-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bvfy4rhYTS/7JdFpps5uwxC+uK5iB2sX2ME7vjeuirmO1Gdlf9nFxZEFbj88JJOA 08Et7AO0eetN2mgvlYc0SQ== 0000950168-97-000739.txt : 19970329 0000950168-97-000739.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950168-97-000739 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: AMEX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONSBANK CORP CENTRAL INDEX KEY: 0000070858 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560906609 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06523 FILM NUMBER: 97566921 BUSINESS ADDRESS: STREET 1: NATIONSBANK CORPORATE CENTER STREET 2: 100 NORTH TRYON STREET CITY: CHARLOTTE STATE: NC ZIP: 28255 BUSINESS PHONE: 7043865000 MAIL ADDRESS: STREET 1: NATIONALSBANK CORPORATE CENTER STREET 2: NC1007 19 04 CITY: CHARLOTTE STATE: NC ZIP: 28255 FORMER COMPANY: FORMER CONFORMED NAME: NCNB CORP DATE OF NAME CHANGE: 19920107 10-K 1 NATIONSBANK CORPORATION 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 -- Commission File Number 1-6523 NATIONSBANK CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) North Carolina 56-0906609 (STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.) NationsBank Corporate Center Charlotte, North Carolina 28255 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 704 / 386-5000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock New York Stock Exchange London Stock Exchange Pacific Stock Exchange Tokyo Stock Exchange 7 3/4% Debentures, due 2002 American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or in any amendment to this Form 10-K. [ ] Aggregate market value of shares of voting stock held by all persons, other than shares beneficially owned by persons who may be deemed to be affiliates (as defined in SEC Rule 405), is approximately $41,994,576,000 computed by reference to the closing price of Common Stock of $58.00 per share on March 20, 1997, on the New York Stock Exchange Composite Transactions List, as reported in published financial sources, a stated price of $42.50 per share of the ESOP Convertible Preferred Stock, Series C, and the stated value of $100 per share of the 7% Cumulative Redeemable Preferred Stock, Series B. Of the registrant's only class of Common Stock, there were 741,505,154 shares outstanding as of March 7, 1997. DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT OF THE REGISTRANT FORM 10-K REFERENCE LOCATIONS 1996 Annual Report to Shareholders PARTS I, II and IV 1997 Proxy Statement PART III
PART I ITEM 1. BUSINESS GENERAL The registrant is a North Carolina corporation and a multi-bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "Act"), with its principal assets being the stock of its subsidiaries. Through its banking subsidiaries (the "Banks") and its various non-banking subsidiaries, the registrant provides banking and banking-related services, primarily throughout the Mid-Atlantic, Midwest, Southeast and Southwest. The principal executive offices of the registrant are located at NationsBank Corporate Center in Charlotte, North Carolina 28255. On February 27, 1997, the registrant completed a two-for-one split of its common stock (the "Split"). All financial data included in this Annual Report on Form 10-K has been restated to reflect the Split. ACQUISITIONS AND DISPOSITIONS On January 9, 1996, the registrant completed the acquisition of Bank South Corporation ("BKSO"). As of the acquisition date, BKSO had assets of approximately $7.4 billion and deposits of approximately $5.1 billion. The registrant issued 0.88 shares of its common stock for each outstanding share of BKSO common stock, for an aggregate purchase price of approximately 53 million shares of the registrant's common stock (adjusted for the Split). On January 10, 1996, the registrant completed the acquisition of CSF Holdings, Inc. ("CSF"). As of the acquisition date, CSF had assets of approximately $4.8 billion and deposits of approximately $3.8 billion. The purchase price was approximately $516 million and was paid in cash. On January 31, 1996, the registrant completed the acquisition of Sun World, N.A. ("Sun World"). As of the acquisition date, Sun World had assets of approximately $136 million and deposits of approximately $123 million. The purchase price was approximately $16 million and was paid in cash. On April 29, 1996, the registrant, through NationsCredit Commercial Corporation, its wholly owned, indirect subsidiary engaged primarily in the commercial financial services business, completed the acquisition of LDI Corporation ("LDI"). As of the acquisition date, LDI had assets of approximately $247 million. The purchase price was approximately $28 million and was paid in cash. On May 24, 1996, the registrant completed the acquisition of Charter Bancshares, Inc. ("CBI"). As of the acquisition date, CBI had assets of approximately $928 million and deposits of approximately $720 million. The registrant issued 0.77 shares of its common stock for each outstanding share of CBI common stock, for an aggregate purchase price of approximately 2.8 million shares of the registrant's common stock (adjusted for the Split). Prior to this acquisition, the registrant owned approximately 42% of CBI. On August 13, 1996, the registrant completed the acquisition of TAC Bancshares, Inc. ("TAC") and its subsidiary, Chase Federal Bank FSB ("Chase Federal"). As of the acquisition date, TAC and Chase Federal had total assets and total deposits of $2.8 billion and $2.0 billion, respectively. The purchase price was approximately $280 million, in the aggregate, and was paid in cash. On August 31, 1996, the registrant acquired aggregate deposits of approximately $970 million from Bluebonnet Savings Bank, FSB. The purchase price was approximately $46 million and was paid in cash. In connection with the divestiture of its affinity loan business, on September 27, 1996, the registrant, through one of its banking subsidiaries, NationsBank, N.A., sold approximately $393 million in loan account receivables to Household Bank, f.s.b. and approximately $728 million in loan account receivables to MBNA America Bank, N.A. The sales prices for these transactions were approximately $433 million and $784 million, respectively, and were received in cash. On January 7, 1997, the registrant completed the acquisition of Boatmen's Bancshares, Inc. ("BBI"). As of the acquisition date, BBI had assets of approximately $41.2 billion and deposits of approximately $32.0 billion. In the acquisition, each outstanding share of BBI common stock was converted into 1.305 shares of the registrant's common stock (adjusted for the Split) or, at the shareholder's election, $63.11 in cash, for an aggregate 1 purchase price of approximately 195 million shares of the registrant's common stock (adjusted for the Split) and $371 million in cash. The registrant currently intends to consummate the acquisition of First Federal Savings Bank of Brunswick, Georgia ("Brunswick") in the second quarter of 1997. As of December 31, 1996, Brunswick had assets of approximately $254 million and deposits of approximately $220 million. The registrant expects to issue approximately 2.4 million shares of its common stock in the acquisition (adjusted for the Split). As part of its operations, the registrant regularly evaluates the potential acquisition of, and holds discussions with, various financial institutions and other businesses of a type eligible for bank holding company ownership or control. In addition, the registrant regularly analyzes the values of, and submits bids for, the acquisition of customer-based funds and other liabilities and assets of such financial institutions and other businesses. As a general rule, the registrant publicly announces such material acquisitions when a definitive agreement has been reached. OPERATIONS The registrant provides a diversified range of banking and certain nonbanking financial services and products through its various subsidiaries. The registrant manages its business activities through three major business units: the General Bank, Global Finance and Financial Services. The General Bank provides comprehensive services in the retail and commercial banking fields, including the origination and servicing of home mortgage loans, the issuance and servicing of credit cards (through a Delaware subsidiary), indirect lending, dealer finance and certain insurance services. The General Bank also provides full service and discount brokerage services and investment advisory services, including advising the Nations Funds family of mutual funds, as well as banking, fiduciary and investment management services through subsidiaries of the registrant. The registrant has announced its intent to sell its line of business that provides retirement services for defined benefit and defined contribution plans. As of January 7, 1997, the General Bank operated approximately 2,600 banking offices in the states of Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Kentucky, Maryland, Missouri, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia and the District of Columbia. The General Bank also provides fully automated 24-hour cash dispensing and depositing services throughout the states in which it is located, through over 5,000 automated teller machines. Global Finance provides comprehensive corporate and investment banking services to domestic and international customers. Global Finance serves as a principal lender and investor, as well as an advisor, and manages treasury and trade transactions for clients and customers. Loan origination and syndication, asset-backed lending, leasing, factoring, project finance and mergers and acquisitions are representative of the services provided. These services are provided through various domestic offices as well as offices located in London, Singapore, Bogota, Mexico City, Grand Cayman, Nassau, Seoul, Tokyo, Osaka, Mumbai (formerly Bombay), Jakarta, Taipei, Sao Paulo, Frankfurt and Hong Kong. Global Finance also underwrites, distributes and makes markets in high-grade and high-yield securities, is a primary dealer of U.S. Government securities and is a market maker in derivatives products, including swap agreements, option contracts, forward settlement contracts, financial futures and other derivative products in certain interest rate, foreign exchange, commodity and equity markets. In support of these activities, Global Finance takes positions to support client demands and its own account. Major centers for such activities are Charlotte, Chicago, London, New York, Singapore and Tokyo. Financial Services is primarily comprised of NationsCredit Corporation, a holding company, which includes NationsCredit Consumer Corporation and NationsCredit Commercial Corporation. NationsCredit Consumer Corporation, which has approximately 264 offices located in 32 states, provides personal, mortgage and automobile loans to consumers and retail finance programs to dealers. NationsCredit Commercial Corporation consists of divisions that specialize in the following areas of commercial finance: equipment loans and leases; loans for debt restructuring, mergers and acquisitions and working capital; real estate, golf/recreational and health care financing; and inventory financing to manufacturers, distributors and dealers. Additional information about the registrant and its operations is incorporated by reference from Table Two (page 19) and the narrative comments under the caption "Management's Discussion and Analysis -- Business Unit Operations" (pages 19 through 22) in the registrant's 1996 Annual Report to Shareholders. 2 PRIMARY MARKET AREAS The registrant provides banking and banking-related services primarily throughout the Mid-Atlantic (Maryland, Virginia and the District of Columbia), the Midwest (Illinois, Iowa, Kansas and Missouri), the Southeast (Florida, Georgia, Kentucky, North Carolina, South Carolina and Tennessee) and the Southwest (Arkansas, New Mexico, Oklahoma and Texas). The registrant serves an aggregate of over 13 million customers in these regions, and management believes that these are dynamic regions in which to be located. Personal income levels in these regions as a whole rose 5.1% between 1995 and 1996, and the population in these areas as a whole rose an estimated 1.2% between 1995 and 1996. The number of housing permits authorized increased 8.4% between 1995 and 1996, ranging from an increase of 2.95% in the Mid-Atlantic to an increase of 11.84% in the Midwest. Between 1995 and 1996, the levels of unemployment in these regions as a whole fell by approximately .20 percentage points, for an average unemployment rate of 4.98% in 1996. The registrant has the leading deposit market share position in Georgia, Kansas, Maryland, New Mexico, Oklahoma, Texas and Virginia. In addition, the registrant ranks second in terms of deposit market share in Arkansas, the District of Columbia, Missouri and South Carolina, third in Florida, fourth in North Carolina, fifth in Tennessee and sixth in Iowa. The registrant has less than 1% of the market share in Illinois and Kentucky. GOVERNMENT SUPERVISION AND REGULATION GENERAL As a registered bank holding company, the registrant is subject to the supervision of, and to regular inspection by, the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). The Banks are organized as national banking associations, which are subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (the "Comptroller"), and as state chartered banks, which are subject to regulation, supervision and examination by the relevant state regulators. The Banks are also subject to regulation by the Federal Deposit Insurance Corporation (the "FDIC") and other federal regulatory agencies. The registrant also owns a federal savings bank which is subject to supervision, regulation and examination by the Office of Thrift Supervision. In addition to banking laws, regulations and regulatory agencies, the registrant and its subsidiaries and affiliates are subject to various other laws and regulations and supervision and examination by other regulatory agencies, all of which directly or indirectly affect the operations and management of the registrant and its ability to make distributions. The following discussion summarizes certain aspects of those laws and regulations that affect the registrant. The activities of the registrant, and those of companies which it controls or in which it holds more than 5% of the voting stock, are limited to banking or managing or controlling banks or furnishing services to or performing services for its subsidiaries, or any other activity which the Federal Reserve Board determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In making such determinations, the Federal Reserve Board is required to consider whether the performance of such activities by a bank holding company or its subsidiaries can reasonably be expected to produce benefits to the public such as greater convenience, increased competition or gains in efficiency that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices. Generally, bank holding companies, such as the registrant, are required to obtain prior approval of the Federal Reserve Board to engage in any new activity or to acquire more than 5% of any class of voting stock of any company. Bank holding companies are also required to obtain the prior approval of the Federal Reserve Board before acquiring more than 5% of any class of voting stock of any bank which is not already majority-owned by the bank holding company. Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking and Branching Act"), a bank holding company became able to acquire banks in states other than its home state, beginning September 29, 1995, without regard to the permissibility of such acquisitions under state law, but subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company, prior to or following the proposed acquisition, controls no more than 10% of the total amount of deposits of insured depository institutions in the United States and no more than 30% of such deposits in that state (or such lesser or greater amount set by state law). 3 The Interstate Banking and Branching Act also authorizes banks to merge across state lines, thereby creating interstate branches, beginning June 1, 1997. Under such legislation, each state has the opportunity either to "opt out" of this provision, thereby prohibiting interstate branching in such states, or to "opt in" at an earlier time, thereby allowing interstate branching within that state prior to June 1, 1997. Furthermore, pursuant to the Interstate Banking and Branching Act, a bank is now able to open new branches in a state in which it does not already have banking operations if such state enacts a law permitting such DE NOVO branching. Of those states in which the Banks are located, Delaware, Maryland, New Mexico, North Carolina, Oklahoma and Virginia have enacted legislation to "opt in", thereby permitting interstate branching prior to June 1, 1997, and Texas has adopted legislation to "opt out" of the interstate branching provisions (which Texas law currently expires on September 2, 1999). To the extent permitted under these laws, the registrant plans to consolidate the Banks (with the exception of NationsBank of Delaware, N.A.) into a single bank as soon as practicable. The registrant currently operates four interstate banks (i.e., banks with banking centers in more than one state): NationsBank, N.A., headquartered in Charlotte, North Carolina, with offices in Maryland, North Carolina, South Carolina, Virginia, and the District of Columbia; NationsBank, N.A. (South), headquartered in Atlanta, Georgia, with offices in Florida and Georgia; NationsBank, N.A. (Midwest), headquartered in Kansas City, Missouri, with offices in Kansas and Missouri; and The Boatmen's National Bank of St. Louis, headquartered in St. Louis, Missouri, with offices in Illinois and Missouri. As previously described, the registrant regularly evaluates merger and acquisition opportunities, and it anticipates that it will continue to evaluate such opportunities in light of the new legislation. Proposals to change the laws and regulations governing the banking industry are frequently introduced in Congress, in the state legislatures and before the various bank regulatory agencies. The likelihood and timing of any such proposals or bills and the impact they might have on the registrant and its subsidiaries cannot be determined at this time. CAPITAL AND OPERATIONAL REQUIREMENTS The Federal Reserve Board, the Comptroller and the FDIC have issued substantially similar risk-based and leverage capital guidelines applicable to United States banking organizations. In addition, those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels, whether because of its financial condition or actual or anticipated growth. The Federal Reserve Board risk-based guidelines define a two-tier capital framework. Tier 1 capital consists of common and qualifying preferred shareholders' equity, less certain intangibles and other adjustments. Tier 2 capital consists of subordinated and other qualifying debt, and the allowance for credit losses up to 1.25% of risk-weighted assets. The sum of Tier 1 and Tier 2 capital less investments in unconsolidated subsidiaries represents qualifying total capital, at least 50% of which must consist of Tier 1 capital. Risk-based capital ratios are calculated by dividing Tier 1 and total capital by risk-weighted assets. Assets and off-balance sheet exposures are assigned to one of four categories of risk-weights, based primarily on relative credit risk. The minimum Tier 1 capital ratio is 4% and the minimum total capital ratio is 8%. The registrant's Tier 1 and total risk-based capital ratios under these guidelines at December 31, 1996 were 7.76% and 12.66%, respectively. The leverage ratio is determined by dividing Tier 1 capital by adjusted average total assets. Although the stated minimum ratio is 3%, most banking organizations are required to maintain ratios of at least 100 to 200 basis points above 3%. The registrant's leverage ratio at December 31, 1996 was 7.09%. Management believes that the registrant meets its leverage ratio requirement. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), among other things, identifies five capital categories for insured depository institutions (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the respective Federal regulatory agencies to implement systems for "prompt corrective action" for insured depository institutions that do not meet minimum capital requirements within such categories. FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Failure to meet the capital guidelines could also subject a banking institution to capital raising requirements. An "undercapitalized" bank must develop a capital restoration plan and its parent holding company must guarantee that bank's compliance with the plan. The liability of the parent holding company under any such guarantee is limited to the lesser of 5% of the bank's assets at the time it became "undercapitalized" or the amount needed to comply with the plan. Furthermore, in the event 4 of the bankruptcy of the parent holding company, such guarantee would take priority over the parent's general unsecured creditors. In addition, FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness relating generally to operations and management, asset quality and executive compensation and permits regulatory action against a financial institution that does not meet such standards. The various regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the total risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the relevant capital measures. Such regulations establish various degrees of corrective action to be taken when an institution is considered undercapitalized. Under the regulations, a "well capitalized" institution must have a Tier 1 capital ratio of at least 6 percent, a total capital ratio of at least 10 percent and a leverage ratio of at least 5 percent and not be subject to a capital directive order. An "adequately capitalized" institution must have a Tier 1 capital ratio of at least 4 percent, a total capital ratio of at least 8 percent and a leverage ratio of at least 4 percent, or 3 percent in some cases. Under these guidelines, each of the Banks is considered well capitalized. Banking agencies have also adopted final regulations which mandate that regulators take into consideration concentrations of credit risk and risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital. That evaluation will be made as a part of the institution's regular safety and soundness examination. Banking agencies also have adopted final regulations requiring regulators to consider interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the determination of a bank's capital adequacy. Concurrently, banking agencies have proposed a methodology for evaluating interest rate risk. After gaining experience with the proposed measurement process, those banking agencies intend to propose further regulations to establish an explicit risk-based capital charge for interest rate risk. DISTRIBUTIONS The registrant's funds for cash distributions to its shareholders are derived from a variety of sources, including cash and temporary investments. The primary source of such funds, however, is dividends received from the Banks. Each of the Banks is subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. The appropriate federal regulatory authority is authorized to determine under certain circumstances relating to the financial condition of the bank or bank holding company that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. In addition to the foregoing, the ability of the registrant and the Banks to pay dividends may be affected by the various minimum capital requirements and the capital and non-capital standards established under FDICIA, as described above. The right of the registrant, its shareholders and its creditors to participate in any distribution of the assets or earnings of its subsidiaries is further subject to the prior claims of creditors of the respective subsidiaries. SOURCE OF STRENGTH According to Federal Reserve Board policy, bank holding companies are expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each such subsidiary. This support may be required at times when a bank holding company may not be able to provide such support. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act, in the event of a loss suffered or anticipated by the FDIC -- either as a result of default of a banking or thrift subsidiary of the registrant or related to FDIC assistance provided to a subsidiary in danger of default -- the other Banks may be assessed for the FDIC's loss, subject to certain exceptions. ADDITIONAL INFORMATION The following information set forth in the 1996 Annual Report to Shareholders of the registrant is hereby incorporated by reference: Table Three (page 21) for average balance sheet amounts, related taxable-equivalent interest earned or paid, and related average yields earned and rates paid. 5 Table Four (page 23) and the narrative comments under the caption "Net Interest Income" (page 22) for changes in taxable-equivalent interest income and expense for each major category of interest-earning assets and interest-bearing liabilities. The narrative comments under the caption "Securities" (pages 27 and 28) and Note Three (pages 56 through 58) of the Notes To Consolidated Financial Statements for information on the book values, maturities and weighted average yields of the securities (by category) of the registrant. Tables Seven (page 28), Eight (page 29) and Nineteen (page 41) for distribution of loans, leases and factored accounts receivable, selected loan maturity data and interest-rate risk. Table Fourteen (page 36), the narrative comments under the caption "Credit Risk Management And Credit Portfolio Review -- Nonperforming Assets" (pages 36 and 37), and Note One (page 54) of the Notes To Consolidated Financial Statements for information on the nonperforming assets of the registrant. Table Fifteen (page 36) for information on loans past due 90 days or more and still accruing interest. The narrative comments under the captions "Credit Risk Management And Credit Portfolio Review" (pages 32 through 35) and "Loans And Leases" (pages 28 and 29) and Tables Seventeen and Eighteen (pages 38 and 39) for a discussion of the characteristics of the loan and lease portfolio. Tables Twelve (page 34) and Thirteen (page 35), the narrative comments under the captions "Provision for Credit Losses" (pages 22 through 24) and "Credit Risk Management And Credit Portfolio Review -- Allowance for Credit Losses" (page 35) and Note One (page 54) of the Notes To Consolidated Financial Statements for information on the credit loss experience of the registrant. Table Three (page 21) and the narrative comments under the caption "Deposits" (page 29) for deposit information. "Six-Year Consolidated Statistical Summary" (page 73) for return on assets, return on equity and dividend payout ratio for 1991 through 1996, inclusive. Table Nine (page 30) and Note Six (pages 60 and 61) of the Notes To Consolidated Financial Statements for information on the short-term borrowings of the registrant. All tables, graphs, charts, summaries and narrative on pages 17 through 47 and pages 72 and 73 for additional data on the consolidated operations of the registrant and its majority-owned subsidiaries. COMPETITION The activities in which the registrant and its three major business units (the General Bank, Global Finance and Financial Services) engage are highly competitive. Generally, the lines of activity and markets served involve competition with other banks, savings and loan associations, credit unions and other non-bank financial institutions, such as investment banking firms, brokerage firms, mutual funds and insurance companies, as well as other entities which offer financial services, located both within and without the United States. The methods of competition center around various factors, such as customer services, interest rates on loans and deposits, lending limits and location of offices. The commercial banking business in the various local markets served by the registrant's three major business units is highly competitive. The General Bank, Global Finance and Financial Services compete with other commercial banks, savings and loan associations, finance companies and other businesses which provide similar services. The three major business units actively compete in commercial lending activities with local, regional and international banks and non-bank financial organizations, some of which are larger than certain of the registrant's non-banking subsidiaries and the Banks. In its consumer lending operations, the competitors of the three major business units include other banks, savings and loan associations, credit unions, regulated small loan companies and other non-bank organizations offering financial services. In the investment banking, investment advisory and brokerage business, the registrant's non-banking subsidiaries compete with other banking and investment banking firms, investment advisory firms, brokerage firms, mutual funds and other organizations offering similar services. The registrant's mortgage banking subsidiary competes with commercial banks, savings and loan associations, government agencies, mortgage brokers and other non-bank organizations offering mortgage banking services. In the trust business, the Banks compete with other banks, investment counselors and insurance companies in national markets for institutional funds and corporate pension and profit sharing accounts. The Banks also compete with other banks, trust companies, insurance agents, 6 financial counselors and other fiduciaries for personal trust business. The registrant and its three major business units also actively compete for funds. A primary source of funds for the Banks is deposits, and competition for deposits includes other deposit-taking organizations, such as commercial banks, savings and loan associations and credit unions, as well as money market mutual funds. The registrant's ability to expand into additional states remains subject to various federal and state laws. See "Government Supervision and Regulation -- General" for a more detailed discussion of interstate banking and branching legislation and certain state legislation. EMPLOYEES As of December 31, 1996, the registrant and its subsidiaries had 62,971 full-time equivalent employees. Of the foregoing employees, 35,766 were employed by the General Bank, 5,178 were employed by Global Finance, 3,129 were employed by Financial Services, 14,815 were employed by NationsBanc Services, Inc. (a subsidiary providing operational support services to the registrant and its subsidiaries) and the remainder were employed by the registrant holding company and the registrant's other subsidiaries. As of December 31, 1996, BBI and its subsidiaries had 19,028 full-time equivalent employees. None of the registrant's domestic employees are covered by a collective bargaining agreement. Management considers its employee relations to be good. ITEM 2. PROPERTIES The principal offices of the registrant, as well as the General Bank and Global Finance, are located in the 60-story NationsBank Corporate Center in Charlotte, North Carolina, which is owned by a subsidiary of the registrant. The registrant occupies approximately 512,000 square feet at market rates under a lease which expires in 2002, and approximately 593,000 square feet of office space is available for lease to third parties at market rates. At December 31, 1996, substantially all of the space was occupied by the registrant or subject to existing third party leases or letters of intention to lease. The principal offices of Financial Services are located in approximately 136,000 square feet of space leased by NationsCredit Corporation and NationsCredit Consumer Corporation in Irving, Texas, under a lease which expires in 2006, and 40,000 square feet of space leased by NationsCredit Commercial Corporation in Stamford, Connecticut, under a lease which expires in 1998. The registrant also leases or owns a significant amount of space in Albuquerque, New Mexico; Atlanta, Georgia; Baltimore, Maryland; Dallas, Texas; Richmond, Virginia; St. Louis, Missouri; and Wichita, Kansas; as well as additional premises in Charlotte and throughout its franchise. As of January 7, 1997, the registrant and its subsidiaries owned or leased approximately 3,340 locations in 22 states, the District of Columbia and 10 foreign countries. ITEM 3. LEGAL PROCEEDINGS In the ordinary course of business, the registrant and its subsidiaries are routinely defendants in or parties to a number of pending and threatened legal actions and proceedings, including several actions brought on behalf of various classes of claimants. In certain of these actions and proceedings substantial money damages are asserted against the registrant and its subsidiaries and certain of these actions and proceedings are based on alleged violations of consumer protection, securities, environmental, banking and other laws. Management believes, based upon the advice of counsel, that these actions and proceedings and the losses, if any, resulting from the final outcome thereof, will not be material in the aggregate to the registrant's financial position or results of operations. 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A special meeting of shareholders was held on December 20, 1996 (the "Special Meeting"). The registrant's Common Stock and ESOP Convertible Preferred Stock, Series C, voted together as a single class on the matters submitted to the shareholders at the Special Meeting. The following are voting results on each of these matters:
Against or Broker For Withheld Abstentions Nonvotes 1. The issuance of shares of the registrant's Common Stock and Convertible Preferred Stock, Series A, in the merger with Boatmen's Bancshares, Inc.... 212,153,684 1,702,058 1,119,123 23,662,030 2. The amendment of the registrant's Restated Articles of Incorporation to increase the number of authorized shares of Common Stock to 1,250,000,000....... 231,010,690 6,040,086 1,586,119 0 3. The amendment and restatement of the NationsBank Corporation Key Employee Stock Plan................... 189,481,251 22,637,568 2,811,251 23,706,825
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to the Instructions to Form 10-K and Item 401(b) of Regulation S-K, the name, age and position of each executive officer and the principal accounting officer of the registrant are listed below along with such officer's business experience during the past five years. Officers are appointed annually by the Board of Directors at the meeting of directors immediately following the annual meeting of shareholders. There are no arrangements or understandings between any officer and any other person pursuant to which any officer was selected. Andrew B. Craig, III, age 66, Chairman of the Board of the registrant. Mr. Craig was Chairman of the Board and Chief Executive Officer of Boatmen's Bancshares, Inc. from 1988 until January 7, 1997 when Boatmen's Bancshares, Inc. was merged with the registrant at which time he was elected as Chairman of the Board and a director of the registrant. He also served as President of Boatmen's Bancshares, Inc. from 1985 to 1994. Fredric J. Figge, II, age 60, Chairman, Corporate Risk Policy of the registrant and of the Banks. Mr. Figge was named Chairman, Corporate Risk Policy in October 1993 and prior to that time served as Chairman, Credit Policy of the registrant and of the Banks. He first became an officer in 1987. James H. Hance, Jr., age 52, Vice Chairman and Chief Financial Officer of the registrant. Mr. Hance was named Chief Financial Officer in August 1988, also served as Executive Vice President from March 1987 to October 1993 and was named Vice Chairman in October 1993. He first became an officer in 1987. He also serves as a director of NationsBank, N.A., NationsBank of Tennessee, N.A. and various other subsidiaries of the registrant. Kenneth D. Lewis, age 49, President of the registrant. Mr. Lewis was named to his present position in October 1993. Prior to that time, from June 1990 to October 1993 he served as President of the registrant's General Bank. He first became an officer in 1971. Mr. Lewis also serves as Chairman and a director of NationsBank, N.A., as President and a director of NationsBank, N.A. (South) and as a director of NationsBank of Texas, N.A. Hugh L. McColl, Jr., age 61, Chief Executive Officer of the registrant and Chief Executive Officer of the Banks. Mr. McColl was Chairman of the registrant from September 1983 until December 31, 1991, and from December 31, 1992 until January 7, 1997. He first became an officer in 1962. He also serves as a director of the registrant. 8 Marc D. Oken, age 50, Executive Vice President and Principal Accounting Officer of the registrant. He first became an officer in 1989. F. William Vandiver, Jr., age 55, President of NationsBank Global Finance, which includes Corporate Finance/Capital Markets, Real Estate and Specialized Lending. Mr. Vandiver was named President of NationsBank Global Finance in January 1996. In 1984, he was named Investment Banking Company executive and president in 1988. He has been an officer since 1968. He also serves as President and a director of NationsBank, N.A. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The principal market on which the registrant's common stock (the "Common Stock") is traded is the New York Stock Exchange. The Common Stock is also listed on the London Stock Exchange and the Pacific Stock Exchange, and certain shares are listed on the Tokyo Stock Exchange. The following table sets forth the high and low sales prices of Common Stock on the New York Stock Exchange Composite Transactions List, restated to give effect to the Split, for the periods indicated:
QUARTER HIGH LOW 1995 first $25 7/8 $22 5/16 second 28 7/8 24 13/16 third 34 7/16 26 7/8 fourth 37 3/8 32 1996 first 40 11/16 32 3/16 second 42 5/16 37 3/8 third 47 1/16 38 3/16 fourth 52 5/8 43 1/8
As of January 7,, 1997, there were 145,657 record holders of Common Stock. During 1995 and 1996, the registrant paid dividends on the Common Stock on a quarterly basis. The following table sets forth dividends declared per share of Common Stock for the periods indicated, restated to give effect to the Split:
QUARTER DIVIDEND 1995 first $.25 second .25 third .25 fourth .29 1996 first .29 second .29 third .29 fourth .33
For additional information regarding the registrant's ability to pay dividends, see "Government Supervision and Regulation -- Distributions." Note Nine (page 63) of the Notes To Consolidated Financial Statements in the registrant's 1996 Annual Report to Shareholders is hereby incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA The information set forth in Table One (page 18) in the registrant's 1996 Annual Report to Shareholders is hereby incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All of the information set forth under the captions "Management's Discussion and Analysis -- 1996 Compared to 1995" (pages 17 through 43), "Management's Discussion and Analysis -- 1995 Compared to 1994" (pages 43 through 47), "Report of Management" (page 48) and all tables, graphs and charts presented under 9 the foregoing captions in the 1996 Annual Report to Shareholders of the registrant are hereby incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following information set forth in the 1996 Annual Report to Shareholders of the registrant is hereby incorporated by reference: The Consolidated Financial Statements and Notes To Consolidated Financial Statements of NationsBank Corporation and Subsidiaries, together with the report thereon of Price Waterhouse LLP dated January 10, 1997 (pages 48 through 71); the unaudited information presented in Table Twenty (page 44); and the narrative comments under the caption "Fourth Quarter Review" (page 43). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in or disagreements with accountants on accounting and financial disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information set forth under the caption "Election of Directors" on pages 2 through 8 of the definitive 1997 Proxy Statement of the registrant furnished to shareholders in connection with its Annual Meeting to be held on April 23, 1997 (the "1997 Proxy Statement") with respect to the name of each nominee or director, that person's age, positions and offices with the registrant, business experience, directorships in other public companies, service on the registrant's Board and certain family relationships, and information set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 11 of the 1997 Proxy Statement with respect to Section 16 matters, is hereby incorporated by reference. The information required by Item 10 with respect to executive officers is set forth in Part I, Item 4A hereof. ITEM 11. EXECUTIVE COMPENSATION Information with respect to current remuneration of executive officers, certain proposed remuneration to them, their options and certain indebtedness and other transactions set forth in the 1997 Proxy Statement (i) under the caption "Board of Directors' Compensation" on pages 11 and 12 thereof, (ii) under the caption "Executive Compensation" on pages 12 and 13 thereof, (iii) under the caption "Retirement Plans" on pages 13 and 14 thereof, (iv) under the caption "Deferred Compensation Plan" on page 14 thereof, (v) under the caption "Special Compensation Arrangement" on page 14 thereof, (vi) under the caption "Compensation Committee Interlocks and Insider Participation" on page 18 thereof, and (vii) under the caption "Certain Transactions" on pages 18 and 19 thereof, is, to the extent such information is required by Item 402 of Regulation S-K, hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The security ownership information required by Item 403 of Regulation S-K relating to persons who beneficially own more than 5% of the outstanding shares of Common Stock, ESOP Preferred Stock or 7% Cumulative Redeemable Preferred Stock, Series B, as well as security ownership information relating to directors, nominees and named executive officers individually and directors and executive officers as a group, is hereby incorporated by reference to the ownership information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" on pages 8 through 10 of the 1997 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to relationships and related transactions between the registrant and any director, nominee for director, executive officer, security holder owning 5% or more of the registrant's voting securities or any member of the immediate family of any of the above, as set forth in the 1997 Proxy Statement under the caption "Compensation Committee Interlocks and Insider Participation" on page 18 and under the caption "Certain Transactions" on pages 18 and 19 thereof, is, to the extent such information is required by Item 404 of Regulation S-K, hereby incorporated by reference. 10 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a. The following documents are filed as part of this report:
PAGE IN ANNUAL REPORT* (1) Financial Statements: Report of Independent Accountants....................................................... 48 Consolidated Statement of Income for each of the three years ended December 31, 1996..................................................................... 49 Consolidated Balance Sheet at December 31, 1996 and 1995................................ 50 Consolidated Statement of Cash Flows for each of the three years ended December 31, 1996..................................................................... 51 Consolidated Statement of Changes in Shareholders' Equity for each of the three years ended December 31, 1996............................................................... 52 Notes to Consolidated Financial Statements.............................................. 53-71 * Incorporated by reference from the indicated pages of the 1996 Annual Report to Shareholders. (2) All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
b. The following reports on Form 8-K have been filed by the registrant during the quarter ended December 31, 1996: Current Report on Form 8-K dated October 15, 1996 and filed October 25, 1996, Items 5 and 7. Current Report on Form 8-K/A-2 dated August 29, 1996 and filed November 13, 1996, Item 7. The following financial statements of the business to be acquired (Boatmen's Bancshares, Inc.) were filed as part of this Current Report on Form 8-K/A-2: Consolidated Balance Sheets as of September 30, 1996 (unaudited), June 30, 1996 (unaudited) and December 31, 1995 and 1994; Consolidated Statements of Income for the nine months ended September 30, 1996 and 1995 (unaudited), the six months ended June 30, 1996 and 1995 (unaudited) and the years ended December 31, 1995 and 1994; Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 1996 and 1995 (unaudited), the six months ended June 30, 1996 and 1995 (unaudited) and the years ended December 31, 1995 and 1994; and Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (unaudited), the six months ended June 30, 1996 and 1995 (unaudited) and the years ended December 31, 1995 and 1994. In addition, the following unaudited pro forma financial information was filed as part of this Current Report on Form 8-K/A-2: Unaudited Pro Forma Condensed Balance Sheet as of September 30, 1996; Unaudited Pro Forma Condensed Statement of Income for the nine months ended September 30, 1996; and Unaudited Pro Forma Condensed Statement of Income for the year ended December 31, 1995. Current Report on Form 8-K dated November 8, 1996 and filed November 14, 1996, Items 5 and 7. 11 Current Report on Form 8-K dated November 27, 1996 and filed December 4, 1996, Items 5 and 7. Current Report on Form 8-K dated December 10, 1996 and filed December 17, 1996, Items 5 and 7. Current Report on Form 8-K dated December 13, 1996 and filed December 17, 1996, Items 5 and 7. c. The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are listed in the Index to Exhibits to this Annual Report on Form 10-K (pages E-1 through E-5, including executive compensation plans and arrangements which are identified separately by asterisk). With the exception of the information herein expressly incorporated by reference, the 1996 Annual Report to Shareholders and the 1997 Proxy Statement are not to be deemed filed as part of this Annual Report on Form 10-K. 12 SIGNATURES Pursuant to the requirements of Section 13 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. NATIONSBANK CORPORATION Date: March 28, 1997 By: */s/ Hugh L. McColl, Jr. HUGH L. MCCOLL, JR. CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE Chief Executive Officer and Director March 28, 1997 */s/ Hugh L. McColl, Jr. (Principal Executive Officer) (HUGH L. MCCOLL, JR.) Vice Chairman and March 28, 1997 */s/ James H. Hance, Jr. Chief Financial Officer (JAMES H. HANCE, JR.) (Principal Financial Officer) Executive Vice President March 28, 1997 */s/ Marc D. Oken (Principal Accounting Officer) (MARC D. OKEN) */s/ Andrew B. Craig, III Chairman of the Board March 28, 1997 (ANDREW B. CRAIG, III) */s/ Ronald W. Allen Director March 28, 1997 (RONALD W. ALLEN) */s/ Ray C. Anderson Director March 28, 1997 (RAY C. ANDERSON) */s/ William M. Barnhardt Director March 28, 1997 (WILLIAM M. BARNHARDT) */s/ B. A. Bridgewater, JR. Director March 28, 1997 (B. A. BRIDGEWATER, JR.) */s/ Thomas E. Capps Director March 28, 1997 (THOMAS E. CAPPS) */s/ Charles W. Coker Director March 28, 1997 (CHARLES W. COKER) */s/ Thomas G. Cousins Director March 28, 1997 (THOMAS G. COUSINS) */s/ Alan T. Dickson Director March 28, 1997 (ALAN T. DICKSON) */s/ W. Frank Dowd, Jr. Director March 28, 1997 (W. FRANK DOWD, JR.) */s/ Paul Fulton Director March 28, 1997 (PAUL FULTON)
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SIGNATURE TITLE DATE */s/ Timothy L. Guzzle Director March 28, 1997 (TIMOTHY L. GUZZLE) */s/ C. Ray Holman Director March 28, 1997 (C. RAY HOLMAN) */s/ W. W. Johnson Director March 28, 1997 (W. W. JOHNSON) */s/ Russell W. Meyer, Jr. Director March 28, 1997 (RUSSELL W. MEYER, JR.) Director March , 1997 (JOHN J. MURPHY) */s/ Richard B. Priory Director March 28, 1997 (RICHARD B. PRIORY) */s/ John C. Slane Director March 28, 1997 (JOHN C. SLANE) */s/ O. Temple Sloan, Jr. Director March 28, 1997 (O. TEMPLE SLOAN, JR.) */s/ John W. Snow Director March 28, 1997 (JOHN W. SNOW) */s/ Meredith R. Spangler Director March 28, 1997 (MEREDITH R. SPANGLER) */s/ Robert H. Spilman Director March 28, 1997 (ROBERT H. SPILMAN) */s/ Albert E. Suter Director March 28, 1997 (ALBERT E. SUTER) */s/ Ronald Townsend Director March 28, 1997 (RONALD TOWNSEND) */s/ Jackie M. Ward Director March 28, 1997 (JACKIE M. WARD) */s/ Virgil R. Williams Director March 28, 1997 (VIRGIL R. WILLIAMS) *By: /s/ Charles M. Berger CHARLES M. BERGER, ATTORNEY-IN-FACT
II-2 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION 3. (a) Restated Articles of Incorporation of registrant, as in effect on the date hereof, incorporated by reference to Exhibit 3.1 of registrant's Current Report on Form 8-K dated December 31, 1996. (b) Amended and Restated Bylaws of registrant, as in effect on the date hereof, incorporated by reference to Exhibit 3(b) of registrant's Annual Report on Form 10-K dated March 29, 1996 (the "1995 Form 10-K"). 4. (a) Specimen certificate of registrant's Common Stock, incorporated by reference to Exhibit 4.1 of registrant's Registration No. 33-45542. (b) Specimen certificate of registrant's ESOP Convertible Preferred Stock, Series C, incorporated by reference to Exhibit 4(c) of registrant's Annual Report on Form 10-K dated March 25, 1992. (c) Indenture dated as of August 1, 1982 between registrant and Morgan Guaranty Trust Company of New York, pursuant to which registrant issued its 7 3/4% Debentures, due 2002, incorporated by reference to Exhibit 4.2 of registrant's Registration No. 2-78530. (d) Indenture dated as of September 1, 1989 between registrant and The Bank of New York, pursuant to which registrant issued its 9 3/8% Subordinated Notes, due 2009; its 10.20% Subordinated Notes, due 2015; its 9 1/8% Subordinated Notes, due 2001; and its 8 1/8% Subordinated Notes, due 2002, incorporated by reference to Exhibit 4.1 of registrant's Registration No. 33-30717. (e) Indenture dated as of January 1, 1992 between registrant and BankAmerica Trust Company of New York, pursuant to which registrant issued its 6 5/8% Senior Notes, due 1998, incorporated by reference to Exhibit 4.1 of registrant's Registration No. 33-54784. (f) Indenture dated as of November 1, 1992 between registrant and The Bank of New York, pursuant to which registrant issued its 6 7/8% Subordinated Notes, due 2005, incorporated by reference to Exhibit 4.1 of registrant's Amendment to Application or Report on Form 8 dated March 1, 1993. (g) First Supplemental Indenture dated as of July 1, 1993 to the Indenture dated as of January 1, 1992 between registrant and BankAmerica National Trust Company (formerly BankAmerica Trust Company of New York), pursuant to which registrant issued its Senior Medium-Term Notes, Series A, B and C; its 5 1/8% Senior Notes, due 1998; and its 5 3/8% Senior Notes, due 2000, incorporated by reference to Exhibit 4.1 of registrant's Current Report on Form 8-K dated July 6, 1993. (h) First Supplemental Indenture dated as of July 1, 1993 to the Indenture dated as of November 1, 1992 between registrant and The Bank of New York, pursuant to which registrant issued its Subordinated Medium-Term Notes, Series A and B; its 6 1/2% Subordinated Notes, due 2003; and its 7 3/4% Subordinated Notes, due 2004, incorporated by reference to Exhibit 4.4 of registrant's Current Report on Form 8-K dated July 6, 1993. (i) Indenture dated as of January 1, 1995 between registrant and BankAmerica National Trust Company, pursuant to which registrant issued its Floating Rate Senior Notes, due 1998; its 7% Senior Notes, due, 2003; its 7% Senior Notes, due 2001; and its Senior Medium-Term Notes, Series D, E and F, incorporated by reference to Exhibit 4.1 of registrant's Registration No. 33-57533. (j) Indenture dated as of January 1, 1995 between registrant and The Bank of New York, pursuant to which registrant issued its 7 5/8% Subordinated Notes, due 2005; its 7 3/4% Subordinated Notes, due 2015; its 7 1/4% Subordinated Notes, due 2025; its 6 1/2% Subordinated Notes, due 2006; its 7.80% Subordinated Notes, due 2016; and its Subordinated Medium-Term Notes, Series D, E and F, incorporated by reference to Exhibit 4.1 of registrant's Registration No. 33-57533. (k) Fiscal and Paying Agency Agreement dated as of July 5, 1995, between registrant and The Chase Manhattan Bank, N.A. (London Branch), pursuant to which registrant issued its Floating Rate Senior Notes, due 2000, incorporated by reference to Exhibit 4(l) of the 1995 Form 10-K. (l) Agency Agreement dated as of November 8, 1995 between registrant and The Chase Manhattan Bank, N.A. (London Branch), pursuant to which registrant issued its Senior Euro Medium-Term Notes, as amended and restated dated as of July 5, 1996.
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EXHIBIT NO. DESCRIPTION (m) Issuing and Paying Agency Agreement dated as of April 10, 1995 between NationsBank, N.A. (as successor to NationsBank, N.A. (Carolinas)), NationsBank of Texas, N.A. and NationsBank, N.A. (South) (as successor to NationsBank of Georgia, N.A.), as Issuers, and Bankers Trust Company, as Issuing and Paying Agent, incorporated by reference to Exhibit 4(n) of the 1995 Form 10-K. (n) Articles of Association of NationsBank, N.A. (South), incorporated by reference to Exhibit 4(o) of the 1995 Form 10-K. (o) Statement of Designation relating to the NationsBank, N.A. (South) Series H Preferred Stock, incorporated by reference to Exhibit 4(p) of the 1995 Form 10-K. (p) Statement of Designation relating to the NationsBank, N.A. (South) Series 1993A Preferred Stock, incorporated by reference to Exhibit 4(q) of the 1995 Form 10-K. (q) Specimen certificate of registrant's 7% Cumulative Redeemable Preferred Stock, Series B. (r) Indenture dated as of November 27, 1996 between the registrant and The Bank of New York, incorporated by reference to Exhibit 4.10 of registrant's Registration No. 333-15375. (s) First Supplemental Indenture dated as of December 4, 1996 to the Indenture dated as of November 27, 1996 between the registrant and The Bank of New York pursuant to which the registrant issued its 7.84% Junior Subordinated Deferrable Interest Notes due 2026, incorporated by reference to Exhibit 4.3 of registrant's Current Report on Form 8-K dated November 27, 1996. (t) Second Supplemental Indenture dated as of December 17, 1996 to the Indenture dated as of November 27, 1996 between the registrant and The Bank of New York pursuant to which the registrant issued its 7.83% Junior Subordinated Deferrable Interest Notes due 2026, incorporated by reference to Exhibit 4.3 of registrant's Current Report on Form 8-K dated December 10, 1996. (u) Third Supplemental Indenture dated as of February 3, 1997 to the Indenture dated as of November 27, 1996 between the registrant and The Bank of New York pursuant to which the registrant issued its Floating Rate Junior Subordinated Deferrable Interest Notes due 2027, incorporated by reference to Exhibit 4.3 of registrant's Current Report on Form 8-K dated January 22, 1997. (v) The registrant has other long-term debt agreements, but these are not material in amount. Copies of these agreements will be furnished to the Commission on request. 10. (a) Limited Partnership Agreement of CSC Associates, L. P., between The Citizens and Southern Corporation and Cousins Properties Incorporated dated as of September 29, 1989, including Transfer of Partnership Interest between The Citizens and Southern Corporation and C&S Premises, Inc. and First Amendment thereto, both of which are incorporated by reference to Exhibit 10(ss) of registrant's Annual Report on Form 10-K dated March 25, 1992; and Second Amendment thereto dated as of December 31, 1990, incorporated by reference to Exhibit 10(a) of registrant's Annual Report on Form 10-K dated March 30, 1995. (b) The NationsBank Retirement Savings Plan, as effective January 1, 1993, incorporated * by reference to Exhibit 10(d) of registrant's Annual Report on Form 10-K dated March 30, 1994; Amendment thereto dated as of December 31, 1993, incorporated by reference to Exhibit 10(c) of registrant's Annual Report on Form 10-K dated March 30, 1995; Amendments thereto dated as of December 31, 1994 and August 1, 1995, both of which are incorporated by reference to Exhibit 10(b) of the 1995 Form 10-K; and Amendments thereto dated as of December 31, 1995, January 1, 1996, June 30, 1996 and October 1, 1996. (c) Investment Trust Agreement Under The NationsBank Retirement Savings Plan, as * effective January 1, 1993, incorporated by reference to Exhibit 10(e) of registrant's Annual Report on Form 10-K dated March 30, 1994. (d) ESOP Trust Agreement Under The NationsBank Retirement Savings Plan, as effective * January 1, 1993, incorporated by reference to Exhibit 10(f) of registrant's Annual Report on Form 10-K dated March 30, 1994. (e) Ancillary Trust Agreement for the Investment Trust of The NationsBank Retirement * Savings Plan, as effective January 1, 1993, incorporated by reference to Exhibit 10(g) of registrant's Annual Report on Form 10-K dated March 30, 1994.
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EXHIBIT NO. DESCRIPTION (f) Independent Agency Agreement for the Investment Trust of The NationsBank Retirement * Savings Plan, as effective January 1, 1993, incorporated by reference to Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 30, 1994. (g) NationsBank Corporation and Designated Subsidiaries Directors' Retirement Plan, * incorporated by reference to Exhibit 10(f) of registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated as of September 28, 1994, incorporated by reference to Exhibit 10(i) of registrant's Annual Report on Form 10-K dated March 30, 1995; and Amendment thereto dated as of April 24, 1996. (h) NationsBank Corporation and Designated Subsidiaries Supplemental Executive Retirement * Plan, incorporated by reference to Exhibit 10(j) of registrant's Annual Report on Form 10-K dated March 30, 1995; Amendment thereto dated as of June 28, 1989, incorporated by reference to Exhibit 10(g) of registrant's Annual Report on Form 10-K dated March 28, 1990; Amendment thereto dated as of June 27, 1990, incorporated by reference to Exhibit 10(g) of registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated as of July 21, 1991, incorporated by reference to Exhibit 10(bb) of registrant's Annual Report on Form 10-K dated March 25, 1992; Amendments thereto dated as of December 3, 1992 and December 15, 1992, both of which are incorporated by reference to Exhibit 10(l) of registrant's Annual Report on Form 10-K dated March 24, 1993; and Amendment thereto dated as of September 28, 1994, incorporated by reference to Exhibit 10(j) of registrant's Annual Report on Form 10-K dated March 30, 1995. (i) NationsBank Corporation and Designated Subsidiaries Deferred Compensation Plan for * Key Employees, incorporated by reference to Exhibit 10(k) of registrant's Annual Report on Form 10-K dated March 30, 1995; Amendment thereto dated as of June 28, 1989, incorporated by reference to Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 28, 1990; Amendment thereto dated as of June 27, 1990, incorporated by reference to Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated as of July 21, 1991, incorporated by reference to Exhibit 10(bb) of registrant's Annual Report on Form 10-K dated March 25, 1992; and Amendment thereto dated as of December 3, 1992, incorporated by reference to Exhibit 10(m) of registrant's Annual Report on Form 10-K dated March 24, 1993. (j) 1986 Restricted Stock Award Plan of NationsBank Corporation, as amended, incorporated * by reference to Exhibit 10(n) of registrant's Annual Report on Form 10-K dated March 24, 1993. (k) The NationsBank Pension Plan, as effective January 1, 1993, incorporated by reference * to Exhibit 10(n) of registrant's Annual Report on Form 10-K dated March 30, 1994; Amendments thereto dated as of September 28, 1994, December 15, 1994 and December 28, 1994, all of which are incorporated by reference to Exhibit 10(m) of registrant's Annual Report on Form 10-K dated March 30, 1995; Amendments thereto dated as of June 28, 1995, July 5, 1995, August 24, 1995 and September 28, 1995, all of which are incorporated by reference to Exhibit 10(k) of the 1995 Form 10-K; and Amendments thereto dated as of December 31, 1995, June 26, 1996 and October 2, 1996. (l) NationsBank Corporation and Designated Subsidiaries Supplemental Retirement Plan, * incorporated by reference to Exhibit 10(o) of registrant's Annual Report on Form 10-K dated March 30, 1994; Amendment thereto dated as of June 28, 1989, incorporated by reference to Exhibit 10(k) of registrant's Annual Report on Form 10-K dated March 28, 1990; Amendment thereto dated as of June 27, 1990, incorporated by reference to Exhibit 10(k) of registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated as of July 21, 1991, incorporated by reference to Exhibit 10(bb) of registrant's Annual Report on Form 10-K dated March 25, 1992; Amendments thereto dated as of December 3, 1992 and December 4, 1992, both of which are incorporated by reference to Exhibit 10(p) of registrant's Annual Report on Form 10-K dated March 24, 1993; and Amendment thereto dated as of July 5, 1995, incorporated by reference to Exhibit 10(l) of the 1995 Form 10-K.
E-3
EXHIBIT NO. DESCRIPTION (m) NationsBank Corporation and Designated Subsidiaries Supplemental Executive Retirement * Plan for Senior Management Employees, incorporated by reference to Exhibit 10(o) of registrant's Annual Report on Form 10-K dated March 30, 1995; Amendment thereto dated as of June 28, 1989, incorporated by reference to Exhibit 10(l) of registrant's Annual Report on Form 10-K dated March 28, 1990; Amendment thereto dated as of June 27, 1990, incorporated by reference to Exhibit 10(1) of registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated as of July 21, 1991, incorporated by reference to Exhibit 10(bb) of registrant's Annual Report on Form 10-K dated March 25, 1992; Amendments thereto dated as of December 3, 1992 and December 15, 1992, both of which are incorporated by reference to Exhibit 10(q) of registrant's Annual Report on Form 10-K dated March 24, 1993; and Amendment thereto dated as of September 28, 1994, incorporated by reference to Exhibit 10(o) of registrant's Annual Report on Form 10-K dated March 30, 1995. (n) Split Dollar Agreement dated as of February 1, 1990 between registrant and Hugh L. * McColl III, as Trustee for the benefit of Hugh L. McColl, Jr. and Jane S. McColl, incorporated by reference to Exhibit 10(s) of registrant's Annual Report on Form 10-K dated March 27, 1991. (o) NationsBank Corporation Benefit Security Trust dated as of June 27, 1990, * incorporated by reference to Exhibit 10(t) of registrant's Annual Report on Form 10-K dated March 27, 1991; First Supplement thereto dated as of November 30, 1992, incorporated by reference to Exhibit 10(v) of registrant's Annual Report on Form 10-K dated March 24, 1993; and Trustee Removal/Appointment Agreement dated as of December 19, 1995, incorporated by reference to Exhibit 10(o) of the 1995 Form 10-K. (p) The NationsBank Retirement Savings Restoration Plan, as amended and restated * effective July 1, 1996. (q) Employment Arrangement with Fredric J. Figge, II dated July 27, 1987, incorporated by * reference to Exhibit 10(tt) of registrant's Annual Report on Form 10-K dated March 25, 1992. (r) NationsBank Corporation Executive Incentive Compensation Plan, as amended and * restated effective July 1, 1996. (s) NationsBank Corporation Key Employee Deferral Plan, as amended and restated effective * July 1, 1996. (t) NationsBank Corporation Director Deferral Plan, as amended and restated effective * April 24, 1996. (u) Special Trust Agreement under The NationsBank Pension Plan, as effective December 31, * 1994, incorporated by reference to Exhibit 10(y) of registrant's Annual Report on Form 10-K dated March 30, 1995. (v) NationsBank Corporation Key Employee Stock Plan, as amended and restated effective December 20, 1996. * (w) NationsBank Corporation Directors' Stock Plan, incorporated by reference to Exhibit * 99.1 of registrant's Registration No. 333-02875. (x) Amendment to Restricted Stock Award Plan Agreements with Hugh L. McColl, Jr. dated * December 20, 1996. (y) Agreement and Plan of Merger, by and between Boatmen's Bancshares, Inc. and registrant, dated as of August 29, 1996, incorporated by reference to Exhibit 2.1 of registrant's Registration No. 333-16189; Amendment thereto, dated as of November 11, 1996, incorporated by reference to Exhibit 2.2 of registrant's Registration No. 333-16189; and Amendment thereto, dated as of January 6, 1997. (z) Employment Agreement, dated as of September 26, 1996, by and between registrant and * Andrew B. Craig, III, incorporated by reference to Exhibit 10.1 of registrant's Registration No. 333-16189. (aa) Employment Agreement, dated as of January 30, 1996, as amended May 17, 1996, by and * between Boatmen's Bancshares, Inc. and Andrew B. Craig, III, incorporated by reference to Exhibit 10.2 of registrant's Registration No. 333-16189. 11. Earnings per share computation. 12. (a) Ratio of Earnings to Fixed Charges. (b) Ratio of Earnings to Fixed Charges and Preferred Dividends. 13. 1996 Annual Report to Shareholders. This exhibit contains only those portions of the Annual Report that are incorporated by reference herein.
E-4
EXHIBIT NO. DESCRIPTION 21. List of Subsidiaries of Registrant. 23. Consent of Price Waterhouse LLP. 24. (a) Power of Attorney. (b) Corporate Resolution. 27. Financial Data Schedule.
* Denotes executive compensation plan or arrangement. E-5 EX-4 2 EXHIBIT 4(L) AMENDED AND RESTATED AGENCY AGREEMENT RELATING TO NATIONSBANK CORPORATION, U.S. $4,500,000,000 Euro Medium-Term Note Program AMONG NATIONSBANK CORPORATION as Issuer and THE CHASE MANHATTAN BANK, N.A., London Branch as Issuing and Principal Paying Agent and CHASE MANHATTAN BANK LUXEMBOURG S.A. as Paying Agent Dated as of July 5, 1996 INDEX Clause Page 1. Definitions and Interpretation.................................... 1 2. Appointments of Agent, Paying Agents and Calculation Agents......................................... 3 3. Issue of Temporary Global Notes................................... 4 4. Determination of Exchange Date, Issue of Permanent Global Notes or Definitive Notes and Determination of Restricted Period............................. 5 5. Issue of Definitive Notes......................................... 6 6. Terms of Issue.................................................... 6 7. Payments.......................................................... 7 8. Determinations and Notifications in Respect of Notes and Interest Determination............................... 9 9. Notice of any Withholding or Deduction............................ 11 10. Duties of the Agent in Connection with Early Redemption..................................................... 12 11. Receipt and Publication of Notices; Receipt of Certificates................................................... 13 12. Cancellation of Notes, Receipts, Coupons and Talons............... 13 13. Issue of Replacement Notes, Receipts, Coupons and Talons......................................................... 14 14. Copies of Documents Available for Inspection...................... 15 15. Meetings of Noteholders........................................... 15 16. Repayment by the Agent............................................ 16 17. Conditions of Appointment......................................... 16 18. Communication Between the Parties................................. 17 19. Change in Agent and Paying Agents................................. 17 20. Merger and Consolidation.......................................... 19 21. Notification of Changes to Paying Agents.......................... 19 22. Change of Specified Office........................................ 19 23. Notices........................................................... 19 24. Taxes and Stamp Duties............................................ 20 25. Commissions, Fees and Expenses.................................... 20 26. Indemnity......................................................... 21 27. Reporting......................................................... 21 28. Governing Law..................................................... 22 29. Amendments........................................................ 22 30. Descriptive Headings.............................................. 23 31. Counterparts...................................................... 23 Schedule 1 - Form of Temporary Global Note - ---------- Schedule 2 - Form of Permanent Global Note - ---------- Schedule 3 - Form of Definitive Note, Coupon, Receipt and Talon - ---------- Schedule 4 - Terms and Conditions - ---------- Schedule 5 - Form of Certificate to be Presented by Euroclear or Cedel Bank - ---------- Schedule 6 - Form of Certificate of Beneficial Owner - ---------- Schedule 7 - Provision for Meetings of Noteholders - ---------- Schedule 8 - Form of Put Notice - ---------- Schedule 9 - Form of Calculation Agency Agreement - ---------- THIS AMENDED AND RESTATED AGREEMENT dated as of July 5, 1996 among: (i) NationsBank Corporation (the "Corporation"); (ii) The Chase Manhattan Bank, N.A., London Branch (the "Agent" and the "Issuing and Principal Paying Agent"); and (iii) Chase Manhattan Bank Luxembourg S.A. (the "Paying Agent"). WHEREAS, the Corporation, the Agent and the Paying Agent wish to record the arrangements originally agreed among them pursuant to that certain Agency Agreement dated November 8, 1995 (the "Original Agency Agreement"). WHEREAS, the Corporation proposes to issue up to U.S. $4,500,000,000 (or its equivalent in other currencies) in aggregate principal amount of Euro Medium-Term Notes (the "Notes") outstanding at any one time as provided in an amended and restated Program Agreement of even date among the Corporation, the Arrangers and the Dealers named therein (the "Program Agreement") and as described in an Offering Circular of even date (the "Offering Circular"); WHEREAS, Notes will be issued in the denominations specified in the relevant Pricing Supplement issued in connection with each Series and each Tranche of Notes; WHEREAS, beneficial interests in each Tranche of Notes will initially be represented by a Temporary Global Note, exchangeable, as provided in such Temporary Global Note, for beneficial interests in a Permanent Global Note and, only under limited circumstances, beneficial interests in a Global Note may be exchangeable for Definitive Notes, in each case in accordance with the terms of the Global Notes; and NOW, THEREFORE, it is agreed as follows: 1. Definitions and Interpretation (1) Terms and expressions defined in the Program Agreement or the Notes or used in the applicable Pricing Supplement shall have the same meanings in this Agreement, except where the context requires otherwise. (2) Without prejudice to the foregoing in this Agreement: "outstanding" means, in relation to the Notes, all the Notes issued other than (a) those which have been redeemed in accordance with the Terms and Conditions, (b) those in respect of which the date for redemption in accordance with the Terms and Conditions has occurred and the redemption moneys (including all interest accrued on such Notes to the date for such redemption and any interest or other amounts payable under the Terms and Conditions after such date) have been duly paid to the Agent as provided in this Agreement and remain available for payment against presentation and surrender of Notes and/or Receipts and/or Coupons, as the case may be, (c) those which have become void under Condition 8, (d) those which have been purchased and canceled as provided in Condition 6 (or as provided in the Global Notes), (e) those mutilated or defaced Notes which have been surrendered in exchange for replacement Notes pursuant to Condition 10, (f) (for the purposes only of determining how many Notes are outstanding and without prejudice to their status for any other purpose) those Notes alleged to have been lost, stolen or destroyed and in respect of which replacement Notes have been issued pursuant to Condition 10, (g) any Temporary Global Note to the extent that it shall have been exchanged for a Permanent Global Note, in each case pursuant to their respective provisions; provided that for the purposes of (i) ascertaining the right to attend and vote at any meeting of the Noteholders and (ii) the determination of how many Notes are outstanding for the purposes of Schedule 7, those Notes which are beneficially held by, or are held on behalf of, the Corporation or any of its affiliates shall (unless and until ceasing to be so held) be deemed not to remain outstanding; "Paying Agents" means the Issuing and Principal Paying Agent and the Paying Agent referred to above and such other Paying Agent or Agents as may be appointed from time to time hereunder; and (3) The term "Notes" as used in this Agreement shall include the Permanent Global Note, the Definitive Notes and the Coupons and, as the case may be, the Temporary Global Note. The term "Global Note" as used in this Agreement shall include both the Temporary Global Note and the Permanent Global Note, each of which is a "Global Note." The term "Noteholders" as used in this Agreement shall mean the several persons who are for the time being the holders of the Notes, which expression shall, while the Notes are represented by a Global Note, mean (other than with respect to the payment of principal and interest on the Notes, the right to which shall be vested as against the Corporation solely in the bearer of such Global Note in accordance with and subject to its terms) the persons for the time being shown in the records of Euroclear (as defined below) or Cedel Bank (as defined below)(other than Cedel Bank, if Cedel Bank shall be an accountholder of Euroclear, and Euroclear, if Euroclear shall be an accountholder of Cedel Bank) as the Noteholders of particular principal amounts of Notes (in which regard any certificate or other document issued by Euroclear or Cedel Bank as to the principal amount of Notes standing to the credit of the account of any person shall be conclusive and binding for all purposes). (4) For purposes of this Agreement, the Notes of each Series shall form a separate series of Notes and the provisions of this Agreement shall apply mutatis mutandis separately and independently to the Notes of each Series and in such provisions the expressions "Notes", "Noteholders", "Receipts, "Receiptholders", "Coupons", "Couponholders", "Talons" and "Talonholders" shall be construed accordingly. (5) All references in this Agreement to principal and/or interest or both in respect of the Notes or to any moneys payable by the Corporation under this Agreement shall have the meaning set out in Condition 5. (6) All references in this Agreement to the "relevant currency" shall be construed as references to the currency (which term shall, for these purposes, be deemed to include ECU) in which the relevant Notes and/or Coupons are denominated (or payable in the case of Dual Currency Notes) or, in the case of Notes denominated in ECU, the chosen currency (as defined in Condition 5(c)) in which payments in respect of such Notes are to be made, as the case may be. (7) In this Agreement, Clause headings are inserted for convenience and ease of reference only and shall not affect the interpretation of this Agreement. All references in this Agreement to the provisions of any statute shall be deemed to be references to that statute as from time to time modified, extended, amended or re-enacted or to any statutory instrument, order or regulation made thereunder or under such re-enactment. (8) All references in this Agreement to an agreement, instrument or other document (including, without limitation, this Agreement, the Program Agreement, the Notes and any Terms and Conditions appertaining thereto) shall be construed as a reference to that agreement, instrument or document as the same may be amended, modified, varied or supplemented from time to time. (9) Any references herein to Euroclear and/or Cedel Bank shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearance system approved by the Corporation and the Agent. 2. Appointments of Agent, Paying Agents and Calculation Agents (1) The Corporation hereby appoints The Chase Manhattan Bank, N.A., London Branch, as Agent and The Chase Manhattan Bank, N.A., London Branch, hereby accepts such appointment as Agent of the Corporation, upon the terms and subject to the conditions set out below, for the purposes of, INTER ALIA: (a) completing, authenticating and delivering Globa Notes and (if required) authenticating and delivering Definitive Notes; -2- (b) exchanging Temporary Global Notes for Permanent Global Notes or Definitive Notes, as the case may be, in accordance with the terms of such Temporary Global Notes; (c) under limited circumstances, exchanging Permanent Global Notes for Definitive Notes in accordance with the terms of such Permanent Global Notes; (d) paying sums due on Global Notes and Definitive Notes, Receipts and Coupons; (e) determining the end of the Restricted Period applicable to each Tranche; (f) unless otherwise specified in the applicable Pricing Supplement, determining the interest and/or other amounts payable in respect of the Notes in accordance with the Terms and Conditions; (g) arranging on behalf of the Corporation for notices to be communicated to the Noteholders; (h) preparing and sending monthly reports to the Ministry of Finance of Japan (the "MoF"), the German Central Bank and the Bank of England and, subject to confirmation from the Corporation for the need for such further reporting, ensuring that all necessary action is taken to comply with any reporting requirements of any competent authority of any relevant currency as may be in force from time to time with respect to the Notes to be issued under the Program; (i) subject to the Procedures Memorandum, submitting to the Stock Exchange such number of copies of each Pricing Supplement which relates to Notes which are to be listed as it may reasonably require; (j) receiving notice from Euroclear and/or Cedel Bank relating to the certificates of non-US. beneficial ownership of the Notes; and (k) performing all other obligations and duties imposed upon it by the Terms and Conditions and this Agreement. (2) The Corporation may, in its discretion, appoint one or more agents outside the United States and its possessions (each a "Paying Agent") for the payment (subject to applicable laws and regulations) of the principal of and any interest and Additional Amounts, if any, (as defined in Section 5 of the Terms and Conditions) on the Notes. The Corporation hereby appoints Chase Manhattan Bank Luxembourg S.A., at its office in Luxembourg at 5 rue Plaetis, L-2338 Luxembourg-Grund, as its Paying Agent in Luxembourg. Each Paying Agent shall have the powers and authority granted to and conferred upon it herein and in the Notes, and such further powers and authority, acceptable to it, to act on behalf of the Corporation as the Corporation may hereafter grant to or confer upon it in writing. As used herein, "paying agencies" shall mean paying agencies maintained by a Paying Agent on behalf of the Corporation as provided elsewhere herein. (3) The Corporation will appoint an agent to make certain calculations with respect to the Notes (the "Calculation Agent") pursuant to the Terms and Conditions. 3. Issue of Temporary Global Notes (1) Subject to sub-clause (2), following receipt of a notification from the Corporation in respect of an issue of Notes (such notification being by receipt of a confirmation (a "Confirmation"), substantially in the applicable form set out in the Procedures Memorandum) the Agent will take the steps required of the Agent in the Procedures Memorandum. For this purpose the Agent is hereby authorized on behalf of the Corporation: -3- (a) to prepare a Temporary Global Note in accordance with such Confirmation by attaching a copy of the applicable Pricing Supplement to a copy of the relevant master Temporary Global Note; (b) to authenticate (or cause to be authenticated) such Temporary Global Note; (c) to deliver such Temporary Global Note to the specified common depositary of Euroclear and/or Cedel Bank in accordance with the Confirmation against receipt from the common depositary of confirmation that such common depositary is holding the Temporary Global Note in safe custody for the account of Euroclear and/or Cedel Bank and to instruct Euroclear or Cedel Bank or both of them (as the case may be) unless otherwise agreed in writing between the Agent and the Corporation (i) in the case of an issue of Notes on a non-syndicated basis, to credit the Notes represented by such Temporary Global Note to the Agent's distribution account, and (ii) in the case of Notes issued on a syndicated basis, to hold the Notes represented by such Temporary Global Note to the Corporation's order; and (d) to ensure that the Notes of each Tranche are assigned a Common Code and ISIN by Euroclear and Cedel Bank which are different from the Common Code and ISIN assigned to Notes of any other Tranche of the same Series until 40 days after the completion of the distribution of the Notes of such Tranche as notified by the Agent to the relevant Dealer. (2) The Agent shall only be required to perform its obligations under sub-clause (1) if it holds: (a) master Temporary Global Notes, duly executed by a person or persons authorized to execute the same on behalf of the Corporation, which may be used by the Agent for the purpose of preparing Temporary Global Notes in accordance with paragraph (a) of that sub-clause; and (b) master Permanent Global Notes, duly executed by a person or persons authorized to execute the same on behalf of the Corporation, which may be used by the Agent for the purpose of preparing Permanent Global Notes in accordance with Clause 4 below. (3) The Agent will provide Euroclear and/or Cedel Bank with the notifications, instructions or other information to be given by the Agent to Euroclear and/or Cedel Bank in accordance with the standard procedures of Euroclear and/or Cedel Bank. 4. Determination of Exchange Date, Issue of Permanent Global Notes or Definitive Notes and Determination of Restricted Period (1) (a) The Agent shall determine the Exchange Date for each Temporary Global Note in accordance with the terms thereof. Forthwith upon determining the Exchange Date in respect of any Tranche the Agent shall notify such determination to the Corporation, the relevant Dealer, Euroclear and Cedel Bank. (b) The Agent shall deliver, upon notice from Euroclear or Cedel Bank, a Permanent Global Note or Definitive Notes, as the case may be, in accordance with the terms of the Temporary Global Note. Upon any such exchange of a portion of a Temporary Global Note for an interest in a Permanent Global Note the Agent is hereby authorized on behalf of the Corporation: (i) in the case of the first Tranche of any Series of Notes, to prepare and complete a Permanent Global Note in accordance with the terms of the Temporary Global Note applicable to such Tranche by attaching a copy of the applicable Pricing Supplement to a copy of the relevant master Permanent Global Note; -4- (ii) in the case of the first Tranche of any Series of Notes, to authenticate such Permanent Global Note; (iii) in the case of the first Tranche of any Series of Notes, to deliver such Permanent Global Note to the common depositary which is holding the Temporary Global Note applicable to such Tranche for the time being on behalf of Euroclear and/or Cedel Bank either in exchange for such Temporary Global Note or, in the case of a partial exchange, on entering details of such partial exchange of the Temporary Global Note in the relevant spaces in Schedule 2 of both the Temporary Global Note and the Permanent Global Note, and in either case against receipt from the common depositary of confirmation that such common depositary is holding the Permanent Global Note in safe custody for the account of Euroclear and/or Cedel Bank; and (iv) in any other case, to attach a copy of the applicable Pricing Supplement to the Permanent Global Note applicable to the relevant Series and enter details of any exchange in whole or part as aforesaid. (2) (a) In the case of a Tranche in respect of which there is only one Dealer, the Agent will determine the end of the Restricted Period in respect of such Tranche as being the fortieth day following the date certified by the relevant Dealer to the Agent as being the date as of which distribution of the Notes of that Tranche was completed. (b) In the case of a Tranche in respect of which there is more than one Dealer but is not issued on a syndicated basis, the Agent will determine the end of the Restricted Period in respect of such Tranche as being the fortieth day following the latest of the dates certified by all the relevant Dealers to the Agent as being the respective dates as of which distribution of the Notes of that Tranche purchased by each such dealer was completed. (c) In the case of a Tranche issued on a syndicated basis, the Agent will determine the end of the Restricted Period in respect of such Tranche as being the fortieth day following the date certified by the Lead Manager to the Agent as being the date as of which distribution of the Notes of that Tranche was completed. (d) Forthwith upon determining the end of the Restricted Period in respect of any Tranche, the Agent shall notify such determination to the Corporation and the relevant Dealer or the Lead Manager in the case of a syndicated issue. 5. Issue of Definitive Notes (1) Interests in a Global Note will be exchangeable for Definitive Notes with Coupons attached only if: (i) an Event of Default (as defined in the Terms and Conditions) occurs and is continuing, or (ii) the Corporation is notified that either Euroclear or Cedel Bank has been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) after the original issuance of the Notes or has announced an intention permanently to cease business or has in fact done so and no alternative clearance system approved by the Noteholders is available, or (iii) the Corporation, after notice to the Agent, determines to issue Notes in definitive form. Upon the occurrence of these events, the Agent shall deliver the relevant Definitive Note(s) in accordance with the terms of the relevant Global Note. For this purpose the Agent is hereby authorized on behalf of the Corporation: (a) to authenticate such Definitive Note(s) in accordance with the provisions of this Agreement; and (b) to deliver such Definitive Note(s) to or to the order of Euroclear and/or Cedel Bank in exchange for such Global Note. -5- The Agent shall notify the Corporation forthwith upon receipt of a request for issue of (a) Definitive Note(s) in accordance with the provisions of a Global Note and this Agreement (and the aggregate principal amount of such Temporary Global Note or Permanent Global Note, as the case may be, to be exchanged in connection therewith). (2) The Corporation undertakes to deliver to the Agent sufficient numbers of executed Definitive Notes with, if applicable, Receipts, Coupons and Talons attached to enable the Agent to comply with its obligations under this Clause 5. 6. Terms of Issue (1) The Agent shall cause all Temporary Global Notes, Permanent Global Notes and Definitive Notes delivered to and held by it under this Agreement to be maintained in safe custody and shall ensure that such Notes are issued only in accordance with the provisions of this Agreement and the relevant Global Note and Terms and Conditions. (2) Subject to the procedures set out in the Procedures Memorandum, for the purposes of Clause 3(1) the Agent is entitled to treat a telephone, telex or facsimile communication from a person purporting to be (and who the Agent believes in good faith to be) the authorized representative of the Corporation named in the lists referred to in, or notified pursuant to, Clause 17(7) as sufficient instructions and authority of the Corporation for the Agent to act in accordance with Clause 3(l). (3) In the event that a person who has signed on behalf of the Corporation any Note not yet issued but held by the Agent in accordance with Clause 3(1) ceases to be authorized as described in Clause 17(7), the Agent shall (unless the Corporation gives notice to the Agent that Notes signed by that person do not constitute valid and binding obligations of the Corporation or otherwise until replacements have been provided to the Agent) continue to have authority to issue any such Notes, and the Corporation hereby warrants to the Agent that such Notes shall, unless notified as aforesaid, be valid and binding obligations of the Corporation. Promptly upon such person ceasing to be authorized, the Corporation shall provide the Agent with replacement Notes and upon receipt of such replacement Notes the Agent shall cancel and destroy the Notes held by it which are signed by such person and shall provide to the Corporation a confirmation of destruction in respect thereof specifying the Notes so canceled and destroyed. (4) If the Agent pays an amount (the "Advance") to the Corporation on the basis that a payment (the "Payment") has been, or will be, received from a Dealer and if the Payment is not received by the Agent on the date the Agent pays the Corporation, the Agent shall notify the Corporation by tested telex or facsimile that the Payment has not been received and the Corporation shall repay to the Agent the Advance and shall pay interest on the Advance (or the unreimbursed portion thereof) from (and including) the date such Advance is made to (but excluding) the earlier of repayment of the Advance and receipt by the Agent of the Payment (at a rate quoted at that time by the Agent as its cost of funding the Advance). (5) Except in the case of issues where the Agent does not act as receiving bank for the Corporation in respect of the purchase price of the Notes being issued, if on the relevant Issue Date a Dealer does not pay the full purchase price due from it in respect of any Note (the "Defaulted Note") and, as a result, the Defaulted Note remains in the Agent's distribution account with Euroclear and/or Cedel Bank) after such Issue Date, the Agent will continue to hold the Defaulted Note to the order of the Corporation. The Agent shall notify the Corporation forthwith of the failure of the Dealer to pay the full purchase price due from it in respect of any Defaulted Note and, subsequently, shall notify the Corporation forthwith upon receipt from the Dealer of the full purchase price in respect of such Defaulted Note. -6- 7. Payments (1) The Agent shall advise the Corporation, no later than ten Business Days (as defined below) immediately preceding the date on which any payment is to be made to the Agent pursuant to this sub-clause (1) of the payment amount, value date and payment instructions and the Corporation will before 10:00 a.m. New York time on each date on which any payment in respect of any Notes issued by it becomes due, transfer to an account specified by the Agent such amount in the relevant currency as shall be sufficient for the purposes of such payment in funds settled through such payment system as the Agent and the Corporation may agree. (2) The Corporation will ensure that no later than 4:00 p.m. (London time) on the second Business Day (as defined below) immediately preceding the date on which any payment is to be made to the Agent pursuant to sub-clause (1), the Agent shall receive from the paying bank of the Corporation an irrevocable confirmation in the form of a SWIFT message or tested telex that such payment shall be made. For the purposes of this Clause 7 "Business Day" means a day which is both: (a) a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in London and in Charlotte, North Carolina; and (b) either (1) in relation to a payment to be made in a Specified Currency other than ECU, a day on which commercial banks and foreign exchange markets settle payments in the principal financial center of the country of the relevant Specified Currency (if other than London) or (2) in relation to a payment to be made in ECU, an ECU Settlement Day. (3) The Agent shall ensure that payments of both principal and interest in respect of any Temporary Global Note will be made only to the extent that certification of non-U.S. beneficial ownership as required by U.S. securities laws and U.S. Treasury regulations (in the form set out in the Temporary Global Note) has been received from Euroclear and/or Cedel Bank in accordance with the terms thereof. (4) Subject to the receipt by the Agent of the payment confirmation as provided in sub-clause (2) above, the Agent or the relevant Paying Agent shall pay or cause to be paid all amounts due in respect of the Notes on behalf of the Corporation in the manner provided in the Terms and Conditions. If any payment provided for in sub-clause (l) is made late but otherwise in accordance with the provisions of this Agreement, the Agent and each Paying Agent shall nevertheless make payments in respect of the Notes as aforesaid following receipt by it of such payment. (5) If for any reason the Agent considers in its sole discretion that the amounts to be received by the Agent pursuant to sub-clause (1) will be, or the amounts actually received by it pursuant thereto are, insufficient to satisfy all claims in respect of all payments then falling due in respect of the Notes, neither the Agent nor any Paying Agent shall be obliged to pay any such claims until the Agent has received the full amount of all such payments. Should the Agent or any Paying Agent elect not to make payment of amounts falling due in respect of the Notes as aforesaid, it shall advise the Corporation of any such decision as soon as practicable by telephone with confirmation by telefax. (6) Without prejudice to sub-clauses (4) and (5), if the Agent pays any amounts to the holders of Notes, Receipts or Coupons or to any Paying Agent at a time when it has not received payment in full in respect of the relevant Notes in accordance with sub-clause (1) (the excess of the amounts so paid over the amounts so received being the "Shortfall"), the Corporation will, in addition to paying amounts due under sub-clause (l), pay to the Agent on demand interest (at a rate which represents the Agent's cost of funding the Shortfall) on the Shortfall (or the unreimbursed portion thereof) until the receipt in full by the Agent of the Shortfall. (7) The Agent shall on demand promptly reimburse each Paying Agent for payments in respect of Notes properly made by such Paying Agent in accordance with this Agreement and the Terms and Conditions unless the Agent has notified the Paying Agent, prior to the opening of business in the location of the office of the Paying Agent through which payment in respect of the Notes can be made prior to the day on which such Agent has to give payment instructions in respect of the due date of a payment in respect of the Notes, that the -7- Agent does not expect to receive sufficient funds to make payment of all amounts falling due in respect of such Notes. (8) If the Agent pays out on or after the due date therefor, or becomes liable to pay out, funds on the assumption that the corresponding payment by the Corporation has been or will be made and such payment has in fact not been so made by the Corporation, then the Corporation shall on demand reimburse the Agent for the relevant amount, and pay interest to the Agent on such amount from the date on which it is paid out to the date of reimbursement at a rate per annum equal to the cost to the Agent of funding the amount paid out, as certified by the Agent and expressed as a rate per annum. For the avoidance of doubt, the provisions of the Terms and Conditions as to subordination shall not apply to the Corporation's obligations under this sub-clause 8. (9) While any Notes are represented by a Global Note or Global Notes, all payments due in respect of such Notes shall be made to, or to the order of, the holder of the Global Note or Global Notes, subject to and in accordance with the provisions of the Global Note or Global Notes. On the occasion of any such payment the Paying Agent to which any Global Note was presented for the purpose of making such payment shall cause the appropriate Schedule to the relevant Global Note to be annotated so as to evidence the amounts and dates of such payments of principal and/or interest as applicable. (10) If a payment in respect of a Note denominated in ECU is to be made in a chosen currency: (i) the Agent shall choose a component currency of the ECU as the chosen currency as provided in Condition 5(c) and shall forthwith notify the Corporation, the other Paying Agents and the Stock Exchange; (ii) the Agent shall promptly perform the duties required of it under Condition 5(c); and (iii) the Agent shall notify the Corporation and the other Paying Agents of the amount payable per Note and Coupon in the chosen currency. (11) If the amount of principal and/or interest then due for payment is not paid in full (otherwise than by reason of a deduction required by law to be made therefrom), the Paying Agent to which a Note is presented for the purpose of making such payment shall make a record of such shortfall on the Note and such record shall, in the absence of manifest error, be prima facie evidence that the payment in question has not to that extent been made. 8. Determinations and Notifications in Respect of Notes and Interest Determination (a) Determinations and Notifications (1) The Agent shall make all such determinations and calculations (howsoever described) as it is required to do under the Terms and Conditions, all subject to and in accordance with the Terms and Conditions, provided that certain calculations with respect to the Notes, and associated publication or notification, shall be made by the Calculation Agent in accordance with the Terms and Conditions. (2) The Agent or the Calculation Agent, as the case may be, shall not be responsible to the Corporation or to any third party (except in the event of negligence, default or bad faith of the Agent or the Calculation Agent) as a result of the Agent or the Calculation Agent having acted in good faith on any quotation given by any Reference Bank which subsequently may be found to be incorrect. (3) The Agent or the Calculation Agent, as the case may be, shall promptly notify (and confirm in writing to) the Corporation, the other Paying Agents and (in respect of a Series of Notes listed on a Stock Exchange) the relevant Stock Exchange of, INTER ALIA, each Rate of Interest, Interest Amount and Interest Payment Date and all other amounts, rates and dates which it is obliged to determine or calculate under the Terms -8- and Conditions as soon as practicable after the determination thereof (and in any event no later than the tenth Business Day as defined in Clause 7(2) immediately preceding the date on which payment is to be made to the Agent pursuant to Clause 7(l)) and of any subsequent amendment thereto pursuant to the Terms and Conditions. (4) The Agent or the Calculation Agent, as the case may be, shall use its best efforts to cause each Rate of Interest, Interest Amount and Interest Payment Date and all other amounts, rates and dates which it is obliged to determine or calculate under the Terms and Conditions to be published as required in accordance with the Terms and Conditions as soon as possible after their determination or calculation. (5) If the Agent or the Calculation Agent, as the case may be, does not at any material time for any reason determine and/or calculate and/or publish the Rate of Interest, Interest Amount and/or Interest Payment Date in respect of any Interest Period or any other amount, rate or date as provided in this Clause 8, it shall forthwith notify the Corporation and the Paying Agents of such fact. (6) Determinations with regard to Notes (including, without limitation, Indexed Notes and Dual Currency Notes) shall be made by the Calculation Agent specified in the applicable Pricing Supplement in the manner specified in the applicable Pricing Supplement. Unless otherwise agreed between the Corporation and the relevant Dealer, such determinations shall be made on the basis of a Calculation Agency Agreement substantially in the form of Schedule 9 to this Agreement. (7) For the purposes of monitoring the aggregate principal amount of Notes issued under the Program, the Agent shall determine the U.S. dollar equivalent of the principal amount of each issue of Notes denominated in another currency, each issue of Dual Currency Notes and each issue of Indexed Notes as follows: (a) the U.S. dollar equivalent of Notes denominated in a currency other than U.S. Dollars shall be determined by the Agent as of the date of the agreement to issue such Notes or on the preceding day on which commercial banks and foreign exchange markets are open for business in London, in each case on the basis of the spot rate for the sale of the U.S. dollar against the purchase of such other currency in the London foreign exchange market quoted by any leading bank selected by the Agent; (b) the U.S. dollar equivalent of Dual Currency Notes, Indexed Notes and Partly Paid Notes shall be determined in the manner specified above by reference to the original principal amount of such Notes; and (c) the U.S. dollar equivalent of Zero Coupon Notes and other Notes issued at a discount shall be deemed to be the net proceeds received by the Company for the relevant issue. (b) Interest Determination, Screen Rate Determination including Fallback Provisions (1) Where screen rate determination ("Screen Rate Determination") is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either: (A) the offered quotation (if there is only one quotation on the relevant screen page (the "Relevant Screen Page")); or (B) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations, (expressed as a percentage rate per annum), for the reference rate ("Reference Rate") which appears or appear, as the case may be, on the Relevant Screen Page at approximately 11:00 a.m. (London time) on the interest determination date ("Interest Determination Date") in question plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any), all as determined by the Calculation Agent. If five or more such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest -9- quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations. (2) If the Relevant Screen Page is not available or if, in the case of sub-clause(b)(1)(A) above, no such offered quotation appears or, in the case of sub-clause (b)(1)(B) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph, the Calculation Agent shall at its sole discretion request the principal London office of each of the Reference Banks (defined below) to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for deposits in the Specified Currency for the relevant Interest Period to leading banks in the London inter-bank market at approximately 11:00 a.m. (London time) on the Interest Determination Date in question. If two or more of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest for such Interest Period shall be the arithmetic mean (rounded if necessary to the fifth decimal place with 0.000005 being rounded upwards) of such offered quotations plus or minus (as appropriate) the Margin (if any), all as determined by the Calculation Agent. (3) If on any Interest Determination Date one only or none of the Reference Banks provides the Calculation Agent with such offered quotations as provided in the preceding paragraph, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Calculation Agent determines as being the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the rates, as communicated to (and at the request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such banks offered, at approximately 11:00 a.m. (London time) on the relevant Interest Determination Date, deposits in the Specified Currency for the relevant Interest Period by leading banks in the London inter-bank market plus or minus (as appropriate) the Margin (if any). If fewer than two of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest shall be the offered quotation for deposits in the Specified Currency for the relevant Interest Period, or the arithmetic mean (rounded as provided above) of the offered quotations for deposits in the Specified Currency for the relevant Interest Period, at which, at approximately 11:00 a.m. (London time) on the relevant Interest Determination Date, any one or more banks informs the Calculation Agent it is quoting to leading banks in the London inter-bank market plus or minus (as appropriate) the Margin (if any), provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period, in place of the Margin relating to that last preceding Interest Period). (4) If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Pricing Supplement as being other than the London inter-bank offered rate, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Pricing Supplement. In this Clause 8, the expression "Reference Banks" means, in the case of sub-clause (b)(1)(A) above, those banks whose offered rates were used to determine such quotation when such quotation last appeared on the Relevant Screen Page and in the case of sub-clause (b)(1)(B) above, those banks whose offered quotations last appeared on the Relevant Screen Page when no fewer than three such offered quotations appeared. 9. Notice of any Withholding or Deduction If the Corporation is, in respect of any payment, compelled to withhold or deduct any amount for or on account of taxes, duties, assessments or governmental charges as specifically contemplated under the Terms and Conditions, the Corporation shall give notice thereof to the Agent as soon as it becomes aware of the requirement to make such withholding or deduction and shall give to the Agent such information as it shall require to enable it to comply with such requirement. -10- 10. Duties of the Agent in Connection with Early Redemption (1) If the Corporation decides to redeem any outstanding Notes (in whole or in part) for the time being outstanding prior to their Maturity Date or the Interest Payment Date falling in the Redemption Month (as the case may be) in accordance with the Terms and Conditions, the Corporation shall give notice of such decision to the Agent not less than seven London Business Days before the date on which the Corporation will give notice to the Noteholders in accordance with the Terms and Conditions of such redemption in order to enable the Agent to undertake its obligations herein and in the Terms and Conditions. (2) If only some of the Notes of like tenor and of the same Series are to be redeemed on such date, the Agent shall make the required drawing in accordance with the Terms and Conditions but shall give the Corporation reasonable notice of the time and place proposed for such drawing. Where partial redemptions are to be effected when there are Definitive Notes outstanding, the Issuing and Principal Paying Agent will select by lot the Notes to be redeemed from the outstanding Notes in compliance with all applicable laws and stock exchange requirements and deemed by the Agent to be appropriate and fair; and where partial redemptions are to be effected when there are no Definitive Notes outstanding, the rights of Noteholders will be governed by the standard provisions of Euroclear and Cedel Bank. Notice of any partial redemption and, when there are Definitive Notes outstanding, of the serial numbers of the Notes so drawn, will be given by the Agent to the Noteholders in accordance with the terms of the Notes and this Agreement. (3) The Agent shall publish the notice on behalf of and at the expense of the Corporation required in connection with any such redemption and shall at the same time also publish a separate list of the serial numbers of any Notes previously drawn and not presented for redemption. Such notice shall specify the date fixed for redemption, the redemption amount, the manner in which redemption will be effected and, in the case of a partial redemption, the serial numbers of the Notes to be redeemed. Such notice will be published in accordance with the Terms and Conditions. The Agent will also notify the other Paying Agents of any date fixed for redemption of any Notes. (4) Immediately prior to the date on which any notice of redemption is to be given to the Noteholders, the Corporation shall deliver to the Agent a certificate stating that the Corporation is entitled to effect such redemption and setting forth in reasonable detail a statement of facts showing that all conditions precedent to such redemption have occurred or been satisfied and shall comply with all notice requirements provided for in the Terms and Conditions. (5) Each Paying Agent will keep a stock of notices (each a "Put Notice") in the form set out in Schedule 8 and will make such notices available on demand to holders of Notes, the Terms and Conditions of which provide for redemption at the option of Noteholders. Upon receipt of any Note deposited in the exercise of such option in accordance with the Terms and Conditions, the Paying Agent with which such Note is deposited shall hold such Note (together with any Coupons, if any, relating to it and deposited with it) on behalf of the depositing Noteholder (but shall not, save as provided below, release it) until the due date for redemption of the relevant Note consequent upon the exercise of such option, when, subject as provided below, it shall present such Note (and any such Coupons, if any) to itself for payment of the amount due thereon together with any interest due on such date in accordance with the Terms and Conditions and shall pay such moneys in accordance with the directions of the Noteholder contained in the Put Notice. If, prior to such due date for its redemption, such Note becomes immediately due and payable or if upon due presentation payment of such redemption moneys is improperly withheld or refused, the Paying Agent concerned shall post such Note (together with any such Coupons, if any) by uninsured post to, and at the risk of, the relevant Noteholder unless the Noteholder has otherwise requested and paid the costs of such insurance to the relevant Paying Agent at the time of depositing the Notes at such address as may have been given by the Noteholder in the Put Notice. At the end of each period for the exercise of such option, each Paying Agent shall promptly notify the Agent of the principal amount of the Notes in respect of which such option has been exercised with it together with their serial numbers and the Agent shall promptly notify such details to the Corporation. 11. Receipt and Publication of Notices; Receipt of Certificates -11- (1) Upon the receipt by the Agent of a demand or notice from any Noteholder in accordance with the Terms and Conditions the Agent shall forward a copy thereof to the Corporation. (2) On behalf of and at the request and expense of the Corporation, the Agent shall cause to be published all notices required to be given by the Corporation to the Noteholders in accordance with the Terms and Conditions. (3) The Agent shall have no responsibility to obtain the certificate of the Corporation delivered by the Corporation to the Agent pursuant to Condition 9 if such a certificate is required to be issued, nor shall the Agent have any responsibility to notify the Corporation that the Agent has not obtained such a certificate from the Corporation if such a certificate is required to be issued. 12. Cancellation of Notes, Receipts, Coupons and Talons (1) All Notes which are redeemed, all Receipts or Coupons which are paid and all Talons which are exchanged shall be delivered outside the United States to the Agent, and shall be canceled by the Agent. In addition, all Notes which are purchased by or on behalf of the Corporation or any of its subsidiaries and are surrendered to the Agent for cancellation, together (in the case of Notes in definitive form) with all unmatured Receipts, Coupons or Talons (if any) attached thereto or surrendered therewith, shall be canceled by the Agent. (2) The Corporation shall have the right to request that the Agent provide, without limitation, the following information: (a) the aggregate principal amount of Notes which have been redeemed and the aggregate amount paid in respect thereof; (b) the number of Notes canceled together (in the case of Definitive Notes, if any) with details of all unmatured Receipts, Coupons or Talons (if any) attached thereto or delivered therewith; (c) the aggregate amount paid in respect of interest on the Notes; (d) the total number by maturity date of Receipts, Coupons and Talons so canceled; and (e) (in the case of Definitive Notes, if any) the serial numbers of such Notes, shall be given to the Corporation by the Agent as soon as reasonably practicable and in any event within three months after the date of such repayment or, as the case may be, payment or exchange. (3) The Agent shall destroy all canceled Notes, Receipts Coupons and Talons. (4) The Agent shall keep a full and complete record of all Notes, Receipts, Coupons and Talons (other than serial numbers of Coupons, except those which have been replaced pursuant to Condition 10) and of all replacement Notes, Receipts, Coupons or Talons issued in substitution for mutilated, defaced, destroyed, lost or stolen Notes, Receipts, Coupons or Talons. The Agent shall at all reasonable times make such record available to the Corporation and any persons authorized by it for inspection and for the taking of copies thereof or extracts therefrom. (5) All records and certificates made or given pursuant to this Clause 12 and Clause 13 shall make a distinction between Notes, Receipts, Coupons and Talons of each Series. 13. Issue of Replacement Notes, Receipts, Coupons and Talons (1) The Corporation will cause a sufficient quantity of additional forms of Notes, Receipts, Coupons and Talons to be available, upon request to the Agent in Luxembourg (in such capacity, the "Replacement -12- Agent") at its specified office for the purpose of issuing replacement Notes, Receipts, Coupons and Talons as provided below. (2) The Replacement Agent will, subject to and in accordance with the Terms and Conditions and the following provisions of this Clause 13, authenticate and cause to be delivered any replacement Notes, Receipts, Coupons and Talons which the Corporation may determine to issue in place of Notes, Receipts, Coupons and Talons which have been lost, stolen, mutilated, defaced or destroyed. (3) In the case of a mutilated or defaced Note, the Replacement Agent shall ensure that (unless otherwise covered by such indemnity as the Corporation may reasonably require) any replacement Note will only have attached to it Receipts, Coupons and Talons corresponding to those (if any) attached to the mutilated or defaced Note which is presented for replacement. (4) The Replacement Agent shall not issue any replacement Note, Receipt, Coupon or Talon unless and until the applicant therefor shall have: (a) paid such reasonable costs and expenses as may be incurred in connection therewith, including any tax or other governmental charge that may be imposed in relation thereto; (b) furnished it with such evidence and indemnity as the Corporation may reasonably require; and (c) in the case of any mutilated or defaced Note, Receipt, Coupon or Talon, surrendered it to the Replacement Agent. (5) The Replacement Agent shall cancel any mutilated or defaced Notes, Receipts, Coupons and Talons in respect of which replacement Notes, Receipts, Coupons and Talons have been issued pursuant to this Clause 13 and shall furnish the Corporation with a certificate stating the serial numbers of the Notes, Receipts, Coupons and Talons so canceled and, unless otherwise instructed by the Corporation in writing, shall destroy such canceled Notes, Receipts, Coupons and Talons and furnish the Corporation with a destruction certificate stating the serial number of the Notes (in the case of Definitive Notes) and the number by maturity date of Receipts, Coupons and Talons so destroyed. (6) The Replacement Agent shall, on issuing any replacement Note, Receipt, Coupon or Talon, forthwith inform the Corporation, the Agent and the other Paying Agents of the serial number of such replacement Note, Receipt, Coupon or Talon issued and (if known) of the serial number of the Note, Receipt, Coupon or Talon in place of which such replacement Note, Receipt, Coupon or Talon has been issued. Whenever replacement Receipts, Coupons or Talons are issued pursuant to the provisions of this Clause 13, the Replacement Agent shall also notify the Agent and the other Paying Agents of the maturity dates of the lost, stolen, mutilated, defaced or destroyed Receipts, Coupons or Talons and of the replacement Receipts, Coupons or Talons issued. (7) The Agent shall keep a full and complete record of all replacement Notes, Receipts, Coupons and Talons issued and shall make such record available at all reasonable times to the Corporation and any persons authorized by it for inspection and for the taking of copies thereof or extracts therefrom. (8) Whenever any Note, Receipt, Coupon or Talon for which a replacement Note, Receipt, Coupon or Talon has been issued and in respect of which the serial number is known is presented to the Agent or any of the Paying Agents for payment, the Agent or, as the case may be, the relevant Paying Agent shall immediately send notice thereof to the Corporation and the other Paying Agents and shall not make payment in respect thereto, until instructed by the Corporation. 14. Copies of Documents Available for Inspection The Agent and the Paying Agents shall hold available for inspection copies of: -13- (i) the organizational documents of the Corporation; (ii) the latest available audited consolidated financial statements of NationsBank Corporation and its consolidated subsidiaries beginning with such financial statements for the fiscal years ended December 31, 1993, December 31, 1994 and December 31, 1995, and the latest available consolidated unaudited interim financial statements of NationsBank Corporation and its consolidated subsidiaries, beginning with the statements for the quarter ended March 31, 1996; (iii) the Program Agreement and this Agreement; (iv) the Offering Circular; and (v) any future offering circulars, information memoranda and supplements (except that a Pricing Supplement relating to any unlisted Note will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Paying Agent as to ownership) to the Offering Circular and any other documents incorporated therein by reference and in the case of a syndicated issue of listed Notes, the syndication agreement (or equivalent document). For this purpose, the Corporation shall furnish the Agent and the Paying Agents with sufficient copies of each of such documents. 15. Meetings of Noteholders (1) The provisions of Schedule 7 hereto shall apply to meetings of the Noteholders and shall have effect in the same manner as if set out in this Agreement. (2) Without prejudice to sub-clause (l), each of the Agent and the Paying Agents on the request of any Noteholder shall issue voting certificates and block voting instructions in accordance with Schedule 7 and shall forthwith give notice to the Corporation in writing of any revocation or amendment of a block voting instruction. Each of the Agent and the Paying Agents will keep a full and complete record of all voting certificates and block voting instructions issued by it and will, not less than 24 hours before the time appointed for holding a meeting or adjourned meeting, deposit at such place as the Agent shall designate or approve, full particulars of all voting certificates and block voting instructions issued by it in respect of such meeting or adjourned meeting. 16. Repayment by the Agent Upon the Corporation being discharged from its obligation to make payments in respect of any Notes pursuant to the relevant Terms and Conditions, and provided that there is no outstanding, bona fide and proper claim in respect of any such payments, the Agent shall forthwith on written demand pay to the Corporation sums equivalent to any amounts paid to it by the Corporation for the purposes of such payments. 17. Conditions of Appointment (1) The Agent shall be entitled to deal with money paid to it by the Corporation for the purpose of this Agreement in the same manner as other money paid to a banker by its customers except: (a) that it shall not exercise any right of set-off, lien or similar claim in respect thereof; (b) as provided in sub-clause (2) below; and (c) that it shall not be liable to account to the Corporation for any interest thereon. -14- (2) In acting hereunder and in connection with the Notes, the Agent and the Paying Agents shall act solely as agents of the Corporation and will not thereby assume any obligations towards or relationship of agency or trust for or with any of the owners or holders of the Notes, Receipts, Coupons or Talons. (3) The Agent and the Paying Agents hereby undertake to the Corporation to perform such obligations and duties, and shall be obliged to perform such duties and only such duties as are herein, in the Terms and Conditions and in the Procedures Memorandum specifically set forth and no implied duties or obligations shall be read into this Agreement or the Notes against the Agent and the Paying Agents, other than the duty to act honestly and in good faith. (4) The Agent may consult with legal and other professional advisers and the opinion of such advisers shall be full and complete protection in respect of any action taken, omitted or suffered hereunder in good faith and in accordance with the opinion of such advisers. (5) Each of the Agent and the Paying Agents shall be protected and shall incur no liability for or in respect of any action taken, omitted or suffered in reliance upon any instruction, request or order from the Corporation or any notice, resolution, direction, consent, certificate, affidavit, statement, cable, telex or other paper or document which it reasonably believes to be genuine and to have been delivered, signed or sent by the proper party or parties or upon written instructions from the Corporation. (6) Any of the Agent and the Paying Agents and their officers, directors and employees may become the owner of, or acquire any interest in any Notes, Receipts, Coupons or Talons with the same rights that it or he would have if the Agent or the relevant Paying Agent, as the case may be, concerned were not appointed hereunder, and may engage or be interested in any financial or other transactions with the Corporation and may act on, or as depositary, trustee or agent for, any committee or body of Noteholders or Couponholders or in connection with any other obligations of the Corporation as freely as if the Agent or the relevant Paying Agent, as the case may be, were not appointed hereunder. (7) The Corporation shall provide the Agent with a certified copy of the list of persons authorized to execute documents and take action on its behalf in connection with this Agreement and shall notify the Agent immediately in writing if any of such persons ceases to be so authorized or if any additional person becomes so authorized together, in the case of an additional authorized person, with evidence satisfactory to the Agent that such person has been so authorized, provided, however, that the Agent shall not incur any liability for any losses, claims or damages resulting from the Corporation's failure to provide such notification to the Agent. 18. Communication Between the Parties A copy of all communications relating to the subject matter of this Agreement between the Corporation and the Noteholders, Receiptholders or Couponholders and any of the Paying Agents shall be sent to the Agent by the relevant Paying Agent. 19. Changes in Agent and Paying Agents (1) The Corporation agrees that, for so long as any Note is outstanding, or until moneys for the payment of all amounts in respect of all outstanding Notes have been made available to the Agent or have been returned to the Corporation as provided herein: (a) so long as any Notes are listed on any Stock Exchange, there will at all times be a Paying Agent with a specified office in such place as may be required by the rules and regulations of the relevant Stock Exchange; and (b) there will at all times be a Paying Agent with a specified office in a city in continental Europe; and (c) there will at all times be an Agent. In addition, the Corporation shall appoint a Paying Agent having a specified office in New York City in the circumstances described in the final paragraph of Condition 5(b). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency (as provided in sub-clause (5)), when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice thereof shall have been given to the Noteholders in accordance with the Terms and Conditions. (2) The Agent may (subject as provided in sub-clause (4)) at any time resign as Agent by giving at least 90 days' written notice to the Corporation of such intention on its part, specifying the date on which its desired resignation shall become effective, provided that such date shall never be less than three months after the receipt of such notice by the Corporation unless the Corporation agrees to accept less notice. (3) The Agent may (subject as provided in sub-clause (4)) be removed at any time on at least 45 days' notice by the filing with it of an instrument in writing signed on behalf of the Corporation specifying such removal and the date when it shall become effective. (4) Any resignation under sub-clause (2) or removal under sub-clause (3) shall only take effect upon the appointment by the Corporation as hereinafter provided, of a successor Agent and (other than in cases of insolvency of the Agent) on the expiry of the notice to be given under Clause 21. The Corporation agrees with the Agent that if, by the day falling ten days before the expiry of any notice under sub-clause (2), the Corporation has not appointed a successor Agent, then the Agent shall be entitled, on behalf of the Corporation, to appoint as a successor Agent in its place a reputable financial institution of good standing as it may reasonably determine to be capable of performing the duties of the Agent hereunder. (5) In case at any time the Agent resigns, or is removed, or becomes incapable of acting or is adjudged bankrupt or insolvent, or files a voluntary petition in bankruptcy or makes an assignment for the benefit of its creditors or consents to the appointment of an administrator, liquidator or administrative or other receiver of all or a substantial part of its property, or admits in writing its inability to pay or meet its debts as they mature or suspends payment thereof, or if any order of any court is entered approving any petition filed by or against it under the provisions of any applicable bankruptcy or insolvency law or if a receiver of it or of all or a substantial part of its property is appointed or any officer takes charge or control of it or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, a successor Agent, which shall be a reputable financial institution of good standing, may be appointed by the Corporation by an instrument in writing filed with the successor Agent. Upon the appointment as aforesaid of a successor Agent and acceptance by the latter of such appointment and (other than in case of insolvency of the Agent) upon expiry of the notice to be given under Clause 21 the Agent so superseded shall cease to be the Agent hereunder. (6) Subject to sub-clause (l): (A) the Corporation may, after prior consultation (other than in the case of insolvency of any Paying Agent) with the Agent, terminate the appointment of any of the Paying Agents at any time; and/or (B) the Corporation may in respect of the Program or the Corporation may in respect of any Series of Notes, if so required by the relevant Stock Exchange or regulatory body, appoint one or more further Paying Agents by giving to the Agent, and to the relevant Paying Agent, at least 45 days' notice in writing to that effect. (7) Subject to sub-clause (l), all or any of the Paying Agents may resign their respective appointments hereunder at any time by giving the Corporation and the Agent at least 45 days' written notice to that effect. (8) Upon its resignation or removal becoming effective the Agent or the relevant Paying Agent: (a) shall, in the case of the Agent, forthwith transfer all moneys held by it hereunder and the records referred to in Clause 12(4) to the successor Agent hereunder; and (b) shall be entitled to the payment by the Corporation of its commissions, fees and expenses for the services theretofore rendered hereunder in accordance with the terms of Clause 25. (9) Upon its appointment becoming effective, a successor Agent and any new Paying Agent shall, without further act, deed or conveyance, become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of its predecessor or, as the case may be, a Paying Agent with like effect as if originally named as Agent or (as the case may be) a Paying Agent hereunder. 20. Merger and Consolidation Any corporation into which the Agent or any Paying Agent may be merged or converted, or any corporation with which the Agent or any of the Paying Agents may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Agent or any of the Paying Agents shall be a party, or any corporation to which the Agent or any of the Paying Agents shall sell or otherwise transfer all or substantially all the assets of the Agent or any Paying Agent shall, on the date when such merger, conversion, consolidation or transfer becomes effective and to the extent permitted by any applicable laws, become the successor Agent or, as the case may be, Paying Agent under this Agreement without the execution or filing of any paper or any further act on the part of the parties hereto, unless otherwise required by the Corporation, and after the said effective date all references in this Agreement to the Agent or, as the case may be, such Paying Agent shall be deemed to be references to such corporation. Written notice of any such merger, conversion, consolidation or transfer shall forthwith be given to the Corporation by the relevant Agent or Paying Agent. 21. Notification of Changes to Paying Agents Following receipt of notice of resignation from the Agent or any Paying Agent and forthwith upon appointing a successor Agent or, as the case may be, further or other Paying Agents or on giving notice to terminate the appointment of any Agent or, as the case may be, Paying Agent, the Agent (on behalf of and at the expense of the Corporation) shall give or cause to be given not more than 60 days' nor less than 30 days' notice thereof to the Noteholders in accordance with the Terms and Conditions. 22. Change of Specified Office If the Agent or any Paying Agent determines to change its specified office it shall give to the Corporation and (if applicable) the Agent written notice of such determination giving the address of the new specified office which shall be in the same city and stating the date on which such change is to take effect, which shall not be less than 45 days thereafter. The Agent (on behalf and at the expense of the Corporation) shall within 15 days of receipt of such notice (unless the appointment of the Agent or the relevant Paying Agent, as the case may be, is to terminate pursuant to Clause 19 on or prior to the date of such change) give or cause to be given not more than 45 days' nor less than 30 days' notice thereof to the Noteholders in accordance with the Terms and Conditions. 23. Notices All notices hereunder shall be deemed to have been given when deposited in the mail as first class mail, registered or certified, return receipt requested, postage prepaid, addressed to any party hereto as follows: Address The Corporation: NationsBank Corporation NationsBank Corporate Center NC 1007-23-1 Charlotte, North Carolina 28255-0065 Attn: John E. Mack -17- Treasurer Telecopy: (704)386-0270 with a copy to: NationsBank Corporation NationsBank Corporate Center Legal Department NC 1007-20-1 Charlotte, North Carolina 28255-0065 Attn: Paul J. Polking, Esq. General Counsel Telecopy: (704)386-6453 The Agent: The Chase Manhattan Bank, N.A. Woolgate House Coleman Street London EC2P 2HD United Kingdom Attn: Manager, Corporate Trust Operations Telecopy: 44-1202-347438 The Paying Agent: Chase Manhattan Bank Luxembourg S.A. 5 rue Plaetis L-2338 Luxembourg - Grund Attn: Manager, Corporate Trust Operations Telecopy: 352-462685-380 or at any other address of which any of the foregoing shall have notified the others in writing. (a) if delivered in person to the relevant address specified in the signature pages hereof and if so delivered, shall be deemed to have been delivered at the time of receipt; or (b) if sent by facsimile or telex to the relevant number specified on the signature pages hereof and, if so sent, shall be deemed to have been delivered immediately after transmission provided such transmission is confirmed by the answerback of the recipient (in the case of telex) or when an acknowledgement of receipt is received (in the case of facsimile). Where a communication is received after business hours it shall be deemed to be received and become effective on the next business day. Every communication shall be irrevocable save in respect of any manifest error therein. 24. Taxes and Stamp Duties The Corporation agrees to pay any and all stamp and other documentary taxes or duties which may be payable in connection with the execution, delivery, performance and enforcement of this Agreement. 25. Commissions, Fees and Expenses (1) The Corporation undertakes to pay in respect of the services of the Agent and the Paying Agents under this Agreement such fees and expenses as may be agreed between them from time to time, the initial such fees being set out in a letter of even date herewith from the Agent to, and countersigned by, the Corporation. -18- (2) The Corporation will promptly pay on demand all out-of-pocket expenses (including legal, advertising, facsimile, telex and postage expenses) properly incurred by the Agent and the Paying Agents in connection with their services hereunder, including without limitation the expenses contemplated in Clause 24. 26. Indemnity (1) The Corporation undertakes to indemnify and hold harmless each of the Agent and the Paying Agents against all losses, liabilities, costs (including, without limitation, legal fees and expenses), expenses, claims, actions or demands which the Agent or any Paying Agent, as the case may be, may reasonably incur or which may be made against the Agent or any Paying Agent, as a result of or in connection with the appointment or the exercise of or performance of the powers, discretions, authorities and duties of the Agent or any Paying Agent under this Agreement except such as may result from its own gross negligence, bad faith or failure to comply with its obligations hereunder or that of its officers, employees or agents. (2) Each of the Agent and the Paying Agents shall severally indemnify and hold harmless the Corporation against any loss, liability, costs (including, without limitation, legal fees and expenses), expense, claim, action or demand which it may reasonably incur or which may be made against it as a result of such Agent's or Paying Agent's own negligence, bad faith or material failure to comply with its obligations under this Agreement or that of its officers, employees or agents. (3) If, under any applicable law and whether pursuant to a judgment being made or registered or in the liquidation, insolvency or analogous process of any party hereto or for any other reason, any payment under or in connection with this Agreement is made or fails to be satisfied in a currency (the "Other Currency") other than that in which the relevant payment is expressed to be due (the "Required Currency") under this Agreement, then, to the extent that the payment (when converted into the Required Currency at the rate of exchange on the date of payment or, if it is not practicable for the payee to purchase the Required Currency with the Other Currency on the date of payment, at the rate of exchange as soon thereafter as it is practicable for it to do so or, in the case of a liquidation, insolvency or analogous process, at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation, insolvency or analogous process) actually received by the payee falls short of the amount due under the terms of this Agreement, the payor shall, as a separate and independent obligation, indemnify and hold harmless the payee against the amount of such shortfall. For the purpose of this Clause 26, "rate of exchange" means the rate at which the payee is able on the relevant date to purchase the Required Currency with the Other Currency and shall take into account any premium and other costs of exchange. 27. Reporting (1) The Agent shall upon receipt of a written request therefor from the Corporation and after the payment of any further remuneration agreed between the Corporation and the Agent (on behalf of the Corporation and on the basis of the information and documentation the Agent had in its possession) use all reasonable efforts to submit such reports or information as may be required from time to time by any applicable law, regulation or guideline promulgated by (i) any relevant United States governmental regulatory authority in respect of the issue and purchase of Notes or (ii) any other relevant governmental regulatory authority in respect of the issue and purchase of Notes denominated in the applicable currency of such governmental regulatory authority. (2) The Agent will notify the MoF of such details relating to Yen Notes and provide such other information about the Program to the MoF as may be required. (3) The Agent will notify the German Bundesbank at the end of each month about the amounts, dates of issue and other terms of all DM-denominated Notes issued during the month in question and provide such other information about the Program to the German Bundesbank as may be required. (4) The Agent will notify the Bank of England of such details relating to Sterling Notes and provide such other information about the Program to the Bank of England as may be required. -19- 28. Governing Law (1) This Agreement, the Notes, and any Receipts, Coupons or Talons appertaining thereto shall be governed by and construed in accordance with the laws of the State of New York, United States of America, without regard to principles of conflicts of laws. (2) The Corporation and the Agent each hereby irrevocably submits to the non-exclusive jurisdiction of any United States Federal court sitting in New York City, the Borough of Manhattan over any suit, action or proceeding arising out of or related to this Agreement, any Note, Receipt, Coupon or Talon, as the case may be (together, the "Proceedings"). The Corporation and the Agent each irrevocably waives, to the fullest extent permitted by law, any objection which it may have to the laying of the venue of the Proceedings brought in such a court and any claim that the Proceedings have been brought in an inconvenient forum. The Corporation and the Agent each agrees that final judgment in the Proceedings brought in such a court shall be conclusive and binding upon the Corporation or the Agent, as the case may be, and may be enforced in any court of the jurisdiction to which the Corporation or the Agent is subject by a suit upon such judgment, provided that the service of process is effected upon the Corporation and the Agent in the manner specified in subsection (C) below or as otherwise permitted by law. (3) As long as any of the Notes, Receipts, Coupons or Talons remains outstanding, the Corporation shall at all times either maintain an office or have an authorized agent in New York City upon whom process may be served in the Proceedings. Service of process upon either it at its offices or upon such agent with written notice of such service mailed or delivered to the Corporation shall, to the fullest extent permitted by law, be deemed in every respect effective service of process upon the Corporation in the Proceedings. The Corporation hereby appoints CT Corporation System located at 1633 Broadway, New York, New York 10019 as its agent for such purposes, and covenants and agrees that service of process in the Proceedings may be made upon it at its office or at the specified offices of such agent (or such other addresses or at the offices of any other authorized agents which the Corporation may designate by written notice to the Agent) and prior to any termination of such agencies for any reason, it will so appoint a successor thereto as agent hereunder. 29. Amendments Without the consent of the Noteholders, Receiptholders or Couponholders, the Agent and the Corporation may agree to modifications of or amendments to this Agreement, the Notes, the Receipts or the Coupons for any of the following purposes: (i) to evidence the succession of another corporation to the Corporation and the assumption by any such successor of the covenants of the Corporation in this Agreement, the Notes, Receipts or Coupons; (ii) to add to the covenants of the Corporation for the benefit of the Noteholders, the Receiptholders or the Couponholders, or to surrender any right or power herein conferred upon the Corporation; (iii) to relax or eliminate the restrictions on payment of principal and interest in respect of the Notes, Receipts or Coupons in the United States, provided that such payment is permitted by United States tax laws and regulations then in effect and provided that no adverse tax consequences would result to the Noteholders, the Receiptholders or the Couponholders; (iv) to cure any ambiguity, to correct or supplement any defective provision herein or any provision which may be inconsistent with any other provision herein; (v) to make any other provisions with respect to matters or questions arising under the Notes, the Receipts, the Coupons or this Agreement, provided such action pursuant to -21- this sub-clause (v) shall not adversely affect the interests of the Noteholders, the Receiptholders or the Couponholders; and (vi) permit further issuances of Notes in accordance with the terms of this Agreement and as further provided hereof. Any such modification or amendment shall be binding on the Noteholders, the Receiptholders and the Couponholders and any such modification or amendment shall be notified to the Noteholders, the Receiptholders or the Couponholders in accordance with Condition 13 as soon as practicable thereafter. 30. Descriptive Headings The descriptive headings in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 31. Counterparts This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument. Any party may enter into this Agreement by signing such a counterpart. -21- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective corporate names by their respective officers thereunder duly authorized as of the date and year first above written. NATIONSBANK CORPORATION as Issuer By /s/ John E. Mack ______________________________________________ Name: John E. Mack Title: Senior Vice President and Treasurer THE CHASE MANHATTAN BANK, N.A., LONDON BRANCH as Agent and Principal Paying Agent By /s/ Chris Knowles ______________________________________________ Name: Chris Knowles Title: Second Vice President CHASE MANHATTAN BANK LUXEMBOURG S.A. as Paying Agent By /s/ Chris Knowles ______________________________________________ Name: Chris Knowles Title: Second Vice President -22- (TO COME) EX-4 3 EXHIBIT 4(Q) EXHIBIT 4 [FACE OF CERTIFICATE] 7% CUMULATIVE REDEEMABLE NATIONSBANK CORPORATION 7% CUMULATIVE REDEEMABLE PREFERRED STOCK, SERIES B PREFERRED STOCK, SERIES B NUMBER SHARES PB INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA CUSIP 638585 60 4 SEE REVERSE FOR CERTAIN DEFINITIONS This Certifies that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF THE STATED VALUE OF ONE HUNDRED DOLLARS EACH OF THE 7% CUMULATIVE REDEEMABLE PREFERRED STOCK, SERIES B OF NationsBank Corporation transferable only on the Books of the Corporation in conformity with the Bylaws in person or by Attorney on the surrender of this certificate. This certificate is not valid until countersigned by the Transfer Agent. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: SECRETARY [SEAL] CHIEF EXECUTIVE OFFICER countersigned: chasemellon shareholder services, l.l.c. transfer agent by authorized signature [REVERSE OF CERTIFICATE] NATIONSBANK CORPORATION NATIONSBANK CORPORATION'S AUTHORIZED CAPITAL STOCK INCLUDES COMMON STOCK AND ADDITIONAL SERIES OF PREFERRED STOCK WHICH, WHEN ISSUED, MAY HAVE CERTAIN PREFERENCES OR SPECIAL RIGHTS IN THE PAYMENT OF DIVIDENDS, IN VOTING, UPON LIQUIDATION, OR OTHERWISE. THE CORPORATION WILL, UPON REQUEST, FURNISH TO ANY SHAREHOLDER WITHOUT CHARGE INFORMATION IN WRITING AS TO EACH CLASS OR SERIES OF SUCH COMMON AND PREFERRED STOCK AUTHORIZED AND OUTSTANDING AND A COPY OF THE PORTIONS OF THE RESTATED ARTICLES OF INCORPORATION OR RESOLUTIONS CONTAINING THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ALL SHARES AND ANY CLASS OR SERIES THEREOF. ANY SUCH REQUEST IS TO BE ADDRESSED TO THE TRANSFER AGENT NAMED ON THE FACE OF THIS CERTIFICATE. KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations.
TEN COM -- as tenants in common UNIF GIF MIN ACT -- _______Custodian __________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right of under Uniform Gifts to Minor survivorship and not as tenants Act ______________________ in common (State)
Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ----------------------------------------------------------------------------- - ------------------------------------------------------------------------------ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE) SHARES OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ATTORNEY TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES. DATE SIGNATURE NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-10 4 EXHIBIT 10(B) FOURTH AMENDMENT TO THE NATIONSBANK RETIREMENT SAVINGS PLAN (as restated effective January 1, 1993) THIS INSTRUMENT is executed as of the 31st day of December, 1995 by NATIONSBANK CORPORATION, a North Carolina corporation with its principal office and place of business in Charlotte, North Carolina, hereinafter referred to as "NationsBank"; Statement of Purpose The NationsBank Retirement Savings Plan (the "Plan") was amended and restated effective January 1, 1993 by Instrument dated December 31, 1992 and further amended by Instruments dated December 31, 1993, December 31, 1994 and August 1, 1995. By this Instrument, NationsBank is amending the Plan to modify the definition of compensation and to reflect the merger of certain defined contribution plans into the Plan and other matters related to plan mergers, corporate acquisitions and dispositions. These amendments have been authorized by the Compensation Committee of the Board of Directors of NationsBank, which Compensation Committee has the authority to amend the Plan on behalf of all Participating Employers. NOW, THEREFORE, for the purposes aforesaid, the Plan, as set forth in said Instrument dated December 31, 1992, as subsequently amended, is amended as follows: Section 2.1(c)(18) of the Plan is amended effective as of January 1, 1996 to read as follows: "(18) Compensation of a Participant for a particular period of time means the base salary or base wages payable by the Participating Employers to the Participant for employment with the Participating Employers during such period prior to (i) any salary or wage reduction pursuant to Article IV of the Plan or (ii) any salary or wage reduction pursuant to the Group Benefits Plan. Compensation shall not include: (A) any amount excluded by Section 5.6 of the Plan (regarding the Code Section 401(a)(17) limitation on compensation); (B) any bonuses (contractual, discretionary or otherwise), awards, overtime pay, shift premium, incentive compensation of any kind whatsoever, or other extra or special remuneration of any kind, except to the extent otherwise provided in the last paragraph of this Section 2.1(c)(18); (C) any deferred compensation pursuant to the Plan or any other agreement or arrangement between a Participating Employer and the Participant, including any deferrals of base salary or wages pursuant to any nonqualified deferred compensation plan; (D) any sums paid by a Participating Employer (i) on account of any health, welfare or group insurance benefits (exclusive of sick pay), including dependent care assistance, or (ii) on account of reimbursement of relocation expenses, regardless of whether such sums are taxable income to the Participant; provided, however, this subparagraph (D) shall not exclude from Compensation any sums paid by a Participating Employer that are attributable to base salary or wage reductions under the Group Benefits Plan; (E) any severance, vacation or similar benefits paid in a lump sum; or (F) any compensation pursuant to any other employee benefit plan, including without limitation, any sums elected to be received in cash pursuant to any such plan. Notwithstanding subparagraph (B) above, a Participant's Compensation shall include, in addition to base salary or wages, fifty percent (50%) of the commissions payable to the Participant if: (X) the Participant's remuneration from the Participating Employers is based solely on commissions earned by the Participant and the Participant's base salary is deducted from the commissions earned by and payable to the Participant; (Y) the Participant is employed in a position which directly supervises Participant(s) described in subparagraph (X) above and some or all of the Participant's remuneration from the Participating Employers is based on override commissions from the production of the supervised Participant(s); or (Z) the Participant is employed in a position which directly supervises Participant(s) described in subparagraph (X) above and some or all of the Participant's remuneration from the Participating Employers is based on commissions resulting from the Participant's personal production." 2. Section 7.4(a)(i) of the Plan is amended effective as of October 1, 1995 to read as follows: "(i) Basic Form. Except as otherwise provided in Section 7.2(d)(2) of the Plan (requiring Financial Hardship Distributions to be made in cash) or Article XVI or Article XVIII (regarding prior methods of payments under certain merged defined contribution plans), the method of Distribution shall be a single lump sum consisting of cash and/or shares of NationsBank Common Stock as hereinafter provided." 3. The following Section 16.16 is added to the Plan effective as of January 1, 1995: "SECTION 16.16. DIVESTITURES (a) General. From time to time, certain banking centers and other business units of the Participating Employers are sold to unrelated third parties, and as a result certain Participants employed at such banking centers and other business units (the "Affected Participants") terminate their employment with the Participating Employers. Schedule 16.16 attached to the Plan lists (i) the banking centers and other business units that have been sold which are subject to this Section, (ii) the names of the various purchasers and (iii) the effective dates of such sales. Schedule 16.16 shall be updated from time to time by the Participating Employers to reflect additional sales that are subject to this Section. The provisions of this Section shall be effective with respect to a particular group of Affected Participants as of the applicable effective date set forth on Schedule 16.16 (a "Termination Date"). Notwithstanding any provisions of the Plan to the contrary, the provisions of this Section 16.16 shall control with respect to the Affected Participants. (b) Pre-Tax Employee Contributions. No Pre-Tax Employee Contributions shall be made for an Affected Participant with respect to any payroll periods that begin after the Termination Date applicable to such Affected Participant. (c) Matching Contribution Accounts of Affected Participants. The Matching Contribution Account of an Affected Participant shall be fully vested and nonforfeitable as of the Termination Date applicable to such Affected Participant. Schedule 16.16 shall indicate for each divestiture subject to this Section whether the applicable Affected Participants shall be eligible to receive a Matching Contribution for the Plan Year in which the applicable Termination Date occurs. For the divestitures in which the applicable Affected Participants are eligible for a Matching Contribution and solely for purposes of determining the amount and form (i.e., cash or stock) of such Matching Contributions, each such Affected Participant shall be treated as if he or she had Retired as of the applicable Termination Date and shall therefore be allocated a Matching Contribution for the Plan Year in which such Termination Date occurs consistent with the provisions of Article V of the Plan. (d) Transfer of Accounts. If indicated on Schedule 16.16 with respect to a divestiture, the Accounts of each applicable Affected Participant shall be transferred in a trustee-to-trustee transfer to the tax-qualified plan maintained by the applicable purchaser." 4. The following 16.17 is added to the Plan effective as of April 1, 1995: "SECTION 16.17. CERTAIN FORMER EMPLOYEES OF PEROT SYSTEMS CORPORATION. (a) General. NationsBanc Services, Inc., which is a Participating Employer ("NBSI"), and Perot Systems Corporation ("PSC") entered into an Agreement dated April 1, 1995 modifying the business relationships between them (the "April 1, 1995 PSC Agreement"). The April 1, 1995 PSC Agreement contemplates that certain PSC employees, referred to in the April 1, 1995 PSC Agreement as "Transferred Employees," will become employees of NBSI during 1995 and 1996 ("Transferred PSC Employees"). Certain Transferred PSC Employees will have participated in the Perot Systems Corporation Retirement Savings Plan (the "PSC Plan") during their PSC employment. The April 1, 1995 PSC Agreement also provides for the transfer to the Plan of the PSC Plan assets representing the PSC Plan accounts of certain Transferred PSC Employees. (b) Accounts Related to Participation in the PSC Plan. (1) Establishment of Accounts. Whenever PSC Plan assets representing a Transferred PSC Employee's PSC Plan accounts are transferred to the Plan pursuant to the April 1, 1995 PSC Agreement, the transferred assets shall be credited as of the date of transfer to existing or new Plan accounts for the Transferred PSC Employee as follows: (i) Accounts for Salary Reduction Contributions. Any transferred assets representing the Transferred PSC Employee's interest in "Salary Reduction Contributions" under the PSC Plan (or contributions of the same type under its predecessor of transferor plans) shall be credited to the Transferred PSC Employee's Pre-Tax Employee Contribution Account under the Plan. (ii) Creation of Former PSC Plan Accounts. Any transferred assets representing the Transferred PSC Employee's interest in other contributions under the PSC Plan (or its predecessor or transferor plans) shall be credited to one or more Accounts established under the Plan for such purpose ("Former PSC Plan Accounts"). The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in-Service distributions as required by the Code. The Committee may from time to time combine a Participant's Former PSC Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. Except for promissory notes evidencing Participant loans (see the next paragraph), the Accounts representing a Participant's interest in the PSC Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. (3) Investment in Participant Loans. If PSC Plan assets transferred to the Plan pursuant to the April 1, 1995 PSC Agreement include a Transferred PSC Employee's promissory note representing an outstanding loan made under the PSC Plan (or its predecessor or transferor plans), the promissory note shall be held by the Investment Trustee as a segregated investment allocated to and made solely for the benefit of the Transferred PSC Employee's Account(s) that correspond to the Transferred PSC Employee's PSC Plan account(s) that were invested in such note. The Investment Trustee shall become the successor lender with respect to such "earmarked" loan for all purposes, and the transfer of the promissory note from the PSC Plan shall not affect the terms of the promissory note or the security for the repayment of the promissory note evidencing such loan. (c) Active Participation in the Plan. The following rules apply for purposes of determining when a Transferred PSC Employee becomes a Participant in the Plan on or after the date on which he or she becomes an Employee of NBSI as a Transferred PSC Employee (the Transferred PSC Employee's "NBSI Employment Date"): (i) Eligible on NBSI Employment Date. If the Transferred PSC Employee is a Covered Employee on the NBSI Employment Date and has satisfied the eligibility requirements of Section 3.2(c) of the Plan by then, the Transferred PSC Employee shall become a Participant on the NBSI Employment Date. (ii) Other Situations. If the Transferred PSC Employee does not become a Participant on the NBSI Employment Date as provided immediately above, the Transferred PSC Employee shall become a Participant when and as provided in Section 3.2(c) of the Plan. If, however, one or more Accounts are established for the Transferred PSC Employee pursuant to Section 16.17(b)(1) of the Plan because of assets transferred from the PSC Plan, the Transferred PSC Employee shall become a Participant on the NBSI Employment Date for purposes of the investment, administration and distribution of those Account(s) in accordance with the provisions of the Plan, but the Transferred PSC Employee shall not be entitled to otherwise participate in the Plan unless and until he or she satisfies the requirements of Section 3.2(c) of the Plan. (iii) Eligibility Service. For purposes of Section 3.2(c), the Transferred PSC Employee's Periods of Service and Qualifying Periods of Severance shall include the following: the Transferred PSC Employee shall be credited with Months of Service for time prior to the Transferred PSC Employee's NBSI Employment Date determined as if PSC had been a Participating Employer in the Plan. (d) Vesting in Former PSC Plan Accounts; Vesting Service. (1) Former PSC Plan Accounts. A Transferred PSC Employee's Former PSC Plan Accounts shall be fully Vested and nonforfeitable. (2) Determination of Vesting Service. For purposes of determining the Vesting Service of a Participant who is a Transferred PSC Employee, the person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.17, except that the person shall be credited (without duplication) with Months of Service for the person's employment with PSC determined as if PSC had been a Participating Employer in the Plan. (e) Distribution of Accounts. While a Transferred PSC Employee is in Service, Distributions to the Transferred PSC Employee from the Transferred PSC Employee's Former PSC Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the PSC Plan had remained in effect. Following separation from Service of a Transferred PSC Employee who has any Former PSC Plan Accounts, Distributions from the Transferred PSC Employee's Accounts (including Accounts that are not Former PSC Plan Accounts) shall be made either (i) when and as provided in Section 7.3 and 7.4 of the Plan or (ii) if the total Vested interest in the Transferred PSC Employee's Accounts at the time of Distribution exceeds three thousand five hundred dollars ($3,500), as provided in Article XVIII of the Plan. The Committee shall establish the procedures by which Transferred PSC Employees and Beneficiaries may make their related payment elections." 5. The following Section 16.18 is added to the Plan effective as of June 30, 1995. "SECTION 16.18. CERTAIN FORMER EMPLOYEES OF THE NNW UTILITY FUNDING COMPANIES. Pursuant to a Purchase Agreement dated June 8, 1995, NationsBanc Leasing Corporation of North Carolina, which is a Participating Employer ("NBLC-NC"), acquired NNW Utility Funding I, Inc. and NNW Utility Funding II, Inc. on June 30, 1995. The June 8, 1995 Purchase Agreement contemplates that certain employees of the acquired companies or their affiliates, referred to in the Purchase Agreement and this Section 16.18 as "Transferred Employees," will become employees of NBLC-NC during 1995. For purposes of (i) determining when a Transferred Employee becomes a Participant in the Plan (after becoming a Covered Employee of NBLC-NC) and (ii) determining the Transferred Employee's Vesting Service, the Transferred Employee shall be credited with the service that was credited to the Transferred Employee for eligibility and vesting purposes under the NNW, Inc. 401(k) Plan on the effective date of the Transferred Employee's employment with NBLC-NC." 6. The following Sections 16.19 through Section 16.21 are added to the Plan effective as of December 31, 1995: SECTION 16.19. MERGER OF THE INTERCONTINENTAL PLAN. (a) Merger of the Intercontinental Plan. NationsBank acquired Intercontinental Bank on December 13, 1995 (the "Intercontinental Acquisition Date"). At the time of the acquisition, Intercontinental Bank sponsored the Intercontinental Bank Retirement Plan (the "Intercontinental Plan"), which has continued in existence since then. The Intercontinental Plan shall merge with and into the Plan effective as of the close of business on December 31, 1995. In connection therewith and effective as of that time, (i) the Trust under the Intercontinental Plan shall merge with and into the Investment Trust for the Plan and (ii) the assets of the Trust under the Intercontinental Plan shall become assets of the Plan. The Committee shall have the duty and authority to direct the Investment Trustee with respect to the merger and consolidation of the assets of the various investment funds maintained under the Trust of the Intercontinental Plan on December 31, 1995 with and into the Funds being maintained by the Investment Trustee under the Investment Trust on or after January 1, 1996 pursuant to Article XII of the Plan. (b) Accounts Related to Participation in the Intercontinental Plan. (1) Establishment of Accounts. Effective as of January 1, 1996, the accounts being maintained for participants in the Intercontinental Plan on December 31, 1995 shall be combined with other accounts, or maintained as separate accounts, under the Plan as follows: (i) Accounts for Salary Deferral Contributions. The account maintained under the Intercontinental Plan for a Participant who participated in the Intercontinental Plan representing the Participant's interest in the Participant's "Salary Deferral Contributions" thereunder shall become the Participant's Pre-Tax Employee Contribution Account under the Plan. (ii) Creation of Former Intercontinental Plan Accounts. An Account shall be established under the Plan for each of the accounts maintained under the Intercontinental Plan for a Participant who participated in the Intercontinental Plan other than the account described immediately above. These Accounts are referred to in the Plan as "Former Intercontinental Plan Accounts." The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in-Service distributions as required by the Code. The Committee may from time to time after January 1, 1996 combine a Participant's Former Intercontinental Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. The Accounts representing a Participant's interest in the Intercontinental Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. (c) Active Participation in the Plan. The following rules shall apply for the purpose of determining when persons with "Hours of Service" under the Intercontinental Plan before January 1, 1996 for employment with any participating employer in the Intercontinental Plan become Participants in the Plan on or after January 1, 1996: (i) Prior Participants. With respect to persons who had become "Participants" in the Intercontinental Plan by December 31, 1995: Covered Employee on January 1, 1996. If a person is a Covered Employee on January 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on January 1, 1996. If the person is not a Covered Employee on January 1, 1996 but one or more Accounts are established for the person pursuant to Section 16.19(b)(1) of the Plan because of the person's Intercontinental Plan participation, the person shall become a Participant on that date for purposes of the investment, administration and distribution of the Account(s) in accordance with the provisions of the Plan, but the person shall not be entitled to otherwise participate in the Plan unless and until the person subsequently becomes a Covered Employee. Other situations. In any other case, the person shall become a Participant if and when the person becomes a Covered Employee after January 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the Intercontinental Plan by December 31, 1995: Eligible Covered Employee on January 1, 1996. If the person is a Covered Employee on January 1, 1996 and would have commenced participation in the Intercontinental Plan on January 1, 1996 had it not merged into the Plan, the person shall become a Participant on January 1, 1996. Other situations. Otherwise, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person's Periods of Service and Qualifying Periods of Severance shall include the following: the person shall be credited with Months of Service for time prior to the Intercontinental Acquisition Date determined as if the participating employers in the Intercontinental Plan had been Participating Employers in the Plan. (d) Vesting in Former Intercontinental Plan Accounts and Matching Contribution Accounts; Vesting Service. (1) Former Intercontinental Plan Accounts. A Participant's Former Intercontinental Plan Account representing the Participant's "Rollover Contributions" to the Intercontinental Plan shall be fully Vested and nonforfeitable. The person's other Former Intercontinental Plan Accounts shall vest as follows: (i) Employee on Intercontinental Acquisition Date. If the person was an employee of any Intercontinental Plan participating employer on the Intercontinental Acquisition Date, the person's Former Intercontinental Plan Accounts shall be fully Vested and nonforfeitable. (ii) Not Employee on Intercontinental Acquisition Date. If the person was not an employee of any Intercontinental Plan participating employer on the Intercontinental Acquisition Date, the participant's Former Intercontinental Plan Accounts shall be subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan. (2) Matching Contribution Accounts. The Matching Contribution Accounts of persons who had "Hours of Service" under the Intercontinental Plan on or before the Intercontinental Acquisition Date for employment with any participating employer in the Intercontinental Plan (including persons who had not become "Participants" in the Intercontinental Plan by the Intercontinental Acquisition Date) shall vest as follows: (i) Employee on Intercontinental Acquisition Date. If the person was an employee of any Intercontinental Plan participating employer on the Intercontinental Acquisition Date, the person's Matching Contribution Account shall be fully Vested and nonforfeitable. (ii) Not Employee on Intercontinental Acquisition Date. If the person was not an employee of any Intercontinental Plan participating employer on the Intercontinental Acquisition Date, the person's Matching Contribution Account shall be subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan. (3) Determination of Vesting Service. In determining the Vesting Service of a person described in Section 16.19(d)(1)(ii) or 16.17(d)(2)(ii) of the Plan, the person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.17(d), except that the person shall be credited with Months of Service for time prior to the Intercontinental Acquisition Date determined as if the participating employers in the Intercontinental Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. If the person had become a "Participant" in the Intercontinental Plan by December 31, 1995, however, in no event shall the person's Vesting Service for time prior to January 1, 1996 be less than the person's "Vesting Service" on December 31, 1995 under the Intercontinental Plan. (e) Distribution of Accounts. (1) General. While a Participant is in Service, Distributions to the Participant from the Participant's Former Intercontinental Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the Intercontinental Plan had remained in effect. Following separation from Service of a Participant who has any Former Intercontinental Plan Accounts, Distributions from the Participant's Accounts (including Accounts that are not Former Intercontinental Plan Accounts) shall be made either (i) when and as provided in Section 7.3 and 7.4 of the Plan or (ii) if the total Vested interest in the Participant's Accounts at the time of Distribution exceeds three thousand five hundred dollars ($3,500), as provided in Article XVIII of the Plan. The Committee shall establish the procedures by which Participants and Beneficiaries may make their related payment elections. (2) Benefit Payments in Progress. The merger of the Intercontinental Plan into the Plan shall not revoke or suspend any Intercontinental Plan methods of payment elected before or in progress on January 1, 1996, and any method of payment in progress under the Intercontinental Plan on January 1, 1996 with respect to a Participant's accounts thereunder shall continue in effect with respect to the Participant's interest under the Plan in such accounts. (f) Beneficiary Designations. Any Participant's written beneficiary designation in effect under the Intercontinental Plan with respect to the Participant's accounts thereunder shall not be revoked by reason of the merger of the Intercontinental Plan into the Plan. Such designation shall be effective under the Plan from and after January 1, 1996 as designating the Beneficiary of all of the Participant's Accounts, including any resulting Former Intercontinental Plan Accounts, unless and until the Participant revokes or changes the designation or the designation otherwise becomes ineffective, in accordance with the terms and provisions of the Plan. SECTION 16.20. MERGER OF THE NATIONSSECURITIES PLAN (a) Merger of the NationsSecurities Plan. NationsBank acquired full ownership of NationsSecurities, a Dean Witter/NationsBank Company ("NationsSecurities"), on November 15, 1994 (the "NationsSecurities Acquisition Date"). At the time of the acquisition, NationsSecurities sponsored the NationsSecurities, a Dean Witter/NationsBank Company Employee Retirement Investment Plan (the "NationsSecurities Plan"), which has continued in existence since then. The NationsSecurities Plan shall merge with and into the Plan effective as of the close of business on December 31, 1995. In connection therewith and effective as of that time, (i) the Trust under the NationsSecurities Plan shall merge with and into the Investment Trust for the Plan and (ii) the assets of the Trust under the NationsSecurities Plan shall become assets of the Plan. The Committee shall have the duty and authority to direct the Investment Trustee with respect to the merger and consolidation of the assets of the various investment funds maintained under the Trust of the NationsSecurities Plan on December 31, 1995 with and into the Funds being maintained by the Investment Trustee under the Investment Trust on or after January 1, 1996 pursuant to Article XII of the Plan. (b) Accounts Related to Participation in the NationsSecurities Plan. (1) Establishment of Accounts. Effective as of January 1, 1996, the accounts being maintained for participants in the NationsSecurities Plan on December 31, 1995 shall be combined with other accounts, or maintained as separate accounts, under the Plan as follows: (i) Accounts for Elective Deferrals. The accounts maintained under the NationsSecurities Plan for a Participant who participated in the NationsSecurities Plan representing the Participant's interest in the Participant's "Elective Deferrals" thereunder shall become the Participant's Pre-Tax Employee Contribution Account under the Plan. (ii) Creation of Former NationsSecurities Plan Accounts. An Account shall be established under the Plan for each of the accounts maintained under the NationsSecurities Plan for a Participant who participated in the NationsSecurities Plan other than the account described immediately above. These Accounts are referred to in the Plan as "Former NationsSecurities Plan Accounts." The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in- Service distributions as required by the Code. The Committee may from time to time after January 1, 1996 combine a Participant's Former NationsSecurities Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. The Accounts representing a Participant's interest in the NationsSecurities Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. (c) Active Participation in the Plan. The following rules shall apply for the purpose of determining when persons with "Hours of Service" under the NationsSecurities Plan before January 1, 1996 for employment with any participating employer in the NationsSecurities Plan become Participants in the Plan on or after January 1, 1996: (i) Prior Participants. With respect to persons who had become "Participants" in the NationsSecurities Plan by December 31, 1995: Covered Employee on January 1, 1996. If a person is a Covered Employee on January 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on January 1, 1996. If the person is not a Covered Employee on January 1, 1996 but one or more Accounts are established for the person pursuant to Section 16.20(b)(1) of the Plan because of the person's NationsSecurities Plan participation, the person shall become a Participant on that date for purposes of the investment, administration and distribution of the Account(s) in accordance with the provisions of the Plan, but the person shall not be entitled to otherwise participate in the Plan unless and until the person subsequently becomes a Covered Employee. Other situations. In any other case, the person shall become a Participant if and when the person becomes a Covered Employee after January 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the NationsSecurities Plan by December 31, 1995: Eligible Covered Employee on January 1, 1996. If the person is a Covered Employee on January 1, 1996 and would have commenced participation in the NationsSecurities Plan on January 1, 1996 had it not merged into the Plan, the person shall become a Participant on January 1, 1996. Other situations. Otherwise, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person's Periods of Service and Qualifying Periods of Severance shall include the following: the person shall be credited (without duplication) with Months of Service for time prior to the NationsSecurities Acquisition Date equal to the person's "Period of Service" under the NationsSecurities Plan on the NationsSecurities Acquisition Date. (d) Vesting in Former NationsSecurities Plan Accounts and Matching Contribution Accounts; Vesting Service. (1) Former NationsSecurities Plan Accounts. A Participant's Former NationsSecurities Plan Accounts that correspond to the Participant's "Qualified Company Contribution Account" and the portion of the Participant's "Supplemental Pretax Account" attributable to "Rollover Contributions" under the NationsSecurities Plan shall be fully Vested and nonforfeitable. A Participant's Former NationsSecurities Plan Account that corresponds to the Participant's "Matching Contribution Account" under the NationsSecurities Plan shall be subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan. (2) Determination of Vesting Service. For purposes of determining the Vesting Service of a Participant who had "Hours of Service" under the NationsSecurities Plan before January 1, 1996 for employment with any participating employer in the NationsSecurities Plan, the person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.20(d), except that the person shall be credited (without duplication) with Months of Service for time prior to the NationsSecurities Acquisition Date equal to the person's "Period of Service" under the NationsSecurities Plan on the NationsSecurities Acquisition Date. (e) Distribution of Accounts. (1) General. While a Participant is in Service, Distributions to the Participant from the Participant's Former NationsSecurities Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the NationsSecurities Plan had remained in effect. Following separation from Service of a Participant who has any Former NationsSecurities Plan Accounts, Distributions from the Participant's Accounts (including Accounts that are not Former NationsSecurities Plan Accounts) shall be made when and as provided in Section 7.3 and 7.4 of the Plan. (2) Benefit Payments in Progress. The merger of the NationsSecurities Plan into the Plan shall not revoke or suspend any NationsSecurities Plan methods of payment elected before or in progress on January 1, 1996, and any method of payment in progress under the NationsSecurities Plan on January 1, 1996 with respect to a Participant's accounts thereunder shall continue in effect with respect to the Participant's interest under the Plan in such accounts. (f) Beneficiary Designations. Any Participant's written beneficiary designation in effect under the NationsSecurities Plan with respect to the Participant's accounts thereunder shall not be revoked by reason of the merger of the NationsSecurities Plan into the Plan. Such designation shall be effective under the Plan from and after January 1, 1996 as designating the Beneficiary of all of the Participant's Accounts, including any resulting Former NationsSecurities Plan Accounts, unless and until the Participant revokes or changes the designation or the designation otherwise becomes ineffective, in accordance with the terms and provisions of the Plan. SECTION 16.21. MERGER OF THE NORTH FLORIDA PLAN (a) Merger of the North Florida Plan. NationsBank acquired North Florida Bank Corporation on December 21, 1995 (the "North Florida Acquisition Date"). At the time of the acquisition, North Florida Bank Corporation sponsored the North Florida Bank Corporation Profit Sharing and Thrift Plan (the "North Florida Plan"), which has continued in existence since then. The North Florida Plan shall merge with and into the Plan effective as of the close of business on December 31, 1995. In connection therewith and effective as of that time, (i) the Trust under the North Florida Plan shall merge with and into the Investment Trust for the Plan and (ii) the assets of the Trust under the North Florida Plan shall become assets of the Plan. The Committee shall have the duty and authority to direct the Investment Trustee with respect to the merger and consolidation of the assets of the various investment funds maintained under the Trust of the North Florida Plan on December 31, 1995 with and into the Funds being maintained by the Investment Trustee under the Investment Trust on or after January 1, 1996 pursuant to Article XII of the Plan. (b) Accounts Related to Participation in the North Florida Plan. (1) Establishment of Accounts. Effective as of January 1, 1996, the accounts being maintained for participants in the North Florida Plan on December 31, 1995 shall be combined with other accounts, or maintained as separate accounts, under the Plan as follows: (i) Accounts for Elective Contributions. The account maintained under the North Florida Plan for a Participant who participated in the North Florida Plan representing the Participant's interest in the Participant's "elective contributions" thereunder shall become the Participant's Pre-Tax Employee Contribution Account under the Plan. (ii) Creation of Former North Florida Plan Accounts. An Account shall be established under the Plan for each of the accounts maintained under the North Florida Plan for a Participant who participated in the North Florida Plan other than the account described immediately above. These Accounts are referred to in the Plan as "Former North Florida Plan Accounts." The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in-Service distributions as required by the Code. The Committee may from time to time after January 1, 1996 combine a Participant's Former North Florida Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. Except as provided in the next paragraph, the Accounts representing a Participant's interest in the North Florida Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. The North Florida Plan maintained "Merger Accounts" for certain Participants representing their interests in the North Florida Bank Corporation Employee Stock Ownership Plan, which had merged into the North Florida Plan. If a Participant had a "Merger Account" that was invested in NationsBank Common Stock on December 31, 1995, the corresponding Former North Florida Plan Account shall be subject to the investment restrictions of Section 12.6(a) of the Plan. (Therefore, the Account must be invested in the NationsBank Common Stock Fund until transferred to the other Funds pursuant to Section 12.6(b) of the Plan.) (c) Active Participation in the Plan. The following rules shall apply for the purpose of determining when persons with "Hours of Service" under the North Florida Plan before January 1, 1996 for employment with any participating employer in the North Florida Plan become Participants in the Plan on or after January 1, 1996: (i) Prior Participants. With respect to persons who had become "Participants" in the North Florida Plan by December 31, 1995: Covered Employee on January 1, 1996. If a person is a Covered Employee on January 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on January 1, 1996. If the person is not a Covered Employee on January 1, 1996 but one or more Accounts are established for the person pursuant to Section 16.21(b)(1) of the Plan because of the person's North Florida Plan participation, the person shall become a Participant on that date for purposes of the investment, administration and distribution of the Account(s) in accordance with the provisions of the Plan, but the person shall not be entitled to otherwise participate in the Plan unless and until the person subsequently becomes a Covered Employee. Other situations. In any other case, the person shall become a Participant if and when the person becomes a Covered Employee after January 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the North Florida Plan by December 31, 1995: Eligible Covered Employee on January 1, 1996. If the person is a Covered Employee on January 1, 1996 and would have commenced participation in the North Florida Plan on January 1, 1996 had it not merged into the Plan, the person shall become a Participant on January 1, 1996. Other situations. Otherwise, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person's Periods of Service and Qualifying Periods of Severance shall include (without duplication) the following: The person shall be credited with Months of Service for time prior to the North Florida Acquisition Date determined as if the participating employers in the North Florida Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. The person shall be credited with twelve (12) Months of Service for each completed "Year of Service" for eligibility purposes under the North Florida Plan that the person had as of December 31, 1995. (See paragraph (uu)(1)(B) of Article I of the North Florida Plan.) If the person had in progress on December 31, 1995 a 12-month computation period that would be a "Year of Service" for eligibility purposes under the North Florida Plan if the person completed 1,000 Hours of Service within it, the person shall be credited with twelve (12) Months of Service upon the completion of such computation period during 1996 if the person had completed 1,000 "Hours of Service" under the North Florida Plan during the portion of the computation period that had elapsed by December 31, 1995. (d) Vesting in Former North Florida Plan Accounts and Matching Contribution Accounts; Vesting Service. (1) Former North Florida Plan Accounts. A Participant's Former North Florida Plan Accounts that correspond to the Participant's "Matching Contribution Account," "Non-Elective Contribution Account" and "Rollover Contribution Account" under the North Florida Plan shall be fully Vested and nonforfeitable. A Participant's Former North Florida Plan Accounts that correspond to the Participant's "Employer Contribution Account" and "Merger Account" under the North Florida Plan shall be subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan. (2) Determination of Vesting Service. For purposes of determining the Vesting Service of a Participant who had "Hours of Service" under the North Florida Plan before January 1, 1996 for employment with any participating employer in the North Florida Plan, the person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.21(d), except that the person shall be credited with Months of Service for time prior to the North Florida Acquisition Date determined as if the participating employers in the North Florida Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. If the Participant had become a "Participant" in the North Florida Plan by December 31, 1995, however, in no event shall such Participant's Vested percentage in any Account that is subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan be less at any time than the Vested percentage that would result had the vesting provisions of the North Florida Plan remained in effect. (e) Distribution of Accounts. (1) General. While a Participant is in Service, Distributions to the Participant from the Participant's Former North Florida Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the North Florida Plan had remained in effect. Following separation from Service of a Participant who has any Former North Florida Plan Accounts, Distributions from the Participant's Accounts (including Accounts that are not Former North Florida Plan Accounts) shall be made either (i) when and as provided in Section 7.3 and 7.4 of the Plan or (ii) if the total Vested interest in the Participant's Accounts at the time of Distribution exceeds three thousand five hundred dollars ($3,500), as provided by Article XVIII of the Plan. The Committee shall establish the procedures by which Participants and Beneficiaries may make their related payment elections. (2) Benefit Payments in Progress. The merger of the North Florida Plan into the Plan shall not revoke or suspend any North Florida Plan methods of payment elected before or in progress on January 1, 1996, and any method of payment in progress under the North Florida Plan on January 1, 1996 with respect to a Participant's accounts thereunder shall continue in effect with respect to the Participant's interest under the Plan in such accounts. (f) Beneficiary Designations. Any Participant's written beneficiary designation in effect under the North Florida Plan with respect to the Participant's accounts thereunder shall not be revoked by reason of the merger of the North Florida Plan into the Plan. Such designation shall be effective under the Plan from and after January 1, 1996 as designating the Beneficiary of all of the Participant's Accounts, including any resulting Former North Florida Plan Accounts, unless and until the Participant revokes or changes the designation or the designation otherwise becomes ineffective, in accordance with the terms and provisions of the Plan." 7. The following Article XVIII is added to the Plan effective as of October 1, 1995: "ARTICLE XVIII ADDITIONAL METHODS OF DISTRIBUTION SECTION 18.1. GENERAL. From time to time certain tax-qualified defined contribution plans are merged into the Plan or transfer assets to the Plan in connection with business acquisitions by the Participating Employers. Sometimes these prior plans provide for annuity or installment methods of payment which are required to be preserved under the Plan in accordance with Code Section 411(d)(6). In some cases, the prior plans provide for a Qualified Annuity as the normal form of payment. The purpose of this Article is to provide for additional methods of Distribution and special rules applicable to Qualified Annuities and Qualified Preretirement Survivor Annuities for Participants who participated in these prior plans. SECTION 18.2. DEFINITIONS. For purposes of this Article, the following terms shall have the following meanings: (a) Applicable Election Period means: (i) in the case of a Participant's election to waive the Qualified Annuity form of Distribution, the ninety (90) day period ending on the date of commencement of Distribution; and (ii) in the case of a Participant's election to waive the Qualified Preretirement Survivor Annuity form of Distribution, the period which begins on the first day of the Plan Year in which the Participant attains age thirty-five (35) and ends on the date of the Participant's death; provided, however, in the case the Participant separates from Service, the period under this subparagraph (ii), with respect to benefits accrued before the date of the separation of Service, shall not begin later than the date of the separation from Service. (b) Prior Plan means each plan listed on Schedule 18.2(b) attached to the Plan. Schedule 18.2(b) shall indicate which Prior Plans had a Qualified Annuity as the normal form of payment. Schedule 18.2(b) shall be updated from time to time to reflect additional merged or transferor plans that are subject to this Article. (c) Qualified Annuity means: (i) with respect to a married Participant, an annuity for the life of the Participant with a survivor annuity for the life of the Participant's spouse which is not less than fifty percent (50%), nor greater than one hundred percent (100%), of the amount which is payable during the joint lives of the Participant and such spouse; and (ii) with respect to an unmarried Participant, an annuity for the life of the Participant. (d) Qualified Preretirement Survivor Annuity means, with respect to the surviving spouse of a Participant, an annuity for the life of such surviving spouse. (e) Qualified Waiver means, with respect to a Participant, a written election by the Participant to waive the Qualified Annuity form of Distribution or the Qualified Preretirement Survivor Annuity form of Distribution (as the case may be). The election must (i) be in writing, (ii) be delivered to the Committee at any time during the Applicable Election Period with respect to the election, (iii) specify the alternative method of Distribution and (iv) if applicable, specify any non-spouse Beneficiary under the alternative method of Distribution. If the Participant is married, the election shall not be effective unless (i) the spouse of the Participant consents in writing to the election and the spouse's said consent acknowledges the effect of the election and is witnessed by a member of the Committee or other representative of the Plan or by a notary public or (ii) it is established to the satisfaction of the Committee or other representative of the Plan that such consent may not be obtained because there is no spouse, because such spouse cannot be located, or because of such circumstances as may be prescribed by applicable Code regulations. Any consent by a spouse, or establishment that the consent of a spouse may not be obtained, shall be effective only with respect to that spouse. Any Qualified Waiver by a Participant may be revoked by the Participant, without the consent of the Participant's spouse to such revocation, at any time during the Applicable Election Period with respect to the Qualified Waiver by written notice of revocation delivered to the Committee during the Applicable Election Period. Following any such revocation, the Participant may make another Qualified Waiver pursuant to the provisions set forth above. SECTION 18.3 PARTICIPANTS SUBJECT TO THIS ARTICLE. The Participants subject to this Article shall be each Participant who participated in a Prior Plan and whose account(s) under the Prior Plan were transferred to this Plan. For these Participants, the provisions of this Article shall control notwithstanding any provision of this Plan to the contrary. SECTION 18.4 ADDITIONAL METHODS OF DISTRIBUTION. In addition to the single lump sum method of Distribution as provided in Section 7.4, a Participant who has separated from Service, and any Beneficiary of a deceased Participant who died prior to commencement of Distribution, may elect to have the Participant's Accounts paid by one or any combination of the following methods, subject to the provisions of this Article: Single Life Annuity: an annuity payable for the life of the Participant (or Beneficiary, if applicable). Term Certain Annuity: an annuity payable for the life of the Participant (or Beneficiary, if applicable), with payments guaranteed for a period selected by the Participant (or Beneficiary, if applicable) of five (5), ten (10), fifteen (15) or twenty (20) years. Any payments during the guaranteed period following the Participant's (or Beneficiary's) death would be paid to the Participant's (or Beneficiary's) designated beneficiary. Contingent Annuity: an annuity payable for the life of the Participant (or Beneficiary, if applicable), with a survivor annuity payable to the Participant's (or Beneficiary's) designated beneficiary equal to either fifty percent (50%) or one hundred percent (100%), as selected by the Participant (or Beneficiary), of the amount payable during the joint lives of the Participant (or Beneficiary) and such designated beneficiary. Installments: payment of the balance of the Participant's Accounts in substantially equal installments at regular intervals not more frequent than monthly over a period selected by the Participant (or Beneficiary, if applicable) In certain circumstances some Participants may have available additional methods of Distribution that are required to be preserved under the Plan in accordance with Code Section 411(d)(6). See Article XVI of the Plan. SECTION 18.5 QUALIFIED ANNUITY AS NORMAL FORM. For a Participant who participated in a Prior Plan that had a Qualified Annuity as the normal form of payment: (i) where there is no Qualified Waiver in effect with respect to the Qualified Annuity method of Distribution, the method of Distribution to the Participant shall be by purchasing a Qualified Annuity with the amount distributable to the Participant and distributing the Qualified Annuity to the Participant; and (ii) where there is a Qualified Waiver in effect with respect to the Qualified Annuity method of Distribution, the method of Distribution to the Participant shall be in accordance with the method selected by the Participant as described above and consistent with the Qualified Waiver. SECTION 18.6 QUALIFIED ANNUITY NOT AS NORMAL FORM. For a Participant who participated in a Prior Plan that did not have a Qualified Annuity as the normal form of payment, no Qualified Waiver shall be required for the Participant to be paid by the single lump sum method or installment method of Distribution. If, however, the Participant elects an annuity method of Distribution, the method of Distribution to the Participant shall be by purchasing a Qualified Annuity with the amount distributable to the Participant and distributing the Qualified Annuity to the Participant unless a Qualified Waiver is in effect permitting the elected method of payment. SECTION 18.7 ADDITIONAL REQUIREMENTS. (a) Qualified Preretirement Survivor Annuity. The Qualified Preretirement Survivor Annuity requirement of this Section 18.7(a) shall apply with respect to each Participant with respect to whom the Qualified Annuity requirement of this Article applies. If such requirement applies with respect to a Participant and the Participant dies prior to the commencement of Distribution and is survived by the Participant's spouse, then: (i) where there is no Qualified Waiver with respect to the Qualified Preretirement Survivor Annuity form of Distribution in effect at the time of the Participant's death, the spouse shall be the Participant's Beneficiary and the method of Distribution to the Beneficiary shall be (A) by purchasing a Qualified Preretirement Survivor Annuity with the amount distributable to the Beneficiary and distributing the Qualified Preretirement Survivor Annuity to the Beneficiary or (B) at the Beneficiary's election, by any alternative method set forth in Section 18.4 of the Plan; and (ii) where there is a Qualified Waiver in effect with respect to the Qualified Preretirement Survivor Annuity form of Distribution, the Beneficiary shall be as provided in or permitted by the Qualified Waiver and the method of Distribution to such Beneficiary shall be consistent with the Qualified Waiver. (b) Notice Requirements. The Committee shall provide each Participant with respect to whom the Qualified Annuity requirement of this Article applies, within a reasonable period of time prior to the commencement of Distribution, with a written explanation of (i) the terms and conditions of the Qualified Annuity, (ii) the Participant's right to make, and the effect of, a Qualified Waiver with respect to the Qualified Annuity form of Distribution, (iii) the rights of the Participant's spouse as to spousal consent with respect to the Qualified Waiver and (iv) the right to make, and the effect of, a revocation of a Qualified Waiver. The Committee shall also provide each Participant with respect to whom the Qualified Preretirement Survivor Annuity requirement of this Article applies with a written explanation with respect to the Qualified Preretirement Survivor Annuity that is comparable to the explanation hereinabove required with respect to the Qualified Annuity. The Committee shall provide such written explanation with respect to the Qualified Preretirement Survivor Annuity within the period (i) beginning on the first day of the Plan Year in which the Participant attains age thirty-two (32) and (ii) ending with the close of the Plan Year in which the Participant attains and thirty-five (35). If the Participant becomes a Participant in the Plan after the first day of the Plan Year in which the Participant attains age thirty-two (32), however, the Committee shall provide the written explanation with respect to the Qualified Preretirement Survivor Annuity to the Participant no later than the close of the second Plan Year following the Participant's becoming a Participant in the Plan. (c) Purchase of Annuities. Any annuity that is to be purchased and distributed to a Participant or Beneficiary under this Article shall be provided under a contract issued by an insurance company selected by the Committee, and the Committee shall provide such insurance company with all pertinent information required for issuance of the annuity contract, including without limitation the name, sex and date of birth of the annuitant(s) and the type of annuity to be provided under the annuity contract. The amount distributable shall disbursed to the insurance company in payment of the annuity contract. Any annuity contract distributed to a Participant or Beneficiary shall be nontransferable. (d) Maximum Period of Distribution to Participants. Any method of Distribution to a Participant mus meet either the requirements of subparagraph (i) or subparagraph (ii) below: (i) such method shall provide for Distribution over a period which does not exceed the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and the Participant's Beneficiary; or (ii) such method is the purchase of an annuity providing for payments to the Participant over the life of the Participant or to the Participant and the Participant's Beneficiary over the joint lives and life of the survivor of the Participant and the Participant's Beneficiary. (e) Maximum Period of Distribution to Beneficiaries. If Distribution had begun to the Participant [within the meaning of Section 401(a)(9)(B)(i) of the Code], Distributions to the Participant's Beneficiary shall be completed at least as rapidly as under the method under which Distributions were being made to the Participant at the time of the Participant's death. If Distributions had not so begun to the Participant, Distributions to the Participant's Beneficiary shall be completed within five (5) years after the Participant's death; provided, however: (i) if the Participant's Beneficiary is an individual and Distributions to or on behalf of such Beneficiary begin not later than one (1) year after the date of the Participant's death [or such later date as may be provided by regulations under Section 401(a)(9) of the Code], Distributions may be made over a period that does not exceed the life expectancy of the Beneficiary or by the purchase of an annuity providing for payments over the life of the Beneficiary; and (ii) in the event that the Beneficiary is the Participant's surviving spouse, (A) if Distributions to such Beneficiary begin not later than the date on which the Participant would have attained age seventy and one-half (70-1/2), Distributions may be made over a period not exceeding the life expectancy of the Beneficiary or by the purchase of an annuity providing for payments over the life of the Beneficiary, and (B) if the Beneficiary dies before Distributions commence, the provisions of this Section 18.7 shall apply as if the Beneficiary had been the Participant. (f) Exception. Notwithstanding any provision of this Article to the contrary, any Distribution with respect to a Participant whose Accounts do not exceed three thousand five hundred dollars ($3,500) in the aggregate shall be paid in the form of a single lump sum payment in accordance with the provisions of the Plan other than this Article. (g) Compliance with Section 401(a)(9). Payments of Plan benefits under this Article shall comply with the requirements of Section 401(a)(9) of the Code, including the minimum distribution incidental benefit requirement of Section 401(a)(9)(G) of the Code and Proposed Treasury Regulation ss.1.401(a)(9)-2." IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, has caused this Instrument to be executed by its duly authorized officer, as of the day and year first above written. NATIONSBANK CORPORATION By: /s/Susan B. Waldkirch Name: Susan B. Waldkirch Title: Vice President FIFTH AMENDMENT TO THE NATIONSBANK RETIREMENT SAVINGS PLAN (as restated effective January 1, 1993) THIS INSTRUMENT is executed as of the 1st day of January, 1996 by NATIONSBANK CORPORATION, a North Carolina corporation with its principal office and place of business in Charlotte, North Carolina, hereinafter referred to as "NationsBank"; Statement of Purpose The NationsBank Retirement Savings Plan (the "Plan") was amended and restated effective January 1, 1993 by Instrument dated December 31, 1992 and further amended by Instruments dated December 31, 1993, December 31, 1994, August 1, 1995 and December 31, 1995. By this Instrument, NationsBank is amending the Plan to reflect three 1996 corporate acquisitions. These amendments have been authorized by the Compensation Committee of the Board of Directors of NationsBank, which Compensation Committee has the authority to amend the Plan on behalf of all Participating Employers. NOW, THEREFORE, for the purposes aforesaid, the Plan, as set forth in said Instrument dated December 31, 1992, as subsequently amended, is amended as follows: 1. The following Section 16.22 is added to the Plan effective as of January 10, 1996: "SECTION 16.22. EMPLOYEES OF CSF HOLDINGS. (a) General. NationsBank acquired CSF Holdings, Inc. ("CSF Holdings") on January 10, 1996 (the "CSF Holdings Acquisition Date"). At the time of the acquisition, CSF Holdings sponsored the CSF Holdings Cash or Deferred Profit Sharing Plan (the "CSF Holdings Plan"), and contributions to the CSF Holdings Plan ceased effective as of the CSF Holdings Acquisition Date. This Section 16.22 provides rules for (i) determining when persons employed by CSF Holdings or any of its subsidiary companies on or before the CSF Holdings Acquisition Date become Participants in the Plan and (ii) determining their Vested interest in their resulting Matching Contribution Accounts. (b) Participation in the Plan. The following rules shall apply for the purpose of determining when persons employed by CSF Holdings or any of its subsidiary companies on or before the CSF Holdings Acquisition Date become Participants in the Plan on or after the CSF Holdings Acquisition Date: (i) CSF Holdings Plan Participants. With respect to persons who had become "Participants" in the CSF Holdings Plan before the CSF Holdings Acquisition Date (including persons who could have elected to participate by the CSF Holdings Acquisition Date but chose not to do so): Covered Employee on the CSF Holdings Acquisition Date. If a person is a Covered Employee on the CSF Holdings Acquisition Date, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on the CSF Holdings Acquisition Date. If the person is not a Covered Employee on the CSF Holdings Acquisition Date, the person shall become a Participant if and when the person becomes a Covered Employee after the CSF Holdings Acquisition Date. (ii) Other Employees. With respect to persons who had not become "Participants" in the CSF Holdings Plan before the CSF Holdings Acquisition Date, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person's Periods of Service and Qualifying Periods of Severance shall include (without duplication) the following: the person shall be credited with Months of Service for time prior to the CSF Holdings Acquisition Date determined as if CSF Holdings and its subsidiary companies and their predecessor companies had been Participating Employers in the Plan. (c) Vesting in Matching Contribution Accounts; Vesting Service. The Matching Contribution Accounts of persons who were employees of CSF Holdings or any of its subsidiary companies on or before the CSF Holdings Acquisition Date (including persons who had not become "Participants" in the CSF Holdings Plan by the CSF Holdings Acquisition Date) shall vest as follows: (i) Employee on CSF Holdings Acquisition Date. If the person was an employee of CSF Holdings or any of its subsidiary companies on the CSF Holdings Acquisition Date, the person's Matching Contribution Account shall be fully Vested and nonforfeitable. (ii) Not Employee on CSF Holdings Acquisition Date. If the person was not an employee of CSF Holdings or any of its subsidiary companies on the CSF Holdings Acquisition Date, the person's Matching Contribution Account shall be subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan. The person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.22(c), except that the person shall be credited (without duplication) with Months of Service for time prior to the CSF Holdings Acquisition Date determined as if CSF Holdings and its subsidiary companies and their predecessor companies had been Participating Employers in the Plan." 2. The following Section 16.23 is added to the Plan effective as of February 1, 1996: "SECTION 16.23. EMPLOYEES OF BANK SOUTH. (a) General. NationsBank acquired Bank South Corporation ("Bank South") on January 9, 1996 (the "Bank South Acquisition Date"). At the time of the acquisition, Bank South sponsored the Bank South 401(k) Investment Plan (the "Bank South Plan"), and contributions to the Bank South Plan ceased effective January 31, 1996. This Section 16.23 provides rules for (i) determining when persons employed by Bank South or any of its subsidiary companies on or before the Bank South Acquisition Date become Participants in the Plan and (ii) determining their Vested interest in their resulting Matching Contribution Accounts. (b) Participation in the Plan. The following rules shall apply for the purpose of determining when persons employed by Bank South or any of its subsidiary companies on or before the Bank South Acquisition Date become Participants in the Plan on or after February 1, 1996: (i) Bank South Plan Participants. With respect to persons who had become "Participants" in the Bank South Plan by January 31, 1996 (including persons who could have elected to participate in the "Pay Transfer Portion" of the Bank South Plan by January 1, 1996 but chose not to do so): Covered Employee on February 1, 1996. If the person is a Covered Employee on February 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on February 1, 1996. If the person is not a Covered Employee on February 1, 1996, the person shall become a Participant if and when the person becomes a Covered Employee after February 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the Bank South Plan by January 31, 1996: Eligible Covered Employee on February 1, 1996. If the person is a Covered Employee on February 1, 1996 and had completed "Six Months of Service" within the meaning of Section 3.2(b) of the Bank South Plan by January 31, 1996, the person shall become a Participant on February 1, 1996. Other situations. Otherwise, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person's Periods of Service and Qualifying Periods of Severance shall include (without duplication) the following: the person shall be credited with Months of Service for time prior to the Bank South Acquisition Date determined as if Bank South and its subsidiary companies and their predecessor companies had been Participating Employers in the Plan. (c) Vesting in Matching Contribution Accounts; Vesting Service. The Matching Contribution Accounts of persons who were employees of Bank South or any of its subsidiary companies on or prior to the Bank South Acquisition Date (including persons who had not become "Participants" in the Bank South Plan by the Bank South Acquisition Date) shall vest as follows: (i) Employee on Bank South Acquisition Date. If the person was an employee of Bank South or any of its subsidiary companies on the Bank South Acquisition Date, the person's Matching Contribution Account shall be fully Vested and nonforfeitable. (ii) Not Employee on Bank South Acquisition Date. If the person was not an employee of Bank South or any of its subsidiary companies on the Bank South Acquisition Date, the person's Matching Contribution Account shall be subject to the vesting schedule set forth in Section 6.4(b)(iii) of the Plan. The person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.23(c), except that the person shall be credited (without duplication) with Months of Service for time prior to the Bank South Acquisition Date determined as if Bank South and its subsidiary companies and their predecessor companies had been Participating Employers in the Plan." 3. The following Section 16.24 is added to the Plan effective as of February 1, 1996: "SECTION 16.24. CERTAIN FORMER EMPLOYEES OF SUN WORLD BANK. (a) General. NationsBank acquired Sun World Savings Bank, FSB ("Sun World") on January 31, 1996 (the "Sun World Acquisition Date"). At the time of the acquisition, Sun World participated in the Sun World 401(k) Savings Plan, a defined contribution plan sponsored by Sun World's affiliate Sun World Corporation (the "Sun World Plan"). This Section 16.24 applies to persons who are employed by Sun World on the Sun World Acquisition Date and provides rules for (i) determining when they become Participants in the Plan and (ii) determining their Vested Service for time prior to the Sun World Acquisition Date. (b) Participation in the Plan. The following rules shall apply for purposes of determining when persons employed by Sun World on the Sun World Acquisition Date become Participants in the Plan on or after February 1, 1996: (i) Sun World Plan Participants. With respect to persons who had become "Participants" in the Sun World Plan by the Sun World Acquisition Date (including persons who could have elected to participate in the Sun World Plan by the Sun World Acquisition Date but chose not to do so): Covered Employee on February 1, 1996. If the person is a Covered Employee on February 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on February 1, 1996. If a person is not a Covered Employee on February 1, 1996, the person shall become a Participant if and when the person becomes a Covered Employee after February 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the Sun World Plan by the Sun World Acquisition Date, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan, but in no event earlier than February 1, 1996. For purposes of Section 3.2(c), a person's Periods of Service and Qualifying Periods of Severance shall include (without duplication) the following: the person shall be credited with Months of Service for time prior to the Sun World Acquisition Date determined as if Sun World and its affiliated companies and their predecessor companies had been Participating Employers in the Plan. (c) Vesting Service. The Vesting Service of a person who is employed by Sun World on the Sun World Acquisition Date shall be determined under the applicable provisions of the Plan other than this Section 16.24, except that the person shall be credited (without duplication) with Months of Service for time prior to the Sun World Acquisition Date determined as if Sun World and its affiliated companies and their predecessor companies had been Participating Employers in the Plan." IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, has caused this Instrument to be executed by its duly authorized officer, as of the day and year first above written. NATIONSBANK CORPORATION By: /s/Susan B. Waldkirch Name: Susan B. Waldkirch Title: Vice President SIXTH AMENDMENT TO THE NATIONSBANK RETIREMENT SAVINGS PLAN (as restated effective January 1, 1993) THIS INSTRUMENT is executed as of the 30th day of June, 1996 by NATIONSBANK CORPORATION, a North Carolina corporation with its principal office and place of business in Charlotte, North Carolina, hereinafter referred to as "NationsBank"; Statement of Purpose The NationsBank Retirement Savings Plan (the "Plan") was amended and restated effective January 1, 1993 by Instrument dated December 31, 1992 and further amended by Instruments dated December 31, 1993, December 31, 1994, August 1, 1995, December 31, 1995 and January 1, 1996. By this Instrument, NationsBank is amending the Plan to reflect certain 1996 corporate acquisitions. These amendments have been authorized by the Compensation Committee of the Board of Directors of NationsBank, which Compensation Committee has the authority to amend the Plan on behalf of all Participating Employers. NOW, THEREFORE, for the purposes aforesaid, the Plan, as set forth in said Instrument dated December 31, 1992, as subsequently amended, is amended as follows: 1. The following Sections 16.25, Section 16.26 and Section 16.27 are added to the Plan effective as of June 30, 1996: "SECTION 16.25. MERGER OF THE LDI PLAN (a) Merger of the LDI Plan. NationsCredit Commercial Corporation, which is a Participating Employer, acquired LDI Corporation on April 29, 1996 (the "LDI Acquisition Date"). At the time of the acquisition, LDI Corporation sponsored the LDI Corporation Retirement Savings Plan (the "LDI Plan"), which has continued in existence since then. The LDI Plan shall merge with and into the Plan effective as of the close of business on June 30, 1996. In connection therewith and effective as of that time, (i) the Trust under the LDI Plan shall merge with and into the Investment Trust for the Plan and (ii) the assets of the Trust under the LDI Plan shall become assets of the Plan. The Committee shall have the duty and authority to direct the Investment Trustee with respect to the merger and consolidation of the assets of the various investment funds maintained under the Trust of the LDI Plan on June 30, 1996 with and into the Funds being maintained by the Investment Trustee under the Investment Trust on or after July 1, 1996 pursuant to Article XII of the Plan. (b) Accounts Related to Participation in the LDI Plan. (1) Establishment of Accounts. Effective as of July 1, 1996, the accounts being maintained for participants in the LDI Plan on June 30, 1996 shall be combined with other accounts, or maintained as separate accounts, under the Plan as follows: (i) Accounts for Participant Elected Contributions. The account maintained under the LDI Plan for a Participant who participated in the LDI Plan representing the Participant's interest in the Participant's "Participant Elected Contributions" thereunder shall become the Participant's Pre-Tax Employee Contribution Account under the Plan. (ii) Creation of Former LDI Plan Accounts. An Account shall be established under the Plan for each of the accounts maintained under the LDI Plan for a Participant who participated in the LDI Plan other than the account described immediately above. These Accounts are referred to in the Plan as "Former LDI Plan Accounts." The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in-Service distributions as required by the Code. The Committee may from time to time after July 1, 1996 combine a Participant's Former LDI Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. Except as hereafter provided in this Section 16.25(b)(2), the Accounts representing a Participant's interest in the LDI Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. If a loan made under the LDI Plan to a Participant who participated in the LDI Plan is outstanding on July 1, 1996, the promissory note evidencing such loan shall be held by the Investment Trustee as a segregated investment allocated to and made solely for the benefit of the Participant's Account(s) that correspond to the Participant's account(s) under the LDI Plan that were invested in such promissory note. The Investment Trustee shall become the successor lender of each such "earmarked" loan outstanding on July 1, 1996 for all purposes, and the merger of the LDI Plan into the Plan shall not adversely affect the interest of the Plan (as successor to the LDI Plan) in the promissory note evidencing such loan or in the security for the repayment of the promissory note. (No loans were made under the LDI Plan after May 22, 1996.) Certain participant accounts in the LDI Plan were invested in insurance contracts issued by Aetna Life Insurance Company (or an affiliate thereof). If any such contract is held by the LDI Plan at the time of its merger into the Plan, the contract shall be held by the Investment Trustee, as successor contractholder, as a segregated investment allocated to and made solely for the benefit of the Participant's Account(s) that correspond to the Participant's LDI Plan account(s) that were invested in the contract. (c) Active Participation in the Plan. The following rules shall apply for the purpose of determining when persons with "Hours of Service" under the LDI Plan before July 1, 1996 for employment with any participating employer in the LDI Plan become Participants in the Plan on or after July 1, 1996: (i) Prior Participants. With respect to persons who had become "Participants" in the LDI Plan by June 30, 1996: Covered Employee on July 1, 1996. If the person is a Covered Employee on July 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on July 1, 1996. If the person is not a Covered Employee on July 1, 1996 but one or more Accounts are established for the person pursuant to Section 16.25(b)(1) of the Plan because of the person's LDI Plan participation, the person shall become a Participant on that date for purposes of the investment, administration and distribution of the Account(s) in accordance with the provisions of the Plan, but the person shall not be entitled to otherwise participate in the Plan unless and until the person subsequently becomes a Covered Employee. Other situations. In any other case, the person shall become a Participant if and when the person becomes a Covered Employee after July 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the LDI Plan by June 30, 1996: Eligible Covered Employee on January 1, 1996. If the person is a Covered Employee on July 1, 1996 and would have commenced participation in the LDI Plan on July 1, 1996 had it not merged into the Plan, the person shall become a Participant on July 1, 1996. Other situations. Otherwise, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person shall be credited with Months of Service for time prior to the LDI Acquisition Date determined as if the participating employers in the LDI Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. (d) Vesting in Former LDI Plan Accounts; Vesting Service. (1) Former LDI Plan Accounts. A Participant's Former LDI Plan Accounts shall be fully Vested and nonforfeitable. (2) Determination of Vesting Service. For purposes of determining the Vesting Service of a Participant who had "Hours of Service" under the LDI Plan before July 1, 1996 for employment with any participating employer in the LDI Plan, the person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.25(d), except that the person shall be credited with Months of Service for time prior to the LDI Acquisition Date determined as if the participating employers in the LDI Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. (e) Distribution of Accounts. (1) General. While a Participant is in Service, Distributions to the Participant from the Participant's Former LDI Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the LDI Plan had remained in effect. Following separation from Service of a Participant who has any Former LDI Plan Accounts, Distributions from the Participant's Accounts (including Accounts that are not Former LDI Plan Accounts) shall be made either (i) when and as provided in Section 7.3 and 7.4 of the Plan or (ii) if the total Vested interest in the Participant's Accounts at the time of Distribution exceeds three thousand five hundred dollars ($3,500), as provided by Article XVIII of the Plan. The Committee shall establish the procedures by which Participants and Beneficiaries may make their related payment elections. (2) Benefit Payments in Progress. The merger of the LDI Plan into the Plan shall not revoke or suspend any LDI Plan methods of payment elected before or in progress on July 1, 1996, and any method of payment in progress under the LDI Plan on July 1, 1996 with respect to a Participant's accounts thereunder shall continue in effect with respect to the Participant's interest under the Plan in such accounts. (f) Beneficiary Designations. Any Participant's written beneficiary designation in effect under the LDI Plan with respect to the Participant's accounts thereunder shall not be revoked by reason of the merger of the LDI Plan into the Plan. Such designation shall be effective under the Plan from and after July 1, 1996 as designating the Beneficiary of all of the Participant's Accounts, including any resulting Former LDI Plan Accounts, unless the Participant revokes or changes the designation or the designation otherwise becomes ineffective, in accordance with the terms and provisions of the Plan. (For example, the designation is superseded by a beneficiary designation made by the Participant at the time that the Participant enrolls in the Plan.) SECTION 16.26. MERGER OF THE CHARTER BANCSHARES PLAN (a) Merger of the Charter Bancshares Plan. NationsBank acquired Charter Bancshares, Inc. on May 24, 1996 (the "Charter Bancshares Acquisition Date"). At the time of the acquisition, Charter Bancshares, Inc. sponsored the Charter Bancshares, Inc. 401(k) Profit Sharing Plan (the "Charter Bancshares" Plan), which has continued in existence since then. The Charter Bancshares Plan shall merge with and into the Plan effective as of the close of business on June 30, 1996. In connection therewith and effective as of that time, (i) the Trust under the Charter Bancshares Plan shall merge with and into the Investment Trust for the Plan and (ii) the assets of the Trust under the Charter Bancshares Plan shall become assets of the Plan. The Committee shall have the duty and authority to direct the Investment Trustee with respect to the merger and consolidation of the assets of the various investment funds maintained under the Trust of the Charter Bancshares Plan on June 30, 1996 with and into the Funds being maintained by the Investment Trustee under the Investment Trust on or after July 1, 1996 pursuant to Article XII of the Plan. (b) Accounts Related to Participation in the Charter Bancshares Plan. (1) Establishment of Accounts. Effective as of July 1, 1996, the accounts being maintained for participants in the Charter Bancshares Plan on June 30, 1996 shall be combined with other accounts, or maintained as separate accounts, under the Plan as follows: (i) Accounts for Deferral Contributions. The account maintained under the Charter Bancshares Plan for a Participant who participated in the Charter Bancshares Plan representing the Participant's interest in the Participant's "deferral contributions" thereunder shall become the Participant's Pre-Tax Employee Contribution Account under the Plan. (ii) Creation of Former Charter Bancshares Plan Accounts. An Account shall be established under the Plan for each of the accounts maintained under the Charter Bancshares Plan for a Participant who participated in the Charter Bancshares Plan other than the account described immediately above. These Accounts are referred to in the Plan as "Former Charter Bancshares Plan Accounts." The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in-Service distributions as required by the Code. The Committee may from time to time after July 1, 1996 combine a Participant's Former Charter Bancshares Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. Except as provided in the next paragraph, the Accounts representing a Participant's interest in the Charter Bancshares Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. If a loan made under the Charter Bancshares Plan to a Participant who participated in the Charter Bancshares Plan is outstanding on July 1, 1996, the promissory note evidencing such loan shall be held by the Investment Trustee as a segregated, "earmarked" investment allocated to and made solely for the benefit of the Participant's Account(s). The Investment Trustee shall become the successor lender of each such outstanding loan for all purposes, and the merger of the Charter Bancshares Plan into the Plan shall not adversely affect the interest of the Plan (as successor to the Charter Bancshares Plan) in the promissory note evidencing such loan or in the security for the repayment of the promissory note. (No loans were made under the Charter Bancshares Plan after June 15, 1996.) (c) Active Participation in the Plan. The following rules shall apply for the purpose of determining when persons with "Hours of Service" under the Charter Bancshares Plan before July 1, 1996 for employment with any participating employer in the Charter Bancshares Plan become Participants in the Plan on or after July 1, 1996: (i) Prior Participants. With respect to persons who had become "Participants" in the Charter Bancshares Plan by June 30, 1996: Covered Employee on July 1, 1996. If the person is a Covered Employee on July 1, 1996, the person shall become a Participant on that date. Non-Covered Employee or Former Employee on July 1, 1996. If the person is not a Covered Employee on July 1, 1996 but one or more Accounts are established for the person pursuant to Section 16.26(b)(1) of the Plan because of the person's Charter Bancshares Plan participation, the person shall become a Participant on that date for purposes of the investment, administration and distribution of the Account(s) in accordance with the provisions of the Plan, but the person shall not be entitled to otherwise participate in the Plan unless and until the person subsequently becomes a Covered Employee. Other situations. In any other case, the person shall become a Participant if and when the person becomes a Covered Employee after July 1, 1996. (ii) Other Employees. With respect to persons who had not become "Participants" in the Charter Bancshares Plan by June 30, 1996: Eligible Covered Employee on January 1, 1996. If the person is a Covered Employee on July 1, 1996 and would have commenced participation in the Charter Bancshares Plan on July 1, 1996 had it not merged into the Plan, the person shall become a Participant on July 1, 1996. Other situations. Otherwise, the person shall become a Participant when and as provided in Section 3.2(c) of the Plan. For purposes of Section 3.2(c), the person's Periods of Service and Qualifying Periods of Severance shall include (without duplication) the following: The person shall be credited with Months of Service for time prior to the Charter Bancshares Acquisition Date determined as if the participating employers in the Charter Bancshares Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. The person shall be credited with twelve (12) Months of Service for each completed "Year of Service" for eligibility purposes under the Charter Bancshares Plan that the person had as of June 30, 1996. (See Section 2.02 of the Charter Bancshares Plan.) If the person had in progress on June 30, 1996 a 12-month computation period that would be a "Year of Service" for eligibility purposes under the Charter Bancshares Plan if the person completed 1,000 Hours of Service within it, the person shall be credited with twelve (12) Months of Service upon the completion of such computation period if the person had completed 1,000 "Hours of Service" under the Charter Bancshares Plan during the portion of the computation period that had elapsed by June 30, 1996. (d) Vesting in Former Charter Bancshares Plan Accounts; Vesting Service. (1) Former Charter Bancshares Plan Accounts. A Participant's Former Charter Bancshares Plan Accounts shall be fully Vested and nonforfeitable. (2) Determination of Vesting Service. For purposes of determining the Vesting Service of a Participant who had "Hours of Service" under the Charter Bancshares Plan before July 1, 1996 for employment with any participating employer in the Charter Bancshares Plan, the person's Vesting Service shall be determined under the applicable provisions of the Plan other than this Section 16.26(d), except that the person shall be credited with Months of Service for time prior to the Charter Bancshares Acquisition Date determined as if the participating employers in the Charter Bancshares Plan and their affiliates and predecessor companies had been Participating Employers in the Plan. (e) Distribution of Accounts. (1) General. While a Participant is in Service, Distributions to the Participant from the Participant's Former Charter Bancshares Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the Charter Bancshares Plan had remained in effect. Following separation from Service of a Participant who has any Former Charter Bancshares Plan Accounts, Distributions from the Participant's Accounts (including Accounts that are not Former Charter Bancshares Plan Accounts) shall be made either (i) when and as provided in Section 7.3 and 7.4 of the Plan or (ii) if the total Vested interest in the Participant's Accounts at the time of Distribution exceeds three thousand five hundred dollars ($3,500), as provided by Article XVIII of the Plan. The Committee shall establish the procedures by which Participants and Beneficiaries may make their related payment elections. (2) Benefit Payments in Progress. The merger of the Charter Bancshares Plan into the Plan shall not revoke or suspend any Charter Bancshares Plan methods of payment elected before or in progress on July 1, 1996, and any method of payment in progress under the Charter Bancshares Plan on July 1, 1996 with respect to a Participant's accounts thereunder shall continue in effect with respect to the Participant's interest under the Plan in such accounts. (f) Beneficiary Designations. Any Participant's written beneficiary designation in effect under the Charter Bancshares Plan with respect to the Participant's accounts thereunder shall not be revoked by reason of the merger of the Charter Bancshares Plan into the Plan. Such designation shall be effective under the Plan from and after July 1, 1996 as designating the Beneficiary of all of the Participant's Accounts, including any resulting Former Charter Bancshares Plan Accounts, unless the Participant revokes or changes the designation or the designation otherwise becomes ineffective, in accordance with the terms and provisions of the Plan. (For example, the designation is superseded by a beneficiary designation made by the Participant at the time that the Participant enrolls in the Plan.) SECTION 16.27. MERGER OF THE CHATTAHOOCHEE BANCORP PLAN (a) Merger of the Chattahoochee Bancorp Plan. Bank South Corporation ("Bank South"), which was acquired by NationsBank on January 9, 1996 (see Section 16.23 of the Plan), acquired Chattahoochee Bancorp, Inc., the sponsor of the Chattahoochee Bancorp, Inc. 401(k) and Employee Stock Ownership Plan ("the Chattahoochee Bancorp Plan") on March 15, 1994. In connection with that acquisition, all participant accounts in the Chattahoochee Bancorp Plan became fully vested, contributions to the Chattahoochee Bancorp Plan ceased, and the assets of the Chattahoochee Bancorp Plan attributable to its "employee stock ownership plan" feature were transferred to a separate plan. The Chattahoochee Bancorp Plan shall merge with and into the Plan effective as of the close of business on June 30, 1996. In connection therewith and effective as of that time, (i) the Trust under the Chattahoochee Bancorp Plan shall merge with and into the Investment Trust for the Plan and (ii) the assets of the Trust under the Chattahoochee Bancorp Plan shall become assets of the Plan. The Committee shall have the duty and authority to direct the Investment Trustee with respect to the merger and consolidation of the assets of the various investment funds maintained under the Trust of the Chattahoochee Bancorp Plan on June 30, 1996 with and into the Funds being maintained by the Investment Trustee under the Investment Trust on or after July 1, 1996 pursuant to Article XII of the Plan. The suspense account being maintained under the Chattahoochee Bancorp Plan on June 30, 1996 for Code Section 415 annual additions shall be applied to reduce employer contributions to the Plan as soon as practical pursuant to Section 5.5(b) of the Plan. (b) Accounts Related to Participation in the Chattahoochee Bancorp Plan. (1) Establishment of Accounts. Effective as of July 1, 1996, the accounts being maintained for participants in the Chattahoochee Bancorp Plan on June 30, 1996 shall be combined with other accounts, or maintained as separate accounts, under the Plan as follows: (i) Accounts for Elective Deferrals. The account maintained under the Chattahoochee Bancorp Plan for a Participant who participated in the Chattahoochee Bancorp Plan representing the Participant's interest in the Participant's "Elective Deferrals" thereunder shall become the Participant's Pre-Tax Employee Contribution Account under the Plan (or shall be added to the person's existing Pre-Tax Employee Contribution Account if the person has participated in the Plan). (ii) Creation of Former Chattahoochee Bancorp Plan Accounts. An Account shall be established under the Plan for each of the accounts maintained under the Chattahoochee Bancorp Plan for a Participant who participated in the Chattahoochee Bancorp Plan other than the account described immediately above. These Accounts are referred to in the Plan as "Former Chattahoochee Bancorp Plan Accounts." The Committee shall cause to be maintained such sub-accounts as are necessary to limit or restrict in-Service distributions as required by the Code. The Committee may from time to time after July 1, 1996 combine a Participant's Former Chattahoochee Bancorp Plan Accounts with one another or with other Accounts of the Participant to the extent that the Committee determines that the combination of Accounts is administratively feasible and permitted by the Act and the Code. (2) Investment of Accounts. The Accounts representing a Participant's interest in the Chattahoochee Bancorp Plan shall be held and invested from time to time in the Funds in accordance with Participant investment designations pursuant to Section 12.5 of the Plan. (c) Active Participation in the Plan. Each person for whom one or more Accounts are established for the person pursuant to Section 16.27(b)(1) of the Plan because of the person's Chattahoochee Bancorp Plan participation, the person shall become a Participant on that date for purposes of the investment, administration and distribution of the Account(s) in accordance with the provisions of the Plan. The person, however, shall not be entitled to otherwise participate in the Plan except to the extent (if any) provided by the applicable provisions of the Plan other than this Section 16.27. (d) Vesting in Former Chattahoochee Bancorp Plan Accounts. A Participant's Former Chattahoochee Bancorp Plan Accounts shall be fully Vested and nonforfeitable. (e) Distribution of Accounts. While a Participant is in Service, Distributions to the Participant from the Participant's Former Chattahoochee Bancorp Plan Accounts shall be determined, to the extent required by the Act and the Code, as if the Chattahoochee Bancorp Plan had remained in effect. Following separation from Service of a Participant who has any Former Chattahoochee Bancorp Plan Accounts, Distributions from the Participant's Accounts (including Accounts that are not Former Chattahoochee Bancorp Plan Accounts) shall be made when and as provided in Section 7.3 and 7.4 of the Plan. The Committee shall establish the procedures by which Participants and Beneficiaries may make their related payment elections. (f) Beneficiary Designations. Any Participant's written beneficiary designation in effect under the Chattahoochee Bancorp Plan with respect to the Participant's accounts thereunder shall not be revoked by reason of the merger of the Chattahoochee Bancorp Plan into the Plan. Such designation shall be effective under the Plan from and after July 1, 1996 as designating the Beneficiary of all of the Participant's Accounts, including any resulting Former Chattahoochee Bancorp Plan Accounts, unless the Participant revokes or changes the designation or the designation otherwise becomes ineffective, in accordance with the terms and provisions of the Plan. (For example, the designation is superseded by a beneficiary designation made by the Participant at the time that the Participant enrolls in the Plan.)" 2. The following Section 16.28 is added to the Plan effective as of July 1, 1996: "SECTION 16.28. CERTAIN FORMER EMPLOYEES OF COMMERCE FINANCE. Pursuant to an Agreement of Purchase and Sale dated May 10, 1996, NationsCredit Financial Services Corporation, which is a Participating Employer ("NationsCredit"), acquired certain branch offices of Commerce Financial Company ("Commerce Finance") on July 1, 1996. In connection therewith, certain employees of Commerce Finance were offered employment with, and became employees of, NationsCredit at the time of the acquisition ("Transferred Commerce Finance Employees"). For purposes of (i) determining when a Transferred Commerce Finance Employee becomes a Participant in the Plan (after becoming a Covered Employee of NationsCredit) and (ii) determining the Transferred Commerce Financial Employee's Vesting Service, the Transferred Commerce Financial Employee will be credited (without duplication) with Months of Service for time prior to July 1, 1996 determined as if Commerce Finance and its affiliates and their predecessor companies had been Participating Employers in the Plan." 3. The following Section 16.29 is added to the Plan effective as of August 30, 1996: "SECTION 16.29. CERTAIN FORMER EMPLOYEES OF BLUEBONNET SAVINGS BANK. Pursuant to a Purchase of Assets and Liability Assumption Agreement dated April 24, 1996, NationsBank of Texas, N.A., which is a Participating Employer ("NationsBank-Texas"), acquired certain branch offices of Bluebonnet Savings Bank FSB ("Bluebonnet Savings Bank") on August 30, 1996. In connection therewith, certain employees of Bluebonnet Savings Plan were offered employment with, and became employees of, NationsBank-Texas at the time of the acquisition ("Transferred Bluebonnet Employees"). For purposes of (i) determining when a Transferred Bluebonnet Employee becomes a Participant in the Plan (after becoming a Covered Employee of NationsBank-Texas) and (ii) determining the Transferred Bluebonnet Employee's Vesting Service, the Transferred Bluebonnet Employee will be credited (without duplication) with Months of Service for time prior to August 30, 1996 determined as if Bluebonnet Savings Bank and its affiliates and their predecessor companies had been Participating Employers in the Plan." IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, has caused this Instrument to be executed by its duly authorized officer, as of the day and year first above written. NATIONSBANK CORPORATION By: /s/Ann P. West Name: Ann P. West Title: Vice President SEVENTH AMENDMENT TO THE NATIONSBANK RETIREMENT SAVINGS PLAN (as restated effective January 1, 1993) THIS INSTRUMENT is executed as of the 1st day of October, 1996 by NATIONSBANK CORPORATION, a North Carolina corporation with its principal office and place of business in Charlotte, North Carolina, hereinafter referred to as "NationsBank"; Statement of Purpose The NationsBank Retirement Savings Plan (the "Plan") was amended and restated effective January 1, 1993 by Instrument dated December 31, 1992 and further amended by Instruments dated December 31, 1993, December 31, 1994, August 1, 1995, December 31, 1995, January 1, 1996 and June 30, 1996. By this Instrument, NationsBank is amending the Plan to modify the payment procedures following a participant's separation from service. These amendments have been authorized by the Compensation Committee of the Board of Directors of NationsBank, which Compensation Committee has the authority to amend the Plan on behalf of all Participating Employers. NOW, THEREFORE, for the purposes aforesaid, the Plan, as set forth in said Instrument dated December 31, 1992, as subsequently amended, is amended as follows: 1. The following subparagraph (d) is added to the end of Section 6.1 of the Plan effective as of October 1, 1996: "(d) Coordination With Distributions Following Separation From Service. Section 7.3(a) of the Plan provides that a Distribution to a Participant following the Participant's separation from Service shall be made based on the Vested balance in the Participant's Accounts determined as of the Valuation Date at the end of the Valuation Period immediately preceding the Valuation Period in which the Participant separates from Service (or, if applicable, the Valuation Date at the end of the Valuation Period immediately preceding the Valuation Period in which the Participant consents to the Distribution) (the "Distribution Valuation Date"). In order to make the Distribution as soon as administratively practicable after the Distribution Valuation Date, (i) no Adjustment shall be made with respect to the Participant's Accounts for any Valuation Period beginning after the Distribution Valuation Date, and (ii) no additional shares of NationsBank Employer Stock shall be credited to the Participant's Accounts with respect to any cash dividends declared or paid after the Distribution Valuation Date on shares of NationsBank Employer Stock invested in the Participant's Accounts." 2. Section 7.3(a) of the Plan is amended effective as of October 1, 1996 to read as follows: " (a) Distributions to Participants. Following a Participant's separation from Service, Distribution of the Vested shares of NationsBank Employer Stock and all other Vested amounts credited to the Participant's Accounts as of the Valuation Date at the end of the Valuation Period immediately preceding the Valuation Period in which the Participant's separation from Service occurs shall be made as soon as practicable following such Valuation Date. If the Participant's total Vested interest in the Plan at the time of Distribution exceeds three thousand five hundred dollars ($3,500), however, Distribution to the Participant may not be made without the Participant's consent before the date on which the Participant attains seventy and one-half (70-1/2) years of age. (See Section 7.1(b) of the Plan.) A Participant whose Distribution is deferred pursuant to the provisions of the preceding sentence and who has not returned to Service may elect to receive Distribution as soon as practicable following the end of any Valuation Period that immediately precedes the Valuation Period during which the Participant provides written notice to the Committee to that effect in accordance with procedures prescribed by the Committee. Distribution during the lifetime of a Participant shall be made only to or for the benefit of the Participant." 3. Except as expressly or by necessary implication amended hereby, the Plan shall continue in full force and effect. IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, has caused this Instrument to be executed by its duly authorized officer, as of the day and year first above written. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley, Executive Vice President EX-10 5 EXHIBIT 10(G) AMENDMENT TO THE NATIONSBANK CORPORATION AND DESIGNATED SUBSIDIARIES DIRECTORS' RETIREMENT PLAN WHEREAS, NationsBank Corporation ("NationsBank") sponsors the NationsBank Corporation and Designated Subsidiaries Directors' Retirement Plan (the "Plan") for the benefit of non-employee directors of NationsBank and certain participating subsidiaries (collectively, the "Participating Employers"); and WHEREAS, NationsBank is establishing the NationsBank Corporation Directors' Stock Plan (the "Stock Plan"); and WHEREAS, the Participating Employers desire to amend the Plan to provide that (i) current and future directors of NationsBank shall not participate in the Plan and (ii) current directors of NationsBank shall have benefits accrued under the Plan calculated and paid as of April 24, 1996 in a combination of cash and shares of NationsBank common stock to be issued under the Stock Plan, all as more specifically set forth herein; and WHEREAS, such amendment to the Plan has been authorized and approved by the Board of Directors of NationsBank pursuant to Article IV of the Plan; NOW, THEREFORE, NationsBank does hereby declare that the Plan is hereby amended effective as of the date hereof as follows: 1. The following Section 5.5 is added to the end of Article V of the Plan: "Section 5.5. Termination of Participation for Certain NationsBank Corporation Directors. A person who serves as a Director of NationsBank Corporation at any time after April 24, 1996 (the "Determination Date") shall not be paid any benefit under the Plan attributable to such person's service as a Director of NationsBank Corporation except as otherwise provided by this Section 5.5. The provisions of this Section 5.5 shall not affect the amount of benefits, the timing of the payment of such benefits or the method of payment of such benefits under the Plan for any person other than the Directors described in the preceding sentence, including (i) Former Directors who have ceased serving as Directors on or before the Determination Date and (ii) Directors of Participating Employers other than NationsBank Corporation. For any person serving as a Director of NationsBank Corporation immediately following the Determination Date (other than any person who was first elected as a director on the Determination Date) (each an "Affected Director"), NationsBank Corporation shall calculate the present value of such Affected Director's benefits earned under Article II of the Plan as of the Determination Date using for such purpose the methodology set forth on Exhibit I attached hereto. As soon as practicable after the Determination Date, each Affected Director shall be paid such present value as follows: fifty percent (50%) of such amount shall be paid in cash and fifty percent (50%) shall be paid in shares of common stock of NationsBank Corporation issued under, and in accordance with, the NationsBank Corporation Directors' Stock Plan." 2. The amendment set forth in paragraph 1 above is contingent on the approval of the NationsBank Corporation Directors' Stock Plan by the shareholders of the Corporation at the 1996 annual shareholders' meeting. If such plan is not so approved by the shareholders, the amendment set forth herein shall be null and void. 3. Except as expressly or by necessary implication amended hereby, the Plan shall continue in full force and effect. IN WITNESS WHEREOF, NationsBank, on behalf of the Participating Employers, has caused this instrument to be executed by its duly authorized officer as of the 24th day of April, 1996. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley Executive Vice President "NationsBank" EXHIBIT I METHODOLOGY FOR DETERMINING THE PRESENT VALUE OF ACCRUED BENEFITS FOR ACTIVE NONEMPLOYEE DIRECTORS OF NATIONSBANK CORPORATION IN THE DIRECTORS' RETIREMENT PLAN I. Establish the Participant's annual retirement benefit based on an annual retainer amount of $36,000, and the maximum period the benefit would have been paid (the lesser of 10 years or the number of completed years of service as a Director as of the Determination Date). II. Establish the Participant's Assumed Benefit Commencement Date as the last day of the quarter in which the last of the following dates occurs: A. The date the Participant attains age 65, B. The fifth anniversary of the Participant's date of election to the Board, or C. The Determination Date (April 24, 1996). III. Determine the Present Value of Accrued Benefits as of the Determination Date. For purposes of this determination an interest rate of 7.50% compounded annually and the 1983 Group Annuity Mortality Table shall be used. EX-10 6 EXHIBIT 10(K) EIGHTH AMENDMENT TO THE NATIONSBANK PENSION PLAN THIS AGREEMENT is made and entered into as of the 31st day of December, 1995 by and between NATIONSBANK CORPORATION, a North Carolina corporation ("NationsBank"), and NATIONSBANK, N.A., a national banking association (the "Trustee"). W I T N E S S E T H: WHEREAS, NationsBank and certain of its subsidiary corporations (collectively with NationsBank, the "Participating Employers") maintain The NationsBank Pension Plan (the "Plan"); and WHEREAS, NationsBank desires to amend the Plan to (i) modify the definition of "Compensation" to include a portion of commissions paid to Participants who are compensated through commission arrangements, (ii) modify the application of the Plan to Participants who remain employed with the Participating Employers in a "benefits-eligible" position after age sixty-five (65) or who retire and commence receiving benefits under the Plan and are subsequently rehired by the Participating Employers in a "benefits-eligible" position, (iii) reflect certain business acquisitions of the Participating Employers and the merger of a pension plan into the Plan as a result of one of those acquisitions and (iv) add special provisions for the benefit of certain employees of the Participating Employers who separate from service with the Participating Employers as a result of certain business dispositions; and WHEREAS, in Section 11.1 of the Plan, the Participating Employers reserved the right to amend the Plan at any time, in whole or in part, and have delegated to the Compensation Committee of the Board of Directors of NationsBank the right to make the amendments set forth below on behalf of all Participating Employers; and WHEREAS, the amendments set forth below have been authorized and approved by the Compensation Committee; NOW, THEREFORE, in consideration of the premises and the mutual ovenants herein contained, NationsBank and the Trustee hereby agree as follows: 1. Section 2.1(c)(14) of the Plan is amended effective as of January 1, 1996 to read as follows: "(14) Compensation of a Participant means the base salary or base wages payable by the Participating Employers to the Participant for employment with the Participating Employers prior to (i) any salary or wage reduction pursuant to Article IV of the Savings Plan or (ii) any salary or wage reduction pursuant to the Group Benefits Plan. Compensation shall not include: (A) any bonuses (contractual, discretionary or otherwise), awards, overtime pay, shift premium, incentive compensation of any kind whatsoever, or other extra or special remuneration of any kind, except to the extent otherwise provided in the last paragraph of this Section 2.1(c)(14); (B) any deferred compensation pursuant to the Plan or any other agreement or arrangement between a Participating Employer and the Participant, including any deferrals of base salary or wages pursuant to any nonqualified deferred compensation plan; (C) any sums paid by a Participating Employer (i) on account of any health, welfare or group insurance benefits (exclusive of sick pay), including dependent care assistance, or (ii) on account of reimbursement of relocation expenses, regardless of whether such sums are taxable income to the Participant; provided, however, this subparagraph (C) shall not exclude from Compensation any sums paid by a Participating Employer that are attributable to base salary or wage reductions under the Group Benefits Plan; (D) any severance, vacation or similar benefits paid in a lump sum; or (E) any compensation pursuant to any other employee benefit plan, including without limitation, any sums elected to be received in cash pursuant to any such plan. For periods during which a Participant is on a leave of absence and deemed to have Hours of Service during such absence as provided in Section 2.1(c)(29)(E), Compensation shall mean the base salary or base wages which would have been paid by the Participating Employers to the Participant during such absence assuming the base salary or base wages paid by the Participating Employers to the Par- ticipant had continued during such absence at the monthly rate in effect when such absence commenced. Notwithstanding subparagraph (A) above, a Participant's Compensation shall include, in addition to base salary or wages, fifty percent (50%) of the commissions payable to the Participant if: (X) the Participant's remuneration from the Participating Employers is based solely on commissions earned by the Participant and the Participant's base salary is deducted from the commissions earned by and payable to the Participant; (Y) the Participant is employed in a position which directly supervises Participant(s) described in subparagraph (X) above and some or all of the Participant's remuneration from the Participating Employers is based on override commissions from the production of the supervised Participant(s); or (Z) the Participant is employed in a position which directly supervises Participant(s) described in subparagraph (X) above and some or all of the Participant's remuneration from the Participating Employers is based on commissions resulting from the Participant's personal production." 2. The following Section 5.1(e) is added to the end of Section 5.1 of the Plan effective as of January 1, 1995: "(e) Special Retirement Benefit for Retirement After Age 65. Notwithstanding the foregoing provisions of this Section 5.1, in the event a Participant retires after the Participant's Normal Retirement Date, the amount of the Participant's retirement income payable under the Plan shall be the greater of Amount A or Amount B, where: Amount A is the amount of the Participant's retirement income determined under the Plan without regard to this Section 5.1(e), and Amount B is the amount of the Participant's accrued retirement income under the Plan as of the Participant's Normal Retirement Date actuarially increased to the date of the Participant's actual retirement, using for such purpose the following actuarial assumptions: Mortality: A unisex rate that is fifty percent (50%) male, fifty percent (50%) female, taken from the 1971 Group Annuity Mortality Table. Interest: Five percent (5%)." 3. Section 5.8 of the Plan is deleted in its entirety, and Sections 5.9 and 5.10 of the Plan and all references in the Plan to said Section 5.9 and 5.10 are redesignated as Sections 5.8 and 5.9, respectively, all effective as of January 1, 1995. 4. Section 6.3(a) and Section 6.3(b) of the Plan are amended effective as of January 1, 1995 to read as follows: "(a) Prior to Normal Retirement Date. No Participant, regardless of the Participant's vesting status, shall receive a retirement income payment for any month prior to the Participant's Normal Retirement Date if, on the date during such month when the Participant's retirement income payment would otherwise be made thereunder, the Participant is in Service. However, any retirement income that has commenced to a Participant who is not in Service shall not be stopped if the Participant resumes Service and is regularly scheduled to work less than forty (40) hours per week (as referred to in Section 6.3(b) below), and Section 6.3(b)(5) below shall apply to such a Participant. (b) On Or After Normal Retirement Date. No Participant, regardless of the Participant's vesting status, may commence receiving retirement income payments for any month following the Participant's Normal Retirement Date if the Participant is in Service and regularly scheduled to work at least twenty (20) hours per week. Provided, however, the following conditions shall apply: (1) Payments shall commence to a Participant whose regularly scheduled hours of employment decrease after the Participant's Normal Retirement Date from twenty (20) or more per week to less than twenty (20) per week only if the Participant so elects in writing under the Plan's regular benefit election procedures. (2) Any retirement income that has commenced to a Participant not in Service shall be withheld only if the Participant resumes Service and is regularly scheduled to work at least forty (40) hours per week. (3) No retirement income shall be withheld after the Participant's required commencement date under Section 5.1(c). (4) The amount of retirement income to be withheld any month shall be equal to the amount otherwise payable for such month. (5) The following provisions apply to the Participants described below who die while in Service prior to the required commencement date of their retirement income under Section 5.1(c). If at the time of such Participant's death the Participant's retirement income is being withheld under this Section 6.3 because (i) the Participant has resumed Service and the Participant's regularly scheduled hours of employment following such resumption of Service equal or exceed forty (40) hours per week or (ii) the Participant has continued Service following the Participant's Normal Retirement Date and the Participant's regularly scheduled hours of employment have remained at least twenty (20) hours per week, the Participant shall be covered by the death benefit provisions of Section 6.2. If at the time of the Participant's death the Participant's retirement income is being paid to the Participant because (i) the Participant has resumed Service and the Participant's regularly scheduled hours of employment following such resumption of Service do not equal or exceed forty (40) hours per week or (ii) the Participant has continued Service following the Participant's Normal Retirement Date but the Participant's regularly scheduled hours of employment decreased to less than twenty (20) hours per week, the Participant shall be covered by the death benefit provisions of Section 6.2 only with respect to any additional retirement income the Participant has accrued over and above the retirement income that was being paid to the Participant at the time of the Participant's death, and the only death benefit, if any, payable with respect to the retirement income being paid to the Participant at the time of the Participant's death shall be according to the form of payment applicable to such retirement income." 5. Section 6.4 of the Plan is amended effective as of January 1, 1995 to read as follows: "SECTION 6.4. BENEFIT ACCRUAL AFTER CERTAIN PERIODS OF INTERRUPTED SERVICE OR AFTER CERTAIN COMMENCEMENTS OF RETIREMENT INCOME. (a) After Certain Interruptions of Service. If a Participant's Service is interrupted and then recommenced, and either such interruption did not result in benefit payments being made to the Participant or, even if payments were so made, such Participant was reemployed at a regularly scheduled rate of forty (40) or more hours per week (as referred to in Section 6.3), then any retirement income subsequently payable to the Participant shall be calculated by combining Benefit Service and Compensation as described in the next sentence. Benefit Service credited and Compensation earned by the Participant prior to such interruption shall be combined with any Benefit Service credited and Compensation earned after such interruption, subject, however, to the exclusion of any such Benefit Service or Compensation under other provisions of the Plan. Any retirement income so calculated shall be appropriately reduced to reflect any retirement income payments or lump sum payment (other than Disability retirement income payments) previously received by the Participant. In no event, however, shall the Participant's retirement income be less than the sum of (i) the amount of retirement income previously being paid to the Participant, actuarially increased in accordance with Section 5.1(e) if the Participant's retirement income is being recommenced after the Participant's Normal Retirement Date, or, in the case of a Participant whose retirement income was not yet being paid, the Participant's retirement income that would have commenced at the Participant's Normal Retirement Date, reduced, if applicable, for earlier commencement in accordance with Section 5.2(b)(1) and (ii) any additional retirement income accrued hereunder by the Participant derived solely from the Benefit Service credited to the Participant and Compensation earned by the Participant during the Participant's period of recommenced Service. If a Participant's Service is interrupted and then recommenced and benefit payments to such Participant continue following such resumption of Service because the Participant's regularly scheduled hours of employment following such resumption of Service do not equal or exceed forty (40) hours per week (as referred to in Section 6.3), then any additional retirement income accrued hereunder by the Participant shall be derived solely from the Participant's period of recommenced Service. (b) After Certain Commencements of Retirement Income. If a Participant's retirement income commenced while the Participant remained in Service after the Participant's Normal Retirement Date because the Participant's regularly scheduled hours of employment decreased to below the twenty (20) hour per week level (as referred to in Section 6.3), then any additional retirement income accrued by the Participant shall be derived solely from the Participant's period of Service that began when the Participant's Service decreased below that level." 6. The following new Sections 15.14 and 15.15 are added to the end of Article XV of the Plan effective as of January 1, 1995: "SECTION 15.14. DIVESTITURES. (a) General. From time to time, certain banking centers and other business units of the Participating Employers are sold to unrelated third parties, and as a result certain Participants employed at such banking centers and other business units (the "Affected Participants") terminate their employment with the Participating Employers. Schedule 15.14 attached to the Plan lists (i) the banking centers and other business units that have been sold which are subject to this Section, (ii) the names of the various purchasers and (iii) the effective dates of such sales. Schedule 15.14 shall be updated from time to time by the Participating Employers to reflect additional sales that are subject to this Section. The provisions of this Section shall be effective with respect to a particular group of Affected Participants as of the applicable effective date set forth on Schedule 15.14 (a "Termination Date"). (b) Vesting of Affected Participants. The accrued retirement income under the Plan of an Affected Participant shall be fully vested and nonforfeitable as of the Termination Date applicable to such Affected Participant. (c) Separation from Service. For purposes of determining an Affected Participant's accrued retirement income under the Plan, such Affected Participant shall be deemed to have separated from Service as of the Termination Date applicable to such Affected Participant. (d) Provisions Controlling. Notwithstanding any provisions of the Plan to the contrary, the provisions of this Section 15.14 shall control with respect to the Affected Participants. SECTION 15.15. ACQUISITIONS. (a) General. From time to time the Participating Employers acquire certain businesses, and as a result certain of the employees of such acquired businesses become Covered Employees of the Participating Employers (the "Acquired Employees"). Schedule 15.15 attached to the Plan lists (i) the acquired businesses which are subject to this Section and (ii) the effective dates of such acquisitions. Schedule 15.15 shall be updated from time to time by the Participating Employers to reflect additional acquisitions that are subject to this Section. The provisions of this Section shall be effective with respect to a particular group of Affected Participants as of the applicable effective date set forth on Schedule 15.15 (an "Acquisition Date"). (b) Eligibility, Vesting and Benefit Service. Solely for purposes of determining (i) whether an Acquired Employee has satisfied the eligibility requirements of Article III, (ii) an Acquired Employee's Vesting Service and (iii) to the extent specified in Schedule 15.15, an Acquired Employee's Benefit Service, the Acquired Employee's service with the acquired business prior to the applicable Acquisition Date shall be treated as Service with the Participating Employers. (c) Provisions Controlling. Notwithstanding any provisions of the Plan to the contrary, the provisions of this Section 15.15 shall control with respect to the Acquired Employees." 7. The following Section 15.16 is added to the end of Article XV of the Plan effective as of February 1, 1996: "SECTION 15.16. MERGER OF THE BANK SOUTH PLAN. (a) General. Bank South Corporation sponsored the Bank South Corporation Employees' Retirement Plan and Trust (the "Bank South Plan"), a tax-qualified defined benefit plan. Bank South Corporation was acquired by NationsBank Corporation. In connection therewith, the Bank South Plan is merged with and into the Plan effective as of February 1, 1996 (the "Bank South Plan Merger Date"). As part of said plan merger, on the Bank South Plan Merger Date the trust maintained under the Bank South Plan shall become a part of the Trust maintained under this Plan, and the assets of the Bank South Plan shall thereupon become assets of this Plan. As of the Bank South Plan Merger Date, the Plan shall be the successor in interest to, and shall have assumed all the liabilities of, the Bank South Plan. (b) Benefits. For a Participant who was a participant in the Bank South Plan immediately prior to the Bank South Plan Merger Date, such Participant's benefits under the Plan shall equal the sum of Amount A and Amount B, where: Amount A is the Participant's "Accrued Benefit" under and as defined in the Bank South Plan (which includes such Participant's "Final Average Earnings Benefit" and "Cash Balance Benefit" under the Bank South Plan) determined immediately prior to the Bank South Plan Merger Date, and Amount B is the Participant's benefits determined under the applicable provisions of the Plan without regard to any Service for periods prior to the Bank South Plan Merger Date. (c) Limited Effect of Plan Merger. To the extent required by Section 204(g) of the Act and Section 411(d)(6) of the Code, no "optional form of benefit" (within the meaning of the Act and the Code) under the Bank South Plan shall be reduced or eliminated as a result of the merger of the Bank South Plan into the Plan." 8. Schedules 15.14 and 15.15 attached hereto are hereby added to and made a part of the Schedules to the Plan effective as of December 31, 1995. 9. Except as expressly or by necessary implication amended hereby, the Plan shall continue in full force and effect. IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, and the Trustee have caused this Agreement to be executed by their respective duly authorized officers, all as of the day and year first above written. NATIONSBANK CORPORATION By: /s/Ann P. West Name: Ann P. West Title: Vice President NATIONSBANK, N.A. By: /s/Ann-Louise Hyatt Name: Ann-Louise Hyatt Title: Vice President NINTH AMENDMENT TO THE NATIONSBANK PENSION PLAN THIS AGREEMENT is made and entered into as of the 26th day of June, 1996 by and between NATIONSBANK CORPORATION, a North Carolina corporation ("NationsBank"), and NATIONSBANK, N.A., a national banking association (the "Trustee"). W I T N E S S E T H: WHEREAS, NationsBank and certain of its subsidiary corporations (collectively with NationsBank, the "Participating Employers") maintain The NationsBank Pension Plan (the "Plan"); and WHEREAS, NationsBank desires to amend the Plan to extend the transition provisions in the Plan for the calculation of certain lump sum benefit payments using the interest rate and mortality assumptions specified in Section 417(e)(3) of the Internal Revenue Code of 1986, as amended by the Retirement Protection Act of 1994; and WHEREAS, in Section 11.1 of the Plan, the Participating Employers reserved the right to amend the Plan at any time, in whole or in part, and have delegated to the Compensation Committee of the Board of Directors of NationsBank the right to make the amendments set forth below on behalf of all Participating Employers; and WHEREAS, the amendments set forth below have been authorized and approved by the Compensation Committee; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, NationsBank and the Trustee hereby agree as follows: 1. The first paragraph immediately following subparagraph (B) of Section 15.4(h)(2) of the Plan (as amended by the Third Amendment to the Plan) is amended effective as of June 26, 1996 to read as follows: "The single sum value of the benefit described in clauses (ii) and (iii) of Subsection (A) above shall be calculated by applying the actuarial assumptions specified in Section 5.5(d)(2)(B); provided, however, in the event a Prior CVN Plan Participant is in Service on December 31, 1994 and eligible as of December 31, 1994 for early retirement under Section 5.2 and such Prior CVN Plan Participant separates from Service before January 1, 1998, then such single sum value shall not be less than the single sum value of such benefit calculated as of December 31, 1994 by applying the actuarial assumptions specified in Section 5.5(d)(2)(A) as in effect on December 31, 1994." 2. Except as expressly or by necessary implication amended hereby, the Plan shall continue in full force and effect. IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, and the Trustee have caused this Agreement to be executed by their respective duly authorized officers, all as of the day and year first above written. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley, Executive Vice President NATIONSBANK, N.A. By: /s/David R. Lofland Name: David R. Lofland Title: Senior Vice President TENTH AMENDMENT TO THE NATIONSBANK PENSION PLAN THIS AGREEMENT is made and entered into as of the 2nd day of October, 1996 by and between NATIONSBANK CORPORATION, a North Carolina corporation ("NationsBank"), and NATIONSBANK, N.A., a national banking association (the "Trustee"). Statement of Purpose NationsBank sponsors The NationsBank Pension Plan (the "Plan"). A civil action was filed in 1994 in the United States District Court for the Northern District of Texas, Fort Worth Division, (Civil Action No. 4-94CV-104A) as a class action entitled "Sam L. Gill, Jr. et al. v. NationsBank Corporation and The NationsBank Pension Plan" relating to the First United Bancorporation Pension Trust (the "FUBI Plan"), which was previously maintained by First United Bancorporation, Inc. and certain of its subsidiaries. The FUBI Plan was merged into the InterFirst Corporation Pension Plan (the "InterFirst Plan"), which was sponsored by InterFirst Corporation. Subsequently, the InterFirst Plan was merged into this Plan. In connection with the settlement of all issues of the class action lawsuit other than attorneys' fees, the Plan was amended by the Seventh Amendment to the Plan to add Section 15.13 to the Plan regarding the "FUBI Plan Special Benefit," which amendment was approved by the Court in connection with the settlement and by the Internal Revenue Service pursuant to a determination letter request. However, the attorneys' fee issue of the class action lawsuit was not settled. Pursuant to an order of the Court regarding the attorneys' fee issue, Section 15.13 of the Plan is required to be further amended as set forth herein to provide that the FUBI Plan Special Benefit of an "Eligible Former FUBI Plan Participant" be reduced by an "Attorneys' Fee Amount" in the event such benefit becomes payable, which such amendment is authorized and permitted under the terms of the Seventh Amendment to the Plan. In Section 11.1 of the Plan the "Participating Employers" under the Plan have reserved the right to amend the Plan at any time, in whole or in part, and have delegated to the Compensation Committee of the Board of Directors of NationsBank the right to make the amendments set forth below on behalf of all Participating Employers. The undersigned has been authorized by the Compensation Committee to make the amendments set forth below. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, NationsBank and the Trustee hereby agree as follows: 1. Section 15.13(c) of the Plan is hereby amended to read as follows: "(c) FUBI Plan Special Benefit Defined. The "FUBI Plan Special Benefit" means, with respect to an Eligible Former FUBI Plan Participant, the sum of (A) plus (B) plus (C), reduced by (D), where: (A) is the "FUBI Portion" of such Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit (as defined in subparagraph (d) below); (B) is the "InterFirst Portion," if any, of such Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit (as defined in subparagraph (e) below); (C) is the "NationsBank Portion," if any, of such Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit (as defined in subparagraph (f) below); and (D) is the "Attorneys' Fee Amount" of such Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit (as defined in subparagraph (q) below). The FUBI Portion of an Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit shall be subject to the FUBI Plan COLAs as provided in subparagraph (k) below. For purposes of determining the FUBI Plan Special Benefit for an Eligible Former FUBI Plan Participant, both the FUBI Portion and the InterFirst Portion, if any, of such FUBI Plan Special Benefit shall be converted to a single life annuity as provided below. An Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit shall be stated as a monthly benefit and may be paid pursuant to any optional form of benefit set forth in Section 5.4 which such Participant elects (to the extent eligible) in accordance with the terms and provisions of the Plan other than this Section 15.13; provided, however, that the special provisions of subparagraph (r) below shall apply in the case of lump sum payments." 2. The following Sections 15.13(q) and 15.13(r) are hereby added to the Plan: "(q) Attorneys' Fee Amount Defined. The Attorneys' Fee Amount of the FUBI Plan Special Benefit of a particular Eligible Former FUBI Plan Participant means the product of (i) 20.9172% times (ii) the "Excess FUBI Plan Special Benefit" with respect to such Participant. The "Excess FUBI Plan Special Benefit" with respect to an Eligible Former FUBI Plan Participant means the excess, if any, of (x) such Participant's FUBI Plan Special Benefit determined without reduction for the Attorneys' Fee Amount over (y) the amount of such Participant's monthly retirement income determined under the provisions of the Plan without regard to this Section 15.13. The amount in (x) and the amount in (y) shall each be appropriately adjusted in accordance with the terms of the Plan in the event the Eligible Former FUBI Plan Participant's monthly retirement income under the Plan is payable in an optional form of payment or commences prior to the Participant's Normal Retirement Date. (r) Special Provisions Related to Lump Sum Payments. The following provisions shall apply with respect to an Eligible Former FUBI Plan Participant who is eligible to receive the Participant's monthly retirement income under the Plan in the form of a lump sum payment and the Participant in fact elects such method of payment: (i) The amount of the lump sum payment determined as of a given determination date shall equal the sum of (A) and (B), reduced by (C), where: (A) is an amount determined as of the determination date equal to the single sum value of the Participant's monthly retirement income under the Plan payable through the Participant's "Crossover Date" (as defined below); (B) is an amount determined as of the determination date equal to the single sum value of the Participant's FUBI Plan Special Benefit payable from and after the Participant's Crossover Date but without regard to the Attorneys' Fee Amount set forth in Section 15.13(q) above; and (C) is the Attorneys' Fee Amount with respect to the lump sum payment determined in accordance with subparagraph (iv) below. (ii) For purposes of this Section 15.13(r), the "Crossover Date" determined as of a given determination date with respect to an Eligible Former FUBI Plan Participant means the first date, if any, on which the Participant's FUBI Plan Special Benefit is expected (based on the assumptions set forth in subparagraph (iii) below) to equal or exceed the Participant's monthly retirement income under the Plan determined without regard to the provisions of this Section 15.13. (iii) The calculation of all single sum values under this Section 15.13(r) shall be made using the actuarial assumptions and methods in effect from time to time under the Plan for determining lump sum payments. In addition, for purposes of calculating the single sum value of an Eligible Former FUBI Plan Participant's FUBI Plan Special Benefit payable after the Participant's Crossover Date, as well as for purposes of determining such Crossover Date, the FUBI Portion of the Participant's FUBI Plan Special Benefit shall be assumed to increase at an annual rate equal to the average over the twenty (20) completed calendar year period immediately preceding the determination date of the COLA amounts determined in accordance with the provisions of Section 15.13(k) above. (iv) For purposes of this Section 15.13(r), the Attorneys' Fee Amount with respect to an Eligible Former FUBI Plan Participant's lump sum payment shall equal the product of (A) and (B) where: (A) is 20.9172%; and (B) is the amount, if any, by which the sum of (A) and (B) under subparagraph (i) above exceeds the single sum value of the Participant's monthly retirement income under the Plan determined without regard to the provisions of this Section 15.13, all determined as of the applicable determination date using the actuarial assumptions set forth in subparagraph (iii) above." 3. The effective date of the amendment set forth herein shall be July 5, 1995 (the effective date of the Seventh Amendment to the Plan), subject, however, to the entering of a "Final Judgment as to Attorneys' Fees and Expenses" which has become final and nonappealable. If such "Final Judgment as to Attorneys' Fees and Expenses" is not entered or does not become final and nonappealable, the amendment set forth herein shall be null and void. 4. Except as expressly or by necessary implication amended hereby, the Plan shall continue in full force and effect. IN WITNESS WHEREOF, NationsBank Corporation, on behalf of the Participating Employers, and the Trustee have caused this Agreement to be executed by their respective duly authorized officers, all as of the day and year first above written. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley, Executive Vice President "NationsBank" NATIONSBANK, N.A. By: /s/Anne-Louise Hyatt Name: Ann-Louie Hyatt Title: Vice President "Trustee" EX-10 7 EXHIBIT 10(P) THE NATIONSBANK RETIREMENT SAVINGS RESTORATION PLAN (as amended and restated effective July 1, 1996)
ARTICLE I. DEFINITIONS............................................................................1 ----------- Section 1.1 Definitions............................................................................1 ----------- ARTICLE II. PLAN ADMINISTRATION....................................................................3 ------------------- Section 2.1 Restoration Plan Committee.............................................................3 -------------------------- ARTICLE III. DEFERRED COMPENSATION PROVISIONS.......................................................4 -------------------------------- Section 3.1 Employee Elections.....................................................................4 ------------------ Section 3.2 Deferral Accounts......................................................................4 ----------------- Section 3.3 Matching Contribution Restoration Accounts.............................................5 ------------------------------------------ Section 3.4 Account Adjustments....................................................................5 ------------------- Section 3.5 Account Payments.......................................................................6 ---------------- Section 3.6 Withdrawals on Account of an Unforeseeable Emergency...................................9 ---------------------------------------------------- ARTICLE IV. AMENDMENT AND TERMINATION.............................................................10 ------------------------- Section 4.1 Amendment and Termination.............................................................10 ------------------------- ARTICLE V. MISCELLANEOUS PROVISIONS..............................................................10 ------------------------ Section 5.1 Nature of Plan and Rights.............................................................10 ------------------------- Section 5.2 Termination of Employment.............................................................11 ------------------------- Section 5.3 Spendthrift Provision.................................................................11 --------------------- Section 5.4 Employment Noncontractual.............................................................11 ------------------------- Section 5.5 Adoption by Other Participating Employers.............................................11 ----------------------------------------- Section 5.6 Applicable Law........................................................................11 -------------- Section 5.7 Merged Plans..........................................................................11 ------------
THE NATIONSBANK RETIREMENT SAVINGS RESTORATION PLAN (as amended and restated effective July 1, 1996) THIS INSTRUMENT OF AMENDMENT AND RESTATEMENT is executed as of the 1st day of July, 1996, by NATIONSBANK CORPORATION, a North Carolina Corporation ("NationsBank"); Statement of Purpose NationsBank sponsors The NationsBank Retirement Savings Restoration Plan (the "Restoration Plan"). The purpose of the Restoration Plan is to provide benefits, on a non-qualified and unfunded basis, to certain employees whose benefits under The NationsBank Retirement Savings Plan are adversely affected by the limitations of Sections 401(a)(17), 401(k)(3), 401(m) and 402(g) of the Internal Revenue Code. By this Instrument, NationsBank is amending and restating the Restoration Plan effective July 1, 1996 to (i) provide covered employees with a choice in methods for determining the adjustment to Restoration Plan accounts and (ii) modify the payment methods available under the Restoration Plan. NOW, THEREFORE, for the purposes aforesaid, NationsBank hereby amends and restates the Restoration Plan effective July 1, 1996 to consist of the following Articles I through V: ARTICLE I. DEFINITIONS Section 1.1 Definitions. Unless the context clearly indicates otherwise, when used in the Restoration Plan: (a) Account means, collectively, the Deferral Account and Matching Contribution Restoration Account. (b) Code means the Internal Revenue Code of 1986. References to the Code shall include the valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder. (c) Code Limitations means any one or more of the limitations and restrictions that Sections 401(a)(17), 401(k)(3), 401(m) and 402(g) of the Code place on the Pre-Tax Employee Contributions and Matching Contributions for a Covered Employee under the Retirement Savings Plan. In addition, Code Limitations also means and refers to any limitations on contributions under the Retirement Savings Plan established by the Retirement Savings Plan administrative committee with respect to highly compensated participants. (d) Covered Employee means an Employee eligible to participate in the Retirement Savings Plan. (e) Deferral Account means the account established and maintained on the books of a Participating Employer to record a Covered Employee's interest under the Restoration Plan attributable to amounts credited to the Covered Employee pursuant to Section 3.2 of the Restoration Plan. (f) Employee means an individual employed by a Participating Employer. (g) Matching Contribution Restoration Account means the account established and maintained on the books of a Participating Employer to record a Covered Employee's interest under the Restoration Plan attributable to amounts credited to the Covered Employee pursuant to Section 3.3 of the Restoration Plan. Prior to January 1, 1993, the Restoration Plan referred to this account as the "Restoration Account." (h) Mirror Rate Method means a method for determining the adjustment to a Covered Employee's Account for a month such that the level of investment return for the Account for such month substantially equals the aggregate level of investment return for such month of all of the Covered Employee's accounts under the Retirement Savings Plan that are invested in the Investment Trust under the Retirement Savings Plan other than amounts mandatorily invested in the common stock of NationsBank under the Investment Trust. For this purpose, amounts shall be deemed to be mandatorily invested in the common stock of NationsBank even if the Covered Employee is eligible to make a diversification election under the Retirement Savings Plan with respect to such common stock. However, once such a diversification election is in fact made by a Covered Employee, amounts transferred out of such mandatorily invested account in accordance with such election shall be included in determining the aggregate level of investment return under the Mirror Rate Method for the Covered Employee from and after the effective date of such election. (i) Participating Employer means (i) NationsBank, (ii) each other "Participating Employer" under (and as defined in) the Retirement Savings Plan on the date hereof and (iii) any other incorporated or unincorporated trade or business which may hereafter adopt both the Retirement Savings Plan and the Restoration Plan. (j) Plan Year means the twelve-month period commencing January 1 and ending the following December 31. (k) Restoration Plan means this Plan: The NationsBank Retirement Savings Restoration Plan as in effect from time to time. Prior to January 1, 1993, the Restoration Plan was named the "NationsBank Thrift Restoration Plan." (l) Restoration Plan Committee means the committee designated pursuant to Section 2.1 of the Restoration Plan. (m) Retirement Savings Plan means The NationsBank Retirement Savings Plan, as in effect from time to time. Prior to January 1, 1993, the Retirement Savings Plan was named the "NationsBank Corporation and Designated Subsidiaries Stock/Thrift Plan." (n) 30-Year Treasury Rate Method means a method for determining the adjustment to a Covered Employee's Account for a month such that the level of investment return of the Account for such month substantially equals the ask yield of the most recent auction of 30-year Treasury bonds, as quoted for the last business day of the immediately preceding calendar month in the Wall Street Journal (Eastern Edition), or if such quotations are not available in the Wall Street Journal, in a similar financial publication selected by the Restoration Plan Committee. Any capitalized terms used in the Restoration Plan that are defined in the documents comprising the Retirement Savings Plan have the meanings assigned to them in the Retirement Savings Plan, unless such terms are otherwise defined above in this Article or unless the context clearly indicates otherwise. ARTICLE II. PLAN ADMINISTRATION Section 2.1 Restoration Plan Committee. The Restoration Plan shall be administered by the Restoration Plan Committee, which shall have the same membership as the committee from time to time acting as the "Committee" under (and as defined in) the Retirement Savings Plan. The Restoration Plan Committee shall be empowered to interpret the provisions of the Restoration Plan and to perform and exercise all of the duties and powers granted to it under the terms of the Restoration Plan by action of a majority of its members in office from time to time. The Restoration Plan Committee may adopt such rules and regulations for the administration of the Restoration Plan as are consistent with the terms hereof and shall keep adequate records of its proceedings and acts. All interpretations and decisions made (both as to law and fact) and other action taken by the Restoration Plan Committee with respect to the Restoration Plan shall be conclusive and binding upon all parties having or claiming to have an interest under the Restoration Plan. Not in limitation of the foregoing, the Restoration Plan Committee shall have the discretion to decide any factual or interpretative issues that may arise in connection with its administration of the Restoration Plan (including without limitation any determination as to claims for benefits hereunder), and the Restoration Plan Committee's exercise of such discretion shall be conclusive and binding on all affected parties as long as it is not arbitrary or capricious. ARTICLE III. DEFERRED COMPENSATION PROVISIONS Section 3.1 Employee Elections. Prior to January 1 of a Plan Year, or at such other times as may be established by the Restoration Plan Committee, a Covered Employee who is expected to be a highly compensated employee within the meaning of section 414(q) of the Code for the Plan Year of the Retirement Savings Plan to which such election relates may elect to defer under the Restoration Plan the portion of the Covered Employee's Pre-Tax Employee Contributions otherwise permissible under the Retirement Savings Plan which cannot be credited to the Covered Employee under the Retirement Savings Plan for such Plan Year because of the Code Limitations. All elections made under this Section 3.1 shall be made in writing on a form prescribed by and filed with the Restoration Plan Committee and shall be irrevocable for such Plan Year. An election by a Covered Employee under this Section 3.1 shall continue in effect for all subsequent Plan Years (during which the Covered Employee is a highly compensated employee) unless and until changed or terminated by the Covered Employee in accordance with procedures established from time to time by the Restoration Plan Committee. Any such change in or termination of an election under this Section 3.1 shall be effective as of the January 1 of the next succeeding Plan Year. Section 3.2 Deferral Accounts. A Participating Employer shall establish and maintain on its books a Deferral Account for each Covered Employee employed by such Participating Employer who elects to defer the receipt of any amount pursuant to Section 3.1 of the Restoration Plan. Such Deferral Account shall be designated by the name of the Covered Employee for whom established. The amount attributable to any Pre-Tax Employee Contribution for a particular pay period during such Plan Year which cannot be credited to the Covered Employee under the Retirement Savings Plan because of the Code Limitations, and which the Covered Employee has elected to defer pursuant to Section 3.1 of the Restoration Plan, shall be credited to such Deferral Account as of the last day of the calendar month to which such contribution is related and actually withheld. Section 3.3 Matching Contribution Restoration Accounts. A Participating Employer shall establish and maintain on its books a Matching Contribution Restoration Account for each Covered Employee employed by such Participating Employer whose Matching Contributions under the Retirement Savings Plan shall have been limited, directly or indirectly, by the operation of the Code Limitations. Such Matching Contribution Restoration Account shall be designated by the name of the Covered Employee for whom established. If a Covered Employee is a Participant Eligible for Matching Contributions for the Plan Year under the Retirement Savings Plan, the Covered Employee's Matching Contribution Restoration Account shall be credited as of the Valuation Date under the Retirement Savings Plan that occurs on the last day of the Plan Year with an amount equal to the sum of Amount A and Amount B, where: Amount A is seventy-five percent (75%) of the sum of the portions (if any) of the amounts credited to the Covered Employee's Deferral Account for the Plan Year pursuant to Section 3.1 of the Restoration Plan that would have been Matchable Pre-Tax Employee Contributions for the Plan Year under the Retirement Savings Plan had such amounts been contributed to the Retirement Savings Plan as Pre-Tax Employee Contributions for the Covered Employee and the Code Limitations not applied to the Retirement Savings Plan. Amount B is seventy-five percent (75%) of the portion (if any) of the actual Matchable Pre-Tax Employee Contributions made to the Retirement Savings Plan for the Covered Employee for the Plan Year with respect to which Matching Contribution allocations were not made under Section 5.2 of the Retirement Savings Plan or (if made) were forfeited under Section 5.4 of the Retirement Savings Plan because of the Code Limitations. Section 3.4 Account Adjustments. Beginning July 1, 1996, each Account shall be adjusted on a monthly basis pursuant to either the Mirror Rate Method or the 30-Year Treasury Rate Method. Each Covered Employee with an Account shall be given an opportunity to elect between the Mirror Rate Method and the 30-Year Treasury Rate Method for such purpose. To be effective, such election must be made at such times, on such forms and pursuant to such procedures as established by the Restoration Plan Committee in its sole discretion from time to time. An election once made shall remain in effect unless and until changed by the Covered Employee in accordance with this Section 3.4. If a Covered Employee fails to make an election under this Section 3.4, the method for making adjustments to the Covered Employee's Account shall be the 30-Year Treasury Rate Method. Prior to July 1, 1996, account adjustments were made in accordance with the terms of the Restoration Plan as then in effect. If a Covered Employee has elected the Mirror Rate Method, and subsequently the Covered Employee ceases to have any account balances under the Retirement Savings Plan upon which the Mirror Rate Method is based (e.g., as a result of an in-service withdrawal of the Covered Employee's accounts under the Retirement Savings Plan after attaining age 59 1/2), then the method for making adjustments to the Covered Employee's Account shall automatically be changed to the 30-Year Treasury Rate Method beginning effective with the calendar month in which the Covered Employee ceases to have such Retirement Savings Plan account balances. Section 3.5 Account Payments. (a) Payment Options. (i) A Covered Employee who first elects to defer amounts under this Article III after having attained age fifty-four (54) shall, at the time of the Covered Employee's initial deferral election, irrevocably elect one of the payment options described in subparagraph (iii) below. (ii) For a Covered Employee who first elects to defer amounts under this Article III before having attained age fifty-four (54), such Covered Employee shall, upon attainment of age fifty-four (54), be given the opportunity to irrevocably elect one of the payment options described in subparagraph (iii) below. (iii) The payment options from which a Covered Employee may elect are as follows: (A) single cash payment, (B) five (5) annual installments or (C) ten (10) annual installments, as such methods are more fully described below. (iv) Any election made under this Section 3.5(a) shall be made on such form, at such time and pursuant to such procedures as determined by the Restoration Plan Committee in its sole discretion from time to time. An election made under subparagraph (i) shall be effective upon the later of the date of such election or the attainment of age fifty-five (55). An election made under subparagraph (ii) shall not become effective until the first anniversary of the date of such election. In addition, the Committee may establish special procedures for the first Plan Year in which this election becomes available for Covered Employees who are age fifty-four (54) and older, provided that any such election is not effective for at least twelve (12) months from the date made. (v) For a Covered Employee who does not yet have an election in effect under this Section 3.5(a) or for a Covered Employee who fails to elect a payment option under this Section 3.5(a), the method of payment shall be the single cash payment. (b) Single Cash Payments. The following provisions shall apply with respect to single cash payments under the Restoration Plan: (i) In the case of a Covered Employee whose termination of employment with the Participating Employers occurs before the Covered Employee attains age fifty-five (55), then such Covered Employee's Account, to the extent vested, shall be determined as of the last business day of the calendar month immediately preceding such termination of employment, and such final vested Account balance shall be paid in a single cash payment to the Covered Employee (or to the Covered Employees's "Beneficiary" as determined under the Retirement Savings Plan in the case of the Covered Employee's termination of employment as the result of the Covered Employee's death) as soon as administratively practicable after the date of such termination of employment. (ii) In the case of a Covered Employee whose termination of employment with the Participating Employers occurs on or after the Covered Employee attains age fifty-five (55) and whose vested Account balance is to be paid in a single cash payment in accordance with Section 3.5(a), then such Covered Employee's Account, to the extent vested, shall continue to be credited with monthly adjustments under Section 3.4 through March 31 of the calendar year immediately following the calendar year of such termination of employment, except that the rate for such monthly adjustments for the calendar month of such termination of employment through such March 31 shall be the 30-year Treasury bond ask yield for the last business day of the calendar month immediately preceding such termination of employment (regardless of the method of Account adjustment elected by the Covered Employee under Section 3.4 above). The final vested Account balance as of such March 31 shall be paid in a single cash payment to the Covered Employee (or to the Covered Employees's "Beneficiary" as determined under the Retirement Savings Plan in the case of the Covered Employee's termination of employment as the result of the Covered Employee's death) on or about such March 31. (c) Annual Installments. In the event a Covered Employee's employment with the Participating Employers terminates after the effectiveness of the Covered Employee's election as to the method of payment under Section 3.5(a) and the Covered Employee has selected annual installments, the amount of such annual installments shall be calculated and paid pursuant to the provisions of this Section 3.5(c). The first installment shall be paid on or about March 31 of the calendar year immediately following the calendar year of such termination of employment, and each subsequent installment shall be paid on or about each subsequent March 31. The amount of the installments shall be calculated as follows: First, the Covered Employee's Account, to the extent vested, shall continue to be credited with monthly adjustments under Section 3.4 through such March 31, except that the rate for such monthly adjustments for the calendar month of such termination of employment through such March 31 shall be the 30-year Treasury bond ask yield for the last business day of the calendar month immediately preceding such termination of employment (regardless of the method of Account adjustment elected by the Covered Employee under Section 3.4 above). The amount of the annual installments shall then be calculated, based on the vested Account balance as of such March 31, as equal annual installments amortized over the selected period using the same 30-year Treasury bond ask yield. If a Covered Employee dies after the effectiveness of the Covered Employee's election as to the method of payment under Section 3.5(a) and the Covered Employee has selected annual installments, such annual installments (or remaining annual installments in the case of death after commencement of payment) shall be paid to the Covered Employees's "Beneficiary" as determined under the Retirement Savings Plan. (d) Vesting of Matching Contribution Restoration Account. Notwithstanding any provision of the Restoration Plan to the contrary, if a Covered Employee is not fully (100%) vested in the amount credited to the Employee's Matching Contribution Account and/or the Employee's Pre-1993 Stock/Thrift Plan Matching Contribution Account under the Retirement Savings Plan at the time of the Employee's termination of employment with the Participating Employers, the amount credited to the Covered Employee's Matching Contribution Restoration Account shall be reduced at the time of such termination of employment to an amount equal to the product of (i) the amount then credited to said Matching Contribution Restoration Account multiplied by (ii) the vested percentage applicable to the Employee's Matching Contribution Account and Pre-1993 Stock/Thrift Plan Matching Contribution Account under the Retirement Savings Plan as of the date of such termination of employment. The amount by which the Employee's Matching Contribution Restoration Account is reduced by application of the preceding sentence shall be forfeited at the time the Employee terminates employment. (e) Other Payment Provisions. Subject to the provisions of Section 3.6, a Covered Employee shall not be paid any portion of the Employee's Account prior to the Employee's termination of employment with the Participating Employers. Any deferral or payment hereunder shall be subject to applicable payroll and withholding taxes. For purposes of the Restoration Plan, a Covered Employee shall be deemed to have terminated employment with the Participating Employers upon eligibility for benefits under the NationsBank Long-Term Disability Plan as in effect from time to time. In the event any amount becomes payable under the provisions of the Restoration Plan to a Covered Employee, beneficiary or other person who is a minor or an incompetent, whether or not declared incompetent by a court, such amount may be paid directly to the minor or incompetent person or to such person's fiduciary (or attorney-in-fact in the case of an incompetent) as the Restoration Plan Committee, in its sole discretion, may decide, and the Restoration Plan Committee shall not be liable to any person for any such decision or any payment pursuant thereto. Section 3.6 Withdrawals on Account of an Unforeseeable Emergency. A Covered Employee who is in active service of a Participating Employer may, in the Restoration Plan Committee's sole discretion, receive a refund of all or any part of the amounts previously credited to the Covered Employee's Deferral Account (but not the Covered Employee's Matching Contribution Restoration Account) in the case of an "unforeseeable emergency." A Covered Employee requesting a payment pursuant to this Section shall have the burden of proof of establishing, to the Restoration Plan Committee's satisfaction, the existence of such "unforeseeable emergency," and the amount of the payment needed to satisfy the same. In that regard, the Covered Employee shall provide the Restoration Plan Committee with such financial data and information as the Restoration Plan Committee may request. If the Restoration Plan Committee determines that a payment should be made to a Covered Employee under this Section such payment shall be made within a reasonable time after the Restoration Plan Committee's determination of the existence of such "unforeseeable emergency" and the amount of payment so needed. As used herein, the term "unforeseeable emergency" means a severe financial hardship to a Covered Employee resulting from a sudden and unexpected illness or accident of the Covered Employee or of a dependent of the Covered Employee, loss of the Covered Employee's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Covered Employee. The circumstances that shall constitute an "unforeseeable emergency" shall depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Covered Employee's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Examples of what are not considered to be "unforeseeable emergencies" include the need to send a Covered Employee's child to college or the desire to purchase a home. Withdrawals of amounts because of an "unforeseeable emergency" shall not exceed an amount reasonably needed to satisfy the emergency need. If any withdrawal is permitted pursuant to this Section during a Plan Year, no further deferral of compensation shall be made during the Plan Year from and after the effective date of the withdrawal. ARTICLE IV. AMENDMENT AND TERMINATION Section 4.1 Amendment and Termination. NationsBank shall have the right and power at any time and from time to time to amend the Restoration Plan in whole or in part, on behalf of all Participating Employers, and at any time to terminate the Restoration Plan or any Participating Employer's participation hereunder; provided, however, that no such amendment or termination shall reduce the amount actually credited to an Employee's Account(s) under the Restoration Plan on the date of such amendment or termination, or further defer the due dates for the payment of such amounts, without the consent of the affected Employee. ARTICLE V. MISCELLANEOUS PROVISIONS Section 5.1 Nature of Plan and Rights. The Restoration Plan is unfunded and intended to constitute an incentive and deferred compensation plan for a select group of officers and key management employees of the Participating Employers. If necessary to preserve the above intended plan status, the Restoration Plan Committee, in its sole discretion, reserves the right to limit or reduce the number of actual participants and otherwise to take any remedial or curative action that the Restoration Plan Committee deems necessary or advisable. The Accounts established and maintained under the Restoration Plan by a Participating Employer are for accounting purposes only and shall not be deemed or construed to create a trust fund of any kind or to grant a property interest of any kind to any Employee, designated beneficiary or estate. The amounts credited by a Participating Employer to such Accounts are and for all purposes shall continue to be a part of the general assets of such Participating Employer, and to the extent that an Employee, beneficiary or estate acquires a right to receive payments from such Participating Employer pursuant to the Restoration Plan, such right shall be no greater than the right of any unsecured general creditor of such Participating Employer. Section 5.2 Termination of Employment. For the purposes of the Restoration Plan, an Employee's employment with a Participating Employer shall not be considered to have terminated so long as the Employee is in the employ of any Participating Employer or other member of the Controlled Group. Section 5.3 Spendthrift Provision. No Account balance or other right or interest under the Restoration Plan of an Employee, beneficiary or estate may be assigned, transferred or alienated, in whole or in part, either directly or by operation of law, and no such balance, right or interest shall be liable for or subject to any debt, obligation or liability of the Employee, designated beneficiary or estate. Section 5.4 Employment Noncontractual. The establishment of the Restoration Plan shall not enlarge or otherwise affect the terms of any Employee's employment with his Participating Employer, and such Participating Employer may terminate the employment of the Employee as freely and with the same effect as if the Restoration Plan had not been established. Section 5.5 Adoption by Other Participating Employers. The Restoration Plan may be adopted by any Participating Employer participating under the Retirement Savings Plan, such adoption to be effective as of the date specified by such Participating Employer at the time of adoption. Section 5.6 Applicable Law. The Restoration Plan shall be governed and construed in accordance with the laws of the State of North Carolina, except to the extent such laws are preempted by the laws of the United States of America. Section 5.7 Merged Plans. From time to time the Participating Employers may cause other nonqualified plans to be merged into the Restoration Plan. Schedule 5.7 attached hereto sets forth the names of the plans that merged into the Restoration Plan by July 1, 1996 and their respective merger dates. Schedule 5.7 shall be updated from time to time to reflect mergers after July 1, 1996. Upon such a merger, the account balance(s) immediately prior to the date of merger of each participant in the merged plan shall be transferred and credited as of the merger date to one or more accounts established under the Restoration Plan for such participant. From and after the merger date, the participant's rights shall be determined under the Restoration Plan, and the participant shall be subject to all of the restrictions, limitations and other terms and provisions of the Restoration Plan. Not in limitation of the foregoing, each Restoration Plan Account established for the participant as a result of the merger shall be periodically adjusted when and as provided in Section 3.4 hereof as in effect from time to time and shall be paid at such time and in such manner as provided in Section 3.5 and Section 3.6 hereof, except to the extent otherwise provided on Schedule 5.7. IN WITNESS WHEREOF, this instrument has been executed by NationsBank as of the day and year first above written. NATIONSBANK CORPORATION By: /s/C. J. Cooley Title: Executive Vice President SCHEDULE 5.7 MERGED PLANS AS OF JULY 1, 1996 Plan Name Date of Merger C&S Policy Committee Supplemental December 31, 1992 Savings Plan C&S Key Executive Supplemental December 31, 1992 Savings Plan C&S/Sovran Supplemental Retirement Plan December 31, 1992 for Former Sovran Executives (Thrift Restoration Benefits) First & Merchants Corporation Deferred March 31, 1993 Management Incentive Compensation Plan Sovran Deferred Compensation Plan March 31, 1993 NationsBank of Texas, N.A. Profit March 31, 1993 Sharing Restoration Plan Thrift Plan Reserve Account Maintained Mach 31, 1993 Under the NationsBank Corporation and Designated Subsidiaries Supplemental Executive Retirement Plan Bank South Executive Bonus Deferral Plan July 1, 1996 EX-10 8 EXHIBIT 10(R) NATIONSBANK CORPORATION EXECUTIVE INCENTIVE COMPENSATION PLAN (as amended and restated effective July 1, 1996) THIS INSTRUMENT OF AMENDMENT AND RESTATEMENT is executed as of the 1st day of July, 1996 by NATIONSBANK CORPORATION, a North Carolina corporation (the "Corporation"). Statement of Purpose The Corporation maintains the NationsBank Corporation Executive Incentive Compensation Plan (the "Plan"), pursuant to which certain covered employees of the Corporation may receive annual incentive compensation based on the annual performance of the Corporation consistent with the "performance-based compensation" requirements of Section 162(m) of the Internal Revenue Code. The Plan permits covered employees to defer the payment of amounts under the Plan, and such deferred amounts are credited with earnings based on the 30-year Treasury bond rate. The Corporation desires to amend the Plan effective July 1, 1996 to give covered employees who defer amounts under the Plan a choice between the 30-year treasury bond rate and a rate that "mirrors" the covered employee's investment results under The NationsBank Retirement Savings Plan. The Corporation believes that such amendment can best be effected by amending and restating the Plan in its entirety effective as of July 1, 1996. In accordance with paragraph 7 of the Plan, such amendment and restatement of the Plan has been approved by the Board of Directors of the Corporation. NOW, THEREFORE, the Plan is hereby amended and restated in its entirety to consist of the following paragraphs 1 through 11 effective as of the date hereof: 1. Name: This plan shall be known as the "NationsBank Corporation Executive Incentive Compensation Plan" (the "Plan"). 2. Purpose and Intent: NationsBank Corporation (the "Corporation") established this Plan effective January 1, 1994 for the purpose of providing certain of its senior executive officers with annual incentive compensation based on the annual performance of the Corporation measured by the Corporation's return on average common shareholders' equity. This amendment and restatement is effective July 1, 1996. The intent of the Plan is to provide "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code. The provisions of the Plan shall be construed and interpreted to effectuate such intent. 3. Definitions: For purposes of the Plan, the following terms shall have the following meanings: (a) "Account" means the account established and maintained on the books of the Corporation to record a Covered Employee's interest under the Plan attributable to amounts credited to the Covered Employee pursuant to paragraph 10(b) below, as adjusted from time to time pursuant to the terms of the Plan. (b) "Base Benchmark" means a level of ROE for a Plan Year selected by the Committee below which no incentive compensation shall be payable under the Plan to Covered Employees for such Plan Year. (c) "Claim" means a claim for benefits under the Plan. (d) "Claimant" means a person making a Claim. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and references thereto shall include the valid Treasury regulations thereunder. (f) "Committee" means all of the members of the Compensation Committee of the Board of Directors of the Corporation who are Outside Directors. (g) "Covered Employee" for a Plan Year means any employee of the Corporation whose compensation is anticipated to be subject to the provisions of Section 162(m) of the Code and who is designated by the Committee prior to April 1 of such Plan Year as a "Covered Employee" under the Plan for such Plan Year. (h) "Incentive Compensation Pool" for a Plan Year means the amount established in accordance with paragraph 5. (i) "Mirror Rate Method" means a method for determining the adjustment to a Covered Employee's Account for a month such that the level of investment return for the Account for such month substantially equals the aggregate level of investment return for such month of all of the Covered Employee's accounts under The NationsBank Retirement Savings Plan (the "Savings Plan") that are invested in the Investment Trust under the Savings Plan other than amounts mandatorily invested in the common stock of the Corporation under the Investment Trust. For this purpose, amounts shall be deemed to be mandatorily invested in the common stock of the Corporation even if the Covered Employee is eligible to make a diversification election under the Savings Plan with respect to such common stock. However, once such a diversification election is in fact made by a Covered Employee, amounts transferred out of such mandatorily invested account in accordance with such election shall be included in determining the aggregate level of investment return under the Mirror Rate Method for the Covered Employee from and after the effective date of such election. (j) "Outside Director" means an "outside director" within the meaning of Section 162(m)(4)(C)(i) of the Code. (k) "Plan Year" means the fiscal year of the Corporation beginning January 1 and ending December 31. (l) "ROE" means, with respect to a Plan Year, the Corporation's "return on average common shareholders' equity" for such Plan Year determined in accordance with generally accepted accounting principles that would be reported in the Corporation's Annual Report to Shareholders for such Plan Year assuming payment of the entire Incentive Compensation Pool for such Plan Year. (m) "Single Sum Value" of the Account of a Covered Employee who is receiving annual installments pursuant to paragraph 10(f) means the single sum present value of the installments determined as of the relevant determination date using for such purpose as the discount rate the same rate that was used in calculating the amount of the installments pursuant to paragraph 10(f) below. (n) "30-Year Treasury Rate Method" means a method for determining the adjustment to a Covered Employee's Account for a month such that the level of investment return of the Account for such month substantially equals the ask yield of the most recent auction of 30-year Treasury bonds, as quoted for the last business day of the immediately preceding calendar month in the Wall Street Journal (Eastern Edition), or if such quotations are not available in the Wall Street Journal, in a similar financial publication selected by the Committee. 4. Administration: The Committee shall be responsible for administering the Plan. The Committee shall have all of the powers necessary to enable it to properly carry out its duties under the Plan. Not in limitation of the foregoing, the Committee shall have the power to construe and interpret the Plan and to determine all questions that shall arise thereunder. The Committee shall have such other and further specified duties, powers, authority and discretion as are elsewhere in the Plan either expressly or by necessary implication conferred upon it. The Committee may appoint such agents, who need not be members of the Committee, as it may deem necessary for the effective performance of its duties, and may delegate to such agents such powers and duties as the Committee may deem expedient or appropriate that are not inconsistent with the intent of the Plan. The decision of the Committee upon all matters within its scope of authority shall be final and conclusive on all persons, except to the extent otherwise provided by law. 5. Operation: (a) Prior to April 1 of a Plan Year, the Committee shall determine (i) the Covered Employees for the Plan Year, (ii) the specific level of ROE that shall constitute the Base Benchmark for the Plan Year, (iii) the formula for determining the amount of the Incentive Compensation Pool in the event the Base Benchmark is attained or exceeded for the Plan Year and (iv) the formula for determining the allocation of the Incentive Compensation Pool, if any, for the Plan Year among the Covered Employees for the Plan Year. In that regard, the formula for determining the amount of the Incentive Compensation Pool in the event the Base Benchmark is attained or exceeded and the formula for determining the allocation of the Incentive Compensation Pool for a Plan Year shall be fixed formulas that do not permit Committee discretion except as otherwise provided in paragraph 5(c) below. (b) The Incentive Compensation Pool for a Plan Year, if any, shall be established immediately following the determination of ROE for the Plan Year. The amount of the Incentive Compensation Pool, if any, for a Plan Year shall be determined as follows: (i) If ROE for the Plan Year is below the Base Benchmark for the Plan Year, there shall be no Incentive Compensation Pool for the Plan Year and no incentive compensation shall be payable under the Plan to Covered Employees for the Plan Year; and (ii) If ROE for the Plan Year equals or exceeds the Base Benchmark for the Plan Year, the Incentive Compensation Pool for the Plan Year shall be equal to an amount determined under the formula for the Plan Year established by the Committee in accordance with paragraph 5(a). In that regard, such formula may provide that the amount of the Incentive Compensation Pool will increase for levels of ROE exceeding the Base Benchmark. (c) If an Incentive Compensation Pool is established for a Plan Year in accordance with paragraph 5(b), the Incentive Compensation Pool shall be allocated among the Covered Employees for the Plan Year in accordance with the formula for the Plan Year determined by the Committee in accordance with paragraph 5(a); provided, however, that the Committee may in its sole discretion reduce for any reason the amount otherwise allocable to a Covered Employee. In the event the Committee reduces an amount otherwise allocable to a Covered Employee for a Plan Year as provided in the preceding sentence, the amount of such reduction shall not be reallocated among the other Covered Employees for the Plan Year. (d) In accordance with Section 162(m)(4)(C)(iii) of the Code, prior to any payment under the Plan for a Plan Year, the Committee shall certify in writing the attainment of (i) the Base Benchmark for such Plan Year and (ii) any other higher level of ROE used in determining the amount of the Incentive Compensation Pool pursuant to the formula established by the Committee for such Plan Year. (e) Unless deferred pursuant to the provisions of paragraph 10, the amounts allocated to each Covered Employee for a Plan Year shall be paid by the Corporation to each such Covered Employee in cash, less applicable payroll and withholding taxes, within seventy-five (75) days after the establishment of the Incentive Compensation Pool as provided in paragraph 5(b), subject to certification by the Committee as provided in paragraph 5(d). (f) Notwithstanding any provision of the Plan to the contrary, in no event shall a Covered Employee be allocated more than Two Million Seven Hundred Thousand Dollars ($2,700,000) under the Plan for a Plan Year. (g) If the employment of a Covered Employee for a Plan Year is terminated for any reason during the Plan Year, the Covered Employee shall not receive any amounts otherwise allocable to the Covered Employee under the Plan's formula established by the Committee for the Plan Year. Such amount shall not be reallocated among the other Covered Employees for the Plan Year. (h) Notwithstanding any provision of the Plan to the contrary, a reduction in the amount otherwise payable to a Covered Employee for a Plan Year as provided in paragraph 5(c) or paragraph 5(g) above shall not result in a recalculation of ROE for purposes of the Plan or an increase in the amount of the Incentive Compensation Pool for such Plan Year. 6. Shareholder Approval: Shareholder approval for and ratification of the Plan was originally obtained on or before December 31, 1994. In accordance with Section 162(m)(4)(C)(ii) of the Code, the continued effectiveness of the Plan is subject to its approval and ratification by the shareholders of the Corporation at such other times as required by Section 162(m)(4)(C)(ii) of the Code. 7. Amendment, Modification and Termination of the Plan: (a) General. The Board of Directors of the Corporation may amend, modify or terminate the Plan at any time, provided that no amendment, modification or termination of the Plan shall reduce the amount payable to a Covered Employee under the Plan as of the date of such amendment, modification or termination. (b) Effect on Deferred Amounts Under the Plan. Notwithstanding any provision of the Plan to the contrary, no amendment, modification or termination of the Plan shall reduce the amount actually credited to a Covered Employee's Account under the Plan on the date of such amendment, modification or termination, or further defer the due dates for the payment of such amounts, without the consent of the affected Covered Employee. Notwithstanding the provisions of paragraph 10(d), in connection with any termination of the Plan the Committee shall have the authority to cause the Accounts of all Covered Employees to be paid in a single sum payment as of a date determined by the Committee or to otherwise accelerate the payment of all Accounts in such manner as the Committee shall determine in its discretion. In that regard, upon any termination of the Plan the amount of any payment to a Covered Employee (or beneficiary of a deceased Covered Employee) who is receiving annual installments pursuant to paragraph 10(f) shall be the Single Sum Value of the Covered Employee's Account determined as of the selected determination date. 8. Applicable Law: The Plan shall be construed, administered, regulated and governed in all respects under and by the laws of the United States to the extent applicable, and to the extent such laws are not applicable, by the laws of the state of North Carolina. 9. Miscellaneous: A Covered Employee's rights and interests under the Plan may not be assigned or transferred by the Covered Employee. To the extent the Covered Employee acquires a right to receive payments from the Corporation under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. Nothing contained herein shall be deemed to create a trust of any kind or any fiduciary relationship between the Corporation and the Covered Employee. Designation as a Covered Employee in the Plan shall not entitle or be deemed to entitle a Covered Employee to continued employment with the Corporation. 10. Deferral of Amounts Payable Under the Plan: (a) Elections to Defer. Each Covered Employee for a Plan Year shall be given the opportunity to irrevocably elect, on a form provided by the Committee, to defer all or a portion of any amount that may become payable to such Covered Employee under the Plan for such Plan Year. In order to be effective, a Covered Employee's election to defer must be executed and returned to the Committee on or before the date specified by the Committee for such purpose. (b) Establishment of Accounts. The Corporation shall establish and maintain on its books an Account for each Covered Employee making an election to defer under this paragraph 10. Each Account shall be designated by the name of the Covered Employee for whom established. Any amount otherwise allocable to the Covered Employee under the formula established for a Plan Year that is deferred by the Covered Employee under this paragraph 10 shall be credited to the Covered Employee's Account as of the date such amount would have otherwise been paid to the Covered Employee. (c) Account Adjustments. Each Account shall be adjusted on a monthly basis pursuant to either the Mirror Rate Method or the 30-Year Treasury Rate Method. Each Covered Employee with an Account shall be given an opportunity to elect between the Mirror Rate Method and the 30-Year Treasury Rate Method for such purpose. To be effective, such election must be made at such times, on such forms and pursuant to such procedures as established by the Committee in its sole discretion from time to time. An election once made shall remain in effect unless and until changed by the Covered Employee in accordance with this paragraph 10(c). If a Covered Employee fails to make an election under this paragraph 10(c), the method for making adjustments to the Covered Employee's Account shall be the 30-Year Treasury Rate Method. If a Covered Employee has elected the Mirror Rate Method, and subsequently the Covered Employee ceases to have any account balances under the Savings Plan upon which the Mirror Rate Method is based (e.g., as a result of an in-service withdrawal of the Covered Employee's accounts under the Savings Plan after attaining age 59-1/2), then the method for making adjustments to the Covered Employee's Account shall automatically be changed to the 30-Year Treasury Rate Method beginning effective with the calendar month in which the Covered Employee ceases to have such Savings Plan account balances. (d) Payment Options. (i) A Covered Employee who first elects to defer amounts under this paragraph 10 after having attained age fifty-four (54) shall, at the time of the Covered Employee's initial deferral election, irrevocably elect one of the payment options described in subparagraph (iii) below. (ii) For a Covered Employee who first elects to defer amounts under this paragraph 10 before having attained age fifty-four (54), such Covered Employee shall, upon attainment of age fifty-four (54), be given the opportunity to irrevocably elect one of the payment options described in subparagraph (iii) below. (iii) The payment options from which a Covered Employee may elect are as follows: (A) single cash payment, (B) five (5) annual installments or (C) ten (10) annual installments, as such methods are more fully described below. (iv) Any election made under this paragraph 10(d) shall be made on such forms, at such time and pursuant to such procedures as determined by the Committee in its sole discretion from time to time. An election made under subparagraph (i) shall be immediately effective. An election made under subparagraph (ii) shall not become effective until the first anniversary of the date of such election. In addition, the Committee may establish special procedures for the first Plan Year in which such election becomes available for Covered Employees who are age fifty-four (54) and older, provided that any such election is not effective for at least twelve (12) months from the date made. (v) For a Covered Employee who does not yet have an election in effect under this paragraph 10(d) or for a Covered Employee who fails to elect a payment option under this paragraph 10(d), the method of payment shall be the single cash payment. (e) Single Cash Payment. If a Covered Employee who is to be paid by the single cash payment method pursuant to paragraph 10(d) terminates employment with the Corporation, then such Covered Employee's Account shall continue to be credited with monthly adjustments under paragraph 10(c) through March 31 of the calendar year immediately following the calendar year of such termination of employment, except that the rate for such monthly adjustments for the calendar month of such termination of employment through such March 31 shall be the 30-year Treasury bond ask yield for the last business day of the calendar month immediately preceding such termination of employment (regardless of the method of Account adjustment elected by the Covered Employee under paragraph 10(d) above). The final Account balance as of such March 31 shall be paid in a single cash payment to the Covered Employee (or to the Covered Employee's designated beneficiary in the case of the Covered Employee's termination of employment as the result of the Covered Employee's death) on or about such March 31. (f) Annual Installments. If a Covered Employee who is to be paid by one of the annual installment payment methods pursuant to paragraph 10(d) terminates employment with the Corporation, the amount of such annual installments shall be calculated and paid pursuant to the provisions of this paragraph 10(f). The first installment shall be paid on or about March 31 of the calendar year immediately following the calendar year of such termination of employment, and each subsequent installment shall be paid on or about each subsequent March 31. The amount of the installments shall be calculated as follows: First, the Covered Employee's Account shall continue to be credited with monthly adjustments under paragraph 10(c) through such March 31, except that the rate for such monthly adjustments for the calendar month of such termination of employment through such March 31 shall be the 30-year Treasury bond ask yield for the last business day of the calendar month immediately preceding such termination of employment (regardless of the method of Account adjustment elected by the Covered Employee under paragraph 10(d) above). The amount of the annual installments shall then be calculated, based on the Account balance as of such March 31, as equal annual installments amortized over the selected period using the same 30-year Treasury bond ask yield. If a Covered Employee dies after the effectiveness of the Covered Employee's election as to the method of payment under paragraph 10(d) and the Covered Employee has selected annual installments, such annual installments (or remaining annual installments in the case of death after commencement of payment) shall be paid to the Covered Employee's designated beneficiary. (g) Other Payment Provisions. Subject to the provisions of paragraph 10(h) below and paragraph 7 above, a Covered Employee shall not be paid any portion of the Covered Employee's Account prior to the Covered Employee's termination of employment with the Corporation. Any deferral or payment hereunder shall be subject to applicable payroll and withholding taxes. For purposes of the Plan, a Covered Employee shall be deemed to have terminated employment with the Corporation upon such Covered Employee becoming eligible for benefits under the NationsBank Long-Term Disability Plan as in effect from time to time. In the event any amount becomes payable under the provisions of the Plan to a Covered Employee, beneficiary or other person who is a minor or an incompetent, whether or not declared incompetent by a court, such amount may be paid directly to the minor or incompetent person or to such person's fiduciary (or attorney-in-fact in the case of an incompetent) as the Committee, in its sole discretion, may decide, and the Committee shall not be liable to any person for any such decision or any payment pursuant thereto. (h) Withdrawals on Account of an Unforeseeable Emergency. A Covered Employee who is in active service with the Corporation may, in the Plan Administrator's sole discretion, receive a refund of all or any part of the amounts previously credited to the Covered Employee's Account in the case of an "unforeseeable emergency." A Covered Employee requesting a payment pursuant to this subparagraph (h) shall have the burden of proof of establishing, to the Committee's satisfaction, the existence of such "unforeseeable emergency," and the amount of the payment needed to satisfy the same. In that regard, the Covered Employee shall provide the Committee with such financial data and information as the Committee may request. If the Committee determines that a payment should be made to a Covered Employee under this subparagraph (h), such payment shall be made within a reasonable time after the Committee's determination of the existence of such "unforeseeable emergency" and the amount of payment so needed. As used herein, the term "unforeseeable emergency" means a severe financial hardship to a Covered Employee resulting from a sudden and unexpected illness or accident of the Covered Employee or of a dependent of the Covered Employee, loss of the Covered Employee's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Covered Employee. The circumstances that shall constitute an "unforeseeable emergency" shall depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Covered Employee's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Examples of what are not considered to be "unforeseeable emergencies" include the need to send a Covered Employee's child to college or the desire to purchase a home. Withdrawals of amounts because of an "unforeseeable emergency" shall not exceed an amount reasonably needed to satisfy the emergency need. (i) Statements of Account. Each Covered Employee shall receive an annual statement of the Covered Employee's Account balance. 11. Claims Procedures: (a) General. In the event that a Covered Employee or designated beneficiary has a claim for benefits under the Plan (a "Claim"), such Claim shall be made by such person's (the "Claimant") filing a notice thereof with the Committee within ninety (90) days after such Claimant first has knowledge of such Claim. Each Claimant who has submitted a Claim to the Committee shall be afforded a reasonable opportunity to state such Claimant's position and to present evidence and other material relevant to the Claim to the Committee for its consideration in rendering its decision with respect thereto. The Committee shall render its decision in writing within ninety (90) days after the Claim is referred to it, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered no later than one hundred eighty (180) days after the Claim is referred to it. A copy of such written decision shall be furnished to the Claimant. (b) Notice of Decision of Committee. Each Claimant whose Claim has been denied by the Committee shall be provided written notice thereof, which notice shall set forth: (i) the specific reason(s) for the denial; (ii) specific reference to pertinent provision(s) of the Plan upon which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect such Claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure hereunder for review of such Claim; all in a manner calculated to be understood by such Claimant. (c) Review of Decision of Committee. Each such Claimant shall be afforded a reasonable opportunity for a full and fair review of the decision of the Committee denying the Claim. Such review shall be by the Committee. Such appeal shall be made within ninety (90) days after the Claimant received the written decision of the Committee and shall be made by the written request of the Claimant or such Claimant's duly authorized representative of the Committee. In the event of appeal, the Claimant or such Claimant's duly authorized representative may review pertinent documents and submit issues and comments in writing to the Committee. The Committee shall review the following: (i) the initial proceedings of the Committee with respect to such Claim; (ii) such issues and comments as were submitted in writing by the Claimant or the Claimant's duly authorized representative; and (iii) such other material and information as the Committee, in its sole discretion, deems advisable for a full and fair review of the decision of the Committee. The Committee may approve, disapprove or modify the decision of the Committee, in whole or in part, or may take such other action with respect to such appeal as it deems appropriate. The decision of the Committee with respect to such appeal shall be made promptly, and in no event later than sixty (60) days after receipt of such appeal, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered as soon as possible and in no event later than one hundred twenty (120) days following receipt of such appeal. The decision of the Committee shall be in writing and in a manner calculated to be understood by the Claimant and shall include specific reasons for such decision and set forth specific references to the pertinent provisions of the Plan upon which such decision is based. The Claimant shall be furnished a copy of the written decision of the Committee. Such decision shall be final and conclusive upon all persons interested therein, except to the extent otherwise provided by applicable law. IN WITNESS WHEREOF, this instrument has been executed by an authorized officer of the Corporation as of the day and year first above written. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley Executive Vice President "Corporation" EX-10 9 EXHIBIT 10(S) NATIONSBANK CORPORATION KEY EMPLOYEE DEFERRAL PLAN (as amended and restated effective July 1, 1996) THIS INSTRUMENT OF AMENDMENT AND RESTATEMENT is executed as of the 1st day of July, 1996 by NATIONSBANK CORPORATION, a North Carolina corporation (the "Corporation"). Statement of Purpose The Corporation maintains the NationsBank Corporation Key Employee Deferral Plan (the "Plan"), pursuant to which certain of its employees may defer payment of certain annual incentives in accordance with the terms and provisions set forth herein. The Plan provides that amounts deferred under the Plan are credited with earnings based on the 30-year Treasury bond rate. The Corporation desires to amend the Plan effective July 1, 1996 to give participants under the Plan a choice between the 30-year Treasury bond rate and a rate that "mirrors" the participant's investment results under The NationsBank Retirement Savings Plan. The Corporation believes that such amendment can best be effected by amending and restating the Plan in its entirety effective as of July 1, 1996. In accordance with paragraph 6 of the Plan, such amendment and restatement of the Plan has been approved by the Compensation Committee of the Board of Directors of the Corporation. NOW, THEREFORE, the Plan is hereby amended and restated in its entirety to consist of the following paragraphs 1 through 9 effective as of the date hereof: 1. Name: This plan shall be known as the "NationsBank Corporation Key Employee Deferral Plan" (the "Plan"). 2. Purpose and Intent: The Corporation established this Plan effective October 1, 1994 for the purpose of providing certain of its key employees with the opportunity to defer payment of certain annual incentives. This amendment and restatement is effective July 1, 1996. It is the intent of the Corporation that amounts deferred under the Plan by an employee shall not be taxable to the employee for income tax purposes until the time actually received by the employee. The provisions of the Plan shall be construed and interpreted to effectuate such intent. 3. Definitions: For purposes of the Plan, the following terms shall have the following meanings: (a) "Account" means the account established and maintained on the books of the Corporation to record a Participant's interest under the Plan attributable to amounts credited to the Participant pursuant to paragraph 5(c) below, as adjusted from time to time pursuant to the terms of the Plan. (b) "Annual Incentive Award" means, with respect to a Participant, any annual incentive award payable to such Participant pursuant to (i) the Corporate Management Incentive Plan and (ii) any other incentive compensation plan of the Corporation or any of its Subsidiaries approved for purposes of this Plan by the Plan Administrator. (c) "Claim" means a claim for benefits under the Plan. (d) "Claimant" means a person making a Claim. (e) "Compensation Committee" means the committee of individuals who are serving from time to time as the Compensation Committee of the Board of Directors of the Corporation. (f) "Corporate Benefits Committee" means the committee of individuals who are serving from time to time as the members of the NationsBank Corporation Corporate Benefits Committee. (g) "Corporate Personnel Group" means the group of employees designated as such from time to time by the Corporation. (h) "Eligible Employee" means a Key Employee of the Corporation who has been designated as eligible to become a Participant in the Plan by a member of the Management Compensation Committee as provided in paragraph 5(a) below. (i) "Key Employee" means a regular employee of the Corporation or any of its Subsidiaries who is an officer of the Corporation or its Subsidiaries, as determined by the Plan Administrator, and who, in the opinion of the Plan Administrator, has demonstrated a capacity for contributing materially to the success of the business and operations of the Corporation and its Subsidiaries. (j) "Management Compensation Committee" means the committee of individuals who are serving from time to time as the NationsBank Corporation Management Compensation Committee. (k) "Mirror Rate Method" means a method for determining the adjustment to a Participant's Account for a month such that the level of investment return for the Account for such month substantially equals the aggregate level of investment return for such month of all of the Participants's accounts under The NationsBank Retirement Savings Plan (the "Savings Plan") that are invested in the Investment Trust under the Savings Plan other than amounts mandatorily invested in the common stock of the Corporation under the Investment Trust. For this purpose, amounts shall be deemed to be mandatorily invested in the common stock of the Corporation even if the Participant is eligible to make a diversification election under the Savings Plan with respect to such common stock. However, once such a diversification election is in fact made by a Participant, amounts transferred out of such mandatorily invested account in accordance with such election shall be included in determining the aggregate level of investment return under the Mirror Rate Method for the Participant from and after the effective date of such election. (l) "Participant" means an Eligible Employee who has elected to participate in the Plan as provided in paragraph 5(b) below. (m) "Plan Administrator" means the Corporate Personnel Group, or such other person or entity designated as the "Plan Administrator" for purposes of the Plan by the Compensation Committee. (n) "Plan Year" means the twelve (12) month period beginning January 1 and ending December 31. (o) "Single Sum Value" of the Account of a Participant who is receiving annual installments pursuant to paragraph 5(g) means the single sum present value of the installments determined as of the relevant determination date using for such purpose as the discount rate the same rate that was used in calculating the amount of the installments pursuant to paragraph 5(g) below. (p) "Subsidiary" means (i) any corporation more than fifty percent (50%) of whose outstanding voting capital stock is owned by the Corporation, (ii) any corporation at least eighty percent (80%) of whose outstanding voting capital stock and at least eighty percent (80%) of each class of whose outstanding non-voting capital stock is owned by a corporation more than fifty percent (50%) of whose outstanding voting capital stock is owned by the Corporation, (iii) any corporation at least eighty percent (80%) of whose outstanding voting capital stock and at least eighty percent (80%) of each class of whose outstanding non-voting capital stock is owned by a corporation described in clause (ii) above, or (iv) any other corporation or other business entity affiliated with the Corporation that is designated by the Plan Administrator as a Subsidiary for purposes of the Plan. (q) "30-Year Treasury Rate Method" means a method for determining the adjustment to a Participant's Account for a month such that the level of investment return of the Account for such month substantially equals the ask yield of the most recent auction of 30-year Treasury bonds, as quoted for the last business day of the immediately preceding calendar month in the Wall Street Journal (Eastern Edition), or if such quotations are not available in the Wall Street Journal, in a similar financial publication selected by the Plan Administrator. 4. Administration: The Plan Administrator shall be responsible for administering the Plan. The Plan Administrator shall have all of the powers necessary to enable it to properly carry out its duties under the Plan. Not in limitation of the foregoing, the Plan Administrator shall have the power to construe and interpret the Plan and to determine all questions that shall arise thereunder. The Plan Administrator shall have such other and further specified duties, powers, authority and discretion as are elsewhere in the Plan either expressly or by necessary implication conferred upon it. The Plan Administrator may appoint such agents as it may deem necessary for the effective performance of its duties, and may delegate to such agents such powers and duties as the Plan Administrator may deem expedient or appropriate that are not inconsistent with the intent of the Plan. The decision of the Plan Administrator upon all matters within its scope of authority shall be final and conclusive on all persons, except to the extent otherwise provided by law. 5. Operation: (a) Eligibility. The individuals who serve from time to time as the members of the Management Compensation Committee, in their sole and exclusive discretion, shall determine which Key Employees shall be Eligible Employees for a Plan Year. (b) Elections to Defer. An Eligible Employee may become a Participant in the Plan by irrevocably electing, on a form provided by the Plan Administrator, to defer all or a portion of the Eligible Employee's Annual Incentive Award for a given Plan Year; provided, however, that: (i) if an Eligible Employee elects to defer a portion of the Eligible Employee's Annual Incentive Award for a Plan Year, the amount elected to be deferred with respect to such Annual Incentive Award shall not be less than Ten Thousand Dollars ($10,000); and (ii) if an Eligible Employee's Annual Incentive Award for a Plan Year is less than Ten Thousand Dollars ($10,000), no amount of such Annual Incentive Award shall be deferred under the Plan for such Plan Year. In order to be effective, an Eligible Employee's election to defer must be executed and returned to the Plan Administrator on or before the date specified by the Plan Administrator for such purpose. Such election must normally be made prior to the beginning of the Plan Year to which the election relates. However, the Plan Administrator, in its sole and exclusive discretion, may determine that in any Plan Year during which (A) a Key Employee first becomes an Eligible Employee (including the Plan Year in which the Plan is first implemented) or (B) a Key Employee who is already an Eligible Employee with respect to certain incentive compensation covered by the Plan becomes an Eligible Employee with respect to incentive compensation not previously covered by the Plan, such election may be made by such Eligible Employee within thirty (30) days after becoming eligible. (c) Establishment of Accounts. The Corporation shall establish and maintain on its books an Account for each Participant. Each Account shall be designated by the name of the Participant for whom established. The amount of any Annual Incentive Award deferred by a Participant shall be credited to the Participant's Account as of the date such Annual Incentive Award would have otherwise been paid to the Participant. (d) Account Adjustments. Each Account shall be adjusted on a monthly basis pursuant to either the Mirror Rate Method or the 30-Year Treasury Rate Method. Each Participant with an Account shall be given an opportunity to elect between the Mirror Rate Method and the 30-Year Treasury Rate Method for such purpose. To be effective, such election must be made at such times, on such forms and pursuant to such procedures as established by the Plan Administrator in its sole discretion from time to time. An election once made shall remain in effect unless and until changed by the Participant in accordance with this paragraph 5(d). If a Participant fails to make an election under this paragraph 5(d), the method for making adjustments to the Participant's Account shall be the 30-Year Treasury Rate Method. If a Participant has elected the Mirror Rate Method, and subsequently the Participant ceases to have any account balances under the Savings Plan upon which the Mirror Rate Method is based (e.g., as a result of an in-service withdrawal of the Participant's accounts under the Savings Plan after attaining age 592), then the method for making adjustments to the Participant's Account shall automatically be changed to the 30-Year Treasury Rate Method beginning effective with the calendar month in which the Participant ceases to have such Savings Plan account balances. (e) Payment Options. (i) A Participant who first elects to defer amounts under this paragraph 5 after having attained age fifty-four (54) shall, at the time of the Participant's initial deferral election, irrevocably elect one of the payment options described in subparagraph (iii) below. (ii) For a Participant who first elects to defer amounts under this paragraph 5 before having attained age fifty-four (54), such Participant shall, upon attainment of age fifty-four (54), be given the opportunity to irrevocably elect one of the payment options described in subparagraph (iii) below. (iii) The payment options from which a Participant may elect are as follows: (A) single cash payment, (B) five (5) annual installments or (C) ten (10) annual installments, as such methods are more fully described below. (iv) Any election made under this paragraph 5(e) shall be made on such forms, at such time and pursuant to such procedures as determined by the Plan Administrator in its sole discretion from time to time. An election made under subparagraph (i) shall be effective upon the later of the date of such election or the attainment of age fifty-five (55). An election made under subparagraph (ii) shall not become effective until the first anniversary of the date of such election. In addition, the Plan Administrator may establish special procedures for the first Plan Year in which this election becomes available for Participants who are age fifty-four (54) and older, provided that any such election is not effective for at least twelve (12) months from the date made. (v) For a Participant who does not yet have an election in effect under this paragraph 5(e) or for a Participant who fails to elect a payment option under this paragraph 5(e), the method of payment shall be the single cash payment. (f) Single Cash Payment. (i) In the case of a Participant whose termination of employment with the Corporation and its Subsidiaries occurs before the Participant attains age fifty-five (55), then such Participant's Account shall be determined as of the last business day of the calendar month immediately preceding such termination of employment, and such final Account balance shall be paid in a single cash payment to the Participant (or to the Participant's designated beneficiary in the case of the Participant's termination of employment as the result of the Participant's death) as soon as administratively practicable after the date of such termination of employment. (ii) In the case of a Participant whose termination of employment with the Corporation and its Subsidiaries occurs on or after the Participant attains age fifty-five (55) and whose Account balance is to be paid in a single cash payment in accordance with paragraph 5(e), then such Participant's Account shall continue to be credited with monthly adjustments under paragraph 5(d) through March 31 of the calendar year immediately following the calendar year of such termination of employment, except that the rate for such monthly adjustments for the calendar month of such termination of employment through such March 31 shall be the 30-year Treasury bond ask yield for the last business day of the calendar month immediately preceding such termination of employment (regardless of the method of Account adjustment elected by the Participant under paragraph 5(d) above). The final Account balance as of such March 31 shall be paid in a single cash payment to the Participant (or to the Participant's designated beneficiary in the case of the Participant's termination of employment as the result of the Participant's death) on or about such March 31. (g) Annual Installments. In the event a Participant's employment with the Corporation and its Subsidiaries terminates after the effectiveness of the Participant's election as to the method of payment under paragraph 5(e) and the Participant has selected annual installments, the amount of such annual installments shall be calculated and paid pursuant to the provisions of this paragraph 5(g). The first installment shall be paid on or about March 31 of the calendar year immediately following the calendar year of such termination of employment, and each subsequent installment shall be paid on or about each subsequent March 31. The amount of the installments shall be calculated as follows: First, the Participant's Account shall continue to be credited with monthly adjustments under paragraph 5(d) through such March 31, except that the rate for such monthly adjustments for the calendar month of such termination of employment through such March 31 shall be the 30-year Treasury bond ask yield for the last business day of the calendar month immediately preceding such termination of employment (regardless of the method of Account adjustment elected by the Participant under paragraph 5(d) above). The amount of the annual installments shall then be calculated, based on the Account balance as of such March 31, as equal annual installments amortized over the selected period using the same 30-year Treasury bond ask yield. If a Participant dies after the effectiveness of the Participant's election as to the method of payment under paragraph 5(e) and the Participant has selected annual installments, such annual installments (or remaining annual installments in the case of death after commencement of payment) shall be paid to the Participant's designated beneficiary. (h) Other Payment Provisions. Subject to the provisions of paragraph 5(i) and paragraph 6 below, a Participant shall not be paid any portion of the Participant's Account prior to the Participant's termination of employment with the Corporation and its Subsidiaries. Any deferral or payment hereunder shall be subject to applicable payroll and withholding taxes. For purposes of the Plan, a Participant shall be deemed to have terminated employment with the Corporation upon eligibility for benefits under the NationsBank Long-Term Disability Plan as in effect from time to time. In the event any amount becomes payable under the provisions of the Plan to a Participant, beneficiary or other person who is a minor or an incompetent, whether or not declared incompetent by a court, such amount may be paid directly to the minor or incompetent person or to such person's fiduciary (or attorney-in-fact in the case of an incompetent) as the Plan Administrator, in its sole discretion, may decide, and the Plan Administrator shall not be liable to any person for any such decision or any payment pursuant thereto. (i) Withdrawals on Account of an Unforeseeable Emergency. A Participant who is in active service with the Corporation may, in the Plan Administrator's sole discretion, receive a refund of all or any part of the amounts previously credited to the Participant's Account in the case of an "unforeseeable emergency." A Participant requesting a payment pursuant to this subparagraph (i) shall have the burden of proof of establishing, to the Plan Administrator's satisfaction, the existence of such "unforeseeable emergency," and the amount of the payment needed to satisfy the same. In that regard, the Participant shall provide the Plan Administrator with such financial data and information as the Plan Administrator may request. If the Plan Administrator determines that a payment should be made to a Participant under this subparagraph (i), such payment shall be made within a reasonable time after the Plan Administrator's determination of the existence of such "unforeseeable emergency" and the amount of payment so needed. As used herein, the term "unforeseeable emergency" means a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that shall constitute an "unforeseeable emergency" shall depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Examples of what are not considered to be "unforeseeable emergencies" include the need to send a Participant's child to college or the desire to purchase a home. Withdrawals of amounts because of an "unforeseeable emergency" shall not exceed an amount reasonably needed to satisfy the emergency need. (j) Statements of Account. Each Participant shall receive an annual statement of the Participant's Account balance. 6. Amendment, Modification and Termination of the Plan: The Compensation Committee shall have the right and power at any time and from time to time to amend the Plan in whole or in part and at any time to terminate the Plan; provided, however, that no such amendment or termination shall reduce the amount actually credited to a Participant's Account under the Plan on the date of such amendment or termination, or further defer the due dates for the payment of such amounts, without the consent of the affected Participant. Notwithstanding the provisions of paragraph 5(e), in connection with any termination of the Plan the Compensation Committee shall have the authority to cause the Accounts of all Participants to be paid in a single sum payment as of a date determined by the Compensation Committee or to otherwise accelerate the payment of all Accounts in such manner as the Compensation Committee shall determine in its discretion. In that regard, upon any termination of the Plan the amount of any payment to a Participant (or beneficiary of a deceased Participant) who is receiving annual installments pursuant to paragraph 5(g) shall be the Single Sum Value of the Participant's Account determined as of the selected determination date. 7. Claims Procedures: (a) General. In the event that a Claimant has a Claim under the Plan, such Claim shall be made by the Claimant's filing a notice thereof with the Plan Administrator within ninety (90) days after such Claimant first has knowledge of such Claim. Each Claimant who has submitted a Claim to the Plan Administrator shall be afforded a reasonable opportunity to state such Claimant's position and to present evidence and other material relevant to the Claim to the Plan Administrator for its consideration in rendering its decision with respect thereto. The Plan Administrator shall render its decision in writing within ninety (90) days after the Claim is referred to it, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered no later than one hundred eighty (180) days after the Claim is referred to it. A copy of such written decision shall be furnished to the Claimant. (b) Notice of Decision of Plan Administrator. Each Claimant whose Claim has been denied by the Plan Administrator shall be provided written notice thereof, which notice shall set forth: (i) the specific reason(s) for the denial; (ii) specific reference to pertinent provision(s) of the Plan upon which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect such Claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure hereunder for review of such Claim; all in a manner calculated to be understood by such Claimant. (c) Review of Decision of Plan Administrator. Each such Claimant shall be afforded a reasonable opportunity for a full and fair review of the decision of the Plan Administrator denying the Claim. Such review shall be by the Corporate Benefits Committee. Such appeal shall be made within ninety (90) days after the Claimant received the written decision of the Plan Administrator and shall be made by the written request of the Claimant or such Claimant's duly authorized representative of the Corporate Benefits Committee. In the event of appeal, the Claimant or such Claimant's duly authorized representative may review pertinent documents and submit issues and comments in writing to the Corporate Benefits Committee. The Corporate Benefits Committee shall review the following: (i) the initial proceedings of the Plan Administrator with respect to such Claim; (ii) such issues and comments as were submitted in writing by the Claimant or the Claimant's duly authorized representative; and (iii) such other material and information as the Corporate Benefits Committee, in its sole discretion, deems advisable for a full and fair review of the decision of the Plan Administrator. The Corporate Benefits Committee may approve, disapprove or modify the decision of the Plan Administrator, in whole or in part, or may take such other action with respect to such appeal as it deems appropriate. The decision of the Corporate Benefits Committee with respect to such appeal shall be made promptly, and in no event later than sixty (60) days after receipt of such appeal, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered as soon as possible and in no event later than one hundred twenty (120) days following receipt of such appeal. The decision of the Corporate Benefits Committee shall be in writing and in a manner calculated to be understood by the Claimant and shall include specific reasons for such decision and set forth specific references to the pertinent provisions of the Plan upon which such decision is based. The Claimant shall be furnished a copy of the written decision of the Corporate Benefits Committee. Such decision shall be final and conclusive upon all persons interested therein, except to the extent otherwise provided by applicable law. 8. Applicable Law: The Plan shall be construed, administered, regulated and governed in all respects under and by the laws of the United States to the extent applicable, and to the extent such laws are not applicable, by the laws of the state of North Carolina. 9. Miscellaneous: A Participant's rights and interests under the Plan may not be assigned or transferred by the Participant. The Plan shall be an unsecured, unfunded arrangement. To the extent the Participant acquires a right to receive payments from the Corporation under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. Nothing contained herein shall be deemed to create a trust of any kind or any fiduciary relationship between the Corporation and any Participant. Designation as an Eligible Employee or Participant in the Plan shall not entitle or be deemed to entitle such person to continued employment with the Corporation. The Plan shall be binding on the Corporation and any successor in interest of the Corporation. IN WITNESS WHEREOF, this instrument has been executed by an authorized officer of the Corporation as of the 1st day of July, 1996. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley Executive Vice President "Corporation" EX-10 10 EXHIBIT 10(T) NATIONSBANK CORPORATION DIRECTOR DEFERRAL PLAN AS AMENDED AND RESTATED EFFECTIVE APRIL 24, 1996 1. NAME: This plan shall be known as the "NationsBank Corporation Director Deferral Plan" (the "Plan"). 2. PURPOSE AND INTENT: NationsBank Corporation (the "Corporation") established this Plan effective January 1, 1995 for the purpose of providing the nonemployee members of its Board of Directors with the opportunity to defer payment of all (but not any portion of) the annual retainer fee and/or meetings fees payable during a year. Effective April 24, 1996, the Corporation adopted the NationsBank Corporation Directors' Stock Plan (the "Stock Plan") which provides in part that a portion of a director's annual retainer fee will be paid in cash and a portion in shares of common stock of the Corporation. This amendment and restatement of the Plan (i) allows a participating director to defer all or any portion of the director's annual retainer fee and/or meetings fees and (ii) sets forth special provisions for crediting the portion of any annual retainer fee deferred hereunder that would have been paid in stock under the Stock Plan. It is the intent of the Corporation that amounts deferred under the Plan by a director shall not be taxable to the director for income tax purposes until the time actually received by the director. The provisions of the Plan shall be construed and interpreted to effectuate such intent. 3. DEFINITIONS: For purposes of the Plan, the following terms shall have the following meanings: (a) "Accounts" of a Participant mean collectively the Participant's Cash Account and the Stock Account. (b) "Cash Account" means the account established and maintained on the books of the Corporation to record a Participant's interest under the Plan attributable to the cash portion of any Annual Retainer Fee and Meetings Fees credited to the Participant pursuant to paragraph 5(c) below, as adjusted from time to time pursuant to the terms of the Plan. (c) "Claim" means a claim for benefits under the Plan. (d) "Claimant" means a person making a Claim. (e) "Common Stock" means the common stock of the Corporation. (f) "Compensation Committee" means the committee of individuals who are serving from time to time as the members of the Compensation Committee of the Board of Directors of the Corporation. (g) "Corporate Benefits Committee" means the committee of individuals who are serving from time to time as the members of the NationsBank Corporation Corporate Benefits Committee. (h) "Corporate Personnel Group" means the group of employees designated as such from time to time by the Corporation. (i) "Fair Market Value" of a share of Common Stock means the closing price on the relevant date of a share of Common Stock on the New York Stock Exchange (or such other principal securities exchange on which the shares of the Common Stock are traded if such shares are no longer traded on the New York Stock Exchange). (j) "Fees" means both (i) the annual retainer fee (the "Annual Retainer Fee") and (ii) any meetings fees (the "Meetings Fees") payable to a Nonemployee Director under the Corporation's compensation policies for directors in effect from time to time. (k) "Nonemployee Director" means an individual who is a member of the Board of Directors of the Corporation, but who is not an employee of the Corporation or any of its subsidiaries. (l) "Participant" means a Nonemployee Director who has elected to participate in the Plan as provided in paragraph 5(b) below. (m) "Plan Administrator" means the Corporate Personnel Group, or such other person or entity designated as the "Plan Administrator" for purposes of the Plan by the Compensation Committee. (n) "Plan Year" means the twelve (12) month period beginning January 1 and ending December 31. (o) "Single Sum Value" of the Cash Account of a Participant who is receiving annual installments pursuant to paragraph 5(h) means the single sum present value of the installments determined as of the relevant determination date using for such purpose as the discount rate the same rate that was used in calculating the amount of the installments pursuant to paragraph 5(h) below. (p) "Stock Account" means the account established and maintained on the books of the Corporation to record a Participant's interest under the Plan attributable to the stock portion of any Annual Retainer Fee credited to the Participant pursuant to paragraph 5(c) below, as adjusted from time to time pursuant to the terms of the Plan. (q) "Stock Unit" means a unit having a value as of a given date equal to the Fair Market Value of one (1) share of Common Stock on such date. 4. ADMINISTRATION: The Plan Administrator shall be responsible for administering the Plan. The Plan Administrator shall have all of the powers necessary to enable it to properly carry out its duties under the Plan. Not in limitation of the foregoing, the Plan Administrator shall have the power to construe and interpret the Plan and to determine all questions that shall arise thereunder. The Plan Administrator shall have such other and further specified duties, powers, authority and discretion as are elsewhere in the Plan either expressly or by necessary implication conferred upon it. The Plan Administrator may appoint such agents as it may deem necessary for the effective performance of its duties, and may delegate to such agents such powers and duties as the Plan Administrator may deem expedient or appropriate that are not inconsistent with the intent of the Plan. The decision of the Plan Administrator upon all matters within its scope of authority shall be final and conclusive on all persons, except to the extent otherwise provided by law. 5. OPERATION: (a) Eligibility. Each Nonemployee Director shall be eligible to participate in the Plan. (b) Elections to Defer. A Nonemployee Director may become a Participant in the Plan by irrevocably electing, on a form provided by the Plan Administrator, to defer all or any portion of the Annual Retainer Fee payable to the Nonemployee Director during such Plan Year and/or the Meetings Fees payable to the Nonemployee Director for all meetings occurring during such Plan Year. Such election shall be made separately with respect to the cash and stock portions of the Annual Retainer Fee and the Meetings Fees. In order to be effective, a Nonemployee Director's election to defer must be executed and returned to the Plan Administrator on or before the date specified by the Plan Administrator for such purpose. Such election must normally be made prior to the beginning of the Plan Year to which the election relates. However, the Plan Administrator, in its sole and exclusive discretion, may determine that in certain circumstances an election may be made during a Plan Year if such determination is not inconsistent with the intent of the Plan expressed in paragraph 2 above. (c) Establishment of Accounts. The Corporation shall establish and maintain on its books a Cash Account for each Participant and, if the Participant elects to defer the stock portion of an Annual Retainer Fee, a Stock Account. Each Account shall be designated by the name of the Participant for whom established. Both the Meetings Fees and the cash portion of any Annual Retainer Fee deferred by a Participant shall be credited to the Participant's Cash Account as of the date such Fees would have otherwise been paid to the Participant. The Stock Account of a Participant who elects to defer the stock portion of an Annual Retainer Fee shall be credited with a number of Stock Units equal to the number of shares of Common Stock which the Participant would have received under the Stock Plan with respect to such Annual Retainer Fee, and such Stock Units shall be credited to the Participant's Stock Account as of the date the related shares would have been issued to the Participant. (d) Account Adjustments: Cash Account. As of the last day of each calendar month, each Cash Account shall be adjusted for such month so that the level of investment return of the Cash Account shall be substantially equal to the ask yield of the most recent auction of 30-year Treasury bonds, as quoted for the last business day of the immediately preceding calendar month in the Wall Street Journal (Eastern Edition), or if such quotations are not available in the Wall Street Journal, in a similar financial publication selected by the Plan Administrator. (e) Account Adjustments: Stock Account. Each Stock Account shall be credited additional full or fractional Stock Units for cash dividends paid on the Common Stock based on the number of Stock Units in the Stock Account on the applicable dividend record date and calculated based on the Fair Market Value of the Common Stock on the applicable dividend payment date. Each Stock Account shall also be equitably adjusted as determined by the Plan Administrator in the event of any stock dividend, stock split or similar change in the capitalization of the Corporation. (f) Payment Options. At the time a Participant first makes an election to defer Fees under the Plan, the Participant shall be given the opportunity to irrevocably elect one of the following payment options: (i) single cash payment, (ii) five (5) annual installments or (iii) ten (10) annual installments. The election shall be made in writing on a form provided by the Plan Administrator and must be returned to the Plan Administrator before such date as specified by the Plan Administrator. Such election shall be effective with respect to any Fees deferred under the Plan by the Participant, including Fees deferred under the Plan for all subsequent Plan Years. If a Participant fails to duly elect a payment option, the method of payment shall be the single cash payment. (g) Single Cash Payment. If a Participant to whom the single cash payment method applies terminates services with the Corporation as a member of the Board of Directors of the Corporation, such Participant's Accounts shall continue to be credited with adjustments under paragraph 5(d) and paragraph 5(e) above through January 31 of the calendar year immediately following the calendar year of such termination of services, except that, with respect to the Participant's Cash Account, the rate for such monthly adjustments from the calendar month of such termination of services through such January 31 shall be the 30-year Treasury bond ask yield for the last day of the calendar month immediately preceding such termination of services. The number of Stock Units in the Stock Account as of such January 31 shall be converted to cash based on the Fair Market Value of the Common Stock on such date, and such cash amount together with the final Cash Account balance as of such January 31 shall be paid in a single cash payment to the Participant (or to the Participant's designated beneficiary in the case of the Participant's termination of services as the result of the Participant's death) on or about such January 31. (h) Annual Installments. If a Participant to whom the annual installments method applies terminates service with the Corporation as a member of the Board of Directors of the Corporation, the amount of such annual installments shall be calculated and paid pursuant to the provisions of this paragraph 5(h). The first installment shall be paid on or about the January 31 of the calendar year immediately following the calendar year of such termination of services, and each subsequent installment shall be paid on or about each subsequent January 31. The amount of the installments shall be calculated as follows: First, as of such date of termination of services the Participant's Stock Account shall be debited of all Stock Units credited to it, and the Participant's Cash Account shall be credited with an amount equal to the aggregate Fair Market Value of such debited Stock Units as of such date of termination. Second, the Participant's Cash Account shall continue to be credited with monthly adjustments under paragraph 5(d) through such January 31, except that the rate for such monthly adjustments from the calendar month of such termination of services through such January 31 shall be the 30-year Treasury bond ask yield for the last day of the calendar month immediately preceding such termination of services. The amount of the annual installments shall then be calculated as equal installments amortized over the selected period using the same 30-year Treasury bond ask yield. If a Participant who has selected the annual installments method dies before any or all of the annual installments have been paid, such remaining annual installments shall be paid to the Participant's designated beneficiary. Participants shall designate a beneficiary under the Plan on a form furnished by the Plan Administrator, and if a Participant does not have a beneficiary designation in effect, the designated beneficiary shall be the Participant's estate. (i) Other Payment Provisions. Subject to the provisions of paragraph 5(j) and paragraph 6 below, a Participant shall not be paid any portion of the Participant's Accounts prior to the Participant's termination of services as a member of the Board of Directors of the Corporation. Any payment hereunder shall be subject to applicable payroll and withholding taxes. In the event any amount becomes payable under the provisions of the Plan to a Participant, beneficiary or other person who is a minor or an incompetent, whether or not declared incompetent by a court, such amount may be paid directly to the minor or incompetent person or to such person's fiduciary (or attorney-in-fact in the case of an incompetent) as the Plan Administrator, in its sole discretion, may decide, and the Plan Administrator shall not be liable to any person for any such decision or any payment pursuant thereto. (j) Withdrawals on Account of an Unforeseeable Emergency. A Participant who is in active service as a member of the Board of Directors of the Corporation may, in the Plan Administrator's sole discretion, receive a payment of all or any part of the amounts previously credited to the Participant's Cash Account (but not Stock Account) in the case of an "unforeseeable emergency." A Participant requesting a payment pursuant to this subparagraph (j) shall have the burden of proof of establishing, to the Plan Administrator's satisfaction, the existence of such "unforeseeable emergency," and the amount of the payment needed to satisfy the same. In that regard, the Participant shall provide the Plan Administrator with such financial data and information as the Plan Administrator may request. If the Plan Administrator determines that a payment should be made to a Participant under this subparagraph (j), such payment shall be made within a reasonable time after the Plan Administrator's determination of the existence of such "unforeseeable emergency" and the amount of payment so needed. As used herein, the term "unforeseeable emergency" means a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that shall constitute an "unforeseeable emergency" shall depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Examples of what are not considered to be "unforeseeable emergencies" include the need to send a Participant's child to college or the desire to purchase a home. Withdrawals of amounts because of an "unforeseeable emergency" shall not exceed an amount reasonably needed to satisfy the emergency need. (k) Statements of Account. Each Participant shall receive an annual statement of the balance in the Participant's Accounts. 6. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN: The Compensation Committee shall have the right and power at any time and from time to time to amend the Plan in whole or in part and at any time to terminate the Plan; provided, however, that no such amendment or termination shall reduce the amount actually credited to a Participant's Accounts under the Plan on the date of such amendment or termination, or further defer the due dates for the payment of such amounts, without the consent of the affected Participant. Notwithstanding the provisions of paragraph 5(f), in connection with any termination of the Plan the Compensation Committee shall have the authority to cause the Accounts of all Participants to be paid in a single cash payment as of a date determined by the Compensation Committee or to otherwise accelerate the payment of Accounts in such manner as the Compensation Committee shall determine in its discretion. In that regard, upon any termination of the Plan the amount of any payment to a Participant (or beneficiary of a deceased Participant) who is receiving annual installments pursuant to paragraph 5(h) shall be the Single Sum Value of the Participant's Cash Account determined as of the selected determination date. Notwithstanding the foregoing, the accelerated payment of Participant Accounts described above shall be limited to the Participants' Cash Accounts to the extent necessary to insure that Stock Units under the Plan do not constitute "derivative securities" that are subject to the short-swing profit recovery rules of Section 16 of the Securities Exchange Act of 1934, and in such case a Participant's Stock Account shall continue to be adjusted and shall be paid as and when provided by the Plan without regard to such action to terminate the Plan. 7. CLAIMS PROCEDURES: (a) General. In the event that a Claimant has a Claim under the Plan, such Claim shall be made by the Claimant's filing a notice thereof with the Plan Administrator within ninety (90) days after such Claimant first has knowledge of such Claim. Each Claimant who has submitted a Claim to the Plan Administrator shall be afforded a reasonable opportunity to state such Claimant's position and to present evidence and other material relevant to the Claim to the Plan Administrator for its consideration in rendering its decision with respect thereto. The Plan Administrator shall render its decision in writing within ninety (90) days after the Claim is referred to it, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered no later than one hundred eighty (180) days after the Claim is referred to it. A copy of such written decision shall be furnished to the Claimant. (b) Notice of Decision of Plan Administrator. Each Claimant whose Claim has been denied by the Plan Administrator shall be provided written notice thereof, which notice shall set forth: (i) the specific reason(s) for the denial; (ii) specific reference to pertinent provision(s) of the Plan upon which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect such Claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure hereunder for review of such Claim; all in a manner calculated to be understood by such Claimant. (c) Review of Decision of Plan Administrator. Each such Claimant shall be afforded a reasonable opportunity for a full and fair review of the decision of the Plan Administrator denying the Claim. Such review shall be by the Corporate Benefits Committee. Such appeal shall be made within ninety (90) days after the Claimant received the written decision of the Plan Administrator and shall be made by the written request of the Claimant or such Claimant's duly authorized representative of the Corporate Benefits Committee. In the event of appeal, the Claimant or such Claimant's duly authorized representative may review pertinent documents and submit issues and comments in writing to the Corporate Benefits Committee. The Corporate Benefits Committee shall review the following: (i) the initial proceedings of the Plan Administrator with respect to such Claim; (ii) such issues and comments as were submitted in writing by the Claimant or the Claimant's duly authorized representative; and (iii) such other material and information as the Corporate Benefits Committee, in its sole discretion, deems advisable for a full and fair review of the decision of the Plan Administrator. The Corporate Benefits Committee may approve, disapprove or modify the decision of the Plan Administrator, in whole or in part, or may take such other action with respect to such appeal as it deems appropriate. The decision of the Corporate Benefits Committee with respect to such appeal shall be made promptly, and in no event later than sixty (60) days after receipt of such appeal, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered as soon as possible and in no event later than one hundred twenty (120) days following receipt of such appeal. The decision of the Corporate Benefits Committee shall be in writing and in a manner calculated to be understood by the Claimant and shall include specific reasons for such decision and set forth specific references to the pertinent provisions of the Plan upon which such decision is based. The Claimant shall be furnished a copy of the written decision of the Corporate Benefits Committee. Such decision shall be final and conclusive upon all persons interested therein, except to the extent otherwise provided by applicable law. 8. APPLICABLE LAW: The Plan shall be construed, administered, regulated and governed in all respects under and by the laws of the United States to the extent applicable, and to the extent such laws are not applicable, by the laws of the state of North Carolina. 9. MISCELLANEOUS: A Participant's rights and interests under the Plan may not be assigned or transferred by the Participant. The Plan shall be an unsecured, unfunded arrangement. To the extent the Participant acquires a right to receive payments from the Corporation under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. Nothing contained herein shall be deemed to create a trust of any kind or any fiduciary relationship between the Corporation and any Participant. The Plan shall be binding on the Corporation and any successor in interest of the Corporation. IN WITNESS WHEREOF, this instrument has been executed by an authorized officer of the Corporation as of the 24th day of April, 1996. NATIONSBANK CORPORATION By: /s/C. J. Cooley C. J. Cooley Executive Vice President "Corporation" EX-10 11 EXHIBIT 10(V) NATIONSBANK CORPORATION KEY EMPLOYEE STOCK PLAN Effective Date: January 1, 1995 (As amended and restated effective December 20, 1996) CONTENTS - --------------------------------------------------------------------------- PAGE Article 1. Establishment, Purpose, and Duration 1 Article 2. Definitions 1 Article 3. Administration 6 Article 4. Shares Subject to the Plan 7 Article 5. Eligibility and Participation 8 Article 6. Stock Options 8 Article 7. Stock Appreciation Rights 10 Article 8. Restricted Stock 12 Article 9. Performance Shares 14 Article 10. Performance Measures 15 Article 11. Beneficiary Designation 15 Article 12. Deferrals 16 Article 13. Rights of Key Employees 16 Article 14. Change in Control 16 Article 15. Amendment, Modification, and Termination 19 Article 16. Withholding 19 Article 17. Indemnification 20 Article 18. Successors 20 Article 19. Legal Construction 20 NATIONSBANK CORPORATION KEY EMPLOYEE STOCK PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. NationsBank Corporation, a North Carolina corporation (hereinafter referred to as the "Company"), hereby establishes an incentive compensation plan to be known as the "NationsBank Corporation Key Employee Stock Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock and Performance Shares. Subject to approval by the Company's shareholders, the Plan shall become effective as of January 1, 1995 (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof. 1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of the Company's shareholders, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest and special effort the successful conduct of its operation largely is dependent. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article 15 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan after December 31, 2004. ARTICLE 2. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: 2.1 "AWARD" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock or Performance Shares. 2.2 "AWARD AGREEMENT" means an agreement entered into by the Company and each Participant setting forth the terms and provisions applicable to Awards granted under this Plan. 2.3 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 1 2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company. 2.5 "CHANGE IN CONTROL" of the Company means, and shall be deemed to have occurred upon, any of the following events: (a) The acquisition by any Person of Beneficial Ownership of twenty-five percent (25%) or more of either: (i) The then-outstanding Shares (the "Outstanding Shares"); or (ii) The combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of Directors (the "Outstanding Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company or pursuant to a written agreement to which the Company is a party, as such written agreement is more particularly described in Section 55-9A-01(b)(3)f and g of the North Carolina Business Corporation Act as ratified by the North Carolina General Assembly on June 8, 1989, (B) any acquisition by the Company or any of its Subsidiaries, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries, (D) any acquisition by any corporation with respect to which, following such acquisition, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock of such corporation and the combined voting power of the then-outstanding voting securities of such corporation entitled to vote generally in the election of directors are then beneficially owned by all or substantially all of the Persons who were the Beneficial Owners, respectively, of the Outstanding Shares and Outstanding Voting Securities immediately prior to such acquisition in substantially the same proportions as their Beneficial Ownership, immediately prior to such acquisition, of the Outstanding Shares and Outstanding Voting Securities, as the case may be; or (b) Individuals who, as of the Effective Date, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual who becomes a Director subsequent to the Effective Date and whose election, or whose nomination for election by the Company's shareholders, to the Board of Directors was either (i) approved by a vote of at least a majority of the Directors then comprising the Incumbent Board or (ii) recommended by a Nominating Committee comprised entirely of Directors who are then Incumbent Board members shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act), other actual or threatened solicitation of proxies or consents or an actual or threatened tender offer; or 2 (c) Approval by the Company's shareholders of a reorganization, merger, or consolidation, in each case, with respect to which all or substantially all of the Persons who were the Beneficial Owners, respectively, of the Outstanding Shares and Outstanding Voting Securities immediately prior to such reorganization, merger, or consolidation do not, following such reorganization, merger, or consolidation, beneficially own more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger, or consolidation in substantially the same proportions as their Beneficial Ownership, immediately prior to such reorganization, merger, or consolidation, of the Outstanding Shares and Outstanding Voting Securities, as the case may be; or (d) Approval by the Company's shareholders of: (i) A complete liquidation or dissolution of the Company; or (ii) The sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, more than fifty percent (50%) of, respectively, the then-outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned by all or substantially all of the Persons who were the Beneficial Owners, respectively, of the Outstanding Shares and Outstanding Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their Beneficial Ownership, immediately prior to such sale or other disposition, of the Outstanding Shares and Outstanding Voting Securities, as the case may be. 2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to time. References to the Code shall include the valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder. 2.7 "COMMITTEE" means the Stock Option Committee of the Board, as specified in Article 3 herein, appointed by the Board to administer the Plan with respect to grants of Awards. 2.8 "COMPANY" means NationsBank Corporation, a North Carolina corporation, and any successor as provided in Article 18 herein. 2.9 "DIRECTOR" means any individual who is a member of the Board of Directors of the Company. 2.10 "DISABILITY," with respect to a Participant, means "disability" as defined from time to time under any long-term disability plan of the Company or Subsidiary with which the Participant is employed. 3 2.11 "EARNINGS PER SHARE" means "earnings per common share" of the Company determined in accordance with generally accepted accounting principles that would be reported in the Company's Annual Report to Shareholders. 2.12 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section 1.1 hereof. 2.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. 2.14 "FAIR MARKET VALUE" shall be determined on the basis of the closing sale price on the New York Stock Exchange (or such other principal securities exchange on which the Shares are traded if the Shares are no longer traded on the New York Stock Exchange) or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. 2.15 "FREESTANDING SAR" means an SAR that is granted independently of any Options. 2.16 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares, granted under Article 6 herein, and which is designated as an Incentive Stock Option which is intended to meet the requirements of Section 422 of the Code. 2.17 "INSIDER" shall mean an individual who is, on the relevant date, an officer, director or ten percent (10%) beneficial owner of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act. 2.18 "KEY EMPLOYEE" means an employee of the Company, including an officer of the Company, in a managerial or other important position who, by virtue of such employee's ability, qualifications and performance, has made important contributions to the Company, all as determined by the Committee in its discretion. 2.19 "NAMED EXECUTIVE OFFICER" means, for a calendar year, a Participant who is one of the group of "covered employees" for such calendar year within the meaning of Code Section 162(m) or any successor statute. 2.20 "NET INCOME" means "net income" of the Company determined in accordance with generally accepted accounting principles that would be reported in the Company's Annual Report to Shareholders. 2.21 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares granted to Key Employees under Article 6 herein, and which is not intended to meet the requirements of Code Section 422. 2.22 "OPTION" means an Incentive Stock Option or a Nonqualified Stock Option. 4 2.23 "OPTION PRICE" means the price at which a Share may be purchased by a Participant pursuant to an Option. 2.24 "PARTICIPANT" means a Key Employee who has outstanding an Award granted under the Plan. 2.25 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception set forth in Code Section 162(m)(4)(C) from the deductibility limitations of Code Section 162(m). 2.26 "PERFORMANCE SHARE" means an Award granted to an Key Employee, as described in Article 9 herein. 2.27 "PERIOD OF RESTRICTION" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein. 2.28 "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof. 2.29 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to Article 8 herein. 2.30 "RETIREMENT" of a Participant means the Participant's termination of employment with the Company and Subsidiaries (other than by reason of death) after the Participant has attained both (i) age fifty (50) and (ii) a combined age and years of "Vesting Service" under the NationsBank Pension Plan equal to at least seventy-five (75). 2.31 "RETURN ON ASSETS" means "return on average assets" of the Company determined in accordance with generally accepted accounting principles that would be reported in the Company's Annual Report to Shareholders. 2.32 "RETURN ON EQUITY" means "return on average common shareholders' equity" of the Company determined in accordance with generally accepted accounting principles that would be reported in the Company's Annual Report to Shareholders. 2.33 "SHARES" means the shares of Common Stock of the Company. 2.34 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to the terms of Article 7 herein. 2.35 "SUBSIDIARY" means any corporation, partnership, joint venture, affiliate, or other entity in which the Company has an ownership interest, and which the Committee designates as a participating entity in the Plan. 5 2.36 "TANDEM SAR" means an SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). 2.37 "TOTAL SHAREHOLDER RETURN" means the percentage change of an initial investment in Shares over a specified period assuming reinvestment of all dividends during the period. ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Stock Option Committee of the Board or by any other Committee appointed by the Board consisting of not less than two (2) Directors. All of the members of the Committee shall comply with the "disinterested administration" rules of Rule 16b-3 under the Exchange Act. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. In addition, any action taken with respect to Named Executive Officers for purposes of meeting the Performance-Based Exception shall be taken by the Committee only if all of the members of the Committee are "outside directors" within the meaning of Code Section 162(m). If all of the members of the Committee are not "outside directors," such action shall be taken by a subcommittee of the Committee comprised of at least two (2) members who are "outside directors." 3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law, or by the Articles of Incorporation or Bylaws of the Company, and subject to the provisions herein, the Committee shall have full power to select Key Employees who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 15 herein), amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority as identified herein. 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Board shall be final, conclusive and binding on all persons, including the Company, its shareholders, employees, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN 4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Beginning on the Effective Date, there is hereby reserved for issuance under the Plan a number of shares equal to: (a) seventy-five one hundredths of a percent (0.75%) of the outstanding Shares as of the first business day of each calendar year beginning with calendar year 1995 and continuing through calendar year 2004; plus 6 (b) the Shares available for issuance under the Company's 1986 Restricted Stock Award Plan (the "1986 Plan") as of January 31, 1995. Such Shares available for grants of Awards in any year shall be increased by the number of Shares available under this Section 4.1 in previous years but not covered by Awards granted under this Plan in those years plus any Shares as to which Awards granted under this Plan have lapsed, expired, terminated, or been canceled. In addition, any Shares as to which Awards under the Company's 1986 Plan may lapse, expire, terminate, or be canceled, shall also be reserved and available for issuance or reissuance under this Section 4.1 in any calendar year. No further awards are to be granted under the 1986 Plan after January 31, 1995; provided that any outstanding awards under the 1986 Plan shall continue to remain outstanding in accordance with the terms thereof. In addition, the Company has entered an Agreement and Plan of Merger with Boatmen's Bancshares, Inc. ("Boatmen's"). In the event the Boatmen's transaction is consummated, an additional Five Million Two Hundred Fifty Thousand (5,250,000) Shares shall be made available for grants of Awards under the Plan beginning effective as of the consummation of such transaction. In no event shall a Participant receive an Award or Awards during any one (1) calendar year covering in the aggregate more than Two Hundred Fifty Thousand (250,000) Shares. In addition, in no event shall the total number of Incentive Stock Options granted during the ten (10) year term of the Plan cover in the aggregate more than the product of (i) ten (10) times (ii) seventy-five one hundredths of a percent (0.75%) of the outstanding Shares as of the first business day of calendar year 1995. The number of Shares reserved for issuance under this Section 4.1 and the limitations on the number of Incentive Stock Option Awards and annual Awards to individuals set forth above shall be subject to adjustment as provided in Section 4.3. 4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option, or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award again shall be available for the grant of an Award under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class of Shares which may be delivered under the Plan and in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number. ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan are all Key Employees of the Company, as determined by the Committee, including Key Employees who are Directors, but excluding Directors who are not Key Employees. 7 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Key Employees those to whom Awards shall be granted and shall determine the nature and amount of each Award. 5.3 FOREIGN EMPLOYEES. Notwithstanding any provision of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company operates or has employees, the Committee, in its sole discretion, shall have the power and authority to (i) determine which Key Employees (if any) employed outside the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of any Awards made to such Key Employees and (iii) establish subplans, modified Option exercise and other terms and procedures to the extent such actions may be necessary or advisable. ARTICLE 6. STOCK OPTIONS 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Key Employees in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee. 6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Section 422 of the Code, or an NQSO whose grant is intended not to fall under Code Section 422. 6.3 OPTION PRICE. The Option Price for each grant of an Option under this Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. 6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve and which shall be set forth in the applicable Award Agreement, which need not be the same for each grant or for each Participant. 6.6 PAYMENT. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). 8 The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.8 TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment. In that regard, if an Award Agreement permits exercise of an Option following the death of the Participant, the Award Agreement shall provide that such Option shall be exercisable to the extent provided therein by any person that may be empowered to do so under the Participant's will, or if the Participant shall fail to make a testamentary disposition of the Option or shall have died intestate, by the Participant's executor or other legal representative. 6.9 NONTRANSFERABILITY OF OPTIONS. (a) INCENTIVE STOCK OPTIONS. No ISO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. (b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a Participant's Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant. 9 6.10 NO RIGHTS. A Participant granted an Option shall have no rights as a shareholder of the Company with respect to the Shares covered by such Option except to the extent that Shares are issued to the Participant upon the due exercise of the Option. ARTICLE 7. STOCK APPRECIATION RIGHTS 7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs may be granted to Key Employees at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. The grant price of a Freestanding SAR shall equal the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of the related Option. 7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO. 7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them. 7.4 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine. 7.5 TERM OF SARS. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years. 7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) The difference between the Fair Market Value of a Share on the date of exercise over the grant price; by 10 (b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 7.7 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on exercise of an SAR (including, without limitation, the right of the Committee to limit the time of exercise to specified periods) as may be required to satisfy the requirements of Section 16 (or any successor rule) of the Exchange Act. 7.8 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. In that regard, if an Award Agreement permits exercise of an SAR following the death of the Participant, the Award Agreement shall provide that such SAR shall be exercisable to the extent provided therein by any person that may be empowered to do so under the Participant's will, or if the Participant shall fail to make a testamentary disposition of the SAR or shall have died intestate, by the Participant's executor or other legal representative. 7.9 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a Participant's Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. 7.10 NO RIGHTS. A Participant granted an SAR shall have no rights as a shareholder of the Company with respect to the Shares covered by such SAR except to the extent that Shares are issued to the Participant upon the due exercise of the SAR. ARTICLE 8. RESTRICTED STOCK 8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to eligible Key Employees in such amounts as the Committee shall determine. 8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of Restriction, or Periods, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine. 8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established 11 by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable Federal or state securities laws. The Company shall retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. 8.5 VOTING RIGHTS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. 8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may be credited with regular cash dividends paid with respect to the underlying Shares while they are so held. The Committee may apply any restrictions to the dividends that the Committee deems appropriate. In the event that any dividend constitutes a "derivative security" or an "equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend shall be subject to a vesting period equal to the remaining vesting period of the Shares of Restricted Stock with respect to which the dividend is paid. 8.7 TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Restricted Shares following termination of the Participant's employment with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all Shares of Restricted Stock issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. In amplification but not limitation of the foregoing, in the case of an award of Restricted Stock to a Named Executive Officer which is intended to qualify for the Performance-Based Exception, the Award Agreement may provide that such Restricted Stock may become payable in the event of a termination of employment by reason of 12 death, Disability or Change in Control, such payment not to occur before attainment of the related performance goal. ARTICLE 9. PERFORMANCE SHARES 9.1 GRANT OF PERFORMANCE SHARES. Subject to the terms of the Plan, Performance Shares may be granted to eligible Key Employees in such amount and upon such terms, and at any time and from time to time, as shall be determined by the Committee. The number and/or vesting of Performance Shares granted, in the Committee's discretion, shall be contingent upon the degree of attainment of specified performance goals or other conditions over a specified period (the "Performance Period"). The terms and conditions of an Award of Performance Shares shall be evidenced by an appropriate Award Agreement. 9.2 VALUE OF PERFORMANCE SHARES. The value of a Performance Share at any time shall equal the Fair Market Value of a Share at such time. 9.3 FORM AND TIMING OF PAYMENT OF PERFORMANCE SHARES. During the course of a Performance Period, the Committee shall determine the number of Performance Shares as to which the Participant has earned a right to be paid pursuant to the terms of the applicable Award Agreement. The Committee shall pay any earned Performance Shares as soon as practical after they are earned in the form of cash, Shares or a combination thereof (as determined by the Committee) having an aggregate Fair Market Value equal to the value of the earned Performance Shares as of the date they are earned. Any Shares used to pay out earned Performance Shares may be granted subject to any restrictions deemed appropriate by the Committee. In addition, the Committee, in its discretion, may cancel any earned Performance Shares and grant Stock Options to the Participant which the Committee determines to be of equivalent value based on a conversion formula stated in the Performance Shares Award Agreement. The Committee, in its discretion, may also grant dividend equivalents rights with respect to earned but unpaid Performance Shares as evidenced by the applicable Award Agreement. Performance Shares shall not have any voting rights. Prior to the beginning of a Performance Period (or at such other time as determined by the Committee), Participants may elect to defer the receipt of payment of any Performance Shares or other amounts (e.g., dividend equivalents rights) earned pursuant to the Award Agreement upon such terms as the Committee deems appropriate and as set forth in the applicable Award Agreement. 9.4 TERMINATION OF EMPLOYMENT. Each Performance Share Award Agreement shall set forth the extent to which the Participant shall have the right to receive unearned Performance Shares following termination of the Participant's employment with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreements entered into with Participants, need not be uniform among all Performance Shares awarded pursuant to the Plan, and may reflect distinctions based on the reasons of termination of employment. In amplification but not limitation of the foregoing, in the case of an award of Performance Shares to a Named Executive Officer which is intended to qualify for the Performance- 13 Based Exception, the Award Agreement may provide that such Performance Shares may become payable in the event of a termination of employment by reason of death, Disability or Change in Control, such payment not to occur before attainment of the related performance goal. 9.5 NONTRANSFERABILITY. Except as otherwise provided in a Participant's Award Agreement, Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant. ARTICLE 10. PERFORMANCE MEASURES The performance measure(s) to be used for purposes of Awards to Named Executive Officers which are designed to qualify for the Performance-Based Exception shall be chosen from among the following alternatives: (a) Earnings Per Share; (b) Net Income; (c) Return On Assets; (d) Return On Equity; or (e) Total Shareholder Return. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the preestablished performance goals; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Named Executive Officers, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. ARTICLE 11. BENEFICIARY DESIGNATION Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 12. DEFERRALS 14 The Committee may permit a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. ARTICLE 13. RIGHTS OF KEY EMPLOYEES 13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Company to erminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of this Plan, a transfer of a Participant's employment between the Company and a Subsidiary, or between Subsidiaries, shall not be deemed to be a termination of employment. Upon such a transfer, the Committee may make such adjustments to outstanding Awards as it deems appropriate to reflect the changed reporting relationships. 13.2 PARTICIPATION. No Key Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 14. CHANGE IN CONTROL 14.1TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges: (a) Any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term; (b) Any restriction periods and restrictions imposed on shares of Restricted Stock shall lapse; (c) The target payout opportunities attainable under all outstanding Awards of Restricted Stock and Performance Shares shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control, and the vesting of all Awards shall be accelerated as of the effective date of the Change in Control; and (d) Subject to Article 15 herein, the Committee shall have the authority to make any modifications to the Awards as determined by the Committee to be appropriate before the effective date of the Change in Control. 14.2 LIMITATION ON CHANGE-IN-CONTROL BENEFITS. It is the intention of the Company and the Participants to reduce the amounts payable or distributable to a Participant hereunder if the aggregate Net After Tax Receipts (as defined below) to the Participant would thereby be increased, as a result of the application of the excise tax provisions of Section 4999 of the Code. Accordingly, anything in this Plan to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to any "change" described below (the "Accounting 15 Firm") shall determine that receipt of all Payments (as defined below) would subject the Participant to tax under Section 4999 of the Code, it shall determine whether some amount of Payments would meet the definition of a "Reduced Amount," (as defined below). If the Accounting Firm determines that there is a Reduced Amount, the aggregate Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 14.2(b) below. (a) For purposes of this Section 14.2(a): (i) A "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of a Participant who is a "disqualified individual" within the meaning of Section 280G(c) of the Code and which is contingent on a "change" described in Section 280G(b)(2)(A)(i) of the Code with respect to the Company, whether paid or payable pursuant to this Plan or otherwise; (ii) "Plan Payment" shall mean a Payment paid or payable pursuant to this Plan (disregarding this Section 14.2); (iii)"Net After Tax Receipt" shall mean the Present Value of a Payment, net of all taxes imposed on the Participant with respect thereto under Sections 1 and 4999 of the Code, determined by applying the highest marginal rate under Section 1 of the Code which applied to the Participant's Federal taxable income for the immediately preceding taxable year; (iv) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the smallest aggregate amount of Payments which (A) is less than the sum of all Payments and (B) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if all Payments were paid to or for the benefit of the Participant. (b) If the Accounting Firm determines that aggregate Payments should be reduced to the Reduced Amount, the Committee shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof, and the Participant may then elect, in the Participant's sole discretion, which and how much of the Payments, including without limitation Plan Payments, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments is equal to the Reduced Amount), and shall advise the Committee in writing of such election within ten (10) days of the Participant's receipt of notice. If no such election is made by the Participant within such ten (10) day period, the Committee may elect which of the Payments, including without limitation Plan Payments, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Payments is equal to the Reduced Amount) and shall notify the Participant promptly of such election. All determinations made by the Accounting Firm under this Section 14.2 shall be binding upon the Company and the Participant and shall be made within sixty (60) days immediately following the event constituting the "change" referred to above. As promptly as 16 practicable following such determination, the Company shall pay to or distribute for the benefit of the Participant such Payments as are then due to the Participant under this Plan. (c) At the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Plan which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Participant pursuant to this Plan could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant which the Accounting Firm believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Participant shall be treated for all purposes as a loan ab initio to the Participant which the Participant shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Participant to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Participant is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. 14.3 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 14 may not be terminated, amended, or modified on or after the date of a Change in Control to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant's outstanding Awards; provided, however, the Board of Directors, upon recommendation of the Committee, may terminate, amend, or modify this Article 14 at any time and from time to prior to the date of a Change in Control. ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION 15.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment which requires shareholder approval in order for the Plan to continue to comply with Rule 16b-3 under the Exchange Act, including any successor to such Rule, shall be effective unless such amendment shall be approved by the requisite vote of shareholders of the Company entitled to vote thereon. The Committee shall not have the authority to cancel outstanding Awards and issue substitute Awards in replacement thereof. 17 15.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. 15.3 ACCELERATION OF AWARD VESTING; WAIVER OF RESTRICTIONS. Notwithstanding any provision of this Plan or any Award Agreement provision to the contrary, the Committee, in its sole and exclusive discretion, shall have the power at any time to (i) accelerate the vesting of any Award granted under the Plan, including without limitation, acceleration to such a date that would result in said Awards becoming immediately vested, or (ii) waive any restrictions of any Award granted under the Plan. ARTICLE 16. WITHHOLDING 16.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan. 16.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. ARTICLE 17. INDEMNIFICATION Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. ARTICLE 18. SUCCESSORS All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 18 ARTICLE 19. LEGAL CONSTRUCTION 19.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 19.2 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 19.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 19.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions or Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 19.5 GOVERNING LAW. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of North Carolina. 19 EX-10 12 EXHIBIT 10(X) AMENDMENT TO RESTRICTED STOCK AWARD PLAN AGREEMENTS THIS AMENDMENT TO RESTRICTED STOCK AWARD PLAN AGREEMENTS (the "Agreement") is made and entered into as of the 20 day of December, 1996, by and between NATIONSBANK CORPORATION, a North Carolina corporation ("NationsBank"), and HUGH L. McCOLL, JR. ("Executive"). Statement of Purpose NationsBank and Executive previously entered into a Restricted Stock Award Plan Agreement dated January 22, 1992 and another Restricted Stock Award Plan Agreement dated June 22, 1994 (collectively, the "Award Agreements," and individually, an "Award Agreement"). Under the Award Agreements, shares of restricted stock (the "Restricted Stock") were granted to Executive under the 1986 Restricted Stock Award Plan of NationsBank Corporation, as amended (the "Restricted Stock Plan"), and such shares of Restricted Stock were scheduled to vest in five (5) equal annual installments beginning January 1, 1993 in the case of the 1992 Award Agreement and January 1, 1995 in the case of the 1994 Award Agreement. As of the date hereof, shares of Restricted Stock remain unvested under each Award Agreement. As additional incentive for Executive to remain with NationsBank through his normal retirement date, the parties desire to amend the Award Agreements as set forth herein to provide that the unvested shares of Restricted Stock shall not vest until Executive's normal retirement date. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, NationsBank and Executive hereby agree that each Award Agreement is amended as follows: 1. Notwithstanding any provision of the Award Agreements to the contrary, (i) the vesting schedule attached as Exhibit B to each Award Agreement is hereby terminated with respect to any shares of the Restricted Stock that are not vested as of the date hereof, and (ii) in lieu thereof, such unvested shares of Restricted Stock shall not vest until July 1, 2000 (i.e., Executive's normal retirement date), subject to becoming earlier vested in accordance with the provisions of Paragraph 6 of the Restricted Stock Plan. 2. Except as expressly or by necessary implication amended hereby, each Award Agreement shall remain in full force and effect. IN WITNESS WHEREOF, NationsBank has caused this Agreement to be executed by its duly authorized officer and Executive has hereunto set his hand and seal, all as of the day and year first above written. NATIONSBANK CORPORATION By: /s/ C. J. Cooley C. J. Cooley, Executive Vice President "NationsBank" /s/ Hugh L. McColl, Jr. [SEAL] Hugh L. McColl, Jr. "Executive" EX-10 13 EXHIBIT 10(Y) Exhibit 10(y) AMENDMENT #2 TO AGREEMENT AND PLAN OF MERGER AMENDMENT, dated as of January 6, 1997 (this "Amendment") between NationsBank Corporation, a North Carolina corporation ("Parent"), NB Holdings Corporation, a Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub") and Boatmen's Bancshares, Inc., a Missouri corporation (the "Company"). WHEREAS, Parent, the Company and Merger Sub have previously entered into that certain Agreement and Plan of Merger dated as of August 29, 1996, as amended on November 11, 1996 (the "Agreement"); and WHEREAS, such persons wish to amend the Agreement in the manner set forth below. NOW, THEREFORE, the parties hereto agree as follows: 1. All capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Agreement, and each reference in the Agreement to "this Agreement", "hereof", "herein", "hereunder" or "hereby" and each other similar reference shall be deemed to refer to the Agreement as amended hereby. All references to the Agreement in any other agreement between Parent and the Company relating to the transactions comtemplated by the Agreement shall be deemed to refer to the Agreement as amended hereby. 2. Section 2.01(b) is hereby amended and restated in its entirety as follows: (b) Effectiveness And Effects Of the Merger. Subject to the satisfaction or waiver of the conditions set forth in Article VII in accordance with this Agreement, the Merger shall become effective upon the filing in the office of the Secretary of State of Delaware of a certificate of merger or such later date and time as may be set forth in such certificate of merger in accordance with Section 252 of the General Corporation Law of the State of Delaware (the "GCL"). The Merger shall have the effects prescribed in Section 450 of the General and Business Corporation Law of Missouri and Section 252 of the GCL. 3. This Amendment shall be governed by and construed in accordance with the law of the State of Missouri, without regard to the conflicts of law rules of such state. 4. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. 5. Except as expressly amended hereby, the Agreement shall remain in full force and effect. -2- IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed in counterparts by their duly authorized officers, all as of the day and year first above written. BOATMEN'S BANCSHARES, INC. By: /s/ Gregory L. Curl Name: Gregory L. Curl Title: Vice Chairman NATIONSBANK CORPORATION By: /s/ James H. Hance, Jr. Name: James H. Hance, Jr. Title: Vice Chairman and Chief Financial Officer NB HOLDINGS CORPORATION By: /s/ James H. Hance, Jr. Name: James H. Hance, Jr. Title: Vice Chairman and Chief Financial Officer -3- EX-11 14 EXHIBIT 11 EXHIBIT 11 FULLY DILUTED EARNINGS PER COMMON SHARE AND FULLY DILUTED AVERAGE COMMON SHARES OUTSTANDING For fully diluted earnings per common share, net income available to common shareholders can be affected by the conversion of the registrant's convertible preferred stock. Where the effect of this conversion would have been dilutive, net income available to common shareholders is adjusted by the associated preferred dividends. This adjusted net income is divided by the weighted average number of common shares outstanding for each period plus amounts representing the dilutive effect of stock options outstanding and the dilution resulting from the conversion of the registrant's convertible preferred stock, if applicable. The effect of convertible preferred stock is excluded from the computation of fully diluted earnings per share in periods in which the effect would be antidilutive. Fully diluted earnings per common share was determined as follows (shares in thousands, dollars in millions except per-share information):
Year Ended December 31 ------------------------------------- 1996 1995 1994 ------- ------- ------- Average common shares outstanding ................................... 590,216 544,959 549,312 Dilutive effect of Convertible preferred stock ........................................ 3,896 4,582 5,026 Stock options ...................................................... 9,418 4,726 2,808 -------- -------- -------- Total fully dilutive shares ......................................... 603,530 554,267 557,146 ======== ======== ======== Income available to common shareholders ............................. $ 2,360 $ 1,942 $ 1,680 Preferred dividends paid on dilutive convertible preferred stock .................................................. 7 8 10 -------- -------- -------- Total net income available for common shareholders adjusted for full dilution ....................................... $ 2,367 $ 1,950 $ 1,690 ======== ======== ======== Fully diluted earnings per common share ............................. $ 3.92 $ 3.52 $ 3.03 ======== ======== ========
EX-12 15 EXHIBIT 12(A) NATIONSBANK CORPORATION AND SUBSIDIARIES EXHIBIT 12(a) RATIO OF EARNINGS TO FIXED CHARGES - -------------------------------------------------------------------------------- (Dollars in Millions)
Year ended December 31 -------------------------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- ------- -------- -------- EXCLUDING INTEREST ON DEPOSITS - ------------------------------- Income before taxes .................................. $ 3,634 $ 2,991 $ 2,555 $ 1,991 $ 1,396 Equity in undistributed (earnings) losses of unconsolidated subsidiaries...................... 2 (7) (3) (5) (1) Fixed charges: Interest expense (including capitalized interest) ......................... 4,125 4,480 2,896 1,421 916 Amortization of debt discount and appropriate issuance costs .................... 20 12 8 6 3 1/3 of net rent expense ......................... 126 125 114 96 91 -------- -------- ------- ------- -------- Total fixed charges ........................... 4,271 4,617 3,018 1,523 1,010 Earnings (excluding capitalized interest) ............ $ 7,907 $ 7,601 $ 5,570 $ 3,509 $ 2,398 ======== ======== ======= ======= ======== Fixed charges ........................................ $ 4,271 $ 4,617 $ 3,018 $ 1,523 $ 1,010 ======== ======== ======= ======= ======== Ratio of Earnings to Fixed Charges ................... 1.85 1.65 1.85 2.30 2.38 INCLUDING INTEREST ON DEPOSITS - ------------------------------ Income before taxes .................................. $ 3,634 $ 2,991 $ 2,555 $ 1,991 $ 1,396 Equity in undistributed (earnings) losses of unconsolidated subsidiaries...................... 2 (7) (3) (5) (1) Fixed charges: Interest expense (including capitalized interest) ......................... 7,447 7,761 5,310 3,570 3,688 Amortization of debt discount and appropriate issuance costs .................... 20 12 8 6 3 1/3 of net rent expense ......................... 126 125 114 96 91 -------- -------- ------- ------- -------- Total fixed charges ........................... 7,593 7,898 5,432 3,672 3,782 Earnings (excluding capitalized interest) ............ $ 11,229 $ 10,882 $ 7,984 $ 5,658 $ 5,170 ======== ======== ======= ======= ======== Fixed charges ........................................ $ 7,593 $ 7,898 $ 5,432 $ 3,672 $ 3,782 ======== ======== ======= ======= ======== Ratio of Earnings to Fixed Charges ................... 1.48 1.38 1.47 1.54 1.37
EX-12 16 EXHIBIT 12(B) NATIONSBANK CORPORATION AND SUBSIDIARIES EXHIBIT 12(b) RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS - -------------------------------------------------------------------------------- (Dollars in Millions)
Year ended December 31 -------------------------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- ------- -------- -------- EXCLUDING INTEREST ON DEPOSITS - ------------------------------- Income before taxes .................................. $ 3,634 $ 2,991 $ 2,555 $ 1,991 $ 1,396 Equity in undistributed (earnings) losses of unconsolidated subsidiaries...................... 2 (7) (3) (5) (1) Fixed charges: Interest expense (including capitalized interest) ......................... 4,125 4,480 2,896 1,421 916 Amortization of debt discount and appropriate issuance costs .................... 20 12 8 6 3 1/3 of net rent expense ......................... 126 125 114 96 91 -------- -------- ------- ------- -------- Total fixed charges ........................... 4,271 4,617 3,018 1,523 1,010 Preferred dividend requirements....................... 22 13 15 16 29 Earnings (excluding capitalized interest) ............ $ 7,907 $ 7,601 $ 5,570 $ 3,509 $ 2,398 ======== ======== ======= ======= ======== Fixed charges ........................................ $ 4,293 $ 4,630 $ 3,033 $ 1,539 $ 1,039 ======== ======== ======= ======= ======== Ratio of Earnings to Fixed Charges ................... 1.84 1.64 1.84 2.28 2.31 INCLUDING INTEREST ON DEPOSITS - ------------------------------- Income before taxes .................................. $ 3,634 $ 2,991 $ 2,555 $ 1,991 $ 1,396 Equity in undistributed (earnings) losses of unconsolidated subsidiaries...................... 2 (7) (3) (5) (1) Fixed charges: Interest expense (including capitalized interest) ......................... 7,447 7,761 5,310 3,570 3,688 Amortization of debt discount and appropriate issuance costs .................... 20 12 8 6 3 1/3 of net rent expense ......................... 126 125 114 96 91 -------- -------- ------- ------- -------- Total fixed charges ........................... 7,593 7,898 5,432 3,672 3,782 Preferred dividend requirements ...................... 22 13 15 16 29 Earnings (excluding capitalized interest) ............ $ 11,229 $ 10,882 $ 7,984 $ 5,658 $ 5,170 ======== ======== ======= ======= ======== Fixed charges ........................................ $ 7,615 $ 7,911 $ 5,447 $ 3,688 $ 3,811 ======== ======== ======= ======= ======== Ratio of Earnings to Fixed Charges ................... 1.47 1.38 1.47 1.53 1.36
EX-13 17 EXHIBIT 13 1996 ANNUAL REPORT Management's Discussion And Analysis ON FEBRUARY 27, 1997, NATIONSBANK COMPLETED A 2-FOR-1 SPLIT OF ITS COMMON STOCK. ALL FINANCIAL DATA INCLUDED IN THE 1996 ANNUAL REPORT HAS BEEN RESTATED TO REFLECT THE IMPACT OF THE STOCK SPLIT. 1996 COMPARED TO 1995 OVERVIEW NationsBank Corporation (the Corporation), a multi-bank holding company headquartered in Charlotte, North Carolina, provides a diversified range of banking and certain non-banking financial services both domestically and internationally through three major Business Units: the GENERAL BANK, GLOBAL FINANCE and FINANCIAL SERVICES. After the acquisition of Boatmen's Bancshares, Inc. on January 7, 1997, the Corporation had approximately $227 billion in assets, making it the fourth largest banking company in the United States. The Corporation's continued earnings momentum was demonstrated through a 26-percent increase in operating net income to $2.45 billion in 1996 compared to $1.95 billion in 1995. Operating earnings per common share for 1996 increased 16 percent to $4.13 from $3.56 in 1995 and fully diluted operating earnings per share increased 15 percent to $4.05. Including a merger-related charge of $118 million ($77 million, net of tax), net income increased 22 percent to $2.38 billion, earnings per share rose 12 percent to $4.00 and fully diluted earnings per share increased 11 percent to $3.92. KEY PERFORMANCE HIGHLIGHTS FOR 1996 WERE: (bullet) Operating return on average common shareholders' equity increased 152 basis points to 18.53 percent from 17.01 percent in 1995. Including the merger-related charge, return on average common shareholders' equity increased to 17.95 percent for 1996. (bullet) Taxable-equivalent net interest income rose 16 percent to $6.4 billion in 1996 due to the impact of acquisitions, higher spreads in the securities portfolio, growth in average consumer loans and an increase in noninterest-bearing deposits. The net interest yield increased to 3.62 percent compared to 3.33 percent in 1995. (bullet) Provision for credit losses covered net charge-offs and totaled $605 million in 1996 compared to $382 million in 1995, reflecting the continuation of a return to more normalized levels of credit losses following periods of unusually low credit losses. Net charge-offs totaled $598 million, or .48 percent of average loans, leases and factored accounts receivable, versus .38 percent in 1995. Nonperforming assets increased to $1.0 billion on December 31, 1996 compared to $853 million on December 31, 1995 due primarily to acquisitions. (bullet) Noninterest income increased 18.5 percent to $3.6 billion in 1996, driven primarily by higher deposit account service charges, investment banking income and mortgage servicing and mortgage-related fees. (bullet) Noninterest expense increased 9.7 percent to $5.7 billion. Excluding the impact of acquisitions, noninterest expense increased only 4 percent. (bullet) Revenue growth continued to outpace expense growth in 1996, improving the efficiency ratio 351 basis points to 56.3 percent. (bullet) Cash basis ratios, which measure operating performance excluding intangible assets and the related amortization expense, improved with cash basis earnings per share rising 15 percent to $4.34 and return Management's Discussion And Analysis 17
TABLE ONE. FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA =================================================================================================================================== (DOLLARS IN MILLIONS EXCEPT PER-SHARE INFORMATION) 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Income from earning assets........................................ $13,796 $13,220 $10,529 $8,327 $7,780 Interest expense.................................................. 7,467 7,773 5,318 3,690 3,682 Net interest income (taxable-equivalent).......................... 6,423 5,560 5,305 4,723 4,190 Net interest income............................................... 6,329 5,447 5,211 4,637 4,098 Provision for credit losses....................................... 605 382 310 430 715 Gains (losses) on sales of securities............................. 67 29 (13) 84 249 Noninterest income................................................ 3,646 3,078 2,597 2,101 1,913 Other real estate owned expense (income).......................... 20 18 (12) 78 183 Merger-related charge............................................. 118 - - 30 - Other noninterest expense......................................... 5,665 5,163 4,942 4,293 3,966 Income before taxes and effect of change in method of accounting for income taxes........................ 3,634 2,991 2,555 1,991 1,396 Income tax expense................................................ 1,259 1,041 865 690 251 Income before effect of change in method of accounting for income taxes..................................... 2,375 1,950 1,690 1,301 1,145 Effect of change in method of accounting for income taxes......... - - - 200 - Net income........................................................ 2,375 1,950 1,690 1,501 1,145 Net income available to common shareholders....................... 2,360 1,942 1,680 1,491 1,121 Net income (excluding merger-related charge)...................... 2,452 1,950 1,690 1,521 1,145 Average common shares issued (in thousands)....................... 590,216 544,959 549,312 515,938 487,496 PER COMMON SHARE Earnings before effect of change in method of accounting for income taxes...................................... $4.00 $3.56 $3.06 $2.50 $2.30 Earnings............................................................ 4.00 3.56 3.06 2.89 2.30 Earnings (excluding merger-related charge).......................... 4.13 3.56 3.06 2.93 2.30 Fully diluted earnings per share.................................... 3.92 3.52 3.03 2.86 2.26 Fully diluted earnings per share (excluding merger-related charge).. 4.05 3.52 3.03 2.90 2.26 Cash basis earnings (excluding merger-related charge) (1)........... 4.34 3.78 3.28 3.10 2.48 Cash dividends paid................................................. 1.20 1.04 .94 .82 .76 Shareholders' equity (year-end)..................................... 23.69 23.26 19.85 18.20 15.40 BALANCE SHEET (YEAR-END) Total loans, leases and factored accounts receivable, net of unearned income...........................................122,630 117,033 103,371 92,007 72,714 Total assets.......................................................185,794 187,298 169,604 157,686 118,059 Total deposits.....................................................106,498 100,691 100,470 91,113 82,727 Long-term debt..................................................... 22,985 17,775 8,488 8,352 3,066 Common shareholders' equity........................................ 13,586 12,759 10,976 9,859 7,793 Total shareholders' equity......................................... 13,709 12,801 11,011 9,979 7,814 PERFORMANCE RATIOS Return on average assets........................................... 1.18% 1.03% 1.02% .97% 1.00% Return on average assets (excluding merger-related charge)......... 1.22 1.03 1.02 .98 1.00 Return on average tangible assets (excluding merger-related charge) (1)............................ 1.30 1.11 1.10 1.06 1.08 Return on average common shareholders' equity (2).................. 17.95 17.01 16.10 15.00 15.83 Return on average common shareholders' equity (excluding merger-related charge) (2)............................ 18.53 17.01 16.10 15.23 15.83 Return on average tangible common shareholders' equity (excluding merger-related charge) (1)(2)......................... 22.80 20.74 19.85 18.34 19.46 Tier 1 capital ratio............................................... 7.76 7.24 7.43 7.41 7.54 Total capital ratio................................................ 12.66 11.58 11.47 11.73 11.52 Leverage capital ratio............................................. 7.09 6.27 6.18 6.00 6.16 Total equity to total assets....................................... 7.38 6.83 6.49 6.33 6.62 MARKET PRICE PER SHARE OF COMMON STOCK Market price of common stock (close at the end of the year)........ $48 7/8 $34 13/16 $22 9/16 $24 1/2 $25 11/16 High for the year.................................................. 52 5/8 37 3/8 28 11/16 29 26 11/16 Low for the year................................................... 32 3/16 22 5/16 21 11/16 22 1/4 19 13/16
(1) CASH BASIS RATIOS EXCLUDE INTANGIBLE ASSETS AND THE RELATED AMORTIZATION EXPENSE. (2) AVERAGE COMMON SHAREHOLDERS' EQUITY DOES NOT INCLUDE THE EFFECT OF MARKET VALUE ADJUSTMENTS TO SECURITIES AVAILABLE FOR SALE AND MARKETABLE EQUITY SECURITIES. IN 1993, RETURN ON AVERAGE ASSETS AND RETURN ON EQUITY AFTER THE TAX BENEFIT FROM THE IMPACT OF ADOPTING A NEW INCOME TAX ACCOUNTING STANDARD WERE 1.12% AND 17.33%, RESPECTIVELY. 18 NationsBank Corporation Annual Report 1996 on average tangible common shareholders' equity increasing over 200 basis points to 22.80 percent. HIGHLIGHTS FROM A BUSINESS UNIT PERSPECTIVE WERE: (bullet) The GENERAL BANK'S 1996 earnings increased 35 percent to $1.6 billion. Return on equity increased approximately 300 basis points to 22 percent in 1996. Revenue growth and expense control led to a 520 basis-point improvement in the efficiency ratio in 1996 to 58.6 percent. (bullet) GLOBAL FINANCE's earnings rose to $635 million in 1996. Return on equity remained constant at 16 percent in 1996. The efficiency ratio improved slightly to 53.5 percent. (bullet) FINANCIAL SERVICES' earnings rose 29 percent to $166 million in 1996. Return on equity remained constant at 14 percent in 1996. The efficiency ratio was 45.1 percent in 1996 compared to 42.1 percent in 1995 due primarily to office consolidation costs in 1996. The remainder of management's discussion and analysis of the consolidated results of operations and financial condition of the Corporation should be read together with the consolidated financial statements and related notes presented on pages 49 through 71. BUSINESS UNIT OPERATIONS The Business Units are managed with a focus on numerous performance objectives including return on equity, operating efficiency and net income. TABLE TWO summarizes key performance measures for each of the Business Units. The net interest income of the Business Units reflects the results of a funds transfer pricing process which derives net interest
TABLE TWO. BUSINESS UNIT SUMMARY ================================================================================================================================ (DOLLARS IN MILLIONS) GENERAL BANK GLOBAL FINANCE FINANCIAL SERVICES - -------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 - -------------------------------------------------------------------------------------------------------------------------------- Net interest income (taxable-equivalent) ................ $4,602 $3,817 $1,202 $1,186 $572 $527 Noninterest income ...................................... 2,500 2,100 1,019 910 122 68 --------------------------------------------------------------------- Total revenue ........................................ 7,102 5,917 2,221 2,096 694 595 Provision for credit losses ............................. 438 267 43 - 124 115 Gains on sales of securities ............................ 25 - - - - - Other real estate owned expense (income) ................ 16 11 (5) (7) 9 14 Noninterest expense ..................................... 4,165 3,776 1,188 1,136 313 250 -------------------------------------------------------------------- Income before income taxes .............................. 2,508 1,863 995 967 248 216 Income tax expense ...................................... 916 688 360 358 82 87 -------------------------------------------------------------------- Net income (1) .......................................... $1,592 $1,175 $635 $609 $166 $129 ====================================================================== Net interest yield (2) .................................. 4.68% 4.69% 3.09% (3) 3.39% (3) 7.10% 7.30% Average equity to assets ................................ 6.8% 6.8% 4.9% 5.4% 14.1% 12.2% Return on equity ........................................ 22% 19% 16% 16% 14% 14% Efficiency ratio ........................................ 58.6% 63.8% 53.5% 54.2% 45.1% 42.1% Average (2)(4) Total loans and leases, net of unearned income .......$78,708 $68,607 $36,117 $34,195 $8,022 $7,204 Total deposits ....................................... 87,904 77,333 8,212 7,160 - - Total assets .........................................104,395 88,918 78,368 71,833 8,528 7,699 Year-end (2)(4) Total loans and leases, net of unearned income ....... 76,815 74,031 36,763 35,187 8,279 7,798 Total deposits ....................................... 90,080 79,549 8,321 7,861 - -
(1) BUSINESS UNIT RESULTS ARE PRESENTED ON A FULLY ALLOCATED BASIS EXCEPT FOR MINOR AMOUNTS ASSOCIATED WITH UNASSIGNED CAPITAL, GAINS ON SALES OF CERTAIN SECURITIES, MERGER-RELATED CHARGES AND OTHER CORPORATE ACTIVITIES. (2) 1995 NET INTEREST YIELDS AND AVERAGE AND YEAR-END BALANCES HAVE BEEN RESTATED TO REFLECT THE CURRENT ORGANIZATIONAL STRUCTURE. (3) GLOBAL FINANCE'S NET INTEREST YIELD EXCLUDES THE IMPACT OF TRADING-RELATED ACTIVITIES. INCLUDING TRADING-RELATED ACTIVITIES, THE NET INTEREST YIELD WAS 1.78 PERCENT FOR 1996 AND 1.95 PERCENT FOR 1995. (4) THE SUMS OF BALANCE SHEET AMOUNTS DIFFER FROM CONSOLIDATED AMOUNTS DUE TO ACTIVITIES BETWEEN THE BUSINESS UNITS. Management's Discussion And Analysis 19 income by matching assets and liabilities with similar interest rate sensitivity and maturity characteristics. Equity capital is allocated to each Business Unit based on an assessment of its inherent risk. The GENERAL BANK provides comprehensive services in the retail and commercial banking fields. Within the GENERAL BANK, the BANKING GROUP, which contains the retail banking network, is the service provider for small and medium-size companies and individuals. On December 31, 1996, the BANKING GROUP had 1,979 banking offices located in the states of Florida, Georgia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee, Texas and Virginia and the District of Columbia. In addition, fully-automated, 24-hour cash dispensing and depositing services are provided throughout these states through 3,948 automated teller machines. Specialized services, such as the origination and servicing of home mortgage loans, the issuance and servicing of credit cards, indirect lending, dealer finance and certain insurance services, are provided throughout the Corporation's franchise, and on a nationwide basis for certain products, through the FINANCIAL PRODUCTS group of the GENERAL BANK. The GENERAL BANK also contains the ASSET MANAGEMENT GROUP which includes INVESTING AND INVESTMENT MANAGEMENT, which provides retirement services for defined benefit and defined contribution plans, full service and discount brokerage services and investment advisory services, including advising the Nations Funds family of mutual funds, and THE PRIVATE CLIENT GROUP, which offers banking, fiduciary and investment management services. The GENERAL BANK'S earnings increased 35 percent to $1.6 billion in 1996. The BANKING GROUP'S strong loan growth and growth in fee income accounted for most of the increased earnings over 1995. The GENERAL BANK'S return on equity rose approximately 300 basis points to 22 percent. Taxable-equivalent net interest income increased 21 percent including the impact of acquisitions. Excluding the impact of acquisitions and securitizations, net interest income increased 10 percent. Average loans and leases in the GENERAL BANK increased 15 percent primarily attributable to residential mortgages acquired through acquisitions. Noninterest income rose 19 percent to $2.5 billion led by increases in deposit service fee income, increased mortgage servicing and production fees, a gain related to the change in control of Gartmore plc and a gain on the sale of certain consumer loans. Noninterest expense increased 10 percent, which was significantly below the total revenue growth of 20 percent. Acquisition-related and other increases in personnel and higher general operating expense accounted for most of the expense growth. Excluding acquisitions, noninterest expense increased only 3 percent. Strong revenue growth offset moderate expense growth, resulting in a 520 basis-point improvement in the efficiency ratio. GLOBAL FINANCE provides comprehensive corporate and investment banking services to domestic and international customers through its CORPORATE FINANCE/CAPITAL MARKETS, SPECIALIZED LENDING and REAL ESTATE units. The GLOBAL FINANCE group serves as a principal lender and investor as well as an advisor, and manages treasury and trade transactions for clients and customers. Loan origination and syndication, asset-backed lending, leasing, factoring, project finance and mergers and acquisitions are representative of the services provided. These services are provided through various domestic offices as well as offices located in London, Singapore, Bogota, Mexico City, Grand Cayman, Nassau, Seoul, Tokyo, Osaka, Bombay, Jakarta, Taipei, Sao Paulo and Hong Kong. Through its Section 20 subsidiary, NATIONSBANC CAPITAL MARKETS, INC., GLOBAL FINANCE underwrites, distributes and makes markets in high-grade and high-yield securities. Additionally, GLOBAL FINANCE is a primary dealer of U.S. Government securities and is a market maker in derivatives products which include swap agreements, option contracts, forward settlement contracts, financial futures and other derivative products in certain interest rate, foreign exchange, commodity and equity markets. In support of these activities, GLOBAL FINANCE takes positions to support client demands and its own account. Major centers for the above activities are Charlotte, Chicago, London, New York, Singapore and Tokyo. GLOBAL FINANCE'S earnings increased 4 percent to $635 million in 1996, resulting in a consistent return on equity of 16 percent. Taxable-equivalent net interest income increased $16 million over 1995 due to loan growth which was partially offset by competitive loan pricing. Loan growth, primarily commercial, was concentrated in the CORPORATE FINANCE/CAPITAL MARKETS and SPECIALIZED LENDING units. 20 NationsBank Corporation Annual Report 1996
TABLE THREE. 12-MONTH TAXABLE-EQUIVALENT DATA =================================================================================================================================== (DOLLARS IN MILLIONS) 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE BALANCE INCOME BALANCE INCOME BALANCE INCOME SHEET OR YIELDS/ SHEET OR YIELDS/ SHEET OR YIELDS/ AMOUNTS EXPENSE RATES AMOUNTS EXPENSE RATES AMOUNTS EXPENSE RATES - ----------------------------------------------------------------------------------------------------------------------------------- Earning assets Loans and leases, net of unearned income (1) Commercial (2) ............................. $49,553 $4,042 8.16% $46,358 $3,797 8.19%$41,606 $3,147 7.56% Real estate commercial .................... 6,090 550 9.03 7,195 669 9.30 7,780 636 8.18 Real estate construction .................. 3,165 281 8.89 3,106 302 9.73 3,155 268 8.49 - ----------------------------------------------------------------------------------------------------------------------------------- Total commercial ........................ 58,808 4,873 8.29 56,659 4,768 8.42 52,541 4,051 7.71 - ----------------------------------------------------------------------------------------------------------------------------------- Residential mortgage ...................... 27,813 2,169 7.80 20,562 1,600 7.78 14,980 1,141 7.62 Credit card ............................... 6,228 733 11.77 5,013 641 12.78 3,956 508 12.84 Other consumer ............................ 22,467 2,218 9.87 21,940 2,209 10.07 19,768 1,831 9.26 - ----------------------------------------------------------------------------------------------------------------------------------- Total consumer .......................... 56,508 5,120 9.06 47,515 4,450 9.37 38,704 3,480 8.99 - ----------------------------------------------------------------------------------------------------------------------------------- Foreign ................................... 2,664 183 6.87 2,036 157 7.71 1,417 86 6.10 Lease financing ........................... 4,288 324 7.58 3,277 249 7.59 2,344 176 7.50 - ----------------------------------------------------------------------------------------------------------------------------------- Total loans and leases, net ............. 122,268 10,500 8.59 109,487 9,624 8.79 95,006 7,793 8.20 - ----------------------------------------------------------------------------------------------------------------------------------- Securities Held for investment ....................... 3,442 193 5.59 15,521 864 5.57 15,048 761 5.06 Available for sale (3) .................... 17,295 1,146 6.63 10,272 642 6.25 12,386 644 5.20 - ----------------------------------------------------------------------------------------------------------------------------------- Total securities ........................ 20,737 1,339 6.46 25,793 1,506 5.84 27,434 1,405 5.12 - ----------------------------------------------------------------------------------------------------------------------------------- Loans held for sale ......................... 1,078 79 7.30 322 24 7.47 339 23 6.63 Federal funds sold .......................... 389 23 5.95 774 47 6.10 983 45 4.59 Securities purchased under agreements to resell 12,445 643 5.16 14,385 890 6.19 12,406 502 4.05 Time deposits placed and other short-term investments .................... 1,436 80 5.54 2,066 142 6.87 1,762 90 5.12 Trading account securities (4) .............. 19,047 1,226 6.44 14,177 1,100 7.76 10,451 765 7.32 - ----------------------------------------------------------------------------------------------------------------------------------- Total earning assets (5) ................ 177,400 13,890 7.83 167,004 13,333 7.98 148,381 10,623 7.16 Cash and cash equivalents ...................... 7,807 7,820 8,271 Factored accounts receivable ................... 1,135 1,163 1,252 Other assets, less allowance for credit losses . 14,543 12,560 8,415 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets ............................ $200,885 $188,547 $166,319 =================================================================================================================================== Interest-bearing liabilities Savings ..................................... $9,024 201 2.22 $8,575 204 2.37 $9,116 212 2.33 NOW and money market deposit accounts ....... 30,243 763 2.52 27,640 740 2.68 29,724 696 2.34 Consumer CDs and IRAs (6) ................... 30,034 1,585 5.28 24,840 1,290 5.19 23,937 999 4.17 Negotiated CDs, public funds and other time deposits ................... 3,114 171 5.49 2,992 166 5.56 3,319 133 4.02 Foreign time deposits ....................... 11,180 602 5.38 14,103 881 6.25 7,544 375 4.98 Federal funds purchased ..................... 4,694 251 5.35 5,455 322 5.91 5,397 219 4.07 Securities sold under agreements to repurchase (6) ............................. 28,517 1,531 5.37 30,336 1,863 6.14 24,903 1,075 4.32 Commercial paper ............................ 2,966 165 5.57 2,804 171 6.10 2,482 111 4.46 Other short-term borrowings (6) ............. 3,344 208 6.22 5,690 354 6.20 5,015 213 4.25 Trading account liabilities (4) ............. 10,137 653 6.44 12,025 896 7.45 10,526 735 6.98 Long-term debt (7) .......................... 20,603 1,337 6.51 12,652 886 7.00 8,033 550 6.85 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities ...... 153,856 7,467 4.85 147,112 7,773 5.28 129,996 5,318 4.09 Noninterest-bearing sources Noninterest-bearing deposits ................ 23,990 21,128 20,097 Other liabilities ........................... 9,776 8,856 5,742 Shareholders' equity ........................ 13,263 11,451 10,484 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity ................................ $200,885 $188,547 $166,319 =================================================================================================================================== Net interest spread ............................ 2.98 2.70 3.07 Impact of noninterest-bearing sources .......... .64 .63 .51 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income/yield on earning assets .... $6,423 3.62% $5,560 3.33% $5,305 3.58% ===================================================================================================================================
(1) NONPERFORMING LOANS ARE INCLUDED IN THE RESPECTIVE AVERAGE LOAN BALANCES. INCOME ON SUCH NONPERFORMING LOANS IS RECOGNIZED ON A CASH BASIS. (2) COMMERCIAL LOAN INTEREST INCOME INCLUDES NET INTEREST RATE SWAP REVENUES RELATED TO SWAPS CONVERTING VARIABLE-RATE COMMERCIAL LOANS TO FIXED RATE. INTEREST RATE SWAPS INCREASED (DECREASED) INTEREST INCOME $26, ($209) AND $62 IN 1996, 1995 AND 1994, RESPECTIVELY. (3) THE AVERAGE BALANCE SHEET AMOUNTS AND YIELDS ON SECURITIES AVAILABLE FOR SALE ARE BASED ON THE AVERAGE OF HISTORICAL AMORTIZED COST BALANCES. (4) THE FAIR VALUES OF DERIVATIVES-DEALER POSITIONS ARE REPORTED IN OTHER ASSETS AND LIABILITIES, RESPECTIVELY. (5) INTEREST INCOME INCLUDES TAXABLE-EQUIVALENT ADJUSTMENTS OF $94, $113 AND $94 IN 1996, 1995 AND 1994, RESPECTIVELY. (6) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, OTHER SHORT-TERM BORROWINGS AND CONSUMER CDS INTEREST EXPENSE INCLUDES NET INTEREST RATE SWAP EXPENSE RELATED TO SWAPS FIXING THE COST OF CERTAIN OF THESE LIABILITIES. INTEREST RATE SWAPS INCREASED INTEREST EXPENSE $66, $28 AND $35 IN 1996, 1995 AND 1994, RESPECTIVELY. (7) LONG-TERM DEBT INTEREST EXPENSE INCLUDES NET INTEREST RATE SWAP EXPENSE RELATED TO SWAPS PRIMARILY CONVERTING THE COST OF CERTAIN FIXED-RATE DEBT TO VARIABLE RATE. INTEREST RATE SWAPS INCREASED (DECREASED) INTEREST EXPENSE ($12) AND $2 IN 1996 AND 1995, RESPECTIVELY. Management's Discussion And Analysis 21 Continued progress was made in reducing average commercial real estate outstandings by $1.3 billion in 1996. Noninterest income increased 12 percent over 1995, with most of the growth concentrated in investment banking income. Noninterest expense rose only 4.6 percent, contributing to a 70 basis-point improvement in the efficiency ratio. FINANCIAL SERVICES is primarily comprised of the holding company, NATIONSCREDIT CORPORATION, which includes NATIONSCREDIT CONSUMER CORPORATION, primarily a consumer finance operation, and NATIONSCREDIT COMMERCIAL CORPORATION, primarily a commercial finance operation. NATIONSCREDIT CONSUMER CORPORATION, which has 293 branches in 33 states, provides personal, mortgage and automobile loans to consumers, and retail finance programs to dealers. NATIONSCREDIT COMMERCIAL CORPORATION consists of divisions that specialize in the following commercial financing areas: equipment loans and leases; loans for debt restructuring, mergers and acquisitions and working capital; real estate, golf/recreational and health care financing; and inventory financing to manufacturers, distributors and dealers. FINANCIAL SERVICES' earnings of $166 million increased 29 percent over 1995. Consistent with 1995, earnings represented 7 percent of consolidated earnings and return on equity was 14 percent. Taxable-equivalent net interest income increased 9 percent as average loans and leases increased 11 percent. Market demand in the consumer lending, commercial real estate and distribution finance businesses continued to contribute to loan growth. The increase in provision for credit losses was mainly driven by loan growth and higher consumer loss rates. The net interest yield decreased 20 basis points to 7.10 percent in 1996 due to higher funding costs combined with more competitive loan pricing. Noninterest income increased $54 million reflecting higher warrant gains and higher loan prepayment fees. Noninterest expense increased $63 million driven by office consolidation costs and operating expenses for acquisitions, resulting in an efficiency ratio of 45.1 percent for 1996. RESULTS OF OPERATIONS NET INTEREST INCOME An analysis of the Corporation's taxable-equivalent net interest income and average balance sheet levels for the last three years is presented in TABLE THREE. The changes in net interest income from year to year are analyzed in TABLE FOUR. Taxable-equivalent net interest income increased 16 percent to $6.4 billion in 1996 compared to $5.6 billion in 1995 due to acquisitions of several banking operations, higher spreads in the securities portfolio, core loan growth and an increase in noninterest-bearing deposits, partially offset by the impact of securitizations and a shift in funding to term debt. While securitizations lowered net interest income by $264 million in 1996, they do not significantly affect the Corporation's earnings. As the Corporation continues to securitize loans, its role becomes that of a servicer and the income related to securitized loans is reflected in noninterest income. The net interest yield increased 29 basis points to 3.62 percent in 1996 compared to 1995 due to the sale of low-yielding securities and the reinvestment of proceeds from the sale of low-yielding securities into higher-spread products. Loan growth is dependent on economic conditions as well as various discretionary factors, such as decisions to securitize certain loan portfolios, the retention of residential mortgage loans generated by the Corporation's mortgage subsidiary and the management of borrower, industry, product and geographic concentrations. PROVISION FOR CREDIT LOSSES The provision for credit losses covered net charge-offs and was $605 million in 1996 compared to $382 million in the prior year. Net charge-offs increased $177 million to $598 million in 1996 compared to 1995 due primarily to increases in commercial, other consumer and credit card net charge-offs. Management expects the charge-off trends experienced in 1996 to continue as the Corporation maintains its efforts to shift the mix of the loan portfolio to a higher consumer concentration and credit losses return to more normalized levels. NET INTEREST INCOME (Billions) (chart appears along the right side of page and its plot points are as follows) 1992 4.1 1993 4.6 1994 5.2 1995 5.4 1996 6.3 22 NationsBank Corporation Annual Report 1996 The allowance for credit losses was $2.3 billion, or 1.89 percent of net loans, leases and factored accounts receivable, on December 31, 1996 compared to $2.2 billion, or 1.85 percent, at the end of 1995. The allowance for credit losses was 260 percent of nonperforming loans on December 31, 1996 compared to 306 percent on December 31, 1995. Future economic conditions will impact credit quality and may result in increased net charge-offs and higher provisions for credit losses. TABLE TWELVE provides an analysis of the activity in the Corporation's allowance for TABLE FOUR. CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME
=================================================================================================================================== (DOLLARS IN MILLIONS) THIS TABLE PRESENTS AN ANALYSIS OF THE YEAR-TO-YEAR CHANGES IN NET INTEREST INCOME ON A FULLY TAXABLE-EQUIVALENT BASIS FOR THE YEARS SHOWN. THE CHANGES FOR EACH CATEGORY OF INCOME AND EXPENSE ARE DIVIDED BETWEEN THE PORTION OF CHANGE ATTRIBUTABLE TO THE VARIANCE IN AVERAGE LEVELS OR YIELDS/RATES FOR THAT CATEGORY. THE AMOUNT OF CHANGE THAT CANNOT BE SEPARATED IS ALLOCATED TO EACH VARIANCE PROPORTIONATELY. FROM 1995 TO 1996 FROM 1994 TO 1995 - ----------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) INCREASE (DECREASE) IN INCOME/EXPENSE IN INCOME/EXPENSE DUE TO CHANGE IN DUE TO CHANGE IN - ----------------------------------------------------------------------------------------------------------------------------------- PERCENTAGE PERCENTAGE AVERAGE YIELDS/ INCREASE AVERAGE YIELDS/ INCREASE LEVELS RATES TOTAL (DECREASE) LEVELS RATES TOTAL (DECREASE) - ----------------------------------------------------------------------------------------------------------------------------------- Income from earning assets Loans and leases, net of unearned income Commercial ................................ $ 261 $(16) $245 6.5% $377 $ 273 $650 20.7% Real estate commercial .................... (100) (19) (119) (17.8) (50) 83 33 5.2 Real estate construction .................. 6 (27) (21) (7.0) (4) 38 34 12.7 ----- ----- Total commercial ........................ 179 (74) 105 2.2 331 386 717 17.7 ----- ----- Residential mortgage ...................... 565 4 569 35.6 434 25 459 40.2 Credit card ............................... 146 (54) 92 14.4 135 (2) 133 26.2 Other consumer ............................ 52 (43) 9 .4 211 167 378 20.6 ----- ----- Total consumer .......................... 819 (149) 670 15.1 820 150 970 27.9 ----- ----- Foreign ................................... 45 (19) 26 16.6 44 27 71 82.6 Lease financing ........................... 76 (1) 75 30.1 71 2 73 41.5 ----- ----- Total loans and leases, net ............. 1,102 (226) 876 9.1 1,246 585 1,831 23.5 Securities ----- ----- Held for investment ....................... (677) 6 (671) (77.7) 24 79 103 13.5 Available for sale ........................ 463 41 504 78.5 (120) 118 (2) (.3) ----- ----- Total securities ........................ (316) 149 (167) (11.1) (88) 189 101 7.2 ----- ----- Loans held for sale ......................... 55 - 55 229.2 (1) 2 1 4.3 Federal funds sold .......................... (23) (1) (24) (51.1) (11) 13 2 4.4 Securities purchased under agreements to resell ................................. (111) (136) (247) (27.8) 90 298 388 77.3 Time deposits placed and other short-term investments .................... (38) (24) (62) (43.7) 17 35 52 57.8 Trading account securities .................. 335 (209) 126 11.5 287 48 335 43.8 ----- ----- Total income from earning assets ........ 818 (261) 557 4.2 1,413 1,297 2,710 25.5 ----- ----- Interest expense Savings ..................................... 10 (13) (3) (1.5) (13) 5 (8) (3.8) NOW and money market deposit accounts ....... 67 (44) 23 3.1 (51) 95 44 6.3 Consumer CDs and IRAs ....................... 274 21 295 22.9 39 252 291 29.1 Negotiated CDs, public funds and other time deposits ................... 7 (2) 5 3.0 (14) 47 33 24.8 Foreign time deposits ....................... (167) (112) (279) (31.7) 391 115 506 134.9 Federal funds purchased ..................... (42) (29) (71) (22.0) 2 101 103 47.0 Securities sold under agreements to repurchase ............................. (107) (225) (332) (17.8) 268 520 788 73.3 Commercial paper ............................ 10 (16) (6) (3.5) 16 44 60 54.1 Other short-term borrowings ................. (146) - (146) (41.2) 32 109 141 66.2 Trading account liabilities ................. (130) (113) (243) (27.1) 109 52 161 21.9 Long-term debt .............................. 520 (69) 451 50.9 323 13 336 61.1 ----- ----- Total interest expense .................. 346 (652) (306) (3.9) 764 1,691 2,455 46.2 ----- ----- Net interest income ............................ 359 504 $863 15.5 636 (381) $255 4.8 ===== =====
Management's Discussion And Analysis 23 credit losses for each of the last five years. Allowance levels, net charge-offs and nonperforming assets are discussed in the Credit Risk Management and Credit Portfolio Review section beginning on page 32. NONINTEREST INCOME As presented in TABLE FIVE, noninterest income increased 18.5 percent to $3.6 billion in 1996, reflecting strong growth in most categories as described below: (bullet) Service charges on deposit accounts increased 27 percent over 1995, attributable to growth in number of households served, in part due to acquisitions, higher fees and emphasis on fee collection. (bullet) Mortgage servicing and mortgage-related fees grew 54 percent to $213 million in 1996. Including acquisitions, the average portfolio of loans serviced increased 30 percent from $69.3 billion in 1995 to $89.9 billion in 1996. On December 31, 1996, the servicing portfolio, which includes mortgage loans originated by the Corporation's mortgage subsidiary as well as loans serviced on behalf of the Corporation's banking subsidiaries, totaled $96.4 billion compared to $81.4 billion on December 31, 1995. Mortgage loan originations through the Corporation's mortgage subsidiary increased $901 million to $12.0 billion in 1996, compared to $11.1 billion in 1995, primarily reflecting changes in the interest rate environment in 1996. Origination volume in 1996 consisted of approximately $4.7 billion of retail loan volume and $7.3 billion of correspondent and wholesale loan volume. In conducting its mortgage banking activities, the Corporation is exposed to interest rate risk for the period between loan commitment date and subsequent delivery date. The value of the Corporation's mortgage servicing rights is also affected by changes in prepayment rates. To manage risk associated with mortgage banking activities, the Corporation enters into various financial instruments including option contracts, forward delivery contracts and certain rate swaps. The contract notional amount of these instruments approximated $7.8 billion on December 31, 1996. Net unrealized gains associated with these contracts were insignificant on December 31,1996. (bullet) Investment banking income increased 85 percent to $356 million in 1996, primarily reflecting increased syndication, securities underwriting activity and gains on principal investment activity (investing
TABLE FIVE. NONINTEREST INCOME =================================================================================================================================== (DOLLARS IN MILLIONS) CHANGE - ----------------------------------------------------------------------------------------------------------------------------------- 1996 1995 AMOUNT PERCENT - ----------------------------------------------------------------------------------------------------------------------------------- Service charges on deposit accounts ......................................... $1,121 $884 $237 26.8% - ----------------------------------------------------------------------------------------------------------------------------------- Nondeposit-related service fees Safe deposit rent ........................................................ 28 27 1 3.7 Mortgage servicing and mortgage-related fees ............................. 213 138 75 54.3 Fees on factored accounts receivable ..................................... 64 68 (4) (5.9) Investment banking income ................................................ 356 192 164 85.4 Other service fees ....................................................... 170 129 41 31.8 - ----------------------------------------------------------------------------------------------------------------------------------- Total nondeposit-related service fees .................................. 831 554 277 50.0 - ----------------------------------------------------------------------------------------------------------------------------------- Asset management and fiduciary service fees ................................. 432 444 (12) (2.7) - ----------------------------------------------------------------------------------------------------------------------------------- Credit card income Merchant discount fees ................................................... 6 7 (1) (14.3) Annual credit card fees .................................................. 25 24 1 4.2 Other credit card fees ................................................... 283 246 37 15.0 - ----------------------------------------------------------------------------------------------------------------------------------- Total credit card income ............................................... 314 277 37 13.4 - ----------------------------------------------------------------------------------------------------------------------------------- Other income Brokerage income ......................................................... 110 114 (4) (3.5) Trading account profits and fees ......................................... 274 306 (32) (10.5) Bankers' acceptances and letters of credit fees .......................... 67 74 (7) (9.5) Insurance commissions and earnings ....................................... 79 65 14 21.5 Miscellaneous ............................................................ 418 360 58 16.1 - ----------------------------------------------------------------------------------------------------------------------------------- Total other income ..................................................... 948 919 29 3.2 - ----------------------------------------------------------------------------------------------------------------------------------- $3,646 $3,078 $568 18.5 ===================================================================================================================================
24 NationsBank Corporation Annual Report 1996 in equity or equity-related transactions on behalf of clients). The GLOBAL FINANCE syndication group was agent or co-agent on 566 deals totaling $346.0 billion in 1996, compared to 420 deals totaling $281.6 billion in 1995. An analysis of investment banking income by major business activity follows (in millions): 1996 1995 - ------------------------------------------------- INVESTMENT BANKING INCOME Syndications .............. $108 $93 Securities underwriting ... 84 40 Principal investment activities .............. 77 19 Other ..................... 87 40 - ------------------------------------------------- Total investment banking income ........ $356 $192 ================================================= (bullet) GENERAL BANK asset management and fiduciary service fees declined $12 million to $432 million in 1996, reflecting the impact of the late 1995 sale of the Corporate Trust business. Excluding the impact of this sale, asset management fees increased 17 percent in 1996. An analysis of asset management and fiduciary service fees by major business activity for 1996 and 1995 as well as the market values of assets under management and administration on December 31 are presented below (in millions): 1996 1995 - -------------------------------------------------- ASSET MANAGEMENT AND FIDUCIARY SERVICE FEES Private Client Group ...... $271 $241 Retirement services and corporate trust ......... 66 107 Mutual funds .............. 29 28 Investment management subsidiaries and other .. 66 68 - -------------------------------------------------- Total asset management and fiduciary service fees ................ $ 432 $444 ================================================== MARKET VALUE OF ASSETS Assets under management ............ $72,270 $66,200 Assets under administration ........ 180,269 183,200 The Private Client Group provides investment management, fiduciary and tax services primarily to individuals and investors. These fees increased $30 million in 1996 over 1995, principally due to increased sales, market appreciation associated with assets under management and acquisitions. Retirement services and corporate trust encompass a wide range of services including investment advisory, administrative and record-keeping services for customers' employee benefit plans, securities lending and investment management services offered to corporations, municipalities and others. The decline in retirement services and corporate trust fees in 1996 reflects the impact of management's repositioning of this business in an effort to concentrate on the most profitable product lines. Mutual fund revenues reflect fees received for providing advisory services to the Nations Funds family. Investment management subsidiaries' fees include revenues of SOVRAN CAPITAL MANAGEMENT, ASB CAPITAL MANAGEMENT and TRADESTREET INVESTMENT ASSOCIATES, INC., which provide institutional investors with investment management services. (bullet) Credit card income increased 13 percent to $314 million in 1996, primarily due to increased purchase volume and interchange rates. Credit card income includes $58 million from the impact of credit card securitizations. (bullet) Trading account profits and fees totaled $274 million in 1996, a decrease of $32 million from $306 million in 1995, reflecting a continued expansion of the Corporation's client-driven business more than offset by less favorable gains on position-taking. An analysis of GLOBAL FINANCE'S trading account profits and fees by major business activity follows (in millions): 1996 1995 - --------------------------------------------------- TRADING ACCOUNT PROFITS AND FEES Securities trading ........... $96 $103 Interest rate contracts ......... 136 151 Foreign exchange contracts ...... 4 26 Other ..................... 38 26 - --------------------------------------------------- Total trading account profits and fees ......... $274 $306 =================================================== (bullet) Miscellaneous income totaled $418 million in 1996, an increase of $58 million over 1995. Miscellaneous income includes certain prepayment fees and other fees such as net gains on sales of miscellaneous investments, business activities, premises, venture capital investments and other similar items. NONINTEREST EXPENSE As presented in TABLE SIX, the Corporation's noninterest expense increased 9.7 percent to $5.7 billion in 1996 from $5.2 billion in 1995. Approximately two-thirds of the increase in 1996 over 1995 resulted from acquisitions of several smaller banking organizations. Additionally, increased expenditures in selected areas to enhance revenue growth contributed to the year-over-year increase, including the costs of ongoing initiatives related to enhancing customer sales and optimizing product delivery channels. For example, the Model Banking project was implemented in the District of Columbia and four states of the Corporation's franchise to facilitate and enhance the GENERAL BANK'S retail customer sales and product delivery. PC Banking was also introduced in 9 states of the Corporation's franchise providing instant on-line account access and personal finance management capabilities for customers. A discussion of the significant components of noninterest expense in 1996 compared to 1995 is as follows: (bullet)Personnel expense increased $240 million over 1995, primarily due to the impact of acquisitions and an increase in personnel and contracted temporary services for the implementation of revenue enhancement projects. (bullet)Equipment expense increased 14 percent in 1996 over 1995, reflecting acquisitions and enhancements to computer resources throughout the Corporation and to product delivery systems, such as PC banking, direct banking and data base management. This investment in infrastructure is expected to continue due to the Corpor-ation's commitment to maintaining state-of-the-art capabilities in sales, information, processing and delivery to customers and across lines of business. (bullet) Marketing expense increased $35 million to $252 million in 1996, primarily attributable to the Corporation's sponsorship of the 1996 Olympic Summer Games. (bullet) Professional fees increased $74 million, reflecting higher consulting and technical support fees for projects to enhance revenue growth and for the development and installation of infrastructure enhancements. (bullet)The Corporation's deposit insurance expense totaled $26 million in 1996 compared to $118 million in 1995, reflecting reductions beginning June 1, 1995 in insurance rates charged by the FDIC. (bullet)Other general operating expenses increased $79 million to $490 million in 1996. Included in 1996 expenses are $43 million in pretax charges reflecting the estimated losses associated with certain customers' fraudulent commercial transactions. TABLE SIX. NONINTEREST EXPENSE
=========================================================================================================================== (DOLLARS IN MILLIONS) 1996 1995 - --------------------------------------------------------------------------------------------------------------------------- PERCENT PERCENT OF TAXABLE- OF TAXABLE- EQUIVALENT EQUIVALENT NET INTEREST NET INTEREST AND AND NONINTEREST NONINTEREST CHANGE AMOUNT INCOME AMOUNT INCOME AMOUNT PERCENT - --------------------------------------------------------------------------------------------------------------------------------- Personnel ........................................... $2,731 27.1% $2,491 28.8% $ 240 9.6% Occupancy, net ...................................... 523 5.2 495 5.7 28 5.7 Equipment ........................................... 451 4.5 397 4.6 54 13.6 Marketing ........................................... 252 2.5 217 2.5 35 16.1 Professional fees ................................... 256 2.5 182 2.1 74 40.7 Amortization of intangibles ......................... 128 1.3 119 1.4 9 7.6 Credit card ......................................... 64 .6 55 .6 9 16.4 Deposit insurance ................................... 26 .3 118 1.4 (92) (78.0) Data processing ..................................... 237 2.4 229 2.7 8 3.5 Telecommunications .................................. 172 1.7 150 1.7 22 14.7 Postage and courier ................................. 148 1.5 135 1.6 13 9.6 Other general operating ............................. 490 4.8 411 4.8 79 19.2 General administrative and miscellaneous ............ 187 1.9 164 1.9 23 14.0 ------------------------------------------------------------------------- $5,665 56.3% $5,163 59.8% $ 502 9.7 =========================================================================
26 NationsBank Corporation Annual Report 1996 INCOME TAXES The Corporation's income tax expense for 1996 was $1.3 billion, for an effective tax rate of 34.6 percent of pretax income. Income tax expense for 1995 was $1.0 billion, for an effective rate of 34.8 percent. Note Twelve to the consolidated financial statements includes a reconciliation of federal income tax expense computed using the federal statutory rate of 35 percent to actual income tax expense. BALANCE SHEET REVIEW AND LIQUIDITY RISK MANAGEMENT The Corporation utilizes an integrated approach in managing its balance sheet which includes management of interest rate sensitivity, credit risk, liquidity risk and capital position. Average customer-based funds increased $11.1 billion in 1996 compared to 1995 primarily due to deposits acquired in acquisitions. As a percentage of the total funding mix, average customer-based funds increased to 46 percent in 1996 from 44 percent in 1995. Average market-based funds decreased $9.5 billion in 1996 compared to 1995 and comprised a smaller portion of total sources of funds at 32 percent for 1996 compared to 39 percent in 1995, the result of a shift towards term debt for funding. Average long-term debt increased $8.0 billion in 1996 over 1995 and represented 10 percent of total sources of funds compared to 7 percent during 1995. Average loans and leases, the Corporation's primary utilization of funds, increased $12.8 billion during 1996 due to the impact of acquisitions and core loan growth partially offset by the impact of securitizations, and comprised 61 percent of total uses of funds compared to 58 percent during 1995. The ratio of average loans and leases to customer-based funds was approximately 130 percent in both 1996 and 1995. The average securities portfolio as a percentage of total uses decreased to 10 percent in 1996 from 14 percent in 1995 due to management's focus on the reduction of low-yielding assets. Cash and cash equivalents were $8.9 billion on December 31, 1996, an increase of $485 million from December 31, 1995. During 1996, net cash provided by operating activities was $1.8 billion, net cash provided by investing activities was $15.9 billion and net cash used in financing activities was $17.2 billion. For further information on cash flows, see the Consolidated Statement of Cash Flows in the consolidated financial statements. Liquidity is a measure of the Corporation's ability to fulfill its cash requirements and is managed by the Corporation through its asset and liability management process. The Corporation monitors its assets and liabilities and modifies these positions as liquidity requirements change. This process, coupled with the Corporation's ability to raise capital and debt financing, is designed to cover the liquidity needs of the Corporation. The following discussion provides an overview of significant on- and off-balance sheet components of liquidity. SECURITIES The securities portfolio serves a primary role in the overall context of balance sheet management by the Corporation. The decision to purchase or sell securities is based upon the current assessment of economic and financial conditions, including the interest rate environment, liquidity requirements and on- and off-balance sheet positions. The securities portfolio on December 31, 1996 consisted of securities held for investment totaling $2.1 billion and securities available for sale totaling $12.3 billion compared to $4.4 billion and $19.4 billion, respectively, on December 31, 1995. The decrease in the securities portfolio from December 31, 1995 to December 31, 1996 was attributable to management's focus on the reduction of low-yielding assets. On December 31, 1996 and 1995, the market value of the Corporation's portfolio of securities held for investment approximated the book value of the portfolio. The valuation reserve for securities available for sale and marketable equity securities increased shareholders' equity by $86 million on December 31, 1996, reflecting pretax appreciation of $8 million on securities available for sale and $123 million on marketable equity securities. The valuation reserve increased shareholders' equity by $323 million on December 31, 1995. The decrease in Management's Discussion And Analysis 27 the valuation reserve was primarily attributable to maturities and sales of securities and the general increase in interest rates when comparing December 31, 1996 to December 31, 1995. The average expected maturity of the securities held for investment and securities available for sale portfolios were 1.47 years and 6.91 years, respectively, on December 31, 1996 compared to 1.65 years and 2.96 years, respectively, on December 31, 1995. The increase in the average expected maturity of the available for sale portfolio reflects the sale and maturity of shorter average life securities and the addition of mortgage-backed securities obtained primarily through securitization of the Corporation's residential mortgages and acquisitions. On December 31, 1996, the Corporation had forward agreements to purchase $1.5 billion of mortgage-backed securities. LOANS AND LEASES Total loans and leases increased approximately 5 percent to $121.6 billion on December 31, 1996 compared to $116.0 billion on December 31, 1995. Average loans and leases increased 12 percent to $122.3 billion in 1996 compared to 1995 due primarily to growth in residential mortgage, commercial and credit card loans partially offset by the impact of securitizations. Average residential mortgage loans increased 35 percent to $27.8 billion in 1996 compared to $20.6 billion in 1995, primarily as a result of acquisitions. Average total commercial loans increased to $58.8 billion in 1996 compared to $56.7 billion in 1995, primarily due to acquisitions. Average real estate commercial and construction loans decreased to $9.3 billion in 1996 as a result of the Corporation's efforts to lower its exposure to this line of business. Average credit card and other consumer loans, including direct and indirect consumer loans and home equity loans, increased $1.7 billion including the impact of securitizations in 1996. Higher levels of consumer AVERAGE LOANS AND LEASES (BILLIONS) (Chart appears on the right side of the page and its plot points are as follows) '92 '93 '94 '95 '96 68 79 95 109 122 TABLE SEVEN. DISTRIBUTION OF LOANS, LEASES AND FACTORED ACCOUNTS RECEIVABLE
================================================================================================================================= DECEMBER 31 (DOLLARS IN MILLIONS) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT - ------------------------------------------------------------------------------------------------------------------------------- Domestic Commercial .................. $ 50,270 41.0% $ 47,989 41.0% $ 44,665 43.1% $ 40,808 44.3% $ 32,260 44.4% Real estate commercial ...... 5,445 4.4 6,183 5.3 7,349 7.1 8,239 9.0 6,324 8.7 Real estate construction .... 2,863 2.3 2,976 2.5 2,981 2.9 3,256 3.5 3,065 4.2 ------------------------------------------------------------------------------------------------- Total commercial .......... 58,578 47.7 57,148 48.8 54,995 53.1 52,303 56.8 41,649 57.3 ------------------------------------------------------------------------------------------------- Residential mortgage ........ 27,963 22.8 24,026 20.6 17,244 16.7 12,689 13.8 9,262 12.7 Credit card ................. 6,747 5.5 6,532 5.6 4,753 4.6 3,728 4.1 4,297 5.9 Other consumer .............. 20,595 16.8 22,287 19.0 20,511 19.9 19,326 21.0 14,152 19.4 ------------------------------------------------------------------------------------------------- Total consumer ............ 55,305 45.1 52,845 45.2 42,508 41.2 35,743 38.9 27,711 38.0 ------------------------------------------------------------------------------------------------- Lease financing ............. 4,198 3.4 3,264 2.8 2,440 2.4 1,729 1.9 1,301 1.8 Factored accounts receivable 1,047 .9 991 .8 1,004 1.0 1,001 1.1 917 1.3 ------------------------------------------------------------------------------------------------- 119,128 97.1 114,248 97.6 100,947 97.7 90,776 98.7 71,578 98.4 ------------------------------------------------------------------------------------------------- Foreign Commercial and industrial companies ................. 2,229 1.8 1,635 1.4 1,183 1.1 510 .5 634 .9 Banks and other financial institutions .............. 599 .5 609 .5 795 .8 446 .5 304 .4 Governments and official institutions ..... -- -- 7 -- 6 -- 22 -- 2 -- Lease financing ............. 674 .6 534 .5 440 .4 253 .3 196 .3 ----------------------------------------------------------------------------------------------- 3,502 2.9 2,785 2.4 2,424 2.3 1,231 1.3 1,136 1.6 ----------------------------------------------------------------------------------------------- Total loans, leases and factored accounts receivable, net of unearned income .......... $122,630 100.0% $117,033 100.0% $103,371 100.0% $ 92,007 100.0% $ 72,714 100.0% =================================================================================================
28 NationsBank Corporation Annual Report 1996 loans are the result of the Corporation's efforts to shift the mix of the loan portfolio to a higher consumer concentration and the impact of acquisitions. A significant source of liquidity for the Corporation is the repayment and maturities of loans. TABLE EIGHT shows selected loan maturity data on December 31, 1996 and indicates that approximately 38 percent of the selected loans had maturities of one year or less. The securitization and sale of certain loans and the use of loans as collateral in asset-backed financing arrangements are also sources of liquidity. The Corporation securitized approximately $900 million of credit card loans in the second quarter of 1996 and approximately $2.1 billion of indirect auto loans in the third quarter of 1996. DEPOSITS TABLE THREE provides information on the average amounts of deposits and the rates paid by deposit category. Through the Corporation's diverse retail banking network, deposits remain a primary source of funds for the Corporation. Average deposits increased 8 percent in 1996 compared to 1995 primarily due to deposits acquired in acquisitions. On December 31, 1996, the Corporation had domestic certificates of deposit greater than $100 thousand totaling $7.3 billion, with $3.6 billion maturing within three months or less, $1.5 billion maturing within three to six months, $1.1 billion maturing within six to twelve months and $1.1 billion maturing after twelve months. Additionally, on December 31, 1996, the Corporation had other domestic time deposits greater than $100 thousand totaling $499 million, with $59 million maturing within three months or less, $47 million maturing within three to six months, $55 million maturing within six to twelve months and $338 million maturing after twelve months. Foreign office certificates of deposit and other time deposits of $100 thousand or more totaled $8.1 billion and $12.9 billion on December 31, 1996 and 1995, respectively. TABLE EIGHT. SELECTED LOAN MATURITY DATA ================================================================================ DECEMBER 31, 1996 (DOLLARS IN MILLIONS) THIS TABLE PRESENTS THE MATURITY DISTRIBUTION AND INTEREST SENSITIVITY OF SELECTED LOAN CATEGORIES (EXCLUDING RESIDENTIAL MORTGAGE, CREDIT CARD, OTHER CONSUMER LOANS, LEASE FINANCING AND FACTORED ACCOUNTS RECEIVABLE). MATURITIES ARE PRESENTED ON A CONTRACTUAL BASIS.
DUE AFTER DUE IN 1 1 YEAR YEAR THROUGH DUE AFTER OR LESS 5 YEARS 5 YEARS TOTAL - ----------------------------------------------------------------------------------------------------------------------- Commercial ................................................................ $17,950 $23,082 $ 9,238 $50,270 Real estate commercial .................................................... 1,615 3,014 816 5,445 Real estate construction .................................................. 1,736 1,038 89 2,863 Foreign ................................................................... 2,149 434 245 2,828 ----------------------------------------- Total selected loans, net of unearned income ........................... $23,450 $27,568 $10,388 $61,406 ========================================= Percent of total .......................................................... 38.2% 44.9% 16.9% 100.0% Cumulative percent of total ............................................... 38.2 83.1 100.0 Sensitivity of loans to changes in interest rates--loans due after one year Predetermined interest rate ............................................ $ 7,182 $ 4,661 $11,843 Floating or adjustable interest rate ................................... 20,386 5,727 26,113 -------------------------------------------------- $27,568 $10,388 $37,956 ==================================================
Management's Discussion And Analysis 29 SHORT-TERM BORROWINGS AND TRADING ACCOUNT LIABILITIES The Corporation uses short-term borrowings as a funding source and in its management of interest rate risk. TABLE NINE presents the categories of short-term borrowings. As of December 31, 1996, short-term bank notes outstanding under the Corporation's bank note program were $872 million compared to $3.1 billion on December 31, 1995. Total average short-term borrowings decreased 11 percent to $39.5 billion and average short sales decreased 16 percent to $10.1 billion in 1996 compared to 1995 levels. LONG-TERM DEBT On December 31, 1996 and 1995, long-term debt was $23.0 billion and $17.8 billion, respectively. The Corporation continued to diversify its funding sources through increasing its Euro medium-term note program to offer up to $4.5 billion in senior and subordinated notes and the issuance of $965 million of trust preferred securities. During 1996, the Corporation issued approximately $7.2 billion in long-term senior and subordinated debt, including $2.8 billion which was issued under its medium-term note programs. Proceeds from the issuance of long-term debt were used primarily to fund average earning asset growth of 6 percent, various common stock repurchase programs and certain banking acquisitions. See Note Six to the consolidated financial statements for further details on long-term debt. OTHER The Corporation has commercial paper back-up lines totaling $1.5 billion which mature in 1997. No borrowings have been made under these lines. The strength of the Corporation's overall TABLE NINE. SHORT-TERM BORROWINGS ================================================================================ (DOLLARS IN MILLIONS) FEDERAL FUNDS PURCHASED GENERALLY REPRESENT OVERNIGHT BORROWINGS, AND REPURCHASE AGREEMENTS REPRESENT BORROWINGS WHICH GENERALLY RANGE FROM ONE DAY TO THREE MONTHS IN MATURITY. COMMERCIAL PAPER IS ISSUED IN MATURITIES NOT TO EXCEED NINE MONTHS. OTHER SHORT-TERM BORROWINGS PRINCIPALLY CONSIST OF BANK NOTES AND U.S. TREASURY NOTE BALANCES.
1996 1995 1994 - ----------------------------------------------------------------------------------------------------- AMOUNT RATE AMOUNT RATE AMOUNT RATE - ----------------------------------------------------------------------------------------------------- Federal funds purchased On December 31 ............................ $ 3,536 6.58% $ 5,940 5.26% $ 3,993 5.19% Average during year ....................... 4,694 5.35 5,455 5.91 5,397 4.07 Maximum month-end balance during year ..... 8,585 -- 7,317 -- 7,264 -- Securities sold under agreements to repurchase On December 31 ............................ 15,842 5.40 23,034 5.66 21,977 5.36 Average during year ....................... 28,517 5.37 30,336 6.14 24,903 4.32 Maximum month-end balance during year ..... 29,582 -- 38,926 -- 27,532 -- Commercial paper On December 31 ............................ 2,787 5.41 2,773 5.65 2,519 5.22 Average during year ....................... 2,966 5.57 2,804 6.10 2,482 4.46 Maximum month-end balance during year ..... 3,276 -- 2,930 -- 2,871 -- Other short-term borrowings On December 31 ............................ 1,836 5.20 4,143 5.94 5,640 7.21 Average during year ....................... 3,344 6.22 5,690 6.20 5,015 4.25 Maximum month-end balance during year ..... 4,954 -- 7,378 -- 6,634 --
30 NationsBank Corporation Annual Report 1996 financial position is reflected in the following December 31, 1996 debt ratings which reflect upgrades since December 31, 1995: COMMERCIAL SENIOR PAPER DEBT - -------------------------------------------------------------------------------- Moody's Investors Service ................. P-1 A1 Standard & Poor's Corporation ............ A-1 A+ Duff and Phelps, Inc....... D-1+ A+ Fitch Investors Service, Inc. .......... F-1 A+ IBCA ...................... A1 A+ Thomson BankWatch ......... TBW-1 A+ In managing liquidity, the Corporation takes into consideration the ability of the subsidiary banks to pay dividends to the parent company. See Note Nine to the consolidated financial statements for further details on dividend capabilities of the subsidiary banks. OFF-BALANCE SHEET DERIVATIVES -- ASSET AND LIABILITY MANAGEMENT POSITIONS The Corporation utilizes interest rate contracts in its asset and liability management (ALM) process. Interest rate contracts allow the Corporation to efficiently manage its interest rate risk position. The Corporation primarily uses non-leveraged generic and basis swaps. Generic swaps involve the exchange of fixed-rate and variable-rate interest payments based on the contractual underlying notional amounts. Basis swaps involve the exchange of interest payments based on the contractual underlying notional amounts, where both the pay rate and the receive rate are floating rates based on different indices. As presented in the footnotes to TABLE THREE, net interest receipts and payments on these contracts have been included in interest income and expense on the underlying instruments. TABLE TEN summarizes the notional amount and the activity of ALM interest rate contracts for the year ended December 31, 1996. As reflected in the table, the gross notional amount of the Corporation's ALM swap program on December 31, 1996 was $30.1 billion, with the Corporation receiving fixed on $27.7 billion, primarily converting variable-rate commercial loans to fixed rate, and receiving variable on $1.0 billion, fixing the cost of certain liabilities. Subsequent to the sale and securitization of fixed-rate assets during 1996, the Corporation increased the net receive fixed position to $26.7 billion on December 31, 1996 from $3.9 billion on December 31, 1995 in order to maintain the Corporation's relatively neutral posture to changes in interest rates. The net receive fixed position modifies the interest rate characteristics of certain variable-rate assets. TABLE ELEVEN summarizes the expected maturities, weighted average pay and receive rates and the unrealized gain/loss on December 31, 1996 of the Corporation's ALM swaps. Floating rates represent the last repricing and will change in the future primarily based on movements in one-, three- and six-month LIBOR rates. The net unrealized appreciation of the ALM swap portfolio on December 31, 1996 was $69 million compared to net unrealized depreciation of $75 million on December 31, 1995, reflecting TABLE TEN. ASSET AND LIABILITY MANAGEMENT INTEREST RATE NOTIONAL CONTRACTS
================================================================================================================================ (DOLLARS IN MILLIONS) CMO AND INDEX GENERIC AMORTIZING TOTAL TOTAL --------------------------------------------- INTEREST RECEIVE PAY RECEIVE PAY RECEIVE PAY TOTAL OPTION RATE FIXED FIXED FIXED FIXED FIXED FIXED BASIS SWAPS PRODUCTS CONTRACTS - -------------------------------------------------------------------------------------------------------------------------------- Balance on December 31, 1995.... $5,963 $9,908 $7,875 $75 $13,838 $9,983 $486 $24,307 $80 $24,387 Additions.................... 26,271 478 1,256 - 27,527 478 960 28,965 7,249 36,214 Maturities, terminations and other.................. (4,494) (9,351) (9,131) (75) (13,625) (9,426) (100) (23,151) (934) (24,085) - -------------------------------------------------------------------------------------------------------------------------------- BALANCE ON DECEMBER 31, 1996 $27,740 $1,035 $- $- $27,740 $1,035 $1,346 $30,121 $6,395 $36,516 ================================================================================================================================
Management's Discussion And Analysis 31 the maturity and termination during 1996 of certain contracts in a loss position. The amount of net realized deferred losses associated with ALM swaps terminated during 1996 was $48 million on December 31, 1996. In its ALM process, the Corporation also utilizes interest rate option products, primarily caps and floors. Interest rate caps and floors are agreements where, for a fee, the purchaser obtains the right to receive interest payments when a variable interest rate moves above or below a specified cap or floor rate, respectively. TABLE TEN includes a summary of the notional amount and the activity of ALM interest rate option contracts for the year ended December 31, 1996. At December 31, 1996, the Corporation had a gross notional amount of $6.4 billion in outstanding interest rate option contracts used for ALM purposes. Such instruments are primarily linked to term debt, short-term borrowings and pools of residential mortgages. TABLE ELEVEN includes a summary of the expected maturities and the net unrealized gain of the Corporation's ALM option contracts. On December 31, 1996, the net unrealized appreciation of option products was $2 million. The net unrealized appreciation in the estimated value of the ALM interest rate contract portfolio should be viewed in the context of the overall balance sheet. The value of any single component of the balance sheet or off-balance sheet positions should not be viewed in isolation. For a discussion of the Corporation's management of risk associated with mortgage banking activities, see Noninterest Income beginning on page 24. CREDIT RISK MANAGEMENT AND CREDIT PORTFOLIO REVIEW In conducting business activities, the Corporation is exposed to the possibility that borrowers or counterparties may default on their obligations to the Corporation. Credit risk arises through the extension of loans, leases and factored accounts receivable, certain securities, letters of credit, financial guarantees and through counterparty risk on trading and capital markets transactions. To manage this risk, the Credit Policy group establishes policies and procedures to manage both on- and off-balance sheet credit risk and communicates and monitors the application of these policies and procedures throughout the Corporation. The Corporation's overall objective in managing credit risk is to minimize the adverse impact of any single event or set of occurrences. To achieve this objective, the Corporation strives to maintain a credit risk profile that is diverse in terms of product type, industry concentration, geographic distribution and borrower or counterparty concentration. The Credit Policy group works with lending officers, trading personnel and various other line personnel in areas that conduct activities involving credit risk and is involved in the implementation, refinement and monitoring of credit policies and procedures. The Corporation manages credit exposure to individual borrowers and counterparties on an aggregate basis including loans, leases, factored accounts receivable, securities, letters of credit, bankers' acceptances, derivatives and unfunded commitments. The creditworthiness of a borrower or counterparty is determined by experienced personnel, and limits are established for the total credit exposure to any one borrower or counterparty. Credit limits are subject to varying levels of approval by senior line and credit policy management. Total exposure to a borrower or counterparty is aggregated and measured against established limits. The originating credit officer assigns borrowers or counterparties an initial risk rating which is based on the amount of inherent credit risk and reviewed for appropriateness by senior line and credit policy personnel. Credits are monitored by line and credit policy personnel for deterioration in a borrower's or counterparty's financial condition which would impact the ability of the borrower or counterparty to perform under the contract. Risk ratings are adjusted as necessary. For consumer lending, credit scoring systems are utilized to provide standards for extension of credit. Consumer portfolio credit risk is monitored primarily using statistical models to predict portfolio behavior. Whenever possible, the Corporation obtains collateral to support credit extensions and commitments. Generally, such collateral is in the form of real and personal property, cash on deposit or other highly liquid instruments. In certain circumstances, the Corporation obtains real property as security for loans that are made on the general 32 NationsBank Corporation Annual Report 1996 creditworthiness of the borrower and whose proceeds were not used for real estate-related purposes. The Corporation also manages exposure to a single borrower, industry, product-type or other concentration through syndications TABLE ELEVEN. ASSET AND LIABILITY MANAGEMENT INTEREST RATE CONTRACTS
=========================================================================================================================== DECEMBER 31, 1996 (DOLLARS IN MILLIONS, AVERAGE EXPECTED MATURITY IN YEARS) EXPECTED MATURITY ------------------------------------------------------------------------------- AVERAGE UNREALIZED AFTER EXPECTED GAIN/(LOSS) TOTAL 1997 1998 1999 2000 2001 2001 MATURITY - --------------------------------------------------------------------------------------------------------------------------- ASSET CONVERSION SWAPS Receive fixed generic .......... $ 121 3.44 Notional amount .............. $ 23,510 $ 500 $ 2,000 $ 5,800 $ 7,060 $ 8,150 -- Weighted average receive rate. 6.42% 4.59% 5.89% 6.48% 6.48% 6.57% -- Weighted average pay rate .... 5.58 Pay fixed generic .............. (1) 4.76 -------- Notional amount .............. $ 10 $ 1 $ 1 $ 1 $ 1 $ 1 $ 5 Weighted average pay rate .... 9.78% 9.78% 9.78% 9.78% 9.78% 9.78% 9.78% Weighted average receive rate. 6.80 Total asset conversion swaps ... $ 120 ======== Notional amount .............. $ 23,520 $ 501 $ 2,001 $ 5,801 $ 7,061 $ 8,151 $ 5 LIABILITY CONVERSION SWAPS Receive fixed generic .......... $ (38) 6.19 Notional amount .............. $ 4,230 $ 175 $ 28 $ 679 $ 308 $ 1,439 $1,601 Weighted average receive rate 6.81% 6.77% 6.32% 7.36% 6.79% 6.41% 6.94% Weighted average pay rate .... 5.86 Pay fixed generic .............. (13) .39 -------- Notional amount .............. $ 1,025 $ 925 $ 100 -- -- -- -- Weighted average pay rate .... 8.24% 8.13% 9.31% -- -- -- -- Weighted average receive rate 5.71 Total liability conversion swaps $ (51) ======== Notional amount .............. $ 5,255 $ 1,100 $ 128 $ 679 $ 308 $ 1,439 $ 1,601 - ------------------------------------------------------------------------------------------------------------------------------------ Total receive fixed swaps ...... $ 83 3.86 Notional amount .............. $ 27,740 $ 675 $ 2,028 $6,479 $ 7,368 $ 9,589 $ 1,601 Weighted average receive rate. 6.48% 5.15% 5.89% 6.57% 6.49% 6.55% 6.94% Weighted average pay rate .... 5.62 Total pay fixed swaps .......... (14) .43 Notional amount .............. $ 1,035 $ 926 $ 101 $ 1 $ 1 $ 1 $ 5 Weighted average pay rate .... 8.26% 8.13% 9.31% 9.78% 9.78% 9.78% 9.78% Weighted average receive rate. 5.72 Basis swaps .................... -- 1.40 -------- Notional amount .............. $ 1,346 $ 371 $ 700 $ 250 -- $ 25 -- Weighted average receive rate. 5.53% Weighted average pay rate .... 5.55 Total swaps .................... $ 69 ======== Notional amount .............. $ 30,121 $ 1,972 $ 2,829 $6,730 $ 7,369 $ 9,615 $ 1,606 - ---------------------------------------------------------------------------------------------------------------------------------- OPTION PRODUCTS ................... $ 2 ======== Notional amount .............. $ 6,395 $ 600 $ 2,425 $ 2,075 $ 10 $ 1,086 $ 199 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest rate contracts .. $ 71 ======== Notional amount .............. $ 36,516 $ 2,572 $ 5,254 $ 8,805 $ 7,379 $ 10,701 $ 1,805
ON DECEMBER 31, 1996, IN ADDITION TO THE ABOVE INTEREST RATE SWAPS, THE CORPORATION HAD A $500 MILLION NOTIONAL RECEIVE FIXED GENERIC INTEREST RATE SWAP ASSOCIATED WITH A CREDIT CARD SECURITIZATION. ON DECEMBER 31, 1996, THIS POSITION HAD AN UNREALIZED MARKET VALUE OF NEGATIVE $17 MILLION, A WEIGHTED AVERAGE RECEIVE RATE OF 5.96 PERCENT, A PAY RATE OF 5.61 PERCENT AND AN EXPECTED MATURITY OF 6.96 YEARS. Management's Discussion And Analysis 33 of credits, participations, loan sales and securitizations. Through GLOBAL FINANCE, the Corporation is a major participant in the syndications market. In a syndicated facility, each participating lender funds only its portion of the syndicated facility, therefore limiting its exposure to the borrower. The Corporation also identifies and reduces its exposure to funded borrower, product or industry concentrations through loan sales. Generally, these sales are without recourse to the Corporation. For instance, in the second quarter of 1996, to further reduce real estate exposures, the Corporation sold $110 million of primarily lower quality commercial real estate loans. TABLE TWELVE. ALLOWANCE FOR CREDIT LOSSES
=============================================================================================================================== (DOLLARS IN MILLIONS) 1996 1995 1994 1993 1992 ---------------------------------------------------------- Balance on January 1............................................... $2,163 $2,186 $2,169 $1,454 $1,605 ---------------------------------------------------------- Loans, leases and factored accounts receivable charged off Commercial ..................................................... (150) (98) (113) (107) (245) Real estate commercial ......................................... (38) (25) (32) (84) (279) Real estate construction ....................................... (5) (17) (27) (17) (114) ----------------------------------------------------------- Total commercial ............................................. (193) (140) (172) (208) (638) ---------------------------------------------------------- Residential mortgage ........................................... (12) (8) (7) (10) (18) Credit card .................................................... (272) (189) (126) (184) (172) Other consumer ................................................. (329) (263) (192) (172) (166) ----------------------------------------------------------- Total consumer ............................................... (613) (460) (325) (366) (356) ----------------------------------------------------------- Foreign ........................................................ -- -- -- -- (7) Lease financing ................................................ (4) (2) (4) (5) (8) Factored accounts receivable ................................... (26) (34) (32) (30) (17) ----------------------------------------------------------- Total loans, leases and factored accounts receivable charged off (836) (636) (533) (609) (1,026) ----------------------------------------------------------- Recoveries of loans, leases and factored accounts receivable previously charged off Commercial ..................................................... 66 78 69 67 62 Real estate commercial ......................................... 13 15 17 21 13 Real estate construction ....................................... 2 9 26 12 8 ---------------------------------------------------------- Total commercial ............................................. 81 102 112 100 83 ---------------------------------------------------------- Residential mortgage ........................................... 2 2 2 3 4 Credit card .................................................... 60 26 22 19 13 Other consumer ................................................. 85 72 67 65 48 ---------------------------------------------------------- Total consumer ............................................... 147 100 91 87 65 ---------------------------------------------------------- Foreign ........................................................ -- -- -- 1 1 Lease financing ................................................ 1 1 3 2 2 Factored accounts receivable ................................... 9 12 11 7 9 ---------------------------------------------------------- Total recoveries of loans, leases and factored accounts receivable previously charged off .......... 238 215 217 197 160 ---------------------------------------------------------- Net charge-offs ................................................ (598) (421) (316) (412) (866) ---------------------------------------------------------- Provision for credit losses ....................................... 605 382 310 430 715 Allowance applicable to loans of purchased companies and other .... 145 16 23 697 -- ----------------------------------------------------------- Balance on December 31 ............................................ $ 2,315 $ 2,163 $ 2,186 $ 2,169 $ 1,454 =========================================================== Loans, leases and factored accounts receivable, net of unearned income, outstanding on December 31 ............. $ 122,630 $ 117,033 $ 103,371 $ 92,007 $ 72,714 Allowance for credit losses as a percentage of loans, leases and factored accounts receivable, net of unearned income, outstanding on December 31 ............. 1.89% 1.85% 2.11% 2.36% 2.00% Average loans, leases and factored accounts receivable, net of unearned income, outstanding during the year ............ $ 123,403 $ 110,650 $ 96,258 $ 80,058 $ 69,136 Net charge-offs as a percentage of average loans, leases and factored accounts receivable, net of unearned income, outstanding during the year ............ .48% .38% .33% .51% 1.25% Ratio of the allowance for credit losses on December 31 to net charge-offs .............................. 3.87 5.14 6.93 5.27 1.68 Allowance for credit losses as a percentage of nonperforming loans. 260.02% 306.49% 273.07% 193.38% 103.11%
34 NationsBank Corporation Annual Report 1996 (Chart appears here as follows) Net Charge-Offs As A Percentage Of Average Net Loans (Percent) (Chart appears along right side of page and its plot points are as follows): 92 1.25 93 .51 94 .33 95 .38 96 .48 In conducting derivatives activities in certain jurisdictions, the Corporation reduces risk to any one counterparty through the use of legally enforceable master netting agreements which allow the Corporation to settle positive and negative positions with the same counterparty on a net basis. An independent credit review group conducts ongoing reviews of credit activities and portfolios, reexamining on a regular basis risk assessments for credit exposures and overall compliance with policy. LOAN, LEASE AND FACTORED ACCOUNTS RECEIVABLE PORTFOLIO - The Corporation's credit exposure is centered in its loan, lease and factored accounts receivable portfolio which on December 31, 1996 totaled $122.6 billion. TABLE SEVEN on page 28 presents a distribution of loans by product type. ALLOWANCE FOR CREDIT LOSSES - The Corporation's allowance for credit losses was $2.3 billion and $2.2 billion on December 31, 1996 and 1995, respectively. TABLE TWELVE provides an analysis of the changes in the allowance for credit losses. The provision for credit losses increased $223 million to $605 million in 1996 compared to 1995, reflecting the industry-wide trend towards more normal losses compared to lower levels in prior periods. Total net charge-offs increased $177 million in 1996 to $598 million, or .48 percent of average loans, leases and factored accounts receivable, versus $421 million, or .38 percent, in 1995. The increases were experienced primarily in commercial, other consumer and credit card net charge-offs, which increased $64 million, $53 million and $49 million, respectively. The increase in credit card net charge-offs was partially due to the seasoning of the credit card portfolio and an increase in the rate of personal bankruptcies in 1996. Management expects the charge-offs trends experienced in 1996 to continue as the Corporation maintains its efforts to shift the mix of the loan portfolio to a higher consumer concentration and credit losses return to more normalized levels. Portions of the allowance for credit losses are allocated to cover the estimated losses inherent in particular categories of credit risk. The allocation of the allowance for credit losses, as presented in TABLE THIRTEEN, is based upon the Corporation's loss experience over a period of years and is adjusted for existing economic conditions as well as performance trends within specific portfolio segments and individual concentrations of credit. In 1996, the Corporation modified its allocation methodology to include historical peak loss conditions. Prior year allocations have been restated to reflect the current allocation methodology. The nature of the process by which the Corporation determines the appropriate allowance for credit losses requires the exercise of considerable judgment. Management believes that the allowance for credit losses is appropriate given its analysis of inherent credit losses on December 31, 1996.
TABLE THIRTEEN. ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES =================================================================================================================================== DECEMBER 31 (DOLLARS IN MILLIONS) 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT - ----------------------------------------------------------------------------------------------------------------------------------- Commercial ....................... $665 28.7% $626 28.9% $569 26.0% $510 23.5% $389 26.8% Real estate commercial ........... 267 11.5 311 14.4 397 18.2 403 18.6 310 21.3 Real estate construction ......... 140 6.1 146 6.7 147 6.7 160 7.4 150 10.3 ----------------------------------------------------------------------------------------------- Total commercial .............. 1,072 46.3 1,083 50.0 1,113 50.9 1,073 49.5 849 58.4 ----------------------------------------------------------------------------------------------- Residential mortgage ............. 78 3.4 64 3.0 45 2.0 32 1.4 24 1.6 Credit card ...................... 216 9.3 209 9.7 152 7.0 119 5.5 136 9.4 Other consumer ................... 281 12.1 291 13.4 211 9.7 199 9.2 144 9.9 ----------------------------------------------------------------------------------------------- Total consumer ................ 575 24.8 564 26.1 408 18.7 350 16.1 304 20.9 ----------------------------------------------------------------------------------------------- Foreign .......................... 23 1.0 21 1.0 19 .9 8 .4 8 .6 Lease financing .................. 61 2.6 36 1.7 26 1.2 16 .7 12 .8 Factored accounts receivable ..... 20 .9 20 .9 13 .6 13 .6 12 .8 Unallocated ...................... 564 24.4 439 20.3 607 27.7 709 32.7 269 18.5 ----------------------------------------------------------------------------------------------- $2,315 100.0% $2,163 100.0% $2,186 100.0% $2,169 100.0% $1,454 100.0% ===============================================================================================
Management's Discussion and Analysis 35 NONPERFORMING ASSETS - On December 31, 1996, nonperforming assets were $1.0 billion, or .85 percent of net loans, leases, factored accounts receivable and other real estate owned, compared to $853 million, or .73 percent, on December 31, 1995. As presented in TABLE FOURTEEN, nonperforming loans were $890 million at the end of 1996 compared to $706 million at the end of 1995. The allowance coverage of nonperforming loans was 260 percent on December 31, 1996 compared to 306 percent at the end of 1995.
TABLE FOURTEEN. NONPERFORMING ASSETS =================================================================================================================================== DECEMBER 31 (DOLLARS IN MILLIONS) 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- Nonperforming loans Commercial ......................................................... $342 $271 $362 $474 $650 Real estate commercial ............................................. 145 196 201 318 404 Real estate construction ........................................... 28 16 66 142 210 --------------------------------------------------------- Total commercial ................................................. 515 483 629 934 1,264 _________________________________________________________ Residential mortgage ............................................... 215 87 66 77 88 Other consumer ..................................................... 135 130 94 93 34 --------------------------------------------------------- Total consumer ................................................... 350 217 160 170 122 _________________________________________________________ Foreign ............................................................ - - 3 8 9 Lease financing .................................................... 25 6 9 10 15 --------------------------------------------------------- Total nonperforming loans ...................................... 890 706 801 1,122 1,410 _________________________________________________________ Other real estate owned ............................................... 153 147 337 661 587 _________________________________________________________ Total nonperforming assets ................................... $1,043 $853 $1,138 $1,783 $1,997 ========================================================= Nonperforming assets as a percentage of Total assets .56% .46% .67% 1.13% 1.69% Loans, leases and factored accounts receivable, net of unearned income, and other real estate owned .85 .73 1.10 1.92 2.72
The loss of income associated with nonperforming loans on December 31 and the cost of carrying other real estate owned were:
1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------------- Income that would have been recorded in accordance with original terms ................................................... $103 $102 $96 $80 $105 Less income actually recorded ............................................ (35) (27) (31) (34) (31) ------------------------------------------------------- Loss of income ........................................................... $68 $75 $65 $46 $74 ======================================================= Cost of carrying other real estate owned ................................. $8 $13 $24 $18 $25 =======================================================
ON DECEMBER 31, 1996, THERE WERE NO MATERIAL COMMITMENTS TO LEND ADDITIONAL FUNDS WITH RESPECT TO NONPERFORMING LOANS.
TABLE FIFTEEN. LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST =================================================================================================================================== DECEMBER 31 (DOLLARS IN MILLIONS) 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT PERCENT (1) AMOUNT PERCENT (1) - ----------------------------------------------------------------------------------------------------------------------------------- Commercial ................................................................ $38 .08% $24 .05% Real estate commercial .................................................... 13 .24 6 .10 Real estate construction .................................................. 5 .17 - - -------------------------------------------------- Total commercial ........................................................ 56 .10 30 .05 ________________________________________________ Residential mortgage ...................................................... 45 .16 22 .09 Credit card ............................................................... 105 1.56 70 1.07 Other consumer ............................................................ 30 .15 34 .15 -------------------------------------------------- Total consumer .......................................................... 180 .33 126 .24 __________________________________________________ Foreign ................................................................... - - 10 .36 Factored accounts receivable .............................................. 9 .86 8 .81 -------------------------------------------------- Total ................................................................. $245 .20 $174 .15 ==================================================
(1)REPRESENTS AMOUNTS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST AS A PERCENTAGE OF NET LOANS, LEASES AND FACTORED ACCOUNTS RECEIVABLE FOR EACH RESPECTIVE CATEGORY. 36 NationsBank Corporation Annual Report 1996 (Chart appears along the left side of the page and its plot points are as follows): Nonperforming Assets (Billions) 92 2.0 93 1.8 94 1.1 95 .85 96 1.0 Other real estate owned increased to $153 million on December 31, 1996 compared to $147 million on December 31, 1995. Internal loan workout units are devoted to the management and/or collection of certain nonperforming assets as well as certain performing loans. Concerted collection strategies and a proactive approach to managing overall credit risk has expedited the Corporation's disposition, collection and renegotiation of nonperforming and other lower-quality assets and allowed loan officers to concentrate on generating new business. As part of this process, the Corporation routinely evaluates all reasonable alternatives, including the sale of assets individually or in groups. The final decision to proceed with any alternative is evaluated in the context of the overall credit-risk profile of the Corporation. LOANS PAST DUE 90 DAYS OR MORE - TABLE FIFTEEN presents total loans past due 90 days or more and still accruing interest. On December 31, 1996, loans past due 90 days or more and still accruing interest were $245 million, or .20 percent of net loans, leases and factored accounts receivable, compared to $174 million, or .15 percent, on December 31, 1995. DERIVATIVES ACTIVITIES - Credit risk associated with derivatives positions is measured as the net replacement cost the Corporation could incur should counterparties with contracts in a gain position completely fail to perform under the terms of those contracts and any collateral underlying the contracts proves to be of no value to the Corporation. In managing derivatives credit risk, the Corporation considers both the current exposure, which is the replacement cost of contracts on the measurement date, as well as an estimate of the potential change in value of contracts over their remaining lives. TABLE SIXTEEN presents the notional or contract amounts on December 31, 1996 and 1995 and the current credit risk amounts (the net replacement cost of contracts in a gain position on December 31, 1996 and 1995) of the Corporation's derivatives-dealer positions which are primarily executed in the over-the-counter market. The notional or contract amounts indicate the total volume of transactions and significantly exceed the
TABLE SIXTEEN. DERIVATIVES-DEALER POSITIONS =================================================================================================================================== DECEMBER 31 (DOLLARS IN MILLIONS) 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- CONTRACT/ CREDIT RISK CONTRACT/ CREDIT RISK NOTIONAL AMOUNT (1) NOTIONAL AMOUNT (1) - ----------------------------------------------------------------------------------------------------------------------------------- Interest Rate Contracts Swaps ............................................................... $252,187 $927 $123,946 $989 Futures and forwards ................................................ 186,333 5 193,774 37 Written options ..................................................... 298,594 - 233,976 - Purchased options ................................................... 294,591 561 236,317 1,310 Foreign Exchange Contracts Swaps ............................................................... 1,303 24 1,196 21 Spot, futures and forwards .......................................... 94,028 1,137 70,199 532 Written options ..................................................... 63,081 - 42,227 - Purchased options ................................................... 61,716 352 44,273 350 Commodity and Other Contracts Swaps ............................................................... 812 81 757 141 Futures and forwards ................................................ 2,728 - 3,231 3 Written options ..................................................... 14,064 - 15,476 - Purchased options ................................................... 13,828 357 16,344 600 ----- ----- Total before cross product netting ................................ 3,444 3,983 ----- ----- Cross product netting ............................................. 286 183 ------ ------ Net replacement cost .............................................. $3,158 $3,800 ====== ======
(1)REPRESENTS THE NET REPLACEMENT COST THE CORPORATION COULD INCUR SHOULD COUNTERPARTIES WITH CONTRACTS IN A GAIN POSITION TO THE CORPORATION COMPLETELY FAIL TO PERFORM UNDER THE TERMS OF THOSE CONTRACTS. AMOUNTS INCLUDE ACCRUED INTEREST. Management's Discussion and Analysis 37 amount of the Corporation's credit or market risk associated with these instruments. The credit risk amounts presented in TABLE SIXTEEN do not consider the value of any collateral, but generally take into consideration the effects of legally enforceable master netting agreements. On December 31, 1996, the credit risk associated with the Corporation's asset and liability management positions was not significant. In managing credit risk associated with its derivatives activities, the Corporation deals with creditworthy counterparties, primarily U.S. and foreign commercial banks, broker-dealers and corporates. A portion of the Corporation's derivatives-dealer activity involves exchange-traded instruments. Because exchange-traded instruments conform to standard terms and are subject to policies set by the exchange involved, including counterparty approval, margin requirements and security deposit requirements, the credit risk to the Corporation is minimal. During 1996 there were no credit losses associated with derivatives transactions. In addition, on December 31, 1996, there were no nonperforming derivatives positions. CONCENTRATIONS OF CREDIT RISK - As previously discussed, in an effort to minimize the adverse impact of any single event or set of occurrences, the Corporation strives to maintain a diverse credit portfolio. Summarized below are areas of significant credit risk. REAL ESTATE - Total nonresidential real estate commercial and construction loans, the portion of such loans which are nonperforming, OREO and other credit exposures are presented in TABLE SEVENTEEN. The exposures presented represent credit extensions for real estate-related purposes to borrowers or counterparties who are primarily in the real estate development or investment business and for which the ultimate repayment of the credit is dependent on the sale, lease, rental or refinancing of the real estate. Total nonresidential real estate commercial and construction loans continued to decline in 1996 and totaled $8.3 billion, or 7 percent of net loans, leases and factored
TABLE SEVENTEEN. REAL ESTATE COMMERCIAL AND CONSTRUCTION LOANS, OTHER REAL ESTATE OWNED AND OTHER REAL ESTATE CREDIT EXPOSURES =================================================================================================================================== DECEMBER 31, 1996 (DOLLARS IN MILLIONS) LOANS (1) OTHER CREDIT _____________________ OUTSTANDING NONPERFORMING OREO EXPOSURES (2) - ----------------------------------------------------------------------------------------------------------------------------------- BY GEOGRAPHIC REGION (3): Maryland, District of Columbia and Virginia ............................ $1,643 $51 $32 $377 Florida ................................................................ 1,746 49 41 172 North Carolina and South Carolina ...................................... 1,369 33 28 29 Other states ........................................................... 3,550 40 11 301 --------------------------------------------------------- $8,308 $173 $112 $879 ========================================================= BY PROPERTY TYPE: Apartments ............................................................. $1,484 $26 $- $325 Shopping centers/retail ................................................ 1,264 13 2 105 Residential ............................................................ 1,215 12 12 36 Office buildings ....................................................... 1,174 20 13 16 Hotels ................................................................. 630 3 2 48 Land and land development .............................................. 573 20 43 78 Industrial/warehouse ................................................... 551 18 1 19 Commercial-other ....................................................... 404 17 11 11 Resorts/golf courses ................................................... 275 - - - Unsecured .............................................................. 159 2 - 35 Multiple use ........................................................... 115 5 1 3 Other .................................................................. 464 37 27 203 --------------------------------------------------------- $8,308 $173 $112 $879 =========================================================
(1) ON DECEMBER 31, 1996, THE CORPORATION HAD UNFUNDED BINDING REAL ESTATE COMMERCIAL AND CONSTRUCTION LOAN COMMITMENTS. (2) OTHER CREDIT EXPOSURES INCLUDE LETTERS OF CREDIT AND LOANS HELD FOR SALE. (3) DISTRIBUTION BASED ON GEOGRAPHIC LOCATION OF COLLATERAL. 38 NationsBank Corporation Annual Report 1996 accounts receivable, on December 31, 1996 compared to $9.2 billion, or 8 percent, at the end of 1995. During 1996, the Corporation recorded real estate net charge-offs of $28 million, or .30 percent of average real estate loans, compared to net charge-offs of $18 million, or .17 percent, in 1995. Of the increase in total real estate net charge-offs in 1996, $18 million was attributable to the second quarter bulk sale of $110 million of loans, primarily commercial real estate. Real estate commercial and construction loans which were past due 90 days or more and still accruing interest were $18 million, or .22 percent of total real estate loans, on December 31, 1996 compared to $6 million, or .07 percent, at the end of 1995. Nonperforming real estate commercial and construction loans decreased $39 million to $173 million on December 31, 1996 compared to December 31, 1995, primarily due to the above-mentioned bulk sale. The exposures included in TABLE SEVENTEEN do not include credit extensions which were made on the general creditworthiness of the borrower for which real estate was obtained as security or as an abundance of caution and for which the ultimate repayment of the credit is not dependent on the sale, lease, rental or refinancing of the real estate. Accordingly, the exposures presented do not include commercial loans secured by owner-occupied real estate, except where the borrower is a real estate developer. In addition to the amounts presented in the tables, on December 31, 1996, the Corporation had approximately $7.9 billion of commercial loans which were not real estate dependent but for which the Corporation had obtained real estate as secondary repayment security. OTHER INDUSTRIES - TABLE EIGHTEEN presents selected industry credit exposures. Commercial loans, factored accounts receivable and lease financings are included in the table. Other credit exposures as presented include loans held for sale, letters of credit, bankers' acceptances and derivatives exposures in a gain position. Commercial loan outstandings totaled $50.3 billion and $48.0 billion on December 31, 1996 and 1995, respectively, or 41 percent of net loans, leases and factored accounts receivable. Net charge-offs of commercial loans totaled $84 million, or .17 percent of average commercial loans, in 1996, versus $20 million, or .04 percent, in 1995. Commercial loans which were past due 90 days or more and still accruing interest were $38 million, or .08 percent of commercial loans, on December 31, 1996 compared to $24 million, or .05 percent, at the end of 1995. Nonperforming commercial loans were $342 million and $271 million on December 31, 1996 and 1995, respectively.
TABLE EIGHTEEN. SELECTED INDUSTRY CREDIT EXPOSURES =========================================================================================================================== DECEMBER 31, 1996 (DOLLARS IN MILLIONS) LOANS, LEASES AND FACTORED ACCOUNTS RECEIVABLE, NET OF UNEARNED INCOME ________________________________________________ OTHER UNFUNDED CREDIT OUTSTANDING NONPERFORMING COMMITMENTS EXPOSURES (1) - ------------------------------------------------------------------------------------------------------------------------------- Communications ................................................... $4,653 $18 $5,669 $449 Health care ...................................................... 3,852 9 3,543 858 Leisure and sports ............................................... 3,133 29 2,104 243 Textiles and apparel ............................................. 2,750 39 1,578 362 Oil and gas ...................................................... 2,734 30 3,852 730 Automotive, excluding trucking ................................... 2,618 9 2,153 92 Retail ........................................................... 2,528 46 3,531 562 Food, including agribusiness ..................................... 2,487 14 2,441 304 Machinery and equipment, excluding defense ....................... 2,412 3 2,665 244 Forest products and paper ........................................ 1,670 16 2,113 303 Services ......................................................... 1,605 14 1,679 293 Computers and electronics ........................................ 1,594 15 2,831 112 Utilities ........................................................ 1,383 1 4,247 222 Finance companies ................................................ 1,042 1 4,570 156 Banks ............................................................ 880 1 1,663 2,646 Brokers and dealers .............................................. 246 - 1,220 1,198
(1) OTHER CREDIT EXPOSURES INCLUDE LOANS HELD FOR SALE, LETTERS OF CREDIT, BANKERS' ACCEPTANCES AND DERIVATIVES EXPOSURES IN A GAIN POSITION. Management's Discussion and Analysis 39 CONSUMER - On December 31, 1996 and 1995, consumer loan outstandings totaled $55.3 billion and $52.8 billion, respectively, representing 45 percent of net loans, leases and factored accounts receivable. Net charge-offs in the consumer portfolio were $466 million in 1996 compared to $360 million in 1995, reflecting the impact of loan growth and the continuation of a return to more normal levels of credit losses. TABLE SEVEN details the components of the Corporation's consumer loan portfolio. In addition to the credit card and other consumer loans reported in the financial statements, the Corporation manages credit card and consumer receivables which have been sold. Total average credit card receivables managed by the CARD SERVICES group (excluding private label credit cards) were $8.1 billion in 1996 compared to $6.1 billion in 1995. Average securitized credit card loans totaled $2.2 billion during 1996 and included a $900 million securitization completed during the second quarter. During 1995, average securitized credit card loans were $1.3 billion. Net charge-off ratios for the managed credit card portfolio were 4.54 percent for 1996 and 3.95 percent for 1995. Total average managed other consumer loans, including direct and indirect consumer loans and home equity lines, were $24.6 billion in 1996 including the impact of the July 31, 1996 securitization of $2.1 billion of indirect auto loans compared to total average managed other consumer loans of $22.6 billion in 1995. The consumer managed portfolio, which includes both on balance sheet receivables and indirect auto loan and consumer finance securitizations, experienced net charge-offs as a percentage of average managed consumer loans of 1.07 percent in 1996 and .87 percent in 1995. Total consumer loans which were past due 90 days or more and still accruing interest were $180 million, or .33 percent of total consumer loans, on December 31, 1996 compared to $126 million, or .24 percent, at the end of 1995. Total consumer nonperforming loans were $350 million and $217 million on December 31, 1996 and 1995, respectively, primarily due to an increase in nonperforming residential mortgage loans obtained through acquisitions. FOREIGN - Foreign outstandings include loans and leases, interest-bearing deposits with foreign banks, bankers' acceptances and other investments. The Corporation has no significant medium- or long-term outstandings to restructuring countries. The Corporation's foreign outstandings totaled $8.1 billion on December 31, 1996 compared to $3.8 billion on December 31, 1995. MARKET RISK MANAGEMENT In the normal course of conducting business activities, the Corporation is exposed to market risk which includes both price and liquidity risk. Price risk arises from fluctuations in interest rates, foreign exchange rates and commodity and equity prices that may result in changes in the values of financial instruments. Liquidity risk arises from the possibility that the Corporation may not be able to satisfy current and future financial commitments or that the Corporation may not be able to liquidate financial instruments at market prices. Risk management procedures and policies have been established and are utilized to manage the Corporation's exposure to market risk. The strategy of the Corporation with respect to market risk is to maximize net income while maintaining an acceptable level of risk to changes in market rates. While achievement of this goal requires a balance between profitability, liquidity and market price risk, there are opportunities to enhance revenues through controlled risks. Market risk is managed by the Corporation's Finance Committee which formulates policy based on desirable levels of market risk. In setting desirable levels of market risk, the Finance Committee considers the impact on both earnings and capital of the current outlook in market rates, potential changes in the outlook in market rates, world and regional economies, liquidity, business strategies and other factors. The Corporation's asset and liability management process is utilized to manage interest rate risk through the structuring of balance sheet and off-balance sheet portfolios. To effectively measure and manage interest rate risk, the Corporation uses computer simulations which determine the impact on net interest income of numerous interest rate scenarios, balance sheet trends and strategies. These simulations incorporate assumptions about balance sheet dynamics, such as loan and deposit growth and pricing, changes in funding mix and asset and liability repricing and maturity characteristics. Simulations are run under various interest 40 NationsBank Corporation Annual Report 1996 rate scenarios to determine the impacts on net income and capital. From these scenarios, interest rate risk is quantified and appropriate strategies are developed and implemented. The overall interest rate risk position and strategies are reviewed on an ongoing basis by executive management. Additionally, duration and market value sensitivity measures are selectively utilized where they provide added value to the overall interest rate risk management process. In implementing strategies to manage interest rate risk, the primary tools used by the Corporation are the securities portfolio and interest rate swaps, and management of the mix, yields or rates and maturities of assets and of the wholesale and retail funding sources of the Corporation. TABLE NINETEEN represents the Corporation's interest rate gap position on December 31, 1996. Based on contractual maturities or repricing dates (or anticipated dates where no contractual maturity or repricing date exists or where prepayments are a factor), interest-sensitive assets and liabilities are placed in maturity categories. The Corporation's near-term cumulative interest rate gap position is a reflection of the customer-deposit gathering franchise which provides the Corporation with a relatively stable core deposit base. These funds have been deployed in longer-term interest earning assets, primarily loans and securities. A gap analysis is limited in its usefulness as it represents a one-day position, which is continually changing and not necessarily indicative of the Corporation's position at any other time.
TABLE NINETEEN. INTEREST RATE GAP ANALYSIS =================================================================================================================================== DECEMBER 31, 1996 (DOLLARS IN MILLIONS) OVER 12 MONTHS AND INTEREST-SENSITIVE NONINTEREST- ________________________________________________ 30-DAY 3-MONTH 6-MONTH 12-MONTH TOTAL SENSITIVE TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- Earning assets Loans and leases, net of unearned income ..... $49,346 $12,268 $4,636 $8,716 $74,966 $46,617 $121,583 Securities held for investment ............... 53 197 308 394 952 1,158 2,110 Securities available for sale ................ 135 275 432 1,143 1,985 10,292 12,277 Loans held for sale .......................... 1,215 - - - 1,215 - 1,215 Time deposits placed and other short-term investments ..................... 1,402 355 31 55 1,843 - 1,843 Trading account securities ................... 15,391 - - - 15,391 - 15,391 Federal funds sold and securities purchased under agreements to resell ....... 6,959 - - - 6,959 - 6,959 ------------------------------------------------------------------------------- Total .................................... 74,501 13,095 5,407 10,308 103,311 58,067 161,378 _____________________________________________________________________________ Interest-bearing liabilities Savings ...................................... 8,498 - - - 8,498 - 8,498 NOW and money market deposit accounts ........ 31,128 - - - 31,128 - 31,128 Consumer CDs and IRAs ........................ 4,352 4,993 6,143 6,583 22,071 8,701 30,772 Negotiated CDs, public funds and other time deposits ........................ 785 473 385 338 1,981 328 2,309 Foreign time deposits ........................ 7,103 507 347 96 8,053 - 8,053 Borrowed funds ............................... 21,619 1,957 414 11 24,001 - 24,001 Short sales .................................. 7,904 - - - 7,904 - 7,904 Trust preferred securities ................... - - - - - 965 965 Long-term debt ............................... 4,873 7,398 200 208 12,679 10,306 22,985 ------------------------------------------------------------------------------- Total .................................... 86,262 15,328 7,489 7,236 116,315 20,300 136,615 Noninterest-bearing, net ........................ - - - - - 24,763 24,763 ------------------------------------------------------------------------------- Total .................................... 86,262 15,328 7,489 7,236 116,315 45,063 $161,378 ------------------------------------------------------------------------------- Interest rate gap ............................... (11,761) (2,233) (2,082) 3,072 (13,004) 13,004 Effect of asset and liability management interest rate swaps, futures and other off-balance sheet items ................ (11,673) (14,188) (790) (103) (26,754) 26,754 ------------------------------------------------------------------ Adjusted interest rate gap ...................... $(23,434) $(16,421) $(2,872) $2,969 $(39,758) $39,758 ================================================================== Cumulative adjusted interest rate gap ........... $(23,434) $(39,855) $(42,727) $(39,758) ============================================
Management's Discussion and Analysis 41 Additionally, the gap analysis does not consider the many factors accompanying interest rate movements. On December 31, 1996, the interest rate risk position of the Corporation was relatively neutral as the impact of a gradual parallel 100 basis-point rise or fall in interest rates over the next 12 months was estimated to be less than one percent of net income when compared to stable rates. The Corporation manages its exposure to market risk resulting from trading activities through a risk management function which is independent of the business units. Each major trading site in Charlotte, Chicago, New York, London, Singapore and Tokyo is monitored by these risk management units. Risk limits have been approved by the Corporation's Finance Committee, and daily earnings at risk limits are generally allocated to the business units. In addition to limits placed on these individual business units, limits are also imposed on the risks individual traders can take and on the amount of risk that can be concentrated in a particular product or market. Risk positions are monitored by business unit, risk management personnel and senior management on a daily basis. Business unit and risk management personnel are responsible for continual monitoring of the changing aggregate position of the portfolios under their responsibility, including projection of the profit or loss levels that could result from both normal and extreme market moves. If any market risk limits are exceeded, the risk management units are responsible for taking actions as necessary to bring portfolios within approved trading limits. To estimate potential losses that could result from adverse market movements, the Corporation uses a daily earnings at risk methodology. Earnings at risk represents a one-day measurement of pretax earnings at risk from movements in market prices using the assumption that positions cannot be rehedged during the period of any prescribed price and volatility change. A 99-percent confidence level is utilized, which indicates that actual trading profits and losses may deviate from expected levels and exceed estimates approximately one day out of every 100 days of trading activity. Earnings at risk estimates are measured on a daily basis at the individual trading unit level, by type of trading activity and for all trading activities in the aggregate. Daily reports of estimates compared to respective limits are reviewed by senior management, and trading strategies are adjusted accordingly. In addition to these simulations, portfolios which have significant option positions are stress tested continually to simulate the potential loss that might occur due to unexpected market movements in each market. Earnings at risk is measured on both a gross and uncorrelated basis. The gross measure assumes that adverse market movements occur simultaneously across all segments of the trading portfolio, an unlikely assumption. On December 31, 1996, the gross estimates for aggregate interest rate, foreign exchange and equity and commodity trading activities were $59 million, $3 million and $2 million, respectively. Alternately, using a statistical measure which is more likely to capture the effects of market movements, the uncorrelated estimate on December 31, 1996 for aggregate trading activities was $25 million. Average daily trading-related revenues in 1996 approximated $1 million. During 1996, the Corporation's trading-related activities resulted in positive daily revenues for approximately 74 percent of total trading days. In 1996, the standard deviation of trading-related revenues was $3 million. Using this data, one can conclude that the aggregate trading activities should not result in exposure of more than $7 million for any one day, assuming 99-percent confidence. When comparing daily earnings at risk to trading-related revenues, daily earnings at risk will average considerably more due to the assumption of no evasive actions as well as the assumption that adverse market movements occur simultaneously across all segments of the trading portfolio. CAPITAL RESOURCES AND CAPITAL MANAGEMENT Shareholders' equity on December 31, 1996 was $13.7 billion compared to $12.8 billion on December 31, 1995. Net earnings retention of $1.7 billion coupled with the acquisition of Bank South Corporation, which resulted in the issuance of 52.6 million shares of common stock and an increase of $685 million in shareholders' 42 NationsBank Corporation Annual Report 1996 equity, were the primary reasons for the increase. The increase was partially offset by the repurchase of 34.2 million shares of common stock for approximately $1.5 billion and net depreciation of $240 million in the market value of securities available for sale and marketable equity securities due to sales and maturities of securities during 1996. The Corporation's and significant subsidiaries' regulatory capital ratios, along with a description of the components of risk-based capital, capital adequacy requirements and prompt corrective action provisions, are included in Note Nine to the consolidated financial statements. FOURTH QUARTER REVIEW During the fourth quarter of 1996, the Corporation recorded net income of $632 million compared to $510 million in the fourth quarter of 1995.TABLE TWENTY presents selected quarterly operating results for each quarter of 1996 and 1995. TABLE TWENTY-ONE presents an analysis of the Corporation's taxable-equivalent net interest income for each of the last five quarters. Taxable-equivalent net interest income was $1.6 billion in the fourth quarter of 1996 compared to $1.4 billion in the comparable 1995 period. The net interest yield was 3.75 percent in the fourth quarter of 1996 compared to 3.38 percent in the fourth quarter of 1995. The increase in the net interest yield reflected the sale of low-yielding securities and the reinvestment of cash from the sale of low-yielding securities into higher-spread products. The provision for credit losses was $150 million in the fourth quarter of 1996 compared to $142 million in the same quarter of 1995. Net charge-offs for the fourth quarter of 1996 were $151 million compared to $156 million in the fourth quarter of 1995. The increase in the provision for credit losses resulted from growth in commercial and consumer lending as well as the continuation of a return to more normalized levels of credit losses following periods of unusually low credit losses. Noninterest income was $958 million and $846 million in the fourth quarters of 1996 and 1995, respectively. The 13-percent increase was driven primarily by higher deposit account service charges, investment banking income and trading account profits and fees. Noninterest expense increased 9 percent in the fourth quarter of 1996 compared to the fourth quarter of 1995, primarily due to acquisitions. Income tax expense was $326 million in the fourth quarter of 1996, reflecting an effective tax rate of 34.0 percent of pretax income. This compared to income tax expense of $278 million, or an effective tax rate of 35.3 percent, in the fourth quarter of 1995. 1995 COMPARED TO 1994 The following discussion and analysis provides a comparison of the Corporation's results of operations for the years ended December 31, 1995 and 1994. This discussion should be read in conjunction with the consolidated financial statements and related notes on pages 49 through 71. OVERVIEW The Corporation's net income of $1.95 billion in 1995 reflected an increase of 15 percent over 1994. Earnings per common share for 1995 increased 16 percent to $3.56 from $3.06 for 1994. Return on average common shareholders' equity rose to 17.01 percent from 16.10 percent in 1994. Revenue growth outpaced expense growth in 1995, bringing the efficiency ratio to 59.8 percent, an improvement of approximately 280 basis points over 1994. BUSINESS UNIT OPERATIONS The GENERAL BANK'S 1995 earnings of $1.2 billion increased 26 percent over 1994. Return on equity increased to 19 percent in 1995 from 17 percent in 1994. Revenue growth and expense control led to a 365 basis-point improvement in the efficiency ratio in 1995 to 63.8 percent. GLOBAL FINANCE produced a return on equity of 16 percent in 1995, consistent with the return in 1994. Earnings were $609 million compared to $631 million in 1994. Increased investment in personnel resulted in a 27 basis-point rise in the efficiency ratio to 54.2 percent in 1995. FINANCIAL SERVICES' earnings increased 25 percent to $129 million in 1995. Return on equity increased to 14 percent in 1995 from 13 percent in the prior year. The efficiency ratio improved 352 basis points in 1995 to 42.1 percent. Management's Discussion and Analysis 43 NET INTEREST INCOME Taxable-equivalent net interest income increased $255 million to $5.6 billion in 1995, driven by growth in average earning assets, principally loans and leases, which increased $14.5 billion to $109.5 billion. The increase in net interest income resulting primarily from loan growth was partially offset by the use of higher cost market-based funds and term debt. As the growth in earning assets outpaced customer deposit growth, the Corporation shifted to alternative funding sources such as term debt. The net interest yield of 3.33 percent in 1995 reflected the funding of earning asset growth principally with market-based funds
TABLE TWENTY. SELECTED QUARTERLY OPERATING RESULTS =========================================================================================================================== (DOLLARS IN MILLIONS EXCEPT PER-SHARE INFORMATION) 1996 QUARTERS 1995 QUARTERS ___________________________________________________________________________________ FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST - --------------------------------------------------------------------------------------------------------------------------- Income from earning assets ................ $3,358 $3,423 $3,442 $3,573 $3,361 $3,398 $3,391 $3,070 Interest expense .......................... 1,768 1,828 1,855 2,016 1,948 2,007 2,055 1,763 Net interest income (taxable-equivalent) .. 1,612 1,616 1,611 1,584 1,438 1,420 1,367 1,335 Net interest income ....................... 1,590 1,595 1,587 1,557 1,413 1,391 1,336 1,307 Provision for credit losses ............... 150 145 155 155 142 100 70 70 Gains (losses) on sales of securities ..... 33 26 (6) 14 21 3 4 1 Noninterest income ........................ 958 886 917 885 846 776 730 726 Other real estate owned expense ........... 7 6 7 - 8 7 1 2 Merger-related charge ..................... - - - 118 - - - - Other noninterest expense ................. 1,466 1,400 1,405 1,394 1,342 1,245 1,288 1,288 Income before income taxes ................ 958 956 931 789 788 818 711 674 Income tax expense ........................ 326 331 326 276 278 288 244 231 Net income ................................ 632 625 605 513 510 530 467 443 Net income (excluding merger-related charge) ................................ 632 625 605 590 510 530 467 443 Earnings per common share ................. 1.09 1.06 1.00 .85 .94 .98 .86 .80 Earnings per common share (excluding merger-related charge) ................. 1.09 1.06 1.00 .98 .94 .98 .86 .80 Dividends per common share ................ .33 .29 .29 .29 .29 .25 .25 .25 Yield on average earning assets ........... 7.86% 7.87% 7.80% 7.80% 7.95% 8.08% 7.98% 7.93% Rate on average interest- bearing liabilities .................... 4.77 4.84 4.83 4.97 5.22 5.38 5.39 5.13 Net interest spread ....................... 3.09 3.03 2.97 2.83 2.73 2.70 2.59 2.80 Net interest yield ........................ 3.75 3.69 3.62 3.43 3.38 3.35 3.19 3.41 Average total assets ......................$194,321 $197,923 $202,796 $208,617 $191,693 $190,501 $194,302 $177,515 Average total deposits .................... 105,765 107,715 109,988 106,906 98,602 98,671 100,569 99,285 Average total shareholders' equity ........ 13,224 13,133 13,552 13,144 11,903 11,487 11,213 11,192 Return on average assets .................. 1.29% 1.26% 1.20% .99% 1.06% 1.10% .96% 1.01% Return on average assets (excluding merger-related charge) ................. 1.29 1.26 1.20 1.14 1.06 1.10 .96 1.01 Return on average common shareholders' equity (1) ............... 19.06 19.00 18.00 15.71 16.98 18.29 16.69 16.03 Return on average common shareholders' equity (excluding merger-related charge) (1) ............................ 19.06 19.00 18.00 18.07 16.98 18.29 16.69 16.03 Market price per share of common stock High for the period .................... $52 5/8 $47 1/16 $42 5/16 $40 11/16 $37 3/8 $34 7/16 $28 7/8 $25 7/8 Low for the period ..................... 43 1/8 38 3/16 37 3/8 32 3/16 32 26 7/8 24 13/16 22 5/16 Closing price .......................... 48 7/8 43 7/16 41 5/16 40 1/16 34 13/16 33 5/8 26 13/16 25 3/8 Tier 1 capital ratio ...................... 7.76% 7.05% 7.58% 7.35% 7.24% 7.16% 7.03% 7.25% Total capital ratio ....................... 12.66 12.05 11.93 11.71 11.58 11.23 10.90 11.06 (1)AVERAGE COMMON SHAREHOLDERS' EQUITY DOES NOT INCLUDE THE EFFECT OF MARKET VALUE ADJUSTMENTS TO SECURITIES AVAILABLE FOR SALE AND MARKETABLE EQUITY SECURITIES.
44 NationsBank Corporation Annual Report 1996 and term debt and the addition of $6.5 billion in low-spread trading-related assets when compared to 1994. PROVISION FOR CREDIT LOSSES The provision for credit losses was $382 million in 1995 compared to $310 million in the prior year, reflecting increased loans, the continuing shift in the mix of the loan portfolio towards consumer lending and the maturing credit cycle. The level of provision expense in 1995 was consistent with credit quality indicators. Net charge-offs in 1995 increased by $105 million compared to 1994 due to higher levels of credit card and other consumer loan charge-offs coupled with a lower level of recoveries in 1995. The allowance for credit losses was $2.2 billion, or 1.85 percent of net loans, leases and factored accounts receivable, on December 31, 1995 compared to $2.2 billion, or 2.11 percent, at the end of 1994. The allowance for credit losses was 306 percent of nonperforming loans on December 31, 1995 compared to 273 percent on December 31, 1994. NONINTEREST INCOME Noninterest income increased 19 percent to $3.1 billion in 1995, reflecting the diverse fee-generating activities of the Corporation. Capital markets revenues, deposit and other service fees and acquisition-related mortgage servicing fees were factors in the year-over-year increase. NONINTEREST EXPENSE Noninterest expense increased 4 percent to $5.2 billion. Excluding the impact of acquisitions, noninterest expense increased 3 percent reflecting additional investment in personnel in selected areas, expanded marketing efforts to support revenue growth and increased expenditures related to technology initiatives, partially offset by reduced deposit insurance expense. INCOME TAXES The Corporation's income tax expense for 1995 was $1.0 billion, for an effective tax rate of 34.8 percent of pretax income. Income tax expense for 1994 was $865 million, reflecting an effective tax rate of 33.9 percent. Management's Discussion And Analysis 45
TABLE TWENTY-ONE. QUARTERLY TAXABLE-EQUIVALENT DATA - ---------------------------------------------------------------------------------------------------------------------- (DOLLARS IN MILLIONS) FOURTH QUARTER 1996 THIRD QUARTER 1996 ----------------------------------------------------------- AVERAGE AVERAGE BALANCE INCOME BALANCE INCOME SHEET OR YIELDS/ SHEET OR YIELDS/ AMOUNTS EXPENSE RATES AMOUNTS EXPENSE RATES - ---------------------------------------------------------------------------------------------------------------------- Earning assets Loans and leases, net of unearned income (1) Commercial (2)....................................... 49,987 $1,044 8.30% $ 48,920 $1,011 8.23% Real estate commercial............................... 5,388 122 9.00 5,921 138 9.25 Real estate construction............................. 3,084 67 8.74 3,195 74 9.15 ------------------------------------------------------------ Total commercial................................... 58,459 1,233 8.39 58,036 1,223 8.38 ------------------------------------------------------------ Residential mortgage................................. 28,174 548 7.77 27,990 545 7.77 Credit card.......................................... 6,363 185 11.58 5,903 169 11.38 Other consumer....................................... 20,581 503 9.69 22,026 544 9.84 ------------------------------------------------------------ Total consumer..................................... 55,118 1,236 8.93 55,919 1,258 8.97 ------------------------------------------------------------ Foreign.............................................. 2,701 47 6.89 2,813 46 6.59 Lease financing...................................... 4,614 87 7.66 4,429 85 7.60 ------------------------------------------------------------ Total loans and leases, net........................ 120,892 2,603 8.57 121,197 2,612 8.58 ------------------------------------------------------------ Securities Held for investment.................................. 2,585 36 5.55 3,173 46 5.73 Available for sale (3)............................... 11,540 205 7.10 16,388 273 6.66 ------------------------------------------------------------ Total securities................................... 14,125 241 6.82 19,561 319 6.51 ------------------------------------------------------------ Loans held for sale.................................... 802 15 7.31 1,025 20 7.87 Federal funds sold..................................... 273 4 5.79 361 6 6.39 Securities purchased under agreements to resell........ 12,018 158 5.21 11,828 153 5.14 Time deposits placed and other short-term investments............................... 1,991 25 4.86 1,430 20 5.74 Trading account securities (4)......................... 21,148 334 6.32 18,897 314 6.60 ------------------------------------------------------------ Total earning assets (5)............................. 171,249 3,380 7.86 174,299 3,444 7.87 Cash and cash equivalents................................ 7,720 7,597 Factored accounts receivable............................. 1,256 1,150 Other assets, less allowance for credit losses........... 14,096 14,877 ------------------------------------------------------------ Total assets......................................... $194,321 $197,923 ============================================================ Interest-bearing liabilities Savings................................................ $ 8,607 46 2.12 $ 8,798 48 2.15 NOW and money market deposit accounts.................. 30,634 191 2.47 30,485 189 2.49 Consumer CDs and IRAs (6).............................. 30,870 405 5.22 30,092 394 5.21 Negotiated CDs, public funds and other time deposits............................................. 2,544 35 5.53 3,314 46 5.50 Foreign time deposits.................................. 9,139 117 5.10 10,836 145 5.31 Federal funds purchased................................ 3,915 51 5.21 3,631 49 5.39 Securities sold under agreements to repurchase (6)..... 25,192 330 5.22 26,309 355 5.36 Commercial paper....................................... 2,850 40 5.59 3,129 44 5.59 Other short-term borrowings (6)........................ 1,971 34 6.99 2,999 51 6.76 Trading account liabilities (4)........................ 9,314 152 6.48 9,848 163 6.57 Long-term debt (7)..................................... 22,702 367 6.53 21,067 344 6.53 ------------------------------------------------------------ Total interest-bearing liabilities................... 147,738 1,768 4.77 150,508 1,828 4.84 ------------------------------------------------------------ Noninterest-bearing sources Noninterest-bearing deposits........................... 23,971 24,190 Other liabilities...................................... 9,388 10,092 Shareholders' equity................................... 13,224 13,133 ------------------------------------------------------------ Total liabilities and shareholders' equity........... $194,321 $197,923 ============================================================= Net interest spread...................................... 3.09 3.03 Impact of noninterest-bearing sources.................... .66 .66 ------------------------------------------------------------ Net interest income/yield on earning assets.............. $1,612 3.75% $1,616 3.69% =============================================================
(1) NONPERFORMING LOANS ARE INCLUDED IN THE RESPECTIVE AVERAGE LOAN BALANCES. INCOME ON SUCH NONPERFORMING LOANS IS RECOGNIZED ON A CASH BASIS. (2) COMMERCIAL LOAN INTEREST INCOME INCLUDES NET INTEREST RATE SWAP REVENUES RELATED TO SWAPS CONVERTING VARIABLE-RATE COMMERCIAL LOANS TO FIXED RATE. INTEREST RATE SWAPS INCREASED (DECREASED) INTEREST INCOME $31, $11, $3 AND ($19) IN THE FOURTH, THIRD, SECOND AND FIRST QUARTERS OF 1996, RESPECTIVELY, AND ($34) IN THE FOURTH QUARTER OF 1995. (3) THE AVERAGE BALANCE SHEET AMOUNTS AND YIELDS ON SECURITIES AVAILABLE FOR SALE ARE BASED ON THE AVERAGE OF HISTORICAL AMORTIZED COST BALANCES. (4) THE FAIR VALUES OF DERIVATIVES-DEALER POSITIONS ARE REPORTED IN OTHER ASSETS AND LIABILITIES, RESPECTIVELY. (5) INTEREST INCOME INCLUDES TAXABLE-EQUIVALENT ADJUSTMENTS OF $22, $21, $24 AND $27 IN THE FOURTH, THIRD, SECOND AND FIRST QUARTERS OF 1996, RESPECTIVELY, AND $25 IN THE FOURTH QUARTER OF 1995. (6) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, OTHER SHORT-TERM BORROWINGS AND CONSUMER CDS INTEREST EXPENSE INCLUDES NET INTEREST RATE SWAP EXPENSE RELATED TO SWAPS FIXING THE COST OF CERTAIN OF THESE LIABILITIES. INTEREST RATE SWAPS INCREASED INTEREST EXPENSE $3, $16, $26 AND $21 IN THE FOURTH, THIRD, SECOND AND FIRST QUARTERS OF 1996, RESPECTIVELY, AND $12 IN THE FOURTH QUARTER OF 1995. (7) LONG-TERM DEBT INTEREST EXPENSE INCLUDES NET INTEREST RATE SWAP EXPENSE RELATED TO SWAPS PRIMARILY CONVERTING THE COST OF CERTAIN FIXED-RATE DEBT TO VARIABLE RATE. INTEREST RATE SWAPS DECREASED INTEREST EXPENSE $4, $3, $2 AND $3 IN THE FOURTH, THIRD, SECOND AND FIRST QUARTERS OF 1996, RESPECTIVELY. 46 NationsBank Corporation Annual Report 1996
- ------------------------------------------------------------------------------------------ SECOND QUARTER 1996 FIRST QUARTER 1996 FOURTH QUARTER 1995 - ------------------------------------------------------------------------------------------ AVERAGE AVERAGE AVERAGE BALANCE INCOME BALANCE INCOME BALANCE INCOME SHEET OR YIELDS/ SHEET OR YIELDS/ SHEET OR YIELDS/ AMOUNTS EXPENSE RATES AMOUNTS EXPENSE RATES AMOUNTS EXPENSE RATES - ------------------------------------------------------------------------------------------ $ 49,983 $1,000 8.04% $ 49,319 $ 987 8.05% $ 47,077 $ 971 8.18% 6,288 141 9.07 6,774 149 8.82 6,649 157 9.39 3,229 71 8.83 3,154 69 8.85 3,016 72 9.44 - ------------------------------------------------------------------------------------------ 59,500 1,212 8.19 59,247 1,205 8.18 56,742 1,200 8.39 - ------------------------------------------------------------------------------------------ 27,728 542 7.82 27,352 534 7.83 23,573 459 7.78 6,057 173 11.45 6,590 206 12.59 5,709 182 12.69 23,441 578 9.93 23,850 593 9.99 22,852 581 10.09 - ------------------------------------------------------------------------------------------ 57,226 1,293 9.07 57,792 1,333 9.26 52,134 1,222 9.33 - ------------------------------------------------------------------------------------------ 2,746 45 6.56 2,392 45 7.54 2,100 40 7.65 4,254 80 7.59 3,851 72 7.46 3,628 68 7.48 - ------------------------------------------------------------------------------------------ 123,726 2,630 8.54 123,282 2,655 8.65 114,604 2,530 8.77 - ------------------------------------------------------------------------------------------ 3,731 51 5.45 4,292 60 5.62 12,945 186 5.72 18,328 303 6.64 22,997 365 6.37 10,689 174 6.45 - ------------------------------------------------------------------------------------------ 22,059 354 6.44 27,289 425 6.25 23,634 360 6.05 - ------------------------------------------------------------------------------------------ 1,156 19 6.49 1,331 25 7.55 644 12 7.34 397 5 5.75 525 8 5.89 534 8 6.02 12,075 149 4.99 13,870 183 5.29 12,088 163 5.36 1,263 17 5.28 1,056 18 6.90 1,634 28 6.77 17,912 292 6.53 18,213 286 6.33 16,196 285 6.99 - ------------------------------------------------------------------------------------------ 178,588 3,466 7.80 185,566 3,600 7.80 169,334 3,386 7.95 7,928 7,998 7,500 1,124 1,010 1,221 15,156 14,043 13,638 - ------------------------------------------------------------------------------------------ $202,796 $208,617 $191,693 =========================================================================================== $ 9,336 52 2.27 $ 9,361 55 2.35 $ 8,287 49 2.34 30,155 191 2.52 29,692 192 2.61 27,233 185 2.71 29,698 389 5.28 29,469 397 5.42 24,682 339 5.44 3,331 46 5.53 3,273 44 5.42 2,946 42 5.74 12,867 170 5.34 11,902 170 5.73 13,546 211 6.18 4,433 59 5.37 6,817 92 5.41 5,599 81 5.78 28,924 391 5.44 33,705 455 5.43 30,136 440 5.79 3,064 42 5.49 2,821 39 5.62 2,871 43 5.89 3,968 58 5.80 4,455 65 5.89 4,550 78 6.72 8,912 147 6.63 12,485 191 6.16 11,125 185 6.60 19,730 310 6.30 18,885 316 6.68 17,276 295 6.83 - ------------------------------------------------------------------------------------------ 154,418 1,855 4.83 162,865 2,016 4.97 148,251 1,948 5.22 - ------------------------------------------------------------------------------------------ 24,601 23,209 21,908 10,225 9,399 9,631 13,552 13,144 11,903 - ------------------------------------------------------------------------------------------ $202,796 $208,617 $191,693 =========================================================================================== 2.97 2.83 2.73 .65 .60 .65 - ------------------------------------------------------------------------------------------ $1,611 3.62% $1,584 3.43% $1,438 3.38% ===========================================================================================
Management's Discussion And Analysis 47 - ------------------------------------------------------------------------------- Report Of Management The management of NationsBank Corporation is responsible for the preparation, integrity and objectivity of the consolidated financial statements of the Corporation. The consolidated financial statements and notes have been prepared by the Corporation in accordance with generally accepted accounting principles and, in the judgment of management, present fairly the Corporation's financial position and results of operations. The financial information contained elsewhere in this report is consistent with that in the financial statements. The financial statements and other financial information in this report include amounts that are based on management's best estimates and judgments and give due consideration to materiality. The Corporation maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Management recognizes that even a highly effective internal control system has inherent risks, including the possibility of human error and the circumvention or overriding of controls, and that the effectiveness of an internal control system can change with circumstances. However, management believes that the internal control system provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented or would be detected on a timely basis and corrected through the normal course of business. As of December 31, 1996, management believes that the internal controls are in place and operating effectively. The Internal Audit Division of the Corporation reviews, evaluates, monitors and makes recommendations on both administrative and accounting control, which acts as an integral, but independent, part of the system of internal controls. The independent accountants were engaged to perform an independent audit of the consolidated financial statements. In determining the nature and extent of their auditing procedures, they have evaluated the Corporation's accounting policies and procedures and the effectiveness of the related internal control system. An independent audit provides an objective review of management's responsibility to report operating results and financial condition. Their report appears below. The Board of Directors discharges its responsibility for the Corporation's financial statements through its Audit Committee. The Audit Committee meets periodically with the independent accountants, internal auditors and management. Both the independent accountants and internal auditors have direct access to the Audit Committee to discuss the scope and results of their work, the adequacy of internal accounting controls and the quality of financial reporting. (Signature of Hugh L. McColl, Jr.) (Signature of James H. Hance Jr.) Hugh L. McColl Jr. James H. Hance Jr. Chief Executive Officer Vice Chairman and Chief Financial Officer Report Of Independent Accountants TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NATIONSBANK CORPORATION In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of NationsBank Corporation and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. (Signature of Price Waterhouse LLP) Charlotte, North Carolina January 10, 1997 48 NationsBank Corporation Annual Report 1996
- ------------------------------------------------------------------------------------------- NationsBank Corporation And Subsidiaries CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN MILLIONS EXCEPT PER-SHARE INFORMATION) YEAR ENDED DECEMBER 31 ----------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------------------- INCOME FROM EARNING ASSETS Interest and fees on loans................................ $10,138 $ 9,331 $ 7,577 Lease financing income.................................... 302 221 150 Interest and dividends on securities Held for investment..................................... 186 851 755 Available for sale...................................... 1,120 617 623 Interest and fees on loans held for sale.................. 79 24 23 Interest on time deposits placed and other short-term investments............................ 80 142 90 Federal funds sold........................................ 23 47 45 Securities purchased under agreements to resell........... 643 890 502 Trading account securities................................ 1,225 1,097 764 ------------------------------- Total income from earning assets...................... 13,796 13,220 10,529 ------------------------------- INTEREST EXPENSE Deposits.................................................. 3,322 3,281 2,415 Borrowed funds............................................ 2,155 2,710 1,618 Trading account liabilities............................... 653 896 735 Long-term debt............................................ 1,337 886 550 ------------------------------- Total interest expense................................ 7,467 7,773 5,318 ------------------------------- NET INTEREST INCOME......................................... 6,329 5,447 5,211 PROVISION FOR CREDIT LOSSES................................. 605 382 310 ------------------------------- NET CREDIT INCOME........................................... 5,724 5,065 4,901 GAINS (LOSSES) ON SALES OF SECURITIES....................... 67 29 (13) NONINTEREST INCOME.......................................... 3,646 3,078 2,597 OTHER REAL ESTATE OWNED EXPENSE (INCOME).................... 20 18 (12) MERGER-RELATED CHARGE....................................... 118 - - OTHER NONINTEREST EXPENSE................................... 5,665 5,163 4,942 ------------------------------- INCOME BEFORE INCOME TAXES.................................. 3,634 2,991 2,555 INCOME TAX EXPENSE.......................................... 1,259 1,041 865 ------------------------------- NET INCOME.................................................. $ 2,375 $ 1,950 $ 1,690 =============================== NET INCOME AVAILABLE TO COMMON SHAREHOLDERS................. $ 2,360 $ 1,942 $ 1,680 =============================== PER-SHARE INFORMATION (RESTATED FOR 2-FOR-1 STOCK SPLIT ON FEBRUARY 27, 1997) Earnings per common share................................. $ 4.00 $ 3.56 $ 3.06 =============================== Fully diluted earnings per common share................... $ 3.92 $ 3.52 $ 3.03 =============================== Dividends per common share................................ $ 1.20 $ 1.04 $ .94 =============================== AVERAGE COMMON SHARES ISSUED (in thousands)................. 590,216 544,959 549,312 ===============================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Consolidated Financial Statements 49
- ----------------------------------------------------------------------------------- NationsBank Corporation And Subsidiaries CONSOLIDATED BALANCE SHEET (DOLLARS IN MILLIONS) DECEMBER 31 ---------------------- 1996 1995 - ----------------------------------------------------------------------------------- ASSETS Cash and cash equivalents................................. $ 8,933 $ 8,448 Time deposits placed and other short-term investments............................................. 1,843 1,296 Securities Held for investment, at cost (market value - $2,110 and $4,432).................................... 2,110 4,432 Available for sale...................................... 12,277 19,415 ---------------------- Total securities...................................... 14,387 23,847 ---------------------- Loans held for sale....................................... 1,215 1,663 Federal funds sold........................................ 77 111 Securities purchased under agreements to resell........... 6,882 6,119 Trading account assets.................................... 18,689 18,867 Loans and leases, net of unearned income.................. 121,583 116,042 Factored accounts receivable.............................. 1,047 991 Allowance for credit losses............................... (2,315) (2,163) ---------------------- Loans, leases and factored accounts receivable, net of unearned income and allowance for credit losses....................... 120,315 114,870 ---------------------- Premises, equipment and lease rights, net................. 2,712 2,508 Customers' acceptance liability........................... 858 918 Interest receivable....................................... 1,159 1,597 Mortgage servicing rights................................. 946 707 Goodwill.................................................. 1,640 1,139 Core deposit and other intangibles........................ 390 375 Other assets.............................................. 5,748 4,833 ---------------------- $185,794 $187,298 ======================= LIABILITIES Deposits Noninterest-bearing..................................... $ 25,738 $ 23,414 Savings................................................. 8,498 8,257 NOW and money market deposit accounts................... 31,128 28,160 Time.................................................... 33,081 27,971 Foreign time............................................ 8,053 12,889 ---------------------- Total deposits........................................ 106,498 100,691 ---------------------- Federal funds purchased................................... 3,536 5,940 Securities sold under agreements to repurchase............ 15,842 23,034 Trading account liabilities............................... 11,752 15,177 Commercial paper.......................................... 2,787 2,773 Other short-term borrowings............................... 1,836 4,143 Liability to factoring clients............................ 597 580 Acceptances outstanding................................... 858 918 Accrued expenses and other liabilities.................... 4,429 3,466 Trust preferred securities................................ 965 - Long-term debt............................................ 22,985 17,775 ---------------------- Total liabilities..................................... 172,085 174,497 ---------------------- Contingent liabilities and other financial commitments (Notes Eight and Ten) SHAREHOLDERS' EQUITY Preferred stock: authorized - 45,000,000 shares; issued - 5,220,459 and 2,473,081 shares................. 171 105 Common stock: authorized - 1,250,000,000 shares; issued - 573,492,308 and 548,537,546 shares (Note One).. 3,855 4,655 Retained earnings......................................... 9,673 7,826 Other, including loan to ESOP trust...................... 10 215 ---------------------- Total shareholders' equity............................ 13,709 12,801 ---------------------- $185,794 $187,298 ======================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 50 NationsBank Corporation Annual Report 1996
- ----------------------------------------------------------------------------------------------- NationsBank Corporation And Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN MILLIONS) YEAR ENDED DECEMBER 31 ----------------------------------- 1996 1995 1994 - ----------------------------------------------------------------------------------------------- Operating Activities Net income................................................ $ 2,375 $ 1,950 $ 1,690 Reconciliation of net income to net cash provided by (used in) operating activities Provision for credit losses............................. 605 382 310 (Gains) losses on sales of securities................... (67) (29) 13 Depreciation and premises improvements amortization.......................................... 314 280 265 Amortization of intangibles............................. 128 119 141 Deferred income tax expense............................. 304 159 372 Net change in trading instruments....................... (3,280) (5,175) 3,796 Net decrease (increase) in interest receivable.......... 518 (182) (282) Net (decrease) increase in interest payable............. (545) 208 299 Net decrease (increase) in loans held for sale.......... 449 (1,345) 1,379 Net increase (decrease) in liability to factoring clients............................................... 17 (6) 52 Other operating activities.............................. 986 (1,294) 1,083 ----------------------------------- Net cash provided by (used in) operating activities.......................................... 1,804 (4,933) 9,118 ----------------------------------- Investing Activities Proceeds from maturities of securities held for investment.............................................. 2,329 5,547 5,864 Purchases of securities held for investment............... (14) (545) (10,293) Proceeds from sales and maturities of securities available for sale...................................... 28,998 25,556 23,762 Purchases of securities available for sale................ (12,708) (27,594) (16,055) Net (increase) decrease in federal funds sold and securities purchased under agreements to resell.................... (424) 4,931 (3,805) Net (increase) decrease in time deposits placed and other short-term investments............................ (565) 863 (670) Purchases and net originations of loans and leases........ (13,822) (18,331) (15,592) Proceeds from sales and securitizations of loans and leases.................................................. 12,286 4,681 4,126 Purchases and originations of mortgage servicing rights.................................................. (366) (598) (124) Purchases of factored accounts receivable................. (7,738) (7,856) (7,612) Collections of factored accounts receivable............... 7,656 7,834 7,577 Net purchases of premises and equipment................... (348) (307) (327) Proceeds from sales of other real estate owned............ 174 204 369 Sales (acquisitions) of business activities, net of cash.................................................... 416 (567) 3,778 ----------------------------------- Net cash provided by (used in) investing activities.......................................... 15,874 (6,182) (9,002) ----------------------------------- Financing Activities Net (decrease) increase in deposits....................... (6,573) (158) 4,261 Net (decrease) increase in federal funds purchased and securities sold under agreements to repurchase..................... (10,601) 2,909 (2,562) Net (decrease) increase in other short-term borrowings and commercial paper.................................... (3,171) (1,244) 491 Proceeds from issuance of trust preferred securities.............................................. 965 - - Proceeds from issuance of long-term debt.................. 7,230 11,393 1,198 Retirement of long-term debt.............................. (3,093) (2,061) (1,017) Preferred stock repurchased and redeemed.................. - - (94) Proceeds from issuance of common stock.................... 136 239 267 Cash dividends paid....................................... (722) (575) (527) Common stock repurchased.................................. (1,503) (522) (180) Other financing activities................................ 139 - (20) ----------------------------------- Net cash (used in) provided by financing activities.......................................... (17,193) 9,981 1,817 ----------------------------------- Net increase (decrease) in cash and cash equivalents........ 485 (1,134) 1,933 Cash and cash equivalents on January 1...................... 8,448 9,582 7,649 ----------------------------------- Cash and cash equivalents on December 31.................... $ 8,933 $ 8,448 $ 9,582 =================================== Supplemental cash flow disclosure: Cash paid for interest.................................... $ 7,974 $ 7,565 $ 5,020 Cash paid for income taxes................................ 786 675 718
LOANS TRANSFERRED TO OTHER REAL ESTATE OWNED AMOUNTED TO $160, $98 AND $207 IN 1996, 1995 AND 1994, RESPECTIVELY. MORTGAGE LOANS CONVERTED TO MORTGAGE-BACKED SECURITIES AMOUNTED TO $4,302 FOR THE YEAR ENDED DECEMBER 31, 1996. SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Consolidated Financial Statements 51
- ----------------------------------------------------------------------------------------------------------------------- NationsBank Corporation And Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DOLLARS IN MILLIONS, SHARES IN THOUSANDS) TOTAL COMMON STOCK LOAN TO SHARE- PREFERRED ----------------- RETAINED ESOP HOLDERS' STOCK SHARES AMOUNT EARNINGS TRUST OTHER EQUITY - ----------------------------------------------------------------------------------------------------------------------- BALANCE ON DECEMBER 31, 1993................. $208 541,810 $ 4,594 $5,247 $ (88) $ 18 $ 9,979 Net income................................. 1,690 1,690 Cash dividends Common................................... (517) (517) Preferred................................ (10) (10) Preferred stock repurchased and redeemed... (93) (1) (94) Common stock issued under dividend reinvestment and employee plans.......... 10,702 254 13 267 Common stock issued in acquisitions........ 7,020 64 41 105 Common stock repurchased................... (7,048) (180) (180) Net change in unrealized gains (losses) on securities available for sale and marketable equity securities............. (240) (240) Other...................................... (4) 420 9 12 (6) 11 -------------------------------------------------------------------------- BALANCE ON DECEMBER 31, 1994................. 111 552,904 4,740 6,451 (76) (215) 11,011 Net income................................. 1,950 1,950 Cash dividends Common................................... (567) (567) Preferred................................ (8) (8) Common stock issued under dividend reinvestment and employee plans.......... 8,878 214 25 239 Common stock issued in acquisitions........ 5,996 217 217 Common stock repurchased................... (19,466) (522) (522) Net change in unrealized gains (losses) on securities available for sale and marketable equity securities............. 460 460 Other...................................... (6) 226 6 13 8 21 -------------------------------------------------------------------------- BALANCE ON DECEMBER 31, 1995................. 105 548,538 4,655 7,826 (63) 278 12,801 Net income................................. 2,375 2,375 Cash dividends Common................................... (707) (707) Preferred................................ (15) (15) Common stock issued under dividend reinvestment and employee plans.......... 3,456 109 27 136 Stock issued in acquisitions............... 73 55,436 586 192 2 853 Common stock repurchased................... (34,196) (1,503) (1,503) Net change in unrealized gains (losses) on securities available for sale and marketable equity securities............. (240) (240) Other...................................... (7) 258 8 2 15 (9) 9 -------------------------------------------------------------------------- BALANCE ON DECEMBER 31, 1996................. $171 573,492 $ 3,855 $9,673 $ (48) $ 58 $13,709 ==========================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 52 NationsBank Corporation Annual Report 1996 NationsBank Corporation And Subsidiaries Notes To Consolidated Financial Statements NationsBank Corporation (the Corporation) is a multi-bank holding company organized under the laws of North Carolina in 1968 and registered under the Bank Holding Company Act of 1956, as amended. As discussed more fully in the first and fourth full paragraphs on page 20 and the second full paragraph on page 22, through its banking subsidiaries and its various nonbanking subsidiaries, the Corporation provides banking and banking-related services, primarily throughout the Southeast and Mid-Atlantic states and Texas. The geographic region served by the Corporation has been expanded through the acquisition of Boatmen's Bancshares, Inc. (Boatmen's) on January 7, 1997 to include the Midwestern states. NOTE ONE. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Corporation and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Results of operations of companies purchased are included from the dates of acquisition. Certain prior period amounts have been reclassified to conform to current year classifications. Net assets of companies acquired in purchase transactions are recorded at fair value at the date of acquisition. Identified intangibles are amortized on an accelerated or straight-line basis over the period benefited. Goodwill is amortized on a straight-line basis over 25 years. Assets held in an agency or fiduciary capacity are not included in the consolidated financial statements. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Significant estimates made by management are discussed in these footnotes as applicable. On February 27, 1997, the Corporation completed a 2-for-1 split of its common stock. Accordingly, the financial statements for all years presented have been restated to reflect the impact of the stock split. CASH AND CASH EQUIVALENTS Cash on hand, cash items in the process of collection and amounts due from correspondent banks and the Federal Reserve Bank are included in cash and cash equivalents. SECURITIES Securities are classified based on management's intention on the date of purchase. Securities which management has the intent and ability to hold to maturity are classified as held for investment and reported at amortized cost. All other securities, except those used in trading activities, are classified as available for sale and carried at fair value with net unrealized gains and losses included in shareholders' equity on an after-tax basis. In addition, marketable equity securities are carried at fair value with net unrealized gains and losses included in shareholders' equity, net of tax. Interest and dividends on securities, including amortization of premiums and accretion of discounts, are included in interest income. Realized gains and losses from the sales of securities are determined using the specific identification method. LOANS HELD FOR SALE Loans held for sale include residential mortgage, commercial real estate and other loans and are carried at the lower of aggregate cost or market value. Generally, such loans are originated with the intent of sale. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. It is the Corporation's policy to obtain control or take possession of securities purchased under agreements to resell. The Corporation monitors the market value of the underlying securities which collateralize the related receivable on resale agreements, including accrued interest, and requests additional collateral when deemed appropriate. TRADING INSTRUMENTS Instruments utilized in trading activities include both securities and derivatives and are stated at fair value. Fair value is generally based on quoted market prices. If quoted market prices are not available, fair values are estimated on the basis of dealer quotes, pricing models or quoted prices for instruments with similar characteristics. Gross unrealized gains and losses on trading derivative positions with the same counterparty are generally presented on a net basis for balance sheet reporting purposes where legally enforceable master netting agreements have been executed. Realized and unrealized gains and losses are recognized as noninterest income. LOANS Loans are reported at their outstanding principal balances net of any charge-offs, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to income over the lives of the related loans. Discounts and premiums are amortized to income using methods that approximate the interest method. Notes to Consolidated Financial Statements 53 ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses is primarily available to absorb losses inherent in the loan and lease portfolio. Credit exposures deemed to be uncollectible are charged against the allowance for credit losses. Recoveries of previously charged-off amounts are credited to the allowance for credit losses. Individually identified impaired loans are measured based on the present value of payments expected to be received, observable market prices, or for loans that are solely dependent on the collateral for repayment, the estimated fair value of the collateral. If the recorded investment in the impaired loan exceeds the measure of estimated fair value, a valuation allowance is established as a component of the allowance for credit losses. The Corporation's process for determining an appropriate allowance for credit losses includes management's judgment and use of estimates. The adequacy of the allowance for credit losses is reviewed regularly by management. On a quarterly basis, a comprehensive review of the adequacy of the allowance for credit losses is performed. This assessment is made in the context of historical losses as well as existing economic conditions and performance trends within specific portfolio segments and individual concentrations of credit. Additions to the allowance for credit losses are made by charges to the provision for credit losses. NONPERFORMING LOANS Commercial loans and leases that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, including loans that are individually identified as being impaired, are generally classified as nonperforming loans unless well secured and in the process of collection. Loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties, and loans similarly restructured prior to 1995 that are impaired, are classified as nonperforming until such time as the loan is not impaired based on the terms of the restructured agreement and the interest rate is a market rate as measured at the restructuring date. Generally, loans which are past due 180 days or more as to principal or interest are classified as nonperforming regardless of collateral or collection status. Generally, interest accrued but not collected is reversed when a loan or lease is classified as nonperforming. Interest collections on nonperforming loans and leases for which the ultimate collectibility of principal is uncertain are applied as principal reductions. Otherwise, such collections are credited to income when received. Credit card loans that are 180 days past due are charged off and not classified as nonperforming. All other consumer loans and residential mortgages are generally charged off at 120 days or placed on nonperforming status upon repossession or the inception of foreclosure proceedings. Ordinarily, interest accrued but not collected is charged off along with the principal. OTHER REAL ESTATE OWNED Loans are classified as other real estate owned when the Corporation forecloses on a property or when physical possession of the collateral is taken regardless of whether foreclosure proceedings have taken place. In addition, other real estate owned includes premises no longer used for business operations. Other real estate owned is carried at the lower of (1) the recorded amount of the loan or lease for which the property previously served as collateral, or (2) the fair value of the property minus estimated costs to sell. Prior to foreclosure, the recorded amount of the loan or lease is reduced, if necessary, to the fair value, minus estimated costs to sell, of the real estate to be acquired by charging the allowance for credit losses. Subsequent to foreclosure, gains or losses on the sale of and losses on the periodic revaluation of other real estate owned are credited or charged to expense. Net costs of maintaining and operating foreclosed properties are expensed as incurred. PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized principally using the straight-line method over the estimated useful lives of the assets. MORTGAGE SERVICING RIGHTS Beginning April 1, 1995, the Corporation revised its accounting for Mortgage Servicing Rights (MSRs). The total cost of mortgage loans originated or purchased is allocated between the cost of the loans and the MSRs based on the relative fair values of the loans and the MSRs. MSRs acquired separately are capitalized at their cost. During 1996, the Corporation capitalized $366 million of MSRs. Prior to April 1, 1995, only MSRs purchased separately were recorded as assets. The cost of the MSRs is amortized in proportion to and over the estimated period of net servicing revenues. During 1996 and 1995, amortization was $127 million and $86 million, respectively. The fair value on December 31, 1996 of servicing for which the Corporation has capitalized an acquisition cost was $1.1 billion compared to a carrying value of $946 million. Additionally, there is value associated with servicing originated prior to April 1995 for which the carrying value is zero. Total loans serviced approximated $96.4 billion on December 31, 1996, including loans serviced on behalf of the Corporation's banking subsidiaries. The Corporation evaluates MSRs strata for impairment by estimating the fair value based on anticipated future net cash flows, taking into consideration prepayment predictions. The predominant characteristics used as the basis for stratifying MSRs are loan type and period of origination. MSRs acquired prior to April 1, 1995 are evaluated for impairment separately. If the carrying value of the MSRs exceeds the estimated fair value, a valuation allowance is established. Changes to the valuation allowance are charged against or credited to mortgage servicing income and fees. The valuation allowance on December 31, 1996 and 1995 and changes in the valuation allowance during 1996 were insignificant. INCOME TAXES There are two components of income tax provision: current and deferred. Current income tax provisions approximate taxes to be paid or refunded for the applicable period. Balance sheet amounts of deferred taxes are recognized on 54 NationsBank Corporation Annual Report 1996 the temporary differences between the bases of assets and liabilities as measured by tax laws and their bases as reported in the financial statements. Deferred tax expense or benefit is then recognized for the change in deferred tax liabilities or assets between periods. Recognition of deferred tax assets is based on management's belief that it is more likely than not that the tax benefit associated with certain temporary differences, tax operating loss carryforwards and tax credits will be realized. A valuation allowance is recorded for those deferred tax items for which it is more likely than not that realization will not occur. RETIREMENT BENEFITS The Corporation has established qualified retirement plans covering full- time, salaried employees and certain part-time employees. Pension expense under these plans is accrued each year. The costs are charged to current operations and consist of several components of net pension cost based on various actuarial assumptions regarding future experience under the plans. In addition, the Corporation and its subsidiaries have established unfunded supplemental benefit plans providing any benefits that could not be paid from a qualified retirement plan because of Internal Revenue Code restrictions and supplemental executive retirement plans for selected officers of the Corporation and its subsidiaries. These plans are nonqualified and, therefore, in general, a participant's or beneficiary's claim to benefits is as a general creditor. The Corporation and its subsidiaries have established several postretirement medical benefit plans which are not funded. RISK MANAGEMENT INSTRUMENTS Risk management instruments are utilized to modify the interest rate characteristics of related assets or liabilities or hedge against changes in interest rates, currency fluctuations or other such exposures as part of the Corporation's asset and liability management process. Instruments must be designated as hedges and must be effective throughout the hedge period. Swaps, principally interest rate, used in the asset and liability management process are accounted for on the accrual basis with revenues or expenses recognized as adjustments to income or expense on the underlying linked assets or liabilities. Risk management swaps generally are not terminated. When terminations do occur, gains or losses are recorded as adjustments to the carrying value of the underlying assets or liabilities and recognized as income or expense over the shorter of either the remaining expected lives of such underlying assets or liabilities or the remaining life of the swap. In circumstances where the underlying assets or liabilities are sold, any remaining carrying value adjustments and the cumulative change in value of any open positions are recognized immediately as a component of the gain or loss on disposition of such underlying assets and liabilities. Gains and losses associated with futures and forward contracts used as effective hedges of existing risk positions or anticipated transactions are deferred as an adjustment to the carrying value of the related asset or liability and recognized in income over the remaining term of the related asset or liability. Risk management instruments used to hedge or modify the interest rate characteristics of debt securities classified as available for sale are carried at fair value with unrealized gains or losses deferred as a component of shareholders' equity. The Corporation also purchases options in the interest rate market to protect the value of certain assets, principally mortgage servicing rights, against changes in prepayment rates. Option premiums are amortized over the option life on a straight-line basis. Such contracts are designated as hedges, and gains or losses are recorded as adjustments to the carrying value of the underlying assets. As such, they are included in the basis of mortgage servicing rights which are subjected to impairment valuations as described in the Mortgage Servicing Rights accounting policy. The Corporation also utilizes forward delivery contracts and options to reduce the interest rate risk inherent in mortgage loans held for sale and the commitments made to borrowers for mortgage loans which have not been funded. These financial instruments are considered in the Corporation's valuation of its mortgage loans held for sale which are carried at the lower of cost or market. EARNINGS PER COMMON SHARE Earnings per common share are computed by dividing net income, reduced by dividends on preferred stock, by the weighted average number of common shares outstanding for each period presented. Fully diluted earnings per share are computed by dividing net income available to common shareholders, adjusted for preferred dividends paid on dilutive convertible preferred stock, by average fully dilutive shares outstanding, which include convertible preferred stock and stock options. NOTE TWO. MERGER-RELATED ACTIVITY On January 7, 1997, the Corporation completed the acquisition of Boatmen's, headquartered in St. Louis, Missouri. Each outstanding share of Boatmen's common stock was converted into 1.305 shares of the Corporation's common stock (adjusted for 2-for-1 stock split) or, at the election of each holder of Boatmen's common stock, an amount in cash as specified in the merger agreement, resulting in the net issuance of approximately 195 million shares of the Corporation's common stock valued at $9.4 billion on the date of the merger and aggregate cash payments of $371 million to Boatmen's shareholders. Boatmen's unaudited total assets and total deposits were approximately $41.2 billion and $32.0 billion, respectively, on the date of the acquisition. The Corporation will account for this acquisition as a purchase; therefore, the results of operations of Boatmen's will be included in the consolidated financial statements of the Corporation from the date of acquisition. The following table presents condensed pro forma consolidated results of operations as if the acquisition of Boatmen's had occurred on January 1, 1996. This information combines Notes To Consolidated Financial Statements 55 the historical results of operations of the Corporation and Boatmen's after the effect of estimated preliminary purchase accounting adjustments. Actual adjustments will be made on the basis of appraisals and evaluations and may differ from those reflected below. A cash election of 40 percent in the Boatmen's acquisition has been assumed. The Corporation currently expects to repurchase shares of its common stock from time to time so that the pro forma impact of the Boatmen's acquisition will be the issuance of approximately 60 percent of the aggregate consideration in the Corporation's common stock and 40 percent of the aggregate consideration in cash. The actual cash election in the transaction was approximately 4 percent. The pro forma information does not purport to be indicative of the results that would have been obtained if the operations had actually been combined during the period presented and is not necessarily indicative of operating results to be expected in future periods. UNAUDITED PRO FORMA RESULTS OF OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER-SHARE INFORMATION) 1996 - ----------------------------------------------------- Net interest income........................... $7,573 Net income.................................... 2,379 Net income available to common shareholders... 2,357 Earnings per common share..................... 3.30 Fully diluted earnings per common share....... 3.25 On January 9, 1996, the Corporation completed the acquisition of Bank South Corporation (Bank South), headquartered in Atlanta, Georgia. Each outstanding share of Bank South common stock was converted into .88 shares of Corporation common stock (adjusted for 2-for-1 stock split), resulting in the net issuance of 52,609,234 shares of common stock by the Corporation. Bank South's total assets, total deposits and total shareholders' equity were $7.4 billion, $5.1 billion and $685 million, respectively, on the date of acquisition. This acquisition was accounted for as a pooling of interests and did not have a material impact on the results of operations or financial condition of the Corporation. During 1996, the Corporation acquired several small banking organizations and banking centers in Florida and Texas. Combined total loans and total deposits of these entities acquired were $5.1 billion and $7.6 billion, respectively. These acquisitions were accounted for as purchases and did not have a material impact on the results of operations or financial condition of the Corporation. During the first quarter of 1996, primarily in connection with the acquisition of Bank South, the Corporation recorded a pre-tax merger-related charge of $118 million. The charge consisted of $34 million of severance costs, $28 million for facilities consolidations and branch closures, $11 million related to cancellations of contractual obligations, and other merger-related expenses. An immaterial amount of the $118 million accrued charge remained at December 31, 1996. NOTE THREE. SECURITIES The book and market values of securities held for investment and securities available for sale on December 31 were (dollars in millions):
GROSS GROSS BOOK UNREALIZED UNREALIZED MARKET SECURITIES HELD FOR INVESTMENT VALUE GAINS LOSSES VALUE - -------------------------------------------------------------------------------------------------- 1996 - ---- U.S. Treasury securities and agency debentures... $ 862 $ - $ (3) $ 859 Foreign sovereign securities..................... 25 - - 25 Mortgage-backed securities....................... 1,101 3 (4) 1,100 Other taxable securities......................... 5 - - 5 ------------------------------------------------ Total taxable.................................. 1,993 3 (7) 1,989 ------------------------------------------------ Tax-exempt securities............................ 117 4 - 121 ------------------------------------------------ Total.......................................... $ 2,110 $ 7 $ (7) $ 2,110 ================================================ 1995 - ---- U.S. Treasury securities and agency debentures... $ 2,309 $ 7 $ (10) $ 2,306 Foreign sovereign securities..................... 22 - - 22 Mortgage-backed securities....................... 1,883 5 (8) 1,880 Other taxable securities......................... 18 - - 18 ------------------------------------------------ Total taxable.................................. 4,232 12 (18) 4,226 ------------------------------------------------ Tax-exempt securities............................ 200 7 (1) 206 ------------------------------------------------ Total.......................................... $ 4,432 $ 19 $ (19) $ 4,432 ================================================ 1994 - ---- U.S. Treasury securities and agency debentures... $15,097 $ 1 $ (593) $14,505 Foreign sovereign securities..................... 19 - - 19 Mortgage-backed securities....................... 2,492 - (101) 2,391 Other taxable securities......................... 51 - (4) 47 ------------------------------------------------ Total taxable.................................. 17,659 1 (698) 16,962 ------------------------------------------------ Tax-exempt securities............................ 141 1 (3) 139 ------------------------------------------------ Total.......................................... $17,800 $ 2 $ (701) $17,101 ================================================
56 NationsBank Corporation Annual Report 1996
GROSS GROSS UNREALIZED UNREALIZED MARKET SECURITIES AVAILABLE FOR SALE COST GAINS LOSSES VALUE - -------------------------------------------------------------------------------------------------- 1996 - ---- U.S. Treasury securities and agency debentures... $ 1,437 $ 5 $ (26) $ 1,416 Foreign sovereign securities..................... 952 2 (8) 946 Mortgage-backed securities....................... 8,805 58 (45) 8,818 Other taxable securities......................... 484 5 (1) 488 ------------------------------------------------ Total taxable.................................. 11,678 70 (80) 11,668 ------------------------------------------------ Tax-exempt securities............................ 591 20 (2) 609 ------------------------------------------------ Total.......................................... $12,269 $ 90 $ (82) $12,277 ================================================ 1995 - ---- U.S. Treasury securities and agency debentures... $16,909 $ 407 $ (16) $17,300 Foreign sovereign securities..................... 1,591 22 - 1,613 Mortgage-backed securities....................... 63 1 - 64 Other taxable securities......................... 392 3 - 395 ------------------------------------------------ Total taxable.................................. 18,955 433 (16) 19,372 ------------------------------------------------ Tax-exempt securities............................ 42 1 - 43 ------------------------------------------------ Total.......................................... $18,997 $ 434 $ (16) $19,415 ================================================ 1994 - ---- U.S. Treasury securities and agency debentures... $ 7,729 $ - $ (274) $ 7,455 Mortgage-backed securities....................... 1 - - 1 Other taxable securities......................... 249 - - 249 ------------------------------------------------ Total taxable.................................. 7,979 - (274) 7,705 ------------------------------------------------ Tax-exempt securities............................ 310 11 (1) 320 ------------------------------------------------ Total.......................................... $ 8,289 $ 11 $ (275) $ 8,025 ================================================
The components, expected maturity distribution and yields (computed on a taxable-equivalent basis) of the Corporation's securities portfolio on December 31, 1996 are summarized below (dollars in millions). Actual maturities may differ from contractual maturities or maturities shown below since borrowers may have the right to prepay obligations with or without prepayment penalties.
DUE AFTER 1 DUE AFTER 5 DUE IN 1 YEAR THROUGH 5 THROUGH 10 DUE AFTER OR LESS YEARS YEARS 10 YEARS TOTAL --------------------------------------------------------------------------------------- AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD - ------------------------------------------------------------------------------------------------------------------------------- Book value of securities held for investment U.S. Treasury securities and agency debentures............. $364 4.79% $ 498 5.66% $ - -% $ - -% $ 862 5.30% Foreign sovereign securities........ 3 7.48 13 7.71 8 6.52 1 6.17 25 7.25 Mortgage-backed securities.......... 483 5.74 594 6.11 24 5.32 - - 1,101 5.93 Other taxable securities............ 2 1.41 - - - - 3 6.35 5 4.08 --------------------------------------------------------------------------------------- Total taxable..................... 852 5.33 1,105 5.93 32 5.62 4 6.33 1,993 5.67 Tax-exempt securities............... 26 10.93 55 10.22 19 9.90 17 8.77 117 10.07 --------------------------------------------------------------------------------------- Total............................. $878 5.50 $1,160 6.12 $ 51 7.25 $ 21 8.36 $ 2,110 5.91 ======================================================================================= Market value of securities held for investment................... $877 $1,159 $ 52 $ 22 $ 2,110 ======================================================================================= Market value of securities available for sale U.S. Treasury securities and agency debentures............. $ 58 5.20% $ 470 6.01% $ 870 6.15% $ 18 8.57% $ 1,416 6.09% Foreign sovereign securities........ 61 24.10 206 4.49 158 6.01 521 6.28 946 7.00 Mortgage-backed securities.......... 71 7.30 3,419 7.32 3,944 7.03 1,384 7.32 8,818 7.19 Other taxable securities............ 8 7.24 45 6.97 168 7.07 267 6.17 488 6.57 --------------------------------------------------------------------------------------- Total taxable..................... 198 11.88 4,140 7.03 5,140 6.85 2,190 6.94 11,668 7.02 Tax-exempt securities............... 4 10.93 11 7.71 88 8.31 506 9.02 609 8.90 --------------------------------------------------------------------------------------- Total............................. $202 11.87 $4,151 7.03 $5,228 6.88 $2,696 7.33 $12,277 7.11 ======================================================================================= Cost of securities available for sale... $202 $4,135 $5,236 $2,696 $12,269 =======================================================================================
Notes To Consolidated Financial Statements 57 The components of gains and losses on sales of available for sale securities for the years ended December 31 were (dollars in millions): 1996 1995 1994 - ------------------------------------------------------------------- Gross gains on sales of securities...... $ 200 $ 74 $ 36 Gross losses on sales of securities..... (133) (45) (49) --------------------------- Gains (losses) on sales of securities... $ 67 $ 29 $ (13) =========================== There were no sales of securities held for investment in 1996, 1995 or 1994. There were no investments in obligations of states and political subdivisions that were payable from and secured by the same source of revenue or taxing authority and that exceeded 10 percent of consolidated shareholders' equity on December 31, 1996 or 1995. The income tax expense attributable to securities transactions was $23 million for 1996 compared to $10 million in 1995 and an income tax benefit of $5 million in 1994. Securities are pledged or assigned to secure borrowed funds, government and trust deposits and for other purposes. The carrying value of pledged securities was $12.6 billion and $22.5 billion on December 31, 1996 and December 31, 1995. On December 31, 1996, the valuation reserve for securities available for sale and marketable equity securities increased shareholders' equity by $86 million, reflecting $8 million of pretax appreciation on securities available for sale and $123 million of pretax appreciation on marketable equity securities. NOTE FOUR. TRADING ACCOUNT ASSETS AND LIABILITIES The fair values on December 31 and the average fair values for the years ended December 31 of the components of trading account assets and liabilities were (dollars in millions):
AVERAGE BALANCES ------------------ 1996 1995 1996 1995 - ------------------------------------------------------------------------------- ------------------ Securities owned U.S. Treasury securities.................................. $ 6,914 $10,364 $13,168 $10,254 Securities of other U.S. Government agencies and corporations............................................ 2,096 1,508 1,843 1,541 Certificates of deposit, bankers' acceptances and commercial paper........................................ 501 555 553 524 Corporate debt............................................ 1,552 1,443 1,589 1,031 Foreign sovereign debt.................................... 3,396 576 1,044 200 Other securities.......................................... 932 402 850 627 ------------------ ------------------ Total securities owned.................................. 15,391 14,848 19,047 14,177 Derivatives-dealer positions................................ 3,298 4,019 3,791 3,230 ------------------ ------------------ Total trading account assets............................ $18,689 $18,867 $22,838 $17,407 ================== ================== Short sales U.S. Treasury securities.................................. $ 7,143 $11,066 $ 9,287 $11,416 Corporate debt............................................ 452 683 535 591 Other securities.......................................... 309 33 315 18 ------------------ ------------------ Total short sales....................................... 7,904 11,782 10,137 12,025 Derivatives-dealer positions................................ 3,848 3,395 3,170 2,970 ------------------ ------------------ Total trading account liabilities....................... $11,752 $15,177 $13,307 $14,995 ================== ==================
A discussion of the Corporation's trading activities and an analysis of the revenues associated with the Corporation's trading activities is presented on page 25. The Corporation's derivatives-dealer positions are presented in the discussion beginning on page 37 and TABLE SIXTEEN. The net change in the unrealized gain or loss on trading securities held on December 31, 1996 and 1995, included in noninterest income, was a gain of $68 million for 1996 and a gain of $44 million for 1995. Derivatives-dealer positions presented in the table above represent the fair values of interest rate, foreign exchange, equity and commodity-related products including financial futures, forward settlement and option contracts and swap agreements associated with the Corporation's derivative trading activities. A swap agreement is a contract between two parties to exchange cash flows based on specified underlying notional amounts and indices. Financial futures or forward settlement contracts are agreements to buy or sell a quantity of a financial instrument or commodity at a predetermined future date and rate or price. An option contract is an agreement that conveys to the purchaser the right, but not the obligation, to buy or sell a quantity of a financial instrument, index or commodity at a predetermined rate or price at a time or during a period in the future. These agreements can be transacted on organized exchanges or directly between parties. 58 NationsBank Corporation Annual Report 1996 NOTE FIVE. LOANS, LEASES AND FACTORED ACCOUNTS RECEIVABLE Loans, leases and factored accounts receivable on December 31 were (dollars in millions):
1996 1995 - ----------------------------------------------------------------------------------- LOANS Commercial................................................ $ 50,488 $ 48,186 Real estate commercial.................................... 5,445 6,183 Real estate construction.................................. 2,863 2,976 ---------------------- Total commercial........................................ 58,796 57,345 ---------------------- Residential mortgage...................................... 27,948 24,043 Credit card............................................... 6,747 6,532 Other consumer............................................ 20,993 22,751 ---------------------- Total consumer.......................................... 55,688 53,326 ---------------------- Foreign................................................... 2,829 2,251 Factored accounts receivable.............................. 1,047 991 ---------------------- Total loans and factored accounts receivable............ 118,360 113,913 Less unearned income.................................... (602) (678) ---------------------- Loans and factored accounts receivable, net of unearned income....................................... 117,758 113,235 ---------------------- LEASES Lease receivables......................................... 5,134 3,915 Estimated residual value.................................. 1,537 1,192 Less unearned income...................................... (1,799) (1,309) ---------------------- Leases, net of unearned income.......................... 4,872 3,798 ---------------------- Loans, leases and factored accounts receivable, net of unearned income................................ $122,630 $117,033 ======================
Transactions in the allowance for credit losses were (dollars in millions):
1996 1995 1994 - ------------------------------------------------------------------------------------------ Balance on January 1........................................ $2,163 $2,186 $2,169 ----------------------------- Loans, leases and factored accounts receivable charged off....................................................... (836) (636) (533) Recoveries of loans, leases and factored accounts receivable previously charged off......................... 238 215 217 ----------------------------- Net charge-offs........................................... (598) (421) (316) Provision for credit losses................................. 605 382 310 Allowance applicable to loans of purchased companies and other..................................................... 145 16 23 ----------------------------- Balance on December 31...................................... $2,315 $2,163 $2,186 =============================
The following table presents the recorded investment in certain loans that were considered to be impaired, all of which were classified as nonperforming, on December 31 (dollars in millions): 1996 1995 - ---------------------------------------- Commercial................. $342 $271 Real estate commercial..... 145 196 Real estate construction... 28 16 ------------ Total impaired loans..... $515 $483 ============ The average recorded investment in certain impaired loans for the years ended December 31, 1996 and 1995 was approximately $542 million and $598 million, respectively. For the years ended December 31, 1996 and 1995, interest income recognized on impaired loans totaled $26 million each year, all of which was recognized on a cash basis. On December 31, 1996, 1995 and 1994, nonperforming loans, including certain loans which are considered impaired, totaled $890 million, $706 million and $801 million, respectively. The net amount of interest recorded during each year on loans that were classified as nonperforming or restructured on December 31, 1996, 1995 and 1994 was $35 million, $27 million and $31 million, respectively. If these loans had been accruing interest at their originally contracted rates, related income would have been $103 million in 1996, $102 million in 1995 and $96 million in 1994. Other real estate owned amounted to $153 million, $147 million and $337 million on December 31, 1996, 1995 and 1994, respectively. On January 1, 1995, $80 million of in-substance foreclosed loans previously reported as other real estate owned was reclassified to nonperforming loans. The cost of carrying other real estate owned amounted to $8 million, $13 million and $24 million in 1996, 1995 and 1994, respectively. Notes To Consolidated Financial Statements 59 NOTE SIX. SHORT-TERM BORROWINGS AND LONG-TERM DEBT Certain of the Corporation's banking subsidiaries, NationsBank, N.A., NationsBank, N.A. (South) and NationsBank of Texas, N.A., jointly maintain a program to offer up to $9.0 billion of bank notes from time to time with fixed or floating rates and maturities from 30 days to 15 years from date of issue. On December 31, 1996 and 1995, there were short-term bank notes outstanding of $872 million and $3.1 billion, respectively. In addition, there were bank notes outstanding on December 31, 1996 and 1995 totaling $3.5 billion and $1.9 billion, respectively, which were classified as long-term debt. On December 31, 1996 and 1995, the Corporation had unused commercial back-up lines of credit totaling $1.5 billion which expire in 1997. These lines were supported by fees paid directly by the Corporation to unaffiliated banks. The maturities of long-term debt on December 31 were (dollars in millions):
1996 ------------------------------------- VARIOUS VARIOUS FIXED-RATE FLOATING-RATE 1995 DEBT DEBT AMOUNT AMOUNT OBLIGATIONS OBLIGATIONS OUTSTANDING OUTSTANDING - ------------------------------------------------------------------------------------------------ ----------- PARENT COMPANY Senior debt Due in 1996............................................. $ - $ - $ - $ 1,194 Due in 1997............................................. 337 405 742 743 Due in 1998............................................. 889 525 1,414 1,414 Due in 1999............................................. 116 1,209 1,325 917 Due in 2000............................................. 698 868 1,566 1,513 Due in 2001............................................. - 1,602 1,602 602 Thereafter.............................................. 651 2,129 2,780 369 ----------------------------------- ----------- 2,691 6,738 9,429 6,752 ----------------------------------- ----------- Subordinated debt Due in 1997............................................. 75 - 75 75 Due in 1999............................................. 130 - 130 399 Due in 2001............................................. 299 - 299 299 Thereafter.............................................. 4,257 1,060 5,317 3,674 ----------------------------------- ----------- 4,761 1,060 5,821 4,447 ----------------------------------- ----------- Total parent company long-term debt..................... 7,452 7,798 15,250 11,199 ----------------------------------- ----------- BANKING AND NONBANKING SUBSIDIARIES Senior debt Due in 1996............................................. - - - 244 Due in 1997............................................. 307 995 1,302 908 Due in 1998............................................. 110 2,776 2,886 1,809 Due in 1999............................................. 25 199 224 84 Due in 2000............................................. 28 1,900 1,928 3,001 Due in 2001............................................. 30 317 347 33 Thereafter.............................................. 88 351 439 167 ----------------------------------- ----------- 588 6,538 7,126 6,246 ----------------------------------- ----------- Subordinated debt Due in 1997............................................. 5 - 5 - Due in 2004 and thereafter.............................. 300 8 308 308 ----------------------------------- ----------- 305 8 313 308 ----------------------------------- ----------- Total banking and nonbanking subsidiaries long- term debt............................................. 893 6,546 7,439 6,554 ----------------------------------- ----------- $8,345 $14,344 22,689 17,753 ----------------------------------- ----------- Obligations under capital leases........................ 296 22 ---------- ----------- Total long-term debt.................................... $ 22,985 $17,775 ========== ===========
60 NationsBank Corporation Annual Report 1996 As part of its interest rate risk management activities, the Corporation enters into interest rate swap agreements for certain long-term debt issuances. Through the use of interest rate swaps, $1.7 billion of fixed-rate debt with rates ranging from 5.60 percent to 8.57 percent have been effectively converted to floating rates primarily at spreads over LIBOR. In addition, $300 million of notes with floating rates have been converted to fixed rates ranging from 8.02 percent to 8.12 percent. On December 31, 1996, including the effects of interest rate swap agreements entered into for certain long-term debt issuances, the weighted average effective interest rates for total long-term debt, total fixed-rate debt and total floating-rate debt (based on the rates in effect on December 31, 1996) were 6.39 percent, 7.39 percent and 5.80 percent, respectively. Two series of mortgage-backed bonds were issued during 1995 through Main Place Real Estate Investment Trust (MPREIT), formerly Main Place Funding Corporation, a limited-purpose subsidiary of NationsBank, N.A., a wholly owned banking subsidiary of the Corporation. Outstandings under these issuances were $3.0 billion on December 31, 1996. On December 31, 1996, MPREIT had $14.7 billion of 1-4 family mortgage loans, of which $4.4 billion served as collateral for the two series of mortgage-backed bonds. On February 10, 1997, $1.0 billion was available for issuance under a shelf registration statement filed by MPREIT. On March 15, 1996, the Corporation redeemed $300 million of 101/2-percent subordinated notes originally due 1999. Certain other debt obligations may be redeemed prior to maturity at the option of the Corporation. Of total long-term debt on December 31, 1996, $28 million of debt scheduled to mature in 2002 has been redeemable since 1982, $500 million scheduled to mature in 2000 is redeemable beginning in 1998, an aggregate of $70 million scheduled to mature in either 2006 or 2010 is redeemable beginning in 1999, an aggregate of $513 million scheduled to mature in either 2005, 2006, 2010 or 2011 is redeemable beginning in 2000 and $20 million scheduled to mature in 2006 is redeemable beginning in 2003. On July 5, 1996, the Corporation increased its Euro medium-term note program to offer up to $4.5 billion of senior or subordinated notes exclusively to non- United States residents. The notes bear interest at fixed or floating rates and may be denominated in foreign currencies. The Corporation uses foreign currency swaps to convert foreign-denominated debt into U.S. dollars. As of February 10, 1997, the Corporation had issued $1.4 billion under this program. During the fourth quarter of 1996, the Corporation formed three wholly owned grantor trust subsidiaries (the Trusts) to issue preferred securities (Preferred Securities) representing undivided beneficial interests in the assets of the respective Trusts and to invest the gross proceeds of such Preferred Securities into notes of the Corporation. The sole assets of the Trusts are $619 million aggregate principal amount of the Corporation's 7.84% Junior Subordinated Deferrable Interest Notes due 2026 which are redeemable beginning in 2001 and $376 million aggregate principal amount of the Corporation's 7.83% Junior Subordinated Deferrable Interest Notes due 2026 which are redeemable in 2006. Such securities qualify as Tier 1 Capital for regulatory purposes. On January 22, 1997, the Trusts issued an additional $500 million of Preferred Securities. As of February 10, 1997, two additional wholly owned grantor trust subsidiaries formed by the Corporation had the authority to issue $500 million of Preferred Securities. Payment of periodic cash distributions and payment upon liquidation or redemption with respect to Preferred Securities is guaranteed by the Corporation to the extent of funds held by the Trust (the Preferred Securities Guarantee). The Preferred Securities Guarantee, when taken together with the Corporation's other obligations including its obligations under the Junior Subordinated Deferrable Interest Notes, will constitute a full and unconditional guarantee, on a subordinated basis, by the Corporation of payments due on the Preferred Securities. As of February 10, 1997, the Corporation had the authority to issue approximately $5.0 billion of corporate debt securities and preferred and common stock under its existing shelf registration statements and $3.1 billion of corporate debt securities under the Euro medium-term note program. NOTE SEVEN. SHAREHOLDERS' EQUITY The Corporation has authorized 45 million shares of preferred stock. As of December 31, 1996, the Corporation had issued 2.3 million shares of ESOP Convertible Preferred Stock, Series C (ESOP Preferred Stock). The ESOP Preferred Stock has a stated and liquidation value of $42.50 per share, provides for an annual cumulative dividend of $3.30 per share and is convertible into 1.68 shares of the Corporation's common stock at an initial conversion price of $21.25 per 1.68 shares of the Corporation's common stock. ESOP Preferred Stock in the amount of $7.0 million in 1996, $6.0 million in 1995 and $4.0 million in 1994 was converted into the Corporation's common stock. In connection with the acquisition of a small Florida banking organization (Citizens Federal), a banking subsidiary of the Corporation issued approximately .5 million shares of 8.50% Series H Noncumulative Preferred Stock (Series H Preferred Stock) to holders of the 8.50% Series H Noncumulative Preferred Stock of Citizens Federal and 2.4 million shares of 8.75% Series 1993A Noncumulative Preferred Stock (1993A Preferred Stock) to holders of 8.75% Series 1993A Noncumulative Preferred Stock of Citizens Federal. The Series H Preferred Stock has a stated and liquidation value of $25 per share and provides for an annual noncumulative dividend of $2.125 per share. The 1993A Preferred Notes To Consolidated Financial Statements 61 Stock has a stated and liquidation value of $25 per share and provides for an annual noncumulative dividend of $2.1875 per share. During 1996 and 1995, the Corporation repurchased 34.2 million shares and 19.5 million shares, respectively, of its common stock under various stock repurchase programs authorized by the Board of Directors. Additionally, on August 29, 1996, the Board of Directors authorized the Corporation to repurchase shares of its common stock from time to time so that the pro forma impact of the Boatmen's acquisition will be the issuance of approximately 60 percent of the aggregate consideration in the Corporation's common stock and 40 percent of the aggregate consideration in cash. On January 14, 1997, the Corporation purchased 24 million shares of its common stock pursuant to a purchase agreement with an agent of the Corporation. On January 22, 1997, the Board of Directors approved a 2-for-1 split of the Corporation's common stock payable on February 27, 1997 to shareholders of record February 7, 1997. Other shareholders' equity on December 31 was comprised of the following (dollars in millions): 1996 1995 - --------------------------------------------------------- Restricted stock award plan deferred compensation.................. $ (10) $ (37) Net unrealized gains on available for sale securities and marketable equity securities, net of tax................. 86 323 Foreign exchange translation adjustments and other.............................. (18) (8) ---------------- $ 58 $ 278 ================ NOTE EIGHT. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These instruments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and risk limitation reviews as those recorded on the balance sheet. See the discussion of credit risk policies and procedures beginning on page 32 through the second full paragraph on page 35. CREDIT EXTENSION COMMITMENTS The Corporation enters into commitments to extend credit, standby letters of credit and commercial letters of credit to meet the financing needs of its customers. The commitments shown below have been reduced by amounts collateralized by cash and amounts participated to other financial institutions. The following summarizes commitments outstanding on December 31 (dollars in millions): 1996 1995 - -------------------------------------------------- Commitments to extend credit Credit card commitments...... $24,255 $21,033 Other loan commitments....... 82,506 66,638 Standby letters of credit and financial guarantees......... 10,060 8,356 Commercial letters of credit... 761 986 Commitments to extend credit are legally binding, generally have specified rates and maturities and are for specified purposes. The Corporation manages the credit risk on these commitments by subjecting these commitments to normal credit approval and monitoring processes and protecting against deterioration in the borrowers' ability to pay through adverse-change clauses which require borrowers to maintain various credit and liquidity measures. Credit card lines are unsecured commitments which are reviewed at least annually by management. Upon evaluation of the customers' credit-worthiness, the Corporation has the right to terminate or change the terms of the credit card lines. Of the December 31, 1996 total other loan commitments, $33.8 billion is scheduled to expire in less than one year, $36.8 billion in one to five years and $11.9 billion after five years. Standby letters of credit (SBLC) and financial guarantees are issued to support the debt obligations of customers. If a SBLC or financial guarantee is drawn upon, the Corporation looks to its customer for payment. SBLCs and financial guarantees are subject to the same approval and collateral policies as other extensions of credit. Of the December 31, 1996 total SBLCs and financial guarantees, $6.7 billion is scheduled to expire in less than one year, $3.1 billion in one to five years and $282 million after five years. Commercial letters of credit, issued primarily to facilitate customer trade finance activities, are collateralized by the underlying goods being shipped by the customer and are generally short term. For each of these types of instruments, the Corporation's maximum exposure to credit loss is represented by the contractual amount of these instruments. Many of the commitments are collateralized or are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent risk of loss or future cash requirements. DERIVATIVES Derivative transactions are entered into by the Corporation to meet the financing needs of its customers, to manage its own interest rate and currency risks, and as part of its dealer activities. See TABLES TEN and ELEVEN on pages 31 and 33, the first two paragraphs under Off-Balance Sheet Derivatives - Asset and Liability Management Positions on page 31 and the second full paragraph under the mortgage servicing discussion on page 24 for derivatives used for risk management purposes. See TABLE SIXTEEN on page 37, the discussion beginning on page 37 and Note Four regarding the Corporation's derivative dealer activities. 62 NationsBank Corporation Annual Report 1996 SECURITIES LENDING The Corporation executes securities lending transactions on behalf of certain customers. In certain instances, the Corporation indemnifies the customer against certain losses. The Corporation obtains collateral with a market value in excess of the market value of the securities loaned. On December 31, 1996 and 1995, indemnified securities lending transactions totaled $7.1 billion and $2.6 billion, respectively. Collateral with a market value of $7.2 billion and $2.7 billion on December 31, 1996 and 1995, respectively, was obtained by the Corporation in support of these transactions. WHEN ISSUED SECURITIES When issued securities are commitments entered into to purchase or sell securities in the time period between the announcement of a securities offering and the issuance of those securities. On December 31, 1996, the Corporation had commitments to purchase and sell when issued securities of $7.4 billion each. On December 31, 1995, commitments to purchase and sell when issued securities were $4.4 billion and $4.3 billion, respectively. LITIGATION In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to a number of pending and threatened legal actions and proceedings, including several actions brought on behalf of various classes of claimants. In certain of these actions and proceedings, substantial money damages are asserted against the Corporation and its subsidiaries and certain of these actions and proceedings are based on alleged violations of consumer protection, securities, environmental, banking and other laws. Management believes, based upon the advice of counsel, that the actions and proceedings and losses, if any, resulting from the final outcome thereof, will not be material in the aggregate to the Corporation's financial position or results of operations. NOTE NINE. REGULATORY REQUIREMENTS AND RESTRICTIONS The Corporation's banking subsidiaries are required to maintain average reserve balances with the Federal Reserve Bank based on a percentage of certain deposits. The average of those reserve balances amounted to $873 million and $1.1 billion for 1996 and 1995, respectively. The primary source of funds for cash distributions by the Corporation to its shareholders is dividends received from its banking subsidiaries. The subsidiary banks, including those acquired through the Boatmen's acquisition, can initiate dividend payments in 1997, without prior regulatory approval, of $1.4 billion plus an additional amount equal to their net profits for 1997, as defined by statute, up to the date of any such dividend declaration. The amount of dividends that each subsidiary bank may declare in a calendar year without approval by the Office of the Comptroller of the Currency (OCC) is the bank's net profits for that year combined with its net retained profits, as defined, for the preceding two years. Regulations also restrict banking subsidiaries in lending funds to affiliates. On December 31, 1996, the total amount which could be loaned to the Corporation by its banking subsidiaries was approximately $1.6 billion. On December 31, 1996, no loans to the Corporation from its banking subsidiaries were outstanding. The Federal Reserve Board (FRB), the OCC and the Federal Deposit Insurance Corporation have issued risk-based capital guidelines for U.S. banking organizations. As of December 31, 1996, the Corporation and its banking subsidiaries were well capitalized under this regulatory framework. Failure to meet the capital requirements can initiate certain mandatory and discretionary actions by regulators that could have a material effect on the Corporation's financial statements. There are no conditions or events since December 31, 1996 that management believes have changed either the Corporation's or its banking subsidiaries' capital classifications. The risk-based capital guidelines measure capital in relation to the credit risk of both on- and off-balance sheet items using various risk weights. Under the risk-based capital guidelines, Total Capital consists of two tiers of capital. Tier 1 Capital includes common shareholders' equity and qualifying preferred stock, less goodwill and other adjustments. Tier 2 Capital consists of preferred stock not qualifying as Tier 1, mandatory convertible debt, limited amounts of subordinated debt, other qualifying term debt and the allowance for credit losses up to 1.25 percent of risk-weighted assets. Additionally, in accordance with the FRB's capital adequacy guidelines, the Corporation is required to exclude the equity, assets and off-balance sheet exposures of its broker-dealer subsidiary, NATIONSBANC CAPITAL MARKETS, INC., when calculating regulatory capital ratios. A well-capitalized institution must maintain a Tier 1 Capital ratio of six percent and a Total Capital ratio of ten percent. In order to meet minimum regulatory capital requirements, an institution must maintain a Tier 1 Capital ratio of four percent and a Total Capital ratio of eight percent. The leverage ratio guidelines establish a minimum ratio of Tier 1 Capital to quarterly average assets, excluding goodwill and certain other items, of three to four percent. Banking organizations must maintain a leverage capital ratio of at least five percent to be classified as well capitalized. Notes To Consolidated Financial Statements 63 The following table presents the actual capital ratios and amounts and minimum required capital amounts for the Corporation and its significant banking subsidiaries on December 31 (dollars in millions):
1996 1995 ------------------------------------------------------------------ AMOUNT REQUIRED AMOUNT REQUIRED ACTUAL FOR MINIMUM ACTUAL FOR MINIMUM ------------------ CAPITAL --------------- CAPITAL RATIO AMOUNT ADEQUACY RATIO AMOUNT ADEQUACY - ------------------------------------------------------------------------------------------------ TIER 1 CAPITAL NATIONSBANK CORPORATION...... 7.76% $12,384 $ 6,384 7.24% $10,799 $ 5,966 NationsBank, N.A............. 7.54 5,137 2,725 7.60 4,623 2,433 NationsBank, N.A. (South).... 8.05 2,899 1,440 8.65 2,500 1,156 NationsBank of Texas, N.A.... 6.78 2,468 1,456 6.37 2,487 1,562 TOTAL CAPITAL NATIONSBANK CORPORATION...... 12.66 20,208 12,770 11.58 17,264 11,927 NationsBank, N.A............. 10.41 7,093 5,451 10.19 6,199 4,867 NationsBank, N.A. (South).... 10.56 3,801 2,880 11.46 3,312 2,312 NationsBank of Texas, N.A.... 10.19 3,706 2,910 8.93 3,490 3,127 LEVERAGE CAPITAL NATIONSBANK CORPORATION...... 7.09 12,384 6,987 6.27 10,799 6,889 NationsBank, N.A............. 6.21 5,137 3,309 5.66 4,623 3,267 NationsBank, N.A. (South).... 6.46 2,899 1,795 6.71 2,500 1,490 NationsBank of Texas, N.A.... 6.23 2,468 1,585 5.30 2,487 1,877
NOTE TEN. EMPLOYEE BENEFIT PLANS The Corporation sponsors noncontributory trusteed pension plans that cover substantially all officers and employees. The plans provide defined benefits based on an employee's compensation, age at retirement and years of service. It is the policy of the Corporation to fund not less than the minimum funding amount required by the Employee Retirement Income Security Act. The following table sets forth the plans' estimated status on December 31 (dollars in millions):
1996 1995 - ---------------------------------------------------------------------------------- Actuarial present value of benefit obligation Accumulated benefit obligation, including vested benefits of $813 and $864............................... $ (840) $ (884) ===================== Projected benefit obligation for service rendered to date.................................................... $ (997) $ (1,047) Plan assets at fair value, primarily listed stocks, fixed- income securities and real estate......................... 1,202 1,091 --------------------- Plan assets in excess of projected benefit obligation....... 205 44 Unrecognized net loss....................................... 187 398 Unrecognized net transition asset being amortized........... (12) (13) Unrecognized prior service benefit being amortized.......... (33) (29) Deferred investment gain.................................... (39) (97) --------------------- Prepaid pension cost...................................... $ 308 $ 303 =====================
Net periodic pension expense for the years ended December 31 included the following components (dollars in millions):
1996 1995 1994 - ---------------------------------------------------------------------------- Service cost-benefits earned during the period... $ 43 $ 35 $ 39 Interest cost on projected benefit obligation.... 77 74 72 Actual return on plan assets..................... (148) (199) 22 Net amortization and deferral.................... 39 95 (121) -------------------------- Net periodic pension expense................... $ 11 $ 5 $ 12 ==========================
For December 31, 1996, the weighted average discount rate and rate of increase in future compensation used in determining the actuarial present value of the projected benefit obligation were 8.0 percent and 4.0 percent, respectively. The related expected long-term rate of return on plan assets was 10.0 percent. For December 31, 1995, the weighted average discount rate, rate of increase in future compensation and expected long-term rate of return on plan assets were 7.5 percent, 4.0 percent and 10.0 percent, respectively. 64 NationsBank Corporation Annual Report 1996 HEALTH AND LIFE BENEFIT PLANS In addition to providing retirement benefits, the Corporation provides health care and life insurance benefits for active and retired employees. Substantially all of the Corporation's employees, including certain employees in foreign countries, may become eligible for postretirement benefits if they reach early retirement age while employed by the Corporation and they have the required number of years of service. Under the Corporation's current plan, eligible retirees are entitled to a fixed dollar amount for each year of service. Additionally, certain current retirees are eligible for different benefits attributable to prior plans. All of the Corporation's accrued postretirement benefit liability was unfunded at year-end 1996. The "projected unit credit" actuarial method was used to determine the normal cost and actuarial liability. A reconciliation of the estimated status of the postretirement benefit obligation on December 31 is as follows (dollars in millions): 1996 1995 - ---------------------------------------------------------------- Accumulated postretirement benefit obligation Retirees................................... $ (148) $ (136) Fully eligible active participants......... (3) (2) Other active plan participants............. (42) (49) ------------------ (193) (187) Unamortized transition obligation............ 116 118 Unamortized service cost..................... 1 - Unrecognized net (gain) loss................. (1) 3 ------------------ Accrued postemployment benefit liability... $ (77) $ (66) ================== Net periodic postretirement benefit cost for the years ended December 31 included the following (dollars in millions):
1996 1995 1994 - ------------------------------------------------------------------------------------ Service cost................................................ $ 3 $ 2 $ 3 Interest cost on accumulated postretirement benefit obligation................................................ 15 15 14 Amortization of transition obligation over 20 years......... 7 7 7 Amortization of gains....................................... (1) (5) (6) ---------------------- Net periodic postretirement benefit cost.................. $ 24 $ 19 $ 18 ======================
The health care cost trend rates used in determining the accumulated postretirement benefit obligation were 6.50 percent for pre-65 benefits and 5.25 percent for post-65 benefits. A one-percent change in the average health care cost trend rates would increase the accumulated postretirement benefit obligation by 5 percent and the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost by 3 percent. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 8.0 percent and 7.5 percent at December 31, 1996 and 1995, respectively. SAVINGS AND PROFIT SHARING PLANS In addition to the retirement plans, the Corporation maintains several defined contribution savings and profit sharing plans, one of which features a leveraged employee stock ownership (ESOP) provision. For 1996, 1995 and 1994, the Corporation contributed approximately $39 million, $43 million and $41 million, respectively, in cash which was utilized primarily to purchase the Corporation's common stock under the terms of these plans. On December 31, 1996, an aggregate of 17,491,082 shares of the Corporation's common stock and 2,319,060 shares of ESOP preferred stock were held by the Corporation's various savings and profit sharing plans. Under the terms of the ESOP provision, payments to the plan for dividends on the ESOP Preferred Stock were $8 million for 1996, $8 million for 1995 and $9 million for 1994. Interest incurred to service the ESOP debt amounted to $3 million, $4 million and $5 million for 1996, 1995 and 1994, respectively. STOCK OPTION AND AWARD PLANS At December 31, 1996, the Corporation had certain stock-based compensation plans (the Plans) which are described below. The Corporation has elected to provide SFAS 123 disclosures as if the Corporation had adopted the fair-value based method of measuring employee stock options in 1996 and 1995 as indicated below (dollars in millions except per share data):
AS REPORTED PRO FORMA ------------------------------------ 1996 1995 1996 1995 - ----------------------------------------------------------------------------------- Net income.................................... $2,375 $1,950 $2,282 $1,933 Net income available to common shareholders... 2,360 1,942 2,267 1,925 Earnings per common share..................... 4.00 3.56 3.84 3.53 Fully diluted earnings per common share....... 3.92 3.52 3.77 3.49
The table above does not include the 1997 stock awards disclosed on the next page. Notes To Consolidated Financial Statements 65 In determining the pro forma disclosures on the previous page, the fair value of options granted under the 1996 Associates Stock Option Award Plan and the Key Employee Stock Plan was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
RISK FREE DIVIDEND EXPECTED INTEREST RATES YIELD LIVES VOLATILITY ------------------------------------------------------------------------ 1996 1995 1996 1995 1996 1995 1996 1995 ------------------------------------------------------------------------ 1996 Associates Stock Option Award Plan... 6.44% -% 3.55% -% 4 years - 20.8% -% Key Employee Stock Plan................... 5.52 6.15 3.55 3.55 7 years 7 years 24.6 25.3
The effects of applying SFAS 123 in the pro forma disclosures are not indicative of future amounts. SFAS 123 does not apply to awards prior to 1995. 1996 ASSOCIATES STOCK OPTION AWARD PLAN: On June 26, 1996, the Corporation's Board of Directors approved the 1996 Associates Stock Option Award Plan. Under the plan, eligible full-time and part- time employees at the level of Vice President and below received an award of a predetermined number of stock options entitling them to purchase shares of the Corporation's common stock at the closing price of $42 1/8 per share on July 1, 1996. Options to purchase approximately 32 million shares of the Corporation's common stock were granted on July 1, 1996. Options to purchase approximately 10 million shares were granted on January 7, 1997 to eligible Boatmen's associates. One-half of the options became exercisable after the Corporation's common stock closed at or above $50 per share for ten consecutive trading days, which occurred in January 1997. The remainder of the options are exercisable after the Corporation's common stock closes at or above $60 per share for ten consecutive trading days. Regardless of the stock price, all options will be fully exercisable July 1, 2000. No option could be exercised before January 1, 1997. The options expire on July 1, 2001. KEY EMPLOYEE STOCK PLAN: The Key Employee Stock Plan provides for different types of awards including stock options, restricted stock and performance shares. Under this plan, certain key employees received stock options effective July 1, 1995, entitling them to purchase shares of the Corporation's common stock at the previous day's closing market price of $26 13/16 per share. Options to purchase 7.92 million shares of common stock were granted. Fifty percent of the options are currently vested and exercisable. The remaining fifty percent vest and become exercisable in two equal installments on July 1, 1997 and 1998. Any unexercised options will expire on July 1, 2005. Under the Key Employee Stock Plan, on January 2, 1996, ten-year options to purchase 3.6 million shares of common stock at $34 11/16 per share were granted to certain employees. On February 1, 1996, ten-year options to purchase 1.8 million shares of common stock at $34 3/8 per share were granted to certain employees. In January 1997, ten-year options to purchase 2.31 million shares of common stock at $49 7/16 were granted to certain employees. For these grants, twenty-five percent of the options immediately vested and became exercisable. The remainder vest and become exercisable in three equal annual installments. In addition, in January 1997, 620,000 shares of restricted stock were granted to certain former Boatmen's executives in connection with their employment with the Corporation. These shares vest in three substantially equal installments beginning January 1998. RESTRICTED STOCK AWARD PLAN: Under the Corporation's Restricted Stock Award Plan, key employees were awarded shares of the Corporation's common stock subject to certain vesting requirements. Generally, vesting occurred in five equal annual installments with related deferred compensation expensed over the same period. OTHER PLANS: Additional options under former plans and restricted stock and stock options assumed in connection with various acquisitions remain outstanding and are insignificant in amount. No further options or rights will be granted under such plans. The following tables present the status of the Plans as of December 31, 1996, 1995 and 1994, and changes during the years then ended:
1996 1995 1994 ---------------------------------------------------------------------------------------- WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE Employee Stock Option Plans SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE - ----------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year.... 12,788,762 $23.52 12,741,502 $20.34 17,179,992 $20.44 Shares due to acquisitions.......... 1,098,580 17.26 264,446 19.55 39,192 14.76 Granted............................. 38,259,496 41.08 7,920,000 26.82 - - Exercised........................... (3,783,170) 20.69 (7,691,186) 21.39 (3,570,562) 19.47 Forfeited........................... (3,823,518) 40.57 (446,000) 25.43 (907,120) 25.44 --------------------------------------------------------------------------------------- Outstanding at end of year.......... 44,540,150 37.22 12,788,762 23.52 12,741,502 20.34 ======================================================================================= Options exercisable at year end..... 7,591,598 24.38 6,805,944 20.66 12,716,302 20.35 Weighted-average fair value of options granted during the year... $ 7.82 $ 6.91 =========== ===========
66 NationsBank Corporation Annual Report 1996
1996 1995 1994 ------------------------------------------------------------------------------ WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE Restricted Stock Award Plan SHARES GRANT PRICE SHARES GRANT PRICE SHARES GRANT PRICE - --------------------------------------------------------------------------------------------------------------- Outstanding unvested grants at beginning of year........... 2,520,892 $23.23 3,633,704 $22.93 4,301,140 $22.29 Granted....................... - - 125,000 24.50 574,000 25.94 Vested........................ (1,106,062) 22.76 (1,136,732) 22.39 (1,188,716) 22.03 Canceled...................... (73,280) 24.36 (101,080) 22.75 (52,720) 23.44 ------------------------------------------------------------------------------- Outstanding unvested grants at end of year.............. 1,341,550 23.55 2,520,892 23.23 3,633,704 22.93 ===============================================================================
The following table summarizes information about stock options outstanding on December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------------------------------------- NUMBER WEIGHTED-AVERAGE WEIGHTED- NUMBER WEIGHTED- RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE EXERCISE PRICES AT DECEMBER 31 CONTRACTUAL LIFE EXERCISE PRICE AT DECEMBER 31 EXERCISE PRICE - ----------------------------------------------------------------------------------------------------------- $ 6.00 - $30.00....... 9,941,194 6.9 years $23.93 6,335,694 $22.31 $30.01 - $46.50....... 34,598,956 5.2 years 41.03 1,255,904 34.84 -------------- --------- $ 6.00 - $46.50....... 44,540,150 5.6 years 37.22 7,591,598 24.38 ============== =========
NOTE ELEVEN. NONINTEREST INCOME AND EXPENSE - -------------------------------------------------------------------------------- The significant components of noninterest income and expense for the years ended December 31 are presented below (dollars in millions):
1996 1995 1994 - ----------------------------------------------------------------------------- NONINTEREST INCOME Service charges on deposit accounts............ $1,121 $ 884 $ 797 Mortgage servicing and mortgage-related fees... 213 138 86 Fees on factored accounts receivable........... 64 68 74 Investment banking income...................... 356 192 138 Other nondeposit-related service fees.......... 198 156 138 Asset management and fiduciary service fees.... 432 444 435 Credit card income............................. 314 277 280 Trading account profits and fees............... 274 306 273 Other income................................... 674 613 376 --------------------------- $3,646 $3,078 $2,597 --------------------------- - ----------------------------------------------------------------------------- NONINTEREST EXPENSE Personnel...................................... $2,731 $2,491 $2,311 Occupancy, net................................. 523 495 487 Equipment...................................... 451 397 364 Marketing...................................... 252 217 161 Professional fees.............................. 256 182 171 Amortization of intangibles.................... 128 119 141 Credit card.................................... 64 55 71 Deposit insurance.............................. 26 118 211 Data processing................................ 237 229 235 Telecommunications............................. 172 150 137 Postage and courier............................ 148 135 126 Other general operating........................ 490 411 388 General administrative and miscellaneous....... 187 164 139 -------------------------- $5,665 $5,163 $4,942 ==========================
Notes To Consolidated Financial Statements 67 NOTE TWELVE. INCOME TAXES The components of income tax expense for the years ended December 31 were (dollars in millions): 1996 1995 1994 - --------------------------------------------------------------- Current portion - expense Federal........................... $ 889 $ 814 $451 State............................. 45 55 37 Foreign........................... 21 13 5 ------------------------- 955 882 493 ------------------------- Deferred portion - expense (benefit) Federal........................... 299 147 350 State............................. 19 12 21 Foreign........................... (14) - 1 ------------------------- 304 159 372 ------------------------- Total tax expense............... $1,259 $1,041 $865 ========================= The Corporation's current income tax expense of $955 million, $882 million and $493 million for 1996, 1995 and 1994, respectively, approximates the amounts payable for those years. Deferred expense represents the change in the deferred tax asset or liability and is discussed further below. A reconciliation of the expected federal tax expense, based on the federal statutory rate of 35 percent for 1996, 1995 and 1994, to the actual consolidated tax expense for the years ended December 31 is as follows (dollars in millions): 1996 1995 1994 - -------------------------------------------------------------------------- Expected federal tax expense.................. $1,272 $1,047 $894 Increase (decrease) in taxes resulting from Tax-exempt income........................... (35) (32) (35) State tax expense, net of federal benefit... 48 55 46 Other....................................... (26) (29) (40) ---------------------------- Total tax expense......................... $1,259 $1,041 $865 ============================ Significant components of the Corporation's deferred tax (liabilities) and assets on December 31 are as follows (dollars in millions): 1996 1995 - -------------------------------------------------------------- Deferred tax liabilities Securities available for sale.......... $ (45) $ (192) Equipment lease financing.............. (1,008) (750) Depreciation........................... (132) (140) Intangibles............................ (84) (66) Employee retirement benefits........... (108) (109) Other, net...,......................... (255) (180) -------------------- Gross deferred tax liabilities....... (1,632) (1,437) -------------------- Deferred tax assets Employee benefits...................... 118 89 Net operating loss carryforwards....... 42 16 Allowance for credit losses............ 773 754 Other real estate owned................ 16 16 Loan fees and expenses................. 33 26 General business credit carryforwards.. 6 11 Other, net............................. 193 154 --------------------- Gross deferred tax assets............ 1,181 1,066 Valuation allowance.................... (15) (16) --------------------- Deferred tax assets, net of valuation allowance.......................... 1,166 1,050 --------------------- Net deferred tax liabilities............. $ (466) $ (387) ===================== The Corporation's deferred tax assets on December 31, 1996 include a valuation allowance of $15 million representing primarily state net operating loss carryforwards for which it is more likely than not that realization will not occur. The net change in the valuation allowance for deferred tax assets was a decrease of $1 million, due to the realization of certain state deferred tax assets. 68 NationsBank Corporation Annual Report 1996 NOTE THIRTEEN. FAIR VALUES OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments" (SFAS 107), requires the disclosure of the estimated fair values of financial instruments. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Quoted market prices, if available, are utilized as estimates of the fair values of financial instruments. Because no quoted market prices exist for a significant part of the Corporation's financial instruments, the fair values of such instruments have been derived based on management's assumptions, the amount and timing of future cash flows and estimated discount rates. The estimation methods for individual classifications of financial instruments are described more fully below. Different assumptions could significantly affect these estimates. Accordingly, the net realizable values could be materially different from the estimates presented below. In addition, the estimates are only indicative of the value of individual financial instruments and should not be considered an indication of the fair value of the combined Corporation. The provisions of SFAS 107 do not require the disclosure of nonfinancial instruments, including intangible assets. The value of the Corporation's intangibles, such as franchise, credit card and trust relationships and mortgage servicing rights, is significant. SHORT-TERM FINANCIAL INSTRUMENTS The carrying values of short-term financial instruments, including cash and cash equivalents, federal funds sold and purchased, resale and repurchase agreements, and commercial paper and short-term borrowings, approximate the fair values of these instruments. These financial instruments generally expose the Corporation to limited credit risk and have no stated maturities, or have an average maturity of less than 30 days and carry interest rates which approximate market. FINANCIAL INSTRUMENTS TRADED IN THE SECONDARY MARKET Securities held for investment, securities available for sale, loans held for sale, trading account instruments, long-term debt and trust preferred securities traded actively in the secondary market have been valued using quoted market prices. LOANS Fair values were estimated for groups of similar loans based upon type of loan, credit quality and maturity. The fair value of fixed-rate loans was determined by discounting estimated cash flows using interest rates approximating the Corporation's December 31 origination rates for similar loans. Where quoted market prices were available, primarily for certain residential mortgage loans, such market prices were utilized as estimates for fair values. Contractual cash flows for residential mortgage loans were adjusted for estimated prepayments using published industry data. For most variable-rate loans, the carrying amounts were considered to approximate fair value. Where credit deterioration has occurred, estimated cash flows for fixed- and variable- rate loans have been reduced to incorporate estimated losses. DEPOSITS The fair value for fixed-rate deposits with stated maturities was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximate fair value. The book and fair values of financial instruments for which book and fair value differed on December 31 were (dollars in millions):
1996 1995 ----------------------------------------------- BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE - ----------------------------------------------------------------------------------------------------------- FINANCIAL ASSETS Loans, net of unearned income............................. $116,711 $117,525 $112,244 $112,785 Allowance for credit losses............................... (2,315) - (2,163) - FINANCIAL LIABILITIES Deposits.................................................. 106,498 106,512 100,691 100,843 Long-term debt (excluding obligations under capital leases)................................................. 22,689 22,739 17,753 18,077
For all other financial instruments, book value approximates fair value. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS The fair value of the Corporation's asset and liability management and other interest rate contracts is presented in TABLE ELEVEN on page 33 and in the second full paragraph in the mortgage servicing discussion in the Noninterest Income section on page 24. The fair value of liabilities on binding commitments to lend is based on the net present value of cash flow streams using fee rates currently charged for similar agreements versus original contractual fee rates, taking into account the creditworthiness of the borrowers. The fair value was a liability of approximately $190 million and $111 million on December 31, 1996 and 1995, respectively. Notes To Consolidated Financial Statements 69 NOTE FOURTEEN. PARENT COMPANY FINANCIAL INFORMATION The following tables present consolidated parent company financial information:
NationsBank Corporation (Parent Company) CONDENSED CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN MILLIONS) YEAR ENDED DECEMBER 31 ----------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- Income Dividends from consolidated Subsidiary banks and bank holding companies.... $2,309 $ 999 $1,864 Other subsidiaries............................. 210 7 5 Interest from consolidated subsidiaries.......... 799 635 355 Other income..................................... 593 547 501 ----------------------------- 3,911 2,188 2,725 ----------------------------- Expenses Interest on borrowed funds....................... 1,051 835 582 Noninterest expense.............................. 519 462 442 ----------------------------- 1,570 1,297 1,024 ----------------------------- Earnings Income before equity in undistributed earnings of consolidated subsidiaries and taxes............ 2,341 891 1,701 ----------------------------- Equity in undistributed earnings of consolidated Subsidiary banks and bank holding companies.... (63) 830 (247) Other subsidiaries............................. 34 208 140 ------------------------------ (29) 1,038 (107) ------------------------------ Income before income taxes......................... 2,312 1,929 1,594 Income tax benefit................................. (63) (21) (96) ------------------------------ Net income......................................... $2,375 $1,950 $1,690 ============================== Net income available to common shareholders........ $2,360 $1,942 $1,680 ==============================
NationsBank Corporation (Parent Company) CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN MILLIONS) DECEMBER 31 ------------------- 1996 1995 - --------------------------------------------------------------------- Assets Cash held at subsidiary banks................... $ 8 $ 8 Temporary investments........................... 4,250 396 Receivables from consolidated Subsidiary banks and bank holding companies... 2,936 3,116 Other subsidiaries............................ 8,851 8,633 Investment in consolidated Subsidiary banks and bank holding companies... 13,985 12,255 Other subsidiaries............................ 1,705 1,728 Other assets.................................... 1,176 1,095 -------------------- $32,911 $27,231 ==================== Liabilities and Shareholders' Equity Commercial paper and other notes payable........ $ 2,344 $ 2,494 Accrued expenses and other liabilities.......... 678 737 Payables to consolidated susidiaries............ 995 - Long-term debt.................................. 15,250 11,199 Shareholders' equity............................ 13,644 12,801 -------------------- $32,911 $27,231 ====================
70 NationsBank Corporation Annual Report 1996
NationsBank Corporation (Parent Company) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN MILLIONS) YEAR ENDED DECEMBER 31 --------------------------------- 1996 1995 1994 - --------------------------------------------------------------------------------------------- Operating Activities Net income................................................ $ 2,375 $ 1,950 $ 1,690 Reconciliation of net income to net cash provided by operating activities Equity in undistributed earnings of consolidated subsidiaries.......................................... 29 (1,038) 107 Other operating activities.............................. 802 (380) 142 --------------------------------- Net cash provided by operating activities............. 3,206 532 1,939 --------------------------------- Investing Activities Net (increase) decrease in temporary investments.......... (3,854) 187 (271) Net increase in receivables from consolidated subsidiaries............................................ (38) (3,155) (1,416) Additional capital investment in subsidiaries............. (424) (384) (764) (Acquisitions) sales of subsidiaries, net of cash......... (726) - 101 --------------------------------- Net cash used by investing activities................... (5,042) (3,352) (2,350) --------------------------------- Financing Activities Net (decrease) increase in commercial paper and other notes payable........................................... (150) 68 144 Proceeds from issuance of long-term debt.................. 5,560 4,606 1,159 Retirement of long-term debt.............................. (1,509) (1,005) (438) Preferred stock repurchased and redeemed.................. - - (94) Proceeds from issuance of common stock.................... 136 239 267 Common stock repurchased.................................. (1,503) (522) (180) Cash dividends paid....................................... (715) (575) (527) Other financing activities................................ 17 13 73 --------------------------------- Net cash provided by financing activities............... 1,836 2,824 404 --------------------------------- Net increase (decrease) in cash held at subsidiary banks..................................................... - 4 (7) Cash held at subsidiary banks on January 1.................. 8 4 11 --------------------------------- Cash held at subsidiary banks on December 31................ $ 8 $ 8 $ 4 ==================================
Notes To Consolidated Financial Statements 71
NationsBank Corporation And Subsidiaries SIX-YEAR CONSOLIDATED STATISTICAL SUMMARY 1996 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------ TAXABLE-EQUIVALENT YIELDS EARNED Loans and leases, net of unearned income Commercial............................................ 8.16% 8.19% 7.56% 6.96% 7.08% 8.70% Real estate commercial................................ 9.03 9.30 8.18 7.59 7.78 9.13 Real estate construction.............................. 8.89 9.73 8.49 7.50 7.17 8.82 Total commercial.................................... 8.29 8.42 7.71 7.09 7.20 8.78 Residential mortgage.................................. 7.80 7.78 7.62 8.27 9.33 10.47 Credit card........................................... 11.77 12.78 12.84 13.62 14.45 15.22 Other consumer........................................ 9.87 10.07 9.26 9.24 10.07 11.13 Total consumer...................................... 9.06 9.37 8.99 9.51 10.50 11.47 Foreign............................................... 6.87 7.71 6.10 5.49 6.63 8.47 Lease financing....................................... 7.58 7.59 7.50 7.96 8.25 10.89 Total loans and leases, net......................... 8.59 8.79 8.20 8.06 8.49 9.83 Securities Held for investment................................... 5.59 5.57 5.06 5.54 6.84 8.61 Available for sale.................................... 6.63 6.25 5.20 4.80 5.77 - Total securities.................................... 6.46 5.84 5.12 5.51 6.76 8.61 Loans held for sale..................................... 7.30 7.47 6.63 6.73 7.22 8.74 Federal funds sold and securities purchased under agreements to resell.................. 5.19 6.18 4.09 3.21 3.77 5.89 Time deposits placed and other short-term investments... 5.54 6.87 5.12 3.91 5.09 6.89 Trading account securities.............................. 6.44 7.76 7.32 5.43 4.64 6.99 Total earning assets................................ 7.83 7.98 7.16 7.06 7.70 9.25 RATES PAID Savings................................................. 2.22 2.37 2.33 2.38 2.86 4.55 NOW and money market deposit accounts................... 2.52 2.68 2.34 2.24 2.82 4.96 Consumer CDs and IRAs................................... 5.28 5.19 4.17 4.52 5.58 7.01 Negotiated CDs, public funds and other time deposits.... 5.49 5.56 4.02 3.97 4.93 7.08 Foreign time deposits................................... 5.38 6.25 4.98 4.05 5.52 6.70 Borrowed funds and trading account liabilities.......... 5.65 6.40 4.87 3.45 3.33 5.64 Long-term debt.......................................... 6.51 7.00 6.85 7.44 8.92 8.88 Special Asset Division net funding allocation........... - - - - - (6.20) Total interest-bearing liabilities.................. 4.85 5.28 4.09 3.53 4.12 6.09 PROFIT MARGINS Net interest spread..................................... 2.98 2.70 3.07 3.53 3.58 3.16 Net interest yield...................................... 3.62 3.33 3.58 3.96 4.10 3.82 YEAR-END DATA (DOLLARS IN MILLIONS) Loans, leases and factored accounts receivable, net of unearned income.................... $122,630 $117,033 $103,371 $ 92,007 $ 72,714 $ 69,108 Securities held for investment.......................... 2,110 4,432 17,800 13,584 23,355 16,275 Securities available for sale........................... 12,277 19,415 8,025 15,470 1,374 8,904 Loans held for sale..................................... 1,215 1,663 318 1,697 1,236 585 Time deposits placed and other short-term investments... 1,843 1,296 2,159 1,479 1,994 1,622 Total earning assets.................................... 164,676 167,945 151,722 140,890 103,872 96,491 Total assets (1)........................................ 185,794 187,298 169,604 157,686 118,059 110,319 Noninterest-bearing deposits............................ 25,738 23,414 21,380 20,723 17,702 16,356 Domestic savings and time deposits...................... 72,707 64,388 66,487 66,356 62,988 70,359 Foreign time deposits................................... 8,053 12,889 12,603 4,034 2,037 1,360 Total savings and time deposits......................... 80,760 77,277 79,090 70,390 65,025 71,719 Total deposits.......................................... 106,498 100,691 100,470 91,113 82,727 88,075 Borrowed funds and trading account liabilities.......... 35,753 51,067 45,555 44,248 21,957 9,846 Long-term debt.......................................... 22,985 17,775 8,488 8,352 3,066 2,876 Total shareholders' equity.............................. 13,709 12,801 11,011 9,979 7,814 6,518
(1) EXCLUDES ASSETS OF NATIONSBANK OF TEXAS SPECIAL ASSET DIVISION IN 1991. 72 NationsBank Corporation Annual Report 1996
1996 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------- EARNINGS RATIOS Return on average Total assets (1)......................................... 1.18% 1.03% 1.02% .97% 1.00% .17% Earning assets (1)....................................... 1.34 1.17 1.14 1.09 1.12 .20 Common shareholders' equity.............................. 17.95 17.01 16.10 15.00 15.83 2.70 EARNINGS ANALYSIS (TAXABLE-EQUIVALENT) Noninterest income as a percentage of net interest income................................................... 56.76 55.36 48.96 44.48 45.65 44.22 Noninterest expense, excluding merger-related charge, as a percentage of net interest income................... 88.20 92.85 93.16 90.90 94.64 97.62 Efficiency ratio: noninterest expense, excluding merger-related charge, divided by the sum of net interest income and noninterest income................. 56.3 59.8 62.5 62.9 65.0 67.7 Overhead ratio: noninterest expense, excluding merger-related charge, less noninterest income divided by net interest income........................... 31.44 37.50 44.20 46.42 48.99 53.40 Net income as a percentage of net interest income.......................................... 36.98 35.07 31.86 31.79 27.33 5.12 ASSET QUALITY FOR THE YEAR Net charge-offs as a percentage of average loans, leases and factored accounts receivable........... .48 .38 .33 .51 1.25 1.86 Net charge-offs as a percentage of the provision for credit losses.............................. 98.84 110.21 101.79 95.76 121.15 82.70 AT YEAR END Allowance for credit losses as a percentage of net loans, leases and factored accounts receivable........... 1.89 1.85 2.11 2.36 2.00 2.32 Allowance for credit losses as a percentage of nonperforming loans...................................... 260.02 306.49 273.07 193.38 103.11 81.82 Nonperforming assets as a percentage of net loans, leases, factored accounts receivable and other real estate owned.............................. .85 .73 1.10 1.92 2.72 4.01 Nonperforming assets as a percentage of total assets (1)... .56 .46 .67 1.13 1.69 2.54 Nonperforming assets (in millions)......................... $ 1,043 $ 853 $ 1,138 $ 1,783 $ 1,997 $ 2,804 RISK-BASED CAPITAL RATIOS Tier 1..................................................... 7.76% 7.24% 7.43% 7.41% 7.54% 6.38% Total...................................................... 12.66 11.58 11.47 11.73 11.52 10.30 OTHER CAPITAL RATIOS Common shareholders' equity as a percentage of total assets at year end (1)............... 7.31 6.81 6.47 6.25 6.60 5.67 Dividend payout ratio (per common share)................... 29.95 29.17 30.78 28.38 33.07 215.36 Shareholders' equity per common share Average.................................................. $ 22.28 $ 20.95 $ 19.00 $ 16.68 $ 14.53 $ 13.98 At year end.............................................. 23.69 23.26 19.85 18.20 15.40 13.52 OTHER STATISTICS Number of full-time equivalent employees................... 62,971 58,322 61,484 57,742 50,828 57,177 Rate of increase (decrease) in average Total loans and leases, net of unearned income........... 11.67% 15.24% 20.29% 15.83% (1.70)% 1.82% Earning assets........................................... 6.23 12.55 24.50 16.59 (.84) 2.42 Total assets (1)......................................... 6.54 13.36 23.75 16.82 (.64) 1.85 Total deposits........................................... 8.37 5.91 12.30 .97 (5.59) 3.44 Total shareholders' equity............................... 15.82 9.22 21.19 18.73 10.31 6.16 COMMON STOCK INFORMATION Market price per share High for the year........................................ $ 52 5/8 $37 3/8 $28 11/16 $ 29 $26 11/16 $21 3/8 Low for the year......................................... 32 3/16 22 5/16 21 11/16 22 1/4 19 13/16 10 3/4 Close at the end of the year............................. 48 7/8 34 13/16 22 9/16 24 1/2 25 11/16 20 5/16 Daily average trading volume............................... 1,937,938 1,452,934 1,507,030 1,333,182 1,455,156 794,108 Number of shareholders of record........................... 106,345 103,137 105,774 108,435 89,371 102,209
Six-Year Consolidated Statistical Summary 73 EX-21 18 EXHIBIT 21 EXHIBIT 21 Subsidiaries of NationsBank Corporation and Its Subsidiaries at 02/28/97 (100% Owned by NationsBank Corporation Unless Otherwise Noted) *indicates location of corporate records ASB Capital Management, Inc. Atlantic Equity Corporation GLM Investments, Inc. 1 Blue Ridge Investments, L.L.C. 2 Carolina Mountain Holding Company CSF Holdings, Inc. Citizens Travel, Inc. 3 Citizens Financial Services, Inc. 3 Equitable Service Corporation 4 Transtex Management Company 4 Equitable Bancorporation Overseas Finance N.V. Export Funding Corporation MAR, Inc. MN World Trade Corporation MNC Affiliates Group, Inc. MNC American Corporation 5 MNC Credit Corp 5 A/M Properties, Inc. 6 American Financial Service Group, Inc. (LEASEFIRST)6 Maryland National Realty Investors, Inc. 6 Maryland National Leasing Services Corporation 6 MNC Capital Corporation 6 NationsCredit Corporation NationsCredit Commercial Corporation 7 ALS II, Inc. 8 ALS Superior, Inc. 8 BJCC, Inc. 8 JCCA, Inc. 8 BIRMSON, L.L.C.9 Cape Canterbury, Ltd. 8 LDI Corporation 8 NationsCredit Commercial Corporation of America 8 Ariens Credit Corporation 10 Gravely Credit Corporation 10 Korg Acceptance Corporation 10 Mercury Marine Acceptance Corporation 10 NationsCredit Commercial Corporation Ltd. 10 NationsCredit Marine Funding Corporation 10 NationsCredit Securitization Corporation 10 NIMAC Finance Corp. 10 Sea Ray Credit Corporation 10 Winnebago Acceptance Corporation 10 USW SIS I, Inc. 8 USW SIS II, Inc. 8 NationsCredit Consumer Corporation 7 NationsCredit Acceptance Corporation 11 NationsCredit Consumer Discount Company 11 1 NationsCredit Consumer Services, Inc. 11 NationsCredit Finance Group Inc. 11 NationsCredit Financial Acceptance Corporation 11 NationsCredit Financial Services Corporation 11 NationsCredit Financial Services Corporation of Alabama 11 NationsCredit Financial Services Corporation of America 11 NationsCredit Financial Services Corporation of Florida 11 NationsCredit Mortgage Corporation of Florida 12 NationsCredit Financial Services Corporation of Nevada 11 NationsCredit Financial Services Corporation of Virginia 11 NationsCredit Home Equity Corporation of Kentucky 11 NationsCredit Home Equity Corporation of Virginia 11 NationsCredit Home Equity Services Corporation 11 Canterbury Indiana Holdings, Inc. 13 NationsCredit Insurance Agency, Inc. 11 NationsCredit Insurance Corporation 11 NationsCredit Manufactured Housing Corporation 11 NationsCredit Management Corporation 7 NationsBanc Business Credit, Inc. NationsBanc Capital Markets, Inc. NationsBanc Capital Markets International Limited NationsBanc-CRT Services, Inc. NationsBanc Mortgage Capital Corporation NationsCommercial Corp. 14 NationsLink Funding Corporation 14 Tryon Mortgage Funding, Inc. 14 NB Capital Trust I NB Capital Trust II NB Capital Trust III NB Holdings Corporation BBI Kansas, Inc. 15 Boatmen's National Bank 16 M & M Realty, Inc. 17 Midwest Realty & Management, Inc. 17 Boatmen's National Bank of Oklahoma 18 Bank IV Securities Inc. 19 Bank Marketing Systems 19 CSI Holdings, Inc. 19 Consolidated Asset Management Company, Inc. 19 Maywell Mark Corporation 19 OA Management, Inc. 19 Quatro I, Inc. 19 Rockwell Resources, Inc. 19 Townsite Plaza Development, Inc. 19 Boatmen's Trust Company of Kansas 16 Bank IV Community Development Corporation 16 Bank IV Affordable Housing Corporation 16 Fourth Investment Advisors, Inc. 16 IV Commercial Acquisition, Inc. 16 IV CB&T Tulsa Holdings Inc. 20 Boatmen's Arkansas, Inc. 15 Boatmen's Bank of Northeast Arkansas 21 Citizens Advisory Group, Inc. 22 2 Citizens Real Estate, Inc. 22 Boatmen's National Bank of Arkansas 21 Boatmen's Investment Services of Arkansas, Inc. 23 U.N. Service Corporation 23 The Union Modern Mortgage Corporation 23 Worthen Mortgage Company 23 Boatmen's National Bank of Batesville 21 Boatmen's National Bank of Conway 21 Boatmen's National Bank of Hot Springs 21 WHS Appraisal Corp. 24 Boatmen's National Bank of Newark 21 Boatmen's National Bank of North Central Arkansas 21 Boatmen's National Bank of Northwest Arkansas 21 Boatmen's National Bank of Pine Bluff 21 Boatmen's National Bank of Russellville 21 Boatmen's National Bank of South Arkansas 21 Worthen Financial Corporation 21 Boatmen's National Bank of Austin 25 Boatmen's Trust Company of Arkansas 21 National Credit Corporation 21 Worthen Development Corporation, Inc. 21 Boatmen's Bancshares of Iowa, Inc. 15 Boatmen's Building Corporation of Iowa, Inc. 26 FKF, Inc. 26 Boatmen's Bank Iowa, N.A. 26 Boatmen's of Iowa Investments, Inc. 27 Boatmen's Bank of Fort Dodge 26 Boatmen's of Fort Dodge Investments, Inc. 28 Boatmen's National Bank of Northwest Iowa 26 Boatmen's of Northwest Iowa Investments, Inc. 29 Boatmen's Bank of North Iowa 26 Boatmen's of North Iowa Investments, Inc. 30 Boatmen's Insurance Services of Iowa, Inc. 30 Boatmen's Bank of Franklin County 15 Boatmen's Bank of Kennett 15 Boatmen's Bank of Marshall 15 Boatmen's Bank of Mid-Missouri 15 Boatmen's Bank of Pulaski County 15 Boatmen's Bank of Quincy 15 Boatmen's Bank of Rolla 15 Boatmen's Bank of Southern Missouri 15 Finance Investment Company 31 Boatmen's Bank of Southwest Missouri 15 Boatmen's Bank of Tennessee 15 Boatmen's Financial Services, Inc. 32 200 Madison Ave. Realty Corp. 32 Boatmen's Bank of Troy 15 Boatmen's Bank of Vandalia 15 Boatmen's Credit Card Bank 15 Boatmen's First National Bank of West Plains 15 Boatmen's-Illinois, Inc. 15 3 Boatmen's Bank of South Central Illinois 33 Boatmen's National Bank of Boonville 15 Boatmen's National Bank of Cape Girardeau 15 Boatmen's National Bank of Central Illinois 15 Boatmen's National Bank of Coles County 15 Boatmen's National Bank of Lebanon 15 The Boatmen's National Bank of St. Louis 15 BNB Auto, Inc. 34 Arkansas Home Loan Company 34 National Home Loan Company, Inc. 34 National Home Loan Company of Mississippi, Inc. 34 4625 Lindell Corp. 34 Guardian Property, Inc. 34 Des Peres Banc Corporation 34 First of St. Louis Commercial Leasing Corp. 34 G.B.C. Properties, Inc. 34 Boatmen's Equipment Finance, Inc.34 First Revitalization Corp. 34 Boatmen's Investment Services, Inc. 34 Market Street Securities, Inc. 35 BBI Merchant Processing Company, LLC 36 Boatmen's POS Merchant Processing Company, LLC 37 Plaza Associates 34 St. Louis Investment Properties, Inc. 34 Bonhomme Place Associates, Inc. 38 Marbel Homes, Inc. 34 Boatmen's National Mortgage, Inc. 39 Boatmen's Foreign Investment Corporation 34 Savannah International Sales, Inc. 40 Tyler International Sales, Inc. 40 Boatmen's Osage Bank 15 Boatmen's River Valley Bank 15 Boatmen's Sunwest, Inc. 15 Sunwest Bank of Albuquerque, N.A. 41 Sunwest Bank of Clovis, N.A. 41 Sunwest Bank of Farmington 41 Sunwest Bank of Gallup 41 Sunwest Bank of Grant County 41 Sunwest Bank of Hobbs, N.A. 41 Sunwest Bank of Las Cruces, N.A. 41 Sunwest Bank of Raton, N.A. 41 Sunwest Bank of Rio Arriba, N.A. 41 Sunwest Bank of Roswell, N.A. 41 Sunwest Bank of Santa Fe 41 Sunwest Texas, Inc. 41 Sunwest Bank of El Paso 42 Boatmen's Texas, Inc. 15 Boatmen's First National Bank of Amarillo 43 Centerre Bancorporation, Inc.15 Founders Bancorporation, Inc. 15 NationsBank, N.A. 15 American Security (Louisiana) Ltd. 44 4 Ashburn A Corp. 44 Baltic M Corp. 44 BT Building Corporation 44 Central City General, L.P. 45 Carolina Pacific, Inc. 44 CC Plaza M Corp. 44 Chesapeake M Corp. 44 Courtcom M Corp. 44 Devon A Corp. 44 Down Under Finance Corporation 44 Dulaney Valley Corporation 44 Education Financing Services, LLC 46 Elwin Company, Inc. 44 Federal Properties I, Inc. 44 First Development Corporation 44 Fountain Square Corporation of Maryland 44 Harper Farm M Corp. 44 HICO Park M Corp. 44 Madison Park A Corp. 44 Main Place Holdings Corporation 44 Main Place Real Estate Investment Trust 47 Mar A Lowe Corp. 44 Marco Properties, Inc. 44 Greenburgh Marco, Inc. 48 Reprise, Inc. 48 Maryland National Community Development Corporation 44 Greensides Elderly Limited Partnership 49 The Maryland National/Enterprise Equity Fund Limited Partnership 49 Montgomery Homes Limited Partnership II 50 Montgomery Homes Limited Partnership III 49 Montgomery Homes Limited Partnership IV 49 Neighborhood Rental Limited Partnership II 51 The Newington Limited Partnership 51 Rosedale Terrace Limited Partnership 51 St. Wenceslaus Limited Partnership 51 Maryland Nationalease Corporation 44 Melwood M Corp. 44 Metropo M Corp. 44 Metropolitan Commercial Properties Corporation I 44 Metropolitan Commercial Properties Corporation VIII 44 Metropolitan Commercial Properties Corporation X 44 MNC Consumer Discount Company 44 MNC Investment Bank, Ltd. 44 Multi-State Properties, Inc. 44 MYM Holdings Corporation 44 NationsBanc Advisors, Inc. 44 NationsBanc Auto Funding Corporation 44 NationsBanc Charlotte Center, Inc. 44 Nations-CRT Options, Inc. 44 NationsBanc Dealer Leasing, Inc. 44 NationsBanc Enterprise, Inc. 44 NationsSecurities 52 5 NSI Agency, LLC 53 NationsBanc Equity Mortgage Corporation 44 NationsBanc Financial Products, Inc. 44 NationsBanc Insurance Services, Inc. 44 NationsBanc Investments, Inc. 44 NationsBanc Lease Investments, Inc. 44 NationsBanc Leasing Corporation 54 NationsBanc Leasing Corporation of Virginia 44 NationsBanc SBIC Corporation 44 NationsBanc Venture Corporation 44 NationsBank Carolinas Merchant Services, Inc.44 NationsBank Merchant Services 55 Unified Merchant Services 56 NationsBank de Mexico, S.A. 57 NationsBank Europe Limited 44 Carolina Leasing Ltd. 58 Nations Financial Futures Limited 58 Nations Investment Management Limited 58 Commonwealth Securities Limited 59 Nations Investments Limited 58 Nations Securities Services Ltd. 58 NationsBank (Export Finance) Ltd. 58 NationsBank International 44 NationsBank Overseas Corporation 44 AF Funding (1993), Inc. 60 Kill Devil Hills Finance Limited Partnership 61 Air France/NationsBank (Grantor Trust) 62 Wrightbrothers Ltd. 63 AF Funding II (1993), Inc. 60 Kill Devil Hills II Limited Partnership 64 Air France/KDHF II (NGHGI)(Grantor Trust) 65 Florita Finance Ltd. 66 Binfield Ltd. 60 Carolina Investments Limited 60 Cathay Pacific/NationsBank Trust 1 (Grantor Trust) 60 Wanda Finance Ltd. 67 Clenston Ltd. 60 Diamond Shoals Finance Ltd. 60 Friary Leasing Limited 60 Gatwick, Inc. 60 Mayfair Partners 68 Piccadilly, Inc. 69 High Street, Inc. 70 New Broad Street, Inc. 70 Hatteras Finance Ltd. 60 Heathrow, Inc. 71 InterFirst Leasing Ltd. (London) 72 Island Funding, Ltd. 60 Japan Airlines/NCNB 1993-1 (Grantor Trust) 60 First in Flight Finance Ltd. 73 Nations-CRT Asia, Inc. 60 Nations-CRT Hong Kong, Limited 60 Nations-CRT International, Inc. 60 6 Nations . CRT Japan, Inc. 60 Nations-CRT Overseas, Inc. 60 Nations-CRT U.K. & Co. 60 NationsBank International Trust (Jersey) Limited 74 NCNB Lease Atlantic, Inc. 60 NCNB Lease Finance III 75 Blue Ridge Finance Ltd. 76 NCNB Lease Finance 60 Wingtip Finance Limited 77 NCNB Lease Finance IV 60 Sandhills Finance Ltd. 78 NCNB Lease Finance V 60 Piedmont Finance Ltd. 79 NCNB Lease Finance VI 60 Kitty Hawk Finance Ltd. 80 NCNB Lease International, Inc. 60 Barnesbury, Ltd. 81 NCNB Lease Offshore, Inc. 60 NCNB Lease Finance II 82 Outerbanks Finance Ltd. 83 NCNB Overseas Services, Inc. 60 Phaestos FSC, Inc. 84 Republic Dallas Ltd. (U.K.) 85 TransPacific Funding (1993), Inc. 86 TransPacific Finance Limited Partnership 87 ANA II (Grantor Trust) 88 Fontana Finance Ltd. 89 Uwharrie Finance Ltd. 60 NB Partner Corp. 44 Gartmore Global Partners 90 NB Technology Partner, Inc. 44 Integrion Financial Network, LLC 91 NCNB Community Development Corporation 92 Palisades A Corp. 44 Pratt Management Company 44 Quality A Corp. 44 Ritchie Court M Corporation 44 Rive Gauche A Corp. 44 Rooms-Springfield, Inc. 44 SCRC Carrolltowne, Inc. 44 SCRC Process Service Corp. 44 Service-Wright Corporation 44 Seventeenth Commerce Properties Corporation 44 SOP M Corp. 44 South Charles Realty Corp 44 South Point Shopping Center, Inc. 44 Spotted Horse Holdings, Inc. 44 Sully A Corp. 44 Sunset Hill Corporation 44 Sweitzer M Corp. 44 Sykesville M Corp. 44 TradeStreet Investment Associates, Inc. 44 7 Vernon M Corp. 44 Washington View, Inc. 44 Washington View (H) Corporation 93 Washington View (NH) Corporation 93 Wellington Land Co., Inc. 44 Wickliffe A Corp. 44 Woods M Corp. 44 NationsBank of Delaware, N.A.15 NationsBank, N.A. (South) 15 Atico Financial Corporation dba Cavalier Properties 94 Atico Investment Management 94 Bank South Investment Services, Inc. 94 Bank South Home Equity, Inc. 94 CFB Holding Corporation 94 Chase Eagle, Inc. 94 Chase Federal Housing Corporation 94 Chase I, Inc. 94 ChaseFed Insurance Co. 94 Chase/Scarborough Group, Inc. 94 Citizens Financial Securities Corporation 94 Community Reinvestment Group, L.C. 95 EXHO Properties, Inc. 94 Financial Automation, Inc. 94 First Financial Real Estate Development, Inc. 94 First Land Sales, Inc. 94 Harbilan Corporation 94 Motift, Inc. 94 NationsBanc Commercial Corporation 94 NationsBanc Leasing Corporation 54 NationsBanc Leasing Corporation of North Carolina 94 NNW Utility Funding I, Inc. 96 NNW Utility Funding II, Inc. 96 NationsBank Florida Merchant Services, Inc. 94 NationsBank Merchant Services 55 Unified Merchant Services 56 The Ocmulgee Corporation 94 Pan American Mortgage Corp. 94 Seabrook Operations, Inc. 94 Seaview of Seabrook, Inc. 94 WAC One, Inc. 94 200 Service Corp. 94 NationsBank of Kentucky, N.A. 15 NationsBank of Tennessee, N.A.15 Commerce Place Company 97 Tennessee Nationalease Corporation 97 NationsBank Texas Bancorporation, Inc. 15 NationsBank of Texas, N.A. 98 APL, Inc. 99 Austin National Realty Corporation 99 Beechnut Holdings, Inc. 99 Capitol Information Networks, Inc. 99 8 Charter Colonial Securities, Inc. 99 Charter-Houston Securities, Inc. 99 Charter Venture Group, Inc. 99 DPC, Inc. 99 NationsBanc Capital Corporation 99 NationsBanc Energy Group Denver, Inc. 99 NationsBanc Mortgage Corporation 99 NationsBanc Services, Inc. 99 Republic National Corporation 99 Texas Nationalease Corporation 99 RepublicBank Insurance Agency, Inc. 98 Sun World, N.A. 98 Superior Federal Bank, FSB 15 SFS Corporation 100 Premier Management 101 Southwest Protective Life Insurance Company 101 Superior Financial Services of Oklahoma 101 Arch Reinsurance Company, Ltd. 15 Atlantic Credit Corporation 15 Bancshares Properties, Inc.15 Boatmen's Community Development Corporation 15 Boatmen's Insurance Agency, Inc. 15 Boatmen's Life Insurance Company 15 Boatmen's Service Company, Inc. 15 Boatmen's Trust Company 15 Boatmen's Trust Company of Illinois 102 Boatmen's Trust Company of Oklahoma 102 Boatmen's Trust Company of Texas 102 River City Capital Management, Inc. 102 Tower Commercial Realty, Inc. 102 Tower Holdings Limited Partnership 103 Union Realty and Securities Company 102 Cash Flow, Inc. 15 C&S Premises, Inc. 15 C&S Premises-SPE, Inc. 104 First Mortgage Corporation 15 NationsBanc Insurance Agency, Inc. 15 NationsBanc Insurance Company, Inc. 15 NationsBanc Insurance Inc. 15 NationsBanc Investment Corporation 15 NationsBanc Leasing & Finance Corporation 15 NationsBanc Leasing & R.E. Corporation 15 McCormick Realty Limited Partnership 105 NationsBanc Mortgage Corporation of Georgia 15 NationsBanc Retirement Management, Inc. 15 NationsBank Trust Company of New York 15 NB Insurance Services, Inc. 15 Second Land Sales, Inc. 15 Sovran Capital Management Corporation 15 9 Suburban Service Corporation 15 Three Commercial Place Associates 106 NationsBank Community Development Corporation 107 Atlanta Affordable Housing Fund Limited Partnership 108 Biscayne Apartments, Inc. 109 Capital Crossing Development Corporation 109 The Charlotte Affordable Housing LLC 110 Carlton Court CDC, Inc. 109 Courtyards Apartments, Inc. 109 Coventry Village Apartments, Inc. 109 Tabono Joint Venture 111 Historic District Redevelopment Partnership 112 Kenilworth Industrial Park Limited Liability Company 113 Leon Avenue Redevelopment Company 114 Misty Waters Apartments, Inc. 109 NationsBank CDC Special Holding Company, Inc. 109 The Park at Lakewood L.L.C. dba Campbellton Glen Apartments LLC 116 Queen City Partnership 109 Sherwood Terrace Apartments, Inc. 109 Southern Oaks Condominium Partners, Ltd. 110 Stanton Road LLC 111 T-Oaks Apartments, Inc. 109 Terry Street Redevelopment Limited Liability Company 112 University Park Shopping Center, LLC 113 NationsBank do Brasil Ltda 114 NationsBank Housing Fund Investment Corporation 115 Nations Housing Fund Limited Partnership 116 Florida City Apartments, Ltd. 117 Owen Brown II Limited Partnership 118 Bellevieu Manchester Limited Partnership 123 Hillcrest House Partnership, Ltd. 119 Oliver Plaza Limited Partnership 120 Broadway Court Limited Partnership 123 Walnut Woods Limited Partnership 123 Roanoke at HOME Limited Partnership 123 Broadway Apartments Limited Partnership 123 San Antonio Master Limited Partnership 121 Vera Cruz Redevelopment Partnership, LTD. 122 Greensboro Elderly Affordable Housing I Limited Partnership 123 Historic East Side Neighborhood Housing L.P. 123 Timber Ridge of Immokalee Limited Partnership 123 Park City, Ltd. 122 King Street Apartments, II, L.P. 123 S.C. Model I Limited Partnership 123 Columbia Hill Partners, L.P. 123 Columbia Mill, I, L.P. 123 The Arbors, Limited Partnership 123 Cranberry Equities Limited Partnership 123 ODC Crossing, Limited Partnership 123 Highlandtown Cooperative Limited Partnership 124 VOA Eastern Avenue Limited Partnership 123 Mt. Pleasant Ventures Limited Partnership 123 10 Sherwood Park Limited Partnership 123 Etowah, L.P. 125 Dominion Pines Partners L.P. 123 Cheshire Chase Limited Partnership 123 Delowe Place, L.P. 123 Westwood Manor Development, L.P. 123 Elkridge Apartments Limited Partnership 126 Columbia Plaza I, L.P. 123 Ripley Station Limited Partnership 123 BHP/Johnston Square Limited Partnership 127 SPAR S.H.A.R.E. II, Ltd. 130 North Carolina Equity Fund 128 Riverview Townes Limited Partnership 129 Sedgebrook Limited Partnership 134 Willow Pond Limited Partnership 134 St. Andrew's Homes Limited Partnership 130 Carmel Ridge Limited Partnership 134 Bridgewood Square Limited Partnership 134 Hycienda Heights Limited Partnership 134 Nations Housing Fund II Limited Partnership 121 Pine Knoll Limited Partnership 131 NationsBridge, L.L.C.119 NCNB Corporate Services, Inc. NCNB Properties, Inc. South Charles Investment Corporation Tidewater Partners Limited Partnership 132 SCI Holdings Corporation 133 SunStar Acceptance Corporation DCRS Corporation 139 SunStar Acceptance Corporation (California) 139 SunStar Acceptance Corporation (Hawaii) 139 TIM, Inc. Tryon Assurance Company, Ltd. - ----------------------------------------------------------- The following companies are 50% or less owned by NationsBank Corporation or one of its subsidiaries. ABB Funding Partners, L.P., Stamford, CT - NationsCredit Commercial Corporation owns 14.27% of this entity. Carlton Court Limited Partnership, Dallas, TX - NationsBank Community Development Corporation ("NBCDC") and Carlton Court CDC, Inc. own 49% and 1%, respectively, of this entity. Charlotte Transit Center, Inc., Charlotte, NC - NationsBank CDC Special Holding Company, Inc. has 50% control as one of the two members of this non-profit corporation. Church Street Crossing Associates, L.P., Washington, DC - NBCDC owns 50% of this entity. Collmain Customer Services Ltd., London - NationsBank Europe Limited owns 22.5% of this entity. Collmain Services Ltd., London - Carolina Investments Limited holds a 20% minority interest in this company. 11 Columbia Community Investment Limited Partnership, Charlotte, NC - NBCDC has a 20% interest in this entity. Commonwealth National Bank, Mobile, AL - NationsBank Corporation owns nonvoting securities representing 47% of this entity, however, does not exercise any form of control over it. CSC Associates, L.P., Marietta, GA - C&S Premises, Inc. and C&S Premises-SPE, Inc. own 49% and 1%, respectively, of this entity. Danville Community Development Corporation, Danville, VA - NBCDC owns 22% of this entity. Factoraje Bancomer, S.A., Mexico - NationsBank Overseas Corporation owns 10% of this entity. First Housing Development Corporation of Florida, Tampa, FL - NationsBank, N.A. (South) owns 12.07% of this entity. Foremost Factors Limited, New Delhi, India - NationsBank Overseas Corporation owns 35% of this entity. HONOR Technologies, Inc., Maitland, FL - NationsBank Corporation owns 18.26% of this entity. Kenilworth-Burroughs Limited Partnership, Washington, DC - Kenilworth Industrial Park Limited Liability Company is General Partner with a .01% general partnership interest and a 25.99% limited partnership interest. Maryland Housing Equity Fund Limited Partnership, Columbia, MD - Maryland National Community Development Corporation owns 13.12% of this limited partnership. MECA Software, L.L.C., Fairfield, CT - MYM Holdings Corporation owns 16.67% of this entity. Nubia Redevelopment Partnership, Dallas, TX - NBCDC owns 50% of this entity. Roanoke Community Development Corporation, Roanoke, VA - NBCDC owns 28% of this entity. Savannah Community Development Corporation dba Savannah Regional Small Business Capital Fund - NationsBank, N.A. (South) owns 21% of this entity. Springdale Equity Partners, L.P., Charlotte, NC - NationsBanc Investment Corporation is a limited partner and has no voting rights, however, contributed 99.5% of the capital and maintains a veto right over certain actions. 12 Springdale Venture Partners, L.P., Charlotte, NC - NationsBanc Venture Corporation is a limited partner and has no voting rights, however, contributed 99.5% of the capital and maintains a veto right over certain actions. Third Ward Neighborhood Development Association, Charlotte, NC - NCNB Community Development Association, a subsidiary of NationsBank, N.A. owns 50% of this joint venture. Tiryns FSC, Inc., Charlotte Amalie, VI - NationsBank Overseas Corporation owns 50% of this entity. Tri-Tech, L.P., Baltimore, MD - NationsBank of Delaware, N.A. owns 9.1% of this entity. Troy Street Limited Liability Company, Alexandria, VA - NationsBank Community Development Corporation has a 39.89% interest in this entity, however, has no right of control over it. - -------- 1 Atlantic Equity Corporation owns 100% of this entity. 2 NationsBank Corporation and NB Holdings Corporation own 99% and 1%, respectively, of this entity. 3 CSF Holdings, Inc. owns 100% of this entity. 4 Citizens Financial Services, Inc owns 100% of this entity. 5 MNC Affiliates Group, Inc. owns 100% of this entity. 6 MNC Credit Corp owns 100% of this entity. 7 Nations Credit Corporation owns 100% of this entity. 8 NationsCredit Commercial Corporation owns 100% of this entity. 9 BJCC, Inc. and JCCA, Inc. own 40% and 60%, respectively, of this entity. 10 NationsCredit Commercial Corporation of America owns 100% of this entity. 11 NationsCredit Consumer Corporation owns 100% of this entity. 12 NationsCredit Financial Services Corporation of Florida owns 100% of this entity. 13 NationsCredit Home Equity Services Corporation owns 100% of this entity. 14 NationsBanc Mortgage Capital Corporation owns 100% of this entity. 15 NB Holdings Corporation owns 100% of this entity. 16 BBI Kansas, Inc. owns 100% of this entity. 17 Boatmen's National Bank owns 100% of this entity. 18 BBI Kansas, Inc. and IV Commercial Acquisition, Inc. own 82.7% and 17.3%, respectively, of this entity. 19 Boatmen's National Bank of Oklahoma owns 100% of this entity. 20 IV Commercial Acquisition, Inc. owns 100% of this entity. 21 Boatmen's Arkansas, Inc. owns 100% of this entity. 22 Boatmen's Bank of Northeast Arkansas owns 100% of this entity. 23 Boatmen's National Bank of Arkansas owns 100% of this entity. 24 Boatmen's National Bank of Hot Springs owns 100% of this entity. 25 Worthen Financial Corporation owns 100% of this entity. 26 Boatmen's Bancshares of Iowa, Inc. owns 100% of this entity. 27 Boatmen's Bank Iowa, N.A. owns 100% of this entity. 28 Boatmen's Bank of Fort Dodge owns 100% of this entity. 29 Boatmen's Bank of Northwest Iowa owns 100% of this entity. 30 Boatmen's Bank of North Iowa owns 100% of this entity. 31 Boatmen's Bank of Southern Missouri owns 100% of this entity. 32 Boatmen's Bank of Tennessee owns 100% of this entity. 33 Boatmen's-Illinois, Inc. owns 100% of this entity. 34 The Boatmen's National Bank of St. Louis owns 100% of this entity. 35 Boatmen's Investment Services, Inc. owns 100% of this entity. 36 A number of Boatmen's banks own percentages of this entity. 37 BBI Merchant Processing Company, LLC owns 50% of this entity. 38 St. Louis Investment Properties, Inc. owns 100% of this entity. 39 Marbel Homes, Inc. owns 100% of this entity 13 40 Boatmen's Foreign Investment Corporation owns 100% of this entity. 41 Boatmen's Sunwest, Inc. owns 100% of this entity. 42 Sunwest Texas, Inc. owns 100% of this entity. 43 Boatmen's Texas, Inc. owns 100% of this entity. 44 NationsBank, N.A. owns 100% of this entity. 45 BT Building Corporation has a 17% general partnership interest and a 43% limited partnership interest in this entity. 46 NationsBank, N.A. owns up to 22.26% of this entity; definitive % depends on total number of participants. 47 Main Place Holdings Corporation owns 100% of this entity. 48 Marco Properties, Inc. owns 100% of this entity. 49 Maryland National Community Development Corporation owns 99% of this entity. 50 Maryland National Community Development Corporation and NationsBank, N.A., each, has a 33.3% interest in this entity. 51 Maryland National Community Development Corporation owns 98.99% of this entity. 52 NationsBanc Enterprise, Inc. and NationsBanc Investments, Inc., each, has a 50% interest in this general partnership. 53 NationsSecurities and NationsBanc Enterprise, Inc. have 99% and 1% interests, respectively, in this entity. 54 NationsBank, N.A. and NationsBank, N.A. (South) own 63% and 37%, respectively, of this entity. 55 NationsBank Carolinas Merchant Services, Inc. and NationsBank Florida Merchant Services, Inc. own 49% and 51%, respectively, of this entity. 56 NationsBank Merchant Services owns 20% of this entity. 57 NationsBank Overseas Corporation and NationsBank, N.A. own 99% and 1%, respectively, of this entity. 58 NationsBank Europe Limited owns 100% of this entity. 59 Nations Investment Management Limited owns 100% of this entity. 60 NationsBank Overseas Corporation owns 100% of this entity. 61 AF Funding (1993), Inc. holds a 1% general partnership and a 49% limited partnership interest in this entity. 62 Kill Devil Hills Finance Limited Partnership owns 100% of this entity. 63 Air France/NationsBank (Grantor Trust) owns 100% of this entity. 64 AF Funding II (1993), Inc. holds a 1% general partnership and a 34% limited partnership interest in this entity. 65 Kill Devil Hills II Limited Partnership owns 100% of this entity. 66 Air France/KDHF II (NGHGI)(Grantor Trust) owns 100% of this entity. 67 Cathay Pacific/NationsBank Trust I (Grantor Trust) owns 100% of this entity. 68 Gatwick, Inc. and Heathrow, Inc. own 75% and 25%, respectively, of this entity. 69 Mayfair Partners owns 100% of this entity. 70 Piccadilly, Inc. owns 90% of this entity. The remainder is owned by an unrelated third party. 71 NationsBank Overseas Corporation and Island Funding, Inc. own 75% and 25%, respectively, of this entity. 72 NationsBank Overseas Corporation owns 99.5% of this entity. 73 Japan Airlines/NCNB 1993-1 (Grantor Trust) owns 100% of this entity. 74 NationsBank Overseas Corporation and NationsBank, N.A. own 99.33% and .67%, respectively, of this entity. 75 NCNB Lease Atlantic, Inc. owns 100% of this entity. 76 NCNB Lease Finance III owns 100% of this entity. 77 NCNB Lease Finance owns 100% of this entity. 78 NCNB Lease Finance IV owns 100% of this entity. 79 NCNB Lease Finance V owns 100% of this entity. 80 NCNB Lease Finance VI owns 100% of this entity. 81 NCNB Lease International, Inc. owns 99.9% of this entity. 82 NCNB Lease Offshore, Inc. owns 100% of this entity. 83 NCNB Lease Finance II owns 100% of this entity. 84 NationsBank Overseas Corporation owns 50% of this entity. 85 NationsBank Overseas Corporation owns 98% of this entity. 86 NationsBank Overseas Corporation owns 66% of this entity. 14 87 TransPacific Funding (1993), Inc. holds a 1% general partnership and a 65% limited partnership interest in this entity. 88 TransPacific Finance Limited Partnership owns 100% of this entity. 89 ANA II (Grantor Trust) owns 100% of this entity. 90 NB Partner Corp. owns 50% of this entity. 91 NB Technology Partner, Inc. owns 5.88% of this entity. 92 NationsBank, N.A. is the sole member of this non-profit corporation. 93 Washington View, Inc. owns 69% of this entity. 94 NationsBank, N.A. (South) owns 100% of this entity. 95 NationsBank, N.A. (South) owns 61.5% of this entity. 96 NationsBanc Leasing Corporation of North Carolina owns 100% of this entity. 97 NationsBank of Tennessee, N.A. owns 100% of this entity. 98 NationsBank Texas Bancorporation, Inc. owns 100% of this entity. 99 NationsBank of Texas, N.A. owns 100% of this entity. 100 Superior Federal Bank, FSB owns 100% of this entity. 101 SFS Corporation owns 100% of this entity. 102 Boatmen's Trust Company owns 100% of this entity. 103 Boatmen's Trust Company owns 99% of this entity. 104 C&S Premises, Inc. owns 100% of this entity. 105 NationsBanc Leasing & R.E. Corporation owns 100% of this entity. 106 NB Holdings Corporation owns 70% of this entity. 107 NationsBank, N.A. (South), NationsBank, N.A. and NationsBank of Texas, N.A. own, respectively, 31%, 42% and 27% of this entity. 108 NationsBank Community Development Corporation ("NBCDC")has a 95.4% general partnership interest in this entity. 109 NBCDC owns 100% of this entity. 110 NBCDC and NCNB Community Development Corporation have 99% and 1% interests, respectively, in this entity. 111 Eban Incorporated owns 5% of this entity, however, has control over it. 112 NBCDC has a 94.89% interest in this entity. 113 NBCDC owns 70% of this entity. 114 NBCDC owns 80% of this entity. 115 NBCDC has a 50.26% interest in this entity. 116 NBCDC owns 99% of this entity. 117 NBCDC owns 98% of this entity. 118 NBCDC owns 81% of this entity. 119 NationsBank Corporation and NB Holdings Corporation own 99% and 1%, respectively, of this entity. 120 NationsBank, N.A. and NationsBank of Texas, N.A., each, owns 25% of the voting stock of this entity, and NationsBank, N.A. (South) owns 50%. 121 NationsBank Housing Fund Investment Corporation has a 99% limited partnership interest in this entity. 122 Nations Housing Fund Limited Partnership ("NHF") has a 51% limited partnership interest in this entity. 123 NHF has a 99% limited partnership interest in this entity. 124 NHF has an 88% limited partnership interest in this entity. 125 NHF has a 67.5% limited partnership interest in this entity. 126 NHF has a 50.49% limited partnership interest in this entity. 127 San Antonio Master Limited Partnership has a 99% limited partnership interest in this entity. 128 NHF has a 75.85% limited partnership interest in this entity. 129 NHF has an 88.05% limited partnership interest in this entity. 130 NHF has a 98.99% limited partnership interest in this entity. 131 NHF has a 51.17% limited partnership interest in this entity. 132 NHF has a 32.51% limited partnership interest in this entity. 133 NHF has a 39.6% limited partnership interest in this entity. 134 North Carolina Equity Fund ("NCEF") has a 99% limited partnership interest in this entity. 135 NCEF has a 98% limited partnership interest in this entity. 136 Nations Housing Fund II Limited Partnership ("NHFII") has a 99% limited partnership interest in this entity. 137 South Charles Investment Corporation has an 88% limited partnership interest and SCI Holdings Corporation has a 2% general partnership interest in this entity 138 South Charles Investment Corporation owns 100% of this entity. 139 SunStar Acceptance Corporation owns 100% of this entity. 15 136 Nations Housing Fund II Limited Partnership ("NHFII") has a 99% limited partnership interest in this entity. 137 South Charles Investment Corporation has an 88% limited partnership interest and SCI Holdings Corporation has a 2% general partnership interest in this entity. 138 South Charles Investment Corporation owns 100% of this entity. 139 SunStar Acceptance Corporation owns 100% of this entity. EX-23 19 EXHIBIT 23 EXHIBIT 23 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Nos. 33-44826; 33-57533; 33-63097; 333-7229; 333-13811; 333-15375 and 333-18273); the Registration Statements on Forms S-8 (Nos. 2-91958; 2-73761; 2-80406; 33-45279; 33-48883; 33-60695; 333-02875 and 333-07105) and the Post-Effective Amendment No. 1 on form S-8 to Registration Statements on Form S-4 (Nos. 33-43125; 33-55145; 33-63351; 33-62069; 33-62208 and 333-16189) of NationsBank Corporation of our report dated January 10, 1997 appearing on page 48 of the 1996 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Charlotte, North Carolina March 28, 1997 EX-24 20 EXHIBIT 24(A) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each of NationsBank Corporation and the several undersigned officers and directors whose signatures appear below, hereby makes, constitutes and appoints James W. Kiser and Charles M. Berger, and each of them acting individually, its, his and her true and lawful attorneys with power to act without any other and with full power of substitution, to execute, deliver and file in its, his and her name and on its, his and her behalf, and in each of the undersigned officer's and director's capacity or capacities as shown below, an Annual Report on Form 10-K for the year ended December 31, 1996, and all exhibits thereto and all documents in support thereof or supplemental thereto, and any and all amendments or supplements to the foregoing, hereby ratifying and confirming all acts and things which said attorneys or attorney might do or cause to be done by virtue hereof. IN WITNESS WHEREOF, NationsBank Corporation has caused this power of attorney to be signed on its behalf, and each of the undersigned officers and directors, in the capacity or capacities noted, has hereunto set his or her hand as of the date indicated below. NATIONSBANK CORPORATION By: /s/ Hugh L. McColl, Jr. HUGH L. MCCOLL, JR. CHIEF EXECUTIVE OFFICER Dated: March 26, 1997
SIGNATURE TITLE DATE Chief Executive Officer and Director March 26, 1997 /s/ Hugh L. McColl, Jr. (Principal Executive Officer) (HUGH L. MCCOLL, JR.) Vice Chairman and March 26, 1997 /s/ James H. Hance, Jr. Chief Financial Officer (JAMES H. HANCE, JR.) (Principal Financial Officer) Executive Vice President March 26, 1997 /s/ Marc D. Oken (Principal Accounting Officer) (MARC D. OKEN) Chairman of the Board March 26, 1997 /s/ Andrew B. Craig, III (ANDREW B. CRAIG, III) /s/ Ronald W. Allen Director March 26, 1997 (RONALD W. ALLEN) /s/ Ray C. Anderson Director March 26, 1997 (RAY C. ANDERSON) /s/ William M. Barnhardt Director March 26, 1997 (WILLIAM M. BARNHARDT) /s/ B.A. Bridgewater, Jr. Director March 26, 1997 (B.A. BRIDGEWATER, JR.) /s/ Thomas E. Capps Director March 26, 1997 (THOMAS E. CAPPS) SIGNATURE TITLE DATE /s/ Charles W. Coker Director March 26, 1997 (CHARLES W. COKER) /s/ Thomas G. Cousins Director March 26, 1997 (THOMAS G. COUSINS) /s/ Alan T. Dickson Director March 26, 1997 (ALAN T. DICKSON) /s/ W. Frank Dowd, Jr. Director March 26, 1997 (W. FRANK DOWD, JR.) /s/ Paul Fulton Director March 26, 1997 (PAUL FULTON) /s/ Timothy L. Guzzle Director March 26, 1997 (TIMOTHY L. GUZZLE) /s/ C. Ray Holman Director March 26, 1997 (C. RAY HOLMAN) /s/ W. W. Johnson Director March 26, 1997 (W. W. JOHNSON) /s/ Russell W. Meyer, Jr. Director March 26, 1997 (RUSSELL W. MEYER, JR.) Director March , 1997 (JOHN J. MURPHY) /s/ Richard B. Priory Director March 26, 1997 (RICHARD B. PRIORY) /s/ John C. Slane Director March 26, 1997 (JOHN C. SLANE) /s/ O. Temple Sloan, Jr. Director March 26, 1997 (O. TEMPLE SLOAN, JR.) /s/ John W. Snow Director March 26, 1997 (JOHN W. SNOW) /s/ Meredity R. Spangler Director March 26, 1997 (MEREDITH R. SPANGLER) /s/ Robert H. Spilman Director March 26, 1997 (ROBERT H. SPILMAN) /s/ Albert E. Suter Director March 26, 1997 (ALBERT E. SUTER) SIGNATURE TITLE DATE /s/ Ronald Townsend Director March 26, 1997 (RONALD TOWNSEND) /s/ Jackie M. Ward Director March 26, 1997 (JACKIE M. WARD) /s/ Virgil R. Williams Director March 26, 1997 (VIRGIL R. WILLIAMS)
EX-24 21 EXHIBIT 24(B) NATIONSBANK CORPORATION BOARD OF DIRECTORS RESOLUTION March 26, 1997 Annual Report on Form 10-K RESOLVED, that the Corporation's Annual Report on Form 10-K for the year ended December 31, 1996 (the "10-K Report"), be, and it hereby is, authorized and approved substantially in the form presented to and considered at this meeting, with such changes in form or content or attachment of exhibits as the signing officers shall approve, their approval to be conclusively evidenced by their signature thereof; RESOLVED FURTHER, that the proper officers of the Corporation be, and they hereby are, authorized and empowered on behalf of the Corporation to execute the 10-K Report and file it with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, and with such over governmental agencies or instrumentalities as such officers deem necessary or desirable, and to make, execute and file any amendment or amendments to the 10-K Report, as they may deem necessary or appropriate; RESOLVED FURTHER, that J.W. Kiser and Charles M. Berger be, and each of them with full power to act without the other hereby is, authorized and empowered to sign the aforesaid 10-K Report and any amendment or amendments thereto on behalf of and as attorneys for NationsBank Corporation and on behalf of and as attorneys for any of the following, to wit: the Principal Executive Officer, the Principal Financial Officer, the Principal Accounting Officer, and any other officer of NationsBank Corporation. RESOLVED FURTHER, that the officers of NationsBank Corporation be, and they hereby are, authorized and directed to do all things necessary, appropriate or convenient to carry into effect, the foregoing resolutions. CERTIFICATE OF SECRETARY I, ALLISON L. GILLIAM, Assistant Secretary of NationsBank Corporation, a corporation duly organized and existing under the laws of the State of North Carolina, do hereby certify that the foregoing is a true and correct copy of resolutions duly adopted by a majority of the entire Board of Directors of said corporation at a meeting of said Board of Directors held March 26, 1997, at which meeting a quorum was present and acted throughout and that said resolutions are in full force and effect and have not been amended or rescinded as of the date hereof. IN WITNESS WHEREOF, I have hereupon set my hand and affixed the seal of said corporation this 26th day of March, 1997. (CORPORATE SEAL) /s/ Allison L. Gilliam Assistant Secretary EX-27 22 EXHIBIT 27
9 YEAR DEC-31-1996 DEC-31-1996 8,933 1,843 6,959 18,689 12,277 2,110 2,110 122,630 (2,315) 185,794 106,498 35,753 6,849 22,985 0 171 3,855 9,683 185,794 10,138 1,306 2,352 13,796 3,322 7,467 6,329 605 67 5,803 3,634 3,634 0 0 2,375 4.00 3.92 3.62 890 245 0 0 2,163 836 238 2,315 1,728 23 564
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