senior vice presidents, first vice presidents, vice presidents and assistant vice presidents. The board of directors shall annually elect such number of each designation as it may deem proper. Each category of vice presidents shall have such responsibilities and duties as shall be specifically assigned to them by the directors or by the chief executive officer. Section 5.11. Secretary. The secretary shall act as secretary ------------ --------- at all meetings of the shareholders and at all meetings of the directors. He shall issue notices for such meetings in accordance with the requirements of the bylaws. He shall have custody of the corporate seal and, upon request of an officer authorized by the board of directors to execute on behalf of the corporation an instrument relating to real or personal property, shall attest any such instrument and shall perform such other duties as from time to time shall be assigned to him by the directors or by the chief executive officer. Section 5.12. Assistant Secretaries. Each assistant ------------ --------------------- secretary, if such officer is elected, shall have such powers and perform such duties as may be assigned by the board of directors or the chief executive officer (notwithstanding the absence of any authorization by the board of directors to prescribe the authority and duties of officers), and the assistant secretaries shall exercise the powers of the secretary during that officer's absence or inability to act. Section 5.13. Voting Upon Stocks. Unless otherwise ordered by ------------ ------------------ the board of directors, the chief executive officer (or such officer as the chief executive officer shall designate) shall have full power and authority on behalf of the corporation to attend, act and vote at meetings of the shareholders of any corporation in which this corporation may hold stock, and at such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such stock and which, as the owner, the corporation might have possessed and exercised if present. The board of directors may by resolution from time to time confer such power and authority upon any other person or persons. ARTICLE 6 CAPITAL STOCK Section 6.1. Certificates. Shares of the capital stock of ----------- ------------ the corporation shall be represented by certificates. The name and address of the persons to whom shares of capital stock of the corporation are issued, with the number of shares and date of issue, shall be entered on the stock transfer records of the corporation. Certificates for shares of the capital stock of the corporation shall be in such form not inconsistent with the articles of incorporation of the corporation as shall be approved by the board of directors. Each certificate shall be signed (either manually or by facsimile) by the chief executive officer, the chairman or the president and by the secretary or an assistant secretary. Each certificate may be sealed with the seal of the corporation or a facsimile thereof. -10- 15 Section 6.2. Transfer of Shares. Transfer of shares shall be ----------- ------------------ made on the stock transfer records of the corporation, and transfers shall be made only upon surrender of the certificate for the shares sought to be transferred by the recordholder or by a duly authorized agent, transferee or legal representative. All certificates surrendered for transfer or reissue shall be cancelled before new certificates for the shares shall be issued. Section 6.3. Transfer Agent and Registrar. The board of ----------- ---------------------------- directors may appoint one or more transfer agents and one or more registrars of transfers and may require all stock certificates to be signed or countersigned by the transfer agent and registered by the registrar of transfers. Section 6.4. Regulations. The board of directors may make ----------- ----------- rules and regulations as it deems expedient concerning the issue, transfer and registration of shares of capital stock of the corporation. Section 6.5. Fixing Record Date. For the purpose of ----------- ------------------ determining shareholders entitled to notice of or to vote at any meeting of shareholders, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the board of directors or the chief executive officer may fix in advance a date as the record date for the determination of shareholders. The record date shall be not more than 70 days before the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting shall be effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date is fixed for the determination of shareholders, the record date shall be the day the notice of the meeting is mailed or the day the action requiring a determination of shareholders is taken. Section 6.6. Lost Certificates. The corporation must ----------- ----------------- authorize the issuance of a new certificate in place of a certificate claimed to have been lost, destroyed or wrongfully taken, upon receipt of (a) an affidavit from the person explaining the loss, destruction or wrongful taking, and (b) a bond from the claimant in such sum and with such surety or other security and in such form acceptable to the corporation as the corporation may reasonably direct to indemnify the corporation against loss from any claim with respect to the certificate claimed to have been lost, destroyed or wrongfully taken. The corporation may, in its discretion, waive the affidavit and bond and authorize the issuance of a new certificate in place of a certificate claimed to have been lost, destroyed or wrongfully taken. ARTICLE 7 INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 7.1. Indemnification Provisions. Any person who at ----------- -------------------------- any time serves or has served as a director, officer or employee of the corporation or of any wholly owned subsidiary or affiliate of the corporation, or in such capacity at the request of the corporation for any other foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or as a trustee or administrator under any employee benefit plan of the corporation or of any wholly owned subsidiary thereof (a "Claimant"), shall have the right to be indemnified and held harmless by the corporation to the fullest extent from time to time permitted by law against all liabilities and litigation expenses (as -11- 16 hereinafter defined) in the event a claim shall be made or threatened against that person in, or that person is made or threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether or not brought by or on behalf of the corporation, including all appeals therefrom (a "proceeding"), seeking to hold the Claimant liable by reason of the fact that he or she is or was serving in such capacity (whether the basis of such proceeding is alleged action in such official capacity or in any other capacity while serving in such official capacity); provided, such indemnification shall not be effective with respect to (a) that portion of any liabilities or litigation expenses with respect to which the Claimant is entitled to receive payment under any insurance policy other than a directors' and officers' insurance policy maintained by the Company or (b) any liabilities or litigation expenses incurred on account of any of the Claimant's activities which were at the time taken known or believed by the Claimant to be clearly in conflict with the best interests of the corporation. Section 7.2. Definitions. As used in this Article, (a) ----------- ----------- "liabilities" shall include, without limitation, (1) payments in satisfaction of any judgment, money decree, excise tax, fine or penalty for which the Claimant had become liable in any proceeding and (2) payments in settlement of any such proceeding subject, however, to Section 7.3; (b) "litigation expenses" shall include, without limitation, (1) reasonable costs and expenses and attorneys' fees and expenses actually and necessarily incurred by the Claimant in connection with any proceeding and (2) reasonable costs and expenses and attorneys' fees and expenses in connection with the enforcement of rights to the indemnification granted hereby or by applicable law, if such enforcement is successful in whole or in part; and (c) "disinterested directors" shall mean directors who are not party to the proceeding in question. Section 7.3. Settlements. The corporation shall not be ----------- ----------- liable to indemnify the Claimant for any amounts paid in settlement of any proceeding effected without the corporation's written consent. The corporation will not unreasonably withhold its consent to any proposed settlement. Section 7.4. Litigation Expense Advances. ----------- --------------------------- (a) Subject to the provisions of subsections (b) and (c) below, any litigation expenses shall be advanced to any Claimant within 60 days of receipt by the General Counsel or secretary of the corporation of a demand therefor, together with an undertaking (in such form as the corporation may prescribe from time to time) by or on behalf of the Claimant to repay to the corporation such amount unless it is ultimately determined that the Claimant is entitled to be indemnified by the corporation against such expenses. The Claimant shall also forward to the General Counsel or secretary a statement as to any insurance in effect of the type described in Section 7.1, together with any information which the Claimant wishes to have considered in determining whether the standards set forth below have been met. The General Counsel or secretary shall promptly forward notice of the demand and undertaking immediately to all directors of the corporation. (b) In the event a demand for an advance of litigation expenses is received from a Claimant who is or was a director or the chief executive of the corporation, the General Counsel or secretary shall call a meeting of a special committee (the "Special Committee"), the membership of which shall include only disinterested directors, and such Special Committee shall determine within 30 days thereafter, based upon the facts and information then available to them, whether the Claimant's activities were at the time taken known or believed by the Claimant to be clearly in conflict with the best interests of the corporation. In making such determination, the Special Committee shall consult with -12- 17 representatives of any insurance carrier having a directors' and officers' liability policy in effect which covers the Claimant, where such insurance has been purchased by the corporation. No such advance shall be made if a majority of the Special Committee determines that the litigation expenses have been incurred on account of activities which at the time taken by such Claimant were known or believed by him to be clearly in conflict with the best interests of the corporation. To the extent that any Claimant shall be entitled to an advance under this Section, it shall be a further condition to such advance that counsel selected by a Claimant be approved by the corporation and to the extent deemed necessary by the corporation the selection of such counsel shall also be approved by the carrier of any directors' and officer's liability insurance then in effect. The corporation also reserves the right, in the instance of multiple Claimants, to require, if appropriate, the consolidation of the defense of Claimants with counsel chosen by the corporation. No such advance of any particular items of litigation expenses shall be made if a majority of the Special Committee affirmatively determines that such particular items are unreasonable and/or excessive. In any such case, the Special Committee must determine the unreasonable or excessive amount, and the Company shall withhold advances of expenses only in the dollar amount so determined as excessive and/or unreasonable. (c) In the discretion of the chief executive officer or his designee, the Special Committee procedures set forth in Section 7.4(b) may be deemed to apply to a demand for an advance of litigation expenses received from a Claimant not referred to in the first sentence of Section 7.4(b) (including but not limited to a Claimant who is or was an officer (other than the chief executive officer) or employee of the corporation or a director, officer or employee of a subsidiary of the corporation). Alternatively, the chief executive officer or his designee may cause the Special Committee procedures set forth in subsection (b) to be waived and, in lieu thereof, the chief executive officer or his designee may determine whether the applicable standard of conduct required by Section 7.4(b) has been met, whether the amount of such expenses is reasonable and the amount of such expenses, if any, that are unreasonable or excessive and consequently are to be withheld. Section 7.5. Approval of Indemnification Payments. Except as ----------- ------------------------------------ may be determined in an action brought pursuant to Section 7.6 below, indemnification payments by the corporation for liabilities and litigation expenses (or a termination of the undertaking required under Section 7.4 above with respect to advanced expenses) may be made only following a determination that the activities of the Claimant (if the Claimant is or was a director of the corporation) were not of the kind described in Section 7.4(b), which determination shall be made (a) by a majority of the disinterested directors (if there are at least two such directors), or (b) if there are not two such directors, or if a majority of the disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by a majority of the shareholders or (d) in accordance with any other reasonable procedures prescribed by the board of directors prior to the assertion of the claim for which indemnification is sought. The reasonableness of amounts of settlements and litigation expenses may be approved by a majority of the disinterested members of the board of directors. If the Claimant is an officer or employee of the corporation, the determination required by this paragraph may be made by the chief executive officer of the corporation or his designee. Section 7.6. Suits by Claimant. If a claim under Section 7.1 ----------- ----------------- is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, or a demand for advances is not paid within 60 days of receipt by the corporation of such demand accompanied by an undertaking as described in Section 7.4, the Claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim or demand. It shall be a defense to any such -13- 18 action that the Claimant's liabilities or litigation expenses were incurred on account of activities which were at the time taken known or believed by the Claimant to be clearly in conflict with the best interests of the corporation, or were unreasonable, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its disinterested directors, independent legal counsel, shareholders or the chief executive officer or his designee, if applicable) to have made a determination prior to the commencement of such action that indemnification of the Claimant is proper in the circumstances, nor an actual determination by the corporation (including its disinterested directors, independent legal counsel, shareholders or the chief executive officer or his designee, if applicable) that the Claimant had not met such applicable standard of conduct shall be a defense to the action or create a presumption that Claimant has not met the applicable standard of conduct. Section 7.7. Consideration; Personal Representatives and ----------- ------------------------------------------- Other Remedies. Any Claimant who during such time as this Article or - -------------- corresponding provisions of predecessor bylaws is or has been in effect serves or has served in any of the capacities described in Section 7.1 shall be deemed to be doing so or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein or therein. The right of indemnification provided herein or therein shall inure to the benefit of the legal representatives of any Claimant hereunder, and the right shall not be exclusive of any other rights to which the Claimant or legal representative may be entitled apart from this Article. Section 7.8. Scope of Indemnification Rights. The rights ----------- ------------------------------- granted herein shall not be limited by the provisions of Section 55-8-51 of the General Statutes of North Carolina or any successor statute. ARTICLE 8 GENERAL PROVISIONS Section 8.1. Dividends and other Distributions. The board of ----------- --------------------------------- directors may from time to time declare and the corporation may pay dividends or make other distributions with respect to its outstanding shares in the manner and upon the terms and conditions provided by law. If the board of directors does not fix the record date for determining shareholders entitled to a distribution, the record date shall be the date the board of directors authorizes the distribution (other than a distribution involving a purchase, redemption or other acquisition of the corporation's shares, for which no record date is required to be fixed). Section 8.2. Seal. The seal of the corporation shall be any ----------- ---- form approved from time to time or at any time by the board of directors. Section 8.3. Waiver of Notice. Whenever notice is required ----------- ---------------- to be given to a shareholder, director or other person under the provisions of these bylaws, the articles of incorporation or applicable law, a waiver in writing signed by the person or persons entitled to the notice, whether before or after the date and time stated in the notice, and delivered to the corporation shall be equivalent to giving the notice. Section 8.4. Checks. All checks, drafts or orders for the ----------- ------ payment of money shall be signed by the officer or officers or other individuals that the board of directors or chief executive officer may from time to time authorize. -14- 19 Section 8.5. Fiscal Year. The fiscal year of the corporation ----------- ----------- shall be the calendar year or such other period fixed by the board of directors. Section 8.6. Amendments. Unless otherwise provided in the ----------- ---------- articles of incorporation or a bylaw adopted by the shareholders or by law, these bylaws may be amended or repealed by the board of directors, except that a bylaw adopted, amended or repealed by the shareholders may not be readopted, amended or repealed by the board of directors if neither the articles of incorporation nor a bylaw adopted by the shareholders authorizes the board of directors to adopt, amend or repeal that particular bylaw or the bylaws generally. These bylaws may be amended or repealed by the shareholders even though the bylaws may also be amended or repealed by the board of directors. A bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed (a) if originally adopted by the shareholders, only by the shareholders, unless such bylaw as originally adopted by the shareholders provides that such bylaw may be amended or repealed by the board of directors or (b) if originally adopted by the board of directors, either by the shareholders or by the board of directors. A bylaw that fixes a greater quorum or voting requirement may not be adopted by the board of directors by a vote less than a majority of the directors then in office and may not itself be amended by a quorum or vote of the directors less than the quorum or vote prescribed in such bylaw or prescribed by the shareholders. Section 8.7. Applicability of Antitakeover Statutes. The ----------- -------------------------------------- provisions of Article 9 of the North Carolina Business Corporation Act, entitled "Shareholder Protection Act," shall not be applicable to the corporation. 15 20 * * * * * THIS IS TO CERTIFY that the above bylaws of Wachovia Corporation were adopted by the board of directors of the corporation by action taken at a meeting held on October 23, 1992. This 23rd day of October, 1992. ---------------------------------------- Secretary (Corporate Seal) 16 EX-10.11 4 WACHOVIA RETIREMENT SAVINGS & PROFIT-SHARING PLAN 1 EXHIBIT 10.11 1993 DECLARATION OF AMENDMENT TO WACHOVIA CORPORATION RETIREMENT SAVINGS AND PROFIT-SHARING BENEFIT EQUALIZATION PLAN THIS DECLARATION OF AMENDMENT, made the 22nd day of October, 1993, by WACHOVIA CORPORATION (the "Company"), a North Carolina corporation with its principal office at Winston-Salem, North Carolina, to the Wachovia Corporation Retirement Savings and Profit-Sharing Benefit Equalization Plan (the "plan"). R E C I T A L S: ---------------- It is deemed advisable to amend the plan to allow a participant to elect, with the consent of the Committee which administers the plan, for his benefit under the plan to be paid to him or applied for his benefit in installments over a period not in excess of 15 years or in a single lump sum payment. NOW, THEREFORE, it is declared that the plan shall be and hereby is amended, effective as of October 22, 1993, by deleting Section 6 in its entirety and substituting therefor the following: "Section 6. Payment of Benefits. The amount in ---------- ------------------- the Benefit Equalization Account of a Participant (the `Participant's Benefit') shall be paid to the same person or persons as the Participant's benefit under the RSPSP (the "RSPSP Beneficiaries") under one of the following options as elected by the Participant, with the consent of the Committee, prior to the date the Participant's Benefit becomes payable under the Plan: (i) Installments: Payment in cash in ------------- approximately equal monthly installments over a term certain not exceeding 15 years. (ii) Lump Sum: Payment in cash in a --------- single lump sum payment. 2 The Participant's Benefit shall become payable at the same time his benefit under the RSPSP becomes payable on account of retirement, termination of service or death. In no event shall a Participant's Benefit be subject to withdrawal while the Participant is in service. A Participant's election as to the form of the payment of the Participant's Benefit shall be made in the same manner and at the same time as his election is made as to the form of the payment of benefits under the RSPSP. If a Participant fails to elect one of the foregoing distribution options, the Participant's Benefit shall be paid in the same manner as his benefit under the RSPSP. At any time prior to the death of a Participant, the Participant may elect (which election shall be subject to change at any time upon notice in writing by the Participant to the Committee) for any payments hereunder following his death to be made to a person or persons other than the RSPSP Beneficiaries, in which event such payments shall be made to such other person or persons in the same manner and at the same time as such payments would have been made to the RSPSP Beneficiaries pursuant to this Section 6. Such election shall be made by the Participant in writing on a form provided by the Committee." IN WITNESS WHEREOF, this Declaration of Amendment has been executed in behalf of the Company on the day and year first above stated. WACHOVIA CORPORATION By: /s/ L. M. Baker, Jr. ----------------------------------- President Attest: /s/ Alice Washington Grogan - ----------------------------- Secretary (Corporate Seal) 2 EX-10.16 5 WACHOVIA AGREEMENT 1 EXHIBIT 10.16 AGREEMENT THIS AGREEMENT, made and entered into this the 22nd day of October, 1993, by and between WACHOVIA CORPORATION ("Wachovia") and JOHN G. MEDLIN, JR. ("Medlin"). RECITALS -------- John G. Medlin, Jr. presently serves as the chief executive officer of Wachovia, a position he has held since July of 1985. He also has served as chairman of the board of Wachovia since May of 1987. Medlin will retire as chief executive officer effective December 31, 1993, in accordance with the Executive Retirement Agreement under date of December 31, 1987, as amended, between him and Wachovia. After that date, he will no longer be an employee of Wachovia or any of its subsidiary companies. Medlin has been an active employee of Wachovia since 1959, during which time he has acquired special competence in and intimate knowledge of the business of the Company and of financial institutions in general. He has held many executive positions with the Wachovia organization, including service as chief executive officer of The Wachovia Corporation and Wachovia Bank and Trust Company, N.A. from 1977 until the merger with First Atlanta Corporation to form Wachovia in 1985. He is one of the most highly respected chief executive officers in the United States and has received national recognition on many occasions for his management and professional skills. Because of his intimate knowledge of the Wachovia organization, his exceptional skills in banking, his proven record of leadership and knowledge of the industry, and the significant contributions which he has made and can continue to make to Wachovia and to its board of directors, the board has unanimously requested that he continue to serve as chairman of the board of directors of Wachovia until he resigns as chairman or his chairmanship otherwise terminates as provided herein. The board believes that at this time it is in the best interest of Wachovia to have Medlin continue to serve as chairman of the board after his retirement as chief executive officer and as an employee of the Company on December 31, 1993, and to provide herein for expanded responsibilities and services to Wachovia by Medlin as chairman. The Wachovia Bylaws vest the board of directors with the authority to confer upon the chairman of the board added responsibilities and duties, and to establish reasonable compensation for the services of the chairman as set forth by the board of directors. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, Wachovia, through the action of its board of directors, and Medlin mutually agree as follows: 2 1. TERM OF AGREEMENT. Subject to the provisions for ----------------- termination as hereinafter set forth, the term of this Agreement shall be for a period beginning January 1, 1994 and ending December 31, 1995. The term of this Agreement is subject to Medlin's re-election as a director of Wachovia at its 1994 annual meeting of shareholders and as chairman at the annual organizational meeting of Wachovia directors. 2. DUTIES and RESPONSIBILITIES. Medlin shall perform the --------------------------- duties of the chairman of the board of directors of Wachovia as set forth in the Wachovia Bylaws. Additionally, it is acknowledged by Wachovia that Medlin has unique skills, knowledge and acquaintances in areas where Wachovia and its subsidiaries operate which qualify him to represent Wachovia and its subsidiaries in public relations and civic matters and to assist Wachovia and its subsidiaries in maintaining and developing relationships with customers. To that end, Medlin as chairman will perform the following services, subject to the reasonable request and general direction of Wachovia's chief executive officer: (1) he will assist management in maintaining relations and communications with the investing public, shareholders, and financial analysts; (2) he will represent Wachovia in charitable, educational, and public interest organizations and projects; (3) he will study, evaluate and advise management and the board on economic conditions and interpret the implications of economic trends as a basis for determining the financial plans and policies of Wachovia; (4) he will assist management in establishing and maintaining relationships and communications with federal and state agencies involved in the regulation of Wachovia and its subsidiary companies; (5) he will keep abreast of legislative matters which affect the Company's operations, and represent Wachovia when called upon to present its views on legislative issues to federal, state and local governments; (6) he will assist management in representing Wachovia's views and interests to banking trade associations and other industry-related organizations; (7) he will personally participate and assist in the contact, maintenance, and development of existing and prospective customer relationships for Wachovia and its subsidiary companies; (8) he will be available for speaking engagements and other presentations on behalf of Wachovia; and (9) he will perform for the benefit of Wachovia and its subsidiary companies any other reasonable specific service as may be requested by the chief executive officer and\or the board of directors of Wachovia. 3. INDEPENDENT CONTRACTOR. Medlin shall carry out his duties ---------------------- and responsibilities hereunder as an independent contractor and not as an employee of Wachovia. Medlin shall endeavor to make himself available at such times as Wachovia shall reasonably request for meetings, public appearances and similar events. Consistent with the foregoing, Medlin shall devote such time to carrying out his duties and responsibilities herein as he shall deem necessary, and he shall render the services herein at such time or times as he shall determine. Medlin shall not be required to work any set schedule or number of hours during any specific period, nor shall he be required to submit reports or schedules to Wachovia, except as otherwise provided herein for reimbursement of expenses. 4. COMPENSATION. For the services rendered by Medlin as ------------ chairman of the board of directors of Wachovia, pursuant to this agreement, Wachovia shall pay to Medlin the 2 3 sum of twenty-five thousand dollars ($25,000) per month, payable at the end of each calendar month during which this Agreement is in effect. 5. EXPENSES. Wachovia shall make available for Medlin office -------- space and secretarial and other support services appropriate to the performance of these duties and responsibilities. The Company shall pay the bills of or reimburse Medlin in accordance with Wachovia policies for all reasonable travel and other expenses incurred by Medlin in performing his obligations under this Agreement upon presentation by him of the required accounting and documentation in such form as is satisfactory to the chief financial officer of Wachovia. Medlin may use the corporate aircraft in the performance of these duties and will be provided a company automobile or allowance in accordance with Wachovia policy. The Company will continue to maintain for him a home alarm security service, a company network telephone at his residence, and a car telephone for business use. 6. BENEFITS. Medlin shall not be entitled to participate in -------- any retirement plans or other benefit plans provided by Wachovia for its employees as a consequence of his service as chairman of the board of directors on or after January 1, 1994, except to the extent that such participation results from Medlin's prior services as an employee or officer of the Company. Medlin will no longer be an employee of Wachovia or any of its subsidiary companies after December 31, 1993. 7. INCOME TAX WITHHOLDING. Wachovia shall not withhold ---------------------- federal or state income taxes or employment taxes from payments made to Medlin hereunder, unless otherwise required so to do by law. 8. FINANCIAL PLANNING SERVICES. Wachovia shall provide --------------------------- Medlin with financial planning services and shall reimburse Medlin for the costs of financial and legal advisors, to the same extent as if Medlin were a senior executive entitled to participate in Wachovia's Executive Financial Planning Program as in effect on January 1, 1994. Such services and reimbursement shall be available to Medlin for one year following the end of the term hereof and to his spouse for one year following his death if he shall die during the term. 9. NON-COMPETITION. During the term of this Agreement, --------------- Medlin shall not engage in any business in competition with the business of Wachovia as an officer, employee, advisor, consultant, partner, principal shareholder, or otherwise in which he shall have an active role in consulting or advising with respect to such competitive business. Medlin shall be deemed to be a principal shareholder of any corporation if he owns or controls, directly or indirectly, twenty-five percent (25%) or more of the voting stock of the corporation. 10. TERMINATION. This Agreement shall terminate at the close ----------- of business on December 31, 1995, or upon the selection of Medlin's successor as chairman of the board of directors of Wachovia Corporation, whichever event shall first occur. Additionally, this Agreement shall terminate upon the occurrence of the following events: 3 4 (a) Death or Incapacity. This Agreement shall terminate upon the ------------------- death of Medlin. In the event of Medlin's incapacity for a period in excess of three months, the board of directors of Wachovia may terminate this Agreement. In the event of the death of Medlin, Wachovia shall pay to any party that has been designated by Medlin in writing to Wachovia, or if no such party has been designated, to his executor(s) or administrator(s), or in the event of such incapacity, to Medlin or his designee, guardian, or representative, an amount equal to his unpaid compensation hereunder as of the end of the month in which he dies or has been incapacitated for the previous consecutive three months, and thereafter Wachovia shall have no further liability to Medlin or his executors or administrators for compensation arising pursuant to this Agreement. (b) Failure to Perform. In the event of Medlin's failure to observe ------------------ or perform any of the provisions of this Agreement required to be observed or performed by him, or if Medlin shall accept full-time employment with any other organization, Wachovia may terminate this Agreement, such termination to be effective thirty (30) days after Wachovia gives written notice of such termination to Medlin. Notwithstanding the foregoing, Wachovia may not terminate this Agreement unreasonably. It is explicitly understood and agreed by Medlin and Wachovia that nothing contained in this Agreement shall obligate the board, any member of the board, or Wachovia in any way to vote for, elect, or continue Medlin in office as a director or as chairman of the board of directors beyond the annual organization meeting scheduled for April 22, 1994. 11. NOTICES. Any notice required or permitted to be given ------- under this Agreement shall be sufficient if in writing and sent by registered mail to Medlin at 1056 Kenleigh Circle, Winston-Salem, North Carolina 27106 or to such other address as either party shall designate by written notice to the other. 12. ASSIGNMENT. The rights and obligations of Wachovia under ---------- this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Wachovia. The rights and obligations of Medlin hereunder are personal, and may not be assigned or delegated by Medlin. 13. MODIFICATION, WAIVER, AND ATTACHMENT. ------------------------------------ (a) Amendment of Agreement. This Agreement may not be modified or ---------------------- amended except by an instrument in writing signed by the parties hereto. This Agreement may be modified, amended, or extended 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 4 5 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. (c) 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 any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 14. 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. 15. EFFECT ON OTHER AGREEMENTS. Nothing contained in this -------------------------- Agreement is intended to alter in any way or to affect the provisions of any other agreement or contract which previously may have been entered into by and between Medlin and Wachovia. 16. 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, through its board of directors, has caused this Agreement to be executed and its seal to be affixed hereunto by its officers duly authorized, and Medlin has signed and sealed this Agreement, all on the day and year first above written. Wachovia Corporation By:/s/ Sherwood H. Smith, Jr. -------------------------- Sherwood H. Smith, Jr. Attest: Chairman - Compensation, Nominating, and Organization Committee /s/ Aice Washington Grogan - -------------------------- Alice Washington Grogan Secretary /s/ John G. Medlin, Jr. ----------------------- (CORPORATE SEAL) John G. Medlin, Jr. 5 EX-10.27 6 WACHOVIA AMENDED TO SUPP. RETIREMENT PLAN 1 EXHIBIT 10.27 STATE OF SOUTH CAROLINA ) THIRD AMENDMENT TO THE ) SOUTH CAROLINA NATIONAL COUNTY OF RICHLAND ) CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN WHEREAS, South Carolina National Corporation ("SCNC") previously established the South Carolina National Corporation Executive Retirement Plan (the "Plan") for the benefit of certain key management employees of SCNC and its affiliated corporations; and WHEREAS, SCNC desires to amend the Plan to condition the election of a participant to receive benefits under the Plan in a single lump sum payment on obtaining the consent of the Committee, to eliminate the condition that such election be made at least two (2) years prior to the relevant distribution date, and to make certain other changes that are deemed necessary and appropriate. NOW, THEREFORE, pursuant to Article IX of the Plan, effective as of October 18, 1993, Article IV, Section 4.06 Lump Sum Payment Option is ----------------------- amended in its entirety to read as follows: "4.06 Lump Sum Payment Option. Notwithstanding anything in ----------------------- this Article IV to the contrary, in lieu of the installment payment methods for distribution of benefits outlined in this Article IV, a Vested Participant entitled to a distribution of benefits under this Article IV (including Vested Participants entitled to benefits under Articles V and VI) may elect, with the consent of the Committee, to receive the present value of that benefit in one lump sum payment. For purposes of this Section 4.06, the present value of any SERP Normal Retirement Benefit or SERP Early Retirement Benefit shall be determined by discounting the installment payments at the rate in effect on the date the lump sum payment is to be made that would be used by the Pension Benefit Guaranty Corporation for purposes of determining the present value of a lump sum distribution on a plan termination. All lump sum payments under this Section 4.06 shall be made as soon as is administratively feasible after the Vested Participant's Normal Retirement Date, Early Retirement Date, or other relevant distribution date, as the case may be, but not later than ninety (90) days after such date. Any election by a Vested Participant to receive his benefits under the Plan in one lump sum payment shall be made at least sixty (60) days prior to his Normal Retirement Date, Early Retirement Date or other relevant distribution date, as the 2 case may be. Such election shall be made on the form and in the manner specified by the Committee." IN WITNESS WHEREOF, South Carolina National Corporation has caused this Third Amendment to the South Carolina National Corporation Supplemental Executive Retirement Plan to be adopted and executed this 18th day of October, 1993. SOUTH CAROLINA NATIONAL CORPORATION By: /s/ Anthony L. Furr ------------------------------------- Its: Chairman ATTEST: /s/ T. Stephen Lynch - --------------------------- Secretary EX-10.35 7 WACHOVIA AMEND TO SOUTH CAROLINA DEF. COMP PLAN 1 EXHIBIT 10.35 STATE OF SOUTH CAROLINA ) THIRD AMENDMENT TO THE ) SOUTH CAROLINA NATIONAL COUNTY OF RICHLAND ) CORPORATION DEFERRED COMPENSATION PLAN WHEREAS, South Carolina National Corporation ("SCNC") previously established the South Carolina National Corporation Deferred Compensation Plan (the "Plan") for the benefit of certain key employees of SCNC and its affiliated corporations; and WHEREAS, SCNC desires to amend the Plan to condition the election of a participating employee as to the form and timing of the payment of benefits under the Plan on obtaining the consent of the Committee, to eliminate the condition that such election be made at least two (2) years prior to the date on which the participating employee becomes entitled to receive benefits under the Plan, and to make certain other changes that are deemed necessary and appropriate. NOW, THEREFORE, pursuant to Article II, Section 22 of the Plan, the Plan is amended as follows: 1. Article II, Section 8 is amended in its entirety to read as follows: "SECTION 8. BENEFIT PAYMENTS AT TERMINATION OF EMPLOYMENT. ---------- --------------------------------------------- Upon a Participating Employee's termination of employment with SCN for any reason other than death, the Participating Employee shall be entitled to receive deferred compensation in the amount determined under Article II, Section 7. The Participating Employee may elect, with the consent of the Committee, to receive deferred compensation in either (i) a lump sum, or (ii) equal monthly payments over a fifteen (15) year period; with the amount of payments under either method determined in accordance with the appropriate column on the schedule of benefits provided for in Article II, Section 7. Payments of deferred compensation shall be made to a Participant (in the case of a lump sum), or commence (in the case of installment payments) during the January immediately following the Participating Employee's termination of employment with SCN. Any election as to the form of the payment of benefits under this Plan shall be made at least sixty (60) days prior to the date on which the Participating Employee becomes entitled to benefits under this Section 8. Such election shall be made on the form provided by the Committee for such purpose. In the event that a participating employee shall fail to make such an election, benefits payable under this Plan shall be paid in equal monthly installments over a fifteen (15) year period." 2 2. Article II, Section 9 is amended in its entirety to read as follows: "SECTION 9. BENEFIT PAYMENT WHEN TERMINATION OF EMPLOYMENT ---------- ---------------------------------------------- OCCURS BETWEEN AGE 60 AND 65. If a Participating Employee terminates ---------------------------- employment with SCN after attaining age sixty (60), but prior to age sixty-five (65), the Participating Employee may elect, with the consent of the Committee, to delay the payment of, or commencement of payments in the event installments are elected, his deferred compensation under this Plan until the January immediately following the date on which he attains age sixty-five (65). A Participating Employee's election to delay the commencement of his benefits under this Section must be made at least sixty (60) days prior to the Participating Employee's termination of employment with SCN. Such election shall be made on the form provided by the Committee for such purpose. If a Participating Employee makes a valid election to delay the commencement of his benefits until the January immediately following the date he attains age sixty-five (65) and dies prior to attaining such age, his date of death shall be deemed to be the date of his termination of employment with SCN and his benefits shall be paid in the form elected by the Participating Employee." 3. The effective date of this Third Amendment shall be October 18, 1993. IN WITNESS WHEREOF, South Carolina National Corporation has caused this Third Amendment to the South Carolina National Corporation Deferred Compensation Plan to be adopted and executed this 18th day of October, 1993. SOUTH CAROLINA NATIONAL CORPORATION By: /s/ Anthony L. Furr ------------------------------------- Its: Chairman ATTEST: /s/ T. Stephen Lynch - -------------------------- Secretary EX-13 8 WACHOVIA ANNUAL REPORT 1 - ------------------------------------------------------------------------------ EXHIBIT 13 1993 ANNUAL REPORT WACHOVIA - ------------------------------------------------------------------------------ 2 - ----------------------------------------------------------------------------------------------------------------------------------- CONTENTS Financial Highlights . . . . . . . . . . . . . . 1 Fourth Quarter Analysis . . . . . . . . . . . . . 28 Wachovia Corporation . . . . . . . . . . . . . . 2 Results of Operations, 1992 vs. 1991 . . . . . . . 33 Selected Year-End Data . . . . . . . . . . . . . 2 Management's Responsibility for News Developments . . . . . . . . . . . . . 3 Financial Reporting . . . . . . . . . . . . . . . 35 Letter to Shareholders . . . . . . . . . . . . . 4 Report of Independent Auditors. . . . . . . . . . . . . 35 Executive Management . . . . . . . . . . . . . 6 Financial Statements . . . . . . . . . . . . . . . . . 36 Management's Discussion and Analysis of Financial Six-Year Financial Summaries . . . . . . . . . . . . . 54 Condition and Results of Operations . . . . . 8 Stock Data . . . . . . . . . . . . . . . . . . . . . . 62 Results of Operations . . . . . . . . . . . . 9 Member Company Directors . . . . . . . . . . . . . . . 64 Shareholders' Equity and Capital Ratios . . . 26 Wachovia Corporation Directors and Officers . . . . . . 65
- --------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER INFORMATION ANNUAL MEETING TRANSFER AGENT/DIVIDEND DISBURSING AGENT The Annual Meeting of Shareholders of Wachovia Corporation Wachovia Bank of North Carolina, N.A. will be at 10:30 a.m., Friday, April 22, 1994, in the Wachovia Corporate Trust Department Building, 301 North Main Street, Winston-Salem, North Carolina. P. O. Box 3001 All shareholders are invited to attend. Winston-Salem, NC 27102 1-800-633-4236 INDEPENDENT AUDITORS Ernst & Young, Winston-Salem, North Carolina FORM 10-K AND OTHER INFORMATION Copies of Wachovia Corporation's Annual Report to the DIVIDEND SERVICES/ADDRESS CHANGE Securities and Exchange Commission, Form 10-K, and other For information concerning Wachovia Corporation's Dividend information may be obtained by contacting: Reinvestment Plan or Direct Deposit of Dividends services, please fill out the card in the back of this report. Requests for Robert S. McCoy, Jr. address changes or corrections should be sent in writing to Chief Financial Officer the address below. Use of your shareholder account number 910-770-5926 in all correspondence will be appreciated. or James C. Mabry H. Jo Barlow Manager, Investor Relations Shareholder Services 910-770-5788 910-770-5787 Wachovia Corporation Wachovia Corporation P. O. Box 3099 P. O. Box 3099 Winston-Salem, NC 27150 Winston-Salem, NC 27150 COMMON STOCK LISTING New York Stock Exchange Symbol: WB
3
- ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Percent 1993 1992 Change ---------- ---------- ------- EARNINGS AND DIVIDENDS (thousands, except per share data) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 13.6 Cash dividends paid on common stock . . . . . . . . . . . . . . . 191,488 170,756 12.1 Payout ratio (total cash dividends/net income) . . . . . . . . . . 38.9% 39.4% Net income per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 12.7 Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 13.5 Cash dividends paid per common share . . . . . . . . . . . . . . . $ 1.11 $ 1.00 11.0 Average primary shares outstanding . . . . . . . . . . . . . . . . 173,941 172,641 .8 Average fully diluted shares outstanding . . . . . . . . . . . . . 175,198 175,512 (.2) Return on average assets . . . . . . . . . . . . . . . . . . . . . 1.46% 1.36% Return on average shareholders' equity . . . . . . . . . . . . . . 17.13 16.69 BALANCE SHEET DATA AT YEAR-END (millions, except per share data) Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,526 $ 33,367 9.5 Interest-earning assets. . . . . . . . . . . . . . . . . . . . . . 32,349 29,136 11.0 Loans -- net of unearned income . . . . . . . . . . . . . . . . . 22,977 21,086 9.0 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,352 23,375 (.1) Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . 26,545 23,839 11.3 Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 3,018 2,775 8.8 Shareholders' equity to total assets . . . . . . . . . . . . . . . 8.26% 8.32% Risk-based capital ratios: Tier I capital . . . . . . . . . . . . . . . . . . . . . . . 9.72 9.83 Total capital . . . . . . . . . . . . . . . . . . . . . . . . 12.88 12.32 Per share: Book value . . . . . . . . . . . . . . . . . . . . . . . . . $ 17.61 $ 16.18 8.8 Common stock closing price (NYSE) . . . . . . . . . . . . . . 33.50 34.125 (1.8) Price/earnings ratio. . . . . . . . . . . . . . . . . . . . . 11.8x 13.6x
Note: Percentage changes were calculated before rounding. 1 4 - ------------------------------------------------------------------------------- Wachovia Corporation Wachovia Corporation is a southeastern interstate bank holding company with good diversification and balance of business activities and geographic markets. It has dual headquarters in Atlanta, Georgia, and Winston-Salem, North Carolina. Principal banking subsidiaries are Wachovia Bank of Georgia, N.A., Atlanta; Wachovia Bank of North Carolina, N.A., Winston-Salem; and The South Carolina National Bank, Columbia. At December 31, 1993, the corporation had 509 banking offices in 214 cities and communities throughout the states of Georgia, North Carolina and South Carolina. Wachovia Bank of Georgia, N.A. had 129 branches in 48 cities, including 90 in metropolitan Atlanta; Wachovia Bank of North Carolina, N.A., operated 223 branches in 96 cities; and The South Carolina National Bank had 157 branches in 70 cities. The First National Bank of Atlanta in Wilmington, Delaware, provides credit card services for Wachovia's affiliated banks. Major corporate and institutional relationships of the company's banks outside the southeast are managed by Wachovia Corporate Services, Inc., with representative offices in Chicago, London, New York City and Tokyo. Banking offices throughout the corporation's three home states also serve both national and international markets. Through its banking subsidiaries, Wachovia also has foreign branches at Grand Cayman and an Edge Act bank branch in New York City. Wachovia Trust Services, Inc., provides fiduciary, investment management and related financial services for corporate, institutional and individual clients. Wachovia Operational Services Corporation provides information processing and systems development services for Wachovia's subsidiaries. Mortgage banking operations are conducted through Wachovia Mortgage Company's 18 residential loan offices in North Carolina, South Carolina, Florida and Georgia. The corporation is involved in several other financial service activities including state and local government securities underwriting, sales and trading, discount brokerage, foreign exchange, corporate finance and other money market services.
- ------------------------------------------------------------------------------------------------------------------------------------ SELECTED YEAR-END DATA 1993 1992 1991 1990 1989 1988 -------- -------- -------- -------- ------- ------- Trust assets (millions): Discretionary management . . . . . . . . . . . $ 17,950 $ 16,147 $ 14,302 $ 12,777 $12,881 $11,216 Total . . . . . . . . . . . . . . . . . . . . 92,287 85,806 78,214 68,423 65,137 55,207 Banking offices: North Carolina . . . . . . . . . . . . . . . . 223 222 224 222 218 218 Georgia . . . . . . . . . . . . . . . . . . . 129 134 135 142 133 130 South Carolina . . . . . . . . . . . . . . . . 157 158 160 153 148 144 -------- -------- -------- -------- ------- ------- Total . . . . . . . . . . . . . . . . . . 509 514 519 517 499 492 ======== ======== ======== ======== ======= ======= Automated banking machines: North Carolina . . . . . . . . . . . . . . . . 251 221 210 200 189 178 Georgia . . . . . . . . . . . . . . . . . . 180 173 164 162 152 143 South Carolina . . . . . . . . . . . . . . . . 167 164 163 156 142 138 -------- -------- -------- -------- ------- ------- Total . . . . . . . . . . . . . . . . . . 598 558 537 518 483 459 ======== ======== ======== ======== ======= ======= Mortgage servicing portfolio (millions) . . . . . . $ 9,007 $ 8,591 $ 8,024 $ 6,146 $ 4,446 $ 3,885 Mortgages serviced (thousands). . . . . . . . . . . 136 135 131 108 88 79 Employees (full-time equivalent). . . . . . . . . . 15,531 16,164 16,886 16,864 17,000 17,034 Common stock shareholders . . . . . . . . . . . . . 28,079 26,706 29,806 28,195 27,710 27,890 Common shares outstanding (thousands)*. . . . . . . 171,376 171,471 85,323 84,276 83,998 72,008
*Common shares outstanding for years before 1992 have not been restated for the two-for-one common stock split effective April 1, 1993 2 5 - ------------------------------------------------------------------------------ NEWS DEVELOPMENTS - - L.M. Baker, Jr., 51, became chief executive officer of Wachovia Corporation on January 1, 1994 succeeding John G. Medlin, Jr., 60, who served in that position for the previous 17 years. Mr. Baker remains president of the corporation and a director. Mr. Medlin continues to serve as chairman of the board. The appointment was made by the corporation's directors in October 1993. Mr. Medlin said, "The exceptional skills and experience of Bud Baker and the executives who head the major business units and administrative functions, allow me to retire from management responsibilities with full confidence in Wachovia's future." Mr. Baker joined Wachovia in 1969. He has held the positions of president of the North Carolina bank, chief credit officer of the corporation, executive in charge of the Administrative Services Division and head of the International Group. He became president, chief operating officer and a director of the parent company in February 1993. During Mr. Medlin's 17-year tenure as chief executive officer, Wachovia expanded to a multistate company by adding leading banks in Georgia and South Carolina, with assets growing from $3.6 billion to $36.5 billion. The originally reported net income per fully diluted share of Wachovia grew at a compound annual rate of around 12 percent over the 17 years. For a Wachovia common share increased for stock splits, the market value rose from $21 on December 31, 1976 to $160.80 on December 31, 1993 and the dividend grew from $.63 in 1976 to $5.328 in 1993. During that period, the compound annual rate of total return on the stock was 17 percent. - - Three other members of executive management retired from Wachovia. Retiring on December 31 were Thomas E. Boland, 59, as executive vice president for consumer credit services after nearly 40 years of service with Wachovia Bank of Georgia and its predecessor, First Atlanta, and James T. Brewer, 59, as executive vice president and head of the Administrative Services Division after 33 years of service. David L. Cotterill, 56, retired on January 31, 1994 as head of Wachovia Trust Services following 30 years of service with Wachovia. - - Wachovia Corporation joined the Standard & Poor's 500 Index of stocks and the Major Regional Banks S&P 500 Industry Group on October 1, 1993. The addition removed Wachovia from the S&P MidCap 400 Index to which it was added in 1991. - - The North Carolina and Georgia banks successfully launched the Visa Check debit card beginning last summer, capitalizing on the previous experience of South Carolina National Bank. Wachovia also became the first bank nationwide to have Visa Check appear on its automated banking machine cards. Visa Check allows authorized purchase transactions to be debited automatically from customers' available checking account balances. At year-end, Wachovia had more than 770,000 debit card customers and ranked as one of the largest debit card issuers in the country. - - In November 1993, Wachovia's Treasury Services Group began offering Integrated Payables, a disbursing service that is part of its cash management product line. The service outsources companies' accounts payable functions, enabling them to streamline activities, reduce costs and enhance internal controls. Also, Wachovia Connection PC, an automated banking service for small to medium-size businesses, was introduced in 1993. The service enables smaller businesses to have on-line access to their deposit accounts and to perform a variety of functions at their convenience using personal computers and special software. - - Wachovia Trust Services celebrated the 100th anniversary of its business which began with the opening of the Wachovia Loan and Trust Company on June 15, 1893. Today, Wachovia's trust function provides services across the nation and has under administration assets totaling more than $92 billion. During 1993, Wachovia Trust Services expanded its mutual funds investment choices to include stocks and bonds, as well as money market securities with the addition of six new Biltmore Funds. The funds had total assets amounting to $1.285 billion at year-end 1993. - - Wachovia's Brokerage Service celebrated its 10th year of operation in October 1993. The group provides brokerage services, including buying and selling of stocks, corporate bonds, mutual funds and options to more than 80,000 clients. Customers also may select the Wachovia Investor's Account which automatically sweeps cash from a checking account into a selected money market investment. - - South Carolina National Bank, a member company of Wachovia Corporation since 1991, plans to change its name to Wachovia Bank of South Carolina, N.A., in May 1994. The action was approved by its board of directors in October 1993. - - John G. Medlin, Jr., was selected as the nation's best chief executive for banking in 1993 as part of Financial World magazine's 20th annual chief executive officer of the year competition. Mr. Medlin was one of 12 silver award winners chosen from more than 3,000 chief executives originally nominated in the contest. Judging is done by senior securities analysts for each business category. Earlier, the magazine ranked Wachovia as the best performing bank among the 25 largest U.S. banks for the 12-month period ending September 30, 1993. The publication cited Wachovia's credit quality and return on assets as key factors in the top rating. 3 6 - ------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Wachovia Shareholder: The economy improved during 1993, but growth was uneven and moderate on balance. The stimulation of low interest rates and a large budget deficit was tempered by slow employment gains, fragile consumer confidence and concerns about heavier tax and regulatory burdens. Loan demand increased somewhat and credit problems declined, but net interest spreads narrowed. In this climate, Wachovia's performance was excellent. Net income per fully diluted share was $2.81, an increase of 13.5 percent from $2.48 per share in 1992. Net income totaled $492.1 million, up 13.6 percent from $433.2 million in the prior year, and represented strong returns of 17.1 percent on shareholders' equity and 1.46 percent on assets. These excellent earnings resulted from higher levels of net interest income, good growth of other operating revenues, careful control of operating costs and reduced provisions for credit losses. The earnings performance reflects the diligent and determined efforts of Wachovians to secure and develop enduring business relationships, while maintaining high standards of credit quality and expense management. Average interest-earning assets for the year were up $1.683 billion or 6 percent from 1992. Loans grew $1.514 billion or 7.6 percent with the consumer category, primarily credit card and automobile financing, accounting for the majority of the increase. Wachovia's popular Prime Plus credit card pricing options continued to generate strong growth. Investment securities increased $838 million or 13.5 percent. Average interest-bearing liabilities rose $1.201 billion or 5.2 percent from the prior year. A moderate decrease in total time deposits was offset by higher levels of short-term borrowings and long-term debt, including the issuance of notes by Wachovia Bank of North Carolina to supplement funding at attractive rates. Taxable equivalent net interest income increased $48.4 million or 3.6 percent, reflecting the combination of growth in earning assets and a narrowing of net interest spreads. The net yield on interest-earning assets decreased 11 basis points for 1993, as the drop in funding costs slowed in the last half of the year, while asset yields continued a steady decline. Other operating revenue grew $64.9 million or 12.1 percent. Good gains were achieved in fees from credit card, deposit account and trust services. Gains on the sale of investment securities and subsidiary sales totaled $27.4 million in 1993 versus $21 million for 1992, resulting in total noninterest income growth of $71.4 million or 12.8 percent. Noninterest expense rose a more moderate $35.6 million or 3.2 percent. Personnel expense increased $28.9 million or 5.3 percent, largely reflecting higher employee benefits expense. Net occupancy and equipment expense was up by $2.7 million or 1.5 percent with remaining categories of noninterest expense growing a combined $4 million or 1.1 percent. Wachovia's exceptional credit quality was even better as nonperforming assets declined to $155 million or .67 percent of loans and foreclosed property at December 31, 1993 from $265 million or 1.25 percent a year earlier. Net loan losses totaled $67.4 million or .31 percent of average loans, a reduction of $27.8 million or 29.2 percent from $95.2 million or .48 percent of average loans in 1992. The provision for loan losses was $92.7 million, exceeding net charge-offs by $25.2 million, and down $26.8 million or 22.4 percent from $119.4 million in 1992. The allowance for loan losses totaled $405 million at year-end 1993, representing 1.76 percent of loans and 372 percent coverage of nonperforming loans compared with $380 million or 1.80 percent of loans and 218 percent coverage a year earlier. At December 31, 1993, shareholders' equity was $3.018 billion and represented 8.26 percent of assets. The Tier I and total risk-based capital ratios were 9.72 percent and 12.88 percent, respectively. Wachovia continues to be a leader in financial strength and earnings quality among the major banking companies of the nation and world. Dividends totaled $1.11 per share in 1993, up 11 percent from $1.00 per share paid in 1992. The total return for 1993 on Wachovia common stock, including dividend reinvestment, was 1.3 percent compared with 10.1 percent for the S&P 500 Index, reflecting market weakness in bank stocks as a group. At December 31, 1993, Wachovia's assets of $36.526 billion ranked 22nd among U.S. banking companies, while net income of $492.1 million for the year was 16th. Wachovia's market capitalization of $5.741 billion ranked 13th. More detailed financial information for 1993 and the previous five years is given in the Management's Discussion and Analysis 4 7 section beginning on page 8. Highlights for the period include: - - Net income per fully diluted share grew at a compound annual rate of 9.7 percent from 1989 to 1993. Returns on shareholders' equity and assets averaged 14.9 percent and 1.17 percent, respectively, for the past five years, while common equity to assets averaged 7.79 percent. - - Average major balance sheet categories increased at the following five-year compound annual rates: interest-earning assets, 6.4 percent; loans, 5.7 percent; interest-bearing liabilities, 6 percent; total deposits, 3.5 percent; total assets, 5.9 percent; and shareholders' equity, 9.9 percent. - - Other operating revenue, which excludes gains from investment securities and subsidiary sales, grew at a compound annual rate of 10.4 percent for the period, while noninterest expense advanced a slower 5.5 percent. - - Net loan losses averaged .52 percent of loans for the past five years and nonperforming assets to loans and foreclosed property averaged 1.06 percent. Reserve coverage of nonperforming loans averaged 212 percent for the period. - - Common dividends paid increased at a compound annual rate of 13.7 percent for the years 1989 through 1993. The five-year compound annual rate of total return on Wachovia common stock, including dividend reinvestment, was 20.4 percent compared with 14.5 percent for the S&P 500 Index. These excellent results were achieved during a treacherous period for banking, while investing heavily in people, technology and interstate expansion. They are a tribute to the leadership of John Medlin, who served with distinction as chief executive officer for the past 17 years and retired from that position on December 31 after 34 years of service. Thanks to John's passion for excellence, Wachovia avoided most of the pitfalls of banking and faces the remainder of this decade from a unique and coveted position of strength. He also had the vision to plan and guide top management succession through a smooth and gradual transition over recent years. We are fortunate to have him continue as chairman, a director and an active ambassador for the company. Personal profiles of the talented executives who now head major business units and administrative functions are on pages 6 and 7. Together, we are proud to lead your company. Our sacred mission is to continue providing exceptional protection and growth of your investment. Sincerely, /s/ L. M. Baker, Jr. ----------------------- L. M. Baker, Jr. Chief Executive Officer February 16, 1994 (Photo) 5 8 - ------------------------------------------------------------------------------ EXECUTIVE MANAGEMENT In addition to L.M. Baker, Jr., chief executive officer, Wachovia Corporation's executive management team at the beginning of 1994 includes the following: Anthony L. Furr, G. Joseph Prendergast, J. Walter McDowell, Hugh M. Durden, Jerry D. Craft, Mickey W. Dry, Walter E. Leonard, Jr., Robert S. McCoy, Jr., Kenneth W. McAllister and Richard B. Roberts. Mr. Furr, 50, is president and chief executive officer of South Carolina National Corporation and The South Carolina National Bank. Prior to being elected to these positions in 1993, Mr. Furr served first as a regional executive in North Carolina and later as chief financial officer of Wachovia Corporation. He joined Wachovia in 1969 in the International Group and later headed International Banking from 1980 until 1988. Mr. Craft, 46, is executive vice president in charge of consumer credit services including responsibility for Wachovia's credit card, sales finance and mortgage banking activities. Mr. Craft joined Wachovia Bank of Georgia (then First Atlanta) in 1982 as a group vice president of the bank card services division after serving in credit card management positions with banks in North Carolina, South Carolina and Maryland. He assumed overall responsibility for consumer credit in late 1993. Mr. Durden, 51, is executive vice president for Trust Services, responsible for Wachovia's trust businesses and Biltmore family of diversified mutual funds. Prior to assuming this position in early 1994, Mr. Durden was executive vice president and head of the Western Division for Wachovia Bank of North Carolina. Since joining Wachovia in 1972, Mr. Durden has served in several capacities including Loan Administration Division executive and head of the Corporate Banking Services. Mr. Prendergast, 48, is president and chief executive officer of Wachovia Bank of Georgia, N.A., as well as president of Wachovia Corporate Services. Joining Wachovia in 1973, Mr. Prendergast served in the corporation's New York office before being named manager of the company's Edge Act bank in 1975. He was elected executive vice president of the corporation and president of Wachovia Corporate Services in 1988 and assumed his current position in 1993. Mr. McDowell, 43, is president and chief executive officer of Wachovia Bank of North Carolina, N.A. He joined the bank in 1973 as a Personal Banker and became manager of corporate banking for North Carolina in 1988. He was named head of the Piedmont Triad Region in 1990, Central Division executive in 1991 and to his current position in May 1993. (Photo) 6 9 Mr. McAllister, 45, is executive vice president and head of the Administrative Services Division with overall responsibility for Wachovia's audit, corporate communications, legal, personnel and security functions. He was named to his current position in early 1994. In addition, Mr. McAllister serves as the corporation's general counsel, a position he has held since joining Wachovia in 1988. Previously, Mr. McAllister was in private law practice, and from 1981 to 1986 he served as U.S. Attorney for the Middle District of North Carolina. Mr. McCoy, 55, is executive vice president and chief financial officer with overall responsibility for the financial management and general services functions of the corporation. Prior to assuming his current position in 1992, he served for a period as comptroller of Wachovia. Mr. McCoy joined South Carolina National in 1984 following ten years as a partner with the accounting firm of Price Waterhouse. He held positions as president of South Carolina National Corporation and chief financial officer and vice chairman of South Carolina National Bank. Mr. Leonard, 48, is executive vice president in charge of Wachovia Operational Services Corporation. He has overall responsibility for technology, including banking, credit, and trust operations, information services, systems development, remittance processing and telecommunications of the company. Mr. Leonard joined Wachovia in 1965 and has served in various operations and information services capacities, including manager of the Systems Development Group and manager of Banking Operations. He was named to his present position in 1988. Mr. Roberts, 50, is executive vice president, treasurer and head of Funds Management. He joined Wachovia in 1967 as a commercial operations manager. From 1972 to 1980, he was investment portfolio and asset/liability manager in the Funds Management Group. In 1985, Mr. Roberts became head of Funds Management for Wachovia Corporation and was elected executive vice president and treasurer in 1990. Mr. Dry, 54, is executive vice president and chief credit officer. In this capacity, he heads General Loan Administration and has overall responsibility for the corporation's lending policy and credit quality. Mr. Dry joined Wachovia in 1961. He has served as manager of Corporate Loan Administration for Wachovia Bank of North Carolina's Eastern and Central Regions. In 1985, he was named group executive and senior loan administration officer for Wachovia's corporate banking function. Mr. Dry was appointed to his current position in 1989. (Photo) 7 10 - -------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SUMMARY TABLE 1 - ------------------------------------------------------------------------------------------------------------------------------------ Five-Year Compound Growth 1993 1992 1991 1990 1989 1988 Rate ---- ---- ---- ---- ---- ---- --------- SUMMARY OF OPERATIONS (thousands, except per share data) Interest income -- taxable equivalent . . . . . . . $2,221,738 $2,301,325 $2,731,925 $2,856,318 $2,773,970 $2,291,521 (.6%) Interest expense. . . . . . . . . . . . . . . . . . 839,012 967,028 1,467,849 1,684,114 1,672,856 1,244,382 (7.6) ---------- ---------- ---------- ---------- ---------- ---------- Net interest income -- taxable equivalent . . . . . 1,382,726 1,334,297 1,264,076 1,172,204 1,101,114 1,047,139 5.7 Taxable equivalent adjustment . . . . . . . . . . . 98,901 79,247 94,910 107,674 101,317 91,348 1.6 ---------- ---------- ---------- ---------- ---------- ---------- Net interest income . . . . . . . . . . . . . . . . 1,283,825 1,255,050 1,169,166 1,064,530 999,797 955,791 6.1 Provision for loan losses . . . . . . . . . . . . . 92,652 119,420 293,000 142,992 86,531 78,110 3.5 ---------- ---------- ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 1,191,173 1,135,630 876,166 921,538 913,266 877,681 6.3 Other operating revenue . . . . . . . . . . . . . . 600,179 535,242 490,178 458,852 411,817 366,465 10.4 Gain on sale of subsidiary. . . . . . . . . . . . . 8,030 19,486 -- -- -- -- Investment securities gains . . . . . . . . . . . . 19,394 1,497 11,091 6,218 7,625 5,213 30.1 ---------- ---------- ---------- ---------- ---------- ---------- Total other income. . . . . . . . . . . . . . . . . 627,603 556,225 501,269 465,070 419,442 371,678 11.0 Personnel expense . . . . . . . . . . . . . . . . . 568,680 539,823 524,489 487,473 484,998 456,973 4.5 Other expense . . . . . . . . . . . . . . . . . . . 562,556 555,829 572,028 464,811 431,892 407,186 6.7 ---------- ---------- ---------- ---------- ---------- ---------- Total other expense 1,131,236 1,095,652 1,096,517 952,284 916,890 864,159 5.5 Income before income taxes. . . . . . . . . . . . . 687,540 596,203 280,918 434,324 415,818 385,200 12.3 Applicable income taxes* . . . . . . . . . . . . . 195,445 162,978 51,378 88,647 87,669 86,434 17.7 ---------- ---------- ---------- ---------- ---------- ---------- Net income. . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540 $ 345,677 $ 328,149 $ 298,766 10.5 ========== ========== ========== ========== ========== ========== Net income per common share: Primary . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34 $ 2.05 $ 1.95 $ 1.82 9.2 Fully diluted . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 $ 1.32 $ 2.02 $ 1.92 $ 1.77 9.7 Cash dividends paid per common share. . . . . . . . $ 1.11 $ 1.00 $ .92 $ .82 $ .697 $ .584 13.7 Average primary shares outstanding. . . . . . . . . 173,941 172,641 171,481 168,888 168,268 164,266 1.2 Average fully diluted shares outstanding. . . . . . 175,198 175,512 175,218 172,722 172,586 172,366 .3 SELECTED AVERAGE BALANCES (millions) Total assets. . . . . . . . . . . . . . . . . . . . $ 33,629 $ 31,832 $ 32,045 $ 30,469 $ 28,347 $ 25,250 5.9 Loans -- net of unearned income . . . . . . . . . . 21,546 20,032 20,589 20,080 18,604 16,355 5.7 Investment securities . . . . . . . . . . . . . . . 7,039 6,201 5,783 4,879 4,301 3,946 12.3 Other interest-earning assets . . . . . . . . . . . 1,195 1,864 1,988 1,823 1,810 1,503 (4.5) Total interest-earning assets . . . . . . . . . . . 29,780 28,097 28,360 26,782 24,715 21,804 6.4 Interest-bearing deposits . . . . . . . . . . . . . 17,019 17,884 17,924 16,583 16,610 14,198 3.7 Short-term borrowed funds . . . . . . . . . . . . . 5,403 4,961 6,080 6,231 4,276 3,840 7.1 Long-term debt. . . . . . . . . . . . . . . . . . . 2,073 449 178 177 230 284 48.8 Total interest-bearing liabilities. . . . . . . . . 24,495 23,294 24,182 22,991 21,116 18,322 6.0 Noninterest-bearing deposits. . . . . . . . . . . . 5,354 4,947 4,595 4,620 4,586 4,631 2.9 Total deposits . . . . . . . . . . . . . . . . . . 22,373 22,831 22,519 21,203 21,196 18,829 3.5 Shareholders' equity. . . . . . . . . . . . . . . . 2,872 2,596 2,462 2,237 2,043 1,792 9.9 RATIOS (averages) Loans to deposits . . . . . . . . . . . . . . . . . 96.30% 87.74% 91.43% 94.71% 87.77% 86.86% Net loan losses to loans. . . . . . . . . . . . . . .31 .48 .99 .47 .37 .66 Net yield on interest-earning assets. . . . . . . . 4.64 4.75 4.46 4.38 4.46 4.80 Shareholders' equity to: Total assets . . . . . . . . . . . . . . . . . 8.54 8.16 7.68 7.34 7.21 7.10 Net loans. . . . . . . . . . . . . . . . . . . 13.58 13.21 12.13 11.28 11.11 11.10 Return on assets. . . . . . . . . . . . . . . . . . 1.46 1.36 .72 1.13 1.16 1.18 Return on shareholders' equity. . . . . . . . . . . 17.13 16.69 9.33 15.45 16.06 16.67 *Income taxes applicable to securities transactions were $7,472, $470, $3,997, $2,379, $2,903 and $1,997, respectively - ------------------------------------------------------------------------------------------------------------------------------------
8 11 RESULTS OF OPERATIONS Summary Wachovia Corporation's primary markets within the Southeast are Georgia, North Carolina and South Carolina. The combined population of the three states totaled 17.502 million in 1993, up 305 thousand or 1.8 percent from 17.197 million in 1992. The three-state population represented 6.8 percent of the total U.S. population. Economic activity in all three states has shown general improvement since the recession of 1991. An index of business activity composed of nonagricultural employment, average manufacturing workweek, building permits and initial claims for unemployment has shown consecutive quarterly gains since the second quarter of 1991. For example, on a combined basis using most currently available data, nonagricultural employment for the three states averaged 7.875 million during 1993, up 208 thousand or 2.7 percent from 1992. Building permits for the three states averaged $638.672 million during 1993, an increase of $120 million or 23.2 percent from $518.206 million in 1992. Wachovia Corporation's consolidated operating results and financial condition are presented and analyzed in the following narrative, tables and charts. The narrative should be read in conjunction with the Notes to Consolidated Financial Statements on pages 40 through 53. Expanded six-year financial data appears on pages 54 through 61. References to changes in the corporation's assets and liabilities refer to daily average levels unless otherwise noted. Net income for 1993 totaled $492.095 million compared with $433.225 million in 1992. On a fully diluted basis, net income per share was $2.81 for the year versus $2.48 per share in 1992. Return on shareholders' equity was 17.1 percent and return on assets 1.46 percent for 1993 compared with 16.7 percent and 1.36 percent, respectively, in the prior year. NET INCOME PER SHARE NET INCOME (FULLY DILUTED) (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX) RETURN ON ASSETS RETURN ON COMMON EQUITY COMMON EQUITY TO ASSETS (AVERAGE) (AVERAGE) (AVERAGE) (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX) APPENDIX) 9 12 Net Interest Income Taxable equivalent net interest income (which is adjusted for the tax-favored status of earnings from certain loans and investments) rose $48.429 million or 3.6 percent in 1993. The increase primarily reflected growth in interest-earning assets partially offset by the effects of narrowing of the net yield on interest-earning assets. The net yield on interest-earning assets (taxable equivalent net interest income as a percentage of average interest-earning assets) decreased 11 basis points for the year in comparison with 1992. A continued drop in yields on assets, which are supported partially by noninterest-bearing funds, accounted for the decrease. Asset yields fell in line with a declining interest rate environment with higher-yielding assets replaced by lower-yielding loans and investments. Funding rates declined by approximately the same amount as asset yields but would have declined further if the corporation had not lengthened maturities of its borrowings to take advantage of favorable longer-term interest rates. Interest income and yields for 1993 are stated on a fully taxable equivalent basis using both the federal income tax rate of 35 percent and state tax rates, as applicable, reduced by the nondeductible portion of interest expense. The taxable equivalent adjustment for 1992 is based on only the federal income tax rate of 34 percent. The 1993 presentation better reflects the current economic benefit of certain categories of tax-favored income. NET INTEREST INCOME NET INTEREST INCOME (TAXABLE EQUIVALENT) (TAXABLE EQUIVALENT) AS A PERCENTAGE OF AVERAGE EARNING ASSETS (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX)
- ------------------------------------------------------------------------------------------------------------------------------- COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2 - ------------------------------------------------------------------------------------------------------------------------------- Change Change 1993 1992 1991 1993/1992 1992/1991 ----- ----- ----- --------- --------- Interest income -- taxable equivalent . . . . . . . . . . . . $ 12.77 $ 13.33 $ 15.93 ($.56) ($2.60) Interest expense. . . . . . . . . . . . . . . . . . . . . . . 4.82 5.60 8.56 (.78) (2.96) ------- ------- ------- ------- ------- Net interest income -- taxable equivalent . . . . . . . . . . 7.95 7.73 7.37 .22 .36 Taxable equivalent adjustment . . . . . . . . . . . . . . . . .57 .46 .55 .11 (.09) ------- ------- ------- ------- ------- Net interest income . . . . . . . . . . . . . . . . . . . . . 7.38 7.27 6.82 .11 .45 Provision for loan losses . . . . . . . . . . . . . . . . . . .53 .69 1.71 (.16) (1.02) ------- ------- ------- ------- ------- Net interest income after provision for loan losses . . . . . 6.85 6.58 5.11 .27 1.47 Other operating revenue . . . . . . . . . . . . . . . . . . . 3.45 3.10 2.86 .35 .24 Gain on sale of subsidiary. . . . . . . . . . . . . . . . . . .05 .11 -- (.06) .11 Investment securities gains . . . . . . . . . . . . . . . . . .11 .01 .06 .10 (.05) ------- ------- ------- ------- ------- Total other income. . . . . . . . . . . . . . . . . . . . . . 3.61 3.22 2.92 .39 .30 Personnel expense . . . . . . . . . . . . . . . . . . . . . . 3.27 3.13 3.06 .14 .07 Other expense . . . . . . . . . . . . . . . . . . . . . . . . 3.24 3.22 3.33 .02 (.11) ------- ------- ------- ------- ------- Total other expense . . . . . . . . . . . . . . . . . . . . . 6.51 6.35 6.39 .16 (.04) Income before income taxes. . . . . . . . . . . . . . . . . . 3.95 3.45 1.64 .50 1.81 Applicable income taxes . . . . . . . . . . . . . . . . . . . 1.12 .94 .30 .18 .64 ------- ------- ------- ------- ------- Net income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34 $.32 $1.17 ======= ======= ======= ======= ======= - -------------------------------------------------------------------------------------------------------------------------------
10 13
- ------------------------------------------------------------------------------------------------------------------------------------ TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS* TABLE 3 - ------------------------------------------------------------------------------------------------------------------------------------ Variance Average Volume Average Rate Interest Attributable to - ---------------- ------------ --------------------- ------------------- 1993 1992 1993 1992 1993 1992 Variance Rate Volume - ------- ------- ---- ---- -------- --------- --------- -------- -------- (Millions) INTEREST INCOME (Thousands) Loans: $ 6,198 $ 5,867 5.29 5.96 Commercial . . . . . . . . . . . . $ 327,729 $ 349,868 $(22,139) $(41,125) $ 18,986 1,891 1,998 9.05 8.67 Tax-exempt . . . . . . . . . . . . 171,163 173,158 (1,995) 7,564 (9,559) - ------- ------- ---------- ---------- -------- 8,089 7,865 6.17 6.65 Total commercial . . . . . . . 498,892 523,026 (24,134) (38,673) 14,539 685 688 8.68 11.32 Direct retail. . . . . . . . . . . 59,455 77,850 (18,395) (18,071) (324) 2,245 2,006 8.42 9.55 Indirect retail. . . . . . . . . . 189,143 191,594 (2,451) (23,893) 21,442 2,591 1,774 11.75 14.53 Credit card. . . . . . . . . . . . 304,502 257,885 46,617 (56,053) 102,670 328 323 11.15 11.63 Other revolving credit . . . . . . 36,580 37,538 (958) (1,568) 610 - ------- ------- ---------- ---------- -------- 5,849 4,791 10.08 11.79 Total retail . . . . . . . . . 589,680 564,867 24,813 (89,008) 113,821 470 520 7.45 7.78 Construction . . . . . . . . . . . 35,034 40,441 (5,407) (1,670) (3,737) 3,147 3,064 7.39 7.96 Commercial mortgages . . . . . . . 232,688 243,861 (11,173) (17,720) 6,547 3,780 3,602 8.10 8.89 Residential mortgages. . . . . . . 305,965 320,363 (14,398) (29,664) 15,266 - ------- ------- ---------- ---------- -------- 7,397 7,186 7.76 8.42 Total real estate. . . . . . . 573,687 604,665 (30,978) (48,410) 17,432 135 118 8.90 10.01 Lease financing. . . . . . . . . . 12,051 11,830 221 (1,387) 1,608 76 72 4.35 5.20 Foreign. . . . . . . . . . . . . . 3,318 3,760 (442) (635) 193 - ------- ------- ---------- ---------- -------- 21,546 20,032 7.79 8.53 Total loans. . . . . . . . . . 1,677,628 1,708,148 (30,520) (154,387) 123,867 Investment securities: 689 780 12.46 12.38 State and municipal. . . . . . . . 85,854 96,649 (10,795) 621 (11,416) 3,455 1,993 6.54 7.40 United States Treasury . . . . . . 225,893 147,447 78,446 (18,882) 97,328 2,372 2,521 6.93 8.16 Federal agency . . . . . . . . . . 164,436 205,763 (41,327) (29,693) (11,634) 523 907 4.62 5.85 Other. . . . . . . . . . . . . . . 24,156 53,064 (28,908) (9,625) (19,283) - ------- ------- ---------- ---------- -------- 7,039 6,201 7.11 8.11 Total investment securities. . 500,339 502,923 (2,584) (66,181) 63,597 79 302 3.71 4.24 Interest-bearing bank balances . . . 2,905 12,772 (9,867) (1,415) (8,452) Federal funds sold and securities purchased under resale 395 484 3.15 3.52 agreements . . . . . . . . . . . . 12,433 17,038 (4,605) (1,690) (2,915) 721 1,078 3.94 5.61 Trading account assets . . . . . . . 28,433 60,444 (32,011) (15,119) (16,892) - ------- ------- ---------- ---------- -------- $29,780 $28,097 7.46 8.19 Total interest-earning assets. 2,221,738 2,301,325 (79,587) (212,486) 132,899 ======= ======= INTEREST EXPENSE $ 3,219 $ 2,843 1.88 2.55 Interest-bearing demand. . . . . . . 60,433 72,548 (12,115) (20,876) 8,761 5,998 5,826 2.53 3.26 Savings and money market savings . . 151,748 189,699 (37,951) (43,388) 5,437 5,595 6,198 4.30 5.23 Savings certificates . . . . . . . . 240,795 324,063 (83,268) (53,739) (29,529) 1,740 2,594 5.18 5.74 Large denomination certificates. . . 90,101 148,931 (58,830) (13,507) (45,323) - ------- ------- ---------- ---------- -------- Total time deposits in 16,552 17,461 3.28 4.21 domestic offices . . . . . . 543,077 735,241 (192,164) (155,523) (36,641) 467 423 3.11 3.70 Time deposits in foreign offices . . 14,503 15,646 (1,143) (2,651) 1,508 - ------- ------- ---------- ---------- -------- 17,019 17,884 3.28 4.20 Total time deposits. . . . . . 557,580 750,887 (193,307) (158,431) (34,876) Federal funds purchased and securities sold under 3,945 3,111 3.23 3.73 repurchase agreements. . . . . . . 127,580 115,939 11,641 (16,694) 28,335 486 469 3.02 3.54 Commercial paper . . . . . . . . . . 14,693 16,629 (1,936) (2,513) 577 972 1,381 3.25 4.23 Other short-term borrowed funds. . . 31,574 58,420 (26,846) (11,777) (15,069) - ------- ------- ---------- ---------- -------- Total short-term 5,403 4,961 3.22 3.85 borrowed funds . . . . . . . 173,847 190,988 (17,141) (33,145) 16,004 1,535 273 4.54 4.83 Bank notes . . . . . . . . . . . . . 69,785 13,183 56,602 (839) 57,441 538 176 7.03 6.80 Other long-term debt . . . . . . . . 37,800 11,970 25,830 408 25,422 - ------- ------- ---------- ---------- -------- 2,073 449 5.19 5.61 Total long-term debt . . . . . 107,585 25,153 82,432 (2,014) 84,446 - ------- ------- ---- ---- ---------- ---------- -------- Total interest-bearing $24,495 $23,294 3.43 4.15 liabilities. . . . . . . . . 839,012 967,028 (128,016) (175,899) 47,883 ======= ======= ---- ---- ---------- ---------- -------- 4.03 4.04 INTEREST RATE SPREAD ==== ==== NET YIELD ON INTEREST-EARNING 4.64 4.75 ASSETS AND NET INTEREST INCOME . . $1,382,726 $1,334,297 $ 48,429 (30,191) 78,620 ==== ==== ========== ========== ======== - ------------------------------------------------------------------------------------------------------------------------------------
*Interest income and yields for 1993 are presented on a fully taxable equivalent basis using the federal income tax rate of 35% and state tax rates, as applicable, reduced by the nondeductible portion of interest expense; the taxable equivalent adjustment for 1992 reflects the federal income tax rate of 34% 11 14 Interest Income Taxable equivalent interest income decreased $79.587 million or 3.5 percent in 1993, although gains occurred in the latter months of the year. Lower yields earned were offset only partially by higher levels of interest-earning assets. The average rate earned dropped 73 basis points, reflecting, in part, shifts in the credit card portfolio from higher fixed rates to lower variable rates, prepayments of higher rate residential mortgages, lower rates on investment securities and intensely competitive market pricing for loans. Average interest-earning assets rose $1.683 billion or 6 percent with better growth in the second half and especially the latter months of the year. Despite soft demand, the corporation's average loans were higher by $1.514 billion or 7.6 percent for the year. Good gains occurred in retail loans with commercial outstandings rising modestly. Retail loans, including residential mortgages, increased $1.236 billion or 14.7 percent, reflecting good growth primarily in the credit card and automobile categories. Credit card outstandings gained $817 million or 46.1 percent. At December 31, 1993, the credit card portfolio totaled $3.123 billion compared with $2.216 billion a year earlier. Approximately 84 percent of the total was variable rate versus approximately 61 percent at year-end 1992. Borrowers continued to be attracted to the corporation's low variable rate pricing option. In 1993, Wachovia introduced a First-Year Prime Visa and MasterCard option to complement its popular Prime Plus 2.9 percent card, which is offered with a $39 annual fee. The new pricing option carries an interest rate of prime for the first year and is 3.9 percent above prime thereafter, with an $18 annual fee. Indirect retail loans, primarily consisting of automobile sales financing in the three home states, grew $239 million or 11.9 percent. Residential mortgages and other revolving credit also were higher for the year. The home equity portion of residential mortgages averaged $768 million compared with $805 million in 1992. Direct retail loans declined modestly. Commercial loans, including related real estate categories, increased $278 million or 2.4 percent, reflecting continued softness in demand due to slow economic growth and alternative funding from public debt and equity markets for large corporate borrowers. Regular commercial loans, up $331 million or 5.6 percent, and commercial mortgages, higher by $83 million or 2.7 percent, had the strongest gains for the year. Lease financing and foreign loans rose slightly, while construction loans and tax-exempt borrowings declined. Commercial real estate outstandings at December 31, 1993 were $3.693 billion, representing 16.1 percent of total loans versus $3.583 billion or 17 percent at year-end 1992. Based on regulatory definitions, commercial mortgages were $3.199 billion or 13.9 percent of total loans and construction loans were $494 million or 2.2 percent. Comparable amounts a year earlier were $3.119 billion or 14.8 percent and $464 million or 2.2 percent, respectively. The $3.693 billion of commercial real estate outstandings at year-end 1993 included $2.088 billion in commercial real estate loans, representing 9.1 percent of total loans, originated through the corporation's Commercial Mortgage Group. Loans in this group are dependent primarily on the income stream, refinancing or resale value of the property mortgaged for repayment and are segregated from other commercial real estate 12 15 loans which have real estate as the collateral but not the primary consideration in the credit risk evaluation. Additional detail on the Commercial Mortgage Group is provided as of December 31, 1993 and 1992 in the following presentations with geographic distribution listing loans by location of collateral.
Summary of Commercial Mortgage Group Real Estate Loans and Commitments - ---------------------------------------------------------------------- Geographic Distribution ($ in millions) Loans Outstanding Percent of Total Loans Loans and Unused Commitments December 31 1993 1992 1993 1992 1993 1992 ------ ------ ------ ------ ------ ------ North Carolina . . . . . . . . . . . . . . . . $ 856 $ 806 3.7 3.8 $ 979 $ 938 South Carolina . . . . . . . . . . . . . . . . 637 615 2.8 2.9 729 664 Georgia . . . . . . . . . . . . . . . . . . . 437 381 1.9 1.8 505 436 Virginia . . . . . . . . . . . . . . . . . . . 52 55 .2 .3 55 61 Florida . . . . . . . . . . . . . . . . . . . 57 54 .2 .2 58 72 Tennessee. . . . . . . . . . . . . . . . . . . 18 15 .1 .1 20 17 Alabama . . . . . . . . . . . . . . . . . . . 18 21 .1 .1 19 22 ------ ------ ---- ---- ------ ------ Total Southeast. . . . . . . . . . . 2,075 1,947 9.0 9.2 2,365 2,210 Outside Southeast . . . . . . . . . . . . . . 13 37 .1 .2 23 42 ------ ------ ---- ---- ------ ------ Total . . . . . . . . . . . . . . . $2,088 $1,984 9.1 9.4 $2,388 $2,252 ====== ====== ==== ==== ====== ====== General Category ($ in millions) Loans Outstanding Percent of Total Loans Loans and Unused Commitments December 31 1993 1992 1993 1992 1993 1992 ------ ------ ------ ------ ------ ------ Construction . . . . . . . . . . . . . . . . . $ 241 $ 251 1.0 1.2 $ 441 $ 439 Permanent . . . . . . . . . . . . . . . . . . 1,691 1,556 7.4 7.4 1,778 1,614 Land development . . . . . . . . . . . . . . . 97 125 .4 .6 107 141 Other . . . . . . . . . . . . . . . . . . . . 59 52 .3 .2 62 58 ------ ------ ---- ---- ------ ------ Total . . . . . . . . . . . . . . . $2,088 $1,984 9.1 9.4 $2,388 $2,252 ====== ====== ==== ==== ====== ====== Type of Property ($ in millions) Loans Outstanding Percent of Total Loans Loans and Unused Commitments December 31 1993 1992 1993 1992 1993 1992 ------ ------ ------ ------ ------ ------ Apartments . . . . . . . . . . . . . . . . . . $ 401 $ 331 1.7 1.6 $ 489 $ 361 Office warehouse . . . . . . . . . . . . . . . 328 318 1.4 1.5 352 343 Office building . . . . . . . . . . . . . . . 312 311 1.4 1.5 343 345 Retail property . . . . . . . . . . . . . . . 475 423 2.1 2.0 530 514 Hotel/motel. . . . . . . . . . . . . . . . . . 265 256 1.2 1.2 320 296 Land development . . . . . . . . . . . . . . . 97 125 .4 .6 107 141 Other . . . . . . . . . . . . . . . . . . . . 210 220 .9 1.0 247 252 ------ ------ ---- ---- ------ ------ Total. . . . . . . . . . . . . . . . $2,088 $1,984 9.1 9.4 $2,388 $2,252 ====== ====== ==== ==== ====== ======
Although regulatory criteria and reporting requirements for highly leveraged transactions (HLT) were withdrawn in 1992, the corporation continues to recognize and define HLTs in accordance with the previously existing definition. At December 31, 1993, the corporation had 4 HLTs with combined outstandings of $89 million, representing .4 percent of total loans and 3 percent of shareholders' equity. Additional unused commitments were $15 million. This compared with 9 HLTs with outstandings totaling $142 million or .7 percent of loans and 5.1 percent of equity with additional unused commitments of $34 million at year-end 1992. Cross border outstandings, primarily consisting of loans, were $352 million at December 31, 1993, representing 1 percent of total assets. This was down $38 million or 9.6 percent from $390 million or 1 percent of assets at year-end 1992. In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (FASB 114), which the corporation 13 16
--------------------------------------------------------------------------------------------------------------------- SELECTED LOAN MATURITIES AND INTEREST SENSITIVITY TABLE 4 December 31, 1993 (thousands) --------------------------------------------------------------------------------------------------------------------- One Year One to Over Total or Less Five Years Five Years ------------ ------------ ------------ ---------- Commercial, financial and other . . . . . . . . . . . . . $ 6,727,207 $ 6,131,474 $ 402,514 $ 193,219 Industrial revenue and other tax-exempt financing . . . . 1,959,266 888,253 602,151 468,862 Construction . . . . . . . . . . . . . . . . . . . . . . 494,148 466,820 27,328 -- Commercial mortgages . . . . . . . . . . . . . . . . . . 3,199,434 1,947,322 793,009 459,103 ----------- ----------- ---------- ---------- Loans to domestic borrowers . . . . . . . . . . . . 12,380,055 9,433,869 1,825,002 1,121,184 Loans to foreign borrowers . . . . . . . . . . . . . . . 73,055 73,024 31 -- ----------- ----------- ---------- ---------- Selected loans, net . . . . . . . . . . . . . . . . $12,453,110 $ 9,506,893 $1,825,033 $1,121,184 =========== =========== ========== ========== Interest sensitivity: Loans with predetermined interest rates . . . . . . . $ 4,518,659 $ 1,952,609 $1,625,190 $ 940,860 Loans with floating interest rates . . . . . . . . . . 7,934,451 7,554,284 199,843 180,324 ----------- ----------- ---------- ---------- Total . . . . . . . . . . . . . . . . . . . . . . . $12,453,110 $ 9,506,893 $1,825,033 $1,121,184 =========== =========== ========== ========== ---------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT SECURITIES TABLE 5 December 31 (thousands) - ------------------------------------------------------------------------------------------------------------------------------------ 1993 1992 1991 -------------------------------------------------------- --------------------- -------------------- Taxable Principal Book Market Average Equivalent Book Market Book Market Amount Value Value Maturity Yield* Value Value Value Value ----------- ----------- -------- ---------- -------- -------- --------- --------- --------- (Yrs./Mos.) State and municipal: Within one year . . . $ 74,846 $ 75,501 $ 77,254 13.02% $ 62,837 $ 63,673 $ 108,060 $ 110,224 One to five years . . 309,172 309,939 337,197 12.89 337,815 369,395 257,431 279,744 Five to ten years . . 155,105 151,253 172,827 12.28 192,030 214,277 248,385 276,599 Over ten years . . . 148,989 118,464 140,456 12.75 155,335 177,842 237,307 268,350 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total . . . . . . 688,112 655,157 727,734 5/6 12.78 748,017 825,187 851,183 934,917 U.S. Treasury: Within one year . . . 536,500 536,440 543,315 6.96 213,737 218,269 462,919 468,256 One to five years . . 3,670,500 3,719,325 3,816,471 5.95 1,899,421 1,947,427 887,834 930,868 Five to ten years . . 117,500 116,665 137,324 9.55 414,559 464,696 452,168 511,144 Over ten years . . . 17,930 15,950 23,340 12.52 16,582 22,588 17,133 23,374 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total 4,342,430 4,388,380 4,520,450 2/9 6.19 2,544,299 2,652,980 1,820,054 1,933,642 Federal agency: Within one year . . . 75,550 75,544 77,254 7.33 45,292 45,307 75,402 75,265 One to five years . . 607,224 611,559 618,618 5.72 246,418 254,657 185,392 192,118 Five to ten years . . 552,075 554,267 555,330 5.57 422,245 434,553 283,428 301,819 Over ten years . . . 1,112,968 1,114,976 1,166,232 7.53 1,826,179 1,904,388 2,012,813 2,128,454 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total 2,347,817 2,356,346 2,417,434 12/2 6.59 2,540,134 2,638,905 2,557,035 2,697,656 Other interest-earning investments: Within one year . . . 78,488 78,376 78,379 4.41 20,291 19,750 170,401 170,337 One to five years . . 122,586 122,831 122,946 4.03 130,065 131,238 184,718 185,178 Five to ten years . . 16,737 16,742 16,787 5.48 86,088 86,083 58,435 58,425 Over ten years . . . 152,116 152,106 152,414 4.32 283,567 286,358 499,719 503,685 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total . . . . . . 369,927 370,055 370,526 8/5 4.30 520,011 523,429 913,273 917,625 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total interest-earning investments $7,748,286 7,769,938 8,036,144 6/1 6.81 6,352,461 6,640,501 6,141,545 6,483,840 ========== Federal Reserve Bank stock and other investments . . . . . 108,718 120,546 133,710 152,542 123,313 131,827 ---------- ---------- ---------- ---------- ---------- ---------- Total portfolio . $7,878,656 $8,156,690 $6,486,171 $6,793,043 $6,264,858 $6,615,667 ========== ========== ========== ========== ========== ========== *Yields were computed using a 35% tax rate for 1993 - ------------------------------------------------------------------------------------------------------------------------------------
14 17 will be required to adopt by 1995. This standard modifies the accounting for certain loans where it is probable that the corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. The corporation is in the process of evaluating the timing of adoption and the effect that implementation of the standard will have on its financial statements, but does not expect it to have a material impact. Note E of Notes to Consolidated Financial Statements contains additional information about FASB 114. During a period when loan growth expectations have been modest, the corporation added significantly to its investment securities, the second largest category of interest-earning assets. They expanded $838 million or 13.5 percent during the year. U.S. Treasury securities accounted for all the increase, rising $1.462 billion or 73.4 percent. At year-end 1993, 95.6 percent of the corporation's municipal portfolio was rated A or higher by Moody's. At December 31, 1993, the market value of the total investment securities portfolio was $8.157 billion, representing a $278 million appreciation over book value. This compared with a $6.793 billion market value and a $307 million appreciation at year-end 1992. The corporation has elected to adopt Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FASB 115), as of January 1, 1994. FASB 115 requires that investment securities be classified as either "held to maturity" or "available for sale." "Held to maturity" securities will be carried at amortized cost which is the accounting method currently used for the investment securities account. Securities classified as "available for sale" will be accounted for at fair market value with unrealized gains and losses reported as a separate component of shareholders' equity. Under FASB 115, trading account securities will continue to be carried in a separate account at fair market value with gains and losses recorded in the income statement. If the corporation had adopted FASB 115 at December 31, 1993, the impact on shareholders' equity would have been an increase of $24.368 million. Note D of Notes to Consolidated Financial Statements contains additional information regarding FASB 115. Interest Expense Interest expense for 1993 decreased $128.016 million or 13.2 percent as the average rate paid on interest-bearing liabilities dropped 72 basis points. Partially reducing the impact of the rate decline was a $1.201 billion or 5.2 percent increase in average interest-bearing liabilities for the year. Total interest-bearing deposits were lower by $865 million or 4.8 percent. Interest-bearing demand and savings and money market savings were up a combined $548 million or 6.3 percent. This was offset by the outflow of longer-term consumer deposits seeking higher yields as they matured. Savings certificates declined $603 million or 9.7 percent. Large denomination certificates decreased $854 million or 32.9 percent. The corporation allowed its large denomination certificates to roll off as it continued to grow its medium-term bank note program. Total short-term borrowings rose $442 million or 8.9 percent led by growth in federal funds purchased and repurchase agreements. Other short-term borrowings, which primarily consists of term federal funds, decreased. Long-term debt rose $1.624 billion, primarily reflecting the growth of Wachovia Bank of North Carolina's medium-term bank note program begun in the second quarter of 1992. At December 31, 1993, Wachovia Bank of North Carolina had a total of $2.370 billion of these notes outstanding with an average cost of 4.54 percent and an average maturity of 1.8 years versus $758 million, 4.59 percent and 1.8 years, respectively, a year earlier. These notes had been classified under short-term borrowed funds but have been reclassified as long-term debt to more accurately reflect the weighted average maturity of these instruments, and prior periods have been restated. The bank notes issued during 1993 generally had maturities of two to five years but can be issued for maturities up to 10 years. The corporation also issued $250 million of ten-year subordinated notes in April 1993. They were priced at a spread of 60 basis points above the yield on U.S. Treasury notes of comparable maturity at the time of sale to yield 6.481 percent. The corporation redeemed $79 million of floating rate subordinated capital notes in March 1993. Gross deposits for 1993 averaged $22.373 billion, down $458 million or 2 percent compared with $22.831 billion in the prior year. Collected deposits, net of float, averaged $20.762 billion, lower by $373 million or 1.8 percent from $21.135 billion in 1992. Demand and noninterest-bearing time deposits averaged $5.355 billion compared with $4.947 billion in the previous year. 15 18 Asset and Liability Management, Interest Rate Sensitivity and Liquidity Management Changes in interest rates can substantially impact the corporation's net interest income and profitability. The goal of asset/liability management is to maximize net interest income while mitigating negative impacts of interest rate changes. The corporation seeks to meet this goal by managing discretionary investments and funding sources, by product pricing and structuring strategies and by utilizing off-balance sheet instruments when appropriate. In addition to monitoring the relationship between interest-earning assets and interest-bearing liabilities, this process is facilitated by the application of simulation models which are the principal tools employed for interest rate management. Information provided by the multidimensional models portrays the results of changes in interest rates which are analyzed with the objective of identifying potential adverse performance situations. If such a condition should occur, the immediate goal is to construct a strategy to neutralize, as much as possible, the impact. Additionally, the corporation monitors the difference or gap between the corporation's rate sensitive assets and rate sensitive liabilities over various time periods. The gap may be either positive (rate sensitive assets exceed liabilities) or negative (rate sensitive liabilities exceed assets). The table on page 17 sets forth the volume of interest-earning assets and interest-bearing liabilities outstanding as of December 31, 1993 and 1992, which mature or are projected to reprice in each of the future time periods shown. The projected asset repricing volumes include anticipated prepayments of mortgage loans and mortgage-backed securities. The projected interest checking and savings repricing volumes are based on the expected rate sensitivity of these accounts in relationship to the prime rate. Prepayment assumptions and the distribution of these deposit liabilities based on management's assumptions present a more accurate view of the corporation's rate risk position. The nonsensitive and maturing beyond one year section of the table includes bank credit card loans of $499 million in 1993 and $860 million in 1992, savings balances of $577 million in 1993 and $852 million in 1992 and interest-bearing 16 19 Interest Rate Sensitivity Gap Analysis - --------------------------------------
Interest Sensitive Period ------------------------------------------------------------ $ in millions Total Over One 0 to 3 4 to 6 7 to 12 Within Year and December 31, 1993 Months Months Months One Year Nonsensitive Total - ----------------- ------ ------ ------ --------- ------------ ----- Loans and net leases, net of unearned income. . . . . . . . . . . . . $13,076 $ 683 $ 1,035 $14,794 $ 8,183 $22,977 State and municipal investment securities . . . . . . . . . . . . . 30 16 36 82 573 655 Other investment securities . . . . . . . . . . . . . . . . . . . . . 1,025 277 693 1,995 5,229 7,224 Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 13 -- -- 13 -- 13 Federal funds sold and securities purchased under resale agreements . 691 -- -- 691 -- 691 Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 789 -- -- 789 -- 789 ------- ------- ------- ------- ------- ------- Total earning assets . . . . . . . . . . . . . . . . . 15,624 976 1,764 18,364 13,985 32,349 Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . 460 278 556 1,294 2,222 3,516 Savings and money market savings. . . . . . . . . . . . . . . . . . . 4,750 289 578 5,617 577 6,194 Savings certificates . . . . . . . . . . . . . . . . . . . . . . . . 1,828 1,280 762 3,870 1,272 5,142 Large denomination certificates . . . . . . . . . . . . . . . . . . . 826 243 191 1,260 247 1,507 Time deposits in foreign offices . . . . . . . . . . . . . . . . . . 761 16 -- 777 27 804 Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,741 -- -- 4,741 -- 4,741 Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . 589 -- -- 589 -- 589 Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 1,033 56 2 1,091 -- 1,091 Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 180 186 516 1,854 2,370 Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 100 -- -- 100 491 591 ------- ------- ------- ------- ------- ------- Total interest-bearing liabilities . . . . . . . . . . 15,238 2,342 2,275 19,855 6,690 26,545 Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . (58) (63) (47) (168) 168 -- ------- ------- ------- ------- ------- ------- Interest sensitivity gap . . . . . . . . . . . . . . . 328 (1,429) (558) $(1,659) 7,463 $ 5,804 ------- ------- ------- ======= ------- ======= Cumulative interest sensitivity gap . . . . . . . . . $ 328 ($1,101) ($1,659) $ 5,804 ======= ======= ======= ======= December 31, 1992 - ----------------- Loans and net leases, net of unearned income . . . . . . . . . . . . $12,710 $ 761 $ 1,128 $14,599 $ 6,487 $21,086 State and municipal investment securities . . . . . . . . . . . . . . 28 17 16 61 687 748 Other investment securities . . . . . . . . . . . . . . . . . . . . 783 205 386 1,374 4,364 5,738 Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 189 -- -- 189 -- 189 Federal funds sold and securities purchased under resale agreements . 479 -- -- 479 -- 479 Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 896 -- -- 896 -- 896 ------- ------- ------- ------- ------- ------- Total earning assets . . . . . . . . . . . . . . . . . 15,085 983 1,530 17,598 11,538 29,136 Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . 503 347 694 1,544 1,767 3,311 Savings and money market savings. . . . . . . . . . . . . . . . . . . 4,840 154 308 5,302 851 6,153 Savings certificates . . . . . . . . . . . . . . . . . . . . . . . . 2,090 1,324 897 4,311 1,257 5,568 Large denomination certificates . . . . . . . . . . . . . . . . . . . 1,164 376 294 1,834 308 2,142 Time deposits in foreign offices. . . . . . . . . . . . . . . . . . . 441 73 4 518 -- 518 Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,707 5 2 3,714 -- 3,714 Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . 387 -- -- 387 -- 387 Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 578 85 186 849 -- 849 Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 250 250 508 758 Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 103 5 -- 108 331 439 ------- ------- ------- ------- ------- ------- Total interest-bearing liabilities . . . . . . . . . . 13,813 2,369 2,635 18,817 5,022 23,839 Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . 389 34 (59) 364 (364) -- ------- ------- ------- ------- ------- ------- Interest sensitivity gap . . . . . . . . . . . . . . . 1,661 (1,352) (1,164) $ (855) 6,152 $ 5,297 ------- ------- ------- ------- ------- ------- Cumulative interest sensitivity gap. . . . . . . . . . $ 1,661 $ 309 $ (855) $ 5,297 ======= ======= ======= ======= Note: Refer to page 16 for details on management's assumptions of the repricing characteristics of certain accounts without contractual maturity dates.
checking balances of $2.222 billion in 1993 and $1.767 billion in 1992. The corporation uses off-balance sheet or "derivative" instruments to change the structure of both assets and liabilities to help manage the interest rate sensitivity of its balance sheet and also as a product to assist corporate and other customers manage their interest rate risk. The primary instruments used have been interest rate swaps, caps and floors. As of December 31, 1993, the corporation had $3.387 billion in notional amount 17 20 of these transactions outstanding as compared with $1.915 billion a year ago with 37 percent related to its balance sheet management versus 34 percent a year earlier. The ability of counterparties to perform under the terms of these transactions is the primary risk of this activity. The corporation mitigates this risk by subjecting the transactions to a similar approval process as is used for on-balance sheet credit transactions, by dealing in the national market with a few highly rated counterparties and by using collateral agreements to reduce exposure when appropriate. See Note J of Notes to Consolidated Financial Statements for additional information. The objective of liquidity management is to ensure that the corporation is positioned to meet all immediate and future demands for cash. There are multiple requirements for cash placed on a financial intermediary. Consequently, the process for liability planning must include, but not be limited to, considerations of credit demand, deposit flows and corporate operating expenses and revenues. Not only are contractual cash flows such as loan repayments and deposit maturities and withdrawals factored into this process, but economic events also must be considered. Liquidity management relies upon liquidity analysis and knowledge of historical trends over past credit and business cycles and forecasts of future conditions to achieve its objectives. The two broad-based sources of liquidity which exist for the corporation are its high quality marketable assets, and liabilities which are readily acceptable by providers of funds. Asset liquidity primarily is provided --------------------------------------------------- LARGE DENOMINATION DEPOSITS* TABLE 6 December 31, 1993 (thousands) --------------------------------------------------- REMAINING MATURITIES Three months or less. . . . . . . $ 744,146 Over three through six months. . . . . . . . . . 232,824 Over six through twelve months . . . . . . . . 238,998 Over twelve months . . . . . . . . 291,493 ---------- Total. . . . . . . . . . . $1,507,461 ========== *Includes domestic office certificates of deposit of $100 or more ---------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM BORROWED FUNDS (thousands) TABLE 7 - ------------------------------------------------------------------------------------------------------------------------------ 1993 1992 1991 ------------------- ------------------ ----------------- Amount Rate Amount Rate Amount Rate ------ ---- ------ ---- ------ ---- At year-end: Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . $4,741,283 2.88% $3,713,492 2.82% $4,002,086 4.15% Commercial paper. . . . . . . . . . . . . . . . . . . . 589,178 2.92 386,618 2.99 397,720 4.25 Other borrowed funds. . . . . . . . . . . . . . . . . . 1,091,123 3.24 848,823 3.21 2,200,862 5.41 ---------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . . $6,421,584 2.94 $4,948,933 2.90 $6,600,668 4.58 ========== ========== ========== Average for the year: Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . $3,944,864 3.23 $3,110,737 3.73 $3,498,869 5.78 Commercial paper* . . . . . . . . . . . . . . . . . . . 485,889 3.02 469,120 3.54 348,125 5.74 Other borrowed funds. . . . . . . . . . . . . . . . . . 972,008 3.25 1,381,713 4.23 2,233,271 6.58 ---------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . . $5,402,761 3.22 $4,961,570 3.85 $6,080,265 6.07 ========== ========== ========== Maximum month-end balance: Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . $5,307,332 $4,058,560 $4,252,149 Commercial paper . . . . . . . . . . . . . . . . . . . 613,375 597,934 397,720 Other borrowed funds . . . . . . . . . . . . . . . . . 1,525,017 2,260,089 2,552,723 *Average interest rate for each year includes effect of fees paid on back-up lines of credit - ------------------------------------------------------------------------------------------------------------------------------
18 21 by securities which by their maturity structure or marketability can produce cash flows that result in enhanced liquidity. The ability to generate additional cash through the liability side of the balance sheet focuses on the growth of deposits, the issuance of bank notes and other forms of debt securities. Wachovia's ability to attract a variety of funds rests on the corporation's strength of capital, reputation, credit ratings and diverse statewide banking networks. At December 31, 1993, Wachovia's common equity to assets ratio was 8.26 percent, 4th highest among the 25 largest U.S. banks. Wachovia's strong capital position is reflected in its credit ratings and remains central to its ability to raise additional funds at attractive rates through short-term borrowings and long-term debt. At year-end 1993, Wachovia Corporation's senior debt was rated (P) Aa3 by Moody's and (P)AA by Standard & Poor's. The corporation's subordinated debt was rated A1 and AA- by Moody's and Standard & Poor's, respectively. Commercial paper was rated P-1 by Moody's and A-1+ by Standard & Poor's. All of the corporation's asset/liability strategies are conducted under policies and guidelines established by the corporation's Finance Committee. The committee monitors interest rate risk, liquidity and capital. Committee guidelines limit the acceptable negative change in forecasted net interest income from assumed movements in interest rates. Funding guidelines include limits on concentrations of maturities and funding categories, and funding exposure to single outside sources. Guidelines for capital require maintenance of sufficient capital to be classified a well-capitalized banking organization under regulatory capital guidelines and definitions. Nonperforming Assets Nonperforming assets were $154.901 million or .67 percent of loans and foreclosed property at December 31, 1993, a decline of $110.508 million or 41.6 percent from year-end 1992. The decrease resulted principally from paydowns, property sales and the return of cash-basis assets to accrual status, reflecting continued sound loan administration and active management of credit, combined with lower interest rates and generally improving real estate market conditions in the corporation's primary states. Real estate nonperforming assets, the largest segment of total nonperforming assets, were $123.595 million or 1.65 percent of real estate loans and foreclosed real estate at December 31, 1993. This compared with $228.714 million or 3.12 percent a year earlier, a decline of $105.119 million or 46 percent. Although the real estate markets in which Wachovia operates maintained stronger values relative to norms in the national market, overbuilding resulted in elevated levels of foreclosed property each year between 1987 and 1992. This 19 22 trend has been reversed in 1993 with foreclosed property of $45.939 million at year-end, a decline of $45.376 million or 49.7 percent since year-end 1992. Commercial real estate nonperforming assets totaled $98.014 million or 2.63 percent of related loans and foreclosed property, a drop of $99.208 million or 50.3 percent from $197.222 million or 5.39 percent at year-end 1992. Within the Commercial Mortgage Group described on page 12, nonperforming assets were $70.461 million or 3.33 percent of its loans and foreclosed real estate, down $77.799 million or 52.5 percent from $148.260 million or 7.24 percent at December 31, 1992. No HLTs were nonperforming at year-end 1993 or 1992. NET LOAN LOSSES TO AVERAGE LOANS NONPERFORMING ASSETS TO YEAR-END LOANS AND FORECLOSED PROPERTY (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX)
- ----------------------------------------------------------------------------------------------------------------------------------- NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 8 December 31 (thousands) - ----------------------------------------------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 1988 -------- -------- -------- -------- -------- -------- NONPERFORMING ASSETS Cash-basis assets: Domestic borrowers . . . . . . . . . $108,882 $173,977 $240,578 $199,480 $110,165 $ 70,524 Foreign borrowers -- less developed countries . . . . . . . . . . . . -- -- -- 1,437 1,437 7,477 -------- ------- -------- -------- -------- -------- Total cash-basis assets . . . 108,882 173,977 240,578 200,917 111,602 78,001 Restructured loans -- domestic . . . . . 80* 117 604 2,629 4,693 4,011 -------- ------- -------- -------- -------- -------- Total nonperforming loans . . 108,962** 174,094 241,182 203,546 116,295 82,012 Foreclosed property: Foreclosed real estate . . . . . . . 51,701 93,555 69,957 41,139 17,964 9,974 Less valuation allowance . . . . . . 9,168 5,082 2,837 4,012 820 91 Other foreclosed assets . . . . . . 3,406 2,842 2,609 5,106 5,267 5,136 -------- ------- -------- -------- -------- -------- Total foreclosed property . . 45,939 91,315 69,729 42,233 22,411 15,019 -------- ------- -------- -------- -------- -------- Total nonperforming assets . . $154,901*** $265,409 $310,911 $245,779 $138,706 $ 97,031 ======== ======== ======== ======== ======== ======== Nonperforming loans to year-end loans . . .47% .83% 1.17% .96% .60% .47% Nonperforming assets to year-end loans and foreclosed property . . . . . . .67 1.25 1.50 1.16 .71 .55 Year-end allowance for loan losses times nonperforming loans . . . . . 3.72x 2.18x 1.49x 1.33x 1.89x 2.45x Year-end allowance for loan losses times nonperforming assets . . . . . 2.61 1.43 1.16 1.10 1.58 2.07 CONTRACTUALLY PAST DUE LOANS (accruing loans past due 90 days or more) Domestic borrowers . . . . . . . . . . . $ 44,897 $ 49,277 $ 88,158 $ 66,202 $ 55,489 $113,691 ======== ======== ======== ======== ======== ======== *Excludes $14,803 of loans which have been renegotiated at market rates and have demonstrated performance at the renegotiated terms for at least one year **See Note E for interest income foregone on loans that had been placed on a cash basis or on which the contractual rate of interest has been reduced below market ***Net of cumulative corporate and commercial real estate charge-offs and foreclosed real estate write-downs totaling $60,914; includes $27,192 of nonperforming assets on which interest and principal are paid current - -----------------------------------------------------------------------------------------------------------------------------------
20 23 Provision and Allowance for Loan Losses The provision for loan losses totaled $92.652 million in 1993, exceeding net credit losses by $25.241 million. The provision was lower by $26.768 million or 22.4 percent from the $119.420 million taken in 1992. The corporation maintains, through its provision, an allowance for loan losses believed by management to be adequate to absorb potential credit losses inherent in the portfolio. Improved conditions within the corporation's loan and commitments portfolio, including better payment experience, reduced delinquencies and more favorable expectations of collectibility, as well as continued gradual economic recovery in 1993 led to the reduced provision for the year. Net loan losses totaled $67.411 million or .31 percent of average loans, a decrease of $27.834 million or 29.2 percent from $95.245 million or .48 percent of average loans in 1992. Recoveries represented 30.6 percent of gross loan charge-offs versus 27.6 percent in 1992. Credit card net charge-offs for the year declined $4.120 million or 7.3 percent to $52.675 million or 2.03 percent of average credit card loans. Credit card loans delinquent 30 days or more at December 31, 1993 totaled $41.434 million, representing 1.33 percent of the period-end portfolio. This compared with $46.870 million or 2.11 percent a year earlier. Net loan losses for other revolving credit were lower by $710 thousand or 19.7 percent and totaled $2.893 million or .88 percent of average related loans for the year versus $3.603 million or 1.12 percent in 1992. Other retail net loan losses, consisting of direct and indirect retail net credit losses, decreased $7.100 million or 60.5 percent to $4.640 million or .16 percent of average related loans. Real estate net charge-offs totaled $5.821 million or .08 percent of average real estate loans, down $15.428 million or 72.6 percent from $21.249 million or .30 percent of related loans in 1992. No HLTs were charged-off in 1993 or 1992. At December 31, 1993, the allowance for loan losses totaled $404.798 million, representing 1.76 percent of year-end loans and 372 percent coverage of nonperforming loans. Comparable amounts a year earlier were $379.557 million or 1.80 percent of loans and 218 percent coverage of nonperforming loans.
ALLOWANCE FOR LOAN LOSSES EARNINGS COVERAGE OF NET LOAN LOSSES LOAN LOSS EXPERIENCE (EXCLUDING SUBSIDIARY SALE AND SECURITIES TRANSACTIONS) (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX) APPENDIX)
21 24
- --------------------------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 9 - --------------------------------------------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 1988 ---- ---- ---- ---- ---- ---- SUMMARY OF TRANSACTIONS Balance at beginning of year. . . . . . . . . $379,557 $360,193 $269,916 $219,219 $200,698 $229,902 Additions from acquisitions . . . . . . . . . -- -- 276 1,510 327 1,166 Allowance of company sold . . . . . . . . . . -- (4,811) -- -- -- -- Provision for loan losses . . . . . . . . . . 92,652 119,420 293,000 142,992 86,531 78,110 Deduct net loan losses: Loans charged off: Commercial. . . . . . . . . . . . . 6,792 13,153 61,089 22,982 14,219 13,964 Credit card . . . . . . . . . . . . 62,991 67,863 72,386 48,150 40,069 36,134 Other revolving credit . . . . . . 3,922 4,627 5,154 3,680 2,690 2,618 Other retail . . . . . . . . . . . 8,431 17,221 26,251 23,625 23,945 20,099 Real estate . . . . . . . . . . . . 14,514 27,041 58,089 16,241 7,907 8,733 Lease financing . . . . . . . . . . 458 668 1,614 1,497 1,351 6,587 Foreign . . . . . . . . . . . . . . -- 960 675 -- 452 51,283 -------- -------- --------- -------- -------- -------- Total . . . . . . . . . . . . 97,108 131,533 225,258 116,175 90,633 139,418 Recoveries: Commercial. . . . . . . . . . . . . 5,572 12,594 4,599 6,704 4,801 5,564 Credit card . . . . . . . . . . . . 10,316 11,068 7,027 6,329 7,231 7,784 Other revolving credit. . . . . . . 1,029 1,024 721 747 707 616 Other retail . . . . . . . . . . . 3,791 5,481 6,545 5,368 5,899 4,633 Real estate . . . . . . . . . . . . 8,693 5,792 2,626 2,657 1,170 628 Lease financing . . . . . . . . . . 264 322 263 246 2,091 135 Foreign . . . . . . . . . . . . . . 32 7 478 319 397 11,578 -------- -------- --------- -------- -------- -------- Total . . . . . . . . . . . . 29,697 36,288 22,259 22,370 22,296 30,938 -------- -------- --------- -------- -------- -------- Net loan losses . . . . . . . . . . . . 67,411 95,245 202,999 93,805 68,337 108,480 -------- -------- --------- -------- -------- -------- Balance at end of year. . . . . . . . . . . . $404,798 $379,557 $ 360,193 $269,916 $219,219 $200,698 ======== ======== ========= ======== ======== ======== NET LOAN LOSSES (RECOVERIES) BY CATEGORY Commercial . . . . . . . . . . . . . . . . . $ 1,220 $ 559 $ 56,490 $ 16,278 $ 9,418 $ 8,400 Credit card . . . . . . . . . . . . . . . . . 52,675 56,795 65,359 41,821 32,838 28,350 Other revolving credit. . . . . . . . . . . . 2,893 3,603 4,433 2,933 1,983 2,002 Other retail. . . . . . . . . . . . . . . . . 4,640 11,740 19,706 18,257 18,046 15,466 Real estate . . . . . . . . . . . . . . . . . 5,821 21,249 55,463 13,584 6,737 8,105 Lease financing . . . . . . . . . . . . . . . 194 346 1,351 1,251 (740) 6,452 Foreign . . . . . . . . . . . . . . . . . . . (32) 953 197 (319) 55 39,705 -------- -------- --------- -------- -------- -------- Total. . . . . . . . . . . . . $ 67,411 $ 95,245 $ 202,999 $ 93,805 $ 68,337 $108,480 ======== ======== ========= ======== ======== ======== NET LOAN LOSSES (RECOVERIES) TO AVERAGE LOANS BY CATEGORY Commercial. . . . . . . . . . . . . . . . . . .02% .01% .69% .20% .12% .12% Credit card . . . . . . . . . . . . . . . . . 2.03 3.20 4.19 2.94 2.64 2.45 Other revolving credit . . . . . . . . . . . .88 1.12 1.48 1.02 .74 .79 Other retail . . . . . . . . . . . . . . . . .16 .44 .72 .64 .64 .54 Real estate . . . . . . . . . . . . . . . . . .08 .30 .73 .19 .11 .16 Lease financing . . . . . . . . . . . . . . . .14 .29 1.08 .87 (.47) 4.08 Foreign . . . . . . . . . . . . . . . . . . . (.04) 1.32 .23 (.40) .06 31.43 Total loans . . . . . . . . . . . . . . . . . .31 .48 .99 .47 .37 .66 Net loan losses to average loans excluding foreign. . . . . . . . . . . . . . . . . .31% .47% .99% .47% .37% .42% Year-end allowance to outstanding loans . . . 1.76 1.80 1.75 1.27 1.12 1.14 Earnings coverage of net loan losses* . . . . 11.17x 7.29x 2.77x 6.09x 7.24x 4.22x *Earnings before income taxes and provision for loan losses excluding subsidiary sales and securities transactions - ------------------------------------------------------------------------------------------------------------------------------------
22 25 Noninterest Income Other operating revenue rose $64.937 million or 12.1 percent for the year. Good growth was achieved in most major categories of noninterest income. Credit card fee income increased $23.712 million or 30.4 percent in 1993, reflecting both good growth in new accounts and increased sales volume. During the year, the corporation introduced a First-Year Prime pricing option on its Visa and MasterCard credit cards. This is in addition to Wachovia's popular Prime Plus and No Fee pricing options. Annual credit card fees and cardholder interchange income represented 76 percent of credit card fee income. Income on cash advances and late charge fees are recorded as part of credit card interest income. Deposit account service revenues rose $13.348 million or 7 percent due to growth in commercial analysis fees, consumer demand deposit charges and overdraft fees. Trading account activities recorded gains of $13.103 million for the year compared with losses of $11.542 million in 1992 which stemmed from hedging in mortgage-backed securities. This portfolio was affected adversely in 1992 by prepayment experience substantially above historical norms, as well as abnormal changes in historical rate relationships between mortgage-backed securities and hedging instruments. This was offset by the net interest income earned on the inventory of mortgage-backed trading securities during the year. Trust fees grew $10.526 million or 9.6 percent, as a result of increased volumes of personal and institutional business combined with improved portfolio valuations associated with rising prices in the stock and bond markets. In the second quarter of the year, the corporation expanded its Biltmore Funds, a proprietary family of mutual funds, from five to eleven investment portfolios. The funds had assets totaling $1.285 billion at year-end. At December 31, 1993, trust assets totaled $92.287 billion with $17.950 billion under management. This compared with $85.806 billion a year earlier with $16.147 billion under management. Mortgage fee income, which primarily includes servicing and origination fees and revenues from mortgage loan sales, decreased $977 thousand or 2.4 percent for the year. Combined servicing and origination fees were up $6.035 million or 13.7 percent. However, increased mortgage prepayments in a lower interest rate environment resulted in write-offs of excess servicing fees amounting to $1.554 million. At year-end 1993, the mortgage portfolio serviced totaled $9.007 billion, representing 135,637 loans compared with $8.591 billion and 135,068 loans a year earlier. Remaining categories of noninterest income, excluding revenues from student loan servicing and gains from securities and subsidiary sales, rose $21.398 million or 22.2 percent. In February of 1993, the corporation sold its student loan services subsidiary. Consequently, revenue comparisons between 1993 and 1992 for student loan servicing are not meaningful. The sale resulted in a pretax gain of $8.030 million. This subsidiary's net income for 1992 was less than 1 percent of the corporation's consolidated net income. In the 1992 third quarter, a consumer finance subsidiary was sold resulting in a pretax gain of $19.486 million. The net income of this subsidiary for the first six months of 1992
- ------------------------------------------------------------------------------------------------------------------------------------ NONINTEREST INCOME (thousands) TABLE 10 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 1992 1991 1990 1989 1988 ---- ---- ---- ---- ---- ---- Service charges on deposit accounts . . . . . . . . . . . . $202,885 $189,537 $170,827 $155,808 $136,620 $126,146 Fees for trust services . . . . . . . . . . . . . . . . . . 120,030 109,504 102,665 99,572 101,072 87,959 Credit card income -- net of interchange payments . . . . . 101,780 78,068 62,814 55,202 50,092 45,243 Mortgage fee income . . . . . . . . . . . . . . . . . . . . 39,101 40,078 28,608 20,741 16,003 16,260 Trading account profits (losses) -- excluding interest. . . 13,103 (11,542) 11,541 11,637 7,510 7,293 Insurance premiums and commissions. . . . . . . . . . . . . 11,847 15,002 12,819 14,232 15,387 15,180 Bankers' acceptance and letter of credit fees . . . . . . . 19,668 20,141 14,232 11,605 11,655 7,263 Student loan servicing . . . . . . . . . . . . . . . . . . 5,535 33,250 31,470 29,841 27,230 23,915 Other service charges and fees. . . . . . . . . . . . . . . 48,915 44,585 42,108 34,919 30,883 27,766 Other income. . . . . . . . . . . . . . . . . . . . . . . . 37,315 16,619 13,094 25,295 15,365 9,440 -------- -------- -------- -------- -------- -------- Total other operating revenue. . . . . . . . . . . . 600,179 535,242 490,178 458,852 411,817 366,465 Gain on sale of subsidiary. . . . . . . . . . . . . . . . . 8,030 19,486 -- -- -- -- Investment securities gains . . . . . . . . . . . . . . . . 19,394 1,497 11,091 6,218 7,625 5,213 -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . . . . $627,603 $556,225 $501,269 $465,070 $419,442 $371,678 ======== ========= ======== ======== ======== ======== - ----------------------------------------------------------------------------------------------------------------------------------
23 26 was 1.2 percent of the consolidated total. Securities gains in 1993 totaled $19.394 million, including $18.422 million from the sale of three equity investments. This compared with investment securities gains of $1.497 million in 1992. Noninterest Expense Noninterest expense increased $35.584 million or 3.2 percent for the year. Careful expense control remains an important operating principle with management. The corporation's overhead ratio measuring noninterest expense to taxable equivalent net interest income and noninterest income, excluding securities and subsidiary sales, dropped to 57 percent from 58.6 percent in 1992. This compared with a median overhead ratio of 62.5 percent in 1993 for the 25 largest U.S. banks, as shown in the accompanying chart. Total personnel expense rose $28.857 million or 5.3 percent. Salaries expense edged up $4.428 million or 1 percent. Employee benefits expense rose $24.429 million or 27.6 percent. This primarily reflected a special contribution to the retirement savings and profit sharing plan for employees in recognition of the corporation's 1993 earnings results and the impact of a new accounting change for postretirement expenses. The corporation adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions" (FASB 106), on January 1, 1993, which requires the accrual of nonpension benefits as employees render service. The corporation has elected, under the transitional method of adoption, to amortize the accumulated postretirement benefits obligation of $63.041 million over 20 years. NONINTEREST EXPENSE AS A PERCENTAGE OF TOTAL ADJUSTED REVENUES (EXCLUDING SECURITIES AND SUBSIDIARY SALE GAINS) (Graph - SEE GRAPHICS APPENDIX)
- ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE (thousands) TABLE 11 - ----------------------------------------------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 1988 ------- -------- ------- ------- -------- -------- Salaries . . . . . . . . . . . . . . . . . . . $ 455,621 $ 451,193 $ 443,273 $413,592 $403,888 $379,169 Employee benefits. . . . . . . . . . . . . . . 113,059 88,630 81,216 73,881 81,110 77,804 ---------- ---------- --------- -------- -------- -------- Total personnel expense . . . . . . . . . 568,680 539,823 524,489 487,473 484,998 456,973 Net occupancy expense . . . . . . . . . . . . 82,070 80,673 75,729 71,402 64,044 60,599 Equipment expense . . . . . . . . . . . . . . 102,246 100,916 99,569 98,042 101,101 98,925 Postage and delivery . . . . . . . . . . . . . 38,160 37,036 38,188 33,655 32,888 31,064 Outside data processing, programming and software 38,613 33,082 30,671 27,684 28,027 23,392 Stationery and supplies . . . . . . . . . . . 25,344 26,342 28,507 23,289 24,949 23,505 Advertising and sales promotion. . . . . . . . 38,141 27,911 22,139 30,010 24,753 20,706 Professional services . . . . . . . . . . . . 17,144 18,412 25,786 18,887 15,536 16,443 Travel and business promotion . . . . . . . . 15,563 13,578 13,641 13,637 13,393 13,206 FDIC insurance and regulatory examinations . . 53,663 53,970 49,629 27,377 18,736 15,885 Check clearing and other bank services . . . . 10,159 10,391 11,334 10,310 9,187 8,384 Amortization of intangible assets. . . . . . . 28,001 34,423 51,756 19,815 14,816 14,822 Foreclosed property expense. . . . . . . . . . 7,654 9,755 15,655 4,845 2,100 1,896 Other expense. . . . . . . . . . . . . . . . . 105,798 109,340 109,424 85,858 82,362 78,359 ---------- ---------- ---------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . $1,131,236 $1,095,652 $1,096,517 $952,284 $916,890 $864,159 ========== ========== ========== ======== ======== ======== Overhead ratio . . . . . . . . . . . . . . . . 57.0% 58.6% 62.5% 58.4% 60.6% 61.1% - ------------------------------------------------------------------------------------------------------------------------------------
24 27 For 1993, postretirement benefits expense was approximately $5.210 million higher under FASB 106 than would have been recorded under the previous accounting method. Net occupancy and equipment expense increased $2.727 million or 1.5 percent. Other combined categories of noninterest expense were higher by $4 million or 1.1 percent. Total foreclosed property expense included write-downs of $8.317 million in 1993 versus $6.032 million in 1992. Income Taxes Applicable income taxes rose $32.467 million or 19.9 percent in 1993, reflecting increased federal tax rates and higher levels of pretax income. Income taxes computed at the statutory rate are reduced primarily by the interest earned on state and municipal debt securities and industrial revenue obligations. Also, within certain limitations, one-half of the interest income of qualifying employee stock ownership plan loans is exempt from federal taxes. The interest earned on state and municipal debt instruments is exempt from federal taxes and, except for out-of-state issues, from North Carolina and Georgia taxes as well, and results in substantial interest savings for local governments and their constituents. During the first quarter of 1993, the corporation prospectively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FASB 109). The adoption changes the corporation's method of accounting for income taxes from the deferred method previously required to an asset and liability approach to accounting for income taxes. The cumulative impact of this change in accounting principle was a tax benefit of $2.700 million, which was included in income tax expense for 1993. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax base of assets and liabilities. Since FASB 109 requires deferred tax assets and liabilities to be adjusted to reflect the effect of enacted tax law or rate changes, future tax legislation will have an impact on deferred income tax expense.
- ------------------------------------------------------------------------------------------------------------------------------------ INCOME TAXES (thousands) TABLE 12 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 1992 1991 ----------------- ------------------ ------------------- Amount % Amount % Amount % ------ ----- ------ ----- ------ ----- Income before income taxes. . . . . . . . . . . . . . . . . . $687,540 $596,203 $280,918 ======== ======== ======== Federal income taxes at statutory rate. . . . . . . . . . . . $240,639 35.0 $202,709 34.0 $ 95,512 34.0 State and local income taxes -- net of federal tax benefit. . 7,235 1.1 8,290 1.4 3,340 1.2 Effect of tax-exempt securities interest and other income . . (50,817) (7.4) (49,783) (8.4) (59,165) (21.0) Tax reserves. . . . . . . . . . . . . . . . . . . . . . . . . 2,594 .4 2,874 .5 5,903 2.1 Goodwill and deposit base intangible amortization . . . . . . 298 -- (328) (.1) 4,541 1.6 Other items . . . . . . . . . . . . . . . . . . . . . . . . . (4,504) (.7) (784) (.1) 1,247 .4 -------- ----- -------- ----- -------- ---- Total tax expense. . . . . . . . . . . . . . . . . . . $195,445 28.4 $162,978 27.3 $ 51,378 18.3 ======== ===== ======== ===== ======== ==== Currently payable: Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . $209,853 107.4 $159,787 98.0 $ 90,221 175.6 Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . 289 .1 261 .2 641 1.2 State and local . . . . . . . . . . . . . . . . . . . . . . 11,966 6.1 14,667 9.0 5,035 9.8 -------- ----- -------- ----- -------- ----- Total . . . . . . . . . . . . . . . . . . . . . . . . . 222,108 113.6 174,715 107.2 95,897 186.6 Deferred: Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . (25,828) (13.2) (9,631) (5.9) (44,171) (86.0) State. . . . . . . . . . . . . . . . . . . . . . . . . . . . (835) (.4) (2,106) (1.3) 25 .1 -------- ----- -------- ----- -------- ----- Total . . . . . . . . . . . . . . . . . . . . . . . . . (26,663) (13.6) (11,737) (7.2) (44,146) (85.9) Deferred investment tax credit amortization . . . . . . . . . -- -- -- -- (373) (.7) -------- ----- -------- ----- -------- ----- Total tax expense. . . . . . . . . . . . . . . . . . . $195,445 100.0 $162,978 100.0 $ 51,378 100.0 ======== ===== ======== ===== ======== ===== - ------------------------------------------------------------------------------------------------------------------------------------
25 28 SHAREHOLDERS' EQUITY AND CAPITAL RATIOS Shareholders' equity at December 31, 1993 totaled $3.018 billion, an increase of $243 million or 8.8 percent from $2.775 billion a year earlier. Equity averaged $2.872 billion for the year, higher by $276 million or 10.6 percent from $2.596 billion in 1992. Wachovia's book value at December 31, 1993 was $17.61 per share, up 8.8 percent from $16.18 per share at year-end 1992. Wachovia's internal capital generation rate (net income less dividends as a percentage of average equity) was 10.5 percent in 1993 versus 10.1 percent in 1992. The corporation's board of directors has authorized the repurchase of up to 5 million shares of Wachovia common stock for various corporate purposes, including the issuance of shares for the corporation's employee stock plans and dividend reinvestment plan. Share repurchase began on July 1, 1993. During 1993, 2,730,200 shares were repurchased at an average price of $35.35 per share for a total cost of $96.511 million. The number of shares available for possible repurchase at year-end 1993 totaled 2,269,800. Intangible assets totaled $90.118 million at December 31, 1993, a decrease of $12.919 million or 12.5 percent from $103.037 million a year earlier. The decline reflected both normal amortization of intangibles and $6.966 million of accelerated write-downs of mortgage servicing rights and credit card premiums. These write-downs took place during a period of sharply declining interest rates, resulting in the refinancing of large numbers of mortgages serviced and a runoff of high rate cardholder balances from purchased portfolios. The 1993 year-end total consisted of $40.875 million in mortgage servicing rights, $32.451 million in goodwill, $10.647 million in deposit base intangibles and $6.145 million in other intangibles. Comparable amounts at year-end 1992 were $45.443 million in mortgage servicing rights, $33.941 million in goodwill, $13.984 million in deposit base intangibles and $9.669 million in other intangibles. Regulatory agencies divide capital into Tier I (consisting of shareholders' equity less ineligible intangible assets) and Tier II (consisting of the allowable portion of the reserve for loan losses and certain long-term debt) and measure capital adequacy by applying both capital levels to a banking company's risk-adjusted assets and off-balance sheet items. In addition, 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 total capital ratio to risk-adjusted assets ratio of 8 percent with one-half consisting of tangible common shareholders' equity and a minimum Tier I leverage ratio of 3 percent. Banks which meet or exceed a Tier I ratio of 6 percent, a total capital to risk-adjusted assets ratio of 10 percent and a Tier I leverage ratio of 5 percent are considered well capitalized by regulatory standards.
-------------------------------------------------------------------------------------------------------------------------- CAPITAL COMPONENTS AND RATIOS TABLE 13 December 31 (thousands) -------------------------------------------------------------------------------------------------------------------------- 1993 1992 1991 ---------- ---------- ---------- Tier I capital: Common shareholders' equity . . . . . . . . . . . . . $ 3,017,947 $ 2,774,767 $ 2,484,414 Less ineligible intangible assets . . . . . . . . . . 32,451 33,941 33,198 ----------- ----------- ----------- Total Tier I capital . . . . . . . . . . . . . . . 2,985,496 2,740,826 2,451,216 Tier II capital: Allowable allowance for loan losses . . . . . . . . . 384,032 348,887 332,528 Allowable long-term debt. . . . . . . . . . . . . . . 583,738 344,983 136,682 ----------- ----------- ----------- Tier II capital additions. . . . . . . . . . . . . 967,770 693,870 469,210 ----------- ----------- ----------- Total capital. . . . . . . . . . . . . . . . . . . $ 3,953,266 $ 3,434,696 $ 2,920,426 =========== =========== =========== Risk-adjusted assets. . . . . . . . . . . . . . . . . . . $30,701,782 $27,880,304 $26,583,836 Quarterly average assets. . . . . . . . . . . . . . . . . $35,419,829 $32,518,351 $32,180,449 Risk-based capital ratios: Tier I capital. . . . . . . . . . . . . . . . . . . . 9.72% 9.83% 9.22% Total capital . . . . . . . . . . . . . . . . . . . . 12.88 12.32 10.99 Tier I leverage ratio . . . . . . . . . . . . . . . . . . 8.44% 8.44% 7.62% Shareholders' equity to total assets. . . . . . . . . . . 8.26% 8.32% 7.49% --------------------------------------------------------------------------------------------------------------------------
26 29 At December 31, 1993, Wachovia's Tier I to risk-adjusted assets ratio was 9.72 percent and including Tier II was 12.88 percent. The corporation's Tier I leverage ratio was 8.44 percent. These capital ratios remain well in excess of minimum regulatory requirements. Dividends The corporation paid cash dividends of $191.488 million for 1993, an increase of $20.732 million or 12.1 percent from the $170.756 million paid in 1992. This represents a payout of net income amounting to 38.9 percent versus 39.4 percent a year ago. Wachovia's payout ratio ranks among the highest of the 25 largest U.S. banks. Cash dividends per share totaled $1.11, up 11 percent from $1.00 per share paid in the prior year. At its meeting on January 28, 1994, the board of directors declared a first quarter dividend of $.30 per share, which is 11.1 percent higher than the $.27 per share paid in the same period of 1993. The dividend is payable on March 1 to shareholders of record on February 8, 1994. Additional dividend information is presented on pages 62 and 63. YEAR-END SHAREHOLDERS' EQUITY PER SHARE (Graph - SEE GRAPHICS APPENDIX)
- ----------------------------------------------------------------------------------------------------------------------------------- SUMMARY OF SHAREHOLDERS' EQUITY TABLE 14 (thousands, except per share) - ----------------------------------------------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 1988 ---------- ---------- ---------- ---------- ---------- ---------- Balance at beginning of year . . . . . . . $2,774,767 $2,484,414 $2,370,928 $2,176,503 $1,952,422 $1,651,473 Net income . . . . . . . . . . . . . . . . 492,095 433,225 229,540 345,677 328,149 298,766 Cash dividends declared on common stock: Wachovia Corporation . . . . . . . . . . (191,488) (170,756) (128,713) (114,051) (96,313) (78,133) Pooled company prior to merger . . . . . -- -- (17,691) (16,746) (15,150) (13,468) Stock option and employee benefit plans. . 14,534 19,190 10,818 7,675 5,679 2,426 Dividend reinvestment plan . . . . . . . . 10,953 9,191 6,262 5,522 3,962 3,352 Conversion of notes and debentures . . . . 16,435 4,549 10,268 1,233 4,282 84,061 Bank acquisitions . . . . . . . . . . . . -- -- 6,240 -- 9,362 11,974 Common stock acquired . . . . . . . . . . (98,804) (31,197) (1,215) (9,558) (13,384) (7,511) Loan to ESOP . . . . . . . . . . . . . . . -- -- -- (25,000) -- -- Repayment of loan to ESOP. . . . . . . . . -- 25,000 -- -- -- -- Miscellaneous (net). . . . . . . . . . . . (545) 1,151 (2,023) (327) (2,506) (518) ---------- ---------- ---------- ---------- ---------- ---------- Balance at end of year . . . . . . . . . . $3,017,947 $2,774,767 $2,484,414 $2,370,928 $2,176,503 $1,952,422 ========== ========== ========== ========== ========== ========== Book value per share at year-end . . . . . $ 17.61 $ 16.18 $ 14.56 $ 14.07 $ 12.96 $ 11.70 Book value percentage increase over prior year-end. . . . . . . . . . . . . . . 8.8% 11.1% 3.5% 8.6% 10.8% 12.9% Total dividends as a percentage of net income . . . . . . . . . . . . . . . 38.9 39.4 63.8 37.8 34.0 30.7 Equity at year-end to year-end: Total assets . . . . . . . . . . . . . . 8.3% 8.3% 7.5% 7.1% 7.2% 7.1% Net loans . . . . . . . . . . . . . . . 13.4 13.4 12.3 11.3 11.3 11.2 Deposits . . . . . . . . . . . . . . . . 12.9 11.9 10.8 10.2 9.9 9.5 Equity and long-term debt. . . . . . . . 50.5 69.9 93.6 93.5 90.7 89.3 - -----------------------------------------------------------------------------------------------------------------------------------
27 30 FOURTH QUARTER ANALYSIS Net income per fully diluted share for the fourth quarter of 1993 was $.71, an increase of 12.9 percent from $.63 per share earned in the same period of 1992. Net income totaled $122.997 million, up $13.326 million or 12.2 percent from $109.671 million and represented returns of 16.8 percent on shareholders' equity and 1.39 percent on assets. Taxable equivalent net interest income rose $11.028 million or 3.2 percent. Higher volume of interest-earning assets accounted for the increase, which was offset partially by the impact of reduced rates. Loans grew $1.573 billion or 7.6 percent led by credit cards, automobile financing, residential mortgages and regular commercial loans. Investment securities increased $1.513 billion or 23.3 percent. The net yield on interest-earning assets decreased 29 basis points, reflecting both a slower decline in funding costs and higher levels of interest-earning assets with lower yields. The provision for loan losses was $18.013 million, down $10.551 million or 36.9 percent from $28.564 million taken in the final period of 1992, but exceeded net charge-offs for the quarter by $707 thousand. Net loan losses totaled $17.306 million or .31 percent of average loans, lower by $10.995 million or 38.9 percent from the year-earlier quarter. Real estate net loan losses had the greatest improvement, dropping to $1.156 million or .06 percent of average real estate loans from $12.306 million or .68 percent of related loans in the 1992 fourth period. Net loan losses on other retail loans decreased $613 thousand or 25.3 percent to $1.812 million or .23 percent of average related loans. Credit card net charge-offs increased slightly but dropped as a percentage of average credit card loans to 1.74 percent versus 2.48 percent in the same period of 1992. QUARTERLY NET INCOME PER SHARE, QUARTERLY NET INCOME PER SHARE, 1992 1993 (FULLY DILUTED) (FULLY DILUTED) (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX)
- ------------------------------------------------------------------------------------------------------------------------------ COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 15 - ------------------------------------------------------------------------------------------------------------------------------ 1993 1992 Fourth Fourth Quarter Quarter Change ------- ------- ------ Interest income -- taxable equivalent . . . . . . . . . $3.28 $3.19 $ .09 Interest expense . . . . . . . . . . . . . . . . . . . 1.25 1.21 .04 ------ ----- ----- Net interest income -- taxable equivalent . . . . . . . 2.03 1.98 .05 Taxable equivalent adjustment . . . . . . . . . . . . . .15 .11 .04 ------ ----- ----- Net interest income . . . . . . . . . . . . . . . . . . 1.88 1.87 .01 Provision for loan losses . . . . . . . . . . . . . . . .10 .17 (.07) ------ ----- ----- Net interest income after provision for loan losses . . 1.78 1.70 .08 Other operating revenue . . . . . . . . . . . . . . . . .88 .81 .07 Investment securities gains . . . . . . . . . . . . . . .04 -- .04 ------ ----- ----- Total other income . . . . . . . . . . . . . . . . . . .92 .81 .11 Personnel expense . . . . . . . . . . . . . . . . . .85 .80 .05 Other expense . . . . . . . . . . . . . . . . . . . . . .88 .83 .05 ------ ----- ----- Total other expense . . . . . . . . . . . . . . . . . . 1.73 1.63 .10 Income before income taxes. . . . . . . . . . . . . . . .97 .88 .09 Applicable income taxes . . . . . . . . . . . . . . . . .26 .24 .02 ------ ----- ----- Net income. . . . . . . . . . . . . . . . . . . . . . . $ .71 $ .64 $ .07 ====== ===== ===== - ----------------------------------------------------------------------------------------------------------------------------
28 31 Other operating revenue rose $12.450 million or 8.9 percent from a year ago. Credit card fee income was up $5.017 million or 22 percent, trust service fees were higher by $3.965 million or 15 percent and deposit account service revenues increased $1.036 million or 2.2 percent. Trading account profits grew $1.289 million, and mortgage fee income had gains of $628 thousand or 6.6 percent. Other combined operating
- -------------------------------------------------------------------------------------------------------------------------------- QUARTERLY FINANCIAL SUMMARY TABLE 16 - -------------------------------------------------------------------------------------------------------------------------------- 1993 1992 ----------------------------------------- -------------------------------------- Fourth Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter -------- ------- ------- -------- --------- ------- ------- ------- SUMMARY OF OPERATIONS (thousands, except per share data) Interest income -- taxable equivalent. . . . $568,749 $558,418 $549,446 $545,125 $550,733 $555,454 $584,017 $611,121 Interest expense . . . . . . . . . . . . . . 217,832 211,145 203,377 206,658 210,844 224,698 250,800 280,686 -------- -------- -------- -------- -------- -------- -------- -------- Net interest income -- taxable equivalent. . 350,917 347,273 346,069 338,467 339,889 330,756 333,217 330,435 Taxable equivalent adjustment. . . . . . . . 24,732 26,487 24,423 23,259 19,189 19,120 19,948 20,990 -------- -------- -------- -------- -------- -------- -------- -------- Net interest income. . . . . . . . . . . . . 326,185 320,786 321,646 315,208 320,700 311,636 313,269 309,445 Provision for loan losses. . . . . . . . . . 18,013 23,483 26,084 25,072 28,564 28,234 27,984 34,638 -------- -------- -------- -------- -------- -------- -------- -------- Net interest income after provision for loan losses . . . . . . . . . . . . 308,172 297,303 295,562 290,136 292,136 283,402 285,285 274,807 Other operating revenue. . . . . . . . . . . 152,441 149,761 148,593 149,384 139,991 136,132 129,504 129,615 Gain on sale of subsidiary . . . . . . . . . -- -- -- 8,030 -- 19,486 -- -- Investment securities gains . . . . . . . . 7,216 702 1,254 10,222 280 611 225 381 -------- -------- -------- -------- -------- -------- -------- -------- Total other income . . . . . . . . . . . . . 159,657 150,463 149,847 167,636 140,271 156,229 129,729 129,996 Personnel expense . . . . . . . . . . . . . 147,709 142,393 138,234 140,344 138,109 135,841 133,455 132,418 Other expense. . . . . . . . . . . . . . . . 152,031 131,153 134,600 144,772 143,248 153,821 131,984 126,776 -------- -------- -------- -------- -------- -------- -------- -------- Total other expense. . . . . . . . . . . . . 299,740 273,546 272,834 285,116 281,357 289,662 265,439 259,194 Income before income taxes . . . . . . . . . 168,089 174,220 172,575 172,656 151,050 149,969 149,575 145,609 Applicable income taxes* . . . . . . . . . . 45,092 49,813 49,452 51,088 41,379 41,156 40,956 39,487 -------- -------- -------- -------- -------- -------- -------- -------- Net income . . . . . . . . . . . . . . . . . $122,997 $124,407 $123,123 $121,568 $109,671 $108,813 $108,619 $106,122 ======== ======== ======== ======== ======== ======== ======== ======== Net income per common share: Primary . . . . . . . . . . . . . . . . $ .71 $ .71 $ .71 $ .70 $ .64 $ .63 $ .63 $ .61 Fully diluted . . . . . . . . . . . . . $ .71 $ .71 $ .70 $ .69 $ .63 $ .62 $ .62 $ .61 Cash dividends paid per common share. . . . . . . . . . . . . . $ .30 $ .27 $ .27 $ .27 $ .25 $ .25 $ .25 $ .25 Average primary shares outstanding . . . . . 173,175 174,300 174,712 173,579 172,960 172,558 172,304 172,738 Average fully diluted shares outstanding . . 173,943 175,414 176,004 175,904 175,580 175,089 175,022 175,537 SELECTED AVERAGE BALANCES (millions) Total assets . . . . . . . . . . . . . . . . $ 35,420 $ 33,870 $ 32,718 $ 32,473 $ 32,518 $ 31,338 $ 31,401 $ 32,067 Loans -- net of unearned income. . . . . . . 22,165 21,656 21,268 21,082 20,592 19,793 19,849 19,893 Investment securities. . . . . . . . . . . . 7,992 7,072 6,615 6,462 6,479 5,992 6,096 6,236 Other interest-earning assets. . . . . . . . 1,234 1,277 1,145 1,119 1,508 1,852 1,871 2,227 Total interest-earning assets. . . . . . . . 31,391 30,005 29,028 28,663 28,579 27,637 27,816 28,356 Interest-bearing deposits. . . . . . . . . . 17,030 16,835 16,986 17,228 17,484 17,750 18,286 18,021 Short-term borrowed funds. . . . . . . . . . 6,218 5,432 4,998 4,950 4,952 4,486 4,577 5,835 Long-term debt. . . . . . . . . . . . . . . 2,774 2,370 1,768 1,363 848 505 268 170 Total interest-bearing liabilities . . . . . 26,022 24,637 23,752 23,541 23,284 22,741 23,131 24,026 Noninterest-bearing deposits . . . . . . . . 5,544 5,410 5,253 5,208 5,416 4,971 4,748 4,647 Total deposits . . . . . . . . . . . . . . . 22,574 22,245 22,239 22,436 22,900 22,721 23,034 22,668 Shareholders' equity . . . . . . . . . . . . 2,934 2,907 2,852 2,794 2,689 2,631 2,568 2,497 RATIOS (averages) Loans to deposits. . . . . . . . . . . . . . 98.19% 97.35% 95.63% 93.97% 89.92% 87.11% 86.17% 87.76% Annualized net loan losses to loans. . . . . .31 .35 .32 .27 .55 .39 .42 .54 Annualized net yield on interest-earning assets . . . . . . . . 4.44 4.59 4.78 4.79 4.73 4.76 4.82 4.69 Shareholders' equity to: Total assets. . . . . . . . . . . . . . 8.28 8.58 8.72 8.60 8.27 8.39 8.18 7.79 Net loans . . . . . . . . . . . . . . . 13.48 13.68 13.66 13.50 13.30 13.55 13.19 12.79 Annualized return on assets. . . . . . . . . 1.39 1.47 1.51 1.50 1.35 1.39 1.38 1.32 Annualized return on shareholders' equity. . 16.77 17.12 17.27 17.41 16.32 16.54 16.92 17.00 *Income taxes applicable to securities transactions were $2,846, $291, $371, $3,964, $163, $97, $64 and $146, respectively - ----------------------------------------------------------------------------------------------------------------------------
29 32
- ------------------------------------------------------------------------------------------------------------------------------------ TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- FOURTH QUARTER* TABLE 17 - ------------------------------------------------------------------------------------------------------------------------------------ Variance Average Volume Average Rate Interest Attributable to - ---------------- ------------- --------------------- ------------------- 1993 1992 1993 1992 1993 1992 Variance Rate Volume - ------ ------ ------ ------ --------- -------- ----------- --------- --------- (Millions) INTEREST INCOME (Thousands) Loans: $ 6,273 $6,153 5.22 5.36 Commercial . . . . . . . . . . . . $ 82,541 $ 82,881 $ (340) $(1,946) $ 1,606 1,908 1,977 8.82 8.67 Tax-exempt . . . . . . . . . . . . 42,414 43,064 (650) 879 (1,529) - ------- ------ -------- -------- ------- 8,181 8,130 6.05 6.16 Total commercial . . . . . . . . 124,955 125,945 (990) (1,780) 790 706 677 8.33 9.27 Direct retail. . . . . . . . . . . 14,820 15,792 (972) (1,619) 647 2,389 2,056 8.02 9.16 Indirect retail. . . . . . . . . . 48,283 47,340 943 (6,184) 7,127 2,927 2,005 11.17 13.24 Credit card. . . . . . . . . . . . 82,439 66,713 15,726 (11,419) 27,145 329 323 11.15 11.22 Other revolving credit . . . . . . 9,266 9,105 161 (29) 190 ------ ------ -------- -------- ------- 6,351 5,061 9.67 10.92 Total retail . . . . . . . . . . 154,808 138,950 15,858 (16,798) 32,656 471 476 7.69 7.40 Construction . . . . . . . . . . . 9,116 8,849 267 369 (102) 3,157 3,082 7.55 7.59 Commercial mortgages . . . . . . . 60,103 58,784 1,319 (114) 1,433 3,787 3,646 7.84 8.48 Residential mortgages . . . . . . . 74,787 77,706 (2,919) (5,849) 2,930 ------ ------ -------- -------- ------- 7,415 7,204 7.71 8.03 Total real estate . . . . . . . 144,006 145,339 (1,333) (5,517) 4,184 147 122 8.40 9.44 Lease financing . . . . . . . . . . 3,113 2,907 206 (336) 542 71 75 4.08 4.54 Foreign . . . . . . . . . . . . . . 735 856 (121) (82) (39) ------ ------ -------- -------- ------- 22,165 20,592 7.65 8.00 Total loans. . . . . . . . . . . 427,617 413,997 13,620 (17,170) 30,790 Investment securities . . . . . . . 660 750 12.14 12.10 State and municipal. . . . . . . . 20,190 22,836 (2,646) 122 (2,768) 4,339 2,363 6.09 6.92 United States Treasury . . . . . . 66,577 41,111 25,466 (5,359) 30,825 2,497 2,628 5.83 7.41 Federal agency . . . . . . . . . . 36,709 48,930 (12,221) (9,871) (2,350) 496 738 5.09 5.35 Other. . . . . . . . . . . . . . . 6,369 9,914 (3,545) (426) (3,119) ------ ------ -------- -------- ------- 7,992 6,479 6.45 7.54 Total investment securities . . 129,845 122,791 7,054 (19,074) 26,128 11 260 4.08 3.73 Interest-bearing bank balances. . . 116 2,435 (2,319) 216 (2,535) Federal funds sold and securities purchased under resale 513 513 3.16 3.18 agreements. . . . . . . . . . . . 4,089 4,096 (7) (13) 6 710 735 3.96 4.01 Trading account assets 7,082 7,414 (332) (79) (253) - ------- ------- -------- -------- ------- $31,391 $28,579 7.19 7.67 Total interest-earning assets . 568,749 550,733 18,016 (34,164) 52,180 ======= ======= INTEREST EXPENSE $ 3,319 $ 3,006 1.79 2.06 Interest-bearing demand . . . . . . 14,976 15,545 (569) (2,090) 1,521 6,080 5,949 2.40 2.73 Savings and money market savings. . 36,774 40,788 (4,014) (4,899) 885 5,426 5,880 4.12 4.66 Savings certificates. . . . . . . . 56,393 68,929 (12,536) (7,458) (5,078) 1,550 2,216 4.95 5.51 Large denomination certificates . . 19,338 30,664 (11,326) (2,791) (8,535) - ------- ------- -------- -------- ------- Total time deposits in 16,375 17,051 3.09 3.64 domestic offices . . . . . . 127,481 155,926 (28,445) (22,453) (5,992) 655 433 3.13 3.34 Time deposits in foreign offices. . 5,170 3,639 1,531 (238) 1,769 - ------- ------- -------- -------- ------- 17,030 17,484 3.09 3.63 Total time deposits . . . . . . 132,651 159,565 (26,914) (22,865) (4,049) Federal funds purchased and securities sold under 4,604 3,297 3.19 3.22 repurchase agreements . . . . . . 37,017 26,708 10,309 (199) 10,508 595 499 3.05 3.07 Commercial paper. . . . . . . . . . 4,584 3,843 741 (5) 746 1,019 1,156 3.22 3.39 Other short-term borrowed funds . . 8,276 9,846 (1,570) (431) (1,139) - ------- ------- -------- -------- ------- Total short-term 6,218 4,952 3.18 3.25 borrowed funds. . . . . . . . 49,877 40,397 9,480 (681) 10,161 2,181 628 4.53 4.60 Bank notes. . . . . . . . . . . . . 24,913 7,260 17,653 (93) 17,746 593 220 6.96 6.55 Other long-term debt . . . . . . . 10,391 3,622 6,769 248 6,521 - ------- ------- -------- -------- ------- 2,774 848 5.05 5.11 Total long-term debt . . . . . 35,304 10,882 24,422 (96) 24,518 - ------- ------- -------- -------- ------- Total interest-bearing $26,022 $23,284 3.32 3.60 liabilities . . . . . . . . . 217,832 210,844 6,988 (16,664) 23,652 ======= ======= ----- ----- -------- -------- ------- 3.87 4.07 INTEREST RATE SPREAD ===== ===== NET YIELD ON INTEREST-EARNING 4.44 4.73 ASSETS AND NET INTEREST INCOME . $350,917 $339,889 $11,028 (21,173) 32,201 ===== ===== ======== ======== ======= - ------------------------------------------------------------------------------------------------------------------------------------
*Interest income and yields for 1993 are presented on a fully taxable equivalent basis using the federal income tax rate of 35% and state tax rates, as applicable, reduced by the nondeductible portion of interest expense; the taxable equivalent adjustment for 1992 reflects the federal income tax rate of 34% 30 33
- ------------------------------------------------------------------------------------------------------------------------------------ QUARTERLY ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 18 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 1992 ---------------------------------------- --------------------------------------- Fourth Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- ------- ------- ------- SUMMARY OF TRANSACTIONS Balance at beginning of period . . . . . . $404,091 $399,480 $390,621 $379,557 $379,294 $375,047 $367,971 $360,193 Allowance of company sold . . . . . . . . . -- -- --- -- -- (4,811) -- -- Provision for loan losses . . . . . . . . . 18,013 23,483 26,084 25,072 28,564 28,234 27,984 34,638 Deduct net loan losses: Loans charged off: Commercial . . . . . . . . . . . . . . 1,418 1,875 2,129 1,370 3,567 4,759 2,301 2,526 Credit card . . . . . . . . . . . . . . 15,392 17,147 15,650 14,802 15,026 15,224 18,099 19,514 Other revolving credit . . . . . . . . 1,375 758 943 846 1,480 825 1,340 982 Other retail . . . . . . . . . . . . . 2,754 1,853 1,904 1,920 3,276 3,361 4,452 6,132 Real estate . . . . . . . . . . . . . . 4,899 3,706 3,384 2,525 13,066 2,767 5,182 6,026 Lease financing . . . . . . . . . . . . 81 110 63 204 184 127 156 201 Foreign . . . . . . . . . . . . . . . . -- -- -- -- -- -- 960 -- -------- -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . 25,919 25,449 24,073 21,667 36,599 27,063 32,490 35,381 Recoveries: Commercial . . . . . . . . . . . . . . 971 1,354 1,382 1,865 3,726 779 5,882 2,207 Credit card . . . . . . . . . . . . . 2,625 2,566 2,645 2,480 2,618 2,856 2,971 2,623 Other revolving credit . . . . . . . . 270 228 316 215 259 220 318 227 Other retail . . . . . . . . . . . . . 942 842 996 1,011 851 1,531 1,425 1,674 Real estate . . . . . . . . . . . . . 3,743 1,525 1,445 1,980 760 2,432 884 1,716 Lease financing . . . . . . . . . . . 53 54 55 102 77 69 102 74 Foreign . . . . . . . . . . . . . . . 9 8 9 6 7 -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . 8,613 6,577 6,848 7,659 8,298 7,887 11,582 8,521 -------- -------- -------- -------- -------- -------- -------- -------- Net loan losses . . . . . . . . . . . . . 17,306 18,872 17,225 14,008 28,301 19,176 20,908 26,860 -------- -------- -------- -------- -------- -------- -------- -------- Balance at end of period . . . . . . . . . $404,798 $404,091 $399,480 $390,621 $379,557 $379,294 $375,047 $367,971 ======== ======== ======== ========= ======== ======== ======== ======== NET LOAN LOSSES (RECOVERIES) BY CATEGORY Commercial . . . . . . . . . . . . . . . . $ 447 $ 521 $ 747 $ (495) $ (159) $ 3,980 $ (3,581) 319 Credit card . . . . . . . . . . . . . . . . 12,767 14,581 13,005 12,322 12,408 12,368 15,128 16,891 Other revolving credit . . . . . . . . . . 1,105 530 627 631 1,221 605 1,022 755 Other retail . . . . . . . . . . . . . . . 1,812 1,011 908 909 2,425 1,830 3,027 4,458 Real estate . . . . . . . . . . . . . . . . 1,156 2,181 1,939 545 12,306 335 4,298 4,310 Lease financing . . . . . . . . . . . . . . 28 56 8 102 107 58 54 127 Foreign . . . . . . . . . . . . . . . . . . (9) (8) (9) (6) (7) -- 960 -- -------- -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . $ 17,306 $ 18,872 $ 17,225 $ 14,008 $ 28,301 $ 19,176 $ 20,908 $ 26,860 ======== ======== ======== ======== ======== ======== ======== ======== ANNUALIZED NET LOAN LOSSES (RECOVERIES) TO AVERAGE LOANS BY CATEGORY Commercial. . . . . . . . . . . . . . . . . .02% .03% .04% (0.2%) (.01%) .21% (.18%) .02% Credit card . . . . . . . . . . . . . . . . 1.74 2.16 2.11 2.18 2.48 2.75 3.64 4.15 Other revolving credit . . . . . . . . . . 1.34 .64 .76 .78 1.51 .75 1.27 .93 Other retail . . . . . . . . . . . . . . . .23 .14 .13 .13 .35 .27 .45 .66 Real estate . . . . . . . . . . . . . . . . .06 .12 .10 .03 .68 .02 .24 .24 Lease financing . . . . . . . . . . . . . . .08 .16 .02 .33 .35 .20 .18 .44 Foreign . . . . . . . . . . . . . . . . . . (.05) (.04) (.04) (.03) (.04) -- 5.42 -- Total loans. . . . . . . . . . . . . . . . .31 .35 .32 .27 .55 .39 .42 .54 Period-end allowance to outstanding loans . . . . . . . . . . . . 1.76% 1.83% 1.84% 1.80% 1.80% 1.89% 1.89% 1.82% - ------------------------------------------------------------------------------------------------------------------------------------
31 34 revenue categories, excluding income from student loan servicing activities and securities gains, were up $9.442 million or 40 percent and included $5.796 million from the sale of the corporation's client ATM processing activity. The sale of this activity will have no significant impact on the corporation's future results of operations. Investment securities gains totaled $7.216 million versus $280 thousand in the 1992 fourth quarter. Noninterest expense was higher by $18.383 million or 6.5 percent. Total personnel expense increased $9.600 million or 7 percent. Salaries expense was higher by $6.148 million or 5.3 percent, and employee benefits expense grew $3.452 million or 15.7 percent. Combined net occupancy and equipment expense expanded $4.575 million or 9.9 percent, while remaining categories of noninterest expense were up a combined $4.208 million or 4.3 percent. Total foreclosed property expense included write-downs of $2.328 million for the period.
- ----------------------------------------------------------------------------------------------------------------------------------- NONINTEREST INCOME (thousands) TABLE 19 - ----------------------------------------------------------------------------------------------------------------------------------- 1993 1992 ----------------------------------- -------------------------------------- Fourth Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter -------- ------- ------- ------- -------- -------- ------- ------- Service charges on deposit accounts . . . . . . . $48,982 $51,909 $51,622 $50,372 $47,946 $49,572 $46,085 $45,934 Fees for trust services . . . . . . . . . . . . . 30,352 29,697 29,614 30,367 26,387 27,437 27,651 28,029 Credit card income -- net of interchange payments . . . . . . . . . . . . 27,834 26,009 25,629 22,308 22,817 20,379 19,573 15,299 Mortgage fee income . . . . . . . . . . . . . . . 10,130 9,699 10,102 9,170 9,502 10,175 11,584 8,817 Trading account profits (losses) -- excluding interest . . . . . . . . . . . . . 2,097 3,521 2,746 4,739 808 (1,914) (6,299) (4,137) Insurance premiums and commissions. . . . . . . . 2,167 2,897 3,764 3,019 3,490 3,601 4,048 3,863 Bankers' acceptance and letter of credit fees . . . . . . . . . . . . . . . 4,633 4,925 5,276 4,834 4,353 4,952 4,068 6,768 Student loan servicing. . . . . . . . . . . . . . -- -- -- 5,535 8,927 8,230 7,935 8,158 Other service charges and fees. . . . . . . . . . 11,948 12,248 11,907 12,812 10,612 9,216 11,352 13,405 Other income. . . . . . . . . . . . . . . . . . . 14,298 8,856 7,933 6,228 5,149 4,484 3,507 3,479 -------- -------- -------- -------- -------- -------- -------- -------- Total other operating revenue . . . . . . . . 152,441 149,761 148,593 149,384 139,991 136,132 129,504 129,615 Gain on sale of subsidiary. . . . . . . . . . . . -- -- -- 8,030 -- 19,486 -- -- Investment securities gains . . . . . . . . . . . 7,216 702 1,254 10,222 280 611 225 381 -------- -------- -------- -------- -------- -------- -------- -------- Total. . . . . . . . . . . . . . . $159,657 $150,463 $149,847 $167,636 $140,271 $156,229 $129,729 $129,996 ======== ======== ======== ======== ======== ======== ======== ======== - -----------------------------------------------------------------------------------------------------------------------------------
32 35
- ------------------------------------------------------------------------------------------------------------------------------------ NONINTEREST EXPENSE (thousands) TABLE 20 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 1992 ----------------------------------------- ----------------------------------------- Fourth Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- -------- -------- -------- -------- Salaries . . . . . . . . . . . . . . . . . $122,205 $112,982 $110,119 $110,315 $116,057 $113,583 $111,348 $110,205 Employee benefits. . . . . . . . . . . . . 25,504 29,411 28,115 30,029 22,052 22,258 22,107 22,213 -------- -------- -------- -------- -------- -------- -------- -------- Total personnel expense . . . . . . 147,709 142,393 138,234 140,344 138,109 135,841 133,455 132,418 Net occupancy expense. . . . . . . . . . . 23,587 18,950 19,660 19,873 21,432 21,240 18,789 19,212 Equipment expense. . . . . . . . . . . . . 27,283 24,856 25,633 24,474 24,863 25,114 25,741 25,198 Postage and delivery . . . . . . . . . . . 9,315 8,921 11,643 8,281 8,439 10,090 9,191 9,316 Outside data processing, programming and software . . . . . . . . 12,494 9,194 8,198 8,727 10,428 5,770 9,168 7,716 Stationery and supplies. . . . . . . . . . 7,018 6,353 5,572 6,401 7,088 6,584 6,227 6,443 Advertising and sales promotion. . . . . . 11,435 7,681 7,805 11,220 7,993 7,727 6,120 6,071 Professional services. . . . . . . . . . . 6,381 4,120 3,771 2,872 4,538 4,242 4,941 4,691 Travel and business promotion. . . . . . . 4,706 3,668 3,905 3,284 4,310 2,633 3,460 3,175 FDIC insurance and regulatory examinations . . . . . . . . . . . . . . 13,122 13,274 13,084 14,183 13,029 13,620 13,642 13,679 Check clearing and other bank services . . 2,348 2,563 2,586 2,662 2,683 2,491 2,620 2,597 Amortization of intangible assets. . . . . 6,844 7,502 6,540 7,115 6,015 15,624 6,390 6,394 Foreclosed property expense. . . . . . . . 2,630 1,737 1,226 2,061 2,625 3,706 2,707 717 Other expense. . . . . . . . . . . . . . . 24,868 22,334 24,977 33,619 29,805 34,980 22,988 21,567 -------- -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . $299,740 $273,546 $272,834 $285,116 $281,357 $289,662 $265,439 $259,194 ======== ======== ======== ======== ======== ======== ======== ======== Overhead ratio . . . . . . . . . . . . . . 59.5% 55.0% 55.2% 58.4% 58.6% 62.0% 57.4% 56.3% - ------------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS 1992 vs. 1991 Net income for 1992 totaled $433.225 million and represented returns of 16.7 percent on shareholders' equity and 1.36 percent on assets versus net income of $229.540 million and returns of 9.3 percent and .72 percent, respectively, in 1991. Comparisons with 1991 results were distorted by special charges related to Wachovia's merger with South Carolina National Corporation. During the fourth quarter of 1991, South Carolina National took $138.5 million of special charges, including $97.8 million to conform litigation, real estate and loan valuation policies and practices; $23.9 million to write down the book value of intangible assets; and $16.8 million of merger related expenses, including consolidation expenses, software write-offs, insurance expense, debt issuance cost, employment contracts and transaction costs (such as legal, investment bankers and trustee fees) necessary to effect the acquisition. Taxable equivalent net interest income increased 5.6 percent, the result of improved rate spreads. The net yield on interest-earning assets rose 29 basis points. Taxable equivalent interest income declined 15.8 percent, reflecting a 144 basis point drop in the average rate earned and a slight decrease in average interest-earning assets. Loans were down 2.7 percent with gains in retail loans offset by lower overall commercial borrowings. Credit card loans and other revolving credit led 33 36 the growth in consumer loans, rising 13.8 percent and 7.8 percent, respectively, while commercial mortgages increased 5.2 percent. Investment securities were higher by 7.2 percent. Interest expense decreased 34.1 percent, primarily the result of a 192 basis point decline in the average rate paid. Average interest-bearing liabilities were lower by 3.7 percent, also contributing to the expense decrease. Total interest-bearing deposits declined less than 1 percent with savings certificates and large denomination certificates down a combined 11.8 percent, while interest-bearing demand and savings and money-market savings rose a combined 13 percent. Short-term borrowed funds decreased 18.4 percent and long-term debt grew by $271 million due to the introduction of the medium-term bank note program by Wachovia Bank of North Carolina in the second quarter of 1992. Nonperforming assets at year-end 1992 dropped 14.6 percent from a year earlier to $265.409 million or 1.25 percent of loans and foreclosed property. Net loan losses were lower by 53.1 percent and totaled $95.245 million or .48 percent of loans compared with $202.999 million or .99 percent of loans in 1991. The provision for loan losses declined 59.2 percent to $119.420 million and exceeded net charge-offs by $24.175 million. The allowance for loan losses at December 31, 1992 totaled $379.557 million or 1.80 percent of loans and 218 percent coverage of nonperforming loans versus $360.193 million or 1.75 percent of loans and 149 percent coverage a year earlier. Higher levels of provision and charge-offs in 1991 relative to 1992 were related primarily to adjustments made at the time of Wachovia Corporation's merger with South Carolina National to ensure that South Carolina National's loan and real estate valuation policies and practices were applied consistently on a mutually satisfactory basis with those of Wachovia. In addition, recession and general softness in commercial real estate markets during 1991 resulted in increased charge-offs and provision to rebuild the loan loss reserve to a level considered adequate. Moderate economic recovery, while less robust than in previous business cycles, gave some relief to troubled borrowers in 1992 and losses declined. Other operating revenue grew 9.2 percent. Credit card fee income rose 24.3 percent, led by growth in new accounts and higher business volume. Deposit account service revenues were up 11 percent. Mortgage fee income increased 40.1 percent, prompted by heavier refinancing as interest rates declined. Trading account activities resulted in a net loss of $11.542 million related to mortgage-backed securities hedging compared with income of $11.541 million in 1991. Noninterest expense for the year decreased less than 1 percent from 1991. Total personnel expense increased 2.9 percent, primarily reflecting higher health care benefits. Combined net occupancy and equipment expense rose 3.6 percent, while other remaining categories of noninterest expense were down 5.7 percent. The corporation's overhead ratio measuring noninterest expense to taxable equivalent net interest income and noninterest income, excluding securities and subsidiary sales, dropped to 58.6 percent from 62.5 percent in 1991. 34 37 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The management of Wachovia Corporation is responsible for the preparation of the financial statements, related financial data and other information in this annual report. The financial statements are prepared in accordance with generally accepted accounting principles and include amounts based on management's estimates and judgment where appropriate. Financial information appearing throughout this annual report is consistent with the financial statements. In meeting its responsibility both for the integrity and fairness of these statements and information, management depends on the accounting system and related internal control structures that are designed to provide reasonable assurances that transactions are authorized and recorded in accordance with established procedures and that assets are safeguarded and proper and reliable records are maintained. The concept of reasonable assurance is based on the recognition that the cost of an internal control structure should not exceed the related benefits. As an integral part of the internal control structure, the corporation maintains a professional staff of internal auditors who monitor compliance with and assess the effectiveness of the internal control structure and coordinate audit coverage with the independent auditors. The Audit Committee of Wachovia's Board of Directors, composed solely of outside directors, meets regularly with the corporation's management, internal auditors, independent auditors and regulatory examiners to review matters relating to financial reporting, internal control structure and the nature, extent and results of the audit effort. The independent auditors, internal auditors and banking regulators have direct access to the Audit Committee with or without management present. The financial statements have been audited by Ernst & Young, independent auditors, who render an independent professional opinion on management's financial statements. Their appointment was recommended by the Audit Committee, approved by the Board of Directors and ratified by the shareholders. Their examination provides an objective assessment of the degree to which the corporation's management meets its responsibility for financial reporting. Their opinion on the financial statements is based on auditing procedures which include reviewing internal control structures and performing selected tests of transactions and records as they deem appropriate. These auditing procedures are designed to provide a reasonable level of assurance that the financial statements are fairly presented in all material respects. REPORT OF INDEPENDENT AUDITORS The Board of Directors Wachovia Corporation We have audited the consolidated statements of condition of Wachovia Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 1991 financial statements of South Carolina National Corporation, a wholly owned subsidiary, which statements reflect net interest income constituting 23% of consolidated net interest income in 1991. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, as it relates to data included for South Carolina National Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and, for 1991, the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wachovia Corporation and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes K and M to the financial statements, in 1993 the company changed its methods of accounting for income taxes and postretirement benefits. /s/ Ernst & Young Winston-Salem, North Carolina January 13, 1994 35 38 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION
December 31 $ in thousands 1993 1992 ------------ ------------ ASSETS Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . $ 2,529,528 $ 2,627,859 Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 12,478 189,553 Federal funds sold and securities purchased under resale agreements. . . . . . . . . . . . . . . . 691,106 478,972 Trading account assets. . . . . . . . . . . . . . . . . . . . . . . . 788,779 895,968 Investment securities: State and municipal. . . . . . . . . . . . . . . . . . . . . . . 655,157 748,017 Other investments. . . . . . . . . . . . . . . . . . . . . . . . 7,223,499 5,738,154 ----------- ----------- Total investment securities (market value of $8,156,690 in 1993 and $6,793,043 in 1992) . . . . . . . . . 7,878,656 6,486,171 Loans and net leases. . . . . . . . . . . . . . . . . . . . . . . . . 22,986,307 21,096,682 Less unearned income on loans . . . . . . . . . . . . . . . . . . . . 8,819 11,029 ----------- ----------- Total loans. . . . . . . . . . . . . . . . . . . . . . 22,977,488 21,085,653 Less allowance for loan losses. . . . . . . . . . . . . . . . . . . . 404,798 379,557 ----------- ----------- Net loans. . . . . . . . . . . . . . . . . . . . . . . 22,572,690 20,706,096 Premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . 502,699 443,461 Due from customers on acceptances . . . . . . . . . . . . . . . . . . 434,584 748,944 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,252 789,495 ----------- ----------- Total assets . . . . . . . . . . . . . . . . . . . . . $36,525,772 $33,366,519 =========== =========== LIABILITIES Deposits in domestic offices: Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,140,884 $ 5,625,937 Interest-bearing demand. . . . . . . . . . . . . . . . . . . . . 3,515,680 3,310,883 Savings and money market savings . . . . . . . . . . . . . . . . 6,194,086 6,153,822 Savings certificates . . . . . . . . . . . . . . . . . . . . . . 5,141,410 5,568,076 Large denomination certificates. . . . . . . . . . . . . . . . . 1,507,461 2,142,534 Noninterest-bearing time . . . . . . . . . . . . . . . . . . . . 45,802 55,399 ----------- ----------- Total deposits in domestic offices . . . . . . . . . . 22,545,323 22,856,651 Deposits in foreign offices: Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011 763 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804,064 518,047 ----------- ----------- Total deposits in foreign offices. . . . . . . . . . . 807,075 518,810 ----------- ----------- Total deposits . . . . . . . . . . . . . . . . . . . . 23,352,398 23,375,461 Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . . . . . . . . 4,741,283 3,713,492 Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . 589,178 386,618 Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 1,091,123 848,823 Long-term debt: Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,091 757,893 Other long-term debt . . . . . . . . . . . . . . . . . . . . . . 590,365 439,045 ----------- ----------- Total long-term debt . . . . . . . . . . . . . . . . . 2,960,456 1,196,938 Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . 434,584 748,944 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 338,803 321,476 ----------- ----------- Total liabilities. . . . . . . . . . . . . . . . . . . 33,507,825 30,591,752 Off-balance sheet items, commitments and contingent liabilities--Note J SHAREHOLDERS' EQUITY Preferred stock, par value $5 a share: Authorized 50,000,000 shares; none outstanding . . . . . . . . . -- -- Common stock, par value $5 a share: Issued 171,375,772 shares in 1993 and 171,471,178 shares in 1992. . . . . . . . . . . . . . . 856,879 857,356 Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,573 817,889 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 1,399,495 1,099,522 ----------- ----------- Total shareholders' equity . . . . . . . . . . . . . . 3,017,947 2,774,767 ----------- ----------- Total liabilities and shareholders' equity . . . . . . $36,525,772 $33,366,519 =========== ===========
See notes to consolidated financial statements 36 39 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31 $ in thousands, except per share 1993 1992 1991 ---------- ---------- ---------- INTEREST INCOME Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,627,450 $1,663,388 $2,018,208 Investment securities: State and municipal. . . . . . . . . . . . . . . . . . . . . . . 57,670 65,154 74,116 Other investments. . . . . . . . . . . . . . . . . . . . . . . . 396,056 403,982 412,914 Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 2,905 12,772 26,974 Federal funds sold and securities purchased under resale agreements. . . . . . . . . . . . . . . . 12,433 17,038 35,537 Trading account assets. . . . . . . . . . . . . . . . . . . . . . . . 26,323 59,744 69,266 ---------- ---------- ---------- Total interest income. . . . . . . . . . . . . . . . . 2,122,837 2,222,078 2,637,015 INTEREST EXPENSE Deposits: Domestic offices . . . . . . . . . . . . . . . . . . . . . . . . 543,077 735,241 1,068,764 Foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . 14,503 15,646 16,834 ---------- ---------- ---------- Total interest on deposits . . . . . . . . . . . . . . 557,580 750,887 1,085,598 Short-term borrowed funds . . . . . . . . . . . . . . . . . . . . . . 173,847 190,988 369,202 Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,585 25,153 13,049 ---------- ---------- ---------- Total interest expense . . . . . . . . . . . . . . . . 839,012 967,028 1,467,849 NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 1,283,825 1,255,050 1,169,166 Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . 92,652 119,420 293,000 ---------- ---------- ---------- Net interest income after provision for loan losses. . . . . . . . . . . . . . . . . . . . 1,191,173 1,135,630 876,166 OTHER INCOME Service charges on deposit accounts . . . . . . . . . . . . . . . . . 202,885 189,537 170,827 Fees for trust services . . . . . . . . . . . . . . . . . . . . . . . 120,030 109,504 102,665 Credit card income. . . . . . . . . . . . . . . . . . . . . . . . . . 101,780 78,068 62,814 Mortgage fee income . . . . . . . . . . . . . . . . . . . . . . . . . 39,101 40,078 28,608 Trading account profits (losses). . . . . . . . . . . . . . . . . . . 13,103 (11,542) 11,541 Student loan servicing. . . . . . . . . . . . . . . . . . . . . . . . 5,535 33,250 31,470 Other operating income. . . . . . . . . . . . . . . . . . . . . . . . 117,745 96,347 82,253 ---------- ---------- ---------- Total other operating revenue. . . . . . . . . . . . . 600,179 535,242 490,178 Gain on sale of subsidiary. . . . . . . . . . . . . . . . . . . . . . 8,030 19,486 -- Investment securities gains . . . . . . . . . . . . . . . . . . . . . 19,394 1,497 11,091 ---------- ---------- ---------- Total other income . . . . . . . . . . . . . . . . . . 627,603 556,225 501,269 OTHER EXPENSE Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455,621 451,193 443,273 Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 113,059 88,630 81,216 ---------- ---------- ---------- Total personnel expense. . . . . . . . . . . . . . . . 568,680 539,823 524,489 Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . 82,070 80,673 75,729 Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . 102,246 100,916 99,569 Other operating expense . . . . . . . . . . . . . . . . . . . . . . . 378,240 374,240 396,730 ---------- ---------- ---------- Total other expense. . . . . . . . . . . . . . . . . . 1,131,236 1,095,652 1,096,517 Income before income taxes. . . . . . . . . . . . . . . . . . . . . . 687,540 596,203 280,918 Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . 195,445 162,978 51,378 ---------- ---------- ---------- NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540 ========== ========== ========== Net income per common share: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34 Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 $ 1.32 Average shares outstanding: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,941 172,641 171,481 Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . 175,198 175,512 175,218
See notes to consolidated financial statements 37 40 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock --------------------------- Capital Loan to Retained Shares Amount Surplus ESOP Earnings ----------- ----------- --------- -------- ---------- $ in thousands, except per share YEAR ENDED DECEMBER 31, 1991 Balance at beginning of year . . . . . . . . . 84,276,306 $421,381 $793,739 ($25,000) $1,180,808 Net income . . . . . . . . . . . . . . . . . . 229,540 Cash dividends declared by pooled companies: Wachovia Corporation -- $.92 a share . . . . (128,713) South Carolina National Corporation -- $.80 a share. . . . . . . . . . . . . . . (17,691) Common stock issued pursuant to: Stock option and employee benefit plans . . 329,467 1,647 9,171 Dividend reinvestment plan . . . . . . . . . 118,884 594 5,668 Conversion of notes and debentures . . . . . 355,618 1,778 8,490 Acquisition of bank . . . . . . . . . . . . 294,154 1,471 2,457 2,312 Common stock acquired . . . . . . . . . . . . . (22,511) (113) (1,102) Miscellaneous . . . . . . . . . . . . . . . . . (28,704) (142) (19) (1,862) ---------- -------- -------- -------- ---------- Balance at end of year . . . . . . . . . . . . 85,323,214 $426,616 $818,404 ($25,000) $1,264,394 ========== ======== ======== ========= ========== YEAR ENDED DECEMBER 31, 1992 Balance at beginning of year . . . . . . . . . 85,323,214 $426,616 $818,404 ($25,000) $1,264,394 Net income . . . . . . . . . . . . . . . . . . 433,225 Cash dividends declared on common stock -- $1.00 a share . . . . . . . . . . . (170,756) Common stock issued pursuant to: Stock option and employee benefit plans . . 602,152 3,011 16,179 Dividend reinvestment plan . . . . . . . . . 149,323 747 8,444 Conversion of notes and debentures . . . . . 193,675 968 3,581 Common stock acquired . . . . . . . . . . . . . (528,086) (2,640) (28,557) Repayment of loan to ESOP . . . . . . . . . . . 25,000 Miscellaneous . . . . . . . . . . . . . . . . . (4,689) (24) (162) 1,337 Two-for-one common stock split . . . . . . . . 85,735,589 428,678 (428,678) ---------- -------- -------- -------- ---------- Balance at end of year . . . . . . . . . . . . 171,471,178 $857,356 $817,889 $ -- $1,099,522 =========== ======== ======== ======== ========== YEAR ENDED DECEMBER 31, 1993 Balance at beginning of year . . . . . . . . . 171,471,178 $857,356 $817,889 $ -- $1,099,522 Net income . . . . . . . . . . . . . . . . . . 492,095 Cash dividends declared on common stock -- $1.11 a share . . . . . . . . . . . (191,488) Common stock issued pursuant to: Stock option and employee benefit plans . . 645,539 3,228 11,347 (41) Dividend reinvestment plan . . . . . . . . . 318,655 1,593 9,375 (15) Conversion of notes and debentures . . . . . 1,738,533 8,693 7,802 (60) Common stock acquired . . . . . . . . . . . . . (2,797,232) (13,986) (84,826) 8 Miscellaneous . . . . . . . . . . . . . . . . . (901) (5) (14) (526) ----------- -------- -------- -------- ---------- Balance at end of year . . . . . . . . . . . . 171,375,772 $856,879 $761,573 $ -- $1,399,495 =========== ======== ======== ======== ==========
See notes to consolidated financial statements 38 41 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31 $ in thousands 1993 1992 1991 ---------- ------------ ------------- OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540 Adjustments to reconcile net income to cash provided (used) by operations: Provision for loan losses . . . . . . . . . . . . . . . . . . . 92,652 119,420 293,000 Depreciation of premises and equipment . . . . . . . . . . . . 64,985 61,134 58,018 Amortization of intangible assets . . . . . . . . . . . . . . . 28,001 34,423 51,756 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . (26,663) (11,737) (44,146) Gain on sale of investment securities . . . . . . . . . . . . . (19,394) (1,497) (11,091) Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . (8,030) (19,486) -- (Gain) loss on sale of noninterest-earning assets . . . . . . . (1,517) 2,002 2,694 Amortization of investment security premiums (discounts) . . . 15,099 (879) (7,944) Increase (decrease) in accrued income taxes . . . . . . . . . . 6,207 29,234 (16,496) (Increase) decrease in accrued interest receivable . . . . . . (38,968) 28,250 38,728 Decrease in accrued interest payable . . . . . . . . . . . . . (43,116) (55,260) (19,000) Net change in other accrued and deferred income and expense . . (2,818) (66,628) (7,654) Net trading account activities . . . . . . . . . . . . . . . . 107,189 548,840 (651,629) Net loans held for resale . . . . . . . . . . . . . . . . . . . (113,775) 14,726 (132,907) ---------- ---------- ---------- Net cash provided (used) by operating activities . . . . . 551,947 1,115,767 (217,131) INVESTING ACTIVITIES Net decrease in interest-bearing bank balances . . . . . . . . . . . 177,075 218,475 156,920 Net (increase) decrease in federal funds sold and securities purchased under resale agreements . . . . . . . . . . . . . . . (212,134) 67,001 44,927 Purchases of investment securities . . . . . . . . . . . . . . . . . (3,287,189) (2,969,876) (3,729,925) Sales of investment securities . . . . . . . . . . . . . . . . . . . 76,224 260,568 347,500 Calls, maturities and prepayments of investment securities . . . . . 1,819,801 2,489,917 2,417,033 Net (increase) decrease in loans made to customers . . . . . . . . . (1,885,727) (684,499) 417,943 Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (152,061) (100,526) (160,386) Proceeds from sales of premises and equipment . . . . . . . . . . . . 14,457 25,479 94,568 Net (increase) decrease in other assets . . . . . . . . . . . . . . . (188,376) 64,418 (13,761) Business combinations and dispositions . . . . . . . . . . . . . . . 20,000 44,834 601,674 ---------- ---------- ---------- Net cash provided (used) by investing activities . . . . . (3,617,930) (584,209) 176,493 FINANCING ACTIVITIES Net increase (decrease) in demand, savings and money market accounts . . . . . . . . . . . . . . . . . . . . . 752,659 2,184,766 (266,548) Net decrease in certificates of deposit . . . . . . . . . . . . . . . (775,722) (1,815,595) (570,623) Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements . . . . . . . . . . . . . . . 1,027,791 (288,594) 134,726 Net increase (decrease) in commercial paper . . . . . . . . . . . . . 202,560 (11,102) 66,531 Net increase (decrease) in other short-term borrowings . . . . . . . 242,300 (1,352,039) (271,775) Proceeds from issuance of bank notes . . . . . . . . . . . . . . . . 1,861,010 757,893 -- Maturities of bank notes . . . . . . . . . . . . . . . . . . . . . . (250,000) -- -- Proceeds from issuance of other long-term debt . . . . . . . . . . . 248,075 297,266 25,479 Payments on other long-term debt . . . . . . . . . . . . . . . . . . (80,579) (24,249) (9,229) Repayment of loan to ESOP . . . . . . . . . . . . . . . . . . . . . . -- 25,000 -- Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . 24,961 29,717 16,462 Dividend payments . . . . . . . . . . . . . . . . . . . . . . . . . . (191,488) (170,756) (150,730) Common stock repurchased . . . . . . . . . . . . . . . . . . . . . . (98,804) (31,197) (1,215) Other equity transactions . . . . . . . . . . . . . . . . . . . . . . (19) (186) (21) Net increase (decrease) in other liabilities . . . . . . . . . . . . 4,908 19,790 (43,081) ---------- ---------- ---------- Net cash provided (used) by financing activities . . . . . 2,967,652 (379,286) (1,070,024) ---------- ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . (98,331) 152,272 (1,110,662) Cash and cash equivalents at beginning of year . . . . . . . . . . . 2,627,859 2,475,587 3,586,249 ---------- ---------- ---------- Cash and cash equivalents at end of year . . . . . . . . . . . . . . $2,529,528 $2,627,859 $2,475,587 ========== ========== ==========
See notes to consolidated financial statements 39 42 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS $ in thousands - ------------------------------------------------------------------------------- NOTE A -- ACCOUNTING POLICIES The accounting and reporting policies of Wachovia Corporation and subsidiaries (the Corporation) follow generally accepted accounting principles and policies within the financial services industry. The following is a summary of the more significant policies: Principles of Consolidation -- The consolidated financial statements include the accounts of Wachovia Corporation and its subsidiaries after elimination of all material intercompany balances and transactions. Cash and Due from Banks -- The Corporation considers cash and due from banks, all of which are maintained in financial institutions, as cash and cash equivalents for purposes of the consolidated statement of cash flows. Investment Securities -- Investment securities are acquired with the intent and ability to hold on a long-term basis and are carried at cost adjusted for amortization of premium and accretion of discount, each computed by the interest method. The adjusted cost of the specific security sold is used to compute gains or losses on the sale of investment securities. Investment securities are concentrated in a variety of state and municipal, U.S. Treasury and federal agency securities. Effective January 1, 1994, the Corporation prospectively adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FASB 115), which requires that securities be classified as held to maturity, available for sale or trading securities. Further discussion of FASB 115 is included in Note D. Trading Account Assets -- Trading account assets are held with the intent of selling them at a profit and are carried at market. Adjustments to market value are included in "trading account profits" in the consolidated statement of income. Trading account assets are comprised primarily of securities backed by the U.S. Treasury and various federal agencies. Financial Instruments -- Financial instruments are defined as cash, evidence of ownership in an entity, contracts that convey either a right to receive cash or other financial instruments or an obligation to deliver cash or other financial instruments, or contracts that convey the right or obligation to exchange financial instruments on potentially favorable or unfavorable terms. The Corporation has a variety of financial instruments which include items recorded on the statement of condition and items which, by their nature, are not recorded on the statement of condition. The body of the financial statements, as well as the accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations, include discussion of specific financial instruments and their related market and credit risks, as well as applicable discussion of significant credit concentrations and collateral policies. Financial instruments not specifically discussed elsewhere include Interest-bearing bank balances, Federal funds sold and securities purchased under resale agreements, Federal funds purchased and securities sold under repurchase agreements and Other borrowed funds. These financial instruments carry no risk of accounting loss in excess of the recorded asset or liability amounts, and no significant credit concentrations exist outside of Interest-bearing bank balances, Federal funds sold and Federal funds purchased, which are maintained with other financial institutions. Interest Rate Futures and Swaps -- Interest rate futures and swaps are used as part of the Corporation's overall interest rate risk management. Gains and losses on futures contracts used in securities trading operations are recognized currently by the mark-to-market method of accounting and included in "other operating income" in the consolidated statement of income. The Corporation maintains a portfolio of generally matched offsetting swap agreements as an intermediary for customers; payments made or received under these interest rate swaps are recognized as received and included in "other operating income" in the consolidated statement of income. Income or expense associated with open futures and interest rate swap contracts used in asset/liability management is accrued over the life of the contracts and included in "net interest income" in the consolidated statement of income. Loans and Allowance for Loan Losses -- Loans are carried at their principal amount outstanding, except for loans held for resale which are carried at the lower of cost or market. Interest on commercial, mortgage and installment loans is accrued and credited to operating income based upon the principal amount outstanding. Except for revolving credit loans, the recognition of interest income is discontinued when a loan becomes 90 days past due as to principal and interest or when, in management's judgment, the interest will not be collectible in the normal course of business. When interest accruals are discontinued, the balance of accrued interest is reversed. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal balance and accrued interest. The banking subsidiaries accrue interest on revolving credit loans until payments become 120 days delinquent, at which time the outstanding principal balance and accrued unpaid interest is charged off. The allowance is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loan loss experience, current domestic and international economic conditions, volume, growth and composition of the loan portfolio, and other risks inherent in the portfolio. Premises and Equipment -- Premises, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. For financial reporting purposes, the provision for depreciation is computed by the straight-line method based upon the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the life of the leasehold asset or the lease term. Intangible Assets -- Premiums paid to purchase servicing rights of mortgage loans are amortized over the aggregate estimated remaining servicing life of the loans. The excess of cost over net assets and identifiable intangible assets, including deposit base intangibles, of acquired businesses is amortized on the straight-line method over the estimated periods benefited. - ------------------------------------------------------------------------------- 40 43 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - ------------------------------------------------------------------------------- NOTE A -- ACCOUNTING POLICIES -- Concluded Pension Plan -- The Corporation maintains a pension plan which covers substantially all employees. The pension expense of the plan is determined using the projected unit credit method. The Corporation's policy is to fund amounts allowable for federal income tax purposes. Income Taxes -- Effective January 1, 1993, the Corporation prospectively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FASB 109), which requires an asset and liability approach to accounting for income taxes. Under FASB 109, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Financial statements for prior years reflect income taxes recorded under the deferred method required under previous accounting standards. The Corporation and its subsidiaries file a consolidated tax return. Each subsidiary provides for income taxes based on its contribution to income taxes (benefit) of the consolidated group. Reclassifications -- Medium-term bank notes previously classified as short-term borrowed funds have been reclassified to long-term debt to more accurately reflect the weighted average maturity of these instruments. - ------------------------------------------------------------------------------- NOTE B -- MERGER On December 6, 1991, South Carolina National Corporation (SCNC), a South Carolina bank and savings and loan holding company, was merged into and became a wholly owned subsidiary of the Corporation. Pursuant to the Agreement and Plan of Merger (the Agreement), which was approved by the shareholders of both the Corporation and SCNC on October 25, 1991, approximately 15,954,662 shares of the Corporation's common stock were authorized for issuance under the Agreement. These shares do not reflect the two-for-one common stock split effective April 1, 1993. At the effective time of the merger, and in accordance with the terms of the Agreement, the shareholders of SCNC common stock received .675 of a share of the Corporation's common stock for each share of SCNC common stock owned. The consolidated financial statements of the Corporation give effect to the merger which has been accounted for as a pooling-of-interests. Accordingly, the accounts of SCNC have been combined with those of the Corporation for all periods presented. Separate results of operations of the combining entities for the year ended December 31, 1991 were as follows:
1991 ---------- Net interest income: Wachovia . . . . . . . . . . . . . . . . . $ 900,297 SCNC . . . . . . . . . . . . . . . . . . . 268,869 ---------- $1,169,166 ========== Net income (loss): Wachovia . . . . . . . . . . . . . . . . . $ 298,592 SCNC . . . . . . . . . . . . . . . . . . . (69,052) ---------- $ 229,540 ==========
The net income presented above for SCNC includes adjustments of $97.8 million to conform litigation, real estate and loan valuation policies and practices and $23.9 million to write down the book value of certain intangible assets. - ------------------------------------------------------------------------------- NOTE C -- FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" (FASB 107), requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Also, the fair value estimates presented herein are based on pertinent information available to management as of December 31, 1993 and 1992. Such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein. The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments: Trading Account Assets -- Fair values for the Corporation's trading account assets, which also are the amounts recognized in the statement of condition, are based on quoted market prices. Investment Securities -- Fair values for investment securities are based on quoted market prices. If a quoted market price is not available, fair value is estimated using market prices for similar securities. - ------------------------------------------------------------------------------- 41 44 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - ------------------------------------------------------------------------------- NOTE C -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- Concluded Loans -- For credit card, equity lines and other loans with short-term or variable rate characteristics, the carrying value reduced by an estimate of credit losses inherent in the portfolio is a reasonable estimate of fair value. The fair values of residential mortgage loans are estimated using quoted market prices for securities backed by similar loans, adjusted for differences between the market for the securities and the loans being valued and an estimate of credit losses in the portfolio. The fair value of all other loans is estimated by discounting their future cash flows using interest rates currently being offered for loans with similar terms, reduced by an estimate of credit losses inherent in the portfolio. The discount rates used are commensurate with the interest rate and prepayment risks involved for the various types of loans. Deposits -- The fair values disclosed for demand deposits (e.g., interest- and noninterest-bearing demand, savings and money market savings) are, as required by FASB 107, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated monthly maturities. Long-Term Debt -- Fair values of long-term debt are based on market prices where available. When quoted market prices are not available, fair values are estimated using discounted cash flow analyses, based on the Corporation's current incremental borrowing rates for similar types of borrowing arrangements. Off-Balance Sheet Instruments -- Fair values for the Corporation's off-balance sheet instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing (loan commitments and letters of credit), and the estimated amount the Corporation would receive or pay to terminate or replace the contract at current market rates for the remainder of the off-balance sheet instruments. Many of the Corporation's assets and liabilities are short-term financial instruments whose carrying amounts reported in the statement of condition approximate fair value. These items include cash and due from banks, interest-bearing bank balances, federal funds sold and securities purchased under resale agreements, due from customers on acceptances, short-term borrowed funds, acceptances outstanding, and the financial instruments included in other assets and liabilities. The estimated fair values of the Corporation's remaining on-balance sheet financial instruments as of December 31 are summarized below.
1993 -------------------------- Estimated Book Value Fair Value ----------- ----------- Financial assets: Trading account assets . . . . . . . . . . . . $ 788,779 $ 788,779 Investment securities. . . . . . . . . . . . . 7,878,656 8,156,690 Loans, net of allowance for loan losses. . . . 22,572,690 23,156,885 Financial liabilities: Deposits . . . . . . . . . . . . . . . . . . . 23,352,398 23,433,622 Long-term debt . . . . . . . . . . . . . . . . 2,960,456 3,012,852
1992 -------------------------- Estimated Book Value Fair Value ----------- ----------- Financial assets: Trading account assets . . . . . . . . . . . . $ 895,968 $ 895,968 Investment securities. . . . . . . . . . . . . 6,486,171 6,793,043 Loans, net of allowance for loan losses. . . . 20,706,096 21,098,225 Financial liabilities: Deposits . . . . . . . . . . . . . . . . . . . 23,375,461 23,457,276 Long-term debt . . . . . . . . . . . . . . . . 1,196,938 1,261,413
The estimated fair values of the Corporation's off-balance sheet financial instruments as of December 31 are summarized below.
1993 1992 Estimated Estimated Fair Value Fair Value ----------- ----------- Unfunded commitments to extend credit. . . . . . ($46,165) ($32,122) Letters of credit. . . . . . . . . . . . . . . . (23,536) (19,680) Interest rate swaps. . . . . . . . . . . . . . . (22,217) (35,512) Other off-balance sheet financial instruments. . (42,548) (79,161)
FASB 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. The disclosures also do not include certain intangible assets, such as customer relationships, mortgage servicing rights, deposit base intangibles and goodwill. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation. The financial information presented over periods of years which encompass various economic and interest rate conditions and cycles provides a means of evaluating the effectiveness of the Corporation in dealing with changing market conditions and in managing the controllable aspects of its business. - ------------------------------------------------------------------------------- 42 45 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - ------------------------------------------------------------------------------- NOTE D -- INVESTMENT SECURITIES The aggregate book and market values of investment securities as of December 31, as well as gross unrealized gains and losses of investment securities were as follows:
1993 1992 ----------------------------------------------- ------------------------------------------------ Book Unrealized Unrealized Market Book Unrealized Unrealized Market Value Gains Losses Value Value Gains Losses Value ---------- --------- --------- ---------- ---------- -------- --------- ---------- State and municipal . . . . . . . $ 655,157 $ 72,754 $ (177) $ 727,734 $ 748,017 $ 78,119 $ (949) $ 825,187 United States Treasury. . . . . . 4,388,380 138,052 (5,982) 4,520,450 2,544,299 113,653 (4,972) 2,652,980 Federal agency. . . . . . . . . . 2,356,346 67,071 (5,983) 2,417,434 2,540,134 102,661 (3,890) 2,638,905 Other . . . . . . . . . . . . . . 478,773 12,356 (57) 491,072 653,721 23,303 (1,053) 675,971 ---------- --------- --------- ---------- ---------- -------- --------- ---------- Total investment securities. . $7,878,656 $ 290,233 ($12,199) $8,156,690 $6,486,171 $317,736 ($10,864) $6,793,043 ========== ========= ========= ========== ========== ======== ========= ==========
The amortized cost and estimated market value of investment securities at December 31, 1993, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Book Market Value Value ---------- ---------- Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 765,861 $ 776,202 Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,763,654 4,895,232 Due after five years through ten years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838,927 882,268 Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,401,496 1,482,442 ---------- ---------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,769,938 8,036,144 No contractual maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,718 120,546 ---------- ---------- Total investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,878,656 $8,156,690 ========== ==========
There were no sales of investments in debt securities during 1993. Proceeds from sales of investments in debt securities for the two years ended December 31, 1992, as well as gross gains and losses realized on these sales were as follows:
1992 1991 ---------- --------- Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,566 $ 328,049 Gross gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,059 6,470 Gross losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,453) (185)
At December 31, 1993 and 1992, investment securities with a carrying value of $3,543,263 and $3,021,363, respectively, were pledged as collateral to secure public deposits and for other purposes. In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FASB 115), which is effective January 1, 1994 with early adoption permitted. FASB 115 requires that investments in equity securities having readily determinable fair values and all investments in debt securities be classified and accounted for in three categories. Debt securities that management has the positive intent and ability to hold to maturity are to be classified as securities held to maturity. Held to maturity securities are reported at amortized cost. Debt and equity securities that are held principally for the purpose of selling them in the near term are to be classified as trading securities. Trading securities are reported at fair value with unrealized gains and losses included in earnings. Debt and equity securities not classified as either held to maturity or trading are to be classified as available for sale. Available for sale securities are reported at fair value with unrealized gains and losses reported in a separate component of shareholders' equity, net of tax. Upon adoption of FASB 115 as of January 1, 1994, the Corporation will classify securities with an amortized cost of $3,713,450 as available for sale at their fair value of $3,753,650. The excess of the fair value over the amortized cost, net of tax, equal to $24,368 will be recorded as an increase to shareholders' equity. The adoption of FASB 115 will not have a material impact on the Corporation's results of operations, but increased volatility of shareholders' equity and related capital ratios could result from changes in unrealized gains and losses on securities classified as available for sale. - -------------------------------------------------------------------------------- 43 46 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - -------------------------------------------------------------------------------- NOTE E -- LOANS AND ALLOWANCE FOR LOAN LOSSES Loans at December 31 are summarized as follows:
1993 1992 ----------- ----------- Commercial: Commercial, financial and other . . . . . . . . . . . . $ 6,727,207 $ 6,364,881 Tax-exempt . . . . . . . . . . . . . . . . . . . . . . 1,959,266 1,951,903 Retail: Direct . . . . . . . . . . . . . . . . . . . . . . . . 715,418 672,985 Indirect . . . . . . . . . . . . . . . . . . . . . . . 2,429,497 2,108,708 Credit card. . . . . . . . . . . . . . . . . . . . . . 3,122,732 2,216,495 Other revolving credit. . . . . . . . . . . . . . . . . 333,405 326,861 Real estate: Construction. . . . . . . . . . . . . . . . . . . . . . 494,148 464,035 Commercial mortgages. . . . . . . . . . . . . . . . . . 3,199,434 3,119,196 Residential mortgages . . . . . . . . . . . . . . . . . 3,766,600 3,662,879 Lease financing -- net . . . . . . . . . . . . . . . . . . . 156,726 125,150 Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . 73,055 72,560 ----------- ----------- Total loans -- net. . . . . . . . . . . . . . . $22,977,488 $21,085,653 =========== ===========
Loans at December 31 that had been placed on a cash basis and those on which the contractual rate of interest had been reduced below market are summarized below:
1993 1992 -------- -------- Cash-basis assets -- domestic . . . . . . . . . . . . . . . . . $108,882 $173,977 Restructured loans. . . . . . . . . . . . . . . . . . . . . . . 80 117 -------- -------- Total nonperforming loans . . . . . . . . . . . . $108,962 $174,094 ======== ======== Interest income which would have been recorded pursuant to original terms: Domestic loans . . . . . . . . . . . . . . . . . . . . . $ 11,140 $ 16,587 ======== ======== Interest income recorded: Domestic loans . . . . . . . . . . . . . . . . . . . . . $ 4,456 $ 6,028 ======== ========
Loans totaling $14,803 at December 31, 1993, which have been restructured at market rates and have demonstrated performance for a period of at least one year under the restructured terms, are not included in the nonperforming loans total. Foregone interest on these balances is included in the above presentation. At December 31, 1993, the Corporation had no significant outstanding commitments to lend additional funds to borrowers owing cash-basis and restructured loans. Changes in the allowance for loan losses for the three years ended December 31, 1993 were as follows:
1993 1992 1991 -------- -------- -------- Balance at beginning of year . . . . . . . . . . . . . . . $379,557 $360,193 $269,916 Additions from acquisitions. . . . . . . . . . . . . . . . -- -- 276 Allowance of company sold. . . . . . . . . . . . . . . . . -- (4,811) -- Provision for loan losses. . . . . . . . . . . . . . . . . 92,652 119,420 293,000 Recoveries on loans previously charged off . . . . . . . . . . . . . . . . . . . . . 29,697 36,288 22,259 Loans charged off. . . . . . . . . . . . . . . . . . . . . (97,108) (131,533) (225,258) -------- -------- -------- Balance at end of year . . . . . . . . . . . . . . . . . . $404,798 $379,557 $360,193 ======== ======== ========
Loans totaling $42,256, $81,592 and $104,626 were transferred to foreclosed real estate during 1993, 1992 and 1991, respectively. It is the policy of the Corporation to review each prospective credit in order to determine an adequate level of security or collateral to obtain prior to making the loan. The type of collateral will vary and ranges from liquid assets to real estate. The Corporation's access to collateral, in the event of borrower default, is assured through adherence to state lending laws and the Corporation's sound lending standards and credit monitoring procedures. The Corporation regularly monitors its credit concentrations on loan purpose, industry and customer bases. At year-end, there were no significant credit concentrations within these categories. For additional discussion related to off-balance sheet credit issues, refer to the Management's Discussion and Analysis of Financial Condition and Results of Operations and Note J. The Corporation's subsidiaries have granted loans and extended letters of credit to certain directors and executive officers of the Corporation and its subsidiaries and to their associates. The aggregate amount of loans was $219,623 and $251,274 at December 31, 1993 and 1992, respectively. During 1993, $547,817 in new loans was made, and repayments totaled $579,468. Outstanding standby letters of credit to related parties totaled $28,183 and $9,426 at December 31, 1993 and 1992, respectively. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectibility. Loans held for sale at December 31 along with activity during the period are summarized as follows:
1993 1992 ----------- ---------- Balance at beginning of year . . . . . . . . . . . . . . $ 276,746 $ 291,472 Originations/purchases . . . . . . . . . . . . . . . . . 3,230,192 2,522,389 Sales/transfers. . . . . . . . . . . . . . . . . . . . . (3,116,417) (2,537,115) ---------- ---------- Balance at end of year . . . . . . . . . . . . . . . . . $ 390,521 $ 276,746 ========== ==========
In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (FASB 114), which is effective January 1, 1995, with early adoption permitted. This standard modifies the accounting for impaired loans, defined as those loans where, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractural terms of the loan agreement. The Corporation is in the process of evaluating the timing of adoption and the effect that implementation of FASB 114 will have on its financial statements, but does not expect it to have a material impact on its financial position or results of operations. - -------------------------------------------------------------------------------- 44 47 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - -------------------------------------------------------------------------------- NOTE F -- PREMISES, EQUIPMENT AND LEASES Premises and equipment at December 31 are summarized as follows:
1993 1992 ---------- ---------- Land . . . . . . . . . . . . . . . . . $ 87,947 $ 75,536 Premises . . . . . . . . . . . . . . . 318,911 269,972 Equipment. . . . . . . . . . . . . . . 514,482 480,977 Leasehold improvements . . . . . . . . 66,470 62,363 -------- --------- 987,810 888,848 Less accumulated depreciation and amortization. . . . . . . . . 485,111 445,387 --------- ---------- Total premises and equipment. $502,699 $ 443,461 ========= ==========
The annual minimum rentals under the terms of the Corporation's noncancelable operating leases as of December 31, 1993 are as follows: 1994 . . . . . . . . . . . . . . . . . . . . . . . $ 35,039 1995 . . . . . . . . . . . . . . . . . . . . . . . 32,806 1996 . . . . . . . . . . . . . . . . . . . . . . . 28,890 1997 . . . . . . . . . . . . . . . . . . . . . . . 25,679 1998 . . . . . . . . . . . . . . . . . . . . . . . 23,405 Thereafter . . . . . . . . . . . . . . . . . . . . 160,794 -------- Total minimum lease payments . . . . . . $306,613 ========
The net rental expense for all operating leases amounted to $47,579 in 1993, $48,254 in 1992 and $43,626 in 1991. Certain leases have various renewal options and require increased rentals under cost of living escalation clauses. In June 1993, The South Carolina National Bank purchased certain branch and administration buildings which it had previously leased under a sale-leaseback arrangement for $54,425. The property was recorded at $43,540, which represents the purchase price net of a portion of the gain on the original sale-leaseback arrangement that had not been recognized. - -------------------------------------------------------------------------------- NOTE G -- CREDIT ARRANGEMENTS At December 31, 1993 and 1992, lines of credit arrangements aggregating $160,000 and $130,000, respectively, were available to the Corporation from unaffiliated banks. Commitment fees were 15 basis points in 1993 and ranged from 15 basis points to 20 basis points in 1992; compensating balances are not required. The unused portion of these banking arrangements principally serves as commercial paper back-up lines. There were no borrowings outstanding under credit arrangements at December 31, 1993 or 1992.
- -------------------------------------------------------------------------------------------------------------------------------- NOTE H -- LONG-TERM DEBT Long-term debt at December 31 is summarized as follows: 1993 1992 ---------- ---------- Bank notes, net of discount of $3,859 and $706 in 1993 and 1992, respectively (a) . . . $2,370,091 $ 757,893 Other long-term debt: 7.0% subordinated debt securities due in 1999, net of discount of $2,457 and $2,778 in 1993 and 1992, respectively (b) . . . . . . . . . . . . . . . . . . . . . . . 297,543 297,222 6.375% subordinated debt securities due in 2003, net of discount of $1,830 (b) . . 248,170 -- 9.67% subordinated capital notes due in 2001 (b) . . . . . . . . . . . . . . . . . 25,484 25,481 6.5% convertible subordinated debentures due in 2001 (b) (c) . . . . . . . . . . . 12,540 22,280 Floating rate subordinated capital notes due in 1996 (b) (d) . . . . . . . . . . . -- 79,330 11.5% convertible notes due in 1993 (1983 -- Cartersville Series) (b) (e). . . . . -- 5,261 11.5% convertible notes due in 1993 (1983 -- Warner Robins Series) (e) . . . . . . -- 1,944 Capitalized lease obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,549 6,833 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 694 ---------- ---------- Total other long-term debt . . . . . . . . . . . . . . . . . . . . . . . 590,365 439,045 ---------- ---------- Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . $2,960,456 $1,196,938 ========== ========== - --------------------------------------------------------------------------------------------------------------------------------
45 48 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - -------------------------------------------------------------------------------- NOTE H -- LONG-TERM DEBT -- Concluded (a) During 1992, Wachovia Bank of North Carolina established a medium-term bank note program under which the bank may offer an aggregate principal amount of up to $4 billion outstanding at any one time. The notes can be issued as fixed or floating rate notes and with terms of 9 months to 10 years. The interest rates ranged from 3.30% to 6.10% and 3.20% to 6.00% with maturities ranging from 1994 to 1998 and 1993 to 1995 at December 31, 1993 and 1992, respectively. The average rates were 4.54% and 4.59% with average maturities of 1.8 years and 1.8 years at December 31, 1993 and 1992, respectively. (b) Debt qualifies for inclusion in the determination of total capital under the Risk-Based Capital guidelines. (c) The debentures are redeemable under certain conditions and are convertible into common stock of the Corporation at a conversion price of $19.29 per share. At December 31, 1993, $22,460 of these notes had been converted. (d) The notes were called in December 1992, with a payment date in March 1993. (e) The notes were convertible into common stock of the Corporation at a conversion price of $5.5555 per share. The principal maturities of long-term debt for the next five years subsequent to December 31, 1993 are $515,114 in 1994, $1,215,991 in 1995, $435,437 in 1996, $444 in 1997 and $205,164 in 1998. Interest paid on deposits and other borrowings was $882,128 in 1993, $1,022,288 in 1992 and $1,472,254 in 1991. In January 1994, the Corporation issued $250,000 of 6.375% subordinated notes due in 2009. - ------------------------------------------------------------------------------- NOTE I -- CAPITAL STOCK On April 1, 1993, a two-for-one common stock split, effected in the form of a stock dividend, was paid to the Corporation's shareholders. Unless otherwise noted, information in this note, as well as share and per share information presented throughout the financial statements, has been restated to reflect the effect of the stock split. The authorized capital stock of the Corporation consists of 500,000,000 common shares and 50,000,000 preferred shares. At December 31, 1993, 21,034,848 common shares were reserved for the conversion of notes and for stock issuable in connection with employee benefit plans and the dividend reinvestment plan. The Corporation's board of directors has authorized the repurchase of up to 5,000,000 shares of common stock for various corporate purposes including the issuance of shares for the Corporation's employee benefit plans and dividend reinvestment plan. Share repurchase began on July 1, 1993. During the year, the Corporation repurchased 2,730,200 shares pursuant to this authorization. At December 31, 1993, the number of shares available for possible repurchase totaled 2,269,800. The various stock option and incentive plans of the Corporation provide for the granting of options or awards for the purchase or issuance of 5,260,192 shares at 100% of the fair market value of the stock at the date of the grant. A committee of the board of directors determines the number of shares subject to each option and the time or times when options shall be granted and exercised and the duration of the exercise period, which in no case shall exceed ten years. The committee also determines the number of awards to be granted and the time or times when awards shall be granted and the period when awards are deemed to be earned. Awards are exercised at no cost to the participant. Under one plan, the non-management directors of the Corporation are granted a one-time award of common stock to be earned over a period of three years. At the time the options are exercised, the par value of all shares issued is credited to common stock and the excess of the proceeds over the par value is credited to capital surplus. At the time awards are granted, capital surplus is credited and retained earnings debited for the fair market value of the awards. When the stock awarded is issued, common stock is credited and capital surplus is debited for the par value of the shares issued. Recipients of awards are entitled to compensation equivalent to the dividends that would have been payable on the proportion of the awards reserved but not yet fully earned based on the years of service since the date of grant divided by the number of years over which the award is deemed to be fully earned. Compensation equivalent to dividends totaled $54 in 1993, $86 in 1992 and $63 in 1991. At December 31, 1993 and 1992, deferred compensation related to director and management awards was $2,614 and $2,246, respectively. Compensation expense related to stock awards was $1,864 for 1993, $4,050 for 1992 and $1,758 for 1991. Activity in the option and award plans during 1993 and 1992 is summarized as follows:
Options and Awards --------------------------------- Outstanding Available -------------------- Option Price for Grant Awards Options Per Share --------- -------- --------- --------------- January 1, 1992. . . . . . 2,405,012 415,928 4,337,260 $4.948-$28.25 Granted. . . . . . . . . (743,500) 80,600 662,900 29.688-31.125 Exercised. . . . . . . . -- (301,860) (957,704) 4.948-29.688 Forfeited. . . . . . . . 41,526 (2,150) (41,562) 18.386-29.688 --------- -------- --------- Total December 31, 1992 . . . . . . . . . . 1,703,038 192,518 4,000,894 5.41-31.125 Granted. . . . . . . . . (841,860) 67,400 774,460 33.125-37.00 Exercised. . . . . . . . -- (52,701) (582,320) 5.41-33.125 Forfeited. . . . . . . . 30,890 (901) (31,226) 12.50-33.125 --------- -------- --------- Total December 31, 1993 . . . . . . . . . . 892,068 206,316 4,161,808 5.41-37.00 ========= ======== =========
Of the above options outstanding at December 31, 1993, options for 2,114,844 shares were exercisable at option prices ranging from $5.41 to $33.125. - -------------------------------------------------------------------------------- 46 49 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - ------------------------------------------------------------------------------- NOTE J -- OFF-BALANCE SHEET ITEMS, COMMITMENTS AND CONTINGENT LIABILITIES The Corporation is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage its own exposure to fluctuation in interest rates. These financial instruments include unfunded commitments to extend credit, standby, commercial and similar letters of credit, commitments to sell securities, foreign exchange contracts, futures and forward contracts, interest rate contracts, participations in bankers' acceptances and mortgage loans sold with recourse. These instruments involve, in varying degrees, exposure to credit and interest rate risk in excess of the amount recognized in the statement of financial condition. The contract or notional amount represents the extent of the Corporation's involvement in any particular class of instrument. The Corporation's exposure to credit loss in the event of non-performance by the other party to the financial instrument for unfunded commitments to extend credit and commercial, standby, and other letters of credit, securities lent, participations in bankers' acceptances and mortgage loans sold with recourse is represented by the contractual amount of those instruments. The Corporation follows the same credit policies and careful underwriting practices in making commitments and conditional obligations as it does for on-balance sheet instruments. For interest rate contracts, commitments to purchase and sell securities, and futures and forward contracts, the contract or notional amounts do not represent exposure to credit loss. The Corporation controls the credit risk of these instruments through adherence to credit approval policies, monetary limits and monitoring procedures. Unless otherwise noted, the Corporation does not require collateral or other security to support financial instruments with credit risk. In those instances where collateral is deemed necessary, the Corporation ensures its ability to access the collateral, in the event of borrower default, through strict adherence to corporate lending policy and applicable state lending laws. Financial instruments whose contract amounts represent potential credit risk at December 31 are shown below.
1993 1992 ----------- ----------- Unfunded commitments to extend credit. . . . . . . . . $19,664,000 $15,958,834 Standby letters of credit. . . . . . . . . . . . . . . 3,155,601 2,587,631 Commercial and similar letters of credit . . . . . . . 133,899 150,961 Securities lent. . . . . . . . . . . . . . . . . . . . 61,210 121,468 Participations in bankers' acceptances . . . . . . . . 6,055 -- Mortgage loans sold with recourse. . . . . . . . . . . 44,284 81,873
The notional values of financial instruments whose contract or notional amounts do not represent potential credit risk at December 31 are as follows:
1993 1992 ----------- ----------- Interest rate swaps. . . . . . . . . . . . . . . . . . $2,633,089 $1,531,019 Interest rate caps and floors written. . . . . . . . . 169,499 184,345 Commitments to purchase securities, futures and forward contracts . . . . . . . . . . . . . . . 996,833 468,721 Commitments to sell securities, futures and forward contracts . . . . . . . . . . . . . . . . . 1,059,041 547,439 Net options written to purchase or sell securities . . 71,000 25,000 Commitments to purchase foreign exchange . . . . . . . 597,593 411,211 Commitments to sell foreign exchange . . . . . . . . . 585,854 407,117 Foreign exchange options written . . . . . . . . . . . 12,000 12,542
Specific discussion of these instruments, along with the attendant risks, credit concentrations and collateral policies, is as follows: Commitments to Extend Credit -- These are legally binding contracts to lend to a customer, so long as there is no violation of any condition established in the contract. These commitments have fixed termination dates and generally require payment of a fee. As most commitments expire prior to being drawn, the amounts shown do not necessarily represent the future cash requirements of the contracts. Credit worthiness is evaluated on a case by case basis, and in some instances, collateral is obtained to support the borrowing. The collateral held may vary from liquid assets to real estate. At December 31, 1993 and 1992, approximately 15% and 17%, respectively, of unfunded commitments to extend credit were supported by collateral. Of the total unfunded commitment amounts presented, approximately 29% in 1993 and 30% in 1992 were comprised of cancellable credit card commitments, and approximately 9% in 1993 and 8% in 1992 were represented by real estate commitments. Also included in total unfunded commitments were securities underwriting commitments of $2,766 in 1993 and $3,510 in 1992. Standby, Commercial and Similar Letters of Credit -- These instruments are conditional commitments issued by the Corporation guaranteeing the performance of a customer to a third party. These guarantees are issued primarily to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending credit to customers and is subject to the Corporation's normal sound underwriting process. At December 31, 1993 and 1992, approximately 6% and 8%, respectively, of these instruments were supported by collateral. There were no significant concentrations of letters of credit to any one group of borrowers at either year-end. Securities Lent -- These are securities of the Corporation and its customers lent to third parties. Credit risk arises in these transactions through the possible failure of the borrower to return the securities. To minimize this risk, the Corporation evaluates the credit worthiness of the borrower on a case by case basis, and collateral with a market value exceeding 100% of the contract amount of securities lent is obtained. Participations in Bankers' Acceptances -- These instruments represent risk participations in time drafts drawn by customers under a committed multibank credit facility. These drafts have been accepted and remarketed by other financial institutions. Under the terms of these arrangements, the Corporation may be required to reimburse the accepting financial institution for the Corporation's pro rata share of any payment default by the customer. The Corporation applies the same underwriting standards in evaluating the credit risk associated with these instruments as it does in evaluating on-balance sheet instruments. Mortgage Loans Sold with Recourse -- The Corporation is obligated under recourse provisions related to the sale of residential mortgages to the Federal National Mortgage Association. These mortgages are collateralized by 1-4 family residential homes. - ------------------------------------------------------------------------------- 47 50 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - ------------------------------------------------------------------------------- NOTE J -- OFF-BALANCE SHEET ITEMS, COMMITMENTS AND CONTINGENT LIABILITIES -- Concluded All mortgage loans with original loan-to-value ratios exceeding 80% (up to a maximum of 95%) have private mortgage insurance coverage. Interest Rate Swaps -- These transactions generally involve the exchange of fixed and floating rate interest payments without the exchange of the underlying principal amounts. The majority of the interest rate swaps entered into by the Corporation arise when the Corporation acts as an intermediary in arranging these swaps on behalf of its customers, although some swaps are entered into as part of the Corporation's asset/liability management. The Corporation typically acts as a principal in the exchange of interest payments between parties and, therefore, is exposed to loss should one of the parties default. The Corporation performs normal credit reviews on its swap customers and minimizes its exposure to interest rate risk inherent in intermediated swaps by entering into offsetting swap positions that essentially counterbalance each other or by using other hedging techniques to manage risk. Entering into interest rate swap agreements involves not only credit risk but also the interest rate risk associated with unmatched positions. Notional principal amounts are often used to express the volume of these transactions but do not represent the much smaller amounts potentially subject to credit risk. These amounts are derived by estimating the cost, on a present value basis, of replacing at current market rates all those outstanding agreements for which the Corporation would incur a loss in replacing the contract. At December 31, 1993 and 1992, the amount of risk totaled $19,203 and $14,699, respectively. At December 31, 1993, the notional amount of interest rate swaps where the Corporation acts as an intermediary totaled $1,790,589. The notional amount of interest rate swaps used in asset/liability management was $842,500 at December 31, 1993. Of the $2,633,089 total notional amount, the notional amount of fixed payment agreements totaled $1,331,199 and had a weighted average remaining term of 2.59 years at December 31, 1993. The Corporation was paying interest under these agreements at a weighted average fixed rate of 6.46% and was receiving interest at a weighted average variable rate of 3.52% at December 31, 1993. The notional amount of variable rate payment agreements totaled $1,301,890 and had a weighted average remaining term of 2.92 years at December 31, 1993. The Corporation was paying interest under these agreements at a weighted average variable rate of 3.56% and was receiving interest at a weighted average fixed rate of 5.51% at December 31, 1993. Interest Rate Caps and Floors -- These instruments are written by the Corporation to enable its customers to transfer, modify, or reduce their interest rate exposure. Credit risk and interest rate risk are managed through the oversight procedures applied to other interest rate contracts, as well as through the purchase of offsetting cap and floor positions. The present value of caps and floors in a profitable position, which represents the credit risk of these instruments, totaled $4,672 at December 31, 1993 and $1,527 at December 31, 1992. At December 31, 1993, the Corporation had purchased $169,499 in interest rate caps and floors as offsetting positions to written caps and floors. The comparable figure for December 31, 1992 was $184,345. The Corporation also had interest rate caps purchased as part of the Corporation's asset/liability management of $415,000 at December 31, 1993 and $15,000 at December 31, 1992. Commitments to Purchase and Sell Securities, Futures and Forward Contracts -- These instruments are contracts for delayed delivery of securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified instrument, at a specified price or yield. Risks arise in these transactions through the possible inability of one of the counterparties to meet the terms of the contracts and from movements in interest rates or securities values. Risks associated with these instruments are controlled through offsetting purchase and sell positions, as well as oversight provided by organized exchanges, which determine who may buy and sell such instruments. The present value of futures contracts in a profitable position totaled $18,026 at December 31, 1993 and $6,053 at December 31, 1992. Net Options Written to Purchase or Sell Securities -- These options give the holder the right to require the Corporation to buy or sell securities at a specified price at some future date within the option period. Interest rate fluctuations constitute the risk associated with these instruments. This risk may be mitigated through the establishment of offsetting purchase positions. Commitments to Purchase and Sell Foreign Exchange -- As with commitments to sell securities, these future type agreements represent contractual obligations to purchase and sell foreign exchange at some future date for some future price. The potential risks associated with these obligations arise from fluctuations in foreign exchange rates, as well as the potential inability of the counterparty to perform under the contract. These risks are mitigated through the establishment of offsetting sell positions, as well as standard limit and monitoring procedures. Foreign exchange contracts in a profitable position amounted to $12,656 at December 31, 1993 and $18,492 at December 31, 1992. Foreign Exchange Options -- These agreements represent rights to purchase or sell foreign currency at a predetermined price at a future date. Fluctuations in foreign currency markets, as well as the potential default of the counterparty to an option contract, represent the risks associated with these instruments. Limit and monitoring procedures, along with offsetting positions, serve to control the risk associated with these items. Foreign exchange options purchased, which serve to offset written options, amounted to $12,000 and $12,542 for December 31, 1993 and 1992, respectively. The subsidiaries of the Corporation are defendants in certain legal proceedings arising in connection with their business. In the opinion of management and general counsel, the ultimate resolution of those proceedings will result in no material adverse effect on the Corporation's financial position and results of operations. - ------------------------------------------------------------------------------- 48 51 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - ------------------------------------------------------------------------------- NOTE K -- INCOME TAXES As of January 1, 1993, the Corporation prospectively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FASB 109), which requires an asset and liability approach to accounting for income taxes. As permitted under FASB 109, prior years' financial statements have not been restated. The cumulative impact of adopting FASB 109 is a tax benefit of $2,700 or $.02 per fully diluted share, which is reflected in income tax expense for the year ended December 31, 1993. The effect of this change on operating results for 1993, excluding the cumulative effect of changing methods, is not material. The provision for income taxes is summarized below. Included in these amounts are income taxes related to securities transactions of $7,472, $470 and $3,997 in 1993, 1992 and 1991, respectively. The Corporation made income tax payments totaling $217,716 in 1993, $151,948 in 1992 and $112,386 in 1991.
1993 1992 1991 -------- -------- -------- Currently payable: Federal. . . . . . . . . . . . $209,853 $159,787 $90,221 Foreign. . . . . . . . . . . . 289 261 641 State and local. . . . . . . . 11,966 14,667 5,035 -------- -------- -------- Total currently payable. . 222,108 174,715 95,897 Deferred: Federal. . . . . . . . . . . . (25,828) (9,631) (44,171) State. . . . . . . . . . . . . (835) (2,106) 25 -------- -------- -------- Total deferred . . . . . . (26,663) (11,737) (44,146) Deferred investment tax credit amortization . . . . . . . . -- -- (373) -------- -------- -------- Total tax expense. . . . . $195,445 $162,978 $51,378 ======== ======== ========
The deferred tax provision for 1993 includes a benefit of $2,683 related to the revaluation of the Corporation's net deferred tax asset for the increase in the federal corporate tax rate from 34% to 35% effective January 1, 1993. The reasons for the difference between consolidated income tax expense and the amount computed by applying the statutory federal income tax rate of 35% in 1993 and 34% in 1992 and 1991 to income before taxes were as follows:
1993 1992 1991 -------- -------- -------- Federal income taxes at statutory rate . . . . . . . . $240,639 $202,709 $95,512 State and local income taxes, net of federal benefit . . . . 7,235 8,290 3,340 Effect of tax-exempt securities interest and other income. . . (50,817) (49,783) (59,165) Tax reserves . . . . . . . . . . 2,594 2,874 5,903 Goodwill and deposit base intangible amortization. . . . 298 (328) 4,541 Other items . . . . . . . . . . (4,504) (784) 1,247 -------- -------- -------- Total tax expense. . . . . $195,445 $162,978 $51,378 ======== ======== ========
Under FASB 109, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Corporation's deferred tax assets and liabilities at December 31, 1993 are as follows:
Deferred Deferred Tax Tax Assets Liabilities -------- ----------- Allowance for loan losses . . . . . . . . . . . $146,305 Depreciation. . . . . . . . . . . . . . . . . . -- $34,674 Lease financing . . . . . . . . . . . . . . . . -- 15,998 Accretion of discounts on securities. . . . . . -- 13,981 Other . . . . . . . . . . . . . . . . . . . . . 43,493 10,382 -------- ------- Total deferred taxes . . . . . . . . . . . $189,798 $75,035 ======== =======
Management believes that the Corporation will fully realize the net deferred tax asset as of December 31, 1993 based upon the Corporation's refundable taxes from carryback years, as well as its current level of operating income. The consolidated net deferred income tax asset amounted to $88,877 at December 31, 1992. The components of the provision for deferred income taxes for the years ended December 31, 1992 and 1991 are as follows:
1992 1991 -------- --------- Provision for loan losses . . . . . . . . . . . $(7,953) ($31,364) Bond trading revaluations . . . . . . . . . . . (7,957) 7,934 Deposit base intangible amortization. . . . . . 1,361 (3,027) Other . . . . . . . . . . . . . . . . . . . . . 2,812 (17,689) -------- --------- Total deferred income taxes. . . . . . . . ($11,737) ($44,146) ======== =========
- ------------------------------------------------------------------------------- NOTE L -- CASH, DIVIDEND AND LOAN RESTRICTIONS In the normal course of business, the Corporation and its subsidiaries enter into agreements, or are subject to regulatory requirements, that result in cash, debt and dividend restrictions. A summary of the most restrictive items follows. The Corporation's banking subsidiaries are required to maintain average reserve balances with the Federal Reserve Bank. The average amount of those reserve balances for the year ended December 31, 1993 was approximately $440,055. Under current Federal Reserve regulations, the banking subsidiaries are also limited in the amount they may loan to their affiliates, including the Corporation. Loans to a single affiliate may not exceed 10% and loans to all affiliates may not exceed 20% of the bank's capital, surplus and undivided profits (net assets) after adding back the allowance for loan losses. Based on these limitations, approximately $324,951 was available for loans to the Corporation at December 31, 1993. - ------------------------------------------------------------------------------- 49 52 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - -------------------------------------------------------------------------------- NOTE L -- CASH, DIVIDEND AND LOAN RESTRICTIONS -- Concluded The approval of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank's net profits, as defined, for that year combined with its retained net profits for the preceding two calendar years. Under this formula, the banking subsidiaries can distribute as dividends to the Corporation in 1994, without the approval of the Comptroller of the Currency, more than $379,411 plus an additional amount equal to the banks' retained net profits for 1994 up to the date of any dividend declaration. As a result of the above dividend and loan restrictions, approximately $2,146,047 of consolidated net assets of the Corporation's banking subsidiaries at December 31, 1993 was restricted from transfer to the Corporation in the form of cash dividends, loans or advances. - -------------------------------------------------------------------------------- NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS The following table sets forth the funded status of the Corporation's defined benefit pension plan and the amounts recognized in the consolidated statement of condition at December 31.
1993 1992 -------- -------- Actuarial present value of accumulated benefit obligation: Vested . . . . . . . . . . . . . . . . . . . . $303,288 $253,270 Nonvested. . . . . . . . . . . . . . . . . . . 2,765 34,139 -------- -------- Total. . . . . . . . . . . . . . . . $306,053 $287,409 ======== ======== Actuarial present value of projected benefit obligation for service rendered to date. . . .($360,428) ($307,199) Plan assets at fair value -- primarily listed stocks, fixed income securities and collective funds (including Wachovia common stock valued at $2,282 in 1992) . . . . 449,853 432,071 ------- -------- Plan assets in excess of projected benefit obligation . . . . . . . . . . . . . . 89,425 124,872 Unrecognized net (gain) loss from past experience different from that assumed. . . . . . . . . . 9,685 (22,504) Unrecognized prior service cost . . . . . . . . . . (24,091) (26,588) Unrecognized transition asset . . . . . . . . . . . (52,126) (58,331) ------- ------- Pension asset recorded in consolidated statement of condition . . . . . . . . . . . . $22,893 $ 17,449 ======= ========
Net pension benefit included the following components:
1993 1992 1991 ------- ------- ------- Service cost -- benefits earned during the period . . . . . . . . $12,714 $12,502 $11,444 Interest cost on projected benefit obligation. . . . . . . . . . . . 24,647 22,411 20,741 Actual return on plan assets . . . . . (39,227) (25,337) (68,767) Net amortization and deferral. . . . . (3,577) (16,532) 30,250 ------- ------- ------- Net periodic pension benefit . . . . . $(5,443) $(6,956) $(6,332) ======= ======= =======
The rates used in determining the actuarial present value of the projected benefit obligation were as follows:
1993 1992 1991 -------- -------- -------- Discount rates . . . . . . . . . . 7.5% 8% 8%-9% Rates of increase in compensation levels . . . . . 5.25% 5.25% 5.5%-6.5% Expected long-term rate of return on plan assets. . . 8% 8% 8%-9.5%
The Corporation also sponsors separate unfunded nonqualified pension plans that provide certain officers with defined pension benefits in excess of limits imposed on qualified plans by federal tax law and for certain compensation not covered in the qualified plans. The following table summarizes the plans at December 31.
1993 1992 -------- -------- Actuarial present value of accumulated benefit obligation: Vested . . . . . . . . . . . . . . . . . . $14,287 $14,477 Nonvested. . . . . . . . . . . . . . . . . 10,544 10,400 ------- ------- Total. . . . . . . . . . . . . . $24,831 $24,877 ======= ======= Actuarial present value of projected benefit obligation for service rendered to date. . ($32,129) ($29,867) Unrecognized actuarial losses. . . . . . . . 6,129 2,393 Unrecognized transition obligation . . . . . 489 893 Unrecognized prior service cost. . . . . . . (261) (666) ------- ------- Pension liability recorded in consolidated statement of condition. . . . . . . . . ($25,772) ($27,247) ======= =======
Net pension cost included the following components:
1993 1992 1991 -------- -------- -------- Service cost -- benefits earned during the period . . . . . . . $ 526 $ 504 $ 441 Interest cost on projected benefit obligation. . . . . . . . . . . 2,612 2,704 2,585 Net amortization and deferral. . . . 520 1,073 2,413 ------ ------ ------ Net periodic pension cost. . . . . . $3,658 $4,281 $5,439 ====== ====== ======
The rates used in determining the actuarial present value of the projected benefit obligation were as follows:
1993 1992 1991 -------- -------- -------- Discount rates . . . . . . . . . . . 7.5% 10% 9%-10% Rates of increase in compensation levels . . . . . . 5% 5%-7% 4.9%-7%
The Corporation also provides supplemental benefits through defined contribution plans designed to encourage participants to save on a regular basis and to provide such participants with deferred compensation and additional performance incentive. Total expense relating to these plans, which represented the Corporation's matching and discretionary contributions, was $22,767 in 1993, $11,043 in 1992 and $7,248 in 1991. Employee participants may elect to contribute from 1% to 10% of base salary, with the Corporation matching 50% of each participant's contribution up to a maximum employer contribution of 3% of base salary. The plans provide for additional contributions of up to 3% of salary in accordance with a preestablished formula based - -------------------------------------------------------------------------------- 50 53 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued $ in thousands - -------------------------------------------------------------------------------- NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- Concluded on certain earnings performance criteria and also for special discretionary employer contributions of up to 4% of each eligible employee's base salary as approved annually by the board of directors. During 1992, the employee stock ownership plan (ESOP) of SCNC repaid its outstanding indebtedness of $25,000 with proceeds received from the sale of Wachovia common stock held by the ESOP. Company contributions to the ESOP have been discontinued, and all remaining shares of Wachovia common stock have been allocated to the ESOP participants. Dividends paid on shares held by the ESOP totaled $443 in 1992 and $1,026 in 1991. Interest expense on ESOP debt amounted to $625 in 1992 and $2,259 in 1991. Company contributions and ESOP related expenses in 1991 totaled $1,497 and $2,535, respectively. The Corporation and its subsidiaries provide certain health care benefits for retired employees. Substantially all of the employees may become eligible for these benefits if they reach normal retirement age while working for the Corporation or its subsidiaries. The benefits are provided through self-insured plans administered by insurance companies whose premiums are based on the claims paid during the year. On January 1, 1993, the Corporation prospectively adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (FASB 106), which requires the accrual of nonpension benefits as employees render service. Adoption of FASB 106 increased postretirement benefits expense in 1993 by $5,210 and, on an after-tax basis, reduced net income by $3,235 or $.02 per fully diluted share. In years prior to 1993, the Corporation recognized the cost of providing these retirement benefits by expensing the annual premiums or claims, which were $3,005 in 1992 and $2,271 in 1991. The liability for postretirement benefits is unfunded. The following table presents the status of the plan as of December 31, 1993. Accumulated postretirement benefit obligation: Retirees. . . . . . . . . . . . . . . . . . . . . . ($50,043) Fully eligible active plan participants . . . . . . (6,864) Other active plan participants. . . . . . . . . . . (11,646) -------- Total. . . . . . . . . . . . . . . . . . . . . (68,553) Unrecognized net loss. . . . . . . . . . . . . . . . . . 3,454 Unrecognized transition obligation . . . . . . . . . . . 59,889 -------- Accrued postretirement benefit cost. . . . . . . . . . . $(5,210) =======
Net periodic postretirement benefit cost for 1993 includes the following components: Service cost. . . . . . . . . . . . . . . . . . . . . . . $ 738 Interest cost . . . . . . . . . . . . . . . . . . . . . . 4,953 Amortization of transition obligation over 20 years . . . 3,152 ------ Net periodic postretirement benefit cost. . . . . . . . . $8,843 ======
The annual assumed rate of increase in health care costs for the plan is 14% for 1994 compared with 16% for 1993, and is assumed to decrease gradually to 7% in 2007 and remain at that level there- after. The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by one percentage point would increase the accumulated postretirement benefit obligation for the plan as of December 31, 1993 by $3,637 and the aggregate of the service and interest cost of the net periodic postretirement benefit cost for 1993 by $291. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5%.
- ---------------------------------------------------------------------------------------------------------------------------------- NOTE N -- SELECTED INCOME STATEMENT INFORMATION The components of other operating income and expense for the three years ended December 31, 1993 were as follows: 1993 1992 1991 -------- -------- -------- Other operating income: Insurance premiums and commissions . . . . . . . . . $ 11,847 $ 15,002 $ 12,819 Bankers' acceptance and letter of credit fees. . . . 19,668 20,141 14,232 Other service charges and fees . . . . . . . . . . . 48,915 44,585 42,108 Other income . . . . . . . . . . . . . . . . . . . . 37,315 16,619 13,094 -------- -------- -------- Total other operating income . . . . . . . $117,745 $ 96,347 $ 82,253 ======== ======== ======== Other operating expense: Postage and delivery . . . . . . . . . . . . . . . . $ 38,160 $ 37,036 $ 38,188 Outside data processing, programming and software. . 38,613 33,082 30,671 Stationery and supplies. . . . . . . . . . . . . . . 25,344 26,342 28,507 Advertising and sales promotion. . . . . . . . . . . 38,141 27,911 22,139 Professional services. . . . . . . . . . . . . . . . 17,144 18,412 25,786 Travel and business promotion. . . . . . . . . . . . 15,563 13,578 13,641 FDIC insurance and regulatory examinations . . . . . 53,663 53,970 49,629 Check clearing and other bank services . . . . . . . 10,159 10,391 11,334 Amortization of intangible assets. . . . . . . . . . 28,001 34,423 51,756 Foreclosed property expense. . . . . . . . . . . . . 7,654 9,755 15,655 Other expense. . . . . . . . . . . . . . . . . . . . 105,798 109,340 109,424 -------- -------- -------- Total other operating expense. . . . . . . $378,240 $374,240 $396,730 ======== ======== ======== - ------------------------------------------------------------------------------------------------------------------------------------
51 54 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED $ in thousands
- ----------------------------------------------------------------------------------------------------------------------------------- NOTE O -- EARNINGS PER SHARE Year Ended December 31 ---------------------------------- 1993 1992 1991 -------- -------- ---------- Primary (thousands, except per share) - ------- Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,273 170,763 169,841 Dilutive common stock options -- based on treasury stock method using average market price . 1,594 1,738 1,518 Dilutive common stock awards -- based on treasury stock method using average market price . . 74 140 122 -------- -------- -------- Average primary shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,941 172,641 171,481 ======== ======== ======== Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $492,095 $433,225 $229,540 ======== ======== ======== Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34 Fully Diluted (thousands, except per share) - ------------- Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,273 170,763 169,841 Dilutive common stock options -- based on treasury stock method using period-end market price if higher than average market price . . . . . . . . . . . . . . . . . . . . . . . 1,594 1,975 1,901 Dilutive common stock awards -- based on treasury stock method using period-end market price if higher than average market price . . . . . . . . . . . . . . . . . . . . . . . 77 140 150 Convertible long-term debt assumed converted . . . . . . . . . . . . . . . . . . . . . . . . 1,254 2,634 3,326 -------- -------- -------- Average fully diluted shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 175,198 175,512 175,218 ======== ======== ======== Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $492,095 $433,225 $229,540 Add interest on convertible long-term debt, after taxes . . . . . . . . . . . . . . . . . . . 937 1,777 2,218 -------- -------- -------- Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $493,032 $435,002 $231,758 ======== ======== ======== Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 $ 1.32 - -----------------------------------------------------------------------------------------------------------------------------------
52 55 WACHOVIA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Concluded
$ in thousands - ------------------------------------------------------------------------------------------------------------------------------------ NOTE P -- WACHOVIA CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION The following is a condensed statement of financial condition of the parent company at December 31. 1993 1992 --------- ---------- Assets - ------ Cash on demand deposit with bank subsidiary . . . . . . . $ 13 $ 46 Interest-bearing bank balances with bank subsidiaries . . . . . . . . . . . . . . 77,883 23,850 Investment securities . . . . . . . . . . . . . . . . . . 8,510 1,021 Demand loans to nonbank subsidiaries . . . . . . . . . . 671,502 421,945 Capital notes receivable from bank subsidiaries . . . . . . . . . . . . . . . . . 375,000 275,000 Loan participation with nonbank subsidiary . . . . . . . 25,000 25,000 Current amount due from subsidiaries . . . . . . . . . . 2,086 1,675 Investments in: Bank and bank holding company subsidiaries . . . . 2,953,323 2,730,611 Nonbank subsidiaries . . . . . . . . . . . . . . . 58,872 6,676 Other assets . . . . . . . . . . . . . . . . . . . . 35,149 3,407 ---------- ---------- Total assets . . . . . . . . . . . . . . . . . $4,207,338 $3,489,231 ========== ========== Liabilities and Shareholders' Equity - ------------------------------------ Parent company commercial paper . . . . . . . . . . . . . $ 589,178 $ 386,618 Subordinated capital notes, net of discount of $4,286 and $2,778 in 1993 and 1992, respectively . . . . . . . . . . . . 545,714 297,222 Demand loans from bank and bank holding company subsidiaries . . . . . . . . . . . 33,571 4,856 Demand loan from nonbank subsidiary -- 17,020 Other liabilities . . . . . . . . . . . . . . . . . . . . 20,928 8,748 Shareholders' equity . . . . . . . . . . . . . . . . . . 3,017,947 2,774,767 ---------- ---------- Total liabilities and shareholders' equity . . . . . . . . . . $4,207,338 $3,489,231 ========== ==========
The operating results of the parent company for the three years ended December 31, 1993 are shown below.
1993 1992 1991 -------- -------- -------- Income - ------ Dividends from: Bank and bank holding company subsidiaries . . . . . . . . . . . . . . . . . $186,493 $302,267 $187,447 Nonbank subsidiaries . . . . . . . . . . . . . . . 5,218 -- -- Interest from subsidiaries . . . . . . . . . . . . . . . 39,968 14,461 14,072 Other interest income . . . . . . . . . . . . . . . . . . 152 54 10 Other income . . . . . . . . . . . . . . . . . . . . 21,243 16,833 12,394 -------- -------- -------- Total income . . . . . . . . . . . . . . . . . 253,074 333,615 213,923 Expense - ------- Interest on short-term borrowed funds . . . . . . . . . . . . . . . . . . 14,692 14,096 14,201 Interest on long-term debt . . . . . . . . . . . . . . . 32,580 1,167 -- Interest paid to subsidiaries . . . . . . . . . . . . . . 1,096 914 3,329 Other expense . . . . . . . . . . . . . . . . . . . . 21,367 14,246 12,529 -------- -------- -------- Total expense . . . . . . . . . . . . . . . . 69,735 30,423 30,059 Income before income taxes and equity in undistributed net income of subsidiaries . . . . . . . . . . . . . . . . . . 183,339 303,192 183,864 Applicable income taxes (benefit) . . . . . . . . . . . . (3,423) 253 (230) -------- -------- -------- Income before equity in undistributed net income of subsidiaries . . . . . . . . . . . . 186,762 302,939 184,094 Equity in undistributed net income of subsidiaries . . . . . . . . . . . . . . 305,333 130,286 45,446 -------- -------- -------- Net income . . . . . . . . . . . . . . . . . . $492,095 $433,225 $229,540 ======== ======== ========
The cash flows for the parent company for the three years ended December 31, 1993 were as follows:
1993 1992 1991 --------- --------- ---------- Operating Activities - -------------------- Net income . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540 Adjustments to reconcile net income: Deferred income taxes . . . . . . . . . . . . . . . (3,491) 98 (60) Net change in refundable or accrued income taxes . . . . . . . . . . . . . (7,517) 70 156 (Increase) decrease in accrued interest receivable . . . . . . . . . . . . . (266) (595) 172 Increase (decrease) in accrued interest payable . . . . . . . . . . . . . . . 2,735 984 (128) Net change in other accrued and deferred income and expense . . . . . . . . . 1,739 (2,868) 5,479 Equity in undistributed net income of subsidiaries . . . . . . . . . . . . (305,333) (130,286) (45,446) --------- --------- ---------- Net cash provided by operations . . . . . . . . 179,962 300,628 189,713 Investing Activities - -------------------- Net increase in interest-bearing bank balances . . . . . . . . . . . . . . . . . . . (54,033) (4,873) (18,977) Net decrease in resale agreements with bank subsidiary . . . . . . . . . . . . . . . -- -- 2,800 Purchases of investment securities . . . . . . . . . . . (712) (385) (740) Sales and maturities of investment securities . . . . . . . . . . . . . . . . . . . . 49 -- 730 Investment in loan participation . . . . . . . . . . . . -- -- (25,000) Net increase in demand loans to nonbank subsidiaries . . . . . . . . . . . . . . . (249,557) (86,675) (94,026) Capital notes issued to bank subsidiaries . . . . . . . . (100,000) (275,000) -- Net (increase) decrease in other assets . . . . . . . . . (4,991) (638) 6,415 Equity investment in subsidiaries . . . . . . . . . . . . (1,940) (134,046) (2,132) --------- --------- ---------- Net cash used by investing activities . . . . . . . . . . . . . . . (411,184) (501,617) (130,930) Financing Activities - -------------------- Net increase (decrease) in demand loans from subsidiaries. . . . . . . . . . . . . . 53,239 (9,279) (14,870) Net increase in commercial paper . . . . . . . . . . . . 202,560 78,453 91,647 Proceeds from long-term debt . . . . . . . . . . . . . . 248,075 297,222 -- Payments on long-term debt . . . . . . . . . . . . . . . (335) -- -- Increase (decrease) in other liabilities . . . . . . . . (7,000) 7,000 -- Issuance of stock . . . . . . . . . . . . . . . . . . . . 24,961 29,717 16,462 Dividend payments . . . . . . . . . . . . . . . . . . . (191,488) (170,756) (150,730) Common stock repurchased . . . . . . . . . . . . . . . . (98,804) (31,197) (1,215) Other equity transactions . . . . . . . . . . . . . . . . (19) (186) (21) --------- --------- ---------- Net cash provided (used) by financing activities . . . . . . . . 231,189 200,974 (58,727) --------- --------- ---------- Increase (decrease) in cash . . . . . . . . . . . . . . . (33) (15) 56 Cash at beginning of year . . . . . . . . . . . . . . . . 46 61 5 --------- --------- ---------- Cash at end of year . . . . . . . . . . . . . . . . . . . $ 13 $ 46 $ 61 ========= ========= ========== Noncash investing and financing activities: Common stock issued upon conversion of long-term debt . . . . . . . . . $ 16,437 $ 4,551 $ 10,268 Common stock issued in bank acquisitions . . . . . . . . . . . . . . . . . -- -- 3,928
On March 31, 1993, Wachovia Corporation of North Carolina and Wachovia Corporation of Georgia were merged into Wachovia Corporation. The assets and liabilities of these second tier holding companies which were merged into the Wachovia Corporation parent company totaled $28,506 and $26,192, respectively. - -------------------------------------------------------------------------------- 53 56 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCES (thousands)
1993 1992 --------------------- --------------------- Amount % Amount % ---------- ----- --------- ---- ASSETS Loans -- net of unearned income: Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,198,159 18.5 $ 5,867,310 18.4 Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,890,337 5.6 1,997,998 6.3 ----------- ----- ----------- ----- Total commercial . . . . . . . . . . . . . . . . . . . . . . . 8,088,496 24.1 7,865,308 24.7 Direct retail . . . . . . . . . . . . . . . . . . . . . . . . . . 684,679 2.0 687,556 2.2 Indirect retail . . . . . . . . . . . . . . . . . . . . . . . . . 2,245,115 6.7 2,006,442 6.3 Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591,207 7.7 1,774,342 5.6 Other revolving credit . . . . . . . . . . . . . . . . . . . . . 328,075 1.0 322,768 1.0 ----------- ----- ----------- ----- Total retail . . . . . . . . . . . . . . . . . . . . . . . . . 5,849,076 17.4 4,791,108 15.1 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 470,465 1.4 519,971 1.7 Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . 3,147,293 9.4 3,063,395 9.6 Residential mortgages. . . . . . . . . . . . . . . . . . . . . . . 3,779,444 11.2 3,602,157 11.3 ----------- ----- ----------- ----- Total real estate . . . . . . . . . . . . . . . . . . . . . . 7,397,202 22.0 7,185,523 22.6 Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . 135,355 .4 118,209 .3 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,212 .2 72,347 .2 ----------- ----- ----------- ----- Total loans . . . . . . . . . . . . . . . . . . . . . . . . . 21,546,341 64.1 20,032,495 62.9 Investment securities: State and municipal . . . . . . . . . . . . . . . . . . . . . . . 688,799 2.1 780,426 2.5 Other investments . . . . . . . . . . . . . . . . . . . . . . . . 6,350,557 18.9 5,420,655 17.0 ----------- ----- ----------- ----- Total investment securities . . . . . . . . . . . . . . . . . 7,039,356 21.0 6,201,081 19.5 Interest-bearing bank balances . . . . . . . . . . . . . . . . . . . 78,297 .2 301,568 1.0 Federal funds sold and securities purchased under resale agreements . 394,959 1.2 483,679 1.5 Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 721,111 2.1 1,078,370 3.4 ----------- ----- ----------- ----- Total interest-earning assets . . . . . . . . . . . . . . . . 29,780,064 88.6 28,097,193 88.3 Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . 2,368,237 7.0 2,370,379 7.4 Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 468,218 1.4 444,957 1.4 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,411,152 4.2 1,294,825 4.1 Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . (398,697) (1.2) (375,762) (1.2) ----------- ----- ----------- ----- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $33,628,974 100.0 $31,831,592 100.0 =========== ===== =========== ===== LIABILITIES AND SHAREHOLDERS' EQUITY Time deposits in domestic offices: Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . $ 3,219,413 9.6 $ 2,842,853 8.9 Savings and money market savings . . . . . . . . . . . . . . . . 5,997,750 17.8 5,826,317 18.3 Savings certificates . . . . . . . . . . . . . . . . . . . . . . 5,595,225 16.6 6,197,779 19.5 Large denomination certificates . . . . . . . . . . . . . . . . . 1,739,831 5.2 2,593,675 8.2 ----------- ----- ----------- ---- Total time deposits in domestic offices . . . . . . . . . . . 16,552,219 49.2 17,460,624 54.9 Time deposits in foreign offices . . . . . . . . . . . . . . . . . . 466,571 1.4 423,069 1.3 ----------- ----- ----------- ---- Total interest-bearing deposits . . . . . . . . . . . . . . . 17,018,790 50.6 17,883,693 56.2 Federal funds purchased and securities sold under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,944,864 11.7 3,110,737 9.8 Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . 485,889 1.5 469,120 1.5 Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 972,008 2.9 1,381,713 4.3 ----------- ----- ----------- ---- Total short-term borrowed funds . . . . . . . . . . . . . . . 5,402,761 16.1 4,961,570 15.6 Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,535,750 4.6 272,688 .9 Other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 537,852 1.6 175,940 .5 ----------- ----- ----------- ---- Total long-term debt . . . . . . . . . . . . . . . . . . . . . 2,073,602 6.2 448,628 1.4 ----------- ----- ----------- ---- Total interest-bearing liabilities . . . . . . . . . . . . . . 24,495,153 72.9 23,293,891 73.2 Other deposits: Demand in domestic offices . . . . . . . . . . . . . . . . . . . 5,277,509 15.7 4,853,925 15.2 Demand in foreign offices . . . . . . . . . . . . . . . . . . . . 5,516 .0 5,759 .0 Noninterest-bearing time in domestic offices . . . . . . . . . . 71,577 .2 87,358 .3 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 907,111 2.7 994,263 3.1 Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 2,872,108 8.5 2,596,396 8.2 ---------- ----- ----------- ---- Total liabilities and shareholders' equity . . . . . . . . . . $33,628,974 100.0 $31,831,592 100.0 =========== ===== =========== ===== TOTAL DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,373,392 $22,830,735
54 57
1991 1990 1989 1988 Five-Year ----------------------- ----------------- --------------------- ---------------------- Compound Amount % Amount % Amount % Amount % Growth Rate --------- ------ --------- ----- --------- ---- --------- ---- ----------- $ 6,112,621 19.1 $ 6,023,033 19.8 $ 6,247,505 22.0 $ 5,680,865 22.5 1.8% 2,070,612 6.4 2,114,022 6.9 1,662,497 5.9 1,187,976 4.7 9.7 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 8,183,233 25.5 8,137,055 26.7 7,910,002 27.9 6,868,841 27.2 3.3 757,865 2.4 830,280 2.7 907,513 3.2 935,643 3.7 (6.1) 1,991,185 6.2 2,000,545 6.6 1,913,786 6.8 1,933,935 7.7 3.0 1,558,929 4.9 1,422,072 4.7 1,242,990 4.4 1,155,136 4.6 17.5 299,301 .9 288,156 .9 268,283 .9 253,784 1.0 5.3 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 4,607,280 14.4 4,541,053 14.9 4,332,572 15.3 4,278,498 17.0 6.5 1,020,690 3.2 1,225,283 4.0 1,213,174 4.3 1,085,936 4.3 (15.4) 2,912,517 9.1 2,740,395 9.0 2,275,530 8.0 1,333,595 5.3 18.7 3,653,410 11.4 3,212,427 10.5 2,617,306 9.2 2,504,067 9.9 8.6 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 7,586,617 23.7 7,178,105 23.5 6,106,010 21.5 4,923,598 19.5 8.5 124,519 .4 144,041 .5 157,820 .6 158,138 .6 (3.1) 86,968 .2 80,223 .3 97,202 .3 126,315 .5 (9.6) ----------- ------ ----------- ----- ----------- ----- ----------- ----- 20,588,617 64.2 20,080,477 65.9 18,603,606 65.6 16,355,390 64.8 5.7 877,991 2.7 948,192 3.1 994,475 3.5 1,025,975 4.1 (7.7) 4,904,993 15.3 3,930,476 12.9 3,306,723 11.7 2,919,901 11.5 16.8 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 5,782,984 18.0 4,878,668 16.0 4,301,198 15.2 3,945,876 15.6 12.3 416,103 1.3 604,162 2.0 617,461 2.2 682,097 2.7 (35.1) 597,354 1.9 479,735 1.6 717,746 2.5 508,432 2.0 (4.9) 974,621 3.0 739,268 2.4 474,634 1.7 311,991 1.2 18.2 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 28,359,679 88.4 26,782,310 87.9 24,714,645 87.2 21,803,786 86.3 6.4 2,486,267 7.8 2,702,272 8.9 2,680,681 9.4 2,594,132 10.3 (1.8) 432,908 1.4 419,958 1.4 409,614 1.4 393,616 1.6 3.5 1,061,906 3.3 807,485 2.6 752,362 2.7 663,063 2.6 16.3 (295,891) (.9) (243,069) (.8) (210,390) (.7) (204,404) (.8) 14.3 ----------- ------ ----------- ----- ----------- ----- ----------- ----- $32,044,869 100.0 $30,468,956 100.0 $28,346,912 100.0 $25,250,193 100.0 5.9 =========== ====== =========== ===== =========== ===== =========== ===== $ 2,354,780 7.3 $ 2,092,729 6.9 $ 1,840,259 6.5 $ 1,710,145 6.8 13.5 5,314,432 16.6 4,876,599 16.0 4,508,380 15.9 4,527,409 17.9 5.8 6,862,392 21.4 5,998,805 19.7 5,248,099 18.5 4,382,926 17.4 5.0 3,102,496 9.7 3,126,103 10.2 4,465,825 15.8 3,001,757 11.9 (10.3) ----------- ------ ----------- ----- ----------- ----- ----------- ----- 17,634,100 55.0 16,094,236 52.8 16,062,563 56.7 13,622,237 54.0 4.0 289,722 .9 489,044 1.6 547,517 1.9 576,019 2.3 (4.1) ----------- ------ ----------- ----- ----------- ----- ----------- ----- 17,923,822 55.9 16,583,280 54.4 16,610,080 58.6 14,198,256 56.3 3.7 3,498,869 10.9 3,876,762 12.7 3,655,028 12.9 3,317,201 13.1 3.5 348,125 1.1 365,369 1.2 284,677 1.0 259,229 1.0 13.4 2,233,271 7.0 1,988,614 6.6 336,666 1.2 263,565 1.1 29.8 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 6,080,265 19.0 6,230,745 20.5 4,276,371 15.1 3,839,995 15.2 7.1 -- -- -- -- -- -- -- - 177,623 .6 177,436 .6 229,588 .8 283,941 1.1 13.6 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 177,623 .6 177,436 .6 229,588 .8 283,941 1.1 48.8 ----------- ------ ----------- ----- ----------- ----- ----------- ----- 24,181,710 75.5 22,991,461 75.5 21,116,039 74.5 18,322,192 72.6 6.0 4,519,407 14.1 4,562,568 15.0 4,539,305 16.0 4,595,912 18.2 2.8 7,213 .0 7,208 .0 7,219 .0 8,402 .0 (8.1) 68,801 .2 49,698 .2 39,149 .2 26,960 .1 21.6 806,206 2.5 620,568 2.0 602,537 2.1 504,710 2.0 12.4 2,461,532 7.7 2,237,453 7.3 2,042,663 7.2 1,792,017 7.1 9.9 ----------- ------ ----------- ----- ----------- ----- ----------- ----- $32,044,869 100.0 $30,468,956 100.0 $28,346,912 100.0 $25,250,193 100.0 5.9 =========== ====== =========== ===== =========== ===== =========== ===== $22,519,243 $21,202,754 $21,195,753 $18,829,530 3.5
55 58 WACHOVIA CORPORATION AND SUBSIDIARIES SUMMARY OF OPERATIONS (thousands)
1993 1992 -------------------- -------------------- Amount % Amount % ---------- ------ ---------- ----- INTEREST INCOME . . . . . . . . . . . . . . . . $2,122,837 77.2 $2,222,078 80.0 INTEREST EXPENSE. . . . . . . . . . . . . . . . 839,012 30.5 967,028 34.8 ---------- ---- ---------- ---- NET INTEREST INCOME . . . . . . . . . . . . . . 1,283,825 46.7 1,255,050 45.2 Provision for loan losses . . . . . . . . . . . 92,652 3.4 119,420 4.3 ---------- ---- ---------- ---- Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . 1,191,173 43.3 1,135,630 40.9 OTHER INCOME Service charges on deposit accounts . . . . . . 202,885 7.4 189,537 6.8 Fees for trust services . . . . . . . . . . . . 120,030 4.4 109,504 3.9 Credit card income. . . . . . . . . . . . . . . 101,780 3.7 78,068 2.8 Mortgage fee income . . . . . . . . . . . . . . 39,101 1.4 40,078 1.5 Trading account profits (losses). . . . . . . . 13,103 .5 (11,542) (.4) Student loan servicing. . . . . . . . . . . . . 5,535 .2 33,250 1.2 Other operating income. . . . . . . . . . . . . 117,745 4.2 96,347 3.5 ---------- ---- ---------- ---- Total other operating revenue. . 600,179 21.8 535,242 19.3 Gain on sale of subsidiary. . . . . . . . . . . 8,030 .3 19,486 .7 Investment securities gains . . . . . . . . . . 19,394 .7 1,497 .0 ---------- ---- ---------- ---- Total other income . . . . . . . 627,603 22.8 556,225 20.0 OTHER EXPENSE Salaries. . . . . . . . . . . . . . . . . . . . 455,621 16.6 451,193 16.2 Employee benefits . . . . . . . . . . . . . . . 113,059 4.1 88,630 3.2 ---------- ---- ---------- ---- Total personnel expense. . . . . 568,680 20.7 539,823 19.4 Net occupancy expense . . . . . . . . . . . . . 82,070 3.0 80,673 2.9 Equipment expense . . . . . . . . . . . . . . . 102,246 3.7 100,916 3.6 Other operating expense . . . . . . . . . . . . 378,240 13.7 374,240 13.5 ---------- ---- ---------- ---- Total other expense. . . . . . . 1,131,236 41.1 1,095,652 39.4 Income before income taxes. . . . . . . . . . . 687,540 25.0 596,203 21.5 Applicable income taxes (2) . . . . . . . . . . 195,445 7.1 162,978 5.9 ---------- ---- ---------- ---- NET INCOME. . . . . . . . . . . . . . . . . . . $ 492,095 17.9 $ 433,225 15.6 ========== ==== ========== ==== Net income per common share: Primary. . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 Fully diluted. . . . . . . . . . . . . . . $ 2.81 $ 2.48 Cash dividends paid per common share. . . . . . $ 1.110 $ 1.000 Average shares outstanding: Primary (3). . . . . . . . . . . . . . . . 173,941 172,641 Fully diluted (4). . . . . . . . . . . . . 175,198 175,512
(1) Percentages reflected above are based on total income (interest plus other). (2) Income taxes applicable to securities transactions were as follows: 1993 -- $7,472; 1992 -- $470; 1991 -- $3,997; 1990 -- $2,379; 1989 -- $2,903; and 1988 -- $1,997. (3) Average primary shares outstanding include common equivalent shares as follows: 1993 -- 1,668; 1992 -- 1,878; 1991 -- 1,640; 1990 -- 828; 1989 -- 860; and 1988 -- 601. (4) Average fully diluted shares outstanding include dilutive common stock options and awards and convertible long-term debt as follows: 1993 -- 2,925; 1992 -- 4,749; 1991 -- 5,377; 1990 -- 4,662; 1989 -- 5,178; and 1988 -- 8,702. 56 59
1991 1990 1989 1988 Five-Year - --------------------- -------------------- -------------------- -------------------- Compound Amount % Amount % Amount % Amount % Growth Rate - ---------- ------ ---------- ----- ---------- ----- ---------- ----- ------------- $2,637,015 84.0 $2,748,644 85.5 $2,672,653 86.4 $2,200,173 85.5 (.7%) 1,467,849 46.8 1,684,114 52.4 1,672,856 54.1 1,244,382 48.4 (7.6) - ---------- ---- ---------- ----- ---------- ----- ---------- ---- 1,169,166 37.2 1,064,530 33.1 999,797 32.3 955,791 37.1 6.1 293,000 9.3 142,992 4.4 86,531 2.8 78,110 3.0 3.5 - ---------- ---- ---------- ----- ---------- ----- ---------- ---- 876,166 27.9 921,538 28.7 913,266 29.5 877,681 34.1 6.3 170,827 5.4 155,808 4.8 136,620 4.4 126,146 4.9 10.0 102,665 3.3 99,572 3.1 101,072 3.3 87,959 3.4 6.4 62,814 2.0 55,202 1.7 50,092 1.6 45,243 1.8 17.6 28,608 .9 20,741 .6 16,003 .5 16,260 .7 19.2 11,541 .4 11,637 .4 7,510 .2 7,293 .3 12.4 31,470 1.0 29,841 .9 27,230 .9 23,915 .9 (25.4) 82,253 2.6 86,051 2.8 73,290 2.4 59,649 2.3 14.6 - ---------- ---- ---------- ----- ---------- ----- ---------- ---- 490,178 15.6 458,852 14.3 411,817 13.3 366,465 14.3 10.4 -- -- -- -- -- -- -- -- 11,091 .4 6,218 .2 7,625 .3 5,213 .2 30.1 - ---------- ---- ---------- ----- ---------- ----- ---------- ---- 501,269 16.0 465,070 14.5 419,442 13.6 371,678 14.5 11.0 443,273 14.1 413,592 12.9 403,888 13.1 379,169 14.8 3.7 81,216 2.6 73,881 2.3 81,110 2.6 77,804 3.0 7.8 - ---------- ---- ---------- ----- ---------- ----- ---------- ---- 524,489 16.7 487,473 15.2 484,998 15.7 456,973 17.8 4.5 75,729 2.4 71,402 2.2 64,044 2.1 60,599 2.4 6.3 99,569 3.2 98,042 3.0 101,101 3.3 98,925 3.8 .7 396,730 12.7 295,367 9.3 266,747 8.6 247,662 9.6 8.8 - ---------- ---- ---------- ----- ---------- ----- ---------- ---- 1,096,517 35.0 952,284 29.7 916,890 29.7 864,159 33.6 5.5 280,918 8.9 434,324 13.5 415,818 13.4 385,200 15.0 12.3 51,378 1.6 88,647 2.7 87,669 2.8 86,434 3.4 17.7 - ---------- ---- ---------- ----- ---------- ----- ---------- ---- $ 229,540 7.3 $ 345,677 10.8 $ 328,149 10.6 $ 298,766 11.6 10.5 ========== ==== ========== ===== ========== ===== ========== ==== $ 1.34 $ 2.05 $ 1.95 $ 1.82 9.2 $ 1.32 $ 2.02 $ 1.92 $ 1.77 9.7 $ .920 $ .820 $ .697 $ .584 13.7 171,481 168,888 168,268 164,266 1.2 175,218 172,722 172,586 172,366 .3
57 60 WACHOVIA CORPORATION AND SUBSIDIARIES NET INTEREST INCOME --TAXABLE EQUIVALENT (thousands)
1993 1992 ------------------ ------------------ AMOUNT % AMOUNT % ---------- ----- ---------- ----- INTEREST INCOME Loans: Commercial........................................................... $ 327,729 14.8 $ 349,868 15.2 Tax-exempt........................................................... 171,163 7.7 173,158 7.5 ---------- ----- ---------- ----- Total commercial............................................. 498,892 22.5 523,026 22.7 Direct retail........................................................ 59,455 2.7 77,850 3.4 Indirect retail...................................................... 189,143 8.5 191,594 8.3 Credit card.......................................................... 304,502 13.7 257,885 11.2 Other revolving credit............................................... 36,580 1.6 37,538 1.6 ---------- ----- ---------- ----- Total retail................................................. 589,680 26.5 564,867 24.5 Construction......................................................... 35,034 1.6 40,441 1.8 Commercial mortgages................................................. 232,688 10.5 243,861 10.6 Residential mortgages................................................ 305,965 13.8 320,363 13.9 ---------- ----- ---------- ----- Total real estate............................................ 573,687 25.9 604,665 26.3 Lease financing...................................................... 12,051 .5 11,830 .5 Foreign.............................................................. 3,318 .1 3,760 .2 ---------- ----- ---------- ----- Total loans.................................................. 1,677,628 75.5 1,708,148 74.2 Investment securities: State and municipal.................................................. 85,854 3.8 96,649 4.2 Other investments.................................................... 414,485 18.7 406,274 17.7 ---------- ----- ---------- ----- Total investment securities.................................. 500,339 22.5 502,923 21.9 Interest-bearing bank balances......................................... 2,905 .1 12,772 .6 Federal funds sold and securities purchased under resale agreements.... 12,433 .6 17,038 .7 Trading account assets................................................. 28,433 1.3 60,444 2.6 ---------- ----- ---------- ----- Total interest income........................................ 2,221,738 100.0 2,301,325 100.0 INTEREST EXPENSE Interest-bearing demand................................................ 60,433 2.7 72,548 3.1 Savings and money market savings....................................... 151,748 6.8 189,699 8.2 Savings certificates................................................... 240,795 10.8 324,063 14.1 Large denomination certificates........................................ 90,101 4.1 148,931 6.5 ---------- ----- ---------- ----- Total time deposits in domestic offices...................... 543,077 24.4 735,241 31.9 Time deposits in foreign offices....................................... 14,503 .7 15,646 .7 ---------- ----- ---------- ----- Total time deposits.......................................... 557,580 25.1 750,887 32.6 Federal funds purchased and securities sold under repurchase agreements........................................................... 127,580 5.8 115,939 5.1 Commercial paper....................................................... 14,693 .7 16,629 .7 Other short-term borrowed funds........................................ 31,574 1.4 58,420 2.5 ---------- ----- ---------- ----- Total short-term borrowed funds.............................. 173,847 7.9 190,988 8.3 Bank notes............................................................. 69,785 3.1 13,183 .6 Other long-term debt................................................... 37,800 1.7 11,970 .5 ---------- ----- ---------- ----- Total long-term debt......................................... 107,585 4.8 25,153 1.1 ---------- ----- ---------- ----- Total interest expense....................................... 839,012 37.8 967,028 42.0 ---------- ----- ---------- ----- NET INTEREST INCOME.................................................... $1,382,726 62.2 $1,334,297 58.0 ========== ===== ========== ===== Percentage of interest-earning assets: Interest income...................................................... 7.46% 8.19% Interest expense..................................................... 2.82 3.44 ---- ---- Net interest income.......................................... 4.64% 4.75% ==== ==== Taxable equivalent adjustment included in interest income: Loans................................................................ $ 50,178 $ 44,760 Investment securities................................................ 46,613 33,787 Trading account assets............................................... 2,110 700 ---------- ---------- Total (2).................................................... $ 98,901 $ 79,247 ========== ==========
(1) Percentages reflected above are based on total interest income. (2) The taxable equivalent adjustment for 1993 reflects the federal income tax rate of 35% and state tax rates, as applicable, reduced by the nondeductible portion of interest expense; the taxable equivalent adjustments for prior years reflect the federal income tax rate of 34%. 58 61
1991 1990 1989 1988 FIVE-YEAR ------------------ ------------------ ------------------ ------------------ COMPOUND AMOUNT % AMOUNT % AMOUNT % AMOUNT % GROWTH RATE ---------- ----- ---------- ----- ---------- ----- ---------- ----- ----------- $ 502,100 18.4 $ 596,227 20.9 $ 674,211 24.3 $ 538,825 23.5 (9.5%) 206,099 7.5 230,049 8.0 197,015 7.1 139,745 6.1 4.1 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 708,199 25.9 826,276 28.9 871,226 31.4 678,570 29.6 (6.0) 97,655 3.6 110,423 3.9 122,358 4.4 122,167 5.3 (13.4) 209,985 7.7 225,582 7.9 221,218 8.0 215,341 9.4 (2.6) 259,773 9.5 240,709 8.4 213,320 7.7 203,256 8.9 8.4 38,106 1.4 39,567 1.4 37,713 1.4 32,571 1.4 2.3 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 605,519 22.2 616,281 21.6 594,609 21.5 573,335 25.0 .6 95,503 3.5 126,754 4.4 136,802 4.9 110,927 4.9 (20.6) 273,371 10.0 290,390 10.2 255,919 9.2 135,733 5.9 11.4 370,733 13.6 347,730 12.2 293,531 10.6 254,465 11.1 3.8 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 739,607 27.1 764,874 26.8 686,252 24.7 501,125 21.9 2.7 12,990 .5 15,407 .5 17,068 .6 16,845 .7 (6.5) 6,775 .2 7,745 .3 11,285 .4 16,102 .7 (27.1) ---------- ----- ---------- ----- ---------- ----- ---------- ----- 2,073,090 75.9 2,230,583 78.1 2,180,440 78.6 1,785,977 77.9 (1.2) 109,607 4.0 119,799 4.2 126,074 4.5 130,298 5.7 (8.0) 416,668 15.3 353,199 12.4 298,997 10.8 257,373 11.2 10.0 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 526,275 19.3 472,998 16.6 425,071 15.3 387,671 16.9 5.2 26,974 1.0 50,855 1.7 58,454 2.1 54,107 2.4 (44.3) 35,537 1.3 39,496 1.4 66,464 2.4 39,888 1.8 (20.8) 70,049 2.5 62,386 2.2 43,541 1.6 23,878 1.0 3.6 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 2,731,925 100.0 2,856,318 100.0 2,773,970 100.0 2,291,521 100.0 (.6) 95,809 3.5 93,564 3.3 86,107 3.1 77,397 3.4 (4.8) 275,951 10.1 301,248 10.5 297,522 10.7 259,772 11.3 (10.2) 475,012 17.4 473,150 16.5 437,119 15.8 326,455 14.2 (5.9) 221,992 8.1 256,243 9.0 399,471 14.4 228,649 10.0 (17.0) ---------- ----- ---------- ----- ---------- ----- ---------- ----- 1,068,764 39.1 1,124,205 39.3 1,220,219 44.0 892,273 38.9 (9.5) 16,834 .6 39,147 1.4 50,260 1.8 43,259 1.9 (19.6) ---------- ----- ---------- ----- ---------- ----- ---------- ----- 1,085,598 39.7 1,163,352 40.7 1,270,479 45.8 935,532 40.8 (9.8) 202,299 7.4 309,846 10.9 325,192 11.7 243,020 10.6 (12.1) 19,985 .7 29,416 1.0 25,330 .9 18,723 .8 (4.7) 146,918 5.4 166,251 5.8 29,920 1.1 21,780 1.0 7.7 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 369,202 13.5 505,513 17.7 380,442 13.7 283,523 12.4 (9.3) -- -- -- -- -- -- -- -- 13,049 .5 15,249 .6 21,935 .8 25,327 1.1 8.3 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 13,049 .5 15,249 .6 21,935 .8 25,327 1.1 33.5 ---------- ----- ---------- ----- ---------- ----- ---------- ----- 1,467,849 53.7 1,684,114 59.0 1,672,856 60.3 1,244,382 54.3 (7.6) ---------- ----- ---------- ----- ---------- ----- ---------- ----- $1,264,076 46.3 $1,172,204 41.0 $1,101,114 39.7 $1,047,139 45.7 5.7 ========== ===== ========== ===== ========== ===== ========== ===== 9.63% 10.66% 11.22% 10.51% 5.17 6.28 6.76 5.71 ----- ----- ----- ----- 4.46% 4.38% 4.46% 4.80% ===== ===== ===== ===== $ 54,882 $ 62,415 $ 56,213 $ 46,869 39,245 44,635 44,371 43,745 783 624 733 734 ---------- ---------- ---------- ---------- $ 94,910 $ 107,674 $ 101,317 $ 91,348 ========== ========== ========== ==========
59 62 WACHOVIA CORPORATION AND SUBSIDIARIES STATISTICAL SUMMARY
1993 1992 1991 1990 1989 1988 ---- ---- ---- ---- ---- ---- AVERAGE YIELDS EARNED (taxable equivalent) Loans: Commercial . . . . . . . . . . . . . . . . . 5.29% 5.96% 8.21% 9.90% 10.79% 9.48% Tax-exempt . . . . . . . . . . . . . . . . . 9.05 8.67 9.95 10.88 11.85 11.76 Total commercial . . . . . . . . . . . . 6.17 6.65 8.65 10.15 11.01 9.88 Direct retail . . . . . . . . . . . . . . . 8.68 11.32 12.89 13.30 13.48 13.06 Indirect retail . . . . . . . . . . . . . . 8.42 9.55 10.55 11.28 11.56 11.13 Credit card . . . . . . . . . . . . . . . . 11.75 14.53 16.66 16.93 17.16 17.60 Other revolving credit . . . . . . . . . . . 11.15 11.63 12.73 13.73 14.06 12.83 Total retail . . . . . . . . . . . . . . 10.08 11.79 13.14 13.57 13.72 13.40 Construction . . . . . . . . . . . . . . . . 7.45 7.78 9.36 10.34 11.28 10.21 Commercial mortgages . . . . . . . . . . . . 7.39 7.96 9.39 10.60 11.25 10.18 Residential mortgages . . . . . . . . . . . 8.10 8.89 10.15 10.82 11.22 10.16 Total real estate . . . . . . . . . . . . 7.76 8.42 9.75 10.66 11.24 10.18 Lease financing . . . . . . . . . . . . . . 8.90 10.01 10.43 10.70 10.81 10.65 Foreign . . . . . . . . . . . . . . . . . . 4.35 5.20 7.79 9.66 11.61 12.75 Total loans . . . . . . . . . . . . . . . 7.79 8.53 10.07 11.11 11.72 10.92 State and municipal securities . . . . . . . . 12.46 12.38 12.48 12.63 12.68 12.70 Other investments . . . . . . . . . . . . . . . 6.53 7.50 8.49 8.99 9.04 8.81 Total investment securities . . . . . . . 7.11 8.11 9.10 9.70 9.88 9.82 Interest-bearing bank balances . . . . . . . . 3.71 4.24 6.48 8.42 9.47 7.93 Federal funds sold and securities purchased under resale agreements . . . . . 3.15 3.52 5.95 8.23 9.26 7.85 Trading account assets . . . . . . . . . . . . 3.94 5.61 7.19 8.44 9.17 7.65 Total interest-earning assets . . . . . . 7.46 8.19 9.63 10.66 11.22 10.51 AVERAGE RATES PAID Interest-bearing demand . . . . . . . . . . . . 1.88% 2.55% 4.07% 4.47% 4.68% 4.53% Savings and money market savings . . . . . . . 2.53 3.26 5.19 6.18 6.60 5.74 Savings certificates . . . . . . . . . . . . . 4.30 5.23 6.92 7.89 8.33 7.45 Large denomination certificates . . . . . . . . 5.18 5.74 7.16 8.20 8.95 7.62 Total time deposits in domestic offices . 3.28 4.21 6.06 6.99 7.60 6.55 Time deposits in foreign offices . . . . . . . 3.11 3.70 5.81 8.00 9.18 7.51 Total time deposits . . . . . . . . . . . 3.28 4.20 6.06 7.02 7.65 6.59 Federal funds purchased and securities sold under repurchase agreements . . . . . . 3.23 3.73 5.78 7.99 8.90 7.33 Commercial paper . . . . . . . . . . . . . . . 3.02 3.54 5.74 8.05 8.90 7.22 Other short-term borrowed funds . . . . . . . . 3.25 4.23 6.58 8.36 8.89 8.26 Total short-term borrowed funds . . . . . 3.22 3.85 6.07 8.11 8.90 7.38 Bank notes . . . . . . . . . . . . . . . . . . 4.54 4.83 -- -- -- -- Other long-term debt . . . . . . . . . . . . . 7.03 6.80 7.35 8.59 9.55 8.92 Total long-term debt . . . . . . . . . . 5.19 5.61 7.35 8.59 9.55 8.92 Total interest-bearing liabilities . . . 3.43 4.15 6.07 7.32 7.92 6.79 Interest rate spread . . . . . . . . . . . . . 4.03% 4.04% 3.56% 3.34% 3.30% 3.72% Net yield on interest-earning assets . . . . . 4.64% 4.75% 4.46% 4.38% 4.46% 4.80% RATIOS (averages) Loans to deposits . . . . . . . . . . . . . . . 96.30% 87.74% 91.43% 94.71% 87.77% 86.86% Shareholders' equity to: Total assets . . . . . . . . . . . . . . . . 8.54 8.16 7.68 7.34 7.21 7.10 Net loans . . . . . . . . . . . . . . . . . 13.58 13.21 12.13 11.28 11.11 11.10 Deposits . . . . . . . . . . . . . . . . . . 12.84 11.37 10.93 10.55 9.64 9.52 Equity and long-term debt . . . . . . . . . 58.07 85.27 93.27 92.65 89.90 86.32 Return on assets . . . . . . . . . . . . . . . 1.46 1.36 .72 1.13 1.16 1.18 Return on shareholders' equity . . . . . . . . 17.13 16.69 9.33 15.45 16.06 16.67 Return on deposits . . . . . . . . . . . . . . 2.20 1.90 1.02 1.63 1.55 1.59 Dividends paid as a percentage of net income . 38.91 39.42 63.78 37.84 33.97 30.66
60 63 WACHOVIA CORPORATION AND SUBSIDIARIES YEAR-END INFORMATION
1993 1992 1991 1990 1989 1988 -------- -------- ------- -------- -------- ------- CONDENSED BALANCE SHEET (millions) Cash and due from banks . . . . . . . . . . . . $ 2,529 $ 2,628 $ 2,475 $ 3,586 $ 3,291 $ 3,246 Interest-bearing bank balances . . . . . . . . 13 189 408 565 593 673 Federal funds sold and securities purchased under resale agreements . . . . . . 691 479 546 591 646 689 Trading account assets . . . . . . . . . . . . 789 896 1,445 793 648 311 Investment securities . . . . . . . . . . . . . 7,879 6,486 6,265 5,273 4,629 4,124 Loans and net leases . . . . . . . . . . . . . 22,986 21,097 20,643 21,255 19,626 17,676 Less unearned income on loans . . . . . . . . . 9 11 26 48 94 118 -------- -------- -------- -------- -------- -------- Total loans . . . . . . . . . . . . . . . 22,977 21,086 20,617 21,207 19,532 17,558 Less allowance for loan losses . . . . . . . . 405 380 360 270 219 201 -------- -------- -------- -------- -------- -------- Net loans . . . . . . . . . . . . . . . . 22,572 20,706 20,257 20,937 19,313 17,357 Premises and equipment . . . . . . . . . . . . 503 444 435 429 412 402 Other assets . . . . . . . . . . . . . . . . . 1,550 1,539 1,327 1,141 733 668 -------- -------- -------- -------- -------- -------- Total assets . . . . . . . . . . . . . . $ 36,526 $ 33,367 $ 33,158 $ 33,315 $ 30,265 $ 27,470 ======== ======== ======== ======== ======== ======== Deposits in domestic offices . . . . . . . . . $ 22,545 $ 22,856 $ 22,602 $ 22,736 $ 21,578 $ 19,944 Deposits in foreign offices . . . . . . . . . . 807 519 404 499 476 576 -------- -------- -------- -------- -------- -------- Total deposits . . . . . . . . . . . . . 23,352 23,375 23,006 23,235 22,054 20,520 Federal funds purchased and securities sold under repurchase agreements . . . . . . 4,741 3,714 4,002 3,867 3,857 3,556 Commercial paper . . . . . . . . . . . . . . . 589 387 398 331 310 239 Other short-term borrowed funds . . . . . . . . 1,091 849 2,201 2,473 1,163 500 Bank notes . . . . . . . . . . . . . . . . . . 2,370 758 -- -- -- -- Other long-term debt . . . . . . . . . . . . . 591 439 171 164 224 235 Other liabilities . . . . . . . . . . . . . . . 774 1,070 896 874 480 468 Shareholders' equity . . . . . . . . . . . . . 3,018 2,775 2,484 2,371 2,177 1,952 -------- -------- -------- -------- -------- -------- Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . $ 36,526 $ 33,367 $ 33,158 $ 33,315 $ 30,265 $ 27,470 ======== ======== ======== ======== ======== ======== LOAN PORTFOLIO (millions) Domestic borrowers: Commercial . . . . . . . . . . . . . . . . . $ 6,727 $ 6,365 $ 6,396 $ 6,627 $ 6,182 $ 6,077 Tax-exempt . . . . . . . . . . . . . . . . . 1,959 1,952 1,993 2,065 2,089 1,290 Direct retail . . . . . . . . . . . . . . . 716 673 723 796 909 907 Indirect retail . . . . . . . . . . . . . . 2,429 2,109 1,983 2,022 1,930 1,907 Credit card . . . . . . . . . . . . . . . . 3,123 2,216 1,671 1,598 1,391 1,267 Other revolving credit . . . . . . . . . . . 333 327 302 297 283 266 Construction . . . . . . . . . . . . . . . . 494 464 637 1,197 1,148 1,168 Commercial mortgages . . . . . . . . . . . . 3,199 3,119 3,066 2,860 2,484 2,041 Residential mortgages . . . . . . . . . . . 3,767 3,663 3,660 3,506 2,882 2,373 Lease financing, net . . . . . . . . . . . . 157 125 116 138 151 159 -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . 22,904 21,013 20,547 21,106 19,449 17,455 Foreign borrowers: Commercial and industrial . . . . . . . . . 73 73 56 92 74 87 Banks and other financial institutions . . . -- -- 7 -- 1 5 Governments and official institutions . . . -- -- 7 9 8 11 -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . 73 73 70 101 83 103 -------- -------- -------- -------- -------- -------- Total loans . . . . . . . . . . . . . . . $ 22,977 $ 21,086 $ 20,617 $ 21,207 $ 19,532 $ 17,558 ======== ======== ======== ======== ======== ======== ALLOCATION OF ALLOWANCE FOR LOAN LOSSES* (thousands) Commercial . . . . . . . . . . . . . . . . . . $ 89,431 $ 92,279 $ 89,055 $ 73,636 $ 65,591 $ 66,596 Credit card . . . . . . . . . . . . . . . . . . 78,264 54,584 44,655 39,255 39,918 36,942 Other revolving credit . . . . . . . . . . . . 4,958 4,718 6,193 3,545 2,860 2,722 Other retail . . . . . . . . . . . . . . . . . 33,748 28,113 25,303 44,233 41,399 36,752 Real estate . . . . . . . . . . . . . . . . . . 111,960 113,996 128,216 76,534 42,610 30,515 Lease financing . . . . . . . . . . . . . . . . 2,018 1,994 2,159 3,114 3,032 2,562 Foreign . . . . . . . . . . . . . . . . . . . . 931 715 1,382 2,296 2,933 3,318 Unallocated . . . . . . . . . . . . . . . . . . 83,488 83,158 63,230 27,303 20,876 21,291 -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . $404,798 $379,557 $360,193 $269,916 $219,219 $200,698 ======== ======== ======== ======== ======== ========
* The allocation of the allowance for loan losses above represents an estimate based on historical loss experience, individual credits, economic conditions and other judgmental factors. Since any allocation is judgmental and involves consideration of many factors, the allocation may be more or less than the charge-offs that may ultimately occur. The entire allowance is available for charge-offs in any category of loans. 61 64 - -------------------------------------------------------------------------------- STOCK DATA Wachovia Corporation's common stock is listed on the New York Stock Exchange under the trading symbol of WB. On October 1, 1993, the corporation was added to the Standard & Poor's 500 Index of stocks and to the S&P 500 Major Regional Banks Industry Group. Stock price and dividend information for the corporation is presented in the following charts and table. Wachovia Corporation merged with South Carolina National Corporation, effective December 6, 1991, COMMON STOCK PRICE RANGE NYSE SYMBOL: WB CASH DIVIDENDS PER SHARE (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX) COMMON STOCK PRICE/EARNINGS RATIOS CASH DIVIDEND PAYOUT (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS APPENDIX) APPENDIX)
- ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK DATA -- PER SHARE TABLE 21 - ------------------------------------------------------------------------------------------------------------------------------------ 1993 1992 1991 1990 1989 1988 ---- ---- ---- ---- ---- ---- Market value:* End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 1/2 $ 34 1/8 $ 29 $ 20 7/8 $ 20 3/8 $ 15 3/4 High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 1/2 34 3/4 30 22 3/8 22 5/8 17 Low. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 7/8 28 1/4 20 1/4 16 1/8 15 1/2 13 7/8 Book value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.61 16.18 14.56 14.07 12.96 11.70 Dividend* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.110 1.000 .920 .820 .697 .584 Price/earnings ratio**. . . . . . . . . . . . . . . . . . . . . . . 11.8x 13.6x 21.7x 9.9x 10.6x 8.7x *Information for years before 1991 represents that of Wachovia Corporation prior to merger **Based on net income per primary share and end-of-year stock price - ------------------------------------------------------------------------------------------------------------------------------------
62 65 under an agreement providing for a tax-free exchange of .675 of a share of Wachovia Corporation common stock for each share of South Carolina National. As a result of merger and special charges taken in the fourth quarter of 1991, the corporation's net income per primary share for the year 1991 was $1.34 compared with $2.05 in 1990 and $2.51 in 1992. The Five-Year Total Return chart compares Wachovia, the S&P 500 and the Keefe, Bruyette & Woods (KBW) 50 Index in stock price appreciation and dividends, assuming quarterly reinvestment, from the base period December 31, 1988 through year-end 1993. The KBW Index is a market capitalization weighted measure of total return for 50 money center and major regional banks. Wachovia's total return is based on stock prices and dividends per share of Wachovia Corporation prior to its merger with South Carolina National. QUARTERLY COMMON STOCK PRICE RANGE (Graph - SEE GRAPHICS APPENDIX) QUARTERLY COMMON STOCK PRICE/EARNINGS RATIOS (Graph - SEE GRAPHICS APPENDIX) FIVE-YEAR TOTAL RETURN (Graph - SEE GRAPHICS APPENDIX) 63 66 - ------------------------------------------------------------------------------- MEMBER COMPANY DIRECTORS WACHOVIA BANK OF GEORGIA, N.A. G. JOSEPH PRENDERGAST President and Chief Executive Officer THOMAS E. BOLAND Chairman of the Board F. DUANE ACKERMAN President and Chief Executive Officer BellSouth Telecommunications, Inc. EDWARD L. ADDISON Chairman and Chief Executive Officer The Southern Company L. M. BAKER, JR. President and Chief Executive Officer Wachovia Corporation CARL BOLCH, JR. Chairman of the Board and Chief Executive Officer Racetrac Petroleum, Inc. JAMES E. BOSTIC, JR. Group Vice President Communication Papers Division Georgia-Pacific Corporation MICHAEL C. CARLOS Chairman of the Board and Chief Executive Officer National Distributing Co., Inc. G. STEPHEN FELKER Chairman of the Board and Chief Executive Officer Avondale Mills, Inc. BRYAN D. LANGTON (Advisory Director) Chairman of the Board and Chief Executive Officer Holiday Inn Worldwide BERNARD MARCUS Chairman of the Board and Chief Executive Officer The Home Depot, Inc. DANIEL W. MCGLAUGHLIN President and Chief Operating Officer Equifax Inc. JOHN G. MEDLIN, JR. Chairman of the Board Wachovia Corporation D. RAYMOND RIDDLE President and Chief Executive Officer National Service Industries, Inc. S. STEPHEN SELIG III Chairman of the Board and President Selig Enterprises, Inc. ALANA S. SHEPHERD Secretary of the Board Shepherd Spinal Center J. V. WHITE Chairman of the Executive Committee Equifax Inc. WACHOVIA BANK OF NORTH CAROLINA, N.A. J. WALTER MCDOWELL President and Chief Executive Officer L. M. BAKER, JR. Chairman of the Board H. C. BISSELL Chairman of the Board and Chief Executive Officer The Bissell Companies, Inc. HERBERT BRENNER Chairman of the Board Amarr Company President Brenner Companies, Inc. FELTON J. CAPEL Chairman of the Board and President Century Associates of North Carolina WILLIAM CAVANAUGH, III President and Chief Operating Officer Carolina Power & Light Company BERT COLLINS President and Chief Executive Officer North Carolina Mutual Life Insurance Company RICHARD L. DAUGHERTY North Carolina Senior State Executive, Vice President Worldwide Manufacturing IBM PC Company IBM Corporation ESTELL C. LEE Chairman of the Board and President The Lee Company JOHN G. MEDLIN, JR. Chairman of the Board Wachovia Corporation WYNDHAM ROBERTSON Vice President, Communications University of North Carolina DAVID J. WHICHARD, II Chairman The Daily Reflector JOHN C. WHITAKER, JR. Chairman of the Board and Chief Executive Officer Inmar Enterprises, Inc. SOUTH CAROLINA NATIONAL CORPORATION THE SOUTH CAROLINA NATIONAL BANK ANTHONY L. FURR Chairman of the Board, President and Chief Executive Officer L. M. BAKER, JR. President and Chief Executive Officer Wachovia Corporation CHARLES J. BRADSHAW President Bradshaw Investments, Inc. W. T. CASSELS, JR. Chairman of the Board Southeastern Freight Lines, Inc. THOMAS C. COXE, III Executive Vice President Sonoco Products Company FREDERICK B. DENT, JR. President Mayfair Mills, Inc. JAMES B. EDWARDS, D.M.D. President Medical University of South Carolina ROBERT M. GALLANT Owner Gallant Development Company JAMES G. LINDLEY Chairman Emeritus JOHN G. MEDLIN, JR. Chairman of the Board Wachovia Corporation JOE A. PADGETT Executive Vice President The South Carolina National Bank RICHARD H. PENNELL President Metromont Materials Corporation W. M. SELF President and Chief Executive Officer Greenwood Mills, Inc. ROBERT S. SMALL, JR. President AVTEX Properties, Inc. WILLIAM G. TAYLOR President The Springs Company BEATRICE R. THOMPSON, PH.D. Coordinator of Psychological Services Anderson School District Five 64 67 - ------------------------------------------------------------------------------ WACHOVIA CORPORATION DIRECTORS AND OFFICERS DIRECTORS L. M. BAKER, JR. President and Chief Executive Officer JOHN G. MEDLIN, JR. Chairman of the Board RUFUS C. BARKLEY, JR. Chairman of the Board Cameron & Barkley Company CRANDALL C. BOWLES Executive Vice President Springs Industries, Inc. JOHN L. CLENDENIN Chairman of the Board, President and Chief Executive Officer BellSouth Corporation LAWRENCE M. GRESSETTE, JR. Chairman of the Board, President and Chief Executive Officer SCANA Corporation THOMAS K. HEARN, JR. President Wake Forest University W. HAYNE HIPP President and Chief Executive Officer The Liberty Corporation ROBERT M. HOLDER, JR. Chairman of the Board and Chief Executive Officer Holder Corporation DONALD R. HUGHES Vice Chairman of the Board and Chief Financial Officer Burlington Industries, Inc. F. KENNETH IVERSON Chairman and Chief Executive Officer Nucor Corporation JAMES W. JOHNSTON Chairman and Chief Executive Officer R. J. Reynolds Tobacco Worldwide W. DUKE KIMBRELL Chairman of the Board and Chief Executive Officer Parkdale Mills, Inc. JAMES G. LINDLEY Chairman Emeritus South Carolina National Corporation The South Carolina National Bank JAMES H. MILLIS, SR. Partner Amos/Millis Company J. MACK ROBINSON Chairman of the Board and President Delta Life Insurance Company HERMAN J. RUSSELL Chairman of the Board and Chief Executive Officer H. J. Russell & Company SHERWOOD H. SMITH, JR. Chairman of the Board and Chief Executive Officer Carolina Power & Light Company CHARLES MCKENZIE TAYLOR Chairman of the Board Taylor & Mathis, Inc. EXECUTIVE OFFICERS L. M. BAKER, JR. President and Chief Executive Officer JERRY D. CRAFT Executive Vice President MICKEY W. DRY Executive Vice President Chief Credit Officer HUGH M. DURDEN Executive Vice President ANTHONY L. FURR Executive Vice President WALTER E. LEONARD, JR. Executive Vice President KENNETH W. MCALLISTER Executive Vice President General Counsel ROBERT S. MCCOY, JR. Executive Vice President Chief Financial Officer J. WALTER MCDOWELL Executive Vice President G. JOSEPH PRENDERGAST Executive Vice President RICHARD B. ROBERTS Executive Vice President Treasurer 65 68 GRAPHICS APPENDIX 1. RETURN ON ASSETS (AVERAGE) - The graph appearing on page 9 of the 1993 -------------------------- Annual Report plots the return on assets for Wachovia Corporation and subsidiaries (the Corporation) and the Montgomery Securities Median (median) of the 25 largest U.S. Banks. The Corporation's information is displayed in tabular format on page 8, Table 1 of the 1993 Annual Report. The return on assets for the median of the 25 largest U.S. Banks was .99%, .78%, .58%, .72%, .85% and 1.16% for the years ended 1988-1993, respectively. 2. RETURN ON COMMON EQUITY (AVERAGE) - The graph appearing on page 9 of the --------------------------------- 1993 Annual Report plots the return on common equity for the Corporation and the median of the 25 largest U.S. Banks. The Corporation's information is displayed in tabular format on page 8, Table 1 of the 1993 Annual Report (return on shareholders' equity). The return on common equity for the median of the 25 largest U.S. Banks was 17.16%, 13.07%, 9.57%, 10.49%, 13.43% and 16.74% for the years ended 1988-1993, respectively. 3. COMMON EQUITY TO ASSETS (AVERAGE) - The graph appearing on page 9 of the --------------------------------- 1993 Annual Report plots common equity to assets for the Corporation and the median of the 25 largest U.S. Banks. The Corporation's information is displayed in tabular format on page 8, Table 1 of the 1993 Annual Report (shareholders' equity to total assets). The common equity to assets for the median of the 25 largest U.S. Banks was 5.01%, 5.07%, 4.97%, 5.36%, 6.15% and 6.57% for the years ended 1988-1993, respectively. 4. NET INTEREST INCOME (TAXABLE EQUIVALENT) AS A PERCENTAGE OF ----------------------------------------------------------- AVERAGE EARNING ASSETS - The graph appearing on page 10 of the 1993 Annual ---------------------- Report plots the net yield on interest-earning assets for the Corporation and the median of the 25 largest U.S. Banks. The Corporation's information is displayed in tabular format on page 8, Table 1 of the 1993 Annual Report. The net yield on interest-earning assets for the median of the 25 largest U.S. Banks was 4.14%, 4.02%, 3.75%, 4.05%, 4.44% and 4.48% for the years ended 1988-1993, respectively. 5. NET LOAN LOSSES TO AVERAGE LOANS - The graph appearing on page 20 of the -------------------------------- 1993 Annual Report plots net loan losses to average loans for the Corporation and the median of the 25 largest U.S. Banks. The Corporation's information is displayed in tabular format on page 22, Table 9 of the 1993 Annual Report. The net loan losses to average loans for the median of the 25 largest U.S. Banks was .98%, .98%, 1.70%, 1.54%, 1.25% and .76%, for the years ended 1988-1993, respectively. 69 6. NONPERFORMING ASSETS TO YEAR-END LOANS AND FORECLOSED PROPERTY - The -------------------------------------------------------------- graph appearing on page 20 of the 1993 Annual Report plots nonperforming assets to year-end loans and foreclosed property for the Corporation and the median of the 25 largest U.S. Banks. The Corporation's information is displayed in tabular format on page 20, Table 8 of the 1993 Annual Report. The nonperforming assets to year-end loans and foreclosed property for the median of the 25 largest U.S. Banks was 2.63%, 2.61%, 3.88%, 4.20%, 3.14% and 1.76% for the years ended 1988-1993, respectively. 7. EARNINGS COVERAGE OF NET LOAN LOSSES (EXCLUDING SUBSIDIARY SALE AND ------------------------------------------------------------------- SECURITIES TRANSACTIONS) - The graph appearing on page 21 of the 1993 ------------------------ Annual Report plots the Corporation's earnings before income taxes and provision for loan losses and the number of times earnings covered net loan losses. The earnings coverage of net loan losses is displayed in tabular format on page 22, Table 9 of the 1993 Annual Report. The Corporation's earnings before income taxes and provision for loan losses excluding subsidiary sales and securities transactions were (in millions) $458.1, $494.7, $571.1, $562.8, $694.6 and $752.8 for the years ended 1988-1993, respectively. 8. LOAN LOSS EXPERIENCE - The graph appearing on page 21 of the 1993 Annual -------------------- Report plots the net loan losses to average loans and loan loss experience for various loan categories. The net loan losses to average loans is displayed in tabular format on page 22, Table 9 of the 1993 Annual Report. The loan loss experience for credit card, commercial, foreign, and other loans for the years ended 1988-1993 (in millions) is listed below:
Credit Card Commercial Foreign Other Total ------ ---------- ------- ----- ----- 1988 $28.350 $ 8.400 $39.705 $32.025 $108.480 1989 $32.838 $ 9.418 $ .055 $26.026 $ 68.337 1990 $41.821 $16.278 $ (.319) $36.025 $ 93.805 1991 $65.359 $56.490 $ .197 $80.953 $202.999 1992 $56.795 $ .559 $ .953 $36.938 $ 95.245 1993 $52.675 $ 1.220 $ (.032) $13.548 $ 67.411
9. NONINTEREST EXPENSE AS A PERCENTAGE OF TOTAL ADJUSTED REVENUES (EXCLUDING ------------------------------------------------------------------------- SECURITIES AND SUBSIDIARY SALE GAINS) - The graph appearing on page 24 of ------------------------------------- the 1993 Annual Report plots the overhead ratios for the Corporation and the median of the 25 largest U.S. Banks. The overhead ratios for the Corporation are displayed in tabular format on page 24, Table 11 of the 1993 Annual Report. The overhead ratios for the median of the 25 largest U.S. Banks were 61.81%, 63.27%, 64.80%, 64.84%, 64.52% and 62.54% for the years ended 1988-1993, respectively. 70 10. YEAR-END SHAREHOLDERS' EQUITY PER SHARE - The graph appearing on page 27 --------------------------------------- of the 1993 Annual Report plots the book value per share for the Corporation at year-end for the years ended 1988-1993. This information is displayed in tabular format on page 27, Table 14 of the 1993 Annual Report. The five-year compound growth rate was 8.5% for the Corporation. 11. CASH DIVIDENDS PER SHARE - The graph appearing on page 62 of the 1993 ------------------------ Annual Report plots the cash dividends per share paid by the Corporation prior to the merger for the years ended 1988-1993. This information is displayed in tabular format on page 62, Table 21 of the 1993 Annual Report. The five-year compound growth rate was 13.7%. 12. COMMON STOCK PRICE/EARNINGS RATIOS - The graph appearing on page 62 of the ---------------------------------- 1993 Annual Report plots the common stock price/earnings ratios based on the high and low common stock prices and annual net income per primary share as originally reported by the Corporation prior to merger. The high price/earnings ratios were 9.4x, 11.7x, 10.5x, 22.4x, 13.8x and 14.3x for the years ended 1988-1993, respectively. The low price/earnings ratios for the years ended 1988-1993 were 7.7x, 8.0x, 7.6x, 15.1x, 11.3x and 11.3x, respectively. 13. CASH DIVIDEND PAYOUT - The graph appearing on page 62 of the 1993 Annual -------------------- Report plots total dividends (including amounts paid by pooled companies) as a percentage of net income. The total dividends paid (in millions) for the years 1988-1993 were $91.6, $111.5, $130.8, $146.4, $170.8 and $191.5, respectively. The payout ratios for the Corporation were 30.7%, 34.0%, 37.8%, 63.8%, 39.4% and 38.9% for the years ended 1988-1993, respectively. 14. QUARTERLY COMMON STOCK PRICE RANGE - The graph appearing on page 63 of the ---------------------------------- 1993 Annual Report plots the quarterly high and low stock prices for the years ended 1992 and 1993.
1992 1993 High Low High Low ---- --- ---- --- 1st Quarter 31 28 1/4 36 7/8 32 1/2 2nd Quarter 33 28 5/8 40 1/2 32 3/8 3rd Quarter 32 3/4 28 7/8 40 3/8 33 3/8 4th Quarter 34 3/4 29 1/2 39 3/4 31 7/8
15. QUARTERLY COMMON STOCK PRICE/EARNINGS RATIOS - The graph appearing on page -------------------------------------------- 63 of the 1993 Annual Report plots the quarterly common stock price/earnings ratios based on high and low common stock prices for each period and net income per 71 primary share for the 12 months ended on the last day of each period. The Corporations's quarterly common stock price/earnings ratios for the years ended 1992 and 1993 are listed below:
1992 1993 High Low High Low ---- --- ---- --- 1st Quarter 20.7x 18.8x 14.2x 12.5x 2nd Quarter 21.2x 18.3x 15.1x 12.1x 3rd Quarter 20.1x 17.7x 14.6x 12.1x 4th Quarter 13.8x 11.8x 14.0x 11.3x
16. FIVE-YEAR TOTAL RETURN - The graph appearing on page 63 of the 1993 Annual ---------------------- Report plots the five-year total return for the Corporation, the S&P 500 and the KBW 50 Index. The base period of December 31, 1988 is equal to 100. Dividends are assumed to be reinvested. The data for the KBW 50 Index is weighted by market capitalization. The five-year total return for the Corporation was 100%, 134.34%, 143.59%, 206.31%, 250.14% and 253.34% for the years ended 1988-1993, respectively. The S&P 500 five-year total return was 100%, 131.68%, 127.58%, 166.46%, 179.14%, and 197.19% for the years ended 1988-1993, respectively. The KBW 50 Index five-year total return was 100%, 118.91%, 85.40%, 135.17%, 172.23% and 181.77% for the years ended 1988-1993, respectively.
Cross Reference to 1993 Annual Report Omitted Graphs Page of Description -------------- ------------------- 1. Net Income Per Share (fully diluted) Page 8, Table 1 2. Net Income Page 8, Table 1 3. Net Interest Income (taxable equivalent) Page 8, Table 1 4. Allowance for Loan Losses Page 20, Table 8 5. Quarterly Net Income Per Share (fully diluted), 1992 Page 29, Table 16 6. Quarterly Net Income Per Share (fully diluted), 1993 Page 29, Table 16 7. Common Stock Price Range Page 62, Table 21
The above listed graphs were omitted from the EDGAR version of the 1993 Form 10-K, Exhibit 13. However, the information depicted in the graphs was adequately displayed in tabular format within the 1993 Annual Report. EX-23.1 9 WACHOVIA CONSENTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8: Nos. 33-34386, 33-15706, 2-99538, 33-44191, 33-44386, 33-44394, 33-54094; Form S-3: Nos. 33-6280, 33-2232 of Wachovia Corporation and in the related prospectuses of our report dated January 13, 1994, with respect to the consolidated financial statements of Wachovia Corporation incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1993. /s/ Ernst & Young Winston-Salem, North Carolina March 25, 1994 EX-23.2 10 WACHOVIA CONSENTS 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (No. 33-6280 and No. 33-2232) and Form S-8 (No. 33-34386, No. 33-15706, No. 2-99538, No. 33-44191, No. 33-44386, No. 33-44394 and No. 33-54094) of Wachovia Corporation of our report dated January 15, 1992 relating to the financial statements of South Carolina National Corporation and Subsidiaries for the year ended December 31, 1991, appearing as Exhibit 99 in this Form 10-K. /s/ Price Waterhouse - ----------------------- PRICE WATERHOUSE Columbia, South Carolina March 24, 1994 EX-24 11 WACHOVIA POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: We, the undersigned directors of Wachovia Corporation, and each of us, do hereby make, constitute and appoint Kenneth W. McAllister and Alice W. Grogan, and each of them (either of whom may act without the consent or joinder of the other), our attorneys-in-fact and agents with full power of substitution for us and in our name, place and stead, in any and all capacities, to execute for us and in our behalf the Annual Report on Form 10-K of Wachovia Corporation for the year ended December 31, 1993 and any and all amendments to the foregoing Report and any other documents and instruments incidental thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as we might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and/or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, we the undersigned have executed this Power of Attorney this 28th day of January, 1994. /s/ L. M. Baker, Jr. /s/ Rufus C. Barkley, Jr. - ------------------------------ ------------------------------ L. M. Baker, Jr. Rufus C. Barkley, Jr. /s/ Crandall C. Bowles /s/ John L. Clendenin - ------------------------------ ------------------------------ Crandall C. Bowles John L. Clendenin /s/ Lawrence M. Gressette, Jr. /s/ Thomas K. Hearn, Jr. - ------------------------------ ------------------------------ Lawrence M. Gressette, Jr. Thomas K. Hearn, Jr. /s/ W. Hayne Hipp /s/ Robert M. Holder, Jr. - ------------------------------ ------------------------------ W. Hayne Hipp Robert M. Holder, Jr. /s/ Donald R. Hughes - ------------------------------ ------------------------------ Donald R. Hughes F. Kenneth Iverson /s/ James W. Johnston /s/ W. Duke Kimbrell - ------------------------------ ------------------------------ James W. Johnston W. Duke Kimbrell /s/ James G. Lindley /s/ John G. Medlin, Jr. - ------------------------------ ------------------------------ James G. Lindley John G. Medlin, Jr. /s/ J. Mack Robinson - ------------------------------ ------------------------------ James H. Millis J. Mack Robinson /s/ Herman J. Russell /s/ Sherwood H. Smith, Jr. - ------------------------------ ------------------------------ Herman J. Russell Sherwood H. Smith, Jr. /s/ Charles McKenzie Taylor - ------------------------------ Charles McKenzie Taylor 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: I, the undersigned director of Wachovia Corporation, do hereby make, constitute and appoint Kenneth W. McAllister and Alice W. Grogan, and each of them (either of whom may act without the consent or joinder of the other), my attorneys-in-fact and agents with full power of substitution for me and in my name, place and stead, in any and all capacities, to execute for me and in my behalf the Annual Report on Form 10-K of Wachovia Corporation for the year ended December 31, 1993 and any and all amendments to the foregoing Report and any other documents and instruments incidental thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and/or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I the undersigned have executed this Power of Attorney this 28th day of January, 1994. /s/ F. Kenneth Iverson ---------------------------- F. Kenneth Iverson 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: I, the undersigned director of Wachovia Corporation, do hereby make, constitute and appoint Kenneth W. McAllister and Alice W. Grogan, and each of them (either of whom may act without the consent or joinder of the other), my attorneys-in-fact and agents with full power of substitution for me and in my name, place and stead, in any and all capacities, to execute for me and in my behalf the Annual Report on Form 10-K of Wachovia Corporation for the year ended December 31, 1993 and any and all amendments to the foregoing Report and any other documents and instruments incidental thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents and/or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I the undersigned have executed this Power of Attorney this 3rd day of February, 1994. /s/ James H. Millis ---------------------------- James H. Millis EX-99 12 WACHOVIA REPORT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 99 Report of Independent Accountants --------------------------------- To the Board of Directors and Shareholder of South Carolina National Corporation In our opinion, the consolidated statements of income, of cash flows and of changes in shareholder's equity of South Carolina National Corporation and Subsidiaries (not separately presented herein - a wholly-owned subsidiary of Wachovia Corporation) present fairly, in all material respects, the results of their operations and their cash flows for the year ended December 31, 1991, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. As discussed in Notes 1 and 2, as a result of the merger with Wachovia Corporation, the Corporation changed its loan, litigation and real estate valuation policies and practices so as to be applied consistently with those of Wachovia Corporation. /s/ Price Waterhouse Columbia, South Carolina January 15, 1992 -----END PRIVACY-ENHANCED MESSAGE-----