1
WACHOVIA
________________________________________________________________________________
FINANCIAL SUPPLEMENT
AND FORM 10-Q
FIRST QUARTER 1996
2
WACHOVIA CORPORATION DIRECTORS AND OFFICERS
_______________________________________________________________________________________________________________
DIRECTORS
L. M. BAKER, JR. THOMAS K. HEARN, JR. WYNDHAM ROBERTSON
President and President Writer and Retired
Chief Executive Officer Wake Forest University Vice President, Communications
University of North Carolina
JOHN G. MEDLIN, JR. W. HAYNE HIPP
Chairman of the Board President and HERMAN J. RUSSELL
Chief Executive Officer Chairman and
RUFUS C. BARKLEY, JR. The Liberty Corporation Chief Executive Officer
Chairman H.J. Russell & Company
Cameron & Barkley Company ROBERT M. HOLDER, JR.
Chairman of the Board SHERWOOD H. SMITH, JR.
CRANDALL C. BOWLES Holder Corporation Chairman of the Board and
Executive Vice President Chief Executive Officer
Springs Industries, Inc. DONALD R. HUGHES Carolina Power & Light Company
Consultant and Retired
JOHN L. CLENDENIN Vice Chairman of the Board CHARLES MCKENZIE TAYLOR
Chairman, President Burlington Industries, Inc. Chairman of the Board
and Chief Executive Officer Taylor & Mathis, Inc.
BellSouth Corporation JAMES W. JOHNSTON Taylor & Mathis Properties
Vice Chairman
LAWRENCE M. GRESSETTE, JR. RJR Nabisco, Inc. JOHN C. WHITAKER, JR.
Chairman, President and Chairman of the Board Chairman and
Chief Executive Officer R.J. Reynolds Tobacco Company Chief Executive Officer
SCANA Corporation Inmar Enterprises, Inc.
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 Services General Counsel/Administrative Treasurer
2
3
SELECTED PERIOD-END DATA
__________________________________________________________________________________
March 31 March 31
1996 1995
-------- --------
Banking offices:
North Carolina.............................................. 219 218
Georgia .................................................... 123 126
South Carolina ............................................. 144 148
------- ------
Total .................................................... 486 492
======= ======
Automated banking machines:
North Carolina ............................................. 331 305
Georgia .................................................... 208 192
South Carolina ............................................. 190 165
------- -------
Total .................................................... 729 662
======= =======
Employees (full-time equivalent) ............................. 16,191 15,577
Common stock shareholders of record .......................... 27,833 28,643
Common shares outstanding (thousands) ........................ 168,968 171,207
COMMON STOCK DATA -- PER SHARE
________________________________________________________________________________________________________________
1996 1995
------- ---------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
Market value:
Period-end................................................ $ 44 3/4 $ 45 3/4 $ 43 1/8 $ 35 3/4 $ 35 1/2
High ..................................................... 48 3/8 48 1/4 45 37 7/8 36 1/2
Low ...................................................... 41 1/4 43 1/8 35 3/8 34 1/4 32
Book value at period-end ................................... 22.07 22.15 21.24 20.75 19.89
Dividend ................................................... .36 .36 .36 .33 .33
Price/earnings ratio* ...................................... 12.6x 13.1x 12.4x 10.5x 11.0x
* Based on most recent twelve months net income per primary share and
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) 732-5926
James C. Mabry, Investor Relations Manager, (910) 732-5788
Wachovia Corporation
P. O. Box 3099
Winston-Salem, NC 27150
Common Stock Listing -- New York Stock Exchange, ticker symbol - WB
3
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
FINANCIAL SUMMARY TABLE 1
________________________________________________________________________________________________________________________________
Twelve
Months 1996 1995
Ended ----------- --------------------------------------------------
March 31 First Fourth Third Second First
1996 Quarter Quarter Quarter Quarter Quarter
----------- ----------- ----------- ----------- ----------- -----------
Summary of Operations
(thousands, except per share data)
Interest income -- taxable equivalent ......... $ 3,205,209 $ 802,120 $ 815,894 $ 813,117 $ 774,078 $ 715,414
Interest expense .............................. 1,649,839 413,328 424,624 418,917 392,970 342,596
----------- ----------- ----------- ----------- ----------- -----------
Net interest income -- taxable equivalent ..... 1,555,370 388,792 391,270 394,200 381,108 372,818
Taxable equivalent adjustment ................. 94,028 18,877 24,531 26,633 23,987 23,622
----------- ----------- ----------- ----------- ----------- -----------
Net interest income ........................... 1,461,342 369,915 366,739 367,567 357,121 349,196
Provision for loan losses ..................... 109,337 27,334 30,172 23,179 28,652 21,788
----------- ----------- ----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ................................. 1,352,005 342,581 336,567 344,388 328,469 327,408
Other operating revenue ....................... 707,113 184,105 186,289 170,415 166,304 157,093
Gain on sale of mortgage servicing portfolio .. 79,025 -- -- -- 79,025
Investment securities gains (losses) .......... (22,667) 698 2,554 317 (26,236) (129)
----------- ----------- ----------- ----------- ----------- -----------
Total other income ............................ 763,471 184,803 188,843 170,732 219,093 156,964
Personnel expense ............................. 616,981 161,618 152,078 153,298 149,987 144,963
Other expense ................................. 611,828 146,627 162,987 145,584 156,630 138,069
----------- ----------- ----------- ----------- ----------- -----------
Total other expense ........................... 1,228,809 308,245 315,065 298,882 306,617 283,032
Income before income taxes .................... 886,667 219,139 210,345 216,238 240,945 201,340
Applicable income taxes* ...................... 276,410 69,269 64,147 64,958 78,036 59,184
----------- ----------- ----------- ----------- ----------- -----------
Net income .................................... $ 610,257 $ 149,870 $ 146,198 $ 151,280 $ 162,909 $ 142,156
=========== =========== =========== =========== =========== ===========
Net income per common share:
Primary .................................. $ 3.54 $ .87 $ .85 $ .88 $ .94 $ .83
Fully diluted ............................ $ 3.54 $ .87 $ .85 $ .87 $ .95 $ .82
Cash dividends paid per common share .......... $ 1.41 $ .36 $ .36 $ .36 $ .33 $ .33
Cash dividends paid on common stock ........... $ 240,126 $ 61,089 $ 61,423 $ 61,312 $ 56,302 $ 56,458
Cash dividend payout ratio .................... 39.3% 40.8% 42.0% 40.5% 34.6% 39.7%
Average primary shares outstanding ............ 171,905 171,467 172,372 171,793 171,986 172,205
Average fully diluted shares outstanding ...... 172,331 171,653 172,705 172,512 172,446 172,760
SELECTED AVERAGE BALANCES (millions)
Total assets .................................. $ 42,841 $ 44,435 $ 43,477 $ 42,573 $ 40,876 $ 38,902
Loans -- net of unearned income ............... 28,247 29,218 28,470 28,097 27,203 26,219
Investment securities** ....................... 8,632 8,795 8,676 8,778 8,276 7,612
Other interest-earning assets ................. 1,345 1,594 1,562 1,210 1,012 815
Total interest-earning assets ................. 38,224 39,607 38,708 38,085 36,491 34,646
Interest-bearing deposits ..................... 19,779 20,666 20,705 19,352 18,388 17,354
Short-term borrowed funds ..................... 7,962 8,055 7,332 8,593 7,869 7,390
Long-term debt ................................ 5,103 5,487 5,213 4,851 4,863 4,674
Total interest-bearing liabilities ............ 32,844 34,208 33,250 32,796 31,120 29,418
Noninterest-bearing deposits .................. 5,319 5,372 5,361 5,212 5,333 5,302
Total deposits ................................ 25,098 26,038 26,066 24,564 23,721 22,656
Shareholders' equity .......................... 3,518 3,687 3,576 3,463 3,345 3,253
RATIOS (averages)
Annualized net loan losses to loans ........... .39% .37% .42% .33% .42% .30%
Annualized net yield on interest-earning assets 4.07 3.95 4.01 4.11 4.19 4.36
Shareholders' equity to:
Total assets ............................. 8.21 8.30 8.22 8.13 8.18 8.36
Net loans ................................ 12.64 12.80 12.74 12.51 12.48 12.60
Annualized return on assets*** ................ 1.42 1.35 1.35 1.42 1.59 1.46
Annualized return on shareholders' equity*** .. 17.35 16.26 16.36 17.47 19.48 17.48
________________________________________________________________________________________________________________________________
* Income taxes applicable to securities transactions were ($8,231), $278, $980, $91, ($9,580) and ($67), respectively
** Reported at amortized cost; excludes pretax unrealized gains (losses) on securities available-for-sale of $93, $188, $104,
$65, $15 and ($49), respectively
*** Includes average unrealized gains (losses) on securities available-for-sale of $57, $114, $64, $40, $9 and ($30) net of tax,
respectively
4
5
RESULTS OF OPERATIONS
OVERVIEW
Wachovia Corporation ("Wachovia") is a southeastern
interstate bank holding company with dual headquarters in
Atlanta, Georgia, and Winston-Salem, North Carolina. Principal
banking subsidiaries are Wachovia Bank of Georgia, N.A., Wachovia
Bank of North Carolina, N.A., and Wachovia Bank of South
Carolina, N.A. The First National Bank of Atlanta provides credit
card services for Wachovia's affiliated banks.
The economy continued to grow at a modest pace during the
first three months of 1996. Business conditions remained
generally favorable although some credit weakening appeared. In
Wachovia's primary operating states of Georgia, North Carolina
and South Carolina, seasonally adjusted unemployment rates for
the quarter were 4.6 percent, 4.6 percent and 5 percent,
respectively, versus 5.6 percent for the nation.
Wachovia's net income for the first quarter of 1996 totaled
$149.870 million or $.87 per fully diluted share versus $142.156
million or $.82 per fully diluted share in the same three months
of 1995. Annualized returns were 16.26 percent on shareholders'
equity and 1.35 percent on assets compared with 17.48 percent and
1.46 percent, respectively, a year earlier. The equity and assets
used in calculating returns include unrealized gains or losses,
net of tax, on securities available-for-sale.
Expanded discussion of operating results and the
corporation's financial condition is presented in the following
narrative and tables. Interest income is stated on a taxable
equivalent basis which is adjusted for the tax-favored status of
earnings from certain loans and investments. References to
changes in assets and liabilities represent daily average levels
unless otherwise noted.
5
6
______________________________________________________________________________________________________
COMPONENTS OF EARNINGS PER PRIMARY SHARE TABLE 2
______________________________________________________________________________________________________
1996 1995
First First
Quarter Quarter Change
------- ------- ------
Interest income -- taxable equivalent.................................. $ 4.68 $4.15 $ .53
Interest expense ...................................................... 2.41 1.99 .42
------- ----- -----
Net interest income -- taxable equivalent ............................. 2.27 2.16 .11
Taxable equivalent adjustment ......................................... .11 .13 (.02)
------- ----- -----
Net interest income ................................................... 2.16 2.03 .13
Provision for loan losses ............................................. .16 .13 .03
------- ----- -----
Net interest income after provision
for loan losses ..................................................... 2.00 1.90 .10
Other operating revenue ............................................... 1.07 .91 .16
Investment securities gains (losses) .................................. -- -- --
------- ----- -----
Total other income .................................................... 1.07 .91 .16
Personnel expense ..................................................... .94 .84 .10
Other expense ......................................................... .86 .80 .06
------- ----- -----
Total other expense ................................................... 1.80 1.64 .16
Income before income taxes ............................................ 1.27 1.17 .10
Applicable income taxes ............................................... .40 .34 .06
------- ----- -----
Net income ............................................................ $ .87 $ .83 $ .04
======= ===== =====
_____________________________________________________________________________________________________
________________________________________________________________________________________________________________
COMPUTATION OF EARNINGS PER COMMON SHARE TABLE 3
(thousands, except per share)
________________________________________________________________________________________________________________
Three Months Three Months
Ended Ended
March 31 March 31
1996 1995
------------ ------------
PRIMARY
Average common shares outstanding ................................................. 169,710 171,071
Dilutive common stock options -- based on treasury
stock method using average market price ......................................... 1,650 1,059
Dilutive common stock awards -- based on treasury
stock method using average market price ......................................... 107 75
-------- --------
Average primary shares outstanding ................................................ 171,467 172,205
======== ========
Net income ........................................................................ $149,870 $142,156
======== ========
Net income per common share -- primary ............................................ $ .87 $ .83
FULLY DILUTED
Average common shares outstanding ................................................. 169,710 171,071
Dilutive common stock options -- based on treasury
stock method using higher of period-end
market price or average market price ............................................ 1,650 1,139
Dilutive common stock awards -- based on treasury
stock method using higher of period-end
market price or average market price ............................................ 107 83
Convertible notes assumed converted ............................................... 186 467
-------- --------
Average fully diluted shares outstanding .......................................... 171,653 172,760
======== ========
Net income ........................................................................ $149,870 $142,156
Add interest on convertible notes after taxes ..................................... 23 96
-------- --------
Adjusted net income ............................................................... $149,893 $142,252
======== ========
Net income per common share -- fully diluted ...................................... $ .87 $ .82
________________________________________________________________________________________________________________
6
7
NET INTEREST INCOME
Taxable equivalent net interest income for the first three
months of 1996 increased $15.974 million or 4.3 percent from the
same period a year earlier. Good growth in interest-earning
assets, led by loans, accounted for the rise which was moderated
by a reduced yield on interest-earning assets and by higher
funding costs. Compared with the fourth quarter of 1995, taxable
equivalent net interest income was lower by $2.478 million or
less than 1 percent. The net yield on interest-earning assets
(taxable equivalent net interest income as a percentage of
average interest-earning assets) decreased 41 basis points year
over year and 6 basis points from the preceding three months.
Effective with the first quarter of 1996, factors used by
the corporation for calculating taxable equivalent adjustments to
interest income on tax free loans and investment securities were
changed to reflect apportionment versus full allocation of
respective state income tax rates. The change more accurately
reflects earning asset income contribution and had the effect of
reducing the taxable equivalent adjustment to net interest
income. Prior period amounts have not been restated. If the new
factors had been in effect in 1995, taxable equivalent net
interest income for the first quarter of 1996 would have been
higher by $20.195 million or 5.5 percent from a year earlier and
would have been up $2.171 million or 1 percent from the 1995
fourth quarter. In addition, the net yield on interest-earning
assets for the first three months of 1996 would have been lower
by 36 basis points year over year and 1 basis point from the
preceding quarter.
Taxable equivalent interest income for the quarter rose
$86.706 million or 12.1 percent from the same three-month period
in 1995. Average interest-earning assets grew $4.961 billion or
14.3 percent, while the average rate earned decreased 22 basis
points. Compared with the fourth quarter of 1995, taxable
equivalent interest income was lower by $13.774 million or a
modest 1.7 percent, with average interest-earning assets
expanding $899 million or 2.3 percent and the average rate earned
down 21 basis points.
Loans grew solidly, advancing $2.999 billion or 11.4 percent
year over year, led by the commercial portfolio. Loans were up
$748 million or 2.6 percent from the fourth quarter of 1995.
Comparisons from both periods were reduced partially by the
securitization of $500 million in credit card receivables in the
last three months of 1995.
Commercial loans, including related real estate categories,
rose $2.365 billion or 15.8 percent year over year. Good growth
was achieved in all categories with the largest gains occurring
in regular commercial loans, up $917 million or 10.5 percent,
commercial mortgages, which were higher by $411 million or 11.6
percent, and tax-exempt loans, which increased $380 million or
21.5 percent.
Based on regulatory definitions, commercial real estate
loans were $4.714 billion or 15.8 percent of total loans at March
31, 1996. Regulatory definitions for commercial real estate
include loans which have real estate as the collateral but not
the primary consideration in a credit risk evaluation. Commercial
mortgages were $3.982 billion or 13.3 percent and construction
loans were $732 million or 2.5 percent. Comparable amounts one
year earlier were $4.135 billion in commercial real estate loans,
representing 15.5 percent of total loans, with $3.621 billion in
commercial mortgages and $514 million in construction loans. At
year-end 1995, commercial mortgages were $3.855 billion and
construction loans were $746 million, representing a combined 15.7
percent of total loans.
Retail loans, including residential mortgages, increased
$634 million or 5.6 percent. Growth was paced by residential
mortgages, which were higher by $380 million or 9.9 percent, and
by indirect retail loans, consisting primarily of automobile
sales financing and which were up $235 million or 10 percent.
Credit card loans were largely unchanged for the period.
Underlying growth, however, remained good, being masked by the
$500 million securitization of receivables. Managed credit card
outstandings at March 31, 1996 were $4.593 billion, including
$625 million in net securitized loans, compared with $4.081
billion in managed receivables, including $125 million in net
securitized loans, one year earlier. Managed credit card
receivables averaged $4.583 billion for the first quarter of 1996
versus $4.078 billion in the same three months of 1995.
Investment securities rose $1.183 billion or 15.6 percent
from the year-earlier period and were higher by $119 million or a
modest 1.4 percent from the 1995 fourth quarter. Increased levels
of available-for-sale
7
8
__________________________________________________________________________________________________________________________________
NET INTEREST INCOME AND AVERAGE BALANCES TABLE 4
__________________________________________________________________________________________________________________________________
Twelve
Months 1996 1995
Ended ------- -----------------------------------------------
March 31 First Fourth Third Second First
1996 Quarter Quarter Quarter Quarter Quarter
-------- ------- ------- ------- ------ -------
NET INTEREST INCOME -- TAXABLE
EQUIVALENT (thousands)
Interest income:
Loans ......................................... $ 2,484,737 $ 619,722 $ 629,348 $ 630,199 $ 605,468 $ 571,334
Investment securities ......................... 632,894 157,631 160,381 163,187 151,695 130,210
Interest-bearing bank balances ................ 18,038 9,018 8,442 473 105 101
Federal funds sold and securities
purchased under resale agreements ............ 9,282 3,250 3,310 1,959 763 1,202
Trading account assets ........................ 60,258 12,499 14,413 17,299 16,047 12,567
----------- ---------- ---------- ----------- ----------- ---------
Total ..................................... 3,205,209 802,120 815,894 813,117 774,078 715,414
Interest expense:
Interest-bearing demand ....................... 57,318 12,669 15,392 14,845 14,412 14,367
Savings and money market savings .............. 254,731 64,980 65,731 62,425 61,595 50,578
Savings certificates .......................... 386,886 91,467 98,647 99,999 96,773 74,870
Large denomination certificates ............... 131,567 39,634 43,028 28,679 20,226 20,011
Time deposits in foreign offices .............. 47,470 13,101 13,567 11,299 9,503 7,507
Short-term borrowed funds ..................... 469,008 110,390 109,721 129,411 119,486 108,389
Long-term debt ................................ 302,859 81,087 78,538 72,259 70,975 66,874
----------- ---------- ---------- ----------- ----------- ---------
Total ..................................... 1,649,839 413,328 424,624 418,917 392,970 342,596
----------- ---------- ---------- ----------- ----------- ---------
Net interest income ............................. $ 1,555,370 $ 388,792 $ 391,270 $ 394,200 $ 381,108 $ 372,818
=========== ========== ========== =========== =========== =========
Annualized net yield on
interest-earning assets ....................... 4.07% 3.95% 4.01% 4.11% 4.19% 4.36%
AVERAGE BALANCES (millions)
Assets:
Loans-- net of unearned income ................ $ 28,247 $ 29,218 $ 28,470 $ 28,097 $ 27,203 $ 26,219
Investment securities ......................... 8,632 8,795 8,676 8,778 8,276 7,612
Interest-bearing bank balances ................ 227 456 421 23 6 6
Federal funds sold and securities
purchased under resale agreements ............ 162 241 225 133 51 77
Trading account assets ........................ 956 897 916 1,054 955 732
----------- ---------- ---------- ----------- ----------- ---------
Total interest-earning assets ............. 38,224 39,607 38,708 38,085 36,491 34,646
Cash and due from banks ....................... 2,547 2,612 2,556 2,530 2,491 2,502
Premises and equipment ........................ 595 633 606 578 563 546
Other assets .................................. 1,790 1,802 1,909 1,725 1,724 1,662
Unrealized gains (losses) on securities
available-for-sale ........................... 93 188 104 65 15 (49)
Allowance for loan losses ..................... (408) (407) (406) (410) (408) (405)
----------- ---------- ---------- ----------- ----------- ---------
Total assets .............................. $ 42,841 $ 44,435 $ 43,477 $ 42,573 $ 40,876 $ 38,902
=========== ========== ========== =========== =========== =========
Liabilities and shareholders' equity:
Interest-bearing demand ....................... $ 3,270 $ 3,314 $ 3,317 $ 3,231 $ 3,218 $ 3,288
Savings and money market savings .............. 6,843 7,285 6,985 6,689 6,415 6,060
Savings certificates .......................... 6,611 6,401 6,631 6,698 6,712 5,917
Large denomination certificates ............... 2,205 2,675 2,797 1,939 1,407 1,502
Time deposits in foreign offices .............. 850 991 975 795 636 587
Short-term borrowed funds ..................... 7,962 8,055 7,332 8,593 7,869 7,390
Long-term debt ................................ 5,103 5,487 5,213 4,851 4,863 4,674
----------- ---------- ---------- ----------- ----------- ---------
Total interest-bearing liabilities ........ 32,844 34,208 33,250 32,796 31,120 29,418
Demand deposits in domestic offices ............. 5,307 5,365 5,349 5,199 5,316 5,275
Demand deposits in foreign offices .............. 6 4 7 8 7 6
Noninterest-bearing time deposits in
domestic offices .............................. 6 3 5 5 10 21
Other liabilities ............................... 1,160 1,168 1,290 1,102 1,078 929
Shareholders' equity ............................ 3,518 3,687 3,576 3,463 3,345 3,253
----------- ---------- ---------- ----------- ----------- ---------
Total liabilities and shareholders' equity $ 42,841 $ 44,435 $ 43,477 $ 42,573 $ 40,876 $ 38,902
=========== ========== ========== =========== =========== =========
Total deposits .................................. $ 25,098 $ 26,038 $ 26,066 $ 24,564 $ 23,721 $ 22,656
__________________________________________________________________________________________________________________________________
8
9
securities accounted for the growth from both periods. At March
31, 1996, securities available-for-sale were $7.407 billion and
securities held-to-maturity were $1.536 billion as detailed in
the following table.
$ in thousands
Securities available-for-sale at market value:
U.S. Government and agency .............................................. $5,672,765
Mortgage backed securities .............................................. 1,557,516
Other.................................................................... 177,089
----------
Total securities available-for-sale .................................. 7,407,370
Securities held-to-maturity:
Mortgage backed securities .............................................. 1,232,113
State and municipal...................................................... 301,211
Other ................................................................... 2,336
----------
Total securities held-to-maturity .................................... 1,535,660
----------
Total investment securities .......................................... $8,943,030
==========
The decline in securities held-to-maturity from prior
periods reflects a one-time reclassification made in the fourth
quarter of 1995 of securities held-to-maturity with a book value
of $2.720 billion to securities available-for-sale, following
issuance by the Financial Accounting Standards Board of "A Guide
to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities." At March 31, 1996,
securities held-to-maturity had a market value of $1.616 billion,
representing an $80 million appreciation over book value. On the
same date, 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 unrealized gains of $94.544 million,
pretax, and $57.338 million, net of tax. Average securities
available-for-sale for the period had unrealized gains of
$187.631 million, pretax, and $114.386 million, net of tax.
Interest expense for the quarter grew $70.732 million or
20.6 percent year over year. Expanded levels of interest-bearing
liabilities, primarily deposits, accounted for most of the
increase, which was widened additionally by a higher average cost
of funds. Average interest-bearing liabilities were up $4.790
billion or 16.3 percent, while the average rate paid rose 14
basis points. Interest expense declined $11.296 million or 2.7
percent from the fourth quarter of 1995.
Interest-bearing time deposits grew $3.312 billion or 19.1
percent from the year-earlier quarter and remained largely
unchanged from the preceding three-month period. The savings and
money market savings category was up $1.225 billion or 20.2
percent year over year, primarily reflecting good growth in
Wachovia's Premiere money market account. Large denomination
certificates rose $1.173 billion or 78 percent. Savings
certificates and foreign time deposits also had good growth,
while interest-bearing time deposits were modestly higher.
Short-term borrowings rose $665 million or 9 percent year
over year and were up $723 million or 9.9 percent from the fourth
quarter of 1995. Growth from the year-earlier period primarily
reflected increases in federal funds purchased and securities
sold under repurchase agreements and expanded commercial paper
borrowings. Other short-term borrowings, consisting largely of
short-term bank notes, were up modestly for the period.
Short-term bank notes are part of Wachovia Bank of North
Carolina's $16 billion domestic bank note program, comprised of
short- and medium-term bank notes. At March 31, 1996, short-term
bank notes totaled $703 million with an average cost of 5.29
percent and an average maturity of 17 days. This compared with
$1.187 billion in outstandings with an average cost of 6.19
percent and an average maturity of
9
10
____________________________________________________________________________________________________________________________________
TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS-- FIRST QUARTER* TABLE 5
____________________________________________________________________________________________________________________________________
Variance
Average Volume Average Rate Interest Attributable to
-------------- ------------ ---------------- ----------------
1996 1995 1996 1995 1996 1995 Variance Rate Volume
---- ---- ---- ---- ---- ---- ----------- ---- -------
(Millions) (Thousands)
INTEREST INCOME
Loans:
$ 9,609 $ 8,692 7.12 7.56 Commercial............................ $170,217 $162,083 $ 8,134 $ (9,263) $ 17,397
2,149 1,769 8.95 9.65 Tax-exempt............................ 47,829 42,077 5,752 (3,113) 8,865
- ------- ------- -------- -------- -------
11,758 10,461 7.46 7.91 Total commercial................... 218,046 204,160 13,886 (11,725) 25,611
734 733 9.36 8.90 Direct retail......................... 17,068 16,075 993 972 21
2,588 2,353 8.27 7.98 Indirect retail....................... 53,193 46,307 6,886 1,835 5,051
3,958 3,953 11.57 12.29 Credit card........................... 113,856 119,797 (5,941) (6,096) 155
353 340 12.37 12.53 Other revolving credit................ 10,857 10,526 331 (114) 445
- ------- ------- -------- -------- -------
7,633 7,379 10.27 10.59 Total retail....................... 194,974 192,705 2,269 (5,127) 7,396
693 532 9.19 9.66 Construction.......................... 15,848 12,671 3,177 (623) 3,800
3,963 3,552 8.30 8.63 Commercial mortgages.................. 81,807 75,588 6,219 (2,800) 9,019
4,231 3,851 8.48 8.18 Residential mortgages................. 89,204 77,654 11,550 3,132 8,418
- ------- ------- -------- -------- -------
8,887 7,935 8.46 8.48 Total real estate.................. 186,859 165,913 20,946 (364) 21,310
530 191 9.57 7.95 Lease financing....................... 12,614 3,741 8,873 913 7,960
410 253 7.09 7.72 Foreign............................... 7,229 4,815 2,414 (414) 2,828
- ------- ------- -------- -------- -------
29,218 26,219 8.53 8.84 Total loans........................ 619,722 571,334 48,388 (19,316) 67,704
Investment securities:
Held-to-maturity:
-- 2,493 -- 6.89 U.S. Government and agency.......... -- 42,337 (42,337) -- (42,337)
1,269 1,250 8.06 8.02 Mortgage backed securities.......... 25,442 24,724 718 174 544
308 506 11.15 12.20 State and municipal................. 8,538 15,208 (6,670) (1,204) (5,466)
2 14 9.89 6.04 Other............................... 57 215 (158) 88 (246)
- ------- ------- -------- -------- -------
1,579 4,263 8.67 7.85 Total securities held-to-maturity.. 34,037 82,484 (48,447) 7,885 (56,332)
Available-for-sale:**
5,553 2,321 6.87 5.98 U.S. Government and agency.......... 94,790 34,219 60,571 5,852 54,719
1,499 786 7.07 4.97 Mortgage backed securities.......... 26,340 9,622 16,718 5,315 11,403
164 242 6.04 6.52 Other............................... 2,464 3,885 (1,421) (265) (1,156)
- ------- ------- -------- -------- -------
7,216 3,349 6.89 5.78 Total securities available-for-sale 123,594 47,726 75,868 10,819 65,049
- ------- ------- -------- -------- -------
8,795 7,612 7.21 6.94 Total investment securities........ 157,631 130,210 27,421 6,419 21,002
456 6 7.95 7.16 Interest-bearing bank balances.......... 9,018 101 8,917 12 8,905
Federal funds sold and
securities purchased under
241 77 5.43 6.32 resale agreements..................... 3,250 1,202 2,048 (190) 2,238
897 732 5.60 6.96 Trading account assets.................. 12,499 12,567 (68) (2,661) 2,593
- ------- ------- -------- -------- -------
$39,607 $34,646 8.15 8.37 Total interest-earning assets...... 802,120 715,414 86,706 (18,322) 105,028
======= =======
INTEREST EXPENSE
$ 3,314 $ 3,288 1.54 1.77 Interest-bearing demand................. 12,669 14,367 (1,698) (1,814) 116
7,285 6,060 3.59 3.38 Savings and money market savings........ 64,980 50,578 14,402 3,382 11,020
6,401 5,917 5.75 5.13 Savings certificates.................... 91,467 74,870 16,597 9,895 6,702
2,675 1,502 5.96 5.40 Large denomination certificates......... 39,634 20,011 19,623 2,302 17,321
- ------- ------- -------- -------- -------
Total time deposits in
19,675 16,767 4.27 3.87 domestic offices................. 208,750 159,826 48,924 18,285 30,639
991 587 5.31 5.19 Time deposits in foreign offices........ 13,101 7,507 5,594 182 5,412
- ------- ------- -------- -------- -------
20,666 17,354 4.32 3.91 Total time deposits................ 221,851 167,333 54,518 19,331 35,187
Federal funds purchased and
securities sold under
5,960 5,457 5.55 5.96 repurchase agreements................. 82,301 80,156 2,145 (5,402) 7,547
554 419 4.93 5.51 Commercial paper........................ 6,790 5,694 1,096 (635) 1,731
1,541 1,514 5.56 6.04 Other short-term borrowed funds......... 21,299 22,539 (1,240) (1,673) 433
- ------- ------- -------- -------- -------
Total short-term
8,055 7,390 5.51 5.95 borrowed funds................... 110,390 108,389 2,001 (7,906) 9,907
4,155 3,838 5.73 5.56 Bank notes.............................. 59,158 52,590 6,568 1,777 4,791
1,332 836 6.62 6.92 Other long-term debt.................... 21,929 14,284 7,645 (632) 8,277
- ------- ------- -------- -------- -------
5,487 4,674 5.94 5.80 Total long-term debt............... 81,087 66,874 14,213 1,734 12,479
- ------- ------- -------- -------- -------
$34,208 $29,418 4.86 4.72 Total interest-bearing liabilities. 413,328 342,596 70,732 10,894 59,838
======= ======= ---- ---- -------- -------- -------
3.29 3.65 Interest rate spread
==== ====
Net yield on interest-earning
3.95 4.36 assets and net interest income........ $388,792 $372,818 $15,974 (35,973) 51,947
==== ==== ======== ======== =======
- ------------------------------------------------------------------------------------------------------------------------------------
* 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; taxable equivalent factors for 1996 have been
reduced to reflect state income tax apportionment
**Volume amounts are reported at amortized cost; excludes pretax unrealized gains (losses) of $188 million in 1996 and ($49) million
in 1995
10
11
2.8 months one year earlier. In April, Wachovia Bank of North
Carolina announced it would replace the domestic bank note
program with a $16 billion global bank note program as part of a
long-term strategy of diversifying funding sources and expanding
balance sheet liquidity.
Long-term debt increased $813 million or 17.4 percent year
over year and was higher by $274 million or 5.3 percent from the
preceding quarter. Medium-term bank notes grew $317 million or
8.2 percent from the same period in 1995, and other long-term
debt rose $496 million or 59.2 percent. At March 31, 1996,
medium-term bank notes totaled $4.827 billion with an average
cost of 5.52 percent and an average maturity of 1.34 years versus
$3.809 billion in outstandings with an average cost of 5.47
percent and an average maturity of 1.59 years at first
quarter-close 1995. Included in other long-term debt is $250
million in 30-year subordinated debentures issued in the fourth
quarter of 1995.
Gross deposits for the quarter averaged $26.038 billion, an
increase of $3.382 billion or 14.9 percent from $22.656 billion
in the same three months of 1995. Collected deposits, net of
float, averaged $24.198 billion, up $3.250 billion or 15.5
percent from $20.948 billion a year earlier.
ASSET AND LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY
The corporation uses a number of tools to measure interest
rate risk, including monitoring the difference or gap between
rate sensitive assets and liabilities over various time periods,
monitoring the change in present value of the asset and liability
portfolios under various rate scenarios and simulating net
interest income under the same rate scenarios. Management
believes that rate risk is best measured by simulation modeling
which calculates expected net interest income based on projected
interest-earning assets, interest-bearing liabilities,
off-balance sheet financial instruments and interest rates.
The corporation monitors exposure to a gradual change in
rates of 200 basis points up or down over a rolling 12-month
period and an interest rate shock of an instantaneous change in
rates of 200 basis points up or down over the same period. From
time to time, the model horizon is expanded to a 24-month period.
The corporation policy limit for the maximum negative impact on
net interest income from a gradual change in interest rates of 2
percentage points over 12 months is 7.5 percent. Management
generally has maintained a risk position well within the policy
guideline level. As of March 31, 1996, the model indicated the
impact of a 2 percentage point gradual rise in rates over 12
months would approximate a .40 percent decrease in net interest
income, while a 2 percentage point decline in rates over the same
period would approximate a .05 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
March 31, 1996, the corporation had $1.334 billion notional
amount of derivatives outstanding for asset and liability
management purposes, all of which represent interest rate swaps.
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 $16 million at March 31, 1996. The fair value of all
asset and liability derivative
11
12
positions for which counterparties were exposed to the
corporation amounted to $16 million on the same date. Fair value
details and additional asset and liability derivative information
are included in the accompanying tables.
Estimated Fair Value of Asset and Liability Management Derivatives by Purpose
-----------------------------------------------------------------------------
March 31, 1996 March 31, 1995
------------------------------------------------ -------------------------
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.......... $ 116 $-- $ (3) $ (3) $181 $--
Caps purchased-pay fixed/receive floating. -- -- -- -- 15 --
Convert fixed rate assets to floating:
Swaps-pay fixed/receive floating.......... 387 -- (5) (5) 17 --
Forward starting swaps-pay fixed/receive
floating................................ 39 -- (3) (3) 58 (1)
Convert fixed rate liabilities to floating:
Swaps-receive fixed/pay floating.......... 300 4 (5) (1) 100 (13)
Convert floating rate assets to fixed:
Swaps-receive fixed/pay floating.......... 167 1 -- 1 120 (2)
Index amortizing swaps-receive fixed/pay
floating................................ 325 11 -- 11 425 3
------ --- ---- --- ---- ----
Total derivatives...................... $1,334 $16 ($16) $-- $916 ($13)
====== === ==== === ==== ====
Maturity Schedule of Asset and Liability Management Derivatives
---------------------------------------------------------------
March 31, 1996
Within Over Average
One Two Three Four Five Five Life
Year Years Years Years Years Years Total (Years)
------- ----- ----- ----- ----- ----- ----- -------
$ in millions
Interest rate swaps:
Pay fixed/receive floating:
Notional amount........................... $ 406 $ 12 $ 16 $ 20 $ 4 $ 45 $ 503 1.86
Weighted average rates received........... 4.45% 5.63% 5.72% 5.67% 6.10% 5.36% 4.67%
Weighted average rates paid............... 7.50 6.13 6.94 6.79 9.01 7.78 7.46
Receive fixed/pay floating:
Notional amount........................... $ 59 $ 51 $ 52 $ 1 $ 202 $ 102 $ 467 5.25
Weighted average rates received........... 5.49% 6.84% 6.89% 9.84% 7.10% 6.38% 6.69%
Weighted average rates paid............... 5.72 5.32 5.41 8.31 5.41 5.92 5.55
Index amortizing swaps:*
Receive fixed/pay floating:
Notional amount........................... $ 75 $ 125 $ 102 $ 23 -- -- $ 325 1.43
Weighted average rates received........... 7.14% 7.88% 8.56% 8.56% -- -- 7.97%
Weighted average rates paid............... 5.88 5.18 5.94 5.94 -- -- 5.63
Total interest rate swaps:
Notional amount............................. $ 540 $ 188 $ 170 $ 44 $ 206 $ 147 $1,295 2.97
Weighted average rates received............. 4.94% 7.45% 7.78% 7.27% 7.08% 6.07% 6.23%
Weighted average rates paid................. 7.08 5.28 5.87 6.36 5.49 6.49 6.31
Forward starting interest rate swaps:
Notional amount............................. -- -- -- -- -- $ 39 $ 39 8.53
Weighted average rates received............. -- -- -- -- -- 8.03% 8.03%
Total derivatives (notional amount).... $ 540 $ 188 $ 170 $ 44 $ 206 $ 186 $1,334 3.14
* Maturity is based upon expected average lives rather than contractual lives.
12
13
Asset and liability transactions are accounted for following
hedge accounting rules. Accordingly, gains and losses related to
the fair value of derivative contracts used for asset and
liability management purposes are not immediately recognized in
earnings. If the hedged or altered balance sheet amounts were
marked to market, the resulting unrealized balance sheet gains or
losses could be expected to offset unrealized derivatives gains
and losses.
Nonperforming Assets
Nonperforming assets at March 31, 1996 were $77.552 million
or .26 percent of period-end loans and foreclosed property, down
$15.171 million or 16.4 percent from one year earlier. Compared
with year-end 1995, nonperforming assets were higher by $8.188
million or 11.8 percent, reflecting a rise in both cash-basis
assets and foreclosed properties.
Included in the $77.552 million total at March 31, 1996 were
real estate nonperforming assets of $63.937 million, representing
.71 percent of real estate loans and foreclosed real estate. This
compared with $64.120 million or .80 percent at first
quarter-close 1995 and with $55.181 million or .63 percent at
December 31, 1995. Real estate nonperforming loans were $49.547
million at March 31, 1996, $46.755 million one year earlier and
$43.576 million at year-end 1995.
Commercial real estate nonperforming assets were $33.370
million or .71 percent of related loans and foreclosed real
estate versus $40.030 million or .97 percent at March 31, 1995
and $30.910 million or .67 percent at the end of the 1995 fourth
quarter. Included in these totals were commercial real estate
nonperforming loans of $29.815 million at March 31, 1996, $33.018
million one year earlier and $27.163 million at December 31,
1995.
___________________________________________________________________________________________________________________________________
NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS TABLE 6
(thousands)
___________________________________________________________________________________________________________________________________
March 31 Dec. 31 Sept. 30 June 30 March 31
1996 1995 1995 1995 1995
------- ------- ------- ------- -------
NONPERFORMING ASSETS
Cash-basis assets -- domestic borrowers ............................. $57,867* $53,547 $57,524 $57,918 $71,848
Restructured loans -- domestic ...................................... --** -- -- -- --
------- ------- ------- ------- -------
Total nonperforming loans ...................................... 57,867 53,547 57,524 57,918 71,848
Foreclosed property:
Foreclosed real estate ............................................ 17,209 14,468 16,651 18,859 20,669
Less valuation allowance .......................................... 2,819 2,863 2,980 3,084 3,304
Other foreclosed assets ........................................... 5,295 4,212 4,254 2,947 3,510
------- ------- ------- ------- -------
Total foreclosed property ...................................... 19,685 15,817 17,925 18,722 20,875
------- ------- ------- ------- -------
Total nonperforming assets ..................................... $77,552*** $ 69,364 $75,449 $76,640 $92,723
======= ======= ======= ======= =======
Nonperforming loans to period-end loans ............................. .19% .18% .20% .21% .27%
Nonperforming assets to period-end loans and foreclosed property .... .26 .24 .26 .27
.35
Period-end allowance for loan losses times nonperforming loans ...... 7.07x 7.63x 7.10x 7.06x 5.69x
Period-end allowance for loan losses times nonperforming assets ..... 5.27 5.89 5.42 5.33
4.41
CONTRACTUALLY PAST DUE LOANS
(accruing loans past due 90 days or more)
Domestic borrowers .................................................. $57,415 $48,970 $47,058 $49,004 $48,998
======= ======= ======= ======= =======
* Includes $15,988 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 $199 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 $21,506; includes $3,985 of nonperforming assets
on which interest and principal are paid current
___________________________________________________________________________________________________________________________________
13
14
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $27.334 million for the
quarter, up $5.546 million or 25.5 percent year over year and
slightly exceeded net charge-offs. Compared with the fourth
quarter of 1995, the provision was lower by $2.838 million or 9.4
percent.
The provision reflects management's assessment of the
adequacy of the allowance for loan losses to absorb potential
write-offs in the loan portfolio due to a deterioration in credit
conditions or change in risk profile. Factors considered in this
assessment include growth and mix of the loan portfolio, current
and anticipated economic conditions, historical credit loss
experience and changes in borrowers' financial positions.
Net loan losses for the period totaled $27.214 million or
.37 percent annualized of average loans. This compared with
$19.420 million or .30 percent in the same three months of 1995,
a rise of $7.794 million or 40.1 percent, reflecting higher
losses in consumer loans, primarily credit cards. Net charge-offs
were lower by $2.834 million or 9.4 percent from the 1995 fourth
quarter due to increased recoveries, principally in real estate
loans. Excluding credit cards, the loan portfolio had net
recoveries of $664 thousand or .01 percent annualized of average
loans compared with net loan losses of $1.192 million or .02
percent and $4.121 million or .07 percent in the first and
fourth quarters of 1995, respectively.
Credit card loans had net losses of $27.878 million or 2.82
percent of average credit card receivables, up $9.650 million or
52.9 percent from $18.228 million or 1.84 percent of average
outstandings in the same three months of 1995. Other retail
loans, consisting of direct and indirect retail lending, had net
losses of $4.443 million or .54 percent of average related loans,
an increase of $2.050 million or 85.7 percent compared with the
same period a year earlier. Partially offsetting the rise in
consumer net loan losses for the quarter were higher recoveries
in real estate and commercial loans. Selected data on the
corporation's managed credit card portfolio, which includes
securitized loans, is presented in the following table.
1996 1995
---------- -------------------------------------------------
First Fourth Third Second First
$ in thousands Quarter Quarter Quarter Quarter Quarter
---------- ----------- ---------- ---------- ----------
Average credit card outstandings............... $4,583,000 $ 4,285,000 $4,188,000 $4,118,000 $4,078,000
Net loan losses ............................... 32,359 29,164 24,832 20,955 18,421
Annualized net loan losses to average loans ... 2.82% 2.72% 2.37% 2.04% 1.81%
Delinquencies to period-end loans ............. 2.30 1.93 1.74 1.46 1.37
The corporation's policy is to accrue interest on revolving
credit card loans until payments become 120 days delinquent, at
which time the outstanding principal balance is charged off to the
allowance and any accrued but unpaid interest is charged directly
to interest income.
At March 31, 1996, the allowance for loan losses totaled
$408.928 million, representing 1.37 percent of period-end loans
and 707 percent of nonperforming loans. Comparable amounts were
$408.500 million, 1.53 percent and 569 percent, respectively, one
year earlier and $408.808 million, 1.40 percent and 763 percent,
respectively, at the end of the 1995 fourth quarter.
14
15
____________________________________________________________________________________________________________________________________
ALLOWANCE FOR LOAN LOSSES (thousands) TABLE 7
____________________________________________________________________________________________________________________________________
1996 1995
--------- --------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- ---------
SUMMARY OF TRANSACTIONS
Balance at beginning of period ............................... $ 408,808 $ 408,684 $ 408,633 $ 408,500 $ 406,132
Provision for loan losses .................................... 27,334 30,172 23,179 28,652 21,788
Deduct net loan losses:
Loans charged off:
Commercial ............................................... 65 1,662 431 1,872 318
Credit card .............................................. 31,902 29,292 27,424 23,829 21,431
Other revolving credit ................................... 1,092 1,239 1,202 1,058 805
Other retail ............................................. 5,495 4,747 3,609 3,528 3,412
Real estate .............................................. 134 1,332 526 5,499 391
Lease financing .......................................... 377 56 99 636 101
Foreign .................................................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total .................................................. 39,065 38,328 33,291 36,422 26,458
Recoveries:
Commercial ............................................... 860 894 2,561 1,400 695
Credit card .............................................. 4,024 3,365 3,207 3,186 3,203
Other revolving credit ................................... 283 278 273 267 322
Other retail ............................................. 1,052 913 1,056 972 1,019
Real estate .............................................. 5,578 2,804 3,021 2,037 1,761
Lease financing .......................................... 54 26 45 41 30
Foreign .................................................. -- -- -- -- 8
--------- --------- --------- --------- ---------
Total .................................................. 11,851 8,280 10,163 7,903 7,038
--------- --------- --------- --------- ---------
Net loan losses ............................................ 27,214 30,048 23,128 28,519 19,420
--------- --------- --------- --------- ---------
Balance at end of period* .................................... $ 408,928 $ 408,808 $ 408,684 $ 408,633 $ 408,500
========= ========= ========= ========= =========
NET LOAN LOSSES (RECOVERIES) BY CATEGORY
Commercial ................................................... $ (795) $ 768 $ (2,130) $ 472 $ (377)
Credit card .................................................. 27,878 25,927 24,217 20,643 18,228
Other revolving credit ....................................... 809 961 929 791 483
Other retail ................................................. 4,443 3,834 2,553 2,556 2,393
Real estate .................................................. (5,444) (1,472) (2,495) 3,462 (1,370)
Lease financing .............................................. 323 30 54 595 71
Foreign ...................................................... -- -- -- -- (8)
--------- --------- --------- --------- ---------
Total .................................................. $ 27,214 $ 30,048 $ 23,128 $ 28,519 $ 19,420
========= ========= ========= ========= =========
Net loan losses -- excluding credit cards .................... $ (664) $ 4,121 $ (1,089) $ 7,876 $ 1,192
ANNUALIZED NET LOAN LOSSES (RECOVERIES)
TO AVERAGE LOANS BY CATEGORY
Commercial ................................................... (.03%) .03% (.07%) .02% (.01%)
Credit card .................................................. 2.82 2.73 2.38 2.07 1.84
Other revolving credit ....................................... .92 1.10 1.08 .93 .57
Other retail ................................................. .54 .47 .32 .33 .31
Real estate .................................................. (.25) (.07) (.12) .17 (.07)
Lease financing .............................................. .24 .03 .09 1.19 .15
Foreign ...................................................... -- -- -- -- (.01)
Total loans .................................................. .37 .42 .33 .42 .30
Total loans -- excluding credit cards ........................ (.01) .07 (.02) .14 .02
Period-end allowance to outstanding loans .................... 1.37 1.40 1.41 1.45 1.53
* Includes the related allowance for credit losses for impaired loans as
defined in FASB 114, "Accounting by Creditors for Impairment of a Loan," of
$883 at March 31, 1996, $916 at December 31, 1995, $916 at September 30,
1995, $0 at June 30, 1995 and $2,070 at March 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
15
16
Noninterest Income
Total other operating revenue for the first quarter rose
$27.012 million or 17.2 percent from the same period in 1995. All
major categories except mortgage fee income and trading account
profits were up with strongest growth occurring primarily in
deposit account service charges, investment fee income, credit
card income, trust services and electronic banking. Compared with
the fourth quarter of 1995, total other operating revenue was
lower by $2.184 million or 1.2 percent, largely reflecting lower
trading account profits due to unfavorable market conditions.
Excluding trading account profits, total other operating revenue
grew $2.602 million or 1.5 percent from the 1995 fourth quarter.
Deposit account service charge revenues expanded $7.717
million or 15.8 percent. The gain primarily reflected higher
overdraft charges, with increases in commercial account analysis
fees and in charges associated with savings and demand accounts
also contributing to the rise.
Investment fee income, consisting largely of fees from
mutual funds, brokerage commissions, variable rate demand bonds
and loan syndications, grew $5.052 million or 97.6 percent.
Increased mutual fund activity, along with higher brokerage
commission income and administrative agent fees, primarily
accounted for the strong gain.
Net revenues received from cardholder payments on
securitized loans, increased overlimit charge activity and higher
levels of interchange income helped push credit card fee income
up $3.578 million or 12.4 percent. Active managed credit card
accounts totaled 1.832 million at March 31, 1996 compared with
1.675 million one year earlier and 1.805 million at December 31,
1995.
Trust service fee revenues expanded $3.464 million or 11.2
percent, paced primarily by growth in personal trust services.
Asset management services also had good gains, while corporate
trust revenues were up modestly for the period. In April,
Wachovia completed the sale of its bond trustee business to The
Bank of New York.
Increased ATM and debit card usage fueled expansion of
electronic banking service income which rose $2.095 million or
28.9 percent.
Mortgage fee income declined $4.053 million or 47.9 percent
due principally to the corporation's sale of its $9 billion
residential mortgage servicing portfolio in April 1995 and loss
of associated servicing
16
17
fee income. Helping to offset the decrease were higher levels of
mortgage origination activity and gains on associated sales of
mortgage servicing rights.
Trading account profits were lower by $2.754 million or 44.4
percent, primarily reflecting unfavorable bond market conditions
in the latter two months of the quarter. Renewed inflation
concerns within the bond market bid up long-term interest rates,
reducing the values of trading account assets for the period.
Remaining combined categories of total other operating
revenue rose $11.913 million or 55.9 percent. Insurance premiums
and commissions increased $435 thousand or 13.1 percent and
bankers' acceptance and letter of credit fees were up $339
thousand or 6.1 percent. Other service charges and fees grew
$2.195 million or 34.3 percent, primarily due to contractual
servicing revenues on the corporation's securitized loan
portfolio. Other income was higher by $8.944 million. Included
in other income are fees associated with Wachovia's Capital
Markets Group and expanded sturctured leverage leasing activity.
Including sales of investment securities, total noninterest
income was up $27.839 million or 17.7 percent. Investment
securities sales resulted in a net gain of $698 thousand for the
first three months of 1996 versus a net loss of $129 thousand in
the same period a year earlier.
_______________________________________________________________________________________________________________________
NONINTEREST INCOME (thousands) TABLE 8
_______________________________________________________________________________________________________________________
1996 1995
-------- -----------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- --------
Service charges on deposit accounts............................ $ 56,598 $ 55,371 $ 52,409 $ 52,452 $ 48,881
Fees for trust services........................................ 34,345 34,689 31,740 33,211 30,881
Credit card income -- net of interchange payments.............. 32,522 32,291 31,180 31,867 28,944
Electronic banking............................................. 9,340 9,412 8,962 8,860 7,245
Investment fee income.......................................... 10,229 7,682 8,690 5,404 5,177
Mortgage fee income............................................ 4,401 4,050 4,269 6,547 8,454
Trading account profits -- excluding interest.................. 3,452 8,238 5,646 5,608 6,206
Insurance premiums and commissions............................. 3,748 3,422 3,044 3,385 3,313
Bankers' acceptance and letter of credit fees.................. 5,898 6,003 5,885 5,743 5,559
Other service charges and fees................................. 8,590 7,054 5,609 5,624 6,395
Other income................................................... 14,982 18,077 12,981 7,603 6,038
-------- -------- -------- -------- --------
Total other operating revenue............................ 184,105 186,289 170,415 166,304 157,093
Gain on sale of mortgage servicing portfolio................... -- -- -- 79,025 --
Investment securities gains (losses)........................... 698 2,554 317 (26,236) (129)
-------- -------- -------- -------- --------
Total.................................................... $184,803 $188,843 $170,732 $219,093 $156,964
======== ======== ======== ======== ========
_______________________________________________________________________________________________________________________
17
18
NonInterest Expense
Total noninterest expense for the quarter increased $25.213
million or 8.9 percent year over year. Higher personnel expense
primarily accounted for the rise, with modest growth occurring in
combined net occupancy and equipment expense and in other
remaining combined categories of noninterest expense spending.
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 53.8
percent for the quarter, largely unchanged from 53.4 percent in
the same three months a year earlier. Total noninterest expense
declined $6.820 million or 2.2 percent from the fourth quarter of
1995.
Total personnel expense increased $16.655 million or 11.5
percent. Salaries expense rose $13.635 million or 11.5 percent,
driven principally by growth in base salaries and new incentive
pay plans. Employee benefits expense was higher by $3.020 million
or 11.3 percent, generally in line with salary and personnel
growth. Full-time equivalent employees totaled 16,191 at March
31, 1996 versus 15,577 one year earlier.
Combined net occupancy and equipment expense grew $3.156
million or 6.5 percent. Net occupancy expense increased $2.488
million or 12.3 percent, primarily due to higher building
depreciation, maintenance and premise service costs. Equipment
expense was up a modest $668 thousand or 2.4 percent.
Remaining combined categories of noninterest expense
increased $5.402 million or 6 percent. Advertising and sales
promotion spending rose $7.659 million or 81.4 percent, largely
due to expanded credit card solicitation costs. Professional
services expenses was higher by $4.016 million or 70.6 percent,
reflecting a continuation of increased spending begun in the
second quarter of 1995 for the corporation's strategic
initiatives.
_______________________________________________________________________________________________________________________
NONINTEREST EXPENSE (thousands) TABLE 9
_______________________________________________________________________________________________________________________
1996 1995
-------- -----------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- --------
Salaries................................................... $131,820 $129,673 $127,152 $123,720 $118,185
Employee benefits.......................................... 29,798 22,405 26,146 26,267 26,778
-------- -------- -------- -------- --------
Total personnel expense.............................. 161,618 152,078 153,298 149,987 144,963
Net occupancy expense...................................... 22,678 24,551 21,424 20,940 20,190
Equipment expense.......................................... 28,931 27,753 25,750 27,935 28,263
Postage and delivery....................................... 10,452 9,801 9,379 9,190 9,592
Outside data processing, programming and software.......... 10,704 11,966 9,959 10,664 9,897
Stationery and supplies.................................... 7,006 7,604 6,374 6,619 6,208
Advertising and sales promotion............................ 17,071 16,869 14,334 9,747 9,412
Professional services...................................... 9,707 14,922 9,721 9,149 5,691
Travel and business promotion.............................. 4,237 6,051 4,474 5,110 4,059
Regulatory agency fees and other bank services............. 1,053 6,576 11,838 15,681 15,489
Amortization of intangible assets.......................... 1,078 1,190 1,210 2,116 4,071
Foreclosed property expense................................ (126) 813 (146) 408 (155)
Other expense.............................................. 33,836 34,891 31,267 39,071 25,352
-------- -------- -------- -------- --------
Total................................................ $308,245 $315,065 $298,882 $306,617 $283,032
======== ======== ======== ======== ========
Overhead ratio............................................. 53.8% 54.6% 52.9% 56.0% 53.4%
_______________________________________________________________________________________________________________________
18
19
Income Taxes
Applicable income taxes for the quarter were higher by
$10.085 million or 17 percent. 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 earned on qualifying employee stock ownership plan
loans is exempt from federal taxes. The interest earned on state
and municipal debt instruments is exempt from federal taxes and,
except for out-of-state issues, from Georgia and North Carolina
taxes as well, and results in substantial interest savings for
local governments and their constituents.
_______________________________________________________________________________________________________________________
INCOME TAXES (thousands) TABLE 10
_______________________________________________________________________________________________________________________
Three Months Three Months
Ended Ended
March 31 March 31
1996 1995
-------- --------
Income before income taxes....................................................... $219,139 $201,340
======== ========
Federal income taxes at statutory rate........................................... $ 76,699 $ 70,469
State and local income taxes -- net of
federal benefit................................................................ 2,890 398
Effect of tax-exempt securities
interest and other income...................................................... (10,392) (10,849)
Other items...................................................................... 72 (834)
-------- --------
Total tax expense.......................................................... $ 69,269 $ 59,184
======== ========
Currently payable:
Federal........................................................................ $ 50,178 $ 62,517
Foreign........................................................................ 96 67
State and local................................................................ 2,205 1,935
-------- --------
Total...................................................................... 52,479 64,519
Deferred:
Federal........................................................................ 14,566 (4,012)
State and local................................................................ 2,224 (1,323)
-------- --------
Total...................................................................... 16,790 (5,335)
-------- --------
Total tax expense.......................................................... $ 69,269 $ 59,184
======== ========
_______________________________________________________________________________________________________________________
19
20
FINANCIAL CONDITION AND CAPITAL RATIOS
Assets at March 31, 1996 totaled $45.425 billion, with
$40.527 billion in interest-earning assets, including $29.869
billion in loans. Comparable amounts one year earlier were
$40.223 billion, $35.814 billion and $26.728 billion,
respectively. At December 31, 1995, total assets were $44.981
billion, interest-earning assets were $40.001 billion and loans
were $29.261 billion.
Deposits at first quarter-close 1996 were $25.909 billion,
including $20.384 billion of time deposits, representing 78.7
percent of the total. Deposits were $23.110 billion, including
time deposits of $17.956 billion or 77.7 percent of the total one
year earlier and were $26.369 billion, including time deposits of
$20.508 billion or 77.8 percent of the total at year-end 1995.
Shareholders' equity at March 31, 1996 was $3.729 billion,
up $324 million or 9.5 percent from $3.405 billion a year earlier
and lower by $45 million or 1.2 percent from fourth quarter-close
1995. The total at March 31, 1996 included $57.338 million, net
of tax, of unrealized gains on securities available-for-sale
marked to fair market value under FASB 115 compared with
unrealized losses of $10.111 million, net of tax, one year
earlier and unrealized gains of $116.113 million, net of tax, at
December 31, 1995. At its meeting on April 26, 1996, the
corporation's board of directors declared a second quarter
dividend of $.36 per share, payable June 3 to shareholders of
record on May 6, 1996. The dividend represents an increase of 9.1
percent from $.33 per share paid in the same three months of
1995. For the year-to-date, the dividend will total $.72 per
share, up 9.1 percent from $.66 per share paid in 1995.
The corporation was authorized by the board of directors
also on April 26, 1996 to repurchase up to 8 million shares of
its common stock, replacing an earlier action on July 28, 1995 to
repurchase up to 5 million shares. As of March 31, 1996, a total
of 2,355,700 shares had been repurchased under the earlier
authorization which was terminated effective with the new
authorization. Share repurchase activity is part of the
corporation's capital management strategy designed to enhance
shareholder value over the long-term. In addition, repurchased
shares will be used for various corporate purposes, including
share issuance for the corporation's employee stock plans and
dividend reinvestment plan.
Intangible assets at March 31, 1996 totaled $38.015 million,
consisting of $29.099 million in goodwill, $6.559 million in
deposit base intangibles, $1.194 million in purchased credit card
intangibles and $1.163 million in other intangible assets. At
first quarter-close 1995, intangible assets were $74.614 million,
with $31.903 million in mortgage servicing rights, $30.589
million in goodwill, $8.163 million in deposit base intangibles,
$2.379 million in purchased credit card intangibles and $1.580
million in other intangible assets.
20
21
The corporation sold its residential mortgage servicing
portfolio in April 1995, removing mortgage servicing right
intangibles from its balance sheet.
Effective January 1, 1996, the corporation prospectively
adopted Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of" (FASB 121). The adoption of
FASB 121 did not have a material impact on the corporation's
financial position or results of operations.
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 March 31, 1996, the corporation's Tier I to risk-adjusted
assets ratio was 9.39 percent with total capital 13.55 percent of
risk-adjusted assets. The Tier I leverage ratio was 8.22 percent.
____________________________________________________________________________________________________________________________
CAPITAL COMPONENTS AND RATIOS (thousands) TABLE 11
____________________________________________________________________________________________________________________________
1996 1995
----------- -----------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
----------- ----------- ----------- ----------- -----------
Tier I capital:
Common shareholders' equity......................... $ 3,729,349 $ 3,773,757 $ 3,617,642 $ 3,535,313 $ 3,404,983
Less ineligible intangible assets................... 29,099 29,472 29,844 30,216 30,589
Unrealized (gains) losses on securities
available-for-sale, net of tax..................... (57,339) (116,113) (44,431) (44,556) 10,111
----------- ----------- ----------- ----------- -----------
Total Tier I capital............................ 3,642,911 3,628,172 3,543,367 3,460,541 3,384,505
Tier II capital:
Allowable allowance for loan losses................. 408,928 408,808 408,684 408,633 408,500
Allowable long-term debt............................ 1,204,191 1,208,479 1,018,003 1,020,267 770,680
----------- ----------- ----------- ----------- -----------
Tier II capital additions....................... 1,613,119 1,617,287 1,426,687 1,428,900 1,179,180
----------- ----------- ----------- ----------- -----------
Total capital................................... $ 5,256,030 $ 5,245,459 $ 4,970,054 $ 4,889,441 $ 4,563,685
=========== =========== =========== =========== ===========
Risk-adjusted assets.................................. $38,803,497 $38,469,866 $38,011,712 $37,189,208 $36,207,967
Quarterly average assets.............................. $44,434,973 $43,477,038 $42,572,976 $40,875,958 $38,901,940
Risk-based capital ratios:
Tier I capital...................................... 9.39% 9.43% 9.32% 9.31% 9.35%
Total capital....................................... 13.55 13.64 13.08 13.15 12.60
Tier I leverage ratio*................................ 8.22 8.36 8.34 8.47 8.70
Shareholders' equity to total assets.................. 8.21 8.39 8.20 8.25 8.47
* Ratio excludes the average unrealized gains (losses)
on securities available-for-sale, net of tax, of
$114,386, $63,884, $39,715, $8,933 and ($29,681),
respectively
____________________________________________________________________________________________________________________________
21
22
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
March 31 December 31 March 31
$ in thousands 1996 1995 1995
ASSETS ----------- ------------ -----------
Cash and due from banks ....................................................... $ 2,661,486 $ 2,692,318 $ 2,419,234
Interest-bearing bank balances ................................................ 460,481 451,279 6,364
Federal funds sold and securities
purchased under resale agreements ........................................... 398,560 144,105 24,341
Trading account assets ........................................................ 856,077 1,114,926 770,457
Securities available-for-sale ................................................. 7,407,370 7,409,825 3,759,901
Securities held-to-maturity (market value of $1,615,807,
$1,721,222 and $4,558,931, respectively) .................................... 1,535,660 1,619,480 4,524,687
Loans and net leases .......................................................... 29,877,059 29,269,825 26,735,997
Less unearned income on loans ................................................. 8,068 8,672 7,863
----------- ----------- -----------
Total loans ............................................................. 29,868,991 29,261,153 26,728,134
Less allowance for loan losses ................................................ 408,928 408,808 408,500
----------- ----------- -----------
Net loans ............................................................... 29,460,063 28,852,345 26,319,634
Premises and equipment ........................................................ 643,412 628,153 556,428
Due from customers on acceptances ............................................. 707,239 883,825 646,265
Other assets .................................................................. 1,294,767 1,185,058 1,196,040
----------- ----------- -----------
Total assets ............................................................ $45,425,115 $44,981,314 $40,223,351
=========== =========== ===========
LIABILITIES
Deposits in domestic offices:
Demand ...................................................................... $ 5,522,490 $ 5,855,286 5,147,945
Interest-bearing demand ..................................................... 3,352,894 3,473,607 3,259,075
Savings and money market savings ............................................ 7,451,042 6,991,133 6,192,203
Savings certificates ........................................................ 6,418,985 6,613,238 6,500,958
Large denomination certificates ............................................. 2,239,966 2,671,759 1,545,074
Noninterest-bearing time .................................................... 4,030 3,334 19,895
----------- ----------- -----------
Total deposits in domestic offices ...................................... 24,989,407 25,608,357 22,665,150
Deposits in foreign offices:
Demand ...................................................................... 2,353 5,766 5,737
Time ........................................................................ 916,803 754,634 438,704
----------- ----------- -----------
Total deposits in foreign offices ....................................... 919,156 760,400 444,441
----------- ----------- -----------
Total deposits .......................................................... 25,908,563 26,368,757 23,109,591
Federal funds purchased and securities
sold under repurchase agreements ............................................ 6,983,025 5,850,540 6,098,915
Commercial paper .............................................................. 549,034 502,136 404,791
Other short-term borrowed funds ............................................... 909,311 1,720,592 1,472,795
Long-term debt:
Bank notes .................................................................. 4,823,147 4,088,326 3,809,124
Other long-term debt ........................................................ 1,330,346 1,334,702 836,526
----------- ----------- -----------
Total long-term debt .................................................... 6,153,493 5,423,028 4,645,650
Acceptances outstanding ....................................................... 707,239 883,825 646,265
Other liabilities ............................................................. 485,101 458,679 440,361
----------- ----------- -----------
Total liabilities ....................................................... 41,695,766 41,207,557 36,818,368
SHAREHOLDERS' EQUITY
Preferred stock, par value $5 per share:
Authorized 50,000,000 shares; none outstanding............................... -- -- --
Common stock, par value $5 per share:
Issued 168,968,164, 170,358,504 and
171,207,470, respectively ................................................. 844,841 851,793 856,037
Capital surplus ............................................................... 656,050 713,120 748,955
Retained earnings ............................................................. 2,171,120 2,092,731 1,810,102
Unrealized gains (losses) on securities available-for-sale, net of tax ........ 57,338 116,113 (10,111)
----------- ----------- -----------
Total shareholders' equity .............................................. 3,729,349 3,773,757 3,404,983
----------- ----------- -----------
Total liabilities and shareholders' equity .............................. $45,425,115 $44,981,314 $40,223,351
=========== =========== ===========
22
23
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31
$ in thousands, except per share 1996 1995
-------- --------
INTEREST INCOME
Loans .............................................................. $608,285 $559,774
Securities available-for-sale:
Other investments ................................................ 119,274 44,602
Securities held-to-maturity:
State and municipal .............................................. 5,883 10,206
Other investments ................................................ 25,499 64,238
Interest-bearing bank balances ..................................... 9,018 101
Federal funds sold and securities
purchased under resale agreements ................................ 3,250 1,202
Trading account assets ............................................. 12,034 11,669
-------- --------
Total interest income ........................................ 783,243 691,792
INTEREST EXPENSE
Deposits:
Domestic offices ................................................. 208,750 159,826
Foreign offices .................................................. 13,101 7,507
-------- --------
Total interest on deposits ................................... 221,851 167,333
Short-term borrowed funds .......................................... 110,390 108,389
Long-term debt ..................................................... 81,087 66,874
-------- --------
Total interest expense ....................................... 413,328 342,596
NET INTEREST INCOME ................................................ 369,915 349,196
Provision for loan losses .......................................... 27,334 21,788
-------- --------
Net interest income after
provision for loan losses ........................................ 342,581 327,408
OTHER INCOME
Service charges on deposit accounts ................................ 56,598 48,881
Fees for trust services ............................................ 34,345 30,881
Credit card income ................................................. 32,522 28,944
Mortgage fee income ................................................ 4,401 8,454
Trading account profits ............................................ 3,452 6,206
Other operating income ............................................. 52,787 33,727
-------- --------
Total other operating revenue ................................ 184,105 157,093
Investment securities gains (losses) ............................... 698 (129)
-------- --------
Total other income ........................................... 184,803 156,964
OTHER EXPENSE
Salaries ........................................................... 131,820 118,185
Employee benefits .................................................. 29,798 26,778
-------- --------
Total personnel expense ...................................... 161,618 144,963
Net occupancy expense .............................................. 22,678 20,190
Equipment expense .................................................. 28,931 28,263
Other operating expense ............................................ 95,018 89,616
-------- --------
Total other expense .......................................... 308,245 283,032
Income before income taxes ......................................... 219,139 201,340
Applicable income taxes ............................................ 69,269 59,184
-------- --------
NET INCOME ......................................................... $149,870 $142,156
======== ========
Net income per common share:
Primary .......................................................... $ .87 $ .83
Fully diluted .................................................... $ .87 $ .82
Average shares outstanding:
Primary .......................................................... 171,467 172,205
Fully diluted .................................................... 171,653 172,760
23
24
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Unrealized
Common Stock Securities
------------------------ Capital Retained Gains
$ in thousands, except per share Shares Amount Surplus Earnings (Losses)
----------- --------- --------- ----------- ----------
PERIOD ENDED MARCH 31, 1995
Balance at beginning of year ............................ 170,933,749 $ 854,669 $ 741,946 $ 1,727,527 $ (37,635)
Net income .............................................. 142,156
Cash dividends declared on common
stock -- $.33 a share ................................. (56,458)
Common stock issued pursuant to:
Stock option and employee benefit plans ............... 253,308 1,266 6,844
Dividend reinvestment plan ............................ 95,767 479 2,792
Conversion of debentures .............................. 33,177 166 470
Common stock acquired ................................... (108,531) (543) (3,063)
Unrealized gains on securities
available-for-sale, net of tax ........................ 27,524
Miscellaneous ........................................... (34) (3,123)
----------- --------- --------- ----------- ----------
Balance at end of period ................................ 171,207,470 $ 856,037 $ 748,955 $ 1,810,102 $ (10,111)
=========== ========= ========= =========== ==========
PERIOD ENDED MARCH 31, 1996
Balance at beginning of year ............................ 170,358,504 $ 851,793 $ 713,120 $ 2,092,731 $ 116,113
Net income .............................................. 149,870
Cash dividends declared on common
stock -- $.36 a share ................................. (61,089)
Common stock issued pursuant to:
Stock option and employee benefit plans ............... 320,441 1,602 17,091
Dividend reinvestment plan ............................ 75,843 379 3,149
Conversion of debentures .............................. 228,096 1,141 3,244
Common stock acquired ................................... (2,014,720) (10,074) (80,553)
Unrealized losses on securities
available-for-sale, net of tax ........................ (58,775)
Miscellaneous ........................................... (1) (10,392)
----------- --------- --------- ----------- ----------
Balance at end of period ................................ 168,968,164 $ 844,841 $ 656,050 $ 2,171,120 $ 57,338
=========== ========= ========= =========== ==========
24
25
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31
$ in thousands 1996 1995
--------- ----------
OPERATING ACTIVITIES
Net income $ 149,870 $ 142,156
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses .............................................................. 27,334 21,788
Depreciation and amortization .......................................................... 22,263 26,090
Deferred income taxes (benefit) ........................................................ 16,790 (5,335)
Investment securities (gains) losses ................................................... (698) 129
Gain on sale of noninterest-earning assets ............................................. (448) (802)
Increase in accrued income taxes ....................................................... 59,271 63,777
(Increase) decrease in accrued interest receivable ..................................... (6,378) 2,775
(Decrease) increase in accrued interest payable ........................................ (1,984) 56,141
Net change in other accrued and deferred income and expense ............................ (41,544) (2,044)
Net trading account activities ......................................................... 258,849 119,501
Net loans held for resale .............................................................. 5,436 (1,193)
---------- ----------
Net cash provided by operating activities .......................................... 488,761 422,983
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing bank balances ................................ (9,202) 399
Net (increase) decrease in federal funds sold and securities
purchased under resale agreements ...................................................... (254,455) 177,265
Purchases of securities available-for-sale ............................................... (405,217) (630,963)
Purchases of securities held-to-maturity ................................................. (505) (438,963)
Sales of securities available-for-sale ................................................... 790 274,577
Calls, maturities and prepayments of securities available-for-sale ....................... 310,636 178,172
Calls, maturities and prepayments of securities held-to-maturity ......................... 85,792 98,009
Net increase in loans made to customers .................................................. (641,194) (857,470)
Capital expenditures ..................................................................... (40,297) (33,445)
Proceeds from sales of premises and equipment ............................................ 5,257 2,513
Net (increase) decrease in other assets .................................................. (65,629) 7,139
---------- ----------
Net cash used by investing activities .............................................. (1,014,024) (1,222,767)
FINANCING ACTIVITIES
Net increase (decrease) in demand, savings and money market accounts ..................... 3,683 (653,208)
Net (decrease) increase in certificates of deposit ....................................... (463,877) 693,541
Net increase in federal funds purchased and securities sold under repurchase agreements .. 1,132,485 200,517
Net increase (decrease) in commercial paper .............................................. 46,898 (1,915)
Net (decrease) increase in other short-term borrowings ................................... (811,281) 465,455
Proceeds from issuance of bank notes ..................................................... 1,349,236 100,000
Maturities of bank notes ................................................................. (614,328) (244,892)
Payments on other long-term debt ......................................................... (106) (112)
Common stock issued ...................................................................... 7,799 6,162
Dividend payments ........................................................................ (61,089) (56,458)
Common stock repurchased ................................................................. (88,319) (2,188)
Net (decrease) increase in other liabilities ............................................. (6,670) 42,001
---------- ----------
Net cash provided by financing activities .......................................... 494,431 548,903
DECREASE IN CASH AND CASH EQUIVALENTS .................................................... (30,832) (250,881)
Cash and cash equivalents at beginning of year ........................................... 2,692,318 2,670,115
---------- ----------
Cash and cash equivalents at end of period ............................................... $2,661,486 $2,419,234
========== ==========
SUPPLEMENTAL DISCLOSURES
Unrealized (losses) gains in securities available-for-sale:
(Decrease) increase in securities available-for-sale ................................... $ (95,566) $ 45,235
Increase (decrease) in deferred taxes .................................................. 36,791 (17,711)
(Decrease) increase in shareholders' equity ............................................ (58,775) 27,524
25
26
1996 Form 10-Q
________________________________________________________________________________
United States Securities and Exchange Commission
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 1-9021
WACHOVIA CORPORATION
Incorporated in the State of North Carolina
IRS Employer Identification Number 56-1473727
Address and Telephone:
100 North Main Street, Winston-Salem, North Carolina 27101, (910)
770-5000
191 Peachtree Street NE, Atlanta, Georgia 30303, (404) 332-5000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock -- $5.00 par value, which is registered on the New York
Stock Exchange.
As of March 31, 1996, Wachovia Corporation had 168,968,164 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 March
31, 1996 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
Item 1 FINANCIAL STATEMENTS (UNAUDITED) PAGE
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
26
27
1996 Form 10-Q - continued
_______________________________________________________________________________
PART II OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a) 11 "Computation of Earnings per Common Share," is presented as
Table 3 on page 6 of the first quarter 1996 financial
supplement.
19 "Unaudited Consolidated Financial Statements," listed in Part
I, Item 1 do not include all information and footnotes
required under generally accepted accounting principles.
However, in the opinion of management, the profit and loss
information presented in the interim financial statements
reflects all adjustments necessary to present fairly the
results of operations for the periods presented. Adjustments
reflected in the first quarter of 1996 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.
27 Financial Data Schedule (for SEC purposes only).
b) Reports on Form 8-K: No reports on Form 8-K were filed
during the three months ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WACHOVIA CORPORATION
May 13, 1996 /s/ ROBERT S. McCOY, JR. May 13, 1996 /s/ JOHN C. McLEAN, JR.
--------------------------- -----------------------
Robert S. McCoy, Jr. John C. McLean, Jr.
Executive Vice President Comptroller
and Chief Financial Officer
27
28
[WACHOVIA LOGO] BULK RATE
U.S. POSTAGE PAID
WACHOVIA
Wachovia Corporation CORPORATION
P.O. Box 3099
Winston-Salem, NC 27150