-----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, MmFgQNpSBmmhXwZPuWGE8ofBGPIlPyXfyzRNwba7B3ICtxE0imYVNGHWtNX/EPQ4 FK3DcSCV0Mb6V41K4OSl6w== 0000950144-94-001484.txt : 19940817 0000950144-94-001484.hdr.sgml : 19940817 ACCESSION NUMBER: 0000950144-94-001484 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09021 FILM NUMBER: 94543751 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-Q 1 WACHOVIA FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 1994 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 ---------------------------- 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 --- --- Indicated below is the number of shares outstanding of each of the issuer's classes of common stock as of July 31, 1994 Common Stock, $5.00 par value, 171,081,682 shares 2 QUARTERLY REPORT ON FORM 10-Q WACHOVIA CORPORATION June 30, 1994 PART I - FINANCIAL INFORMATION Item 1. Financial Statements 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. Wachovia's principal subsidiaries, Wachovia Bank of North Carolina, N.A., Wachovia Bank of Georgia, N.A., and Wachovia Bank of South Carolina, N.A. provide personal, commercial, trust and institutional banking services through 494 full-service banking offices located in North Carolina, South Carolina and Georgia. In addition, The First National Bank of Atlanta, another subsidiary of Wachovia Corporation, provides credit card services for Wachovia's affiliated banks. National and international banking services are provided through Wachovia's three Cayman Island branches, an Edge Act subsidiary located in New York, and various offices located throughout the Southeast, the nation and the world. The following consolidated financial statements of Wachovia Corporation and subsidiaries are included on pages 18 through 21 of the quarterly Report to Shareholders of the Registrant (attached hereto as Exhibit 19) and are incorporated herein by reference: Consolidated Statement of Condition Consolidated Statement of Income Consolidated Statement of Shareholders' Equity Consolidated Statement of Cash Flows The accompanying unaudited consolidated financial statements in Exhibit 19 do not include all information and footnotes required under generally accepted accounting principles. However, in the opinion of management, the profit and loss information presented in the interim financial statements reflects all adjustments necessary to present fairly the results of operations for the periods presented. Adjustments reflected in the second quarter 1994 figures are of a normal, recurring nature. The results of operations shown in the interim statements are not necessarily indicative of the results that may be expected for the entire year. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis included on pages 4 - 17 of the quarterly Report to Shareholders of the Registrant (attached hereto as Exhibit 19) is incorporated herein by reference. PART II - OTHER INFORMATION Item 5. Other Information On July 22, 1994, the board of directors of Wachovia Corporation authorized the repurchase of up to 5 million shares of the corporation's common stock. The action replaces earlier authorizations to repurchase the corporation's common stock. The company intends to continue reissuing some or all of the repurchased shares for its employee stock plans, dividend reinvestment plan and for other appropriate purposes. 3 QUARTERLY REPORT ON FORM 10-Q WACHOVIA CORPORATION June 30, 1994 Item 5. Other Information (continued) In May 1994, South Carolina National Bank, a member company of Wachovia Corporation since 1991, changed its name to Wachovia Bank of South Carolina, N.A. The action was approved by its board of directors in October 1993. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Computation of Earnings Per Common Share 19 Wachovia Corporation Report to Shareholders for the period ending June 30, 1994 (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended June 30, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WACHOVIA CORPORATION August 12, 1994 By ROBERT S. McCOY, JR. ------------------------------ Robert S. McCoy, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) August 12, 1994 By JOHN C. McLEAN, JR. ------------------------------ John C. McLean, Jr. Comptroller (Principal Accounting Officer) EX-11 2 COMPUTATION OF EARNINGS 1 Wachovia Corporation Computation of Earnings Per Common Share Exhibit 11
Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ 1994 1993 1994 1993 ------ ------ ------ ------ PRIMARY (in thousands, except per share amount) Average common shares outstanding 171,298 172,979 171,372 172,449 Dilutive common stock options - based on treasury stock method using average market price 1,178 1,662 1,200 1,633 Dilutive common stock awards - based on treasury stock method using average market price 82 71 76 67 -------- -------- -------- -------- Average primary shares outstanding 172,558 174,712 172,648 174,149 ======== ======== ======== ======== Net income $134,141 $123,123 $258,940 $244,691 ======== ======== ======== ======== Per share amount $ .78 $ .71 $ 1.50 $ 1.41 FULLY DILUTED (in thousands, except per share amount) Average common shares outstanding 171,298 172,979 171,372 172,449 Dilutive common stock options - based on treasury stock method using higher of period-end market price or average market price 1,188 1,662 1,216 1,633 Dilutive common stock awards - based on treasury stock method using higher of period-end market price or average market price 82 71 76 71 Convertible notes assumed converted 629 1,292 634 1,712 -------- -------- -------- -------- Average fully diluted shares outstanding 173,197 176,004 173,298 175,865 ======== ======== ======== ======== Net income $134,141 $123,123 $258,940 $244,691 Add interest on convertible notes after taxes 133 250 266 610 -------- -------- -------- -------- Adjusted net income $134,274 $123,373 $259,206 $245,301 ======== ======== ======== ======== Per share amount $ .78 $ .70 $ 1.50 $ 1.39
EX-19 3 REPORT TO SHAREHOLDERS 1 Exhibit 19 2 WACHOVIA - - -------------------------------------------------------------------------------- REPORT TO SHAREHOLDERS FOR THE PERIOD ENDING JUNE 30, 1994 Dear Wachovia Shareholder: During the second quarter, the economy continued to grow at a moderate pace, while price inflation remained subdued. Banking benefited from increased loan demand and improved credit losses, although net interest margins remained under pressure. In this environment, Wachovia achieved good earnings growth. Net income per fully diluted share was $.78, up 10.6 percent from $.70 in the same three months of 1993. Net income totaled $134.1 million versus $123.1 million and represented annualized returns of 17.5 percent on shareholders' equity and 1.46 percent on assets. Annualized returns include unrealized gains or losses on securities available-for-sale, net of tax. For the first six months, net income per fully diluted share was $1.50, higher by 7.2 percent from $1.39 in the year-earlier period. Net income was $258.9 million compared with $244.7 million and represented annualized returns of 17 percent on equity and 1.43 percent on assets. Average interest-earning assets increased $3.537 billion or 12.2 percent for the second period and $3.328 billion or 11.5 percent for the first half led by good growth in loan demand. Average loans rose $2.701 billion or 12.7 percent for the quarter, with the commercial category leading the increase, and $2.316 billion or 10.9 percent for the first six months, with the retail portfolio showing the largest gain. Compared with the strong growth experienced in the first quarter, average loans were up an additional $959 million or an annualized rate of 16.8 percent, although the rate of increase is expected to moderate in the latter half of the year. Average interest-bearing liabilities expanded $3.531 billion or 14.9 percent and $3.253 billion or 13.8 percent for the three and six months, respectively. Average interest-bearing time deposits remained largely unchanged for both periods in comparison with year-earlier levels, while short-term borrowings and long-term debt rose. Taxable equivalent net interest income increased modestly for both the quarter and first half. The impact from good growth in interest-earning assets was moderated by lower average rates earned and higher levels of interest-bearing liabilities. The net yield on interest-earning assets decreased 44 basis points for both the second period and year to date. Other operating revenue rose $4.7 million or 3.2 percent for the quarter and was up modestly for the first six months but grew $8.4 million or 5.8 percent from the first quarter. Year-over-year gains, largely in trust fees and credit card income, offset lower revenues from mortgage fee income, deposit account service charges and trading account profits. Noninterest expense increased $1.7 million or less than 1 percent for the second period and was down $13.4 million or 2.4 percent for the first half. At June 30, 1994, nonperforming assets totaled $125 million or .51 percent of loans and foreclosed property compared with $227 million or 1.04 percent a year earlier. Net loan losses for the second period and first half were $15.9 million or .26 percent of average loans and $33 million or .28 percent, respectively, versus $17.2 million or .32 percent and $31.2 million or .29 percent in the same periods of 1993. The provision for loan losses was $16.3 million for the quarter, down $9.7 million or 37.3 percent, and $34.1 million year to date, a decrease of $17.1 million or 33.3 percent. At second quarter-end, the allowance for loan losses totaled $406 million, representing 1.67 percent of loans and 403 percent coverage of nonperforming loans. Shareholders' equity was 8.50 percent of assets, and the Tier I and total capital to risk-adjusted assets ratios were 9.56 percent and 13.35 percent, respectively. The pace of economic growth is likely to be somewhat more restrained over the remainder of the year, while competition among banks and other financial services providers continues to intensify. As part of its strategy to address an increasingly challenging period for banking, Wachovia is realigning its corporate, consumer, investment management and trust functions. The changes will strengthen the development and delivery of services and increase responsiveness and attention to customers in each market served by Wachovia. In the News Developments section on page 2, the important steps are discussed in more detail. These initiatives, combined with a strong credit culture, advanced technology and excellent people, position Wachovia well to remain a leader in banking. Sincerely, /s/ L. M. Baker, Jr. - - -------------------------- L. M. Baker, Jr. Chief Executive Officer July 29, 1994 2 [ ] NEWS DEVELOPMENTS - - -------------------------------------------------------------------------------- - - - Wachovia announced on July 22 a realignment of its corporate, consumer, investment management and trust functions to strengthen the development and delivery of services to customers and provide more focus on each market served by the corporation. L.M. Baker, Jr., chief executive officer, said corporate banking, corporate trust, employee benefit and charitable trust services will be combined under the Corporate Financial Services Division. Retail banking and personal trust services will be part of the Consumer Financial Services Division. The Financial Management Division will have responsibility for fiduciary investment management services, bond, money market and brokerage services as well as the control and funds management functions. "Individual and corporate customers are increasingly looking for convenient and effective access to professional financial services," Mr. Baker said. "The alignment of customer-centered functions with relationship bankers and trust professionals will enable Wachovia to identify and respond more directly to the specialized financial needs of customers." Hugh M. Durden will succeed G. Joseph Prendergast as executive in charge of the Corporate Financial Services Division and president of Wachovia Corporate Services, Inc., which offers corporate banking services outside Wachovia's home markets. Currently, Mr. Durden is responsible for the Trust Division. Under the new structure, Mr. Prendergast will devote full energy to his continuing responsibilities as president and chief executive officer of Wachovia Bank of Georgia. Will B. Spence, Jr., will continue as executive in charge of the newly named Consumer Financial Services Division. Robert S. McCoy, Jr., continues as executive in charge of the expanded Financial Management Division. Within the Consumer Financial Services Division, George W.P. Atkins will continue as the senior Personal Trust executive. Mr. Atkins has ongoing accountability for maintaining the integrity of personal trust relationships and high standards of fiduciary responsibility. Fiduciary services such as estate planning, estate settlement and estate management will continue to be provided by Personal Trust officers and estate administrators in Wachovia's member banks. Earlier, it was announced that W. Doug King became executive in charge of the Consumer Credit Services Division of Wachovia Corporation effective June 3. He is responsible for the corporation's credit card, sales finance, mortgage banking activities and the Wachovia On-Call central telephone and sales and service center. In addition, Mr. King was elected an executive vice president of Wachovia Corporation by the board of directors at its July meeting. - - - The board of directors on July 22 declared a third quarter dividend of $.30 per share, payable September 1 to shareholders of record on August 8. The dividend represents an increase of 11.1 percent from $.27 per share paid in the same quarter of 1993. For the year to date, dividends will total $.90 per share, higher by 11.1 percent from $.81 per share paid in the same year-earlier period. The board also authorized the repurchase of up to 5 million shares of the corporation's common stock. The action replaces earlier authorizations to repurchase the corporation's common stock. The company intends to continue reissuing some or all of the repurchased shares for its employee stock plans, dividend reinvestment plan and for other appropriate purposes. [ ] SELECTED PERIOD-END DATA - - --------------------------------------------------------------------------------
June 30 June 30 1994 1993 -------- -------- Banking offices: North Carolina . . . . . . . . . . . . . . . . 216 222 Georgia . . . . . . . . . . . . . . . . . . . . 127 129 South Carolina . . . . . . . . . . . . . . . . 151 158 ------- ------- Total . . . . . . . . . . . . . . . . . . . . 494 509 ======= ======= Automated banking machines: North Carolina . . . . . . . . . . . . . . . . 270 232 Georgia . . . . . . . . . . . . . . . . . . . . 181 175 South Carolina . . . . . . . . . . . . . . . . 165 166 ------- ------- Total . . . . . . . . . . . . . . . . . . . . 616 573 ======= ======= Employees (full-time equivalent) . . . . . . . . 15,553 15,838 Common stock shareholders of record . . . . . . . 28,722 27,696 Common shares outstanding (thousands) . . . . . . 171,182 173,498
2 3 [ ] FINANCIAL HIGHLIGHTS - - -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 30 Percent June 30 Percent 1994 1993 Change 1994 1993 Change -------- -------- ------- -------- -------- ------- EARNINGS AND DIVIDENDS (thousands, except per share data) Net income . . . . . . . . . . . . . . . . . . . $134,141 $123,123 8.9 $258,940 $244,691 5.8 Cash dividends paid on common stock . . . . . . . 51,399 46,762 9.9 102,842 93,216 10.3 Payout ratio (total cash dividends\ net income) . . . . . . . . . . . . . . . . . . 38.3% 38.0% 39.7% 38.1% Net income per common share: Primary . . . . . . . . . . . . . . . . . . . . $ .78 $ .71 10.3 $ 1.50 $ 1.41 6.7 Fully diluted . . . . . . . . . . . . . . . . . $ .78 $ .70 10.6 $ 1.50 $ 1.39 7.2 Cash dividends paid per common share . . . . . . $ .30 $ .27 11.1 $ .60 $ .54 11.1 Average primary shares outstanding . . . . . . . 172,558 174,712 (1.2) 172,648 174,149 (.9) Average fully diluted shares outstanding . . . . 173,197 176,004 (1.6) 173,298 175,865 (1.5) Annualized return on average assets . . . . . . . 1.46% 1.51% 1.43% 1.50% Annualized return on average shareholders' equity . . . . . . . . . . . . . 17.47 17.27 17.06 17.33 Including average unrealized gains (losses) on securities available-for-sale, net of tax:* Annualized return on average assets . . . . . . 1.46 -- 1.43 -- Annualized return on average shareholders' equity . . . . . . . . . . . . 17.52 -- 17.03 -- BALANCE SHEET DATA AT PERIOD-END (millions, except per share data) Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,069 $ 33,248 11.5 Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,964 29,573 11.5 Loans -- net of unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,300 21,690 12.0 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,218 21,886 1.5 Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,637 24,392 13.3 Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,149** 2,950 6.7 Shareholders' equity to total assets . . . . . . . . . . . . . . . . . . . . . . . . 8.50% 8.87% Risk-based capital ratios: Tier I capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.56 10.06 Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.35 13.34 Per share: Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.40 $ 17.01 8.2 Common stock closing price (NYSE) . . . . . . . . . . . . . . . . . . . . . . . . . 33.125 34.375 (3.6) * Includes unrealized gains (losses) on securities available-for-sale of ($9) for the second quarter and $7 year-to-date, net of tax ** Includes unrealized losses on securities available-for-sale of ($15), net of tax
[ ] COMMON STOCK DATA -- PER SHARE - - --------------------------------------------------------------------------------------------------------------------------------
1994 1993 -------------------- ------------------------------- Second First Fourth Third Second Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- Market value: Period-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 1/8 $ 31 3/4 $ 33 1/2 $ 39 1/8 $ 34 3/8 High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 3/8 35 1/8 40 1/2 40 3/8 40 1/2 Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3/4 30 1/8 31 7/8 33 3/8 32 3/8 Book value at period-end . . . . . . . . . . . . . . . . . . . . . . 18.40 18.05 17.61 17.29 17.01 Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 .30 .30 .27 .27 Price/earnings ratio* . . . . . . . . . . . . . . . . . . . . . . . . 11.3x 11.1x 11.8x 14.2x 12.8x * Based on most recent twelve months net income per primary share and period-end stock price
3 4 [ ] MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SUMMARY TABLE 1 - - ------------------------------------------------------------------------------------------------------------------------------------
Twelve Months 1994 1993 Ended --------------- -------------------------- Six Months Ended June 30 Second First Fourth Third Second June 30 1994 Quarter Quarter Quarter Quarter Quarter 1994 1993 ------- ------- ------- ------- ------- ------- ---------- ---------- SUMMARY OF OPERATIONS (thousands, except per share data) Interest income -- taxable equivalent . . . $2,280,165 $594,669 $558,329 $568,749 $558,418 $549,446 $1,152,998 $1,094,571 Interest expense . . . . . . . . . . . . . 887,472 242,488 216,007 217,832 211,145 203,377 458,495 410,035 ---------- -------- -------- -------- -------- -------- ---------- ---------- Net interest income -- taxable equivalent . 1,392,693 352,181 342,322 350,917 347,273 346,069 694,503 684,536 Taxable equivalent adjustment . . . . . . . 100,577 24,882 24,476 24,732 26,487 24,423 49,358 47,682 ---------- -------- -------- -------- -------- -------- ---------- ---------- Net interest income . . . . . . . . . . . . 1,292,116 327,299 317,846 326,185 320,786 321,646 645,145 636,854 Provision for loan losses . . . . . . . . . 75,597 16,342 17,759 18,013 23,483 26,084 34,101 51,156 ---------- -------- -------- -------- -------- -------- ---------- ---------- Net interest income after provision for loan losses . . . . . . . . 1,216,519 310,957 300,087 308,172 297,303 295,562 611,044 585,698 Other operating revenue . . . . . . . . . . 600,370 153,299 144,869 152,441 149,761 148,593 298,168 297,977 Gain on sale of subsidiary . . . . . . . . -- -- -- -- -- -- -- 8,030 Investment securities gains . . . . . . . . 8,711 221 572 7,216 702 1,254 793 11,476 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total other income . . . . . . . . . . . . 609,081 153,520 145,441 159,657 150,463 149,847 298,961 317,483 Personnel expense . . . . . . . . . . . . . 572,348 141,232 141,014 147,709 142,393 138,234 282,246 278,578 Other expense . . . . . . . . . . . . . . . 545,533 133,313 129,036 152,031 131,153 134,600 262,349 279,372 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total other expense . . . . . . . . . . . . 1,117,881 274,545 270,050 299,740 273,546 272,834 544,595 557,950 Income before income taxes . . . . . . . . 707,719 189,932 175,478 168,089 174,220 172,575 365,410 345,231 Applicable income taxes* . . . . . . . . . 201,375 55,791 50,679 45,092 49,813 49,452 106,470 100,540 ---------- -------- -------- -------- -------- -------- ---------- ---------- Net income . . . . . . . . . . . . . . . . $ 506,344 $134,141 $124,799 $122,997 $124,407 $123,123 $ 258,940 $ 244,691 ========== ======== ======== ======== ======== ======== ========== ========== Net income per common share: Primary . . . . . . . . . . . . . . . . . $ 2.92 $ .78 $ .72 $ .71 $ .71 $ .71 $ 1.50 $ 1.41 Fully diluted . . . . . . . . . . . . . . $ 2.92 $ .78 $ .72 $ .71 $ .71 $ .70 $ 1.50 $ 1.39 Cash dividends paid per common share . . . $ 1.17 $ .30 $ .30 $ .30 $ .27 $ .27 $ .60 $ .54 Average primary shares outstanding . . . . 173,197 172,558 172,739 173,175 174,300 174,712 172,648 174,149 Average fully diluted shares outstanding 173,988 173,197 173,378 173,943 175,414 176,004 173,298 175,865 SELECTED AVERAGE BALANCES (millions) Total assets . . . . . . . . . . . . . . . $ 35,450 $ 36,753 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 36,268 $ 32,596 Loans -- net of unearned income . . . . . . 22,695 23,969 23,010 22,165 21,656 21,268 23,492 21,176 Investment securities . . . . . . . . . . . 7,629** 7,767** 7,690** 7,992 7,072 6,615 7,728* 6,539 Other interest-earning assets . . . . . . . 1,106 829 1,083 1,234 1,277 1,145 955 1,132 Total interest-earning assets . . . . . . . 31,430 32,565 31,783 31,391 30,005 29,028 32,175 28,847 Interest-bearing deposits . . . . . . . . . 16,882 16,964 16,694 17,030 16,835 16,986 16,831 17,106 Short-term borrowed funds . . . . . . . . . 5,957 6,038 6,148 6,218 5,432 4,998 6,092 4,974 Long-term debt . . . . . . . . . . . . . . 3,269 4,281 3,670 2,774 2,370 1,768 3,977 1,567 Total interest-bearing liabilities . . . . 26,108 27,283 26,512 26,022 24,637 23,752 26,900 23,647 Noninterest-bearing deposits . . . . . . . 5,414 5,333 5,366 5,544 5,410 5,253 5,349 5,231 Total deposits . . . . . . . . . . . . . . 22,296 22,297 22,060 22,574 22,245 22,239 22,180 22,337 Shareholders' equity . . . . . . . . . . . 2,981 3,063 3,021 2,934 2,907 2,852 3,042 2,823 RATIOS (averages) Loans to deposits . . . . . . . . . . . . . 101.79% 107.49% 104.31% 98.19% 97.35% 95.63% 105.92% 94.80% Annualized net loan losses to loans . . . . .30 .26 .30 .31 .35 .32 .28 .29 Annualized net yield on interest-earning assets . . . . . . . . . 4.43 4.34 4.37 4.44 4.59 4.78 4.35 4.79 Shareholders' equity to: Total assets . . . . . . . . . . . . . . 8.41 8.33 8.44 8.28 8.58 8.72 8.39 8.66 Net loans . . . . . . . . . . . . . . . . 13.37 13.00 13.36 13.48 13.68 13.66 13.18 13.58 Annualized return on assets . . . . . . . . 1.43 1.46 1.40 1.39 1.47 1.51 1.43 1.50 Annualized return on shareholders' equity . . . . . . . . . . 16.99 17.52 16.53 16.77 17.12 17.27 17.03 17.33 * Income taxes applicable to securities transactions were $3,452, $89, $226, $2,846, $291, $371, $315 and $4,335, respectively ** Reported at amortized cost; excludes pretax unrealized gains (losses) on securities available-for-sale of $6 for the twelve months ended June 30, 1994, ($14) for the second quarter of 1994, $37 for the first quarter of 1994 and $11 for the six months ended June 30, 1994 - - ------------------------------------------------------------------------------------------------------------------------------------
4 5 RESULTS OF OPERATIONS Overview The economy continued to expand moderately in the second quarter of 1994. Business activity within the corporation's three primary states of Georgia, North Carolina and South Carolina increased in general with seasonally adjusted unemployment averaging 5.4 percent, 3.9 percent and 6.5 percent, respectively, for the second three months of the year. Wachovia's net income was $134.141 million for the second quarter and $258.940 million for the first six months of 1994 compared with $123.123 million and $244.691 million in the same periods of 1993. On a fully diluted basis, net income per share was $.78 for the quarter and $1.50 for the first half versus $.70 and $1.39, respectively, in 1993. Annualized returns including unrealized gains or losses on securities available-for-sale, net of tax, were 17.5 percent on shareholders' equity and 1.46 percent on assets for the second quarter. For the first six months, annualized returns were 17 percent on shareholders' equity and 1.43 percent on assets. Expanded operating results and the corporation's financial condition are presented in the following narrative and tables. Interest income is stated on a taxable equivalent basis which is adjusted for the tax-favored status of earnings from certain loans and investments. References to changes in assets and liabilities represent daily average levels unless otherwise noted. - - ---------------------------------------------------------------------------------------------------------------------------------- COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2 - - ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 30 June 30 1994 1993 Change 1994 1993 Change ----- ----- ------ ----- ----- ------ Interest income -- taxable equivalent . . . . . . . . . . . . $3.45 $3.14 $ .31 $6.68 $6.28 $ .40 Interest expense . . . . . . . . . . . . . . . . . . . . . . 1.41 1.16 .25 2.66 2.35 .31 ----- ----- ----- ----- ----- ----- Net interest income -- taxable equivalent . . . . . . . . . . 2.04 1.98 .06 4.02 3.93 .09 Taxable equivalent adjustment . . . . . . . . . . . . . . . . .15 .14 .01 .28 .27 .01 ----- ----- ----- ----- ----- ----- Net interest income . . . . . . . . . . . . . . . . . . . . . 1.89 1.84 .05 3.74 3.66 .08 Provision for loan losses . . . . . . . . . . . . . . . . . . .09 .15 (.06) .20 .29 (.09) ----- ----- ----- ----- ----- ----- Net interest income after provision for loan losses . . . . . 1.80 1.69 .11 3.54 3.37 .17 Other operating revenue . . . . . . . . . . . . . . . . . . . .89 .85 .04 1.73 1.71 .02 Gain on sale of subsidiary . . . . . . . . . . . . . . . . . -- -- -- -- .05 (.05) Investment securities gains . . . . . . . . . . . . . . . . . -- .01 (.01) -- .06 (.06) ----- ----- ----- ----- ----- ----- Total other income . . . . . . . . . . . . . . . . . . . . . .89 .86 .03 1.73 1.82 (.09) Personnel expense . . . . . . . . . . . . . . . . . . . . . . .82 .79 .03 1.63 1.60 .03 Other expense . . . . . . . . . . . . . . . . . . . . . . . . .77 .77 -- 1.52 1.60 (.08) ----- ----- ----- ----- ----- ----- Total other expense . . . . . . . . . . . . . . . . . . . . . 1.59 1.56 .03 3.15 3.20 (.05) Income before income taxes . . . . . . . . . . . . . . . . . 1.10 .99 .11 2.12 1.99 .13 Applicable income taxes . . . . . . . . . . . . . . . . . . . .32 .28 .04 .62 .58 .04 ----- ----- ----- ----- ----- ----- Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ .78 $ .71 $ .07 $1.50 $1.41 $ .09 ===== ===== ===== ===== ===== ===== - - ----------------------------------------------------------------------------------------------------------------------------------
5 6 - - ------------------------------------------------------------------------------------------------------------------------------------ NET INTEREST INCOME AND AVERAGE BALANCES TABLE 3 - - ------------------------------------------------------------------------------------------------------------------------------------
Twelve Months 1994 1993 Ended ----------------- ---------------------------- Six Months Ended June 30 Second First Fourth Third Second June 30 1994 Quarter Quarter Quarter Quarter Quarter 1994 1993 ---------- -------- -------- -------- -------- -------- ---------- ---------- NET INTEREST INCOME -- TAXABLE EQUIVALENT (thousands) Interest income: Loans . . . . . . . . . . . . . . . . . $1,730,948 $458,695 $422,388 $427,617 $422,248 $416,418 $ 881,083 $ 827,763 Investment securities . . . . . . . . . 506,448 126,313 125,663 129,845 124,627 122,779 251,976 245,867 Interest-bearing bank balances . . . . 946 185 160 116 485 712 345 2,304 Federal funds sold and securities purchased under resale agreements . . 12,654 1,842 3,111 4,089 3,612 2,535 4,953 4,732 Trading account assets . . . . . . . . 29,169 7,634 7,007 7,082 7,446 7,002 14,641 13,905 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total . . . . . . . . . . . . . . . 2,280,165 594,669 558,329 568,749 558,418 549,446 1,152,998 1,094,571 Interest expense: Interest-bearing demand . . . . . . . . 57,145 13,456 13,235 14,976 15,478 14,771 26,691 29,979 Savings and money market savings . . . 146,830 37,928 34,284 36,774 37,844 37,778 72,212 77,130 Savings certificates . . . . . . . . . 222,077 53,156 53,465 56,393 59,063 61,221 106,621 125,339 Large denomination certificates . . . . 74,079 18,507 15,057 19,338 21,177 23,693 33,564 49,586 Time deposits in foreign offices . . . 15,624 4,098 3,280 5,170 3,076 2,797 7,378 6,257 Short-term borrowed funds . . . . . . . 206,749 61,337 51,625 49,877 43,910 39,659 112,962 80,060 Long-term debt . . . . . . . . . . . . 164,968 54,006 45,061 35,304 30,597 23,458 99,067 41,684 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total . . . . . . . . . . . . . . . 887,472 242,488 216,007 217,832 211,145 203,377 458,495 410,035 ---------- -------- -------- -------- -------- -------- ---------- ---------- Net interest income . . . . . . . . . . . $1,392,693 $352,181 $342,322 $350,917 $347,273 $346,069 $ 694,503 $ 684,536 ========== ======== ======== ======== ======== ======== ========== ========== Annualized net yield on interest-earning assets . . . . . . . . 4.43% 4.34% 4.37% 4.44% 4.59% 4.78% 4.35% 4.79% AVERAGE BALANCES (millions) Assets: Loans -- net of unearned income . . . . $ 22,695 $ 23,969 $ 23,010 $ 22,165 $ 21,656 $ 21,268 $ 23,492 $ 21,176 Investment securities . . . . . . . . . 7,629 7,767 7,690 7,992 7,072 6,615 7,728 6,539 Interest-bearing bank balances . . . . 26 18 17 11 59 88 18 122 Federal funds sold and securities purchased under resale agreements . . 386 182 394 513 454 329 287 305 Trading account assets . . . . . . . . 694 629 672 710 764 728 650 705 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total interest-earning assets . . . 31,430 32,565 31,783 31,391 30,005 29,028 32,175 28,847 Cash and due from banks . . . . . . . . 2,376 2,346 2,387 2,421 2,349 2,332 2,367 2,351 Premises and equipment . . . . . . . . 501 510 502 497 493 444 506 441 Other assets . . . . . . . . . . . . . 1,544 1,754 1,476 1,520 1,427 1,310 1,617 1,348 Unrealized gains (losses) on securities available-for-sale . . . . . . . . . 6 (14) 37 -- -- -- 11 -- Allowance for loan losses . . . . . . . (407) (408) (407) (409) (404) (396) (408) (391) ---------- -------- -------- -------- -------- -------- ---------- ---------- Total assets . . . . . . . . . . . $ 35,450 $ 36,753 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 36,268 $ 32,596 ========== ======== ======== ======== ======== ======== ========== ========== Liabilities and shareholders' equity: Interest-bearing demand . . . . . . . . $ 3,339 $ 3,420 $ 3,385 $ 3,319 $ 3,233 $ 3,196 $ 3,403 $ 3,162 Savings and money market savings . . . 6,068 6,103 6,074 6,080 6,013 5,946 6,089 5,948 Savings certificates . . . . . . . . . 5,404 5,283 5,355 5,426 5,551 5,648 5,319 5,703 Large denomination certificates . . . . 1,597 1,736 1,463 1,550 1,637 1,825 1,600 1,889 Time deposits in foreign offices . . . 474 422 417 655 401 371 420 404 Short-term borrowed funds . . . . . . . 5,957 6,038 6,148 6,218 5,432 4,998 6,092 4,974 Long-term debt . . . . . . . . . . . . 3,269 4,281 3,670 2,774 2,370 1,768 3,977 1,567 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total interest-bearing liabilities. 26,108 27,283 26,512 26,022 24,637 23,752 26,900 23,647 Demand deposits in domestic offices . . 5,336 5,245 5,302 5,480 5,314 5,168 5,273 5,156 Demand deposits in foreign offices . . 5 5 5 6 5 5 5 6 Noninterest-bearing time deposits in domestic offices . . . . . . . . . 73 83 59 58 91 80 71 69 Other liabilities . . . . . . . . . . . 947 1,074 879 920 916 861 977 895 Shareholders' equity . . . . . . . . . 2,981 3,063 3,021 2,934 2,907 2,852 3,042 2,823 ---------- -------- -------- -------- -------- -------- ---------- ---------- Total liabilities and shareholders' equity . . . . . . $ 35,450 $ 36,753 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 36,268 $ 32,596 ========== ======== ======== ======== ======== ======== ========== ========== Total deposits . . . . . . . . . . . . . $ 22,296 $ 22,297 $ 22,060 $ 22,574 $ 22,245 $ 22,239 $ 22,180 $ 22,337 - - ------------------------------------------------------------------------------------------------------------------------------------
6 7 Net Interest Income Taxable equivalent net interest income increased $6.112 million or 1.8 percent for the second quarter of 1994 and $9.967 million or 1.5 percent for the first half. Good growth occurred in interest-earning assets, but net interest income increases were moderated by lower average asset yields and higher levels of interest-bearing liabilities. Also negatively impacting net interest income for the second quarter was a modestly higher average cost of funds. Continued growth in interest-earning assets pushed taxable equivalent net interest income up $9.859 million or 2.9 percent from the first quarter of 1994. The net yield on interest-earning assets (net interest income as a percentage of average interest-earning assets) was lower by 44 basis points for both the second period and first half. The declines in comparison with the year-earlier periods reflected erosion of average asset yields relative to average funding costs. The average rate earned decreased 26 basis points for the second period and 42 basis points year to date as rates earned on newly acquired assets were lower than those on assets being replaced. Average funding costs rose 13 basis points for the quarter, reflecting, in part, higher short-term borrowing costs and continued lengthening by the corporation of its debt market maturities through the issuance of long-term debt. For the first half, average funding costs declined 6 basis points. As interest rates continued to rise during the second quarter, the average asset yield expanded 21 basis points, the average cost of funds rose 26 basis points and the net yield on interest-earning assets declined 3 basis points from the first quarter. Taxable equivalent interest income increased $45.223 million or 8.2 percent for the quarter and $58.427 million or 5.3 percent year to date supported by higher levels of interest-earning assets. Average interest-earning assets grew $3.537 billion or 12.2 percent for the second quarter, $3.328 billion or 11.5 percent for the first half and $782 million or 2.5 percent from the preceding quarter. Average loans rose $2.701 billion or 12.7 percent for the quarter and $2.316 billion or 10.9 percent for the first six months of 1994. Growth in the commercial portfolio was stronger in the second period, while consumer lending outpaced commercial loan growth year to date. Average loans for the quarter were up an additional $959 million or 4.2 percent, representing an annualized growth rate of 16.8 percent, from the strong gains achieved in the first quarter, fueled primarily by continued good gains in commercial lending. Commercial loans, including related real estate categories, increased $1.527 billion or 12.9 percent for the second quarter, $1.086 billion or 9.1 percent year to date and $741 million or 5.9 percent from the first quarter. Regular commercial loans led the growth in all periods, rising $1.199 billion or 19.6 percent, $800 million or 12.9 percent and $660 million or 9.9 percent, respectively. Gains also were achieved in commercial mortgages, tax-exempt loans and lease financing. Construction loans declined for the second period and from the first quarter but were up year to date. Based on regulatory definitions, construction loans at June 30, 1994 were $477 million and commercial mortgages were $3.357 billion. Comparable amounts were $453 million and $3.165 billion, respectively, a year earlier and $477 million and $3.323 billion, respectively, at March 31, 1994. Retail loans, including residential mortgages, were higher by $1.174 billion or 12.5 percent for the quarter, $1.230 billion or 13.3 percent year to date and $218 million or 2.1 percent from the first three months of 1994. Gains occurred mainly in credit card loans, indirect retail lending, which primarily consists of automobile sales financing, and direct retail loans. Average credit card loans rose $967 million or 39.1 percent for the second period and $935 million or 39.5 percent for the six months in comparison with year-earlier periods and were up $276 million or 8.7 percent from the first quarter. At June 30, 1994, credit card outstandings totaled $3.591 billion versus $2.603 billion at the end of the 1993 second quarter and $3.298 billion at first quarter-close. Consumers continued to be attracted to Wachovia's First Year Prime Visa and MasterCard pricing option introduced in the fall of 1993. 7 8 - - ------------------------------------------------------------------------------------------------------------------------------------ TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- SECOND QUARTER* TABLE 4 - - ------------------------------------------------------------------------------------------------------------------------------------
Variance Average Volume Average Rate Interest Attributable to - - ----------------- -------------- ----------------- ----------------- 1994 1993 1994 1993 1994 1993 Variance Rate Volume - - -------- ------- ------ ------- -------- -------- --------- ------- ------- (Millions) INTEREST INCOME (Thousands) Loans: $ 7,330 $ 6,131 5.71 5.31 Commercial . . . . . . . . . . . . . $104,411 $ 81,119 $23,292 $ 6,558 $16,734 1,985 1,884 8.61 9.09 Tax-exempt . . . . . . . . . . . . . 42,633 42,691 (58) (2,280) 2,222 ------- ------- -------- -------- ------- 9,315 8,015 6.33 6.20 Total commercial . . . . . . . . 147,044 123,810 23,234 2,773 20,461 735 674 8.18 9.05 Direct retail. . . . . . . . . . . . . 14,988 15,213 (225) (1,530) 1,305 2,444 2,172 7.81 8.61 Indirect retail . . . . . . . . . . . 47,629 46,623 1,006 (4,527) 5,533 3,437 2,470 10.80 11.96 Credit card . . . . . . . . . . . . . 92,522 73,633 18,889 (7,726) 26,615 331 328 11.28 11.05 Other revolving credit . . . . . . . . 9,302 9,045 257 195 62 ------- ------- -------- -------- ------- 6,947 5,644 9.49 10.27 Total retail . . . . . . . . . . 164,441 144,514 19,927 (11,542) 31,469 480 484 8.62 7.32 Construction . . . . . . . . . . . . . 10,317 8,822 1,495 1,560 (65) 3,333 3,139 7.60 7.35 Commercial mortgages . . . . . . . . . 63,138 57,506 5,632 2,006 3,626 3,641 3,770 7.65 8.29 Residential mortgages. . . . . . . . . 69,466 77,865 (8,399) (5,812) (2,587) ------- ------- -------- -------- ------- 7,454 7,393 7.69 7.82 Total real estate 142,921 144,193 (1,272) (2,472) 1,200 172 131 7.78 9.14 Lease financing. . . . . . . . . . . . 3,328 2,997 331 (492) 823 81 85 4.76 4.29 Foreign. . . . . . . . . . . . . . . . 961 904 57 96 (39) ------- ------- -------- -------- ------- 23,969 21,268 7.68 7.85 Total loans. . . . . . . . . . . 458,695 416,418 42,277 (9,595) 51,872 Investment securities: Held-to-maturity: 2,248 3,252 6.57 6.13 U.S. Government and agency. . . . 36,806 49,701 (12,895) 3,346 (16,241) 999 2,318 7.71 8.09 Mortgage backed securities. . . . 19,215 46,731 (27,516) (2,071) (25,445) 614 701 12.78 12.82 State and municipal . . . . . . . 19,565 22,381 (2,816) (64) (2,752) 6 344 3.57 4.62 Other . . . . . . . . . . . . . . 53 3,966 (3,913) (736) (3,177) ------- ------- -------- -------- ------- 3,867 6,615 7.85 7.45 Total securities held-to-maturity 75,639 122,779 (47,140) 6,286 (53,426) Available-for-sale:** 2,643 -- 5.52 -- U.S. Government and agency. . . . 36,396 -- 36,396 -- 36,396 977 -- 4.51 -- Mortgage backed securities. . . . 10,992 -- 10,992 -- 10,992 280 -- 4.72 -- Other . . . . . . . . . . . . . . 3,286 -- 3,286 -- 3,286 ------- ------- -------- -------- ------- 3,900 -- 5.21 -- Total securities available-for-sale 50,674 -- 50,674 -- 50,674 ------- ------- -------- -------- ------- 7,767 6,615 6.52 7.45 Total investment securities. . . 126,313 122,779 3,534 (16,301) 19,835 18 88 4.15 3.23 Interest-bearing bank balances . . . . 185 712 (527) 159 (686) Federal funds sold and securities purchased under 182 329 4.07 3.09 resale agreements. . . . . . . . . . 1,842 2,535 (693) 652 (1,345) 629 728 4.87 3.85 Trading account assets . . . . . . . . 7,634 7,002 632 1,679 (1,047) ------- ------- -------- -------- ------- $32,565 $29,028 7.33 7.59 Total interest-earning assets. . 594,669 549,446 45,223 (19,870) 65,093 ======= ======= INTEREST EXPENSE $ 3,420 $ 3,196 1.58 1.85 Interest-bearing demand. . . . . . . . 13,456 14,771 (1,315) (2,302) 987 6,103 5,946 2.49 2.55 Savings and money market savings . . . 37,928 37,778 150 (835) 985 5,283 5,648 4.04 4.35 Savings certificates . . . . . . . . . 53,156 61,221 (8,065) (4,247) (3,818) 1,736 1,825 4.28 5.21 Large denomination certificates. . . . 18,507 23,693 (5,186) (4,077) (1,109) ------- ------- -------- -------- ------- Total time deposits in 16,542 16,615 2.98 3.32 domestic offices . . . . . . . 123,047 137,463 (14,416) (13,816) (600) 422 371 3.89 3.02 Time deposits in foreign offices . . . 4,098 2,797 1,301 881 420 ------- ------- -------- -------- ------- 16,964 16,986 3.01 3.31 Total time deposits. . . . . . . 127,145 140,260 (13,115) (12,938) (177) Federal funds purchased and securities sold under 4,955 3,574 4.15 3.19 repurchase agreements. . . . . . . . 51,217 28,454 22,763 9,920 12,843 517 447 3.51 2.96 Commercial paper . . . . . . . . . . . 4,515 3,299 1,216 662 554 566 977 3.97 3.25 Other short-term borrowed funds. . . . 5,605 7,906 (2,301) 1,503 (3,804) ------- ------- -------- -------- ------- Total short-term 6,038 4,998 4.07 3.18 borrowed funds . . . . . . . . 61,337 39,659 21,678 12,441 9,237 3,441 1,218 4.71 4.55 Bank notes . . . . . . . . . . . . . 40,397 13,822 26,575 499 26,076 840 550 6.50 7.03 Other long-term debt . . . . . . . . . 13,609 9,636 3,973 (769) 4,742 ------- ------- -------- -------- ------- 4,281 1,768 5.06 5.32 Total long-term debt . . . . . . 54,006 23,458 30,548 (1,200) 31,748 ------- ------- -------- -------- ------- $ 27,283 $23,752 3.56 3.43 Total interest-bearing liabilities 242,488 203,377 39,111 7,966 31,145 ======== ======= ----- ------ -------- -------- ------- 3.77 4.16 Interest rate spread ===== ====== Net yield on interest-earning assets 4.34 4.78 and net interest income. . . . . . . . 352,181 346,069 6,112 (33,815) 39,927 ===== ====== ======== ======== ======= - - ------------------------------------------------------------------------------------------------------------------------------------ *Interest income and yields are presented on a fully taxable equivalent basis using the federal income tax rate and state tax rates, as applicable, reduced by the nondeductible portion of interest expense **Volume amounts are reported at amortized cost; excludes pretax unrealized losses of ($14) million
8 9 - - ------------------------------------------------------------------------------------------------------------------------------------ TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- SIX MONTHS* TABLE 5 - - -----------------------------------------------------------------------------------------------------------------------------------
Variance Average Volume Average Rate Interest Attributable to - - ---------------- ------------ --------------------- ------------------ 1994 1993 1994 1993 1994 1993 Variance Rate Volume - - ------- ------- ----- ----- ---------- --------- -------- ------- ------- (Millions) (Thousands) INTEREST INCOME Loans: $ 7,002 $ 6,202 5.40 5.30 Commercial . . . . . . . . . . . . . . . . $ 187,373 $ 163,073 $24,300 $ 2,944 $21,356 1,983 1,901 8.58 9.03 Tax-exempt . . . . . . . . . . . . . . . . 84,416 85,132 (716) (4,327) 3,611 - - ------- ------- ---------- --------- ------- 8,985 8,103 6.10 6.18 Total commercial. . . . . . . . . . . . 271,789 248,205 23,584 (3,138) 26,722 724 671 8.14 8.96 Direct retail. . . . . . . . . . . . . . . 29,246 29,797 (551) (2,835) 2,284 2,434 2,159 7.78 8.70 Indirect retail. . . . . . . . . . . . . . 93,955 93,137 818 (10,367) 11,185 3,300 2,365 10.84 12.34 Credit card. . . . . . . . . . . . . . . . 177,387 144,685 32,702 (19,171) 51,873 331 326 11.23 11.14 Other revolving credit . . . . . . . . . . 18,419 18,040 379 131 248 - - ------- ------- ---------- --------- ------- 6,789 5,521 9.48 10.43 Total retail. . . . . . . . . . . . . . 319,007 285,659 33,348 (27,952) 61,300 490 479 8.32 7.28 Construction . . . . . . . . . . . . . . . 20,230 17,285 2,945 2,514 431 3,292 3,135 7.39 7.36 Commercial mortgages . . . . . . . . . . . 120,653 114,465 6,188 440 5,748 3,691 3,729 7.71 8.35 Residential mortgages. . . . . . . . . . . 141,126 154,487 (13,361) (11,776) (1,585) - - ------- ------- ---------- --------- ------- 7,473 7,343 7.61 7.86 Total real estate . . . . . . . . . . . 282,009 286,237 (4,228) (9,237) 5,009 166 129 7.96 9.26 Lease financing. . . . . . . . . . . . . . 6,533 5,899 634 (908) 1,542 79 80 4.44 4.45 Foreign. . . . . . . . . . . . . . . . . . 1,745 1,763 (18) (4) (14) - - ------- ------- ---------- --------- ------- 23,492 21,176 7.56 7.88 Total loans . . . . . . . . . . . . . . 881,083 827,763 53,320 (34,560) 87,880 Investment securities: Held-to-maturity: 2,228 3,051 6.63 6.60 U.S. Government and agency. . . . . . . . 73,294 99,903 (26,609) 458 (27,067) 1,079 2,403 7.64 7.83 Mortgage backed securities. . . . . . . . 40,877 93,323 (52,446) (2,226) (50,220) 622 715 12.71 12.54 State and municipal . . . . . . . . . . . 39,228 44,448 (5,220) 606 (5,826) 10 370 5.33 4.46 Other . . . . . . . . . . . . . . . . . . 263 8,193 (7,930) 1,331 (9,261) - - ------- ------- ---------- --------- ------- 3,939 6,539 7.87 7.58 Total securities held-to-maturity . . . 153,662 245,867 (92,205) 8,892 (101,097) Available-for-sale:** 2,502 -- 5.59 -- U.S. Government and agency. . . . . . . . 69,286 -- 69,286 -- 69,286 995 -- 4.59 -- Mortgage backed securities. . . . . . . . 22,686 -- 22,686 -- 22,686 292 -- 4.38 -- Other . . . . . . . . . . . . . . . . . . 6,342 -- 6,342 -- 6,342 - - ------- ------- ---------- --------- ------- 3,789 -- 5.23 -- Total securities available-for-sale . . 98,314 -- 98,314 -- 98,314 - - ------- ------- ---------- --------- ------- 7,728 6,539 6.57 7.58 Total investment securities . . . . . . 251,976 245,867 6,109 (35,190) 41,299 18 122 3.99 3.80 Interest-bearing bank balances . . . . . . . 345 2,304 (1,959) 111 (2,070) Federal funds sold and securities purchased under 287 305 3.48 3.13 resale agreements. . . . . . . . . . . . . 4,953 4,732 221 502 (281) 650 705 4.54 3.98 Trading account assets . . . . . . . . . . . 14,641 13,905 736 1,874 (1,138) - - ------- ------- ---------- --------- ------- $32,175 $28,847 7.23 7.65 Total interest-earning assets . . . . . 1,152,998 1,094,571 58,427 (63,153) 121,580 ======= ======= INTEREST EXPENSE $ 3,403 $ 3,162 1.58 1.91 Interest-bearing demand. . . . . . . . . . . 26,691 29,979 (3,288) (5,454) 2,166 6,089 5,948 2.39 2.61 Savings and money market savings . . . . . . 72,212 77,130 (4,918) (6,711) 1,793 5,319 5,703 4.04 4.43 Savings certificates . . . . . . . . . . . . 106,621 125,339 (18,718) (10,578) (8,140) 1,600 1,889 4.23 5.29 Large denomination certificates. . . . . . . 33,564 49,586 (16,022) (9,100) (6,922) - - ------- ------- ----------- --------- ------- Total time deposits in 16,411 16,702 2.94 3.41 domestic offices. . . . . . . . . . . 239,088 282,034 (42,946) (38,094) (4,852) 420 404 3.54 3.12 Time deposits in foreign offices . . . . . . 7,378 6,257 1,121 869 252 - - -------- -------- ---------- --------- ------- 16,831 17,106 2.95 3.40 Total time deposits . . . . . . . . . . 246,466 288,291 (41,825) (37,239) (4,586) Federal funds purchased and securities sold under 4,906 3,616 3.81 3.26 repurchase agreements. . . . . . . . . . . 92,678 58,423 34,255 11,004 23,251 560 404 3.34 2.98 Commercial paper . . . . . . . . . . . . . . 9,273 5,973 3,300 782 2,518 626 954 3.55 3.31 Other short-term borrowed funds. . . . . . . 11,011 15,664 (4,653) 1,052 (5,705) - - ------- ------- ---------- --------- ------- Total short-term 6,092 4,974 3.74 3.25 borrowed funds. . . . . . . . . . . . 112,962 80,060 32,902 13,263 19,639 3,162 1,086 4.63 4.59 Bank notes . . . . . . . . . . . . . . . . . 72,562 24,692 47,870 228 47,642 815 481 6.56 7.12 Other long-term debt . . . . . . . . . . . . 26,505 16,992 9,513 (1,436) 10,949 - - ------- ------- ---------- --------- ------- 3,977 1,567 5.02 5.36 Total long-term debt. . . . . . . . . . 99,067 41,684 57,383 (2,810) 60,193 - - ------- ------- ---------- --------- ------- $26,900 $23,647 3.44 3.50 Total interest-bearing liabilities. . . 458,495 410,035 48,460 (7,086) 55,546 ======= ======= ---- ---- ---------- --------- ------- 3.79 4.15 Interest rate spread ==== ==== Net yield on interest-earning assets 4.35 4.79 and net interest income. . . . . . . . . . $ 694,503 $684,536 $ 9,967 (65,024) 74,991 ==== ==== ========== ======== ======= - - -------------------------------------------------------------------------------------------------------------------------------- *Interest income and yields are presented on a fully taxable equivalent basis using the federal income tax rate and state tax rates, as applicable, reduced by the nondeductible portion of interest expense **Volume amounts are reported at amortized cost; excludes pretax unrealized gains of $11 million
9 10 Investment securities were up $1.152 billion or 17.4 percent for the second period and $1.189 billion or 18.2 percent year to date. However, investment securities increased $77 million or 1 percent from the first quarter as loans continued to show strong growth. 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), pertaining to the accounting and classification of all debt securities and equity securities having a readily determinable fair value. FASB 115 requires debt securities which management can demonstrate positive intent and ability to hold to maturity to be classified as held-to-maturity and reported at amortized cost. Debt and equity securities acquired principally to sell in the near term continue to be classified as trading securities and reported at fair market value. Unrealized gains and losses resulting from adjustments to market value are included in earnings under trading account profits or losses. Debt and equity securities not classified as either held-to-maturity or trading are classified as available-for-sale and reported at fair market value. Unrealized gains and losses are included, net of tax, in shareholders' equity. At June 30, 1994, securities held-to-maturity totaled $3.850 billion and securities available-for-sale were $3.819 billion. These compared with total investment securities at amortized cost of $6.604 billion a year earlier. The market value of the securities held-to-maturity at second quarter-end was $3.907 billion, representing a $57 million appreciation over book value. The following details securities available-for-sale and securities held-to-maturity as of June 30, 1994. $ in thousands Securities available-for-sale at market value: U.S. Government and agency . . . . . . . . . . . . . . . . . . . . . . . . . . $2,611,837 Mortgage backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . 933,760 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,812 ---------- Total securities available-for-sale . . . . . . . . . . . . . . . . . . . . 3,819,409 Securities held-to-maturity: U.S. Government and agency . . . . . . . . . . . . . . . . . . . . . . . . . . 2,281,949 Mortgage backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . 950,375 State and municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602,816 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,505 ---------- Total securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . 3,849,645 ---------- Total investment securities . . . . . . . . . . . . . . . . . . . . . . . . $7,669,054 ==========
Unrealized losses on securities available-for-sale were $24.720 million on a pretax basis and $15.140 million, net of tax, at June 30, 1994. For the second quarter, the corporation had an unrealized loss on average securities available-for-sale of $13.905 million, pretax, and $8.535 million, net of tax. For the six months ended June 30, 1994, there was an unrealized gain of $11.162 million, pretax, and $6.847 million, net of tax, on average securities available-for-sale. Interest expense rose $39.111 million or 19.2 percent for the quarter and $48.460 million or 11.8 percent for the first half. Higher levels of interest-bearing liabilities largely accounted for the increases. Average interest-bearing liabilities expanded $3.531 billion or 14.9 percent for the second period and $3.253 billion or 13.8 percent for the first half providing funding for interest-earning assets growth, particularly loans. Total interest-bearing time deposits were down modestly for the second quarter and the first six months. Interest-bearing demand deposits were up in both periods, rising $224 million or 7 percent and $241 million or 7.6 percent, respectively. Savings and money market savings also were higher, while savings certificates and large denomination certificates declined. 10 11 Both short-term borrowings and long-term debt grew for the second period and first six months, offsetting the modest decline in interest-bearing time deposits. Short-term borrowings expanded $1.040 billion or 20.8 percent for the second quarter and $1.118 billion or 22.5 percent year to date. Increases in the second period and first half primarily occurred in federal funds purchased and repurchase agreements. Other short-term borrowings, which largely consists of term federal funds, declined from the year-earlier periods. Total long-term debt rose $2.513 billion for the second quarter and $2.410 billion year to date. Growth primarily was due to the continued issuance of bank notes. The note program, begun in the second quarter of 1992, provides long-term funding at attractive market rates due to the corporation's strong credit ratings. Bank notes outstanding at June 30, 1994 totaled $3.661 billion with an average cost of 4.77 percent and an average maturity of 2.1 years. This compared with $1.391 billion with an average rate of 4.52 percent and an average maturity of 1.5 years at second quarter-end 1993 and with $3.263 billion in outstandings at March 31, 1994. Gross deposits averaged $22.297 billion for the quarter and $22.180 billion year to date, higher by $58 million or less than 1 percent and lower by $157 million or less than 1 percent, respectively, from the prior year periods. Collected deposits, net of float, averaged $20.737 billion for the second period and $20.611 billion for the first half, an increase of $103 million or .5 percent and a decrease of $97 million or .5 percent, respectively. 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. At June 30, 1994, the corporation had $3.768 billion in notional amount of these transactions outstanding including $1.329 billion related to its balance sheet management. This compared with $3.545 billion and $1.322 billion, respectively, at March 31, 1994. Derivative activity is generally reported in terms of notional amounts, which are the basis for calculating interest payments, not the value of payments due to and due from counterparties to derivative contracts. The corporation's financial risk of derivatives is the present value of the difference between cash flows payable and receivable should counterparties fail to perform and amounts receivable exceed amounts payable for any given counterparty. This financial risk is substantially less than the notional amounts reported. The corporation controls this financial 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. Nonperforming Assets Nonperforming assets totaled $124.529 million or .51 percent of loans and foreclosed property at June 30, 1994, a decline of $101.979 million or 45 percent from a year earlier. Continued improvement in the general credit quality of borrowers, as well as sales of foreclosed property, accounted for the decrease from second quarter-end 1993. Real estate loans comprise the majority of total nonperforming assets. At June 30, 1994, real estate nonperforming assets were $85.444 million or 1.14 percent of real estate loans and foreclosed real estate. This compared with $189.361 million or 2.54 percent a year earlier, a decrease of $103.917 million or 54.9 percent, and with $95.077 million or 1.28 percent at first quarter-close, down $9.633 million or 10.1 percent. 11 12 Included in real estate nonperforming assets were $64.875 million of real estate nonperforming loans at June 30, 1994, $144.468 million a year earlier and $71.918 million at March 31, 1994. Commercial real estate nonperforming assets were $63.503 million or 1.66 percent of related loans and foreclosed real estate versus $157.515 million or 4.32 percent at second quarter-close 1993 and $72.374 million or 1.90 percent at March 31, 1994. The total at June 30, 1994 included $51.295 million of commercial real estate nonperforming loans compared with $127.022 million a year earlier and $58.354 million at first quarter-end. - - ----------------------------------------------------------------------------------------------------------------------------------- NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 6 (thousands) - - -----------------------------------------------------------------------------------------------------------------------------------
June 30 March 31 Dec. 31 Sept. 30 June 30 1994 1994 1993 1993 1993 -------- -------- -------- -------- -------- NONPERFORMING ASSETS Cash-basis assets -- domestic borrowers . . . . . . . . . . . . . . $100,696 $100,126 $108,882 $126,474 $179,150 Restructured loans -- domestic . . . . . . . . . . . . . . . . . . --* -- 80 84 105 -------- -------- -------- -------- -------- Total nonperforming loans . . . . . . . . . . . . . . . . . . 100,696 100,126 108,962 126,558 179,255 Foreclosed property: Foreclosed real estate . . . . . . . . . . . . . . . . . . . . . 26,347 30,136 51,701 65,038 51,411 Less valuation allowance . . . . . . . . . . . . . . . . . . . . 5,778 6,977 9,168 7,264 6,518 Other foreclosed assets . . . . . . . . . . . . . . . . . . . . 3,264 2,982 3,406 3,746 2,360 -------- -------- -------- -------- -------- Total foreclosed property . . . . . . . . . . . . . . . . . . 23,833 26,141 45,939 61,520 47,253 -------- -------- -------- -------- -------- Total nonperforming assets . . . . . . . . . . . . . . . . . $124,529** $126,267 $154,901 $188,078 $226,508 ======== ======== ======== ======== ======== Nonperforming loans to period-end loans . . . . . . . . . . . . . . .41% .42% .47% .57% .83% Nonperforming assets to period-end loans and foreclosed property . .51 .53 .67 .85 1.04 Period-end allowance for loan losses times nonperforming loans . . 4.03x 4.05x 3.72x 3.19x 2.23x Period-end allowance for loan losses times nonperforming assets . . 3.26 3.21 2.61 2.15 1.76 CONTRACTUALLY PAST DUE LOANS (accruing loans past due 90 days or more) Domestic borrowers . . . . . . . . . . . . . . . . . . . . . . . . $ 50,321 $ 42,744 $ 44,897 $ 47,532 $ 49,515 ======== ======== ======== ======== ======== *Excludes $14,528 of loans which have been renegotiated at market rates and have been reclassified to performing status **Net of cumulative corporate and commercial real estate charge-offs and foreclosed real estate write-downs totaling $42,242; includes $24,351 of nonperforming assets on which interest and principal are paid current - - -----------------------------------------------------------------------------------------------------------------------------------
Provision and Allowance for Loan Losses The provision for loan losses was $16.342 million for the second quarter and $34.101 million year to date, lower by $9.742 million or 37.3 percent and $17.055 million or 33.3 percent, respectively, from the same periods in 1993. The provision reflects management's assessment of the adequacy of the allowance for loan losses to absorb potential write-offs in the loan portfolio. This assessment considers several factors, including growth and composition of the portfolio, historical credit loss experience, current and anticipated economic conditions and changes in borrowers' financial conditions. Net loan losses for the second quarter totaled $15.874 million or .26 percent on an annualized basis of average loans and $32.957 million or .28 percent for the first six months. This compares with $17.225 million or .32 percent and $31.233 million or .29 percent, respectively, in the same periods of 1993. 12 13 Real estate loans had net recoveries of $2.154 million for the second quarter and $3.947 million for the first half versus net loan losses of $1.939 million and $2.484 million, respectively, in 1993. Credit card net charge-offs for the second period were higher by $1.043 million or 8 percent but represented 1.63 percent annualized of average credit card loans compared with 2.11 percent in the same three months of 1993. Year to date, credit card net loan losses increased $1.878 million or 7.4 percent to $27.205 million, representing 1.65 percent annualized of average credit card loans versus $25.327 million or 2.14 percent in the same year-earlier period. At June 30, 1994, the allowance for loan losses was $405.942 million, representing 1.67 percent of loans and 403 percent coverage of nonperforming loans. This compared with $399.480 million, 1.84 percent and 223 percent, respectively, a year earlier. - - ------------------------------------------------------------------------------------------------------------------------------ ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 7 - - ------------------------------------------------------------------------------------------------------------------------------
1994 1993 ------------------ ----------------------------- Six Months Ended Second First Fourth Third Second June 30 Quarter Quarter Quarter Quarter Quarter 1994 1993 -------- -------- -------- -------- -------- -------- -------- SUMMARY OF TRANSACTIONS Balance at beginning of period . . . . . . $405,474 $404,798 $404,091 $399,480 $390,621 $404,798 $379,557 Provision for loan losses. . . . . . . . . 16,342 17,759 18,013 23,483 26,084 34,101 51,156 Deduct net loan losses: Loans charged off: Commercial . . . . . . . . . . . . . . 2,947 5,080 1,418 1,875 2,129 8,027 3,499 Credit card . . . . . . . . . . . . . . 16,808 15,928 15,392 17,147 15,650 32,736 30,452 Other revolving credit. . . . . . . . . 902 905 1,375 758 943 1,807 1,789 Other retail. . . . . . . . . . . . . . 2,605 3,084 2,754 1,853 1,904 5,689 3,824 Real estate . . . . . . . . . . . . . . 1,352 819 4,899 3,706 3,384 2,171 5,909 Lease financing . . . . . . . . . . . . 80 61 81 110 63 141 267 Foreign . . . . . . . . . . . . . . . . -- -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . 24,694 25,877 25,919 25,449 24,073 50,571 45,740 Recoveries: Commercial. . . . . . . . . . . . . . . 1,423 1,957 971 1,354 1,382 3,380 3,247 Credit card . . . . . . . . . . . . . . 2,760 2,771 2,625 2,566 2,645 5,531 5,125 Other revolving credit. . . . . . . . . 303 247 270 228 316 550 531 Other retail. . . . . . . . . . . . . . 749 1,121 942 842 996 1,870 2,007 Real estate . . . . . . . . . . . . . . 3,506 2,612 3,743 1,525 1,445 6,118 3,425 Lease financing 70 78 53 54 55 148 157 Foreign . . . . . . . . . . . . . . . . 9 8 9 8 9 17 15 -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . 8,820 8,794 8,613 6,577 6,848 17,614 14,507 -------- -------- -------- -------- -------- -------- -------- Net loan losses . . . . . . . . . . . . 15,874 17,083 17,306 18,872 17,225 32,957 31,233 -------- -------- -------- -------- -------- -------- -------- Balance at end of period . . . . . . . . . $405,942 $405,474 $404,798 $404,091 $399,480 $405,942 $399,480 ======== ======== ======== ======== ======== ======== ======== NET lOAN LOSSES (RECOVERIES) BY CATEGORY Commercial . . . . . . . . . . . . . . . $ 1,524 $ 3,123 $ 447 $ 521 $ 747 $ 4,647 $ 252 Credit card . . . . . . . . . . . . . . . 14,048 13,157 12,767 14,581 13,005 27,205 25,327 Other revolving credit . . . . . . . . . . 599 658 1,105 530 627 1,257 1,258 Other retail . . . . . . . . . . . . . . . 1,856 1,963 1,812 1,011 908 3,819 1,817 Real estate . . . . . . . . . . . . . . . (2,154) (1,793) 1,156 2,181 1,939 (3,947) 2,484 Lease financing. . . . . . . . . . . . . . 10 (17) 28 56 8 (7) 110 Foreign . . . . . . . . . . . . . . . . (9) (8) (9) (8) (9) (17) (15) -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . $ 15,874 $ 17,083 $ 17,306 $ 18,872 $ 17,225 $ 32,957 $ 31,233 ======== ======== ======== ======== ======== ======== ======== ANNUALIZED NET LOAN LOSSES (RECOVERIES) TO AVERAGE LOANS BY CATEGORY . . . . . . Commercial . . . . . . . . . . . . . . . . .07% .14% .02% .03% .04% .10% .01% Credit card . . . . . . . . . . . . . . . 1.63 1.67 1.74 2.16 2.11 1.65 2.14 Other revolving credit . . . . . . . . . . .72 .80 1.34 .64 .76 .76 .77 Other retail . . . . . . . . . . . . . . . .23 .25 .23 .14 .13 .24 .13 Real estate . . . . . . . . . . . . . . . (.12) (.10) .06 .12 .10 (.11) .07 Lease financing. . . . . . . . . . . . . . .02 (.04) .08 .16 .02 (.01) .17 Foreign. . . . . . . . . . . . . . . . . . (.04) (.04) (.05) (.04) (.04) (.04) (.04) Total loans. . . . . . . . . . . . . . . . .26 .30 .31 .35 .32 .28 .29 Period-end allowance to outstanding loans. 1.67% 1.71% 1.76% 1.83% 1.84% 1.67% 1.84% - - ------------------------------------------------------------------------------------------------------------------------------
13 14 Noninterest Income Total other operating revenue grew $4.706 million or 3.2 percent for the quarter and $191 thousand or less than 1 percent year to date. Good gains in trust service fees and credit card income were moderated by lower levels of deposit account service charges, mortgage fee income and trading account profits. In comparison with the first three months of 1994, total other operating revenue for the second quarter rose $8.430 million or 5.8 percent, reflecting growth, in part, in credit card income, deposit account service charges and trust service fees. Trust service fees were up $3.369 million or 11.4 percent for the three months and $4.683 million or 7.8 percent for the first half. Gains primarily reflected increased business volume in Personal Financial Services, along with higher revenues from the Biltmore Funds, a proprietary family of mutual funds. Credit card income rose $2.491 million or 9.7 percent and $5.517 million or 11.5 percent for the three and six month periods, respectively. Primary factors were increased levels of annual fee and interchange income, reflecting continued growth in new accounts and high cardholder renewal rates, as well as stronger net sales volume. Service charges on deposit accounts decreased $976 thousand or 1.9 percent for the quarter and $3.198 million or 3.1 percent year to date. The declines resulted from lower commercial analysis fees and overdraft and NSF charges attributable, in part, to the closing of the corporation's retail lockbox processing services in late 1993. Partially offsetting these decreases were higher levels of savings service charges, which are assessed primarily on interest-bearing demand accounts, and increased miscellaneous service charges, which include charges on consumer demand accounts and wire transfer fees. Deposit account service charges rose $2.496 million or 5.2 percent from the first quarter, mainly due to higher levels of overdraft and NSF charges and miscellaneous service charges. Mortgage fee income, which primarily consists of servicing and origination fees and gains or losses from the sale of mortgage loans, was lower by $2.387 million or 23.6 percent for the second quarter and $3.524 million or 18.3 percent for the first half. Net losses on the sale of loans due to inventory write-downs and lower originations in a higher interest rate environment contributed to the declines. At June 30, 1994, the mortgage portfolio serviced totaled $9.294 billion, representing 137,501 loans compared with $8.833 billion and 135,840 loans a year earlier. Higher interest rates also impacted trading account profits which decreased $2.148 million or 78.2 percent for the quarter and $5.380 million or 71.9 percent for the first six months. - - ------------------------------------------------------------------------------------------------------------------------------------ NONINTEREST INCOME (thousands) TABLE 8 - - ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 ------------------ ---------------------------- Six Months Ended Second First Fourth Third Second June 30 Quarter Quarter Quarter Quarter Quarter 1994 1993 -------- -------- --------- ------- ------- -------- -------- Service charges on deposit accounts . . . . . . . . $ 50,646 $ 48,150 $ 48,982 $ 51,909 $ 51,622 $ 98,796 $101,994 Fees for trust services . . . . . . . . . . . . . . 32,983 31,681 30,352 29,697 29,614 64,664 59,981 Credit card income -- net of interchange payments . 28,120 25,334 27,834 26,009 25,629 53,454 47,937 Mortgage fee income . . . . . . . . . . . . . . . . 7,715 8,033 10,130 9,699 10,102 15,748 19,272 Trading account profits -- excluding interest . . . 598 1,507 2,097 3,521 2,746 2,105 7,485 Insurance premiums and commissions. . . . . . . . . 3,379 2,686 2,167 2,897 3,764 6,065 6,783 Bankers' acceptance and letter of credit fees . . . 5,689 6,287 4,633 4,925 5,276 11,976 10,110 Student loan servicing. . . . . . . . . . . . . . . -- -- -- -- -- -- 5,535 Other service charges and fees. . . . . . . . . . . 13,156 13,627 11,948 12,248 11,907 26,783 24,719 Other income. . . . . . . . . . . . . . . . . . . . 11,013 7,564 14,298 8,856 7,933 18,577 14,161 -------- -------- -------- -------- -------- -------- -------- Total other operating revenue . . . . . . . . . 153,299 144,869 152,441 149,761 148,593 298,168 297,977 Gain on sale of subsidiary. . . . . . . . . . . . . -- -- -- -- -- -- 8,030 Investment securities gains . . . . . . . . . . . . 221 572 7,216 702 1,254 793 11,476 -------- -------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . . $153,520 $145,441 $159,657 $150,463 $149,847 $298,961 $317,483 ======== ======== ======== ======== ======== ======== ======== - - ------------------------------------------------------------------------------------------------------------------------------------
14 15 Excluding income from student loan servicing, which the corporation sold as a subsidiary in the first quarter of 1993, remaining combined categories of total other operating revenue rose $4.357 million or 15.1 percent for the second quarter and $7.628 million or 13.7 percent year to date. Good gains were achieved in bankers' acceptance and letter of credit fees as well as in other service charges and fees. The latter category includes net ATM fees, mutual fund fees, brokerage commissions and debit card interchange fees. Including gains on securities and subsidiary sales, total noninterest income increased $3.673 million or 2.5 percent for the quarter but declined $18.522 million or 5.8 percent for the first six months. Gains on securities sales totaled $221 thousand for the second period and $793 thousand year to date compared with $1.254 million and $11.476 million, respectively, in 1993. A pretax gain of $8.030 million from the sale of Wachovia Student Financial Services, Inc., also was included in the first half of 1993. Noninterest Expense Noninterest expense was modestly higher by $1.711 million or under 1 percent for the quarter but down $13.355 million or 2.4 percent year to date. Excluding $15.872 million of nonrecurring charges taken in the 1993 first quarter, noninterest expense was up $2.517 million or less than 1 percent for the 1994 first half. Total personnel expense and combined net occupancy and equipment expense categories increased in both periods, while remaining combined categories of total other expense declined. Total personnel expense was up $2.998 million or 2.2 percent for the quarter and $3.668 million or 1.3 percent for the first half led by higher salaries expense in both periods. Salaries expense rose $4.763 million or 4.3 percent for the three months and $9.659 million or 4.4 percent year to date. Employee benefits expense declined $1.765 million or 6.3 percent for the quarter and $5.991 million or 10.3 percent for the first six months. Combined net occupancy and equipment expense increased $913 thousand or 2 percent for the three months and $2.506 million or 2.8 percent year to date. Equipment expense remained essentially flat in the second period versus the same three months of 1993 but rose $2.415 million or 4.8 percent for the first half. Remaining combined categories of noninterest expense were down $2.200 million or 2.5 percent for the quarter and $19.529 million or 10.3 percent for the first six months. Foreclosed property expense had net gains of $404 thousand for the second quarter and $3.845 million year to date versus net expenses in the same periods of 1993. - - ------------------------------------------------------------------------------------------------------------------------------------ NONINTEREST EXPENSE (thousands) TABLE 9 - - ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 ------------------ ---------------------------- Six Months Ended Second First Fourth Third Second June 30 Quarter Quarter Quarter Quarter Quarter 1994 1993 -------- -------- -------- -------- --------- -------- -------- Salaries . . . . . . . . . . . . . . . . . . . . . $114,882 $115,211 $122,205 $112,982 $110,119 $230,093 $220,434 Employee benefits . . . . . . . . . . . . . . . . 26,350 25,803 25,504 29,411 28,115 52,153 58,144 -------- -------- -------- -------- -------- -------- -------- Total personnel expense . . . . . . . . . . . 141,232 141,014 147,709 142,393 138,234 282,246 278,578 Net occupancy expense. . . . . . . . . . . . . . . 20,196 19,428 23,587 18,950 19,660 39,624 39,533 Equipment expense . . . . . . . . . . . . . . . . 26,010 26,512 27,283 24,856 25,633 52,522 50,107 Postage and delivery . . . . . . . . . . . . . . . 8,816 9,052 9,315 8,921 11,643 17,868 19,924 Outside data processing, programming and software. 8,119 8,485 12,494 9,194 8,198 16,604 16,925 Stationery and supplies. . . . . . . . . . . . . . 5,836 5,962 7,018 6,353 5,572 11,798 11,973 Advertising and sales promotion . . . . . . . . . 9,316 9,783 11,435 7,681 7,805 19,099 19,025 Professional services . . . . . . . . . . . . . . 5,385 3,952 6,381 4,120 3,771 9,337 6,643 Travel and business promotion. . . . . . . . . . . 4,343 3,504 4,706 3,668 3,905 7,847 7,189 FDIC insurance and regulatory examinations . . . . 13,589 13,380 13,122 13,274 13,084 26,969 27,267 Check clearing and other bank services . . . . . . 1,920 2,295 2,348 2,563 2,586 4,215 5,248 Amortization of intangible assets. . . . . . . . . 4,602 5,137 6,844 7,502 6,540 9,739 13,655 Foreclosed property expense . . . . . . . . . . . (404) (3,441) 2,630 1,737 1,226 (3,845) 3,287 Other expense. . . . . . . . . . . . . . . . . . . 25,585 24,987 24,868 22,334 24,977 50,572 58,596 -------- -------- -------- -------- -------- -------- -------- Total. . . . . . . . . . . . . . . . . . . . . $274,545 $270,050 $299,740 $273,546 $272,834 $544,595 $557,950 ======== ======== ======== ======== ======== ======== ======== Overhead ratio . . . . . . . . . . . . . . . . . . 54.3% 55.4% 59.5% 55.0% 55.2% 54.9% 56.8% - - ------------------------------------------------------------------------------------------------------------------------------------
15 16 Income Taxes Applicable income taxes for the second quarter and first half increased $6.339 million or 12.8 percent and $5.930 million or 5.9 percent, respectively, from the same periods of 1993. 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. - - ----------------------------------------------------------------------------------------------------------------------------- INCOME TAXES (thousands) TABLE 10 - - -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 -------- -------- -------- -------- Income before income taxes . . . . . . . . . . . . . . . . . . . . . . $189,932 $172,575 $365,410 $345,231 ======== ======== ======== ======== Federal income taxes at statutory rate* . . . . . . . . . . . . . . . $ 66,476 $ 58,676 $127,893 $117,379 State and local income taxes -- net of federal benefit . . . . . . . . 970 1,895 2,191 4,111 Effect of tax-exempt securities interest and other income. . . . . . . (12,566) (13,023) (24,986) (25,972) Tax cost to carry tax-exempt assets. . . . . . . . . . . . . . . . . . 561 505 1,014 1,050 Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 1,399 358 3,972 -------- -------- -------- -------- Total tax expense. . . . . . . . . . . . . . . . . . . . . . . . . $ 55,791 $ 49,452 $106,470 $100,540 ======== ======== ======== ======== Currently payable: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,811 $ 49,648 $102,070 $110,169 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 52 60 154 State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,363 2,827 4,776 7,816 -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,200 52,527 106,906 118,139 Deferred: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,539) (3,119) 969 (16,012) State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . (870) 44 (1,405) (1,587) -------- -------- -------- -------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,409) (3,075) (436) (17,599) -------- -------- -------- -------- Total tax expense. . . . . . . . . . . . . . . . . . . . . . . . . $ 55,791 $ 49,452 $106,470 $100,540 ======== ======== ======== ======== *An increase in the federal income tax statutory rate from 34% to 35% was enacted during the third quarter of 1993, retroactive to January 1, 1993. The federal income tax amounts for 1993 of $58,676 and $117,379 represent the 34% rate originally reported for these periods prior to enactment of the tax rate increase. A cumulative adjustment related to the increase in the tax rate was reported in the third quarter of 1993. The 1994 amounts represent a federal income tax statutory rate of 35%. - - -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AND CAPITAL RATIOS At June 30, 1994, total assets were $37.069 billion, including $32.964 billion of interest-earning assets and $24.300 billion of loans. Comparable amounts a year earlier were $33.248 billion, $29.573 billion and $21.690 billion, respectively, and at first quarter-end totals were $36.350 billion of assets, including $32.370 billion of earning assets and $23.662 billion of loans. Deposits constitute the primary source of funding. At June 30, 1994, deposits totaled $22.218 billion including time deposits of $16.945 billion, representing 76.3 percent of the total. This compared with total deposits of $21.886 billion, including $16.828 billion of time deposits or 76.9 percent of the total a year earlier. At March 31, 1994, deposits were $22.279 billion and time deposits were $16.914 billion or 75.9 percent of the total. Shareholders' equity at June 30, 1994 was $3.149 billion, an increase of $199 million or 6.7 percent from $2.950 billion a year earlier and up $55 million or 1.8 percent from first quarter-close. Included in the June 30, 1994 total were unrealized losses of $15 million, net of tax, on securities available-for-sale marked to fair market value under FASB 115. As noted in the News Developments section, the corporation's board of directors at its July 22, 1994 meeting authorized the repurchase of up to 5 million shares of the corporation's common stock. This replaces a July 23, 1993 authorization to repurchase the same number of shares. During the second quarter of 1994, the corporation repurchased 412,900 shares at an average price of $31.97 per share for a total cost of 16 17 $13.201 million. As of June 30, 1994, a total of 3,565,100 shares had been repurchased under earlier authorizations which were terminated effective with the new authorization. The company intends to continue reissuing some or all of the repurchased shares for its employee stock plans, dividend reinvestment plan and for other appropriate purposes. Intangible assets were $85.601 million at the end of the 1994 second quarter versus $95.688 million a year earlier and $88.423 million at first quarter-close. The total at June 30, 1994 consisted of $39.014 million in mortgage servicing rights, $31.706 million in goodwill, $9.610 million in deposit base intangibles and $5.271 million in other intangible assets, principally consisting of purchased credit card intangibles. Comparable amounts a year earlier were $43.501 million, $33.196 million, $11.972 million and $7.019 million, respectively, and at March 31, 1994 they were $40.493 million, $32.095 million, $10.127 million and $5.708 million, respectively. Regulatory agencies divide capital into Tier I (consisting of shareholders' equity less ineligible intangible assets) and Tier II (consisting of the allowable portion of the reserve for loan losses and certain long-term debt) and measure capital adequacy by applying both capital levels to a banking company's risk-adjusted assets and off-balance sheet items. Regulatory requirements presently specify that Tier I capital should exclude the market appreciation or depreciation of securities available-for-sale arising from valuation adjustments under FASB 115. In addition to these capital ratios, regulatory agencies have established a Tier I leverage ratio which measures Tier I capital to average assets less ineligible intangible assets. Regulatory guidelines require a minimum total capital to risk-adjusted assets ratio of 8 percent with one-half consisting of tangible common shareholders' equity and a minimum Tier I leverage ratio of 3 percent. Banks which meet or exceed a Tier I ratio of 6 percent, a total capital ratio of 10 percent and a Tier I leverage ratio of 5 percent are considered well capitalized by regulatory standards. At June 30, 1994, Wachovia's Tier I to risk-adjusted assets ratio was 9.56 percent and including Tier II was 13.35 percent. The corporation's Tier I leverage ratio was 8.43 percent. - - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 11 - - ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 ------------------------- --------------------------------------- Second First Fourth Third Second Quarter Quarter Quarter Quarter Quarter ------------ ------------ ------------ ----------- ----------- Tier I capital: Common shareholders' equity. . . . . . . . . . . . . $ 3,149,144 $ 3,093,593 $ 3,017,947 $ 2,974,699 $ 2,950,413 Less ineligible intangible assets. . . . . . . . . . 32,349 32,095 32,451 36,039 33,196 Unrealized gains (losses) on securities available-for-sale, net of tax . . . . . . . . . . 15,140 (3,825) -- -- -- ----------- ----------- ----------- ----------- ----------- Total Tier I capital . . . . . . . . . . . . . . . 3,131,935 3,057,673 2,985,496 2,938,660 2,917,217 Tier II capital: Allowable allowance for loan losses. . . . . . . . . 405,942 396,449 384,032 370,017 362,867 Allowable long-term debt . . . . . . . . . . . . . . 833,253 833,125 583,738 587,158 587,321 ----------- ----------- ----------- ----------- ----------- Tier II capital additions . . . . . . . . . . . . . 1,239,195 1,229,574 967,770 957,175 950,188 ----------- ----------- ----------- ----------- ----------- Total capital. . . . . . . . . . . . . . . . . . . $ 4,371,130 $ 4,287,247 $ 3,953,266 $ 3,895,835 $ 3,867,405 =========== =========== =========== =========== =========== Risk-adjusted assets . . . . . . . . . . . . . . . . . $32,746,004 $31,706,868 $30,701,782 $29,567,305 $28,992,768 Quarterly average assets . . . . . . . . . . . . . . . $37,174,827 $35,778,460 $35,419,829 $33,869,607 $32,718,390 Risk-based capital ratios: Tier I capital . . . . . . . . . . . . . . . . . . . 9.56% 9.64% 9.72% 9.94% 10.06% Total capital. . . . . . . . . . . . . . . . . . . . 13.35 13.52 12.88 13.18 13.34 Tier I leverage ratio* . . . . . . . . . . . . . . . . 8.43% 8.56% 8.44% 8.69% 8.93% Shareholders' equity to total assets . . . . . . . . . 8.50% 8.51% 8.26% 8.42% 8.87% *Ratio excludes the average unrealized gains (losses) on securities available-for-sale, net of tax, of ($8,535) for the second quarter of 1994 and $22,399 for the first quarter of 1994 - - ------------------------------------------------------------------------------------------------------------------------------------
17 18 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION
June 30 December 31 June 30 $ in thousands 1994 1993 1993 ASSETS ----------- ----------- ----------- Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,200,729 $ 2,529,528 $ 2,185,015 Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . . . 14,464 12,478 97,777 Federal funds sold and securities purchased under resale agreements . . . . . . . . . . . . . . . . . . . 225,471 691,106 317,004 Trading account assets. . . . . . . . . . . . . . . . . . . . . . . . . . 754,735 788,779 863,949 Securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . 3,819,409 -- -- Securities held-to-maturity (market value of $3,906,979, $8,156,690 and $6,950,069, respectively). . . . . . . . . . . . . . . . 3,849,645 7,878,656 6,604,313 Loans and net leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 24,308,606 22,986,307 21,697,849 Less unearned income on loans . . . . . . . . . . . . . . . . . . . . . . 8,714 8,819 7,714 ----------- ----------- ----------- Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,299,892 22,977,488 21,690,135 Less allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . 405,942 404,798 399,480 ----------- ----------- ----------- Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,893,950 22,572,690 21,290,655 Premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 522,317 502,699 490,829 Due from customers on acceptances . . . . . . . . . . . . . . . . . . . . 614,908 434,584 437,794 Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173,386 1,115,252 960,426 ----------- ----------- ----------- Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,069,014 $36,525,772 $33,247,762 =========== =========== =========== LIABILITIES Deposits in domestic offices: Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,267,941 $ 6,140,884 $ 5,052,582 Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . 3,369,453 3,515,680 3,192,082 Savings and money market savings. . . . . . . . . . . . . . . . . . . . 6,178,332 6,194,086 6,100,803 Savings certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 5,096,976 5,141,410 5,347,707 Large denomination certificates . . . . . . . . . . . . . . . . . . . . 1,418,034 1,507,461 1,758,995 Noninterest-bearing time. . . . . . . . . . . . . . . . . . . . . . . . 95,557 45,802 83,681 ----------- ----------- ----------- Total deposits in domestic offices. . . . . . . . . . . . . . . . . 21,426,293 22,545,323 21,535,850 Deposits in foreign offices: Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,448 3,011 5,404 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786,314 804,064 344,951 ----------- ----------- ----------- Total deposits in foreign offices . . . . . . . . . . . . . . . . . 791,762 807,075 350,355 ----------- ----------- ----------- Total deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 22,218,055 23,352,398 21,886,205 Federal funds purchased and securities sold under repurchase agreements. . . . . . . . . . . . . . . . . . . . 5,066,104 4,741,283 3,957,930 Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471,639 589,178 554,677 Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . . . 749,414 1,091,123 1,149,296 Long-term debt: Bank notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,660,767 2,370,091 1,391,101 Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . 839,710 590,365 594,607 ----------- ----------- ----------- Total long-term debt. . . . . . . . . . . . . . . . . . . . . . . . 4,500,477 2,960,456 1,985,708 Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 614,908 434,584 437,794 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,273 338,803 325,739 ----------- ----------- ----------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 33,919,870 33,507,825 30,297,349 SHAREHOLDERS' EQUITY Preferred stock, par value $5 per share: Authorized 50,000,000 shares; none outstanding. . . . . . . . . . . . . -- -- -- Common stock, par value $5 per share: Issued 171,181,931, 171,375,772 and 173,498,420, respectively. . . . . . . . . . . . . . . . . . . . . . 855,910 856,879 867,492 Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753,940 761,573 833,708 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,539,294 1,399,495 1,249,213 ----------- ----------- ----------- Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . 3,149,144 3,017,947 2,950,413 ----------- ----------- ----------- Total liabilities and shareholders' equity. . . . . . . . . . . . . $37,069,014 $36,525,772 $33,247,762 =========== =========== ===========
18 19 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended June 30 June 30 $ in thousands, except per share 1994 1993 1994 1993 -------- -------- ---------- ---------- INTEREST INCOME Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $446,610 $404,145 $ 857,062 $ 803,401 Securities available-for-sale: State and municipal . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 14 -- Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . 47,534 -- 92,332 -- Securities held-to-maturity: State and municipal . . . . . . . . . . . . . . . . . . . . . . . . . 13,100 15,005 26,124 30,363 Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . 53,458 96,118 109,234 193,212 Interest-bearing bank balances . . . . . . . . . . . . . . . . . . . . 185 712 345 2,304 Federal funds sold and securities purchased under resale agreements . . . . . . . . . . . . . . . . . . 1,842 2,535 4,953 4,732 Trading account assets . . . . . . . . . . . . . . . . . . . . . . . . 7,058 6,508 13,576 12,877 -------- -------- ---------- ---------- Total interest income . . . . . . . . . . . . . . . . . . . . . . 569,787 525,023 1,103,640 1,046,889 INTEREST EXPENSE Deposits: Domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . 123,047 137,463 239,088 282,034 Foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,098 2,797 7,378 6,257 -------- -------- ---------- ---------- Total interest on deposits . . . . . . . . . . . . . . . . . . . 127,145 140,260 246,466 288,291 Short-term borrowed funds . . . . . . . . . . . . . . . . . . . . . . . 61,337 39,659 112,962 80,060 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,006 23,458 99,067 41,684 -------- -------- ---------- ---------- Total interest expense . . . . . . . . . . . . . . . . . . . . . 242,488 203,377 458,495 410,035 NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 327,299 321,646 645,145 636,854 Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . 16,342 26,084 34,101 51,156 -------- -------- ---------- ---------- Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . . . . . 310,957 295,562 611,044 585,698 OTHER INCOME Service charges on deposit accounts . . . . . . . . . . . . . . . . . . 50,646 51,622 98,796 101,994 Fees for trust services . . . . . . . . . . . . . . . . . . . . . . . . 32,983 29,614 64,664 59,981 Credit card income . . . . . . . . . . . . . . . . . . . . . . . . . . 28,120 25,629 53,454 47,937 Mortgage fee income . . . . . . . . . . . . . . . . . . . . . . . . . . 7,715 10,102 15,748 19,272 Trading account profits . . . . . . . . . . . . . . . . . . . . . . . . 598 2,746 2,105 7,485 Student loan servicing . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 5,535 Other operating income . . . . . . . . . . . . . . . . . . . . . . . . 33,237 28,880 63,401 55,773 -------- -------- ---------- ---------- Total other operating revenue . . . . . . . . . . . . . . . . . . 153,299 148,593 298,168 297,977 Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . -- -- -- 8,030 Investment securities gains . . . . . . . . . . . . . . . . . . . . . . 221 1,254 793 11,476 -------- -------- ---------- ---------- Total other income . . . . . . . . . . . . . . . . . . . . . . . 153,520 149,847 298,961 317,483 OTHER EXPENSE Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,882 110,119 230,093 220,434 Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,350 28,115 52,153 58,144 -------- -------- ---------- ---------- Total personnel expense . . . . . . . . . . . . . . . . . . . . . 141,232 138,234 282,246 278,578 Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . 20,196 19,660 39,624 39,533 Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,010 25,633 52,522 50,107 Other operating expense . . . . . . . . . . . . . . . . . . . . . . . . 87,107 89,307 170,203 189,732 -------- -------- ---------- ---------- Total other expense . . . . . . . . . . . . . . . . . . . . . . . 274,545 272,834 544,595 557,950 Income before income taxes . . . . . . . . . . . . . . . . . . . . . . 189,932 172,575 365,410 345,231 Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . 55,791 49,452 106,470 100,540 -------- -------- ---------- ---------- NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,141 $123,123 $ 258,940 $ 244,691 ======== ======== ========== ========== Net income per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .78 $ .71 $ 1.50 $ 1.41 Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .78 $ .70 $ 1.50 $ 1.39 Average shares outstanding: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,558 174,712 172,648 174,149 Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,197 176,004 173,298 175,865
19 20 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock ------------------------- Capital Retained $ in thousands, except per share Shares Amount Surplus Earnings ----------- -------- -------- ---------- PERIOD ENDED JUNE 30, 1993 Balance at beginning of year . . . . . . . . . . . . . . . . . . . 171,471,178 $857,356 $817,889 $1,099,522 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,691 Cash dividends declared on common stock -- $.54 a share . . . . . . . . . . . . . . . . . . (93,216) Common stock issued pursuant to: Stock option and employee benefit plans . . . . . . . . . . . . 374,540 1,873 7,492 (41) Dividend reinvestment plan . . . . . . . . . . . . . . . . . . . 155,276 776 4,632 (15) Conversion of notes . . . . . . . . . . . . . . . . . . . . . . 1,540,506 7,702 5,033 (60) Common stock acquired . . . . . . . . . . . . . . . . . . . . . . (42,851) (214) (1,334) 8 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . (229) (1) (4) (1,676) ----------- -------- -------- ---------- Balance at end of period . . . . . . . . . . . . . . . . . . . . . 173,498,420 $867,492 $833,708 $1,249,213 =========== ======== ======== ========== PERIOD ENDED JUNE 30, 1994 Balance at beginning of year . . . . . . . . . . . . . . . . . . . 171,375,772 $856,879 $761,573 $1,399,495 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,940 Cash dividends declared on common stock -- $.60 a share . . . . . . . . . . . . . . . . . . (102,842) Common stock issued pursuant to: Stock option and employee benefit plans. . . . . . . . . . . . . 475,983 2,380 11,352 Dividend reinvestment plan . . . . . . . . . . . . . . . . . . . 176,845 885 4,817 Conversion of notes. . . . . . . . . . . . . . . . . . . . . . . 21,254 106 301 Common stock acquired. . . . . . . . . . . . . . . . . . . . . . . (867,923) (4,340) (23,909) Unrealized losses on securities available- for-sale, net of tax . . . . . . . . . . . . . . . . . . . . . . (15,140) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . (194) (1,159) ----------- -------- -------- ---------- Balance at end of period . . . . . . . . . . . . . . . . . . . . . 171,181,931 $855,910 $753,940 $1,539,294 =========== ======== ======== ==========
20 21 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30 $ in thousands 1994 1993 ---------- ---------- OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 258,940 $ 244,691 Adjustments to reconcile net income to net cash provided by operations: Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,101 51,156 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,174 50,213 Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (436) (17,599) Investment securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (793) (11,476) Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (8,030) Gain on sale of noninterest-earning assets. . . . . . . . . . . . . . . . . . . . . . . . . (3,964) (1,098) Increase (decrease) in accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . (2,036) 9,257 Increase in accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . (7,567) (35,771) Increase (decrease) in accrued interest payable . . . . . . . . . . . . . . . . . . . . . . 5,442 (7,649) Net change in other accrued and deferred income and expense . . . . . . . . . . . . . . . . (20,388) 27,475 Net trading account activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,044 32,019 Net loans held for resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334,077 (364,751) ---------- ---------- Net cash provided (used) by operating activities. . . . . . . . . . . . . . . . . . . . 687,594 (31,563) INVESTING ACTIVITIES Net (increase) decrease in interest-bearing bank balances . . . . . . . . . . . . . . . . . . (1,986) 91,776 Net decrease in federal funds sold and securities purchased under resale agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465,635 161,968 Purchases of securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . (653,997) -- Purchases of securities held-to-maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . (92,171) (744,800) Sales of securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,876 -- Sales of securities held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 40,733 Calls, maturities and prepayments of securities available-for-sale. . . . . . . . . . . . . . 500,870 -- Calls, maturities and prepayments of securities held-to-maturity. . . . . . . . . . . . . . . 384,165 590,137 Net increase in loans made to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,695,888) (275,575) Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,391) (96,042) Proceeds from sales of premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . 3,956 4,708 Net increase in other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,719) (149,206) Business combinations and dispositions. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 20,000 ---------- ---------- Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . (1,169,650) (356,301) FINANCING ACTIVITIES Net decrease in demand, savings and money market accounts . . . . . . . . . . . . . . . . . . (982,732) (712,252) Net decrease in certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . (151,611) (777,004) Net increase in federal funds purchased and securities sold under repurchase agreements . . . 324,821 244,438 Net increase (decrease) in commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . (117,539) 168,059 Net increase (decrease) in other short-term borrowings. . . . . . . . . . . . . . . . . . . . (341,709) 300,473 Proceeds from issuance of bank notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,619,281 633,208 Maturities of bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (330,000) -- Proceeds from issuance of other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . 247,800 248,075 Payments on other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (171) (79,921) Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,009 13,041 Common stock repurchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,345) (1,545) Dividend payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (102,842) (93,216) Net increase (decrease) in other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . (705) 1,664 ---------- ---------- Net cash provided (used) by financing activities. . . . . . . . . . . . . . . . . . . . 153,257 (54,980) DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . (328,799) (442,844) Cash and cash equivalents at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 2,529,528 2,627,859 ---------- ---------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . 2,200,729 2,185,015 ========== ========== SUPPLEMENTAL DISCLOSURES Unrealized losses on securities available-for-sale: Decrease in securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,720 $ -- Increase in deferred taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,580 -- Decrease in shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,140 --
21 22 [ ] MEMBER COMPANY DIRECTORS - - -------------------------------------------------------------------------------- WACHOVIA BANK OF GEORGIA, N.A. G. JOSEPH PRENDERGAST Chairman of the Board, President and Chief Executive Officer F. DUANE ACKERMAN President and Chief Executive Officer BellSouth Telecommunications, Inc. EDWARD L. ADDISON Chairman of the Board and Chief Executive Officer The Southern Company L. M. BAKER, JR. President and Chief Executive Officer Wachovia Corporation THOMAS E. BOLAND Retired Chairman of the Board 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. 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 THOMAS M. BELK, JR. Senior Vice President Belk Stores Services, Inc. H. C. BISSELL Chairman of the Board and Chief Executive Officer The Bissell 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 WYNDHAM ROBERTSON Vice President, Communications University of North Carolina JOHN F. WARD Chief Executive Officer Hanes Group Senior Vice President Sara Lee Corporation ANDERSON D. WARLICK President and Chief Operating Officer Parkdale Mills, Inc. 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 WACHOVIA BANK OF SOUTH CAROLINA, N.A. 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. FRANK W. BRUMLEY President The Brumley Company 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 JAMES G. LINDLEY Chairman Emeritus JOE A. PADGETT Executive Vice President Wachovia Bank of South Carolina,N.A. 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 22 23 [ ] 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 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 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. 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 MICKEY W. DRY Executive Vice President Chief Credit Officer HUGH M. DURDEN Executive Vice President ANTHONY L. FURR Executive Vice President W. DOUG KING 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 23 24 (Logo) (Graphic) Wachovia Corporation P.O. Box 3099 Winston-Salem, NC 27150 [ ] SHAREHOLDER INFORMATION - - ------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER SERVICES Dividend Reinvestment and Common Stock Purchase Plan -- For information about these services, requests for address The plan provides common stockholders of record a regular changes and account assistance, please contact: way of investing cash dividends in additional shares at an average market price and/or investing optional cash payments H. Jo Barlow Wachovia Corporation without payment of brokerage commissions or service charges. Shareholder Services P.O. Box 3099 910-770-5787 Winston-Salem, NC 27150 Direct Deposit of Cash Dividends -- Direct deposit is OTHER INFORMATION a safe, fast and timesaving method of receiving cash Additional information about Wachovia Corporation or its dividends through automatic deposit on date of payment member companies may be obtained by contacting: to a checking, savings or money market account at any financial institution which participates in an Automated Robert S. McCoy, Jr., Chief Financial Officer, 910-770-5926 Clearing House. James C. Mabry, Investor Relations, 910-770-5788 Address Change And Account Assistance -- To help ensure Wachovia Corporation timely receipt of shareholder mailings, please notify the P.O. Box 3099 corporation, in writing, immediately of any address change Winston-Salem, NC 27150 or correction. Use of your shareholder account number and a daytime phone number in all correspondence will be appreciated. COMMON STOCK LISTING New York Stock Exchange Symbol: WB
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