-----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, fjn6P4IxuJQZP1yFPRKoAK7wL3wk6bkdhS5DplAdnrr+vEyuQMU9Ko2e6BdhL7Vd bG60cbHlJ5Dcf9PY5E56Mw== 0000950144-95-001337.txt : 19950517 0000950144-95-001337.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950144-95-001337 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: BSE SROS: MSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACHOVIA CORP/ NC CENTRAL INDEX KEY: 0000774203 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [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: 95538216 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: 10-Q 1 ____________________________________________________________________________________________________________________________________ 1995 FORM 10-Q
United States Securities and Exchange Commission Washington, DC 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 1995 Commission File Number 1-9021 WACHOVIA CORPORATION Incorporated in the State of North Carolina IRS Employer Identification Number 56-1473727 Address and Telephone: 301 North Main Street, Winston-Salem, North Carolina 27150, (910) 770-5000 191 Peachtree Street NE, Atlanta, Georgia 30303, (404) 332-5000 Securities registered pursuant to Section 12(b) of the Act: Common Stock -- $5.00 par value, which is registered on the New York Stock Exchange. As of March 31, 1995, Wachovia Corporation had 171,207,470 shares of common stock outstanding. Wachovia Corporation has (1) 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. DOCUMENTS INCORPORATED BY REFERENCE Portions of the quarterly report to shareholders for the quarter ended March 31, 1995 are incorporated by reference into Parts I and II as indicated in the table below. Except for parts of the Wachovia Corporation Quarterly Report expressly incorporated herein by reference, this Quarterly Report is not to be deemed filed with the Securities and Exchange Commission.
PART I PAGE Item 1 FINANCIAL INFORMATION Selected Period-End Data . . . . . . . . . . . . . . . . 2 Financial Highlights . . . . . . . . . . . . . . . . . . 3 Common Stock Data-Per Share . . . . . . . . . . . . . . . 3 Consolidated Statements of Condition . . . . . . . . . . 22 Consolidated Statements of Income . . . . . . . . . . . . 23 Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Cash Flows . . . . . . . . . . 25 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 5-21
PART II Item 6 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a) Exhibit 11: "Computation of Earnings per Common Share," is presented as Table 3 on page 7 of this report. Exhibit 19: "Unaudited Consolidated Financial Statements," listed in Part I, Item 1 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 of 1995 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. Exhibit 27: Financial Data Schedule (for SEC purposes only) b) Reports on Form 8-K: No reports on Form 8-K were filed during the three months ended March 31, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WACHOVIA CORPORATION May 15, 1995 ROBERT S. McCOY, JR. May 15, 1995 JOHN C. McLEAN, JR. -------------------- ------------------- Robert S. McCoy, Jr. John C. McLean, Jr. Executive Vice President Comptroller and Chief Financial Officer
2 /1/ REPORT TO SHAREHOLDERS AND FORM 10-Q FOR THE PERIOD ENDING MARCH 31, 1995 WACHOVIA ____________________________________________________________________________________________________________________________________ Dear Wachovia Shareholder: During the first quarter, the economy showed signs of slowing from the brisk pace of 1994 while price inflation remained moderate. Banking benefitted from continued good loan demand, but business competition remained intense. Wachovia achieved strong and sound earnings in this environment while continuing to assess and implement strategies for future growth. Net income per fully diluted share was $.82, up 14.3 percent from $.72 a year earlier. Net income was $142.2 million compared with $124.8 million and represented excellent annualized returns of 17.5 percent on shareholders' equity and 1.46 percent on assets. Average interest-earning assets increased $2.863 billion or 9 percent with loans accounting for substantially all the growth. Average loans were up $3.209 billion or 13.9 percent, led by commercial loans, credit cards and commercial mortgages. Average loans expanded $929 million or 3.7 percent from the fourth quarter of 1994. Average interest-bearing liabilities were higher by $2.906 billion or 11 percent. Funding growth primarily came from medium- and short-term bank notes with deposits showing modest gains. In March, the corporation successfully attracted over $1 billion in deposits in a one-day CD sale at selected branch offices and through access to Wachovia On-Call, the 24-hour telephone sales and service center. Taxable equivalent net interest income rose $30.5 million or 8.9 percent, pushed upward by increased loans outstanding, particularly in the commercial area. The net yield on interest-earning assets was down 1 basis point both year over year and from the fourth quarter of 1994 with the average rate paid increasing more than the average rate earned. Both loan and deposit pricing competition should continue throughout the remainder of the year, intensifying downward pressure on the interest rate margin. Other operating revenue was higher by $12.2 million or 8.4 percent. Gains were achieved primarily in credit card income, deposit account service charges, trading account profits and in other service charges and fees. Noninterest expense was up $13 million or 4.8 percent with the corporation's overhead ratio declining to 53.4 percent from 55.4 percent in the same period of 1994. Wachovia's credit quality and capital ratios remained excellent. At March 31, 1995, nonperforming assets were $93 million or .35 percent of loans and foreclosed property compared with $126 million or .53 percent a year earlier and $101 million or .39 percent at year-end 1994. Net loan losses totaled $19.4 million or .30 percent annualized of average loans versus $17.1 million or .30 percent in the same three months a year earlier and $19.4 million or .31 percent in the final period of 1994. Excluding credit cards, net loan losses were $1.2 million or .02 percent compared with $3.9 million or .08 percent in the same period of 1994. The provision for loan losses was $21.8 million for the quarter. At March 31, 1995, the allowance for loan losses totaled $409 million or 1.53 percent of period-end loans and 569 percent of nonperforming loans. Shareholders' equity was 8.47 percent of assets, while the Tier I and total capital ratios were 9.35 percent and 12.60 percent, respectively. Pressures impacting our business are likely to intensify as the economic expansion moderates and financial services competition broadens through evolving technology. Wachovia continues to assess its business activities, strategies and technologies to maintain its position among the industry's leaders. Additional comments on Wachovia and the business environment can be found in my Annual Shareholders' Meeting remarks beginning on page 26. Your continued support and confidence are appreciated. Sincerely, L. M. Baker, Jr. Chief Executive Officer May 5, 1995
3 ____________________________________________________________________________________________________________________________________ NEWS DEVELOPMENTS
- - At the corporation's Annual Shareholders' Meeting on April 28, seven directors were elected and the appointment of Ernst & Young LLP as independent auditors for 1995 was ratified. Crandall C. Bowles, Hayne Hipp, James W. Johnston, Wyndham Robertson, Sherwood H. Smith, Jr. and Charles McKenzie Taylor were elected for three-year terms expiring in 1998. In addition, Donald R. Hughes was elected for a two-year term expiring in 1997. W. Duke Kimbrell retired as a director of Wachovia Corporation after serving with distinction since 1988 and since 1983 as a director of the subsidiary Wachovia Corporation of North Carolina. - - Also at the shareholders' meeting, the board of directors declared a second quarter dividend of $.33 per share, payable June 1, 1995 to shareholders of record on May 8. The dividend is higher by 10 percent from $.30 per share paid in the same quarter of 1994. For the year to date, dividends will total $.66 per share, an increase of 10 percent from $.60 per share paid in the first six months of 1994. - - In March, Wachovia held a one-day sale on certificates of deposit at selected branch offices throughout Georgia, North Carolina and South Carolina. The one-day event also was conducted through Wachovia On-Call, the corporation's 24-hour telephone sales and service center. The sale was open only to residents of Wachovia's three home states and attracted funds of over $1 billion with approximately 86 percent representing new money. - - In April, Wachovia announced it has signed a definitive agreement to sell its $9 billion residential mortgage loan servicing portfolio to GE Capital Mortgage Services, Inc. The transaction is expected to close by May 31 and involves only Wachovia's servicing portfolio. Wachovia will continue to offer a full line of mortgage loan products and services. The decision to sell the portfolio was based on a strategic assessment of the servicing business' future, competitive industry trends and the long-term need for investments in technology. - - Wachovia began offering in early March a new business banking account designed specifically for small to mid-size companies with annual revenues of $10 million or less. The Wachovia Business Choice Account provides a standard package of the most commonly used business products as well as several optional products and services small businesses can select to fit their individual banking needs. - - Wachovia has forged strategic alliances with two highly regarded international banking institutions helping to extend services worldwide for Wachovia's corporate customers involved in global trade. An alliance with the Hongkong Shanghai Banking Corporation allows Wachovia to electronically issue import letters of credit to all Hongkong Shanghai Banking Corporation branches in the Pacific Rim except Japan and Australia. In addition, through Bank Mendes Gans of Amsterdam, Wachovia will provide multilateral netting services, giving corporate treasurers a cash management tool for simplifying and organizing the settlement of intercompany payments among international subsidiaries. - - Wachovia will participate with Visa in a stored-value card pilot program during the 1996 Summer Olympic Games in Atlanta. Integrated circuit cards, also referred to as chip or smart cards, will be used to provide the stored value functionality, which has a predetermined cash value embedded in the microcomputer chip. These cards can be used in place of cash at participating merchants and then discarded once their value is depleted. Wachovia's long-term strategy for smart cards also includes the usage of this technology with proprietary debit and credit cards to include reloadable capability for cards with the stored value feature.
____________________________________________________________________________________________________________________________________ SELECTED PERIOD-END DATA March 31 March 31 1995 1994 -------- -------- Banking offices: North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 219 Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 128 South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 156 --- --- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492 503 === === Automated banking machines: North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 260 Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 180 South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 168 --- --- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662 608 === === Employees (full-time equivalent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,577 15,492 Common stock shareholders of record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,643 28,239 Common shares outstanding (thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,207 171,416
2 4
____________________________________________________________________________________________________________________________________ FINANCIAL HIGHLIGHTS Three Months Ended March 31 Percent 1995 1994 Change -------- -------- ------- EARNINGS AND DIVIDENDS (thousands, except per share data) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,156 $124,799 13.9 Cash dividends paid on common stock . . . . . . . . . . . . . . . . 56,458 51,443 9.7 Payout ratio (total cash dividends / net income) . . . . . . . . . 39.7% 41.2% Net income per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .83 $ .72 14.3 Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ .82 $ .72 14.3 Cash dividends paid per common share . . . . . . . . . . . . . . . $ .33 $ .30 10.0 Average primary shares outstanding . . . . . . . . . . . . . . . . 172,205 172,739 (.3) Average fully diluted shares outstanding . . . . . . . . . . . . . 172,760 173,378 (.4) Annualized return on average assets . . . . . . . . . . . . . . . . 1.46% 1.40% Annualized return on average shareholders' equity . . . . . . . . . 17.32 16.65 Including average unrealized gains (losses) on securities available-for-sale, net of tax:* Annualized return on average assets . . . . . . . . . . . . . . . 1.46 1.40 Annualized return on average shareholders' equity . . . . . . . . 17.48 16.53 BALANCE SHEET DATA AT PERIOD-END (millions, except per share data) Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,223 $ 36,350 10.7 Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . 35,814 32,370 10.6 Loans -- net of unearned income . . . . . . . . . . . . . . . . . . 26,728 23,662 13.0 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,110 22,279 3.7 Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . 30,558 26,853 13.8 Shareholders' equity** . . . . . . . . . . . . . . . . . . . . . . 3,405 3,094 10.1 Shareholders' equity to total assets . . . . . . . . . . . . . . . 8.47% 8.51% Risk-based capital ratios: Tier I capital . . . . . . . . . . . . . . . . . . . . . . . . . 9.35 9.64 Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . 12.60 13.52 Per share: Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19.89 $ 18.05 10.2 Common stock closing price (NYSE) . . . . . . . . . . . . . . . . 35.50 31.75 11.8
*Includes unrealized gains (losses) on securities available-for-sale, net of tax, of ($30) million and $22 million for the first quarters of 1995 and 1994, respectively **Includes unrealized gains (losses) on securities available-for-sale, net of tax, of ($10) million and $4 million for the first quarters of 1995 and 1994, respectively
____________________________________________________________________________________________________________________________________ COMMON STOCK DATA -- PER SHARE 1995 1994 ------- ------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ------- ------- ------- ------- ------- Market value: Period-end . . . . . . . . . . . . . . $ 35 1/2 $ 32 1/4 $ 32 1/4 $ 33 1/8 $ 31 3/4 High. . . . . . . . . . . . . . . . . . 36 1/2 34 1/2 35 1/4 35 3/8 35 1/8 Low . . . . . . . . . . . . . . . . . . 32 31 1/2 31 3/8 30 3/4 30 1/8 Book value at period-end . . . . . . . . 19.89 19.23 18.83 18.40 18.05 Dividend . . . . . . . . . . . . . . . . .33 .33 .30 .30 .30 Price/earnings ratio* . . . . . . . . . . 11.0x 10.3x 10.7x 11.3x 11.1x
*Based on most recent twelve months net income per primary share and period-end stock price 3 5 INTENTIONALLY LEFT BLANK 4 6
____________________________________________________________________________________________________________________________________ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ____________________________________________________________________________________________________________________________________ FINANCIAL SUMMARY TABLE 1 ____________________________________________________________________________________________________________________________________ Twelve Months 1995 1994 Ended ------- ----------------------------------------- March 31 First Fourth Third Second First 1995 Quarter Quarter Quarter Quarter Quarter ---------- ------- -------- -------- -------- -------- SUMMARY OF OPERATIONS (thousands, except per share data) Interest income -- taxable equivalent . . . . . . . . . $2,619,539 $715,414 $677,097 $632,359 $594,669 $558,329 Interest expense . . . . . . . . . . . . . . . . . . . 1,164,977 342,596 305,564 274,329 242,488 216,007 ---------- -------- -------- -------- -------- -------- Net interest income -- taxable equivalent . . . . . . . 1,454,562 372,818 371,533 358,030 352,181 342,322 Taxable equivalent adjustment . . . . . . . . . . . . . 99,306 23,622 25,893 24,909 24,882 24,476 ---------- -------- -------- -------- -------- -------- Net interest income . . . . . . . . . . . . . . . . . . 1,355,256 349,196 345,640 333,121 327,299 317,846 Provision for loan losses . . . . . . . . . . . . . . . 75,792 21,788 19,539 18,123 16,342 17,759 ---------- -------- -------- -------- -------- -------- Net interest income after provision for loan losses . . 1,279,464 327,408 326,101 314,998 310,957 300,087 Other operating revenue . . . . . . . . . . . . . . . . 616,656 157,093 154,723 151,541 153,299 144,869 Investment securities gains (losses) . . . . . . . . . 2,619 (129) 2,094 433 221 572 ---------- -------- -------- -------- -------- -------- Total other income . . . . . . . . . . . . . . . . . . 619,275 156,964 156,817 151,974 153,520 145,441 Personnel expense . . . . . . . . . . . . . . . . . . . 567,456 144,963 141,566 139,695 141,232 141,014 Other expense . . . . . . . . . . . . . . . . . . . . . 543,939 138,069 140,959 131,598 133,313 129,036 ---------- -------- -------- -------- -------- -------- Total other expense . . . . . . . . . . . . . . . . . . 1,111,395 283,032 282,525 271,293 274,545 270,050 Income before income taxes . . . . . . . . . . . . . . 787,344 201,340 200,393 195,679 189,932 175,478 Applicable income taxes* . . . . . . . . . . . . . . . 230,929 59,184 58,267 57,687 55,791 50,679 ---------- -------- -------- -------- -------- -------- Net income . . . . . . . . . . . . . . . . . . . . . . $ 556,415 $142,156 $142,126 $137,992 $134,141 $124,799 ========== ======== ======== ======== ======== ======== Net income per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . $ 3.24 $ .83 $ .83 $ .80 $ .78 $ .72 Fully diluted . . . . . . . . . . . . . . . . . . . . $ 3.22 $ .82 $ .82 $ .80 $ .78 $ .72 Cash dividends paid per common share . . . . . . . . . $ 1.26 $ .33 $ .33 $ .30 $ .30 $ .30 Average primary shares outstanding . . . . . . . . . . 172,207 172,205 171,973 172,097 172,558 172,739 Average fully diluted shares outstanding . . . . . . . 172,802 172,760 172,552 172,701 173,197 173,378 SELECTED AVERAGE BALANCES (millions) Total assets . . . . . . . . . . . . . . . . . . . . . $ 37,799 $ 38,902 $ 38,146 $ 37,409 $ 36,753 $ 35,778 Loans -- net of unearned income . . . . . . . . . . . . 25,004 26,219 25,290 24,553 23,969 23,010 Investment securities** . . . . . . . . . . . . . . . . 7,664 7,612 7,582 7,695 7,767 7,690 Other interest-earning assets . . . . . . . . . . . . . 832 815 877 809 829 1,083 Total interest-earning assets . . . . . . . . . . . . . 33,500 34,646 33,749 33,057 32,565 31,783 Interest-bearing deposits . . . . . . . . . . . . . . . 17,094 17,354 17,040 17,020 16,964 16,694 Short-term borrowed funds . . . . . . . . . . . . . . . 6,537 7,390 6,619 6,115 6,038 6,148 Long-term debt . . . . . . . . . . . . . . . . . . . . 4,597 4,674 4,795 4,637 4,281 3,670 Total interest-bearing liabilities . . . . . . . . . . 28,228 29,418 28,454 27,772 27,283 26,512 Noninterest-bearing deposits . . . . . . . . . . . . . 5,368 5,302 5,471 5,364 5,333 5,366 Total deposits . . . . . . . . . . . . . . . . . . . . 22,462 22,656 22,511 22,384 22,297 22,060 Shareholders' equity . . . . . . . . . . . . . . . . . 3,153 3,253 3,186 3,114 3,063 3,021 RATIOS (averages) Annualized net loan losses to loans . . . . . . . . . . .29% .30% .31% .29% .26% .30% Annualized net yield on interest-earning assets . . . . 4.34 4.36 4.37 4.30 4.34 4.37 Shareholders' equity to: Total assets . . . . . . . . . . . . . . . . . . . . 8.34 8.36 8.35 8.32 8.33 8.44 Net loans . . . . . . . . . . . . . . . . . . . . . . 12.82 12.60 12.80 12.89 13.00 13.36 Annualized return on assets . . . . . . . . . . . . . . 1.47 1.46 1.49 1.48 1.46 1.40 Annualized return on shareholders' equity . . . . . . . 17.64 17.48 17.84 17.73 17.52 16.53 *Income taxes applicable to securities transactions were $1,035, ($67), $840, $173, $89 and $226, respectively **Reported at amortized cost; excludes pretax unrealized gains (losses) on securities available-for-sale of ($33) for the twelve months ended March 31, 1995, ($49) for the first quarter of 1995, ($44) for the fourth quarter of 1994, ($28) for the third quarter of 1994, ($14) for the second quarter of 1994 and $37 for the first quarter of 1994 ____________________________________________________________________________________________________________________________________
5 7 RESULTS OF OPERATIONS OVERVIEW Wachovia Corporation ("Wachovia") is a southeastern interstate bank holding company with dual headquarters in Atlanta, Georgia, and Winston-Salem, North Carolina. Principal banking subsidiaries are Wachovia Bank of Georgia, N.A., Wachovia Bank of North Carolina, N.A., and Wachovia Bank of South Carolina, N.A. The First National Bank of Atlanta provides credit card services for Wachovia's affiliated banks. The economy slowed somewhat during the first quarter of 1995, impeded by the lagging impact of successive interest rate increases throughout 1994. Despite the slower-paced environment, business conditions generally remained favorable. Seasonally adjusted unemployment rates in Wachovia's three primary operating states of Georgia, North Carolina and South Carolina averaged 4.4 percent, 4.1 percent and 5.1 percent, respectively, for the period versus 5.5 percent nationwide. Wachovia's net income for the first quarter of 1995 totaled $142.156 million or $.82 per fully diluted share compared with $124.799 million or $.72 per fully diluted share in the same period of 1994. Annualized returns were 17.5 percent on shareholders' equity and 1.46 percent on assets versus 16.5 percent and 1.40 percent, respectively, a year earlier. The equity and assets used in computing returns include unrealized gains or losses, net of tax, on securities available-for-sale. Expanded discussion of operating results and the corporation's financial condition is presented in the following narrative and tables. Interest income is stated on a taxable equivalent basis which is adjusted for the tax-favored status of earnings from certain loans and investments. References to changes in assets and liabilities represent daily average levels unless otherwise noted.
___________________________________________________________________________________________________________________________ COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2 ___________________________________________________________________________________________________________________________ 1995 1994 First First Quarter Quarter Change ------- ------- ------ Interest income -- taxable equivalent . . . . . . . . . . $4.15 $3.23 $.92 Interest expense . . . . . . . . . . . . . . . . . . . . . 1.99 1.25 .74 ----- ----- ---- Net interest income -- taxable equivalent . . . . . . . . 2.16 1.98 .18 Taxable equivalent adjustment . . . . . . . . . . . . . . .13 .14 (.01) ----- ----- ---- Net interest income . . . . . . . . . . . . . . . . . . . 2.03 1.84 .19 Provision for loan losses . . . . . . . . . . . . . . . . .13 .10 .03 ----- ----- ---- Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . . . 1.90 1.74 .16 Other operating revenue . . . . . . . . . . . . . . . . . .91 .84 .07 Investment securities gains (losses) . . . . . . . . . . . -- -- -- ----- ----- ---- Total other income . . . . . . . . . . . . . . . . . . . . .91 .84 .07 Personnel expense . . . . . . . . . . . . . . . . . . . . .84 .82 .02 Other expense . . . . . . . . . . . . . . . . . . . . . . .80 .75 .05 ----- ----- ---- Total other expense . . . . . . . . . . . . . . . . . . . 1.64 1.57 .07 Income before income taxes . . . . . . . . . . . . . . . . 1.17 1.01 .16 Applicable income taxes . . . . . . . . . . . . . . . . . .34 .29 .05 ----- ----- ---- Net income . . . . . . . . . . . . . . . . . . . . . . . . $ .83 $ .72 $.11 ===== ===== ==== ___________________________________________________________________________________________________________________________
6 8
___________________________________________________________________________________________________________________________ COMPUTATION OF EARNINGS PER COMMON SHARE TABLE 3 (thousands, except per share) ___________________________________________________________________________________________________________________________ Three Months Three Months Ended Ended March 31 March 31 1995 1994 ------------ ----------- PRIMARY Average common shares outstanding . . . . . . . . . . . . . . . . 171,071 171,448 Dilutive common stock options -- based on treasury stock method using average market price . . . . . . . . . . . . 1,059 1,222 Dilutive common stock awards -- based on treasury stock method using average market price . . . . . . . . . . . . 75 69 -------- -------- Average primary shares outstanding . . . . . . . . . . . . . . . . 172,205 172,739 ======== ======== Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,156 $124,799 ======== ======== Net income per common share -- primary . . . . . . . . . . . . . . $ .83 $ .72 FULLY DILUTED Average common shares outstanding . . . . . . . . . . . . . . . . 171,071 171,448 Dilutive common stock options -- based on treasury stock method using higher of period-end market price or average market price . . . . . . . . . . . . . . 1,139 1,222 Dilutive common stock awards -- based on treasury stock method using higher of period-end market price or average market price . . . . . . . . . . . . . . 83 69 Convertible notes assumed converted . . . . . . . . . . . . . . . 467 639 -------- -------- Average fully diluted shares outstanding . . . . . . . . . . . . . 172,760 173,378 ======== ======== Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,156 $124,799 Add interest on convertible notes after taxes . . . . . . . . . . 96 133 -------- -------- Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . $142,252 $124,932 ======== ======== Net income per common share -- fully diluted . . . . . . . . . . . $ .82 $ .72 ___________________________________________________________________________________________________________________________
NET INTEREST INCOME Taxable equivalent net interest income for the first quarter of 1995 rose $30.496 million or 8.9 percent in comparison with the same period a year earlier and was up $1.285 million or less than 1 percent from the final three months of 1994 with two fewer accrual days being recorded in the first quarter. Gains reflected good loan growth moderated by loan and deposit pricing pressures as the average rate paid from both periods increased more than the average rate earned. The net yield on interest-earning assets (net interest income as a percentage of average interest-earning assets) decreased 1 basis point both year over year and from the fourth quarter of 1994. The corporation anticipates pricing pressures both on loans and deposits to continue throughout the remainder of the year, adversely affecting the interest rate margin. Taxable equivalent interest income increased $157.085 million or 28.1 percent from the same period in 1994. Average interest-earning assets expanded $2.863 billion or 9 percent, while the average rate earned rose 125 basis points. Compared with the preceding three months, average interest-earning assets in the first quarter of 1995 were higher by $897 million or 2.7 percent, with the average rate earned increasing 41 basis points. Loan growth continued to remain strong, accounting for substantially all the increase in interest-earning assets. Average loans expanded $3.209 billion or 13.9 percent year over year and $929 million or 3.7 percent from the previous quarter. Commercial loans, including related real estate categories, were up $2.349 billion or 18.6 percent from the same three months a year earlier. Gains were led by regular commercial loans, which rose $2.022 billion or 30.3 percent, and by commercial mortgages, which increased $301 million or 9.2 percent. Foreign loans, construction loans and lease financing also were higher, while tax-exempt loans declined. Based on regulatory definitions, commercial real estate totaled $4.135 billion or 15.5 percent of the corporation's loan portfolio at 7 9
____________________________________________________________________________________________________________________________________ NET INTEREST INCOME AND AVERAGE BALANCES TABLE 4 ____________________________________________________________________________________________________________________________________ Twelve Months 1995 1994 Ended -------- ---------------------------------------------- March 31 First Fourth Third Second First 1995 Quarter Quarter Quarter Quarter Quarter ---------- -------- -------- -------- -------- -------- NET INTEREST INCOME -- TAXABLE EQUIVALENT (thousands) Interest income: Loans . . . . . . . . . . . . . . . . . . . . . . . $2,062,571 $571,334 $537,181 $495,361 $458,695 $422,388 Investment securities . . . . . . . . . . . . . . . 508,749 130,210 126,304 125,922 126,313 125,663 Interest-bearing bank balances . . . . . . . . . . 538 101 110 142 185 160 Federal funds sold and securities purchased under resale agreements . . . . . . . . 5,773 1,202 1,382 1,347 1,842 3,111 Trading account assets . . . . . . . . . . . . . . 41,908 12,567 12,120 9,587 7,634 7,007 ---------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . . 2,619,539 715,414 677,097 632,359 594,669 558,329 Interest expense: Interest-bearing demand . . . . . . . . . . . . . . 56,220 14,367 14,443 13,954 13,456 13,235 Savings and money market savings . . . . . . . . . 180,755 50,578 47,438 44,811 37,928 34,284 Savings certificates . . . . . . . . . . . . . . . 248,465 74,870 63,416 57,023 53,156 53,465 Large denomination certificates . . . . . . . . . . 75,259 20,011 18,288 18,453 18,507 15,057 Time deposits in foreign offices . . . . . . . . . 26,545 7,507 7,898 7,042 4,098 3,280 Short-term borrowed funds . . . . . . . . . . . . . 329,336 108,389 88,115 71,495 61,337 51,625 Long-term debt . . . . . . . . . . . . . . . . . . 248,397 66,874 65,966 61,551 54,006 45,061 ---------- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . . 1,164,977 342,596 305,564 274,329 242,488 216,007 ---------- -------- -------- -------- -------- -------- Net interest income . . . . . . . . . . . . . . . . . $1,454,562 $372,818 $371,533 $358,030 $352,181 $342,322 ========== ======== ======== ======== ======== ======== Annualized net yield on interest-earning assets . . . . . . . . . . . . . . 4.34% 4.36% 4.37% 4.30% 4.34% 4.37% AVERAGE BALANCES (millions) Assets: Loans -- net of unearned income . . . . . . . . . . $ 25,004 $ 26,219 $ 25,290 $ 24,553 $ 23,969 $ 23,010 Investment securities . . . . . . . . . . . . . . . 7,664 7,612 7,582 7,695 7,767 7,690 Interest-bearing bank balances . . . . . . . . . . 10 6 7 11 18 17 Federal funds sold and securities purchased under resale agreements . . . . . . . . 118 77 100 115 182 394 Trading account assets . . . . . . . . . . . . . . 704 732 770 683 629 672 ---------- -------- -------- -------- -------- -------- Total interest-earning assets . . . . . . . . . 33,500 34,646 33,749 33,057 32,565 31,783 Cash and due from banks . . . . . . . . . . . . . . 2,435 2,502 2,544 2,350 2,346 2,387 Premises and equipment . . . . . . . . . . . . . . 529 546 536 523 510 502 Other assets . . . . . . . . . . . . . . . . . . . 1,774 1,662 1,767 1,912 1,754 1,476 Unrealized gains (losses) on securities available-for-sale . . . . . . . . . . . . . . . (33) (49) (44) (28) (14) 37 Allowance for loan losses . . . . . . . . . . . . . (406) (405) (406) (405) (408) (407) ---------- -------- -------- -------- -------- -------- Total assets . . . . . . . . . . . . . . . . . $ 37,799 $ 38,902 $ 38,146 $ 37,409 $ 36,753 $ 35,778 ========== ======== ======== ======== ======== ======== Liabilities and shareholders' equity: Interest-bearing demand . . . . . . . . . . . . . . $ 3,360 $ 3,288 $ 3,364 $ 3,367 $ 3,420 $ 3,385 Savings and money market savings . . . . . . . . . 6,119 6,060 6,114 6,197 6,103 6,074 Savings certificates . . . . . . . . . . . . . . . 5,474 5,917 5,457 5,247 5,283 5,355 Large denomination certificates . . . . . . . . . . 1,583 1,502 1,493 1,599 1,736 1,463 Time deposits in foreign offices . . . . . . . . . 558 587 612 610 422 417 Short-term borrowed funds . . . . . . . . . . . . . 6,537 7,390 6,619 6,115 6,038 6,148 Long-term debt . . . . . . . . . . . . . . . . . . 4,597 4,674 4,795 4,637 4,281 3,670 ---------- -------- -------- -------- -------- -------- Total interest-bearing liabilities . . . . . . 28,228 29,418 28,454 27,772 27,283 26,512 Demand deposits in domestic offices . . . . . . . . . 5,306 5,275 5,424 5,277 5,245 5,302 Demand deposits in foreign offices . . . . . . . . . 5 6 6 5 5 5 Noninterest-bearing time deposits in domestic offices . . . . . . . . . . . . . . . . . 57 21 41 82 83 59 Other liabilities . . . . . . . . . . . . . . . . . . 1,050 929 1,035 1,159 1,074 879 Shareholders' equity . . . . . . . . . . . . . . . . 3,153 3,253 3,186 3,114 3,063 3,021 ---------- -------- -------- -------- -------- -------- Total liabilities and shareholders' equity . . $ 37,799 $ 38,902 $ 38,146 $ 37,409 $ 36,753 $ 35,778 ========== ======== ======== ======== ======== ======== Total deposits . . . . . . . . . . . . . . . . . . . $ 22,462 $ 22,656 $ 22,511 $ 22,384 $ 22,297 $ 22,060 ____________________________________________________________________________________________________________________________________
8 10 March 31, 1995, and consisted of $3.621 billion in commercial mortgages and $514 million in construction loans. Comparable amounts at first quarter-close 1994 were $3.800 billion in commercial real estate, representing 16.1 percent of total loans with $3.323 billion in commercial mortgages and $477 million in construction loans. At year-end 1994, commercial mortgages were $3.484 billion and construction loans were $553 million, representing a combined 15.6 percent of total loans. Retail loans, including residential mortgages, increased $860 million or 8.3 percent from the 1994 first quarter, led by credit cards, which rose $792 million or 25.1 percent. Compared with the fourth quarter of 1994, credit card loans in the first three months of 1995 were higher by $141 million or 3.7 percent. In February, Wachovia added to its popular prime-based Visa and MasterCard pricing options with the introduction of Prime For Life(SM) and the accompanying Prime Rebate Plan(SM). The new option offers an interest rate always maintained at prime and is designed for consumers who regularly carry a balance of $1,000 or more. At March 31, 1995, managed credit card outstandings totaled $4.081 billion, including $125 million of net securitized loans, versus $3.298 billion a year earlier and $4.094 billion at year-end 1994. Residential mortgages, direct retail loans and other revolving credit also increased for the period. Indirect retail loans, primarily consisting of automobile sales financing, were lower by $71 million or 2.9 percent reflecting softer demand due, in part, to the impact of higher interest rates. Investment securities decreased modestly year over year and were up slightly from the fourth quarter of 1994 with holdings being reduced primarily in available-for-sale mortgage backed securities. At March 31, 1995, securities held-to-maturity totaled $4.525 billion and securities available-for-sale were $3.760 billion as detailed in the following. $ in thousands Securities available-for-sale at market value: U.S. Government and agency . . . . . . . . . . . . . . . . . . . $2,613,853 Mortgage backed securities . . . . . . . . . . . . . . . . . . . 902,527 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,521 ---------- Total securities available-for-sale . . . . . . . . . . . . . 3,759,901 Securities held-to-maturity: U.S. Government and agency . . . . . . . . . . . . . . . . . . . 2,491,882 Mortgage backed securities . . . . . . . . . . . . . . . . . . . 1,525,430 State and municipal . . . . . . . . . . . . . . . . . . . . . . 492,843 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,532 ---------- Total securities held-to-maturity . . . . . . . . . . . . . . 4,524,687 ---------- Total investment securities . . . . . . . . . . . . . . . . . $8,284,588 ==========
The market value of securities held-to-maturity was $4.559 billion at March 31, 1995, representing a $34 million appreciation over book value. Securities available-for-sale marked to fair market value under Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FASB 115), had an unrealized loss of $16.613 million, pretax, and $10.111 million, net of tax, at March 31, 1995. For the first quarter of 1995, average securities available-for-sale had an unrealized loss of $48.771 million, pretax, and $29.681 million, net of tax. Interest expense was higher by $126.589 million or 58.6 percent year over year. Average interest-bearing liabilities increased $2.906 billion or 11 percent, while the average rate paid rose 142 basis points. Interest expense was up a more moderate $37.032 million or 12.1 percent from the last three months of 1994, with average interest-bearing liabilities increasing $964 million or 3.4 percent and the average rate paid higher by 46 basis points. Interest-bearing time deposits in the first quarter of 1995 grew $660 million or 4 percent from the same period a year earlier and were higher by $314 million or 1.8 percent from the preceding quarter. Savings 9 11
____________________________________________________________________________________________________________________________________ TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- FIRST QUARTER* TABLE 5 ____________________________________________________________________________________________________________________________________ Variance Average Volume Average Rate Interest Attributable to - --------------- ------------ ------------------- ------------------ 1995 1994 1995 1994 1995 1994 Variance Rate Volume - ------ ------- ----- ----- -------- -------- -------- ------- -------- (Millions) (Thousands) INTEREST INCOME Loans: $ 8,692 $ 6,670 7.56 5.04 Commercial . . . . . . . . . $162,083 $ 82,962 $ 79,121 $ 49,230 $29,891 1,769 1,982 9.65 8.55 Tax-exempt . . . . . . . . . 42,077 41,783 294 5,048 (4,754) - ------- ------- -------- -------- -------- 10,461 8,652 7.91 5.85 Total commercial . . . . 204,160 124,745 79,415 49,908 29,507 733 714 8.90 8.09 Direct retail . . . . . . . . 16,075 14,258 1,817 1,440 377 2,353 2,424 7.98 7.75 Indirect retail . . . . . . . 46,307 46,326 (19) 1,356 (1,375) 3,953 3,161 12.29 10.89 Credit card . . . . . . . . . 119,797 84,865 34,932 11,834 23,098 340 331 12.53 11.17 Other revolving credit . . . 10,526 9,117 1,409 1,140 269 - ------- ------- -------- -------- -------- 7,379 6,630 10.59 9.46 Total retail . . . . . . 192,705 154,566 38,139 19,634 18,505 532 501 9.66 8.03 Construction . . . . . . . . 12,671 9,913 2,758 2,107 651 3,552 3,251 8.63 7.17 Commercial mortgages . . . . 75,588 57,515 18,073 12,420 5,653 3,851 3,740 8.18 7.77 Residential mortgages . . . . 77,654 71,660 5,994 3,831 2,163 - ------- ------- -------- -------- -------- 7,935 7,492 8.48 7.53 Total real estate . . . . 165,913 139,088 26,825 18,277 8,548 191 159 7.95 8.16 Lease financing . . . . . . . 3,741 3,205 536 (85) 621 253 77 7.72 4.11 Foreign . . . . . . . . . . . 4,815 784 4,031 1,125 2,906 - ------- ------- -------- -------- -------- 26,219 23,010 8.84 7.44 Total loans . . . . . . . 571,334 422,388 148,946 85,341 63,605 Investment securities: Held-to-maturity: 2,493 2,208 6.89 6.70 U.S. Government and agency. 42,337 36,488 5,849 1,027 4,822 Mortgage backed 1,250 1,159 8.02 7.58 securities . . . . . . . 24,724 21,662 3,062 1,315 1,747 506 631 12.20 12.64 State and municipal . . . . 15,208 19,663 (4,455) (662) (3,793) 14 14 6.04 6.09 Other . . . . . . . . . . . 215 210 5 (2) 7 - ------- ------- -------- -------- -------- Total securities 4,263 4,012 7.85 7.89 held-to-maturity . . . 82,484 78,023 4,461 (394) 4,855 Available-for-sale:** 2,321 2,358 5.98 5.66 U.S. Government and agency. 34,219 32,890 1,329 1,850 (521) Mortgage backed 786 1,015 4.97 4.67 securities . . . . . . . 9,622 11,694 (2,072) 695 (2,767) 242 305 6.52 4.07 Other . . . . . . . . . . . 3,885 3,056 829 1,559 (730) - ------- ------- -------- -------- -------- Total securities 3,349 3,678 5.78 5.25 available-for-sale . . 47,726 47,640 86 4,548 (4,462) - ------- ------- -------- -------- -------- Total investment 7,612 7,690 6.94 6.63 securities . . . . . . 130,210 125,663 4,547 5,835 (1,288) Interest-bearing bank 6 17 7.16 3.82 balances . . . . . . . . . . 101 160 (59) 87 (146) Federal funds sold and securities purchased 77 394 6.32 3.20 under resale agreements . . . 1,202 3,111 (1,909) 1,694 (3,603) 732 672 6.96 4.23 Trading account assets . . . . 12,567 7,007 5,560 4,878 682 - ------- ------- -------- -------- -------- Total interest-earning $34,646 $31,783 8.37 7.12 assets . . . . . . . . 715,414 558,329 157,085 103,800 53,285 ======= ======= INTEREST EXPENSE $ 3,288 $ 3,385 1.77 1.59 Interest-bearing demand . . . . 14,367 13,235 1,132 1,522 (390) Savings and money market 6,060 6,074 3.38 2.29 savings . . . . . . . . . . . 50,578 34,284 16,294 16,376 (82) 5,917 5,355 5.13 4.05 Savings certificates . . . . . 74,870 53,465 21,405 15,370 6,035 Large denomination 1,502 1,463 5.40 4.17 certificates . . . . . . . . 20,011 15,057 4,954 4,533 421 - ------- ------- -------- -------- -------- Total time deposits 16,767 16,277 3.87 2.89 in domestic offices . . 159,826 116,041 43,785 40,195 3,590 Time deposits in foreign 587 417 5.19 3.19 offices . . . . . . . . . . . 7,507 3,280 4,227 2,562 1,665 - ------- ------- -------- -------- -------- 17,354 16,694 3.91 2.90 Total time deposits . . . 167,333 119,321 48,012 43,129 4,883 Federal funds purchased and securities sold under 5,457 4,857 5.96 3.46 repurchase agreements . . . . 80,156 41,461 38,695 33,037 5,658 419 604 5.51 3.20 Commercial paper . . . . . . . 5,694 4,758 936 2,710 (1,774) Other short-term borrowed 1,514 687 6.04 3.19 funds . . . . . . . . . . . . 22,539 5,406 17,133 7,283 9,850 - ------- ------- -------- -------- -------- Total short-term 7,390 6,148 5.95 3.41 borrowed funds . . . . 108,389 51,625 56,764 44,679 12,085 3,838 2,880 5.56 4.53 Bank notes . . . . . . . . . . 52,590 32,165 20,425 8,289 12,136 836 790 6.92 6.62 Other long-term debt . . . . . 14,284 12,896 1,388 603 785 - ------- ------- -------- -------- -------- 4,674 3,670 5.80 4.98 Total long-term debt . . 66,874 45,061 21,813 8,210 13,603 - ------- ------- -------- -------- -------- Total interest-bearing $29,418 $26,512 4.72 3.30 liabilities . . . . . . 342,596 216,007 126,589 100,845 25,744 ======= ======= ----- ----- -------- -------- -------- 3.65 3.82 Interest rate spread ===== ===== Net yield on interest-earning assets and net interest 4.36 4.37 income . . . . . . . . . . . $372,818 $342,322 $ 30,496 (311) 30,807 ===== ===== ======== ======== ======== ____________________________________________________________________________________________________________________________________
*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 (losses) of ($49) million and $37 million in 1995 and 1994, respectively 10 12 certificates accounted for the majority of the increase from both periods, rising $562 million or 10.5 percent and $460 million or 8.4 percent, respectively. In March, Wachovia held a one-day sale on certificates of deposit offered to residents of Georgia, North Carolina and South Carolina. The one-day sale attracted deposits of over $1 billion which will be used to help fund additional loan growth. Large denomination certificates and foreign interest-bearing time deposits also were higher from the same period a year earlier, while interest-bearing demand and savings and money market savings were modestly lower. Short-term borrowings expanded $1.242 billion or 20.2 percent from the first quarter of 1994 and were up $771 million or 11.6 percent from the preceding three months. Increases from the year-earlier quarter occurred in federal funds purchased and securities sold under repurchase agreements as well as in other short-term borrowings. Funding from commercial paper declined. Other short-term borrowings include short-term bank notes which were issued beginning in the fourth quarter of 1994. The notes have maturities ranging from 30 days to one year and are part of Wachovia Bank of North Carolina's ongoing bank note program, consisting of both short- and medium-term notes. At March 31, 1995, short-term bank notes outstanding were $1.187 billion with an average cost of 6.19 percent and an average maturity of 2.8 months versus $456 million in outstandings with an average cost of 6.13 percent and an average maturity of 4.15 months at year-end 1994. Long-term debt was higher by $1.004 billion or 27.4 percent year over year but lower by $121 million or 2.5 percent from the fourth quarter of 1994. The change from both periods occurred primarily in medium-term bank notes. At March 31, 1995, medium-term bank notes outstanding totaled $3.809 billion with an average cost of 5.47 percent and an average maturity of 1.59 years. This compared with $3.263 billion in notes outstanding with an average cost of 4.47 percent and an average maturity of 2 years at first quarter-close 1994 and with $3.953 billion, 5.31 percent and 1.73 years, respectively, at December 31, 1994. Gross deposits for the first quarter of 1995 averaged $22.656 billion, higher by $596 million or 2.7 percent from $22.060 billion in the same period of 1994. Collected deposits, net of float, averaged $20.948 billion, up $466 million or 2.3 percent from $20.482 billion a year earlier. ASSET AND LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY The corporation uses a number of tools to measure interest rate risk, including monitoring the difference or gap between rate sensitive assets and liabilities over various time periods, monitoring the change in present value of the asset and liability portfolios under various rate scenarios and simulating net interest income under the same rate scenarios. Management believes that rate risk is best measured by simulation modeling which calculates expected net interest income based on projected interest-earning assets, interest-bearing liabilities, off-balance sheet financial instruments and interest rates. The corporation monitors exposure to a gradual change in rates of 200 basis points up or down over a rolling 12-month period and an interest rate shock of an instantaneous change in rates of 200 basis points up or down over the same period. From time to time, the model horizon is expanded to a 24-month period. The corporation policy limit for the maximum negative impact on net interest income from a gradual change in interest rates of 2 percentage points over 12 months is 7.5 percent. Management generally has maintained a risk position well within the policy guideline level. As of March 31, 1995, the model indicated the impact of a 2 percentage point gradual rise in rates over 12 months would approximate a .75 percent increase in net interest income, while a 2 percentage point decline in rates over the same period would approximate a 2 percent decrease from an unchanged rate environment. In addition to on-balance sheet instruments such as investment securities and purchased funds, the corporation uses off-balance sheet derivative instruments to manage interest rate risk, liquidity and net interest income. Off-balance sheet instruments include interest rate swaps, futures and options with indices that directly correlate to on-balance sheet instruments. The corporation has used off-balance sheet financial 11 13 instruments, principally interest rate swaps, over a number of years and believes their use on a sound basis enhances the effectiveness of asset and liability and interest rate sensitivity management. Off-balance sheet asset and liability derivative transactions are based on referenced or notional amounts. At March 31, 1995, the corporation had $916 million notional amount of derivatives outstanding for asset and liability management purposes. Interest rate swaps were $901 million or 98 percent of the total notional amount. Credit risk of off-balance sheet derivative financial instruments is equal to the fair value gain of the instrument if a counterparty fails to perform. The credit risk is normally a small percentage of the notional amount and fluctuates as interest rates move up or down. The corporation mitigates this risk by subjecting the transactions to the same rigorous approval and monitoring process as is used for on-balance sheet credit transactions, by dealing in the national market with highly rated counterparties, by executing all transactions under International Swaps and Derivatives Association Master Agreements and by using collateral instruments to reduce exposure. Collateral is delivered by either party when the fair value of a particular transaction or group of transactions with the same counterparty on a net basis exceeds an acceptable threshold of exposure. The threshold level is determined based on the strength of the individual counterparty. The fair value of all asset and liability derivative positions for which the corporation was exposed to counterparties totaled $8 million at March 31, 1995. The fair value of all asset and liability derivative positions for which counterparties were exposed to the corporation amounted to $21 million on the same date. Details of the net fair value loss of $13 million and additional asset and liability derivative information are included in the accompanying tables.
Estimated Fair Value of Asset and Liability Management Derivatives by Purpose ----------------------------------------------------------------------------- March 31, 1995 March 31, 1994 ------------------------------------- ------------------------- Notional Fair Value Fair Value Notional Net Fair Value $ in millions Value Gains (Losses) Value Gains (Losses) -------- ---------- ---------- -------- -------------- Convert floating rate liabilities to fixed: Swaps-pay fixed/receive floating . . . . . . . . . . . $181 $3 $(3) $ 370 ($10) Caps purchased-pay fixed/receive floating . . . . . . 15 -- -- 15 -- Convert fixed rate assets to floating: Swaps-pay fixed/receive floating . . . . . . . . . . . 17 -- -- -- -- Forward starting swaps-pay fixed/receive floating . . 58 -- (1) -- -- Convert fixed rate liabilities to floating: Swaps-receive fixed/pay floating . . . . . . . . . . . 100 -- (13) 100 (10) Convert floating rate assets to fixed: Swaps-receive fixed/pay floating . . . . . . . . . . . 120 -- (2) 337 (9) Index amortizing swaps-receive fixed/pay floating . . 425 5 (2) 100 (2) Hedge spread between prime and fed funds: Interest rate caps . . . . . . . . . . . . . . . . . . -- -- -- 400 1 ---- --- ---- ------ ---- Total derivatives . . . . . . . . . . . . . . . . $916 $8 ($21) $1,322 ($30) ==== === ==== ====== ====
12 14 Maturity Schedule of Asset and Liability Management Derivatives --------------------------------------------------------------- March 31, 1995
Within Over Average One Two Three Four Five Five Life Year Years Years Years Years Years Total (Years) ---- ----- ----- ----- ----- ----- ----- ------- $ in millions Interest rate swaps: Pay fixed/receive floating: Notional amount . . . . . . . . . . . $ 73 $ 54 $ 12 $ 16 $ 19 $ 24 $ 198 2.46 Weighted average rates received . . . 6.29% 6.63% 7.00% 6.80% 6.93% 6.31% 6.53% Weighted average rates paid . . . . . 8.33 8.57 6.00 6.87 6.71 7.53 7.89 Receive fixed/pay floating: Notional amount . . . . . . . . . . . $ 58 $ 59 $ 1 $ 2 -- $ 100 $ 220 6.90 Weighted average rates received . . . 5.32% 5.45% 9.79% 10.69% -- 6.31% 5.86% Weighted average rates paid . . . . . 6.58 6.60 9.00 9.00 -- 6.69 6.66 Index amoritzing swaps:* Notional amount . . . . . . . . . . . . $ 8 $ 26 $ 122 $ 81 $ 69 $ 119 $ 425 3.88 Weighted average rates received . . . . 5.93% 7.10% 6.34% 8.27% 7.77% 8.08% 7.46% Weighted average rates paid . . . . . . 6.25 6.25 6.27 6.32 6.29 6.35 6.31 Total interest rate swaps: Notional amount . . . . . . . . . . . . $ 139 $ 139 $ 135 $ 99 $ 88 $ 243 $ 843 4.33 Weighted average rates received . . . . 5.87% 6.22% 6.41% 8.08% 7.59% 7.17% 6.83% Weighted average rates paid . . . . . . 7.48 7.31 6.26 6.46 6.38 6.61 6.77 Forward starting interest rate swaps: Notional amount . . . . . . . . . . . . -- -- -- -- -- $ 58 $ 58 9.02 Weighted average rates received . . . . -- -- -- -- -- 8.03% 8.03% Interest rate caps (notional amount)** . . $ 15 -- -- -- -- -- $ 15 .63 Total derivatives (notional amount) . . $ 154 $ 139 $ 135 $ 99 $ 88 $ 301 $ 916 4.57 *Maturity is based upon expected average lives rather than contractual lives. **Average rates are not meaningful.
Asset and liability transactions are accounted for following hedge accounting rules. Accordingly, gains and losses related to the fair value of derivative contracts used for asset and liability management purposes are not immediately recognized in earnings. If the hedged or altered balance sheet amounts were marked to market, the resulting unrealized balance sheet gains or losses could be expected to offset unrealized derivatives gains and losses. NONPERFORMING ASSETS Nonperforming assets were $92.723 million or .35 percent of loans and foreclosed property at March 31, 1995. The total was down $33.544 million or 26.6 percent from a year earlier and lower by $7.794 million or 7.8 percent from year-end 1994. The decreases primarily were due to improvement in borrowers' credit positions, resulting in paydowns and the return of cash-basis assets to accrual status, as well as to sales of foreclosed property. Real estate nonperforming assets, the largest portion of total nonperforming assets, were $64.120 million or .80 percent of real estate loans and foreclosed real estate at March 31, 1995 versus $95.077 million or 1.28 percent a year earlier and $68.353 million or .87 percent at December 31, 1994. The totals included nonperforming real estate loans of $46.755 million at March 31, 1995, $71.918 million one year earlier and $49.479 million at year-end 1994. Commercial real estate nonperforming assets were $40.030 million or .97 percent of related loans and 13 15 foreclosed property compared with $72.374 million or 1.90 percent at first quarter-close 1994 and $43.399 million or 1.07 percent at December 31, 1994. Commercial real estate nonperforming loans included in these amounts were $33.018 million at March 31, 1995, $58.354 million a year earlier and $35.885 million at the end of the 1994 fourth quarter.
____________________________________________________________________________________________________________________________________ NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 6 (thousands) ____________________________________________________________________________________________________________________________________ March 31 Dec. 31 Sept. 30 June 30 March 31 1995 1994 1994 1994 1994 -------- -------- -------- -------- -------- NONPERFORMING ASSETS Cash-basis assets -- domestic borrowers . . . . . . . . . $71,848* $ 78,712 $ 89,184 $100,696 $100,126 Restructured loans -- domestic . . . . . . . . . . . . . --** -- -- -- -- ------- -------- -------- -------- -------- Total nonperforming loans . . . . . . . . . . . . . 71,848 78,712 89,184 100,696 100,126 Foreclosed property: Foreclosed real estate . . . . . . . . . . . . . . . . 20,669 22,900 22,309 26,347 30,136 Less valuation allowance . . . . . . . . . . . . . . . 3,304 4,026 5,025 5,778 6,977 Other foreclosed assets . . . . . . . . . . . . . . . . 3,510 2,931 3,043 3,264 2,982 ------- -------- -------- -------- -------- Total foreclosed property . . . . . . . . . . . . . 20,875 21,805 20,327 23,833 26,141 ------- -------- -------- -------- -------- Total nonperforming assets . . . . . . . . . . . . $92,723*** $100,517 $109,511 $124,529 $126,267 ======= ======== ======== ======== ======== Nonperforming loans to period-end loans . . . . . . . . . .27% .30% .36% .41% .42% Nonperforming assets to period-end loans and foreclosed property . . . . . . . . . . . . . . . . . . .35 .39 .44 .51 .53 Period-end allowance for loan losses times nonperforming loans . . . . . . . . . . . . . . . . . . 5.69x 5.16x 4.55x 4.03x 4.05x Period-end allowance for loan losses times nonperforming assets . . . . . . . . . . . . . . . . . 4.41 4.04 3.71 3.26 3.21 CONTRACTUALLY PAST DUE LOANS (accruing loans past due 90 days or more) Domestic borrowers . . . . . . . . . . . . . . . . . . . $48,998 $ 37,010 $ 43,708 $ 50,321 $ 42,744 ======= ======== ======== ======== ======== *Includes $6,910 of loans which have been defined as impaired per Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (FASB 114) **Excludes $10,261 of loans which have been renegotiated at market rates and have been reclassified to performing status ***Net of cumulative corporate and commercial real estate charge-offs and foreclosed real estate write-downs totaling $29,945; includes $6,395 of nonperforming assets on which interest and principal are paid current ____________________________________________________________________________________________________________________________________
PROVISION AND ALLOWANCE FOR LOAN LOSSES The provision for loan losses was $21.788 million for the first quarter of 1995, exceeding net charge-offs by $2.368 million and higher by $4.029 million or 22.7 percent from $17.759 million in the same period a year earlier. Compared with the fourth quarter of 1994, the provision was up $2.249 million or 11.5 percent. The provision reflects management's assessment of the adequacy of the allowance for loan losses to absorb potential write-offs in the loan portfolio. Several factors are considered in this assessment, including growth and composition of the loan portfolio, historical credit loss experience, current and anticipated economic conditions and changes in borrowers' financial positions. At March 31, 1995, the allowance for loan losses was $408.500 million, representing 1.53 percent of period-end loans and 569 percent coverage of nonperforming loans. Comparable amounts were $405.474 million, 1.71 percent and 405 percent, respectively, a year earlier and $406.132 million, 1.57 percent and 516 percent, respectively, at fourth quarter-close 1994. Net loan losses for the first three months of 1995 totaled $19.420 million or .30 percent annualized of average loans. This compared with $17.083 million or .30 percent in the same period a year earlier. The increase primarily reflected lower recoveries, with gross charge-offs modestly higher from the same three months of 1994. Net loan losses were up slightly from the fourth quarter of 1994 due to reduced recoveries as gross charge-offs declined by $1.075 million or 3.9 percent. Excluding credit cards, net charge-offs were $1.192 million or .02 percent of average loans. This was lower by $2.734 million or 69.6 percent from a year earlier and down $1.464 million or 55.1 percent from 14 16 the fourth quarter of 1994. Credit card net charge-offs totaled $18.228 million or 1.84 percent annualized of average credit card loans. This compares with $13.157 million or 1.67 percent in the same three months of 1994 and $16.756 million or 1.76 percent for the 1994 fourth quarter. Commercial loans had net recoveries of $377 thousand compared with net loan losses of $3.123 million a year earlier.
____________________________________________________________________________________________________________________________________ ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 7 ____________________________________________________________________________________________________________________________________ 1995 1994 -------- ------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- ------- SUMMARY OF TRANSACTIONS Balance at beginning of period . . . . . . . . . . $406,132 $406,005 $405,942 $405,474 $404,798 Provision for loan losses . . . . . . . . . . . . . 21,788 19,539 18,123 16,342 17,759 Deduct net loan losses: Loans charged off: Commercial . . . . . . . . . . . . . . . . . . 318 1,793 3,063 2,947 5,080 Credit card . . . . . . . . . . . . . . . . . . 21,431 19,682 17,310 16,808 15,928 Other revolving credit . . . . . . . . . . . . 805 1,000 908 902 905 Other retail . . . . . . . . . . . . . . . . . 3,412 3,216 2,504 2,605 3,084 Real estate . . . . . . . . . . . . . . . . . . 391 1,785 749 1,352 819 Lease financing . . . . . . . . . . . . . . . . 101 57 28 80 61 Foreign . . . . . . . . . . . . . . . . . . . . -- -- -- -- -- -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . 26,458 27,533 24,562 24,694 25,877 Recoveries: Commercial . . . . . . . . . . . . . . . . . . 695 1,382 915 1,423 1,957 Credit card . . . . . . . . . . . . . . . . . . 3,203 2,926 2,837 2,760 2,771 Other revolving credit . . . . . . . . . . . . 322 224 285 303 247 Other retail . . . . . . . . . . . . . . . . . 1,019 927 1,159 749 1,121 Real estate . . . . . . . . . . . . . . . . . . 1,761 2,624 1,273 3,506 2,612 Lease financing . . . . . . . . . . . . . . . . 30 31 25 70 78 Foreign . . . . . . . . . . . . . . . . . . . . 8 7 8 9 8 -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . 7,038 8,121 6,502 8,820 8,794 -------- -------- -------- -------- -------- Net loan losses . . . . . . . . . . . . . . . . . 19,420 19,412 18,060 15,874 17,083 -------- -------- -------- -------- -------- Balance at end of period . . . . . . . . . . . . . $408,500* $406,132 $406,005 $405,942 $405,474 ======== ======== ======== ======== ======== NET LOAN LOSSES (RECOVERIES) BY CATEGORY Commercial . . . . . . . . . . . . . . . . . . . . $ (377) $ 411 $ 2,148 $ 1,524 $ 3,123 Credit card . . . . . . . . . . . . . . . . . . . . 18,228 16,756 14,473 14,048 13,157 Other revolving credit . . . . . . . . . . . . . . 483 776 623 599 658 Other retail . . . . . . . . . . . . . . . . . . . 2,393 2,289 1,345 1,856 1,963 Real estate . . . . . . . . . . . . . . . . . . . . (1,370) (839) (524) (2,154) (1,793) Lease financing . . . . . . . . . . . . . . . . . . 71 26 3 10 (17) Foreign . . . . . . . . . . . . . . . . . . . . . . (8) (7) (8) (9) (8) -------- -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . $ 19,420 $ 19,412 $ 18,060 $ 15,874 $ 17,083 ======== ======== ======== ======== ======== Net loan losses -- excluding credit cards . . . . . $ 1,192 $ 2,656 $ 3,587 $ 1,826 $ 3,926 ANNUALIZED NET LOAN LOSSES (RECOVERIES) TO AVERAGE LOANS BY CATEGORY Commercial . . . . . . . . . . . . . . . . . . . . (.01%) .02% .09% .07% .14% Credit card . . . . . . . . . . . . . . . . . . . . 1.84 1.76 1.57 1.63 1.67 Other revolving credit . . . . . . . . . . . . . . .57 .92 .74 .72 .80 Other retail . . . . . . . . . . . . . . . . . . . .31 .29 .17 .23 .25 Real estate . . . . . . . . . . . . . . . . . . . . (.07) (.04) (.03) (.12) (.10) Lease financing . . . . . . . . . . . . . . . . . . .15 .06 .01 .02 (.04) Foreign . . . . . . . . . . . . . . . . . . . . . . (.01) (.01) (.04) (.04) (.04) Total loans . . . . . . . . . . . . . . . . . . . . .30 .31 .29 .26 .30 Total loans -- excluding credit cards . . . . . . . .02 .05 .07 .04 .08 Period-end allowance to outstanding loans . . . . . 1.53 1.57 1.63 1.67 1.71 *Includes $2,070 which is the related allowance for credit losses for impaired loans as defined in FASB 114, "Accounting by Creditors for Impairment of a Loan" ____________________________________________________________________________________________________________________________________
15 17 NONINTEREST INCOME Total other operating revenue was up $12.224 million or 8.4 percent from the first quarter of 1994. Higher levels of credit card income and deposit account service charges, stronger trading account profits and increases in other service charges and fees primarily accounted for the change. Total other operating revenue grew modestly from the fourth quarter of 1994. Credit card income rose $3.610 million or 14.2 percent year over year, reflecting good gains in cardholder interchange income and higher levels of both membership fees and net merchant discount fees. Cardholder purchase volume totaled $789 million for the first quarter of 1995 versus $663 million in the same period a year earlier. Service charges on deposit accounts were up $731 thousand or 1.5 percent. Increased overdraft fees and charges for nonsufficient funds primarily accounted for the rise. Commercial account analysis fees largely remained unchanged for the period with increased service levels being compensated by higher credit given for corporate deposit balances due to rising interest rates. A strong market in municipal and government securities helped improve trading account profits. For the first three months of 1995, trading account profits totaled $3.067 million compared with $1.507 million a year earlier, an increase of $1.560 million or 103.5 percent. Trust service fees were down $800 thousand or 2.5 percent. The decrease was due to lower personal financial service fees, reflecting reduced fixed income asset valuations. Corporate trust fees, which include corporate stock transfer and bond trustee as well as employee benefits and charitable funds, were approximately flat for the period. Mortgage fee income rose $421 thousand or 5.2 percent. The increase reflected, in part, higher levels of servicing fees as well as reduced mortgage pool fees and narrowed losses on loan sales. Partially offsetting the increase was lower origination fees. In the first quarter of 1995, loan originations totaled $206.886 million compared with $462.656 million a year earlier. In April, the corporation signed an agreement to sell its $9 billion mortgage servicing portfolio to GE Capital Mortgage Services, Inc. The decision to sell the portfolio was based on a strategic assessment of the servicing business' future, competitive industry trends and the long-term need for investments in technology. Insurance premiums and commissions were up $627 thousand or 23.3 percent, while bankers' acceptance and letter of credit fees were lower by $728 thousand or 11.6 percent. 16 18 Other service charges and fees grew $5.190 million or 38.1 percent. This category consists of several of the corporation's alternative fee sources including mutual fund fees, brokerage commissions, debit card interchange fees and net ATM fees. Other income increased $1.613 million or 21.3 percent to $9.177 million for the first quarter of 1995. At March 31, 1995, Wachovia's customer portfolio of interest rate and currency derivatives (excluding foreign exchange forwards and options) had a notional amount of $3.952 billion and a fair value of $2.909 million versus $2.223 billion and $2.787 million, respectively, one year earlier. Including gains and losses on investment securities, total noninterest income was higher by $11.523 million or 7.9 percent. Investment securities sales had a net loss of $129 thousand for the first three months of 1995 compared with a net gain of $572 thousand in the same period a year earlier.
____________________________________________________________________________________________________________________________________ NONINTEREST INCOME (thousands) TABLE 8 ____________________________________________________________________________________________________________________________________ 1995 1994 --------- ------------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- --------- Service charges on deposit accounts ............................. $ 48,881 $ 48,413 $ 48,940 $ 50,646 $ 48,150 Fees for trust services ......................................... 30,881 31,285 32,151 32,983 31,681 Credit card income -- net of interchange payments ............... 28,944 30,200 28,271 28,120 25,334 Mortgage fee income ............................................. 8,454 8,886 8,590 7,715 8,033 Trading account profits (losses) -- excluding interest .......... 3,067 (582) 1,576 598 1,507 Insurance premiums and commissions .............................. 3,313 3,189 2,425 3,379 2,686 Bankers' acceptance and letter of credit fees ................... 5,559 5,365 5,827 5,689 6,287 Other service charges and fees .................................. 18,817 15,530 14,571 13,156 13,627 Other income .................................................... 9,177 12,437 9,190 11,013 7,564 --------- --------- --------- --------- --------- Total other operating revenue ............................. 157,093 154,723 151,541 153,299 144,869 Investment securities gains (losses) ............................ (129) 2,094 433 221 572 --------- --------- --------- --------- --------- Total ..................................................... $ 156,964 $ 156,817 $ 151,974 $ 153,520 $ 145,441 ========= ========= ========= ========= ========= ____________________________________________________________________________________________________________________________________
17 19 NONINTEREST EXPENSE Total noninterest expense increased $12.982 million or 4.8 percent year over year, reflecting continued good expense management. The corporation's overhead ratio measuring noninterest expense as a percentage of total adjusted revenues (taxable equivalent net interest income and total other operating revenue) decreased to 53.4 percent from 55.4 percent in the same period of 1994. Compared with the preceding quarter, non-interest expense for the first three months of 1995 was higher by $507 thousand or less than 1 percent. Total personnel expense rose $3.949 million or 2.8 percent. Salaries expense was up $2.974 million or 2.6 percent, primarily reflecting higher base salaries. Increased moving expenses, associated with consolidations, also contributed to the rise. Employee benefits expense was up $975 thousand or 3.8 percent, primarily due to lower-than-trend-line medical benefit plan costs in 1994. Net occupancy and equipment expense increased $2.513 million or 5.5 percent. Higher building maintenance, renovation, operating lease and depreciation helped push net occupancy expense up $762 thousand or 3.9 percent. Equipment expense rose $1.751 million or 6.6 percent, primarily due to increased depreciation and equipment installation costs related to new technology projects. Remaining combined categories of noninterest expense were higher by $6.520 million or 7.8 percent of which $3.286 million was due to lower year-over-year gains on sales of foreclosed property. Foreclosed property expense had a net gain of $155 thousand versus a net gain of $3.441 million in the same three months of 1994. Outside data processing expense increased $1.412 million or 16.6 percent. Fees for professional services rose $1.739 million or 44 percent, reflecting expenses associated with the strategic assessment and other related projects.
____________________________________________________________________________________________________________________________________ NONINTEREST EXPENSE (thousands) TABLE 9 ____________________________________________________________________________________________________________________________________ 1995 1994 --------- -------------------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- --------- Salaries ............................................ $ 118,185 $ 117,904 $ 116,793 $ 114,882 $ 115,211 Employee benefits ................................... 26,778 23,662 22,902 26,350 25,803 --------- --------- --------- --------- --------- Total personnel expense ....................... 144,963 141,566 139,695 141,232 141,014 Net occupancy expense ............................... 20,190 21,261 20,026 20,196 19,428 Equipment expense ................................... 28,263 27,197 26,789 26,010 26,512 Postage and delivery ................................ 9,592 8,650 8,645 8,816 9,052 Outside data processing, programming and software ... 9,897 10,773 7,834 8,119 8,485 Stationery and supplies ............................. 6,208 6,182 6,578 5,836 5,962 Advertising and sales promotion ..................... 9,412 6,949 8,019 9,316 9,783 Professional services ............................... 5,691 6,539 4,617 5,385 3,952 Travel and business promotion ....................... 4,059 4,650 3,757 4,343 3,504 FDIC insurance and regulatory examinations .......... 13,339 13,188 13,294 13,589 13,380 Check clearing and other bank services .............. 2,150 2,204 2,475 1,920 2,295 Amortization of intangible assets ................... 4,071 4,430 4,524 4,602 5,137 Foreclosed property expense ......................... (155) 9 (452) (404) (3,441) Other expense ....................................... 25,352 28,927 25,492 25,585 24,987 --------- --------- --------- --------- --------- Total ......................................... $ 283,032 $ 282,525 $ 271,293 $ 274,545 $ 270,050 ========= ========= ========= ========= ========= Overhead ratio ...................................... 53.41% 53.69% 53.24% 54.31% 55.43% ____________________________________________________________________________________________________________________________________
18 20 INCOME TAXES Applicable income taxes were higher by $8.505 million or 16.8 percent, largely reflecting growth in the corporation's income level. 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 on 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 Georgia and North Carolina taxes as well, and results in substantial interest savings for local governments and their constituents.
___________________________________________________________________________________________________________________________ INCOME TAXES (thousands) TABLE 10 ___________________________________________________________________________________________________________________________ Three Months Three Months Ended Ended March 31 March 31 1995 1994 ------------ ------------ Income before income taxes ................................................... $ 201,340 $ 175,478 ========= ========= Federal income taxes at statutory rate ....................................... 70,469 61,417 State and local income taxes -- net of federal benefit ............................................................ 398 1,221 Effect of tax-exempt securities interest and other income .................................................. (10,849) (11,967) Other items .................................................................. (834) 8 --------- --------- Total tax expense ...................................................... $ 59,184 $ 50,679 ========= ========= Currently payable: Federal .................................................................... $ 62,517 $ 43,259 Foreign .................................................................... 67 34 State and local ............................................................ 1,935 2,413 --------- --------- Total .................................................................. 64,519 45,706 Deferred: Federal .................................................................... (4,012) 5,508 State and local ............................................................ (1,323) (535) --------- --------- Total .................................................................. (5,335) 4,973 --------- --------- Total tax expense ...................................................... $ 59,184 $ 50,679 ========= ========= ___________________________________________________________________________________________________________________________
19 21 FINANCIAL CONDITION AND CAPITAL RATIOS Assets at March 31, 1995 totaled $40.223 billion, including $35.814 billion of interest-earning assets and $26.728 billion of loans. Comparable amounts one year earlier were $36.350 billion, $32.370 billion and $23.662 billion, respectively. At year-end 1994, assets were $39.188 billion, including $34.712 billion of interest-earning assets and $25.891 billion of loans. Deposits constitute the primary source of funding for the corporation. At March 31, 1995, deposits were $23.110 billion, including $17.956 billion of time deposits, representing 77.7 percent of the total. Deposits were $22.279 billion, including time deposits of $16.914 billion or 75.9 percent of the total a year earlier and were $23.069 billion, including $17.406 billion or 75.5 percent of the total at December 31, 1994. Shareholders' equity at the end of the 1995 first quarter was $3.405 billion, higher by $311 million or 10.1 percent from $3.094 billion a year earlier and up $118 million or 3.6 percent from fourth quarter-close 1994. The total at March 31, 1995 included $10.111 million, net of tax, of unrealized losses on securities available-for-sale marked to fair market value under FASB 115. The corporation was authorized by the board of directors on July 22, 1994 to repurchase up to 5 million shares of its common stock. The authorization replaced an earlier action in 1993 to repurchase the same number of shares. Repurchased shares will be used for various corporate purposes, including share issuance for the corporation's employee stock plans and dividend reinvestment plan. In the first quarter of 1995, the corporation repurchased 58,600 shares at an average price of $32.925 per share for a total cost of $1.929 million. At March 31, 1995, a total of 4,265,900 shares remained available for possible repurchase. Intangible assets at March 31, 1995 were $74.614 million, consisting of $31.903 million in mortgage servicing rights, $30.589 million in goodwill, $8.163 million in deposit base intangibles and $3.959 million in other intangible assets, primarily purchased credit card intangibles. Intangible assets a year earlier were $88.423 million, with $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. At year-end 1994, intangible assets totaled $78.408 million. Regulatory agencies divide capital into Tier I (consisting of shareholders' equity less ineligible intangible assets) and Tier II (consisting of the allowable portion of the reserve for loan losses and certain long-term debt) and measure capital adequacy by applying both capital levels to a banking company's risk-adjusted assets and off-balance sheet items. Regulatory requirements presently specify that Tier I capital should exclude the market appreciation or depreciation of securities available-for-sale arising from valuation adjustments under FASB 115. In addition to these capital ratios, regulatory agencies have established a Tier I leverage ratio which measures Tier I capital to average assets less ineligible intangible assets. Regulatory guidelines require a minimum of total capital to risk-adjusted assets ratio of 8 percent with one-half consisting of tangible common shareholders' equity and a minimum Tier I leverage ratio of 3 20 22 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, 1995, Wachovia's Tier I to risk-adjusted assets ratio was 9.35 percent with total capital 12.60 percent of risk-adjusted assets. The corporation's Tier I leverage ratio was 8.70 percent.
____________________________________________________________________________________________________________________________________ CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 11 ____________________________________________________________________________________________________________________________________ 1995 1994 ------------ ------------------------------------------------------------------ First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter ------------ ------------ ------------ ------------ ------------ Tier I capital: Common shareholders' equity ........... $ 3,404,983 $ 3,286,507 $ 3,214,881 $ 3,149,144 $ 3,093,593 Less ineligible intangible assets ..... 30,589 30,961 31,334 32,349 32,095 Unrealized (gains) losses on securities available-for-sale -- net of tax ..... 10,111 37,635 21,510 15,140 (3,825) ------------ ------------ ------------ ------------ ------------ Total Tier I capital .............. 3,384,505 3,293,181 3,205,057 3,131,935 3,057,673 Tier II capital: Allowable allowance for loan losses ... 408,500 406,132 406,005 405,942 396,449 Allowable long-term debt .............. 770,680 830,782 832,881 833,253 833,125 ------------ ------------ ------------ ------------ ------------ Tier II capital additions ......... 1,179,180 1,236,914 1,238,886 1,239,195 1,229,574 ------------ ------------ ------------ ------------ ------------ Total capital ..................... $ 4,563,685 $ 4,530,095 $ 4,443,943 $ 4,371,130 $ 4,287,247 ============ ============ ============ ============ ============ Risk-adjusted assets .................... $ 36,207,967 $ 35,573,896 $ 34,100,248 $ 32,746,004 $ 31,706,868 Quarterly average assets ................ $ 38,901,940 $ 38,146,370 $ 37,676,339 $ 37,174,827 $ 35,778,460 Risk-based capital ratios: Tier I capital ........................ 9.35% 9.26% 9.40% 9.56% 9.64% Total capital ......................... 12.60 12.73 13.03 13.35 13.52 Tier I leverage ratio* .................. 8.70 8.63 8.51 8.43 8.56 Shareholders' equity to total assets .... 8.47 8.39 8.43 8.50 8.51 *Ratio excludes the average unrealized gains (losses) on securities available-for-sale, net of tax, of ($29,681) for 1995 and ($26,581), ($16,885), ($8,535) and $22,399, respectively, for 1994 ____________________________________________________________________________________________________________________________________
21 23 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION
March 31 December 31 March 31 $ in thousands 1995 1994 1994 ----------- ----------- ----------- ASSETS Cash and due from banks ................................................ $ 2,419,234 $ 2,670,115 $ 2,220,126 Interest-bearing bank balances ......................................... 6,364 6,763 24,169 Federal funds sold and securities purchased under resale agreements .................................... 24,341 201,606 284,447 Trading account assets ................................................. 770,457 889,958 577,362 Securities available-for-sale .......................................... 3,759,901 3,538,247 3,921,285 Securities held-to-maturity (market value of $4,558,931, $4,114,644 and $4,033,333, respectively) ............................. 4,524,687 4,184,610 3,900,312 Loans and net leases ................................................... 26,735,997 25,898,774 23,670,041 Less unearned income on loans .......................................... 7,863 7,970 7,652 ----------- ----------- ----------- Total loans ...................................................... 26,728,134 25,890,804 23,662,389 Less allowance for loan losses ......................................... 408,500 406,132 405,474 ----------- ----------- ----------- Net loans ........................................................ 26,319,634 25,484,672 23,256,915 Premises and equipment ................................................. 556,428 543,548 507,770 Due from customers on acceptances ...................................... 646,265 416,591 609,149 Other assets ........................................................... 1,196,040 1,251,848 1,048,413 ----------- ----------- ----------- Total assets ..................................................... $40,223,351 $39,187,958 $36,349,948 =========== =========== =========== LIABILITIES Deposits in domestic offices: Demand ............................................................... $ 5,147,945 $ 5,657,579 $ 5,358,943 Interest-bearing demand .............................................. 3,259,075 3,524,857 3,453,505 Savings and money market savings ..................................... 6,192,203 6,065,966 6,295,721 Savings certificates ................................................. 6,500,958 5,464,532 5,037,319 Large denomination certificates ...................................... 1,545,074 1,416,318 1,465,016 Noninterest-bearing time ............................................. 19,895 24,121 72,164 ----------- ----------- ----------- Total deposits in domestic offices ............................... 22,665,150 22,153,373 21,682,668 Deposits in foreign offices: Demand ............................................................... 5,737 5,540 6,417 Time ................................................................. 438,704 910,345 590,166 ----------- ----------- ----------- Total deposits in foreign offices ................................ 444,441 915,885 596,583 ----------- ----------- ----------- Total deposits ................................................... 23,109,591 23,069,258 22,279,251 Federal funds purchased and securities sold under repurchase agreements ..................................... 6,098,915 5,898,398 4,901,139 Commercial paper ....................................................... 404,791 406,706 499,426 Other short-term borrowed funds ........................................ 1,472,795 1,007,340 508,570 Long-term debt: Bank notes ........................................................... 3,809,124 3,953,318 3,262,912 Other long-term debt ................................................. 836,526 837,146 839,669 ----------- ----------- ----------- Total long-term debt ............................................. 4,645,650 4,790,464 4,102,581 Acceptances outstanding ................................................ 646,265 416,591 609,149 Other liabilities ...................................................... 440,361 312,694 356,239 ----------- ----------- ----------- Total liabilities ................................................ 36,818,368 35,901,451 33,256,355 SHAREHOLDERS' EQUITY Preferred stock, par value $5 per share: Authorized 50,000,000 shares; none outstanding ....................... -- -- -- Common stock, par value $5 per share: Issued 171,207,470, 170,933,749 and 171,416,491, respectively .......................................... 856,037 854,669 857,082 Capital surplus ........................................................ 748,955 741,946 759,389 Retained earnings ...................................................... 1,799,991 1,689,892 1,477,122 ----------- ----------- ----------- Total shareholders' equity ....................................... 3,404,983 3,286,507 3,093,593 ----------- ----------- ----------- Total liabilities and shareholders' equity ....................... $40,223,351 $39,187,958 $36,349,948 =========== =========== ===========
22 24 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31 $ in thousands, except per share 1995 1994 --------- --------- INTEREST INCOME Loans ....................................................................... $ 559,774 $ 410,452 Securities available-for-sale: Other investments ......................................................... 44,602 44,812 Securities held-to-maturity: State and municipal ....................................................... 10,206 13,024 Other investments ......................................................... 64,238 55,776 Interest-bearing bank balances .............................................. 101 160 Federal funds sold and securities purchased under resale agreements ......................................... 1,202 3,111 Trading account assets ...................................................... 11,669 6,518 --------- --------- Total interest income ................................................. 691,792 533,853 INTEREST EXPENSE Deposits: Domestic offices .......................................................... 159,826 116,041 Foreign offices ........................................................... 7,507 3,280 --------- --------- Total interest on deposits ............................................ 167,333 119,321 Short-term borrowed funds ................................................... 108,389 51,625 Long-term debt .............................................................. 66,874 45,061 --------- --------- Total interest expense ................................................ 342,596 216,007 NET INTEREST INCOME ......................................................... 349,196 317,846 Provision for loan losses ................................................... 21,788 17,759 --------- --------- Net interest income after provision for loan losses ................................................. 327,408 300,087 OTHER INCOME Service charges on deposit accounts ......................................... 48,881 48,150 Fees for trust services ..................................................... 30,881 31,681 Credit card income .......................................................... 28,944 25,334 Mortgage fee income ......................................................... 8,454 8,033 Trading account profits ..................................................... 3,067 1,507 Other operating income ...................................................... 36,866 30,164 --------- --------- Total other operating revenue ......................................... 157,093 144,869 Investment securities gains (losses) ........................................ (129) 572 --------- --------- Total other income .................................................... 156,964 145,441 OTHER EXPENSE Salaries .................................................................... 118,185 115,211 Employee benefits ........................................................... 26,778 25,803 --------- --------- Total personnel expense ............................................... 144,963 141,014 Net occupancy expense ....................................................... 20,190 19,428 Equipment expense ........................................................... 28,263 26,512 Other operating expense ..................................................... 89,616 83,096 --------- --------- Total other expense ................................................... 283,032 270,050 Income before income taxes .................................................. 201,340 175,478 Applicable income taxes ..................................................... 59,184 50,679 --------- --------- NET INCOME .................................................................. $ 142,156 $ 124,799 ========= ========= Net income per common share: Primary ................................................................... $ .83 $ .72 Fully diluted ............................................................. $ .82 $ .72 Average shares outstanding: Primary ................................................................... 172,205 172,739 Fully diluted ............................................................. 172,760 173,378
23 25 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock ------------------------------- Capital Retained $ in thousands, except per share Shares Amount Surplus Earnings ----------- ------------ ------------ ------------ 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 debentures .......................... 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 =========== ============ ============ ============ PERIOD ENDED MARCH 31, 1995 Balance at beginning of year ........................ 170,933,749 $ 854,669 $ 741,946 $ 1,689,892 Net income .......................................... 142,156 Cash dividends declared on common stock -- $.33 a share ............................. (56,458) Common stock issued pursuant to: Stock option and employee benefit plans ........... 253,308 1,266 6,844 Dividend reinvestment plan ........................ 95,767 479 2,792 Conversion of debentures .......................... 33,177 166 470 Common stock acquired ............................... (108,531) (543) (3,063) Unrealized gains on securities available-for-sale, net of tax .................... 27,524 Miscellaneous ....................................... (34) (3,123) ----------- ------------ ------------ ------------ Balance at end of period ............................ 171,207,470 $ 856,037 $ 748,955 $ 1,799,991 =========== ============ ============ ============
24 26 WACHOVIA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 $ in thousands 1995 1994 ----------- ----------- OPERATING ACTIVITIES Net income ..................................................................................... $ 142,156 $ 124,799 Adjustments to reconcile net income to net cash provided by operations: Provision for loan losses .................................................................... 21,788 17,759 Depreciation and amortization ................................................................ 26,090 28,899 Deferred income taxes (benefit) .............................................................. (5,335) 4,973 Investment securities (gains) losses ......................................................... 129 (572) Gain on sale of noninterest-earning assets ................................................... (802) (3,111) Increase in accrued income taxes ............................................................. 63,777 40,504 Decrease in accrued interest receivable ...................................................... 2,775 24,293 Increase in accrued interest payable ......................................................... 56,141 26,940 Net change in other accrued and deferred income and expense .................................. (2,044) (47,128) Net trading account activities ............................................................... 119,501 211,417 Net loans held for resale .................................................................... (1,193) 72,035 ----------- ----------- Net cash provided by operating activities ................................................ 422,983 500,808 INVESTING ACTIVITIES Net (increase) decrease in interest-bearing bank balances ...................................... 399 (11,691) Net decrease in federal funds sold and securities purchased under resale agreements ............................................................ 177,265 406,659 Purchases of securities available-for-sale ..................................................... (630,963) (512,416) Purchases of securities held-to-maturity ....................................................... (438,963) (2,004) Sales of securities available-for-sale ......................................................... 274,577 23,648 Calls, maturities and prepayments of securities available-for-sale ............................. 178,172 303,596 Calls, maturities and prepayments of securities held-to-maturity ............................... 98,009 245,248 Net increase in loans made to customers ........................................................ (857,470) (777,875) Capital expenditures ........................................................................... (33,445) (24,718) Proceeds from sales of premises and equipment .................................................. 2,513 2,205 Net decrease in other assets ................................................................... 7,139 39,140 ----------- ----------- Net cash used by investing activities .................................................... (1,222,767) (308,208) FINANCING ACTIVITIES Net decrease in demand, savings and money market accounts ...................................... (653,208) (712,713) Net increase (decrease) in certificates of deposit ............................................. 693,541 (360,434) Net increase in federal funds purchased and securities sold under repurchase agreements ........ 200,517 159,856 Net decrease in commercial paper ............................................................... (1,915) (89,752) Net increase (decrease) in other short-term borrowings ......................................... 465,455 (582,553) Proceeds from issuance of bank notes ........................................................... 100,000 1,042,193 Maturities of bank notes ....................................................................... (244,892) (150,000) Proceeds from issuance of other long-term debt ................................................. -- 247,800 Payments on other long-term debt ............................................................... (112) (85) Common stock issued ............................................................................ 6,162 11,702 Dividend payments .............................................................................. (56,458) (51,443) Common stock repurchased ....................................................................... (2,188) (14,147) Net increase (decrease) in other liabilities ................................................... 42,001 (2,426) ----------- ----------- Net cash provided (used) by financing activities ......................................... 548,903 (502,002) DECREASE IN CASH AND CASH EQUIVALENTS .......................................................... (250,881) (309,402) Cash and cash equivalents at beginning of year ................................................. 2,670,115 2,529,528 ----------- ----------- Cash and cash equivalents at end of period ..................................................... $ 2,419,234 $ 2,220,126 =========== =========== SUPPLEMENTAL DISCLOSURES Unrealized appreciation in securities available-for-sale: Increase in securities available-for-sale .................................................... $ 45,235 $ 6,291 Increase (decrease) in deferred taxes ........................................................ (17,711) 3,825 Increase in shareholders' equity ............................................................. 27,524 2,466
25 27 ________________________________________________________________________________ ANNUAL SHAREHOLDERS' MEETING FRIDAY, APRIL 28, 1995 REMARKS BY L. M. BAKER, JR. CHIEF EXECUTIVE OFFICER Welcome to the Annual Shareholders' Meeting of Wachovia Corporation. It is a pleasure to be in Charleston. This beautiful and historic city has played a pivotal role in South Carolina's development and progress. Wachovia is proud to be associated with its continuing success and to have a strong banking presence here. Details of Wachovia's financial performance for 1994 and for the first quarter of 1995 were mailed earlier to shareholders. This morning Bob McCoy will highlight briefly the recent financial performance. Then, I will comment on the challenging environment facing the financial services business and update you on steps the corporation is taking to position itself for the future. These excellent results, shown in the accompanying slides, were not easily achieved. We are operating in a highly complex and competitive business environment. Each month of 1994 seemed to present a new challenge which often tended to restrain rather than enhance our performance. I am very pleased with the effort given by loyal Wachovians who worked hard and performed admirably in face of uncertainty and change. Although the 1995 first quarter performance was strong, the remainder of the year is likely to continue testing financial service businesses. While we are optimistic about Wachovia's prospects, the economy, which is now entering its fifth year of expansion, probably will slow from the brisk pace of 1994. Competitive pressures on loan and deposit pricing should temper the net interest income we have experienced as a result of increased commercial and consumer borrowings. The rate ________________________________________________________________________________ WACHOVIA CORPORATION SELECTED FINANCIAL INFORMATION THREE MONTHS ENDED MARCH 31
($ millions, except per share) % 1995 1994 CHANGE ------- ------- ------ Assets $40,223 $36,350 10.7 Market Capitalization (April 13) 6,142 5,700 7.8 Loans 26,728 23,662 13.0 Net Interest Income (FTE) 373 342 8.9 Provision 22 18 22.7 Other Operating Revenue 157 145 8.4 Other Expense 283 270 4.8 Net Income 142 125 13.9 EPS Fully Diluted .82 .72 14.3 ________________________________________________________________________________
________________________________________________________________________________ WACHOVIA CORPORATION SELECTED FINANCIAL INFORMATION THREE MONTHS ENDED MARCH 31
FIVE-YEAR AVERAGE 1995 1994 1994-1990 ---- ---- --------- Return on Assets 1.46% 1.40% 1.23% Return on Common Equity 17.5 16.5 15.2 Common Equity/Assets (average) 8.36 8.44 8.02 Nonperforming Assets/Loans + Foreclosed Property .35 .53 .99 Net Loan Losses/Loans .30 .30 .51 Net Loan Losses/Loans Excluding Credit Cards .02 .08 .27 Loan Loss Reserve/ Nonperforming Loans 569 405 278 ________________________________________________________________________________
________________________________________________________________________________ WACHOVIA CORPORATION SELECTED FINANCIAL INFORMATION YEAR ENDED DECEMBER 31, 1994
25 LARGEST U.S. BANKS ------------------------ WACHOVIA ($ millions) WACHOVIA MEDIAN RANK -------- ------- -------- Assets $39,188 $59,316 23 Net Income* 539 700 18 Return on Assets 1.46% 1.21% 3 Return on Common Equity 17.41 16.10 8 Common Equity to Assets 8.39 6.47 3 Nonperforming Assets/ Loans + Foreclosed Property .39 1.03 1 Loan Loss Reserve/ Nonperforming Loans 516 267 5 Overhead Ratio 54.15 61.88 1
* Applicable to common shareholders ________________________________________________________________________________ ________________________________________________________________________________ WACHOVIA CORPORATION SELECTED FINANCIAL INFORMATION COMPOUND ANNUAL GROWTH RATES
5 YEARS 1 YEAR 1ST QTR 1994-1990 1994 1995 --------- ------ ------- Net Income Per Share (FD) 10.2% 10.9% 14.3% Dividends Per Share 12.0 10.8 10.0 Total Return* Wachovia 13.5 (.05) 11.2 S&P 500 8.7 1.3 9.7 KBW 50 Index 7.7 (5.1) 13.4
* Dividends reinvested quarterly ________________________________________________________________________________ 26 28 of loan growth itself is likely to moderate. In this economy, the credit cycle has not been repealed. Wachovia's credit card net charge-offs, while still well below the industry average, have been rising during recent quarters. I believe the industry will begin experiencing a higher level of loan losses reflecting a combination of weaker credit standards and a slower-growing economy. Looking ahead to the end of this decade, the financial services industry will navigate through an unprecedented period of dramatic change. Wachovia must embrace this change and make it work to our advantage in order to remain among the ranks of leading companies whose performance warrants and should receive superior market valuation. The extraordinary performance of years past is comforting, but it will not carry Wachovia into the future. The early years of this decade ushered in profound shifts in the economy, customer expectations, and requirements for leadership and high performance. Population shifts and technology are two especially significant areas affecting us now. The population of America is continuing to age. Over the next fifteen years, the number of people in this country under age fifty will remain about the same, while the total population over age fifty will double. This will tend to increase the proportion of savers and investors to spenders and borrowers. Advances in technology are especially dramatic. I suspect we still cannot recognize the different and unique ways in which we will communicate with each other in the future. As the domestic economy in the remainder of the 1990s grows at a slower pace, it will be more challenging to sustain Wachovia's high performance. Growth in loans and deposits, two of the strongest contributors to banking performance, will be less robust. We must continue to find ways to supplement this traditional, and still attractive, spread income business. It will be imperative to manage costs even more effectively, while remaining vigilant in managing the quality of our loan portfolio and other areas of potential risk. This shifting environment led a group of senior Wachovia executives to undertake in 1994 a strategic assessment process. Throughout the spring and summer, we took an unrestrained look at the company. The emphasis was on finding opportunities for growth and ways to help Wachovia meet the future expectations of shareholders, customers, and employees. The assessment was shared with the board of directors in October and has been communicated throughout the organization. The 1994 Annual Report provided a comprehensive review of the resulting corporate strategy. I hope you have had an opportunity to read it. In summary, the assessment identified five strategic areas of emphasis. - Managing key lines of businesses to achieve profitable growth and build shareholder value - Raising Wachovia's effectiveness in selling products and services - Redirecting technology investment to support sales and service efforts - Using mergers and acquisitions to complement business development strategies - Assessing and managing the prudent use of capital These strategies are interrelated, and management teams are in place to implement actions in all five areas. Significant progress is being made, and we are enthusiastic about the opportunities for Wachovia in the months and years ahead. Earlier this month, Wachovia signed an agreement to sell the $9 billion residential mortgage loan servicing portfolio to GE Capital Mortgage Services. The transaction is expected to close by the end of May. It is the latest in a series of strategic business mix actions which has included acquiring a major credit card franchise through the 1985 merger with the First National Bank of Atlanta, building a debit card capability through the 1991 merger with South Carolina National and exiting the retail lockbox and student loan servicing businesses in 1993. In the sales arena, Wachovia opened 200 of its 492 branches throughout the three-state markets one Saturday last month for a special one-day sale on 10-month and three-year CDs and also offered a new money market account. It was a very successful sales event. More than $1 billion in CDs was attracted, about 86 percent of which was new money, and 76,600 accounts were opened, of which 28,000 represented entirely new customers. This one-day sale demonstrated the power of Wachovia's franchise and was a valuable experiment in mass marketing techniques. We will sell more services to these new customers. Wachovia On-Call, reached by calling 1-800-WACHOVIA, is expected to handle in excess of 3 million calls this year. The 24-hour, seven-day-a-week telephone sales and service center opened in June, 1994. The center's bankers continue to expand their menu of services, including originating loan and deposit accounts. Wachovia On-Call's service capabilities also give branch personnel more time to sell to customers directly. There are now 129 investment counselors in our three home states. All are Series 7 registered representatives able to sell a full range of investment products. The new Wachovia Mortgage Origination System is enhancing our ability to build market share in the residential mortgage market. 27 29 Our corporate banking products, deployed by 1,450 Wachovians, are comprehensive and growing. Wachovia is a national leader in providing cash management and Treasury services. An independent study in 1994 ranked Wachovia number one nationally for the quality of cash management services. We rank 12th in the nation in providing master trust employee benefit services. The Capital Markets division has been expanded and offers a wide array of specialized corporate finance, international banking, financial institutions and foreign exchange services. Wachovia Connection, a PC-based gateway to bank information for corporate treasurers, is selling well and additional features will be added this year. The introduction of the Prime For Life card, the nation's first guaranteed prime rate option, will help Wachovia to continue successfully marketing its Visa and MasterCard credit cards in and out of home markets. At the end of the first quarter, managed receivables totaled $4.1 billion, up $784 million from a year ago, with approximately 1.6 million of our 2.6 million credit card accounts located outside the three home states. Technology has long been one of Wachovia's most distinguishing capabilities. For the past nine years, technology investment has focused on infrastructure improvement designed to create common systems across the three states and support back office consolidations. This work largely is complete and results have been excellent. Going forward, a greater proportion of technology investment will be directed toward growth enhancing initiatives designed to build fee income, create value-added products, facilitate marketing and sales efforts and provide management with better performance measurement information. Many of these activities are already in various stages of deployment, including an enhanced trust system, image processing-based products and next generation branch automation providing interactive personal computer systems to better serve customers. Other technology will develop more sophisticated systems for Wachovia's banking card, strengthen automated teller machine capabilities, consolidate customer information data bases, and expand Wachovia's brokerage capability. In the years ahead, organizations lacking a strong commitment to technology will face complications as serious as those brought on by troublesome loans. Technology will remain among the highest priorities at Wachovia. In addition to managing our portfolio of businesses, enhancing sales capabilities, and redirecting technology spending, Wachovia will be alert for strategic acquisitions or combinations which enhance product capabilities, increase the scale of existing businesses, provide access to a larger base of customers, and increase shareholder value. Wachovia will continue to carefully evaluate acquisitions of other commercial banks, but we will not be guided by size, and we are not attracted to transactions which dilute shareholder value. Wachovia remains committed to the maintenance of a strong and impressive capital position. Capital is a precious resource, and it is one of the organization's most cherished strengths. As Wachovia moves ahead with corporate strategies and planned investments, its internal capital generation rate may exceed the needs of future business activities. A management team is looking at our capital, assessing needs for the future, and studying ways to manage and deploy capital in a prudent, competent manner to enhance shareholder value over the long term. The increased attention being placed on major ingredients of the strategic assessment is not detracting from our intense focus on traditional Wachovia strengths, such as exemplary risk and superior cost management. Risk management at Wachovia goes well beyond sound credit administration and encompasses operational, service delivery, and general market risk associated with all aspects of our business. Also, while Wachovia's overhead ratio ranks among the best in banking, we have under way several initiatives which will continue to help improve the expense component of that ratio. We are dedicated to being better than competitors in cost management. During 1994 and early this year, the organization has been realigned to enhance its ability to carry forward these important initiatives. The principal change has been the formation of the Corporate Banking and General Banking divisions. General Banking is responsible for carrying out a single strategic direction for Wachovia's banks and coordination of all consumer market products, including trust and investment services. Corporate Banking includes all credit and noncredit corporate banking services in addition to corporate trust, employee benefit, and charitable trust services. These changes will strengthen Wachovia's sales efforts and help productivity improvement throughout the organization. Adapting to change is not new to Wachovia. Our history is replete with examples of this fine organization moving forward while remaining faithful to its values and principles. The years ahead will be filled with interesting challenges. At the same time, the people of Wachovia approach the future with considerable optimism bolstered by a proud history, strategic preparation, tactical flexibility, enviable financial strength, modern technology, and good leadership. We are well prepared to move quickly toward opportunity and to cope with adversity in the times ahead. Finally, I want you to know that the people of Wachovia have a passionate devotion to this company, an unwavering commitment to excellence, and a dedication to building shareholder value. Thank you very much. 28 30 ____________________________________________________________________________________________________________________________________ SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS Wachovia Corporation 301 North Main Street 191 Peachtree Street, NE Winston-Salem, NC 27150 Atlanta, GA 30303 CORPORATE MAILING ADDRESSES AND TELEPHONE NUMBERS Wachovia Corporation P. O. Box 3099 P. O. Box 4148 Winston-Salem, NC 27150 Atlanta, GA 30302 910-770-5000 404-332-5000 COMMON STOCK The common stock of the Corporation is traded on the New York Stock Exchange with a ticker symbol of WB. TRANSFER AGENT Wachovia Bank of North Carolina, N.A. Corporate Trust Department P. O. Box 3001 Winston-Salem, NC 27102 1-800-633-4236 SHAREHOLDER ACCOUNT ASSISTANCE Shareholders who wish to change the name, address or ownership of stock, report lost certificates, eliminate duplicate mailings of financial material or for other account reregistration procedures and assistance should contact the Transfer Agent at the address or phone number above. Use of your shareholder account number and a daytime phone number in all correspondence will be appreciated. DIVIDEND 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 the date of payment to a checking, savings or money market account at any financial institution which participates in an Automated Clearing House. Information regarding these services can be obtained by contacting the Transfer Agent at the address or phone number above or Wachovia Shareholder Services at the address or phone number below. WACHOVIA SHAREHOLDER SERVICES CONTACT H. Jo Barlow Wachovia Corporation Shareholder Services P. O. Box 3099 910-770-5787 Winston-Salem, NC 27150 FINANCIAL INFORMATION Analysts, investors and others seeking financial information should contact the following either by phone or in writing to the corporate mailing address in Winston-Salem. Robert S. McCoy, Jr. James C. Mabry Chief Financial Officer Investor Relations 910-770-5926 910-770-5788 INDEPENDENT AUDITORS Ernst & Young LLP, Winston-Salem, NC 29 31
____________________________________________________________________________________________________________________________________ MEMBER COMPANY DIRECTORS WACHOVIA BANK OF GEORGIA, N.A. D. GARY THOMPSON CARL BOLCH, JR. BRYAN D. LANGTON D. RAYMOND RIDDLE President and Chairman of the Board and (Advisory Director) Chairman of the Board and Chief Executive Officer Chief Executive Officer Chairman of the Board and Chief Executive Officer Racetrac Petroleum, Inc. Chief Executive Officer National Service Industries, Inc. G. JOSEPH PRENDERGAST Holiday Inn Worldwide Chairman of the Board JAMES E. BOSTIC, JR. S. STEPHEN SELIG III Senior Vice President BERNARD MARCUS Chairman of the Board F. DUANE ACKERMAN Environmental, Government Affairs Chairman of the Board and and President Vice Chairman and and Communications Chief Executive Officer Selig Enterprises, Inc. Chief Operating Officer Georgia-Pacific Corporation The Home Depot, Inc. BellSouth Corporation ALANA S. SHEPHERD MICHAEL C. CARLOS DANIEL W. MCGLAUGHLIN Secretary of the Board L. M. BAKER, JR. Chairman of the Board and President and Shepherd Spinal Center President and Chief Executive Officer Chief Operating Officer Chief Executive Officer National Distributing Co., Inc. Equifax Inc. Wachovia Corporation G. STEPHEN FELKER Chairman of the Board and Chief Executive Officer Avondale Mills, Inc. WACHOVIA BANK OF NORTH CAROLINA, N.A. J. WALTER MCDOWELL WILLIAM CAVANAUGH, III ESTELL C. LEE ANDERSON D. WARLICK President and President and Chairman of the Board President and Chief Executive Officer Chief Operating Officer and President Chief Operating Officer Carolina Power & Light Company The Lee Company Parkdale Mills, Inc. L. M. BAKER, JR. Chairman of the Board BERT COLLINS G. JOSEPH PRENDERGAST DAVID J. WHICHARD, II President and Executive Vice President Chairman THOMAS M. BELK, JR. Chief Executive Officer Wachovia Corporation The Daily Reflector Senior Vice President North Carolina Mutual Belk Stores Services, Inc. Life Insurance Company ROBERT L. TILLMAN JOHN C. WHITAKER, JR. Chief Operating Officer Chairman of the Board and H. C. BISSELL RICHARD L. DAUGHERTY Lowe's Companies, Inc. Chief Executive Officer Chairman of the Board and North Carolina Senior Inmar Enterprises, Inc. Chief Executive Officer State Executive, JOHN F. WARD The Bissell Companies, Inc. Vice President Worldwide Senior Vice President Manufacturing Sara Lee Corporation FELTON J. CAPEL IBM PC Company Chief Executive Officer Chairman of the Board IBM Corporation Hanes Group and President (Retired/Consultant) Century Associates of North Carolina SOUTH CAROLINA NATIONAL CORPORATION WACHOVIA BANK OF SOUTH CAROLINA, N.A. ANTHONY L. FURR W. T. CASSELS, JR. JAMES G. LINDLEY ROBERT S. SMALL, JR. Chairman of the Board, Chairman of the Board Chairman Emeritus President President and Southeastern Freight Lines, Inc. AVTEX Properties, Inc. Chief Executive Officer JOE A. PADGETT THOMAS C. COXE, III Retired Executive Vice J. GUY STEENROD L. M. BAKER, JR. Executive Vice President President President President and Sonoco Products Company Wachovia Bank of South Roche Carolina Inc. Chief Executive Officer Carolina, N.A. Wachovia Corporation FREDERICK B. DENT, JR. WILLIAM G. TAYLOR President G. JOSEPH PRENDERGAST President CHARLES J. BRADSHAW Mayfair Mills, Inc. Executive Vice President The Springs Company President Wachovia Corporation Bradshaw Investments, Inc. JAMES B. EDWARDS, D.M.D. BEATRICE R. THOMPSON, PH.D. President W. M. SELF Coordinator of Psychological FRANK W. BRUMLEY Medical University of South President and Services President Carolina Chief Executive Officer Anderson School District Five The Brumley Company Greenwood Mills, Inc.
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____________________________________________________________________________________________________________________________________ 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 Company JOHN G. MEDLIN, JR. W. HAYNE HIPP Chairman of the Board President and WYNDHAM ROBERTSON Chief Executive Officer Vice President, Communications RUFUS C. BARKLEY, JR. The Liberty Corporation University of North Carolina Chairman of the Board Cameron & Barkley Company ROBERT M. HOLDER, JR. HERMAN J. RUSSELL Chairman of the Board Chairman of the Board and CRANDALL C. BOWLES Holder Corporation Chief Executive Officer Executive Vice President H.J. Russell & Company Springs Industries, Inc. DONALD R. HUGHES Consultant and Retired SHERWOOD H. SMITH, JR. JOHN L. CLENDENIN Vice Chairman of the Board Chairman of the Board and Chairman of the Board Burlington Industries, Inc. Chief Executive Officer and Chief Executive Officer Carolina Power & Light Company BellSouth Corporation F. KENNETH IVERSON Chairman and CHARLES MCKENZIE TAYLOR LAWRENCE M. GRESSETTE, JR. Chief Executive Officer Chairman of the Board Chairman of the Board, Nucor Corporation Taylor & Mathis, Inc. President and Chief Executive Officer SCANA Corporation PRINCIPAL CORPORATE OFFICERS L. M. BAKER, JR. W. DOUG KING ROBERT S. MCCOY, JR. President and Executive Vice President Executive Vice President Chief Executive Officer Consumer Services Chief Financial Officer MICKEY W. DRY WALTER E. LEONARD, JR. G. JOSEPH PRENDERGAST Executive Vice President Executive Vice President Executive Vice President Chief Credit Officer Operations/Technology General Banking HUGH M. DURDEN KENNETH W. MCALLISTER RICHARD B. ROBERTS Executive Vice President Executive Vice President Executive Vice President Corporate Banking General Counsel/Administrative Treasurer
31 33 --------------------- WACHOVIA BULK RATE - -------------------- U.S. POSTAGE PAID WACHOVIA CORPORATION --------------------- Wachovia Corporation P.O. Box 3099 Winston-Salem, NC 27150 EX-27 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WACHOVIA CORPORATION FOR THE THREE MONTHS ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 2,419,234 6,364 24,341 770,457 3,759,901 4,524,687 4,558,931 26,728,134 408,500 40,223,351 23,109,591 7,976,501 1,086,626 4,645,650 856,037 0 0 2,548,946 40,223,351 559,774 119,046 12,972 691,792 167,333 342,596 349,196 21,788 (129) 283,032 201,340 142,156 0 0 142,156 .83 .82 4.36 71,848 48,998 0 0 406,132 26,458 7,038 408,500 0 0 0
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