-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, T4Sr9gAjqTwwRJgMToLWjaEo7uq2ICwQ6EKRCVFmka6urJCu71For9+w6gZ2gcdq ESIzIYJstxKxsYsR1WS/Sg== 0000950144-94-001030.txt : 19940517 0000950144-94-001030.hdr.sgml : 19940517 ACCESSION NUMBER: 0000950144-94-001030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACHOVIA CORP/ NC CENTRAL INDEX KEY: 0000774203 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 561473727 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09021 FILM NUMBER: 94527476 BUSINESS ADDRESS: STREET 1: 301 N MAIN STREET CITY: WINSTON SALEM STATE: NC ZIP: 27150 BUSINESS PHONE: 9197705000 MAIL ADDRESS: STREET 1: 191 PEACHTREE ST NE CITY: ATLANTA STATE: GA ZIP: 30303 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WACHOVIA CORP DATE OF NAME CHANGE: 19910603 10-Q 1 WACHOVIA CORPORATION FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 1994 Commission File Number 1-9021 WACHOVIA CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) North Carolina 56-1473727 - - ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 301 North Main Street, Winston-Salem, North Carolina 27150 191 Peachtree Street, N.E., Atlanta, Georgia 30303 - - ---------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (910)770-5000, (404)332-5000 ---------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicated below is the number of shares outstanding of each of the issuer's classes of common stock as of April 30, 1994 Common Stock, $5.00 par value, 171,460,304 shares 2 QUARTERLY REPORT ON FORM 10-Q WACHOVIA CORPORATION March 31, 1994 PART I - FINANCIAL INFORMATION Item 1. Financial Statements - - ----------------------------- Wachovia Corporation ("Wachovia"), a North Carolina corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and a savings and loan holding company within the meaning of the Home Owners Loan Act of 1933, as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989. Its member companies provide a wide range of banking and bank-related services to customers throughout the United States and abroad. Wachovia's principal subsidiaries, Wachovia Bank of North Carolina, N.A., Wachovia Bank of Georgia, N.A., and The South Carolina National Bank provide personal, commercial, trust and institutional banking services through 503 full-service banking offices located in North Carolina, South Carolina and Georgia. In addition, The First National Bank of Atlanta, another subsidiary of Wachovia Corporation, provides credit card services for Wachovia's affiliated banks. National and international banking services are provided through Wachovia's three Cayman Island branches, an Edge Act subsidiary located in New York, and various offices located throughout the Southeast, the nation and the world. The following consolidated financial statements of Wachovia Corporation and subsidiaries are included on pages 15 through 18 of the quarterly Report to Shareholders of the Registrant (attached hereto as Exhibit 19) and are incorporated herein by reference: Consolidated Statement of Condition Consolidated Statement of Income Consolidated Statement of Shareholders' Equity Consolidated Statement of Cash Flows The accompanying unaudited consolidated financial statements in Exhibit 19 do not include all information and footnotes required under generally accepted accounting principles. However, in the opinion of management, the profit and loss information presented in the interim financial statements reflects all adjustments necessary to present fairly the results of operations for the periods presented. Adjustments reflected in the first quarter 1994 figures are of a normal, recurring nature. The results of operations shown in the interim statements are not necessarily indicative of the results that may be expected for the entire year. Item 2. Management's Discussion and Analysis of Financial Condition and - - ------------------------------------------------------------------------ Results of Operations --------------------- Management's discussion and analysis included on pages 4 - 14 of the quarterly Report to Shareholders of the Registrant (attached hereto as Exhibit 19) is incorporated herein by reference. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - - ------------------------------------------------------------ At the annual meeting of shareholders held on April 22, 1994, six directors were elected and the appointment of Ernst and Young as independent auditors for 1994 was ratified. Shareholders also approved the Wachovia Corporation Stock Plan and certain amendments to the Wachovia Corporation Senior Management Incentive Plan to 3 QUARTERLY REPORT ON FORM 10-Q WACHOVIA CORPORATION March 31, 1994 Item 4. Submission of Matters to a Vote of Security Holders (Continued) - - ------------------------------------------------------------------------ preserve Wachovia's tax deduction for certain plan awards. The distribution of shareholders' votes was as follows:
Shares Voted Shares in Favor Withheld -------- -------- Election of directors: Leslie M. Baker, Jr. 145,786,270 522,709 Rufus C. Barkley, Jr. 145,226,391 1,082,588 John L. Clendenin 145,775,047 533,932 Robert M. Holder, Jr. 145,783,455 525,524 W. Duke Kimbrell 145,248,131 1,060,848 John G. Medlin, Jr. 145,766,763 542,216 Wachovia Corporation Stock Plan: Shares Voted in Favor 138,124,303 Shares Voted Against 6,428,097 Abstentions 1,672,893 Broker Non-Votes 83,704 Amendments to the Wachovia Corporation Senior Management Incentive Plan: Shares Voted in Favor 140,818,901 Shares Voted Against 3,459,832 Abstentions 1,943,072 Broker Non-Votes 87,174 Ratification of the appointment of independent auditors: Shares Voted in Favor 145,344,222 Shares Voted Against 309,744 Abstentions 655,013
Item 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits 10.1 Wachovia Corporation Stock Plan (Exhibit 4.1 to S-8 Registration Statement No. 033-53325*) 10.2 Wachovia Corporation Senior Management Incentive Plan as amended through April 22, 1994 11 Computation of Earnings Per Common Share 19 Wachovia Corporation Report to Shareholders for the period ending March 31, 1994 * Incorporated by reference (b) Reports on Form 8-K A Current Report on Form 8-K, dated January 11, 1994, was filed so as to file with the Securities and Exchange Commission a Statement setting forth the computation of Ratios of Earnings to Fixed Charges to be incorporated into Wachovia's Registration Statement on Form S-3 (Registration No. 33-59206). 4 QUARTERLY REPORT ON FORM 10-Q WACHOVIA CORPORATION March 31, 1994 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WACHOVIA CORPORATION May 11, 1994 By ROBERT S. McCOY, JR. ------------------------------ Robert S. McCoy, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) May 11, 1994 By JOHN C. McLEAN, JR. ------------------------------ John C. McLean, Jr. Comptroller (Principal Accounting Officer) EX-10.2 2 WACHOVIA CORP. SENIOR MANAGEMENT INCENTIVE PLAN 1 Exhibit 10.2 WACHOVIA CORPORATION SENIOR MANAGEMENT INCENTIVE PLAN 2 WACHOVIA CORPORATION SENIOR MANAGEMENT INCENTIVE PLAN 1. Purpose. ------- The purposes of the Wachovia Corporation Senior Management Incentive Plan (the "Plan") are to motivate and reward a greater degree of excellence and team work among the senior officers of Wachovia Corporation (the "Corporation") and related corporations by providing incentive compensation award opportunities; to provide attractive and competitive total cash compensation opportunities for exceptional corporate, organizational unit and personal performance; to reinforce the communication and achievement of the mission, objectives and goals of the Corporation; and to enhance the Corporation's ability to attract, retain and motivate the highest caliber senior officers. The purposes of the Plan shall be carried out by payment to eligible participants of annual incentive cash awards (individually, an "Award" and collectively, "Awards"), subject to the terms and conditions of the Plan and the discretion of the Committee. 2. Effective Date and Plan Year. ---------------------------- The Wachovia Corporation Senior Management Incentive Plan was originally adopted by the Board of Directors of the Corporation (the "Board") effective January 1, 1987. The Plan (as amended) was approved by the Board of Directors on January 28, 1994, and by the Compensation Nominating and Organization Committee effective March 10, 1994, and shall be effective as of April 22, 1994. The plan year shall be the calendar year. 3. Administration of the Plan. -------------------------- Subject to Section 11 herein, the Plan shall be administered by the Compensation, Nominating and Organization Committee of the Board of Directors (the "Committee"). The Committee has full authority and responsibility for the establishment and administration of the Plan, including, without limitation, the authority (i) to determine all matters relating to Awards, including selection of individuals to be granted Awards and the terms, conditions, restrictions and limitations of Awards; (ii) to establish, amend and rescind rules and regulations for the administration of the Plan; and (iii) to construe and interpret the Plan and any agreements related to Awards, to establish and interpret rules and regulations for administering the Plan and to make all other determinations deemed necessary or advisable for administering the Plan. All determinations and decisions of the Committee must be made by a majority of the members present and shall be final and binding on all persons, except that no member of the Committee may at any time participate in any decision affecting the bonus of such member. Should the Committee be unable to render any decision by reason of a deadlock, the majority vote of the 3 entire Board of Directors shall govern and be final and binding upon all parties. 4. Eligibility. ----------- An individual shall be eligible to become a participant in the Plan (a "Participant") who satisfies the following requirements: (a) The individual is an employee of the Corporation or a related corporation. For this purpose, an individual shall be considered to be an "employee" if there exists between the individual and the Corporation or a related corporation the legal and bona fide relationship of employer and employee. (b) The individual is a senior officer of the Corporation or a related corporation. For the purposes herein, a "senior officer" of the Corporation or a related corporation shall mean an officer who is deemed to have sufficient responsibility, ability and potential to make significant contributions to the success of the Corporation or a related corporation. (c) The individual is recommended each year by the Chief Executive Officer of the Corporation (the "Chief Executive Officer") and considered and approved by the Committee as a Participant in the Plan. 5. Participation. ------------- Prior to the beginning of each Plan Year (or, with respect to the 1994 Plan Year, prior to March 31, 1994), the Chief Executive Officer shall recommend to the Committee each senior officer of the Corporation or a related corporation who is eligible to become a Participant in the Plan with respect to such Plan Year. Participants shall be approved by the Committee in its sole and absolute discretion. In the event of the promotion of an employee or the hiring of a new employee during the Plan Year, the Committee, upon the recommendation of the Chief Executive Officer, may approve the entry of a Participant into the Plan during the Plan Year. In such case, the Award determined pursuant to the terms of the Plan with respect to such Participant shall be multiplied by a fraction, the numerator of which is the number of full calendar months during the Plan Year in which he is a Participant and the denominator of which is twelve. Participation in the Plan shall be subject to the provisions of the Plan and such other terms and conditions as the Committee shall provide. 6. Performance Criteria and Evaluation. ----------------------------------- 2 4 (a) Performance Goals. The performance goals upon which ----------------- Awards shall be made shall be based upon business criteria applicable to the Corporation, the business unit to which the Participant is assigned and the Participant individually. The corporate business criteria upon which such Awards shall be based shall include the following earnings factors, weighted as indicated: net income per share fully diluted (50%); return on assets (net income) (25%); and return on equity (net income) (25%). The three earnings measures will be combined to produce a composite corporate performance evaluation percentage factor (the "Composite Percentage Factor") to be used along with the individual performance evaluation percentage factor (the "Individual Percentage Factor") in calculating individual awards. (b) Individual Performance Criteria and Evaluation. A ---------------------------------------------- Participant's Individual Percentage Factor will be based on a composite rating of (i) relevant performance of the organizational unit to which the Participant is assigned (the "Unit") as compared to goals for the Plan Year and (ii) quantitative and qualitative elements of personal performance of the Participant in relation to goals and expectations established for the Plan Year. Each of these two components will have a 50 percent weighing in determining a Participant's Individual Percentage Factor. (i) The evaluation of the performance of the Unit will be based primarily on the degree of success in achieving the Unit's annual profit and business plan. The assessment will include, as applicable to the Unit, such factors as business development, expense management, earnings growth, credit quality, investment results, audit findings, affirmative action goals, staff development, operational efficiency and strategic planning. For purposes of this evaluation, the Unit will be the assigned responsibility area of the Participant. In the case of Participants in administrative and support functions, the evaluation will include the performance of line business units whose results can be influenced significantly by such persons. (ii) The evaluation of a Participant's personal performance will be based on the Participant's success in meeting expectations of subjective, qualitative and quantitative goals for the Plan Year. A Participant's personal performance evaluation will include an assessment of performance relative to the Corporation's standards in such areas as leadership, initiative, professional skills, teamwork, problem solving, personal behavior and advancement and achievement of the 3 5 Corporation's mission and objectives. The following criteria shall apply in measuring a Participant's personal performance: (A) Performance Level IV -- Superior: -------------------------------- Participants performing at this level would be rated in the range of 90 percent to 100 percent. With little guidance, a Participant at this level consistently performs in the superior manner that always exceeds normal requirements and expectations. The Participant's performance clearly is a model of excellence. (B) Performance Level III -- ------------------------ Exceptional: Participants performing at this level ----------- would be rated in the range of 75 percent to 89 percent. A Participant at the level consistently performs in an exceptional manner in which requirements and expectations are always accomplished. The Participant frequently accomplishes more than is expected. (C) Performance Level II - Satisfactory: ----------------------------------- Participants performing at this level would be rated in the range of 50 percent to 74 percent. The Participant performs in an overall satisfactory manner, generally accomplishing requirements and expectations. The Participant does not always perform in an exceptional manner and needs guidance with certain tasks. (D) Performance Level I - Meets Minimum ----------------------------------- Level: No Award will be paid to Participants at this performance level. The Participant generally meets minimum levels of performance but sometimes has difficulty in achieving requirements and expectations. The Participant is capable of satisfactory performance with additional effort, guidance, training and experience. 7. Recommendation and Determination of Awards. ------------------------------------------ In December of each Plan Year, the responsible managers and executives will evaluate each Participant's performance in meeting Unit and personal goals and objectives for the Plan Year. A recommended composite individual performance evaluation factor for each Participant with appropriate supporting documentation will be submitted by Division Executives of the Corporation to the Personnel Director of the Corporation for a review of completeness and compliance with the Plan. The recommended composite individual performance evaluation percentage factor to be used in calculating Awards for Participants shall be subject to review and approval by 4 6 the Chief Executive Officer and the Committee. The composite corporate performance evaluation percentage factor will be calculated using net income per share fully diluted, return on assets and return on equity as plotted in the benchmark table. The resulting percentage representing the composite corporate performance evaluation factor will be multiplied by the composite individual performance evaluation percentage factor and the Participant's base salary paid during the Plan Year to determine the amount of each Participant's Award. Amounts that would otherwise have been payable to a Participant if the composite corporate performance evaluation factor had been higher or if the Participant had received a higher performance individual performance evaluation percentage factor shall not be re-allocated to other Participants. 8. Payment of Awards; Deferral. --------------------------- (a) Unless otherwise determined by the Committee, the Committee will determine the Participants entitled to receive Awards and the amount of such Awards in January following the end of the Plan Year, and the Awards for a Plan Year shall be paid by the Corporation to the Participant (or his beneficiary) on February 1 following the end of the Plan Year. Payment of Awards shall be made by a deposit to the Corporation's payroll system, with a written statement of the amount of each Award provided to each Participant. The amount of each Award shall be rounded to the nearest $100. (b) Prior to the beginning of the Plan Year in which an Award is earned, a Participant may make an irrevocable election to defer receipt of a portion of the Award in an amount not less than $1,000 nor greater than 50 percent of the Award. Such election shall be set forth in, and governed by the terms of, the Wachovia Corporation Senior Management Incentive Plan Deferral Arrangement. 9. Termination of Employment. ------------------------- (a) Termination Due to Death, Disability or Retirement. -------------------------------------------------- If termination of employment occurs during a Plan Year as the result of death, disability or approved retirement, a proportional award shall be paid to the Participant (or his estate in the event of death), for the period of active employment during the Plan Year. In such event, the Award determined pursuant to the terms of the Plan with respect to such Participant shall be multiplied by a fraction, the numerator of which is the number of full calendar months during the Plan Year in which the employee is a Participant and the denominator of which is twelve, and such Award shall be paid in accordance with Section 8 herein. In the event of a Participant's death, any Award payable under the Plan shall be paid to the Participant's estate. 5 7 (b) Other Termination. Except to the extent otherwise ----------------- provided in Section 10, if termination occurs during the Plan Year for any reason other than death, disability or approved retirement, no Award shall be paid. (c) Termination After End of Plan Year. If termination ---------------------------------- occurs between the end of the Plan Year and the date of payment of an Award, the full amount of the Award shall be paid in accordance with Section 8 herein unless the termination was the direct result of dishonesty or misconduct. (d) Certain Definitions. For the purposes herein: ------------------- (i) "Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than twelve months. (ii) "Approved retirement" shall mean early or normal retirement as provided under the Retirement Incentive Plan of Wachovia Corporation or any successor plan thereto applicable to a Participant or the retirement date under a contract, if any, between a Participant and the Corporation or a related corporation providing for the Participant's retirement from the employment of the Corporation or a related corporation prior to the normal retirement date. 10. Change of Control. ----------------- (a) In the event of a Change of Control (as defined in Section 10(b) herein), all Awards made pursuant to the Plan shall be deemed earned and shall become immediately due and payable for the full Plan Year (notwithstanding the date of the Change of Control event during the Plan Year), subject to the following: (i) the corporate Composite Percentage Factor shall be based on corporate performance on an annualized basis as of the date of the Change of Control, and (ii) each Participant shall receive the highest Award that may be granted based on the individual Participant's job classification. Awards that become due and payable upon a Change of Control shall be deemed earned, due and payable regardless of whether the Participant continues service in the same position following the change of control, has a change in position or responsibility, or is terminated from employment with the Corporation or a related corporation. 6 8 (b) A "Change of Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, thirty percent or more of the outstanding Common Stock of the Corporation; (ii) The date the shareholders of the Corporation approve a definitive agreement (A) to merge or consolidate the Corporation with or into another corporation, in which the Corporation is not the continuing or surviving corporation or pursuant to which any shares of Common Stock of the Corporation would be converted into cash, securities or other property of another corporation, other than a merger of the Corporation in which holders of Common Stock immediately prior to the merger have the same proportionate ownership of Common Stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of substantially all the assets of the Corporation; or (iii) The date there shall have been a change in a majority of the Board of Directors of the Corporation within a twelve month period unless the nomination for election by the Corporation's shareholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the twelve month period. (For the purposes herein, the term "person" shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Corporation, a subsidiary of the Corporation or any employee benefit plan(s) sponsored or maintained by the Corporation or any subsidiary thereof, and the term "beneficial owner" shall have the meaning given the term in Rule 13d-3 under the Exchange Act.) (c) Notwithstanding the foregoing, in the event of a merger, share exchange, reorganization or other business combination affecting the Corporation or a related corporation, the Committee may, in its sole and absolute discretion, determine that any or all Awards shall not be paid, if the Board of Directors or the surviving or acquiring corporation, as the case may be, shall have taken such action, 7 9 including but not limited to the making of substitute awards, as in the opinion of the Committee is equitable or appropriate to protect the rights and interests of participants in the Plan. 11. Performance-Based Compensation. To the extent to ------------------------------ which it is necessary to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder, the following provisions shall apply: (a) Compliance with Code Section 162(m). It is the ----------------------------------- intent of the Corporation that Awards conferred under the Plan to Covered Employees, as such term is defined in Section 19(e) herein, shall comply with the qualified performance-based compensation exception to employer compensation deductions set forth in Section 162(m) of the Code, and the Plan shall be construed in favor of meeting the requirements of Section 162(m) of the Code and the regulations thereunder to the extent possible. (b) Committee Authority and Composition. The Committee ----------------------------------- shall be authorized to establish performance goals for Covered Employees, certify satisfaction of performance goals and other material terms for such Covered Employees, and to take such other action as may be necessary in order to qualify for the performance-based compensation exception. The Committee shall be comprised of two or more outside directors (as such term is defined in Section 162(m) of the Code and the regulations thereunder). Notwithstanding the foregoing, the committee authorized to take such actions may be comprised of a subcommittee of the Committee or other directors who qualify as outside directors (as such term is defined in Section 162(m) of the Code and the regulations thereunder), and the actions taken by such subcommittee or other group of outside directors shall be effective as the action of the Committee to the extent permitted by the Plan, and Section 162(m) of the Code and the regulations thereunder. (c) The Committee shall not have discretion to increase the amount of an Award payable to an employee over the amount that is determined in accordance with Sections 6 and 7 herein. The Committee shall in any event have the discretion to reduce or eliminate the amount of an Award that would otherwise be payable to any Participant in accordance with the terms of the Plan. (d) The material terms of the performance goal or goals pursuant to which Awards are to be made shall be disclosed to, and subject to the approval of, the shareholders of the Corporation. Material terms of a performance goal or goals, the targets of which may be changed by the Committee, shall be disclosed to, and subject to the reapproval of, the 8 10 shareholders of the Corporation upon a change of the material terms of a performance goal or goals by the Committee or as may be otherwise required by Section 162(m) of the Code or the regulations thereunder. 12. Nonassignability of Incentive Awards. ------------------------------------ The right to receive payment of an Award shall not be assignable or transferrable (including by pledge or hypothecation) other than by will or the laws of intestate succession. 13. No Trust Fund; Unsecured Interest. --------------------------------- A Participant shall have no interest in any fund or specified asset of the Corporation. No trust fund shall be created in connection with the Plan or any Award, and there shall be no required funding of amounts which may become payable under the Plan. Any amounts which are or may be set aside under the provisions of this Plan shall continue for all purposes to be a part of the general assets of the Corporation, and no person or entity other than the Corporation shall, by virtue of the provisions of this Plan, have any interest in such assets. No right to receive payments from the Corporation pursuant to this Plan shall be greater than the right of any unsecured creditor of the Corporation. 14. No Right or Obligation of Continued Employment. ---------------------------------------------- Nothing contained in the Plan shall require the Corporation or a related corporation to continue to employ a Participant, nor shall the Participant be required to remain in the employment of the Corporation or a related corporation. 15. Withholding. ----------- The Corporation shall withhold all required local, state and federal taxes from any amount of an Award. 16. Retirement Plans. ---------------- In no event shall any amounts accrued or payable under this Plan be treated as compensation for the purpose of determining the amount of contributions or benefits to which a Participant shall be entitled under any retirement plan to which the Corporation or a related corporation may be a party. 9 11 17. Dilution or Other Adjustments. ----------------------------- If there is any change in the Corporation because of a merger, share exchange, reorganization or other business combinations affecting the Corporation or a related corporation, or if extraordinary items of income or expense of the Corporation or a related corporation occur, the Committee may make such adjustments to any provisions of this Plan, including but not limited to adjustments to determinations of performance and Awards, as the Committee deems desirable to prevent the dilution or enlargement of rights granted hereunder. 18. Amendment and Termination of the Plan. ------------------------------------- The Plan may be amended or terminated at any time by the Board or by the Committee as delegated by the Board, provided that such termination or amendment shall not, without the consent of the Participant, affect such Participant's rights with respect to Awards previously awarded to him. With the consent of the Participant affected, the Board, or by delegation of authority by the Board, the Committee, may amend outstanding Awards in a manner not inconsistent with the Plan. 19. Certain Definitions. ------------------- For purposes of the Plan, the following terms shall have the meaning indicated: (a) "Related corporation" means any parent, subsidiary or predecessor of the Corporation. (b) "Parent" or "parent corporation" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if each corporation other than the Corporation owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (c) "Subsidiary" or "subsidiary corporation" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if each corporation other than the last corporation in the unbroken chain owns stock possessing fifty percent or more of the total combined voting power of all classes of stock in another corporation in the chain. (d) "Predecessor" or "predecessor corporation" means a corporation which was a party to a transaction described in Section 425(a) of the Code (or which would be so described if a substitution or assumption under that Section had occurred) with the Corporation, or a corporation which is a parent or 10 12 subsidiary of the Corporation, or a predecessor of any such corporation. (e) "Covered Employee" shall mean any individual who, on the last day of the taxable year, is (i) the Chief Executive Officer or is acting in such capacity or (ii) among the four highest compensated officers (other than the Chief Executive Officer), as determined in accordance with the executive compensation disclosure rules under the Exchange Act, unless otherwise provided in Section 162(m) of the Code or the regulations thereunder. 20. Binding on Successors. --------------------- The obligations of the Corporation under the Plan shall be binding upon any organization which shall succeed to all or substantially all of the assets of the Corporation, and the term "Corporation," whenever used in the Plan, shall mean and include any such organization after the succession. 21. Applicable Law. -------------- The Plan shall be governed by and construed in accordance with the laws of the State of North Carolina. IN WITNESS WHEREOF, the Wachovia Corporation Senior Management Incentive Plan, as amended, is, by the authority of the Board of Directors of the Corporation, executed as of the 22nd day of April, 1994. Attest: WACHOVIA CORPORATION /s/ Alice Washington Grogan By: /s/ Leslie M. Baker, Jr. - - ---------------------------------- -------------------------- Secretary Chief Executive Officer [Corporate Seal] 11 EX-11 3 WACHOVIA CORP. COMPUTATION OF EARNINGS 1 Wachovia Corporation Computation of Earnings Per Common Share EXHIBIT 11
Three Months Ended March 31 -------------------- 1994 1993 -------- -------- PRIMARY (in thousands, except per share amount) Average common shares outstanding 171,448 171,914 Dilutive common stock options - based on treasury stock method using average market price 1,222 1,603 Dilutive common stock awards - based on treasury stock method using average market price 69 62 -------- -------- Average primary shares outstanding 172,739 173,579 ======== ======== Net income $124,799 $121,568 ======== ======== Per share amount $ .72 $ .70 FULLY DILUTED (in thousands, except per share amount) Average common shares outstanding 171,448 171,914 Dilutive common stock options - based on treasury stock method using higher of period-end market price or average market price 1,222 1,786 Dilutive common stock awards - based on treasury stock method using higher of period-end market price or average market price 69 67 Convertible notes assumed converted 639 2,137 -------- -------- Average fully diluted shares outstanding 173,378 175,904 ======== ======== Net income $124,799 $121,568 Add interest on convertible notes after taxes 133 360 -------- -------- Adjusted net income $124,932 $121,928 ======== ======== Per share amount $ .72 $ .69
EX-19 4 WACHOVIA CORP. REPORT TO SHAREHOLDERS 1 EXHIBIT 19 REPORT TO SHAREHOLDERS FOR THE PERIOD ENDING MARCH 31, 1994 Dear Wachovia Shareholder: Following brisk expansion in the final period of last year, the economy grew at a more moderate pace in the first three months of 1994. Short-term interest rates rose, reversing an extended downward trend and dampening anticipated inflationary pressures while roiling financial markets. Loan demand for banks improved and credit problems further eased, but interest margins remained compressed. In this environment, Wachovia's earnings grew moderately and a sound financial position was maintained. Net income per fully diluted share was $.72, an increase of 4 percent from $.69 in the same quarter of 1993. Net income totaled $124.8 million versus $121.6 million and represented annualized returns, excluding unrealized gains on securities available-for-sale, net of tax, of 16.6 percent on shareholders' equity and 1.40 percent on assets. Average interest-earning assets grew $3.120 billion or 10.9 percent with average loans up $1.928 billion or 9.1 percent. Retail loans led the increase, advancing $1.285 billion or 14.1 percent. Growth in commercial loans strengthened with average totals rising $644 million or 5.4 percent from the year-earlier period and $613 million or 5.1 percent from the fourth quarter of 1993. Investment securities expanded $1.228 billion or 19 percent. Average interest-bearing liabilities increased $2.971 billion or 12.6 percent, largely due to the continued issuance of long-term debt under Wachovia Bank of North Carolina's bank note program. Short-term borrowings also were higher while interest-bearing deposits declined slightly. Taxable equivalent net interest income rose modestly, the result of higher volumes and narrower spreads. The net yield on interest-earning assets declined 42 basis points from the year-earlier period and was down 7 basis points from the fourth quarter of 1993. Other operating revenue was lower by $4.5 million or 3 percent. The decrease reflected, in part, the absence of income from student loan servicing, which was sold as a subsidiary in the first period of 1993, and reduced trading account profits. Good gains were achieved in trust and credit card fee income. Noninterest expense was modestly higher by $806 thousand or less than 1 percent after excluding nonrecurring charges in the year-earlier period. Excellent credit quality and capital standards were maintained. Nonperforming assets at March 31, 1994 were $126 million or .53 percent of loans and foreclosed property, down from $275 million or 1.26 percent a year earlier and $155 million or .67 percent at year-end 1993. Net loan losses for the first quarter were $17.1 million or .30 percent of average loans compared with $14 million or .27 percent of loans in the same three months of the preceding year. The provision for loan losses was $17.8 million. At the end of the first quarter, the allowance for loan losses totaled $405 million, representing 1.71 percent of loans and 405 percent coverage of nonperforming loans. Shareholders' equity was 8.51 percent of assets, and the Tier I and total capital to risk-adjusted assets ratios were 9.64 percent and 13.52 percent, respectively. The economy should continue to progress in the second quarter despite the prospect of higher interest rates and uncertainty created by political turmoil domestically and abroad. Competitive pressures and an increasingly stringent regulatory environment will continue to test banks' marketing and funding strategies, credit skills and technological resources. Wachovia remains committed to maintaining its leadership position among the nation's largest financial institutions and to preserving and enhancing shareholder value over time. Additional comments on Wachovia and the climate for banking may be found in my annual shareholders' meeting remarks beginning on page 19. Sincerely, L. M. Baker, Jr. Chief Executive Officer April 29, 1994 1 2 NEWS DEVELOPMENTS - - - At the Annual Shareholders' Meeting of Wachovia Corporation on April 22, six directors were elected, the appointment of Ernst & Young as independent auditors for 1994 was ratified, and the Wachovia Corporation Stock Plan was approved. Five directors elected for three-year terms expiring in 1997 were Rufus C. Barkley, Jr., John L. Clendenin, Robert M. Holder, Jr., W. Duke Kimbrell and John G. Medlin, Jr. Also, L. M. Baker, Jr., was elected for a two-year term expiring in 1996. Retiring as directors after serving with distinction were James G. Lindley, James H. Millis, Sr., and J. Mack Robinson. - - - Also at the Shareholders' Meeting, the board of directors declared a second quarter dividend of $.30 per share, payable June 1 to shareholders of record on May 9, 1994. The dividend is higher by 11.1 percent from the $.27 per share paid in the same quarter of 1993. For the year to date, dividends will total $.60 per share, up 11.1 percent from $.54 per share paid in the first half of last year. - - - Wachovia announced plans to open a three-state customer service center in Columbia, South Carolina, this summer. The service will be an extension of the Flex Response Center already operational in South Carolina and will provide retail banking customers in South Carolina, Georgia and North Carolina with a central, toll-free location to speak directly with service representatives. The customer service center is offered in addition to Wachovia's Phone Access which enables customers in all three states to access their accounts through a self-service phone system. - - - In January, Wachovia Corporation issued $250 million of 6.375 percent subordinated notes due February 1, 2009. The 15-year noncallable notes were priced at 99.87 percent to yield 6.388 percent or 75 basis points above comparable U.S. Treasuries and were rated A1 by Moody's and AA- by Standard & Poor's. - - - Wachovia Operational Services Corporation will consolidate its Savannah Operations Center with the Piedmont Operations Center in Atlanta by the beginning of June, eliminating the need to maintain check-processing equipment in multiple locations. Also, Wachovia Mortgage Company announced plans in March to consolidate its mortgage-processing functions in Columbia, South Carolina, by the middle of 1995. The new mortgage center will be responsible for residential mortgage processing, underwriting and closing operations currently being performed in 14 locations in Georgia, North Carolina and South Carolina. - - - Wachovia Treasury Services has announced the introduction of a new image processing technology as part of its corporate cash management services. Called Wachovia Connection Image Workstation, the service is part of a new system designed in conjunction with several leading image technology vendors including IBM, Check Solutions, Data/Ware Development and Micro View. The system will provide corporate customers of any size and industry a cost-effective way to store and retrieve check images from compact disk read-only memory media. In addition, the system will enable companies to research paid items from their permanent archives in minutes rather than hours or days. - - - Wachovia Bank of North Carolina announced a $20 million partnership with the Center for Community Self-Help to expand affordable home loans in North Carolina. Under the partnership, the Center for Community Self-Help purchases from Wachovia unconventional home loans made through Wachovia's Neighborhood Revitalization Program for resale on the secondary mortgage market. The Center for Community Self-Help guarantees loan repayment, and funds provided by the home loan purchases are used by Wachovia to make additional mortgage loans to North Carolina families on the same flexible basis. The partnership is expected to serve as a model nationwide for community development banking and mortgage lending.
SELECTED PERIOD-END DATA - - ------------------------------------------------------------------------------------------------- March 31 March 31 1994 1993 -------- -------- Full-service banking offices: North Carolina ....................................................... 219 221 Georgia .............................................................. 128 132 South Carolina ....................................................... 156 158 --- --- Total .............................................................. 503 511 === === Automated banking machines: North Carolina ...................................................... 260 226 Georgia ............................................................. 180 173 South Carolina ...................................................... 168 164 --- --- Total ............................................................. 608 563 === === Employees (full-time equivalent) ....................................... 15,492 15,721 Common stock shareholders of record .................................... 28,239 27,110 Common shares outstanding (thousands) .................................. 171,416 172,173
2 3
FINANCIAL HIGHLIGHTS - - ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended March 31 Percent 1994 1993 Change -------- -------- -------- EARNINGS AND DIVIDENDS (thousands, except per share data) Net income ............................................................. $124,799 $121,568 2.7 Cash dividends paid on common stock .................................... 51,443 46,454 10.7 Payout ratio (total cash dividends/net income) ......................... 41.2% 38.2% Net income per common share: Primary .............................................................. $ .72 $ .70 3.2 Fully diluted ........................................................ $ .72 $ .69 4.0 Cash dividends paid per common share ................................... $ .30 $ .27 11.1 Average primary shares outstanding ..................................... 172,739 173,579 (.5) Average fully diluted shares outstanding ............................... 173,378 175,904 (1.4) Annualized return on average assets .................................... 1.40% 1.50% Annualized return on average shareholders' equity ...................... 16.65 17.41 Including average unrealized gains on securities available-for-sale, net of tax:* Annualized return on average assets .................................. 1.40 -- Annualized return on average shareholders' equity .................... 16.53 -- BALANCE SHEET DATA AT PERIOD-END (millions, except per share data) Total assets ........................................................... $ 36,350** $ 33,567 8.3 Interest-earning assets ................................................ 32,370 29,709 9.0 Loans -- net of unearned income ........................................ 23,662 21,688 9.1 Deposits ............................................................... 22,279 22,140 .6 Interest-bearing liabilities ........................................... 26,853 24,804 8.3 Shareholders' equity ................................................... 3,094 2,859 8.2 Shareholders' equity to total assets ................................... 8.51% 8.52% Risk-based capital ratios: Tier I capital ....................................................... 9.64 9.99 Total capital ....................................................... 13.52 12.45 Per share: Book value ........................................................... $ 18.05 $ 16.60 8.7 Common stock closing price (NYSE) .................................... 31.75 36.875 (13.9)
* Based on inclusion of $22.399 million of average unrealized gains on securities available-for-sale, net of tax ** Includes $4 of unrealized gains on securities available-for-sale, net of tax
COMMON STOCK DATA -- PER SHARE - - ------------------------------------------------------------------------------------------------------------------------------------ 1994 1993 ------- ------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- Market value: Period-end .............................................. $31 3/4 $33 1/2 $39 1/8 $34 3/8 $36 7/8 High .................................................... 35 1/8 40 1/2 40 3/8 40 1/2 36 7/8 Low .................................................... 30 1/8 31 7/8 33 3/8 32 3/8 32 1/2 Book value at period-end .................................. 18.05 17.61 17.29 17.01 16.60 Dividend .................................................. .30 .30 .27 .27 .27 Price/earnings ratio* ..................................... 11.1x 11.8x 14.2x 12.8x 14.2x
* Based on most recent twelve months net income per primary share and period-end stock price 3 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SUMMARY TABLE 1 - - ------------------------------------------------------------------------------------------------------------------------------------ Twelve Months 1994 1993 Ended ------- ---------------------------------------------- March 31 First Fourth Third Second First 1994 Quarter Quarter Quarter Quarter Quarter ---------- --------- --------- --------- -------- -------- SUMMARY OF OPERATIONS (thousands, except per share data) Interest income -- taxable equivalent ............... $2,234,942 $ 558,329 $ 568,749 $ 558,418 $549,446 $545,125 Interest expense .................................... 848,361 216,007 217,832 211,145 203,377 206,658 ---------- --------- --------- --------- -------- -------- Net interest income -- taxable equivalent ........... 1,386,581 342,322 350,917 347,273 346,069 338,467 Taxable equivalent adjustment ....................... 100,118 24,476 24,732 26,487 24,423 23,259 ---------- --------- --------- --------- -------- -------- Net interest income ................................. 1,286,463 317,846 326,185 320,786 321,646 315,208 Provision for loan losses ........................... 85,339 17,759 18,013 23,483 26,084 25,072 ---------- --------- --------- --------- -------- -------- Net interest income after provision for loan losses.. 1,201,124 300,087 308,172 297,303 295,562 290,136 Other operating revenue ............................. 595,664 144,869 152,441 149,761 148,593 149,384 Gain on sale of subsidiary .......................... -- -- -- -- -- 8,030 Investment securities gains ......................... 9,744 572 7,216 702 1,254 10,222 ---------- --------- --------- --------- -------- -------- Total other income .................................. 605,408 145,441 159,657 150,463 149,847 167,636 Personnel expense ................................... 569,350 141,014 147,709 142,393 138,234 140,344 Other expense ....................................... 546,820 129,036 152,031 131,153 134,600 144,772 ---------- --------- --------- --------- -------- -------- Total other expense ................................. 1,116,170 270,050 299,740 273,546 272,834 285,116 Income before income taxes .......................... 690,362 175,478 168,089 174,220 172,575 172,656 Applicable income taxes* ............................ 195,036 50,679 45,092 49,813 49,452 51,088 ---------- --------- --------- --------- -------- -------- Net income .......................................... $ 495,326 $ 124,799 $ 122,997 $ 124,407 $123,123 $121,568 ========== ========= ========= ========= ======== ======== Net income per common share: Primary ........................................... $ 2.85 $ .72 $ .71 $ .71 $ .71 $ .70 Fully diluted ...................................... $ 2.84 $ .72 $ .71 $ .71 $ .70 $ .69 Cash dividends paid per common share ................ $ 1.14 $ .30 $ .30 $ .27 $ .27 $ .27 Average primary shares outstanding .................. 173,734 172,739 173,175 174,300 174,712 173,579 Average fully diluted shares outstanding ............ 174,688 173,378 173,943 175,414 176,004 175,904 SELECTED AVERAGE BALANCES (MILLIONS) Total assets ........................................ $ 34,444 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473 Loans -- net of unearned income ..................... 22,021 23,010 22,165 21,656 21,268 21,082 Investment securities ............................... 7,342** 7,690** 7,992 7,072 6,615 6,462 Other interest-earning assets ....................... 1,186 1,083 1,234 1,277 1,145 1,119 Total interest-earning assets ....................... 30,549 31,783 31,391 30,005 29,028 28,663 Interest-bearing deposits ........................... 16,888 16,694 17,030 16,835 16,986 17,228 Short-term borrowed funds ........................... 5,698 6,148 6,218 5,432 4,998 4,950 Long-term debt ...................................... 2,642 3,670 2,774 2,370 1,768 1,363 Total interest-bearing liabilities .................. 25,228 26,512 26,022 24,637 23,752 23,541 Noninterest-bearing deposits ........................ 5,393 5,366 5,544 5,410 5,253 5,208 Total deposits ...................................... 22,281 22,060 22,574 22,245 22,239 22,436 Shareholders' equity ................................ 2,928 3,021 2,934 2,907 2,852 2,794 Ratios (averages) Loans to deposits ................................... 98.84% 104.31% 98.19% 97.35% 95.63% 93.97% Annualized net loan losses to loans ................. .32 .30 .31 .35 .32 .27 Annualized net yield on interest-earning assets ..... 4.54 4.37 4.44 4.59 4.78 4.79 Shareholders' equity to: Total assets ................................... 8.50 8.44 8.28 8.58 8.72 8.60 Net loans ...................................... 13.54 13.36 13.48 13.68 13.66 13.50 Annualized return on assets ......................... 1.44 1.40 1.39 1.47 1.51 1.50 Annualized return on shareholders' equity ........... 16.95 16.65 16.77 17.12 17.27 17.41 * Income taxes applicable to securities transactions were $3,734, $226, $2,846, $291, $371 and $3,964, respectively ** Reported at amortized cost; excludes pretax unrealized gains on securities available-for-sale of $9 for the twelve months ended March 31, 1994 and $37 for the first quarter of 1994 - - ------------------------------------------------------------------------------------------------------------------------------------
4 5 RESULTS OF OPERATIONS Overview The economy grew at a moderate pace in the first quarter of 1994 following strong gains in the last three months of 1993. Georgia, North Carolina and South Carolina, Wachovia Corporation's three primary operating states, showed signs of steady business activity with seasonably adjusted unemployment averaging 6.6 percent, 4.5 percent and 6.3 percent, respectively, for the quarter. Wachovia's net income for the first three months of 1994 was $124.799 million compared with $121.568 million in the same period a year earlier. On a fully diluted basis, net income per share was $.72 versus $.69 per share. Return on shareholders' equity, excluding unrealized gains on securities available-for-sale, net of tax, was 16.6 percent and return on assets on a comparable basis was 1.40 percent compared with 17.4 percent and 1.50 percent, respectively, in the 1993 first quarter. Expanded operating results and the corporation's financial condition are presented in the following narrative and tables. Interest income is stated on a taxable equivalent basis which is adjusted for the tax-favored status of earnings from certain loans and investments. References to changes in assets and liabilities represent daily average levels unless otherwise noted. Net Interest Income Taxable equivalent net interest income for the first quarter of 1994 was higher by $3.855 million or 1.1 percent from the same period of 1993. The gain primarily reflected higher volumes of interest-earning assets with the effect on net interest income partially offset by a narrowing of the interest rate spread and by increased levels of interest-bearing liabilities. The net yield on interest-earning assets (net interest income as a percentage of average interest-earning assets) decreased 42 basis points as asset yields declined more rapidly than funding rates and short-term borrowing costs rose. The average rate earned dropped 59 basis points, largely reflecting growth of earning assets at reduced yields in a lower-rate environment and prepayments of higher-yielding residential mortgage loans and investments. The average rate paid on interest-bearing liabilities decreased 26 basis points. Declines in funding rates slowed, in part, due to lengthening of the corporation's debt market maturities through the issuance of long-term debt. In addition, short-term borrowing costs increased as the federal funds rate rose during the quarter due to actions by the Federal Reserve.
- - ------------------------------------------------------------------------------------------------------------------------------------ COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2 - - ------------------------------------------------------------------------------------------------------------------------------------ 1994 1993 First First Quarter Quarter Change ------- ------- ------- Interest income -- taxable equivalent............................. $3.23 $3.14 $ .09 Interest expense.................................................. 1.25 1.19 .06 ----- ----- ----- Net interest income -- taxable equivalent......................... 1.98 1.95 .03 Taxable equivalent adjustment .................................... .14 .13 .01 ----- ----- ----- Net interest income .............................................. 1.84 1.82 .02 Provision for loan losses......................................... .10 .15 (.05) ----- ----- ----- Net interest income after provision for loan losses ................................................ 1.74 1.67 .07 Other operating revenue .......................................... .84 .86 (.02) Gain on sale of subsidiary ....................................... -- .04 (.04) Investment securities gains....................................... -- .06 (.06) ----- ----- ----- Total other income ............................................... .84 .96 (.12) Personnel expense ................................................ .82 .81 .01 Other expense .................................................... .75 .83 (.08) ----- ----- ----- Total other expense .............................................. 1.57 1.64 (.07) Income before income taxes ....................................... 1.01 .99 .02 Applicable income taxes .......................................... .29 .29 -- ----- ----- ----- Net income ....................................................... $ .72 $ .70 $ .02 ===== ===== ===== - - ------------------------------------------------------------------------------------------------------------------------------------
5 6 Taxable equivalent interest income rose $13.204 million or 2.4 percent. Growth in average interest-earning assets of $3.120 billion or 10.9 percent accounted for the increase which was reduced partially by lower average yields.
- - ----------------------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME AND AVERAGE BALANCES TABLE 3 - - ----------------------------------------------------------------------------------------------------------------------------------- Twelve Months 1994 1993 Ended ------- ----------------------------------------------- March 31 First Fourth Third Second First 1994 Quarter Quarter Quarter Quarter Quarter --------- -------- -------- --------- -------- -------- NET INTEREST INCOME -- TAXABLE EQUIVALENT (THOUSANDS) Interest income: Loans .......................................... $1,688,671 $422,388 $427,617 $422,248 $416,418 $411,345 Investment securities .......................... 502,914 125,663 129,845 124,627 122,779 123,088 Interest-bearing bank balances ................. 1,473 160 116 485 712 1,592 Federal funds sold and securities purchased under resale agreements ............ 13,347 3,111 4,089 3,612 2,535 2,197 Trading account assets ........................ 28,537 7,007 7,082 7,446 7,002 6,903 ---------- -------- -------- ------- -------- -------- Total ...................................... 2,234,942 558,329 568,749 558,418 549,446 545,125 Interest expense: Interest-bearing demand ........................ 58,460 13,235 14,976 15,478 14,771 15,208 Savings and money market savings ............... 146,680 34,284 36,774 37,844 37,778 39,352 Savings certificates ........................... 230,142 53,465 56,393 59,063 61,221 64,118 Large denomination certificates ................ 79,265 15,057 19,338 21,177 23,693 25,893 Time deposits in foreign offices ............... 14,323 3,280 5,170 3,076 2,797 3,460 Short-term borrowed funds ...................... 185,071 51,625 49,877 43,910 39,659 40,401 Long-term debt ................................. 134,420 45,061 35,304 30,597 23,458 18,226 ---------- -------- -------- -------- -------- -------- Total ...................................... 848,361 216,007 217,832 211,145 203,377 206,658 ---------- -------- -------- -------- -------- -------- Net interest income ............................. $1,386,581 $342,322 $350,917 $347,273 $346,069 $338,467 ========== ======== ======== ======== ======== ======== Annualized net yield on interest-earning assets ........................ 4.54% 4.37% 4.44% 4.59% 4.78% 4.79% AVERAGE BALANCES (MILLIONS) Assets: Loans -- net of unearned income ............... $ 22,021 $ 23,010 $ 22,165 $ 21,656 $ 21,268 $ 21,082 Investment securities .......................... 7,342 7,690 7,992 7,072 6,615 6,462 Interest-bearing bank balances ................. 44 17 11 59 88 157 Federal funds sold and securities purchased under resale agreements ............ 423 394 513 454 329 280 Trading account assets ......................... 719 672 710 764 728 682 ---------- -------- -------- -------- -------- -------- Total interest-earning assets .............. 30,549 31,783 31,391 30,005 29,028 28,663 Cash and due from banks ........................ 2,372 2,387 2,421 2,349 2,332 2,371 Premises and equipment ......................... 484 502 497 493 444 438 Other assets ................................... 1,433 1,476 1,520 1,427 1,310 1,387 Unrealized gains on securities available-for-sale ........................... 9 37 -- -- -- -- Allowance for loan losses ...................... (403) (407) (409) (404) (396) (386) ---------- -------- -------- -------- -------- -------- Total assets ............................... $ 34,444 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473 ========== ======== ======== ======== ======== ======== Liabilities and shareholders' equity: Interest-bearing demand ........................ $ 3,283 $ 3,385 $ 3,319 $ 3,233 $ 3,196 $ 3,127 Savings and money market savings ............... 6,029 6,074 6,080 6,013 5,946 5,949 Savings certificates ........................... 5,495 5,355 5,426 5,551 5,648 5,761 Large denomination certificates ................ 1,619 1,463 1,550 1,637 1,825 1,954 Time deposits in foreign offices ............... 462 417 655 401 371 437 Short-term borrowed funds ...................... 5,698 6,148 6,218 5,432 4,998 4,950 Long-term debt ................................. 2,642 3,670 2,774 2,370 1,768 1,363 ---------- -------- -------- -------- -------- -------- Total interest-bearing liabilities ......... 25,228 26,512 26,022 24,637 23,752 23,541 Demand deposits in domestic offices ............. 5,316 5,302 5,480 5,314 5,168 5,144 Demand deposits in foreign offices .............. 5 5 6 5 5 6 Noninterest-bearing time deposits in domestic offices ............................... 72 59 58 91 80 58 Other liabilities ............................... 895 879 920 916 861 930 Shareholders' equity ............................ 2,928 3,021 2,934 2,907 2,852 2,794 ---------- -------- -------- -------- -------- -------- Total liabilities and shareholders' equity.. $ 34,444 $ 35,778 $ 35,420 $ 33,870 $ 32,718 $ 32,473 ========== ======== ======== ======== ======== ======== Total deposits .................................. $ 22,281 $ 22,060 $ 22,574 $ 22,245 $ 22,239 $ 22,436 - - -----------------------------------------------------------------------------------------------------------------------------------
6 7 Average loans were higher by $1.928 billion or 9.1 percent from the year-earlier period and $845 million or 3.8 percent from the fourth quarter of 1993. Retail loans, including residential mortgages, rose $1.285 billion or 14.1 percent year over year and $232 million or 2.3 percent from the final three months of 1993. Within the retail category, credit card loans had the strongest gain from the year-earlier quarter, increasing $901 million or 39.9 percent. Growth has been fueled by continued interest in Wachovia's Prime Plus credit card as well as the First-Year Prime Visa and MasterCard pricing option introduced in the fall of 1993. At March 31, 1994, credit card outstandings totaled $3.298 billion compared with $2.354 billion at the end of the 1993 first quarter. Indirect retail loans, which primarily consists of automobile sales financing, rose $278 million or 13 percent. Increased efficiency in operations, effected by consolidation and employment of technology, combined with a resurgence in cyclical demand accounted for the gain. Other areas of growth in the retail portfolio were residential mortgages, direct retail loans and other revolving credit. Growth in direct retail loans followed an increase begun in the third quarter of 1993, reversing an extended decline in this lending category. Commercial loans, including related real estate categories, were higher by $644 million or 5.4 percent year over year and were up $613 million or 5.1 percent from the 1993 fourth quarter. Regular commercial loans and commercial mortgages led the growth over the first quarter of 1993, increasing $396 million or 6.3 percent and $120 million or 3.8 percent, respectively. Gains also were recorded in tax-exempt loans, lease financing and construction loans which have increased gradually since the third quarter of 1993. Based on regulatory definitions, construction loans totaled $477 million at March 31, 1994 compared with $485 million a year earlier. Commercial mortgages totaled $3.323 billion versus $3.125 billion at the end of the 1993 first quarter. Investment securities increased $1.228 billion or 19 percent. Effective January 1, 1994, the corporation prospectively adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FASB 115), pertaining to the accounting and classification of all debt securities and equity securities having a readily determinable fair value. FASB 115 requires debt securities which management can demonstrate positive intent and ability to hold to maturity to be classified as held-to-maturity and reported at amortized cost. Debt and equity securities acquired principally to sell in the near term continue to be classified as trading securities and reported at fair market value. Unrealized gains and losses resulting from adjustments to market value are included in earnings under trading account profits or losses. Debt and equity securities not classified as either held-to-maturity or trading are classified as available-for-sale and reported at fair market value. Unrealized gains and losses are included, net of tax, in shareholders' equity. At March 31, 1994, securities held-to-maturity totaled $3.900 billion and securities available-for-sale were $3.921 billion. These compared with total investment securities at amortized cost of $6.622 billion a year earlier. The market value of the securities held-to-maturity at first quarter-close was $4.033 billion, representing a $133 million appreciation over book value. The following summarizes securities available-for-sale and securities held-to-maturity by type as of March 31, 1994.
$ in thousands Securities available-for-sale at market value: U.S. Government and agency .................................................................... $2,639,831 Mortgage backed securities .................................................................... 965,649 Other.......................................................................................... 315,805 ---------- Total securities available-for-sale ......................................................... 3,921,285 Securities held-to-maturity: U.S. Government and agency .................................................................... 2,209,253 Mortgage backed securities ................................................................... 1,060,320 State and municipal ........................................................................... 624,677 Other ......................................................................................... 6,062 ---------- Total securities held-to-maturity ............................................................. 3,900,312 ---------- Total investment securities.................................................................. $7,821,597 ==========
7 8
- - ------------------------------------------------------------------------------------------------------------------------------------ TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- FIRST QUARTER* TABLE 4 - - ------------------------------------------------------------------------------------------------------------------------------------ Variance Average Volume Average Rate Interest Attributable to ----------------- ------------- ----------------- ------------------- 1994 1993 1994 1993 1994 1993 Variance Rate Volume ------- ------ ------ ----- ------- -------- ----------- ------- -------- (Millions) (Thousands) INTEREST INCOME Loans: $ 6,670 $ 6,274 5.04 5.30 Commercial ...................... $ 82,962 $ 81,954 $ 1,008 $ (4,027) $ 5,035 1,982 1,918 8.55 8.98 Tax-exempt ...................... 41,783 42,441 (658) (2,050) 1,392 ------- ------- -------- -------- -------- 8,652 8,192 5.85 6.16 Total commercial ............. 124,745 124,395 350 (6,456) 6,806 714 668 8.09 8.86 Direct retail ................... 14,258 14,584 (326) (1,307) 981 2,424 2,145 7.75 8.79 Indirect retail ................. 46,326 46,514 (188) (5,844) 5,656 3,161 2,260 10.89 12.75 Credit card ..................... 84,865 71,052 13,813 (11,487) 25,300 331 324 11.17 11.25 Other revolving credit .......... 9,117 8,995 122 (63) 185 ------- ------- -------- -------- -------- 6,630 5,397 9.46 10.61 Total retail ................. 154,566 141,145 13,421 (16,438) 29,859 501 473 8.03 7.25 Construction .................... 9,913 8,463 1,450 947 503 3,251 3,132 7.17 7.38 Commercial mortgages ............ 57,515 56,959 556 (1,586) 2,142 3,740 3,688 7.77 8.43 Residential mortgages............ 71,660 76,622 (4,962) (6,030) 1,068 ------- ------- -------- -------- -------- 7,492 7,293 7.53 7.90 Total real estate............. 139,088 142,044 (2,956) (6,762) 3,806 159 125 8.16 9.39 Lease financing ................. 3,205 2,902 303 (414) 717 77 75 4.11 4.64 Foreign.......................... 784 859 (75) (101) 26 ------- ------- -------- -------- -------- 23,010 21,082 7.44 7.91 Total loans................... 422,388 411,345 11,043 (25,222) 36,265 Investment securities: Held-to-maturity: 2,208 2,847 6.70 7.15 U.S. Government and agency...... 36,488 50,201 (13,713) (2,988) (10,725) 1,159 2,488 7.58 7.59 Mortgage backed securities...... 21,662 46,592 (24,930) (94) (24,836) 631 730 12.64 12.26 State and municipal............. 19,663 22,068 (2,405) 658 (3,063) 14 397 6.09 4.32 Other........................... 210 4,227 (4,017) 1,231 (5,248) ------- ------- -------- -------- -------- 4,012 6,462 7.89 7.73 Total securities held-to-maturity 78,023 123,088 (45,065) 2,535 (47,600) Available-for-sale:** 2,358 -- 5.66 -- U.S. Government and agency...... 32,890 -- 32,890 -- 32,890 1,015 -- 4.67 -- Mortgage backed securities...... 11,694 -- 11,694 -- 11,694 305 -- 4.07 -- Other........................... 3,056 -- 3,056 -- 3,056 ------- ------- -------- -------- -------- 3,678 -- 5.25 -- Total securities available-for-sale 47,640 -- 47,640 -- 47,640 ------- ------- -------- -------- -------- 7,690 6,462 6.63 7.73 Total investment securities... 125,663 123,088 2,575 (18,913) 21,488 17 157 3.82 4.12 Interest-bearing bank balances..... 160 1,592 (1,432) (106) (1,326) Federal funds sold and securities purchased under 394 280 3.20 3.18 resale agreements................ 3,111 2,197 914 16 898 672 682 4.23 4.11 Trading account assets............. 7,007 6,903 104 201 (97) ------- ------- -------- -------- -------- $31,783 $28,663 7.12 7.71 Total interest-earning assets. 558,329 545,125 13,204 (43,476) 56,680 ======= ======= INTEREST EXPENSE $ 3,385 $ 3,127 1.59 1.97 Interest-bearing demand ........... 13,235 15,208 (1,973) (3,157) 1,184 6,074 5,949 2.29 2.68 Savings and money market savings... 34,284 39,352 (5,068) (5,878) 810 5,355 5,761 4.05 4.51 Savings certificates............... 53,465 64,118 (10,653) (6,325) (4,328) 1,463 1,954 4.17 5.38 Large denomination certificates.... 15,057 25,893 (10,836) (5,098) (5,738) ------- ------- -------- -------- -------- Total time deposits in 16,277 16,791 2.89 3.49 domestic offices ........... 116,041 144,571 (28,530) (24,222) (4,308) 417 437 3.19 3.21 Time deposits in foreign offices... 3,280 3,460 (180) (25) (155) ------- ------- -------- -------- -------- 16,694 17,228 2.90 3.48 Total time deposits........... 119,321 148,031 (28,710) (24,246) (4,464) Federal funds purchased and securities sold under 4,857 3,657 3.46 3.32 repurchase agreements ........... 41,461 29,969 11,492 1,296 10,196 604 360 3.20 3.01 Commercial paper................... 4,758 2,674 2,084 173 1,911 687 932 3.19 3.38 Other short-term borrowed funds.... 5,406 7,758 (2,352) (402) (1,950) ------- ------- -------- -------- -------- Total short-term 6,148 4,949 3.41 3.31 borrowed funds ............. 51,625 40,401 11,224 1,191 10,033 2,880 952 4.53 4.63 Bank notes......................... 32,165 10,870 21,295 (246) 21,541 790 412 6.62 7.25 Other long-term debt............... 12,896 7,356 5,540 (686) 6,226 ------- ------- -------- -------- -------- 3,670 1,364 4.98 5.42 Total long-term debt.......... 45,061 18,226 26,835 (1,601) 28,436 ------- ------- -------- -------- -------- $26,512 $23,541 3.30 3.56 Total interest-bearing liabilities 216,007 206,658 9,349 (15,544) 24,893 ======= ======= ---- ---- -------- -------- -------- 3.82 4.15 Interest rate spread ===== ===== Net yield on interest-earning assets 4.37 4.79 and net interest income ......... $342,322 $338,467 $ 3,855 (31,199) 35,054 ===== ===== ======== ======== ======== *Interest income and yields are presented on a fully taxable equivalent basis using the federal income tax rate and state tax rates, as applicable, reduced by the nondeductible portion of interest expense **Volume amounts are reported at amortized cost; excludes pretax unrealized gains of $37 million - - 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8 9 At March 31, 1994, the pretax unrealized gains on securities available-for-sale were $6.291 million and for the quarter ended the same period the average pretax unrealized gains on securities available-for-sale were $36.507 million. The unrealized gains on securities available-for-sale, net of tax, for the same periods were $3.825 million on a period-end basis and $22.399 million on an average basis. Interest expense was up $9.349 million or 4.5 percent, the result of higher levels of interest-bearing liabilities. Average interest-bearing liabilities increased $2.971 billion or 12.6 percent for the quarter. Interest-bearing time deposits decreased $534 million or 3.1 percent. Both interest-bearing demand and savings and money market savings rose for the period, increasing $258 million or 8.3 percent and $124 million or 2.1 percent, respectively. These gains, however, were offset by lower levels of savings certificates, down $406 million or 7 percent, and large denomination certificates which dropped $491 million or 25.1 percent. Short-term borrowings expanded $1.198 billion or 24.2 percent with federal funds purchased and repurchase agreements higher by $1.200 billion or 32.8 percent and commercial paper borrowings up $244 million or 67.8 percent. Other short-term borrowings, mainly consisting of term federal funds, declined. During the quarter, the Federal Reserve tightened monetary policy resulting in the federal funds rate rising approximately 50 basis points to 3.50 percent. Total long-term debt grew $2.307 billion, primarily due to the continued issuance of bank notes by Wachovia Bank of North Carolina. The bank note program began in the second quarter of 1992 and provides long-term funding at attractive market rates reflective of the corporation's favorable credit ratings. At March 31, 1994, $3.263 billion of these notes were outstanding with an average cost of 4.47 percent and an average maturity of 2.0 years. This compared with $1.078 billion outstanding with an average cost of 4.47 percent and an average maturity of 1.4 years at first quarter-close 1993. In January, Wachovia issued $250 million of 6.375 percent subordinated notes due February 1, 2009. The 15-year noncallable notes were priced at 99.87 percent to yield 6.388 percent or 75 basis points above comparable U.S. Treasuries at the time of issue. Gross deposits averaged $22.060 billion for the quarter, a decrease of $376 million or 1.7 percent from $22.436 billion in the same period of 1993. Collected deposits, net of float, averaged $20.482 billion, lower by $302 million or 1.5 percent from $20.784 billion a year earlier.
- - ---------------------------------------------------------------------------------------------------------------------------- NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 5 (thousands) - - ---------------------------------------------------------------------------------------------------------------------------- March 31 Dec. 31 Sept. 30 June 30 March 31 1994 1993 1993 1993 1993 -------- ------- -------- ------- -------- NONPERFORMING ASSETS Cash-basis assets -- domestic borrowers ..................... $100,126 $108,882 $126,474 $179,150 $185,447 Restructured loans -- domestic............................... --* 80 84 105 106 -------- -------- -------- -------- -------- Total nonperforming loans............................... 100,126 108,962 126,558 179,255 185,553 Foreclosed property: Foreclosed real estate ..................................... 30,136 51,701 65,038 51,411 92,455 Less valuation allowance.................................... 6,977 9,168 7,264 6,518 5,530 Other foreclosed assets .................................... 2,982 3,406 3,746 2,360 2,981 -------- -------- -------- -------- -------- Total foreclosed property .............................. 26,141 45,939 61,520 47,253 89,906 -------- -------- -------- -------- -------- Total nonperforming assets ............................. $126,267** $154,901 $188,078 $226,508 $275,459 ======== ======== ======== ======== ======== Nonperforming loans to period-end loans...................... .42% .47% .57% .83% .86% Nonperforming assets to period-end loans and foreclosed property .53 .67 .85 1.04 1.26 Period-end allowance for loan losses times nonperforming loans 4.05x 3.72x 3.19x 2.23x 2.11x Period-end allowance for loan losses times nonperforming assets 3.21 2.61 2.15 1.76 1.42 CONTRACTUALLY PAST DUE LOANS (accruing loans past due 90 days or more) Domestic borrowers .......................................... $ 42,744 $ 44,897 $ 47,532 $ 49,515 $ 45,512 ======== ======== ======== ======== ======== * Excludes $14,656 of loans which have been renegotiated at market rates and have demonstrated performance at the renegotiated terms for at least one year ** Net of cumulative corporate and commercial real estate charge-offs and foreclosed real estate write-downs totaling $47,692; includes $14,122 of nonperforming assets on which interest and principal are paid current - - -----------------------------------------------------------------------------------------------------------------------------
9 10 Nonperforming Assets Total nonperforming assets were $126.267 million or .53 percent of loans and foreclosed property at March 31, 1994, down $149.192 million or 54.2 percent from a year earlier and $28.634 million or 18.5 percent from year-end 1993. Payments and sales of foreclosed property largely accounted for the declines. The majority of total nonperforming assets is real estate related. Real estate nonperforming assets were $95.077 million or 1.28 percent of real estate loans and foreclosed real estate at March 31, 1994. This compared with $233.970 million or 3.19 percent a year earlier, a decline of $138.893 million or 59.4 percent, and with $123.595 million or 1.65 percent at year-end 1993, down $28.518 million or 23.1 percent. The total at March 31, 1994 included $71.918 million of nonperforming real estate loans versus $147.045 million a year earlier and $81.062 million at December 31, 1993. Commercial real estate nonperforming assets were $72.374 million or 1.90 percent of related loans and foreclosed property versus $200.471 million or 5.45 percent at the end of the 1993 first quarter and $98.014
- - -------------------------------------------------------------------------------------------------------------------------- ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 6 - - -------------------------------------------------------------------------------------------------------------------------- 1994 1993 ---------- ---------------------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- --------- --------- --------- -------- SUMMARY OF TRANSACTIONS Balance at beginning of period.............. $404,798 $404,091 $399,480 $390,621 $379,557 Provision for loan losses .................. 17,759 18,013 23,483 26,084 25,072 Deduct net loan losses: Loans charged off: Commercial .............................. 5,080 1,418 1,875 2,129 1,370 Credit card.............................. 15,928 15,392 17,147 15,650 14,802 Other revolving credit................... 905 1,375 758 943 846 Other retail ............................ 3,084 2,754 1,853 1,904 1,920 Real estate ............................ 819 4,899 3,706 3,384 2,525 Lease financing ......................... 61 81 110 63 204 Foreign ................................ -- -- -- -- -- -------- -------- -------- -------- -------- Total ................................. 25,877 25,919 25,449 24,073 21,667 Recoveries: Commercial .............................. 1,957 971 1,354 1,382 1,865 Credit card ............................. 2,771 2,625 2,566 2,645 2,480 Other revolving credit .................. 247 270 228 316 215 Other retail............................. 1,121 942 842 996 1,011 Real estate.............................. 2,612 3,743 1,525 1,445 1,980 Lease financing ......................... 78 53 54 55 102 Foreign ................................. 8 9 8 9 6 -------- -------- -------- -------- -------- Total.................................. 8,794 8,613 6,577 6,848 7,659 -------- -------- -------- -------- -------- Net loan losses............................ 17,083 17,306 18,872 17,225 14,008 -------- -------- -------- -------- -------- Balance at end of period.................... $405,474 $404,798 $404,091 $399,480 $390,621 ======== ======== ======== ======== ======== NET LOAN LOSSES (RECOVERIES) BY CATEGORY Commercial.................................. $ 3,123 $ 447 $ 521 $ 747 $ (495) Credit card................................. 13,157 12,767 14,581 13,005 12,322 Other revolving credit...................... 658 1,105 530 627 631 Other retail................................ 1,963 1,812 1,011 908 909 Real estate ................................ (1,793) 1,156 2,181 1,939 545 Lease financing............................. (17) 28 56 8 102 Foreign .................................... (8) (9) (8) (9) (6) -------- -------- -------- -------- -------- Total.................................. $ 17,083 $ 17,306 $ 18,872 $ 17,225 $ 14,008 ======== ======== ======== ======== ======== ANNUALIZED NET LOAN LOSSES (RECOVERIES) TO AVERAGE LOANS BY CATEGORY Commercial ................................. .14% .02% .03% .04% (.02%) Credit card ................................ 1.67 1.74 2.16 2.11 2.18 Other revolving credit...................... .80 1.34 .64 .76 .78 Other retail ............................... .25 .23 .14 .13 .13 Real estate................................. (.10) .06 .12 .10 .03 Lease financing ............................ (.04) .08 .16 .02 .33 Foreign .................................... (.04) (.05) (.04) (.04) (.03) Total loans ................................ .30 .31 .35 .32 .27 Period-end allowance to outstanding loans .. 1.71% 1.76% 1.83% 1.84% 1.80% - - -------------------------------------------------------------------------------------------------------------------------
10 11 million or 2.63 percent at year-end 1993. The total included $58.354 million of commercial real estate non-performing loans at March 31, 1994 compared with $129.154 million and $64.136 million at the end of the first and fourth quarters of 1993, respectively. Provision and Allowance for Loan Losses The provision for loan losses was $17.759 million for the first quarter of 1994, down $7.313 million or 29.2 percent from $25.072 million taken in the same three months of 1993. The provision reflects management's assessment of the adequacy of the allowance for loan losses to absorb potential write-offs in the loan portfolio. This assessment considers several factors, including growth and composition of the portfolio, historical credit loss experience, current and anticipated economic conditions, and changes in borrowers' financial conditions. Net loan losses for the first quarter of 1994 totaled $17.083 million or .30 percent on an annualized basis of average loans versus $14.008 million or .27 percent of average loans in the year-earlier period and $17.306 million or .31 percent in the final quarter of 1993. Commercial net loan losses were $3.123 million or .14 percent annualized of average commercial loans compared with net recoveries of $495 thousand or .02 percent in the same three months of 1993. Credit card net charge-offs were higher by $835 thousand or 6.8 percent but represented 1.67 percent annualized of average credit card loans versus 2.18 percent in the 1993 first period. Other retail net charge-offs, consisting of direct and indirect retail lending, increased $1.054 million to $1.963 million or .25 percent of average related loans. Real estate loans had net recoveries of $1.793 million compared with net loan losses of $545 thousand in the same three months of 1993. At March 31, 1994, the allowance for loan losses totaled $405.474 million, representing 1.71 percent of loans and 405 percent coverage of nonperforming loans. Comparable amounts a year earlier were $390.621 million, 1.80 percent and 211 percent, respectively, and at year-end 1993 they were $404.798 million, 1.76 percent and 372 percent. Noninterest Income Other operating revenue for the quarter decreased $4.515 million or 3 percent from the same three months of 1993. Factors contributing to the decline included the absence of $5.535 million earned in the year-earlier period from student loan servicing, as the corporation sold its student loan servicing subsidiary in the first quarter of 1993, decreased trading account profits and lower deposit account service charges. Higher sales volume and growth in total active accounts increased credit card fee income $3.026 million or 13.6 percent. Sales volume rose $241.935 million or 29.7 percent from the year-earlier quarter, including an increase of $111.527 million or 67.1 percent in transfer check volume. The pace of growth in new accounts accelerated during the quarter.
- - ---------------------------------------------------------------------------------------------------------------------------------- NONINTEREST INCOME (thousands) TABLE 7 - - ---------------------------------------------------------------------------------------------------------------------------------- 1994 1993 ---------- ---------------------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ---------- ----------- ---------- ----------- ---------- Service charges on deposit accounts................... $ 48,150 $ 48,982 $ 51,909 $ 51,622 $ 50,372 Fees for trust services............................... 31,681 30,352 29,697 29,614 30,367 Credit card income -- net of interchange payments..... 25,334 27,834 26,009 25,629 22,308 Mortgage fee income .................................. 8,033 10,130 9,699 10,102 9,170 Trading account profits -- excluding interest......... 1,507 2,097 3,521 2,746 4,739 Insurance premiums and commissions.................... 2,686 2,167 2,897 3,764 3,019 Bankers' acceptance and letter of credit fees ........ 6,287 4,633 4,925 5,276 4,834 Student loan servicing ............................... -- -- -- -- 5,535 Other service charges and fees ....................... 13,627 11,948 12,248 11,907 12,812 Other income ......................................... 7,564 14,298 8,856 7,933 6,228 -------- -------- -------- -------- -------- Total other operating revenue ................... 144,869 152,441 149,761 148,593 149,384 Gain on sale of subsidiary ........................... -- -- -- -- 8,030 Investment securities gains........................... 572 7,216 702 1,254 10,222 -------- -------- -------- -------- -------- Total............................................ $145,441 $159,657 $150,463 $149,847 $167,636 ======== ======== ======== ======== ======== - - ---------------------------------------------------------------------------------------------------------------------------------
11 12 Trust fee income rose $1.314 million or 4.3 percent. The increase primarily reflected growth in personal and institutional business combined with increasing sales of the Biltmore Funds, a proprietary family of mutual funds. Service charges on deposit accounts were lower by $2.222 million or 4.4 percent due, in part, to reduced commercial account analysis fees, consumer NSF and overdraft fees, and discontinuation of the retail lockbox product. Mortgage fee income, which primarily consists of servicing and origination fees and gains/losses from mortgage loans held for sale, decreased $1.137 million or 12.4 percent. The decline was largely due to losses on mortgage sales and reduced portfolio market evaluations. At March 31, 1994, the mortgage portfolio serviced totaled $9.095 billion, representing 135,981 loans compared with $8.647 billion and 135,186 loans a year earlier. Trading account profits were lower by $3.232 million or 68.2 percent, primarily as a result of the Federal Reserve raising short-term interest rates in February and March. Remaining combined categories of other operating revenue were down $2.264 million or 7 percent. Including gains on securities and subsidiary sales, total noninterest income was $145.441 million, down $22.195 million or 13.2 percent from $167.636 million in the year-earlier period. Gains on securities sales totaled $572 thousand compared with $10.222 million in the same three months of 1993 which included $9.835 million in pretax equity securities gains. The first quarter of 1993 also included $8.030 million from the sale of Wachovia Student Financial Services, Inc. Noninterest Expense Noninterest expense for the quarter declined $15.066 million or 5.3 percent. As a percent of total adjusted revenues (taxable equivalent net interest income and other operating revenue), noninterest expense decreased to 55.4 percent versus 58.4 percent in the 1993 first quarter. The year-earlier period included $15.872 million of nonrecurring charges related, in part, to write-downs of intangibles and fixed assets, additions to legal reserves and expenses for closing the corporation's retail lockbox operation. Excluding these charges from the first quarter of 1993, noninterest expense for the first three months of 1994 was higher by $806 thousand or less than 1 percent. Total personnel expense increased $670 thousand or under 1 percent. Salaries expense was up $4.896 million or 4.4 percent, while employee benefits expense dropped $4.226 million or 14.1 percent. At March 31, 1994, full-time equivalent employees totaled 15,492 versus 15,721 a year earlier. Combined net occupancy and equipment expense was higher by $1.593 million or 3.6 percent. Other
- - --------------------------------------------------------------------------------------------------------------------------- NONINTEREST EXPENSE (thousands) TABLE 8 - - --------------------------------------------------------------------------------------------------------------------------- 1994 1993 --------- ----------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- -------- Salaries.................................................. $115,211 $122,205 $112,982 $110,119 $110,315 Employee benefits......................................... 25,803 25,504 29,411 28,115 30,029 -------- -------- -------- -------- -------- Total personnel expense ............................. 141,014 147,709 142,393 138,234 140,344 Net occupancy expense .................................... 19,428 23,587 18,950 19,660 19,873 Equipment expense ........................................ 26,512 27,283 24,856 25,633 24,474 Postage and delivery ..................................... 9,052 9,315 8,921 11,643 8,281 Outside data processing, programming and software......... 8,485 12,494 9,194 8,198 8,727 Stationery and supplies................................... 5,962 7,018 6,353 5,572 6,401 Advertising and sales promotion........................... 9,783 11,435 7,681 7,805 11,220 Professional services..................................... 3,952 6,381 4,120 3,771 2,872 Travel and business promotion............................. 3,504 4,706 3,668 3,905 3,284 FDIC insurance and regulatory examinations................ 13,380 13,122 13,274 13,084 14,183 Check clearing and other bank services.................... 2,295 2,348 2,563 2,586 2,662 Amortization of intangible assets......................... 5,137 6,844 7,502 6,540 7,115 Foreclosed property expense............................... (3,441) 2,630 1,737 1,226 2,061 Other expense............................................. 24,987 24,868 22,334 24,977 33,619 -------- -------- -------- -------- -------- Total ............................................... $270,050 $299,740 $273,546 $272,834 $285,116 ======== ======== ======== ======== ======== Overhead ratio............................................ 55.4% 59.5% 55.0% 55.2% 58.4% - - ---------------------------------------------------------------------------------------------------------------------------
12 13 combined categories of noninterest expense were down $17.329 million or 17.3 percent. Expenses associated with foreclosed property had net gains of $3.441 million and included write-downs totaling $97 thousand. This compared with foreclosed property expenses of $2.061 million, including write-downs of $1.631 million in the first three months of 1993. Income Taxes Applicable income taxes for the quarter were lower by $409 thousand or less than 1 percent. Income taxes computed at the statutory rate are reduced primarily by the interest earned on state and municipal debt securities and industrial revenue obligations. Also, within certain limitations, one-half of the interest income of qualifying employee stock ownership plan loans is exempt from federal taxes. The interest earned on state and municipal debt instruments is exempt from federal taxes and, except for out-of-state issues, from North Carolina and Georgia taxes as well, and results in substantial interest savings for local governments and their constituents.
----------------------------------------------------------------------------------------------- INCOME TAXES (thousands) TABLE 9 ----------------------------------------------------------------------------------------------- Three Months Three Months Ended Ended March 31 March 31 1994 1993 ------------ ------------ Income before income taxes ................................. $175,478 $172,656 ======== ======== Federal income taxes at statutory rate* .................... $ 61,417 $ 58,703 State and local income taxes -- net of federal benefit........................................... 1,221 2,216 Effect of tax-exempt securities interest and other income ................................ (12,420) (12,949) Tax cost to carry tax-exempt assets......................... 453 545 Other items ................................................ 8 2,573 -------- -------- Total tax expense ..................................... $ 50,679 $ 51,088 ======== ======== Currently payable: Federal................................................... $ 43,259 $ 60,521 Foreign .................................................. 34 102 State and local........................................... 2,413 4,989 -------- -------- Total.................................................. 45,706 65,612 Deferred: Federal .................................................. 5,508 (12,893) State and local........................................... (535) (1,631) -------- -------- Total.................................................. 4,973 (14,524) -------- -------- Total tax expense ..................................... $ 50,679 $ 51,088 ======== ======== * An increase in the federal income tax statutory rate from 34% to 35% was enacted during the third quarter of 1993 retroactive to January 1, 1993. The tax amount for 1993 of $58,703 represents the 34% rate originally reported for the first quarter of 1993 prior to enactment of the tax rate increase. A cumulative adjustment related to the increase in the tax rate was reported in the third quarter of 1993. -----------------------------------------------------------------------------------------------
FINANCIAL CONDITION AND CAPITAL RATIOS At March 31, 1994, total assets were $36.350 billion, including $32.370 billion of interest-earning assets and $23.662 billion of loans. Comparable amounts a year earlier were $33.567 billion, $29.709 billion and $21.688 billion, respectively, and at year-end 1993 totals were $36.526 billion of assets, including $32.349 billion of earning assets and $22.977 billion of loans. Deposits constitute the primary source of funding for the corporation. At March 31, 1994, deposits totaled $22.279 billion. Time deposits were $16.914 billion, representing 75.9 percent of total deposits. This compared with total deposits of $22.140 billion, including time deposits of $17.114 billion or 77.3 percent at first quarter-close 1993. At December 31, 1993, deposits were $23.352 billion and time deposits were $17.209 billion, representing 73.7 percent of the total. Shareholders' equity at March 31, 1994 was $3.094 billion, an increase of $235 million or 8.2 percent from $2.859 billion a year earlier and higher by $76 million or 2.5 percent from December 31, 1993. Included 13 14 in the $3.094 billion at first quarter-close were unrealized gains of $4 million, net of tax, on securities available-for-sale marked to fair market value under FASB 115. Average shareholders' equity for the first quarter of 1994 included $22 million, net of tax, of unrealized gains on securities available-for-sale under FASB 115. Wachovia's board of directors has authorized the repurchase of up to 5 million shares of common stock to be used for various corporate purposes, including the issuance of shares for the corporation's employee stock plans and dividend reinvestment plan. Share repurchase began on July 1, 1993. During the first quarter of 1994, the corporation repurchased 422,000 shares at an average price of $33.111 per share for a total cost of $13.973 million. At March 31, 1994, a total of 1,847,800 shares remained available for possible repurchase. Intangible assets at first quarter-close 1994 were $88.423 million. The total consisted of $40.493 million in mortgage servicing rights, $32.095 million in goodwill, $10.127 million in deposit base intangibles and $5.708 million in other intangible assets. This compared with $97.945 million in total intangibles, $43.942 million in mortgage servicing rights, $33.569 million in goodwill, $12.978 million in deposit base intangibles and $7.456 million in other intangibles a year earlier. Regulatory agencies divide capital into Tier I (consisting of shareholders' equity less ineligible intangible assets) and Tier II (consisting of the allowable portion of the reserve for loan losses and certain long-term debt) and measure capital adequacy by applying both capital levels to a banking company's risk-adjusted assets and off-balance sheet items. Regulatory requirements presently specify that Tier I capital should exclude the market appreciation of securities available-for-sale arising from valuation adjustments under FASB 115. In addition to these capital ratios, regulatory agencies have established a Tier I leverage ratio which measures Tier I capital to average assets less ineligible intangible assets. Regulatory guidelines require a minimum total capital ratio to risk-adjusted assets ratio of 8 percent with one-half consisting of tangible common shareholders' equity and a minimum Tier I leverage ratio of 3 percent. Banks which meet or exceed a Tier I ratio of 6 percent, a total capital ratio of 10 percent and a Tier I leverage ratio of 5 percent are considered well capitalized by regulatory standards. At March 31, 1994, Wachovia's Tier I to risk-adjusted assets ratio was 9.64 percent and including Tier II was 13.52 percent. The corporation's Tier I leverage ratio was 8.56 percent. These capital ratios remain well in excess of minimum regulatory requirements.
- - ------------------------------------------------------------------------------------------------------------------------- CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 10 - - ------------------------------------------------------------------------------------------------------------------------- 1994 1993 ------- ------------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- Tier I capital: Common shareholders' equity........................... $ 3,093,593 $ 3,017,947 $ 2,974,699 $ 2,950,413 $ 2,858,896 Less ineligible intangible assets..................... 32,095 32,451 36,039 33,196 33,569 Less unrealized gain on securities available-for-sale. 3,825 -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total Tier I capital.............................. 3,057,673 2,985,496 2,938,660 2,917,217 2,825,327 Tier II capital: Allowable allowance for loan losses .................. 396,449 384,032 370,017 362,867 354,000 Allowable long-term debt ............................. 833,125 583,738 587,158 587,321 343,002 ----------- ----------- ----------- ----------- ----------- Tier II capital additions ........................ 1,229,574 967,770 957,175 950,188 697,002 ----------- ----------- ----------- ----------- ----------- Total capital..................................... $ 4,287,247 $ 3,953,266 $ 3,895,835 $ 3,867,405 $ 3,522,329 =========== =========== =========== =========== =========== Risk-adjusted assets................................... $31,706,868 $30,701,782 $29,567,305 $28,992,768 $28,283,418 Quarterly average assets............................... $35,778,460 $35,419,829 $33,869,607 $32,718,390 $32,473,044 Risk-based capital ratios: Tier I capital ....................................... 9.64% 9.72% 9.94% 10.06% 9.99% Total capital ....................................... 13.52 12.88 13.18 13.34 12.45 Tier I leverage ratio* ................................ 8.56% 8.44% 8.69% 8.93% 8.71% Shareholders' equity to total assets................... 8.51% 8.26% 8.42% 8.87% 8.52% *Ratio excludes the average unrealized gain on securities available-for-sale, net of tax, of $22,399 for the first quarter of 1994 - - -------------------------------------------------------------------------------------------------------------------------
14 15 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION
March 31 December 31 March 31 $ in thousands 1994 1993 1993 -------- ----------- -------- ASSETS Cash and due from banks............................................ $ 2,220,126 $ 2,529,528 $ 2,477,505 Interest-bearing bank balances..................................... 24,169 12,478 106,711 Federal funds sold and securities purchased under resale agreements................................ 284,447 691,106 599,130 Trading account assets............................................. 577,362 788,779 692,788 Securities available-for-sale...................................... 3,921,285 -- -- Securities held-to-maturity (Market value of $4,033,333, $8,156,690 and $6,992,575, respectively)......................... 3,900,312 7,878,656 6,621,827 Loans and net leases............................................... 23,670,041 22,986,307 21,697,054 Less unearned income on loans...................................... 7,652 8,819 8,582 ----------- ----------- ----------- Total loans ............................................... 23,662,389 22,977,488 21,688,472 Less allowance for loan losses .................................... 405,474 404,798 390,621 ----------- ----------- ----------- Net loans.................................................. 23,256,915 22,572,690 21,297,851 Premises and equipment ............................................ 507,770 502,699 435,466 Due from customers on acceptances ................................ 609,149 434,584 388,353 Other assets ...................................................... 1,048,413 1,115,252 947,864 ----------- ----------- ----------- Total assets .............................................. $36,349,948 $36,525,772 $33,567,495 =========== =========== =========== LIABILITIES Deposits in domestic offices: Demand .......................................................... $ 5,358,943 $ 6,140,884 $ 5,022,239 Interest-bearing demand ......................................... 3,453,505 3,515,680 3,159,473 Savings and money market savings................................. 6,295,721 6,194,086 6,161,861 Savings certificates ............................................ 5,037,319 5,141,410 5,459,656 Large denomination certificates.................................. 1,465,016 1,507,461 1,914,831 Noninterest-bearing time ........................................ 72,164 45,802 65,597 ----------- ----------- ----------- Total deposits in domestic offices ........................ 21,682,668 22,545,323 21,783,657 Deposits in foreign offices: Demand .......................................................... 6,417 3,011 4,040 Time ........................................................... 590,166 804,064 352,443 ----------- ----------- ----------- Total deposits in foreign offices ......................... 596,583 807,075 356,483 ----------- ----------- ----------- Total deposits ........................................... 22,279,251 23,352,398 22,140,140 Federal funds purchased and securities sold under repurchase agreements................................. 4,901,139 4,741,283 4,521,915 Commercial paper................................................... 499,426 589,178 275,779 Other short-term borrowed funds ................................... 508,570 1,091,123 1,525,016 Long-term debt: Bank notes....................................................... 3,262,912 2,370,091 1,077,665 Other long-term debt............................................. 839,669 590,365 355,700 ----------- ----------- ----------- Total long-term debt....................................... 4,102,581 2,960,456 1,433,365 Acceptances outstanding ........................................... 609,149 434,584 388,353 Other liabilities ................................................. 356,239 338,803 424,031 ----------- ----------- ----------- Total liabilities ......................................... 33,256,355 33,507,825 30,708,599 SHAREHOLDERS' EQUITY Preferred stock, par value $5 per share: Authorized 50,000,000 shares; none outstanding .................. -- -- -- Common stock, par value $5 per share: issued 171,416,491, 171,375,772 and 172,172,636, respectively........................................ 857,082 856,879 860,863 Capital surplus ................................................... 759,389 761,573 825,307 Retained earnings ................................................. 1,477,122 1,399,495 1,172,726 ----------- ----------- ----------- Total shareholders' equity ................................ 3,093,593 3,017,947 2,858,896 ----------- ----------- ----------- Total liabilities and shareholders' equity ................ $36,349,948 $36,525,772 $33,567,495 =========== =========== ===========
15 16 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Three Months Ended March 31 $ in thousands, except per share 1994 1993 -------- -------- INTEREST INCOME Loans ............................................................................. $410,452 $399,256 Securities available-for-sale: State and municipal.............................................................. 14 -- Other investments ............................................................... 44,798 -- Securities held-to-maturity: State and municipal.............................................................. 13,024 15,358 Other investments................................................................ 55,776 97,094 Interest-bearing bank balances .................................................... 160 1,592 Federal funds sold and securities purchased under resale agreements................................................ 3,111 2,197 Trading account assets ............................................................ 6,518 6,369 -------- -------- Total interest income ......................................................... 533,853 521,866 INTEREST EXPENSE Deposits: Domestic offices ................................................................ 116,041 144,571 Foreign offices ................................................................ 3,280 3,460 -------- -------- Total interest on deposits..................................................... 119,321 148,031 Short-term borrowed funds.......................................................... 51,625 40,401 Long-term debt..................................................................... 45,061 18,226 -------- -------- Total interest expense......................................................... 216,007 206,658 NET INTEREST INCOME .............................................................. 317,846 315,208 Provision for loan losses ......................................................... 17,759 25,072 -------- -------- Net interest income after provision for loan losses........................................................ 300,087 290,136 OTHER INCOME Service charges on deposit accounts ............................................... 48,150 50,372 Fees for trust services............................................................ 31,681 30,367 Credit card income ................................................................ 25,334 22,308 Mortgage fee income................................................................ 8,033 9,170 Trading account profits ........................................................... 1,507 4,739 Student loan servicing ............................................................ -- 5,535 Other operating income ........................................................... 30,164 26,893 -------- -------- Total other operating revenue ................................................. 144,869 149,384 Gain on sale of subsidiary ........................................................ -- 8,030 Investment securities gains........................................................ 572 10,222 -------- -------- Total other income ............................................................ 145,441 167,636 OTHER EXPENSE Salaries .......................................................................... 115,211 110,315 Employee benefits ................................................................. 25,803 30,029 -------- -------- Total personnel expense ....................................................... 141,014 140,344 Net occupancy expense.............................................................. 19,428 19,873 Equipment expense.................................................................. 26,512 24,474 Other operating expense ........................................................... 83,096 100,425 -------- -------- Total other expense............................................................ 270,050 285,116 Income before income taxes......................................................... 175,478 172,656 Applicable income taxes ........................................................... 50,679 51,088 -------- -------- NET INCOME......................................................................... $124,799 $121,568 ======== ======== Net income per common share: Primary.......................................................................... $ .72 $ .70 Fully diluted ................................................................... $ .72 $ .69 Average shares outstanding: Primary ......................................................................... 172,739 173,579 Fully diluted.................................................................... 173,378 175,904
16 17 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock ------------------------- Capital Retained $ in thousands, except per share Shares Amount Surplus Earnings ----------- -------- -------- ---------- PERIOD ENDED MARCH 31, 1993 Balance at beginning of year .......................... 171,471,178 $857,356 $817,889 $1,099,522 Net income............................................. 121,568 Cash dividends declared on common stock -- $.27 a share ........................ (46,454) Common stock issued pursuant to: Stock option and employee benefit plans ............. 180,450 902 3,986 (41) Dividend reinvestment plan .......................... 77,416 387 2,229 (15) Conversion of notes.................................. 462,164 2,311 1,751 (60) Common stock acquired.................................. (18,572) (93) (547) 8 Miscellaneous ......................................... (1) (1,802) ----------- -------- -------- ---------- Balance at end of period .............................. 172,172,636 $860,863 $825,307 $1,172,726 =========== ======== ======== ========== PERIOD ENDED MARCH 31, 1994 Balance at beginning of year .......................... 171,375,772 $856,879 $761,573 $1,399,495 Net income ............................................ 124,799 Cash dividends declared on common stock -- $.30 a share......................... (51,443) Common stock issued pursuant to: Stock option and employee benefit plans.............. 374,715 1,873 7,622 Dividend reinvestment plan .......................... 88,357 442 2,368 Conversion of notes ................................. 21,254 106 300 Common stock acquired ................................. (443,607) (2,218) (12,473) Unrealized gains on securities available- for-sale -- net of tax .............................. 3,825 Miscellaneous ......................................... (1) 446 ----------- -------- -------- ---------- Balance at end of period .............................. 171,416,491 $857,082 $759,389 $1,477,122 =========== ======== ======== ==========
17 18 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31 $ in thousands 1994 1993 ---------- ---------- OPERATING ACTIVITIES Net income...................................................................... $ 124,799 $ 121,568 Adjustments to reconcile net income to net cash provided by operations: Provision for loan losses .................................................... 17,759 25,072 Depreciation and amortization ................................................ 28,899 24,599 Deferred income taxes (benefit)............................................... 4,973 (14,524) Investment securities gains .................................................. (572) (10,222) Gain on sale of subsidiary .................................................. -- (8,030) Gain on sale of noninterest-earning assets.................................... (3,111) (486) Increase in accrued income taxes ............................................. 40,504 67,140 (Increase) decrease in accrued interest receivable ........................... 24,293 (6,143) Increase in accrued interest payable ......................................... 26,940 9,481 Net change in other accrued and deferred income and expense .................. (47,128) (10,415) Net trading account activities ............................................... 211,417 203,180 Net loans held for resale .................................................... 72,035 (163,737) ---------- ---------- Net cash provided by operating activities .................................... 500,808 237,483 INVESTING ACTIVITIES Net (increase) decrease in interest-bearing bank balances ...................... (11,691) 82,842 Net (increase) decrease in federal funds sold and securities purchased under resale agreements ............................................ 406,659 (120,158) Purchases of securities available-for-sale...................................... (512,416) -- Purchases of securities held-to-maturity ....................................... (2,004) (588,040) Sales of securities available-for-sale ......................................... 23,648 -- Sales of securities held-to-maturity ........................................... -- 29,727 Calls, maturities and prepayments of securities available-for-sale.............. 303,596 -- Calls, maturities and prepayments of securities held-to-maturity ............... 245,248 428,539 Net increase in loans made to customers......................................... (777,875) (454,637) Capital expenditures ........................................................... (24,718) (11,723) Proceeds from sales of premises and equipment .................................. 2,205 2,947 Net (increase) decrease in other assets ........................................ 39,140 (115,069) Business combinations and dispositions.......................................... -- 20,000 ---------- ---------- Net cash used by investing activities ........................................ (308,208) (725,572) FINANCING ACTIVITIES Net decrease in demand, savings and money market accounts....................... (712,713) (733,594) Net decrease in certificates of deposit......................................... (360,434) (501,727) Net increase in federal funds purchased and securities sold under repurchase agreements.................................................................... 159,856 808,423 Net decrease in commercial paper................................................ (89,752) (110,839) Net increase (decrease) in other short-term borrowings ......................... (582,553) 676,193 Proceeds from issuance of bank notes............................................ 1,042,193 319,772 Maturities of bank notes ....................................................... (150,000) -- Proceeds from issuance of other long-term debt.................................. 247,800 -- Payments on other long-term debt................................................ (85) (79,503) Common stock issued............................................................. 11,702 5,646 Common stock repurchased........................................................ (14,147) (633) Dividend payments............................................................... (51,443) (46,454) Net increase (decrease) in other liabilities.................................... (2,426) 451 ---------- ---------- Net cash provided (used) by financing activities ........................... (502,002) 337,735 DECREASE IN CASH AND CASH EQUIVALENTS .......................................... (309,402) (150,354) Cash and cash equivalents at beginning of year.................................. 2,529,528 2,627,859 ---------- ---------- Cash and cash equivalents at end of period ..................................... $2,220,126 $2,477,505 ========== ========== SUPPLEMENTAL DISCLOSURES Unrealized appreciation in securities available-for-sale: Securities available-for-sale ................................................ $ 6,291 $ -- Shareholders' equity ......................................................... 3,825 -- Deferred taxes ............................................................... 2,466 --
18 19 ANNUAL SHAREHOLDERS' MEETING Friday, April 22, 1994 Remarks by L. M. Baker, Jr. Chief Executive Officer Welcome to the Annual Shareholders' Meeting of Wachovia Corporation. It is a pleasure to conduct this important event in Winston-Salem, the birthplace of Wachovia. About a mile south of here is Old Salem, the Moravian community established in the middle of the 18th century. The Moravians came to this country seeking religious freedom and brought with them a creative spirit, a commitment to education, and a dedication to hard work. They constructed a thriving center of commerce and a prosperous life in North Carolina, they also built the foundation for a bank called Wachovia. Now, I am privileged to sit at the desk used by one of their most successful and enterprising sons, Col. Francis H. Fries. It is also fitting at this meeting of shareholders to recognize the outstanding leadership of John G. Medlin, Jr., who sat at that same desk and served with distinction as chief executive officer of this corporation for 17 years, retiring on December 31 after 34 years of service. Wachovia avoided most of the problems experienced by banks during this period, substantially expanded its operations, maintained exceptional profitability, and faces the remainder of this decade from an enviable position of strength. This is a direct reflection of his great leadership and passion for excellence. We are fortunate that John continues as a director and as Chairman. Details of Wachovia's financial performance for 1993 and the first quarter of this year have been mailed earlier to shareholders. Therefore, this morning I will cover only the highlights of these periods before reviewing important strategies which have been developed to address the slowly growing economy, intensely competitive marketplace, and stringent regulatory climate confronting banking in the nineties. Wachovia Corporation Selected Financial Information
First Quarter -------------- 1994 1993 ---- ---- Net Income Per Share (FD) $ .72 $ .69 Percent Change from 1993 4.0% -- Return on Assets 1.40 1.50% Return on Common Equity 16.6 17.4 Equity/Assets (period-end) 8.51 8.52 Net Loan Losses/Loans .30 .27 Nonperforming Assets/Loans + Foreclosed Property .53 1.26 Loan Loss Reserve/ Nonperforming Loans 405 211
Wachovia Corporation Selected Financial Information 1993
25 Largest U.S. Banks --------------------- Wachovia ($ millions) Wachovia Median Rank --------- ------ ------- Assets $36,526 $51,461 22 Market Capitalization (April 11, 1994) 5,912 5,912 13 Net Income* 492 626 16 Return on Assets 1.46% 1.16% 3 Return on Common Equity 17.1 16.7 11 Common Equity/ Assets (period-end) 8.26 6.93 4 Net Loan Losses/Loans .31 .76 2 Nonperforming Assets/ Loans + Foreclosed Property .67 1.76 1 Loan Loss Reserve/ Nonperforming Loans 372 186 4 * Applicable to common shareholders
Wachovia Corporation Selected Financial Information Five-Year Average (1993-1989)
25 Largest U.S. Banks --------------------- Wachovia ($ millions) Wachovia Median Rank --------- ------ ------- Return on Assets 1.17% .73% 3 Return on Common Equity 14.9 12.2 6 Common Equity/ Assets 7.79 5.61 2 Nonperforming Assets/ Loans + Foreclosed Property 1.06 3.33 1 Net Loan Losses/Loans .52 1.24 1 Loan Loss Reserve/ Nonperforming Loans 212 125 4
Wachovia Corporation Selected Financial Information Compound Annual Growth Rates
5 Years 1 Year 1st Qtr 1993-1989 1993 1994 --------- ----- ------ Net Income Per Share (FD) 9.7% 13.5% 4.0% Dividends Per Share 13.7 11.0 11.1 Total Return* Wachovia 20.4 1.3 (4.4) S&P 500 14.5 10.1 (3.8) KBW 50 Index 12.7 5.5 (1.8) * Dividends reinvested quarterly
19 20 (Graph - See Graphics Appendix) Wachovia's impressive results were achieved during difficult times and while investing heavily in technology, the integration of internal operations, new products and services, and our people. A careful and orderly transition has put in place a new management team deeply committed to keeping Wachovia among the leaders in banking. The organization is keenly aware of the challenges ahead, but is also optimistic about Wachovia's ability to perform in an exceptional manner. The following characteristics support this optimism. Wachovia's guiding principles and beliefs, forged over more than a century, remain the same in good or hard times. We embrace progressive strategies within the discipline of strong financial and credit principles. Our dedication to soundness, profitability, and growth remains intact. Wachovia enjoys an ample balance sheet and strong profits. Wachovia's capital strength and credit quality are among the best in the country. We have the ability to attract funds from a variety of sources. Revenues are growing from diverse areas. Expenses are very well managed. Since banking grows with the overall economy, it is imperative to be in markets which will outpace national averages. In the years to come, Wachovia's three home states should continue to outperform the nation, with the cities and communities in which we are located doing better than the states as a whole. In these good markets, business must be taken from strong competitors to achieve the corporation's growth objectives. Wachovia's menu of consumer, corporate, trust, investment, and operational services is contemporary and competitive. Substantial investment of human, financial, and technological resources will be made to ensure they remain so. Our Personal Banker program, introduced in 1973, continues to build broad relationships with customers. Personal bankers are well trained in general banking and credit needs and sufficiently knowledgeable of other services to make referrals to specialized product areas when appropriate. These bankers provide an excellent human balance to Wachovia's extensive and developing array of "high tech" service capabilities. However, Wachovia's retail bank is not resting. A comprehensive review of products, service delivery, technological capabilities, and the interests of our customers has brought forth new ideas for better, more profitable service and aggressive, low-cost penetration of consumer markets. Here are a few examples: - - - In 1990, when the prime rate was 10 percent and many other cards were charging 20 percent for revolving debt, the organization began a reassessment of credit card pricing. Consequently, in April 1991, Wachovia introduced a prime plus 2.9 percent variable rate option with a $39 annual fee. In October of 1993, Wachovia offered another pricing option which lets new customers pay a prime only interest rate for the first year after which the rate is prime plus 3.9 percent with an $18 annual fee. Prime Plus has been an excellent generator of new accounts and loan balances from more creditworthy cardholders. At the end of the 1994 first quarter, outstandings exceeded $3 billion. - - - Specific projects to identify redundancy and work flow refinement and centralization opportunities will produce several million dollars of cost savings. For example, our automobile sales finance group has consolidated twenty-seven contract-buying branches in the three states into three centers which has resulted in the quadrupling from twelve to fifty the number of loans a credit officer could make each day. The volume of loans generated has grown to record highs with fewer people, better service, and lower cost of product delivery. Also, Wachovia's multistate mortgage processing functions will be combined in Columbia, South Carolina, by mid-1995. - - - Capitalizing on the successful debit card experience achieved by South Carolina National, Wachovia's North Carolina and Georgia banks rolled out Visa Check last summer. Combined with the South Carolina customer base, this gives the corporation approximately 750,000 Visa Check customers. Wachovia receives about 45 cents from each transaction, which totaled in excess of 3.5 million during the fourth quarter. Many of these cards now carry a monthly fee of one dollar. 20 21 - - - Following completion of an intensive training program in individual securities and packaged investments, an expanded investment sales force will be deployed in Georgia and North Carolina, joining the existing South Carolina sales effort. These investment counselors will be part of the retail bank and fully dedicated to selling a broad range of high quality investment products including Wachovia's Biltmore Funds. By year-end, approximately 120 counselors will be serving customers and prospects in three states. - - - A telephone customer service center already in operation in Columbia, South Carolina, is being upgraded and expanded. By year-end, it will be available to Georgia and North Carolina customers. The 200-person center is expected to handle 3.8 million calls annually for the three banks and increase the time available for branch personnel to serve customers and sell banking services. An automated mortgage application processing system providing product comparisons and cross-sell prompting for bankers will be introduced in our branches over the next several weeks. The new Wachovia Investor's Account is available. Products beneficial to small and emerging businesses are on the way. Corporate business outside the southeastern United States is the responsibility of Wachovia Corporate Services. In addition to the U. S. corporate banking division, it houses core business lines such as treasury services, corporate finance and capital markets, financial institutions, and international banking. Wachovia ranks among the top ten banks in share of relationships with the nation's largest corporations. Our revenue-producing strategy has been strongly focused on selling more than ninety state-of-the-art, fee-based banking and trust services. Nationally, the company's cash management and treasury services rank number one in operational quality and among the top five in market share. Disbursing services are delivered to over 1,000 corporate customers, and more than 1,200 customers use our wholesale lockbox service. Wachovia continues to be an innovator in corporate disbursing functions through development of new products and technological capabilities such as the recently announced Wachovia Connection Image Workstation. This service will help corporate customers of any size find, retrieve, examine, and print images of checks that have been drawn on their accounts. Wachovia's Corporate Finance and Capital Markets Group over the past three years has consistently ranked among the top four U.S. banks originating letter of credit enhanced variable rate demand bond transactions. During 1993, this group facilitated loan syndications and private placements of senior debt. Wachovia has been a leader for 100 years in trust services. Today, 1,200 trust specialists sell an outstanding array of employee benefit, personal financial, corporate trust, charitable funds, and investment management services to customers in more than thirty states. Investment opportunities range from the Biltmore Funds to the specialized, nontraditional Timberland investment for employee benefit accounts. Total assets under investment management approximate $18 billion. Trust has significant potential to increase its contribution to fee income. Streamlined and conformed systems are essential to allow Wachovia to realize economies, provide better service, and generate marketing information to build a growing, competitive, and profitable interstate banking network. South Carolina, Georgia, and North Carolina are on a unified, interactive branch automation system. A new, sophisticated general ledger system is common to all three banks, and an enhanced trust system is being developed. Plans are under way to consolidate the credit operations from 12 cities in the three states into a single location in Winston-Salem by mid-1995. Image processing soon will be a reality in Wachovia operations. Investing in appropriate technology remains a major priority. This is just a little taste of the good things happening at Wachovia. Over the years we have shifted with the economy, the reality of the marketplace, and the needs and desires of our customers. Our people are dedicated to excellence, high performance, and unparalleled service in serving millions of customers in three home states, across the nation, and abroad. We are confident that this great franchise offers substantial opportunities for Wachovia to achieve its goals. At the same time, the organization has significant flexibility for service line and geographic expansion. We will be alert to such opportunities, but careful not to waste or misdirect this precious advantage. From this vantage point, we remember the ingredients of past success, and our deep and abiding commitment to excellence and soundness remains intact. Wachovia has historically enjoyed a premium price-to-earnings multiple. We cherish this recognition and the trust inherent in it. Today, you have our pledge that whatever the future may bring, we will be ready, armed with a passionate commitment to providing exceptional protection and growth for your investment. 21 22 MEMBER COMPANY DIRECTORS WACHOVIA BANK OF GEORGIA, N.A. G. JOSEPH PRENDERGAST CARL BOLCH, JR. BRYAN D. LANGTON D. RAYMOND RIDDLE Chairman of the Board, Chairman of the Board and (Advisory Director) President and President and Chief Executive Officer Chairman of the Board and Chief Executive Officer Chief Executive Officer Racetrac Petroleum, Inc. Chief Executive Officer National Service Industries, Inc. Holiday Inn Worldwide F. DUANE ACKERMAN JAMES E. BOSTIC, JR. President and Group Vice President BERNARD MARCUS S. STEPHEN SELIG III Chief Executive Officer Communication Papers Division Chairman of the Board and Chairman of the Board BellSouth Telecommunications, Georgia-Pacific Corporation Chief Executive Officer and President Inc. The Home Depot, Inc. Selig Enterprises, Inc. MICHAEL C. CARLOS EDWARD L. ADDISON Chairman of the Board and DANIEL W. MCGLAUGHLIN ALANA S. SHEPHERD Chairman of the Board and Chief Executive Officer President and Secretary of the Board Chief Executive Officer National Distributing Co., Inc. Chief Operating Officer Shepherd Spinal Center The Southern Company Equifax, Inc. G. STEPHEN FELKER J. V. WHITE L. M. BAKER, JR. Chairman of the Board and Chairman of the President and Chief Executive Officer Executive Committee Chief Executive Officer Avondale Mills, Inc. Equifax, Inc. Wachovia Corporation THOMAS E. BOLAND Retired Chairman of the Board
WACHOVIA BANK OF NORTH CAROLINA, N.A. J. WALTER MCDOWELL FELTON J. CAPEL RICHARD L. DAUGHERTY JOHN F. WARD President and Chairman of the Board North Carolina Senior Chief Executive Officer Chief Executive Officer and President State Executive, Hanes Group Century Associates of Vice President Worldwide Senior Vice President L. M. BAKER, JR. North Carolina Manufacturing Sara Lee Corporation Chairman of the Board IBM PC Company WILLIAM CAVANAUGH, III IBM Corporation ANDERSON D. WARLICK THOMAS M. BELK, JR. President and President and Senior Vice President Chief Operating Officer ESTELL C. LEE Chief Operating Officer Belk Stores Services, Inc. Carolina Power & Light Company Chairman of the Board Parkdale Mills, Inc. and President H. C. BISSELL BERT COLLINS The Lee Company DAVID J. WHICHARD, II Chairman of the Board and President and Chairman Chief Executive Officer Chief Executive Officer WYNDHAM ROBERTSON The Daily Reflector The Bissell Companies, Inc. North Carolina Mutual Vice President, Communications Life Insurance Company University of North Carolina JOHN C. WHITAKER, JR. Chairman of the Board and Chief Executive Officer Inmar Enterprises, Inc.
SOUTH CAROLINA NATIONAL CORPORATION THE SOUTH CAROLINA NATIONAL BANK ANTHONY L. FURR FRANK W. BRUMLEY JAMES B. EDWARDS, D.M.D. ROBERT S. SMALL, JR. Chairman of the Board, President President President President and The Brumley Company Medical University of South Carolina AVTEX Properties, Inc. Chief Executive Officer W. T. CASSELS, JR. JAMES G. LINDLEY WILLIAM G. TAYLOR L. M. BAKER, JR. Chairman of the Board Chairman Emeritus President President and Southeastern Freight Lines, Inc. The Springs Company Chief Executive Officer JOE A. PADGETT Wachovia Corporation THOMAS C. COXE, III Executive Vice President BEATRICE R. THOMPSON, PH.D. Executive Vice President The South Carolina National Bank Coordinator of Psychological CHARLES J. BRADSHAW Sonoco Products Company Services President W. M. SELF Anderson School District Five Bradshaw Investments, Inc. FREDERICK B. DENT, JR. President and President Chief Executive Officer Mayfair Mills, Inc. Greenwood Mills, Inc.
22 23 WACHOVIA CORPORATION DIRECTORS AND OFFICERS DIRECTORS L. M. BAKER, JR. THOMAS K. HEARN, JR. JAMES W. JOHNSTON President and President Chairman and Chief Executive Officer Wake Forest University Chief Executive Officer R.J. Reynolds Tobacco Worldwide JOHN G. MEDLIN, JR. W. HAYNE HIPP Chairman of the Board President and W. DUKE KIMBRELL Chief Executive Officer Chairman of the Board and RUFUS C. BARKLEY, JR. The Liberty Corporation Chief Executive Officer Chairman of the Board Parkdale Mills, Inc. Cameron & Barkley Company ROBERT M. HOLDER, JR. Chairman of the Board HERMAN J. RUSSELL CRANDALL C. BOWLES Holder Corporation Chairman of the Board and Executive Vice President Chief Executive Officer Springs Industries, Inc. DONALD R. HUGHES H.J. Russell & Company Vice Chairman of the Board JOHN L. CLENDENIN and Chief Financial Officer SHERWOOD H. SMITH, JR. Chairman of the Board, Burlington Industries, Inc. Chairman of the Board and President and Chief Executive Officer Chief Executive Officer F. KENNETH IVERSON Carolina Power & Light Company BellSouth Corporation Chairman and Chief Executive Officer CHARLES MCKENZIE TAYLOR LAWRENCE M. GRESSETTE, JR. Nucor Corporation Chairman of the Board Chairman of the Board, Taylor & Mathis, Inc. President and Chief Executive Officer SCANA Corporation
EXECUTIVE OFFICERS L. M. BAKER, JR. ANTHONY L. FURR J. WALTER MCDOWELL President and Executive Vice President Executive Vice President Chief Executive Officer WALTER E. LEONARD, JR. G. JOSEPH PRENDERGAST JERRY D. CRAFT Executive Vice President Executive Vice President Executive Vice President KENNETH W. MCALLISTER RICHARD B. ROBERTS MICKEY W. DRY Executive Vice President Executive Vice President Executive Vice President General Counsel Treasurer Chief Credit Officer ROBERT S. MCCOY, JR. HUGH M. DURDEN Executive Vice President Executive Vice President Chief Financial Officer
23 24 BULK RATE U.S. POSTAGE PAID WACHOVIA CORPORATION (LOGO) Wachovia Corporation P.O. Box 3099 Winston-Salem, NC 27150 SHAREHOLDER INFORMATION - - -------------------------------------------------------------------------------- SHAREHOLDER SERVICES Dividend Reinvestment and Common Stock Purchase Plan - The plan provides common stockholders of record a regular way of investing cash dividends in additional shares at an average market price and/or investing optional cash payments without payment of brokerage commissions or service charges. Direct Deposit of Cash Dividends - Direct deposit is a safe, fast and timesaving method of receiving cash dividends through automatic deposit on date of payment to a checking, savings or money market account at any financial institution which participates in an Automated Clearing House. Address Change and Account Assistance - To help ensure timely receipt of shareholder mailings, please notify the corporation, in writing, immediately of any address change or correction. Use of your shareholder account number and a daytime phone number in all correspondence will be appreciated. For information about these services, requests for address changes and account assistance, please contact: H. Jo Barlow Wachovia Corporation Shareholder Services P.O. Box 3099 910-770-5787 Winston-Salem, NC 27150 OTHER INFORMATION Additional information about Wachovia Corporation or its member companies may be obtained by contacting: Robert S. McCoy, Jr., Chief Financial Officer, 910-770-5926 James C. Mabry, Investor Relations, 910-770-5788 Wachovia Corporation P.O. Box 3099 Winston-Salem, NC 27150 COMMON STOCK LISTING New York Stock Exchange Symbol: WB 24 25 GRAPHICS APPENDIX 1. TOTAL RETURN COMPARISON - The graph appearing on page 20 of the 1994 1st Quarter Report plots total returns for Wachovia, the S&P 500 and the KBW 50 Index. The base period of December 31, 1988 is equal to 100. Dividends are assumed to be reinvested quarterly. The data for both the S&P 500 and KBW 50 Index is weighted by market capitalization. The total returns for the years ended 1988-1993 and the quarter ended March 31, 1994 are listed below:
1st QTR 1988 1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ---- ---- Wachovia 100 134.34 143.59 206.31 250.14 253.34 242.29 S&P 500 100 131.68 127.58 166.46 179.14 197.19 189.71 KBW 50 100 118.91 85.40 135.17 172.23 181.77 178.53
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