Report of Management
The management of NationsBank Corporation is responsible for the
preparation, integrity and objectivity of the consolidated financial statements
of the Corporation. The consolidated financial statements and notes have been
prepared by the Corporation in accordance with generally accepted accounting
principles and, in the judgment of management, present fairly the Corporation's
financial position and results of operations. The financial information
contained elsewhere in this report is consistent with that in the financial
statements. The financial statements and other financial information in this
report include amounts that are based on management's best estimates and
judgments and give due consideration to materiality.
The Corporation maintains a system of internal accounting controls to
provide reasonable assurance that assets are safeguarded and that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with generally
accepted accounting principles.
The Internal Audit Division of the Corporation reviews, evaluates,
monitors and makes recommendations on both administrative and accounting
control, which acts as an integral, but independent, part of the system of
internal controls.
The Corporation's independent accountants were engaged to perform an audit
of the consolidated financial statements. This audit provides an objective
review of management's responsibility to report operating results and financial
condition. Working with the Corporation's internal auditors, they review and
make tests as appropriate of the data included in the financial statements.
The Board of Directors discharges its responsibility for the Corporation's
financial statements through its Audit Committee. The Audit Committee meets
periodically with the independent accountants, internal auditors and management.
Both the independent accountants and internal auditors have direct access to the
Audit Committee to discuss the scope and results of their work, the adequacy of
internal accounting controls and the quality of financial reporting.
/s/ Hugh L. McColl Jr. /s/ James H. Hance Jr.
Hugh L. McColl Jr. James H. Hance Jr.
Chairman Vice Chairman and
Chief Financial Officer
Report of Independent Accountants
To the Board of Directors and
Shareholders of NationsBank Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of NationsBank Corporation and its subsidiaries at December 31, 1994
and 1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Corporation's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Corporation changed its methods of accounting for income taxes, postretirement
benefits other than pensions and certain investments in debt securities in 1993.
/s/ Price Waterhouse LLP
Charlotte, North Carolina
January 13, 1995
NationsBank Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions Except Per-Share Information)
Year Ended December 31
--------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM EARNING ASSETS
Interest and fees on loans................................................. $ 7,577 $6,198 $5,643
Lease financing income..................................................... 150 110 94
Interest and dividends on securities
Held for investment...................................................... 755 1,347 1,506
Available for sale....................................................... 623 49 103
Interest and fees on loans held for sale................................... 23 53 70
Time deposits placed and other short-term investments...................... 90 79 92
Federal funds sold......................................................... 45 14 44
Securities purchased under agreements to resell............................ 502 180 157
Trading account assets..................................................... 764 297 71
---------------------------------------
Total income from earning assets......................................... 10,529 8,327 7,780
---------------------------------------
INTEREST EXPENSE
Deposits................................................................... 2,415 2,149 2,772
Borrowed funds and trading account liabilities............................. 2,353 1,149 639
Long-term debt and obligations under capital leases........................ 550 392 271
---------------------------------------
Total interest expense................................................... 5,318 3,690 3,682
---------------------------------------
NET INTEREST INCOME............................................................ 5,211 4,637 4,098
PROVISION FOR CREDIT LOSSES.................................................... 310 430 715
---------------------------------------
NET CREDIT INCOME.............................................................. 4,901 4,207 3,383
GAINS (LOSSES) ON SALES OF SECURITIES.......................................... (13) 84 249
NONINTEREST INCOME............................................................. 2,597 2,101 1,913
OTHER REAL ESTATE OWNED EXPENSE (INCOME)....................................... (12) 78 183
RESTRUCTURING EXPENSE.......................................................... - 30 -
OTHER NONINTEREST EXPENSE...................................................... 4,942 4,293 3,966
---------------------------------------
INCOME BEFORE INCOME TAXES AND EFFECT OF CHANGE IN METHOD OF ACCOUNTING
FOR INCOME TAXES............................................................. 2,555 1,991 1,396
INCOME TAX EXPENSE............................................................. 865 690 251
---------------------------------------
INCOME BEFORE EFFECT OF CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES........ 1,690 1,301 1,145
EFFECT OF CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES...................... - 200 -
---------------------------------------
NET INCOME..................................................................... $ 1,690 $1,501 $1,145
=======================================
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS.................................... $ 1,680 $1,491 $1,121
=======================================
PER-SHARE INFORMATION
Earnings per common share before effect of change in method of
accounting for income taxes................................................ $ 6.12 $ 5.00 $ 4.60
Effect of change in method of accounting for income taxes.................... - .78 -
---------------------------------------
Earnings per common share.................................................... $ 6.12 $ 5.78 $ 4.60
=======================================
Fully diluted earnings per common share before effect of change in
method of accounting for income taxes...................................... $ 6.06 $ 4.95 $ 4.52
Effect of change in method of accounting for income taxes.................... - .77 -
---------------------------------------
Fully diluted earnings per common share...................................... $ 6.06 $ 5.72 $ 4.52
=======================================
Dividends per common share................................................... $ 1.88 $ 1.64 $ 1.51
=======================================
AVERAGE COMMON SHARES ISSUED (in thousands).................................... 274,656 257,969 243,748
=======================================
See accompanying notes to consolidated financial statements.
58 NationsBank Corporation Annual Report 1994
NationsBank Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
December 31
----------------------
1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents............................................................... $ 9,582 $ 7,649
Time deposits placed and other short-term investments................................... 2,159 1,479
Securities
Held for investment, at cost (market value - $17,101 and $13,604)..................... 17,800 13,584
Available for sale.................................................................... 8,025 15,470
-----------------------
Total securities.................................................................... 25,825 29,054
-----------------------
Loans held for sale..................................................................... 318 1,697
Trading account assets.................................................................. 9,941 10,610
Federal funds sold...................................................................... 960 691
Securities purchased under agreements to resell......................................... 10,152 6,353
Loans and leases, net of unearned income................................................ 102,367 91,006
Factored accounts receivable............................................................ 1,004 1,001
-----------------------
Loans, leases and factored accounts receivable, net of unearned income................ 103,371 92,007
-----------------------
Allowance for credit losses............................................................. (2,186) (2,169)
Premises, equipment and lease rights, net............................................... 2,439 2,259
Customers' acceptance liability......................................................... 684 708
Interest receivable..................................................................... 1,408 1,117
Goodwill................................................................................ 1,047 812
Core deposit and other intangibles...................................................... 665 555
Other assets............................................................................ 3,239 4,864
-----------------------
$169,604 $157,686
=======================
LIABILITIES
Deposits
Noninterest-bearing................................................................... $ 21,380 $ 20,723
Savings............................................................................... 9,037 8,784
NOW and money market deposit accounts................................................. 29,752 30,881
Time.................................................................................. 27,698 26,691
Foreign time.......................................................................... 12,603 4,034
-----------------------
Total deposits...................................................................... 100,470 91,113
-----------------------
Federal funds purchased................................................................. 3,993 7,135
Securities sold under agreements to repurchase.......................................... 21,977 21,236
Commercial paper........................................................................ 2,519 2,056
Other short-term borrowings............................................................. 5,640 5,522
Trading account liabilities............................................................. 11,426 8,299
Liability to factoring clients.......................................................... 586 534
Acceptances outstanding................................................................. 684 708
Accrued expenses and other liabilities.................................................. 2,810 2,752
Long-term debt and obligations under capital leases..................................... 8,488 8,352
-----------------------
Total liabilities..................................................................... 158,593 147,707
-----------------------
Contingent liabilities and other financial commitments (Notes 9 and 11)
SHAREHOLDERS' EQUITY
Preferred stock: authorized - 45,000,000 shares
ESOP Convertible, Series C: issued - 2,606,657 and 2,703,440 shares................... 111 115
Series CC: issued - none and 752,600 shares........................................... - 38
Series DD: issued - none and 1,107,600 shares......................................... - 55
Common stock: authorized - 800,000,000 and 500,000,000 shares;
issued - 276,451,552 and 270,904,656 shares........................................... 4,740 4,594
Retained earnings....................................................................... 6,451 5,247
Other, including loan to ESOP trust..................................................... (291) (70)
-----------------------
Total shareholders' equity.......................................................... 11,011 9,979
-----------------------
$169,604 $157,686
=======================
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements 59
NationsBank Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
Year Ended December 31
----------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income................................................................... $ 1,690 $ 1,501 $ 1,145
Reconciliation of net income to net cash provided by operating activities
Provision for credit losses................................................ 310 430 715
(Gains) losses on sales of securities...................................... 13 (84) (249)
Gain on sale of mortgage servicing unit.................................... - - (55)
Depreciation and premises improvements amortization........................ 265 242 228
Amortization of intangibles................................................ 141 110 111
Deferred income tax expense................................................ 235 210 14
Effect of change in method of accounting for income taxes.................. - (200) -
Net change in trading instruments.......................................... 3,796 707 (783)
Net (increase) decrease in interest receivable............................. (282) (93) 88
Net increase in interest payable........................................... 299 93 81
Net (increase) decrease in loans held for sale............................. 1,379 (406) (651)
Net increase in liability to factoring clients............................. 52 52 5
Other operating activities................................................. 1,220 (425) (71)
----------------------------------------
Net cash provided by operating activities................................ 9,118 2,137 578
----------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of securities held for investment................... 5,864 9,182 5,154
Purchases of securities held for investment.................................. (10,293) (10,493) (12,234)
Proceeds from sales and maturities of securities available for sale.......... 23,762 18,295 27,981
Purchases of securities available for sale................................... (16,055) (15,805) (20,202)
Net increase in federal funds sold and securities
purchased under agreements to resell....................................... (3,805) (410) (1,963)
Net (increase) decrease in time deposits placed and other
short-term investments..................................................... (670) 816 (407)
Net originations of loans and leases......................................... (12,656) (12,473) (8,702)
Net purchases of premises and equipment...................................... (327) (65) (287)
Purchases of loans and leases................................................ (2,936) (3,830) (2,373)
Proceeds from sales and securitizations of loans............................. 4,126 8,682 6,182
Purchases of mortgage servicing rights....................................... (124) (40) (5)
Purchases of factored accounts receivable.................................... (7,612) (7,343) (6,676)
Collections of factored accounts receivable.................................. 7,577 7,229 6,559
Proceeds from sales of other real estate owned............................... 369 261 352
Acquisitions of subsidiaries, net of cash.................................... 3,778 (4,606) (21)
----------------------------------------
Net cash used in investing activities.................................... (9,002) (10,600) (6,642)
----------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits.......................................... 4,261 (1,581) (5,348)
Net increase (decrease) in federal funds purchased and securities
sold under agreements to repurchase........................................ (2,562) 4,503 8,671
Net increase in other borrowed funds......................................... 491 1,958 2,884
Proceeds from issuance of long-term debt..................................... 1,198 4,125 349
Retirement of long-term debt................................................. (1,017) (405) (128)
Preferred stock repurchased and redeemed..................................... (94) - (10)
Proceeds from issuance of common stock....................................... 267 197 544
Cash dividends paid.......................................................... (527) (433) (395)
Common stock repurchased..................................................... (180) - -
Other financing activities................................................... (20) (23) 13
----------------------------------------
Net cash provided by financing activities................................ 1,817 8,341 6,580
----------------------------------------
Net increase (decrease) in cash and cash equivalents........................... 1,933 (122) 516
Cash and cash equivalents at beginning of year................................. 7,649 7,771 7,255
----------------------------------------
Cash and cash equivalents at end of year....................................... $ 9,582 $ 7,649 $ 7,771
========================================
Supplemental cash flow disclosure
Cash paid for interest....................................................... $ 5,020 $ 3,477 $ 3,601
Cash paid for income taxes................................................... 718 360 88
Loans transferred to other real estate owned amounted to $207, $251 and $403
in 1994, 1993 and 1992, respectively.
See accompanying notes to consolidated financial statements.
60 NationsBank Corporation Annual Report 1994
NationsBank Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Millions, Shares in Thousands)
Total
Common Stock Loan to Share-
Preferred -------------------- Retained ESOP holders'
Stock Shares Amount Earnings Trust Other Equity
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE ON DECEMBER 31, 1991.................... $373 231,246 $2,836 $3,429 $(107) $ (13) $ 6,518
Net income...................................... 1,145 1,145
Cash dividends
Common...................................... (371) (371)
Preferred................................... (24) (24)
Redemption and conversion of Series B
preferred stock............................. (250) 6,734 240 (10)
Issuance of common stock........................ 8,050 353 353
Common stock issued under dividend
reinvestment and employee plans............. 6,569 259 (78) 181
Common stock issued upon exercise
of warrants................................. 303 10 10
Other........................................... (4) 88 4 9 3 12
----------------------------------------------------------------------------
BALANCE ON DECEMBER 31, 1992.................... 119 252,990 3,702 4,179 (98) (88) 7,814
Net income...................................... 1,501 1,501
Cash dividends
Common...................................... (423) (423)
Preferred................................... (10) (10)
Issued in MNC acquisition
Series CC and DD preferred stock............ 93 93
Common stock................................ 13,608 701 701
Common stock issued under dividend
reinvestment and employee plans............. 4,213 187 10 197
Valuation reserve for securities available
for sale and marketable equity securities... 104 104
Other........................................... (4) 94 4 10 (8) 2
----------------------------------------------------------------------------
BALANCE ON DECEMBER 31, 1993.................... 208 270,905 4,594 5,247 (88) 18 9,979
Net income...................................... 1,690 1,690
Cash dividends
Common...................................... (517) (517)
Preferred................................... (10) (10)
Preferred stock repurchased and redeemed........ (93) (1) (94)
Common stock issued under dividend
reinvestment and employee plans............. 5,351 254 13 267
Common stock issued in acquisitions............. 3,510 64 41 105
Common stock repurchased........................ (3,524) (180) (180)
Net change in valuation reserve for
securities available for sale and
marketable equity securities................ (240) (240)
Other........................................... (4) 210 9 12 (6) 11
----------------------------------------------------------------------------
BALANCE ON DECEMBER 31, 1994.................... $ 111 276,452 $4,740 $6,451 $ (76) $(215) $11,011
============================================================================
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements 61
NationsBank Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NationsBank Corporation (the Corporation) is a multi-bank holding company
organized under the laws of North Carolina in 1968 and registered under the Bank
Holding Company Act of 1956, as amended. The Corporation provides financial
products and services, both domestically and internationally.
The accounting and reporting policies of NationsBank Corporation and its
subsidiaries conform with generally accepted accounting principles. Certain
prior year amounts have been reclassified to conform to current year
classifications. A description of the significant accounting policies is
presented below.
NOTE 1 -- ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of NationsBank
Corporation and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Results of operations of
companies purchased are included from the dates of acquisition. Prior year
financial statements are restated to include accounts of companies acquired and
accounted for as poolings of interests. Assets held in an agency or fiduciary
capacity are not included in the consolidated financial statements.
CASH AND CASH EQUIVALENTS
Cash on hand, cash items in the process of collection and amounts due from
correspondent banks and the Federal Reserve Bank are included in cash and cash
equivalents.
SECURITIES
Securities are classified based on management's intention at the time of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held for investment and reported at amortized cost.
All other securities are classified as available for sale and carried at fair
value with net unrealized gains and losses included in shareholders' equity on
an after-tax basis. In addition, marketable equity securities are carried at
fair value with net unrealized gains and losses included in shareholders' equity
net of tax.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
The Corporation adopted Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS 115), on December 31, 1993 (Note 3).
LOANS HELD FOR SALE
Loans held for sale include mortgage and other loans and are carried at
the lower of aggregate cost or market value.
TRADING INSTRUMENTS
Instruments utilized in trading activities include both securities and
derivatives and are stated at market value. Quoted market prices are generally
used as a basis to determine the market values of trading instruments. If quoted
market prices are not available, market values are estimated on the basis of
dealer quotes, pricing models, or quoted prices for instruments with similar
characteristics. Realized and unrealized gains and losses are recognized as
noninterest income.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is available to absorb losses inherent in
the credit extension process. The entire allowance is available to absorb losses
related to the loan and lease portfolio and other extensions of credit,
including off-balance sheet credit exposures. Credit exposures deemed to be
uncollectible are charged against the allowance for credit losses. Recoveries of
previously charged-off amounts are credited to the allowance for credit losses.
The adequacy of the allowance for credit losses is reviewed regularly by
management. Additions to the allowance for credit losses are made by charges to
the provision for credit losses. On a quarterly basis, a comprehensive review of
the adequacy of the allowance for credit losses is performed. This assessment is
made in the context of historical losses, as well as existing economic
conditions.
In 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" (SFAS 114), which was amended in 1994 by Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosure" (SFAS 118). These standards address the
accounting for certain loans when it is probable that all amounts due pursuant
to the contractual terms of the loan will not be collected. Individually
identified impaired loans are measured based on the present value of payments
expected to be received, using the historical effective loan rate as the
discount rate. Loans that are to be foreclosed or that are solely dependent on
the collateral for repayment may alternatively be measured based on the fair
value of the collateral for such loans. Measurement may also be based on
observable market prices. If the recorded investment in the loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for credit losses. The Corporation adopted SFAS 114 and SFAS 118
effective January 1, 1995. Adoption of the standards did not have a material
impact on the Corporation's financial position or results of operations.
LOANS
Loans are reported at their outstanding principal balances net of any
charge-offs, unamortized deferred fees and costs on originated loans or
premiums or discounts on purchased loans.
Loan origination fees and certain direct origination costs are deferred
and recognized as adjustments to income over the lives of the related loans.
Discounts and premiums are amortized to income using methods that
approximate the interest method.
NONPERFORMING LOANS
Commercial loans and leases that are past due 90 days or more as to
principal or interest, or where reasonable doubt exists as to timely collection,
are generally classified as nonperforming loans unless well secured and in the
process of collection. Loans whose contractual terms have been restructured in a
manner which grants a concession to a borrower experiencing financial
difficulties, are classified as nonperforming until such time as the loan is
expected to be collected in full and the borrower has demonstrated sustained
performance in
62 NationsBank Corporation Annual Report 1994
accordance with the restructured terms. Generally, loans which are past due 180
days or more as to principal or interest are classified as nonperforming
regardless of collateral or collection status. Generally, interest accrued but
not collected is reversed when a loan or lease is classified as nonperforming.
Interest collections on nonperforming loans and leases for which the
ultimate collectibility of principal is uncertain are applied as principal
reductions. Otherwise, such collections are credited to income when received.
Consumer loans, including credit card loans, that are past due 90 days or
more are not generally classified as nonperforming assets. Generally, consumer
loans are liquidated or charged off soon after becoming 90 days past due or 180
days past due for credit card loans. Income is generally recognized on past-due
consumer and credit card loans until the loan is charged off.
OTHER REAL ESTATE OWNED
Other real estate owned includes both formally foreclosed and in-substance
foreclosed property and premises no longer used for business operations.
Other real estate owned is carried at the lower of (1) the recorded amount
of the loan or lease for which the foreclosed property previously served as
collateral, or (2) the fair value of the property minus estimated costs to sell.
Prior to foreclosure, the recorded amount of the loan or lease is written down,
if necessary, to the fair value, minus estimated costs to sell, of the real
estate to be acquired by charging the allowance for credit losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on
the periodic revaluation of other real estate owned are credited or charged to
expense. Net costs of maintaining and operating foreclosed properties are
expensed as incurred.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are recognized principally
using the straight-line method over the estimated useful lives of the assets.
INCOME TAXES
There are two components of income tax provision, current and deferred.
Current income tax provisions approximate taxes to be paid or refunded
for the applicable period.
Balance sheet amounts of deferred taxes are recognized on the temporary
differences between the bases of assets and liabilities as measured by tax laws
and their bases as reported in the financial statements. Deferred tax expense or
benefit is then recognized for the change in deferred tax liabilities or assets
between periods.
Recognition of deferred tax balance sheet amounts is based on management's
belief that it is more likely than not that the tax benefit associated with
certain temporary differences, tax operating loss carryforwards, and tax credits
will be realized. A valuation allowance is recorded for those deferred tax items
for which it is more likely than not that realization will not occur.
During the first quarter of 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The Corporation had previously recorded income tax expense following
Statement of Financial Accounting Standards No. 96, "Accounting for Income
Taxes" (SFAS 96).
RETIREMENT BENEFITS
The Corporation has established qualified retirement plans covering full-
time, salaried employees and certain part-time employees. Pension expense under
these plans is accrued each year. The costs are charged to current operations
and consist of several components of net pension cost based on various actuarial
assumptions regarding future experience under the plans.
In addition, the Corporation and its subsidiaries have established
unfunded supplemental benefit plans providing any benefits that could not be
paid from a qualified retirement plan because of Internal Revenue Code
restrictions and supplemental executive retirement plans for selected officers
of the Corporation and its subsidiaries. These plans are nonqualified and,
therefore, in general, a participant's or beneficiary's claim to benefits is as
a general creditor.
The Corporation and its subsidiaries have established several
postretirement medical benefit plans which are not funded.
The Corporation adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefit Other Than Pensions"
(SFAS 106), during the first quarter of 1993. Retiree benefits, including health
and life insurance, are accrued under SFAS 106 compared to the Corporation's
prior accounting method of recognizing expense as these benefits were paid.
RISK MANAGEMENT INSTRUMENTS
Revenues or expenses associated with interest rate swap contracts used in
asset and liability management are accounted for on the accrual basis and
recognized as an adjustment to income or expense on the underlying instruments.
Gains and losses associated with futures and forward contracts used as effective
hedges of existing risk positions or anticipated transactions are deferred as an
adjustment to the carrying value of the related asset or liability and
recognized in net interest income over the remaining term of the related asset
or liability.
EARNINGS PER COMMON SHARE
Earnings per common share is computed by dividing net income, reduced by
dividends on preferred stock, by the weighted average number of common shares
outstanding for each period presented.
PURCHASE METHOD OF ACCOUNTING
Net assets of companies acquired in purchase transactions are recorded at
fair value at the date of acquisition. Identified intangibles are amortized on
an accelerated or straight-line basis over the period benefited. Goodwill is
amortized on a straight-line basis over 25 years.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Foreign currency assets and liabilities of the foreign branches and
subsidiaries are translated into U.S. dollars using month-end spot rates of
exchange. Income and expense amounts are translated based on the spot rate in
effect at the date on which the individual transactions are recorded.
Notes to Consolidated Financial Statements 63
NOTE 2 -- ACQUISITION ACTIVITY
On October 1, 1993, the Corporation completed the acquisition of MNC
Financial Inc. (MNC), a bank holding company headquartered in Baltimore,
Maryland, with total assets of approximately $16.5 billion. The acquisition was
accounted for as a purchase. On an unaudited pro forma basis, combined interest
and other income and net income is $11.4 billion and $1.6 billion, respectively,
for 1993. On an unaudited pro forma basis, the reduction in earnings per common
share and fully diluted earnings per common share is $.03 and $.02,
respectively, for 1993.
On December 1, 1993, the Corporation established Greyrock Capital Group
Inc. (previously named Nations Financial Capital Corporation) upon completion of
its acquisition of a substantial amount of the assets and the ongoing business
of U S WEST Financial Services Inc., a corporate finance subsidiary of U S WEST
Inc. The Corporation acquired approximately $2.0 billion in net receivables.
On July 2, 1993, the Corporation, through a banking subsidiary, completed
its acquisition of substantially all the assets and certain of the liabilities
of Chicago Research & Trading Group Ltd. (CRT) and certain of its subsidiaries,
an options market-making and trading firm and a primary government securities
dealer. Total assets at the date of purchase were approximately $12 billion and
consisted primarily of trading account assets and securities purchased under
agreements to resell.
On February 1, 1993, the Corporation, through a subsidiary, acquired
substantially all of the assets and assumed certain of the liabilities of
Chrysler First Inc., the non-automotive finance subsidiary of Chrysler Financial
Corporation. Finance receivables of approximately $3.7 billion, including $1.5
billion which were securitized, were acquired. NationsCredit was formed as a
result of this purchase.
During 1994, the Corporation acquired several smaller banking
organizations. Aggregate acquired loans and assumed deposits were $654 million
and $5.1 billion, respectively. Additionally, in 1994, several mortgage banking
operations, including mortgage servicing rights, were acquired. Aggregate
acquired mortgage servicing rights approximated $8.6 billion, bringing the
Corporation's total servicing portfolio to approximately $39 billion on December
31, 1994.
====================================================================================================================================
NOTE 3 -- SECURITIES
The book and market values of securities held for investment and
securities available for sale on December 31 were (dollars in millions):
U.S. Treasury
Securities Other
and Agency Taxable Total Tax-Exempt
SECURITIES HELD FOR INVESTMENT Debentures Securities Taxable Securities Total
- -----------------------------------------------------------------------------------------------------------------------------------
1994
- ----
Book value.................................................... $ 17,580 $ 79 $ 17,659 $141 $17,800
Gross unrealized gains........................................ 1 - 1 1 2
Gross unrealized losses....................................... (697) (1) (698) (3) (701)
---------------------------------------------------------------
Market value.................................................. $ 16,884 $ 78 $ 16,962 $139 $17,101
===============================================================
1993
- ----
Book value.................................................... $ 13,110 $446 $ 13,556 $28 $13,584
Gross unrealized gains........................................ 35 15 50 2 52
Gross unrealized losses....................................... (30) (2) (32) - (32)
---------------------------------------------------------------
Market value.................................................. $ 13,115 $459 $ 13,574 $30 $13,604
===============================================================
1992
- ----
Book value.................................................... $ 22,352 $486 $ 22,838 $517 $23,355
Gross unrealized gains........................................ 360 5 365 36 401
Gross unrealized losses....................................... (6) (1) (7) (1) (8)
---------------------------------------------------------------
Market value.................................................. $ 22,706 $490 $ 23,196 $552 $23,748
===============================================================
SECURITIES AVAILABLE FOR SALE
- ----------------------------------------------------------------------------------------------------------------------------------
1994
- ----
Cost.......................................................... $ 7,729 $250 $ 7,979 $310 $8,289
Gross unrealized gains........................................ - - - 11 11
Gross unrealized losses....................................... (274) - (274) (1) (275)
---------------------------------------------------------------
Market value.................................................. $ 7,455 $250 $ 7,705 $320 $8,025
===============================================================
1993
- ----
Cost.......................................................... $ 14,960 $ 7 $ 14,967 $378 $15,345
Gross unrealized gains........................................ 100 - 100 30 130
Gross unrealized losses....................................... (5) - (5) - (5)
---------------------------------------------------------------
Market value.................................................. $ 15,055 $ 7 $ 15,062 $408 $15,470
===============================================================
1992
- ----
Book value.................................................... $ 1,374 $ - $ 1,374 $ - $ 1,374
Gross unrealized gains........................................ 3 - 3 - 3
---------------------------------------------------------------
Market value.................................................. $ 1,377 $ - $ 1,377 $ - $ 1,377
===============================================================
64 NationsBank Corporation Annual Report 1994
The components of gains and losses on sales of available for sale
securities for the years ended December 31 were (dollars in millions):
1994 1993 1992
- -------------------------------------------------------------------------------
Gross gains on sales of securities............... $ 36 $166 $ 361
Gross losses on sales of securities.............. (49) (82) (112)
------------------------
Gains (losses) on sales of securities............ $(13) $ 84 $ 249
========================
There were no sales of securities held for investment in 1994, 1993 or
1992.
The components, expected maturity distribution and yields (computed on a
taxable-equivalent basis) of the Corporation's securities portfolio on December
31, 1994, are summarized below (dollars in millions). Actual maturities may
differ from contractual maturities or maturities shown below since borrowers may
have the right to prepay obligations with or without prepayment penalties.
Due after 1 Due after 5
Due in 1 year through 5 through 10 Due after
or less years years 10 years Total
-----------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- ------------------------------------------------------------------------------------------------------------------------------------
Book value of securities held
for investment
U.S. Treasury securities
and agency debentures............ $4,927 4.32% $12,506 5.72% $116 5.96% $ 31 7.39% $17,580 5.33%
Other taxable securities........... 10 5.54 57 6.22 9 6.53 3 6.40 79 6.17
-----------------------------------------------------------------------------------------
Total taxable.................... 4,937 4.32 12,563 5.72 125 6.00 34 7.30 17,659 5.33
Tax-exempt securities.............. 56 5.57 44 8.23 37 10.94 4 10.42 141 7.94
-----------------------------------------------------------------------------------------
Total............................ $4,993 4.34 $12,607 5.73 $162 7.13 $ 38 7.65 $17,800 5.35
=========================================================================================
Market value of securities
held for investment................ $4,893 $12,015 $156 $ 37 $17,101
=========================================================================================
Market value of securities available
for sale
U.S. Treasury securities
and agency debentures............. $2,791 4.23% $ 4,630 5.55% $ 34 7.05% $ - -% $ 7,455 5.08%
Other taxable securities........... - - 25 8.02 11 7.32 214 6.00 250 6.25
----------------------------------------------------------------------------------------
Total taxable...................... 2,791 4.23 4,655 5.56 45 7.12 214 6.00 7,705 5.12
Tax-exempt securities.............. 111 13.27 112 11.69 37 11.29 60 11.83 320 12.21
----------------------------------------------------------------------------------------
Total............................... $2,902 4.57 $ 4,767 5.71 $ 82 9.02 $274 7.29 $ 8,025 5.40
=========================================================================================
Cost of securities available for sale.. $2,908 $ 5,024 $ 84 $273 $ 8,289
=========================================================================================
There were no investments in obligations of states and political
subdivisions that were payable from and secured by the same source of revenue or
taxing authority and that exceeded 10 percent of consolidated shareholders'
equity on December 31, 1994 or 1993.
The income tax benefit attributable to securities transactions was $5
million for 1994, compared to income tax expense of $29 million and $87 million
for 1993 and 1992, respectively.
Securities are pledged or assigned to secure borrowed funds, government
and trust deposits and for other purposes. The book and market values of pledged
securities were $23.1 billion and $22.4 billion, respectively, on December 31,
1994, compared to $24.0 billion and $24.1 billion, respectively, on December 31,
1993.
On December 31, 1993, the Corporation adopted SFAS 115 related to
accounting for investments in debt and equity securities. Upon adoption, in
light of the MNC acquisition, the restrictive criteria on sales out of the held
for investment portfolio imposed by SFAS 115 and the uncertainty regarding
regulatory capital treatment of securities appreciation and depreciation, the
Corporation transferred approximately $14.6 billion from securities held for
investment to securities available for sale. Along with marketable equity
securities, the securities available for sale portfolio was marked to market
value resulting in net unrealized gains of approximately $164 million which are
included in shareholders' equity at $104 million net of tax.
On December 31, 1994, the valuation reserve for securities available for
sale and marketable equity securities reduced shareholders' equity by $136
million, reflecting $264 million of pretax depreciation on securities available
for sale, offset by $48 million of pretax appreciation on marketable equity
securities.
Notes to Consolidated Financial Statements 65
NOTE 4 -- TRADING ACCOUNT ASSETS AND LIABILITIES
The market values on December 31 and the average market values for the
year ended December 31, 1994, of the components of trading account assets and
liabilities were (dollars in millions):
1994
1994 1993 Average
- ------------------------------------------------------------------------------------------------------------------ -------
Securities owned
U.S. Treasury securities................................................................ $ 5,968 $ 8,084 $ 7,713
Securities of other U.S. Government agencies and corporations........................... 1,185 885 1,322
Certificates of deposit, bankers' acceptances and commercial paper...................... 371 703 409
Corporate debt.......................................................................... 581 194 722
Other securities........................................................................ 259 165 285
----------------- -------
Total securities owned................................................................ 8,364 10,031 10,451
Derivatives-dealer positions................................................................ 1,577 579 1,158
----------------- -------
Total trading account assets.......................................................... $ 9,941 $10,610 $11,609
================= =======
Short sales
U.S. Treasury securities................................................................ $ 9,352 $ 7,542 $ 9,840
Securities of other U.S. Government agencies and corporations........................... 182 224 550
Corporate debt.......................................................................... 278 - 134
Other securities........................................................................ - 2 2
----------------- -------
Total short sales..................................................................... 9,812 7,768 10,526
Derivatives-dealer positions................................................................ 1,614 531 1,063
----------------- -------
Total trading account liabilities..................................................... $11,426 $ 8,299 $11,589
================= =======
A discussion of the Corporation's trading activities is presented
beginning on page 49, including TABLE 21. An analysis of the revenues associated
with the Corporation's trading activities is presented in the table in the
noninterest income section on page 33.
The net change in the unrealized gain or loss on trading securities held
on December 31, 1994, included in noninterest income for 1994, was a loss of $3
million.
Derivatives-dealer positions presented in the table above represent the
market values of interest rate, foreign exchange and commodity products
including swap, futures, forward and option contracts associated with the
Corporation's trading derivatives activities.
A swap contract is an agreement between two parties to exchange cash flows
based on specified underlying notional amounts and indices. A futures or forward
contract is an agreement to buy or sell a quantity of a financial instrument or
commodity at a predetermined future date and rate or price. An option contract
is an agreement that conveys to the purchaser the right, but not the obligation,
to buy or sell a quantity of a financial instrument or commodity at a
predetermined rate or price at a time in the future.
These agreements can be transacted on an organized exchange or directly
between parties.
====================================================================================================================================
NOTE 5 -- LOANS, LEASES AND FACTORED ACCOUNTS RECEIVABLE
Loans, leases and factored accounts receivable on December 31 were (dollars in millions):
1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
LOANS
Commercial................................................................................. $ 44,804 $40,940
Real estate commercial..................................................................... 7,350 8,246
Real estate construction................................................................... 2,981 3,256
---------------------
Total commercial........................................................................ 55,135 52,442
---------------------
Residential mortgage....................................................................... 17,311 12,801
Home equity................................................................................ 2,644 2,565
Credit card................................................................................ 4,756 3,728
Other consumer............................................................................. 18,209 17,063
---------------------
Total consumer.......................................................................... 42,920 36,157
---------------------
Foreign.................................................................................... 1,984 978
Factored accounts receivable............................................................... 1,004 1,001
---------------------
Total loans and factored accounts receivable............................................ 101,043 90,578
Less unearned income.................................................................... (552) (553)
---------------------
Loans and factored accounts receivable, net of unearned income.......................... 100,491 90,025
---------------------
LEASES
Lease receivables.......................................................................... 3,056 2,127
Estimated residual value................................................................... 934 557
Less unearned income....................................................................... (1,110) (702)
---------------------
Leases, net of unearned income.......................................................... 2,880 1,982
---------------------
Loans, leases and factored accounts receivable, net of unearned income.................. $103,371 $92,007
=====================
66 NationsBank Corporation Annual Report 1994
Transactions in the allowance for credit losses were (dollars in
millions):
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Balance on January 1......................................................................... $2,169 $1,454 $1,605
----------------------------------
Loans, leases and factored accounts receivable charged off................................... (533) (609) (1,026)
Recoveries of loans, leases and factored accounts receivable previously charged off.......... 217 197 160
----------------------------------
Net charge-offs.......................................................................... (316) (412) (866)
Provision for credit losses.................................................................. 310 430 715
Allowance applicable to loans of purchased companies......................................... 23 697 -
----------------------------------
Balance on December 31....................................................................... $2,186 $2,169 $1,454
==================================
Loans to directors and executive officers of the Corporation on December
31, 1994, were $142 million and $180 million on January 1 and December 31, 1994,
respectively. An analysis of activity for 1994 with respect to such aggregate
loans is as follows (dollars in millions):
Balance New Balance
January 1 Loans Payments December 31
------------------------------------------------------
$142 $166 $128 $180
================================================================================
Loans to immediate family members of directors and executive officers of
the Corporation totaled $10 million and $17 million on January 1 and December
31, 1994, respectively.
Loans to directors and executive officers who were solely directors and/or
executive officers of the Corporation's significant subsidiaries, excluding the
aggregate loan amount of any loans to members of their immediate families,
amounted to $505 million on December 31, 1994.
Extensions of credit to such persons have been made in the ordinary course
of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time in comparable transactions with
others and did not involve more than normal risk of collectibility or present
other unfavorable features.
On December 31, 1994, 1993 and 1992, nonperforming loans totaled $801
million, $1.1 billion and $1.4 billion, respectively.
The net amount of interest recorded during each year on loans that were
nonperforming or restructured on December 31 was $31 million, $34 million and
$31 million in 1994, 1993 and 1992, respectively. If these loans had been
accruing interest at their originally contracted rates, related income would
have been $96 million in 1994, $80 million in 1993 and $105 million in 1992.
Other real estate owned amounted to $337 million, $661 million and $587
million on December 31, 1994, 1993 and 1992, respectively. The cost of carrying
other real estate owned amounted to $24 million, $18 million and $25 million in
1994, 1993 and 1992, respectively.
================================================================================
NOTE 6 -- PREMISES, EQUIPMENT AND LEASE RIGHTS, NET
Premises, equipment and lease rights, net on December 31 were (dollars in millions):
1994 1993
- -------------------------------------------------------------------------------------------------------
Land and land improvements................................................. $ 387 $ 318
Buildings.................................................................. 1,465 1,408
Capitalized leased premises................................................ 50 55
Leasehold improvements..................................................... 508 525
Furniture and equipment.................................................... 1,782 1,690
Construction in process.................................................... 82 63
-------------------
4,274 4,059
Less accumulated depreciation and amortization............................. (1,835) (1,800)
-------------------
$ 2,439 $ 2,259
===================
Provisions for depreciation and amortization charged to noninterest
expense were $265 million, $242 million and $228 million for 1994, 1993 and
1992, respectively.
On December 31, 1994, the minimum future noncancelable operating lease
payments for premises and equipment are $236 million, $199 million, $166
million, $144 million and $112 million for each of the succeeding years 1995
through 1999, respectively. Rental expense, excluding executory costs, charged
to operating expenses during 1994, 1993 and 1992 was approximately $343 million,
$287 million and $272 million, respectively.
Notes to Consolidated Financial Statements 67
NOTE 7 -- SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Corporation's banking subsidiaries in North Carolina, Georgia and
Texas jointly maintain a program to offer from time to time up to $6 billion in
short-term bank notes with fixed or floating rates and maturities from 30 days
to one year from date of issue. As of December 31, 1994 and 1993, short-term
bank notes outstanding were $4.5 billion and $2.2 billion, respectively.
On September 30, 1994, the Corporation renegotiated its commercial paper
back-up lines establishing a single committed, $1.5 billion, three-year credit
facility. As of December 31, 1994, the facility was unused. On December 31,
1993, established and unused bank lines of credit amounted to $1.0 billion. In
both years, these lines were supported by fees paid directly by the Corporation
to unaffiliated banks.
Long-term debt on December 31 is summarized as follows (dollars in
millions):
1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
SENIOR DEBT
Parent company
Floating rate notes, due 1994.......................................................... $ - $ 50
5 3/8 percent notes, due 1995.......................................................... 400 399
11.70 percent notes, due 1995.......................................................... 75 75
4 3/4 percent notes, due 1996.......................................................... 399 399
8 1/2 percent notes, due 1996.......................................................... 150 150
Floating rate medium-term notes at spreads over LIBOR, due 1995 through 1999........... 1,438 683
5 1/8 percent notes, due 1998.......................................................... 300 299
6 5/8 percent notes, due 1998.......................................................... 399 399
5.51 percent ESOP secured notes, due 1996 through 1999................................. 125 125
4.36 to 8.20 percent medium-term notes, due 1995 through 2000.......................... 482 477
5 3/8 percent notes, due 2000.......................................................... 397 396
9 1/4 percent unsecured notes, due 2006................................................ 124 124
Other senior notes..................................................................... 101 190
---------------------
4,390 3,766
---------------------
Banking and nonbanking subsidiaries
Floating rate municipal financing, repurchased 1994.................................... - 120
Floating rate collateralized financing, due 1994 through 1996.......................... 477 919
Other senior notes..................................................................... 80 100
---------------------
557 1,139
---------------------
Total senior debt...................................................................... 4,947 4,905
---------------------
SUBORDINATED DEBT
Parent company
Floating rate notes, repurchased 1994.................................................. - 299
9 3/8 percent notes, due 1997.......................................................... 82 84
9 3/4 percent capital notes, due 1999.................................................. 100 99
10 1/2 percent notes, due 1999......................................................... 299 299
9 1/8 percent notes, due 2001.......................................................... 299 299
8 1/8 percent notes, due 2002.......................................................... 349 349
6 1/2 percent notes, due 2003.......................................................... 600 600
6.20 percent medium-term notes, due 2003............................................... 75 75
7 3/4 percent notes, due 2004.......................................................... 299 -
6 7/8 percent notes, due 2005.......................................................... 398 398
9 3/8 percent notes, due 2009.......................................................... 397 397
10.20 percent notes, due 2015.......................................................... 200 200
8.57 percent medium-term notes, due 2024, putable 2004................................. 100 -
Other subordinated notes............................................................... 10 12
---------------------
3,208 3,111
---------------------
Banking and nonbanking subsidiaries
9 1/2 percent notes, due 2004.......................................................... 301 301
Other subordinated notes............................................................... 8 8
---------------------
309 309
---------------------
Total subordinated debt................................................................ 3,517 3,420
---------------------
Total long-term debt................................................................... 8,464 8,325
---------------------
Obligations under capital leases....................................................... 24 27
---------------------
Total long-term debt and obligations under capital leases.............................. $8,488 $8,352
=====================
Under its $1.1 billion of remaining shelf capacity, in December 1994, the
Corporation initiated a program to issue from time to time up to $1 billion in
aggregate principal amount of certain medium-term notes, which may be senior
debt securities, subordinated debt, or any combination thereof. As of February
28, 1995, approximately $800 million of senior debt notes have been issued under
this program.
As of February 28, 1995, $3 billion of corporate debt securities, and
preferred and common stock was available for issuance under a shelf registration
filed February 1, 1995.
68 NationsBank Corporation Annual Report 1994
The floating rate collateralized financing consists of $247 million in
consumer loan financing and $230 million in homes financing. Consumer loan
financing consists of revolving credit and closed-end asset-backed certificates
collateralized by a pool of credit lines and loans with a book value of $430
million at December 31, 1994. Homes financing consists of home equity and second
mortgage asset-backed certificates collateralized by a pool of second mortgages
and home equity loans with a book value of $427 million on December 31, 1994.
The components of collateralized financing bear interest at floating rates based
on factors of LIBOR. On December 31, 1994, the rates on both the consumer
financing and homes financing were 6.40 percent.
The indentures covering the parent company's senior long-term debt include
provisions that limit funded debt, long-term lease commitments, issuance of
subsidiary preferred stock, creation of liens upon the property of the
Corporation and the payment of dividends. Under the most restrictive of the
provisions, approximately $2.1 billion was available for payment of dividends on
December 31, 1994.
The floating rate collateralized financing obligations may be redeemed at
any time at the option of the Corporation. The 10 1/2-percent subordinated
notes, due 1999, are redeemable beginning in 1996.
The principal maturities for the next five years of long-term debt
outstanding on December 31, 1994, were (dollars in millions):
1995................................................ $1,256
1996................................................ 1,395
1997................................................ 309
1998................................................ 892
1999................................................ 970
===============================================================================
NOTE 8 -- SHAREHOLDERS' EQUITY
The Corporation has authorized 45 million shares of preferred stock. As
of December 31, 1994, the Corporation had issued 2.6 million shares of ESOP
Convertible Preferred Stock, Series C (ESOP Preferred Stock). The ESOP Preferred
Stock has a stated and liquidation value of $42.50 per share, provides for an
annual cumulative dividend of $3.30 per share and is convertible into .84 shares
of the Corporation's common stock at an initial conversion price of $42.50 per
.84 shares of the Corporation's common stock. In 1994, 1993 and 1992, ESOP
Preferred Stock in the amount of $4 million was converted into the Corporation's
common stock.
In connection with MNC acquisition, Series CC and DD Preferred Stock
was issued. During the first quarter of 1994, the Corporation repurchased and
redeemed all 753 thousand shares of its Series CC Preferred Stock at a
weighted average price of $51.32 per share and all 1.108 million shares of
its Series DD Preferred Stock at a weighted average price of $49.86 per
share. The aggregate redemption price was $94 million.
In 1992, all 5 million shares of Series B Preferred Stock were
converted into the Corporation's common stock or redeemed for cash.
On July 27, 1994, the Board of Directors authorized the Corporation
during the next 12 months to purchase from time to time in the open market up
to 10 million shares of its common stock representing the number of shares of
common stock it intends to issue for its dividend reinvestment and stock
purchase plan, its various employee benefit plans and additional shares
associated with small acquisitions. On December 31, 1994, 3.5 million shares
had been repurchased under this program at a repurchase amount of $180
million. In addition to the above authorization, on September 28, 1994, the
Board authorized the Corporation to purchase up to 20 million shares of its
common stock from time to time in open market or privately negotiated
transactions.
Other shareholders' equity on December 31 was comprised of the
following (dollars in millions):
1994 1993
- ------------------------------------------------------------------------
Restricted stock award plan
deferred compensation............................. $ (62) $(74)
Net unrealized gains (losses) on available for
sale securities and marketable equity
securities, net of tax............................ (136) 104
Foreign currency adjustment and other................. (17) (12)
--------------
$(215) $18
==============
===============================================================================
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Corporation enters into a number of
off-balance sheet commitments. These instruments expose the Corporation to
varying degrees of credit and market risk and are subject to the same credit and
risk limitation reviews as those recorded on the balance sheet. See the
discussion of credit risk policies and procedures and concentrations of credit
risk beginning on page 40.
CREDIT EXTENSION COMMITMENTS
The Corporation enters into commitments to extend credit, standby
letters of credit and commercial letters of credit to meet the financing
needs of its customers. The commitments shown below have been reduced by
amounts collateralized by cash and participated to other financial
institutions. The following summarizes commitments outstanding on December 31
(dollars in millions):
1994 1993
- -----------------------------------------------------------------------
Commitments to extend credit
Credit card commitments....................... $15,921 $12,808
Other loan commitments........................ 58,813 48,521
Standby letters of credit and
financial guarantees.......................... 6,884 6,265
Commercial letters of credit...................... 1,282 983
Notes to Consolidated Financial Statements 68
Commitments to extend credit are legally binding, generally have
specified rates and maturities and are for specified purposes. The
Corporation manages the credit risk on these commitments by subjecting these
commitments to normal credit approval and monitoring processes and protecting
against deterioration in the borrowers' ability to pay through adverse-change
clauses which require borrowers to maintain various credit and liquidity
measures. Credit card lines are unsecured commitments which are reviewed at
least annually by management. Upon evaluation of the customer's
creditworthiness, the Corporation has the right to change or terminate the
terms of the credit card line. Of the December 31, 1994 total other loan
commitments, $24.7 billion is scheduled to expire in less than one year,
$24.7 billion in one to five years and $9.4 billion after five years.
Standby letters of credit (SBLC) and financial guarantees are issued to
support the debt obligations of customers. If a SBLC or financial guarantee
is drawn upon, the Corporation looks to its customer for payment. SBLCs and
financial guarantees are subject to the same approval and collateral policies
as other extensions of credit. Of the December 31, 1994 total SBLCs and
financial guarantees, $4.3 billion is scheduled to expire in less than one
year, $2.4 billion in one to five years and $151 million after five years.
Commercial letters of credit, issued primarily to facilitate customer
trade finance activities, are collateralized by the underlying goods being
shipped by the customer and are generally short term.
For each of these types of instruments, the Corporation's maximum
exposure to credit loss is represented by the contractual amount of these
instruments. Many of the commitments are collateralized or are expected to
expire without being drawn upon; therefore, the total commitment amounts do
not necessarily represent risk of loss or future cash requirements.
DERIVATIVES
Derivative transactions are entered into by the Corporation to meet the
financing needs of its customers, to manage its own interest rate and
currency risks, and as part of its trading activities. See TABLES 18 and 19
on pages 45 and 46 and the first eight paragraphs under Interest Rate Risk
Management beginning on page 45 regarding the Corporation's use of
derivatives for risk management purposes. See TABLE 21 on page 49, the
discussion beginning on page 49 and Note 4 regarding the Corporation's
derivative-dealer activities.
SECURITIES LENDING
The Corporation executes securities lending transactions on behalf of
certain customers. In certain instances, the Corporation indemnifies the
customer against certain losses. The Corporation obtains collateral with a
market value in excess of the market value of the securities loaned. On
December 31, 1994 and 1993, indemnified securities lending transactions
totaled $5.7 billion and $5.1 billion, respectively. Collateral with a market
value of $5.9 billion and $5.2 billion on December 31, 1994 and 1993,
respectively, was obtained by the Corporation in support of these
transactions.
WHEN ISSUED SECURITIES
When issued securities are commitments entered into to purchase or sell
securities in the time period between the announcement of a securities
offering and the issuance of those securities. On December 31, 1994, the
Corporation had commitments to purchase and sell when issued securities of
$2.2 billion and $2.5 billion, respectively. This compares to commitments to
purchase and sell when issued securities of $1.1 billion and $866 million,
respectively, on December 31, 1993.
LITIGATION
The Corporation and its subsidiaries are defendants in or parties to a
number of pending and threatened legal actions and proceedings. Management
believes, based upon the opinion of counsel, that the actions and liability
or loss, if any, resulting from the final outcome of these proceedings, will
not be material in the aggregate.
==============================================================================
NOTE 10 -- REGULATORY REQUIREMENTS AND RESTRICTIONS
The banking subsidiaries are required to maintain average reserve
balances with the Federal Reserve Bank based on a percentage of certain
deposits. The average of those reserve balances amounted to $1.4 billion for
both 1994 and 1993.
Funds for cash distributions by the Corporation to its shareholders are
derived from a variety of sources, including cash and investments. The
primary source of such funds, however, is dividends received from its banking
subsidiaries. The subsidiary banks can initiate dividend payments in 1995,
without prior regulatory approval, of $1.0 billion plus an additional amount
equal to their net profits, as defined by statute, for 1995 up to the date of
any such dividend declaration. The amount of dividends that each subsidiary
bank may declare in a calendar year without approval by the OCC is the bank's
net profits for that year combined with its net retained profits, as defined,
for the preceding two years.
Regulations also restrict banking subsidiaries in lending funds to
affiliates. On December 31, 1994, the total amount which could be loaned to
the Corporation by its banking subsidiaries was approximately $1.2 billion.
On December 31, 1994, no loans to the Corporation from its banking
subsidiaries were outstanding.
On December 31, 1994, as a result of the above regulatory restrictions,
substantially all of the net assets of the Corporation's banking
subsidiaries, in excess of the allowable amounts mentioned above, were
restricted from transfer to the Corporation in the form of cash dividends,
loans or advances.
70 NationsBank Corporation Annual Report 1994
NOTE 11 -- EMPLOYEE BENEFIT PLANS
The Corporation sponsors noncontributory trusteed pension plans that
cover substantially all officers and employees. The plans provide defined
benefits based on an employee's compensation, age at retirement and years of
service. It is the policy of the Corporation to fund not less than the
minimum funding amount required by the Employee Retirement Income Security
Act.
The following table sets forth the plans' estimated status on December
31 (dollars in millions):
1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligation
Accumulated benefit obligation, including vested benefits of $711 and $755......................... $(734) $(781)
==================
Projected benefit obligation for service rendered to date.......................................... $(869) $(917)
Plan assets at fair value, primarily listed stocks, fixed income securities and real estate............ 964 1,046
------------------
Plan assets in excess of projected benefit obligation.................................................. 95 129
Unrecognized net loss.................................................................................. 135 243
Unrecognized net transition asset being amortized...................................................... (15) (18)
Unrecognized prior service benefit being amortized..................................................... (34) (30)
Deferred investment (gain) loss........................................................................ 126 (9)
------------------
Prepaid pension cost............................................................................... $ 307 $ 315
==================
Net periodic pension expense (income) for the years ended December 31
included the following components (dollars in millions):
1994 1993 1992
- -------------------------------------------------------------------------------------------------
Service cost-benefits earned during the period.......................... $ 39 $ 31 $ 28
Interest cost on projected benefit obligation........................... 72 58 51
Actual return on plan assets............................................. 22 (101) (21)
Net amortization and deferral............................................ (121) 3 (69)
----------------------
Net periodic pension expense (income).................................. $ 12 $ (9) $ (11)
=======================
For December 31, 1994, the weighted average discount rate and rate of
increase in future compensation used in determining the actuarial present
value of the projected benefit obligation was 8.5 percent and 4.25 percent,
respectively. The related expected long-term rate of return on plan assets
was 10.0 percent. For December 31, 1993, the weighted average discount rate,
rate of increase in future compensation and expected long-term rate of return
on plan assets was 7.75 percent, 4.0 percent and 10.0 percent, respectively.
HEALTH AND LIFE BENEFIT PLANS
In addition to providing retirement benefits, the Corporation provides
health care and life insurance benefits for active and retired employees.
Substantially all of the Corporation's employees, including certain employees
in foreign countries, may become eligible for postretirement benefits if they
reach early retirement age while employed by the Corporation and they have
the required number of years of service. Under the Corporation's current
plan, eligible retirees are entitled to a fixed dollar amount for each year
of service. Additionally, certain current retirees are eligible for different
benefits attributable to prior plans.
All of the Corporation's accrued postretirement benefit liability was
unfunded at year-end 1994. The "projected unit credit" actuarial method was
used to determine the normal cost and actuarial liability.
A reconciliation of the estimated status of the postretirement benefit
obligation on December 31 is as follows (dollars in millions):
1994 1993
- -----------------------------------------------------------------------------
Accumulated postretirement benefit obligation
Retirees....................................... $(128) $(158)
Fully eligible active participants............. (3) (2)
Other active plan participants................. (47) (39)
-------------------
(178) (199)
Unamortized transition obligation.................. 125 135
Unrecognized net loss (gain)....................... (9) 7
-------------------
Accrued postemployment benefit liability....... $ (62) $ (57)
===================
Net periodic postretirement benefit cost for the years ended December
31 included the following (dollars in millions):
1994 1993
- -------------------------------------------------------------------------
Service cost.............................................. $ 3 $ 2
Interest cost on accumulated
postretirement benefit obligation..................... 14 15
Amortization of transition obligation
over 20 years......................................... 7 7
Amortization of gains..................................... (6) -
------------
Net periodic postretirement benefit cost.............. $18 $24
============
The health care cost trend rates used in determining the accumulated
postretirement benefit obligation were 7.0 percent for pre-65 benefits and
5.75 percent for post-65 benefits. A one-percent change in the average
health care cost trend rates would increase the accumulated postretirement
benefit obligation by 5.1 percent and the aggregate of the service cost
Notes to Consolidated Financial Statements 71
and interest cost components of net periodic postretirement benefit cost by 3.9
percent. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 8.50 percent in 1994 and
7.75 percent in 1993.
SAVINGS AND PROFIT SHARING PLANS
In addition to the retirement plans, the Corporation maintains several
defined contribution savings and profit sharing plans, one of which features
a leveraged employee stock ownership (ESOP) provision.
For 1994, 1993 and 1992, the Corporation contributed approximately $41
million, $35 million and $34 million, respectively, in cash which was
utilized primarily to purchase the Corporation's common stock under the terms
of these plans.
Under the terms of the ESOP provision, payments to the plan for
dividends on the ESOP Preferred Stock were $9 million for 1994, 1993 and
1992. Interest incurred to service the ESOP debt amounted to $5 million for
1994, 1993 and 1992.
STOCK OPTION AND AWARD PLANS
Under the 1992 Associates Stock Option Plan, on July 1, 1992, eligible
full-time and part-time employees received a one-time award of a
predetermined number of stock options entitling them to purchase shares of
the Corporation's common stock at the closing market price of $48 3/8 per
share. The options are exercisable until June 30, 1997.
Additional options under a former plan and restricted stock and stock
options assumed in connection with various acquisitions remain outstanding.
No further options or rights will be granted under such plans.
Under the Corporation's current Restricted Stock Award Plan, key
employees are awarded shares of the Corporation's common stock subject to
certain vesting requirements. Generally, vesting occurs in five equal annual
installments and the related deferred compensation is expensed over the same
period.
During 1994, the Board of Directors approved the Key Employee Stock
Plan, subject to shareholder approval at the 1995 Annual Meeting. The Key
Employee Stock Plan will replace the current Restricted Stock Award Plan and
is anticipated to provide for different types of awards including stock
options, restricted stock and performance shares.
The following table summarizes activity under the option and award
plans for 1994 and the status on December 31, 1994:
Outstanding Exercisable
Options Options
--------------------------------------
Average Average
Option Option
Employee Stock Option Plans Shares Price Shares Price
- -------------------------------------------------------------------------------------------
Balance on December 31, 1993.................... 8,589,996 $40.88 8,262,677 $41.67
Shares due to acquisition....................... 19,596 29.51 6,996 22.20
Became exercisable.............................. - - 327,319 20.98
Less
Exercised................................... (1,785,281) 38.94 (1,785,281) 38.94
Expired or canceled......................... (453,560) 50.87 (453,560) 50.87
----------------------------------------
Balance on December 31, 1994.................... 6,370,751 40.68 6,358,151 40.69
=======================================
Average
Grant
Restricted Stock Award Plan Shares Price
- -------------------------------------------------------------------------
Outstanding unvested grants on December 31, 1993.... 2,150,570 $44.57
Additional stock grants............................. 287,000 51.88
Less
Shares vested..................................... (594,358) 44.06
Shares canceled................................... (26,360) 46.88
-------------------
Outstanding unvested grants on December 31, 1994.... 1,816,852 45.86
===================
===============================================================================
NOTE 12 -- NONINTEREST INCOME AND EXPENSE
The significant components of noninterest income and expense for the
years ended December 31 are presented below (dollars in millions):
1994 1993 1992
- -----------------------------------------------------------------------------
NONINTEREST INCOME
Trust fees..................................... $ 435 $371 $331
Service charges on deposit accounts............ 797 681 600
Mortgage servicing and related fees............ 86 77 105
Fees on factored accounts receivable........... 74 74 69
Other nondeposit-related service fees.......... 276 212 144
Credit card income............................. 280 198 199
Trading account profits and fees............... 273 152 71
Other income................................... 376 336 394
---------------------
$2,597 $2,101 $1,913
=====================
72 NationsBank Corporation Annual Report 1994
1994 1993 1992
- -------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Personnel.......................................................... $2,311 $1,903 $1,807
Occupancy, net..................................................... 487 434 435
Equipment.......................................................... 364 317 291
Marketing.......................................................... 161 138 105
Professional fees.................................................. 171 168 182
Amortization of intangibles........................................ 141 110 111
Credit card........................................................ 44 49 41
Private label credit card.......................................... 27 37 43
FDIC insurance..................................................... 211 205 189
Processing......................................................... 235 190 139
Telecommunications................................................. 137 122 109
Postage and courier................................................ 126 120 111
Other general operating............................................ 388 370 281
General administrative and miscellaneous........................... 139 130 122
--------------------------
$4,942 $4,293 $3,966
=========================
================================================================================
NOTE 13 -- INCOME TAXES
The components of income tax expense for the years ended December 31
were (dollars in millions):
1994 1993 1992
- -------------------------------------------------------------------------------------
Current portion--expense
Federal..................................................... $559 $419 $222
State....................................................... 54 54 13
Foreign..................................................... 17 7 2
--------------------
630 480 237
--------------------
Deferred portion--expense
Federal..................................................... 223 218 11
State....................................................... 12 (11) 4
Foreign..................................................... - 3 (1)
--------------------
235 210 14
--------------------
Total tax expense......................................... $865 $690 $251
====================
The Corporation's current income tax expense of $630 million, $480
million and $237 million for 1994, 1993 and 1992, respectively, includes
amounts computed under the regular and alternative minimum tax (AMT) systems
and approximates the amounts payable for those years.
Deferred expense represents the change in the deferred tax asset or
liability.
A reconciliation of the expected federal tax expense, based on the
federal statutory rate of 35 percent for 1994 and 1993 and 34 percent for
1992, to the actual consolidated tax expense for the years ended December 31
is as follows
(dollars in millions):
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
Expected federal tax expense.............................................................. $894 $697 $475
Increase (decrease) in taxes resulting from
Tax-exempt income...................................................................... (34) (33) (38)
Net utilization of operating loss carryforwards for financial reporting purposes....... - - (265)
State tax expense, net of federal benefit.............................................. 50 30 17
Tax rate change on beginning net deferred tax assets................................... - (6) -
Other.................................................................................. (45) 2 62
---------------------
Total tax expense.................................................................... $865 $690 $251
=====================
Notes to Consolidated Financial Statements 73
Significant components of the Corporation's deferred tax (liabilities)
and assets on December 31 are as follows (dollars in millions):
1994 1993
- -------------------------------------------------------------------------------
Deferred tax liabilities
Equipment lease financing................................... $ (596) $ (475)
Depreciation................................................ (66) (75)
Securities available for sale............................... - (58)
Intangibles................................................. (53) (69)
Employee retirement benefits................................ (33) (57)
Other, net.................................................. (205) (76)
--------------
Gross deferred tax liabilities............................ (953) (810)
--------------
Deferred tax assets
Securities available for sale............................... 80 -
Federal net operating loss carryforwards.................... 17 8
Allowance for credit losses................................. 730 731
Other real estate owned..................................... 66 73
Loan fees and expenses...................................... 37 55
AMT credit carryforwards.................................... - 58
Other, net.................................................. 181 132
--------------
Gross deferred tax assets................................. 1,111 1,057
Valuation allowance......................................... (60) (77)
--------------
Deferred tax assets, net of valuation allowance........... 1,051 980
---------------
Net deferred tax assets....................................... $ 98 $ 170
===============
The Corporation's $98-million net deferred tax assets include a
valuation allowance of $60 million representing primarily state net operating
loss carryforwards for which realization is uncertain. The net change in the
valuation allowance for deferred tax assets was a decrease of $17 million,
due to the realization of certain state deferred tax assets.
During the first quarter of 1993, the Corporation adopted SFAS 109,
which superseded SFAS 96. SFAS 109 allows for the recognition of deferred tax
assets with respect to previously unrecognized operating loss and alternative
minimum tax (AMT) credit carryforwards. The cumulative benefit of adopting
the new accounting principle was $200 million.
===============================================================================
NOTE 14 -- FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments" (SFAS 107), requires the
disclosure of the estimated fair values of financial instruments. The fair
value of a financial instrument is the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than in
a forced or liquidation sale. Quoted market prices, if available, are
utilized as estimates of the fair values of financial instruments. Because no
quoted market prices exist for a significant part of the Corporation's
financial instruments, the fair values of such instruments have been derived
based on management's assumptions with respect to future economic conditions,
the amount and timing of future cash flows and estimated discount rates. The
estimation methods for individual classifications of financial instruments
are more fully described below. Different assumptions could significantly
affect these estimates. Accordingly, the net realizable values could be
materially different from the estimates presented below.
In addition, the estimates are only indicative of individual
financial instruments' values and should not be considered an indication of
the fair value of the combined Corporation. The provisions of SFAS 107 do not
require the disclosure of nonfinancial instruments, including intangible
assets. The value of the Corporation's intangibles such as franchise, credit
card and trust relationships, and mortgage servicing rights, is significant.
SHORT-TERM FINANCIAL INSTRUMENTS
The carrying value of short-term financial instruments, including cash
and cash equivalents, federal funds sold and purchased, resell and repurchase
agreements, and commercial paper and short-term borrowings, approximate the
fair value. These financial instruments generally expose the Corporation to
limited credit risk and have no stated maturities, or have an average
maturity of less than 30 days and carry interest rates which approximate
market.
74 NationsBank Corporation Annual Report 1994
FINANCIAL INSTRUMENTS TRADED IN THE SECONDARY MARKET WITH QUOTED MARKET
PRICES OR DEALER QUOTES
Securities held for investment, securities available for sale, loans
held for sale, trading account instruments, and long-term debt which are
actively traded in the secondary market have been valued using quoted market
prices.
LOANS
Fair values were estimated for groups of similar loans based upon type
of loan, credit quality and maturity. The fair value of fixed-rate loans was
estimated by discounting estimated cash flows using corporate bond rates
adjusted by credit risk and servicing costs for commercial and real estate
commercial and construction loans; and for consumer loans, the Corporation's
December 31 origination rate for similar loans. Contractual cash flows for
consumer loans were adjusted for prepayments using published industry data.
For variable-rate loans, the carrying amount was considered to approximate
fair value. Where credit deterioration has occurred, cash flows for fixed-
and variable-rate loans have been reduced to incorporate estimated losses.
Where quoted market prices were available, primarily for certain residential
mortgage loans, such market prices were utilized as estimates for fair
values.
DEPOSITS
The fair value for fixed-rate deposits with stated maturities was
calculated by discounting the difference between the cash flows on a
contractual basis and current market rates for instruments with similar
maturities. For variable-rate deposits, the carrying amount was considered to
approximate fair value.
The book and fair values of financial instruments on December 31 were
(dollars in millions):
1994 1993
------------------------------------------
BOOK FAIR Book Fair
VALUE VALUE Value Value
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and cash equivalents......................................................... $ 9,582 $ 9,582 $ 7,649 $ 7,649
Time deposits placed and other short-term investments............................. 2,159 2,159 1,479 1,479
Securities held for investment.................................................... 17,800 17,101 13,584 13,604
Securities available for sale..................................................... 8,025 8,025 15,470 15,470
Loans held for sale............................................................... 318 318 1,697 1,697
Trading account assets............................................................ 9,941 9,941 10,610 10,610
Federal funds sold and securities purchased under agreements to resell............ 11,112 11,112 7,044 7,044
Loans, net of unearned income
Commercial and foreign......................................................... 46,649 46,375 41,786 41,812
Real estate commercial and construction........................................ 10,330 10,227 11,495 11,072
Residential mortgage........................................................... 17,244 16,251 12,689 12,898
Credit card.................................................................... 4,753 4,782 3,728 3,839
Other consumer and home equity................................................. 20,511 20,328 19,326 19,413
Allowance for credit losses....................................................... (2,186) - (2,169) -
FINANCIAL LIABILITIES
Deposits
Noninterest-bearing............................................................. 21,380 21,380 20,723 20,723
Savings......................................................................... 9,037 9,037 8,784 8,784
NOW and money market deposit accounts........................................... 29,752 29,752 30,881 30,881
Consumer CDs.................................................................... 19,369 19,001 17,850 17,970
Other time deposits............................................................. 20,932 20,721 12,875 13,014
Federal funds purchased and securities sold under agreements to repurchase........ 25,970 25,970 28,371 28,371
Commercial paper.................................................................. 2,519 2,519 2,056 2,056
Other short-term borrowings....................................................... 5,640 5,640 5,522 5,522
Trading account liabilities....................................................... 11,426 11,426 8,299 8,299
Long-term debt.................................................................... 8,464 8,199 8,325 8,774
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
For a presentation of the fair value of the Corporation's derivative-
dealer positions, see Note 4. The fair value of the Corporation's asset and
liability management and other interest rate swaps is presented in TABLE 19 on
page 46.
The fair value of liabilities on binding commitments to lend is based
on the net present value of cash flow streams using fee rates currently
charged for similar agreements versus original contractual fee rates, taking
into account the creditworthiness of the borrowers. The fair value was a
liability of $92 million and $111 million on December 31, 1994 and 1993,
respectively.
Notes to Consolidated Financial Statements 75
NOTE 15 -- PARENT COMPANY FINANCIAL INFORMATION
The following tables present consolidated parent company financial
information:
NationsBank Corporation (Parent Company)
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
Year Ended December 31
-----------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
Income
Dividends from consolidated
Subsidiary banks and bank holding companies.................................................. $1,864 $ 894 $ 481
Other subsidiaries........................................................................... 5 - 40
Interest from consolidated subsidiaries........................................................ 355 172 85
Other income................................................................................... 501 533 688
-----------------------------
2,725 1,599 1,294
-----------------------------
Expenses
Interest on borrowed funds..................................................................... 582 389 255
Noninterest expense............................................................................ 442 453 645
-----------------------------
1,024 842 900
-----------------------------
Earnings
Income before equity in undistributed earnings of consolidated subsidiaries and taxes.......... 1,701 757 394
-----------------------------
Equity in undistributed earnings of consolidated
Subsidiary banks and bank holding companies.................................................. (247) 742 588
Other subsidiaries...........................................................................
140 73 27
-----------------------------
(107) 815 615
-----------------------------
Income before income taxes and effect of change in method
of accounting for income taxes................................................................. 1,594 1,572 1,009
Income tax benefit............................................................................... (96) (56) (136)
-----------------------------
Income before effect of change in method of accounting for income taxes.......................... 1,690 1,628 1,145
Effect of change in method of accounting for income taxes........................................ - (127) -
-----------------------------
Net income....................................................................................... $1,690 $1,501 $1,145
=============================
Net income available to common shareholders...................................................... $1,680 $1,491 $1,121
=============================
NationsBank Corporation (Parent Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
December 31
---------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------------------
Assets
Cash held at subsidiary banks.................................................................. $ 4 $ 11
Temporary investments.......................................................................... 583 312
Receivables from consolidated
Subsidiary banks and bank holding companies.................................................. 1,187 1,176
Other subsidiaries........................................................................... 7,407 6,002
Investment in consolidated
Subsidiary banks and bank holding companies.................................................. 10,739 10,696
Other subsidiaries........................................................................... 1,173 1,249
Other assets................................................................................... 616 562
---------------------
$21,709 $20,008
=====================
Liabilities and Shareholders' Equity
Commercial paper and other notes payable....................................................... $ 2,426 $ 2,282
Accrued expenses and other liabilities......................................................... 674 870
Long-term debt................................................................................. 7,598 6,877
Shareholders' equity........................................................................... 11,011 9,979
---------------------
$21,709 $20,008
=====================
76 NationsBank Corporation Annual Report 1994
NationsBank Corporation (Parent Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
Year Ended December 31
-------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income................................................................................... $ 1,690 $ 1,501 $ 1,145
Reconciliation of net income to net cash provided by operating activities
Gain on sale of mortgage servicing unit...................................................... - - (55)
Equity in undistributed earnings of consolidated subsidiaries................................ 107 (815) (615)
Effect of change in method of accounting for income taxes.................................... - 127 -
Other operating activities................................................................... 142 113 (23)
-------------------------------
Net cash provided by operating activities.................................................... 1,939 926 452
-------------------------------
Investing Activities
Net (increase) decrease in temporary investments............................................. (271) (134) 356
Net increase in receivables from consolidated subsidiaries................................... (1,416) (231) (895)
Additional capital investment in subsidiaries................................................ (764) (1,428) (140)
(Acquisitions) sales of subsidiaries, net of cash............................................ 101 (4,220) (21)
-------------------------------
Net cash used in investing activities........................................................ (2,350) (6,013) (700)
-------------------------------
Financing Activities
Net increase (decrease) in commercial paper and other notes payable.......................... 144 1,332 (124)
Proceeds from issuance of long-term debt..................................................... 1,159 4,125 349
Retirement of long-term debt................................................................. (438) (174) (115)
Preferred stock repurchased and redeemed..................................................... (94) - (10)
Proceeds from issuance of common stock....................................................... 267 197 544
Common stock repurchased..................................................................... (180) - -
Cash dividends paid.......................................................................... (527) (433) (395)
Other financing activities................................................................... 73 30 12
-------------------------------
Net cash provided by financing activities.................................................... 404 5,077 261
-------------------------------
Net increase (decrease) in cash.................................................................. (7) (10) 13
Cash at beginning of year........................................................................ 11 21 8
-------------------------------
Cash at end of year.............................................................................. $ 4 $ 11 $ 21
===============================
Notes to Consolidated Financial Statements 77