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EXHIBIT 13
1993
ANNUAL REPORT
WACHOVIA
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CONTENTS
Financial Highlights . . . . . . . . . . . . . . 1 Fourth Quarter Analysis . . . . . . . . . . . . . 28
Wachovia Corporation . . . . . . . . . . . . . . 2 Results of Operations, 1992 vs. 1991 . . . . . . . 33
Selected Year-End Data . . . . . . . . . . . . . 2 Management's Responsibility for
News Developments . . . . . . . . . . . . . 3 Financial Reporting . . . . . . . . . . . . . . . 35
Letter to Shareholders . . . . . . . . . . . . . 4 Report of Independent Auditors. . . . . . . . . . . . . 35
Executive Management . . . . . . . . . . . . . 6 Financial Statements . . . . . . . . . . . . . . . . . 36
Management's Discussion and Analysis of Financial Six-Year Financial Summaries . . . . . . . . . . . . . 54
Condition and Results of Operations . . . . . 8 Stock Data . . . . . . . . . . . . . . . . . . . . . . 62
Results of Operations . . . . . . . . . . . . 9 Member Company Directors . . . . . . . . . . . . . . . 64
Shareholders' Equity and Capital Ratios . . . 26 Wachovia Corporation Directors and Officers . . . . . . 65
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SHAREHOLDER INFORMATION
ANNUAL MEETING TRANSFER AGENT/DIVIDEND DISBURSING AGENT
The Annual Meeting of Shareholders of Wachovia Corporation Wachovia Bank of North Carolina, N.A.
will be at 10:30 a.m., Friday, April 22, 1994, in the Wachovia Corporate Trust Department
Building, 301 North Main Street, Winston-Salem, North Carolina. P. O. Box 3001
All shareholders are invited to attend. Winston-Salem, NC 27102
1-800-633-4236
INDEPENDENT AUDITORS
Ernst & Young, Winston-Salem, North Carolina FORM 10-K AND OTHER INFORMATION
Copies of Wachovia Corporation's Annual Report to the
DIVIDEND SERVICES/ADDRESS CHANGE Securities and Exchange Commission, Form 10-K, and other
For information concerning Wachovia Corporation's Dividend information may be obtained by contacting:
Reinvestment Plan or Direct Deposit of Dividends services,
please fill out the card in the back of this report. Requests for Robert S. McCoy, Jr.
address changes or corrections should be sent in writing to Chief Financial Officer
the address below. Use of your shareholder account number 910-770-5926
in all correspondence will be appreciated. or
James C. Mabry
H. Jo Barlow Manager, Investor Relations
Shareholder Services 910-770-5788
910-770-5787
Wachovia Corporation Wachovia Corporation
P. O. Box 3099 P. O. Box 3099
Winston-Salem, NC 27150 Winston-Salem, NC 27150
COMMON STOCK LISTING
New York Stock Exchange Symbol: WB
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FINANCIAL HIGHLIGHTS
Percent
1993 1992 Change
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EARNINGS AND DIVIDENDS
(thousands, except per share data)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 13.6
Cash dividends paid on common stock . . . . . . . . . . . . . . . 191,488 170,756 12.1
Payout ratio (total cash dividends/net income) . . . . . . . . . . 38.9% 39.4%
Net income per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 12.7
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 13.5
Cash dividends paid per common share . . . . . . . . . . . . . . . $ 1.11 $ 1.00 11.0
Average primary shares outstanding . . . . . . . . . . . . . . . . 173,941 172,641 .8
Average fully diluted shares outstanding . . . . . . . . . . . . . 175,198 175,512 (.2)
Return on average assets . . . . . . . . . . . . . . . . . . . . . 1.46% 1.36%
Return on average shareholders' equity . . . . . . . . . . . . . . 17.13 16.69
BALANCE SHEET DATA AT YEAR-END
(millions, except per share data)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,526 $ 33,367 9.5
Interest-earning assets. . . . . . . . . . . . . . . . . . . . . . 32,349 29,136 11.0
Loans -- net of unearned income . . . . . . . . . . . . . . . . . 22,977 21,086 9.0
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,352 23,375 (.1)
Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . 26,545 23,839 11.3
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 3,018 2,775 8.8
Shareholders' equity to total assets . . . . . . . . . . . . . . . 8.26% 8.32%
Risk-based capital ratios:
Tier I capital . . . . . . . . . . . . . . . . . . . . . . . 9.72 9.83
Total capital . . . . . . . . . . . . . . . . . . . . . . . . 12.88 12.32
Per share:
Book value . . . . . . . . . . . . . . . . . . . . . . . . . $ 17.61 $ 16.18 8.8
Common stock closing price (NYSE) . . . . . . . . . . . . . . 33.50 34.125 (1.8)
Price/earnings ratio. . . . . . . . . . . . . . . . . . . . . 11.8x 13.6x
Note: Percentage changes were calculated before rounding.
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Wachovia Corporation
Wachovia Corporation is a southeastern interstate bank
holding company with good diversification and balance of business
activities and geographic markets. It has dual headquarters in
Atlanta, Georgia, and Winston-Salem, North Carolina. Principal banking
subsidiaries are Wachovia Bank of Georgia, N.A., Atlanta; Wachovia
Bank of North Carolina, N.A., Winston-Salem; and The South Carolina
National Bank, Columbia.
At December 31, 1993, the corporation had 509 banking
offices in 214 cities and communities throughout the states of
Georgia, North Carolina and South Carolina. Wachovia Bank of Georgia,
N.A. had 129 branches in 48 cities, including 90 in metropolitan
Atlanta; Wachovia Bank of North Carolina, N.A., operated 223 branches
in 96 cities; and The South Carolina National Bank had 157 branches in
70 cities. The First National Bank of Atlanta in Wilmington, Delaware,
provides credit card services for Wachovia's affiliated banks.
Major corporate and institutional relationships of the
company's banks outside the southeast are managed by Wachovia
Corporate Services, Inc., with representative offices in Chicago,
London, New York City and Tokyo. Banking offices throughout the
corporation's three home states also serve both national and
international markets. Through its banking subsidiaries, Wachovia also
has foreign branches at Grand Cayman and an Edge Act bank branch in
New York City.
Wachovia Trust Services, Inc., provides fiduciary, investment
management and related financial services for corporate,
institutional and individual clients. Wachovia Operational Services
Corporation provides information processing and systems development
services for Wachovia's subsidiaries.
Mortgage banking operations are conducted through Wachovia
Mortgage Company's 18 residential loan offices in North
Carolina, South Carolina, Florida and Georgia. The corporation is
involved in several other financial service activities including state
and local government securities underwriting, sales and trading,
discount brokerage, foreign exchange, corporate finance and other
money market services.
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SELECTED YEAR-END DATA
1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- ------- -------
Trust assets (millions):
Discretionary management . . . . . . . . . . . $ 17,950 $ 16,147 $ 14,302 $ 12,777 $12,881 $11,216
Total . . . . . . . . . . . . . . . . . . . . 92,287 85,806 78,214 68,423 65,137 55,207
Banking offices:
North Carolina . . . . . . . . . . . . . . . . 223 222 224 222 218 218
Georgia . . . . . . . . . . . . . . . . . . . 129 134 135 142 133 130
South Carolina . . . . . . . . . . . . . . . . 157 158 160 153 148 144
-------- -------- -------- -------- ------- -------
Total . . . . . . . . . . . . . . . . . . 509 514 519 517 499 492
======== ======== ======== ======== ======= =======
Automated banking machines:
North Carolina . . . . . . . . . . . . . . . . 251 221 210 200 189 178
Georgia . . . . . . . . . . . . . . . . . . 180 173 164 162 152 143
South Carolina . . . . . . . . . . . . . . . . 167 164 163 156 142 138
-------- -------- -------- -------- ------- -------
Total . . . . . . . . . . . . . . . . . . 598 558 537 518 483 459
======== ======== ======== ======== ======= =======
Mortgage servicing portfolio (millions) . . . . . . $ 9,007 $ 8,591 $ 8,024 $ 6,146 $ 4,446 $ 3,885
Mortgages serviced (thousands). . . . . . . . . . . 136 135 131 108 88 79
Employees (full-time equivalent). . . . . . . . . . 15,531 16,164 16,886 16,864 17,000 17,034
Common stock shareholders . . . . . . . . . . . . . 28,079 26,706 29,806 28,195 27,710 27,890
Common shares outstanding (thousands)*. . . . . . . 171,376 171,471 85,323 84,276 83,998 72,008
*Common shares outstanding for years before 1992 have not been restated
for the two-for-one common stock split effective April 1, 1993
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NEWS DEVELOPMENTS
- - L.M. Baker, Jr., 51, became chief executive officer of
Wachovia Corporation on January 1, 1994 succeeding John G. Medlin,
Jr., 60, who served in that position for the previous 17 years. Mr.
Baker remains president of the corporation and a director. Mr. Medlin
continues to serve as chairman of the board. The appointment was made
by the corporation's directors in October 1993.
Mr. Medlin said, "The exceptional skills and experience of Bud
Baker and the executives who head the major business units and
administrative functions, allow me to retire from management
responsibilities with full confidence in Wachovia's future." Mr.
Baker joined Wachovia in 1969. He has held the positions of president
of the North Carolina bank, chief credit officer of the corporation,
executive in charge of the Administrative Services Division and head
of the International Group. He became president, chief operating
officer and a director of the parent company in February 1993.
During Mr. Medlin's 17-year tenure as chief executive officer,
Wachovia expanded to a multistate company by adding leading banks in
Georgia and South Carolina, with assets growing from $3.6 billion to
$36.5 billion. The originally reported net income per fully diluted
share of Wachovia grew at a compound annual rate of around 12 percent
over the 17 years. For a Wachovia common share increased for stock
splits, the market value rose from $21 on December 31, 1976 to $160.80
on December 31, 1993 and the dividend grew from $.63 in 1976 to $5.328
in 1993. During that period, the compound annual rate of total return
on the stock was 17 percent.
- - Three other members of executive management retired from
Wachovia. Retiring on December 31 were Thomas E. Boland, 59, as
executive vice president for consumer credit services after nearly 40
years of service with Wachovia Bank of Georgia and its predecessor,
First Atlanta, and James T. Brewer, 59, as executive vice president
and head of the Administrative Services Division after 33 years of
service. David L. Cotterill, 56, retired on January 31, 1994 as head
of Wachovia Trust Services following 30 years of service with
Wachovia.
- - Wachovia Corporation joined the Standard & Poor's 500 Index
of stocks and the Major Regional Banks S&P 500 Industry Group on
October 1, 1993. The addition removed Wachovia from the S&P MidCap 400
Index to which it was added in 1991.
- - The North Carolina and Georgia banks successfully launched
the Visa Check debit card beginning last summer, capitalizing on the
previous experience of South Carolina National Bank. Wachovia also
became the first bank nationwide to have Visa Check appear on its
automated banking machine cards. Visa Check allows authorized purchase
transactions to be debited automatically from customers' available
checking account balances. At year-end, Wachovia had more than 770,000
debit card customers and ranked as one of the largest debit card
issuers in the country.
- - In November 1993, Wachovia's Treasury Services Group began
offering Integrated Payables, a disbursing service that is part of its
cash management product line. The service outsources companies'
accounts payable functions, enabling them to streamline activities,
reduce costs and enhance internal controls.
Also, Wachovia Connection PC, an automated banking service for
small to medium-size businesses, was introduced in 1993. The service
enables smaller businesses to have on-line access to their deposit
accounts and to perform a variety of functions at their convenience
using personal computers and special software.
- - Wachovia Trust Services celebrated the 100th anniversary of
its business which began with the opening of the Wachovia Loan and
Trust Company on June 15, 1893. Today, Wachovia's trust function
provides services across the nation and has under administration
assets totaling more than $92 billion. During 1993, Wachovia Trust
Services expanded its mutual funds investment choices to include
stocks and bonds, as well as money market securities with the addition
of six new Biltmore Funds. The funds had total assets amounting to
$1.285 billion at year-end 1993.
- - Wachovia's Brokerage Service celebrated its 10th year of
operation in October 1993. The group provides brokerage services,
including buying and selling of stocks, corporate bonds, mutual funds
and options to more than 80,000 clients. Customers also may select the
Wachovia Investor's Account which automatically sweeps cash from a
checking account into a selected money market investment.
- - South Carolina National Bank, a member company of Wachovia
Corporation since 1991, plans to change its name to Wachovia Bank of
South Carolina, N.A., in May 1994. The action was approved by its
board of directors in October 1993.
- - John G. Medlin, Jr., was selected as the nation's best chief
executive for banking in 1993 as part of Financial World magazine's
20th annual chief executive officer of the year competition. Mr.
Medlin was one of 12 silver award winners chosen from more than 3,000
chief executives originally nominated in the contest. Judging is done
by senior securities analysts for each business category. Earlier, the
magazine ranked Wachovia as the best performing bank among the 25
largest U.S. banks for the 12-month period ending September 30, 1993.
The publication cited Wachovia's credit quality and return on assets
as key factors in the top rating.
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LETTER TO SHAREHOLDERS
Dear Wachovia Shareholder:
The economy improved during 1993, but growth was uneven and moderate on
balance. The stimulation of low interest rates and a large budget deficit was
tempered by slow employment gains, fragile consumer confidence and concerns
about heavier tax and regulatory burdens. Loan demand increased somewhat and
credit problems declined, but net interest spreads narrowed. In this climate,
Wachovia's performance was excellent.
Net income per fully diluted share was $2.81, an increase of 13.5 percent from
$2.48 per share in 1992. Net income totaled $492.1 million, up 13.6 percent
from $433.2 million in the prior year, and represented strong returns of 17.1
percent on shareholders' equity and 1.46 percent on assets.
These excellent earnings resulted from higher levels of net interest income,
good growth of other operating revenues, careful control of operating
costs and reduced provisions for credit losses. The earnings performance
reflects the diligent and determined efforts of Wachovians to secure and
develop enduring business relationships, while maintaining high standards of
credit quality and expense management.
Average interest-earning assets for the year were up $1.683 billion or 6
percent from 1992. Loans grew $1.514 billion or 7.6 percent with the consumer
category, primarily credit card and automobile financing, accounting for the
majority of the increase. Wachovia's popular Prime Plus credit card pricing
options continued to generate strong growth. Investment securities increased
$838 million or 13.5 percent.
Average interest-bearing liabilities rose $1.201 billion or 5.2 percent from
the prior year. A moderate decrease in total time deposits was offset by higher
levels of short-term borrowings and long-term debt, including the issuance of
notes by Wachovia Bank of North Carolina to supplement funding at attractive
rates.
Taxable equivalent net interest income increased $48.4 million or 3.6 percent,
reflecting the combination of growth in earning assets and a narrowing of net
interest spreads. The net yield on interest-earning assets decreased 11 basis
points for 1993, as the drop in funding costs slowed in the last half of the
year, while asset yields continued a steady decline.
Other operating revenue grew $64.9 million or 12.1 percent. Good gains were
achieved in fees from credit card, deposit account and trust services. Gains on
the sale of investment securities and subsidiary sales totaled $27.4 million
in 1993 versus $21 million for 1992, resulting in total noninterest income
growth of $71.4 million or 12.8 percent.
Noninterest expense rose a more moderate $35.6 million or 3.2 percent.
Personnel expense increased $28.9 million or 5.3 percent, largely reflecting
higher employee benefits expense. Net occupancy and equipment expense was
up by $2.7 million or 1.5 percent with remaining categories of noninterest
expense growing a combined $4 million or 1.1 percent.
Wachovia's exceptional credit quality was even better as nonperforming assets
declined to $155 million or .67 percent of loans and foreclosed property at
December 31, 1993 from $265 million or 1.25 percent a year earlier. Net loan
losses totaled $67.4 million or .31 percent of average loans, a reduction of
$27.8 million or 29.2 percent from $95.2 million or .48 percent of average
loans in 1992.
The provision for loan losses was $92.7 million, exceeding net charge-offs by
$25.2 million, and down $26.8 million or 22.4 percent from $119.4 million in
1992. The allowance for loan losses totaled $405 million at year-end 1993,
representing 1.76 percent of loans and 372 percent coverage of nonperforming
loans compared with $380 million or 1.80 percent of loans and 218 percent
coverage a year earlier.
At December 31, 1993, shareholders' equity was $3.018 billion and represented
8.26 percent of assets. The Tier I and total risk-based capital ratios were
9.72 percent and 12.88 percent, respectively. Wachovia continues to be a leader
in financial strength and earnings quality among the major banking companies of
the nation and world.
Dividends totaled $1.11 per share in 1993, up 11 percent from $1.00 per share
paid in 1992. The total return for 1993 on Wachovia common stock,
including dividend reinvestment, was 1.3 percent compared with 10.1 percent for
the S&P 500 Index, reflecting market weakness in bank stocks as a group. At
December 31, 1993, Wachovia's assets of $36.526 billion ranked 22nd among U.S.
banking companies, while net income of $492.1 million for the year was 16th.
Wachovia's market capitalization of $5.741 billion ranked 13th.
More detailed financial information for 1993 and the previous five years is
given in the Management's Discussion and Analysis
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section beginning on page 8. Highlights for the period include:
- - Net income per fully diluted share grew at a compound annual rate of 9.7
percent from 1989 to 1993. Returns on shareholders' equity and assets averaged
14.9 percent and 1.17 percent, respectively, for the past five years, while
common equity to assets averaged 7.79 percent.
- - Average major balance sheet categories increased at the following five-year
compound annual rates: interest-earning assets, 6.4 percent; loans, 5.7
percent; interest-bearing liabilities, 6 percent; total deposits, 3.5 percent;
total assets, 5.9 percent; and shareholders' equity, 9.9 percent.
- - Other operating revenue, which excludes gains from investment securities
and subsidiary sales, grew at a compound annual rate of 10.4 percent for
the period, while noninterest expense advanced a slower 5.5 percent.
- - Net loan losses averaged .52 percent of loans for the past five years and
nonperforming assets to loans and foreclosed property averaged 1.06 percent.
Reserve coverage of nonperforming loans averaged 212 percent for the period.
- - Common dividends paid increased at a compound annual rate of 13.7 percent for
the years 1989 through 1993. The five-year compound annual rate of total
return on Wachovia common stock, including dividend reinvestment, was 20.4
percent compared with 14.5 percent for the S&P 500 Index.
These excellent results were achieved during a treacherous period for
banking, while investing heavily in people, technology and interstate
expansion. They are a tribute to the leadership of John Medlin, who served with
distinction as chief executive officer for the past 17 years and retired from
that position on December 31 after 34 years of service.
Thanks to John's passion for excellence, Wachovia avoided most of the
pitfalls of banking and faces the remainder of this decade from a unique and
coveted position of strength. He also had the vision to plan and guide top
management succession through a smooth and gradual transition over recent
years. We are fortunate to have him continue as chairman, a director and an
active ambassador for the company.
Personal profiles of the talented executives who now head major business units
and administrative functions are on pages 6 and 7. Together, we are proud to
lead your company. Our sacred mission is to continue providing exceptional
protection and growth of your investment.
Sincerely,
/s/ L. M. Baker, Jr.
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L. M. Baker, Jr.
Chief Executive Officer
February 16, 1994
(Photo)
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EXECUTIVE MANAGEMENT
In addition to L.M. Baker, Jr., chief executive officer, Wachovia Corporation's
executive management team at the beginning of 1994 includes the following:
Anthony L. Furr, G. Joseph Prendergast, J. Walter McDowell, Hugh M. Durden,
Jerry D. Craft, Mickey W. Dry, Walter E. Leonard, Jr., Robert S. McCoy, Jr.,
Kenneth W. McAllister and Richard B. Roberts.
Mr. Furr, 50, is president and chief executive officer of South Carolina
National Corporation and The South Carolina National Bank. Prior to being
elected to these positions in 1993, Mr. Furr served first as a regional
executive in North Carolina and later as chief financial officer of Wachovia
Corporation. He joined Wachovia in 1969 in the International Group and later
headed International Banking from 1980 until 1988.
Mr. Craft, 46, is executive vice president in charge of consumer credit
services including responsibility for Wachovia's credit card, sales finance and
mortgage banking activities. Mr. Craft joined Wachovia Bank of Georgia (then
First Atlanta) in 1982 as a group vice president of the bank card services
division after serving in credit card management positions with banks in North
Carolina, South Carolina and Maryland. He assumed overall responsibility for
consumer credit in late 1993.
Mr. Durden, 51, is executive vice president for Trust Services, responsible for
Wachovia's trust businesses and Biltmore family of diversified mutual funds.
Prior to assuming this position in early 1994, Mr. Durden was executive vice
president and head of the Western Division for Wachovia Bank of North Carolina.
Since joining Wachovia in 1972, Mr. Durden has served in several capacities
including Loan Administration Division executive and head of the Corporate
Banking Services.
Mr. Prendergast, 48, is president and chief executive officer of Wachovia Bank
of Georgia, N.A., as well as president of Wachovia Corporate Services. Joining
Wachovia in 1973, Mr. Prendergast served in the corporation's New York office
before being named manager of the company's Edge Act bank in 1975. He was
elected executive vice president of the corporation and president of Wachovia
Corporate Services in 1988 and assumed his current position in 1993.
Mr. McDowell, 43, is president and chief executive officer of Wachovia Bank of
North Carolina, N.A. He joined the bank in 1973 as a Personal Banker and became
manager of corporate banking for North Carolina in 1988. He was named head of
the Piedmont Triad Region in 1990, Central Division executive in 1991 and to
his current position in May 1993.
(Photo)
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Mr. McAllister, 45, is executive vice president and head of the Administrative
Services Division with overall responsibility for Wachovia's audit, corporate
communications, legal, personnel and security functions. He was named to his
current position in early 1994. In addition, Mr. McAllister serves as the
corporation's general counsel, a position he has held since joining Wachovia in
1988. Previously, Mr. McAllister was in private law practice, and from 1981 to
1986 he served as U.S. Attorney for the Middle District of North Carolina.
Mr. McCoy, 55, is executive vice president and chief financial officer with
overall responsibility for the financial management and general services
functions of the corporation. Prior to assuming his current position in
1992, he served for a period as comptroller of Wachovia. Mr. McCoy joined South
Carolina National in 1984 following ten years as a partner with the accounting
firm of Price Waterhouse. He held positions as president of South Carolina
National Corporation and chief financial officer and vice chairman of South
Carolina National Bank.
Mr. Leonard, 48, is executive vice president in charge of Wachovia Operational
Services Corporation. He has overall responsibility for technology, including
banking, credit, and trust operations, information services, systems
development, remittance processing and telecommunications of the company. Mr.
Leonard joined Wachovia in 1965 and has served in various operations and
information services capacities, including manager of the Systems Development
Group and manager of Banking Operations. He was named to his present position
in 1988.
Mr. Roberts, 50, is executive vice president, treasurer and head of
Funds Management. He joined Wachovia in 1967 as a commercial operations
manager. From 1972 to 1980, he was investment portfolio and asset/liability
manager in the Funds Management Group. In 1985, Mr. Roberts became head of
Funds Management for Wachovia Corporation and was elected executive vice
president and treasurer in 1990.
Mr. Dry, 54, is executive vice president and chief credit officer. In this
capacity, he heads General Loan Administration and has overall responsibility
for the corporation's lending policy and credit quality. Mr. Dry joined
Wachovia in 1961. He has served as manager of Corporate Loan Administration for
Wachovia Bank of North Carolina's Eastern and Central Regions. In 1985,
he was named group executive and senior loan administration officer for
Wachovia's corporate banking function. Mr. Dry was appointed to his current
position in 1989.
(Photo)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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FINANCIAL SUMMARY TABLE 1
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Five-Year
Compound
Growth
1993 1992 1991 1990 1989 1988 Rate
---- ---- ---- ---- ---- ---- ---------
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent . . . . . . . $2,221,738 $2,301,325 $2,731,925 $2,856,318 $2,773,970 $2,291,521 (.6%)
Interest expense. . . . . . . . . . . . . . . . . . 839,012 967,028 1,467,849 1,684,114 1,672,856 1,244,382 (7.6)
---------- ---------- ---------- ---------- ---------- ----------
Net interest income -- taxable equivalent . . . . . 1,382,726 1,334,297 1,264,076 1,172,204 1,101,114 1,047,139 5.7
Taxable equivalent adjustment . . . . . . . . . . . 98,901 79,247 94,910 107,674 101,317 91,348 1.6
---------- ---------- ---------- ---------- ---------- ----------
Net interest income . . . . . . . . . . . . . . . . 1,283,825 1,255,050 1,169,166 1,064,530 999,797 955,791 6.1
Provision for loan losses . . . . . . . . . . . . . 92,652 119,420 293,000 142,992 86,531 78,110 3.5
---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,191,173 1,135,630 876,166 921,538 913,266 877,681 6.3
Other operating revenue . . . . . . . . . . . . . . 600,179 535,242 490,178 458,852 411,817 366,465 10.4
Gain on sale of subsidiary. . . . . . . . . . . . . 8,030 19,486 -- -- -- --
Investment securities gains . . . . . . . . . . . . 19,394 1,497 11,091 6,218 7,625 5,213 30.1
---------- ---------- ---------- ---------- ---------- ----------
Total other income. . . . . . . . . . . . . . . . . 627,603 556,225 501,269 465,070 419,442 371,678 11.0
Personnel expense . . . . . . . . . . . . . . . . . 568,680 539,823 524,489 487,473 484,998 456,973 4.5
Other expense . . . . . . . . . . . . . . . . . . . 562,556 555,829 572,028 464,811 431,892 407,186 6.7
---------- ---------- ---------- ---------- ---------- ----------
Total other expense 1,131,236 1,095,652 1,096,517 952,284 916,890 864,159 5.5
Income before income taxes. . . . . . . . . . . . . 687,540 596,203 280,918 434,324 415,818 385,200 12.3
Applicable income taxes* . . . . . . . . . . . . . 195,445 162,978 51,378 88,647 87,669 86,434 17.7
---------- ---------- ---------- ---------- ---------- ----------
Net income. . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540 $ 345,677 $ 328,149 $ 298,766 10.5
========== ========== ========== ========== ========== ==========
Net income per common share:
Primary . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34 $ 2.05 $ 1.95 $ 1.82 9.2
Fully diluted . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 $ 1.32 $ 2.02 $ 1.92 $ 1.77 9.7
Cash dividends paid per common share. . . . . . . . $ 1.11 $ 1.00 $ .92 $ .82 $ .697 $ .584 13.7
Average primary shares outstanding. . . . . . . . . 173,941 172,641 171,481 168,888 168,268 164,266 1.2
Average fully diluted shares outstanding. . . . . . 175,198 175,512 175,218 172,722 172,586 172,366 .3
SELECTED AVERAGE BALANCES (millions)
Total assets. . . . . . . . . . . . . . . . . . . . $ 33,629 $ 31,832 $ 32,045 $ 30,469 $ 28,347 $ 25,250 5.9
Loans -- net of unearned income . . . . . . . . . . 21,546 20,032 20,589 20,080 18,604 16,355 5.7
Investment securities . . . . . . . . . . . . . . . 7,039 6,201 5,783 4,879 4,301 3,946 12.3
Other interest-earning assets . . . . . . . . . . . 1,195 1,864 1,988 1,823 1,810 1,503 (4.5)
Total interest-earning assets . . . . . . . . . . . 29,780 28,097 28,360 26,782 24,715 21,804 6.4
Interest-bearing deposits . . . . . . . . . . . . . 17,019 17,884 17,924 16,583 16,610 14,198 3.7
Short-term borrowed funds . . . . . . . . . . . . . 5,403 4,961 6,080 6,231 4,276 3,840 7.1
Long-term debt. . . . . . . . . . . . . . . . . . . 2,073 449 178 177 230 284 48.8
Total interest-bearing liabilities. . . . . . . . . 24,495 23,294 24,182 22,991 21,116 18,322 6.0
Noninterest-bearing deposits. . . . . . . . . . . . 5,354 4,947 4,595 4,620 4,586 4,631 2.9
Total deposits . . . . . . . . . . . . . . . . . . 22,373 22,831 22,519 21,203 21,196 18,829 3.5
Shareholders' equity. . . . . . . . . . . . . . . . 2,872 2,596 2,462 2,237 2,043 1,792 9.9
RATIOS (averages)
Loans to deposits . . . . . . . . . . . . . . . . . 96.30% 87.74% 91.43% 94.71% 87.77% 86.86%
Net loan losses to loans. . . . . . . . . . . . . . .31 .48 .99 .47 .37 .66
Net yield on interest-earning assets. . . . . . . . 4.64 4.75 4.46 4.38 4.46 4.80
Shareholders' equity to:
Total assets . . . . . . . . . . . . . . . . . 8.54 8.16 7.68 7.34 7.21 7.10
Net loans. . . . . . . . . . . . . . . . . . . 13.58 13.21 12.13 11.28 11.11 11.10
Return on assets. . . . . . . . . . . . . . . . . . 1.46 1.36 .72 1.13 1.16 1.18
Return on shareholders' equity. . . . . . . . . . . 17.13 16.69 9.33 15.45 16.06 16.67
*Income taxes applicable to securities transactions were
$7,472, $470, $3,997, $2,379, $2,903 and $1,997,
respectively
- ------------------------------------------------------------------------------------------------------------------------------------
8
11
RESULTS OF OPERATIONS
Summary
Wachovia Corporation's primary markets within the Southeast are
Georgia, North Carolina and South Carolina. The combined population
of the three states totaled 17.502 million in 1993, up 305 thousand
or 1.8 percent from 17.197 million in 1992. The three-state
population represented 6.8 percent of the total U.S. population.
Economic activity in all three states has shown general
improvement since the recession of 1991. An index of business
activity composed of nonagricultural employment, average
manufacturing workweek, building permits and initial claims for
unemployment has shown consecutive quarterly gains since the second
quarter of 1991.
For example, on a combined basis using most currently available
data, nonagricultural employment for the three states averaged 7.875
million during 1993, up 208 thousand or 2.7 percent from 1992.
Building permits for the three states averaged $638.672 million
during 1993, an increase of $120 million or 23.2 percent from
$518.206 million in 1992.
Wachovia Corporation's consolidated operating results and
financial condition are presented and analyzed in the following
narrative, tables and charts. The narrative should be read in
conjunction with the Notes to Consolidated Financial Statements on
pages 40 through 53. Expanded six-year financial data appears on
pages 54 through 61. References to changes in the corporation's
assets and liabilities refer to daily average levels unless otherwise
noted.
Net income for 1993 totaled $492.095 million compared with
$433.225 million in 1992. On a fully diluted basis, net income per
share was $2.81 for the year versus $2.48 per share in 1992. Return
on shareholders' equity was 17.1 percent and return on assets 1.46
percent for 1993 compared with 16.7 percent and 1.36 percent,
respectively, in the prior year.
NET INCOME PER SHARE NET INCOME
(FULLY DILUTED)
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX)
RETURN ON ASSETS RETURN ON COMMON EQUITY COMMON EQUITY TO ASSETS
(AVERAGE) (AVERAGE) (AVERAGE)
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX) APPENDIX)
9
12
Net Interest Income
Taxable equivalent net interest income (which is adjusted for
the tax-favored status of earnings from certain loans and
investments) rose $48.429 million or 3.6 percent in 1993. The
increase primarily reflected growth in interest-earning assets
partially offset by the effects of narrowing of the net yield on
interest-earning assets.
The net yield on interest-earning assets (taxable equivalent
net interest income as a percentage of average interest-earning
assets) decreased 11 basis points for the year in comparison with
1992. A continued drop in yields on assets, which are supported
partially by noninterest-bearing funds, accounted for the decrease.
Asset yields fell in line with a declining interest rate environment
with higher-yielding assets replaced by lower-yielding loans and
investments. Funding rates declined by approximately the same amount
as asset yields but would have declined further if the corporation
had not lengthened maturities of its borrowings to take advantage of
favorable longer-term interest rates.
Interest income and yields for 1993 are stated on a fully
taxable equivalent basis using both the federal income tax rate of 35
percent and state tax rates, as applicable, reduced by the
nondeductible portion of interest expense. The taxable equivalent
adjustment for 1992 is based on only the federal income tax rate of
34 percent. The 1993 presentation better reflects the current
economic benefit of certain categories of tax-favored income.
NET INTEREST INCOME NET INTEREST INCOME (TAXABLE EQUIVALENT)
(TAXABLE EQUIVALENT) AS A PERCENTAGE OF AVERAGE EARNING ASSETS
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX)
- -------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
- -------------------------------------------------------------------------------------------------------------------------------
Change Change
1993 1992 1991 1993/1992 1992/1991
----- ----- ----- --------- ---------
Interest income -- taxable equivalent . . . . . . . . . . . . $ 12.77 $ 13.33 $ 15.93 ($.56) ($2.60)
Interest expense. . . . . . . . . . . . . . . . . . . . . . . 4.82 5.60 8.56 (.78) (2.96)
------- ------- ------- ------- -------
Net interest income -- taxable equivalent . . . . . . . . . . 7.95 7.73 7.37 .22 .36
Taxable equivalent adjustment . . . . . . . . . . . . . . . . .57 .46 .55 .11 (.09)
------- ------- ------- ------- -------
Net interest income . . . . . . . . . . . . . . . . . . . . . 7.38 7.27 6.82 .11 .45
Provision for loan losses . . . . . . . . . . . . . . . . . . .53 .69 1.71 (.16) (1.02)
------- ------- ------- ------- -------
Net interest income after provision for loan losses . . . . . 6.85 6.58 5.11 .27 1.47
Other operating revenue . . . . . . . . . . . . . . . . . . . 3.45 3.10 2.86 .35 .24
Gain on sale of subsidiary. . . . . . . . . . . . . . . . . . .05 .11 -- (.06) .11
Investment securities gains . . . . . . . . . . . . . . . . . .11 .01 .06 .10 (.05)
------- ------- ------- ------- -------
Total other income. . . . . . . . . . . . . . . . . . . . . . 3.61 3.22 2.92 .39 .30
Personnel expense . . . . . . . . . . . . . . . . . . . . . . 3.27 3.13 3.06 .14 .07
Other expense . . . . . . . . . . . . . . . . . . . . . . . . 3.24 3.22 3.33 .02 (.11)
------- ------- ------- ------- -------
Total other expense . . . . . . . . . . . . . . . . . . . . . 6.51 6.35 6.39 .16 (.04)
Income before income taxes. . . . . . . . . . . . . . . . . . 3.95 3.45 1.64 .50 1.81
Applicable income taxes . . . . . . . . . . . . . . . . . . . 1.12 .94 .30 .18 .64
------- ------- ------- ------- -------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34 $.32 $1.17
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------------------
10
13
- ------------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS* TABLE 3
- ------------------------------------------------------------------------------------------------------------------------------------
Variance
Average Volume Average Rate Interest Attributable to
- ---------------- ------------ --------------------- -------------------
1993 1992 1993 1992 1993 1992 Variance Rate Volume
- ------- ------- ---- ---- -------- --------- --------- -------- --------
(Millions) INTEREST INCOME (Thousands)
Loans:
$ 6,198 $ 5,867 5.29 5.96 Commercial . . . . . . . . . . . . $ 327,729 $ 349,868 $(22,139) $(41,125) $ 18,986
1,891 1,998 9.05 8.67 Tax-exempt . . . . . . . . . . . . 171,163 173,158 (1,995) 7,564 (9,559)
- ------- ------- ---------- ---------- --------
8,089 7,865 6.17 6.65 Total commercial . . . . . . . 498,892 523,026 (24,134) (38,673) 14,539
685 688 8.68 11.32 Direct retail. . . . . . . . . . . 59,455 77,850 (18,395) (18,071) (324)
2,245 2,006 8.42 9.55 Indirect retail. . . . . . . . . . 189,143 191,594 (2,451) (23,893) 21,442
2,591 1,774 11.75 14.53 Credit card. . . . . . . . . . . . 304,502 257,885 46,617 (56,053) 102,670
328 323 11.15 11.63 Other revolving credit . . . . . . 36,580 37,538 (958) (1,568) 610
- ------- ------- ---------- ---------- --------
5,849 4,791 10.08 11.79 Total retail . . . . . . . . . 589,680 564,867 24,813 (89,008) 113,821
470 520 7.45 7.78 Construction . . . . . . . . . . . 35,034 40,441 (5,407) (1,670) (3,737)
3,147 3,064 7.39 7.96 Commercial mortgages . . . . . . . 232,688 243,861 (11,173) (17,720) 6,547
3,780 3,602 8.10 8.89 Residential mortgages. . . . . . . 305,965 320,363 (14,398) (29,664) 15,266
- ------- ------- ---------- ---------- --------
7,397 7,186 7.76 8.42 Total real estate. . . . . . . 573,687 604,665 (30,978) (48,410) 17,432
135 118 8.90 10.01 Lease financing. . . . . . . . . . 12,051 11,830 221 (1,387) 1,608
76 72 4.35 5.20 Foreign. . . . . . . . . . . . . . 3,318 3,760 (442) (635) 193
- ------- ------- ---------- ---------- --------
21,546 20,032 7.79 8.53 Total loans. . . . . . . . . . 1,677,628 1,708,148 (30,520) (154,387) 123,867
Investment securities:
689 780 12.46 12.38 State and municipal. . . . . . . . 85,854 96,649 (10,795) 621 (11,416)
3,455 1,993 6.54 7.40 United States Treasury . . . . . . 225,893 147,447 78,446 (18,882) 97,328
2,372 2,521 6.93 8.16 Federal agency . . . . . . . . . . 164,436 205,763 (41,327) (29,693) (11,634)
523 907 4.62 5.85 Other. . . . . . . . . . . . . . . 24,156 53,064 (28,908) (9,625) (19,283)
- ------- ------- ---------- ---------- --------
7,039 6,201 7.11 8.11 Total investment securities. . 500,339 502,923 (2,584) (66,181) 63,597
79 302 3.71 4.24 Interest-bearing bank balances . . . 2,905 12,772 (9,867) (1,415) (8,452)
Federal funds sold and securities
purchased under resale
395 484 3.15 3.52 agreements . . . . . . . . . . . . 12,433 17,038 (4,605) (1,690) (2,915)
721 1,078 3.94 5.61 Trading account assets . . . . . . . 28,433 60,444 (32,011) (15,119) (16,892)
- ------- ------- ---------- ---------- --------
$29,780 $28,097 7.46 8.19 Total interest-earning assets. 2,221,738 2,301,325 (79,587) (212,486) 132,899
======= =======
INTEREST EXPENSE
$ 3,219 $ 2,843 1.88 2.55 Interest-bearing demand. . . . . . . 60,433 72,548 (12,115) (20,876) 8,761
5,998 5,826 2.53 3.26 Savings and money market savings . . 151,748 189,699 (37,951) (43,388) 5,437
5,595 6,198 4.30 5.23 Savings certificates . . . . . . . . 240,795 324,063 (83,268) (53,739) (29,529)
1,740 2,594 5.18 5.74 Large denomination certificates. . . 90,101 148,931 (58,830) (13,507) (45,323)
- ------- ------- ---------- ---------- --------
Total time deposits in
16,552 17,461 3.28 4.21 domestic offices . . . . . . 543,077 735,241 (192,164) (155,523) (36,641)
467 423 3.11 3.70 Time deposits in foreign offices . . 14,503 15,646 (1,143) (2,651) 1,508
- ------- ------- ---------- ---------- --------
17,019 17,884 3.28 4.20 Total time deposits. . . . . . 557,580 750,887 (193,307) (158,431) (34,876)
Federal funds purchased and
securities sold under
3,945 3,111 3.23 3.73 repurchase agreements. . . . . . . 127,580 115,939 11,641 (16,694) 28,335
486 469 3.02 3.54 Commercial paper . . . . . . . . . . 14,693 16,629 (1,936) (2,513) 577
972 1,381 3.25 4.23 Other short-term borrowed funds. . . 31,574 58,420 (26,846) (11,777) (15,069)
- ------- ------- ---------- ---------- --------
Total short-term
5,403 4,961 3.22 3.85 borrowed funds . . . . . . . 173,847 190,988 (17,141) (33,145) 16,004
1,535 273 4.54 4.83 Bank notes . . . . . . . . . . . . . 69,785 13,183 56,602 (839) 57,441
538 176 7.03 6.80 Other long-term debt . . . . . . . . 37,800 11,970 25,830 408 25,422
- ------- ------- ---------- ---------- --------
2,073 449 5.19 5.61 Total long-term debt . . . . . 107,585 25,153 82,432 (2,014) 84,446
- ------- ------- ---- ---- ---------- ---------- --------
Total interest-bearing
$24,495 $23,294 3.43 4.15 liabilities. . . . . . . . . 839,012 967,028 (128,016) (175,899) 47,883
======= ======= ---- ---- ---------- ---------- --------
4.03 4.04 INTEREST RATE SPREAD
==== ====
NET YIELD ON INTEREST-EARNING
4.64 4.75 ASSETS AND NET INTEREST INCOME . . $1,382,726 $1,334,297 $ 48,429 (30,191) 78,620
==== ==== ========== ========== ========
- ------------------------------------------------------------------------------------------------------------------------------------
*Interest income and yields for 1993 are presented on a fully taxable
equivalent basis using the federal income tax rate of 35% and state tax rates,
as applicable, reduced by the nondeductible portion of interest expense; the
taxable equivalent adjustment for 1992 reflects the federal income tax rate of
34%
11
14
Interest Income
Taxable equivalent interest income decreased $79.587 million or
3.5 percent in 1993, although gains occurred in the latter months of
the year. Lower yields earned were offset only partially by higher
levels of interest-earning assets. The average rate earned dropped
73 basis points, reflecting, in part, shifts in the credit card
portfolio from higher fixed rates to lower variable rates,
prepayments of higher rate residential mortgages, lower rates on
investment securities and intensely competitive market pricing for
loans. Average interest-earning assets rose $1.683 billion or 6
percent with better growth in the second half and especially the
latter months of the year.
Despite soft demand, the corporation's average loans were
higher by $1.514 billion or 7.6 percent for the year. Good gains
occurred in retail loans with commercial outstandings rising
modestly.
Retail loans, including residential mortgages, increased $1.236
billion or 14.7 percent, reflecting good growth primarily in the
credit card and automobile categories. Credit card outstandings
gained $817 million or 46.1 percent. At December 31, 1993, the
credit card portfolio totaled $3.123 billion compared with $2.216
billion a year earlier. Approximately 84 percent of the total was
variable rate versus approximately 61 percent at year-end 1992.
Borrowers continued to be attracted to the corporation's low
variable rate pricing option. In 1993, Wachovia introduced a
First-Year Prime Visa and MasterCard option to complement its
popular Prime Plus 2.9 percent card, which is offered with a $39
annual fee. The new pricing option carries an interest rate of prime
for the first year and is 3.9 percent above prime thereafter, with
an $18 annual fee.
Indirect retail loans, primarily consisting of automobile sales
financing in the three home states, grew $239 million or 11.9
percent. Residential mortgages and other revolving credit also were
higher for the year. The home equity portion of residential
mortgages averaged $768 million compared with $805 million in 1992.
Direct retail loans declined modestly.
Commercial loans, including related real estate categories,
increased $278 million or 2.4 percent, reflecting continued
softness in demand due to slow economic growth and alternative
funding from public debt and equity markets for large corporate
borrowers. Regular commercial loans, up $331 million or 5.6 percent,
and commercial mortgages, higher by $83 million or 2.7 percent, had
the strongest gains for the year. Lease financing and foreign loans
rose slightly, while construction loans and tax-exempt borrowings
declined.
Commercial real estate outstandings at December 31, 1993 were
$3.693 billion, representing 16.1 percent of total loans versus
$3.583 billion or 17 percent at year-end 1992. Based on regulatory
definitions, commercial mortgages were $3.199 billion or 13.9
percent of total loans and construction loans were $494 million or
2.2 percent. Comparable amounts a year earlier were $3.119 billion
or 14.8 percent and $464 million or 2.2 percent, respectively.
The $3.693 billion of commercial real estate outstandings at
year-end 1993 included $2.088 billion in commercial real estate
loans, representing 9.1 percent of total loans, originated through
the corporation's Commercial Mortgage Group. Loans in this group are
dependent primarily on the income stream, refinancing or resale
value of the property mortgaged for repayment and are segregated
from other commercial real estate
12
15
loans which have real estate as the collateral but not the primary
consideration in the credit risk evaluation. Additional detail on the
Commercial Mortgage Group is provided as of December 31, 1993 and 1992 in the
following presentations with geographic distribution listing loans by location
of collateral.
Summary of Commercial Mortgage Group Real Estate Loans and Commitments
- ----------------------------------------------------------------------
Geographic Distribution ($ in millions) Loans Outstanding Percent of Total Loans Loans and Unused Commitments
December 31 1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------
North Carolina . . . . . . . . . . . . . . . . $ 856 $ 806 3.7 3.8 $ 979 $ 938
South Carolina . . . . . . . . . . . . . . . . 637 615 2.8 2.9 729 664
Georgia . . . . . . . . . . . . . . . . . . . 437 381 1.9 1.8 505 436
Virginia . . . . . . . . . . . . . . . . . . . 52 55 .2 .3 55 61
Florida . . . . . . . . . . . . . . . . . . . 57 54 .2 .2 58 72
Tennessee. . . . . . . . . . . . . . . . . . . 18 15 .1 .1 20 17
Alabama . . . . . . . . . . . . . . . . . . . 18 21 .1 .1 19 22
------ ------ ---- ---- ------ ------
Total Southeast. . . . . . . . . . . 2,075 1,947 9.0 9.2 2,365 2,210
Outside Southeast . . . . . . . . . . . . . . 13 37 .1 .2 23 42
------ ------ ---- ---- ------ ------
Total . . . . . . . . . . . . . . . $2,088 $1,984 9.1 9.4 $2,388 $2,252
====== ====== ==== ==== ====== ======
General Category ($ in millions) Loans Outstanding Percent of Total Loans Loans and Unused Commitments
December 31 1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------
Construction . . . . . . . . . . . . . . . . . $ 241 $ 251 1.0 1.2 $ 441 $ 439
Permanent . . . . . . . . . . . . . . . . . . 1,691 1,556 7.4 7.4 1,778 1,614
Land development . . . . . . . . . . . . . . . 97 125 .4 .6 107 141
Other . . . . . . . . . . . . . . . . . . . . 59 52 .3 .2 62 58
------ ------ ---- ---- ------ ------
Total . . . . . . . . . . . . . . . $2,088 $1,984 9.1 9.4 $2,388 $2,252
====== ====== ==== ==== ====== ======
Type of Property ($ in millions) Loans Outstanding Percent of Total Loans Loans and Unused Commitments
December 31 1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------
Apartments . . . . . . . . . . . . . . . . . . $ 401 $ 331 1.7 1.6 $ 489 $ 361
Office warehouse . . . . . . . . . . . . . . . 328 318 1.4 1.5 352 343
Office building . . . . . . . . . . . . . . . 312 311 1.4 1.5 343 345
Retail property . . . . . . . . . . . . . . . 475 423 2.1 2.0 530 514
Hotel/motel. . . . . . . . . . . . . . . . . . 265 256 1.2 1.2 320 296
Land development . . . . . . . . . . . . . . . 97 125 .4 .6 107 141
Other . . . . . . . . . . . . . . . . . . . . 210 220 .9 1.0 247 252
------ ------ ---- ---- ------ ------
Total. . . . . . . . . . . . . . . . $2,088 $1,984 9.1 9.4 $2,388 $2,252
====== ====== ==== ==== ====== ======
Although regulatory criteria and reporting requirements for highly
leveraged transactions (HLT) were withdrawn in 1992, the corporation continues
to recognize and define HLTs in accordance with the previously existing
definition. At December 31, 1993, the corporation had 4 HLTs with combined
outstandings of $89 million, representing .4 percent of total loans and 3
percent of shareholders' equity. Additional unused commitments were $15
million. This compared with 9 HLTs with outstandings totaling $142 million or
.7 percent of loans and 5.1 percent of equity with additional unused
commitments of $34 million at year-end 1992.
Cross border outstandings, primarily consisting of loans, were $352
million at December 31, 1993, representing 1 percent of total assets. This
was down $38 million or 9.6 percent from $390 million or 1 percent of assets at
year-end 1992.
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (FASB 114), which the corporation
13
16
---------------------------------------------------------------------------------------------------------------------
SELECTED LOAN MATURITIES AND INTEREST SENSITIVITY TABLE 4
December 31, 1993 (thousands)
---------------------------------------------------------------------------------------------------------------------
One Year One to Over
Total or Less Five Years Five Years
------------ ------------ ------------ ----------
Commercial, financial and other . . . . . . . . . . . . . $ 6,727,207 $ 6,131,474 $ 402,514 $ 193,219
Industrial revenue and other tax-exempt financing . . . . 1,959,266 888,253 602,151 468,862
Construction . . . . . . . . . . . . . . . . . . . . . . 494,148 466,820 27,328 --
Commercial mortgages . . . . . . . . . . . . . . . . . . 3,199,434 1,947,322 793,009 459,103
----------- ----------- ---------- ----------
Loans to domestic borrowers . . . . . . . . . . . . 12,380,055 9,433,869 1,825,002 1,121,184
Loans to foreign borrowers . . . . . . . . . . . . . . . 73,055 73,024 31 --
----------- ----------- ---------- ----------
Selected loans, net . . . . . . . . . . . . . . . . $12,453,110 $ 9,506,893 $1,825,033 $1,121,184
=========== =========== ========== ==========
Interest sensitivity:
Loans with predetermined interest rates . . . . . . . $ 4,518,659 $ 1,952,609 $1,625,190 $ 940,860
Loans with floating interest rates . . . . . . . . . . 7,934,451 7,554,284 199,843 180,324
----------- ----------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . $12,453,110 $ 9,506,893 $1,825,033 $1,121,184
=========== =========== ========== ==========
---------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES TABLE 5
December 31 (thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
-------------------------------------------------------- --------------------- --------------------
Taxable
Principal Book Market Average Equivalent Book Market Book Market
Amount Value Value Maturity Yield* Value Value Value Value
----------- ----------- -------- ---------- -------- -------- --------- --------- ---------
(Yrs./Mos.)
State and municipal:
Within one year . . . $ 74,846 $ 75,501 $ 77,254 13.02% $ 62,837 $ 63,673 $ 108,060 $ 110,224
One to five years . . 309,172 309,939 337,197 12.89 337,815 369,395 257,431 279,744
Five to ten years . . 155,105 151,253 172,827 12.28 192,030 214,277 248,385 276,599
Over ten years . . . 148,989 118,464 140,456 12.75 155,335 177,842 237,307 268,350
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total . . . . . . 688,112 655,157 727,734 5/6 12.78 748,017 825,187 851,183 934,917
U.S. Treasury:
Within one year . . . 536,500 536,440 543,315 6.96 213,737 218,269 462,919 468,256
One to five years . . 3,670,500 3,719,325 3,816,471 5.95 1,899,421 1,947,427 887,834 930,868
Five to ten years . . 117,500 116,665 137,324 9.55 414,559 464,696 452,168 511,144
Over ten years . . . 17,930 15,950 23,340 12.52 16,582 22,588 17,133 23,374
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 4,342,430 4,388,380 4,520,450 2/9 6.19 2,544,299 2,652,980 1,820,054 1,933,642
Federal agency:
Within one year . . . 75,550 75,544 77,254 7.33 45,292 45,307 75,402 75,265
One to five years . . 607,224 611,559 618,618 5.72 246,418 254,657 185,392 192,118
Five to ten years . . 552,075 554,267 555,330 5.57 422,245 434,553 283,428 301,819
Over ten years . . . 1,112,968 1,114,976 1,166,232 7.53 1,826,179 1,904,388 2,012,813 2,128,454
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 2,347,817 2,356,346 2,417,434 12/2 6.59 2,540,134 2,638,905 2,557,035 2,697,656
Other interest-earning
investments:
Within one year . . . 78,488 78,376 78,379 4.41 20,291 19,750 170,401 170,337
One to five years . . 122,586 122,831 122,946 4.03 130,065 131,238 184,718 185,178
Five to ten years . . 16,737 16,742 16,787 5.48 86,088 86,083 58,435 58,425
Over ten years . . . 152,116 152,106 152,414 4.32 283,567 286,358 499,719 503,685
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total . . . . . . 369,927 370,055 370,526 8/5 4.30 520,011 523,429 913,273 917,625
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning
investments $7,748,286 7,769,938 8,036,144 6/1 6.81 6,352,461 6,640,501 6,141,545 6,483,840
==========
Federal Reserve Bank
stock and other
investments . . . . . 108,718 120,546 133,710 152,542 123,313 131,827
---------- ---------- ---------- ---------- ---------- ----------
Total portfolio . $7,878,656 $8,156,690 $6,486,171 $6,793,043 $6,264,858 $6,615,667
========== ========== ========== ========== ========== ==========
*Yields were computed using
a 35% tax rate for 1993
- ------------------------------------------------------------------------------------------------------------------------------------
14
17
will be required to adopt by 1995. This standard modifies the
accounting for certain loans where it is probable that the
corporation will be unable to collect all amounts due according to
the contractual terms of the loan agreement. The corporation is in
the process of evaluating the timing of adoption and the effect that
implementation of the standard will have on its financial
statements, but does not expect it to have a material impact. Note
E of Notes to Consolidated Financial Statements contains additional
information about FASB 114.
During a period when loan growth expectations have been modest,
the corporation added significantly to its investment securities,
the second largest category of interest-earning assets. They
expanded $838 million or 13.5 percent during the year. U.S. Treasury
securities accounted for all the increase, rising $1.462 billion or
73.4 percent. At year-end 1993, 95.6 percent of the corporation's
municipal portfolio was rated A or higher by Moody's. At December
31, 1993, the market value of the total investment securities
portfolio was $8.157 billion, representing a $278 million
appreciation over book value. This compared with a $6.793 billion
market value and a $307 million appreciation at year-end 1992.
The corporation has elected to adopt Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (FASB 115), as of January 1, 1994.
FASB 115 requires that investment securities be classified as either
"held to maturity" or "available for sale." "Held to maturity"
securities will be carried at amortized cost which is the accounting
method currently used for the investment securities account.
Securities classified as "available for sale" will be accounted
for at fair market value with unrealized gains and losses reported
as a separate component of shareholders' equity. Under FASB 115,
trading account securities will continue to be carried in a separate
account at fair market value with gains and losses recorded in the
income statement. If the corporation had adopted FASB 115 at
December 31, 1993, the impact on shareholders' equity would have
been an increase of $24.368 million. Note D of Notes to Consolidated
Financial Statements contains additional information regarding FASB
115.
Interest Expense
Interest expense for 1993 decreased $128.016 million or 13.2
percent as the average rate paid on interest-bearing liabilities
dropped 72 basis points. Partially reducing the impact of the rate
decline was a $1.201 billion or 5.2 percent increase in average
interest-bearing liabilities for the year.
Total interest-bearing deposits were lower by $865 million or
4.8 percent. Interest-bearing demand and savings and money market
savings were up a combined $548 million or 6.3 percent. This was
offset by the outflow of longer-term consumer deposits seeking
higher yields as they matured. Savings certificates declined $603
million or 9.7 percent. Large denomination certificates decreased
$854 million or 32.9 percent. The corporation allowed its large
denomination certificates to roll off as it continued to grow its
medium-term bank note program.
Total short-term borrowings rose $442 million or 8.9 percent
led by growth in federal funds purchased and repurchase agreements.
Other short-term borrowings, which primarily consists of term
federal funds, decreased.
Long-term debt rose $1.624 billion, primarily reflecting the
growth of Wachovia Bank of North Carolina's medium-term bank note
program begun in the second quarter of 1992. At December 31, 1993,
Wachovia Bank of North Carolina had a total of $2.370 billion of
these notes outstanding with an average cost of 4.54 percent and an
average maturity of 1.8 years versus $758 million, 4.59 percent and
1.8 years, respectively, a year earlier. These notes had been
classified under short-term borrowed funds but have been
reclassified as long-term debt to more accurately reflect the
weighted average maturity of these instruments, and prior periods
have been restated. The bank notes issued during 1993 generally had
maturities of two to five years but can be issued for maturities up
to 10 years.
The corporation also issued $250 million of ten-year
subordinated notes in April 1993. They were priced at a spread of 60
basis points above the yield on U.S. Treasury notes of comparable
maturity at the time of sale to yield 6.481 percent. The corporation
redeemed $79 million of floating rate subordinated capital notes in
March 1993.
Gross deposits for 1993 averaged $22.373 billion, down $458
million or 2 percent compared with $22.831 billion in the prior
year. Collected deposits, net of float, averaged $20.762 billion,
lower by $373 million or 1.8 percent from $21.135 billion in 1992.
Demand and noninterest-bearing time deposits averaged $5.355 billion
compared with $4.947 billion in the previous year.
15
18
Asset and Liability Management, Interest Rate Sensitivity and Liquidity
Management
Changes in interest rates can substantially impact the
corporation's net interest income and profitability. The goal of
asset/liability management is to maximize net interest income while
mitigating negative impacts of interest rate changes.
The corporation seeks to meet this goal by managing
discretionary investments and funding sources, by product pricing
and structuring strategies and by utilizing off-balance sheet
instruments when appropriate. In addition to monitoring the
relationship between interest-earning assets and interest-bearing
liabilities, this process is facilitated by the application of
simulation models which are the principal tools employed for
interest rate management. Information provided by the
multidimensional models portrays the results of changes in interest
rates which are analyzed with the objective of identifying potential
adverse performance situations. If such a condition should occur,
the immediate goal is to construct a strategy to neutralize, as much
as possible, the impact.
Additionally, the corporation monitors the difference or gap
between the corporation's rate sensitive assets and rate sensitive
liabilities over various time periods. The gap may be either
positive (rate sensitive assets exceed liabilities) or negative
(rate sensitive liabilities exceed assets).
The table on page 17 sets forth the volume of interest-earning
assets and interest-bearing liabilities outstanding as of December
31, 1993 and 1992, which mature or are projected to reprice in each
of the future time periods shown.
The projected asset repricing volumes include anticipated
prepayments of mortgage loans and mortgage-backed securities. The
projected interest checking and savings repricing volumes are based
on the expected rate sensitivity of these accounts in relationship
to the prime rate.
Prepayment assumptions and the distribution of these deposit
liabilities based on management's assumptions present a more
accurate view of the corporation's rate risk position. The
nonsensitive and maturing beyond one year section of the table
includes bank credit card loans of $499 million in 1993 and $860
million in 1992, savings balances of $577 million in 1993 and $852
million in 1992 and interest-bearing
16
19
Interest Rate Sensitivity Gap Analysis
- --------------------------------------
Interest Sensitive Period
------------------------------------------------------------
$ in millions Total Over One
0 to 3 4 to 6 7 to 12 Within Year and
December 31, 1993 Months Months Months One Year Nonsensitive Total
- ----------------- ------ ------ ------ --------- ------------ -----
Loans and net leases, net of unearned income. . . . . . . . . . . . . $13,076 $ 683 $ 1,035 $14,794 $ 8,183 $22,977
State and municipal investment securities . . . . . . . . . . . . . 30 16 36 82 573 655
Other investment securities . . . . . . . . . . . . . . . . . . . . . 1,025 277 693 1,995 5,229 7,224
Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 13 -- -- 13 -- 13
Federal funds sold and securities purchased under resale agreements . 691 -- -- 691 -- 691
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 789 -- -- 789 -- 789
------- ------- ------- ------- ------- -------
Total earning assets . . . . . . . . . . . . . . . . . 15,624 976 1,764 18,364 13,985 32,349
Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . 460 278 556 1,294 2,222 3,516
Savings and money market savings. . . . . . . . . . . . . . . . . . . 4,750 289 578 5,617 577 6,194
Savings certificates . . . . . . . . . . . . . . . . . . . . . . . . 1,828 1,280 762 3,870 1,272 5,142
Large denomination certificates . . . . . . . . . . . . . . . . . . . 826 243 191 1,260 247 1,507
Time deposits in foreign offices . . . . . . . . . . . . . . . . . . 761 16 -- 777 27 804
Federal funds purchased and securities sold under repurchase
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,741 -- -- 4,741 -- 4,741
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . 589 -- -- 589 -- 589
Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 1,033 56 2 1,091 -- 1,091
Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 180 186 516 1,854 2,370
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 100 -- -- 100 491 591
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities . . . . . . . . . . 15,238 2,342 2,275 19,855 6,690 26,545
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . (58) (63) (47) (168) 168 --
------- ------- ------- ------- ------- -------
Interest sensitivity gap . . . . . . . . . . . . . . . 328 (1,429) (558) $(1,659) 7,463 $ 5,804
------- ------- ------- ======= ------- =======
Cumulative interest sensitivity gap . . . . . . . . . $ 328 ($1,101) ($1,659) $ 5,804
======= ======= ======= =======
December 31, 1992
- -----------------
Loans and net leases, net of unearned income . . . . . . . . . . . . $12,710 $ 761 $ 1,128 $14,599 $ 6,487 $21,086
State and municipal investment securities . . . . . . . . . . . . . . 28 17 16 61 687 748
Other investment securities . . . . . . . . . . . . . . . . . . . . 783 205 386 1,374 4,364 5,738
Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 189 -- -- 189 -- 189
Federal funds sold and securities purchased under resale agreements . 479 -- -- 479 -- 479
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 896 -- -- 896 -- 896
------- ------- ------- ------- ------- -------
Total earning assets . . . . . . . . . . . . . . . . . 15,085 983 1,530 17,598 11,538 29,136
Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . 503 347 694 1,544 1,767 3,311
Savings and money market savings. . . . . . . . . . . . . . . . . . . 4,840 154 308 5,302 851 6,153
Savings certificates . . . . . . . . . . . . . . . . . . . . . . . . 2,090 1,324 897 4,311 1,257 5,568
Large denomination certificates . . . . . . . . . . . . . . . . . . . 1,164 376 294 1,834 308 2,142
Time deposits in foreign offices. . . . . . . . . . . . . . . . . . . 441 73 4 518 -- 518
Federal funds purchased and securities sold under repurchase
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,707 5 2 3,714 -- 3,714
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . 387 -- -- 387 -- 387
Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 578 85 186 849 -- 849
Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 250 250 508 758
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 103 5 -- 108 331 439
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities . . . . . . . . . . 13,813 2,369 2,635 18,817 5,022 23,839
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . 389 34 (59) 364 (364) --
------- ------- ------- ------- ------- -------
Interest sensitivity gap . . . . . . . . . . . . . . . 1,661 (1,352) (1,164) $ (855) 6,152 $ 5,297
------- ------- ------- ------- ------- -------
Cumulative interest sensitivity gap. . . . . . . . . . $ 1,661 $ 309 $ (855) $ 5,297
======= ======= ======= =======
Note: Refer to page 16 for details on management's assumptions of the repricing characteristics of certain accounts without
contractual maturity dates.
checking balances of $2.222 billion in 1993 and $1.767 billion in
1992.
The corporation uses off-balance sheet or "derivative"
instruments to change the structure of both assets and liabilities to
help manage the interest rate sensitivity of its balance sheet and
also as a product to assist corporate and other customers manage
their interest rate risk. The primary instruments used have been
interest rate swaps, caps and floors. As of December 31, 1993, the
corporation had $3.387 billion in notional amount
17
20
of these transactions outstanding as compared with $1.915
billion a year ago with 37 percent related to its balance sheet
management versus 34 percent a year earlier.
The ability of counterparties to perform under the terms of
these transactions is the primary risk of this activity. The
corporation mitigates this risk by subjecting the transactions to a
similar approval process as is used for on-balance sheet credit
transactions, by dealing in the national market with a few highly
rated counterparties and by using collateral agreements to reduce
exposure when appropriate. See Note J of Notes to Consolidated
Financial Statements for additional information.
The objective of liquidity management is to ensure that the
corporation is positioned to meet all immediate and future demands
for cash. There are multiple requirements for cash placed on a
financial intermediary. Consequently, the process for liability
planning must include, but not be limited to, considerations of
credit demand, deposit flows and corporate operating expenses and
revenues. Not only are contractual cash flows such as loan
repayments and deposit maturities and withdrawals factored into this
process, but economic events also must be considered. Liquidity
management relies upon liquidity analysis and knowledge of
historical trends over past credit and business cycles and forecasts
of future conditions to achieve its objectives.
The two broad-based sources of liquidity which exist for the
corporation are its high quality marketable assets, and liabilities
which are readily acceptable by providers of funds. Asset liquidity
primarily is provided
---------------------------------------------------
LARGE DENOMINATION DEPOSITS* TABLE 6
December 31, 1993 (thousands)
---------------------------------------------------
REMAINING MATURITIES
Three months or less. . . . . . . $ 744,146
Over three through
six months. . . . . . . . . . 232,824
Over six through
twelve months . . . . . . . . 238,998
Over twelve months . . . . . . . . 291,493
----------
Total. . . . . . . . . . . $1,507,461
==========
*Includes domestic office
certificates of deposit of
$100 or more
---------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BORROWED FUNDS (thousands) TABLE 7
- ------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
------------------- ------------------ -----------------
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
At year-end:
Federal funds purchased and securities
sold under repurchase agreements . . . . . . . . . $4,741,283 2.88% $3,713,492 2.82% $4,002,086 4.15%
Commercial paper. . . . . . . . . . . . . . . . . . . . 589,178 2.92 386,618 2.99 397,720 4.25
Other borrowed funds. . . . . . . . . . . . . . . . . . 1,091,123 3.24 848,823 3.21 2,200,862 5.41
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . $6,421,584 2.94 $4,948,933 2.90 $6,600,668 4.58
========== ========== ==========
Average for the year:
Federal funds purchased and securities
sold under repurchase agreements . . . . . . . . . $3,944,864 3.23 $3,110,737 3.73 $3,498,869 5.78
Commercial paper* . . . . . . . . . . . . . . . . . . . 485,889 3.02 469,120 3.54 348,125 5.74
Other borrowed funds. . . . . . . . . . . . . . . . . . 972,008 3.25 1,381,713 4.23 2,233,271 6.58
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . $5,402,761 3.22 $4,961,570 3.85 $6,080,265 6.07
========== ========== ==========
Maximum month-end balance:
Federal funds purchased and securities
sold under repurchase agreements . . . . . . . . . $5,307,332 $4,058,560 $4,252,149
Commercial paper . . . . . . . . . . . . . . . . . . . 613,375 597,934 397,720
Other borrowed funds . . . . . . . . . . . . . . . . . 1,525,017 2,260,089 2,552,723
*Average interest rate for each year includes effect of fees paid
on back-up lines of credit
- ------------------------------------------------------------------------------------------------------------------------------
18
21
by securities which by their maturity structure or
marketability can produce cash flows that result in enhanced
liquidity. The ability to generate additional cash through the
liability side of the balance sheet focuses on the growth of
deposits, the issuance of bank notes and other forms of debt
securities.
Wachovia's ability to attract a variety of funds rests on the
corporation's strength of capital, reputation, credit ratings and
diverse statewide banking networks. At December 31, 1993, Wachovia's
common equity to assets ratio was 8.26 percent, 4th highest among
the 25 largest U.S. banks. Wachovia's strong capital position is
reflected in its credit ratings and remains central to its ability
to raise additional funds at attractive rates through short-term
borrowings and long-term debt.
At year-end 1993, Wachovia Corporation's senior debt was rated
(P) Aa3 by Moody's and (P)AA by Standard & Poor's. The corporation's
subordinated debt was rated A1 and AA- by Moody's and Standard &
Poor's, respectively. Commercial paper was rated P-1 by Moody's and
A-1+ by Standard & Poor's.
All of the corporation's asset/liability strategies are
conducted under policies and guidelines established by the
corporation's Finance Committee. The committee monitors interest
rate risk, liquidity and capital. Committee guidelines limit the
acceptable negative change in forecasted net interest income from
assumed movements in interest rates. Funding guidelines include
limits on concentrations of maturities and funding categories, and
funding exposure to single outside sources. Guidelines for capital
require maintenance of sufficient capital to be classified a
well-capitalized banking organization under regulatory capital
guidelines and definitions.
Nonperforming Assets
Nonperforming assets were $154.901 million or .67 percent of
loans and foreclosed property at December 31, 1993, a decline of
$110.508 million or 41.6 percent from year-end 1992. The decrease
resulted principally from paydowns, property sales and the return of
cash-basis assets to accrual status, reflecting continued sound loan
administration and active management of credit, combined with lower
interest rates and generally improving real estate market conditions
in the corporation's primary states.
Real estate nonperforming assets, the largest segment of total
nonperforming assets, were $123.595 million or 1.65 percent of real
estate loans and foreclosed real estate at December 31, 1993. This
compared with $228.714 million or 3.12 percent a year earlier, a
decline of $105.119 million or 46 percent. Although the real estate
markets in which Wachovia operates maintained stronger values
relative to norms in the national market, overbuilding resulted in
elevated levels of foreclosed property each year between 1987 and
1992. This
19
22
trend has been reversed in 1993 with foreclosed property of
$45.939 million at year-end, a decline of $45.376 million or 49.7
percent since year-end 1992.
Commercial real estate nonperforming assets totaled $98.014
million or 2.63 percent of related loans and foreclosed property, a
drop of $99.208 million or 50.3 percent from $197.222 million or 5.39
percent at year-end 1992. Within the Commercial Mortgage Group
described on page 12, nonperforming assets were $70.461 million or
3.33 percent of its loans and foreclosed real estate, down $77.799
million or 52.5 percent from $148.260 million or 7.24 percent at
December 31, 1992.
No HLTs were nonperforming at year-end 1993 or 1992.
NET LOAN LOSSES TO AVERAGE LOANS NONPERFORMING ASSETS TO YEAR-END
LOANS AND FORECLOSED PROPERTY
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX)
- -----------------------------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 8
December 31 (thousands)
- -----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- --------
NONPERFORMING ASSETS
Cash-basis assets:
Domestic borrowers . . . . . . . . . $108,882 $173,977 $240,578 $199,480 $110,165 $ 70,524
Foreign borrowers -- less developed
countries . . . . . . . . . . . . -- -- -- 1,437 1,437 7,477
-------- ------- -------- -------- -------- --------
Total cash-basis assets . . . 108,882 173,977 240,578 200,917 111,602 78,001
Restructured loans -- domestic . . . . . 80* 117 604 2,629 4,693 4,011
-------- ------- -------- -------- -------- --------
Total nonperforming loans . . 108,962** 174,094 241,182 203,546 116,295 82,012
Foreclosed property:
Foreclosed real estate . . . . . . . 51,701 93,555 69,957 41,139 17,964 9,974
Less valuation allowance . . . . . . 9,168 5,082 2,837 4,012 820 91
Other foreclosed assets . . . . . . 3,406 2,842 2,609 5,106 5,267 5,136
-------- ------- -------- -------- -------- --------
Total foreclosed property . . 45,939 91,315 69,729 42,233 22,411 15,019
-------- ------- -------- -------- -------- --------
Total nonperforming assets . . $154,901*** $265,409 $310,911 $245,779 $138,706 $ 97,031
======== ======== ======== ======== ======== ========
Nonperforming loans to year-end loans . . .47% .83% 1.17% .96% .60% .47%
Nonperforming assets to year-end loans
and foreclosed property . . . . . . .67 1.25 1.50 1.16 .71 .55
Year-end allowance for loan losses
times nonperforming loans . . . . . 3.72x 2.18x 1.49x 1.33x 1.89x 2.45x
Year-end allowance for loan losses
times nonperforming assets . . . . . 2.61 1.43 1.16 1.10 1.58 2.07
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers . . . . . . . . . . . $ 44,897 $ 49,277 $ 88,158 $ 66,202 $ 55,489 $113,691
======== ======== ======== ======== ======== ========
*Excludes $14,803 of loans which have been renegotiated at market
rates and have demonstrated performance at the renegotiated
terms for at least one year
**See Note E for interest income foregone on loans that had been
placed on a cash basis or on which the contractual rate of interest
has been reduced below market
***Net of cumulative corporate and commercial real estate charge-offs
and foreclosed real estate write-downs totaling $60,914; includes
$27,192 of nonperforming assets on which interest and principal
are paid current
- -----------------------------------------------------------------------------------------------------------------------------------
20
23
Provision and Allowance for Loan Losses
The provision for loan losses totaled $92.652 million in 1993,
exceeding net credit losses by $25.241 million. The provision was
lower by $26.768 million or 22.4 percent from the $119.420 million
taken in 1992. The corporation maintains, through its provision, an
allowance for loan losses believed by management to be adequate to
absorb potential credit losses inherent in the portfolio. Improved
conditions within the corporation's loan and commitments portfolio,
including better payment experience, reduced delinquencies and more
favorable expectations of collectibility, as well as continued
gradual economic recovery in 1993 led to the reduced provision for
the year.
Net loan losses totaled $67.411 million or .31 percent of
average loans, a decrease of $27.834 million or 29.2 percent from
$95.245 million or .48 percent of average loans in 1992. Recoveries
represented 30.6 percent of gross loan charge-offs versus 27.6
percent in 1992.
Credit card net charge-offs for the year declined $4.120
million or 7.3 percent to $52.675 million or 2.03 percent of average
credit card loans. Credit card loans delinquent 30 days or more at
December 31, 1993 totaled $41.434 million, representing 1.33 percent
of the period-end portfolio. This compared with $46.870 million or
2.11 percent a year earlier.
Net loan losses for other revolving credit were lower by $710
thousand or 19.7 percent and totaled $2.893 million or .88 percent of
average related loans for the year versus $3.603 million or 1.12
percent in 1992. Other retail net loan losses, consisting of direct
and indirect retail net credit losses, decreased $7.100 million or
60.5 percent to $4.640 million or .16 percent of average related
loans.
Real estate net charge-offs totaled $5.821 million or .08
percent of average real estate loans, down $15.428 million or 72.6
percent from $21.249 million or .30 percent of related loans in 1992.
No HLTs were charged-off in 1993 or 1992.
At December 31, 1993, the allowance for loan losses totaled
$404.798 million, representing 1.76 percent of year-end loans and 372
percent coverage of nonperforming loans. Comparable amounts a year
earlier were $379.557 million or 1.80 percent of loans and 218
percent coverage of nonperforming loans.
ALLOWANCE FOR LOAN LOSSES EARNINGS COVERAGE OF NET LOAN LOSSES LOAN LOSS EXPERIENCE
(EXCLUDING SUBSIDIARY SALE AND SECURITIES TRANSACTIONS)
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX) APPENDIX)
21
24
- ---------------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 9
- ---------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
SUMMARY OF TRANSACTIONS
Balance at beginning of year. . . . . . . . . $379,557 $360,193 $269,916 $219,219 $200,698 $229,902
Additions from acquisitions . . . . . . . . . -- -- 276 1,510 327 1,166
Allowance of company sold . . . . . . . . . . -- (4,811) -- -- -- --
Provision for loan losses . . . . . . . . . . 92,652 119,420 293,000 142,992 86,531 78,110
Deduct net loan losses:
Loans charged off:
Commercial. . . . . . . . . . . . . 6,792 13,153 61,089 22,982 14,219 13,964
Credit card . . . . . . . . . . . . 62,991 67,863 72,386 48,150 40,069 36,134
Other revolving credit . . . . . . 3,922 4,627 5,154 3,680 2,690 2,618
Other retail . . . . . . . . . . . 8,431 17,221 26,251 23,625 23,945 20,099
Real estate . . . . . . . . . . . . 14,514 27,041 58,089 16,241 7,907 8,733
Lease financing . . . . . . . . . . 458 668 1,614 1,497 1,351 6,587
Foreign . . . . . . . . . . . . . . -- 960 675 -- 452 51,283
-------- -------- --------- -------- -------- --------
Total . . . . . . . . . . . . 97,108 131,533 225,258 116,175 90,633 139,418
Recoveries:
Commercial. . . . . . . . . . . . . 5,572 12,594 4,599 6,704 4,801 5,564
Credit card . . . . . . . . . . . . 10,316 11,068 7,027 6,329 7,231 7,784
Other revolving credit. . . . . . . 1,029 1,024 721 747 707 616
Other retail . . . . . . . . . . . 3,791 5,481 6,545 5,368 5,899 4,633
Real estate . . . . . . . . . . . . 8,693 5,792 2,626 2,657 1,170 628
Lease financing . . . . . . . . . . 264 322 263 246 2,091 135
Foreign . . . . . . . . . . . . . . 32 7 478 319 397 11,578
-------- -------- --------- -------- -------- --------
Total . . . . . . . . . . . . 29,697 36,288 22,259 22,370 22,296 30,938
-------- -------- --------- -------- -------- --------
Net loan losses . . . . . . . . . . . . 67,411 95,245 202,999 93,805 68,337 108,480
-------- -------- --------- -------- -------- --------
Balance at end of year. . . . . . . . . . . . $404,798 $379,557 $ 360,193 $269,916 $219,219 $200,698
======== ======== ========= ======== ======== ========
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial . . . . . . . . . . . . . . . . . $ 1,220 $ 559 $ 56,490 $ 16,278 $ 9,418 $ 8,400
Credit card . . . . . . . . . . . . . . . . . 52,675 56,795 65,359 41,821 32,838 28,350
Other revolving credit. . . . . . . . . . . . 2,893 3,603 4,433 2,933 1,983 2,002
Other retail. . . . . . . . . . . . . . . . . 4,640 11,740 19,706 18,257 18,046 15,466
Real estate . . . . . . . . . . . . . . . . . 5,821 21,249 55,463 13,584 6,737 8,105
Lease financing . . . . . . . . . . . . . . . 194 346 1,351 1,251 (740) 6,452
Foreign . . . . . . . . . . . . . . . . . . . (32) 953 197 (319) 55 39,705
-------- -------- --------- -------- -------- --------
Total. . . . . . . . . . . . . $ 67,411 $ 95,245 $ 202,999 $ 93,805 $ 68,337 $108,480
======== ======== ========= ======== ======== ========
NET LOAN LOSSES (RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial. . . . . . . . . . . . . . . . . . .02% .01% .69% .20% .12% .12%
Credit card . . . . . . . . . . . . . . . . . 2.03 3.20 4.19 2.94 2.64 2.45
Other revolving credit . . . . . . . . . . . .88 1.12 1.48 1.02 .74 .79
Other retail . . . . . . . . . . . . . . . . .16 .44 .72 .64 .64 .54
Real estate . . . . . . . . . . . . . . . . . .08 .30 .73 .19 .11 .16
Lease financing . . . . . . . . . . . . . . . .14 .29 1.08 .87 (.47) 4.08
Foreign . . . . . . . . . . . . . . . . . . . (.04) 1.32 .23 (.40) .06 31.43
Total loans . . . . . . . . . . . . . . . . . .31 .48 .99 .47 .37 .66
Net loan losses to average loans excluding
foreign. . . . . . . . . . . . . . . . . .31% .47% .99% .47% .37% .42%
Year-end allowance to outstanding loans . . . 1.76 1.80 1.75 1.27 1.12 1.14
Earnings coverage of net loan losses* . . . . 11.17x 7.29x 2.77x 6.09x 7.24x 4.22x
*Earnings before income taxes and provision for loan losses
excluding subsidiary sales and securities transactions
- ------------------------------------------------------------------------------------------------------------------------------------
22
25
Noninterest Income
Other operating revenue rose $64.937 million or 12.1 percent
for the year. Good growth was achieved in most major categories
of noninterest income.
Credit card fee income increased $23.712 million or 30.4
percent in 1993, reflecting both good growth in new accounts and
increased sales volume. During the year, the corporation introduced a
First-Year Prime pricing option on its Visa and MasterCard credit
cards. This is in addition to Wachovia's popular Prime Plus and No
Fee pricing options. Annual credit card fees and cardholder
interchange income represented 76 percent of credit card fee income.
Income on cash advances and late charge fees are recorded as part of
credit card interest income.
Deposit account service revenues rose $13.348 million or 7
percent due to growth in commercial analysis fees, consumer demand
deposit charges and overdraft fees. Trading account activities
recorded gains of $13.103 million for the year compared with losses
of $11.542 million in 1992 which stemmed from hedging in
mortgage-backed securities. This portfolio was affected adversely in
1992 by prepayment experience substantially above historical norms,
as well as abnormal changes in historical rate relationships between
mortgage-backed securities and hedging instruments. This was offset
by the net interest income earned on the inventory of mortgage-backed
trading securities during the year.
Trust fees grew $10.526 million or 9.6 percent, as a result of
increased volumes of personal and institutional business combined
with improved portfolio valuations associated with rising prices in
the stock and bond markets. In the second quarter of the year, the
corporation expanded its Biltmore Funds, a proprietary family of
mutual funds, from five to eleven investment portfolios. The funds
had assets totaling $1.285 billion at year-end. At December 31, 1993,
trust assets totaled $92.287 billion with $17.950 billion under
management. This compared with $85.806 billion a year earlier with
$16.147 billion under management.
Mortgage fee income, which primarily includes servicing and
origination fees and revenues from mortgage loan sales, decreased
$977 thousand or 2.4 percent for the year. Combined servicing and
origination fees were up $6.035 million or 13.7 percent. However,
increased mortgage prepayments in a lower interest rate environment
resulted in write-offs of excess servicing fees amounting to $1.554
million. At year-end 1993, the mortgage portfolio serviced totaled
$9.007 billion, representing 135,637 loans compared with $8.591
billion and 135,068 loans a year earlier. Remaining categories of
noninterest income, excluding revenues from student loan servicing
and gains from securities and subsidiary sales, rose $21.398 million
or 22.2 percent.
In February of 1993, the corporation sold its student loan
services subsidiary. Consequently, revenue comparisons between 1993
and 1992 for student loan servicing are not meaningful. The sale
resulted in a pretax gain of $8.030 million. This subsidiary's net
income for 1992 was less than 1 percent of the corporation's
consolidated net income. In the 1992 third quarter, a consumer
finance subsidiary was sold resulting in a pretax gain of $19.486
million. The net income of this subsidiary for the first six months
of 1992
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 10
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
Service charges on deposit accounts . . . . . . . . . . . . $202,885 $189,537 $170,827 $155,808 $136,620 $126,146
Fees for trust services . . . . . . . . . . . . . . . . . . 120,030 109,504 102,665 99,572 101,072 87,959
Credit card income -- net of interchange payments . . . . . 101,780 78,068 62,814 55,202 50,092 45,243
Mortgage fee income . . . . . . . . . . . . . . . . . . . . 39,101 40,078 28,608 20,741 16,003 16,260
Trading account profits (losses) -- excluding interest. . . 13,103 (11,542) 11,541 11,637 7,510 7,293
Insurance premiums and commissions. . . . . . . . . . . . . 11,847 15,002 12,819 14,232 15,387 15,180
Bankers' acceptance and letter of credit fees . . . . . . . 19,668 20,141 14,232 11,605 11,655 7,263
Student loan servicing . . . . . . . . . . . . . . . . . . 5,535 33,250 31,470 29,841 27,230 23,915
Other service charges and fees. . . . . . . . . . . . . . . 48,915 44,585 42,108 34,919 30,883 27,766
Other income. . . . . . . . . . . . . . . . . . . . . . . . 37,315 16,619 13,094 25,295 15,365 9,440
-------- -------- -------- -------- -------- --------
Total other operating revenue. . . . . . . . . . . . 600,179 535,242 490,178 458,852 411,817 366,465
Gain on sale of subsidiary. . . . . . . . . . . . . . . . . 8,030 19,486 -- -- -- --
Investment securities gains . . . . . . . . . . . . . . . . 19,394 1,497 11,091 6,218 7,625 5,213
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $627,603 $556,225 $501,269 $465,070 $419,442 $371,678
======== ========= ======== ======== ======== ========
- ----------------------------------------------------------------------------------------------------------------------------------
23
26
was 1.2 percent of the consolidated total. Securities gains in
1993 totaled $19.394 million, including $18.422 million from the sale
of three equity investments. This compared with investment securities
gains of $1.497 million in 1992.
Noninterest Expense
Noninterest expense increased $35.584 million or 3.2 percent
for the year. Careful expense control remains an important operating
principle with management. The corporation's overhead ratio measuring
noninterest expense to taxable equivalent net interest income and
noninterest income, excluding securities and subsidiary sales,
dropped to 57 percent from 58.6 percent in 1992. This compared with a
median overhead ratio of 62.5 percent in 1993 for the 25 largest U.S.
banks, as shown in the accompanying chart.
Total personnel expense rose $28.857 million or 5.3 percent.
Salaries expense edged up $4.428 million or 1 percent. Employee
benefits expense rose $24.429 million or 27.6 percent. This primarily
reflected a special contribution to the retirement savings and profit
sharing plan for employees in recognition of the corporation's 1993
earnings results and the impact of a new accounting change for
postretirement expenses. The corporation adopted Statement of
Financial Accounting Standards No. 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions" (FASB 106), on January
1, 1993, which requires the accrual of nonpension benefits as
employees render service. The corporation has elected, under the
transitional method of adoption, to amortize the accumulated
postretirement benefits obligation of $63.041 million over 20 years.
NONINTEREST EXPENSE AS A PERCENTAGE
OF TOTAL ADJUSTED REVENUES (EXCLUDING
SECURITIES AND SUBSIDIARY SALE GAINS)
(Graph - SEE GRAPHICS
APPENDIX)
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 11
- -----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
------- -------- ------- ------- -------- --------
Salaries . . . . . . . . . . . . . . . . . . . $ 455,621 $ 451,193 $ 443,273 $413,592 $403,888 $379,169
Employee benefits. . . . . . . . . . . . . . . 113,059 88,630 81,216 73,881 81,110 77,804
---------- ---------- --------- -------- -------- --------
Total personnel expense . . . . . . . . . 568,680 539,823 524,489 487,473 484,998 456,973
Net occupancy expense . . . . . . . . . . . . 82,070 80,673 75,729 71,402 64,044 60,599
Equipment expense . . . . . . . . . . . . . . 102,246 100,916 99,569 98,042 101,101 98,925
Postage and delivery . . . . . . . . . . . . . 38,160 37,036 38,188 33,655 32,888 31,064
Outside data processing, programming and software 38,613 33,082 30,671 27,684 28,027 23,392
Stationery and supplies . . . . . . . . . . . 25,344 26,342 28,507 23,289 24,949 23,505
Advertising and sales promotion. . . . . . . . 38,141 27,911 22,139 30,010 24,753 20,706
Professional services . . . . . . . . . . . . 17,144 18,412 25,786 18,887 15,536 16,443
Travel and business promotion . . . . . . . . 15,563 13,578 13,641 13,637 13,393 13,206
FDIC insurance and regulatory examinations . . 53,663 53,970 49,629 27,377 18,736 15,885
Check clearing and other bank services . . . . 10,159 10,391 11,334 10,310 9,187 8,384
Amortization of intangible assets. . . . . . . 28,001 34,423 51,756 19,815 14,816 14,822
Foreclosed property expense. . . . . . . . . . 7,654 9,755 15,655 4,845 2,100 1,896
Other expense. . . . . . . . . . . . . . . . . 105,798 109,340 109,424 85,858 82,362 78,359
---------- ---------- ---------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . $1,131,236 $1,095,652 $1,096,517 $952,284 $916,890 $864,159
========== ========== ========== ======== ======== ========
Overhead ratio . . . . . . . . . . . . . . . . 57.0% 58.6% 62.5% 58.4% 60.6% 61.1%
- ------------------------------------------------------------------------------------------------------------------------------------
24
27
For 1993, postretirement benefits expense was approximately
$5.210 million higher under FASB 106 than would have been recorded
under the previous accounting method.
Net occupancy and equipment expense increased $2.727 million or
1.5 percent. Other combined categories of noninterest expense were
higher by $4 million or 1.1 percent. Total foreclosed property
expense included write-downs of $8.317 million in 1993 versus $6.032
million in 1992.
Income Taxes
Applicable income taxes rose $32.467 million or 19.9 percent in
1993, reflecting increased federal tax rates and higher levels of
pretax income. Income taxes computed at the statutory rate are
reduced primarily by the interest earned on state and municipal debt
securities and industrial revenue obligations. Also, within certain
limitations, one-half of the interest income of qualifying employee
stock ownership plan loans is exempt from federal taxes. The interest
earned on state and municipal debt instruments is exempt from federal
taxes and, except for out-of-state issues, from North Carolina and
Georgia taxes as well, and results in substantial interest savings
for local governments and their constituents.
During the first quarter of 1993, the corporation prospectively
adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FASB 109). The adoption changes the
corporation's method of accounting for income taxes from the deferred
method previously required to an asset and liability approach to
accounting for income taxes. The cumulative impact of this change in
accounting principle was a tax benefit of $2.700 million, which was
included in income tax expense for 1993.
The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts
and the tax base of assets and liabilities. Since FASB 109 requires
deferred tax assets and liabilities to be adjusted to reflect the
effect of enacted tax law or rate changes, future tax legislation
will have an impact on deferred income tax expense.
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME TAXES (thousands) TABLE 12
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
----------------- ------------------ -------------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
Income before income taxes. . . . . . . . . . . . . . . . . . $687,540 $596,203 $280,918
======== ======== ========
Federal income taxes at statutory rate. . . . . . . . . . . . $240,639 35.0 $202,709 34.0 $ 95,512 34.0
State and local income taxes -- net of federal tax benefit. . 7,235 1.1 8,290 1.4 3,340 1.2
Effect of tax-exempt securities interest and other income . . (50,817) (7.4) (49,783) (8.4) (59,165) (21.0)
Tax reserves. . . . . . . . . . . . . . . . . . . . . . . . . 2,594 .4 2,874 .5 5,903 2.1
Goodwill and deposit base intangible amortization . . . . . . 298 -- (328) (.1) 4,541 1.6
Other items . . . . . . . . . . . . . . . . . . . . . . . . . (4,504) (.7) (784) (.1) 1,247 .4
-------- ----- -------- ----- -------- ----
Total tax expense. . . . . . . . . . . . . . . . . . . $195,445 28.4 $162,978 27.3 $ 51,378 18.3
======== ===== ======== ===== ======== ====
Currently payable:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . $209,853 107.4 $159,787 98.0 $ 90,221 175.6
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . 289 .1 261 .2 641 1.2
State and local . . . . . . . . . . . . . . . . . . . . . . 11,966 6.1 14,667 9.0 5,035 9.8
-------- ----- -------- ----- -------- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . 222,108 113.6 174,715 107.2 95,897 186.6
Deferred:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . (25,828) (13.2) (9,631) (5.9) (44,171) (86.0)
State. . . . . . . . . . . . . . . . . . . . . . . . . . . . (835) (.4) (2,106) (1.3) 25 .1
-------- ----- -------- ----- -------- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . (26,663) (13.6) (11,737) (7.2) (44,146) (85.9)
Deferred investment tax credit amortization . . . . . . . . . -- -- -- -- (373) (.7)
-------- ----- -------- ----- -------- -----
Total tax expense. . . . . . . . . . . . . . . . . . . $195,445 100.0 $162,978 100.0 $ 51,378 100.0
======== ===== ======== ===== ======== =====
- ------------------------------------------------------------------------------------------------------------------------------------
25
28
SHAREHOLDERS' EQUITY AND CAPITAL RATIOS
Shareholders' equity at December 31, 1993 totaled $3.018
billion, an increase of $243 million or 8.8 percent from $2.775
billion a year earlier. Equity averaged $2.872 billion for the year,
higher by $276 million or 10.6 percent from $2.596 billion in 1992.
Wachovia's book value at December 31, 1993 was $17.61 per share, up
8.8 percent from $16.18 per share at year-end 1992.
Wachovia's internal capital generation rate (net income less
dividends as a percentage of average equity) was 10.5 percent in 1993
versus 10.1 percent in 1992.
The corporation's board of directors has authorized the
repurchase of up to 5 million shares of Wachovia common stock for
various corporate purposes, including the issuance of shares for the
corporation's employee stock plans and dividend reinvestment plan.
Share repurchase began on July 1, 1993. During 1993, 2,730,200 shares
were repurchased at an average price of $35.35 per share for a total
cost of $96.511 million. The number of shares available for possible
repurchase at year-end 1993 totaled 2,269,800.
Intangible assets totaled $90.118 million at December 31, 1993,
a decrease of $12.919 million or 12.5 percent from $103.037 million a
year earlier. The decline reflected both normal amortization of
intangibles and $6.966 million of accelerated write-downs of mortgage
servicing rights and credit card premiums. These write-downs took
place during a period of sharply declining interest rates, resulting
in the refinancing of large numbers of mortgages serviced and a
runoff of high rate cardholder balances from purchased portfolios.
The 1993 year-end total consisted of $40.875 million in mortgage
servicing rights, $32.451 million in goodwill, $10.647 million in
deposit base intangibles and $6.145 million in other intangibles.
Comparable amounts at year-end 1992 were $45.443 million in mortgage
servicing rights, $33.941 million in goodwill, $13.984 million in
deposit base intangibles and $9.669 million in other intangibles.
Regulatory agencies divide capital into Tier I (consisting of
shareholders' equity less ineligible intangible assets) and Tier II
(consisting of the allowable portion of the reserve for loan losses
and certain long-term debt) and measure capital adequacy by applying
both capital levels to a banking company's risk-adjusted assets and
off-balance sheet items. In addition, regulatory agencies have
established a Tier I leverage ratio which measures Tier I capital to
average assets less ineligible intangible assets.
Regulatory guidelines require a minimum total capital ratio to
risk-adjusted assets ratio of 8 percent with one-half consisting of
tangible common shareholders' equity and a minimum Tier I leverage
ratio of 3 percent. Banks which meet or exceed a Tier I ratio of 6
percent, a total capital to risk-adjusted assets ratio of 10 percent
and a Tier I leverage ratio of 5 percent are considered well
capitalized by regulatory standards.
--------------------------------------------------------------------------------------------------------------------------
CAPITAL COMPONENTS AND RATIOS TABLE 13
December 31 (thousands)
--------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
---------- ---------- ----------
Tier I capital:
Common shareholders' equity . . . . . . . . . . . . . $ 3,017,947 $ 2,774,767 $ 2,484,414
Less ineligible intangible assets . . . . . . . . . . 32,451 33,941 33,198
----------- ----------- -----------
Total Tier I capital . . . . . . . . . . . . . . . 2,985,496 2,740,826 2,451,216
Tier II capital:
Allowable allowance for loan losses . . . . . . . . . 384,032 348,887 332,528
Allowable long-term debt. . . . . . . . . . . . . . . 583,738 344,983 136,682
----------- ----------- -----------
Tier II capital additions. . . . . . . . . . . . . 967,770 693,870 469,210
----------- ----------- -----------
Total capital. . . . . . . . . . . . . . . . . . . $ 3,953,266 $ 3,434,696 $ 2,920,426
=========== =========== ===========
Risk-adjusted assets. . . . . . . . . . . . . . . . . . . $30,701,782 $27,880,304 $26,583,836
Quarterly average assets. . . . . . . . . . . . . . . . . $35,419,829 $32,518,351 $32,180,449
Risk-based capital ratios:
Tier I capital. . . . . . . . . . . . . . . . . . . . 9.72% 9.83% 9.22%
Total capital . . . . . . . . . . . . . . . . . . . . 12.88 12.32 10.99
Tier I leverage ratio . . . . . . . . . . . . . . . . . . 8.44% 8.44% 7.62%
Shareholders' equity to total assets. . . . . . . . . . . 8.26% 8.32% 7.49%
--------------------------------------------------------------------------------------------------------------------------
26
29
At December 31, 1993, Wachovia's Tier I to risk-adjusted assets
ratio was 9.72 percent and including Tier II was 12.88 percent. The
corporation's Tier I leverage ratio was 8.44 percent. These capital
ratios remain well in excess of minimum regulatory requirements.
Dividends
The corporation paid cash dividends of $191.488 million for
1993, an increase of $20.732 million or 12.1 percent from the
$170.756 million paid in 1992. This represents a payout of net income
amounting to 38.9 percent versus 39.4 percent a year ago. Wachovia's
payout ratio ranks among the highest of the 25 largest U.S. banks.
Cash dividends per share totaled $1.11, up 11 percent from $1.00 per
share paid in the prior year.
At its meeting on January 28, 1994, the board of directors
declared a first quarter dividend of $.30 per share, which is 11.1
percent higher than the $.27 per share paid in the same period of
1993. The dividend is payable on March 1 to shareholders of record on
February 8, 1994.
Additional dividend information is presented on pages 62 and 63.
YEAR-END SHAREHOLDERS'
EQUITY PER SHARE
(Graph - SEE GRAPHICS
APPENDIX)
- -----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF SHAREHOLDERS' EQUITY TABLE 14
(thousands, except per share)
- -----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ----------
Balance at beginning of year . . . . . . . $2,774,767 $2,484,414 $2,370,928 $2,176,503 $1,952,422 $1,651,473
Net income . . . . . . . . . . . . . . . . 492,095 433,225 229,540 345,677 328,149 298,766
Cash dividends declared on common stock:
Wachovia Corporation . . . . . . . . . . (191,488) (170,756) (128,713) (114,051) (96,313) (78,133)
Pooled company prior to merger . . . . . -- -- (17,691) (16,746) (15,150) (13,468)
Stock option and employee benefit plans. . 14,534 19,190 10,818 7,675 5,679 2,426
Dividend reinvestment plan . . . . . . . . 10,953 9,191 6,262 5,522 3,962 3,352
Conversion of notes and debentures . . . . 16,435 4,549 10,268 1,233 4,282 84,061
Bank acquisitions . . . . . . . . . . . . -- -- 6,240 -- 9,362 11,974
Common stock acquired . . . . . . . . . . (98,804) (31,197) (1,215) (9,558) (13,384) (7,511)
Loan to ESOP . . . . . . . . . . . . . . . -- -- -- (25,000) -- --
Repayment of loan to ESOP. . . . . . . . . -- 25,000 -- -- -- --
Miscellaneous (net). . . . . . . . . . . . (545) 1,151 (2,023) (327) (2,506) (518)
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of year . . . . . . . . . . $3,017,947 $2,774,767 $2,484,414 $2,370,928 $2,176,503 $1,952,422
========== ========== ========== ========== ========== ==========
Book value per share at year-end . . . . . $ 17.61 $ 16.18 $ 14.56 $ 14.07 $ 12.96 $ 11.70
Book value percentage increase over prior
year-end. . . . . . . . . . . . . . . 8.8% 11.1% 3.5% 8.6% 10.8% 12.9%
Total dividends as a percentage of net
income . . . . . . . . . . . . . . . 38.9 39.4 63.8 37.8 34.0 30.7
Equity at year-end to year-end:
Total assets . . . . . . . . . . . . . . 8.3% 8.3% 7.5% 7.1% 7.2% 7.1%
Net loans . . . . . . . . . . . . . . . 13.4 13.4 12.3 11.3 11.3 11.2
Deposits . . . . . . . . . . . . . . . . 12.9 11.9 10.8 10.2 9.9 9.5
Equity and long-term debt. . . . . . . . 50.5 69.9 93.6 93.5 90.7 89.3
- -----------------------------------------------------------------------------------------------------------------------------------
27
30
FOURTH QUARTER ANALYSIS
Net income per fully diluted share for the fourth quarter of
1993 was $.71, an increase of 12.9 percent from $.63 per share earned
in the same period of 1992. Net income totaled $122.997 million,
up $13.326 million or 12.2 percent from $109.671 million and
represented returns of 16.8 percent on shareholders' equity and 1.39
percent on assets.
Taxable equivalent net interest income rose $11.028 million or
3.2 percent. Higher volume of interest-earning assets accounted for
the increase, which was offset partially by the impact of reduced
rates. Loans grew $1.573 billion or 7.6 percent led by credit cards,
automobile financing, residential mortgages and regular commercial
loans. Investment securities increased $1.513 billion or 23.3 percent.
The net yield on interest-earning assets decreased 29 basis points,
reflecting both a slower decline in funding costs and higher levels of
interest-earning assets with lower yields.
The provision for loan losses was $18.013 million, down $10.551
million or 36.9 percent from $28.564 million taken in the final period
of 1992, but exceeded net charge-offs for the quarter by $707
thousand. Net loan losses totaled $17.306 million or .31 percent of
average loans, lower by $10.995 million or 38.9 percent from the
year-earlier quarter. Real estate net loan losses had the greatest
improvement, dropping to $1.156 million or .06 percent of average real
estate loans from $12.306 million or .68 percent of related loans in
the 1992 fourth period. Net loan losses on other retail loans
decreased $613 thousand or 25.3 percent to $1.812 million or .23
percent of average related loans. Credit card net charge-offs
increased slightly but dropped as a percentage of average credit card
loans to 1.74 percent versus 2.48 percent in the same period of 1992.
QUARTERLY NET INCOME PER SHARE, QUARTERLY NET INCOME PER SHARE,
1992 1993
(FULLY DILUTED) (FULLY DILUTED)
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX)
- ------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 15
- ------------------------------------------------------------------------------------------------------------------------------
1993 1992
Fourth Fourth
Quarter Quarter Change
------- ------- ------
Interest income -- taxable equivalent . . . . . . . . . $3.28 $3.19 $ .09
Interest expense . . . . . . . . . . . . . . . . . . . 1.25 1.21 .04
------ ----- -----
Net interest income -- taxable equivalent . . . . . . . 2.03 1.98 .05
Taxable equivalent adjustment . . . . . . . . . . . . . .15 .11 .04
------ ----- -----
Net interest income . . . . . . . . . . . . . . . . . . 1.88 1.87 .01
Provision for loan losses . . . . . . . . . . . . . . . .10 .17 (.07)
------ ----- -----
Net interest income after provision for loan losses . . 1.78 1.70 .08
Other operating revenue . . . . . . . . . . . . . . . . .88 .81 .07
Investment securities gains . . . . . . . . . . . . . . .04 -- .04
------ ----- -----
Total other income . . . . . . . . . . . . . . . . . . .92 .81 .11
Personnel expense . . . . . . . . . . . . . . . . . .85 .80 .05
Other expense . . . . . . . . . . . . . . . . . . . . . .88 .83 .05
------ ----- -----
Total other expense . . . . . . . . . . . . . . . . . . 1.73 1.63 .10
Income before income taxes. . . . . . . . . . . . . . . .97 .88 .09
Applicable income taxes . . . . . . . . . . . . . . . . .26 .24 .02
------ ----- -----
Net income. . . . . . . . . . . . . . . . . . . . . . . $ .71 $ .64 $ .07
====== ===== =====
- ----------------------------------------------------------------------------------------------------------------------------
28
31
Other operating revenue rose $12.450 million or 8.9 percent
from a year ago. Credit card fee income was up $5.017 million or 22
percent, trust service fees were higher by $3.965 million or 15
percent and deposit account service revenues increased $1.036 million
or 2.2 percent. Trading account profits grew $1.289 million, and
mortgage fee income had gains of $628 thousand or 6.6 percent. Other
combined operating
- --------------------------------------------------------------------------------------------------------------------------------
QUARTERLY FINANCIAL SUMMARY TABLE 16
- --------------------------------------------------------------------------------------------------------------------------------
1993 1992
----------------------------------------- --------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- ------- ------- -------- --------- ------- ------- -------
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent. . . . $568,749 $558,418 $549,446 $545,125 $550,733 $555,454 $584,017 $611,121
Interest expense . . . . . . . . . . . . . . 217,832 211,145 203,377 206,658 210,844 224,698 250,800 280,686
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income -- taxable equivalent. . 350,917 347,273 346,069 338,467 339,889 330,756 333,217 330,435
Taxable equivalent adjustment. . . . . . . . 24,732 26,487 24,423 23,259 19,189 19,120 19,948 20,990
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income. . . . . . . . . . . . . 326,185 320,786 321,646 315,208 320,700 311,636 313,269 309,445
Provision for loan losses. . . . . . . . . . 18,013 23,483 26,084 25,072 28,564 28,234 27,984 34,638
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses . . . . . . . . . . . . 308,172 297,303 295,562 290,136 292,136 283,402 285,285 274,807
Other operating revenue. . . . . . . . . . . 152,441 149,761 148,593 149,384 139,991 136,132 129,504 129,615
Gain on sale of subsidiary . . . . . . . . . -- -- -- 8,030 -- 19,486 -- --
Investment securities gains . . . . . . . . 7,216 702 1,254 10,222 280 611 225 381
-------- -------- -------- -------- -------- -------- -------- --------
Total other income . . . . . . . . . . . . . 159,657 150,463 149,847 167,636 140,271 156,229 129,729 129,996
Personnel expense . . . . . . . . . . . . . 147,709 142,393 138,234 140,344 138,109 135,841 133,455 132,418
Other expense. . . . . . . . . . . . . . . . 152,031 131,153 134,600 144,772 143,248 153,821 131,984 126,776
-------- -------- -------- -------- -------- -------- -------- --------
Total other expense. . . . . . . . . . . . . 299,740 273,546 272,834 285,116 281,357 289,662 265,439 259,194
Income before income taxes . . . . . . . . . 168,089 174,220 172,575 172,656 151,050 149,969 149,575 145,609
Applicable income taxes* . . . . . . . . . . 45,092 49,813 49,452 51,088 41,379 41,156 40,956 39,487
-------- -------- -------- -------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . $122,997 $124,407 $123,123 $121,568 $109,671 $108,813 $108,619 $106,122
======== ======== ======== ======== ======== ======== ======== ========
Net income per common share:
Primary . . . . . . . . . . . . . . . . $ .71 $ .71 $ .71 $ .70 $ .64 $ .63 $ .63 $ .61
Fully diluted . . . . . . . . . . . . . $ .71 $ .71 $ .70 $ .69 $ .63 $ .62 $ .62 $ .61
Cash dividends paid per
common share. . . . . . . . . . . . . . $ .30 $ .27 $ .27 $ .27 $ .25 $ .25 $ .25 $ .25
Average primary shares outstanding . . . . . 173,175 174,300 174,712 173,579 172,960 172,558 172,304 172,738
Average fully diluted shares outstanding . . 173,943 175,414 176,004 175,904 175,580 175,089 175,022 175,537
SELECTED AVERAGE BALANCES (millions)
Total assets . . . . . . . . . . . . . . . . $ 35,420 $ 33,870 $ 32,718 $ 32,473 $ 32,518 $ 31,338 $ 31,401 $ 32,067
Loans -- net of unearned income. . . . . . . 22,165 21,656 21,268 21,082 20,592 19,793 19,849 19,893
Investment securities. . . . . . . . . . . . 7,992 7,072 6,615 6,462 6,479 5,992 6,096 6,236
Other interest-earning assets. . . . . . . . 1,234 1,277 1,145 1,119 1,508 1,852 1,871 2,227
Total interest-earning assets. . . . . . . . 31,391 30,005 29,028 28,663 28,579 27,637 27,816 28,356
Interest-bearing deposits. . . . . . . . . . 17,030 16,835 16,986 17,228 17,484 17,750 18,286 18,021
Short-term borrowed funds. . . . . . . . . . 6,218 5,432 4,998 4,950 4,952 4,486 4,577 5,835
Long-term debt. . . . . . . . . . . . . . . 2,774 2,370 1,768 1,363 848 505 268 170
Total interest-bearing liabilities . . . . . 26,022 24,637 23,752 23,541 23,284 22,741 23,131 24,026
Noninterest-bearing deposits . . . . . . . . 5,544 5,410 5,253 5,208 5,416 4,971 4,748 4,647
Total deposits . . . . . . . . . . . . . . . 22,574 22,245 22,239 22,436 22,900 22,721 23,034 22,668
Shareholders' equity . . . . . . . . . . . . 2,934 2,907 2,852 2,794 2,689 2,631 2,568 2,497
RATIOS (averages)
Loans to deposits. . . . . . . . . . . . . . 98.19% 97.35% 95.63% 93.97% 89.92% 87.11% 86.17% 87.76%
Annualized net loan losses to loans. . . . . .31 .35 .32 .27 .55 .39 .42 .54
Annualized net yield on
interest-earning assets . . . . . . . . 4.44 4.59 4.78 4.79 4.73 4.76 4.82 4.69
Shareholders' equity to:
Total assets. . . . . . . . . . . . . . 8.28 8.58 8.72 8.60 8.27 8.39 8.18 7.79
Net loans . . . . . . . . . . . . . . . 13.48 13.68 13.66 13.50 13.30 13.55 13.19 12.79
Annualized return on assets. . . . . . . . . 1.39 1.47 1.51 1.50 1.35 1.39 1.38 1.32
Annualized return on shareholders' equity. . 16.77 17.12 17.27 17.41 16.32 16.54 16.92 17.00
*Income taxes applicable to securities transactions were $2,846,
$291, $371, $3,964, $163, $97, $64 and $146, respectively
- ----------------------------------------------------------------------------------------------------------------------------
29
32
- ------------------------------------------------------------------------------------------------------------------------------------
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- FOURTH QUARTER* TABLE 17
- ------------------------------------------------------------------------------------------------------------------------------------
Variance
Average Volume Average Rate Interest Attributable to
- ---------------- ------------- --------------------- -------------------
1993 1992 1993 1992 1993 1992 Variance Rate Volume
- ------ ------ ------ ------ --------- -------- ----------- --------- ---------
(Millions) INTEREST INCOME (Thousands)
Loans:
$ 6,273 $6,153 5.22 5.36 Commercial . . . . . . . . . . . . $ 82,541 $ 82,881 $ (340) $(1,946) $ 1,606
1,908 1,977 8.82 8.67 Tax-exempt . . . . . . . . . . . . 42,414 43,064 (650) 879 (1,529)
- ------- ------ -------- -------- -------
8,181 8,130 6.05 6.16 Total commercial . . . . . . . . 124,955 125,945 (990) (1,780) 790
706 677 8.33 9.27 Direct retail. . . . . . . . . . . 14,820 15,792 (972) (1,619) 647
2,389 2,056 8.02 9.16 Indirect retail. . . . . . . . . . 48,283 47,340 943 (6,184) 7,127
2,927 2,005 11.17 13.24 Credit card. . . . . . . . . . . . 82,439 66,713 15,726 (11,419) 27,145
329 323 11.15 11.22 Other revolving credit . . . . . . 9,266 9,105 161 (29) 190
------ ------ -------- -------- -------
6,351 5,061 9.67 10.92 Total retail . . . . . . . . . . 154,808 138,950 15,858 (16,798) 32,656
471 476 7.69 7.40 Construction . . . . . . . . . . . 9,116 8,849 267 369 (102)
3,157 3,082 7.55 7.59 Commercial mortgages . . . . . . . 60,103 58,784 1,319 (114) 1,433
3,787 3,646 7.84 8.48 Residential mortgages . . . . . . . 74,787 77,706 (2,919) (5,849) 2,930
------ ------ -------- -------- -------
7,415 7,204 7.71 8.03 Total real estate . . . . . . . 144,006 145,339 (1,333) (5,517) 4,184
147 122 8.40 9.44 Lease financing . . . . . . . . . . 3,113 2,907 206 (336) 542
71 75 4.08 4.54 Foreign . . . . . . . . . . . . . . 735 856 (121) (82) (39)
------ ------ -------- -------- -------
22,165 20,592 7.65 8.00 Total loans. . . . . . . . . . . 427,617 413,997 13,620 (17,170) 30,790
Investment securities . . . . . . .
660 750 12.14 12.10 State and municipal. . . . . . . . 20,190 22,836 (2,646) 122 (2,768)
4,339 2,363 6.09 6.92 United States Treasury . . . . . . 66,577 41,111 25,466 (5,359) 30,825
2,497 2,628 5.83 7.41 Federal agency . . . . . . . . . . 36,709 48,930 (12,221) (9,871) (2,350)
496 738 5.09 5.35 Other. . . . . . . . . . . . . . . 6,369 9,914 (3,545) (426) (3,119)
------ ------ -------- -------- -------
7,992 6,479 6.45 7.54 Total investment securities . . 129,845 122,791 7,054 (19,074) 26,128
11 260 4.08 3.73 Interest-bearing bank balances. . . 116 2,435 (2,319) 216 (2,535)
Federal funds sold and securities
purchased under resale
513 513 3.16 3.18 agreements. . . . . . . . . . . . 4,089 4,096 (7) (13) 6
710 735 3.96 4.01 Trading account assets 7,082 7,414 (332) (79) (253)
- ------- ------- -------- -------- -------
$31,391 $28,579 7.19 7.67 Total interest-earning assets . 568,749 550,733 18,016 (34,164) 52,180
======= =======
INTEREST EXPENSE
$ 3,319 $ 3,006 1.79 2.06 Interest-bearing demand . . . . . . 14,976 15,545 (569) (2,090) 1,521
6,080 5,949 2.40 2.73 Savings and money market savings. . 36,774 40,788 (4,014) (4,899) 885
5,426 5,880 4.12 4.66 Savings certificates. . . . . . . . 56,393 68,929 (12,536) (7,458) (5,078)
1,550 2,216 4.95 5.51 Large denomination certificates . . 19,338 30,664 (11,326) (2,791) (8,535)
- ------- ------- -------- -------- -------
Total time deposits in
16,375 17,051 3.09 3.64 domestic offices . . . . . . 127,481 155,926 (28,445) (22,453) (5,992)
655 433 3.13 3.34 Time deposits in foreign offices. . 5,170 3,639 1,531 (238) 1,769
- ------- ------- -------- -------- -------
17,030 17,484 3.09 3.63 Total time deposits . . . . . . 132,651 159,565 (26,914) (22,865) (4,049)
Federal funds purchased and
securities sold under
4,604 3,297 3.19 3.22 repurchase agreements . . . . . . 37,017 26,708 10,309 (199) 10,508
595 499 3.05 3.07 Commercial paper. . . . . . . . . . 4,584 3,843 741 (5) 746
1,019 1,156 3.22 3.39 Other short-term borrowed funds . . 8,276 9,846 (1,570) (431) (1,139)
- ------- ------- -------- -------- -------
Total short-term
6,218 4,952 3.18 3.25 borrowed funds. . . . . . . . 49,877 40,397 9,480 (681) 10,161
2,181 628 4.53 4.60 Bank notes. . . . . . . . . . . . . 24,913 7,260 17,653 (93) 17,746
593 220 6.96 6.55 Other long-term debt . . . . . . . 10,391 3,622 6,769 248 6,521
- ------- ------- -------- -------- -------
2,774 848 5.05 5.11 Total long-term debt . . . . . 35,304 10,882 24,422 (96) 24,518
- ------- ------- -------- -------- -------
Total interest-bearing
$26,022 $23,284 3.32 3.60 liabilities . . . . . . . . . 217,832 210,844 6,988 (16,664) 23,652
======= ======= ----- ----- -------- -------- -------
3.87 4.07 INTEREST RATE SPREAD
===== =====
NET YIELD ON INTEREST-EARNING
4.44 4.73 ASSETS AND NET INTEREST INCOME . $350,917 $339,889 $11,028 (21,173) 32,201
===== ===== ======== ======== =======
- ------------------------------------------------------------------------------------------------------------------------------------
*Interest income and yields for 1993 are presented on a fully taxable
equivalent basis using the federal income tax rate of 35% and state tax rates,
as applicable, reduced by the nondeductible portion of interest expense; the
taxable equivalent adjustment for 1992 reflects the federal income tax rate of
34%
30
33
- ------------------------------------------------------------------------------------------------------------------------------------
QUARTERLY ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 18
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992
---------------------------------------- ---------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
SUMMARY OF TRANSACTIONS
Balance at beginning of period . . . . . . $404,091 $399,480 $390,621 $379,557 $379,294 $375,047 $367,971 $360,193
Allowance of company sold . . . . . . . . . -- -- --- -- -- (4,811) -- --
Provision for loan losses . . . . . . . . . 18,013 23,483 26,084 25,072 28,564 28,234 27,984 34,638
Deduct net loan losses:
Loans charged off:
Commercial . . . . . . . . . . . . . . 1,418 1,875 2,129 1,370 3,567 4,759 2,301 2,526
Credit card . . . . . . . . . . . . . . 15,392 17,147 15,650 14,802 15,026 15,224 18,099 19,514
Other revolving credit . . . . . . . . 1,375 758 943 846 1,480 825 1,340 982
Other retail . . . . . . . . . . . . . 2,754 1,853 1,904 1,920 3,276 3,361 4,452 6,132
Real estate . . . . . . . . . . . . . . 4,899 3,706 3,384 2,525 13,066 2,767 5,182 6,026
Lease financing . . . . . . . . . . . . 81 110 63 204 184 127 156 201
Foreign . . . . . . . . . . . . . . . . -- -- -- -- -- -- 960 --
-------- -------- -------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . 25,919 25,449 24,073 21,667 36,599 27,063 32,490 35,381
Recoveries:
Commercial . . . . . . . . . . . . . . 971 1,354 1,382 1,865 3,726 779 5,882 2,207
Credit card . . . . . . . . . . . . . 2,625 2,566 2,645 2,480 2,618 2,856 2,971 2,623
Other revolving credit . . . . . . . . 270 228 316 215 259 220 318 227
Other retail . . . . . . . . . . . . . 942 842 996 1,011 851 1,531 1,425 1,674
Real estate . . . . . . . . . . . . . 3,743 1,525 1,445 1,980 760 2,432 884 1,716
Lease financing . . . . . . . . . . . 53 54 55 102 77 69 102 74
Foreign . . . . . . . . . . . . . . . 9 8 9 6 7 -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . 8,613 6,577 6,848 7,659 8,298 7,887 11,582 8,521
-------- -------- -------- -------- -------- -------- -------- --------
Net loan losses . . . . . . . . . . . . . 17,306 18,872 17,225 14,008 28,301 19,176 20,908 26,860
-------- -------- -------- -------- -------- -------- -------- --------
Balance at end of period . . . . . . . . . $404,798 $404,091 $399,480 $390,621 $379,557 $379,294 $375,047 $367,971
======== ======== ======== ========= ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES)
BY CATEGORY
Commercial . . . . . . . . . . . . . . . . $ 447 $ 521 $ 747 $ (495) $ (159) $ 3,980 $ (3,581) 319
Credit card . . . . . . . . . . . . . . . . 12,767 14,581 13,005 12,322 12,408 12,368 15,128 16,891
Other revolving credit . . . . . . . . . . 1,105 530 627 631 1,221 605 1,022 755
Other retail . . . . . . . . . . . . . . . 1,812 1,011 908 909 2,425 1,830 3,027 4,458
Real estate . . . . . . . . . . . . . . . . 1,156 2,181 1,939 545 12,306 335 4,298 4,310
Lease financing . . . . . . . . . . . . . . 28 56 8 102 107 58 54 127
Foreign . . . . . . . . . . . . . . . . . . (9) (8) (9) (6) (7) -- 960 --
-------- -------- -------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . $ 17,306 $ 18,872 $ 17,225 $ 14,008 $ 28,301 $ 19,176 $ 20,908 $ 26,860
======== ======== ======== ======== ======== ======== ======== ========
ANNUALIZED NET LOAN LOSSES
(RECOVERIES) TO AVERAGE
LOANS BY CATEGORY
Commercial. . . . . . . . . . . . . . . . . .02% .03% .04% (0.2%) (.01%) .21% (.18%) .02%
Credit card . . . . . . . . . . . . . . . . 1.74 2.16 2.11 2.18 2.48 2.75 3.64 4.15
Other revolving credit . . . . . . . . . . 1.34 .64 .76 .78 1.51 .75 1.27 .93
Other retail . . . . . . . . . . . . . . . .23 .14 .13 .13 .35 .27 .45 .66
Real estate . . . . . . . . . . . . . . . . .06 .12 .10 .03 .68 .02 .24 .24
Lease financing . . . . . . . . . . . . . . .08 .16 .02 .33 .35 .20 .18 .44
Foreign . . . . . . . . . . . . . . . . . . (.05) (.04) (.04) (.03) (.04) -- 5.42 --
Total loans. . . . . . . . . . . . . . . . .31 .35 .32 .27 .55 .39 .42 .54
Period-end allowance to
outstanding loans . . . . . . . . . . . . 1.76% 1.83% 1.84% 1.80% 1.80% 1.89% 1.89% 1.82%
- ------------------------------------------------------------------------------------------------------------------------------------
31
34
revenue categories, excluding income from student loan
servicing activities and securities gains, were up $9.442 million or
40 percent and included $5.796 million from the sale of the
corporation's client ATM processing activity. The sale of this
activity will have no significant impact on the corporation's future
results of operations. Investment securities gains totaled $7.216
million versus $280 thousand in the 1992 fourth quarter.
Noninterest expense was higher by $18.383 million or 6.5
percent. Total personnel expense increased $9.600 million or 7
percent. Salaries expense was higher by $6.148 million or 5.3
percent, and employee benefits expense grew $3.452 million or 15.7
percent. Combined net occupancy and equipment expense expanded $4.575
million or 9.9 percent, while remaining categories of noninterest
expense were up a combined $4.208 million or 4.3 percent. Total
foreclosed property expense included write-downs of $2.328 million
for the period.
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME (thousands) TABLE 19
- -----------------------------------------------------------------------------------------------------------------------------------
1993 1992
----------------------------------- --------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- ------- ------- ------- -------- -------- ------- -------
Service charges on deposit accounts . . . . . . . $48,982 $51,909 $51,622 $50,372 $47,946 $49,572 $46,085 $45,934
Fees for trust services . . . . . . . . . . . . . 30,352 29,697 29,614 30,367 26,387 27,437 27,651 28,029
Credit card income -- net of
interchange payments . . . . . . . . . . . . 27,834 26,009 25,629 22,308 22,817 20,379 19,573 15,299
Mortgage fee income . . . . . . . . . . . . . . . 10,130 9,699 10,102 9,170 9,502 10,175 11,584 8,817
Trading account profits (losses) --
excluding interest . . . . . . . . . . . . . 2,097 3,521 2,746 4,739 808 (1,914) (6,299) (4,137)
Insurance premiums and commissions. . . . . . . . 2,167 2,897 3,764 3,019 3,490 3,601 4,048 3,863
Bankers' acceptance and letter
of credit fees . . . . . . . . . . . . . . . 4,633 4,925 5,276 4,834 4,353 4,952 4,068 6,768
Student loan servicing. . . . . . . . . . . . . . -- -- -- 5,535 8,927 8,230 7,935 8,158
Other service charges and fees. . . . . . . . . . 11,948 12,248 11,907 12,812 10,612 9,216 11,352 13,405
Other income. . . . . . . . . . . . . . . . . . . 14,298 8,856 7,933 6,228 5,149 4,484 3,507 3,479
-------- -------- -------- -------- -------- -------- -------- --------
Total other operating revenue . . . . . . . . 152,441 149,761 148,593 149,384 139,991 136,132 129,504 129,615
Gain on sale of subsidiary. . . . . . . . . . . . -- -- -- 8,030 -- 19,486 -- --
Investment securities gains . . . . . . . . . . . 7,216 702 1,254 10,222 280 611 225 381
-------- -------- -------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . $159,657 $150,463 $149,847 $167,636 $140,271 $156,229 $129,729 $129,996
======== ======== ======== ======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
32
35
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE (thousands) TABLE 20
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992
----------------------------------------- -----------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------- -------- -------- --------
Salaries . . . . . . . . . . . . . . . . . $122,205 $112,982 $110,119 $110,315 $116,057 $113,583 $111,348 $110,205
Employee benefits. . . . . . . . . . . . . 25,504 29,411 28,115 30,029 22,052 22,258 22,107 22,213
-------- -------- -------- -------- -------- -------- -------- --------
Total personnel expense . . . . . . 147,709 142,393 138,234 140,344 138,109 135,841 133,455 132,418
Net occupancy expense. . . . . . . . . . . 23,587 18,950 19,660 19,873 21,432 21,240 18,789 19,212
Equipment expense. . . . . . . . . . . . . 27,283 24,856 25,633 24,474 24,863 25,114 25,741 25,198
Postage and delivery . . . . . . . . . . . 9,315 8,921 11,643 8,281 8,439 10,090 9,191 9,316
Outside data processing,
programming and software . . . . . . . . 12,494 9,194 8,198 8,727 10,428 5,770 9,168 7,716
Stationery and supplies. . . . . . . . . . 7,018 6,353 5,572 6,401 7,088 6,584 6,227 6,443
Advertising and sales promotion. . . . . . 11,435 7,681 7,805 11,220 7,993 7,727 6,120 6,071
Professional services. . . . . . . . . . . 6,381 4,120 3,771 2,872 4,538 4,242 4,941 4,691
Travel and business promotion. . . . . . . 4,706 3,668 3,905 3,284 4,310 2,633 3,460 3,175
FDIC insurance and regulatory
examinations . . . . . . . . . . . . . . 13,122 13,274 13,084 14,183 13,029 13,620 13,642 13,679
Check clearing and other bank services . . 2,348 2,563 2,586 2,662 2,683 2,491 2,620 2,597
Amortization of intangible assets. . . . . 6,844 7,502 6,540 7,115 6,015 15,624 6,390 6,394
Foreclosed property expense. . . . . . . . 2,630 1,737 1,226 2,061 2,625 3,706 2,707 717
Other expense. . . . . . . . . . . . . . . 24,868 22,334 24,977 33,619 29,805 34,980 22,988 21,567
-------- -------- -------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . $299,740 $273,546 $272,834 $285,116 $281,357 $289,662 $265,439 $259,194
======== ======== ======== ======== ======== ======== ======== ========
Overhead ratio . . . . . . . . . . . . . . 59.5% 55.0% 55.2% 58.4% 58.6% 62.0% 57.4% 56.3%
- ------------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1992 vs. 1991 Net income for 1992 totaled $433.225 million and
represented returns of 16.7 percent on shareholders'
equity and 1.36 percent on assets versus net income of
$229.540 million and returns of 9.3 percent and .72
percent, respectively, in 1991. Comparisons with 1991
results were distorted by special charges related to
Wachovia's merger with South Carolina National
Corporation. During the fourth quarter of 1991, South
Carolina National took $138.5 million of special charges,
including $97.8 million to conform litigation, real estate
and loan valuation policies and practices; $23.9 million
to write down the book value of intangible assets; and
$16.8 million of merger related expenses, including
consolidation expenses, software write-offs, insurance
expense, debt issuance cost, employment contracts and
transaction costs (such as legal, investment bankers and
trustee fees) necessary to effect the acquisition.
Taxable equivalent net interest income increased 5.6
percent, the result of improved rate spreads. The net
yield on interest-earning assets rose 29 basis points.
Taxable equivalent interest income declined 15.8
percent, reflecting a 144 basis point drop in the average
rate earned and a slight decrease in average
interest-earning assets. Loans were down 2.7 percent
with gains in retail loans offset by lower overall
commercial borrowings. Credit card loans and other
revolving credit led
33
36
the growth in consumer loans, rising 13.8 percent and 7.8
percent, respectively, while commercial mortgages increased 5.2
percent. Investment securities were higher by 7.2 percent.
Interest expense decreased 34.1 percent, primarily the result
of a 192 basis point decline in the average rate paid. Average
interest-bearing liabilities were lower by 3.7 percent, also
contributing to the expense decrease. Total interest-bearing deposits
declined less than 1 percent with savings certificates and large
denomination certificates down a combined 11.8 percent, while
interest-bearing demand and savings and money-market savings rose a
combined 13 percent. Short-term borrowed funds decreased 18.4 percent
and long-term debt grew by $271 million due to the introduction of
the medium-term bank note program by Wachovia Bank of North Carolina
in the second quarter of 1992.
Nonperforming assets at year-end 1992 dropped 14.6 percent from
a year earlier to $265.409 million or 1.25 percent of loans and
foreclosed property. Net loan losses were lower by 53.1 percent and
totaled $95.245 million or .48 percent of loans compared with
$202.999 million or .99 percent of loans in 1991. The provision for
loan losses declined 59.2 percent to $119.420 million and exceeded
net charge-offs by $24.175 million. The allowance for loan losses at
December 31, 1992 totaled $379.557 million or 1.80 percent of loans
and 218 percent coverage of nonperforming loans versus $360.193
million or 1.75 percent of loans and 149 percent coverage a year
earlier.
Higher levels of provision and charge-offs in 1991 relative to
1992 were related primarily to adjustments made at the time of
Wachovia Corporation's merger with South Carolina National to ensure
that South Carolina National's loan and real estate valuation
policies and practices were applied consistently on a mutually
satisfactory basis with those of Wachovia. In addition, recession and
general softness in commercial real estate markets during 1991
resulted in increased charge-offs and provision to rebuild the loan
loss reserve to a level considered adequate. Moderate economic
recovery, while less robust than in previous business cycles, gave
some relief to troubled borrowers in 1992 and losses declined.
Other operating revenue grew 9.2 percent. Credit card fee
income rose 24.3 percent, led by growth in new accounts and higher
business volume. Deposit account service revenues were up 11 percent.
Mortgage fee income increased 40.1 percent, prompted by heavier
refinancing as interest rates declined. Trading account activities
resulted in a net loss of $11.542 million related to mortgage-backed
securities hedging compared with income of $11.541 million in 1991.
Noninterest expense for the year decreased less than 1 percent
from 1991. Total personnel expense increased 2.9 percent, primarily
reflecting higher health care benefits. Combined net occupancy and
equipment expense rose 3.6 percent, while other remaining
categories of noninterest expense were down 5.7 percent. The
corporation's overhead ratio measuring noninterest expense to taxable
equivalent net interest income and noninterest income, excluding
securities and subsidiary sales, dropped to 58.6 percent from 62.5
percent in 1991.
34
37
MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL REPORTING
The management of Wachovia Corporation is responsible for the
preparation of the financial statements, related financial data and
other information in this annual report. The financial statements are
prepared in accordance with generally accepted accounting principles
and include amounts based on management's estimates and judgment
where appropriate. Financial information appearing throughout this
annual report is consistent with the financial statements.
In meeting its responsibility both for the integrity and
fairness of these statements and information, management depends on
the accounting system and related internal control structures that
are designed to provide reasonable assurances that transactions are
authorized and recorded in accordance with established procedures and
that assets are safeguarded and proper and reliable records are
maintained.
The concept of reasonable assurance is based on the recognition
that the cost of an internal control structure should not exceed the
related benefits. As an integral part of the internal control
structure, the corporation maintains a professional staff of internal
auditors who monitor compliance with and assess the effectiveness of
the internal control structure and coordinate audit coverage with the
independent auditors.
The Audit Committee of Wachovia's Board of Directors, composed
solely of outside directors, meets regularly with the corporation's
management, internal auditors, independent auditors and regulatory
examiners to review matters relating to financial reporting, internal
control structure and the nature, extent and results of the audit
effort. The independent auditors, internal auditors and banking
regulators have direct access to the Audit Committee with or without
management present.
The financial statements have been audited by Ernst & Young,
independent auditors, who render an independent professional opinion
on management's financial statements. Their appointment was
recommended by the Audit Committee, approved by the Board of
Directors and ratified by the shareholders. Their examination
provides an objective assessment of the degree to which the
corporation's management meets its responsibility for financial
reporting. Their opinion on the financial statements is based on
auditing procedures which include reviewing internal control
structures and performing selected tests of transactions and records
as they deem appropriate. These auditing procedures are designed to
provide a reasonable level of assurance that the financial statements
are fairly presented in all material respects.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Wachovia Corporation
We have audited the consolidated statements of condition of
Wachovia Corporation and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1993. These financial statements are
the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements
based on our audits. We did not audit the 1991 financial statements
of South Carolina National Corporation, a wholly owned subsidiary,
which statements reflect net interest income constituting 23% of
consolidated net interest income in 1991. Those statements were
audited by other auditors whose report has been furnished to us, and
our opinion, as it relates to data included for South Carolina
National Corporation, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1991, the report
of other auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Wachovia Corporation and subsidiaries at December 31, 1993 and
1992, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
As discussed in Notes K and M to the financial statements, in
1993 the company changed its methods of accounting for income taxes
and postretirement benefits.
/s/ Ernst & Young
Winston-Salem, North Carolina
January 13, 1994
35
38
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CONDITION
December 31
$ in thousands 1993 1992
------------ ------------
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . $ 2,529,528 $ 2,627,859
Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 12,478 189,553
Federal funds sold and securities
purchased under resale agreements. . . . . . . . . . . . . . . . 691,106 478,972
Trading account assets. . . . . . . . . . . . . . . . . . . . . . . . 788,779 895,968
Investment securities:
State and municipal. . . . . . . . . . . . . . . . . . . . . . . 655,157 748,017
Other investments. . . . . . . . . . . . . . . . . . . . . . . . 7,223,499 5,738,154
----------- -----------
Total investment securities (market value of $8,156,690
in 1993 and $6,793,043 in 1992) . . . . . . . . . 7,878,656 6,486,171
Loans and net leases. . . . . . . . . . . . . . . . . . . . . . . . . 22,986,307 21,096,682
Less unearned income on loans . . . . . . . . . . . . . . . . . . . . 8,819 11,029
----------- -----------
Total loans. . . . . . . . . . . . . . . . . . . . . . 22,977,488 21,085,653
Less allowance for loan losses. . . . . . . . . . . . . . . . . . . . 404,798 379,557
----------- -----------
Net loans. . . . . . . . . . . . . . . . . . . . . . . 22,572,690 20,706,096
Premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . 502,699 443,461
Due from customers on acceptances . . . . . . . . . . . . . . . . . . 434,584 748,944
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,252 789,495
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . $36,525,772 $33,366,519
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,140,884 $ 5,625,937
Interest-bearing demand. . . . . . . . . . . . . . . . . . . . . 3,515,680 3,310,883
Savings and money market savings . . . . . . . . . . . . . . . . 6,194,086 6,153,822
Savings certificates . . . . . . . . . . . . . . . . . . . . . . 5,141,410 5,568,076
Large denomination certificates. . . . . . . . . . . . . . . . . 1,507,461 2,142,534
Noninterest-bearing time . . . . . . . . . . . . . . . . . . . . 45,802 55,399
----------- -----------
Total deposits in domestic offices . . . . . . . . . . 22,545,323 22,856,651
Deposits in foreign offices:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011 763
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804,064 518,047
----------- -----------
Total deposits in foreign offices. . . . . . . . . . . 807,075 518,810
----------- -----------
Total deposits . . . . . . . . . . . . . . . . . . . . 23,352,398 23,375,461
Federal funds purchased and securities
sold under repurchase agreements . . . . . . . . . . . . . . . . 4,741,283 3,713,492
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . 589,178 386,618
Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 1,091,123 848,823
Long-term debt:
Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,091 757,893
Other long-term debt . . . . . . . . . . . . . . . . . . . . . . 590,365 439,045
----------- -----------
Total long-term debt . . . . . . . . . . . . . . . . . 2,960,456 1,196,938
Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . 434,584 748,944
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 338,803 321,476
----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . 33,507,825 30,591,752
Off-balance sheet items, commitments and contingent liabilities--Note J
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 a share:
Authorized 50,000,000 shares; none outstanding . . . . . . . . . -- --
Common stock, par value $5 a share:
Issued 171,375,772 shares in 1993
and 171,471,178 shares in 1992. . . . . . . . . . . . . . . 856,879 857,356
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,573 817,889
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 1,399,495 1,099,522
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . 3,017,947 2,774,767
----------- -----------
Total liabilities and shareholders' equity . . . . . . $36,525,772 $33,366,519
=========== ===========
See notes to consolidated financial statements
36
39
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
$ in thousands, except per share 1993 1992 1991
---------- ---------- ----------
INTEREST INCOME
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,627,450 $1,663,388 $2,018,208
Investment securities:
State and municipal. . . . . . . . . . . . . . . . . . . . . . . 57,670 65,154 74,116
Other investments. . . . . . . . . . . . . . . . . . . . . . . . 396,056 403,982 412,914
Interest-bearing bank balances. . . . . . . . . . . . . . . . . . . . 2,905 12,772 26,974
Federal funds sold and securities
purchased under resale agreements. . . . . . . . . . . . . . . . 12,433 17,038 35,537
Trading account assets. . . . . . . . . . . . . . . . . . . . . . . . 26,323 59,744 69,266
---------- ---------- ----------
Total interest income. . . . . . . . . . . . . . . . . 2,122,837 2,222,078 2,637,015
INTEREST EXPENSE
Deposits:
Domestic offices . . . . . . . . . . . . . . . . . . . . . . . . 543,077 735,241 1,068,764
Foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . 14,503 15,646 16,834
---------- ---------- ----------
Total interest on deposits . . . . . . . . . . . . . . 557,580 750,887 1,085,598
Short-term borrowed funds . . . . . . . . . . . . . . . . . . . . . . 173,847 190,988 369,202
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,585 25,153 13,049
---------- ---------- ----------
Total interest expense . . . . . . . . . . . . . . . . 839,012 967,028 1,467,849
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 1,283,825 1,255,050 1,169,166
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . 92,652 119,420 293,000
---------- ---------- ----------
Net interest income after
provision for loan losses. . . . . . . . . . . . . . . . . . . . 1,191,173 1,135,630 876,166
OTHER INCOME
Service charges on deposit accounts . . . . . . . . . . . . . . . . . 202,885 189,537 170,827
Fees for trust services . . . . . . . . . . . . . . . . . . . . . . . 120,030 109,504 102,665
Credit card income. . . . . . . . . . . . . . . . . . . . . . . . . . 101,780 78,068 62,814
Mortgage fee income . . . . . . . . . . . . . . . . . . . . . . . . . 39,101 40,078 28,608
Trading account profits (losses). . . . . . . . . . . . . . . . . . . 13,103 (11,542) 11,541
Student loan servicing. . . . . . . . . . . . . . . . . . . . . . . . 5,535 33,250 31,470
Other operating income. . . . . . . . . . . . . . . . . . . . . . . . 117,745 96,347 82,253
---------- ---------- ----------
Total other operating revenue. . . . . . . . . . . . . 600,179 535,242 490,178
Gain on sale of subsidiary. . . . . . . . . . . . . . . . . . . . . . 8,030 19,486 --
Investment securities gains . . . . . . . . . . . . . . . . . . . . . 19,394 1,497 11,091
---------- ---------- ----------
Total other income . . . . . . . . . . . . . . . . . . 627,603 556,225 501,269
OTHER EXPENSE
Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455,621 451,193 443,273
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 113,059 88,630 81,216
---------- ---------- ----------
Total personnel expense. . . . . . . . . . . . . . . . 568,680 539,823 524,489
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . 82,070 80,673 75,729
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . 102,246 100,916 99,569
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . 378,240 374,240 396,730
---------- ---------- ----------
Total other expense. . . . . . . . . . . . . . . . . . 1,131,236 1,095,652 1,096,517
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . 687,540 596,203 280,918
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . 195,445 162,978 51,378
---------- ---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540
========== ========== ==========
Net income per common share:
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 $ 1.32
Average shares outstanding:
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,941 172,641 171,481
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . 175,198 175,512 175,218
See notes to consolidated financial statements
37
40
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Stock
--------------------------- Capital Loan to Retained
Shares Amount Surplus ESOP Earnings
----------- ----------- --------- -------- ----------
$ in thousands, except per share
YEAR ENDED DECEMBER 31, 1991
Balance at beginning of year . . . . . . . . . 84,276,306 $421,381 $793,739 ($25,000) $1,180,808
Net income . . . . . . . . . . . . . . . . . . 229,540
Cash dividends declared by
pooled companies:
Wachovia Corporation -- $.92 a share . . . . (128,713)
South Carolina National Corporation --
$.80 a share. . . . . . . . . . . . . . . (17,691)
Common stock issued pursuant to:
Stock option and employee benefit plans . . 329,467 1,647 9,171
Dividend reinvestment plan . . . . . . . . . 118,884 594 5,668
Conversion of notes and debentures . . . . . 355,618 1,778 8,490
Acquisition of bank . . . . . . . . . . . . 294,154 1,471 2,457 2,312
Common stock acquired . . . . . . . . . . . . . (22,511) (113) (1,102)
Miscellaneous . . . . . . . . . . . . . . . . . (28,704) (142) (19) (1,862)
---------- -------- -------- -------- ----------
Balance at end of year . . . . . . . . . . . . 85,323,214 $426,616 $818,404 ($25,000) $1,264,394
========== ======== ======== ========= ==========
YEAR ENDED DECEMBER 31, 1992
Balance at beginning of year . . . . . . . . . 85,323,214 $426,616 $818,404 ($25,000) $1,264,394
Net income . . . . . . . . . . . . . . . . . . 433,225
Cash dividends declared on common
stock -- $1.00 a share . . . . . . . . . . . (170,756)
Common stock issued pursuant to:
Stock option and employee benefit plans . . 602,152 3,011 16,179
Dividend reinvestment plan . . . . . . . . . 149,323 747 8,444
Conversion of notes and debentures . . . . . 193,675 968 3,581
Common stock acquired . . . . . . . . . . . . . (528,086) (2,640) (28,557)
Repayment of loan to ESOP . . . . . . . . . . . 25,000
Miscellaneous . . . . . . . . . . . . . . . . . (4,689) (24) (162) 1,337
Two-for-one common stock split . . . . . . . . 85,735,589 428,678 (428,678)
---------- -------- -------- -------- ----------
Balance at end of year . . . . . . . . . . . . 171,471,178 $857,356 $817,889 $ -- $1,099,522
=========== ======== ======== ======== ==========
YEAR ENDED DECEMBER 31, 1993
Balance at beginning of year . . . . . . . . . 171,471,178 $857,356 $817,889 $ -- $1,099,522
Net income . . . . . . . . . . . . . . . . . . 492,095
Cash dividends declared on common
stock -- $1.11 a share . . . . . . . . . . . (191,488)
Common stock issued pursuant to:
Stock option and employee benefit plans . . 645,539 3,228 11,347 (41)
Dividend reinvestment plan . . . . . . . . . 318,655 1,593 9,375 (15)
Conversion of notes and debentures . . . . . 1,738,533 8,693 7,802 (60)
Common stock acquired . . . . . . . . . . . . . (2,797,232) (13,986) (84,826) 8
Miscellaneous . . . . . . . . . . . . . . . . . (901) (5) (14) (526)
----------- -------- -------- -------- ----------
Balance at end of year . . . . . . . . . . . . 171,375,772 $856,879 $761,573 $ -- $1,399,495
=========== ======== ======== ======== ==========
See notes to consolidated financial statements
38
41
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
$ in thousands 1993 1992 1991
---------- ------------ -------------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540
Adjustments to reconcile net income to cash provided (used)
by operations:
Provision for loan losses . . . . . . . . . . . . . . . . . . . 92,652 119,420 293,000
Depreciation of premises and equipment . . . . . . . . . . . . 64,985 61,134 58,018
Amortization of intangible assets . . . . . . . . . . . . . . . 28,001 34,423 51,756
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . (26,663) (11,737) (44,146)
Gain on sale of investment securities . . . . . . . . . . . . . (19,394) (1,497) (11,091)
Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . (8,030) (19,486) --
(Gain) loss on sale of noninterest-earning assets . . . . . . . (1,517) 2,002 2,694
Amortization of investment security premiums (discounts) . . . 15,099 (879) (7,944)
Increase (decrease) in accrued income taxes . . . . . . . . . . 6,207 29,234 (16,496)
(Increase) decrease in accrued interest receivable . . . . . . (38,968) 28,250 38,728
Decrease in accrued interest payable . . . . . . . . . . . . . (43,116) (55,260) (19,000)
Net change in other accrued and deferred income and expense . . (2,818) (66,628) (7,654)
Net trading account activities . . . . . . . . . . . . . . . . 107,189 548,840 (651,629)
Net loans held for resale . . . . . . . . . . . . . . . . . . . (113,775) 14,726 (132,907)
---------- ---------- ----------
Net cash provided (used) by operating activities . . . . . 551,947 1,115,767 (217,131)
INVESTING ACTIVITIES
Net decrease in interest-bearing bank balances . . . . . . . . . . . 177,075 218,475 156,920
Net (increase) decrease in federal funds sold and securities
purchased under resale agreements . . . . . . . . . . . . . . . (212,134) 67,001 44,927
Purchases of investment securities . . . . . . . . . . . . . . . . . (3,287,189) (2,969,876) (3,729,925)
Sales of investment securities . . . . . . . . . . . . . . . . . . . 76,224 260,568 347,500
Calls, maturities and prepayments of investment securities . . . . . 1,819,801 2,489,917 2,417,033
Net (increase) decrease in loans made to customers . . . . . . . . . (1,885,727) (684,499) 417,943
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (152,061) (100,526) (160,386)
Proceeds from sales of premises and equipment . . . . . . . . . . . . 14,457 25,479 94,568
Net (increase) decrease in other assets . . . . . . . . . . . . . . . (188,376) 64,418 (13,761)
Business combinations and dispositions . . . . . . . . . . . . . . . 20,000 44,834 601,674
---------- ---------- ----------
Net cash provided (used) by investing activities . . . . . (3,617,930) (584,209) 176,493
FINANCING ACTIVITIES
Net increase (decrease) in demand, savings and
money market accounts . . . . . . . . . . . . . . . . . . . . . 752,659 2,184,766 (266,548)
Net decrease in certificates of deposit . . . . . . . . . . . . . . . (775,722) (1,815,595) (570,623)
Net increase (decrease) in federal funds purchased and securities
sold under repurchase agreements . . . . . . . . . . . . . . . 1,027,791 (288,594) 134,726
Net increase (decrease) in commercial paper . . . . . . . . . . . . . 202,560 (11,102) 66,531
Net increase (decrease) in other short-term borrowings . . . . . . . 242,300 (1,352,039) (271,775)
Proceeds from issuance of bank notes . . . . . . . . . . . . . . . . 1,861,010 757,893 --
Maturities of bank notes . . . . . . . . . . . . . . . . . . . . . . (250,000) -- --
Proceeds from issuance of other long-term debt . . . . . . . . . . . 248,075 297,266 25,479
Payments on other long-term debt . . . . . . . . . . . . . . . . . . (80,579) (24,249) (9,229)
Repayment of loan to ESOP . . . . . . . . . . . . . . . . . . . . . . -- 25,000 --
Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . 24,961 29,717 16,462
Dividend payments . . . . . . . . . . . . . . . . . . . . . . . . . . (191,488) (170,756) (150,730)
Common stock repurchased . . . . . . . . . . . . . . . . . . . . . . (98,804) (31,197) (1,215)
Other equity transactions . . . . . . . . . . . . . . . . . . . . . . (19) (186) (21)
Net increase (decrease) in other liabilities . . . . . . . . . . . . 4,908 19,790 (43,081)
---------- ---------- ----------
Net cash provided (used) by financing activities . . . . . 2,967,652 (379,286) (1,070,024)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . (98,331) 152,272 (1,110,662)
Cash and cash equivalents at beginning of year . . . . . . . . . . . 2,627,859 2,475,587 3,586,249
---------- ---------- ----------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . $2,529,528 $2,627,859 $2,475,587
========== ========== ==========
See notes to consolidated financial statements
39
42
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$ in thousands
- -------------------------------------------------------------------------------
NOTE A -- ACCOUNTING POLICIES
The accounting and reporting policies of Wachovia Corporation and
subsidiaries (the Corporation) follow generally accepted accounting principles
and policies within the financial services industry. The following is a summary
of the more significant policies:
Principles of Consolidation -- The consolidated financial statements
include the accounts of Wachovia Corporation and its subsidiaries after
elimination of all material intercompany balances and transactions.
Cash and Due from Banks -- The Corporation considers cash and due from
banks, all of which are maintained in financial institutions, as cash and
cash equivalents for purposes of the consolidated statement of cash flows.
Investment Securities -- Investment securities are acquired with the
intent and ability to hold on a long-term basis and are carried at cost
adjusted for amortization of premium and accretion of discount, each computed
by the interest method. The adjusted cost of the specific security sold is used
to compute gains or losses on the sale of investment securities. Investment
securities are concentrated in a variety of state and municipal, U.S. Treasury
and federal agency securities.
Effective January 1, 1994, the Corporation prospectively adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (FASB 115), which requires that
securities be classified as held to maturity, available for sale or trading
securities. Further discussion of FASB 115 is included in Note D.
Trading Account Assets -- Trading account assets are held with the
intent of selling them at a profit and are carried at market. Adjustments to
market value are included in "trading account profits" in the consolidated
statement of income. Trading account assets are comprised primarily of
securities backed by the U.S. Treasury and various federal agencies.
Financial Instruments -- Financial instruments are defined as cash,
evidence of ownership in an entity, contracts that convey either a right to
receive cash or other financial instruments or an obligation to deliver cash or
other financial instruments, or contracts that convey the right or obligation
to exchange financial instruments on potentially favorable or unfavorable
terms. The Corporation has a variety of financial instruments which include
items recorded on the statement of condition and items which, by their nature,
are not recorded on the statement of condition. The body of the financial
statements, as well as the accompanying Management's Discussion and Analysis of
Financial Condition and Results of Operations, include discussion of specific
financial instruments and their related market and credit risks, as well as
applicable discussion of significant credit concentrations and collateral
policies. Financial instruments not specifically discussed elsewhere include
Interest-bearing bank balances, Federal funds sold and securities purchased
under resale agreements, Federal funds purchased and securities sold under
repurchase agreements and Other borrowed funds. These financial instruments
carry no risk of accounting loss in excess of the recorded asset or liability
amounts, and no significant credit concentrations exist outside of
Interest-bearing bank balances, Federal funds sold and Federal funds purchased,
which are maintained with other financial institutions.
Interest Rate Futures and Swaps -- Interest rate futures and swaps are
used as part of the Corporation's overall interest rate risk management. Gains
and losses on futures contracts used in securities trading operations are
recognized currently by the mark-to-market method of accounting and included in
"other operating income" in the consolidated statement of income. The
Corporation maintains a portfolio of generally matched offsetting swap
agreements as an intermediary for customers; payments made or received under
these interest rate swaps are recognized as received and included in "other
operating income" in the consolidated statement of income. Income or expense
associated with open futures and interest rate swap contracts used in
asset/liability management is accrued over the life of the contracts and
included in "net interest income" in the consolidated statement of income.
Loans and Allowance for Loan Losses -- Loans are carried at their
principal amount outstanding, except for loans held for resale which are
carried at the lower of cost or market. Interest on commercial, mortgage and
installment loans is accrued and credited to operating income based upon the
principal amount outstanding. Except for revolving credit loans, the
recognition of interest income is discontinued when a loan becomes 90 days past
due as to principal and interest or when, in management's judgment, the
interest will not be collectible in the normal course of business. When
interest accruals are discontinued, the balance of accrued interest is
reversed. Management may elect to continue the accrual of interest when the
estimated net realizable value of collateral is sufficient to cover the
principal balance and accrued interest. The banking subsidiaries accrue
interest on revolving credit loans until payments become 120 days delinquent,
at which time the outstanding principal balance and accrued unpaid interest is
charged off.
The allowance is maintained at a level believed to be adequate by
management to absorb potential losses in the loan portfolio. Management's
determination of the adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current domestic and international
economic conditions, volume, growth and composition of the loan portfolio, and
other risks inherent in the portfolio.
Premises and Equipment -- Premises, equipment and leasehold improvements
are stated at cost less accumulated depreciation and amortization.
For financial reporting purposes, the provision for depreciation is computed by
the straight-line method based upon the estimated useful lives of the assets.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the life of the leasehold asset or the lease term.
Intangible Assets -- Premiums paid to purchase servicing rights of
mortgage loans are amortized over the aggregate estimated remaining servicing
life of the loans. The excess of cost over net assets and identifiable
intangible assets, including deposit base intangibles, of acquired businesses
is amortized on the straight-line method over the estimated periods benefited.
- -------------------------------------------------------------------------------
40
43
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE A -- ACCOUNTING POLICIES -- Concluded
Pension Plan -- The Corporation maintains a pension plan which covers
substantially all employees. The pension expense of the plan is determined
using the projected unit credit method. The Corporation's policy is to fund
amounts allowable for federal income tax purposes.
Income Taxes -- Effective January 1, 1993, the Corporation
prospectively adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FASB 109), which requires an asset and
liability approach to accounting for income taxes. Under FASB 109, deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Financial statements for prior years
reflect income taxes recorded under the deferred method required under previous
accounting standards.
The Corporation and its subsidiaries file a consolidated tax return.
Each subsidiary provides for income taxes based on its contribution to income
taxes (benefit) of the consolidated group.
Reclassifications -- Medium-term bank notes previously classified as
short-term borrowed funds have been reclassified to long-term debt to more
accurately reflect the weighted average maturity of these instruments.
- -------------------------------------------------------------------------------
NOTE B -- MERGER
On December 6, 1991, South Carolina National Corporation (SCNC), a
South Carolina bank and savings and loan holding company, was merged into and
became a wholly owned subsidiary of the Corporation. Pursuant to the Agreement
and Plan of Merger (the Agreement), which was approved by the shareholders of
both the Corporation and SCNC on October 25, 1991, approximately 15,954,662
shares of the Corporation's common stock were authorized for issuance under the
Agreement. These shares do not reflect the two-for-one common stock split
effective April 1, 1993. At the effective time of the merger, and in accordance
with the terms of the Agreement, the shareholders of SCNC common stock received
.675 of a share of the Corporation's common stock for each share of SCNC common
stock owned.
The consolidated financial statements of the Corporation give effect to
the merger which has been accounted for as a pooling-of-interests.
Accordingly, the accounts of SCNC have been combined with those of the
Corporation for all periods presented.
Separate results of operations of the combining entities for the year
ended December 31, 1991 were as follows:
1991
----------
Net interest income:
Wachovia . . . . . . . . . . . . . . . . . $ 900,297
SCNC . . . . . . . . . . . . . . . . . . . 268,869
----------
$1,169,166
==========
Net income (loss):
Wachovia . . . . . . . . . . . . . . . . . $ 298,592
SCNC . . . . . . . . . . . . . . . . . . . (69,052)
----------
$ 229,540
==========
The net income presented above for SCNC includes adjustments of $97.8
million to conform litigation, real estate and loan valuation policies and
practices and $23.9 million to write down the book value of certain intangible
assets.
- -------------------------------------------------------------------------------
NOTE C -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (FASB 107), requires disclosure of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount
rates and estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
Also, the fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and 1992. Such
amounts have not been comprehensively revalued for purposes of these financial
statements since those dates and, therefore, current estimates of fair value
may differ significantly from the amounts presented herein.
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:
Trading Account Assets -- Fair values for the Corporation's trading
account assets, which also are the amounts recognized in the statement of
condition, are based on quoted market prices.
Investment Securities -- Fair values for investment securities are
based on quoted market prices. If a quoted market price is not available, fair
value is estimated using market prices for similar securities.
- -------------------------------------------------------------------------------
41
44
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE C -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- Concluded
Loans -- For credit card, equity lines and other loans with short-term
or variable rate characteristics, the carrying value reduced by an estimate of
credit losses inherent in the portfolio is a reasonable estimate of fair value.
The fair values of residential mortgage loans are estimated using quoted market
prices for securities backed by similar loans, adjusted for differences between
the market for the securities and the loans being valued and an estimate of
credit losses in the portfolio. The fair value of all other loans is estimated
by discounting their future cash flows using interest rates currently being
offered for loans with similar terms, reduced by an estimate of credit losses
inherent in the portfolio. The discount rates used are commensurate with the
interest rate and prepayment risks involved for the various types of loans.
Deposits -- The fair values disclosed for demand deposits (e.g.,
interest- and noninterest-bearing demand, savings and money market savings)
are, as required by FASB 107, equal to the amounts payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated monthly maturities.
Long-Term Debt -- Fair values of long-term debt are based on market
prices where available. When quoted market prices are not available, fair
values are estimated using discounted cash flow analyses, based on the
Corporation's current incremental borrowing rates for similar types of
borrowing arrangements.
Off-Balance Sheet Instruments -- Fair values for the Corporation's
off-balance sheet instruments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing (loan commitments and letters of
credit), and the estimated amount the Corporation would receive or pay to
terminate or replace the contract at current market rates for the remainder of
the off-balance sheet instruments.
Many of the Corporation's assets and liabilities are short-term
financial instruments whose carrying amounts reported in the statement of
condition approximate fair value. These items include cash and due from banks,
interest-bearing bank balances, federal funds sold and securities purchased
under resale agreements, due from customers on acceptances, short-term borrowed
funds, acceptances outstanding, and the financial instruments included in other
assets and liabilities. The estimated fair values of the Corporation's
remaining on-balance sheet financial instruments as of December 31 are
summarized below.
1993
--------------------------
Estimated
Book Value Fair Value
----------- -----------
Financial assets:
Trading account assets . . . . . . . . . . . . $ 788,779 $ 788,779
Investment securities. . . . . . . . . . . . . 7,878,656 8,156,690
Loans, net of allowance for loan losses. . . . 22,572,690 23,156,885
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . . . . 23,352,398 23,433,622
Long-term debt . . . . . . . . . . . . . . . . 2,960,456 3,012,852
1992
--------------------------
Estimated
Book Value Fair Value
----------- -----------
Financial assets:
Trading account assets . . . . . . . . . . . . $ 895,968 $ 895,968
Investment securities. . . . . . . . . . . . . 6,486,171 6,793,043
Loans, net of allowance for loan losses. . . . 20,706,096 21,098,225
Financial liabilities:
Deposits . . . . . . . . . . . . . . . . . . . 23,375,461 23,457,276
Long-term debt . . . . . . . . . . . . . . . . 1,196,938 1,261,413
The estimated fair values of the Corporation's off-balance sheet
financial instruments as of December 31 are summarized below.
1993 1992
Estimated Estimated
Fair Value Fair Value
----------- -----------
Unfunded commitments to extend credit. . . . . . ($46,165) ($32,122)
Letters of credit. . . . . . . . . . . . . . . . (23,536) (19,680)
Interest rate swaps. . . . . . . . . . . . . . . (22,217) (35,512)
Other off-balance sheet financial instruments. . (42,548) (79,161)
FASB 107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. The disclosures also do not
include certain intangible assets, such as customer relationships, mortgage
servicing rights, deposit base intangibles and goodwill. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Corporation.
The financial information presented over periods of years which
encompass various economic and interest rate conditions and cycles provides a
means of evaluating the effectiveness of the Corporation in dealing with
changing market conditions and in managing the controllable aspects of its
business.
- -------------------------------------------------------------------------------
42
45
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE D -- INVESTMENT SECURITIES
The aggregate book and market values of investment securities as of
December 31, as well as gross unrealized gains and losses of investment
securities were as follows:
1993 1992
----------------------------------------------- ------------------------------------------------
Book Unrealized Unrealized Market Book Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
---------- --------- --------- ---------- ---------- -------- --------- ----------
State and municipal . . . . . . . $ 655,157 $ 72,754 $ (177) $ 727,734 $ 748,017 $ 78,119 $ (949) $ 825,187
United States Treasury. . . . . . 4,388,380 138,052 (5,982) 4,520,450 2,544,299 113,653 (4,972) 2,652,980
Federal agency. . . . . . . . . . 2,356,346 67,071 (5,983) 2,417,434 2,540,134 102,661 (3,890) 2,638,905
Other . . . . . . . . . . . . . . 478,773 12,356 (57) 491,072 653,721 23,303 (1,053) 675,971
---------- --------- --------- ---------- ---------- -------- --------- ----------
Total investment securities. . $7,878,656 $ 290,233 ($12,199) $8,156,690 $6,486,171 $317,736 ($10,864) $6,793,043
========== ========= ========= ========== ========== ======== ========= ==========
The amortized cost and estimated market value of investment securities
at December 31, 1993, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Book Market
Value Value
---------- ----------
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 765,861 $ 776,202
Due after one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,763,654 4,895,232
Due after five years through ten years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838,927 882,268
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,401,496 1,482,442
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,769,938 8,036,144
No contractual maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,718 120,546
---------- ----------
Total investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,878,656 $8,156,690
========== ==========
There were no sales of investments in debt securities during 1993.
Proceeds from sales of investments in debt securities for the two years ended
December 31, 1992, as well as gross gains and losses realized on these sales
were as follows:
1992 1991
---------- ---------
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,566 $ 328,049
Gross gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,059 6,470
Gross losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,453) (185)
At December 31, 1993 and 1992, investment securities with a carrying
value of $3,543,263 and $3,021,363, respectively, were pledged as collateral to
secure public deposits and for other purposes.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (FASB 115), which is effective January 1, 1994 with
early adoption permitted. FASB 115 requires that investments in equity
securities having readily determinable fair values and all investments in debt
securities be classified and accounted for in three categories.
Debt securities that management has the positive intent and ability to
hold to maturity are to be classified as securities held to maturity. Held to
maturity securities are reported at amortized cost. Debt and equity securities
that are held principally for the purpose of selling them in the near term are
to be classified as trading securities. Trading securities are reported at fair
value with unrealized gains and losses included in earnings. Debt and equity
securities not classified as either held to maturity or trading are to be
classified as available for sale. Available for sale securities are reported at
fair value with unrealized gains and losses reported in a separate component of
shareholders' equity, net of tax.
Upon adoption of FASB 115 as of January 1, 1994, the Corporation will
classify securities with an amortized cost of $3,713,450 as available for sale
at their fair value of $3,753,650. The excess of the fair value over the
amortized cost, net of tax, equal to $24,368 will be recorded as an increase to
shareholders' equity. The adoption of FASB 115 will not have a material impact
on the Corporation's results of operations, but increased volatility of
shareholders' equity and related capital ratios could result from changes in
unrealized gains and losses on securities classified as available for sale.
- --------------------------------------------------------------------------------
43
46
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE E -- LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at December 31 are summarized as follows:
1993 1992
----------- -----------
Commercial:
Commercial, financial and other . . . . . . . . . . . . $ 6,727,207 $ 6,364,881
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . 1,959,266 1,951,903
Retail:
Direct . . . . . . . . . . . . . . . . . . . . . . . . 715,418 672,985
Indirect . . . . . . . . . . . . . . . . . . . . . . . 2,429,497 2,108,708
Credit card. . . . . . . . . . . . . . . . . . . . . . 3,122,732 2,216,495
Other revolving credit. . . . . . . . . . . . . . . . . 333,405 326,861
Real estate:
Construction. . . . . . . . . . . . . . . . . . . . . . 494,148 464,035
Commercial mortgages. . . . . . . . . . . . . . . . . . 3,199,434 3,119,196
Residential mortgages . . . . . . . . . . . . . . . . . 3,766,600 3,662,879
Lease financing -- net . . . . . . . . . . . . . . . . . . . 156,726 125,150
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . 73,055 72,560
----------- -----------
Total loans -- net. . . . . . . . . . . . . . . $22,977,488 $21,085,653
=========== ===========
Loans at December 31 that had been placed on a cash basis and
those on which the contractual rate of interest had been reduced
below market are summarized below:
1993 1992
-------- --------
Cash-basis assets -- domestic . . . . . . . . . . . . . . . . . $108,882 $173,977
Restructured loans. . . . . . . . . . . . . . . . . . . . . . . 80 117
-------- --------
Total nonperforming loans . . . . . . . . . . . . $108,962 $174,094
======== ========
Interest income which would have been
recorded pursuant to original terms:
Domestic loans . . . . . . . . . . . . . . . . . . . . . $ 11,140 $ 16,587
======== ========
Interest income recorded:
Domestic loans . . . . . . . . . . . . . . . . . . . . . $ 4,456 $ 6,028
======== ========
Loans totaling $14,803 at December 31, 1993, which have been
restructured at market rates and have demonstrated performance
for a period of at least one year under the restructured terms,
are not included in the nonperforming loans total. Foregone
interest on these balances is included in the above presentation.
At December 31, 1993, the Corporation had no significant
outstanding commitments to lend additional funds to borrowers
owing cash-basis and restructured loans.
Changes in the allowance for loan losses for the three years
ended December 31, 1993 were as follows:
1993 1992 1991
-------- -------- --------
Balance at beginning of year . . . . . . . . . . . . . . . $379,557 $360,193 $269,916
Additions from acquisitions. . . . . . . . . . . . . . . . -- -- 276
Allowance of company sold. . . . . . . . . . . . . . . . . -- (4,811) --
Provision for loan losses. . . . . . . . . . . . . . . . . 92,652 119,420 293,000
Recoveries on loans previously
charged off . . . . . . . . . . . . . . . . . . . . . 29,697 36,288 22,259
Loans charged off. . . . . . . . . . . . . . . . . . . . . (97,108) (131,533) (225,258)
-------- -------- --------
Balance at end of year . . . . . . . . . . . . . . . . . . $404,798 $379,557 $360,193
======== ======== ========
Loans totaling $42,256, $81,592 and $104,626 were transferred
to foreclosed real estate during 1993, 1992 and 1991, respectively.
It is the policy of the Corporation to review each prospective
credit in order to determine an adequate level of security or
collateral to obtain prior to making the loan. The type of collateral will
vary and ranges from liquid assets to real estate. The Corporation's
access to collateral, in the event of borrower default, is assured
through adherence to state lending laws and the Corporation's
sound lending standards and credit monitoring procedures. The
Corporation regularly monitors its credit concentrations on loan
purpose, industry and customer bases. At year-end, there were
no significant credit concentrations within these categories.
For additional discussion related to off-balance sheet credit
issues, refer to the Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note J.
The Corporation's subsidiaries have granted loans and extended
letters of credit to certain directors and executive officers of the
Corporation and its subsidiaries and to their associates. The
aggregate amount of loans was $219,623 and $251,274 at December 31,
1993 and 1992, respectively. During 1993, $547,817 in new
loans was made, and repayments totaled $579,468. Outstanding
standby letters of credit to related parties totaled $28,183 and
$9,426 at December 31, 1993 and 1992, respectively. Related
party loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not
involve more than the normal risk of collectibility.
Loans held for sale at December 31 along with activity during the
period are summarized as follows:
1993 1992
----------- ----------
Balance at beginning of year . . . . . . . . . . . . . . $ 276,746 $ 291,472
Originations/purchases . . . . . . . . . . . . . . . . . 3,230,192 2,522,389
Sales/transfers. . . . . . . . . . . . . . . . . . . . . (3,116,417) (2,537,115)
---------- ----------
Balance at end of year . . . . . . . . . . . . . . . . . $ 390,521 $ 276,746
========== ==========
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan" (FASB 114), which is
effective January 1, 1995, with early adoption permitted. This
standard modifies the accounting for impaired loans, defined as
those loans where, based on current information and events, it
is probable that a creditor will be unable to collect all amounts
due according to the contractural terms of the loan agreement.
The Corporation is in the process of evaluating the timing of
adoption and the effect that implementation of FASB 114 will
have on its financial statements, but does not expect it to have a
material impact on its financial position or results of operations.
- --------------------------------------------------------------------------------
44
47
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE F -- PREMISES, EQUIPMENT AND LEASES
Premises and equipment at December 31 are summarized as follows:
1993 1992
---------- ----------
Land . . . . . . . . . . . . . . . . . $ 87,947 $ 75,536
Premises . . . . . . . . . . . . . . . 318,911 269,972
Equipment. . . . . . . . . . . . . . . 514,482 480,977
Leasehold improvements . . . . . . . . 66,470 62,363
-------- ---------
987,810 888,848
Less accumulated depreciation
and amortization. . . . . . . . . 485,111 445,387
--------- ----------
Total premises and equipment. $502,699 $ 443,461
========= ==========
The annual minimum rentals under the terms of the
Corporation's noncancelable operating leases as of
December 31, 1993 are as follows:
1994 . . . . . . . . . . . . . . . . . . . . . . . $ 35,039
1995 . . . . . . . . . . . . . . . . . . . . . . . 32,806
1996 . . . . . . . . . . . . . . . . . . . . . . . 28,890
1997 . . . . . . . . . . . . . . . . . . . . . . . 25,679
1998 . . . . . . . . . . . . . . . . . . . . . . . 23,405
Thereafter . . . . . . . . . . . . . . . . . . . . 160,794
--------
Total minimum lease payments . . . . . . $306,613
========
The net rental expense for all operating leases amounted to
$47,579 in 1993, $48,254 in 1992 and $43,626 in 1991. Certain
leases have various renewal options and require increased rentals
under cost of living escalation clauses.
In June 1993, The South Carolina National Bank purchased certain
branch and administration buildings which it had previously
leased under a sale-leaseback arrangement for $54,425. The
property was recorded at $43,540, which represents the purchase
price net of a portion of the gain on the original sale-leaseback
arrangement that had not been recognized.
- --------------------------------------------------------------------------------
NOTE G -- CREDIT ARRANGEMENTS
At December 31, 1993 and 1992, lines of credit arrangements
aggregating $160,000 and $130,000, respectively, were available
to the Corporation from unaffiliated banks. Commitment fees
were 15 basis points in 1993 and ranged from 15 basis points
to 20 basis points in 1992; compensating balances are not
required. The unused portion of these banking arrangements
principally serves as commercial paper back-up lines. There
were no borrowings outstanding under credit arrangements at
December 31, 1993 or 1992.
- --------------------------------------------------------------------------------------------------------------------------------
NOTE H -- LONG-TERM DEBT
Long-term debt at December 31 is summarized as follows:
1993 1992
---------- ----------
Bank notes, net of discount of $3,859 and $706 in 1993 and 1992, respectively (a) . . . $2,370,091 $ 757,893
Other long-term debt:
7.0% subordinated debt securities due in 1999, net of discount of $2,457 and $2,778
in 1993 and 1992, respectively (b) . . . . . . . . . . . . . . . . . . . . . . . 297,543 297,222
6.375% subordinated debt securities due in 2003, net of discount of $1,830 (b) . . 248,170 --
9.67% subordinated capital notes due in 2001 (b) . . . . . . . . . . . . . . . . . 25,484 25,481
6.5% convertible subordinated debentures due in 2001 (b) (c) . . . . . . . . . . . 12,540 22,280
Floating rate subordinated capital notes due in 1996 (b) (d) . . . . . . . . . . . -- 79,330
11.5% convertible notes due in 1993 (1983 -- Cartersville Series) (b) (e). . . . . -- 5,261
11.5% convertible notes due in 1993 (1983 -- Warner Robins Series) (e) . . . . . . -- 1,944
Capitalized lease obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,549 6,833
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 694
---------- ----------
Total other long-term debt . . . . . . . . . . . . . . . . . . . . . . . 590,365 439,045
---------- ----------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . $2,960,456 $1,196,938
========== ==========
- --------------------------------------------------------------------------------------------------------------------------------
45
48
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE H -- LONG-TERM DEBT -- Concluded
(a) During 1992, Wachovia Bank of North Carolina established a medium-term bank
note program under which the bank may offer an aggregate principal amount
of up to $4 billion outstanding at any one time. The notes can be issued
as fixed or floating rate notes and with terms of 9 months to 10 years. The
interest rates ranged from 3.30% to 6.10% and 3.20% to 6.00% with
maturities ranging from 1994 to 1998 and 1993 to 1995 at December 31, 1993
and 1992, respectively. The average rates were 4.54% and 4.59% with average
maturities of 1.8 years and 1.8 years at December 31, 1993 and 1992,
respectively.
(b) Debt qualifies for inclusion in the determination of total capital under
the Risk-Based Capital guidelines.
(c) The debentures are redeemable under certain conditions and are convertible
into common stock of the Corporation at a conversion price of $19.29 per
share. At December 31, 1993, $22,460 of these notes had been converted.
(d) The notes were called in December 1992, with a payment date in March 1993.
(e) The notes were convertible into common stock of the Corporation at a
conversion price of $5.5555 per share.
The principal maturities of long-term debt for the next five years
subsequent to December 31, 1993 are $515,114 in 1994, $1,215,991 in 1995,
$435,437 in 1996, $444 in 1997 and $205,164 in 1998. Interest paid on deposits
and other borrowings was $882,128 in 1993, $1,022,288 in 1992 and $1,472,254 in
1991.
In January 1994, the Corporation issued $250,000 of 6.375% subordinated notes
due in 2009.
- -------------------------------------------------------------------------------
NOTE I -- CAPITAL STOCK
On April 1, 1993, a two-for-one common stock split, effected in the form
of a stock dividend, was paid to the Corporation's shareholders. Unless
otherwise noted, information in this note, as well as share and per share
information presented throughout the financial statements, has been restated to
reflect the effect of the stock split.
The authorized capital stock of the Corporation consists of 500,000,000
common shares and 50,000,000 preferred shares. At December 31, 1993, 21,034,848
common shares were reserved for the conversion of notes and for stock issuable
in connection with employee benefit plans and the dividend reinvestment plan.
The Corporation's board of directors has authorized the repurchase of up
to 5,000,000 shares of common stock for various corporate purposes including the
issuance of shares for the Corporation's employee benefit plans and dividend
reinvestment plan. Share repurchase began on July 1, 1993. During the year, the
Corporation repurchased 2,730,200 shares pursuant to this authorization. At
December 31, 1993, the number of shares available for possible repurchase
totaled 2,269,800.
The various stock option and incentive plans of the Corporation provide
for the granting of options or awards for the purchase or issuance of 5,260,192
shares at 100% of the fair market value of the stock at the date of the grant. A
committee of the board of directors determines the number of shares subject to
each option and the time or times when options shall be granted and exercised
and the duration of the exercise period, which in no case shall exceed ten
years. The committee also determines the number of awards to be granted and the
time or times when awards shall be granted and the period when awards are deemed
to be earned. Awards are exercised at no cost to the participant. Under one
plan, the non-management directors of the Corporation are granted a one-time
award of common stock to be earned over a period of three years.
At the time the options are exercised, the par value of all shares
issued is credited to common stock and the excess of the proceeds over the par
value is credited to capital surplus. At the time awards are granted, capital
surplus is credited and retained earnings debited for the fair market value of
the awards. When the stock awarded is issued, common stock is credited and
capital surplus is debited for the par value of the shares issued. Recipients of
awards are entitled to compensation equivalent to the dividends that would have
been payable on the proportion of the awards reserved but not yet fully earned
based on the years of service since the date of grant divided by the number of
years over which the award is deemed to be fully earned. Compensation equivalent
to dividends totaled $54 in 1993, $86 in 1992 and $63 in 1991. At December 31,
1993 and 1992, deferred compensation related to director and management awards
was $2,614 and $2,246, respectively. Compensation expense related to stock
awards was $1,864 for 1993, $4,050 for 1992 and $1,758 for 1991.
Activity in the option and award plans during 1993 and 1992 is summarized as
follows:
Options and Awards
---------------------------------
Outstanding
Available -------------------- Option Price
for Grant Awards Options Per Share
--------- -------- --------- ---------------
January 1, 1992. . . . . . 2,405,012 415,928 4,337,260 $4.948-$28.25
Granted. . . . . . . . . (743,500) 80,600 662,900 29.688-31.125
Exercised. . . . . . . . -- (301,860) (957,704) 4.948-29.688
Forfeited. . . . . . . . 41,526 (2,150) (41,562) 18.386-29.688
--------- -------- ---------
Total December 31,
1992 . . . . . . . . . . 1,703,038 192,518 4,000,894 5.41-31.125
Granted. . . . . . . . . (841,860) 67,400 774,460 33.125-37.00
Exercised. . . . . . . . -- (52,701) (582,320) 5.41-33.125
Forfeited. . . . . . . . 30,890 (901) (31,226) 12.50-33.125
--------- -------- ---------
Total December 31,
1993 . . . . . . . . . . 892,068 206,316 4,161,808 5.41-37.00
========= ======== =========
Of the above options outstanding at December 31, 1993, options for
2,114,844 shares were exercisable at option prices ranging from $5.41 to
$33.125.
- --------------------------------------------------------------------------------
46
49
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE J -- OFF-BALANCE SHEET ITEMS, COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its
customers and to manage its own exposure to fluctuation in interest rates.
These financial instruments include unfunded commitments to extend credit,
standby, commercial and similar letters of credit, commitments to sell
securities, foreign exchange contracts, futures and forward contracts, interest
rate contracts, participations in bankers' acceptances and mortgage loans sold
with recourse. These instruments involve, in varying degrees, exposure to
credit and interest rate risk in excess of the amount recognized in the
statement of financial condition. The contract or notional amount represents
the extent of the Corporation's involvement in any particular class of
instrument. The Corporation's exposure to credit loss in the event of
non-performance by the other party to the financial instrument for unfunded
commitments to extend credit and commercial, standby, and other letters of
credit, securities lent, participations in bankers' acceptances and mortgage
loans sold with recourse is represented by the contractual amount of those
instruments. The Corporation follows the same credit policies and careful
underwriting practices in making commitments and conditional obligations as it
does for on-balance sheet instruments. For interest rate contracts, commitments
to purchase and sell securities, and futures and forward contracts, the
contract or notional amounts do not represent exposure to credit loss. The
Corporation controls the credit risk of these instruments through adherence to
credit approval policies, monetary limits and monitoring procedures.
Unless otherwise noted, the Corporation does not require collateral or
other security to support financial instruments with credit risk. In those
instances where collateral is deemed necessary, the Corporation ensures its
ability to access the collateral, in the event of borrower default, through
strict adherence to corporate lending policy and applicable state lending laws.
Financial instruments whose contract amounts represent potential credit risk at
December 31 are shown below.
1993 1992
----------- -----------
Unfunded commitments to extend credit. . . . . . . . . $19,664,000 $15,958,834
Standby letters of credit. . . . . . . . . . . . . . . 3,155,601 2,587,631
Commercial and similar letters of credit . . . . . . . 133,899 150,961
Securities lent. . . . . . . . . . . . . . . . . . . . 61,210 121,468
Participations in bankers' acceptances . . . . . . . . 6,055 --
Mortgage loans sold with recourse. . . . . . . . . . . 44,284 81,873
The notional values of financial instruments whose contract or notional
amounts do not represent potential credit risk at December 31 are as follows:
1993 1992
----------- -----------
Interest rate swaps. . . . . . . . . . . . . . . . . . $2,633,089 $1,531,019
Interest rate caps and floors written. . . . . . . . . 169,499 184,345
Commitments to purchase securities, futures
and forward contracts . . . . . . . . . . . . . . . 996,833 468,721
Commitments to sell securities, futures and
forward contracts . . . . . . . . . . . . . . . . . 1,059,041 547,439
Net options written to purchase or sell securities . . 71,000 25,000
Commitments to purchase foreign exchange . . . . . . . 597,593 411,211
Commitments to sell foreign exchange . . . . . . . . . 585,854 407,117
Foreign exchange options written . . . . . . . . . . . 12,000 12,542
Specific discussion of these instruments, along with the attendant
risks, credit concentrations and collateral policies, is as follows:
Commitments to Extend Credit -- These are legally binding contracts to
lend to a customer, so long as there is no violation of any condition
established in the contract. These commitments have fixed termination dates and
generally require payment of a fee. As most commitments expire prior to being
drawn, the amounts shown do not necessarily represent the future cash
requirements of the contracts. Credit worthiness is evaluated on a case by case
basis, and in some instances, collateral is obtained to support the borrowing.
The collateral held may vary from liquid assets to real estate. At December 31,
1993 and 1992, approximately 15% and 17%, respectively, of unfunded commitments
to extend credit were supported by collateral. Of the total unfunded commitment
amounts presented, approximately 29% in 1993 and 30% in 1992 were comprised of
cancellable credit card commitments, and approximately 9% in 1993 and 8% in
1992 were represented by real estate commitments. Also included in total
unfunded commitments were securities underwriting commitments of $2,766 in 1993
and $3,510 in 1992.
Standby, Commercial and Similar Letters of Credit -- These instruments
are conditional commitments issued by the Corporation guaranteeing the
performance of a customer to a third party. These guarantees are issued
primarily to support public and private borrowing arrangements. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending credit to customers and is subject to the Corporation's normal
sound underwriting process. At December 31, 1993 and 1992, approximately 6% and
8%, respectively, of these instruments were supported by collateral. There were
no significant concentrations of letters of credit to any one group of
borrowers at either year-end.
Securities Lent -- These are securities of the Corporation and its
customers lent to third parties. Credit risk arises in these transactions
through the possible failure of the borrower to return the securities. To
minimize this risk, the Corporation evaluates the credit worthiness of the
borrower on a case by case basis, and collateral with a market value exceeding
100% of the contract amount of securities lent is obtained.
Participations in Bankers' Acceptances -- These instruments represent
risk participations in time drafts drawn by customers under a committed
multibank credit facility. These drafts have been accepted and remarketed by
other financial institutions. Under the terms of these arrangements, the
Corporation may be required to reimburse the accepting financial institution
for the Corporation's pro rata share of any payment default by the customer.
The Corporation applies the same underwriting standards in evaluating the
credit risk associated with these instruments as it does in evaluating
on-balance sheet instruments.
Mortgage Loans Sold with Recourse -- The Corporation is obligated under
recourse provisions related to the sale of residential mortgages to the Federal
National Mortgage Association. These mortgages are collateralized by 1-4 family
residential homes.
- -------------------------------------------------------------------------------
47
50
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE J -- OFF-BALANCE SHEET ITEMS, COMMITMENTS AND CONTINGENT
LIABILITIES -- Concluded
All mortgage loans with original loan-to-value ratios exceeding 80% (up
to a maximum of 95%) have private mortgage insurance coverage.
Interest Rate Swaps -- These transactions generally involve the
exchange of fixed and floating rate interest payments without the exchange of
the underlying principal amounts. The majority of the interest rate swaps
entered into by the Corporation arise when the Corporation acts as an
intermediary in arranging these swaps on behalf of its customers, although some
swaps are entered into as part of the Corporation's asset/liability management.
The Corporation typically acts as a principal in the exchange of interest
payments between parties and, therefore, is exposed to loss should one of the
parties default. The Corporation performs normal credit reviews on its swap
customers and minimizes its exposure to interest rate risk inherent in
intermediated swaps by entering into offsetting swap positions that essentially
counterbalance each other or by using other hedging techniques to manage
risk.
Entering into interest rate swap agreements involves not only credit
risk but also the interest rate risk associated with unmatched positions.
Notional principal amounts are often used to express the volume of these
transactions but do not represent the much smaller amounts potentially subject
to credit risk. These amounts are derived by estimating the cost, on a present
value basis, of replacing at current market rates all those outstanding
agreements for which the Corporation would incur a loss in replacing the
contract. At December 31, 1993 and 1992, the amount of risk totaled $19,203 and
$14,699, respectively.
At December 31, 1993, the notional amount of interest rate swaps where
the Corporation acts as an intermediary totaled $1,790,589. The notional amount
of interest rate swaps used in asset/liability management was $842,500 at
December 31, 1993. Of the $2,633,089 total notional amount, the notional amount
of fixed payment agreements totaled $1,331,199 and had a weighted average
remaining term of 2.59 years at December 31, 1993. The Corporation was paying
interest under these agreements at a weighted average fixed rate of 6.46% and
was receiving interest at a weighted average variable rate of 3.52% at December
31, 1993. The notional amount of variable rate payment agreements totaled
$1,301,890 and had a weighted average remaining term of 2.92 years at December
31, 1993. The Corporation was paying interest under these agreements at a
weighted average variable rate of 3.56% and was receiving interest at a
weighted average fixed rate of 5.51% at December 31, 1993.
Interest Rate Caps and Floors -- These instruments are written by the
Corporation to enable its customers to transfer, modify, or reduce their
interest rate exposure. Credit risk and interest rate risk are managed through
the oversight procedures applied to other interest rate contracts, as well as
through the purchase of offsetting cap and floor positions. The present value
of caps and floors in a profitable position, which represents the credit risk
of these instruments, totaled $4,672 at December 31, 1993 and $1,527 at
December 31, 1992. At December 31, 1993, the Corporation had purchased $169,499
in interest rate caps and floors as offsetting positions to written caps and
floors. The comparable figure for December 31, 1992 was $184,345. The
Corporation also had interest rate caps purchased as part of the Corporation's
asset/liability management of $415,000 at December 31, 1993 and $15,000 at
December 31, 1992.
Commitments to Purchase and Sell Securities, Futures and Forward
Contracts -- These instruments are contracts for delayed delivery of securities
or money market instruments in which the seller agrees to make delivery at a
specified future date of a specified instrument, at a specified price or yield.
Risks arise in these transactions through the possible inability of one of the
counterparties to meet the terms of the contracts and from movements in
interest rates or securities values. Risks associated with these instruments
are controlled through offsetting purchase and sell positions, as well as
oversight provided by organized exchanges, which determine who may buy and sell
such instruments. The present value of futures contracts in a profitable
position totaled $18,026 at December 31, 1993 and $6,053 at December 31, 1992.
Net Options Written to Purchase or Sell Securities -- These options
give the holder the right to require the Corporation to buy or sell securities
at a specified price at some future date within the option period. Interest
rate fluctuations constitute the risk associated with these instruments. This
risk may be mitigated through the establishment of offsetting purchase
positions.
Commitments to Purchase and Sell Foreign Exchange -- As with
commitments to sell securities, these future type agreements represent
contractual obligations to purchase and sell foreign exchange at some future
date for some future price. The potential risks associated with these
obligations arise from fluctuations in foreign exchange rates, as well as the
potential inability of the counterparty to perform under the contract. These
risks are mitigated through the establishment of offsetting sell positions, as
well as standard limit and monitoring procedures. Foreign exchange contracts in
a profitable position amounted to $12,656 at December 31, 1993 and $18,492 at
December 31, 1992.
Foreign Exchange Options -- These agreements represent rights to
purchase or sell foreign currency at a predetermined price at a future date.
Fluctuations in foreign currency markets, as well as the potential default of
the counterparty to an option contract, represent the risks associated with
these instruments. Limit and monitoring procedures, along with offsetting
positions, serve to control the risk associated with these items. Foreign
exchange options purchased, which serve to offset written options, amounted to
$12,000 and $12,542 for December 31, 1993 and 1992, respectively.
The subsidiaries of the Corporation are defendants in certain legal
proceedings arising in connection with their business. In the opinion of
management and general counsel, the ultimate resolution of those proceedings
will result in no material adverse effect on the Corporation's financial
position and results of operations.
- -------------------------------------------------------------------------------
48
51
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- -------------------------------------------------------------------------------
NOTE K -- INCOME TAXES
As of January 1, 1993, the Corporation prospectively adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FASB
109), which requires an asset and liability approach to accounting for income
taxes. As permitted under FASB 109, prior years' financial statements have not
been restated.
The cumulative impact of adopting FASB 109 is a tax benefit of $2,700
or $.02 per fully diluted share, which is reflected in income tax expense for
the year ended December 31, 1993. The effect of this change on operating
results for 1993, excluding the cumulative effect of changing methods, is not
material.
The provision for income taxes is summarized below. Included in these
amounts are income taxes related to securities transactions of $7,472, $470 and
$3,997 in 1993, 1992 and 1991, respectively. The Corporation made income tax
payments totaling $217,716 in 1993, $151,948 in 1992 and $112,386 in 1991.
1993 1992 1991
-------- -------- --------
Currently payable:
Federal. . . . . . . . . . . . $209,853 $159,787 $90,221
Foreign. . . . . . . . . . . . 289 261 641
State and local. . . . . . . . 11,966 14,667 5,035
-------- -------- --------
Total currently payable. . 222,108 174,715 95,897
Deferred:
Federal. . . . . . . . . . . . (25,828) (9,631) (44,171)
State. . . . . . . . . . . . . (835) (2,106) 25
-------- -------- --------
Total deferred . . . . . . (26,663) (11,737) (44,146)
Deferred investment tax credit
amortization . . . . . . . . -- -- (373)
-------- -------- --------
Total tax expense. . . . . $195,445 $162,978 $51,378
======== ======== ========
The deferred tax provision for 1993 includes a benefit of $2,683 related to the
revaluation of the Corporation's net deferred tax asset for the increase in the
federal corporate tax rate from 34% to 35% effective January 1, 1993.
The reasons for the difference between consolidated income tax expense
and the amount computed by applying the statutory federal income tax rate of
35% in 1993 and 34% in 1992 and 1991 to income before taxes were as follows:
1993 1992 1991
-------- -------- --------
Federal income taxes at
statutory rate . . . . . . . . $240,639 $202,709 $95,512
State and local income taxes,
net of federal benefit . . . . 7,235 8,290 3,340
Effect of tax-exempt securities
interest and other income. . . (50,817) (49,783) (59,165)
Tax reserves . . . . . . . . . . 2,594 2,874 5,903
Goodwill and deposit base
intangible amortization. . . . 298 (328) 4,541
Other items . . . . . . . . . . (4,504) (784) 1,247
-------- -------- --------
Total tax expense. . . . . $195,445 $162,978 $51,378
======== ======== ========
Under FASB 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Corporation's deferred tax assets and liabilities
at December 31, 1993 are as follows:
Deferred Deferred
Tax Tax
Assets Liabilities
-------- -----------
Allowance for loan losses . . . . . . . . . . . $146,305
Depreciation. . . . . . . . . . . . . . . . . . -- $34,674
Lease financing . . . . . . . . . . . . . . . . -- 15,998
Accretion of discounts on securities. . . . . . -- 13,981
Other . . . . . . . . . . . . . . . . . . . . . 43,493 10,382
-------- -------
Total deferred taxes . . . . . . . . . . . $189,798 $75,035
======== =======
Management believes that the Corporation will fully realize the net
deferred tax asset as of December 31, 1993 based upon the Corporation's
refundable taxes from carryback years, as well as its current level of
operating income.
The consolidated net deferred income tax asset amounted to $88,877 at
December 31, 1992. The components of the provision for deferred income taxes
for the years ended December 31, 1992 and 1991 are as follows:
1992 1991
-------- ---------
Provision for loan losses . . . . . . . . . . . $(7,953) ($31,364)
Bond trading revaluations . . . . . . . . . . . (7,957) 7,934
Deposit base intangible amortization. . . . . . 1,361 (3,027)
Other . . . . . . . . . . . . . . . . . . . . . 2,812 (17,689)
-------- ---------
Total deferred income taxes. . . . . . . . ($11,737) ($44,146)
======== =========
- -------------------------------------------------------------------------------
NOTE L -- CASH, DIVIDEND AND LOAN RESTRICTIONS
In the normal course of business, the Corporation and its subsidiaries
enter into agreements, or are subject to regulatory requirements, that result
in cash, debt and dividend restrictions. A summary of the most restrictive
items follows.
The Corporation's banking subsidiaries are required to maintain average
reserve balances with the Federal Reserve Bank. The average amount of those
reserve balances for the year ended December 31, 1993 was approximately
$440,055.
Under current Federal Reserve regulations, the banking subsidiaries are
also limited in the amount they may loan to their affiliates, including the
Corporation. Loans to a single affiliate may not exceed 10% and loans to all
affiliates may not exceed 20% of the bank's capital, surplus and undivided
profits (net assets) after adding back the allowance for loan losses. Based on
these limitations, approximately $324,951 was available for loans to the
Corporation at December 31, 1993.
- -------------------------------------------------------------------------------
49
52
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE L -- CASH, DIVIDEND AND LOAN RESTRICTIONS -- Concluded
The approval of the Comptroller of the Currency is required if the
total of all dividends declared by a national bank in any calendar
year exceeds the bank's net profits, as defined, for that year
combined with its retained net profits for the preceding two calendar
years. Under this formula, the banking subsidiaries can distribute
as dividends to the Corporation in 1994, without the approval
of the Comptroller of the Currency, more than $379,411 plus an
additional amount equal to the banks' retained net profits for 1994
up to the date of any dividend declaration.
As a result of the above dividend and loan restrictions, approximately
$2,146,047 of consolidated net assets of the Corporation's banking
subsidiaries at December 31, 1993 was restricted from transfer to
the Corporation in the form of cash dividends, loans or advances.
- --------------------------------------------------------------------------------
NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS
The following table sets forth the funded status of the Corporation's
defined benefit pension plan and the amounts recognized in the
consolidated statement of condition at December 31.
1993 1992
-------- --------
Actuarial present value of accumulated
benefit obligation:
Vested . . . . . . . . . . . . . . . . . . . . $303,288 $253,270
Nonvested. . . . . . . . . . . . . . . . . . . 2,765 34,139
-------- --------
Total. . . . . . . . . . . . . . . . $306,053 $287,409
======== ========
Actuarial present value of projected benefit
obligation for service rendered to date. . . .($360,428) ($307,199)
Plan assets at fair value -- primarily
listed stocks, fixed income securities and
collective funds (including Wachovia
common stock valued at $2,282 in 1992) . . . . 449,853 432,071
------- --------
Plan assets in excess of projected
benefit obligation . . . . . . . . . . . . . . 89,425 124,872
Unrecognized net (gain) loss from past experience
different from that assumed. . . . . . . . . . 9,685 (22,504)
Unrecognized prior service cost . . . . . . . . . . (24,091) (26,588)
Unrecognized transition asset . . . . . . . . . . . (52,126) (58,331)
------- -------
Pension asset recorded in consolidated
statement of condition . . . . . . . . . . . . $22,893 $ 17,449
======= ========
Net pension benefit included the following components:
1993 1992 1991
------- ------- -------
Service cost -- benefits earned
during the period . . . . . . . . $12,714 $12,502 $11,444
Interest cost on projected benefit
obligation. . . . . . . . . . . . 24,647 22,411 20,741
Actual return on plan assets . . . . . (39,227) (25,337) (68,767)
Net amortization and deferral. . . . . (3,577) (16,532) 30,250
------- ------- -------
Net periodic pension benefit . . . . . $(5,443) $(6,956) $(6,332)
======= ======= =======
The rates used in determining the actuarial present value of the
projected benefit obligation were as follows:
1993 1992 1991
-------- -------- --------
Discount rates . . . . . . . . . . 7.5% 8% 8%-9%
Rates of increase in
compensation levels . . . . . 5.25% 5.25% 5.5%-6.5%
Expected long-term rate
of return on plan assets. . . 8% 8% 8%-9.5%
The Corporation also sponsors separate unfunded nonqualified
pension plans that provide certain officers with defined pension
benefits in excess of limits imposed on qualified plans by federal
tax law and for certain compensation not covered in the qualified
plans. The following table summarizes the plans at December 31.
1993 1992
-------- --------
Actuarial present value of accumulated
benefit obligation:
Vested . . . . . . . . . . . . . . . . . . $14,287 $14,477
Nonvested. . . . . . . . . . . . . . . . . 10,544 10,400
------- -------
Total. . . . . . . . . . . . . . $24,831 $24,877
======= =======
Actuarial present value of projected benefit
obligation for service rendered to date. . ($32,129) ($29,867)
Unrecognized actuarial losses. . . . . . . . 6,129 2,393
Unrecognized transition obligation . . . . . 489 893
Unrecognized prior service cost. . . . . . . (261) (666)
------- -------
Pension liability recorded in consolidated
statement of condition. . . . . . . . . ($25,772) ($27,247)
======= =======
Net pension cost included the following components:
1993 1992 1991
-------- -------- --------
Service cost -- benefits earned
during the period . . . . . . . $ 526 $ 504 $ 441
Interest cost on projected benefit
obligation. . . . . . . . . . . 2,612 2,704 2,585
Net amortization and deferral. . . . 520 1,073 2,413
------ ------ ------
Net periodic pension cost. . . . . . $3,658 $4,281 $5,439
====== ====== ======
The rates used in determining the actuarial present value of the
projected benefit obligation were as follows:
1993 1992 1991
-------- -------- --------
Discount rates . . . . . . . . . . . 7.5% 10% 9%-10%
Rates of increase in
compensation levels . . . . . . 5% 5%-7% 4.9%-7%
The Corporation also provides supplemental benefits through
defined contribution plans designed to encourage participants
to save on a regular basis and to provide such participants with
deferred compensation and additional performance incentive.
Total expense relating to these plans, which represented the
Corporation's matching and discretionary contributions, was
$22,767 in 1993, $11,043 in 1992 and $7,248 in 1991. Employee
participants may elect to contribute from 1% to 10% of base salary,
with the Corporation matching 50% of each participant's
contribution up to a maximum employer contribution of 3% of base
salary. The plans provide for additional contributions of up to
3% of salary in accordance with a preestablished formula based
- --------------------------------------------------------------------------------
50
53
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
$ in thousands
- --------------------------------------------------------------------------------
NOTE M -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- Concluded
on certain earnings performance criteria and also for special
discretionary employer contributions of up to 4% of each eligible
employee's base salary as approved annually by the board of
directors.
During 1992, the employee stock ownership plan (ESOP) of
SCNC repaid its outstanding indebtedness of $25,000 with
proceeds received from the sale of Wachovia common stock
held by the ESOP. Company contributions to the ESOP have
been discontinued, and all remaining shares of Wachovia
common stock have been allocated to the ESOP participants.
Dividends paid on shares held by the ESOP totaled $443 in
1992 and $1,026 in 1991. Interest expense on ESOP debt amounted
to $625 in 1992 and $2,259 in 1991. Company contributions
and ESOP related expenses in 1991 totaled $1,497 and $2,535,
respectively.
The Corporation and its subsidiaries provide certain health
care benefits for retired employees. Substantially all of the
employees may become eligible for these benefits if they reach
normal retirement age while working for the Corporation or its
subsidiaries. The benefits are provided through self-insured
plans administered by insurance companies whose premiums
are based on the claims paid during the year.
On January 1, 1993, the Corporation prospectively adopted
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"
(FASB 106), which requires the accrual of nonpension benefits
as employees render service. Adoption of FASB 106 increased
postretirement benefits expense in 1993 by $5,210 and, on an
after-tax basis, reduced net income by $3,235 or $.02 per fully
diluted share. In years prior to 1993, the Corporation recognized
the cost of providing these retirement benefits by expensing the
annual premiums or claims, which were $3,005 in 1992 and
$2,271 in 1991.
The liability for postretirement benefits is unfunded. The following
table presents the status of the plan as of December 31, 1993.
Accumulated postretirement benefit obligation:
Retirees. . . . . . . . . . . . . . . . . . . . . . ($50,043)
Fully eligible active plan participants . . . . . . (6,864)
Other active plan participants. . . . . . . . . . . (11,646)
--------
Total. . . . . . . . . . . . . . . . . . . . . (68,553)
Unrecognized net loss. . . . . . . . . . . . . . . . . . 3,454
Unrecognized transition obligation . . . . . . . . . . . 59,889
--------
Accrued postretirement benefit cost. . . . . . . . . . . $(5,210)
=======
Net periodic postretirement benefit cost for 1993 includes the
following components:
Service cost. . . . . . . . . . . . . . . . . . . . . . . $ 738
Interest cost . . . . . . . . . . . . . . . . . . . . . . 4,953
Amortization of transition obligation over 20 years . . . 3,152
------
Net periodic postretirement benefit cost. . . . . . . . . $8,843
======
The annual assumed rate of increase in health care costs for the
plan is 14% for 1994 compared with 16% for 1993, and is assumed
to decrease gradually to 7% in 2007 and remain at that level there-
after. The health care cost trend rate assumption has a significant
effect on the amounts reported. Increasing the assumed health
care cost trend rates by one percentage point would increase the
accumulated postretirement benefit obligation for the plan as of
December 31, 1993 by $3,637 and the aggregate of the service
and interest cost of the net periodic postretirement benefit cost
for 1993 by $291. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.5%.
- ----------------------------------------------------------------------------------------------------------------------------------
NOTE N -- SELECTED INCOME STATEMENT INFORMATION
The components of other operating income and expense for the three years ended
December 31, 1993 were as follows:
1993 1992 1991
-------- -------- --------
Other operating income:
Insurance premiums and commissions . . . . . . . . . $ 11,847 $ 15,002 $ 12,819
Bankers' acceptance and letter of credit fees. . . . 19,668 20,141 14,232
Other service charges and fees . . . . . . . . . . . 48,915 44,585 42,108
Other income . . . . . . . . . . . . . . . . . . . . 37,315 16,619 13,094
-------- -------- --------
Total other operating income . . . . . . . $117,745 $ 96,347 $ 82,253
======== ======== ========
Other operating expense:
Postage and delivery . . . . . . . . . . . . . . . . $ 38,160 $ 37,036 $ 38,188
Outside data processing, programming and software. . 38,613 33,082 30,671
Stationery and supplies. . . . . . . . . . . . . . . 25,344 26,342 28,507
Advertising and sales promotion. . . . . . . . . . . 38,141 27,911 22,139
Professional services. . . . . . . . . . . . . . . . 17,144 18,412 25,786
Travel and business promotion. . . . . . . . . . . . 15,563 13,578 13,641
FDIC insurance and regulatory examinations . . . . . 53,663 53,970 49,629
Check clearing and other bank services . . . . . . . 10,159 10,391 11,334
Amortization of intangible assets. . . . . . . . . . 28,001 34,423 51,756
Foreclosed property expense. . . . . . . . . . . . . 7,654 9,755 15,655
Other expense. . . . . . . . . . . . . . . . . . . . 105,798 109,340 109,424
-------- -------- --------
Total other operating expense. . . . . . . $378,240 $374,240 $396,730
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
51
54
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
$ in thousands
- -----------------------------------------------------------------------------------------------------------------------------------
NOTE O -- EARNINGS PER SHARE Year Ended December 31
----------------------------------
1993 1992 1991
-------- -------- ----------
Primary (thousands, except per share)
- -------
Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,273 170,763 169,841
Dilutive common stock options -- based on treasury stock method using average market price . 1,594 1,738 1,518
Dilutive common stock awards -- based on treasury stock method using average market price . . 74 140 122
-------- -------- --------
Average primary shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,941 172,641 171,481
======== ======== ========
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $492,095 $433,225 $229,540
======== ======== ========
Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51 $ 1.34
Fully Diluted (thousands, except per share)
- -------------
Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,273 170,763 169,841
Dilutive common stock options -- based on treasury stock method using period-end market
price if higher than average market price . . . . . . . . . . . . . . . . . . . . . . . 1,594 1,975 1,901
Dilutive common stock awards -- based on treasury stock method using period-end market
price if higher than average market price . . . . . . . . . . . . . . . . . . . . . . . 77 140 150
Convertible long-term debt assumed converted . . . . . . . . . . . . . . . . . . . . . . . . 1,254 2,634 3,326
-------- -------- --------
Average fully diluted shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 175,198 175,512 175,218
======== ======== ========
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $492,095 $433,225 $229,540
Add interest on convertible long-term debt, after taxes . . . . . . . . . . . . . . . . . . . 937 1,777 2,218
-------- -------- --------
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $493,032 $435,002 $231,758
======== ======== ========
Per share amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.81 $ 2.48 $ 1.32
- -----------------------------------------------------------------------------------------------------------------------------------
52
55
WACHOVIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Concluded
$ in thousands
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE P -- WACHOVIA CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION
The following is a condensed statement of financial condition
of the parent company at December 31.
1993 1992
--------- ----------
Assets
- ------
Cash on demand deposit with bank subsidiary . . . . . . . $ 13 $ 46
Interest-bearing bank balances
with bank subsidiaries . . . . . . . . . . . . . . 77,883 23,850
Investment securities . . . . . . . . . . . . . . . . . . 8,510 1,021
Demand loans to nonbank subsidiaries . . . . . . . . . . 671,502 421,945
Capital notes receivable from
bank subsidiaries . . . . . . . . . . . . . . . . . 375,000 275,000
Loan participation with nonbank subsidiary . . . . . . . 25,000 25,000
Current amount due from subsidiaries . . . . . . . . . . 2,086 1,675
Investments in:
Bank and bank holding company subsidiaries . . . . 2,953,323 2,730,611
Nonbank subsidiaries . . . . . . . . . . . . . . . 58,872 6,676
Other assets . . . . . . . . . . . . . . . . . . . . 35,149 3,407
---------- ----------
Total assets . . . . . . . . . . . . . . . . . $4,207,338 $3,489,231
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Parent company commercial paper . . . . . . . . . . . . . $ 589,178 $ 386,618
Subordinated capital notes, net of
discount of $4,286 and $2,778 in
1993 and 1992, respectively . . . . . . . . . . . . 545,714 297,222
Demand loans from bank and bank
holding company subsidiaries . . . . . . . . . . . 33,571 4,856
Demand loan from nonbank subsidiary -- 17,020
Other liabilities . . . . . . . . . . . . . . . . . . . . 20,928 8,748
Shareholders' equity . . . . . . . . . . . . . . . . . . 3,017,947 2,774,767
---------- ----------
Total liabilities and
shareholders' equity . . . . . . . . . . $4,207,338 $3,489,231
========== ==========
The operating results of the parent company for the three years
ended December 31, 1993 are shown below.
1993 1992 1991
-------- -------- --------
Income
- ------
Dividends from:
Bank and bank holding company
subsidiaries . . . . . . . . . . . . . . . . . $186,493 $302,267 $187,447
Nonbank subsidiaries . . . . . . . . . . . . . . . 5,218 -- --
Interest from subsidiaries . . . . . . . . . . . . . . . 39,968 14,461 14,072
Other interest income . . . . . . . . . . . . . . . . . . 152 54 10
Other income . . . . . . . . . . . . . . . . . . . . 21,243 16,833 12,394
-------- -------- --------
Total income . . . . . . . . . . . . . . . . . 253,074 333,615 213,923
Expense
- -------
Interest on short-term
borrowed funds . . . . . . . . . . . . . . . . . . 14,692 14,096 14,201
Interest on long-term debt . . . . . . . . . . . . . . . 32,580 1,167 --
Interest paid to subsidiaries . . . . . . . . . . . . . . 1,096 914 3,329
Other expense . . . . . . . . . . . . . . . . . . . . 21,367 14,246 12,529
-------- -------- --------
Total expense . . . . . . . . . . . . . . . . 69,735 30,423 30,059
Income before income taxes and
equity in undistributed net income
of subsidiaries . . . . . . . . . . . . . . . . . . 183,339 303,192 183,864
Applicable income taxes (benefit) . . . . . . . . . . . . (3,423) 253 (230)
-------- -------- --------
Income before equity in undistributed
net income of subsidiaries . . . . . . . . . . . . 186,762 302,939 184,094
Equity in undistributed net
income of subsidiaries . . . . . . . . . . . . . . 305,333 130,286 45,446
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . $492,095 $433,225 $229,540
======== ======== ========
The cash flows for the parent company for the three years
ended December 31, 1993 were as follows:
1993 1992 1991
--------- --------- ----------
Operating Activities
- --------------------
Net income . . . . . . . . . . . . . . . . . . . . $ 492,095 $ 433,225 $ 229,540
Adjustments to reconcile net income:
Deferred income taxes . . . . . . . . . . . . . . . (3,491) 98 (60)
Net change in refundable or
accrued income taxes . . . . . . . . . . . . . (7,517) 70 156
(Increase) decrease in accrued
interest receivable . . . . . . . . . . . . . (266) (595) 172
Increase (decrease) in accrued
interest payable . . . . . . . . . . . . . . . 2,735 984 (128)
Net change in other accrued and
deferred income and expense . . . . . . . . . 1,739 (2,868) 5,479
Equity in undistributed net
income of subsidiaries . . . . . . . . . . . . (305,333) (130,286) (45,446)
--------- --------- ----------
Net cash provided by operations . . . . . . . . 179,962 300,628 189,713
Investing Activities
- --------------------
Net increase in interest-bearing
bank balances . . . . . . . . . . . . . . . . . . . (54,033) (4,873) (18,977)
Net decrease in resale agreements
with bank subsidiary . . . . . . . . . . . . . . . -- -- 2,800
Purchases of investment securities . . . . . . . . . . . (712) (385) (740)
Sales and maturities of investment
securities . . . . . . . . . . . . . . . . . . . . 49 -- 730
Investment in loan participation . . . . . . . . . . . . -- -- (25,000)
Net increase in demand loans to
nonbank subsidiaries . . . . . . . . . . . . . . . (249,557) (86,675) (94,026)
Capital notes issued to bank subsidiaries . . . . . . . . (100,000) (275,000) --
Net (increase) decrease in other assets . . . . . . . . . (4,991) (638) 6,415
Equity investment in subsidiaries . . . . . . . . . . . . (1,940) (134,046) (2,132)
--------- --------- ----------
Net cash used by investing
activities . . . . . . . . . . . . . . . (411,184) (501,617) (130,930)
Financing Activities
- --------------------
Net increase (decrease) in demand
loans from subsidiaries. . . . . . . . . . . . . . 53,239 (9,279) (14,870)
Net increase in commercial paper . . . . . . . . . . . . 202,560 78,453 91,647
Proceeds from long-term debt . . . . . . . . . . . . . . 248,075 297,222 --
Payments on long-term debt . . . . . . . . . . . . . . . (335) -- --
Increase (decrease) in other liabilities . . . . . . . . (7,000) 7,000 --
Issuance of stock . . . . . . . . . . . . . . . . . . . . 24,961 29,717 16,462
Dividend payments . . . . . . . . . . . . . . . . . . . (191,488) (170,756) (150,730)
Common stock repurchased . . . . . . . . . . . . . . . . (98,804) (31,197) (1,215)
Other equity transactions . . . . . . . . . . . . . . . . (19) (186) (21)
--------- --------- ----------
Net cash provided (used)
by financing activities . . . . . . . . 231,189 200,974 (58,727)
--------- --------- ----------
Increase (decrease) in cash . . . . . . . . . . . . . . . (33) (15) 56
Cash at beginning of year . . . . . . . . . . . . . . . . 46 61 5
--------- --------- ----------
Cash at end of year . . . . . . . . . . . . . . . . . . . $ 13 $ 46 $ 61
========= ========= ==========
Noncash investing and financing
activities:
Common stock issued upon
conversion of long-term debt . . . . . . . . . $ 16,437 $ 4,551 $ 10,268
Common stock issued in bank
acquisitions . . . . . . . . . . . . . . . . . -- -- 3,928
On March 31, 1993, Wachovia Corporation of North Carolina
and Wachovia Corporation of Georgia were merged into Wachovia
Corporation. The assets and liabilities of these second tier holding
companies which were merged into the Wachovia Corporation
parent company totaled $28,506 and $26,192, respectively.
- --------------------------------------------------------------------------------
53
56
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES (thousands)
1993 1992
--------------------- ---------------------
Amount % Amount %
---------- ----- --------- ----
ASSETS
Loans -- net of unearned income:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,198,159 18.5 $ 5,867,310 18.4
Tax-exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,890,337 5.6 1,997,998 6.3
----------- ----- ----------- -----
Total commercial . . . . . . . . . . . . . . . . . . . . . . . 8,088,496 24.1 7,865,308 24.7
Direct retail . . . . . . . . . . . . . . . . . . . . . . . . . . 684,679 2.0 687,556 2.2
Indirect retail . . . . . . . . . . . . . . . . . . . . . . . . . 2,245,115 6.7 2,006,442 6.3
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,591,207 7.7 1,774,342 5.6
Other revolving credit . . . . . . . . . . . . . . . . . . . . . 328,075 1.0 322,768 1.0
----------- ----- ----------- -----
Total retail . . . . . . . . . . . . . . . . . . . . . . . . . 5,849,076 17.4 4,791,108 15.1
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 470,465 1.4 519,971 1.7
Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . 3,147,293 9.4 3,063,395 9.6
Residential mortgages. . . . . . . . . . . . . . . . . . . . . . . 3,779,444 11.2 3,602,157 11.3
----------- ----- ----------- -----
Total real estate . . . . . . . . . . . . . . . . . . . . . . 7,397,202 22.0 7,185,523 22.6
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . 135,355 .4 118,209 .3
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,212 .2 72,347 .2
----------- ----- ----------- -----
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . 21,546,341 64.1 20,032,495 62.9
Investment securities:
State and municipal . . . . . . . . . . . . . . . . . . . . . . . 688,799 2.1 780,426 2.5
Other investments . . . . . . . . . . . . . . . . . . . . . . . . 6,350,557 18.9 5,420,655 17.0
----------- ----- ----------- -----
Total investment securities . . . . . . . . . . . . . . . . . 7,039,356 21.0 6,201,081 19.5
Interest-bearing bank balances . . . . . . . . . . . . . . . . . . . 78,297 .2 301,568 1.0
Federal funds sold and securities purchased under resale agreements . 394,959 1.2 483,679 1.5
Trading account assets . . . . . . . . . . . . . . . . . . . . . . . 721,111 2.1 1,078,370 3.4
----------- ----- ----------- -----
Total interest-earning assets . . . . . . . . . . . . . . . . 29,780,064 88.6 28,097,193 88.3
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . 2,368,237 7.0 2,370,379 7.4
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 468,218 1.4 444,957 1.4
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,411,152 4.2 1,294,825 4.1
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . (398,697) (1.2) (375,762) (1.2)
----------- ----- ----------- -----
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $33,628,974 100.0 $31,831,592 100.0
=========== ===== =========== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Time deposits in domestic offices:
Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . $ 3,219,413 9.6 $ 2,842,853 8.9
Savings and money market savings . . . . . . . . . . . . . . . . 5,997,750 17.8 5,826,317 18.3
Savings certificates . . . . . . . . . . . . . . . . . . . . . . 5,595,225 16.6 6,197,779 19.5
Large denomination certificates . . . . . . . . . . . . . . . . . 1,739,831 5.2 2,593,675 8.2
----------- ----- ----------- ----
Total time deposits in domestic offices . . . . . . . . . . . 16,552,219 49.2 17,460,624 54.9
Time deposits in foreign offices . . . . . . . . . . . . . . . . . . 466,571 1.4 423,069 1.3
----------- ----- ----------- ----
Total interest-bearing deposits . . . . . . . . . . . . . . . 17,018,790 50.6 17,883,693 56.2
Federal funds purchased and securities sold under repurchase
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,944,864 11.7 3,110,737 9.8
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . 485,889 1.5 469,120 1.5
Other short-term borrowed funds . . . . . . . . . . . . . . . . . . . 972,008 2.9 1,381,713 4.3
----------- ----- ----------- ----
Total short-term borrowed funds . . . . . . . . . . . . . . . 5,402,761 16.1 4,961,570 15.6
Bank notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,535,750 4.6 272,688 .9
Other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 537,852 1.6 175,940 .5
----------- ----- ----------- ----
Total long-term debt . . . . . . . . . . . . . . . . . . . . . 2,073,602 6.2 448,628 1.4
----------- ----- ----------- ----
Total interest-bearing liabilities . . . . . . . . . . . . . . 24,495,153 72.9 23,293,891 73.2
Other deposits:
Demand in domestic offices . . . . . . . . . . . . . . . . . . . 5,277,509 15.7 4,853,925 15.2
Demand in foreign offices . . . . . . . . . . . . . . . . . . . . 5,516 .0 5,759 .0
Noninterest-bearing time in domestic offices . . . . . . . . . . 71,577 .2 87,358 .3
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 907,111 2.7 994,263 3.1
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 2,872,108 8.5 2,596,396 8.2
---------- ----- ----------- ----
Total liabilities and shareholders' equity . . . . . . . . . . $33,628,974 100.0 $31,831,592 100.0
=========== ===== =========== =====
TOTAL DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,373,392 $22,830,735
54
57
1991 1990 1989 1988 Five-Year
----------------------- ----------------- --------------------- ---------------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
--------- ------ --------- ----- --------- ---- --------- ---- -----------
$ 6,112,621 19.1 $ 6,023,033 19.8 $ 6,247,505 22.0 $ 5,680,865 22.5 1.8%
2,070,612 6.4 2,114,022 6.9 1,662,497 5.9 1,187,976 4.7 9.7
----------- ------ ----------- ----- ----------- ----- ----------- -----
8,183,233 25.5 8,137,055 26.7 7,910,002 27.9 6,868,841 27.2 3.3
757,865 2.4 830,280 2.7 907,513 3.2 935,643 3.7 (6.1)
1,991,185 6.2 2,000,545 6.6 1,913,786 6.8 1,933,935 7.7 3.0
1,558,929 4.9 1,422,072 4.7 1,242,990 4.4 1,155,136 4.6 17.5
299,301 .9 288,156 .9 268,283 .9 253,784 1.0 5.3
----------- ------ ----------- ----- ----------- ----- ----------- -----
4,607,280 14.4 4,541,053 14.9 4,332,572 15.3 4,278,498 17.0 6.5
1,020,690 3.2 1,225,283 4.0 1,213,174 4.3 1,085,936 4.3 (15.4)
2,912,517 9.1 2,740,395 9.0 2,275,530 8.0 1,333,595 5.3 18.7
3,653,410 11.4 3,212,427 10.5 2,617,306 9.2 2,504,067 9.9 8.6
----------- ------ ----------- ----- ----------- ----- ----------- -----
7,586,617 23.7 7,178,105 23.5 6,106,010 21.5 4,923,598 19.5 8.5
124,519 .4 144,041 .5 157,820 .6 158,138 .6 (3.1)
86,968 .2 80,223 .3 97,202 .3 126,315 .5 (9.6)
----------- ------ ----------- ----- ----------- ----- ----------- -----
20,588,617 64.2 20,080,477 65.9 18,603,606 65.6 16,355,390 64.8 5.7
877,991 2.7 948,192 3.1 994,475 3.5 1,025,975 4.1 (7.7)
4,904,993 15.3 3,930,476 12.9 3,306,723 11.7 2,919,901 11.5 16.8
----------- ------ ----------- ----- ----------- ----- ----------- -----
5,782,984 18.0 4,878,668 16.0 4,301,198 15.2 3,945,876 15.6 12.3
416,103 1.3 604,162 2.0 617,461 2.2 682,097 2.7 (35.1)
597,354 1.9 479,735 1.6 717,746 2.5 508,432 2.0 (4.9)
974,621 3.0 739,268 2.4 474,634 1.7 311,991 1.2 18.2
----------- ------ ----------- ----- ----------- ----- ----------- -----
28,359,679 88.4 26,782,310 87.9 24,714,645 87.2 21,803,786 86.3 6.4
2,486,267 7.8 2,702,272 8.9 2,680,681 9.4 2,594,132 10.3 (1.8)
432,908 1.4 419,958 1.4 409,614 1.4 393,616 1.6 3.5
1,061,906 3.3 807,485 2.6 752,362 2.7 663,063 2.6 16.3
(295,891) (.9) (243,069) (.8) (210,390) (.7) (204,404) (.8) 14.3
----------- ------ ----------- ----- ----------- ----- ----------- -----
$32,044,869 100.0 $30,468,956 100.0 $28,346,912 100.0 $25,250,193 100.0 5.9
=========== ====== =========== ===== =========== ===== =========== =====
$ 2,354,780 7.3 $ 2,092,729 6.9 $ 1,840,259 6.5 $ 1,710,145 6.8 13.5
5,314,432 16.6 4,876,599 16.0 4,508,380 15.9 4,527,409 17.9 5.8
6,862,392 21.4 5,998,805 19.7 5,248,099 18.5 4,382,926 17.4 5.0
3,102,496 9.7 3,126,103 10.2 4,465,825 15.8 3,001,757 11.9 (10.3)
----------- ------ ----------- ----- ----------- ----- ----------- -----
17,634,100 55.0 16,094,236 52.8 16,062,563 56.7 13,622,237 54.0 4.0
289,722 .9 489,044 1.6 547,517 1.9 576,019 2.3 (4.1)
----------- ------ ----------- ----- ----------- ----- ----------- -----
17,923,822 55.9 16,583,280 54.4 16,610,080 58.6 14,198,256 56.3 3.7
3,498,869 10.9 3,876,762 12.7 3,655,028 12.9 3,317,201 13.1 3.5
348,125 1.1 365,369 1.2 284,677 1.0 259,229 1.0 13.4
2,233,271 7.0 1,988,614 6.6 336,666 1.2 263,565 1.1 29.8
----------- ------ ----------- ----- ----------- ----- ----------- -----
6,080,265 19.0 6,230,745 20.5 4,276,371 15.1 3,839,995 15.2 7.1
-- -- -- -- -- -- -- -
177,623 .6 177,436 .6 229,588 .8 283,941 1.1 13.6
----------- ------ ----------- ----- ----------- ----- ----------- -----
177,623 .6 177,436 .6 229,588 .8 283,941 1.1 48.8
----------- ------ ----------- ----- ----------- ----- ----------- -----
24,181,710 75.5 22,991,461 75.5 21,116,039 74.5 18,322,192 72.6 6.0
4,519,407 14.1 4,562,568 15.0 4,539,305 16.0 4,595,912 18.2 2.8
7,213 .0 7,208 .0 7,219 .0 8,402 .0 (8.1)
68,801 .2 49,698 .2 39,149 .2 26,960 .1 21.6
806,206 2.5 620,568 2.0 602,537 2.1 504,710 2.0 12.4
2,461,532 7.7 2,237,453 7.3 2,042,663 7.2 1,792,017 7.1 9.9
----------- ------ ----------- ----- ----------- ----- ----------- -----
$32,044,869 100.0 $30,468,956 100.0 $28,346,912 100.0 $25,250,193 100.0 5.9
=========== ====== =========== ===== =========== ===== =========== =====
$22,519,243 $21,202,754 $21,195,753 $18,829,530 3.5
55
58
WACHOVIA CORPORATION AND SUBSIDIARIES
SUMMARY OF OPERATIONS (thousands)
1993 1992
-------------------- --------------------
Amount % Amount %
---------- ------ ---------- -----
INTEREST INCOME . . . . . . . . . . . . . . . . $2,122,837 77.2 $2,222,078 80.0
INTEREST EXPENSE. . . . . . . . . . . . . . . . 839,012 30.5 967,028 34.8
---------- ---- ---------- ----
NET INTEREST INCOME . . . . . . . . . . . . . . 1,283,825 46.7 1,255,050 45.2
Provision for loan losses . . . . . . . . . . . 92,652 3.4 119,420 4.3
---------- ---- ---------- ----
Net interest income after provision for loan
losses . . . . . . . . . . . . . . . . . . 1,191,173 43.3 1,135,630 40.9
OTHER INCOME
Service charges on deposit accounts . . . . . . 202,885 7.4 189,537 6.8
Fees for trust services . . . . . . . . . . . . 120,030 4.4 109,504 3.9
Credit card income. . . . . . . . . . . . . . . 101,780 3.7 78,068 2.8
Mortgage fee income . . . . . . . . . . . . . . 39,101 1.4 40,078 1.5
Trading account profits (losses). . . . . . . . 13,103 .5 (11,542) (.4)
Student loan servicing. . . . . . . . . . . . . 5,535 .2 33,250 1.2
Other operating income. . . . . . . . . . . . . 117,745 4.2 96,347 3.5
---------- ---- ---------- ----
Total other operating revenue. . 600,179 21.8 535,242 19.3
Gain on sale of subsidiary. . . . . . . . . . . 8,030 .3 19,486 .7
Investment securities gains . . . . . . . . . . 19,394 .7 1,497 .0
---------- ---- ---------- ----
Total other income . . . . . . . 627,603 22.8 556,225 20.0
OTHER EXPENSE
Salaries. . . . . . . . . . . . . . . . . . . . 455,621 16.6 451,193 16.2
Employee benefits . . . . . . . . . . . . . . . 113,059 4.1 88,630 3.2
---------- ---- ---------- ----
Total personnel expense. . . . . 568,680 20.7 539,823 19.4
Net occupancy expense . . . . . . . . . . . . . 82,070 3.0 80,673 2.9
Equipment expense . . . . . . . . . . . . . . . 102,246 3.7 100,916 3.6
Other operating expense . . . . . . . . . . . . 378,240 13.7 374,240 13.5
---------- ---- ---------- ----
Total other expense. . . . . . . 1,131,236 41.1 1,095,652 39.4
Income before income taxes. . . . . . . . . . . 687,540 25.0 596,203 21.5
Applicable income taxes (2) . . . . . . . . . . 195,445 7.1 162,978 5.9
---------- ---- ---------- ----
NET INCOME. . . . . . . . . . . . . . . . . . . $ 492,095 17.9 $ 433,225 15.6
========== ==== ========== ====
Net income per common share:
Primary. . . . . . . . . . . . . . . . . . $ 2.83 $ 2.51
Fully diluted. . . . . . . . . . . . . . . $ 2.81 $ 2.48
Cash dividends paid per common share. . . . . . $ 1.110 $ 1.000
Average shares outstanding:
Primary (3). . . . . . . . . . . . . . . . 173,941 172,641
Fully diluted (4). . . . . . . . . . . . . 175,198 175,512
(1) Percentages reflected above are based on total income (interest plus other).
(2) Income taxes applicable to securities transactions were as follows: 1993 --
$7,472; 1992 -- $470; 1991 -- $3,997; 1990 -- $2,379; 1989 -- $2,903; and
1988 -- $1,997.
(3) Average primary shares outstanding include common equivalent shares as
follows: 1993 -- 1,668; 1992 -- 1,878; 1991 -- 1,640; 1990 -- 828;
1989 -- 860; and 1988 -- 601.
(4) Average fully diluted shares outstanding include dilutive common stock
options and awards and convertible long-term debt as follows: 1993 -- 2,925;
1992 -- 4,749; 1991 -- 5,377; 1990 -- 4,662; 1989 -- 5,178; and
1988 -- 8,702.
56
59
1991 1990 1989 1988 Five-Year
- --------------------- -------------------- -------------------- -------------------- Compound
Amount % Amount % Amount % Amount % Growth Rate
- ---------- ------ ---------- ----- ---------- ----- ---------- ----- -------------
$2,637,015 84.0 $2,748,644 85.5 $2,672,653 86.4 $2,200,173 85.5 (.7%)
1,467,849 46.8 1,684,114 52.4 1,672,856 54.1 1,244,382 48.4 (7.6)
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
1,169,166 37.2 1,064,530 33.1 999,797 32.3 955,791 37.1 6.1
293,000 9.3 142,992 4.4 86,531 2.8 78,110 3.0 3.5
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
876,166 27.9 921,538 28.7 913,266 29.5 877,681 34.1 6.3
170,827 5.4 155,808 4.8 136,620 4.4 126,146 4.9 10.0
102,665 3.3 99,572 3.1 101,072 3.3 87,959 3.4 6.4
62,814 2.0 55,202 1.7 50,092 1.6 45,243 1.8 17.6
28,608 .9 20,741 .6 16,003 .5 16,260 .7 19.2
11,541 .4 11,637 .4 7,510 .2 7,293 .3 12.4
31,470 1.0 29,841 .9 27,230 .9 23,915 .9 (25.4)
82,253 2.6 86,051 2.8 73,290 2.4 59,649 2.3 14.6
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
490,178 15.6 458,852 14.3 411,817 13.3 366,465 14.3 10.4
-- -- -- -- -- -- -- --
11,091 .4 6,218 .2 7,625 .3 5,213 .2 30.1
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
501,269 16.0 465,070 14.5 419,442 13.6 371,678 14.5 11.0
443,273 14.1 413,592 12.9 403,888 13.1 379,169 14.8 3.7
81,216 2.6 73,881 2.3 81,110 2.6 77,804 3.0 7.8
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
524,489 16.7 487,473 15.2 484,998 15.7 456,973 17.8 4.5
75,729 2.4 71,402 2.2 64,044 2.1 60,599 2.4 6.3
99,569 3.2 98,042 3.0 101,101 3.3 98,925 3.8 .7
396,730 12.7 295,367 9.3 266,747 8.6 247,662 9.6 8.8
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
1,096,517 35.0 952,284 29.7 916,890 29.7 864,159 33.6 5.5
280,918 8.9 434,324 13.5 415,818 13.4 385,200 15.0 12.3
51,378 1.6 88,647 2.7 87,669 2.8 86,434 3.4 17.7
- ---------- ---- ---------- ----- ---------- ----- ---------- ----
$ 229,540 7.3 $ 345,677 10.8 $ 328,149 10.6 $ 298,766 11.6 10.5
========== ==== ========== ===== ========== ===== ========== ====
$ 1.34 $ 2.05 $ 1.95 $ 1.82 9.2
$ 1.32 $ 2.02 $ 1.92 $ 1.77 9.7
$ .920 $ .820 $ .697 $ .584 13.7
171,481 168,888 168,268 164,266 1.2
175,218 172,722 172,586 172,366 .3
57
60
WACHOVIA CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME --TAXABLE EQUIVALENT (thousands)
1993 1992
------------------ ------------------
AMOUNT % AMOUNT %
---------- ----- ---------- -----
INTEREST INCOME
Loans:
Commercial........................................................... $ 327,729 14.8 $ 349,868 15.2
Tax-exempt........................................................... 171,163 7.7 173,158 7.5
---------- ----- ---------- -----
Total commercial............................................. 498,892 22.5 523,026 22.7
Direct retail........................................................ 59,455 2.7 77,850 3.4
Indirect retail...................................................... 189,143 8.5 191,594 8.3
Credit card.......................................................... 304,502 13.7 257,885 11.2
Other revolving credit............................................... 36,580 1.6 37,538 1.6
---------- ----- ---------- -----
Total retail................................................. 589,680 26.5 564,867 24.5
Construction......................................................... 35,034 1.6 40,441 1.8
Commercial mortgages................................................. 232,688 10.5 243,861 10.6
Residential mortgages................................................ 305,965 13.8 320,363 13.9
---------- ----- ---------- -----
Total real estate............................................ 573,687 25.9 604,665 26.3
Lease financing...................................................... 12,051 .5 11,830 .5
Foreign.............................................................. 3,318 .1 3,760 .2
---------- ----- ---------- -----
Total loans.................................................. 1,677,628 75.5 1,708,148 74.2
Investment securities:
State and municipal.................................................. 85,854 3.8 96,649 4.2
Other investments.................................................... 414,485 18.7 406,274 17.7
---------- ----- ---------- -----
Total investment securities.................................. 500,339 22.5 502,923 21.9
Interest-bearing bank balances......................................... 2,905 .1 12,772 .6
Federal funds sold and securities purchased under resale agreements.... 12,433 .6 17,038 .7
Trading account assets................................................. 28,433 1.3 60,444 2.6
---------- ----- ---------- -----
Total interest income........................................ 2,221,738 100.0 2,301,325 100.0
INTEREST EXPENSE
Interest-bearing demand................................................ 60,433 2.7 72,548 3.1
Savings and money market savings....................................... 151,748 6.8 189,699 8.2
Savings certificates................................................... 240,795 10.8 324,063 14.1
Large denomination certificates........................................ 90,101 4.1 148,931 6.5
---------- ----- ---------- -----
Total time deposits in domestic offices...................... 543,077 24.4 735,241 31.9
Time deposits in foreign offices....................................... 14,503 .7 15,646 .7
---------- ----- ---------- -----
Total time deposits.......................................... 557,580 25.1 750,887 32.6
Federal funds purchased and securities sold under repurchase
agreements........................................................... 127,580 5.8 115,939 5.1
Commercial paper....................................................... 14,693 .7 16,629 .7
Other short-term borrowed funds........................................ 31,574 1.4 58,420 2.5
---------- ----- ---------- -----
Total short-term borrowed funds.............................. 173,847 7.9 190,988 8.3
Bank notes............................................................. 69,785 3.1 13,183 .6
Other long-term debt................................................... 37,800 1.7 11,970 .5
---------- ----- ---------- -----
Total long-term debt......................................... 107,585 4.8 25,153 1.1
---------- ----- ---------- -----
Total interest expense....................................... 839,012 37.8 967,028 42.0
---------- ----- ---------- -----
NET INTEREST INCOME.................................................... $1,382,726 62.2 $1,334,297 58.0
========== ===== ========== =====
Percentage of interest-earning assets:
Interest income...................................................... 7.46% 8.19%
Interest expense..................................................... 2.82 3.44
---- ----
Net interest income.......................................... 4.64% 4.75%
==== ====
Taxable equivalent adjustment included in interest income:
Loans................................................................ $ 50,178 $ 44,760
Investment securities................................................ 46,613 33,787
Trading account assets............................................... 2,110 700
---------- ----------
Total (2).................................................... $ 98,901 $ 79,247
========== ==========
(1) Percentages reflected above are based on total interest income.
(2) The taxable equivalent adjustment for 1993 reflects the federal income tax
rate of 35% and state tax rates, as applicable, reduced by the nondeductible
portion of interest expense; the taxable equivalent adjustments for prior
years reflect the federal income tax rate of 34%.
58
61
1991 1990 1989 1988 FIVE-YEAR
------------------ ------------------ ------------------ ------------------ COMPOUND
AMOUNT % AMOUNT % AMOUNT % AMOUNT % GROWTH RATE
---------- ----- ---------- ----- ---------- ----- ---------- ----- -----------
$ 502,100 18.4 $ 596,227 20.9 $ 674,211 24.3 $ 538,825 23.5 (9.5%)
206,099 7.5 230,049 8.0 197,015 7.1 139,745 6.1 4.1
---------- ----- ---------- ----- ---------- ----- ---------- -----
708,199 25.9 826,276 28.9 871,226 31.4 678,570 29.6 (6.0)
97,655 3.6 110,423 3.9 122,358 4.4 122,167 5.3 (13.4)
209,985 7.7 225,582 7.9 221,218 8.0 215,341 9.4 (2.6)
259,773 9.5 240,709 8.4 213,320 7.7 203,256 8.9 8.4
38,106 1.4 39,567 1.4 37,713 1.4 32,571 1.4 2.3
---------- ----- ---------- ----- ---------- ----- ---------- -----
605,519 22.2 616,281 21.6 594,609 21.5 573,335 25.0 .6
95,503 3.5 126,754 4.4 136,802 4.9 110,927 4.9 (20.6)
273,371 10.0 290,390 10.2 255,919 9.2 135,733 5.9 11.4
370,733 13.6 347,730 12.2 293,531 10.6 254,465 11.1 3.8
---------- ----- ---------- ----- ---------- ----- ---------- -----
739,607 27.1 764,874 26.8 686,252 24.7 501,125 21.9 2.7
12,990 .5 15,407 .5 17,068 .6 16,845 .7 (6.5)
6,775 .2 7,745 .3 11,285 .4 16,102 .7 (27.1)
---------- ----- ---------- ----- ---------- ----- ---------- -----
2,073,090 75.9 2,230,583 78.1 2,180,440 78.6 1,785,977 77.9 (1.2)
109,607 4.0 119,799 4.2 126,074 4.5 130,298 5.7 (8.0)
416,668 15.3 353,199 12.4 298,997 10.8 257,373 11.2 10.0
---------- ----- ---------- ----- ---------- ----- ---------- -----
526,275 19.3 472,998 16.6 425,071 15.3 387,671 16.9 5.2
26,974 1.0 50,855 1.7 58,454 2.1 54,107 2.4 (44.3)
35,537 1.3 39,496 1.4 66,464 2.4 39,888 1.8 (20.8)
70,049 2.5 62,386 2.2 43,541 1.6 23,878 1.0 3.6
---------- ----- ---------- ----- ---------- ----- ---------- -----
2,731,925 100.0 2,856,318 100.0 2,773,970 100.0 2,291,521 100.0 (.6)
95,809 3.5 93,564 3.3 86,107 3.1 77,397 3.4 (4.8)
275,951 10.1 301,248 10.5 297,522 10.7 259,772 11.3 (10.2)
475,012 17.4 473,150 16.5 437,119 15.8 326,455 14.2 (5.9)
221,992 8.1 256,243 9.0 399,471 14.4 228,649 10.0 (17.0)
---------- ----- ---------- ----- ---------- ----- ---------- -----
1,068,764 39.1 1,124,205 39.3 1,220,219 44.0 892,273 38.9 (9.5)
16,834 .6 39,147 1.4 50,260 1.8 43,259 1.9 (19.6)
---------- ----- ---------- ----- ---------- ----- ---------- -----
1,085,598 39.7 1,163,352 40.7 1,270,479 45.8 935,532 40.8 (9.8)
202,299 7.4 309,846 10.9 325,192 11.7 243,020 10.6 (12.1)
19,985 .7 29,416 1.0 25,330 .9 18,723 .8 (4.7)
146,918 5.4 166,251 5.8 29,920 1.1 21,780 1.0 7.7
---------- ----- ---------- ----- ---------- ----- ---------- -----
369,202 13.5 505,513 17.7 380,442 13.7 283,523 12.4 (9.3)
-- -- -- -- -- -- -- --
13,049 .5 15,249 .6 21,935 .8 25,327 1.1 8.3
---------- ----- ---------- ----- ---------- ----- ---------- -----
13,049 .5 15,249 .6 21,935 .8 25,327 1.1 33.5
---------- ----- ---------- ----- ---------- ----- ---------- -----
1,467,849 53.7 1,684,114 59.0 1,672,856 60.3 1,244,382 54.3 (7.6)
---------- ----- ---------- ----- ---------- ----- ---------- -----
$1,264,076 46.3 $1,172,204 41.0 $1,101,114 39.7 $1,047,139 45.7 5.7
========== ===== ========== ===== ========== ===== ========== =====
9.63% 10.66% 11.22% 10.51%
5.17 6.28 6.76 5.71
----- ----- ----- -----
4.46% 4.38% 4.46% 4.80%
===== ===== ===== =====
$ 54,882 $ 62,415 $ 56,213 $ 46,869
39,245 44,635 44,371 43,745
783 624 733 734
---------- ---------- ---------- ----------
$ 94,910 $ 107,674 $ 101,317 $ 91,348
========== ========== ========== ==========
59
62
WACHOVIA CORPORATION AND SUBSIDIARIES
STATISTICAL SUMMARY
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
AVERAGE YIELDS EARNED (taxable equivalent)
Loans:
Commercial . . . . . . . . . . . . . . . . . 5.29% 5.96% 8.21% 9.90% 10.79% 9.48%
Tax-exempt . . . . . . . . . . . . . . . . . 9.05 8.67 9.95 10.88 11.85 11.76
Total commercial . . . . . . . . . . . . 6.17 6.65 8.65 10.15 11.01 9.88
Direct retail . . . . . . . . . . . . . . . 8.68 11.32 12.89 13.30 13.48 13.06
Indirect retail . . . . . . . . . . . . . . 8.42 9.55 10.55 11.28 11.56 11.13
Credit card . . . . . . . . . . . . . . . . 11.75 14.53 16.66 16.93 17.16 17.60
Other revolving credit . . . . . . . . . . . 11.15 11.63 12.73 13.73 14.06 12.83
Total retail . . . . . . . . . . . . . . 10.08 11.79 13.14 13.57 13.72 13.40
Construction . . . . . . . . . . . . . . . . 7.45 7.78 9.36 10.34 11.28 10.21
Commercial mortgages . . . . . . . . . . . . 7.39 7.96 9.39 10.60 11.25 10.18
Residential mortgages . . . . . . . . . . . 8.10 8.89 10.15 10.82 11.22 10.16
Total real estate . . . . . . . . . . . . 7.76 8.42 9.75 10.66 11.24 10.18
Lease financing . . . . . . . . . . . . . . 8.90 10.01 10.43 10.70 10.81 10.65
Foreign . . . . . . . . . . . . . . . . . . 4.35 5.20 7.79 9.66 11.61 12.75
Total loans . . . . . . . . . . . . . . . 7.79 8.53 10.07 11.11 11.72 10.92
State and municipal securities . . . . . . . . 12.46 12.38 12.48 12.63 12.68 12.70
Other investments . . . . . . . . . . . . . . . 6.53 7.50 8.49 8.99 9.04 8.81
Total investment securities . . . . . . . 7.11 8.11 9.10 9.70 9.88 9.82
Interest-bearing bank balances . . . . . . . . 3.71 4.24 6.48 8.42 9.47 7.93
Federal funds sold and securities
purchased under resale agreements . . . . . 3.15 3.52 5.95 8.23 9.26 7.85
Trading account assets . . . . . . . . . . . . 3.94 5.61 7.19 8.44 9.17 7.65
Total interest-earning assets . . . . . . 7.46 8.19 9.63 10.66 11.22 10.51
AVERAGE RATES PAID
Interest-bearing demand . . . . . . . . . . . . 1.88% 2.55% 4.07% 4.47% 4.68% 4.53%
Savings and money market savings . . . . . . . 2.53 3.26 5.19 6.18 6.60 5.74
Savings certificates . . . . . . . . . . . . . 4.30 5.23 6.92 7.89 8.33 7.45
Large denomination certificates . . . . . . . . 5.18 5.74 7.16 8.20 8.95 7.62
Total time deposits in domestic offices . 3.28 4.21 6.06 6.99 7.60 6.55
Time deposits in foreign offices . . . . . . . 3.11 3.70 5.81 8.00 9.18 7.51
Total time deposits . . . . . . . . . . . 3.28 4.20 6.06 7.02 7.65 6.59
Federal funds purchased and securities
sold under repurchase agreements . . . . . . 3.23 3.73 5.78 7.99 8.90 7.33
Commercial paper . . . . . . . . . . . . . . . 3.02 3.54 5.74 8.05 8.90 7.22
Other short-term borrowed funds . . . . . . . . 3.25 4.23 6.58 8.36 8.89 8.26
Total short-term borrowed funds . . . . . 3.22 3.85 6.07 8.11 8.90 7.38
Bank notes . . . . . . . . . . . . . . . . . . 4.54 4.83 -- -- -- --
Other long-term debt . . . . . . . . . . . . . 7.03 6.80 7.35 8.59 9.55 8.92
Total long-term debt . . . . . . . . . . 5.19 5.61 7.35 8.59 9.55 8.92
Total interest-bearing liabilities . . . 3.43 4.15 6.07 7.32 7.92 6.79
Interest rate spread . . . . . . . . . . . . . 4.03% 4.04% 3.56% 3.34% 3.30% 3.72%
Net yield on interest-earning assets . . . . . 4.64% 4.75% 4.46% 4.38% 4.46% 4.80%
RATIOS (averages)
Loans to deposits . . . . . . . . . . . . . . . 96.30% 87.74% 91.43% 94.71% 87.77% 86.86%
Shareholders' equity to:
Total assets . . . . . . . . . . . . . . . . 8.54 8.16 7.68 7.34 7.21 7.10
Net loans . . . . . . . . . . . . . . . . . 13.58 13.21 12.13 11.28 11.11 11.10
Deposits . . . . . . . . . . . . . . . . . . 12.84 11.37 10.93 10.55 9.64 9.52
Equity and long-term debt . . . . . . . . . 58.07 85.27 93.27 92.65 89.90 86.32
Return on assets . . . . . . . . . . . . . . . 1.46 1.36 .72 1.13 1.16 1.18
Return on shareholders' equity . . . . . . . . 17.13 16.69 9.33 15.45 16.06 16.67
Return on deposits . . . . . . . . . . . . . . 2.20 1.90 1.02 1.63 1.55 1.59
Dividends paid as a percentage of net income . 38.91 39.42 63.78 37.84 33.97 30.66
60
63
WACHOVIA CORPORATION AND SUBSIDIARIES
YEAR-END INFORMATION
1993 1992 1991 1990 1989 1988
-------- -------- ------- -------- -------- -------
CONDENSED BALANCE SHEET (millions)
Cash and due from banks . . . . . . . . . . . . $ 2,529 $ 2,628 $ 2,475 $ 3,586 $ 3,291 $ 3,246
Interest-bearing bank balances . . . . . . . . 13 189 408 565 593 673
Federal funds sold and securities
purchased under resale agreements . . . . . . 691 479 546 591 646 689
Trading account assets . . . . . . . . . . . . 789 896 1,445 793 648 311
Investment securities . . . . . . . . . . . . . 7,879 6,486 6,265 5,273 4,629 4,124
Loans and net leases . . . . . . . . . . . . . 22,986 21,097 20,643 21,255 19,626 17,676
Less unearned income on loans . . . . . . . . . 9 11 26 48 94 118
-------- -------- -------- -------- -------- --------
Total loans . . . . . . . . . . . . . . . 22,977 21,086 20,617 21,207 19,532 17,558
Less allowance for loan losses . . . . . . . . 405 380 360 270 219 201
-------- -------- -------- -------- -------- --------
Net loans . . . . . . . . . . . . . . . . 22,572 20,706 20,257 20,937 19,313 17,357
Premises and equipment . . . . . . . . . . . . 503 444 435 429 412 402
Other assets . . . . . . . . . . . . . . . . . 1,550 1,539 1,327 1,141 733 668
-------- -------- -------- -------- -------- --------
Total assets . . . . . . . . . . . . . . $ 36,526 $ 33,367 $ 33,158 $ 33,315 $ 30,265 $ 27,470
======== ======== ======== ======== ======== ========
Deposits in domestic offices . . . . . . . . . $ 22,545 $ 22,856 $ 22,602 $ 22,736 $ 21,578 $ 19,944
Deposits in foreign offices . . . . . . . . . . 807 519 404 499 476 576
-------- -------- -------- -------- -------- --------
Total deposits . . . . . . . . . . . . . 23,352 23,375 23,006 23,235 22,054 20,520
Federal funds purchased and securities
sold under repurchase agreements . . . . . . 4,741 3,714 4,002 3,867 3,857 3,556
Commercial paper . . . . . . . . . . . . . . . 589 387 398 331 310 239
Other short-term borrowed funds . . . . . . . . 1,091 849 2,201 2,473 1,163 500
Bank notes . . . . . . . . . . . . . . . . . . 2,370 758 -- -- -- --
Other long-term debt . . . . . . . . . . . . . 591 439 171 164 224 235
Other liabilities . . . . . . . . . . . . . . . 774 1,070 896 874 480 468
Shareholders' equity . . . . . . . . . . . . . 3,018 2,775 2,484 2,371 2,177 1,952
-------- -------- -------- -------- -------- --------
Total liabilities and shareholders'
equity . . . . . . . . . . . . . . . . . $ 36,526 $ 33,367 $ 33,158 $ 33,315 $ 30,265 $ 27,470
======== ======== ======== ======== ======== ========
LOAN PORTFOLIO (millions)
Domestic borrowers:
Commercial . . . . . . . . . . . . . . . . . $ 6,727 $ 6,365 $ 6,396 $ 6,627 $ 6,182 $ 6,077
Tax-exempt . . . . . . . . . . . . . . . . . 1,959 1,952 1,993 2,065 2,089 1,290
Direct retail . . . . . . . . . . . . . . . 716 673 723 796 909 907
Indirect retail . . . . . . . . . . . . . . 2,429 2,109 1,983 2,022 1,930 1,907
Credit card . . . . . . . . . . . . . . . . 3,123 2,216 1,671 1,598 1,391 1,267
Other revolving credit . . . . . . . . . . . 333 327 302 297 283 266
Construction . . . . . . . . . . . . . . . . 494 464 637 1,197 1,148 1,168
Commercial mortgages . . . . . . . . . . . . 3,199 3,119 3,066 2,860 2,484 2,041
Residential mortgages . . . . . . . . . . . 3,767 3,663 3,660 3,506 2,882 2,373
Lease financing, net . . . . . . . . . . . . 157 125 116 138 151 159
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . 22,904 21,013 20,547 21,106 19,449 17,455
Foreign borrowers:
Commercial and industrial . . . . . . . . . 73 73 56 92 74 87
Banks and other financial institutions . . . -- -- 7 -- 1 5
Governments and official institutions . . . -- -- 7 9 8 11
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . 73 73 70 101 83 103
-------- -------- -------- -------- -------- --------
Total loans . . . . . . . . . . . . . . . $ 22,977 $ 21,086 $ 20,617 $ 21,207 $ 19,532 $ 17,558
======== ======== ======== ======== ======== ========
ALLOCATION OF ALLOWANCE
FOR LOAN LOSSES* (thousands)
Commercial . . . . . . . . . . . . . . . . . . $ 89,431 $ 92,279 $ 89,055 $ 73,636 $ 65,591 $ 66,596
Credit card . . . . . . . . . . . . . . . . . . 78,264 54,584 44,655 39,255 39,918 36,942
Other revolving credit . . . . . . . . . . . . 4,958 4,718 6,193 3,545 2,860 2,722
Other retail . . . . . . . . . . . . . . . . . 33,748 28,113 25,303 44,233 41,399 36,752
Real estate . . . . . . . . . . . . . . . . . . 111,960 113,996 128,216 76,534 42,610 30,515
Lease financing . . . . . . . . . . . . . . . . 2,018 1,994 2,159 3,114 3,032 2,562
Foreign . . . . . . . . . . . . . . . . . . . . 931 715 1,382 2,296 2,933 3,318
Unallocated . . . . . . . . . . . . . . . . . . 83,488 83,158 63,230 27,303 20,876 21,291
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . $404,798 $379,557 $360,193 $269,916 $219,219 $200,698
======== ======== ======== ======== ======== ========
* The allocation of the allowance for loan losses above represents an estimate
based on historical loss experience, individual credits, economic conditions
and other judgmental factors. Since any allocation is judgmental and involves
consideration of many factors, the allocation may be more or less than the
charge-offs that may ultimately occur. The entire allowance is available for
charge-offs in any category of loans.
61
64
- --------------------------------------------------------------------------------
STOCK DATA
Wachovia Corporation's common stock is listed on the New York
Stock Exchange under the trading symbol of WB. On October 1, 1993,
the corporation was added to the Standard & Poor's 500 Index of
stocks and to the S&P 500 Major Regional Banks Industry Group. Stock
price and dividend information for the corporation is presented in
the following charts and table.
Wachovia Corporation merged with South Carolina National
Corporation, effective December 6, 1991,
COMMON STOCK PRICE RANGE NYSE SYMBOL: WB CASH DIVIDENDS PER SHARE
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX)
COMMON STOCK PRICE/EARNINGS RATIOS CASH DIVIDEND PAYOUT
(Graph - SEE GRAPHICS (Graph - SEE GRAPHICS
APPENDIX) APPENDIX)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA -- PER SHARE TABLE 21
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
Market value:*
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 1/2 $ 34 1/8 $ 29 $ 20 7/8 $ 20 3/8 $ 15 3/4
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 1/2 34 3/4 30 22 3/8 22 5/8 17
Low. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 7/8 28 1/4 20 1/4 16 1/8 15 1/2 13 7/8
Book value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.61 16.18 14.56 14.07 12.96 11.70
Dividend* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.110 1.000 .920 .820 .697 .584
Price/earnings ratio**. . . . . . . . . . . . . . . . . . . . . . . 11.8x 13.6x 21.7x 9.9x 10.6x 8.7x
*Information for years before 1991 represents that of Wachovia
Corporation prior to merger
**Based on net income per primary share and end-of-year stock price
- ------------------------------------------------------------------------------------------------------------------------------------
62
65
under an agreement providing for a tax-free exchange of .675 of
a share of Wachovia Corporation common stock for each share of South
Carolina National. As a result of merger and special charges taken in
the fourth quarter of 1991, the corporation's net income per primary
share for the year 1991 was $1.34 compared with $2.05 in 1990 and
$2.51 in 1992.
The Five-Year Total Return chart compares Wachovia, the S&P 500
and the Keefe, Bruyette & Woods (KBW) 50 Index in stock price
appreciation and dividends, assuming quarterly reinvestment, from the
base period December 31, 1988 through year-end 1993. The KBW Index is
a market capitalization weighted measure of total return for 50 money
center and major regional banks. Wachovia's total return is based on
stock prices and dividends per share of Wachovia Corporation prior to
its merger with South Carolina National.
QUARTERLY COMMON STOCK PRICE RANGE
(Graph - SEE GRAPHICS
APPENDIX)
QUARTERLY COMMON STOCK PRICE/EARNINGS RATIOS
(Graph - SEE GRAPHICS
APPENDIX)
FIVE-YEAR TOTAL RETURN
(Graph - SEE GRAPHICS
APPENDIX)
63
66
- -------------------------------------------------------------------------------
MEMBER COMPANY DIRECTORS
WACHOVIA BANK OF GEORGIA, N.A.
G. JOSEPH PRENDERGAST
President and
Chief Executive Officer
THOMAS E. BOLAND
Chairman of the Board
F. DUANE ACKERMAN
President and
Chief Executive Officer
BellSouth Telecommunications, Inc.
EDWARD L. ADDISON
Chairman and
Chief Executive Officer
The Southern Company
L. M. BAKER, JR.
President and
Chief Executive Officer
Wachovia Corporation
CARL BOLCH, JR.
Chairman of the Board and
Chief Executive Officer
Racetrac Petroleum, Inc.
JAMES E. BOSTIC, JR.
Group Vice President
Communication Papers Division
Georgia-Pacific Corporation
MICHAEL C. CARLOS
Chairman of the Board and
Chief Executive Officer
National Distributing Co., Inc.
G. STEPHEN FELKER
Chairman of the Board and
Chief Executive Officer
Avondale Mills, Inc.
BRYAN D. LANGTON
(Advisory Director)
Chairman of the Board and
Chief Executive Officer
Holiday Inn Worldwide
BERNARD MARCUS
Chairman of the Board and
Chief Executive Officer
The Home Depot, Inc.
DANIEL W. MCGLAUGHLIN
President and
Chief Operating Officer
Equifax Inc.
JOHN G. MEDLIN, JR.
Chairman of the Board
Wachovia Corporation
D. RAYMOND RIDDLE
President and
Chief Executive Officer
National Service Industries, Inc.
S. STEPHEN SELIG III
Chairman of the Board
and President
Selig Enterprises, Inc.
ALANA S. SHEPHERD
Secretary of the Board
Shepherd Spinal Center
J. V. WHITE
Chairman of the
Executive Committee
Equifax Inc.
WACHOVIA BANK OF NORTH CAROLINA, N.A.
J. WALTER MCDOWELL
President and
Chief Executive Officer
L. M. BAKER, JR.
Chairman of the Board
H. C. BISSELL
Chairman of the Board and
Chief Executive Officer
The Bissell Companies, Inc.
HERBERT BRENNER
Chairman of the Board
Amarr Company
President
Brenner Companies, Inc.
FELTON J. CAPEL
Chairman of the Board
and President
Century Associates of
North Carolina
WILLIAM CAVANAUGH, III
President and
Chief Operating Officer
Carolina Power & Light Company
BERT COLLINS
President and
Chief Executive Officer
North Carolina Mutual
Life Insurance Company
RICHARD L. DAUGHERTY
North Carolina Senior
State Executive,
Vice President Worldwide
Manufacturing
IBM PC Company
IBM Corporation
ESTELL C. LEE
Chairman of the Board
and President
The Lee Company
JOHN G. MEDLIN, JR.
Chairman of the Board
Wachovia Corporation
WYNDHAM ROBERTSON
Vice President, Communications
University of North Carolina
DAVID J. WHICHARD, II
Chairman
The Daily Reflector
JOHN C. WHITAKER, JR.
Chairman of the Board and
Chief Executive Officer
Inmar Enterprises, Inc.
SOUTH CAROLINA NATIONAL CORPORATION
THE SOUTH CAROLINA NATIONAL BANK
ANTHONY L. FURR
Chairman of the Board,
President and
Chief Executive Officer
L. M. BAKER, JR.
President and
Chief Executive Officer
Wachovia Corporation
CHARLES J. BRADSHAW
President
Bradshaw Investments, Inc.
W. T. CASSELS, JR.
Chairman of the Board
Southeastern Freight Lines, Inc.
THOMAS C. COXE, III
Executive Vice President
Sonoco Products Company
FREDERICK B. DENT, JR.
President
Mayfair Mills, Inc.
JAMES B. EDWARDS, D.M.D.
President
Medical University of South Carolina
ROBERT M. GALLANT
Owner
Gallant Development Company
JAMES G. LINDLEY
Chairman Emeritus
JOHN G. MEDLIN, JR.
Chairman of the Board
Wachovia Corporation
JOE A. PADGETT
Executive Vice President
The South Carolina National Bank
RICHARD H. PENNELL
President
Metromont Materials Corporation
W. M. SELF
President and
Chief Executive Officer
Greenwood Mills, Inc.
ROBERT S. SMALL, JR.
President
AVTEX Properties, Inc.
WILLIAM G. TAYLOR
President
The Springs Company
BEATRICE R. THOMPSON, PH.D.
Coordinator of Psychological Services
Anderson School District Five
64
67
- ------------------------------------------------------------------------------
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
DIRECTORS
L. M. BAKER, JR.
President and
Chief Executive Officer
JOHN G. MEDLIN, JR.
Chairman of the Board
RUFUS C. BARKLEY, JR.
Chairman of the Board
Cameron & Barkley Company
CRANDALL C. BOWLES
Executive Vice President
Springs Industries, Inc.
JOHN L. CLENDENIN
Chairman of the Board,
President and
Chief Executive Officer
BellSouth Corporation
LAWRENCE M. GRESSETTE, JR.
Chairman of the Board,
President and
Chief Executive Officer
SCANA Corporation
THOMAS K. HEARN, JR.
President
Wake Forest University
W. HAYNE HIPP
President and
Chief Executive Officer
The Liberty Corporation
ROBERT M. HOLDER, JR.
Chairman of the Board and
Chief Executive Officer
Holder Corporation
DONALD R. HUGHES
Vice Chairman of the Board
and Chief Financial Officer
Burlington Industries, Inc.
F. KENNETH IVERSON
Chairman and
Chief Executive Officer
Nucor Corporation
JAMES W. JOHNSTON
Chairman and
Chief Executive Officer
R. J. Reynolds Tobacco Worldwide
W. DUKE KIMBRELL
Chairman of the Board and
Chief Executive Officer
Parkdale Mills, Inc.
JAMES G. LINDLEY
Chairman Emeritus
South Carolina National Corporation
The South Carolina National Bank
JAMES H. MILLIS, SR.
Partner
Amos/Millis Company
J. MACK ROBINSON
Chairman of the Board
and President
Delta Life Insurance Company
HERMAN J. RUSSELL
Chairman of the Board and
Chief Executive Officer
H. J. Russell & Company
SHERWOOD H. SMITH, JR.
Chairman of the Board
and Chief Executive Officer
Carolina Power & Light Company
CHARLES MCKENZIE TAYLOR
Chairman of the Board
Taylor & Mathis, Inc.
EXECUTIVE OFFICERS
L. M. BAKER, JR.
President and
Chief Executive Officer
JERRY D. CRAFT
Executive Vice President
MICKEY W. DRY
Executive Vice President
Chief Credit Officer
HUGH M. DURDEN
Executive Vice President
ANTHONY L. FURR
Executive Vice President
WALTER E. LEONARD, JR.
Executive Vice President
KENNETH W. MCALLISTER
Executive Vice President
General Counsel
ROBERT S. MCCOY, JR.
Executive Vice President
Chief Financial Officer
J. WALTER MCDOWELL
Executive Vice President
G. JOSEPH PRENDERGAST
Executive Vice President
RICHARD B. ROBERTS
Executive Vice President
Treasurer
65
68
GRAPHICS APPENDIX
1. RETURN ON ASSETS (AVERAGE) - The graph appearing on page 9 of the 1993
--------------------------
Annual Report plots the return on assets for Wachovia Corporation and
subsidiaries (the Corporation) and the Montgomery Securities Median
(median) of the 25 largest U.S. Banks. The Corporation's information is
displayed in tabular format on page 8, Table 1 of the 1993 Annual Report.
The return on assets for the median of the 25 largest U.S. Banks was .99%,
.78%, .58%, .72%, .85% and 1.16% for the years ended 1988-1993,
respectively.
2. RETURN ON COMMON EQUITY (AVERAGE) - The graph appearing on page 9 of the
---------------------------------
1993 Annual Report plots the return on common equity for the Corporation
and the median of the 25 largest U.S. Banks. The Corporation's information
is displayed in tabular format on page 8, Table 1 of the 1993 Annual Report
(return on shareholders' equity). The return on common equity for the
median of the 25 largest U.S. Banks was 17.16%, 13.07%, 9.57%, 10.49%,
13.43% and 16.74% for the years ended 1988-1993, respectively.
3. COMMON EQUITY TO ASSETS (AVERAGE) - The graph appearing on page 9 of the
---------------------------------
1993 Annual Report plots common equity to assets for the Corporation and
the median of the 25 largest U.S. Banks. The Corporation's information is
displayed in tabular format on page 8, Table 1 of the 1993 Annual Report
(shareholders' equity to total assets). The common equity to assets for
the median of the 25 largest U.S. Banks was 5.01%, 5.07%, 4.97%, 5.36%,
6.15% and 6.57% for the years ended 1988-1993, respectively.
4. NET INTEREST INCOME (TAXABLE EQUIVALENT) AS A PERCENTAGE OF
-----------------------------------------------------------
AVERAGE EARNING ASSETS - The graph appearing on page 10 of the 1993 Annual
----------------------
Report plots the net yield on interest-earning assets for the Corporation
and the median of the 25 largest U.S. Banks. The Corporation's information
is displayed in tabular format on page 8, Table 1 of the 1993 Annual
Report. The net yield on interest-earning assets for the median of the 25
largest U.S. Banks was 4.14%, 4.02%, 3.75%, 4.05%, 4.44% and 4.48% for the
years ended 1988-1993, respectively.
5. NET LOAN LOSSES TO AVERAGE LOANS - The graph appearing on page 20 of the
--------------------------------
1993 Annual Report plots net loan losses to average loans for the
Corporation and the median of the 25 largest U.S. Banks. The Corporation's
information is displayed in tabular format on page 22, Table 9 of the 1993
Annual Report. The net loan losses to average loans for the median of the
25 largest U.S. Banks was .98%, .98%, 1.70%, 1.54%, 1.25% and .76%, for the
years ended 1988-1993, respectively.
69
6. NONPERFORMING ASSETS TO YEAR-END LOANS AND FORECLOSED PROPERTY - The
--------------------------------------------------------------
graph appearing on page 20 of the 1993 Annual Report plots nonperforming
assets to year-end loans and foreclosed property for the Corporation and
the median of the 25 largest U.S. Banks. The Corporation's information is
displayed in tabular format on page 20, Table 8 of the 1993 Annual Report.
The nonperforming assets to year-end loans and foreclosed property for the
median of the 25 largest U.S. Banks was 2.63%, 2.61%, 3.88%, 4.20%, 3.14%
and 1.76% for the years ended 1988-1993, respectively.
7. EARNINGS COVERAGE OF NET LOAN LOSSES (EXCLUDING SUBSIDIARY SALE AND
-------------------------------------------------------------------
SECURITIES TRANSACTIONS) - The graph appearing on page 21 of the 1993
------------------------
Annual Report plots the Corporation's earnings before income taxes and
provision for loan losses and the number of times earnings covered net loan
losses. The earnings coverage of net loan losses is displayed in tabular
format on page 22, Table 9 of the 1993 Annual Report. The Corporation's
earnings before income taxes and provision for loan losses excluding
subsidiary sales and securities transactions were (in millions) $458.1,
$494.7, $571.1, $562.8, $694.6 and $752.8 for the years ended 1988-1993,
respectively.
8. LOAN LOSS EXPERIENCE - The graph appearing on page 21 of the 1993 Annual
--------------------
Report plots the net loan losses to average loans and loan loss experience
for various loan categories. The net loan losses to average loans is
displayed in tabular format on page 22, Table 9 of the 1993 Annual Report.
The loan loss experience for credit card, commercial, foreign, and other
loans for the years ended 1988-1993 (in millions) is listed below:
Credit
Card Commercial Foreign Other Total
------ ---------- ------- ----- -----
1988 $28.350 $ 8.400 $39.705 $32.025 $108.480
1989 $32.838 $ 9.418 $ .055 $26.026 $ 68.337
1990 $41.821 $16.278 $ (.319) $36.025 $ 93.805
1991 $65.359 $56.490 $ .197 $80.953 $202.999
1992 $56.795 $ .559 $ .953 $36.938 $ 95.245
1993 $52.675 $ 1.220 $ (.032) $13.548 $ 67.411
9. NONINTEREST EXPENSE AS A PERCENTAGE OF TOTAL ADJUSTED REVENUES (EXCLUDING
-------------------------------------------------------------------------
SECURITIES AND SUBSIDIARY SALE GAINS) - The graph appearing on page 24 of
-------------------------------------
the 1993 Annual Report plots the overhead ratios for the Corporation and
the median of the 25 largest U.S. Banks. The overhead ratios for the
Corporation are displayed in tabular format on page 24, Table 11 of the
1993 Annual Report. The overhead ratios for the median of the 25 largest
U.S. Banks were 61.81%, 63.27%, 64.80%, 64.84%, 64.52% and 62.54% for the
years ended 1988-1993, respectively.
70
10. YEAR-END SHAREHOLDERS' EQUITY PER SHARE - The graph appearing on page 27
---------------------------------------
of the 1993 Annual Report plots the book value per share for the
Corporation at year-end for the years ended 1988-1993. This information
is displayed in tabular format on page 27, Table 14 of the 1993 Annual
Report. The five-year compound growth rate was 8.5% for the Corporation.
11. CASH DIVIDENDS PER SHARE - The graph appearing on page 62 of the 1993
------------------------
Annual Report plots the cash dividends per share paid by the Corporation
prior to the merger for the years ended 1988-1993. This information is
displayed in tabular format on page 62, Table 21 of the 1993 Annual
Report. The five-year compound growth rate was 13.7%.
12. COMMON STOCK PRICE/EARNINGS RATIOS - The graph appearing on page 62 of the
----------------------------------
1993 Annual Report plots the common stock price/earnings ratios based on
the high and low common stock prices and annual net income per primary
share as originally reported by the Corporation prior to merger. The high
price/earnings ratios were 9.4x, 11.7x, 10.5x, 22.4x, 13.8x and 14.3x for
the years ended 1988-1993, respectively. The low price/earnings ratios
for the years ended 1988-1993 were 7.7x, 8.0x, 7.6x, 15.1x, 11.3x and
11.3x, respectively.
13. CASH DIVIDEND PAYOUT - The graph appearing on page 62 of the 1993 Annual
--------------------
Report plots total dividends (including amounts paid by pooled companies)
as a percentage of net income. The total dividends paid (in millions) for
the years 1988-1993 were $91.6, $111.5, $130.8, $146.4, $170.8 and $191.5,
respectively. The payout ratios for the Corporation were 30.7%, 34.0%,
37.8%, 63.8%, 39.4% and 38.9% for the years ended 1988-1993, respectively.
14. QUARTERLY COMMON STOCK PRICE RANGE - The graph appearing on page 63 of the
----------------------------------
1993 Annual Report plots the quarterly high and low stock prices for the
years ended 1992 and 1993.
1992 1993
High Low High Low
---- --- ---- ---
1st Quarter 31 28 1/4 36 7/8 32 1/2
2nd Quarter 33 28 5/8 40 1/2 32 3/8
3rd Quarter 32 3/4 28 7/8 40 3/8 33 3/8
4th Quarter 34 3/4 29 1/2 39 3/4 31 7/8
15. QUARTERLY COMMON STOCK PRICE/EARNINGS RATIOS - The graph appearing on page
--------------------------------------------
63 of the 1993 Annual Report plots the quarterly common stock
price/earnings ratios based on high and low common stock prices for each
period and net income per
71
primary share for the 12 months ended on the last day of each period. The
Corporations's quarterly common stock price/earnings ratios for the years
ended 1992 and 1993 are listed below:
1992 1993
High Low High Low
---- --- ---- ---
1st Quarter 20.7x 18.8x 14.2x 12.5x
2nd Quarter 21.2x 18.3x 15.1x 12.1x
3rd Quarter 20.1x 17.7x 14.6x 12.1x
4th Quarter 13.8x 11.8x 14.0x 11.3x
16. FIVE-YEAR TOTAL RETURN - The graph appearing on page 63 of the 1993 Annual
----------------------
Report plots the five-year total return for the Corporation, the S&P 500
and the KBW 50 Index. The base period of December 31, 1988 is equal to
100. Dividends are assumed to be reinvested. The data for the KBW 50
Index is weighted by market capitalization. The five-year total return
for the Corporation was 100%, 134.34%, 143.59%, 206.31%, 250.14% and
253.34% for the years ended 1988-1993, respectively. The S&P 500
five-year total return was 100%, 131.68%, 127.58%, 166.46%, 179.14%, and
197.19% for the years ended 1988-1993, respectively. The KBW 50 Index
five-year total return was 100%, 118.91%, 85.40%, 135.17%, 172.23% and
181.77% for the years ended 1988-1993, respectively.
Cross Reference to
1993 Annual Report
Omitted Graphs Page of Description
-------------- -------------------
1. Net Income Per Share (fully diluted) Page 8, Table 1
2. Net Income Page 8, Table 1
3. Net Interest Income (taxable equivalent) Page 8, Table 1
4. Allowance for Loan Losses Page 20, Table 8
5. Quarterly Net Income Per Share
(fully diluted), 1992 Page 29, Table 16
6. Quarterly Net Income Per Share
(fully diluted), 1993 Page 29, Table 16
7. Common Stock Price Range Page 62, Table 21
The above listed graphs were omitted from the EDGAR version of the 1993
Form 10-K, Exhibit 13. However, the information depicted in the graphs
was adequately displayed in tabular format within the 1993 Annual Report.