SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
For the quarterly period ended June 30, 1995
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OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
For the transition period from to
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Commission file number 1-6523
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NationsBank Corporation
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(Exact name of registrant as specified in its charter)
North Carolina 56-0906609
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
NationsBank Corporate Center, Charlotte, North Carolina 28255
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(Address of principal executive offices and zip code)
(704) 386-5000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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On July 31, 1995, there were 270,039,586 shares of NationsBank Corporation
Common Stock outstanding.
1
NationsBank Corporation
June 30, 1995 Form 10-Q
Index
Page
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income for the Three Months and Six
Months Ended June 30, 1995 and 1994............................. 3
Consolidated Balance Sheet on June 30, 1995 and
December 31, 1994............................................... 4
Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 1995 and 1994.......................................... 5
Consolidated Statement of Changes in Shareholders' Equity for
the Six Months Ended June 30, 1995 and 1994..................... 6
Notes to Consolidated Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition......................................... 11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders ............ 41
Item 6. Exhibits and Reports on Form 8-K................................ 43
Signature.................................................................. 44
Index to Exhibits.......................................................... 45
2
Part I. Financial Information
Item 1. Financial Statements
NationsBank Corporation and Subsidiaries
Consolidated Statement of Income
(Dollars in Millions Except Per-Share Information)
Three Months Six Months
Ended June 30 Ended June 30
-----------------------------------------------
1995 1994 1995 1994
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Income from Earning Assets
Interest and fees on loans.................................... $ 2,311 $ 1,826 $ 4,487 $ 3,583
Lease financing income........................................ 51 32 101 62
Interest and dividends on securities
Held for investment......................................... 232 167 466 318
Available for sale.......................................... 162 185 268 364
Interest and fees on loans held for sale...................... 3 6 4 17
Time deposits placed and other short-term investments......... 42 15 82 29
Federal funds sold............................................ 12 8 28 14
Securities purchased under agreements to resell............... 273 100 487 181
Trading account securities.................................... 305 173 538 342
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Total income from earning assets............................ 3,391 2,512 6,461 4,910
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Interest Expense
Deposits...................................................... 842 546 1,625 1,065
Borrowed funds................................................ 779 352 1,377 653
Trading account liabilities................................... 249 162 471 315
Long-term debt................................................ 185 135 345 272
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Total interest expense...................................... 2,055 1,195 3,818 2,305
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Net interest income............................................. 1,336 1,317 2,643 2,605
Provision for credit losses..................................... 70 70 140 170
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Net credit income............................................... 1,266 1,247 2,503 2,435
Gains on sales of securities.................................... 4 5 5 19
Noninterest income.............................................. 730 629 1,456 1,309
Other real estate owned expense (income)........................ 1 (3) 3 2
Noninterest expense............................................. 1,288 1,228 2,576 2,447
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Income before income taxes...................................... 711 656 1,385 1,314
Income tax expense.............................................. 244 219 475 460
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Net income...................................................... $ 467 $ 437 $ 910 $ 854
===============================================
Net income available to common shareholders..................... $ 465 $ 435 $ 906 $ 849
===============================================
Per-share information
Earnings per common share..................................... $ 1.71 $ 1.58 $ 3.31 $ 3.10
===============================================
Fully diluted earnings per common share....................... $ 1.70 $ 1.57 $ 3.28 $ 3.07
===============================================
Dividends per common share.................................... $ 0.50 $ 0.46 $ 1.00 $ 0.92
===============================================
Average common shares(in thousands)............................. 271,717 275,020 274,053 273,492
===============================================
See accompanying notes to consolidated financial statements.
3
NationsBank Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in Millions)
June 30 December 31
1995 1994
-----------------------------
Assets
Cash and cash equivalents.................................................................... $ 8,007 $ 9,582
Time deposits placed and other short-term investments........................................ 2,354 2,159
Securities
Held for investment, at cost (market value - $14,485 and $17,101).......................... 14,452 17,800
Available for sale......................................................................... 12,563 8,025
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Total securities......................................................................... 27,015 25,825
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Loans held for sale.......................................................................... 713 318
Trading account assets....................................................................... 15,104 9,941
Federal funds sold........................................................................... 60 960
Securities purchased under agreements to resell.............................................. 11,331 10,152
Loans and leases, net of unearned income..................................................... 109,802 102,367
Factored accounts receivable................................................................. 1,121 1,004
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Loans, leases and factored accounts receivable, net of unearned income................... 110,923 103,371
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Allowance for credit losses.................................................................. (2,164) (2,186)
Premises, equipment and lease rights, net.................................................... 2,463 2,439
Customers' acceptance liability.............................................................. 785 684
Interest receivable.......................................................................... 1,576 1,408
Mortgage servicing rights.................................................................... 667 195
Goodwill..................................................................................... 1,048 1,047
Core deposit and other intangibles........................................................... 435 470
Other assets................................................................................. 3,871 3,239
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$ 184,188 $ 169,604
=============================
Liabilities
Deposits
Noninterest-bearing........................................................................ $ 22,098 $ 21,380
Savings.................................................................................... 8,553 9,037
NOW and money market deposit accounts...................................................... 27,323 29,752
Time....................................................................................... 27,798 27,698
Foreign time............................................................................... 14,834 12,603
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Total deposits........................................................................... 100,606 100,470
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Federal funds purchased...................................................................... 5,076 3,993
Securities sold under agreements to repurchase............................................... 27,370 21,977
Commercial paper............................................................................. 2,682 2,519
Other short-term borrowings.................................................................. 7,164 5,640
Trading account liabilities.................................................................. 14,550 11,426
Liability to factoring clients............................................................... 581 586
Acceptances outstanding...................................................................... 785 684
Accrued expenses and other liabilities....................................................... 3,154 2,810
Long-term debt............................................................................... 10,716 8,488
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Total liabilities........................................................................ 172,684 158,593
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Shareholders' Equity
Preferred stock: authorized - 45,000,000 shares
ESOP Convertible, Series C: issued - 2,553,552 and 2,606,657 shares........................ 109 111
Common stock: authorized - 800,000,000 shares; issued - 269,812,113 and 276,451,552 shares... 4,373 4,740
Retained earnings............................................................................ 7,083 6,451
Other, including loan to ESOP trust.......................................................... (61) (291)
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Total shareholders' equity............................................................... 11,504 11,011
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$ 184,188 $ 169,604
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See accompanying notes to consolidated financial statements.
4
NationsBank Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Dollars in Millions)
Six Months
Ended June 30
--------------------------------
1995 1994
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Operating Activities
Net income......................................................................... $ 910 $ 854
Reconciliation of net income to net cash (used) provided by operating activities
Provision for credit losses...................................................... 140 170
Gains on sales of securities..................................................... (5) (19)
Depreciation and premises improvements amortization.............................. 139 130
Amortization of intangibles...................................................... 61 68
Deferred income tax expense...................................................... 119 70
Net change in trading instruments................................................ (2,039) 3,236
Net (increase) decrease in interest receivable................................... (168) 8
Net (increase) decrease in interest payable...................................... 183 (57)
Net (increase) decrease in loans held for sale................................... (395) 1,397
Net (decrease) increase in liability to factoring clients........................ (5) 38
Other operating activities....................................................... (730) 1,063
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Net cash (used) provided by operating activities................................ (1,790) 6,958
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Investing Activities
Proceeds from maturities of securities held for investment......................... 3,758 4,530
Purchases of securities held for investment........................................ (414) (5,186)
Proceeds from sales and maturities of securities available for sale................ 16,044 17,075
Purchases of securities available for sale......................................... (20,234) (15,912)
Net increase in federal funds sold and securities
purchased under agreements to resell............................................. (279) (5,788)
Net increase in time deposits placed and other short-term investments.............. (195) (166)
Net originations of loans and leases............................................... (6,356) (5,401)
Purchases of loans and leases...................................................... (1,961) (1,466)
Proceeds from sales and securitizations of loans................................... 794 3,075
Purchases of mortgage servicing rights............................................. (492) (29)
Purchases of factored accounts receivable.......................................... (3,898) (3,900)
Collections of factored accounts receivable........................................ 3,770 3,825
Net purchases of premises and equipment............................................ (165) (146)
Proceeds from sales of other real estate owned..................................... 117 199
Sales/(acquisitions) of business activities, net of cash........................... (585) 126
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Net cash used in investing activities........................................... (10,096) (9,164)
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Financing Activities
Net increase in deposits........................................................... 551 607
Net increase in federal funds purchased and securities
sold under agreements to repurchase.............................................. 6,476 1,744
Net increase in other short-term borrowings and commercial paper................... 1,687 817
Proceeds from issuance of long-term debt........................................... 2,576 -
Retirement of long-term debt....................................................... (350) (675)
Preferred stock repurchased and redeemed........................................... - (94)
Proceeds from issuance of common stock............................................. 96 130
Cash dividends paid................................................................ (278) (258)
Common stock repurchased........................................................... (453) -
Other financing activities......................................................... 6 (8)
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Net cash provided by financing activities....................................... 10,311 2,263
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Net increase (decrease) in cash and cash equivalents................................. (1,575) 57
Cash and cash equivalents on January 1............................................... 9,582 7,649
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Cash and cash equivalents on June 30................................................. $ 8,007 $ 7,706
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Loans transferred to other real estate owned amounted to $47 and $104 for the six months ended June 30, 1995 and
1994, respectively.
See accompanying notes to consolidated financial statements.
5
NationsBank Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
(Dollars in Millions, Shares in Thousands)
Total
Common Stock Share-
Preferred ------------------ Retained Loan to holders'
Stock Shares Amount Earnings ESOP Trust Other Equity
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Balance on December 31, 1993................. $ 208 270,905 $ 4,594 $ 5,247 $ (88) $ 18 $ 9,979
Net income................................. 854 854
Cash dividends
Common................................... (253) (253)
Preferred................................ (5) (5)
Preferred stock repurchased and redeemed... (93) (1) (94)
Common stock issued under dividend
reinvestment and employee plans.......... 2,932 130 130
Common stock issued in acquisitions........ 2,629 21 41 62
Net change in unrealized gains/(losses)
on securities available for sale and
marketable equity securities............. (207) (207)
Other...................................... (3) 51 3 6 1 7
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Balance on June 30, 1994..................... $ 112 276,517 $ 4,747 $ 5,884 $ (82) $ (188) $ 10,473
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Balance on December 31, 1994................. $ 111 276,452 $ 4,740 $ 6,451 $ (76) $ (215) $ 11,011
Net income................................. 910 910
Cash dividends
Common................................... (274) (274)
Preferred................................ (4) (4)
Common stock issued under dividend
reinvestment and employee plans.......... 1,950 84 12 96
Common stock repurchased................... (8,635) (453) (453)
Net change in unrealized gains/(losses)
on securities available for sale and
marketable equity securities............. 216 216
Other...................................... (2) 45 2 6 (4) 2
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Balance on June 30, 1995..................... $ 109 269,812 $ 4,373 $ 7,083 $ (70) $ 9 $ 11,504
================================================================================
See accompanying notes to consolidated financial statements.
6
NationsBank Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Accounting Policies
The consolidated financial statements include the accounts of
NationsBank Corporation and its subsidiaries (the Corporation). Significant
intercompany accounts and transactions have been eliminated in consolidation.
The information contained in the financial statements is unaudited. In
the opinion of management, all normal recurring adjustments necessary for a
fair presentation of the results of interim periods have been made. Certain
prior period amounts have been reclassified to conform to current period
classifications.
Accounting policies followed in the presentation of interim financial
results are presented on pages 62 and 63 of the 1994 Annual Report to
Shareholders, as updated by the following and Note 1 on pages 8 and 9 of the
March 31, 1995 Form 10-Q.
Mortgage Servicing Rights
On April 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights, an
amendment of Statement of Financial Accounting Standards No. 65, Accounting for
Certain Mortgage Banking Activities". This standard addresses accounting and
reporting for the capitalization of mortgage servicing rights (MSRs) acquired
by purchasing servicing rights separately or by purchasing or originating
mortgage loans and selling those loans with servicing rights retained.
Additionally, measurement of the fair value and impairment of such rights are
addressed. Adoption of this standard did not have a material impact on the
Corporation's results of operations or its financial condition.
The Corporation capitalizes MSRs based on the cost of acquiring such
rights. The total cost of the mortgage loans is allocated between the cost of
the loans and the MSRs either at the time of purchase or origination if, at
that time, the Corporation has a definitive plan to sell or securitize the
loans, or at the time of sale of the loans. This allocation is based on the
relative fair values of the loans and MSRs. If it is not practicable to
estimate those relative fair values, the entire cost is allocated to the loans.
The cost of MSRs is amortized in proportion to and over the estimated period of
net servicing revenues, adjusted for actual prepayment experience.
The Corporation evaluates MSRs for impairment by estimating the fair
value based on anticipated future net cash flows, taking into consideration
prepayment predictions and current mortgage interest rates. If the recorded
balance of the MSRs exceeds the estimated fair value, a valuation allowance is
established. Changes to the valuation allowance are charged against or credited
to mortgage servicing income and fees.
Note 2 - Acquisition Activity
On June 26, 1995, the Corporation entered into an agreement to
purchase Intercontinental Bank, based in Miami, Florida, at an estimated
purchase price of approximately $208 million which will be paid in the form of
7
common stock of the Corporation. On July 5, 1995, the Corporation entered into
an agreement to purchase CSF Holdings, Inc., the parent of Citizens Federal
Bank, also based in Miami, at an estimated purchase price of approximately $516
million, which will be paid in cash. Additionally, in July, the Corporation
entered into agreements to acquire two smaller banking organizations in Florida
and Texas. Combined total assets and total deposits of these entities to be
acquired approximate $5.3 billion and $4.7 billion, respectively, on June 30,
1995. These acquisitions, which are subject to approval by the respective
shareholders of the entities to be acquired and various regulatory agencies,
are expected to be completed around year end or early in 1996. These
acquisitions are not expected to have a material impact on the results of
operations or financial condition of the Corporation.
Note 3 - Trading Account Assets and Liabilities
The market values of the components of trading account assets and
liabilities on June 30, 1995 and on December 31, 1994 and the average market
values for the six months ended June 30, 1995 were (dollars in millions):
Average for
the Six
June 30 December 31 Months Ended
1995 1994 June 30, 1995
-------------------------------------
Securities owned
U.S. Treasury securities........................ $ 7,987 $ 5,968 $ 10,692
Securities of other U.S. Government agencies
and corporations.............................. 1,309 1,185 1,382
Certificates of deposit, bankers' acceptances
and commercial paper.......................... 342 371 469
Corporate debentures............................ 1,058 581 791
Other securities................................ 229 259 381
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Total securities owned........................ 10,925 8,364 13,715
Derivative-dealer positions....................... 4,179 1,577 2,494
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Total trading account assets.................. $ 15,104 $ 9,941 $ 16,209
=====================================
Short sales
U.S. Treasury securities........................ $ 10,053 $ 9,352 $ 12,042
Securities of other U.S. Government agencies
and corporations.............................. 199 182 218
Corporate debentures............................ 424 278 277
Other securities................................ 27 - 13
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Total short sales............................. 10,703 9,812 12,550
Derivative-dealer positions....................... 3,847 1,614 2,402
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Total trading account liabilities............. $ 14,550 $ 11,426 $ 14,952
=====================================
Derivative-dealer positions represent the market values of interest
rate, foreign exchange and commodity-related products, including swap, futures,
forward and option contracts associated with the Corporation's derivative
trading activities.
8
Note 4 - Debt
In the second quarter of 1995, under a shelf registration statement,
the Corporation issued approximately $1.1 billion of senior and subordinated
notes, the majority of which bear interest based on a floating rate. As of
August 10, 1995, the Corporation had approximately $1.9 billion of capacity
available under its existing shelf registration statement.
On July 5, 1995, the Corporation issued a $500-million Eurobond
offering in U.S. dollar floating rate notes, due July 2000. These notes bear
interest at a spread over the London interbank offered rate.
In late 1994, the Corporation, through Main Place Funding Corporation
(MPFC), a wholly-owned, limited-purpose finance subsidiary of the Texas banking
subsidiary, filed a shelf registration statement to issue up to $4 billion of
mortgage-backed bonds. These mortgage-backed bonds will be collateralized
primarily by 1 to 4 family mortgage notes and are the sole obligation of MPFC.
On July 11, 1995, MPFC issued $1.5 billion of Series 1995-1 mortgage-backed
bonds, due 1998, bearing interest at a spread over the one-month London
interbank offered rate. This series is initially collateralized by
approximately $2.3 billion of mortgage notes.
On August 1, 1995, the Corporation's Delaware credit card bank
subsidiary issued asset-backed certificates, through the NationsBank Credit
Card Master Trust, totaling approximately $1.1 billion. The certificates bear
an average rate of 6.69 percent which was effectively converted to a spread
over the London interbank offered rate through the execution of an interest
rate swap. Approximately $3.2 billion of credit card loans were initially
transferred to the master trust as collateral for these certificates.
Note 5 - Commitments and Contingencies
The Corporation's commitments to extend credit on June 30, 1995, were
$81.0 billion compared to $74.7 billion on December 31, 1994. Standby letters
of credit (SBLCs) and financial guarantees represent commitments by the
Corporation to meet the obligations of the account party if called upon.
Outstanding SBLCs and guarantees on June 30, 1995, were $7.3 billion compared
to $6.9 billion on December 31, 1994. Commercial letters of credit, issued
primarily to facilitate customer trade finance activities, were $1.4 billion
and $1.3 billion on June 30, 1995 and December 31, 1994, respectively. The
above amounts have been reduced by amounts collateralized by cash and amounts
participated to other financial institutions.
On June 30, 1995 and December 31, 1994, indemnified securities lending
transactions totaled $4.1 billion and $5.7 billion, respectively. Collateral
with a market value of $4.2 billion and $5.9 billion, for the respective
periods, was obtained by the Corporation in support of these transactions.
On June 30, 1995, the Corporation had commitments to purchase and sell
when-issued securities of $3.4 billion and $3.3 billion, respectively. This
compares to commitments to purchase and sell when-issued securities of $2.2
billion and $2.5 billion, respectively, on December 31, 1994.
See Tables 5 and 6 and the accompanying discussion in Item 2 regarding
the Corporation's derivatives used for risk management purposes.
In conducting its mortgage banking activities, the Corporation is
9
exposed to fluctuations in interest rates. Loans originated for sale to third
parties expose the Corporation to interest rate risk for the period between
loan origination and subsequent delivery. Additionally, the value of the
Corporation's mortgage servicing rights is affected by changes in interest
rates and the resulting impact such changes have on the level of prepayments.
To manage interest rate risk associated with mortgage banking activities, the
Corporation enters into various instruments including forward delivery
contracts, optional delivery contracts, purchased option contracts and certain
interest rate swaps. The principal/notional amounts of such contracts
approximated $5 billion on June 30, 1995. Net unrealized and net deferred gains
associated with these contracts were not significant on June 30, 1995.
In the ordinary course of business, the Corporation and its
subsidiaries are routinely defendants in or parties to a number of pending and
threatened legal actions and proceedings, including several actions brought on
behalf of various classes of claimants. In certain of these actions and
proceedings, substantial money damages are asserted against the Corporation and
its subsidiaries and certain of these actions and proceedings are based on
alleged violations of consumer protection, securities, banking and other laws.
Management believes, based upon the advice of counsel, that these actions and
proceedings and losses, if any, resulting from the final outcome thereof, will
not be material in the aggregate to the Corporation's financial position or
results of operations.
10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Earnings Review
A comparison of selected operating results for the three and six-month
periods ended June 30, 1995 and 1994, is presented in Table 1.
Net income for the second quarter of 1995 was $467 million, an
increase of seven percent, over the second quarter of 1994. Earnings per common
share were $1.71 and $1.58 for the second quarters of 1995 and 1994,
respectively. The return on average common shareholders' equity was 16.69
percent for the second quarter of 1995.
Net income of $910 million for the first six months of 1995
represented an increase of seven percent over earnings of $854 million during
the same period in 1994. Earnings per common share were $3.31 and $3.10 for the
first six months of 1995 and 1994, respectively. The return on average common
shareholders' equity was 16.36 percent for the first six months of 1995.
Key performance highlights for the first six months of 1995 compared
with the same period last year were:
o Taxable-equivalent net interest income increased $53 million
to $2.7 billion, primarily as a result of 15-percent growth in
average loans. Partially offsetting this increase was the
narrowing of the spread between investment securities and
market-based funds and the funding of earning asset growth
largely with wholesale funds.
o Provision for credit losses totaled $140 million, down from
$170 million in the first half of 1994. Net charge-offs were
$166 million, or .31 percent of average net loans, leases and
factored receivables versus $154 million, or .33 percent of
average levels, in the prior year period.
o Noninterest income rose $147 million, or 11 percent, to $1.46
billion for the first six months of 1995, primarily due to
increased deposit service fee income, investment banking
income, acquisition-related mortgage servicing income,
miscellaneous other income and the impact of reflecting total
ownership of the full service brokerage company,
NationsSecurities, throughout the Corporation's income
statement, rather than the netting of income and expense under
the equity method of accounting for the prior joint venture.
These increases were partially offset by a decline in trading
account profits and fees.
o Noninterest expense increased $129 million, primarily related
to acquisitions of several smaller banking organizations and
mortgage banking operations, the impact of total ownership of
the full service brokerage company, increased investment in
personnel in selected areas, higher equipment expense and
expanded marketing efforts. These increases were partially
offset by declines in other general operating expense and
professional fees. The efficiency ratio, which measures the
relationship of noninterest expense to total revenue, was
61.97 percent in the first half of 1995.
11
Business Unit Review
The Corporation manages its business activities through three major
internal management groups, or Business Units. These units, shown in Table 2,
are managed with a focus on numerous performance objectives including return on
equity, operating efficiency and net income.
The net income of the business units reflects a funds transfer pricing
system which derives net interest income by matching assets and liabilities
with similar interest rate sensitivity and maturity characteristics. Equity
capital is allocated to each business unit based on an assessment of its
inherent risk.
The General Bank includes the Banking Group, which contains the retail
banking network and is the service provider for the consumer sector as well as
small and medium- size companies; Financial Products, which provides
specialized services such as credit cards, residential mortgages, indirect
lending, dealer finance and retail full service and discount brokerage; and
Trust and Private Banking.
The General Bank earned $539 million in the first six months of 1995,
a 16-percent increase over the same period in 1994. The Banking Group,
reflecting 19-percent loan growth, improved asset quality, and growth in fee
income, accounted for the increased earnings over last year. General Bank's
return on equity remained unchanged at 18 percent. Taxable-equivalent net
interest income in the General Bank declined $6 million reflecting the rise in
interest rates, as more fully discussed in the Net Interest Income section. The
negative impact of the rise in interest rates was largely offset by broad-based
loan growth and deposit cost containment efforts. Average loans increased $9.0
billion, or 16 percent, primarily in the Banking Group, with increased
residential mortgages, and in Financial Products, which experienced strong
credit card loan growth. Credit quality led to a $71-million period-to-period
reduction in the provision for credit losses.
Noninterest income rose 16 percent to $989 million led by increases in
deposit service fee income, acquisition-related mortgage servicing income,
miscellaneous other income, and the impact of reflecting total ownership of the
full service brokerage company. Noninterest expense increased $88 million,
reflecting the acquisition of smaller banking organizations in Florida and
South Carolina and several mortgage banking acquisitions, total ownership of
the full service brokerage company and expanded marketing efforts, primarily
credit card solicitations.
The Global Finance unit includes Corporate Finance, Specialized
Finance and the Capital Markets group. Included under Specialized Finance are
Real Estate, Specialized Lending (includes Business Credit, Factoring, and
Leasing), Structured Finance (asset-backed and project financing), Real Estate
Finance, Leveraged Capital, and International. The Capital Markets group
includes securities trading and debt underwriting, customer-related
derivatives, and foreign exchange activities. Housed in this unit are
NationsBanc-CRT and NationsBanc Capital Markets Inc., which with its Section
20/Tier II powers, underwrites and deals in various types of corporate debt and
has the authority to underwrite and deal in equity securities.
12
The Global Finance unit earned $306 million in the first six months of
1995, a five-percent decrease from the same period in 1994. The return on
equity was 16 percent, compared to 17 percent for the first half of 1994.
Taxable-equivalent net interest income for the first six months of 1995
increased $10 million over the same period a year ago. The benefit to net
interest income of the $3.4-billion increase in average loans was partially
offset by the increased use of foreign time deposits to support earning asset
growth and other factors as more fully discussed in the Net Interest Income
section. Loan growth was concentrated in the Corporate Finance and Specialized
Lending units, while the Real Estate unit reduced average outstandings by $582
million, compared to last year. The increase in average deposits consisted
primarily of foreign time deposits which resulted from wholesale funding
initiatives in the latter half of 1994 in an effort to extend liability
maturities coupled with the use of these deposits to support loan growth. Asset
quality continued to improve, though at a slower pace than in 1994, leading to
no provision for credit losses during the first half of 1995.
Noninterest income increased three percent over last year. Higher
investment banking fees were partially offset by lower trading account profits
and fees. Investments to expand Capital Markets activities, primarily
personnel-related, contributed to the $29-million increase in noninterest
expense.
Financial Services, the Corporation's nonbank subsidiary which offers
a wide variety of financing to small and large corporations, consumers,
retailers, manufacturers and distributors, contributed $55 million of net
income in the first half of 1995, a 15-percent increase from a year ago. This
improvement, the result of $1.6-billion, or 31-percent, growth in average loans
and leases, was partly offset by a higher provision for credit losses to
support loan growth. Demand in the consumer lending, commercial real estate,
and inventory finance businesses and market expansion in consumer lending
contributed to loan growth. The net interest yield of 7.18 percent is down 23
basis points from the first half of 1994, due primarily to higher funding
costs. Noninterest expense increased 12 percent as new offices were opened to
support the expansion of consumer finance operations. The efficiency ratio of
43.01 percent in the first half of 1995 improved from 45.98 percent for the
same period last year due to loan growth and continued improvement in the
productivity of commercial loan portfolio administration.
Net Interest Income
As presented in Table 3, taxable-equivalent net interest income
increased $28 million, to $1.4 billion, in the second quarter of 1995 compared
to the second quarter of 1994. Average earning asset levels increased $26.9
billion quarter-over-quarter to $171.9 billion. Average loans and leases of
$107.9 billion reflected an increase of $15.3 billion, or 17 percent, compared
to the same quarter of 1994. The aggregate of average securities purchased
under agreements to resell and trading account securities increased to $32.7
billion in the second quarter of 1995, primarily reflecting expanded trading-
related activities. The increase in net interest income resulting primarily
from loan growth and deposit cost containment efforts was partially offset by
the narrowing of the spread between investment securities and market-based
funds and the use of higher cost market-based funds to support earning asset
growth.
13
The net interest yield of 3.19 percent in the second quarter of 1995
reflected the addition of $10.3 billion in low-spread trading-related assets
when compared to the second quarter of 1994. Without such an increase, the net
interest yield would have been approximately 20 basis points higher, as
trading-related activities produce virtually no net interest spread.
Compression of spreads in the discretionary portfolios and the funding of loan
growth primarily with market-based funds also served to compress the yield.
Loan growth, although dependent on economic conditions, is expected to
continue and should result in increases in net interest income. However,
compression of the net interest yield may continue due to higher levels of
market-based funds used to support earning asset growth and increased trading-
related asset levels.
As presented in Table 4, taxable-equivalent net interest income
increased $53 million to $2.7 billion in the first six months of 1995 compared
to the same period of 1994. The major factors contributing to this increase
were a 15-percent growth in average loans and leases coupled with deposit cost
containment efforts. Average loans and leases rose $13.8 billion to $105.9
billion in the first half of 1995 compared to the same period of 1994. The
increase in net interest income resulting from loan growth was partially offset
by the factors previously discussed in the quarter-to-quarter comparisons
above.
The net interest yield declined 39 basis points to 3.30 percent in the
first six months of 1995, compared to 3.69 percent in the same period of 1994.
As previously discussed, the decline in the net interest yield primarily
reflected growth in low-spread trading-related assets, spread compression
between fixed-rate investment securities and market-based funds and changes in
the funding mix of earning asset growth. While average customer-based funds
were relatively flat between periods, average market-based funds between
periods increased 34 percent. A large portion of this increase was in foreign
time deposits and bank notes.
Taxable-equivalent interest income increased $1.6 billion to $6.5
billion in the first six months of 1995, compared to the same period of 1994.
Growth in average earning assets drove $761 million of the increase, while $805
million was related to a 105-basis point rise in the yield on earning assets.
Average earning assets increased by $20.7 billion, or 14 percent, in the first
six months of 1995, compared to the same period of 1994. As discussed earlier,
this growth was led by a 15-percent increase in average loans and leases,
primarily commercial, residential mortgage and other consumer loans. This
growth was spread across business units with 16-percent, 11-percent and 31-
percent loan growth in the General Bank, Global Finance and Financial Services,
respectively. In addition, average securities purchased under agreements to
resell and trading account securities increased primarily due to expanded
trading-related activities. The combined securities portfolio declined $1.3
billion between the two periods reflecting the timing of investment of proceeds
from maturities and sales.
The yield on average earning assets increased 105 basis points to 7.96
percent from 6.91 percent between the two six-month periods. The yield on total
loans and leases increased 76 basis points to 8.80 percent in the first six
months of 1995, reflecting loan growth in a rising interest rate environment,
the variable rate nature of a significant portion of the loan portfolio and
loan pricing which has enabled the Corporation to maintain loan spreads. The
Corporation's average prime interest rate rose from 6.46 percent in the first
six months of 1994 to 8.91 percent in the first six months of 1995. The yield
on total securities increased 68 basis points to 5.66 percent compared to the
same period of 1994. This increase resulted from maturities and sales of lower-
yielding securities coupled with investment at higher rates during the first
half of 1995.
14
Interest expense increased $1.5 billion between the two six-month
periods with growth in average interest-bearing liabilities accounting for $400
million of the increase and $1.1 billion attributable to a 159-basis point rise
in rates paid. Average interest-bearing liabilities increased $19.9 billion, or
16 percent, in the first six months of 1995 compared to the same period of
1994. Interest-bearing deposits grew $8.7 billion to $79.4 billion in 1995,
compared to the same period of 1994. An increase in average foreign time
deposits of $9.4 billion as well as deposit increases resulting from smaller
banking organization acquisitions were the primary factors in this growth.
These increases were partially offset by declines in consumer CDs and money
market accounts, reflecting industry-wide trends of customers seeking higher-
yielding investment alternatives as well as the Corporation's disciplined
deposit pricing. Borrowed funds and trading account liabilities increased $9.9
billion, to $57.1 billion, primarily to fund increased earning asset growth.
Average long-term debt increased $1.4 billion period-over-period to $9.6
billion, primarily due to issuances of medium-term notes.
The rate on average interest-bearing liabilities increased 159 basis
points to 5.27 percent in the first six months of 1995, from 3.68 percent in
the first six months of 1994, primarily due to a greater use of market-based
funds and the higher level of interest rates in general.
The Corporation's asset and liability management process is utilized
to manage the Corporation's interest rate risk through structuring the balance
sheet and off-balance sheet portfolios to maximize net interest income while
maintaining acceptable levels of risk to changes in market interest rates. In
implementing strategies to manage interest rate risk, the primary tools used by
the Corporation are the discretionary portfolio, which is comprised of the
securities portfolio and interest rate swaps, and management of the mix, rates
and maturities of the wholesale and retail funding sources of the Corporation.
Swaps allow the Corporation to adjust its interest rate risk position
without exposure to principal risk and funding requirements as swaps do not
involve the exchange of notional amounts, only net interest payments. The
Corporation uses non-leveraged generic, index amortizing and collateralized
mortgage obligation (CMO) swaps. Generic swaps involve the exchange of fixed
and variable interest rates based on the contractual underlying notional
amounts. Index amortizing and CMO swaps also involve the exchange of fixed and
variable interest rates, however, their notional amounts decline and their
maturities vary based on certain interest rate indices in the case of index
amortizing swaps, or mortgage prepayment rates in the case of CMO swaps.
In early 1995, the Corporation entered into pay fixed interest rate
swap transactions with gross notional amounts totaling $1.6 billion. In
addition, $1.9 billion of receive fixed interest rate swaps matured in the
first six months of 1995. As reflected in Table 5, the gross notional amount of
the Corporation's asset and liability management interest rate swap position on
June 30, 1995, was $25.5 billion with the Corporation receiving fixed on $15.5
billion, converting variable-rate commercial loans to fixed rate and receiving
variable on $10.0 billion, fixing the cost of certain variable-rate
liabilities, primarily market-based borrowed funds. On June 30, 1995, the net
receive fixed position was $5.5 billion, representing a reduction from the net
receive fixed position of $8.9 billion on December 31, 1994, and $17.4 billion
on June 30, 1994.
15
Net interest income is impacted by the Corporation's asset and
liability management interest rate swap program. As reflected in Table 6, on
June 30, 1995, the portfolio had a weighted average receive rate of 5.49
percent and a pay rate of 6.35 percent. Net interest receipts and payments have
been included in interest income and expense on the underlying instruments.
Asset and liability management interest rate swaps resulted in a reduction of
net interest income of $139 million in the first six months of 1995 compared to
an increase of $94 million in the first six months of 1994. Deferred gains and
losses related to any terminated contracts are insignificant.
The net unrealized depreciation on June 30, 1995, was $291 million
compared to $726 million on December 31, 1994, primarily reflecting the
reduction in interest rates and maturities.
The unrealized depreciation in the estimated value of the ALM swap
portfolio should be viewed in the context of the overall balance sheet. The
value of any single component of the balance sheet or off-balance sheet
position should not be viewed in isolation. The overall impact of a 100-basis
point parallel increase in interest rates from June 30, 1995 levels is
estimated to have an insignificant impact on the market value of equity.
Average securities for the first six months of 1995 totaled $26.8
billion, a decrease of $1.3 billion from the same period of 1994. Beginning in
the second quarter of 1994, the Corporation did not fully replace maturities
and sales of securities. In light of expected market conditions, the
Corporation began to add to securities levels late in the first quarter and
during the second quarter of 1995, essentially investing the majority of
maturities scheduled for the second half of 1995 prior to their maturity. The
yield on securities was 5.66 percent for the first six months of 1995 compared
to 4.98 percent in the same period of 1994. The weighted average yield of the
securities portfolio on June 30, 1995, was 5.92 percent. See Analysis of
Financial Condition - Securities for further details on the securities
portfolio.
On June 30, 1995, the interest rate risk position of the Corporation
continued to be relatively neutral as the impact of a gradual 100-basis-point
rise or fall in interest rates over the next 12 months was estimated to have an
insignificant impact on net income when compared to stable rates.
Table 7 represents the Corporation's interest rate gap position on
June 30, 1995. Based on contractual maturities or repricing dates, or
anticipated dates where no contractual maturity or repricing date exists,
interest-sensitive assets and liabilities are placed in maturity categories.
The Corporation's negative cumulative interest rate gap position in the near
term reflects the strong customer-deposit gathering franchise which provides a
relatively stable core deposit base. These available funds have been deployed
in longer-term interest-earning assets including certain loans and securities.
A gap analysis is limited in its usefulness as it represents a one-day position
which is continually changing and not necessarily indicative of the
Corporation's position at any other time. Additionally, the gap analysis does
not consider the many factors accompanying interest rate movements.
Provision for Credit Losses
The provision for credit losses was $70 million and $140 million in
the second quarter and first half of 1995, respectively, compared to $70
million and $170 million in the comparable 1994 periods. The level of the
provision is consistent with credit quality indicators. Future economic
conditions may impact credit quality.
16
Securities Gains
Gains from the sales of securities were $4 million in the second
quarter of 1995 compared to $5 million in the same period of 1994. Results for
the first six months of 1995 reflected gains of $5 million compared to gains of
$19 million in the year-earlier period.
Noninterest Income
Table 8 compares the major categories of noninterest income for the
three and six-month periods of 1995 and 1994. Noninterest income totaled $730
million in the second quarter of 1995, an increase of 16 percent from $629
million in the same quarter of 1994. Noninterest income totaled $1.46 billion
in the first six months of 1995, an increase of 11 percent from $1.31 billion
in the first six months of 1994.
Deposit account service charges increased $14 million and $25 million
for the second quarter and first six months of 1995, respectively, from the
comparable 1994 periods, primarily reflecting higher fees from increased
consumer account volumes, in part due to smaller banking organization
acquisitions and emphasis on fee collections, offset by lower commercial
account service charge fees.
Mortgage servicing and related fees totaled $34 million in the second
quarter of 1995, an increase of 62 percent from the same quarter of 1994.
Mortgage servicing and related fees totaled $55 million in the first six months
of 1995, an increase of 49 percent from the first six months of 1994. The
increase was primarily attributable to the acquisitions of mortgage servicing
portfolios. In the last half of 1994, the Corporation's mortgage subsidiary
acquired $7.6 billion in servicing and on March 31, 1995, an additional $35
billion was acquired. The total servicing portfolio on June 30, 1995 was $77.6
billion. Mortgage loan originations through the Corporation's mortgage
subsidiary totaled $2.5 billion for the second quarter of 1995 compared to $1.9
billion for the second quarter of 1994 and totaled $4.1 billion for the first
six months of 1995 compared to $4.0 billion for the first six months of 1994,
primarily reflecting changes in the interest rate environment. Second quarter
1995 origination volume consisted of approximately $1.6 billion of retail loan
volume and $900 million of correspondent loan volume.
The 105-percent increase in investment banking income in the second
quarter of 1995 and the 74-percent increase in the first six months of 1995
compared to the same 1994 periods were the result of higher syndication fees
and venture capital income. The Capital Markets syndication group was agent or
co-agent on 163 deals totaling $138 billion during the first half of 1995,
compared to 122 deals totaling $82 billion during the same period in 1994.
General Bank trust fees for the second quarter and the first six
months of 1995 were relatively flat compared to the same periods in 1994. On
June 30, 1995, discretionary assets under management and total assets under
administration by the Trust Group were $59.6 billion and $171.9 billion,
respectively, compared to $57.4 billion and $163.6 billion, respectively, on
December 31, 1994.
During the first quarter of 1995, the Corporation announced its
decision to sell a portion of its trust business that deals with bond servicing
and administration, known as Corporate Trust. This decision was based on
management's desire to focus on investment management, retirement and fiduciary
services. On June 1, 1995, the Corporation announced that it had reached a
definitive agreement on the sale of this business which is expected to close
around year end. Historically, the Corporate Trust business has generated
approximately 10 percent of the Corporation's trust fees. Management does not
expect the loss of this revenue to have a significant impact on future net
income.
17
On April 3, 1995, the Corporation and First Financial Management
Corporation (FFMC) announced that FFMC's subsidiary NaBANCO and the Financial
Products Card Services unit agreed to form a joint venture to market merchant
credit card authorization, processing and settlement services to regional and
local merchants throughout the Corporation's service area of the Southeast and
Texas. The Corporation contributed its merchant discount unit in exchange for
consideration including an equity investment position in the newly formed joint
venture. The venture is called Unified Merchant Services, a NaBANCO -
NationsBank Venture and began operations in the second quarter of 1995.
Accordingly, merchant discount fee income and the related noninterest expenses
of the contributed unit decreased during the second quarter of 1995 as compared
to prior periods. The Corporation's equity earnings from the operations of the
venture are reported as a component of other credit card fees.
The higher levels of brokerage income for both 1995 periods are due to
the acquisition of the third party interest in the Corporation's full service
brokerage company. This company was a joint venture arrangement prior to
November 15, 1994 and was accounted for under the equity method.
The Corporation maintains trading positions in a variety of cash and
derivative financial instruments. The Corporation offers a number of products
to customers, as well as enters into transactions for its own account. In
setting trading strategies, the Corporation manages these activities to
maximize trading revenues while at the same time taking controlled risks.
Trading revenues are dependent on a number of factors, including
economic conditions such as interest rate and currency fluctuations. Trading
account profits and fees were flat in the second quarter of 1995 compared to
the second quarter of 1994 and declined $12 million, to $145 million, in the
first six months of 1995 compared to the first six months of 1994. An analysis
of trading account profits and fees by major business activity for the six
months ended June 30 is as follows (dollars in millions):
Six Months Ended
June 30
----------------
1995 1994
------- -------
Securities trading..................... $ 63 $ 72
Interest rate contracts................ 41 45
Foreign exchange contracts............. 6 14
Other.................................. 35 26
------- -------
$ 145 $ 157
======= =======
Miscellaneous other income totaled $89 million in the second quarter
of 1995 compared to $53 million in the second quarter of 1994 and totaled $166
million in the first six months of 1995 compared to $125 million in the first
six months of 1994. This category of miscellaneous income includes certain
prepayment fees and other fees such as net gains on sales of miscellaneous
investments, business activities, premises, venture capital investments,
mortgage servicing and other similar items.
18
Noninterest Expense
The Corporation's noninterest expense as shown in Table 9 increased
$60 million, or five percent, in the second quarter of 1995 compared to the
same quarter in 1994, to a total of $1.29 billion. For the first six months of
1995, noninterest expense increased $129 million, or five percent, compared to
the first six months of 1994, to a total of $2.58 billion. Approximately 66
percent of this quarter-over-quarter increase results from acquisitions of
several smaller banking organizations and several mortgage banking operations
and the acquisition of the third party interest in the Corporation's full
service brokerage company, partially offset by reduced expenses associated with
the merchant discount unit as previously discussed in the Noninterest Income
section.
Included in the various components of noninterest expense are the
costs of ongoing initiatives related to enhancing customer sales and optimizing
product delivery channels. For example, the Model Banking project is being
implemented across the Corporation's franchise to facilitate and enhance the
General Bank's retail customer sales and product delivery. Other projects
include the development of alternative delivery channels, such as PC-based
banking, and activities to define and achieve optimal composition of customer
delivery channels.
Personnel expense, which accounts for 49 percent of noninterest
expense, increased $62 million in the second quarter and $123 million in the
first six months of 1995 compared to prior year periods. Of the quarter-over-
quarter increase, $21 million was primarily due to acquisitions. Continued
investment in personnel for the Capital Markets group also contributed to the
increase in personnel expense.
Compared to the respective prior year periods, equipment expense
increased $10 million, or 11 percent, in the second quarter and $17 million, or
10 percent, in the first six months of 1995. This increase is primarily due to
enhancements to computer resources, including higher rental expense for
upgraded mainframe equipment and increased costs related to product delivery
systems.
Marketing expense increased 16 percent in the second quarter and 35
percent in the first six months of 1995. This increase was driven primarily by
increased credit card solicitations in the Financial Products group.
Other general operating expense decreased $16 million in the second
quarter of 1995 compared to the second quarter of 1994 and $34 million in the
first six months of 1995 compared to the first six months of 1994. These
decreases were primarily due to lower loan and collection expenses.
In August 1995, the FDIC announced it had adopted a proposal to reduce
the rates paid for FDIC insurance. Such action should result in an annual
decrease in FDIC insurance of approximately $150 million. Management has not
made a determination of the portion of such savings which will be passed to the
customer or alternatively invested in other initiatives.
Income Taxes
The Corporation's income tax expense was $475 million, for an
effective rate of 34 percent of pretax income, in the first six months of 1995,
compared to $460 million, for an effective tax rate of 35 percent, in the same
period in 1994. Income tax expense for the second quarter of 1995 was $244
million, for an effective rate of 34 percent of pretax income. Tax expense in
the second quarter of 1994 was $219 million, for an effective rate of 33
percent.
19
Analysis of Financial Condition
Liquidity, a measure of the Corporation's ability to fulfill its cash
requirements, is managed by the Corporation through its asset and liability
management process. This entails measuring and managing the relative balance
between asset, liability and off-balance sheet positions. This process, coupled
with the Corporation's ability to raise capital and debt financing and to
securitize certain assets, ensures the maintenance of sufficient funds to meet
the liquidity needs of the Corporation. The Corporation continues to diversify
its funding sources as evidenced by the July 1995 Eurobond offering and the
mortgage-backed bond issuance and the August 1995 credit card securitization
discussed in Note 4 to the consolidated financial statements.
Table 10 presents an analysis of the major sources and uses of funds
for the two six-month periods based on average levels.
Market-based funds increased 34 percent and represented 39.4 percent
of total sources of funds in the first six months of 1995 compared to 33.7
percent of total sources in the same period of 1994. Customer-based funds
remained relatively flat, however, they represented 45.1 percent of total
sources of funds in the first six months of 1995, down from 51.7 percent of
total sources in the same period of 1994.
The composition of uses of funds reflected a 15-percent increase in
average loans and leases to $105.9 billion in the first six months of 1995
compared to the same period one year earlier. Expanded trading-related
activities resulted in higher levels of securities purchased under agreements
to resell and trading account securities.
The Corporation's ratio of average loans to customer-based funds was
126 percent for the first six months of 1995 compared to 110 percent for the
first six months of 1994. The higher loan to deposit ratio was driven by loan
growth of 15 percent, flat levels of customer-based deposits resulting from
disciplined deposit pricing and the use of market-based funds to support
earning asset growth.
Cash and cash equivalents decreased $1.6 billion from December 31,
1994, to $8.0 billion on June 30, 1995, due to $1.8 billion in net cash used by
operating activities and $10.1 billion in net cash used in investing
activities, offset by $10.3 billion in net cash provided by financing
activities.
Net cash used in investing activities primarily reflected $6.4 billion
in net originations of loans and leases, $846 million in net purchases of
securities and $2.0 billion in purchases of loans and leases.
Net cash provided by financing activities included increases of $6.5
billion in federal funds purchased and securities sold under agreements to
repurchase, $1.7 billion in other short-term borrowings and commercial paper
and $2.2 billion in proceeds from net issuances of long-term debt, partially
offset by $453 million of cash used for common stock repurchases.
Period-end assets were $184.2 billion and $169.6 billion on June 30,
1995 and December 31, 1994, respectively. The following discussion analyzes the
major changes in the period-end balance sheet from December 31, 1994 to June
30, 1995.
20
Securities
The securities portfolio on June 30, 1995, consisted of securities
held for investment totaling $14.5 billion and securities available for sale
totaling $12.6 billion compared to $17.8 billion and $8.0 billion,
respectively, on December 31, 1994.
On June 30, 1995, the Corporation's portfolio of securities held for
investment reflected net unrealized appreciation of $33 million compared to net
unrealized depreciation of $699 million on December 31, 1994.
The valuation amount for securities available for sale and marketable
equity securities increased shareholders' equity by $80 million on June 30,
1995, reflecting $75 million and $51 million of pretax appreciation on
securities available for sale and marketable equity securities, respectively.
The valuation amount reduced shareholders' equity by $136 million on December
31, 1994. The appreciation in both securities held for investment and
securities available for sale from year-end 1994 was primarily due to
maturities of and investments in securities combined with the general level of
interest rates during the first half of 1995.
The estimated average maturity of the combined securities portfolio
was 2.80 years on June 30, 1995, and 2.56 years on December 31, 1994, a
reflection of the investment activity which occurred in the first half of 1995.
Loans
Loans and leases, net of unearned income, on June 30, 1995 and
December 31, 1994 were $109.8 billion and $102.4 billion, respectively.
Approximately $3.0 billion of the increase in loans and leases was due
to an increase in residential real estate mortgages to $20.3 billion on June
30, 1995. The majority of this growth was due primarily to increased
originations of residential mortgages through the Corporation's mortgage
subsidiary.
Commercial loans increased approximately $2.4 billion from December
31, 1994 to $47.0 billion on June 30, 1995. Real estate commercial and
construction loans decreased $213 million from December 31, 1994 to June 30,
1995.
Consumer loans increased approximately $1.7 billion from December 31,
1994 to June 30, 1995. The General Bank accounted for $1.1 billion, or 65
percent, of the increase and Financial Services contributed $525 million, or 31
percent, of the increase.
Nonperforming Assets
On June 30, 1995, nonperforming assets, presented in Table 11, were
$1.10 billion, or .99 percent of net loans, leases, factored accounts receiv-
able and other real estate owned, compared to $1.14 billion, or 1.10 percent,
on December 31, 1994.
Nonperforming loans totaled $905 million on June 30, 1995, compared to
$801 million on December 31, 1994. The net increase in nonperforming loans from
December 31, 1994 reflects $80 million of in-substance foreclosed loans
previously reported as other real estate owned. After reflecting this change in
the December 31, 1994 amounts, nonperforming loans rose $24 million, reflecting
increases of $73 million and $27 million in nonperforming commercial and total
consumer loans, respectively, offset by a decrease of $70 million in
nonperforming real estate commercial and construction loans.
21
Other real estate owned, which represents real estate acquired through
foreclosure, totaled $194 million on June 30, 1995, a net decline of $143
million, or 42 percent, from December 31, 1994.
On January 1, 1995, the Corporation adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 114 "Accounting
by Creditors for Impairment of a Loan" (SFAS 114). See Tables 11 and 12 and the
Allowance for Credit Losses section.
Allowance for Credit Losses
On June 30, 1995, and December 31, 1994, the allowance for credit
losses was $2.2 billion and represented 1.95 percent and 2.11 percent,
respectively, of loans, leases and factored accounts receivable.
The allowance for credit losses as a percentage of nonperforming loans
was 239 percent on June 30, 1995, compared to 273 percent at year-end 1994.
Table 12 provides an analysis of the changes in the allowance for
credit losses for the three and six months ended June 30, 1995 and 1994. Total
net charge-offs for the second quarter of 1995 were $83 million, or .31 percent
of average loans, leases and factored accounts receivable, versus $64 million,
or .27 percent, in the comparable three-month period in 1994. Total net charge-
offs for the first six months of 1995 were $166 million, or .31 percent of
average loans, leases and factored accounts receivable, compared to $154
million, or .33 percent, in the same period of 1994. The increase in net
charge-offs was primarily centered in credit card loans. Net charge-offs as a
percentage of average credit card loans were 3.03 percent in the first six
months of 1995 compared to 2.76 percent for the same period of 1994. Increased
credit card solicitations generally result in higher charge-offs until the
portfolios season.
On June 30, 1995, the recorded investment in certain loans that are
considered to be impaired under SFAS 114 was $715 million, all of which were
classified as nonperforming. Provision expense associated with impaired loans
for the first six months of 1995 approximated $10.7 million. The average
recorded investment in certain impaired loans during the six months ended June
30, 1995, was approximately $703 million. During the six months ended June 30,
1995, interest income recognized on impaired loans totaled $14.5 million, all
of which was recognized on a cash basis.
Capital
Shareholders' equity totaled $11.5 billion on June 30, 1995, compared
to $11.0 billion on December 31, 1994. Under common stock repurchase programs,
the Corporation repurchased and retired 8.6 million common shares during the
first six months of 1995 at a cost of $453 million, including approximately two
million shares to offset shares issued through dividend reinvestment and stock
option and grant programs. The Corporation may continue share repurchases under
these programs.
22
The valuation reserve for securities held for sale and marketable
equity securities increased shareholders' equity $80 million on June 30, 1995,
compared to a reduction to shareholders' equity of $136 million on December 31,
1994.
The Corporation's Tier 1 ratios were 7.03 percent and 7.43 percent on
June 30, 1995 and December 31, 1994, respectively. The total risk-based capital
ratios were 10.90 percent and 11.47 percent on June 30, 1995 and December 31,
1994, respectively. Both of these measures compare favorably with the
regulatory minimums. Decreases in these ratios result primarily from increases
in the level of the Corporation's risk weighted assets, primarily loans and
loan commitments. The Corporation's leverage ratios were 5.65 percent and 6.18
percent on June 30, 1995 and December 31, 1994, respectively. The decrease in
the leverage ratio was primarily a result of an increase in average assets,
mainly loans and trading-related assets.
Under the Key Employee Stock Plan, certain key employees received
stock options effective July 1, 1995, entitling them to purchase shares of the
Corporation's common stock at the previous day's closing market price of $53
5/8 per share. Options to purchase 3.96 million shares of common stock were
granted. Twenty-five percent of the options vest and are exercisable
immediately. The remaining 75 percent shall vest and become exercisable in
three equal installments on July 1, 1996, 1997 and 1998. Any unexercised
options will expire July 1, 2005.
Derivative - Dealer Positions
Within the Corporation's Credit Policy organization, a group is
dedicated to managing credit risks associated with trading activities. The
Corporation maintains trading positions in a number of markets and with a
variety of counterparties or obligors (counterparties). To limit credit
exposure arising from such transactions, the Corporation evaluates the credit
standing of counterparties, establishes limits for the total exposure to any
one counterparty, monitors exposure against the established limits and monitors
trading portfolio composition to manage concentrations.
Counterparties are subject to the credit approval and credit
monitoring policies and procedures of the Corporation. Certain instruments
require the Corporation or the counterparty to maintain collateral for all or
part of the exposure. Generally, such collateral is in the form of cash or
other highly liquid instruments. Limits for exposure to any particular
counterparty are established and monitored. In certain jurisdictions,
counterparty risk is also reduced through the use of legally enforceable master
netting agreements, which allow the Corporation to settle positions with the
same counterparty on a net basis. The contract or notional amounts associated
with the Corporation's derivative-dealer positions are reflected in Table 13.
The notional or contract amounts indicate the total volume of transactions and
significantly exceed the amount of the Corporation's credit or market risk
associated with these instruments. The Corporation's exposure to credit risk
from derivative financial instruments is represented by the fair value of the
instruments. Credit risk represents the replacement cost the Corporation could
incur should counterparties with contracts in a gain position to the
Corporation completely fail to perform under the terms of those contracts and
any collateral underlying the contracts proves to be of no value to the
Corporation. Such aggregate amounts measured by the Corporation as the positive
replacement cost on June 30, 1995 and December 31, 1994, were $3.3 billion and
$1.8 billion, respectively. Of these credit risk amounts, $477 million and $354
23
million relates to exchange-traded instruments for 1995 and 1994, respectively.
Because exchange-traded instruments conform to standard terms and are subject
to policies set by the exchange involved, including counterparty approval,
margin requirements and security deposit requirements, the credit risk to the
Corporation is minimal. The $1.5-billion increase in the credit risk amount
from December 31, 1994 is driven primarily by expanded derivatives trading
activities.
24
Table 1
Selected Operating Results
(Dollars in Millions Except Per-Share Information)
Three Months Six Months
Ended June 30 Ended June 30
--------------------------------------------
1995 1994 1995 1994
--------------------------------------------
Income from earning assets.......................... $ 3,391 $ 2,512 $ 6,461 $ 4,910
Interest expense.................................... 2,055 1,195 3,818 2,305
Net interest income (taxable-equivalent)............ 1,367 1,339 2,702 2,649
Net interest income................................. 1,336 1,317 2,643 2,605
Provision for credit losses......................... 70 70 140 170
Gains on sales of securities........................ 4 5 5 19
Noninterest income.................................. 730 629 1,456 1,309
Other real estate owned expense (income)............ 1 (3) 3 2
Noninterest expense................................. 1,288 1,228 2,576 2,447
Income before income taxes.......................... 711 656 1,385 1,314
Income tax expense.................................. 244 219 475 460
Net income.......................................... 467 437 910 854
Earnings per common share........................... 1.71 1.58 3.31 3.10
Yield on average earning assets..................... 7.98 % 7.00 % 7.96 % 6.91 %
Rate on average interest-bearing liabilities........ 5.39 3.80 5.27 3.68
Net interest spread................................. 2.59 3.20 2.69 3.23
Net interest yield.................................. 3.19 3.70 3.30 3.69
Return on average common shareholders' equity (1)... 16.69 17.04 16.36 16.93
Market price per share of common stock
High for the period............................... $ 57 3/4 $ 57 3/8 $ 57 3/4 $ 57 3/8
Low for the period................................ 49 5/8 44 1/2 44 5/8 44 3/8
Closing price..................................... 53 5/8 51 3/8 53 5/8 51 3/8
Risk-based capital ratios
Tier 1............................................ 7.03 % 7.63 %
Total............................................. 10.90 11.57
(1) Average common shareholders' equity does not include the effect of fair value adjustments to
securities available for sale and marketable equity securities.
25
Table 2
Business Unit Summary
For the Six Months Ended June 30
(Dollars in Millions)
General Bank Global Finance Financial Services
---------------------------------------------------------------
1995 1994 1995 1994 1995 1994
---------------------------------------------------------------
Net interest income
(taxable-equivalent)......... $ 1,844 $ 1,850 $ 603 $ 593 $ 245 $ 194
Noninterest income............ 989 852 437 424 30 33
---------------------------------------------------------------
Total revenue................. 2,833 2,702 1,040 1,017 275 227
Provision for credit losses... 82 153 - (23) 58 40
Other real estate owned
expense (income)............. 4 4 (7) (4) 7 2
Noninterest expense........... 1,896 1,808 563 534 118 105
---------------------------------------------------------------
Income before income taxes.... 851 737 484 510 92 80
Income tax expense............ 312 272 178 188 37 32
---------------------------------------------------------------
Net income (1)................ $ 539 $ 465 $ 306 $ 322 $ 55 $ 48
===============================================================
Net interest yield............ 4.49 % 4.81 % 2.87 % (2) 3.46 % (2) 7.18 % 7.41 %
Return on equity.............. 18 % 18 % 16 % 17 % 12 % 13 %
Efficiency ratio.............. 66.98 66.93 54.15 52.63 43.01 45.98
Average (3)
Total loans and leases,
net of unearned income...... $65,592 $56,592 $33,849 $30,491 $ 6,886 $ 5,251
Total deposits............... 77,416 76,802 15,254 10,056 - -
Total assets................. 88,518 82,548 81,140 65,292 7,371 5,817
Period end (3)
Total loans and leases,
net of unearned income...... 68,730 58,483 34,445 30,526 7,345 5,477
Total deposits............... 78,284 76,165 15,042 11,276 - -
(1) Business Unit results are presented on a fully allocated basis but do not include $10
million and $19 million of net income for 1995 and 1994, respectively, which represents
earnings associated with unassigned capital, gains on sales of securities and other
corporate activities.
(2) Global Finance's net interest yield excludes the impact of trading-related activities.
Including trading-related activities, the net interest yield was 1.71 percent in 1995 and
2.04 percent in 1994.
(3) The sums of balance sheet and income statement amounts differ from consolidated amounts due
to activities between the Business Units.
26
Table 3
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
Second Quarter 1995 First Quarter 1995
-------------------------------------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
-------------------------------------------------------------
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 46,525 $ 954 8.22 % $ 45,238 $ 919 8.24 %
Real estate commercial................................ 7,395 171 9.29 7,630 173 9.16
Real estate construction.............................. 3,216 78 9.76 3,100 77 10.07
-------------------- --------------------
Total commercial.................................... 57,136 1,203 8.45 55,968 1,169 8.47
-------------------- --------------------
Residential mortgage.................................. 19,242 378 7.84 17,780 343 7.76
Credit card........................................... 4,775 156 13.13 4,543 139 12.36
Other consumer........................................ 21,609 544 10.11 20,624 501 9.85
-------------------- --------------------
Total consumer...................................... 45,626 1,078 9.47 42,947 983 9.25
-------------------- --------------------
Foreign............................................... 2,048 41 7.96 1,961 36 7.50
Lease financing....................................... 3,114 58 7.43 2,951 58 7.86
-------------------- --------------------
Total loans and leases, net......................... 107,924 2,380 8.84 103,827 2,246 8.76
-------------------- --------------------
Securities
Held for investment................................... 17,457 235 5.40 17,648 238 5.45
Available for sale (3)................................ 10,730 170 6.33 7,728 110 5.80
-------------------- --------------------
Total securities.................................... 28,187 405 5.76 25,376 348 5.56
-------------------- --------------------
Loans held for sale..................................... 153 3 8.06 61 1 9.10
Federal funds sold and securities purchased
under agreements to resell............................ 17,534 285 6.51 15,014 230 6.22
Time deposits placed and other short-term investments... 2,310 42 7.29 2,297 40 7.01
Trading account securities (4).......................... 15,834 307 7.77 11,574 233 8.16
-------------------- --------------------
Total earning assets (5)............................ 171,942 3,422 7.98 158,149 3,098 7.93
Cash and cash equivalents................................. 8,024 8,321
Factored accounts receivable.............................. 1,181 1,048
Other assets, less allowance for credit losses............ 13,155 9,997
--------- ---------
Total assets........................................ $ 194,302 $ 177,515
========= =========
Interest-bearing liabilities
Savings................................................. $ 8,656 51 2.40 $ 8,911 53 2.39
NOW and money market deposit accounts................... 27,608 185 2.68 28,577 187 2.66
Consumer CDs and IRAs................................... 25,075 325 5.20 24,818 291 4.76
Negotiated CDs, public funds and other time deposits.... 3,046 42 5.51 3,151 41 5.30
Foreign time deposits................................... 15,107 239 6.36 13,844 211 6.18
Borrowed funds and trading account liabilities (4)(6)... 63,111 1,028 6.53 50,993 820 6.52
Long-term debt.......................................... 10,209 185 7.22 8,888 160 7.22
-------------------- --------------------
Total interest-bearing liabilities.................. 152,812 2,055 5.39 139,182 1,763 5.13
Noninterest-bearing sources
Noninterest-bearing deposits............................ 21,077 19,984
Other liabilities....................................... 9,200 7,157
Shareholders' equity.................................... 11,213 11,192
--------- ---------
Total liabilities and shareholders' equity.......... $ 194,302 $ 177,515
========= =========
Net interest spread....................................... 2.59 2.80
Impact of noninterest-bearing sources..................... 0.60 0.61
--------- ---------
Net interest income/yield on earning assets............... $ 1,367 3.19 % $ 1,335 3.41 %
========= =========
(1) Nonperforming loans are included in the respective average loan balances. Income on such nonperforming loans is
recognized on a cash basis.
(2) Commercial loan interest income includes net interest rate swap revenues related to swaps converting variable-rate
commercial loans to fixed rate. Such increases (decreases) in interest income were $(65) and $(61) in the second and
first quarters of 1995, respectively, and $(32), $0 and $38 in the fourth, third and second quarters of 1994,
respectively.
(3) The average balance sheet amounts and yields on securities available for sale are based on the average of historical
amortized cost balances.
(4) Unrealized gains and losses on off-balance sheet trading positions are reported in other assets and liabilities,
respectively.
(5) Interest income includes taxable-equivalent adjustments of $31 and $28 in the second and first quarters of 1995,
respectively, and $26, $24 and $22 in the fourth, third and second quarters of 1994, respectively.
(6) Borrowed funds and trading account liabilities interest expense includes net interest rate swap expense related to
swaps fixing the cost of certain variable-rate liabilities, primarily market-based funds. Such increases (decreases)
in interest expense were $(2) and $12 in the second and first quarters of 1995, respectively, and $20, $9 and $(1) in
the fourth, third and second quarters of 1994, respectively.
27
Table 3 (Continued)
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
Fourth Quarter 1994 Third Quarter 1994
-------------------------------------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
-------------------------------------------------------------
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 43,587 $ 855 7.78 % $ 42,037 $ 805 7.60 %
Real estate commercial................................ 7,289 162 8.86 7,473 159 8.43
Real estate construction.............................. 3,038 72 9.33 3,106 66 8.50
-------------------- --------------------
Total commercial.................................... 53,914 1,089 8.01 52,616 1,030 7.77
-------------------- --------------------
Residential mortgage.................................. 16,680 321 7.68 15,528 296 7.60
Credit card........................................... 4,357 141 12.80 4,003 131 12.96
Other consumer........................................ 20,294 486 9.50 19,873 467 9.33
-------------------- --------------------
Total consumer...................................... 41,331 948 9.11 39,404 894 9.02
-------------------- --------------------
Foreign............................................... 1,764 30 6.79 1,453 23 6.34
Lease financing....................................... 2,755 53 7.71 2,474 49 7.90
-------------------- --------------------
Total loans and leases, net......................... 99,764 2,120 8.44 95,947 1,996 8.26
-------------------- --------------------
Securities
Held for investment................................... 17,966 245 5.40 15,443 197 5.08
Available for sale (3)................................ 8,560 117 5.44 11,683 152 5.17
-------------------- --------------------
Total securities.................................... 26,526 362 5.42 27,126 349 5.12
-------------------- --------------------
Loans held for sale..................................... 109 3 7.65 183 3 6.69
Federal funds sold and securities purchased
under agreements to resell............................ 16,159 203 5.00 13,495 149 4.38
Time deposits placed and other short-term investments... 2,231 32 5.75 2,216 29 5.16
Trading account securities (4).......................... 10,318 224 8.64 10,488 199 7.52
-------------------- --------------------
Total earning assets (5)............................ 155,107 2,944 7.54 149,455 2,725 7.24
Cash and cash equivalents................................. 8,674 8,372
Factored accounts receivable.............................. 1,235 1,156
Other assets, less allowance for credit losses............ 9,538 8,300
--------- ---------
Total assets........................................ $ 174,554 $ 167,283
========= =========
Interest-bearing liabilities
Savings................................................. $ 9,143 54 2.37 $ 9,255 54 2.31
NOW and money market deposit accounts................... 29,442 190 2.53 29,507 179 2.41
Consumer CDs and IRAs................................... 25,136 277 4.40 24,439 257 4.17
Negotiated CDs, public funds and other time deposits.... 2,825 35 4.80 3,223 34 4.23
Foreign time deposits................................... 11,576 162 5.57 8,436 108 5.06
Borrowed funds and trading account liabilities (4)(6)... 50,110 756 5.99 48,688 629 5.13
Long-term debt.......................................... 8,147 144 7.08 7,731 134 6.95
-------------------- --------------------
Total interest-bearing liabilities.................. 136,379 1,618 4.71 131,279 1,395 4.22
Noninterest-bearing sources
Noninterest-bearing deposits............................ 20,452 19,796
Other liabilities....................................... 6,817 5,543
Shareholders' equity.................................... 10,906 10,665
--------- ---------
Total liabilities and shareholders' equity.......... $ 174,554 $ 167,283
========= =========
Net interest spread....................................... 2.83 3.02
Impact of noninterest-bearing sources..................... 0.57 0.52
--------- ---------
Net interest income/yield on earning assets............... $ 1,326 3.40 % $ 1,330 3.54 %
========= =========
28
Table 3 (Continued)
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
Second Quarter 1994
------------------------------
Average
Balance Income
Sheet or Yields/
Amounts Expense Rates
------------------------------
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 40,339 $ 765 7.61 %
Real estate commercial................................ 7,955 157 7.92
Real estate construction.............................. 3,226 68 8.42
--------------------
Total commercial.................................... 51,520 990 7.71
--------------------
Residential mortgage.................................. 14,329 270 7.54
Credit card........................................... 3,783 115 12.27
Other consumer........................................ 19,540 443 9.09
--------------------
Total consumer...................................... 37,652 828 8.82
--------------------
Foreign............................................... 1,287 18 5.73
Lease financing....................................... 2,146 38 7.08
--------------------
Total loans and leases, net......................... 92,605 1,874 8.12
--------------------
Securities
Held for investment................................... 14,009 167 4.79
Available for sale (3)................................ 14,829 191 5.16
--------------------
Total securities.................................... 28,838 358 4.98
--------------------
Loans held for sale..................................... 392 6 6.49
Federal funds sold and securities purchased
under agreements to resell............................ 11,780 108 3.64
Time deposits placed and other short-term investments... 1,211 15 4.96
Trading account securities (4).......................... 10,265 173 6.75
--------------------
Total earning assets (5)............................ 145,091 2,534 7.00
Cash and cash equivalents................................. 8,051
Factored accounts receivable.............................. 1,599
Other assets, less allowance for credit losses............ 7,248
---------
Total assets........................................ $ 161,989
=========
Interest-bearing liabilities
Savings................................................. $ 9,181 53 2.30
NOW and money market deposit accounts................... 29,816 166 2.24
Consumer CDs and IRAs................................... 22,855 231 4.02
Negotiated CDs, public funds and other time deposits.... 3,574 33 3.80
Foreign time deposits................................... 5,691 63 4.49
Borrowed funds and trading account liabilities (4)(6)... 47,122 514 4.38
Long-term debt.......................................... 7,952 135 6.75
--------------------
Total interest-bearing liabilities.................. 126,191 1,195 3.80
Noninterest-bearing sources
Noninterest-bearing deposits............................ 20,241
Other liabilities....................................... 5,285
Shareholders' equity.................................... 10,272
---------
Total liabilities and shareholders' equity.......... $ 161,989
=========
Net interest spread....................................... 3.20
Impact of noninterest-bearing sources..................... 0.50
---------
Net interest income/yield on earning assets............... $ 1,339 3.70 %
=========
29
Table 4
Six Month Taxable-Equivalent Data
(Dollars in Millions)
Six Months Ended June 30
-----------------------------------------------------------
1995 1994
-----------------------------------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
-----------------------------------------------------------
Earning assets
Loans and leases, net of unearned income (1)
Commercial (2)........................................ $ 45,884 $ 1,873 8.23 % $ 40,380 $ 1,487 7.43 %
Real estate commercial................................ 7,512 344 9.23 8,186 315 7.76
Real estate construction.............................. 3,159 155 9.91 3,239 130 8.07
--------------------- ---------------------
Total commercial.................................... 56,555 2,372 8.46 51,805 1,932 7.52
--------------------- ---------------------
Residential mortgage.................................. 18,515 721 7.80 13,837 524 7.60
Credit card........................................... 4,660 295 12.75 3,728 236 12.79
Other consumer........................................ 21,119 1,045 9.98 19,448 878 9.10
--------------------- ---------------------
Total consumer...................................... 44,294 2,061 9.36 37,013 1,638 8.91
--------------------- ---------------------
Foreign............................................... 2,004 77 7.74 1,222 33 5.46
Lease financing....................................... 3,033 116 7.64 2,069 74 7.13
--------------------- ---------------------
Total loans and leases, net......................... 105,886 4,626 8.80 92,109 3,677 8.04
--------------------- ---------------------
Securities
Held for investment................................... 17,552 473 5.43 13,365 319 4.80
Available for sale (3)................................ 9,238 280 6.11 14,688 375 5.14
--------------------- ---------------------
Total securities.................................... 26,790 753 5.66 28,053 694 4.98
--------------------- ---------------------
Loans held for sale..................................... 107 4 8.33 536 17 6.48
Federal funds sold and securities purchased
under agreements to resell............................ 16,281 515 6.38 11,925 195 3.29
Time deposits placed and other short-term investments... 2,304 82 7.15 1,293 29 4.52
Trading account securities (4).......................... 13,715 540 7.93 10,500 342 6.56
--------------------- ---------------------
Total earning assets (5)............................ 165,083 6,520 7.96 144,416 4,954 6.91
Cash and cash equivalents................................. 8,172 ---------- 8,014 ----------
Factored accounts receivable.............................. 1,115 1,309
Other assets, less allowance for credit losses............ 11,585 7,904
---------- ----------
Total assets........................................ $ 185,955 $ 161,643
========== ==========
Interest-bearing liabilities
Savings................................................. $ 8,783 104 2.39 $ 9,031 104 2.31
NOW and money market deposit accounts................... 28,090 372 2.67 29,977 327 2.20
Consumer CDs and IRAs................................... 24,947 616 4.98 23,074 464 4.05
Negotiated CDs, public funds and other time deposits.... 3,098 83 5.40 3,618 65 3.62
Foreign time deposits................................... 14,479 450 6.27 5,041 105 4.22
Borrowed funds and trading account liabilities (4)(6)... 57,085 1,848 6.53 47,229 968 4.13
Long-term debt.......................................... 9,552 345 7.21 8,129 272 6.68
--------------------- ---------------------
Total interest-bearing liabilities.................. 146,034 3,818 5.27 126,099 2,305 3.68
Noninterest-bearing sources
Noninterest-bearing deposits............................ 20,533 20,070
Other liabilities....................................... 8,186 5,297
Shareholders' equity.................................... 11,202 10,177
---------- ----------
Total liabilities and shareholders' equity.......... $ 185,955 $ 161,643
========== ==========
Net interest spread....................................... 2.69 3.23
Impact of noninterest-bearing sources..................... 0.61 0.46
---------- ----------
Net interest income/yield on earning assets............... $ 2,702 3.30 % $ 2,649 3.69 %
========== ==========
(1) Nonperforming loans are included in the respective average loan balances. Income on such nonperforming loans is
recognized on a cash basis.
(2) Commercial loan interest income includes net interest rate swap revenues related to swaps converting variable-rate
commercial loans to fixed rate. Such increases (decreases) in interest income were $(126) and $94 in 1995 and 1994,
respectively.
(3) The average balance sheet amounts and yields on securities available for sale are based on the average of historical
amortized cost balances.
(4) Unrealized gains and losses on off-balance sheet trading positions are reported in other assets and liabilities,
respectively.
(5) Interest income includes taxable-equivalent adjustments of $59 and $44 in 1995 and 1994, respectively.
(6) Borrowed funds and trading account liabilities interest expense includes net interest rate swap expense related to
swaps fixing the cost of certain variable-rate liabilities, primarily market-based funds. Such increases in interest
expense were $10 and $2 in 1995 and 1994, respectively.
30
Table 5
Asset and Liability Management Interest Rate Swaps
Notional Contracts
(Dollars in Millions)
Index
Generic Amortizing CMO Total
-----------------------------------------------------------------------------
Receive Pay Receive Receive Pay Receive Pay
Fixed Fixed Fixed Fixed Fixed Fixed Fixed Total
----------------------------------------------------------------------------------------
Balance on December 31, 1994... $ 6,528 $ 8,446 $ 8,450 $ 2,504 $ 97 $ 17,482 $ 8,543 $ 26,025
Additions.................... - 1,561 - - - - 1,561 1,561
Maturities................... (1,010) (96) (792) (135) (8) (1,937) (104) (2,041)
----------------------------------------------------------------------------------------
Balance on June 30, 1995....... $ 5,518 $ 9,911 $ 7,658 $ 2,369 $ 89 $ 15,545 $ 10,000 $ 25,545
========================================================================================
31
Table 6
Asset and Liability Management Interest Rate Swaps
June 30, 1995
(Dollars in Millions, Average Maturity in Years)
Maturities
-----------------------------------------------------------------
Market After Average
Value Total 1995 1996 1997 1998 1999 1999 Maturity
----------------------------------------------------------------------------------
Asset Conversion Swaps
Receive fixed generic.............. $ (39) 0.78
Notional value.................... $ 5,518 $2,127 $ 2,705 $ 575 $ 3 - $ 108
Weighted average receive rate..... 4.57 % 4.32 % 4.63 % 4.45 % 6.58 % - 8.55 %
Weighted average pay rate......... 6.41
Receive fixed amortizing........... (157) 1.32
Notional value.................... $ 7,658 $1,744 $ 2,579 $ 2,552 $ 783 - -
Weighted average receive rate..... 4.89 % 4.91 % 4.87 % 4.86 % 5.06 % - -
Weighted average pay rate......... 6.12
Receive fixed CMO.................. (43) 1.84
------
Notional value.................... $ 2,369 $ 449 $ 638 $ 409 $ 462 $ 411 -
Weighted average receive rate..... 5.12 % 5.09 % 5.10 % 5.11 % 5.08 % 5.21 % -
Weighted average pay rate......... 6.06
Total asset conversion swaps....... $(239) 1.21
======
Notional value.................... $15,545 $4,320 $ 5,922 $ 3,536 $1,248 $ 411 $ 108
Weighted average receive rate..... 4.81 % 4.64 % 4.79 % 4.82 % 5.07 % 5.21 % 8.55 %
Weighted average pay rate......... 6.21
Liability Conversion Swaps
Pay fixed generic.................. $ (54) 1.24
Notional value.................... $ 9,911 $ 10 $ 8,790 $ 925 $ 100 - $ 86
Weighted average pay rate......... 6.58 % 11.06 % 6.52 % 7.34 % 5.02 % - 5.82 %
Weighted average receive rate..... 6.54
Pay fixed CMO...................... 2 1.78
------
Notional value.................... $ 89 $ 14 $ 22 $ 15 $ 38 - -
Weighted average pay rate......... 4.44 % 4.44 % 4.44 % 4.44 % 4.44 % - -
Weighted average receive rate..... 6.01
Total liability conversion swaps... $ (52) 1.24
======
Notional value.................... $10,000 $ 24 $ 8,812 $ 940 $ 138 - $ 86
Weighted average pay rate......... 6.56 % 7.20 % 6.52 % 7.29 % 4.86 % - 5.82 %
Weighted average receive rate..... 6.54
Total.............................. $(291)
======
Notional value.................... $25,545 $4,344 $14,734 $ 4,476 $1,386 $ 411 $ 194
Weighted average receive rate..... 5.49 %
Weighted average pay rate......... 6.35
Floating rates represent the last repricing and will change in the future based on movements
in one, three or six month LIBOR rates.
Maturities are based on interest rates implied by the forward curve on June 30, 1995, and
may differ from actual maturities, depending on future interest rate movements and resultant
prepayment patterns.
In addition to the above asset and liability management interest rate swaps, on June 30,
1995, the Corporation had approximately $1.2 billion notional of net receive fixed generic
interest rate swaps associated primarily with a credit card securitization. On June 30, 1995,
these positions had an unrealized market value of negative $29 million. On June 30, 1995, the
weighted average receive rate was 5.19 percent and the pay rate was 6.00 percent.
32
Table 7
Interest Rate Gap Analysis
June 30, 1995
(Dollars in Millions)
Over 12
Interest-Sensitive Months and
------------------------------------------------------ Noninterest-
30-Day 3-Month 6-Month 12-Month Total Sensitive Total
-------------------------------------------------------------------------------
Earning assets
Loans and leases, net of
unearned income........................ $ 47,782 $ 10,732 $ 4,737 $ 8,261 $ 71,512 $ 38,290 $ 109,802
Securities held for investment........... 103 509 1,009 2,715 4,336 10,116 14,452
Securities available for sale............ 35 30 418 1,606 2,089 10,474 12,563
Loans held for sale...................... 713 - - - 713 - 713
Time deposits placed and other
short-term investments................. 1,538 360 350 104 2,352 2 2,354
Trading account securities............... 10,925 - - - 10,925 - 10,925
Other earning assets..................... 11,391 - - - 11,391 - 11,391
-------------------------------------------------------------------------------
Total.................................. 72,487 11,631 6,514 12,686 103,318 58,882 $ 162,200
-------------------------------------------------------------------------------
Interest-bearing liabilities
Savings.................................. 8,553 - - - 8,553 - $ 8,553
NOW and money market deposit
accounts............................... 24,976 - - - 24,976 2,347 27,323
Consumer CDs and IRAs.................... 3,183 3,466 4,068 4,977 15,694 9,315 25,009
Negotiated CDs, public funds and
other time deposits.................... 839 948 371 368 2,526 263 2,789
Foreign time deposits.................... 6,124 2,086 4,119 2,504 14,833 1 14,834
Borrowed funds........................... 29,356 7,290 3,173 2,473 42,292 - 42,292
Short sales.............................. 10,703 - - - 10,703 - 10,703
Long-term debt........................... 520 2,635 502 479 4,136 6,580 10,716
-------------------------------------------------------------------------------
Total.................................. 84,254 16,425 12,233 10,801 123,713 18,506 142,219
Noninterest-bearing, net................... - - - - - 19,981 19,981
-------------------------------------------------------------------------------
Total.................................. 84,254 16,425 12,233 10,801 123,713 38,487 $ 162,200
-------------------------------------------------------------------------------
Interest rate gap.......................... (11,767) (4,794) (5,719) 1,885 (20,395) 20,395
Effect of asset and liability management
interest rate swaps, futures and
other off-balance sheet items............ (5,582) 3,778 (876) 5,712 3,032 (3,032)
--------------------------------------------------------------------
Adjusted interest rate gap................. $ (17,349) $ (1,016) $ (6,595) $ 7,597 $ (17,363) $ 17,363
====================================================================
Cumulative adjusted interest rate gap...... $ (17,349) $ (18,365) $ (24,960) $ (17,363)
===========================================
33
Table 8
Noninterest Income
(Dollars in Millions)
Three Months Six Months
Ended June 30 Change Ended June 30 Change
----------------------------------------------------------------------------
1995 1994 Amount Percent 1995 1994 Amount Percent
----------------------------------------------------------------------------
Service charges on deposit accounts..... $ 212 $ 198 $ 14 7.1 % $ 419 $ 394 $ 25 6.3 %
----------------------------------------------------------------------------
Nondeposit-related service fees
Safe deposit rent..................... 6 7 (1) (14.3) 15 15 - -
Mortgage servicing
and related fees.................... 34 21 13 61.9 55 37 18 48.6
Fees on factored accounts
receivable.......................... 16 18 (2) (11.1) 33 36 (3) (8.3)
Investment banking income............. 45 22 23 104.5 94 54 40 74.1
Other service fees.................... 29 26 3 11.5 58 53 5 9.4
----------------------------------------------------------------------------
Total nondeposit-related
service fees...................... 130 94 36 38.3 255 195 60 30.8
----------------------------------------------------------------------------
Trust fees.............................. 118 116 2 1.7 228 225 3 1.3
----------------------------------------------------------------------------
Credit card income
Merchant discount fees................ - 6 (6) (100.0) 7 13 (6) (46.2)
Annual credit card fees............... 6 5 1 20.0 12 11 1 9.1
Other credit card fees................ 55 58 (3) (5.2) 109 110 (1) (0.9)
----------------------------------------------------------------------------
Total credit card income............ 61 69 (8) (11.6) 128 134 (6) (4.5)
----------------------------------------------------------------------------
Other income
Brokerage income...................... 25 10 15 150.0 49 23 26 113.0
Trading account profits
and fees............................ 62 62 - - 145 157 (12) (7.6)
Bankers' acceptances
and letters of credit............... 18 15 3 20.0 36 32 4 12.5
Insurance commissions
and earnings........................ 15 12 3 25.0 30 24 6 25.0
Miscellaneous......................... 89 53 36 67.9 166 125 41 32.8
----------------------------------------------------------------------------
Total other income.................. 209 152 57 37.5 426 361 65 18.0
----------------------------------------------------------------------------
$ 730 $ 629 $ 101 16.1 $ 1,456 $ 1,309 $ 147 11.2
============================================================================
34
Table 9
Noninterest Expense
(Dollars in Millions)
Three Months Six Months
Ended June 30 Change Ended June 30 Change
-----------------------------------------------------------------------
1995 1994 Amount Percent 1995 1994 Amount Percent
-----------------------------------------------------------------------
Personnel................. $ 625 $ 563 $ 62 11.0 % $ 1,250 $ 1,127 $ 123 10.9 %
Occupancy, net............ 123 120 3 2.5 244 240 4 1.7
Equipment................. 98 88 10 11.4 191 174 17 9.8
Marketing................. 51 44 7 15.9 109 81 28 34.6
Professional fees......... 43 49 (6) (12.2) 80 92 (12) (13.0)
Amortization of
intangibles............ 31 34 (3) (8.8) 61 68 (7) (10.3)
Credit card............... 12 16 (4) (25.0) 26 35 (9) (25.7)
FDIC insurance............ 51 52 (1) (1.9) 102 105 (3) (2.9)
Processing................ 60 58 2 3.4 123 116 7 6.0
Telecommunications........ 37 34 3 8.8 73 66 7 10.6
Postage and courier....... 33 31 2 6.5 67 64 3 4.7
Other general operating... 84 100 (16) (16.0) 173 207 (34) (16.4)
General administrative
and miscellaneous...... 40 39 1 2.6 77 72 5 6.9
-----------------------------------------------------------------------
$1,288 $1,228 $ 60 4.9 $ 2,576 $ 2,447 $ 129 5.3
=======================================================================
35
Table 10
Sources and Uses of Funds
(Average Dollars in Millions)
Six Months Ended June 30
-------------------------------------------
1995 1994
-------------------------------------------
Amount Percent Amount Percent
-------------------------------------------
Composition of sources
Savings, NOW, money market deposit accounts,
and consumer CDs and IRAs......................... $ 61,820 33.3 % $ 62,082 38.4 %
Noninterest-bearing funds............................. 20,533 11.0 20,070 12.4
Customer-based portion of negotiated CDs.............. 1,508 0.8 1,379 0.9
-------------------------------------------
Customer-based funds.............................. 83,861 45.1 83,531 51.7
Market-based funds.................................... 73,154 39.4 54,509 33.7
Long-term debt........................................ 9,552 5.1 8,129 5.0
Other liabilities..................................... 8,186 4.4 5,297 3.3
Shareholders' equity.................................. 11,202 6.0 10,177 6.3
-------------------------------------------
Total sources..................................... $ 185,955 100.0 % $ 161,643 100.0 %
===========================================
Composition of uses
Loans and leases, net of unearned income.............. $ 105,886 56.9 % $ 92,109 57.0 %
Securities held for investment........................ 17,552 9.4 13,365 8.3
Securities available for sale......................... 9,238 5.0 14,688 9.1
Federal funds sold and securities purchased
under agreements to resell........................ 16,281 8.8 11,925 7.4
Trading account securities............................ 13,715 7.4 10,500 6.5
Other................................................. 2,411 1.3 1,829 1.1
-------------------------------------------
Total earning assets.............................. 165,083 88.8 144,416 89.4
Factored accounts receivable.......................... 1,115 0.6 1,309 0.8
Other assets.......................................... 19,757 10.6 15,918 9.8
-------------------------------------------
Total uses........................................ $ 185,955 100.0 % $ 161,643 100.0 %
===========================================
36
Table 11
Nonperforming Assets
(Dollars in Millions)
June 30 March 31 December 31 September 30 June 30
1995 1995 1994 1994 1994
-----------------------------------------------------------------------------
Nonperforming loans
Commercial.............................. $ 463 $ 406 $ 362 $ 411 $ 425
Real estate commercial.................. 184 209 201 198 248
Real estate construction................ 65 71 66 82 90
-----------------------------------------------------------------------------
Total commercial...................... 712 686 629 691 763
-----------------------------------------------------------------------------
Residential mortgage.................... 76 66 66 71 69
Other consumer.......................... 111 88 94 90 91
-----------------------------------------------------------------------------
Total consumer........................ 187 154 160 161 160
-----------------------------------------------------------------------------
Foreign................................. 3 6 3 4 5
Lease financing......................... 3 8 9 6 8
-----------------------------------------------------------------------------
Total nonperforming loans............. 905 854 801 862 936
Other real estate owned................... 194 221 337 414 485
-----------------------------------------------------------------------------
Total nonperforming assets............ $ 1,099 $ 1,075 $ 1,138 $ 1,276 $ 1,421
=============================================================================
Nonperforming assets as a percentage of
Total assets............................ .60 % .58 % .67 % .75 % .86 %
Loans, leases and factored accounts
receivable, net of unearned income,
and other real estate owned........... .99 1.00 1.10 1.29 1.48
Loans past due 90 days or more and not
classified as nonperforming........... $ 143 $ 129 $ 146 $ 124 $ 90
On January 1, 1995, the date of adoption of SFAS 114, the recorded investments in certain loans that are considered
impaired totaled $712 million (including $80 million of in-substance foreclosed loans previously reported as other real
estate owned) and included $390 million for commercial, $229 million for real estate commercial, $90 million for real
estate construction and $3 million for foreign. On June 30, 1995, the recorded investments in certain loans that are
considered impaired under SFAS 114 totaled $715 million and included commercial, real estate commercial, real estate
construction and foreign nonperforming loans.
37
Table 12
Allowance for Credit Losses
(Dollars in Millions)
Three Months Six Months
Ended June 30 Ended June 30
-----------------------------------------------
1995 1994 1995 1994
-----------------------------------------------
Beginning balance......................................................... $ 2,174 $ 2,187 $ 2,186 $ 2,169
-----------------------------------------------
Loans, leases and factored accounts receivable charged off
Commercial.............................................................. (24) (18) (49) (47)
Real estate commercial.................................................. (6) (5) (13) (17)
Real estate construction................................................ (3) (2) (6) (9)
-----------------------------------------------
Total commercial...................................................... (33) (25) (68) (73)
-----------------------------------------------
Residential mortgage.................................................... (2) (2) (4) (4)
Credit card............................................................. (43) (30) (82) (62)
Other consumer.......................................................... (56) (54) (110) (102)
-----------------------------------------------
Total consumer........................................................ (101) (86) (196) (168)
-----------------------------------------------
Lease financing......................................................... - (1) - (1)
Factored accounts receivable............................................ (6) (5) (10) (21)
-----------------------------------------------
Total loans, leases and factored
accounts receivable charged off..................................... (140) (117) (274) (263)
-----------------------------------------------
Recoveries of loans, leases and factored accounts
receivable previously charged off
Commercial.............................................................. 23 14 41 28
Real estate commercial.................................................. 5 5 8 8
Real estate construction................................................ 3 6 7 17
-----------------------------------------------
Total commercial...................................................... 31 25 56 53
-----------------------------------------------
Residential mortgage.................................................... 1 1 1 2
Credit card............................................................. 6 5 12 11
Other consumer.......................................................... 17 19 34 35
-----------------------------------------------
Total consumer........................................................ 24 25 47 48
-----------------------------------------------
Lease financing......................................................... - 1 1 2
Factored accounts receivable............................................ 2 2 4 6
-----------------------------------------------
Total recoveries of loans, leases and factored accounts
receivable previously charged off.................................. 57 53 108 109
-----------------------------------------------
Net charge-offs....................................................... (83) (64) (166) (154)
-----------------------------------------------
Provision for credit losses............................................... 70 70 140 170
Allowance applicable to loans of purchased companies and other............ 3 3 4 11
-----------------------------------------------
Ending balance............................................................ $ 2,164 $ 2,196 $ 2,164 $ 2,196
===============================================
Loans, leases and factored accounts receivable, net of unearned
income, outstanding on June 30.......................................... $ 110,923 $ 95,678 $ 110,923 $ 95,678
Allowance for credit losses as a percentage of loans, leases and
factored accounts receivable, net of unearned income,
outstanding on June 30.................................................. 1.95 % 2.30 % 1.95 % 2.30 %
Average loans, leases and factored accounts receivable, net of
unearned income, outstanding during the period.......................... $ 109,105 $ 94,204 $ 107,001 $ 93,418
Net charge-offs as a percentage of average loans, leases and
factored accounts receivable, net of unearned income,
outstanding during the period........................................... .31 % .27 % .31 % .33 %
Allowance for credit losses as a percentage of nonperforming loans........ 239.09 234.48 239.09 234.48
Reserves associated with loans that are considered to be impaired under SFAS 114 totaled approximately $64 million
on January 1, 1995 and $58 million on June 30, 1995.
38
Table 13
Derivative - Dealer Positions
(Dollars in Millions)
June 30 December 31
1995 1994
Contract/ Contract/
Notional Notional
--------- ------------
Interest Rate Contracts
Swaps........................ $ 83,935 $ 45,179
Futures and forwards......... 229,013 124,620
Written options.............. 197,898 114,928
Purchased options............ 200,345 118,839
Foreign Exchange Contracts
Swaps........................ 570 470
Spot, futures and forwards... 54,764 26,987
Written options.............. 27,981 13,398
Purchased options............ 20,339 13,507
Commodity Contracts
Swaps........................ 851 570
Futures and forwards......... 6,046 1,984
Written options.............. 18,237 12,608
Purchased options............ 19,797 11,591
39
Table 14
Selected Quarterly Operating Results
(Dollars in Millions Except Per-Share Information)
1995 Quarters
----------------------
First Second
----------------------
Income from earning assets.......................... $ 3,070 $ 3,391
Interest expense.................................... 1,763 2,055
Net interest income (taxable-equivalent)............ 1,335 1,367
Net interest income................................. 1,307 1,336
Provision for credit losses......................... 70 70
Gains on sales of securities........................ 1 4
Noninterest income.................................. 726 730
Other real estate owned expense..................... 2 1
Noninterest expense................................. 1,288 1,288
Income before income taxes.......................... 674 711
Income tax expense.................................. 231 244
Net income.......................................... 443 467
Earnings per common share........................... 1.60 1.71
Yield on average earning assets..................... 7.93 % 7.98 %
Rate on average interest-bearing liabilities........ 5.13 5.39
Net interest spread................................. 2.80 2.59
Net interest yield.................................. 3.41 3.19
Return on average common shareholders' equity (1)... 16.03 16.69
Market price per share of common stock
High for the period............................... $ 51 3/4 $ 57 3/4
Low for the period................................ 44 5/8 49 5/8
Closing price..................................... 50 3/4 53 5/8
Risk-based capital ratios
Tier 1............................................ 7.25 % 7.03 %
Total............................................. 11.06 10.90
(1)Average common shareholders' equity does not include the effect of fair
value adjustments to securities available for sale and marketable equity
securities.
40
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual Meeting of Shareholders was held on April 26, 1995.
b. The following are voting results on each of the matters which were
submitted to the shareholders:
Against
or Broker
For Withheld Abstentions Nonvotes
----------- ----------- ----------- -----------
1. To elect 23 Directors
Ronald W. Allen.......... 229,169,785 1,561,673
William M. Barnhardt..... 229,270,190 1,461,268
Thomas E. Capps.......... 228,251,417 2,480,041
Charles W. Coker......... 229,236,581 1,494,877
Thomas G. Cousins........ 228,340,085 2,391,373
Alan T. Dickson.......... 228,317,027 2,414,431
W. Frank Dowd, Jr........ 229,198,706 1,532,752
A. L. Ellis.............. 220,102,745 10,628,713
Paul Fulton.............. 228,747,179 1,984,279
L. L. Gellerstedt, Jr.... 228,260,469 2,470,989
Timothy L. Guzzle........ 229,223,293 1,508,165
E. Bronson Ingram........ 229,315,460 1,415,998
W. W. Johnson............ 228,359,703 2,371,755
Hugh L. McColl, Jr....... 228,321,079 2,410,379
Buck Mickel.............. 229,193,789 1,537,669
John J. Murphy........... 229,138,154 1,593,304
John C. Slane............ 229,234,811 1,496,647
John W. Snow............. 229,134,623 1,596,835
Meredith R. Spangler..... 229,244,886 1,486,572
Robert H. Spilman........ 229,239,936 1,491,522
Ronald Townsend.......... 229,127,605 1,603,853
Jackie M. Ward........... 229,127,730 1,603,728
Michael Weintraub........ 229,283,851 1,447,607
41
Against
or Broker
For Withheld Abstentions Nonvotes
----------- ----------- ----------- -----------
2. To consider and act upon a
proposal to ratify the action
of the Board of Directors in
selecting Price Waterhouse
LLP as independent public
accountants to audit the books
of the Corporation and its
subsidiaries for the current
year............................. 229,479,489 557,742 694,227 -
3. To consider and act upon a
proposal to approve and adopt
the NationsBank Corporation
Key Employee Stock Plan.......... 178,710,098 28,291,126 3,403,765 20,326,469
4. To consider and act upon a
shareholder proposal
requesting the Corporation to
develop and provide annual
reporting on programs
designed to meet the credit
needs of small and mid-sized
family farms and rural small
business enterprises............. 9,296,213 186,282,480 10,374,689 24,778,076
42
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11 - Earnings Per Common Share Computation
Exhibit 12(a) - Ratio of Earnings to Fixed Charges
Exhibit 12(b) - Ratio of Earnings to Fixed Charges and
Preferred Dividends
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
The following reports on Form 8-K were filed by the
Corporation during the quarter ended June 30, 1995:
Current Report on Form 8-K dated April 19, 1995, and filed
April 24, 1995, Items 5 and 7.
Current Report on Form 8-K dated April 17, 1995, and filed
April 25, 1995, Items 5 and 7.
Current Report on Form 8-K dated April 1, 1995, and filed May
16, 1995, Item 5.
43
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NationsBank Corporation
--------------------------------------
Registrant
Date: August 14, 1995 /s/ Marc D. Oken
--------------- --------------------------------------
Marc D. Oken
Executive Vice President
and Chief Accounting Officer
(Duly Authorized Officer and
Principal Accounting Officer)
44
NationsBank Corporation
Form 10-Q
Index to Exhibits
Exhibit Description Page
------- ----------- ----
11 Earnings Per Common Share Computation......................... 46
12(a) Ratio of Earnings to Fixed Charges............................ 47
12(b) Ratio of Earnings to Fixed Charges and Preferred Dividends.... 48
27 Financial Data Schedule....................................... 49
45