1
________________________________________________________________________________
1995 FORM 10Q
United States Securities and Exchange Commission Officer
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1995
Commission File Number 1-9021
WACHOVIA CORPORATION
Incorporated in the State of North Carolina
IRS Employer Identification Number 56-1473727
Address and Telephone:
301 North Main Street, Winston-Salem, North Carolina 27150,
(910) 770-5000
191 Peachtree Street NE, Atlanta, Georgia 30303, (404) 332-5000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock -- $5.00 par value, which is registered on the New York
Stock Exchange.
As of June 30, 1995, Wachovia Corporation had 170,400,054 shares
of common stock outstanding.
Wachovia Corporation has (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the financial supplement for the quarter ended June
30, 1995 are incorporated by reference into Parts I and II as
indicated in the table below. Except for parts of the Wachovia
Corporation Financial Supplement expressly incorporated herein by
reference, this Financial Supplement is not to be deemed filed with
the Securities and Exchange Commission.
PART I FINANCIAL INFORMATION PAGE
Item 1 FINANCIAL STATEMENTS (UNAUDITED)
Selected Period-End Data ................. 3
Common Stock Data -- Per Share ........... 3
Consolidated Statements of Condition...... 22
Consolidated Statements of Income......... 23
Consolidated Statements of
Shareholders' Equity ................... 24
Consolidated Statements of Cash Flows..... 25
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ............................... 4-21
2
________________________________________________________________________________
1995 FORM 10Q - continued
PART II OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on April 28, 1995 seven
directors were elected and the appointment of Ernst & Young LLP as
independent auditors for 1995 was ratified. The distribution of
shareholders' votes was as follows:
Shares Voted Shares
in Favor Withheld
------------ --------
ELECTION OF DIRECTORS
Crandall C. Bowles 144,369,032 466,581
Hayne Hipp 144,376,258 459,355
James W. Johnston 144,303,217 532,396
Wyndham Robertson 144,162,313 673,300
Sherwood H. Smith, Jr. 144,356,537 479,076
Charles McKenzie Taylor 144,461,946 373,667
Donald R. Hughes 144,318,221 517,392
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Shares Voted in Favor 143,738,018
Shares Voted Against 384,529
Abstentions 713,066
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3.2: Bylaws of the registrant as amended.
Exhibit 10.1: Executive Retirement Agreements between Wachovia
Corporation and Messrs. L.M. Baker, Jr., G. Joseph Prendergast and
Walter E. Leonard, Jr., dated as of January 27, 1995.
Exhibit 10.2: Executive Retirement Agreement between Wachovia
Corporation and Mr. Robert S. McCoy, Jr.
Exhibit 10.3: Retirement Savings and Profit-Sharing Benefit
Equalization Plan of Wachovia Corporation.
Exhibit 10.4: Amendment to Agreement between Wachovia Corporation and
Mr. John G. Medlin, Jr.
Exhibit 11: "Computation of Earnings per Common Share," is presented
as Table 3 on page 6 of the Second Quarter 1995 Financial Supplement.
Exhibit 19: "Unaudited Consolidated Financial Statements," listed in
Part I, Item 1 do not include all information and footnotes required
under generally accepted accounting principles. However, in the
opinion of management, the profit and loss information presented in
the interim financial statements reflects all adjustments necessary
to present fairly the results of operations for the periods
presented. Adjustments reflected in the second quarter of 1995
figures are of a normal, recurring nature. The results of operations
shown in the interim statements are not necessarily indicative of the
results that may be expected for the entire year.
Exhibit 27: Financial Data Schedule (for SEC purposes only).
(b) Reports on Form 8-K: A Current Report on Form 8-K, dated June 1,
1995, was filed with the Securities and Exchange Commission setting
forth the computation of Ratios of Earnings to Fixed Charges to be
incorporated into Wachovia Corporation's Registration Statement on
Form S-3 (Registration No. 33-55839).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WACHOVIA CORPORATION
August 11, 1995 ROBERT S. McCOY, JR. August 11, 1995 JOHN C. McLEAN, JR.
------------------------ -------------------
Robert S. McCoy, Jr. John C. McLean, Jr.
Executive Vice President Comptroller
and Chief Financial Officer
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WACHOVIA
- --------------------------------------------------------------------------------
FINANCIAL SUPPLEMENT
AND FORM 10-Q
SECOND QUARTER 1995
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____________________________________________________________________________________________________________________________________
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
DIRECTORS
L. M. BAKER, JR. THOMAS K. HEARN, JR. JAMES W. JOHNSTON
President and President Chairman and
Chief Executive Officer Wake Forest University Chief Executive Officer
R.J. Reynolds Tobacco Company
JOHN G. MEDLIN, JR. W. HAYNE HIPP
Chairman of the Board President and WYNDHAM ROBERTSON
Chief Executive Officer Vice President, Communications
RUFUS C. BARKLEY, JR. The Liberty Corporation University of North Carolina
Chairman of the Board
Cameron & Barkley Company ROBERT M. HOLDER, JR. HERMAN J. RUSSELL
Chairman of the Board Chairman of the Board and
CRANDALL C. BOWLES Holder Corporation Chief Executive Officer
Executive Vice President H.J. Russell & Company
Springs Industries, Inc. DONALD R. HUGHES
Consultant and Retired SHERWOOD H. SMITH, JR.
JOHN L. CLENDENIN Vice Chairman of the Board Chairman of the Board and
Chairman of the Board Burlington Industries, Inc. Chief Executive Officer
and Chief Executive Officer Carolina Power & Light Company
BellSouth Corporation F. KENNETH IVERSON
Chairman and CHARLES MCKENZIE TAYLOR
LAWRENCE M. GRESSETTE, JR. Chief Executive Officer Chairman of the Board
Chairman of the Board, Nucor Corporation Taylor & Mathis, Inc.
President and
Chief Executive Officer
SCANA Corporation
PRINCIPAL CORPORATE OFFICERS
L. M. BAKER, JR. W. DOUG KING ROBERT S. MCCOY, JR.
President and Executive Vice President Executive Vice President
Chief Executive Officer Consumer Services Chief Financial Officer
MICKEY W. DRY WALTER E. LEONARD, JR. G. JOSEPH PRENDERGAST
Executive Vice President Executive Vice President Executive Vice President
Chief Credit Officer Operations/Technology General Banking
HUGH M. DURDEN KENNETH W. MCALLISTER RICHARD B. ROBERTS
Executive Vice President Executive Vice President Executive Vice President
Corporate Banking General Counsel/Administrative Treasurer
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SELECTED PERIOD-END DATA June 30 June 30
1995 1994
------- -------
Banking offices:
North Carolina ................................. 218 216
Georgia ........................................ 127 127
South Carolina ................................. 146 151
------- -------
Total ......................................... 491 494
======= =======
Automated banking machines:
North Carolina ................................. 314 270
Georgia ........................................ 196 181
South Carolina ................................. 164 165
------- -------
Total ......................................... 674 616
======= =======
Employees (full-time equivalent) ................. 15,707 15,553
Common stock shareholders of record .............. 28,220 28,722
Common shares outstanding(thousands) ............. 170,400 171,182
________________________________________________________________________________
COMMON STOCK DATA-- PER SHARE
1995 1994
---------------------- -------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
-------- -------- --------- --------- ---------
Market value:
Period-end.................................. $ 35 3/4 $ 35 1/2 $ 32 1/4 $ 32 1/4 $ 33 1/8
High ...................................... 37 7/8 36 1/2 34 1/2 35 1/4 35 3/8
Low......................................... 34 1/4 32 31 1/2 31 3/8 30 3/4
Book value at period-end...................... 20.75 19.89 19.23 18.83 18.40
Dividend...................................... .33 .33 .33 .30 .30
Price/earnings ratio*......................... 10.5x 11.0x 10.3x 10.7x 11.3x
*Based on most recent twelve months net income per primary share period-end
stock price.
________________________________________________________________________________
FINANCIAL INFORMATION
Analysts, investors and others seeking additional financial information about
Wachovia Corporation or its member companies should contact the following
either by phone or in writing.
Robert S. McCoy, Jr., Chief Financial Officer, (910) 770-5926
James C. Mabry, Investor Relations Manager, (910) 770-5788
Wachovia Corporation
P. O. Box 3099
Winston-Salem, NC 27150
Common Stock Listing -- New York Stock Exchange, ticker symbol - WB
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____________________________________________________________________________________________________________________________________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
____________________________________________________________________________________________________________________________________
FINANCIAL SUMMARY TABLE 1
____________________________________________________________________________________________________________________________________
Twelve
Months 1995 1994
Ended --------------------- ------------------------------------
June 30 Second First Fourth Third Second
1995 Quarter Quarter Quarter Quarter Quarter
----------- --------- --------- -------- -------- --------
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent ..... $ 2,798,948 $ 774,078 $ 715,414 $677,097 $632,359 $594,669
Interest expense .......................... 1,315,459 392,970 342,596 305,564 274,329 242,488
----------- --------- --------- -------- -------- --------
Net interest income -- taxable equivalent . 1,483,489 381,108 372,818 371,533 358,030 352,181
Taxable equivalent adjustment ............. 98,411 23,987 23,622 25,893 24,909 24,882
----------- --------- --------- -------- -------- --------
Net interest income ....................... 1,385,078 357,121 349,196 345,640 333,121 327,299
Provision for loan losses ................. 88,102 28,652 21,788 19,539 18,123 16,342
----------- --------- --------- -------- -------- --------
Net interest income after
provision for loan losses ............... 1,296,976 328,469 327,408 326,101 314,998 310,957
Other operating revenue ................... 629,661 166,304 157,093 154,723 151,541 153,299
Gain on sale of mortgage servicing
portfolio ............................... 79,025 79,025 -- -- -- --
Investment securities gains (losses) ...... (23,838) (26,236) (129) 2,094 433 221
----------- --------- --------- -------- -------- --------
Total other income ........................ 684,848 219,093 156,964 156,817 151,974 153,520
Personnel expense ......................... 576,211 149,987 144,963 141,566 139,695 141,232
Other expense ............................. 567,256 156,630 138,069 140,959 131,598 133,313
----------- --------- --------- -------- -------- --------
Total other expense ....................... 1,143,467 306,617 283,032 282,525 271,293 274,545
Income before income taxes ................ 838,357 240,945 201,340 200,393 195,679 189,932
Applicable income taxes* .................. 253,174 78,036 59,184 58,267 57,687 55,791
----------- --------- --------- -------- -------- --------
Net income ................................ $ 585,183 $ 162,909 $ 142,156 $142,126 $137,992 $134,141
=========== ========= ========= ======== ======== ========
Net income per common share:
Primary ................................. $ 3.40 $ .94 $ .83 $ .83 $ .80 $ .78
Fully diluted ........................... $ 3.39 $ .95 $ .82 $ .82 $ .80 $ .78
Cash dividends paid per common share ...... $ 1.29 $ .33 $ .33 $ .33 $ .30 $ .30
Cash dividends paid on common stock ....... $ 220,421 $ 56,302 $ 56,458 $ 56,420 $ 51,241 $ 51,399
Cash dividend payout ratio ................ 37.7% 34.6% 39.7% 39.7% 37.1% 38.3%
Average primary shares outstanding ........ 172,065 171,986 172,205 171,973 172,097 172,558
Average fully diluted shares outstanding .. 172,614 172,446 172,760 172,552 172,701 173,197
SELECTED AVERAGE BALANCES (millions)
Total assets .............................. $ 38,827 $ 40,876 $ 38,902 $ 38,146 $ 37,409 $ 36,753
Loans -- net of unearned income ........... 25,811 27,203 26,219 25,290 24,553 23,969
Investment securities** ................... 7,791 8,276 7,612 7,582 7,695 7,767
Other interest-earning assets ............. 878 1,012 815 877 809 829
Total interest-earning assets ............. 34,480 36,491 34,646 33,749 33,057 32,565
Interest-bearing deposits ................. 17,448 18,388 17,354 17,040 17,020 16,964
Short-term borrowed funds ................. 6,994 7,869 7,390 6,619 6,115 6,038
Long-term debt ............................ 4,742 4,863 4,674 4,795 4,637 4,281
Total interest-bearing liabilities ........ 29,184 31,120 29,418 28,454 27,772 27,283
Noninterest-bearing deposits .............. 5,368 5,333 5,302 5,471 5,364 5,333
Total deposits ............................ 22,816 23,721 22,656 22,511 22,384 22,297
Shareholders' equity ...................... 3,224 3,345 3,253 3,186 3,114 3,063
RATIOS (averages)
Annualized net loan losses to loans ....... .33% .42% .30% .31% .29% .26%
Annualized net yield on
interest-earning assets ................. 4.30 4.19 4.36 4.37 4.30 4.34
Shareholders' equity to:
Total assets ............................ 8.30 8.18 8.36 8.35 8.32 8.33
Net loans ............................... 12.69 12.48 12.60 12.80 12.89 13.00
Annualized return on assets*** ............ 1.51 1.59 1.46 1.49 1.48 1.46
Annualized return on
shareholders' equity*** ................. 18.15 19.48 17.48 17.84 17.73 17.52
Six Months Ended
June 30
1995 1994
---------- ----------
SUMMARY OF OPERATIONS
(thousands, except per share data)
Interest income -- taxable equivalent ..... $1,489,492 $1,152,998
Interest expense .......................... 735,566 458,495
---------- ----------
Net interest income -- taxable equivalent.. 753,926 694,503
Taxable equivalent adjustment ............. 47,609 49,358
---------- ----------
Net interest income ....................... 706,317 645,145
Provision for loan losses ................. $ 50,440 $ 34,101
---------- ----------
Net interest income after
provision for loan losses ................ 655,877 611,044
Other operating revenue ................... 323,397 298,168
Gain on sale of mortgage servicing
portfolio ............................... 79,025 --
Investment securities gains (losses) ...... (26,365) 793
---------- ----------
Total other income ........................ 376,057 298,961
Personnel expense ......................... 294,950 282,246
Other expense ............................. 294,699 262,349
---------- ----------
Total other expense ....................... 589,649 544,595
Income before income taxes ................ 442,285 365,410
Applicable income taxes* .................. 137,220 106,470
---------- ----------
Net income ................................ $ 305,065 $ 258,940
========== ==========
Net income per common share:
Primary ................................. $ 1.77 $ 1.50
Fully diluted ........................... $ 1.77 $ 1.50
Cash dividends paid per common share ...... $ .66 $ .60
Cash dividends paid on common stock ....... $ 112,760 $ 102,842
Cash dividend payout ratio ................ 37.0% 39.7%
Average primary shares outstanding ........ 172,095 172,648
Average fully diluted shares outstanding .. 172,589 173,298
SELECTED AVERAGE BALANCES (millions)
Total assets .............................. $ 39,894 $ 36,268
Loans -- net of unearned income ........... 26,714 23,492
Investment securities** ................... 7,946 7,728
Other interest-earning assets ............. 914 955
Total interest-earning assets ............. 35,574 32,175
Interest-bearing deposits ................. 17,874 16,831
Short-term borrowed funds ................. 7,631 6,092
Long-term debt ............................ 4,769 3,977
Total interest-bearing liabilities ........ 30,274 26,900
Noninterest-bearing deposits .............. 5,317 5,349
Total deposits ............................ 23,191 22,180
Shareholders' equity ...................... 3,299 3,042
RATIOS (averages)
Annualized net loan losses to loans ....... .36% .28%
Annualized net yield on
interest-earning assets ................. 4.27 4.35
Shareholders' equity to:
Total assets ............................ 8.27 8.39
Net loans ............................... 12.54 13.18
Annualized return on assets*** ............ 1.53 1.43
Annualized return on
shareholders' equity*** ................. 18.49 17.03
*Income taxes applicable to securities transactions were ($8,634), ($9,580), ($67), $840, $173, $89, ($9,647), $315, respectively
**Reported at amortized cost; excludes pretax unrealized gains (losses) on securities available-for-sale of ($26), $15, ($49),
($44), ($28), ($14), ($17) and $11 respectively
***Includes average unrealized gains (losses) on securities available-for-sale, net of tax, of ($16), $9, ($30), ($27), ($17),
($9), ($10) and $7 million, respectively
____________________________________________________________________________________________________________________________________
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RESULTS OF OPERATIONS
OVERVIEW
Wachovia Corporation ("Wachovia") is a southeastern interstate
bank holding company with dual headquarters in Atlanta, Georgia, and
Winston-Salem, North Carolina. Principal banking subsidiaries are
Wachovia Bank of Georgia, N.A., Wachovia Bank of North Carolina, N.A.,
and Wachovia Bank of South Carolina, N.A. The First National Bank of
Atlanta provides credit card services for Wachovia's affiliated banks.
Economic growth overall appeared to have changed little during
the 1995 second quarter from the first quarter. The seasonally
adjusted unemployment rate for the nation averaged 5.7 percent versus
5.5 percent in the preceding quarter. Within Wachovia's primary
operating states of Georgia, North Carolina and South Carolina,
seasonally adjusted unemployment rates averaged 4.8 percent, 4.5
percent and 4.8 percent, respectively, for the quarter.
Wachovia's net income for the second period of 1995 was $162.909
million or $.95 per fully diluted share versus $134.141 million or
$.78 per fully diluted share a year earlier. Results included an
aftertax gain of $47.385 million or $.27 per share from the sale of
the corporation's $9 billion mortgage servicing portfolio, aftertax
securities losses of $16.656 million or $.10 per share from the
restructuring of maturities in the available-for-sale securities
portfolio and aftertax expenses of $11.291 million or $.07 per share
related to severance costs for consolidations, higher consulting fees
for strategic initiatives and charitable contributions.
Proceeds from the sale of the mortgage servicing portfolio will
be invested in programs to enhance growth and productivity such as
next generation branch automation, upgrades to customer information
databases to improve sales effectiveness and service, and major
refinements to financial systems for performance measurement. The
corporation will continue to invest in a variety of corporate
strategies underway to enhance shareholder value as outlined in
general in the 1994 Annual Report and L. M. Baker, Jr.'s 1995 Annual
Shareholders' Meeting remarks in April.
For the first half, net income totaled $305.065 million or $1.77
per fully diluted share compared with $258.940 million or $1.50 per
fully diluted share in the same period of 1994. Annualized returns for
the quarter were 19.48 percent on shareholders' equity and 1.59
percent on assets. For the first six months, annualized returns were
18.49 percent on equity and 1.53 percent on assets. The equity and
assets used in computing these returns include unrealized gains or
losses, net of tax, on securities available-for-sale. Excluding
unrealized gains or losses on securities available-for-sale,
annualized returns were 1.59 percent on assets and 19.53 percent on
equity for the quarter and were 1.53 percent and 18.44 percent,
respectively, for the first half.
Expanded discussion of operating results and the corporation's
financial condition is presented in the following narrative and
tables. Interest income is stated on a taxable equivalent basis which
is adjusted for the tax-favored status of earnings from certain loans
and investments. References to changes in assets and liabilities
represent daily average levels unless otherwise noted.
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COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
___________________________________________________________________________________________________________________________
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 Change 1995 1994 Change
------ ------ ------- ------ ------ ------
Interest income -- taxable equivalent .......... $ 4.50 $ 3.45 $ 1.05 $ 8.65 $ 6.68 $ 1.97
Interest expense ............................... 2.28 1.41 0.87 4.27 2.66 1.61
------ ------ ------- ------ ------ ------
Net interest income -- taxable equivalent ...... 2.22 2.04 .18 4.38 4.02 .36
Taxable equivalent adjustment .................. .14 .15 (.01) .28 .28 --
------ ------ ------- ------ ------ ------
Net interest income ............................ 2.08 1.89 .19 4.10 3.74 .36
Provision for loan losses ...................... .17 .09 .08 .29 .20 .09
------ ------ ------- ------ ------ ------
Net interest income after provision
for loan losses .............................. 1.91 1.80 .11 3.81 3.54 .27
Other operating revenue ........................ .96 .89 .07 1.88 1.73 .15
Gain on sale of mortgage servicing portfolio ... .46 -- .46 .46 -- .46
Investment securities losses ................... (.15) -- (.15) (.15) -- (.15)
------ ------ ------- ------ ------ ------
Total other income ............................. 1.27 .89 .38 2.19 1.73 .46
Personnel expense .............................. .87 .82 .05 1.72 1.63 .09
Other expense .................................. .91 .77 .14 1.71 1.52 .19
------ ------ ------- ------ ------ ------
Total other expense ............................ 1.78 1.59 .19 3.43 3.15 .28
Income before income taxes ..................... 1.40 1.10 .30 2.57 2.12 .45
Applicable income taxes ........................ .46 .32 .14 .80 .62 .18
------ ------ ------- ------ ------ ------
Net income ..................................... $ .94 $ .78 $ .16 $ 1.77 $ 1.50 $ .27
====== ====== ======= ====== ====== ======
___________________________________________________________________________________________________________________________
COMPUTATION OF EARNINGS PER COMMON SHARE TABLE 3
(thousands, except per share)
___________________________________________________________________________________________________________________________
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
-------- -------- -------- --------
PRIMARY
Average common shares outstanding ............... 170,734 171,298 170,901 171,372
Dilutive common stock options -- based on treasury
stock method using average market price ....... 1,176 1,178 1,118 1,200
Dilutive common stock awards -- based on treasury
stock method using average market price ....... 76 82 76 76
-------- -------- -------- --------
Average primary shares outstanding .............. 171,986 172,558 172,095 172,648
======== ======== ======== ========
Net income ...................................... $162,909 $134,141 $305,065 $258,940
======== ======== ======== ========
Net income per common share -- primary .......... $ .94 $ .78 $ 1.77 $ 1.50
FULLY DILUTED
Average common shares outstanding ............... 170,734 171,298 170,901 171,372
Dilutive common stock options -- based on treasury
stock method using higher of period-end
market price or average market price .......... 1,176 1,188 1,145 1,216
Dilutive common stock awards -- based on treasury
stock method using higher of period-end
market price or average market price .......... 83 82 83 76
Convertible notes assumed converted ............. 453 629 460 634
-------- -------- -------- --------
Average fully diluted shares outstanding ........ 172,446 173,197 172,589 173,298
======== ======== ======== ========
Net income ...................................... $162,909 $134,141 $305,065 $258,940
Add interest on convertible notes after taxes ... 96 133 192 266
-------- -------- -------- --------
Adjusted net income ............................. $163,005 $134,274 $305,257 $259,206
======== ======== ======== ========
Net income per common share -- fully diluted .... $ .95 $ .78 $ 1.77 $ 1.50
________________________________________________________________________________
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NET INTEREST INCOME
Taxable equivalent net interest income increased $28.927 million
or 8.2 percent for the 1995 second quarter compared with the same
period a year earlier and was up $59.423 million or 8.6 percent for
the first six months of the year. Gains in both periods reflected good
growth in interest-earning assets moderated by pricing pressures as
loan and deposit competition remained intense and the yield curve
flattened. Compared with the first quarter of 1995, taxable equivalent
net interest income rose $8.290 million or 2.2 percent. The net yield
on interest-earning assets (net interest income as a percentage of
average interest-earning assets) was lower by 15 basis points for the
second quarter compared with a year earlier and decreased 8 basis
points for the first half. The net yield was down 17 basis points from
the first quarter. Pricing pressures are expected to persist
throughout the remainder of the year.
Taxable equivalent interest income for the second period and
first six months of 1995 was up $179.409 million or 30.2 percent and
$336.494 million or 29.2 percent, respectively. A higher average rate
earned as well as expanded levels of average interest-earning assets
accounted for the increases. Average interest-earning assets grew
$3.926 billion or 12.1 percent for the three months and $3.399 billion
or 10.6 percent year to date with the average rate earned rising 118
basis points and 121 basis points, respectively. Compared with the
first quarter, taxable equivalent interest income was up $58.664
million or 8.2 percent with average interest-earning assets increasing
$1.845 billion or 5.3 percent and the average rate earned higher by 14
basis points.
Loans continued to pace the growth in interest-earning assets,
rising $3.234 billion or 13.5 percent for the second period and $3.222
billion or 13.7 percent for the first half. Loans in the second
quarter increased $984 million or 3.8 percent from the previous three
months.
Commercial loans, including related real estate categories, were
higher by $2.399 billion or 17.9 percent for the quarter and $2.375
billion or 18.2 percent year to date in comparison with the same 1994
periods. Gains were led by regular commercial loans, which expanded
$1.917 billion or 26.2 percent for the three months and $1.969 billion
or 28.1 percent for the first half, and by commercial mortgages, which
increased $331 million or 9.9 percent and $316 million or 9.6 percent,
respectively. Foreign loans, lease financing and construction loans
also rose in both periods.
Based on regulatory definitions, commercial real estate totaled
$4.348 billion at June 30, 1995, representing 15.4 percent of the
corporation's loan portfolio. Commercial mortgages were $3.673 billion
and construction loans were $675 million. Comparable amounts a year
earlier were $3.834 billion in commercial real estate or 15.8 percent
of total loans with $3.357 billion in commercial mortgages and $477
million in construction loans. At March 31, 1995, commercial mortgages
were $3.621 billion and construction loans were $514 million,
representing a combined 15.5 percent of total loans.
Retail loans, including residential mortgages, grew $835 million
or 7.9 percent for the quarter and $847 million or 8.1 percent year to
date. Gains were concentrated in credit cards and residential
mortgages which rose $556 million or 16.2 percent and $319 million or
8.7 percent, respectively, for the three months and $674 million or
20.4 percent and $215 million or 5.8 percent, respectively, for the
first half. At June 30, 1995, managed credit card outstandings totaled
$4.160 billion, including $124 million of net securitized loans,
versus $3.591 billion a year earlier and $4.081 billion at first
quarter-close. Beginning in the fourth quarter of 1995, the
corporation will begin offering Visa commercial cards to facilitate
the credit and recordkeeping needs of both corporate and small
business customers. Commercial accounts offered will include the
Wachovia Visa Purchasing card, the Wachovia Visa Corporate card and
the Wachovia Visa Business card.
Other revolving credit also was up for the quarter and first
half. Direct retail loans were modestly lower for the three months but
up slightly year to date. Indirect retail loans, which primarily
consists of automobile sales financing, decreased modestly in both
periods.
Investment securities were higher by $509 million or 6.6 percent
for the second quarter, $218 million or 2.8 percent year to date and
$664 million or 8.7 percent from the first quarter. During the
quarter, $1.950 billion of available-for-sale securities were sold at
a loss with the proceeds being reinvested in higher yielding
investments to help enhance the overall yield of the portfolio. The
loss amounted to $26.236 million. At June 30,
7
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____________________________________________________________________________________________________________________________________
NET INTEREST INCOME AND AVERAGE BALANCES TABLE 4
____________________________________________________________________________________________________________________________________
Twelve
Months 1995 1994
Ended ----------------------- -------------------------------------
June 30 Second First Fourth Third Second
1995 Quarter Quarter Quarter Quarter Quarter
----------- --------- --------- --------- --------- ---------
NET INTEREST INCOME -- TAXABLE
EQUIVALENT (thousands)
Interest income:
Loans ................................. $ 2,209,344 $ 605,468 $ 571,334 $ 537,181 $ 495,361 $ 458,695
Investment securities ................. 534,131 151,695 130,210 126,304 125,922 126,313
Interest-bearing bank balances ........ 458 105 101 110 142 185
Federal funds sold and securities
purchased under resale agreements .... 4,694 763 1,202 1,382 1,347 1,842
Trading account assets ................ 50,321 16,047 12,567 12,120 9,587 7,634
----------- --------- --------- --------- --------- ---------
Total ............................. 2,798,948 774,078 715,414 677,097 632,359 594,669
Interest expense:
Interest-bearing demand ............... 57,176 14,412 14,367 14,443 13,954 13,456
Savings and money market savings ...... 204,422 61,595 50,578 47,438 44,811 37,928
Savings certificates .................. 292,082 96,773 74,870 63,416 57,023 53,156
Large denomination certificates ....... 76,978 20,226 20,011 18,288 18,453 18,507
Time deposits in foreign offices ...... 31,950 9,503 7,507 7,898 7,042 4,098
Short-term borrowed funds ............. 387,485 119,486 108,389 88,115 71,495 61,337
Long-term debt ........................ 265,366 70,975 66,874 65,966 61,551 54,006
----------- --------- --------- --------- --------- ---------
Total ............................. 1,315,459 392,970 342,596 305,564 274,329 242,488
----------- --------- --------- --------- --------- ---------
Net interest income ..................... $ 1,483,489 $ 381,108 $ 372,818 $ 371,533 $ 358,030 $ 352,181
=========== ========= ========= ========= ========= =========
Annualized net yield on
interest-earning assets ............... 4.30% 4.19% 4.36% 4.37% 4.30% 4.34%
AVERAGE BALANCES (millions)
Assets:
Loans -- net of unearned income ....... $ 25,811 $ 27,203 $ 26,219 $ 25,290 $ 24,553 $ 23,969
Investment securities ................. 7,791 8,276 7,612 7,582 7,695 7,767
Interest-bearing bank balances ........ 7 6 6 7 11 18
Federal funds sold and securities
purchased under resale agreements .... 86 51 77 100 115 182
Trading account assets ................ 785 955 732 770 683 629
----------- --------- --------- --------- --------- ---------
Total interest-earning assets ..... 34,480 36,491 34,646 33,749 33,057 32,565
Cash and due from banks ............... 2,472 2,491 2,502 2,544 2,350 2,346
Premises and equipment ................ 541 563 546 536 523 510
Other assets .......................... 1,766 1,724 1,662 1,767 1,912 1,754
Unrealized gains (losses) on securities
available-for-sale ................... (26) 15 (49) (44) (28) (14)
Allowance for loan losses ............. (406) (408) (405) (406) (405) (408)
----------- --------- --------- --------- --------- ---------
Total assets ..................... $ 38,827 $ 40,876 $ 38,902 $ 38,146 $ 37,409 $ 36,753
=========== ========= ========= ========= ========= =========
Liabilities and shareholders' equity:
Interest-bearing demand ............... $ 3,309 $ 3,218 $ 3,288 $ 3,364 $ 3,367 $ 3,420
Savings and money market savings ...... 6,196 6,415 6,060 6,114 6,197 6,103
Savings certificates .................. 5,831 6,712 5,917 5,457 5,247 5,283
Large denomination certificates ....... 1,501 1,407 1,502 1,493 1,599 1,736
Time deposits in foreign offices ...... 611 636 587 612 610 422
Short-term borrowed funds ............. 6,994 7,869 7,390 6,619 6,115 6,038
Long-term debt ........................ 4,742 4,863 4,674 4,795 4,637 4,281
----------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities 29,184 31,120 29,418 28,454 27,772 27,283
Demand deposits in domestic offices ..... 5,323 5,316 5,275 5,424 5,277 5,245
Demand deposits in foreign offices ...... 6 7 6 6 5 5
Noninterest-bearing time deposits in
domestic offices ...................... 39 10 21 41 82 83
Other liabilities ....................... 1,051 1,078 929 1,035 1,159 1,074
Shareholders' equity .................... 3,224 3,345 3,253 3,186 3,114 3,063
----------- --------- --------- --------- --------- ---------
Total liabilities and
shareholders' equity ............. $ 38,827 $ 40,876 $ 38,902 $ 38,146 $ 37,409 $ 36,753
=========== ========= ========= ========= ========= =========
Total deposits ......................... $ 22,816 $ 23,721 $ 22,656 $ 22,511 $ 22,384 $ 22,297
Six Months Ended
June 30
1995 1994
----------- -----------
NET INTEREST INCOME -- TAXABLE
EQUIVALENT (thousands)
Interest income:
Loans ................................. $ 1,176,802 $ 881,083
Investment securities ................. 281,905 251,976
Interest-bearing bank balances ........ 206 345
Federal funds sold and securities
purchased under resale agreements .... 1,965 4,953
Trading account assets ................ 28,614 14,641
----------- -----------
Total ............................. 1,489,492 1,152,998
Interest expense:
Interest-bearing demand ............... 28,779 26,691
Savings and money market savings ...... 112,173 72,212
Savings certificates .................. 171,643 106,621
Large denomination certificates ....... 40,237 33,564
Time deposits in foreign offices ...... 17,010 7,378
Short-term borrowed funds ............. 227,875 112,962
Long-term debt ........................ 137,849 99,067
----------- -----------
Total ............................. 735,566 458,495
----------- -----------
Net interest income ..................... $ 753,926 $ 694,503
=========== ===========
Annualized net yield on
interest-earning assets ............... 4.27% 4.35%
AVERAGE BALANCES (millions)
Assets:
Loans -- net of unearned income ....... $ 26,714 $ 23,492
Investment securities ................. 7,946 7,728
Interest-bearing bank balances ........ 6 18
Federal funds sold and securities
purchased under resale agreements .... 64 287
Trading account assets ................ 844 650
----------- -----------
Total interest-earning assets ..... 35,574 32,175
Cash and due from banks ............... 2,497 2,367
Premises and equipment ................ 555 506
Other assets .......................... 1,692 1,617
Unrealized gains (losses) on securities
available-for-sale ................... (17) 11
Allowance for loan losses ............. (407) (408)
----------- -----------
Total assets ..................... $ 39,894 $ 36,268
=========== ===========
Liabilities and shareholders' equity:
Interest-bearing demand ............... $ 3,253 $ 3,403
Savings and money market savings ...... 6,238 6,089
Savings certificates .................. 6,317 5,319
Large denomination certificates ....... 1,455 1,600
Time deposits in foreign offices ...... 611 420
Short-term borrowed funds ............. 7,631 6,092
Long-term debt ........................ 4,769 3,977
----------- -----------
Total interest-bearing liabilities 30,274 26,900
Demand deposits in domestic offices ..... 5,296 5,273
Demand deposits in foreign offices ...... 6 5
Noninterest-bearing time deposits in
domestic offices ...................... 15 71
Other liabilities ....................... 1,004 977
Shareholders' equity .................... 3,299 3,042
----------- -----------
Total liabilities and
shareholders' equity ............. $ 39,894 $ 36,268
=========== ===========
Total deposits ......................... $ 23,191 $ 22,180
____________________________________________________________________________________________________________________________________
8
11
1995, securities available-for-sale were $4.456 billion and securities
held-to-maturity were $4.515 billion as detailed in the following
table.
$ in thousands
Securities available-for-sale at market value:
U.S. Government and agency .................... $3,273,424
Mortgage backed securities .................... 939,382
Other ......................................... 242,949
----------
Total securities available-for-sale ........ 4,455,755
Securities held-to-maturity:
U.S. Government and agency .................... 2,489,592
Mortgage backed securities .................... 1,566,217
State and municipal ........................... 443,985
Other ......................................... 15,043
----------
Total securities held-to-maturity .......... 4,514,837
----------
Total investment securities ................ $8,970,592
==========
The market value of securities held-to-maturity at June 30, 1995
was $4.652 billion, representing a $137 million appreciation over book
value. Securities available-for-sale marked to fair market value under
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (FASB 115), had an
unrealized gain of $72.656 million, pretax, and $44.556 million, net
of tax, at June 30, 1995. Unrealized gains on average securities
available-for-sale for the second quarter were $14.581 million,
pretax, and $8.933 million, net of tax. For the first six months of
1995, average securities available-for-sale had unrealized losses of
$16.921 million, pretax, and $10.267 million, net of tax.
Interest expense for the second quarter and first half rose
$150.482 million or 62.1 percent and $277.071 million or 60.4 percent,
respectively, from year-earlier periods and was up $50.374 million or
14.7 percent from the first quarter. The increase resulted from both a
higher average funding cost and greater levels of interest-bearing
liabilities to support interest-earning asset growth. The average rate
paid rose 150 basis points in the second period, 146 basis points year
to date and 34 basis points from the preceeding three months, while
average interest-bearing liabilities expanded $3.837 billion or 14.1
percent for the second period, $3.374 billion or 12.5 percent for the
first six months and $1.702 billion or 5.8 percent from the first
quarter.
Interest-bearing time deposits were up $1.424 billion or 8.4
percent and $1.043 billion or 6.2 percent for the quarter and first
half, respectively. Interest-bearing time deposits rose $1.034 billion
or 6 percent from the first quarter, more than offsetting the $984
million increase in average loans for the same period. Savings
certificates for the second quarter grew $1.429 billion or 27 percent
year over year and rose $998 million or 18.8 percent year to date. The
increases largely reflected the results of a one-day certificates of
deposit sale in March attracting over $1 billion, approximately 86
percent of which was new money to the corporation. The sale also
generated about 28,000 new account relationships out of approximately
77,000 accounts participating in the sale. Gains in both periods also
occurred in savings and money market savings, with growth primarily in
the corporation's newly offered Premiere money market account, which
requires a minimum balance of $10,000. Interest-bearing demand and
large denomination certificates decreased for both the quarter and
first half.
Short-term borrowings were higher by $1.831 billion or 30.3
percent for the quarter and $1.539 billion or 25.3 percent year to
date. Compared with the first quarter, short-term borrowings were up
$479 million or 6.5 percent. Year over year increases occurred in
federal funds purchased and securities sold under repurchase
agreements as well as in other short-term borrowings. Commercial paper
borrowings declined. Other short-term borrowings include short-term
bank notes with maturities from 30 days to one year. The notes are
part of Wachovia Bank of North Carolina's bank note program,
consisting of both short- and medium-term notes, with the former being
issued beginning in the fourth quarter of 1994. At June 30, 1995,
short-term notes outstanding totaled $1.907 billion with an average
cost of 6.07 percent and an average maturity of 2.2 months. This
compared with $1.187 billion in outstandings at March 31, 1995 with an
average cost of 6.19 percent
9
12
____________________________________________________________________________________________________________________________________
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- SECOND QUARTER* TABLE 5
____________________________________________________________________________________________________________________________________
Variance
Average Volume Average Rate Interest Attributable to
----------------- ------------ ------------------ ------------------
1995 1994 1995 1994 1995 1994 Variance Rate Volume
------- ------- ----- ----- ------- ------- -------- -------- -------
(Millions) (Thousands)
INTEREST INCOME
Loans:
$ 9,247 $ 7,330 7.60 5.71 Commercial ..................... $175,296 $104,411 $ 70,885 $ 39,577 $31,308
1,775 1,985 9.73 8.61 Tax-exempt ..................... 43,061 42,633 428 5,194 (4,766)
------- ------- -------- -------- --------
11,022 9,315 7.95 6.33 Total commercial ............ 218,357 147,044 71,313 41,475 29,838
730 735 9.31 8.18 Direct retail................... 16,940 14,988 1,952 2,043 (91)
2,398 2,444 8.26 7.81 Indirect retail ................ 49,370 47,629 1,741 2,662 (921)
3,993 3,437 12.52 10.80 Credit card .................... 124,603 92,522 32,081 15,924 16,157
342 331 12.75 11.28 Other revolving credit.......... 10,853 9,302 1,551 1,241 310
------- ------- -------- -------- --------
7,463 6,947 10.84 9.49 Total retail ................ 201,766 164,441 37,325 24,530 12,795
602 480 10.04 8.62 Construction.................... 15,060 10,317 4,743 1,863 2,880
3,664 3,333 8.71 7.60 Commercial mortgages ........... 79,566 63,138 16,428 9,782 6,646
3,960 3,641 8.23 7.65 Residential mortgages........... 81,246 69,466 11,780 5,460 6,320
------- ------- -------- -------- --------
8,226 7,454 8.58 7.69 Total real estate ........... 175,872 142,921 32,951 17,354 15,597
200 172 8.03 7.78 Lease financing ................ 4,013 3,328 685 111 574
292 81 7.51 4.76 Foreign ........................ 5,460 961 4,499 819 3,680
------- ------- -------- -------- --------
27,203 23,969 8.93 7.68 Total loans ................. 605,468 458,695 146,773 80,308 66,465
Investment securities:
Held-to-maturity:
2,491 2,248 6.79 6.57 U.S. Government and agency..... 42,167 36,806 5,361 1,276 4,085
1,506 999 8.09 7.71 Mortgage backed securities..... 30,373 19,215 11,158 983 10,175
458 614 11.98 12.78 State and municipal ........... 13,702 19,565 (5,863) (1,155) (4,708)
15 6 6.26 3.57 Other.......................... 236 53 183 60 123
------- ------- -------- -------- --------
Total securities held-
4,470 3,867 7.76 7.85 to-maturity .............. 86,478 75,639 10,839 (842) 11,681
Available-for-sale:**
2,769 2,643 7.01 5.52 U.S. Government and agency..... 48,371 36,396 11,975 10,174 1,801
800 977 6.58 4.51 Mortgage backed securities .... 13,120 10,992 2,128 4,385 (2,257)
237 280 6.29 4.72 Other.......................... 3,726 3,286 440 984 (544)
------- ------- -------- -------- --------
Total securities available-
3,806 3,900 6.87 5.21 for-sale ................. 65,217 50,674 14,543 15,788 (1,245)
------- ------- -------- -------- --------
8,276 7,767 7.35 6.52 Total investment securities.. 151,695 126,313 25,382 16,733 8,649
6 18 7.33 4.15 Interest-bearing bank balances.... 105 185 (80) 91 (171)
Federal funds sold and
securities purchased under
51 182 6.02 4.07 resale agreements............... 763 1,842 (1,079) 628 (1,707)
955 629 6.74 4.87 Trading account assets ........... 16,047 7,634 8,413 3,578 4,835
------- ------- -------- -------- --------
Total interest-earning
$36,491 $32,565 8.51 7.33 assets .................... 774,078 594,669 179,409 102,734 76,675
======= =======
INTEREST EXPENSE
3,218 3,420 1.80 1.58 Interest-bearing demand .......... 14,412 13,456 956 1,782 (826)
6,415 6,103 3.85 2.49 Savings and money market savings.. 61,595 37,928 23,667 21,643 2,024
6,712 5,283 5.78 4.04 Savings certificates ............. 96,773 53,156 43,617 26,835 16,782
1,407 1,736 5.76 4.28 Large denomination certificates... 20,226 18,507 1,719 5,652 (3,933)
------- ------- -------- -------- --------
Total time deposits in
17,752 16,542 4.36 2.98 domestic offices .......... 193,006 123,047 69,959 60,387 9,572
636 422 5.99 3.89 Time deposits in foreign offices.. 9,503 4,098 5,405 2,791 2,614
------- ------- -------- -------- --------
18,388 16,964 4.42 3.01 Total time deposits.......... 202,509 127,145 75,364 63,931 11,433
Federal funds purchased and
securities sold under
5,230 4,955 6.10 4.15 repurchase agreements .......... 79,571 51,217 28,354 25,367 2,987
480 517 5.72 3.51 Commercial paper ................. 6,834 4,515 2,319 2,661 (342)
Other short-term borrowed
2,159 566 6.15 3.97 funds .......................... 33,081 5,605 27,476 4,484 22,992
------- ------- -------- -------- --------
Total short-term
7,869 6,038 6.09 4.07 borrowed funds ............ 119,486 61,337 58,149 36,051 22,098
3,962 3,441 5.64 4.71 Bank notes ....................... 55,747 40,397 15,350 8,708 6,642
901 840 6.78 6.50 Other long-term debt ............. 15,228 13,609 1,619 605 1,014
------- ------- -------- -------- --------
4,863 4,281 5.85 5.06 Total long-term debt ........ 70,975 54,006 16,969 9,092 7,877
------- ------- -------- -------- --------
Total interest-bearing
$31,120 $27,283 5.06 3.56 liabilities ............... $392,970 $242,488 $150,482 112,786 37,696
======= ======= ----- ----- -------- -------- --------
3.45 3.77 Interest rate spread
===== =====
Net yield on interest-
earning assets and
4.19 4.34 net interest income ............ $381,108 $352,181 $ 28,927 (12,415) 41,342
===== ===== ======== ======== ========
____________________________________________________________________________________________________________________________________
*Interest income and yields are presented on a fully taxable equivalent
basis using the federal income tax rate and state tax rates, as applicable,
reduced by the nondeductible portion of interest expense
**Volume amounts are reported at amortized cost; excludes pretax unrealized
gains (losses) of $15 million in 1995 and ($14) million in 1994
10
13
____________________________________________________________________________________________________________________________________
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS -- SIX MONTHS* TABLE 6
____________________________________________________________________________________________________________________________________
Variance
Average Volume Average Rate Interest Attributable to
--------------- ------------ ---------------------- -------------------
1995 1994 1995 1994 1995 1994 Variance Rate Volume
------ ------- ------ ------ ---------- ---------- -------- -------- ---------
(Millions) (Thousands)
INTEREST INCOME
Loans:
$ 8,971 $ 7,002 7.58 5.40 Commercial.................... $ 337,379 $ 187,373 $150,006 $ 88,549 $ 61,457
1,772 1,983 9.69 8.58 Tax-exempt ................... 85,138 84,416 722 10,242 (9,520)
------- ------- ---------- ---------- --------
10,743 8,985 7.93 6.10 Total commercial .......... 422,517 271,789 150,728 91,246 59,482
731 724 9.10 8.14 Direct retail ................ 33,015 29,246 3,769 3,484 285
2,375 2,434 8.12 7.78 Indirect retail .............. 95,677 93,955 1,722 4,022 (2,300)
3,974 3,300 12.40 10.84 Credit card .................. 244,400 177,387 67,013 27,742 39,271
Other revolving
341 331 12.64 11.23 credit .................... 21,379 18,419 2,960 2,382 578
------- ------- ---------- ---------- --------
7,421 6,789 10.72 9.48 Total retail................. 394,471 319,007 75,464 44,148 31,316
567 490 9.86 8.32 Construction ................. 27,731 20,230 7,501 4,061 3,440
3,608 3,292 8.67 7.39 Commercial mortgages.......... 155,154 120,653 34,501 22,208 12,293
3,906 3,691 8.20 7.71 Residential mortgages ........ 158,900 141,126 17,774 9,296 8,478
------- ------- ---------- ---------- --------
8,081 7,473 8.53 7.61 Total real estate .......... 341,785 282,009 59,776 35,719 24,057
196 166 7.99 7.96 Lease financing .............. 7,754 6,533 1,221 25 1,196
273 79 7.61 4.44 Foreign ...................... 10,275 1,745 8,530 1,927 6,603
------- ------- ---------- ---------- --------
26,714 23,492 8.88 7.56 Total loans ............... 1,176,802 881,083 295,719 165,614 130,105
Investment securities:
Held-to-maturity:
2,492 2,228 6.84 6.63 U.S. Government and agency... 84,504 73,294 11,210 2,308 8,902
1,378 1,079 8.06 7.64 Mortgage backed securities... 55,097 40,877 14,220 2,346 11,874
482 622 12.10 12.71 State and municipal ......... 28,910 39,228 (10,318) (1,811) (8,507)
15 10 6.15 5.33 Other ....................... 451 263 188 46 142
------- ------- ---------- ---------- --------
Total securities held-
4,367 3,939 7.80 7.87 to-maturity ............. 168,962 153,662 15,300 (1,272) 16,572
Available-for-sale:**
2,546 2,502 6.54 5.59 U.S. Government and agency... 82,590 69,286 13,304 12,041 1,263
793 995 5.79 4.59 Mortgage backed securities... 22,742 22,686 56 5,211 (5,155)
240 292 6.40 4.38 Other........................ 7,611 6,342 1,269 2,555 (1,286)
------- ------- ---------- ---------- --------
Total securities available-
3,579 3,789 6.36 5.23 for-sale ............... 112,943 98,314 14,629 20,336 (5,707)
------- ------- ---------- ---------- --------
7,946 7,728 7.15 6.57 Total investment securities. 281,905 251,976 29,929 22,689 7,240
6 18 7.25 3.99 Interest-bearing bank balances.. 206 345 (139) 178 (317)
Federal funds sold and
securities purchased under
64 287 6.20 3.48 resale agreements ............ 1,965 4,953 (2,988) 2,364 (5,352)
844 650 6.83 4.54 Trading account assets ......... 28,614 14,641 13,973 8,781 5,192
------- ------- ---------- ---------- --------
Total interest-earning
$35,574 $32,175 8.44 7.23 assets ................... 1,489,492 1,152,998 336,494 206,819 129,675
======= =======
INTEREST EXPENSE
$ 3,253 $ 3,403 1.78 1.58 Interest-bearing demand ........ 28,779 26,691 2,088 3,302 (1,214)
6,238 6,089 3.63 2.39 Savings and money market savings 112,173 72,212 39,961 38,150 1,811
6,317 5,319 5.48 4.04 Savings certificates............ 171,643 106,621 65,022 42,551 22,471
1,455 1,600 5.58 4.23 Large denomination certificates. 40,237 33,564 6,673 9,938 (3,265)
------- ------- ---------- ---------- --------
Total time deposits in
17,263 16,411 4.12 2.94 domestic offices......... 352,832 239,088 113,744 100,757 12,987
611 420 5.61 3.54 Time deposits in foreign offices 17,010 7,378 9,632 5,397 4,235
------- ------- ---------- ---------- --------
17,874 16,831 4.17 2.95 Total time deposits ....... 369,842 246,466 123,376 107,263 16,113
Federal funds purchased and
securities sold under
5,343 4,906 6.03 3.81 repurchase agreements......... 159,727 92,678 67,049 58,165 8,884
449 560 5.62 3.34 Commercial paper................ 12,528 9,273 3,255 5,367 (2,112)
Other short-term borrowed
1,839 626 6.10 3.55 funds ........................ 55,620 11,011 44,609 12,103 32,506
------- ------- ---------- ---------- --------
Total short-term
7,631 6,092 6.02 3.74 borrowed funds .......... 227,875 112,962 114,913 81,304 33,609
3,900 3,162 5.60 4.63 Bank notes ..................... 108,337 72,562 35,775 16,964 18,811
869 815 6.85 6.56 Other long-term debt ........... 29,512 26,505 3,007 1,206 1,801
------- ------- ---------- ---------- --------
4,769 3,977 5.83 5.02 Total long-term debt ...... 137,849 99,067 38,782 17,300 21,482
------- ------- ---------- ---------- --------
Total interest-bearing
$30,274 $26,900 4.90 3.44 liabilities ............. 735,566 458,495 277,071 213,992 63,079
======= ======= ----- ----- ---------- ---------- --------
3.54 3.79 Interest rate spread
===== =====
Net yield on interest-earning
assets and net interest
4.27 4.35 income ....................... $ 753,926 $ 694,503 $ 59,423 (12,791) 72,214
===== ===== ========== ========== ========
____________________________________________________________________________________________________________________________________
*Interest income and yields are presented on a fully taxable equivalent
basis using the federal income tax rate and state tax rates, as applicable,
reduced by the nondeductible portion of interest expense
**Volume amounts are reported at amortized cost; excludes pretax unrealized
gains (losses) of ($17) million in 1995 and $11 million in 1994
11
14
and an average maturity of 2.8 months.
Long-term debt increased $582 million or 13.6 percent for the
second quarter, $792 million or 19.9 percent for the first half and
$189 million or 4 percent from the preceeding three months. Growth
primarily reflected gains in medium-term bank notes which totaled
$3.979 billion at June 30, 1995 with an average cost of 5.54 percent
and an average maturity of 1.5 years. Comparable amounts a year earlier
were $3.661 billion in outstandings with an average cost of 4.77
percent and an average maturity of 2.1 years. At March 31, 1995,
medium-term bank notes were $3.809 billion with an average cost of 5.47
percent and an average maturity of 1.59 years.
Gross deposits for the second quarter averaged $23.721 billion,
an increase of $1.424 billion or 6.4 percent from $22.297 billion a
year earlier. For the first half, gross deposits averaged $23.191
billion, higher by $1.011 billion or 4.6 percent from $22.180 billion
in 1994. Collected deposits, net of float, averaged $21.985 billion for
the quarter and $21.469 billion year to date, up $1.248 billion or 6
percent and $858 million or 4.2 percent, respectively, from the same
1994 periods.
ASSET AND LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY
The corporation uses a number of tools to measure interest rate
risk, including monitoring the difference or gap between rate sensitive
assets and liabilities over various time periods, monitoring the change
in present value of the asset and liability portfolios under various
rate scenarios and simulating net interest income under the same rate
scenarios. Management believes that rate risk is best measured by
simulation modeling which calculates expected net interest income based
on projected interest-earning assets, interest-bearing liabilities,
off-balance sheet financial instruments and interest rates.
The corporation monitors exposure to a gradual change in rates
of 200 basis points up or down over a rolling 12-month period and an
interest rate shock of an instantaneous change in rates of 200 basis
points up or down over the same period. From time to time, the model
horizon is expanded to a 24-month period. The corporation policy limit
for the maximum negative impact on net interest income from a gradual
change in interest rates of 2 percentage points over 12 months is 7.5
percent. Management generally has maintained a risk position well
within the policy guideline level. As of June 30, 1995, the model
indicated the impact of a 2 percentage point gradual rise in rates over
12 months would approximate a .1 percent increase in net interest
income, while a 2 percentage point decline in rates over the same
period would approximate a .9 percent decrease from an unchanged rate
environment.
In addition to on-balance sheet instruments such as investment
securities and purchased funds, the corporation uses off-balance sheet
derivative instruments to manage interest rate risk, liquidity and net
interest income. Off-balance sheet instruments include interest rate
swaps, futures and options with indices that directly correlate to
on-balance sheet instruments. The corporation has used off-balance
sheet financial instruments, principally interest rate swaps, over a
number of years and believes their use on a sound basis enhances the
effectiveness of asset and liability and interest rate sensitivity
management.
Off-balance sheet asset and liability derivative transactions
are based on referenced or notional amounts. At june 30, 1995, the
corporation had $1.395 billion notional amount of derivatives
outstanding for asset and liability management purposes. Interest rate
swaps were $1.380 billion or 99 percent of the total notional amount.
Credit risk of off-balance sheet derivative financial instruments is
equal to the fair value gain of the instrument if a counterparty fails
to perform. The credit risk is normally a small percentage of the
notional amount and fluctuates as interest rates move up or down. The
corporation mitigates this risk by subjecting the transactions to the
same rigorous approval and monitoring process as is used for on-balance
sheet credit transactions, by dealing in the national market with
highly rated counterparties, by executing all transactions under
International Swaps and Derivatives Association Master Agreements and
by using collateral instruments to reduce exposure. Collateral is
delivered by either party when the fair value of a particular
transaction or group of transactions with the same counterparty on a
net basis exceeds an acceptable threshold of exposure. The threshold
level is determined based on the strength of the individual
Counterparty.
The fair value of all asset and liability derivative positions
for which the corporation was exposed to counterparties totaled $18
million at June 30, 1995. The fair value of all asset and liability
derivative positions for which counterparties were exposed to the
corporation amounted to $15 million on the same date. Details
12
15
of the net fair value gain of $3 million and additional asset
and liability derivative information are included in the accompanying
tables.
Estimated Fair Value of Asset and Liability Management Derivatives by Purpose
-----------------------------------------------------------------------------
June 30, 1995 June 30, 1994
-------------------------------------------------- -------------------------
Notional Fair Value Fair Value Net Fair Value Notional Net Fair Value
$ in millions Value Gains (losses) Gains (losses) Value Gains (losses)
-------- ---------- ---------- -------------- -------- --------------
Convert floating rate liabilities
to fixed:
Swaps-pay fixed/receive floating........ $ 127 $ 1 $(4) $(3) $ 279 $(3)
Caps purchased-pay fixed/receive
floating.............................. 15 -- -- -- 15 --
Convert fixed rate assets to floating:
Swaps-pay fixed/receive floating........ 140 -- (1) (1) -- --
Forward starting swaps-pay
fixed/receive floating................ 284 -- (4) (4) -- --
Convert fixed rate liabilities to
floating:
Swaps-receive fixed/pay floating........ 200 3 (5) (2) 100 (13)
Convert floating rate assets to fixed:
Swaps-receive fixed/pay floating........ 219 1 (1) -- 385 (15)
Index amortizing swaps-receive
fixed/pay floating.................... 410 13 -- 13 150 (1)
Hedge spread between prime and fed funds:
Interest rate caps...................... -- -- -- -- 400 --
------ --- ---- --- ------ ----
Total derivatives.................... $1,395 $18 ($15) $ 3 $1,329 ($32)
====== === ==== === ====== ====
Maturity Schedule of Asset and Liability Management Derivatives
---------------------------------------------------------------
June 30, 1995
Within Over Average
One Two Three Four Five Five Life
$ in millions Year Years Years Years Years Years Total (Years)
------ ----- ----- ----- ----- ----- ----- -------
Interest rate swaps:
Pay fixed/receive floating:
Notional amount.................... $ 150 $ 48 $ 11 $ 15 $ 19 $ 24 $ 267 1.69
Weighted average rates received.... 5.12% 6.59% 6.97% 6.80% 6.92% 6.12% 5.78%
Weighted average rates paid........ 7.40 8.52 5.87 6.87 6.70 7.52 7.47
Receive fixed/pay floating:
Notional amount.................... $ 108 $ 8 $ 101 $ 2 -- $ 200 $ 419 5.27
Weighted average rates received.... 5.12% 9.06% 6.77% 10.70% -- 7.03% 6.52%
Weighted average rates paid........ 6.37 9.00 6.11 9.00 -- 6.38 6.37
Index amoritzing swaps:*
Receive fixed/pay floating:
Notional amount.................... $ 135 $ 25 $ 250 -- -- -- $ 410 1.73
Weighted average rates received.... 6.35% 7.39% 8.18% -- -- -- 7.53%
Weighted average rates paid........ 6.15 6.13 6.28 -- -- -- 6.23
Total interest rate swaps:
Notional amount...................... $ 393 $ 81 $ 362 $ 17 $ 19 $ 224 $1,096 3.07
Weighted average rates received...... 5.54% 7.08% 7.75% 7.18% 6.93% 6.93% 6.72%
Weighted average rates paid.......... 6.68 7.82 6.22 7.08 6.71 6.50 6.58
Forward starting interest rate swaps:
Notional amount...................... $ 226 -- -- -- -- $ 58 $ 284 1.84
Weighted average rates paid.......... 7.58% -- -- -- -- 8.03% 7.67%
Interest rate caps
(notional amount)**................ $ 15 -- -- -- -- -- $ 15 .38
Total derivatives
(notional amount).............. $ 634 $ 81 $ 362 $ 17 $ 19 $ 282 $1,395 2.79
*Maturity is based upon expected average lives rather than contractual lives.
**Average rates are not meaningful.
Asset and liability transactions are accounted for following
hedge accounting rules. Accordingly, gains and losses related to the
fair value of derivative contracts used for asset and liability
management purposes are not immediately recognized in earnings. If the
hedged or altered balance sheet amounts were marked to market, the
resulting unrealized balance sheet gains or losses could be expected
to offset unrealized derivatives gains and losses.
13
16
NONPERFORMING ASSETS
Nonperforming assets at JUNE 30, 1995 were $76.640 million or
.27 percent of loans and foreclosed property. The total decreased
$47.889 million or 38.5 percent from a year earlier and was lower by
$16.083 million or 17.3 percent from first quarter-close. The declines
primarily reflected paydowns, the return of cash-basis assets to
accrual status and sales of foreclosed property.
The largest portion of nonperforming assets is real estate
related. At June 30, 1995, real estate nonperforming assets were
$53.558 million or .64 percent of real estate loans and foreclosed real
estate compared with $85.444 million or 1.14 percent a year earlier and
$64.120 million or .80 percent at March 31, 1995. Nonperforming real
estate loans included in these amounts were $37.783 million at June 30,
1995, $64.875 million a year earlier and $46.755 million at the end of
the 1995 first quarter.
Commercial real estate nonperforming assets were $29.837
million or .69 percent of related loans and foreclosed property versus
$63.503 million or 1.66 percent at June 30, 1994 and $40.030 million or
.97 percent at March 31, 1995. These included commercial real estate
nonperforming loans of $23.721 million at June 30, 1995, $51.295
million a year earlier and $33.018 million at first quarter-close.
_____________________________________________________________________________________________________________________________
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 7
(thousands)
_____________________________________________________________________________________________________________________________
June 30 March 31 Dec. 31 Sept. 30 June 30
1995 1995 1994 1994 1994
------- ------- -------- -------- --------
NONPERFORMING ASSETS
Cash-basis assets -- domestic borrowers........................ $57,918* $71,848 $ 78,712 $ 89,184 $100,696
Restructured loans -- domestic................................. --** -- -- -- --
------- ------- -------- -------- --------
Total nonperforming loans................................. 57,918 71,848 78,712 89,184 100,696
Foreclosed property:
Foreclosed real estate........................................ 18,859 20,669 22,900 22,309 26,347
Less valuation allowance...................................... 3,084 3,304 4,026 5,025 5,778
Other foreclosed assets....................................... 2,947 3,510 2,931 3,043 3,264
------- ------- -------- -------- --------
Total foreclosed property................................. 18,722 20,875 21,805 20,327 23,833
------- ------- -------- -------- --------
Total nonperforming assets................................ $76,640*** $92,723 $100,517 $109,511 $124,529
======= ======= ======== ======== ========
Nonperforming loans to period-end loans........................ .21% .27% .30% .36% .41%
Nonperforming assets to period-end loans and
foreclosed property.......................................... .27 .35 .39 .44 .51
Period-end allowance for loan losses times
nonperforming loans.......................................... 7.06x 5.69x 5.16x 4.55x 4.03x
Period-end allowance for loan losses times
nonperforming assets......................................... 5.33 4.41 4.04 3.71 3.26
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers............................................. $49,004 $48,998 $ 37,010 $ 43,708 $ 50,321
======= ======= ======== ======== ========
*Includes $18,254 of loans which have been defined as impaired per Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (FASB 114)
**Excludes $10,171 of loans which have been renegotiated at market rates and have been reclassified to performing status
***Net of cumulative corporate and commercial real estate charge-offs and foreclosed real estate write-downs totaling $30,695;
includes $4,639 of nonperforming assets on which interest and principal are paid current
_____________________________________________________________________________________________________________________________
14
17
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $28.652 million for the
quarter and $50.440 million year to date, increasing $12.310 million or
75.3 percent and $16.339 million or 47.9 percent from the same
respective periods a year earlier. The provision was up $6.864 million
or 31.5 percent from the first quarter of 1995.
The provision reflects management's assessment of the adequacy
of the allowance for loan losses to absorb potential write-offs in the
loan portfolio. Several factors are considered in this assessment,
including growth and composition of the loan portfolio, historical
credit loss experience, current and anticipated economic conditions and
changes in borrowers' financial positions.
Net loan losses totaled $28.519 million or .42 percent
annualized of average loans for the quarter and $47.939 million or .36
percent year to date, up $12.645 million or 79.7 percent and $14.982
million or 45.5 percent, respectively, from the same periods in 1994.
Net loan losses were higher by $9.099 million or 46.9 percent from the
first quarter. Excluding credit card loans, net charge-offs totaled
$7.876 million or .14 percent of average loans for the quarter and
$9.068 million or .08 percent for the first half. This compared with
$1.826 million or .04 percent and $5.752 million or .06 percent for the
same three- and six-month periods, respectively, a year earlier and
with $1.192 million or .02 percent in the first quarter of 1995.
Credit card net charge-offs were $20.643 million or 2.07
percent annualized of average credit card loans for the second period
and $38.871 million or 1.96 percent year to date versus $14.048 million
or 1.63 percent and $27.205 million or 1.65 percent in the same
respective periods of 1994. Real estate loans had net charge-offs of
$3.462 million for the quarter and $2.092 million for the first half
versus net recoveries of $2.154 million and $3.947 million,
respectively, in 1994. Net loan losses for other retail loans,
consisting of direct and indirect lending, totaled $2.556 million for
the quarter and $4.949 million for the first six months compared with
$1.856 million and $3.819 million, respectively, a year earlier.
At June 30, 1995, the allowance for loan losses totaled
$408.633 million or 1.45 percent of period-end loans and 706 percent
coverage of nonperforming loans. Comparable amounts were $405.942
million, 1.67 percent and 403 percent, respectively, at second
quarter-close 1994 and $408.500 million, 1.53 percent and 569 percent,
respectively, at March 31, 1995.
15
18
___________________________________________________________________________________________________________________________
ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 8
___________________________________________________________________________________________________________________________
1995 1994
------------------- ---------------------------- Six Months Ended
Second First Fourth Third Second June 30
Quarter Quarter Quarter Quarter Quarter 1995 1994
-------- -------- -------- -------- -------- -------- --------
SUMMARY OF TRANSACTIONS
Balance at beginning of period................ $408,500 $406,132 $406,005 $405,942 $405,474 $406,132 $404,798
Provision for loan losses..................... 28,652 21,788 19,539 18,123 16,342 50,440 34,101
Deduct net loan losses:
Loans charged off:
Commercial................................. 1,872 318 1,793 3,063 2,947 2,190 8,027
Credit card................................ 23,829 21,431 19,682 17,310 16,808 45,260 32,736
Other revolving credit..................... 1,058 805 1,000 908 902 1,863 1,807
Other retail............................... 3,528 3,412 3,216 2,504 2,605 6,940 5,689
Real estate................................ 5,499 391 1,785 749 1,352 5,890 2,171
Lease financing............................ 636 101 57 28 80 737 141
Foreign.................................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total..................................... 36,422 26,458 27,533 24,562 24,694 62,880 50,571
Recoveries:
Commercial................................. 1,400 695 1,382 915 1,423 2,095 3,380
Credit card................................ 3,186 3,203 2,926 2,837 2,760 6,389 5,531
Other revolving credit..................... 267 322 224 285 303 589 550
Other retail............................... 972 1,019 927 1,159 749 1,991 1,870
Real estate................................ 2,037 1,761 2,624 1,273 3,506 3,798 6,118
Lease financing............................ 41 30 31 25 70 71 148
Foreign.................................... -- 8 7 8 9 8 17
-------- -------- -------- -------- -------- -------- --------
Total..................................... 7,903 7,038 8,121 6,502 8,820 14,941 17,614
-------- -------- -------- -------- -------- -------- --------
Net loan losses............................. 28,519 19,420 19,412 18,060 15,874 47,939 32,957
-------- -------- -------- -------- -------- -------- --------
Balance at end of period...................... $408,633* $408,500* $406,132 $406,005 $405,942 $408,633* $405,942
======== ======== ======== ======== ======== ======== ========
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial.................................... $ 472 $ (377) $ 411 $ 2,148 $ 1,524 $ 95 $ 4,647
Credit card................................... 20,643 18,228 16,756 14,473 14,048 38,871 27,205
Other revolving credit........................ 791 483 776 623 599 1,274 1,257
Other retail.................................. 2,556 2,393 2,289 1,345 1,856 4,949 3,819
Real estate................................... 3,462 (1,370) (839) (524 ) (2,154) 2,092 (3,947)
Lease financing............................... 595 71 26 3 10 666 (7)
Foreign....................................... -- (8) (7) (8 ) (9) (8) (17)
-------- -------- -------- -------- -------- -------- --------
Total..................................... $ 28,519 $ 19,420 $ 19,412 $ 18,060 $ 15,874 $ 47,939 $ 32,957
======== ======== ======== ======== ======== ======== ========
Net Loan Losses -- excluding credit cards..... $ 7,876 $ 1,192 $ 2,656 $ 3,587 $ 1,826 $ 9,068 $ 5,752
ANNUALIZED NET LOAN LOSSES (RECOVERIES)
TO AVERAGE LOANS BY CATEGORY
Commercial.................................... .02% (.01%) .02% .09 % .07% --% .10%
Credit card................................... 2.07 1.84 1.76 1.57 1.63 1.96 1.65
Other revolving credit........................ .93 .57 .92 .74 .72 .75 .76
Other retail.................................. .33 .31 .29 .17 .23 .32 .24
Real estate................................... .17 (.07) (.04) (.03 ) (.12) .05 (.11)
Lease financing............................... 1.19 .15 .06 .01 .02 .68 (.01)
Foreign....................................... -- (.01) (.01) (.04 ) (.04) (.01) (.04)
Total loans................................... .42 .30 .31 .29 .26 .36 .28
Total loans -- excluding credit cards......... .14 .02 .05 .07 .04 .08 .06
Period-end allowance to outstanding loans..... 1.45 1.53 1.57 1.63 1.67 1.45 1.67
*Includes the related allowance for credit losses for impaired loans as defined in FASB 114, "Accounting by Creditors for
Impairment of a Loan," of $0 at June 30, 1995 and $2,070 at March 31, 1995
___________________________________________________________________________________________________________________________
16
19
NONINTEREST INCOME
Total other operating revenue for the quarter rose $13.005
million or 8.5 percent year over year and was higher by $25.229 million
or 8.5 percent for the first half. Gains in both periods primarily
reflected good growth in credit card income, trading account profits
and other service charges and fees along with strengthened levels of
deposit account service charges. Compared with the first quarter, total
other operating revenue increased $9.211 million or 5.9 percent.
Credit card income for the quarter and first six months grew
$3.747 million or 13.3 percent and $7.357 million or 13.8 percent,
respectively. Higher levels of cardholder interchange income and net
merchant discount income along with gains from other card income,
including loan securitization, accounted for the increases. Cardholder
purchase volume totaled $913 million for the quarter and $1.702 billion
year to date versus $813 million and $1.475 billion, respectively, in
1994.
Trading account profits rose $1.777 million for the second
period and $3.337 million for the first half, reflecting good gains in
municipal securities and government and U.S. agency securities as well
as narrowed losses on money market trading activities.
Other service charges and fees increased $6.732 million or 51.2
percent and $11.922 million or 44.5 percent for the three- and
six-month periods, respectively. Growth was driven primarily by
electronic banking, consisting of debit card and ATM fees, and by
investment fee income, comprised of fees largely from mutual funds and
brokers commissions. Electronic banking services represent
approximately 40 percent of total other service charges and fees, while
investment fee income represents approximately 30 percent. Safe
deposit and safekeeping fees, representing approximately 10 percent of
the total, and other service charges and fees, comprising approximately
20 percent, also were higher for both periods.
Service charges on deposit accounts were up $1.806 million or
3.6 percent for the quarter and $2.537 million or 2.6 percent year to
date. Gains were due to mainly higher overdraft and insufficient funds
charges as well as to increased savings account service charges.
Commercial account analysis fees were modestly lower in both periods,
although corporate service levels expanded. The lower analysis fees
reflected increased credit given for corporate deposit balances in a
higher year-over-year interest rate environment.
Trust service fees were largely unchanged for the quarter,
rising $228 thousand or less than 1 percent. For the first six months,
trust service fees decreased a modest $572 thousand or under 1 percent,
largely reflecting a decline in custodial assets due to the loss of a
major account in late 1994.
Mortgage fee income decreased $1.168 million or 15.1 percent
for the three months and $747 thousand or 4.7 percent for the six
months. Reduced loan servicing fees, resulting from the April sale of
the corporation's mortgage servicing portfolio, primarily accounted for
the declines in both periods. Lower residential mortgage origination
fees also contributed to the decreases with loan originations for the
second quarter and first half totaling $302.799 million and $509.685
million, respectively, versus $387.470 million and $850.126 million,
respectively, a year earlier.
Remaining combined categories of total other operating revenue
were modestly lower for the second period but increased $1.395 million
or 3.8 percent for the first six months. Insurance premiums and
commissions remained essentially flat for the quarter but were higher
by $633 thousand or 10.4 percent year to date. Bankers' acceptance and
letter of credit fees were up modestly for the second period but
decreased $674 thousand or 5.6 percent for the first half. Other income
decreased $177 thousand or 1.6 percent for the quarter
17
20
but was up $1.436 million or 7.7 percent for the first six months.
Included in other income are revenues from Wachovia's customer
portfolio of interest rate and currency derivatives (excluding foreign
exchange forwards and options) which had a notional amount of $4.905
billion and a fair value of $3.575 million at June 30, 1995 versus
$2.439 billion and $4.744 million, respectively, a year earlier.
Including a gain from the sale of the corporation's mortgage
servicing portfolio and losses on sales of investment securities,
total noninterest income was higher by $65.573 million or 42.7 percent
for the quarter and $77.096 million or 25.8 percent year to date. The
sale of the mortgage servicing portfolio in April resulted in a pretax
gain of $79.025 million, while losses on investment securities sales
totaled $26.236 million for the quarter and $26.365 million for the
first half of 1995.
____________________________________________________________________________________________________________________________________
NONINTEREST INCOME (thousands) TABLE 9
____________________________________________________________________________________________________________________________________
1995 1994
---------------------- -------------------------------- Six Months Ended
Second First Fourth Third Second June 30
Quarter Quarter Quarter Quarter Quarter 1995 1994
--------- --------- --------- -------- -------- --------- --------
Service charges on deposit accounts ....... $ 52,452 $ 48,881 $ 48,413 $ 48,940 $ 50,646 $ 101,333 $ 98,796
Fees for trust services ................... 33,211 30,881 31,285 32,151 32,983 64,092 64,664
Credit card income -- net of
interchange payments .................... 31,867 28,944 30,200 28,271 28,120 60,811 53,454
Mortgage fee income ....................... 6,547 8,454 8,886 8,590 7,715 15,001 15,748
Trading account profits (losses) --
excluding interest....................... 2,375 3,067 (582) 1,576 598 5,442 2,105
Insurance premiums and commissions ........ 3,385 3,313 3,189 2,425 3,379 6,698 6,065
Bankers' acceptance and letter of
credit fees ............................. 5,743 5,559 5,365 5,827 5,689 11,302 11,976
Other service charges and fees ............ 19,888 18,817 15,530 14,571 13,156 38,705 26,783
Other income .............................. 10,836 9,177 12,437 9,190 11,013 20,013 18,577
--------- --------- --------- -------- -------- --------- --------
Total other operating revenue ....... 166,304 157,093 154,723 151,541 153,299 323,397 298,168
Gain on sale of mortgage servicing
portfolio ............................... 79,025 -- -- -- -- 79,025 --
Investment securities gains (losses) ...... (26,236) (129) 2,094 433 221 (26,365) 793
--------- --------- --------- -------- -------- --------- --------
Total ............................... $ 219,093 $ 156,964 $ 156,817 $151,974 $153,520 $ 376,057 $298,961
========= ========= ========= ======== ======== ========= ========
____________________________________________________________________________________________________________________________________
NONINTEREST EXPENSE
Total noninterest expense for the second quarter and first six
months was up $32.072 million or 11.7 percent and $45.054 million or
8.3 percent, respectively, from year-earlier periods. Noninterest
expense for the quarter included $18.100 million of expenses related
to severance costs from continued consolidation efforts, higher
consulting fees associated with strategic initiatives and charitable
contributions. The corporation's overhead ratio measuring noninterest
expense as a percentage of total adjusted revenues (taxable equivalent
net interest income and total other operating revenue) was 56 percent
for the second period and 54.7 percent year to date versus 54.3
percent and 54.9 percent, respectively, in 1994. Noninterest expense
was up $23.585 million or 8.3 percent from the first quarter of 1995.
Total personnel expense for the second period increased $8.755
million or 6.2 percent year over year and $12.704 million or 4.5
percent for the first half. Salaries expense rose $8.838 million or 7.7
percent and
18
21
$11.812 million or 5.1 percent for the three and six months,
respectively, primarily due to higher base salaries and severance
expense resulting from a management structure review and the sale of
the corporation's mortgage servicing portfolio. Employee benefits
expense decreased slightly for the quarter but was up modestly year to
date.
Combined net occupancy and equipment expense was higher by
$2.669 million or 5.8 percent for the second period and $5.182 million
or 5.6 percent for the first six months. Increased installation,
relocation and maintenance costs for enhanced technology projects
helped push equipment expense up $1.925 million or 7.4 percent for the
quarter and $3.676 million or 7 percent year to date. Net occupancy
expense rose $744 thousand or 3.7 percent for the three months and
$1.506 million or 3.8 percent for the first half.
Remaining combined categories of noninterest expense were up
$20.648 million or 23.7 percent for the quarter and $27.168 million or
16 percent for the first six months. Professional services expense
increased $3.764 million or 69.9 percent for the three months and
$5.503 million or 58.9 percent year to date, largely reflecting
consulting fees associated with corporate strategic initiatives.
Outside data processing, programming and software expense rose $2.545
million or 31.3 percent for the quarter and $3.957 million or 23.8
percent for the first half, primarily due to increased volume of
treasury cash services operations and to higher external programming
costs associated with ongoing technology projects. The sale of the
corporation's mortgage servicing portfolio in April helped lower
amortization expense by $2.486 million or 54 percent for the quarter
and $3.552 million or 36.5 percent for the first half. Foreclosed
property expense totaled $408 thousand for the second period and $253
thousand for the first six months versus net gains of $404 thousand
and $3.845 million, respectively, in 1994. Other expense for the
quarter rose $13.486 million or 52.7 percent and included a $10
million increase charitable contributions.
____________________________________________________________________________________________________________________________________
NONINTEREST EXPENSE (thousands) TABLE 10
____________________________________________________________________________________________________________________________________
1995 1994
----------------------- ---------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
-------- --------- -------- --------- ---------
Salaries ............................................ $123,720 $ 118,185 $117,904 $ 116,793 $ 114,882
Employee benefits ................................... 26,267 26,778 23,662 22,902 26,350
-------- --------- -------- --------- ---------
Total personnel expense ....................... 149,987 144,963 141,566 139,695 141,232
Net occupancy expense ............................... 20,940 20,190 21,261 20,026 20,196
Equipment expense ................................... 27,935 28,263 27,197 26,789 26,010
Postage and delivery ................................ 9,190 9,592 8,650 8,645 8,816
Outside data processing, programming and software ... 10,664 9,897 10,773 7,834 8,119
Stationery and supplies ............................. 6,619 6,208 6,182 6,578 5,836
Advertising and sales promotion ..................... 9,747 9,412 6,949 8,019 9,316
Professional services ............................... 9,149 5,691 6,539 4,617 5,385
Travel and business promotion ....................... 5,110 4,059 4,650 3,757 4,343
FDIC insurance and regulatory examinations .......... 13,344 13,339 13,188 13,294 13,589
Check clearing and other bank services .............. 2,337 2,150 2,204 2,475 1,920
Amortization of intangible assets ................... 2,116 4,071 4,430 4,524 4,602
Foreclosed property expense ......................... 408 (155) 9 (452) (404)
Other expense ....................................... 39,071 25,352 28,927 25,492 25,585
-------- --------- -------- --------- ---------
Total ......................................... $306,617 $ 283,032 $282,525 $ 271,293 $ 274,545
======== ========= ======== ========= =========
Overhead ratio ...................................... 56.01% 53.41% 53.69% 53.24% 54.31%
Six Months Ended
June 30
1995 1994
-------- ---------
Salaries ............................................ $241,905 $ 230,093
Employee benefits ................................... 53,045 52,153
-------- ---------
Total personnel expense ....................... 294,950 282,246
Net occupancy expense ............................... 41,130 39,624
Equipment expense ................................... 56,198 52,522
Postage and delivery ................................ 18,782 17,868
Outside data processing, programming and software ... 20,561 16,604
Stationery and supplies ............................. 12,827 11,798
Advertising and sales promotion ..................... 19,159 19,099
Professional services ............................... 14,840 9,337
Travel and business promotion ....................... 9,169 7,847
FDIC insurance and regulatory examinations .......... 26,683 26,969
Check clearing and other bank services .............. 4,487 4,215
Amortization of intangible assets ................... 6,187 9,739
Foreclosed property expense ......................... 253 (3,845)
Other expense ....................................... 64,423 50,572
-------- ---------
Total ......................................... $589,649 $ 544,595
======== =========
Overhead ratio ...................................... 54.73% 54.86%
____________________________________________________________________________________________________________________________________
19
22
INCOME TAXES
Applicable income taxes increased $22.245 million or 39.9
percent for the quarter and $30.750 million or 28.9 percent year to
date. Income taxes computed at the statutory rate are reduced
primarily by the interest earned on state and municipal debt
securities and industrial revenue obligations. Also, within certain
limitations, one-half of the interest income on qualifying employee
stock ownership plan loans is exempt from federal taxes. The interest
earned on state and municipal debt instruments is exempt from federal
taxes and, except for out-of-state issues, from Georgia and North
Carolina taxes as well, and results in substantial interest savings
for local governments and their constituents.
____________________________________________________________________________________________________________________________________
INCOME TAXES (thousands) TABLE 11
____________________________________________________________________________________________________________________________________
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
--------- --------- --------- ---------
Income before income taxes .................................. $ 240,945 $ 189,932 $ 442,285 $ 365,410
========= ========= ========= =========
Federal income taxes at statutory rate ...................... $ 84,331 $ 66,476 $ 154,800 $ 127,893
State and local income taxes -- net of federal benefit....... (2,214) 970 (1,816) 2,191
Effect of tax-exempt securities interest and other income ... (10,756) (12,005) (21,605) (23,972)
Other items ................................................. 6,675 350 5,841 358
--------- --------- --------- ---------
Total tax expense ...................................... $ 78,036 $ 55,791 $ 137,220 $ 106,470
========= ========= ========= =========
Currently payable:
Federal ................................................... $ 90,228 $ 58,811 $ 152,745 $ 102,070
Foreign ................................................... 57 26 124 60
State and local ........................................... 8,778 2,363 10,713 4,776
--------- --------- --------- ---------
Total .................................................. 99,063 61,200 163,582 106,906
Deferred:
Federal ................................................... (8,843) (4,539) (12,855) 969
State and local ........................................... (12,184) (870) (13,507) (1,405)
--------- --------- --------- ---------
Total .................................................. (21,027) (5,409) (26,362) (436)
--------- --------- --------- ---------
Total tax expense ...................................... $ 78,036 $ 55,791 $ 137,220 $ 106,470
========= ========= ========= =========
____________________________________________________________________________________________________________________________________
FINANCIAL CONDITION AND CAPITAL RATIOS
The corporation's assets at June 30, 1995 totaled $42.867
billion, including $38.329 billion of interest-earning assets and
$28.251 billion of loans. Comparable amounts a year earlier were
$37.069 billion, $32.964 billion and $24.300 billion, respectively. At
March 31, 1995, assets were $40.223 billion, interest-earning assets
were $35.814 billion and loans were $26.728 billion.
Deposits at June 30, 1995 were $23.892 billion, including
$18.530 billion of time deposits, representing 77.6 percent of the
total. This compared with $22.218 billion of deposits, including
$16.945 billion of time deposits or 76.3 percent of the total at
second quarter-end 1994 and with $23.110 billion of deposits,
including $17.956 billion of time deposits or 77.7 percent of the
total at March 31, 1995.
Shareholders' equity at second quarter-close was $3.535 billion,
higher by $386 million or 12.3 percent from $3.149 billion at June 30,
1994 and up $130 million or 3.8 percent from the preceding
quarter-close. The total at June 30, 1995 included $44.556 million,
net of tax, of unrealized gains on securities available-for-sale
marked to fair market value under FASB 115.
Cash dividends paid totaled $56.302 million for the second
quarter and $112.760 million year to date, higher by 9.5 percent and
9.6 percent, respectively, from the same periods in 1994. Cash
dividends paid represented a payout of 34.6 percent of net income for
the quarter and 37 percent for the first half. The corporation's board
of directors declared a third quarter dividend of $.36 per share at
its meeting on July 28, 1995, payable September 1 to shareholders of
record on August 7. The dividend represents an increase of 9.1 percent
from the previous quarter and is higher by 20 percent from the third
quarter of 1994.
The corporation was authorized by the board of directors on July
28, 1995 to repurchase up to 5 million shares of its common stock. The
authorization replaced an earlier action on July 22, 1994 to repurchase
the
20
23
same number of shares. Repurchased shares will be used for various
corporate purposes, including share issuance for the corporation's
employee stock plans and dividend reinvestment plan. In the second
quarter of 1995, the corporation repurchased 1,060,900 shares at an
average price of $35.311 per share for a total cost of $37.462
million. As of June 30, 1995, a total of 1,795,000 shares had been
repurchased under the earlier authorization which was terminated
effective with the new authorization.
Intangible assets at June 30, 1995 were $41.492 million,
consisting of $30.216 million in goodwill, $7.753 million in deposit
base intangibles and $3.523 million in other intangible assets,
primarily purchased credit card intangibles. In April, the corporation
sold its mortgage servicing portfolio with associated mortgage
servicing rights totaling $31.903 million at March 31, 1995.
Intangible assets at second quarter-close 1994 were $85.601 million,
with $39.014 million in mortgage servicing rights, $31.706 million in
goodwill, $9.610 million in deposit base intangibles and $5.271
million in other intangible assets. At March 31, 1995, intangible
assets totaled $74.614 million.
Regulatory agencies divide capital into Tier I (consisting of
shareholders' equity less ineligible intangible assets) and Tier II
(consisting of the allowable portion of the reserve for loan losses
and certain long-term debt) and measure capital adequacy by applying
both capital levels to a banking company's risk-adjusted assets and
off-balance sheet items. Regulatory requirements presently specify
that Tier I capital should exclude the market appreciation or
depreciation of securities available-for-sale arising from valuation
adjustments under FASB 115. In addition to these capital ratios,
regulatory agencies have established a Tier I leverage ratio which
measures Tier I capital to average assets less ineligible intangible
assets.
Regulatory guidelines require a minimum of total capital to
risk-adjusted assets ratio of 8 percent with one-half consisting of
tangible common shareholders' equity and a minimum Tier I leverage
ratio of 3 percent. Banks which meet or exceed a Tier I ratio of 6
percent, a total capital ratio of 10 percent and a Tier I leverage
ratio of 5 percent are considered well capitalized by regulatory
standards.
At June 30, 1995, Wachovia's Tier I to risk-adjusted assets
ratio was 9.31 percent with total capital 13.15 percent of
risk-adjusted assets. The corporation's Tier I leverage ratio was 8.47
percent.
____________________________________________________________________________________________________________________________________
CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 12
____________________________________________________________________________________________________________________________________
1995 1994
------------------------------ ---------------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
------------ ----------- ----------- ----------- -----------
Tier I capital:
Common shareholders' equity ............... $ 3,535,313 $ 3,404,983 $ 3,286,507 $ 3,214,881 $ 3,149,144
Less ineligible intangible assets ......... 30,216 30,589 30,961 31,334 32,349
Unrealized (gains) losses on securities
available-for-sale, net of tax .......... (44,556) 10,111 37,635 21,510 15,140
------------ ----------- ----------- ----------- -----------
Total Tier I capital ................... 3,460,541 3,384,505 3,293,181 3,205,057 3,131,935
Tier II capital:
Allowable allowance for loan losses ....... 408,633 408,500 406,132 406,005 405,942
Allowable long-term debt .................. 1,020,267 770,680 830,782 832,881 833,253
------------ ----------- ----------- ----------- -----------
Tier II capital additions .............. 1,428,900 1,179,180 1,236,914 1,238,886 1,239,195
------------ ----------- ----------- ----------- -----------
Total capital .......................... $ 4,889,441 $ 4,563,685 $ 4,530,095 $ 4,443,943 $ 4,371,130
============ =========== =========== =========== ===========
Risk-adjusted assets ........................ $ 37,189,208 $36,207,967 $35,573,896 $34,100,248 $32,746,004
Quarterly average assets .................... $ 40,875,958 $38,901,940 $38,146,370 $37,676,339 $37,174,827
Risk-based capital ratios:
Tier I capital ............................ 9.31% 9.35% 9.26% 9.40% 9.56%
Total capital ............................. 13.15 12.60 12.73 13.03 13.35
Tier I leverage ratio* ...................... 8.47 8.70 8.63 8.51 8.43
Shareholders' equity to total assets ........ 8.25 8.47 8.39 8.43 8.50
*Ratio excludes the average unrealized gains
(losses) on securities available-for-sale,
net of tax, of $8,933, ($29,681), ($26,581),
($16,885) and ($8,535), respectively
____________________________________________________________________________________________________________________________________
21
24
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
June 30 December 31 June 30
$ in thousands 1995 1994 1994
----------- ----------- -----------
ASSETS
Cash and due from banks.................................................... $ 2,629,502 $ 2,670,115 $ 2,200,729
Interest-bearing bank balances............................................. 5,893 6,763 14,464
Federal funds sold and securities
purchased under resale agreements........................................ 14,571 201,606 225,471
Trading account assets..................................................... 1,086,599 889,958 754,735
Securities available-for-sale.............................................. 4,455,755 3,538,247 3,819,409
Securities held-to-maturity (market value of $4,651,867,
$4,114,644 and $3,906,979, respectively)................................. 4,514,837 4,184,610 3,849,645
Loans and net leases....................................................... 28,258,874 25,898,774 24,308,606
Less unearned income on loans.............................................. 7,815 7,970 8,714
----------- ----------- -----------
Total loans.......................................................... 28,251,059 25,890,804 24,299,892
Less allowance for loan losses............................................. 408,633 406,132 405,942
----------- ----------- -----------
Net loans............................................................ 27,842,426 25,484,672 23,893,950
Premises and equipment..................................................... 574,623 543,548 522,317
Due from customers on acceptances.......................................... 565,785 416,591 614,908
Other assets............................................................... 1,177,488 1,251,848 1,173,386
----------- ----------- -----------
Total assets......................................................... $42,867,479 $39,187,958 $37,069,014
=========== =========== ===========
LIABILITIES
Deposits in domestic offices:
Demand................................................................... $ 5,354,199 $ 5,657,579 $ 5,267,941
Interest-bearing demand.................................................. 3,215,348 3,524,857 3,369,453
Savings and money market savings......................................... 6,486,959 6,065,966 6,178,332
Savings certificates..................................................... 6,529,708 5,464,532 5,096,976
Large denomination certificates.......................................... 1,540,760 1,416,318 1,418,034
Noninterest-bearing time................................................. 4,884 24,121 95,557
----------- ----------- -----------
Total deposits in domestic offices................................... 23,131,858 22,153,373 21,426,293
Deposits in foreign offices:
Demand................................................................... 7,221 5,540 5,448
Time..................................................................... 752,733 910,345 786,314
----------- ----------- -----------
Total deposits in foreign offices.................................... 759,954 915,885 791,762
----------- ----------- -----------
Total deposits....................................................... 23,891,812 23,069,258 22,218,055
Federal funds purchased and securities
sold under repurchase agreements......................................... 6,642,662 5,898,398 5,066,104
Commercial paper........................................................... 493,878 406,706 471,639
Other short-term borrowed funds............................................ 2,256,661 1,007,340 749,414
Long-term debt:
Bank notes............................................................... 3,978,718 3,953,318 3,660,767
Other long-term debt..................................................... 1,087,008 837,146 839,710
----------- ----------- -----------
Total long-term debt................................................. 5,065,726 4,790,464 4,500,477
Acceptances outstanding.................................................... 565,785 416,591 614,908
Other liabilities.......................................................... 415,642 312,694 299,273
----------- ----------- -----------
Total liabilities.................................................... 39,332,166 35,901,451 33,919,870
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding........................... -- -- --
Common stock, par value $5 per share:
Issued 170,400,054, 170,933,749 and
171,181,931, respectively.............................................. 852,000 854,669 855,910
Capital surplus............................................................ 721,806 741,946 753,940
Retained earnings.......................................................... 1,961,507 1,689,892 1,539,294
----------- ----------- -----------
Total shareholders' equity........................................... 3,535,313 3,286,507 3,149,144
----------- ----------- -----------
Total liabilities and shareholders' equity........................... $42,867,479 $39,187,958 $37,069,014
=========== =========== ===========
22
25
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
$ in thousands, except per share 1995 1994 1995 1994
-------- -------- ---------- ---------
INTEREST INCOME
Loans............................................................ $593,858 $446,610 $1,153,632 $ 857,062
Securities available-for-sale:
State and municipal............................................ -- -- -- 14
Other investments.............................................. 61,433 47,534 106,035 92,332
Securities held-to-maturity:
State and municipal............................................ 9,269 13,100 19,475 26,124
Other investments.............................................. 69,756 53,458 133,994 109,234
Interest-bearing bank balances................................... 105 185 206 345
Federal funds sold and securities
purchased under resale agreements.............................. 763 1,842 1,965 4,953
Trading account assets........................................... 14,907 7,058 26,576 13,576
-------- -------- ---------- ----------
Total interest income...................................... 750,091 569,787 1,441,883 1,103,640
INTEREST EXPENSE
Deposits:
Domestic offices............................................... 193,006 123,047 352,832 239,088
Foreign offices................................................ 9,503 4,098 17,010 7,378
-------- -------- ---------- ----------
Total interest on deposits................................. 202,509 127,145 369,842 246,466
Short-term borrowed funds........................................ 119,486 61,337 227,875 112,962
Long-term debt................................................... 70,975 54,006 137,849 99,067
-------- -------- ---------- ----------
Total interest expense..................................... 392,970 242,488 735,566 458,495
NET INTEREST INCOME.............................................. 357,121 327,299 706,317 645,145
Provision for loan losses........................................ 28,652 16,342 50,440 34,101
-------- -------- ---------- ----------
Net interest income after
provision for loan losses ..................................... 328,469 310,957 655,877 611,044
OTHER INCOME
Service charges on deposit accounts.............................. 52,452 50,646 101,333 98,796
Fees for trust services.......................................... 33,211 32,983 64,092 64,664
Credit card income............................................... 31,867 28,120 60,811 53,454
Mortgage fee income.............................................. 6,547 7,715 15,001 15,748
Trading account profits.......................................... 2,375 598 5,442 2,105
Other operating income........................................... 39,852 33,237 76,718 63,401
-------- -------- ---------- ----------
Total other operating revenue.............................. 166,304 153,299 323,397 298,168
Gain on sale of mortgage servicing portfolio..................... 79,025 -- 79,025 --
Investment securities gains (losses)............................. (26,236) 221 (26,365) 793
-------- -------- ---------- ----------
Total other income......................................... 219,093 153,520 376,057 298,961
OTHER EXPENSE
Salaries......................................................... 123,720 114,882 241,905 230,093
Employee benefits................................................ 26,267 26,350 53,045 52,153
-------- -------- ---------- ----------
Total personnel expense ................................... 149,987 141,232 294,950 282,246
Net occupancy expense............................................ 20,940 20,196 41,130 39,624
Equipment expense................................................ 27,935 26,010 56,198 52,522
Other operating expense.......................................... 107,755 87,107 197,371 170,203
-------- -------- ---------- ----------
Total other expense........................................ 306,617 274,545 589,649 544,595
Income before income taxes....................................... 240,945 189,932 442,285 365,410
Applicable income taxes.......................................... 78,036 55,791 137,220 106,470
-------- -------- ---------- ----------
NET INCOME....................................................... $162,909 $134,141 $ 305,065 $ 258,940
======== ======== ========== ==========
Net income per common share:
Primary........................................................ $ .94 $ .78 $ 1.77 $ 1.50
Fully diluted.................................................. $ .95 $ .78 $ 1.77 $ 1.50
Average shares outstanding:
Primary........................................................ 171,986 172,558 172,095 172,648
Fully diluted.................................................. 172,446 173,197 172,589 173,298
23
26
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock
-------------------------- Capital Retained
$ in thousands, except per share Shares Amount Surplus Earnings
----------- -------- -------- ----------
PERIOD ENDED JUNE 30, 1994
Balance at beginning of year ........................................ 171,375,772 $856,879 $761,573 $1,399,495
Net income .......................................................... 258,940
Cash dividends declared on common
stock -- $.60 a share ............................................. (102,842)
Common stock issued pursuant to:
Stock option and employee benefit plans ........................... 475,983 2,380 11,352
Dividend reinvestment plan ........................................ 176,845 885 4,817
Conversion of debentures .......................................... 21,254 106 301
Common stock acquired ............................................... (867,923) (4,340) (23,909)
Unrealized losses on securities
available-for-sale, net of tax .................................... (15,140)
Miscellaneous ....................................................... (194) (1,159)
----------- -------- -------- ----------
Balance at end of period ............................................ 171,181,931 $855,910 $753,940 $1,539,294
=========== ======== ======== ==========
PERIOD ENDED JUNE 30, 1995
Balance at beginning of year ........................................ 170,933,749 $854,669 $741,946 $1,689,892
Net income .......................................................... 305,065
Cash dividends declared on common
stock -- $.66 a share ............................................. (112,760)
Common stock issued pursuant to:
Stock option and employee benefit plans ........................... 428,203 2,141 9,437
Dividend reinvestment plan ........................................ 181,855 909 5,542
Conversion of debentures .......................................... 41,989 210 594
Common stock acquired ............................................... (1,185,742) (5,929) (35,678)
Unrealized gains on securities
available-for-sale, net of tax .................................... 82,191
Miscellaneous ....................................................... (35) (2,881)
----------- -------- -------- ----------
Balance at end of period ............................................ 170,400,054 $852,000 $721,806 $1,961,507
=========== ======== ======== ==========
24
27
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
$ in thousands 1995 1994
---------- ----------
OPERATING ACTIVITIES
Net income.................................................................................... $ 305,065 $ 258,940
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses................................................................... 50,440 34,101
Depreciation and amortization............................................................... 36,125 56,174
Deferred income tax benefit................................................................. (26,362) (436)
Investment securities (gains) losses........................................................ 26,365 (793)
Gain on sale of noninterest-earning assets.................................................. (1,239) (3,964)
Gain on sale of mortgage servicing portfolio................................................ (79,025) --
Increase (decrease) in accrued income taxes................................................. 28,006 (2,036)
Increase in accrued interest receivable..................................................... (36,672) (7,567)
Increase in accrued interest payable........................................................ 37,120 5,442
Net change in other accrued and deferred income and expense................................. 39,496 (20,388)
Net trading account activities.............................................................. (196,641) 34,044
Net loans held for resale................................................................... (221,392) 334,077
---------- ----------
Net cash provided (used) by operating activities........................................ (38,714) 687,594
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing bank balances..................................... 870 (1,986)
Net decrease in federal funds sold and securities
purchased under resale agreements........................................................... 187,035 465,635
Purchases of securities available-for-sale.................................................... (3,554,684) (653,997)
Purchases of securities held-to-maturity...................................................... (533,109) (92,171)
Sales of securities available-for-sale........................................................ 2,245,946 36,876
Calls, maturities and prepayments of securities available-for-sale............................ 497,582 500,870
Calls, maturities and prepayments of securities held-to-maturity.............................. 201,599 384,165
Net increase in loans made to customers....................................................... (2,189,945) (1,695,888)
Capital expenditures.......................................................................... (74,148) (58,391)
Proceeds from sales of premises and equipment................................................. 7,890 3,956
Proceeds from sale of mortgage servicing portfolio............................................ 142,011 --
Net (increase) decrease in other assets....................................................... 33,495 (58,719)
---------- ----------
Net cash used by investing activities................................................... (3,035,458) (1,169,650)
FINANCING ACTIVITIES
Net decrease in demand, savings and money market accounts..................................... (209,452) (982,732)
Net increase (decrease) in certificates of deposit............................................ 1,032,006 (151,611)
Net increase in federal funds purchased and securities sold under repurchase agreements....... 744,264 324,821
Net increase (decrease) in commercial paper................................................... 87,172 (117,539)
Net increase (decrease) in other short-term borrowings........................................ 1,249,321 (341,709)
Proceeds from issuance of bank notes.......................................................... 424,930 1,619,281
Maturities of bank notes...................................................................... (400,722) (330,000)
Proceeds from issuance of other long-term debt................................................ 248,012 247,800
Payments on other long-term debt.............................................................. (285) (171)
Common stock issued........................................................................... 12,013 16,009
Dividend payments............................................................................. (112,760) (27,345)
Common stock repurchased...................................................................... (39,729) (102,842)
Net decrease in other liabilities............................................................. (1,211) (705)
---------- ----------
Net cash provided by financing activities............................................... 3,033,559 153,257
DECREASE IN CASH AND CASH EQUIVALENTS......................................................... (40,613) (328,799)
Cash and cash equivalents at beginning of year................................................ 2,670,115 2,529,528
---------- ----------
Cash and cash equivalents at end of period.................................................... $2,629,502 $2,200,729
========== ==========
SUPPLEMENTAL DISCLOSURES
Unrealized appreciation in securities available-for-sale:
Increase in securities available-for-sale................................................... $ 134,504 $ 24,720
Increase (decrease) in deferred taxes....................................................... (52,313) 9,580
Increase in shareholders' equity............................................................ 82,191 15,140
25
28
WACHOVIA
- -------------------- -------------------
BULK RATE
Wachovia Corporation U.S. POSTAGE PAID
P.O. Box 3099 WACHOVIA
Winston-Salem, NC 27150 CORPORATION
-------------------