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