<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 7, 1995
(First Union $250,000,000
logo appears here) FIRST UNION CORPORATION
6 7/8% SUBORDINATED NOTES DUE SEPTEMBER 15, 2005
Interest on the Notes will be payable semiannually on March 15 and
September 15. The first interest payment date will be March 15, 1996. The Notes
will be issued only in registered form in denominations of $1,000 and integral
multiples thereof. Settlement of the Notes will be made in immediately available
funds. The Notes will be in the Same Day Funds Settlement System at The
Depository Trust Company and, to the extent that secondary market trading in the
Notes is effected through the facilities of such depositary, such trades will be
settled in immediately available funds.
The Notes are not redeemable prior to maturity and no sinking fund is
provided for the Notes. See "Description of Certain Terms of the Notes".
The Notes will be unsecured and subordinated to Senior Indebtedness of the
Corporation as described herein. The Notes will rank PARI PASSU with Existing
Subordinated Indebtedness of the Corporation, subject to the Holders of the
Notes being obligated to pay over any Excess Proceeds to Entitled Persons in
respect of Other Financial Obligations as described herein. Payment of the
principal of the Notes may be accelerated only in the case of certain events
involving the bankruptcy, insolvency or reorganization of the Corporation. There
is no right of acceleration in the case of a default in the performance of any
covenant of the Corporation, including the payment of principal or interest. See
"Description of the Debt Securities" in the Prospectus accompanying this
Prospectus Supplement.
The Notes will not be deposits or other obligations of a bank and will not
be insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) CORPORATION (1)(3)
<S> <C> <C> <C>
Per Note...................................................... 99.923% 0.600% 99.323%
Total......................................................... $249,807,500 $1,500,000 $248,307,500
</TABLE>
(1) Plus accrued interest from September 22, 1995, if any.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $100,000 payable by the Corporation.
The Notes offered hereby are offered by the several Underwriters, as
specified herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part. It is expected that the Notes will be ready for delivery in New York, New
York, on or about September 22, 1995, against payment therefor in immediately
available funds.
FIRST UNION CAPITAL MARKETS CORP.
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus Supplement is September 19, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY OR OTHER NOTES OR DEBENTURES OF THE CORPORATION AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING MAY BE
EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Commissioner of Insurance of the State of North Carolina (the
"Commissioner") has not approved or disapproved this offering, nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus Supplement
or the accompanying Prospectus.
DESCRIPTION OF CERTAIN TERMS OF THE NOTES
The following description of the particular terms of the 6 7/8%
Subordinated Notes Due September 15, 2005 offered hereby (the "Notes" and
referred to in the accompanying Prospectus as the "Debt Securities", the
"Offered Debt Securities" and the "Subordinated Debt Securities") supplements
and modifies the description of the general terms and provisions of the Notes
set forth in the Prospectus under "Description of the Debt Securities", to which
description reference is hereby made. The following description does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the description set forth in the accompanying Prospectus and the provisions
of the Indenture (as defined below). Section references used herein are
referenced to the Indenture. Capitalized terms not otherwise defined herein
shall have the meanings given to them in the Indenture.
GENERAL
The Notes will be limited to $250,000,000 aggregate principal amount, will
be direct, unsecured, subordinated obligations of First Union Corporation (the
"Corporation") and will mature on September 15, 2005. The Notes will not be
redeemable at the option of the Corporation prior to maturity. No sinking fund
will be provided for the Notes.
The Notes are to be issued under the Indenture (the "Indenture"), dated as
of March 15, 1986, as amended by supplemental indentures dated as of August 1,
1990 and November 15, 1992, between the Corporation and The Bank of New York
(formerly Irving Trust Company), as Trustee (the "Trustee"). As of June 30,
1995, $2.6 billion aggregate principal amount of subordinated long-term debt was
issued and outstanding as additional series of Securities under the Indenture.
The Trustee is the trustee for such additional series. As of June 30, 1995, the
Corporation had outstanding an aggregate of $879 million of long-term Senior
Indebtedness, an aggregate of $1.3 billion in short-term Senior Indebtedness,
which consisted primarily of commercial paper, and a net receivable position
with respect to outstanding Other Financial Obligations. The Indenture does not
prohibit or limit the incurrence of additional Senior Indebtedness or Other
Financial Obligations by the Corporation.
Principal of and interest on the Notes are to be payable, and the transfer
of the Notes will be registrable, at the Corporate Trust Office of the Trustee
in the City of New York or at the Corporate Trust Office of First Union National
Bank of North Carolina (the "Bank"), a subsidiary of the Corporation, in
Charlotte, North Carolina, except that interest may be paid at the option of the
Corporation by check mailed to the address of the Holder entitled thereto as it
appears on the Note Register. (SECTIONS 301, 305, AND 1002). The Notes will be
issued in fully registered form only in denominations of $1,000 and any integral
multiple of $1,000, and may be transferred or exchanged without payment of any
charge other than taxes or other governmental charges. (SECTION 302 AND 305).
Settlement for the Notes will be made in immediately available funds. The
Notes will be in the Same Day Funds Settlement System at The Depository Trust
Company and, to the extent that secondary market trading in the Notes is
effected through the facilities of such depositary, such trades will be settled
in immediately available funds.
S-2
<PAGE>
INTEREST
The Notes will bear interest at 6 7/8% per annum from September 22, 1995,
payable semi-annually in arrears on March 15 and September 15, of each year. The
first Interest Payment Date will be March 15, 1996, and will include interest
accrued from September 22, 1995. The interest to be paid on each Note on each
Interest Payment Date will be paid to the Person in whose name such Note (or any
Predecessor Note) is registered at the close of business on the preceding March
1 or September 1, as the case may be. (SECTION 307).
USE OF PROCEEDS
The Corporation currently intends to use the net proceeds from the sale of
the Notes for general corporate purposes, which may include the reduction of
indebtedness, investments at the holding company level, investments in, or
extensions of credit to, its banking and other subsidiaries and other banks and
companies engaged in other financial service activities, possible acquisitions
and the repurchase of capital stock. Pending such use, the net proceeds may be
temporarily invested. The precise amounts and timing of the application of
proceeds will depend upon the funding requirements of the Corporation and its
subsidiaries and the availability of other funds.
Based upon the historical and anticipated future growth of the Corporation
and the financial needs of its subsidiaries, the Corporation may engage in
additional financings of a character and amount to be determined as the need
arises.
RECENT DEVELOPMENTS
FIRST FIDELITY BANCORPORATION MERGER
On June 18, 1995, the Corporation entered into an agreement (the "FFB
Merger Agreement") with First Fidelity Bancorporation ("FFB"), which provides,
among other things, for (i) the merger of FFB with and into a wholly-owned
subsidiary of the Corporation (the "FFB Merger"), (ii) the exchange of each
outstanding share of FFB common stock for 1.35 shares of the Corporation's
common stock ("FUNC Common Stock"), subject to possible adjustment in certain
circumstances, and (iii) the exchange of each share of the three outstanding
series of FFB preferred stock for one share of one of three new series of the
Corporation's Class A Preferred Stock having substantially identical terms as
the relevant series of FFB preferred stock, all subject to the terms and
conditions contained in the FFB Merger Agreement. FFB is a bank holding company
with $35.4 billion in assets as of June 30, 1995, and has banking offices in New
Jersey, Pennsylvania, New York, Connecticut, Delaware and Maryland.
In connection with the execution of the FFB Merger Agreement, FFB granted
an option to the Corporation to purchase, under certain circumstances, up to
19.9 percent of the outstanding shares of FFB common stock at a per share
exercise price equal to $59.00, and the Corporation granted an option to FFB to
purchase, under certain circumstances, up to 19.9 percent of the outstanding
shares of FUNC Common Stock at a per share exercise price equal to $45.625.
Also, in connection with the execution of the FFB Merger Agreement, Banco
Santander, S.A. ("Santander"), the owner of approximately 30 percent of the
outstanding shares of FFB common stock, agreed, among other things, to vote the
FFB shares held by it in favor of the FFB Merger Agreement. Following
consummation of the FFB Merger, Santander is expected to own approximately 11
percent of the outstanding shares of FUNC Common Stock.
The FFB Merger, which will be accounted for as a pooling of interests, is
expected to be consummated on or before January 1, 1996, subject to the receipt
of regulatory approvals, FFB and the Corporation's stockholder approvals, and
other conditions set forth in the FFB Merger Agreement. No assurance can be
given that the FFB Merger will be consummated or as to the timing of such
consummation.
Based on the closing price of FUNC Common Stock on the New York Stock
Exchange Composite Transactions tape on June 16, 1995 ($47.625), the transaction
would be valued at approximately $5.4 billion and represents a purchase price of
$64.29 for each share of FFB common stock.
Prior to consummation of the FFB Merger, FFB and the Corporation may
purchase up to 5.5 million shares of FFB common stock or 7.4 million shares of
FUNC Common Stock, or some combination of the two. See
S-3
<PAGE>
Note (2) to "Pro Forma Financial Information". Approximately 105 million shares
of FUNC Common Stock are expected to be issued in the FFB Merger (net of the
foregoing purchases). In addition, it is expected that after-tax restructuring
charges of approximately $270 million will be taken by the Corporation and FFB
in the fourth quarter of 1995 in connection with the FFB Merger. See " -- 1995
and 1996 Earnings Estimates".
Following consummation of the FFB Merger, the current Chairman and Chief
Executive Officer of FFB, Anthony P. Terracciano, will join Edward E.
Crutchfield and John R. Georgius in an "Office of the Chairman" of the
Corporation. Mr. Crutchfield will continue to serve as Chairman and Chief
Executive Officer, Mr. Georgius, the current President of the Corporation, will
serve as Vice Chairman and Mr. Terracciano will serve as President of the
Corporation. Additionally, six FFB directors, including Mr. Terracciano and a
representative of Santander, will join the Corporation's Board of Directors
following consummation of the FFB Merger.
For information concerning certain additional completed and pending
acquisitions by the Corporation, see Note (3) to "Pro Forma Financial
Information". See also "The Corporation" in the accompanying Prospectus.
1995 AND 1996 EARNINGS ESTIMATES
The Corporation estimates stand-alone earnings for 1995 and 1996 of
approximately $5.75 and $6.55 in net income per share of FUNC Common Stock,
respectively. Theses estimates are based on several assumptions, including
management's expectations for its existing markets and for the Purchase
Acquisitions (as hereinafter defined), in addition to certain other purchase
accounting acquisitions that were completed in 1994. See Note (3) to "Pro Forma
Financial Information".
The Corporation estimates post-FFB Merger net income per share of FUNC
Common Stock of approximately $5.29 for 1995, excluding a currently estimated
FFB Merger-related charge of $270 million, or $.97 per share of FUNC Common
Stock, and approximately $6.31 for 1996. The Corporation's estimates of post-FFB
Merger earnings for 1995 and 1996 are based, in part, on estimated stand-alone
earnings for FFB for 1995 and 1996 of approximately $5.45 and $5.90,
respectively, in fully-diluted net income per share of FFB common stock. As is
the case with the Corporation's stand-alone estimates, the estimates for FFB are
based on several assumptions, including expectations for its existing markets.
The Corporation's estimated post-FFB Merger estimates are based on several
assumptions in addition to the assumptions referred to above with respect to
stand-alone earnings estimates for the Corporation and FFB, including, without
limitation, the following:
(Bullet) The FFB Merger will be consummated on or before January 1,
1996.
(Bullet) The Corporation will have average shares of FUNC Common Stock
outstanding of approximately 279 million in 1995 and 284
million in 1996, including an estimated 105 million shares to
be issued in the FFB Merger (net of the purchases referred to
under Note (2) to "Pro Forma Financial Information").
(Bullet) Before-tax expense savings resulting from the FFB Merger of
approximately $16 million in 1995 and $106 million in 1996,
or approximately $10 million and $64 million, respectively,
after tax. These estimates assume that approximately five
percent of the combined Corporation/FFB pre-FFB Merger annual
expenses are eliminated within 18 months of the consummation
date of the FFB Merger.
(Bullet) Before-tax revenue enhancements relating to the FFB Merger of
approximately $79 million in 1996, or approximately $48
million after tax. These estimates are primarily based on an
analysis of fee income generating products currently offered
by the Corporation which either are not offered by FFB or are
offered by FFB on a more limited basis.
(Bullet) Before-tax earnings resulting from excess capital generated
by the FFB Merger of approximately $25 million in 1996, or
approximately $15 million after tax. These estimates assume
that all tangible common equity generated by the FFB Merger
in excess of 5.50 percent is converted into assets which earn
a 100 basis points before-tax spread, or a 60 basis points
after-tax spread.
S-4
<PAGE>
The estimated $270 million FFB Merger-related charge is summarized below:
<TABLE>
<CAPTION>
(In millions, after tax)
<S> <C>
Severance and change in control related obligations............................... $105
Fixed asset write-downs and vacant space accrual.................................. 40
Accelerated disposition of owned real estate...................................... 30
Service contract terminations..................................................... 30
Professional fees................................................................. 30
Other............................................................................. 35
Total............................................................................. $270
</TABLE>
The FFB Merger-related charge includes approximately $65 million in
non-cash charges. Cash payments included in the FFB Merger-related charge are
expected to be completed by the end of the second quarter of 1996. The "Other"
category includes FFB Merger-related amounts, none of which exceeds $8 million.
The amounts included in the $270 million FFB Merger-related charge are subject
to change prior to the consummation date of the FFB Merger. The estimates
include assumptions about the timing of the consummation of the FFB Merger and
number of employees that will be voluntarily or involuntarily terminated.
Changes in those assumptions could result in a change in the FFB Merger-related
charge.
As with all estimates of the type indicated above, there are many factors,
such as changes in economic or competitive conditions, changes in legislation or
regulation or the failure of any of the underlying assumptions to be correct,
that are beyond the Corporation's or FFB's control. These factors could affect
actual results. As a result, and because of the subjective aspect of any
estimate, there are likely to be differences between such estimates and the
actual results, which differences could be material. These estimates are
necessarily speculative in nature and no assurance can be given that these
estimates will be realized.
PRO FORMA COMPUTATIONS OF CONSOLIDATED RATIOS
OF EARNINGS TO FIXED CHARGES
(THE CORPORATION AND FFB)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Excluding interest on deposits............................ 2.98x 3.55 3.95 2.71 1.80 1.22
Including interest on deposits............................ 1.58x 1.73 1.70 1.32 1.17 1.06
</TABLE>
For purposes of computing these ratios, earnings represent income from
continuing operations before extraordinary items and cumulative effect of a
change in accounting principle plus income taxes and fixed charges (excluding
capitalized interest). Fixed charges, excluding interest on deposits, represent
interest (other than on deposits, but including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs. Fixed charges, including interest on
deposits, represent all interest (including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs.
SELECTED CONSOLIDATED FINANCIAL DATA
The following is selected unaudited consolidated financial information for
the Corporation for each of the five years ended December 31, 1994, and for the
six months ended June 30, 1995 and June 30, 1994. The summary below should be
read in conjunction with the consolidated financial statements of the
Corporation, and the related notes thereto, and the other detailed information
contained in the Corporation's 1994 Annual Report on Form 10-K, the
Corporation's 1995 Second Quarter Report on Form 10-Q, and the Corporation's
1995 Current Reports on Form 8-K, which are incorporated herein by reference.
S-5
<PAGE>
THE CORPORATION (HISTORICAL)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands, except per share data)
Interest income............................ $ 3,000,417 2,397,814 5,094,661 4,556,332 4,479,385 4,647,440 4,829,520
Interest expense........................... 1,406,547 919,916 2,060,946 1,790,439 2,020,968 2,742,996 3,094,334
Net interest income........................ 1,593,870 1,477,898 3,033,715 2,765,893 2,458,417 1,904,444 1,735,186
Provision for loan
losses................................... 76,500 50,000 100,000 221,753 414,708 648,284 425,409
Net interest income after provision for
loan
losses................................... 1,517,370 1,427,898 2,933,715 2,544,140 2,043,709 1,256,160 1,309,777
Securities available for sale
transactions............................. 4,878 1,365 (11,507) 25,767 34,402 -- --
Investment security transactions........... 1,450 1,309 4,006 7,435 (2,881) 155,048 7,884
Noninterest income......................... 628,042 551,792 1,166,470 1,165,086 1,032,651 914,511 690,672
Noninterest expense........................ 1,399,441 1,291,061 2,677,228 2,521,647 2,526,678 1,905,918 1,680,973
Income before income taxes................. 752,299 691,303 1,415,456 1,220,781 581,203 419,801 327,360
Income taxes............................... 266,254 239,224 490,076 403,260 196,152 71,070 64,993
Net income................................. 486,045 452,079 925,380 817,521 385,051 348,731 262,367
Dividends on preferred stock............... 7,029 11,927 25,353 24,900 31,979 34,570 33,868
Net income applicable to common
stockholders before redemption premium... 479,016 440,152 900,027 792,621 353,072 314,161 228,499
Redemption premium on preferred stock...... -- -- 41,355 -- -- -- --
Net income applicable to common
stockholders after redemption premium.... $ 479,016 440,152 858,672 792,621 353,072 314,161 228,499
PER COMMON SHARE DATA
Net income before redemption premium....... $ 2.77 2.59 5.22 4.73 2.23 2.24 1.68
Net income after redemption premium........ 2.77 2.59 4.98 4.73 2.23 2.24 1.68
Cash dividends............................. .92 .80 1.72 1.50 1.28 1.12 1.08
Book value................................. 33.39 29.54 30.66 28.90 25.25 23.23 21.81
CASH DIVIDENDS PAID ON COMMON STOCK
In thousands............................... 158,418 135,520 297,902 243,845 167,601 126,029 116,696
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets..................................... 83,101,612 72,604,401 77,313,505 70,786,969 63,828,031 59,273,177 54,588,410
Loans, net of unearned income.............. 60,020,507 48,925,495 54,029,752 46,876,177 41,923,767 41,383,580 36,050,719
Deposits................................... 58,842,024 53,772,260 58,958,273 53,742,411 49,150,965 47,176,223 38,194,268
Long-term debt............................. 5,376,283 3,129,444 3,428,514 3,061,944 3,151,260 2,630,930 1,850,860
Preferred stockholders' equity............. -- 284,041 -- 284,041 297,215 397,356 317,011
Common stockholders' equity................ 5,736,847 5,104,540 5,397,517 4,923,584 4,161,948 3,463,441 2,983,361
Total stockholders' equity................. $ 5,736,847 5,388,581 5,397,517 5,207,625 4,459,163 3,860,797 3,300,372
Preferred shares outstanding............... -- 6,318 -- 6,318 6,846 10,851 7,293
Common shares outstanding.................. 171,837 172,797 176,034 170,338 164,849 149,112 136,777
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets..................................... $78,881,692 71,088,849 72,670,694 68,101,222 61,145,974 55,095,439 52,124,595
Loans, net of unearned income.............. 56,153,699 46,775,003 49,055,215 43,631,410 41,270,991 37,314,358 35,877,585
Deposits................................... 57,464,423 52,147,743 53,244,751 50,248,848 47,173,706 40,482,433 36,209,083
Long-term debt............................. 4,264,879 3,143,570 3,213,607 3,006,560 2,789,653 2,187,595 1,587,497
Common stockholders' equity*............... 5,611,065 5,062,377 5,282,412 4,550,048 3,889,256 3,131,716 2,937,441
Total stockholders' equity*................ $ 5,611,065 5,346,417 5,554,390 4,839,397 4,213,896 3,467,437 3,244,473
Common shares outstanding.................. 172,745 169,689 172,543 167,692 158,683 140,003 135,622
CONSOLIDATED PERCENTAGES
Net income applicable to common
stockholders before redemption premium to
average common stockholders' equity...... 17.22%** 17.53** 17.04 17.42 9.08 10.03 7.78
Net income applicable to common
stockholders after redemption premium to
average common stockholders' equity...... 17.22** 17.53** 16.26 17.42 9.08 10.03 7.78
Net income to:
Average total stockholders' equity....... 17.47** 17.05** 16.66 16.89 9.14 10.06 8.09
Average assets........................... 1.24** 1.28** 1.27 1.20 .63 .63 .50
Average stockholders' equity to average
assets................................... 6.96 7.01 7.52 7.11 6.89 6.29 6.22
Allowance for loan losses to:
Net loans................................ 1.61 2.06 1.81 2.18 2.24 2.06 1.95
Nonaccrual and restructured loans........ 222 192 245 147 96 72 77
Nonperforming assets..................... 170 152 175 111 70 50 56
Net charge-offs to average net loans....... .38** .27** .33 .58 .86 1.48 .68
Nonperforming assets to loans, net and
foreclosed properties.................... .95 1.35 1.03 1.95 3.19 4.10 3.42
Capital ratios:***
Tier 1 capital........................... 6.86 9.30 7.76 9.14 9.22 7.56 6.53
Total capital............................ 11.58 14.68 12.94 14.64 14.31 11.76 10.83
Leverage................................. 5.74 6.67 6.12 6.13 6.55 5.31 4.90
Net interest margin........................ 4.61%** 4.78** 4.77 4.78 4.77 4.08 3.99
</TABLE>
* Average common stockholders' equity and total stockholders' equity exclude
net unrealized losses on debt and equity securities in 1995 and 1994.
** Annualized.
*** Risk-based capital ratio guidelines require a minimum ratio of Tier 1
capital to risk-weighted assets of four percent and total capital to
risk-weighted assets of eight percent. The minimum leverage ratio of Tier 1
capital to adjusted average quarterly assets is from three to five percent.
Capital ratios are not restated for pooling of interests acquisitions.
S-6
<PAGE>
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(THE CORPORATION, THE FFB MERGER AND THE PURCHASE ACQUISITIONS)
JUNE 30, 1995
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet combines
the consolidated historical balance sheets of the Corporation, FFB and the
companies involved in the Purchase Acquisitions pending at June 30, 1995 or
announced between July 1, 1995, and August 14, 1995, assuming the companies had
been combined as of June 30, 1995, on a pooling of interests accounting basis
with respect to the FFB Merger, and on a purchase accounting basis with respect
to such Purchase Acquisitions.
<TABLE>
<CAPTION>
THE PRO FORMA PRO FORMA PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS) CORPORATION FFB ADJUSTMENTS COMBINED ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks............. $3,191,431 1,750,833 -- 4,942,264 84,413 (595,981) 4,430,696
Interest-bearing balances........... 446,712 455,033 -- 901,745 67,273 -- 969,018
Federal funds sold and securities
purchased under resale
agreements........................ 2,052,236 703,375 -- 2,755,611 8,275 -- 2,763,886
Total cash and cash equivalents... 5,690,379 2,909,241 -- 8,599,620 159,961 (595,981) 8,163,600
Trading account assets.............. 1,559,021 100,529 -- 1,659,550 -- -- 1,659,550
Securities available for sale....... 7,353,926 2,409,976 -- 9,763,902 381,101 -- 10,145,003
Investment securities............... 3,583,906 3,877,896 -- 7,461,802 1,577,325 (28,790) 9,010,337
Loans, net of unearned income....... 60,020,507 23,999,147 -- 84,019,654 5,575,914 (6,473) 89,589,095
Allowance for loan losses......... (969,122 ) (565,450) -- (1,534,572) (45,706) -- (1,580,278)
Loans, net........................ 59,051,385 23,433,697 -- 82,485,082 5,530,208 (6,473) 88,008,817
Premises and equipment.............. 1,881,947 428,328 -- 2,310,275 59,022 (14,645) 2,354,652
Due from customers on
acceptances....................... 383,289 161,355 -- 544,644 -- -- 544,644
Mortgage servicing rights........... 101,024 47,101 -- 148,125 12,694 8,792 169,611
Credit card premium................. 51,005 -- -- 51,005 -- -- 51,005
Other intangible assets............. 1,395,368 809,040 -- 2,204,408 70,814 412,390 2,687,612
Other assets........................ 2,050,362 1,184,618 -- 3,234,980 210,032 1,155 3,446,167
Total assets...................... $83,101,612 35,361,781 -- 118,463,393 8,001,157 (223,552) 126,240,998
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing............... 10,854,459 5,195,045 -- 16,049,504 115,570 -- 16,165,074
Interest-bearing.................. 47,987,565 23,623,878 -- 71,611,443 5,209,243 -- 76,820,686
Total deposits.................. 58,842,024 28,818,923 -- 87,660,947 5,324,813 -- 92,985,760
Short-term borrowings............... 11,012,715 2,020,966 -- 13,033,681 1,750,452 -- 14,784,133
Bank acceptances outstanding........ 383,289 161,355 -- 544,644 -- -- 544,644
Other liabilities................... 1,750,454 744,470 -- 2,494,924 144,846 (3,632) 2,636,138
Long-term debt...................... 5,376,283 676,750 -- 6,053,033 247,829 -- 6,300,862
Total liabilities............... 77,364,765 32,422,464 -- 109,787,229 7,467,940 (3,632) 117,251,537
STOCKHOLDERS' EQUITY
Preferred stock..................... -- 219,219 -- 219,219 -- -- 219,219
Common stock........................ 572,790 81,999 271,939 926,728 16,907 4,973 948,608
Paid-in capital..................... 1,260,261 1,255,143 (437,293) 2,078,111 390,804 (99,387) 2,369,528
Retained earnings................... 3,912,179 1,556,804 -- 5,468,983 128,674 (128,674) 5,468,983
Less: Treasury stock................ -- (165,354) 165,354 -- (3,329) 3,329 --
Unrealized loss on debt and equity
securities........................ (8,383 ) (8,494) -- (16,877) 161 (161) (16,877)
Total stockholders' equity...... 5,736,847 2,939,317 -- 8,676,164 533,217 (219,920) 8,989,461
Total liabilities and
stockholders' equity.......... $83,101,612 35,361,781 -- 118,463,393 8,001,157 (223,552) 126,240,998
</TABLE>
See accompanying notes to pro forma financial information.
S-7
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(THE CORPORATION AND THE PURCHASE ACQUISITIONS)
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of the Corporation and the companies
involved in the Purchase Acquisitions, assuming the companies had been combined
for each period presented on a purchase accounting basis (effective as of
January 1, 1994).
<TABLE>
<CAPTION>
THE PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995
Interest income.............................................. $3,000,417 377,671 (40,193) 3,337,895
Interest expense............................................. 1,406,547 240,696 -- 1,647,243
Net interest income.......................................... 1,593,870 136,975 (40,193) 1,690,652
Provision for loan losses.................................... 76,500 4,130 -- 80,630
Net interest income after provision for loan losses.......... 1,517,370 132,845 (40,193) 1,610,022
Securities available for sale transactions................... 4,878 (3,679) -- 1,199
Investment security transactions............................. 1,450 -- -- 1,450
Noninterest income........................................... 628,042 29,339 -- 657,381
Noninterest expense.......................................... 1,399,441 179,316 20,111 1,598,868
Income before income taxes................................... 752,299 (20,811) (60,304) 671,184
Income taxes................................................. 266,254 990 (19,709) 247,535
Net income................................................... 486,045 (21,801) (40,595) 423,649
Dividends on preferred stock................................. 7,029 -- -- 7,029
Net income applicable to common stockholders................. 479,016 (21,801) (40,595) 416,620
Pro forma per common share data
Net income available to common stockholders................ $ 2.77 2.32
Average common shares (in thousands)....................... 172,745 179,310
<CAPTION>
THE PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Interest income.............................................. $5,094,661 786,606 (80,286) 5,800,981
Interest expense............................................. 2,060,946 453,964 -- 2,514,910
Net interest income.......................................... 3,033,715 332,642 (80,286) 3,286,071
Provision for loan losses.................................... 100,000 1,643 -- 101,643
Net interest income after provision for loan losses.......... 2,933,715 330,999 (80,286) 3,184,428
Securities available for sale transactions................... (11,507 ) 2,647 -- (8,860 )
Investment security transactions............................. 4,006 -- -- 4,006
Noninterest income........................................... 1,166,470 55,018 -- 1,221,488
Noninterest expense.......................................... 2,677,228 270,493 52,677 3,000,398
Income before income taxes................................... 1,415,456 118,171 (132,963) 1,400,664
Income taxes................................................. 490,076 38,119 (40,535) 487,660
Net income................................................... 925,380 80,052 (92,428) 913,004
Dividends on preferred stock................................. 25,353 -- -- 25,353
Net income applicable to common stockholders before
redemption premium......................................... 900,027 80,052 (92,428) 887,651
Redemption premium on preferred stock........................ 41,355 -- -- 41,355
Net income applicable to common stockholders after redemption
premium.................................................... $ 858,672 80,052 (92,428) 846,296
Pro forma per common share data
Net income available to common stockholders before
redemption premium....................................... $ 5.22 5.06
Net income available to common stockholders after
redemption premium....................................... $ 4.98 4.82
Average common shares (in thousands)....................... 172,543 175,554
</TABLE>
See accompanying notes to pro forma financial information.
S-8
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(THE CORPORATION, THE FFB MERGER AND THE PURCHASE ACQUISITIONS)
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of the Corporation, FFB and the
companies involved in the Purchase Acquisitions, assuming the companies had been
combined for each period presented on a pooling of interests accounting basis
with respect to the FFB Merger, and on a purchase accounting basis as to the
Purchase Acquisitions (for the six months ended June 30, 1995, and the year
ended December 31, 1994, only).
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(DOLLARS IN THOUSANDS, EXCEPT JUNE 30, YEARS ENDED DECEMBER 31,
PER SHARE DATA) 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income..................... $4,493,006 3,434,281 7,937,133 6,601,528 6,608,666 7,031,400 7,549,088
Interest expense.................... 2,112,573 1,254,749 3,246,946 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income................. 2,380,433 2,179,532 4,690,187 4,119,576 3,666,986 2,960,515 2,742,617
Provision for loan losses........... 100,630 94,000 180,643 369,753 642,708 946,284 923,409
Net interest income after provision
for loan losses................... 2,279,803 2,085,532 4,509,544 3,749,823 3,024,278 2,014,231 1,819,208
Securities available for sale
transactions...................... 15,242 10,173 8,860 25,767 34,402 -- --
Investment security transactions.... 1,450 1,309 4,006 14,452 1,944 208,614 32,271
Noninterest income.................. 864,592 738,949 1,620,712 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense................. 2,135,961 1,816,102 4,070,027 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes.......... 1,025,126 1,019,861 2,073,095 1,795,265 977,302 699,815 316,110
Income taxes........................ 373,284 347,323 709,028 578,912 278,514 129,843 59,868
Net income.......................... 651,842 672,538 1,364,067 1,216,353 698,788 569,972 256,242
Dividends on preferred stock........ 17,350 22,204 46,020 45,553 53,040 51,746 47,151
Net income applicable to common
stockholders before redemption
premium........................... 634,492 650,334 1,318,047 1,170,800 645,748 518,226 209,091
Redemption premium on preferred
stock............................. -- -- 41,355 -- -- -- --
Net income applicable to common
stockholders after redemption
premium........................... $ 634,492 650,334 1,276,692 1,170,800 645,748 518,226 209,091
PRO FORMA PER COMMON
SHARE DATA
Net income applicable to common
stockholders before redemption
premium......................... $ 2.22 2.32 4.63 4.30 2.53 2.34 .97
Net income applicable to common
stockholders after redemption
premium......................... $ 2.22 2.32 4.48 4.30 2.53 2.34 .97
Average common shares (in
thousands)........................ 285,492 280,153 284,673 272,439 255,384 221,469 215,529
THE CORPORATION HISTORICAL PER
COMMON SHARE DATA
Net income applicable to common
stockholders before redemption
premium......................... $ 2.77 2.59 5.22 4.73 2.23 2.24 1.68
Net income applicable to common
stockholders after redemption
premium......................... $ 2.77 2.59 4.98 4.73 2.23 2.24 1.68
Average common shares (in
thousands)........................ 172,745 169,689 172,543 167,692 158,683 140,003 135,622
</TABLE>
See accompanying notes to pro forma financial information.
S-9
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the FFB Merger and the Purchase Acquisitions been consummated
at the beginning of the applicable periods indicated, nor is it necessarily
indicative of the results of operations in future periods or the future
financial position of the combined entities. Consummation of the FFB Merger
or any of the pending Purchase Acquisitions is not contingent upon
consummation of any other of such acquisitions. Consummation of one or all
of the pending Purchase Acquisitions prior to consummation of the FFB Merger
would not materially impact the results of operations of the Corporation.
Pro forma financial information for the Purchase Acquisitions assumes such
acquisitions were consummated on January 1, 1994, and, except as otherwise
indicated, reflects information from such date to their respective
consummation dates (or to June 30, 1995, with respect to the Purchase
Acquisitions pending as of June 30, 1995, or announced between July 1, 1995
and August 14, 1995). Pro forma financial information with respect to the
FFB Merger assumes the FFB Merger was consummated as of the beginning of
each of the periods indicated.
(2) It is assumed that the FFB Merger will be accounted for on a pooling of
interests accounting basis, and accordingly, the related pro forma
adjustments herein reflect, where applicable, an exchange ratio of (i) 1.35
shares of FUNC Common Stock for each of the 81,998,930 shares of FFB common
stock (less 3,345,884 treasury shares) which were outstanding at June 30,
1995; and (ii) one share of one of three corresponding new series of the
Corporation's Class A Preferred Stock for each share of the related three
series of FFB preferred stock outstanding at June 30, 1995, one series of
which includes 4,368,848 shares of convertible preferred stock, which were
then convertible into 3,408,138 shares of FFB common stock. The three new
series of the Corporation's Class A Preferred Stock will have substantially
identical terms as the related series of FFB preferred stock. The 1.35
exchange ratio is subject to possible increase under certain circumstances.
As a result, information was adjusted for the FFB Merger by the (i) addition
of 106,181,612 shares of FUNC Common Stock amounting to $353,938,000; (ii)
elimination of 81,998,930 shares of FFB common stock amounting to
$81,999,000; (iii) cancellation of 3,345,884 treasury shares of FFB at a
cost of $165,354,000; and (iv) recordation of the remaining net amount of
$437,293,000 as a reduction in paid-in capital at June 30, 1995.
The pro forma financial information presented herein does not give effect to
the possible purchase by the Corporation and/or FFB of up to 5.5 million
shares of FFB common stock or 7.4 million shares of FUNC Common Stock, or
some combination of the two (the "FFB Acquisition Shares"), prior to
consummation of the FFB Merger. From June 19, 1995 to the date hereof, the
Corporation has purchased 2.9 million shares of FFB common stock at a cost
of $181 million, and 250,000 shares of FFB series B preferred stock at a
cost of $12 million.
As of June 30, 1995, the Corporation and FFB had 14,441,144 and 6,788,278
shares of common stock reserved for issuance, respectively, (excluding, as
to the Corporation, shares reserved for issuance in connection with the FFB
Merger, the Purchase Acquisitions then pending, or upon exercise of the
rights attached to shares of FUNC Common Stock), which are not included in
the pro forma financial information presented herein.
For the six months ended June 30, 1995, FFB had net income applicable to
common stockholders of $217,872,000.
(3) During the period from January 1, 1994 through August 14, 1995, the
Corporation completed or had pending at August 14, 1995, the following
acquisitions (the "Purchase Acquisitions"): (i) the acquisition of
BancFlorida Financial Corporation (completed in August 1994) with assets of
$1.6 billion for 3.6 million shares of FUNC Common Stock valued at $161
million, (ii) the acquisitions of First Florida Savings Bank, FSB (completed
in April 1995), Ameribanc Investors Group (completed in April 1995), Coral
Gables Fedcorp, Inc. (completed in May 1995), and Home Federal Savings Bank
of Rome, Georgia (completed in August 1995), at an aggregate cost of $623
million in cash, and (iii) the acquisitions of American Savings of Florida,
F.S.B. (completed in July 1995) and United Financial Corporation of South
Carolina, Inc., Columbia First Bank, a Federal Savings Bank, RS Financial
Corp., and Brentwood National Bank (each of which was pending at August 14,
1995) for an estimated 16.5 million shares of FUNC Common Stock valued at an
estimated $785 million.
In addition to the foregoing Purchase Acquisitions, during 1994, the
Corporation completed the following purchase accounting acquisitions: (i)
the December 1994 purchase of a DE MINIMUS amount of loans, and the
S-10
<PAGE>
purchase of deposits from Chase Manhattan Bank of Florida, N.A. ("Chase")
and Great Western Federal Savings Bank ("Great Western"), which in the
aggregate amounted to $1.8 billion, at an aggregate cost of approximately
$137 million, and (ii) the purchase of deposits of Jacksonville Federal
Savings Association, Citizens Federal Savings Association, Cobb Federal
Savings Association and Hollywood Federal Savings Association from the
Resolution Trust Corporation ("RTC") in the aggregate amount of $640
million, at an aggregate cost of $68 million. Purchases of deposits from
Chase, Great Western and the RTC do not constitute a sufficient continuity
of operations, and moreover, additional financial data is not available to
develop meaningful and reliable pro forma income statement information with
respect to such acquisitions. Accordingly, the pro forma financial
information presented herein includes such acquisitions at their recorded
costs and does not include any pro forma adjustments related thereto.
Goodwill and deposit base premium of approximately $701 million and $378
million, respectively, are currently expected to result from the Purchase
Acquisitions.
In connection with the Purchase Acquisitions in which the consideration
involved or will involve the issuance of FUNC Common Stock, the pro forma
financial information presented herein includes actual and estimated
repurchases of FUNC Common Stock that in the aggregate are estimated to
amount to 20.5 million shares at an estimated cost of $932 million.
In April 1995, the Corporation's Board of Directors authorized the purchase
of up to 15 million shares of FUNC Common Stock, which is in addition to the
possible purchase of the FFB Acquisition Shares. As of the date hereof, the
Corporation has remaining authority to purchase up to 4.2 million shares of
FUNC Common Stock, in addition to the FFB Acquisition Shares.
(4) The pro forma adjustment amounts related to the unaudited pro forma combined
condensed statements of income reflect a 5.84 percent and 4.08 percent cost
of funds for the six months ended June 30, 1995, and the year ended December
31, 1994, respectively, a six-to-ten year straight-line life related to
investment securities, a nine-year straight-line life related to loans, a
10-year straight-line life related to premises and equipment and mortgage
servicing rights, a 10-year sum-of-the-years digits method related to
deposit base premium, and a 25-year straight-line life related to goodwill.
For the six months ended June 30, 1995, and the year ended December 31,
1994, these adjustments resulted in: reductions in interest income, net
interest income and net interest income after provision for loan losses of
$40,193,000 and $80,286,000, respectively; increases in noninterest expense
of $20,111,000 and $52,677,000, respectively; reductions in income before
income taxes of $60,304,000 and $132,963,000, respectively; reductions in
income taxes of $19,709,000 and $40,535,000, respectively; and reductions in
net income applicable to common stockholders of $40,595,000 and $92,428,000,
respectively.
The components of the pro forma adjustments related to interest income and
noninterest expense for the six months ended June 30, 1995, and the year
ended December 31, 1994, are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
(IN THOUSANDS) JUNE 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
Interest income
Interest and fees on loans............................................ $ (2,237) 350
Interest and dividends on investment securities....................... (2,578) (19,999)
Interest-bearing bank balances........................................ (35,378) (60,637)
Total interest income............................................ (40,193) (80,286)
Noninterest expense
Equipment rentals, depreciation and maintenance....................... (1,125) (3,190)
Mortgage servicing amortization....................................... 2,088 5,437
Other amortization
Goodwill........................................................... 10,585 27,225
Deposit base premium............................................... 8,563 23,205
Total noninterest expense........................................ 20,111 52,677
Income before income taxes.............................................. $(60,304) (132,963)
</TABLE>
(5) Income per share data has been computed based on the combined historical net
income applicable to common stockholders of the Corporation, FFB and the
companies involved in the Purchase Acquisitions using the historical
weighted average shares outstanding of FUNC Common Stock and the weighted
average outstanding shares, adjusted to equivalent shares of FUNC Common
Stock, as of the earliest applicable period presented.
S-11
<PAGE>
(6) Certain insignificant reclassifications have been included herein to conform
statement presentations. Transactions conducted in the ordinary course of
business between the companies are immaterial, and accordingly, have not
been eliminated.
(7) The unaudited pro forma financial information does not include any FFB
Merger-related expenses or any material expenses related to the Purchase
Acquisitions. A currently estimated after-tax FFB Merger-related charge of
approximately $270 million, or $.97 per share of FUNC Common Stock, is
expected to be taken in the fourth quarter of 1995. See "Recent
Developments -- 1995 and 1996 Earnings Estimates".
(8) As indicated by the foregoing unaudited pro forma financial information and
based solely on the foregoing assumptions, consummation of the FFB Merger
and the Purchase Acquisitions would have diluted the Corporation's
historical net income per common share (after redemption premium) for the
six months ended June 30, 1995, and the year ended December 31, 1994, by 20
percent and 10 percent, respectively. It should not necessarily be assumed,
however, that the foregoing data will represent actual dilution with respect
to the FFB Merger or the Purchase Acquisitions.
S-12
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Corporation has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
<S> <C>
First Union Capital Markets Corp. ........................................ $ 50,000,000
CS First Boston........................................................... 50,000,000
Goldman, Sachs & Co. ..................................................... 50,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................ 50,000,000
Morgan Stanley & Co. Incorporated ........................................ 50,000,000
Total.............................................................. $250,000,000
</TABLE>
The Underwriters propose to offer the Notes in part directly to retail
purchasers at the public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of 0.35% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0.30% of the principal amount of the Notes to certain brokers and dealers. After
the Notes are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Corporation has been advised by each Underwriter that each such Underwriter
intends to make a market in the Notes but is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.
Settlement for the Notes will be made in immediately available funds. The
Notes will be in the Same Day Funds Settlement System at The Depository Trust
Company and, to the extent the secondary market trading in the Notes is effected
through the facilities of such depositary, such trades will be settled in
immediately available funds.
The Corporation has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
This Prospectus Supplement and the Prospectus may be used by First Union
Capital Markets Corp., an affiliate of the Corporation, in connection with
offers and sales related to market-making transactions in the Notes. First Union
Capital Markets Corp. may act as principal or agent in such transactions. Such
sales will be made at prices related to prevailing market prices at the time of
sale or otherwise.
The participation of First Union Capital Markets Corp. in the offer and
sale of the Notes will comply with the requirements of Schedule E to the Bylaws
of the National Association of Securities Dealers, Inc. (the "NASD"). No NASD
member participating in offers and sales will execute a transaction in the Notes
in a discretionary account without the prior specific written approval of such
member's customer.
The Underwriters not affiliated with the Corporation and certain of their
affiliates and associates are customers of, including borrowers from, engage in
transactions with, and/or perform services for, the Corporation and its
subsidiaries, in the ordinary course of business. The Underwriters not
affiliated with the Corporation have performed investment banking services for
the Corporation in the last two years and have received fees in connection
therewith.
S-13
<PAGE>
EXPERTS
The consolidated balance sheets of the Corporation as of December 31, 1994
and 1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1994, included in the Corporation's 1994 Annual Report
to Stockholders which is incorporated by reference in the Corporation's 1994
Annual Report on Form 10-K and incorporated by reference herein, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The aforementioned report of KPMG Peat Marwick LLP covering the
Corporation's consolidated financial statements refers to a change in the method
of accounting for investments in 1994.
The consolidated statements of condition of FFB as of December 31, 1994 and
1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1994, included in FFB's 1994 Annual Report on Form
10-K and incorporated by reference herein, have been incorporated herein by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing. The aforementioned report of KPMG Peat Marwick LLP
covering FFB's consolidated financial statements refers to changes in the
methods of accounting for income taxes, postretirement benefits other than
pensions, postemployment benefits, and certain investments in debt and equity
securities in 1993.
S-14
<PAGE>
FIRST UNION CORPORATION
DEBT SECURITIES
First Union Corporation (the "Corporation" or "FUNC") may offer from time
to time an aggregate initial offering price of not more than $2,000,000,000 (or,
at the option of the Corporation if so specified in the applicable prospectus
supplement or prospectus supplements to this Prospectus (each, a "Prospectus
Supplement"), the equivalent thereof in any other currency or currency unit such
as the European Currency Unit), of its unsecured debt securities (the "Debt
Securities") consisting of unsecured senior debt securities (the "Senior Debt
Securities") and/or unsecured subordinated debt securities (the "Subordinated
Debt Securities"). The Debt Securities may be offered as separate series in
amounts, at maturities, at prices and on terms to be determined at the time of
sale as set forth in a Prospectus Supplement or Prospectus Supplements. Although
the aggregate initial offering price of the Debt Securities is limited as set
forth above, the respective indentures pursuant to which the Senior Debt
Securities and the Subordinated Debt Securities are to be issued do not contain
any limitation on the aggregate principal amount of the debt securities covered
thereby. The Senior Debt Securities when issued will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Corporation, and the
Subordinated Debt Securities when issued will be subordinated as described
herein under "DESCRIPTION OF THE DEBT SECURITIES -- Subordination of the
Subordinated Debt Securities".
When a particular series of Debt Securities is offered, a Prospectus
Supplement or Prospectus Supplements will be delivered setting forth the terms
of such Debt Securities, including the specific designation, aggregate principal
amount, the currency or currency unit in which payments are to be made,
denominations, maturity, premium, if any, rate (which may be fixed or variable)
and time of payment of interest, if any, terms for redemption at the option of
the Corporation or the holder, if any, terms for sinking fund payments, if any,
subordination terms, if any, and any other terms of such Debt Securities or
otherwise in connection with the offering and sale of the Debt Securities in
respect of which the Prospectus Supplement or Prospectus Supplements are being
delivered. In addition, the Prospectus Supplement or Prospectus Supplements will
set forth the initial public offering price, the names of any underwriters or
agents, the principal amounts, if any, to be purchased by underwriters, the
compensation of such underwriters and agents, if any, and the net proceeds to
the Corporation. The Debt Securities may be issued in definitive or permanent
global form.
The Corporation may sell Debt Securities to or through underwriters,
including First Union Capital Markets Corp., an affiliate of the Corporation,
acting as principals for their own account or as agents, and also may sell Debt
Securities directly to other purchasers or through agents designated from time
to time. If the Corporation, directly or through agents, solicits offers to
purchase the Debt Securities, the Corporation reserves the sole right to accept
and, together with its agents, to reject in whole or in part any proposed
purchase of Debt Securities. See "PLAN OF DISTRIBUTION". Any underwriters,
dealers or agents participating in the offering may be deemed "underwriters"
within the meaning of the Securities Act of 1933 (as amended, the "Securities
Act"). See "PLAN OF DISTRIBUTION" for possible indemnification arrangements for
underwriters, agents and their controlling persons.
This Prospectus and the related Prospectus Supplements may be used by
First Union Capital Markets Corp. in connection with offers and sales related to
market-making transactions in the Debt Securities. First Union Capital Markets
Corp. may act as principal or agent in such transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale.
The Securities will be unsecured obligations of the Corporation and will
not be savings accounts, deposits or other obligations of any bank or nonbank
subsidiary of the Corporation and are not insured by the Federal Deposit
Insurance Corporation ("FDIC"), the Bank Insurance Fund ("BIF") or any
government agency.
This Prospectus may not be used to consummate the sale of Debt Securities
unless accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 7, 1995.
<PAGE>
AVAILABLE INFORMATION
The Corporation and First Fidelity Bancorporation ("First Fidelity") are
subject to the informational requirements of the Securities Exchange Act of 1934
(as amended, the "Exchange Act") and, in accordance therewith, file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Corporation and First Fidelity can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices in New
York (7 World Trade Center, New York, New York 10048) and Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661), and
copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Corporation's Common Stock, $3.33 1/3 par value per share ("First
Union Common Stock"), and First Fidelity's Common Stock, $1.00 par value per
share, are each listed and traded on the New York Stock Exchange, Inc. (the
"NYSE"). Reports, proxy statements and other information of the Corporation and
First Fidelity can also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. This Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-3 of which this
Prospectus is a part (together with all amendments and exhibits thereto, the
"Registration Statement"), which the Corporation has filed with the Commission
under the Securities Act, certain portions of which have been omitted pursuant
to the rules and regulations of the Commission, and to which reference is hereby
made for further information.
The Commissioner of Insurance (the "Commissioner") of the State of North
Carolina has not approved or disapproved this offering nor has the Commissioner
passed upon the adequacy of this Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission (File
No. 1-10000) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus:
(1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "Form 10-K");
(2) the Corporation's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995 (as amended by Form 10-Q/A-No. 1 dated May 16, 1995) and
June 30, 1995; and
(3) the Corporation's Current Reports on Form 8-K dated January 13, 1995,
June 19, 1995, June 20, 1995, June 21, 1995, June 30, 1995 and August
30, 1995.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date hereof and prior to the termination of the
offering of any Debt Securities are hereby incorporated by reference into this
Prospectus and shall be deemed a part hereof from the date of filing of such
documents. Any statement contained herein, in any Prospectus Supplement or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, in any
Prospectus Supplement or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Prospectus or any Prospectus Supplement.
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY
OF THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
EXCEPT FOR CERTAIN EXHIBITS TO SUCH DOCUMENTS. WRITTEN REQUESTS SHOULD BE SENT
TO: INVESTOR RELATIONS, FIRST UNION CORPORATION, TWO FIRST UNION CENTER,
CHARLOTTE, NORTH CAROLINA 28288-0206. TELEPHONE REQUESTS MAY BE DIRECTED TO
(704) 374-6782.
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<PAGE>
THE CORPORATION
The Corporation was incorporated under the laws of North Carolina in 1967
and is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHCA"). Pursuant to a corporate reorganization in
1968, First Union National Bank of North Carolina ("FUNB-NC") and First Union
Mortgage Corporation, a mortgage banking firm acquired by FUNB-NC in 1964,
became subsidiaries of the Corporation.
In addition to North Carolina, the Corporation also operates banking
subsidiaries in Florida, South Carolina, Georgia, Tennessee, Virginia, Maryland
and Washington, D.C. In addition to providing a wide range of commercial and
retail banking and trust services through its banking subsidiaries, the
Corporation also provides various other financial services, including mortgage
banking, home equity lending, leasing, investment banking, insurance and
securities brokerage services, through other subsidiaries.
The Corporation's principal executive offices are located at One First
Union Center, Charlotte, North Carolina 28288-0013 (telephone number (704)
374-6565).
Following the 1985 Supreme Court decision upholding regional interstate
banking legislation, the Corporation concentrated its efforts on building a
large regional banking organization in the southeastern and south atlantic
regions of the United States. Since November 1985, the Corporation has completed
57 banking-related acquisitions and currently has five acquisitions pending,
including the more significant acquisitions (I.E., acquisitions involving the
acquisition of $3.0 billion or more of assets or deposits) set forth in the
following table.
<TABLE>
<CAPTION>
CONSIDERATION/
ASSETS/ ACCOUNTING
NAME HEADQUARTERS DEPOSITS (1)(2) TREATMENT COMPLETION DATE
<S> <C> <C> <C> <C>
Atlantic Bancorporation Florida $3.8 billion common stock/ November 1985
pooling
Northwestern Financial Corporation North Carolina 3.0 billion common stock/ December 1985
pooling
First Railroad & Banking Company of
Georgia Georgia 3.7 billion common stock/ November 1986
pooling
Florida National Banks of Florida, Inc. Florida 7.9 billion cash and preferred January 1990
stock/purchase
Southeast banks Florida 9.9 billion cash, notes September 1991
and preferred
stock/purchase
Resolution Trust Corporation ("RTC")
acquisitions Florida, Georgia, 5.3 billion cash/purchase 1991-1994
Virginia
Dominion Bankshares Corporation Virginia 8.9 billion common stock March 1993
and preferred
stock/pooling
Georgia Federal Bank, FSB Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp. Virginia 4.6 billion cash/purchase June 1993
American Savings of Florida, F.S.B. Florida 3.5 billion common stock/ July 1995
purchase
First Fidelity (3) New Jersey, $35.4 billion common stock
Pennsylvania and preferred
stock/pooling
</TABLE>
(1) The dollar amounts indicated represent assets of the related organization as
of the last reporting period prior to acquisition except for (i) the dollar
amount relating to RTC acquisitions, which represents savings and loan
deposits acquired from the RTC, and (ii) the dollar amount relating to
Southeast banks, which represents assets of the two banking subsidiaries of
Southeast Banking Corporation acquired from the FDIC.
3
<PAGE>
(2) In addition, the Corporation purchased Lieber & Company ("Lieber"), a mutual
fund advisory company with approximately $3.4 billion in assets under
management, in June 1994. Since such assets are not owned by Lieber, they
are not reflected on the Corporation's balance sheet.
(3) Certain financial and other information regarding First Fidelity is
incorporated herein by reference through the Corporation's Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K. See "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
The Corporation is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values, and therefore some dilution of the
Corporation's book value and net income per common share may occur in connection
with any future transactions. See "CERTAIN REGULATORY
CONSIDERATIONS -- Interstate Banking and Branching Legislation".
USE OF PROCEEDS
The Corporation currently intends to use the net proceeds from the sale of
any Debt Securities for general corporate purposes, which may include the
reduction of indebtedness, investments at the holding company level, investments
in, or extensions of credit to, its banking and other subsidiaries and other
banks and companies engaged in other financial service activities, possible
acquisitions, stock repurchases and such other purposes as may be stated in any
Prospectus Supplement. Pending such use, the net proceeds may be temporarily
invested. The precise amounts and timing of the application of proceeds will
depend upon the funding requirements of the Corporation and its subsidiaries and
the availability of other funds. Except as may be described in any Prospectus
Supplement, specific allocations of the proceeds to such purposes will not have
been made at the date of such Prospectus Supplement.
Based upon the historical and anticipated future growth of the Corporation
and the financial needs of the Corporation and its subsidiaries, the Corporation
may engage in additional financings of a character and amount to be determined
as the need arises.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Excluding interest on deposits................................. 2.63x 3.11 3.36 2.27 1.60 1.33
Including interest on deposits................................. 1.53x 1.67 1.66 1.28 1.15 1.10
</TABLE>
For purposes of computing these ratios, earnings represent income from
continuing operations before extraordinary items and cumulative effect of a
change in accounting principle plus income taxes and fixed charges (excluding
capitalized interest). Fixed charges, excluding interest on deposits, represent
interest (other than on deposits, but including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs. Fixed charges, including interest on
deposits, represent all interest (including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, the Corporation is subject to regulation under
the BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not directly or indirectly acquire the ownership or
control of more than five percent of the voting shares or substantially all of
the assets of any company, including a bank, without the prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
In addition, bank holding companies are generally prohibited under the BHCA from
engaging in nonbanking activities, subject to certain exceptions.
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<PAGE>
The earnings of the Corporation's subsidiaries, and therefore the earnings
of the Corporation, are affected by general economic conditions, management
policies and the legislative and governmental actions of various regulatory
authorities, including the Federal Reserve Board and the Comptroller of the
Currency (the "Comptroller"). In addition, there are numerous governmental
requirements and regulations which affect the activities of the Corporation and
its subsidiaries.
PAYMENT OF DIVIDENDS
The Corporation is a legal entity separate and distinct from its banking
and other subsidiaries. A major portion of the revenues of the Corporation
result from amounts paid as dividends to the Corporation by its national bank
subsidiaries. The Corporation's national banking subsidiaries are subject to
legal limitations on the amount of dividends they can pay. The prior approval of
the Comptroller is required if the total of all dividends declared by a national
bank in any calendar year will exceed the sum of such bank's net profits for
that year and its retained net profits for the preceding two calendar years,
less any required transfers to surplus. Federal law also prohibits national
banks from paying dividends which would be greater than the bank's undivided
profits after deducting statutory bad debt in excess of the bank's allowance for
loan losses.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of June
30, 1995, the Corporation's subsidiaries, without obtaining affirmative
governmental approvals, could pay aggregate dividends of $153 million to the
Corporation. During the first six months of 1995, the Corporation's subsidiaries
paid $394 million in cash dividends to the Corporation.
In addition, both the Corporation and its bank subsidiaries are subject to
various general regulatory policies and requirements relating to the payment of
dividends, including requirements to maintain adequate capital above regulatory
minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition of a
bank or bank holding company that the payment of dividends would be an unsafe or
unsound practice and to prohibit payment thereof. The Comptroller has indicated
that paying dividends that deplete a national bank's capital base to an
inadequate level would be an unsound and unsafe banking practice. The
Comptroller and the Federal Reserve Board have each indicated that banking
organizations should generally pay dividends only out of current operating
earnings.
BORROWINGS BY THE CORPORATION
There are also various legal restrictions on the extent to which the
Corporation and its nonbank subsidiaries can borrow or otherwise obtain credit
from its bank subsidiaries. In general, these restrictions require that any such
extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of the Corporation or such nonbank
subsidiaries, to ten percent of the lending bank's capital stock and surplus,
and as to the Corporation and all such nonbank subsidiaries in the aggregate, to
20 percent of such lending bank's capital stock and surplus.
CAPITAL
The minimum requirement for the ratio of capital to risk-weighted assets
(including certain off-balance-sheet activities, such as standby letters of
credit) is eight percent. At least half of the total capital is to be composed
of common equity, retained earnings and qualifying perpetual preferred stock,
less certain intangibles ("tier 1 capital" and, together with tier 2 capital,
"total capital"). The remainder may consist of subordinated debt, qualifying
preferred stock and a limited amount of the loan loss allowance ("tier 2
capital"). At June 30, 1995, the Corporation's tier 1 and total capital ratios
were 6.86 percent and 11.58 percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio requirements for bank holding companies. These requirements provide for a
minimum leverage ratio of tier 1 capital to adjusted average quarterly assets
("leverage ratio") equal to three percent for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies will generally be required to maintain a leverage
ratio of from at least four to five percent. The Corporation's leverage ratio at
June 30, 1995, was 5.74 percent. The requirements also provide that bank holding
companies experiencing internal growth or making acquisitions will be expected
to maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
requirements indicate that the Federal Reserve Board will continue to consider a
"tangible tier 1 leverage ratio" (deducting all
5
<PAGE>
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised the Corporation of any specific minimum tier 1
leverage ratio applicable to it.
Each of the Corporation's subsidiary national banks is subject to similar
capital requirements adopted by the Comptroller. The Comptroller has not advised
any of the Corporation's subsidiary national banks of any specific minimum
leverage ratio applicable to it. As of June 30, 1995, the capital ratios of the
Corporation's banking subsidiaries, FUNB-NC, First Union National Bank of South
Carolina ("FUNB-SC"), First Union National Bank of Georgia ("FUNB-GA"), First
Union National Bank of Florida ("FUNB-FL"), First Union National Bank of
Washington ("FUNB-DC"), First Union National Bank of Maryland ("FUNB-MD"), First
Union National Bank of Tennessee ("FUNB-TN"), First Union National Bank of
Virginia ("FUNB-VA") and First Union Home Equity Bank, N.A. ("FUHEB"), were as
follows:
<TABLE>
<CAPTION>
REGULATORY
MINIMUM FUNB-NC FUNB-SC FUNB-GA FUNB-FL FUNB-DC FUNB-MD FUNB-TN FUNB-VA FUHEB
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 capital ratio..... 4% 6.65 7.86 8.72 6.55 17.46 20.14 11.62 6.81 5.28
Total capital ratio...... 8 10.32 11.79 11.52 10.01 18.74 21.42 12.88 10.39 8.28
Leverage ratio........... 3-5% 5.81 5.94 6.40 5.15 7.70 13.08 7.71 5.28 5.53
</TABLE>
Banking regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations, including a proposal to add an
interest rate risk component to risk-based capital requirements.
FIRREA
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, imposes liability on an institution the deposits
of which are insured by the FDIC, such as the Corporation's subsidiary banks,
for certain potential obligations to the FDIC incurred in connection with other
FDIC-insured institutions under common control with such institution.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's stockholders, pro rata,
and to the extent necessary, if any such assessment is not paid by any
stockholder after three months notice, to sell the stock of such stockholder to
make good the deficiency. Under Federal Reserve Board policy, the Corporation is
expected to act as a source of financial strength to each of its subsidiary
banks and to commit resources to support each of such subsidiaries. This support
may be required at times when, absent such Federal Reserve Board policy, the
Corporation may not find itself able to provide it.
Any capital loans by a bank holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 (as
amended, "FDICIA"), among other things, requires the federal banking agencies to
take "prompt corrective action" in respect of depository institutions that do
not meet minimum capital requirements. FDICIA establishes five capital tiers:
"well capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized" and "critically undercapitalized". A depository institution's
capital tier will depend upon where its capital levels compare to various
relevant capital measures and certain other factors, as established by
regulation.
The Comptroller has adopted regulations establishing relevant capital
measures and relevant capital levels. The relevant capital measures are the
total capital ratio, tier 1 capital ratio and the leverage ratio. Under the
regulations, a bank will be: (i) "well capitalized" if it has a total capital
ratio of ten percent or greater, a tier 1 capital ratio of six percent or
greater and a leverage ratio of five percent or greater and is not subject to
any order or written directive by any such regulatory authority to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total capital ratio of eight percent or greater, a tier
1 capital ratio of four percent or greater and a leverage ratio of four percent
or greater (three percent in certain circumstances) and is not "well
capitalized"; (iii) "undercapitalized" if it has a total capital ratio of less
than eight percent, a tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
6
<PAGE>
circumstances); (iv) "significantly undercapitalized" if it has a total capital
ratio of less than six percent, a tier 1 capital ratio of less than three
percent or a leverage ratio of less than three percent; and (v) "critically
undercapitalized" if its tangible equity is equal to or less than two percent of
average quarterly tangible assets. As of June 30, 1995, all of the Corporation's
deposit-taking subsidiary banks listed above under "Capital" had capital levels
that qualify them as being "well capitalized" under such regulations. FUHEB is
not a deposit-taking bank.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
"undercapitalized". "Undercapitalized" depository institutions are subject to
growth limitations and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the parent
holding company is limited to the lesser of (i) an amount equal to five percent
of the depository institution's total assets at the time it became
"undercapitalized", and (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all capital standards
applicable with respect to such institution as of the time it fails to comply
with the plan. If a depository institution fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized".
"Significantly undercapitalized" depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become "adequately capitalized", requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the appointment of a
receiver or conservator.
DEPOSITOR PREFERENCE STATUTE
Legislation has been enacted providing that deposits and certain claims for
administrative expenses and employee compensation against an insured depository
institution would be afforded a priority over other general unsecured claims
against such an institution, including federal funds and letters of credit, in
the "liquidation or other resolution" of such an institution by any receiver.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("IBBEA"), authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, beginning June 1, 1997, IBBEA authorizes a bank to merge with a bank
in another state as long as neither of the states has opted out of interstate
branching between the date of enactment of IBBEA and May 31, 1997. IBBEA further
provides that states may enact laws permitting interstate bank merger
transactions prior to June 1, 1997. A bank may establish and operate a DE NOVO
branch in a state in which the bank does not maintain a branch if that state
expressly permits DE NOVO branching. Once a bank has established branches in a
state through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where any bank involved
in the interstate merger transaction could have established or acquired branches
under applicable federal or state law. A bank that has established a branch in a
state through DE NOVO branching may establish and acquire additional branches in
such state in the same manner and to the same extent as a bank having a branch
in such state as a result of an interstate merger. If a state opts out of
interstate branching within the specified time period, no bank in any other
state may establish a branch in the opting out state, whether through an
acquisition or DE NOVO.
FDIC INSURANCE ASSESSMENTS
On August 8, 1995, the FDIC amended its regulations on insurance
assessments to establish a new assessment rate schedule of 4 to 31 cents per
$100 of deposits in replacement of the existing schedule of 23 to 31 cents per
$100 of deposits for institutions whose deposits are subject to assessment by
the Bank Insurance Fund ("BIF"). The FDIC has maintained the current assessment
rate schedule of 23 to 31 cents per $100 of deposits for the institutions whose
deposits are subject to assessment by the Savings Association Insurance Fund
("SAIF"). The new BIF schedule will become effective on the first day of the
month after the month in which the BIF reaches its "designated reserve ratio" of
1.25 percent which the FDIC has estimated occurred sometime in the second
quarter of 1995. Assessments collected at the previous assessment schedule that
exceed the amount due
7
<PAGE>
under the new schedule will be refunded, with interest, from the effective date
of the new schedule. As of March 31, 1995, the Corporation had a BIF deposit
assessment base of $40.5 billion and a SAIF deposit assessment base of $14.7
billion. Various legislative proposals regarding the future of the BIF and the
SAIF have been reported recently. Several of these proposals include a one-time
special assessment for SAIF deposits and a subsequent comparable and reduced
level of annual premiums for SAIF and BIF deposits. The Corporation does not
know when and if any such proposal or any other related proposal may be adopted.
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") will be
described in the Prospectus Supplement or Prospectus Supplements relating to
such Offered Debt Securities (the "Applicable Prospectus Supplement(s)").
Senior Debt Securities are to be issued under an Indenture, dated as of
April 1, 1983, as amended by supplemental indentures dated as of May 17, 1986,
July 1, 1988 and August 1, 1990 (the "Senior Indenture"), between the
Corporation and Chemical Bank, as Trustee (the "Senior Trustee"). Subordinated
Debt Securities are to be issued under an Indenture, dated as of March 15, 1986,
as amended by supplemental indentures dated as of August 1, 1990 and November
15, 1992 (the "Subordinated Indenture" and together with the Senior Indenture,
the "Indentures"), between the Corporation and The Bank of New York (formerly
Irving Trust Company), as Trustee (the "Subordinated Trustee", and together with
the Senior Trustee, the "Trustees"). Copies of the Senior Indenture and the
Subordinated Indenture are incorporated by reference as exhibits to the
Registration Statement. The following summaries of certain provisions of the
Senior Debt Securities, the Subordinated Debt Securities, the Senior Indenture
and the Subordinated Indenture, as modified or superseded by the Applicable
Prospectus Supplement(s), are brief summaries of certain provisions thereof, do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Indenture applicable to a
particular series of Debt Securities (the "Applicable Indenture"), including the
definitions therein of certain terms. Whenever particular provisions or defined
terms in one or both of the Indentures are referred to, such provisions or
defined terms are incorporated herein by reference. Section references used
herein are references to the Applicable Indenture. Capitalized terms not
otherwise defined herein shall have the meaning given to them in the Applicable
Indenture.
The Debt Securities will be limited to an aggregate initial offering price
of $2,000,000,000 (or, at the option of the Corporation if so specified in the
Applicable Prospectus Supplement(s), the equivalent thereof in any other
currency or currency unit such as the European Currency Unit), and will be
direct, unsecured obligations of the Corporation. The Debt Securities will not
be deposits or other obligations of a bank and will not be insured by the FDIC.
The Indentures do not limit the aggregate principal amount of Securities or
of any particular series of Securities which may be issued thereunder and
provide that Securities issued thereunder may be issued from time to time in one
or more series, in each case with the same or various maturities, at par or at a
discount. (SECTION 301). The Indentures provide that there may be more than one
trustee under the Indentures with respect to different series of Securities. As
of June 30, 1995, $879 million aggregate principal amount of Senior Debt
Securities was issued and outstanding as additional series of Securities under
the Senior Indenture. The Senior Trustee is trustee for such additional series.
As of June 30, 1995, $2.6 billion aggregate principal amount of Subordinated
Debt Securities was issued and outstanding as additional series of Securities
under the Subordinated Indenture. The Subordinated Trustee is trustee for such
additional series.
The Indentures do not limit the amount of other debt that may be issued by
the Corporation and do not contain financial or similar restrictive covenants.
As of June 30, 1995, the Corporation had an aggregate of $1.3 billion of
short-term Senior Indebtedness outstanding which consisted primarily of
commercial paper. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Indebtedness and Other Financial Obligations
(as defined in the Subordinated Indenture). The Indentures do not prohibit or
limit the incurrence of additional Senior Indebtedness or Other Financial
Obligations.
8
<PAGE>
Because the Corporation is a holding company and a legal entity separate
and distinct from its subsidiaries, the rights of the Corporation to participate
in any distribution of assets of any subsidiary upon its liquidation of assets
or reorganization or otherwise (and thus the ability of Holders of Debt
Securities to benefit indirectly from such distribution) would be subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Corporation itself may be a creditor of that subsidiary with recognized claims.
Claims on the Corporation's subsidiary banks by creditors other than the
Corporation include long-term debt and substantial obligations with respect to
deposit liabilities and federal funds purchased, securities sold under
repurchase agreements, other short-term borrowings and various other financial
obligations. The Indentures do not contain any covenants designed to afford
holders of Securities, including holders of the Debt Securities, protection in
the event of a highly leveraged transaction involving the Corporation.
Reference is made to the Applicable Prospectus Supplement(s) for the
following terms of the Offered Debt Securities offered thereby: (i) the title of
the Offered Debt Securities; (ii) whether the Offered Debt Securities are Senior
Debt Securities or Subordinated Debt Securities; (iii) any limit upon the
aggregate principal amount of the Offered Debt Securities and the percentage of
such principal amount at which such Offered Debt Securities may be issued; (iv)
the date or dates on which the principal of the Offered Debt Securities is
payable (the "Stated Maturity"); (v) the rate or rates (which may be fixed or
variable) per annum at which the Offered Debt Securities will bear interest, or
the method of determining such rate or rates, if any, the date or dates from
which any such interest will accrue, the Interest Payment Dates on which any
such interest will be payable, the Regular Record Date for the interest payable
on any Interest Payment Date, the Person to whom any Offered Debt Security of
such series will be payable, if other than the Person in whose name that Offered
Debt Security (or one or more predecessor Debt Securities) is registered at the
close of business on the Regular Record Date for such interest and the extent to
which, or the manner in which, any interest payable on a permanent global
Offered Debt Security on an Interest Payment Date will be paid; (vi) if other
than the location specified in this Prospectus, the place or places where the
principal of and premium, if any, and interest on the Offered Debt Securities
will be payable; (vii) the period or periods within which, the price or prices
at which and the terms and conditions upon which the Offered Debt Securities
will, pursuant to any mandatory sinking fund provisions or otherwise, or may,
pursuant to any optional sinking fund provisions or otherwise, be redeemed in
whole or in part by the Corporation; (viii) the period or periods within which,
the price or prices at which and the terms and conditions upon which the Offered
Debt Securities may be repaid, in whole or in part, at the option of the Holders
thereof; (ix) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Offered Debt Securities shall be
issuable; (x) if other than the principal amount thereof, the portion of the
principal amount of the Offered Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof; (xi) the currency or
currency unit of payment of principal and premium, if any, and interest on such
Offered Debt Securities, and any index used to determine the amount of payment
of principal or premium, if any, and interest on such Offered Debt Securities;
(xii) whether the Offered Debt Securities are to be issuable in permanent global
form and, in such case, the initial depository with respect thereto and the
circumstances under which such permanent global Debt Security may be exchanged;
(xiii) whether the subordination provisions summarized below or different
subordination provisions, including a different definition of "Senior
Indebtedness", "Entitled Persons", "Existing Subordinated Indebtedness" or
"Other Financial Obligations", shall apply to the Offered Debt Securities; and
(xiv) any other terms of the Offered Debt Securities not specified in this
Prospectus. (SECTION 301). Where appropriate, the Applicable Prospectus
Supplement(s) will describe the United States federal income tax considerations
relevant to the Offered Debt Securities.
Unless otherwise indicated in the Applicable Prospectus Supplement(s),
principal, premium, if any, and interest, if any, on the Debt Securities will be
payable, and the Debt Securities will be transferable, at the Corporate Trust
Office of FUNB-NC in Charlotte, North Carolina, except that interest may be paid
at the option of the Corporation by check mailed to the address of the Holder
entitled thereto as it appears on the Security Register. (SECTIONS 301, 305 AND
1002).
Unless otherwise indicated in the Applicable Prospectus Supplement(s), the
Debt Securities will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple thereof. (SECTION 302). The
Indentures provide that Offered Debt Securities of any series may be issuable in
permanent global form (SECTION 301). No service charge will be made for any
registration of transfer or exchange of the Debt Securities, but the Corporation
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (SECTION 305).
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Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Securities to be offered and sold at a substantial
discount below their stated principal amount. Federal income tax consequences
and other special considerations applicable to any such Original Issue Discount
Securities will be described in the Applicable Prospectus Supplement(s).
"Original Issue Discount Security" means any security which provides for an
amount less than the principal amount thereof to be due and payable upon the
declaration of acceleration of the Maturity thereof in accordance with the terms
of the related Indenture. (SECTION 101).
Reference is made to the Applicable Prospectus Supplement(s) relating to
any series of Offered Debt Securities that are Original Issue Discount
Securities for the particular provisions relating to acceleration of the
maturity of a portion of the principal amount of such series of Original Issue
Discount Securities upon the occurrence of an Event of Default and the
continuation thereof.
PERMANENT GLOBAL DEBT SECURITIES
Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more permanent global Debt Securities ("Global
Securities") which will have an aggregate principal amount equal to that of the
Debt Securities represented thereby. Each Global Security will be registered in
the name of a Depositary or a nominee thereof identified in the Applicable
Prospectus Supplement, will be deposited with such Depositary or nominee or a
custodian therefor and will bear a legend regarding the restrictions on
exchanges and registration of transfer thereof referred to below and any such
other matters as may be provided for pursuant to the Applicable Indenture.
Notwithstanding any provision of the Applicable Indenture or any Debt
Security described herein, no Global Security may be exchanged in whole or in
part for Debt Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Security or any nominee of such Depositary unless (i)
the Depositary has notified the Corporation that it is unwilling or unable to
continue as Depositary for such Global Security or has ceased to be qualified to
act as such as required by the Applicable Indenture, (ii) there shall have
occurred and be continuing an Event of Default with respect to the Debt
Securities represented by such Global Security or (iii) there shall exist such
circumstances, if any, in addition to or in lieu of those described above as may
be described in the Applicable Prospectus Supplement. All securities issued in
exchange for a Global Security or any portion thereof will be registered in such
names as the Depositary may direct. (SECTIONS 203 AND 305).
As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the Applicable Indenture. Except in the limited circumstances referred to above,
owners of beneficial interests in a Global Security will not be entitled to have
such Global Security or any Debt Securities represented thereby registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange therefor and will not be considered to
be the owners or Holders of such Global Security or any Debt Securities
represented thereby for any purpose under the Debt Securities or the Applicable
Indenture. All payments of principal of and any premium and interest on a Global
Security will be made to the Depositary or its nominee, as the case may be, as
the Holder thereof. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in definitive
form. These laws may impair the ability to transfer beneficial interests in a
Global Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to Persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Corporation has been advised by the Depositary that it will credit, on its
book-entry registration and transfer system, the respective principal amounts of
Debt Securities represented by the Global Security to the accounts of its
participants. Ownership of beneficial interests in a Global Security will be
shown only on, and the transfer of those ownership interests will be effected
only through, records maintained by the Depositary (with respect to
participants' interests) or any such participant (with respect to interests of
Persons held by such participants on their behalf). Payments, transfers,
exchanges and other matters relating to beneficial interests in a Global
Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of the Corporation, the Trustees or any agent
of the Corporation or the Trustees will have any responsibility or liability for
any aspect of the Depositary's or any
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participant's records relating to, or for payments made on account of,
beneficial interests in a Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearing-house or next-day funds. In contrast, beneficial interests
in a Global Security, in some cases, may trade in the Depositary's same-day
funds settlement system, in which secondary market trading activity in those
beneficial interests would be required by the Depositary to settle in
immediately available funds. There is no assurance as to the effect, if any,
that settlement in immediately available funds would have on trading activity in
such beneficial interests. Also, settlement for purchases of beneficial
interests in a Global Security upon the original issuance thereof may be
required to be made in immediately available funds.
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES
The obligations of the Corporation to make any payment on account of the
principal of and interest on any Subordinated Debt Securities will, to the
extent set forth in the Subordinated Indenture, be subordinate and junior in
right of payment to all Senior Indebtedness of the Corporation. Unless otherwise
specified in the Applicable Prospectus Supplement relating to the particular
series of Subordinated Debt Securities offered thereby, "Senior Indebtedness" of
the Corporation is defined in the Subordinated Indenture to mean the principal
of, premium, if any, and interest on (i) all indebtedness of the Corporation for
money borrowed (including indebtedness of others guaranteed by the Corporation)
other than the Subordinated Debt Securities, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, except
(a) any obligations on account of Existing Subordinated Indebtedness, and (b)
such indebtedness as is by terms expressly stated to be not superior in right of
payment to the Subordinated Debt Securities or to rank PARI PASSU with the
Subordinated Debt Securities, and (ii) any deferrals, renewals or extensions of
any such Senior Indebtedness. The term "indebtedness of the Corporation for
money borrowed" is defined in the Subordinated Indenture to mean any obligation
of, or any obligation guaranteed by, the Corporation for the repayment of
borrowed money, whether or not evidenced by bonds, debentures, notes or other
written instruments, and any deferred obligation for the payment of the purchase
price of property or assets. (SECTION 101 and ARTICLE FOURTEEN of the
Subordinated Indenture).
The payment of the principal of and interest on the Subordinated Debt
Securities will, to the extent set forth in the Subordinated Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness. Unless otherwise specified in the Applicable Prospectus Supplement
relating to the particular series of Subordinated Debt Securities offered
thereby, in certain events of insolvency, the payment of the principal of and
interest on the Subordinated Debt Securities, other than Subordinated Debt
Securities that are also Existing Subordinated Indebtedness (as defined in the
Subordinated Indenture), will, to the extent set forth in the Subordinated
Indenture, also be effectively subordinated in right of payment to the prior
payment in full of all Other Financial Obligations. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshalling of
assets or any bankruptcy, insolvency or similar proceedings of the Corporation,
the holders of all Senior Indebtedness will first be entitled to receive payment
in full of all amounts due or to become due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of or interest on the Subordinated Debt Securities. If upon any
such payment or distribution of assets to creditors, there remains, after giving
effect to such subordination provisions in favor of the holders of Senior
Indebtedness, any amount of cash, property or securities available for payment
or distribution in respect of Subordinated Debt Securities (defined in the
Subordinated Indenture as "Excess Proceeds") and if, at such time, any Entitled
Persons (as defined in the Subordinated Indenture) in respect of Other Financial
Obligations have not received payment in full of all amounts due or to become
due on or in respect of such Other Financial Obligations, then such Excess
Proceeds shall first be applied to pay or provide for the payment in full of
such Other Financial Obligations before any payment or distribution may be made
in respect of the Subordinated Debt Securities which are not Existing
Subordinated Indebtedness. In the event of the acceleration of the maturity of
any Subordinated Debt Securities, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due thereon before
the Holders of the Subordinated Debt Securities will be entitled to receive any
payment upon the principal of or interest on the Subordinated Debt Securities.
By reason of such subordination in favor of the holders of Senior
Indebtedness, in the event of insolvency, creditors of the Corporation who are
not holders of Senior Indebtedness or Holders of the Subordinated Debt
Securities may recover less, ratably, than the holders of Senior Indebtedness
and may recover more, ratably, than
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the Holders of the Subordinated Debt Securities. By reason of the obligation of
the Holders of Subordinated Debt Securities (other than Existing Subordinated
Indebtedness) to pay over any Excess Proceeds to Entitled Persons in respect to
Other Financial Obligations, in the event of insolvency, holders of Existing
Subordinated Indebtedness may recover less, ratably, than Entitled Persons in
respect of Other Financial Obligations and may recover more, ratably, than the
Holders of Subordinated Debt Securities (other than Existing Subordinated
Indebtedness).
Unless otherwise specified in the Applicable Prospectus Supplement relating
to the particular series of Subordinated Debt Securities offered thereby,
"Existing Subordinated Indebtedness" means Securities issued pursuant to the
Subordinated Indenture prior to November 15, 1992. (SECTION 101 of the
Subordinated Indenture).
Unless otherwise specified in the Applicable Prospectus Supplement relating
to the particular series of Subordinated Debt Securities offered thereby, "Other
Financial Obligations" means all obligations of the Corporation to make payment
pursuant to the terms of financial instruments, such as (i) securities contracts
and foreign currency exchange contracts, (ii) derivative instruments, such as
swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange rate agreements, options, commodity futures
contracts, commodity option contracts, and (iii) in the case of both (i) and
(ii) above, similar financial instruments, other than (a) obligations on account
of Senior Indebtedness, and (b) obligations on account of indebtedness for money
borrowed ranking PARI PASSU with or subordinate to the Subordinated Debt
Securities. Unless otherwise specified in the Applicable Prospectus Supplement
relating to the particular series of Subordinated Debt Securities offered
thereby, "Entitled Persons" means any person who is entitled to payment pursuant
to the terms of Other Financial Obligations.
The Corporation's obligations under the Subordinated Debt Securities shall
rank PARI PASSU in right of payment with each other and with the Existing
Subordinated Indebtedness, subject (unless otherwise specified in the Applicable
Prospectus Supplement relating to the particular series of Subordinated Debt
Securities offered thereby) to the obligations of the Holders of Subordinated
Debt Securities (other than Existing Subordinated Indebtedness) to pay over any
Excess Proceeds to Entitled Persons in respect of Other Financial Obligations as
provided in the Subordinated Indenture.
The Applicable Prospectus Supplement may further describe the provisions,
if any, applicable to the subordination of the Subordinated Debt Securities of a
particular series.
LIMITATION ON DISPOSITION OF STOCK OF FUNB-NC
THE SENIOR INDENTURE
The Senior Indenture contains a covenant by the Corporation that, so long
as any of the Senior Debt Securities issued thereunder before August 1, 1990 are
outstanding, but subject to the rights of the Corporation in connection with its
consolidation with or merger into another corporation or a sale of the
Corporation's assets, it will not sell, assign, transfer, grant a security
interest in or otherwise dispose of any shares of, securities convertible into,
or options, warrants or rights to subscribe for or purchase shares of, Voting
Stock of FUNB-NC, nor will it permit FUNB-NC to issue (other than to the
Corporation) any shares (other than directors' qualifying shares) of, or
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of FUNB-NC, unless (i) any such sale,
assignment, transfer, issuance, grant of a security interest or other
disposition is made for fair market value, as determined by the Board of
Directors of the Corporation, and (ii) the Corporation will own at least 80
percent of the issued and outstanding Voting Stock of FUNB-NC (or any successor
to FUNB-NC) free and clear of any security interest after giving effect to such
transaction. (SECTION 1006).
The foregoing covenant is not a covenant for the benefit of any series of
Senior Debt Securities issued on or after August 1, 1990.
THE SUBORDINATED INDENTURE
The Subordinated Indenture contains a covenant by the Corporation that, so
long as any of the Subordinated Debt Securities issued thereunder before August
1, 1990 are outstanding, but subject to the rights of the Corporation in
connection with its consolidation with or merger into another corporation or a
sale of the Corporation's assets, it will not sell, assign, transfer, grant a
security interest in or otherwise dispose of any shares of, securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock of FUNB-NC (other than to a Wholly-Owned Subsidiary),
nor will it permit FUNB-NC to issue (other than to the Corporation
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or to a Wholly-Owned Subsidiary) any shares (other than directors' qualifying
shares) of, or securities convertible into, or options, warrants or rights to
subscribe for or purchase shares of, Voting Stock of FUNB-NC, unless (i) any
such sale, assignment, transfer, issuance, grant of a security interest or other
disposition is made for fair market value, as determined by the Board of
Directors of the Corporation, and (ii) the Corporation and/or its Wholly-Owned
Subsidiaries will own at least 80 percent of the issued and outstanding Voting
Stock of FUNB-NC (or any successor to FUNB-NC) free and clear of any security
interest after giving effect to such transaction. (SECTION 1006).
The foregoing covenant is not a covenant for the benefit of any series of
Subordinated Debt Securities issued on or after August 1, 1990.
RESTRICTION ON SALE OR ISSUANCE OF VOTING STOCK OF MAJOR SUBSIDIARY BANKS
The Indentures each contain a covenant by the Corporation that it will not,
and will not permit any Subsidiary to, sell, assign, transfer, grant a security
interest or otherwise dispose of any shares of Voting Stock, or any securities
convertible into shares of Voting Stock, of any Major Subsidiary Bank or any
Subsidiary owning, directly or indirectly, any shares of Voting Stock of any
Major Subsidiary Bank and that it will not permit any Major Subsidiary Bank or
any Subsidiary owning, directly or indirectly, any shares of Voting Stock of a
Major Subsidiary Bank to issue any shares of its Voting Stock or any securities
convertible into shares of its Voting Stock, except for sales, assignments,
transfers or other dispositions which: (i) are for the purpose of qualifying a
Person to serve as a director; (ii) are for fair market value (as determined by
the Board of Directors of the Corporation) and, after giving effect to such
dispositions and to any potential dilution, the Corporation will own not less
than 80 percent of the shares of Voting Stock of such Major Subsidiary Bank or
any such Subsidiary owning any shares of Voting Stock of such Major Subsidiary
Bank; (iii) are made (x) in compliance with an order of a court or regulatory
authority of competent jurisdiction, or (y) in compliance with a condition
imposed by any such court or authority permitting the acquisition by the
Corporation, directly or indirectly, of any other Bank or entity the activities
of which are legally permissible for a Person such as the Corporation or a
Subsidiary to engage in, or (z) in compliance with an undertaking made to such
authority in connection with such an acquisition (provided that, in the case of
clauses (y) and (z), the assets of the Bank or entity being acquired and its
consolidated subsidiaries equal or exceed 75 percent of the assets of such Major
Subsidiary Bank or such Subsidiary owning, directly or indirectly, any shares of
Voting Stock of a Major Subsidiary Bank and its respective consolidated
subsidiaries on the date of acquisition); or (iv) are made to the Corporation or
any Wholly-Owned Subsidiary. Notwithstanding the foregoing, any Major Subsidiary
Bank may be merged into or consolidated with another banking institution
organized under the laws of the United States, any State thereof or Washington
D.C., if after giving effect to such merger or consolidation the Corporation or
any Wholly-Owned Subsidiary owns at least 80 percent of the Voting Stock of such
other banking institution then issued and outstanding free and clear of any
security interest and if, immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing. (SECTION 1007). A
Major Subsidiary Bank is defined in each Indenture to mean any Subsidiary which
is a bank and has total assets equal to 25 percent or more of the consolidated
assets of the Corporation determined as of the date of the most recent audited
financial statements of such entities. At present, the only Major Subsidiary
Banks are FUNB-NC and FUNB-FL.
The foregoing covenant is not a covenant for the benefit of any series of
Debt Securities issued before August 1, 1990, or, in the case of Subordinated
Debt Securities, issued after November 15, 1992.
DEFAULTS
THE SENIOR INDENTURE
An Event of Default is defined in the Senior Indenture as, with respect to
Debt Securities of any series issued thereunder: default in payment of principal
of or premium, if any, on any Security of that series at Maturity; default for
30 days in payment of interest of any Debt Security of that series; failure to
deposit any sinking fund payment when due in respect of that series; failure by
the Corporation for 60 days after due notice in performance of any other of the
covenants or warranties in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of Securities other
than that series); failure to pay when due any indebtedness of the Corporation
or, in the case of any series of Senior Debt Securities issued on or after
August 1, 1990, any Major Subsidiary Bank, or, in the case of any series of
Senior Debt Securities issued before
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August 1, 1990, FUNB-NC, for borrowed money in excess of $5,000,000, or
acceleration of the maturity of any such indebtedness in excess of such amount
if acceleration results from a default under the instrument giving rise to such
indebtedness and is not annulled within 30 days after due notice, unless in
either case such default is contested in good faith by appropriate proceedings;
certain events of bankruptcy, insolvency or reorganization of the Corporation
or, in the case of any series of Senior Debt Securities issued on or after
August 1, 1990, any Major Subsidiary Bank, or, in the case of any series of
Senior Debt Securities issued before August 1, 1990, FUNB-NC; and any other
Event of Default provided with respect to Debt Securities of that series.
(SECTION 501).
The Senior Indenture provides that, if any Event of Default with respect to
Debt Securities of any series at the time Outstanding thereunder occurs and is
continuing, either the Senior Trustee or the Holders of not less than 25 percent
in principal amount of the Outstanding Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all Debt Securities of that series to be due and
payable immediately (provided that no such declaration is required upon certain
events of bankruptcy), but upon certain conditions such declaration may be
annulled and past defaults (except, unless theretofore cured, a default in
payment of principal of or premium, if any, or interest on the Debt Securities
of that series and certain other specified defaults) may be waived by the
Holders of a majority in principal amount of the Outstanding Securities of that
series on behalf of the Holders of all Securities of that series. (SECTIONS 502
AND 513). See the penultimate paragraph under "General" above. In the event of
the bankruptcy, insolvency or reorganization of the Corporation, the claims of
Holders would be subject as to enforcement to the broad equity power of a
federal bankruptcy court, and to the determination by that court of the nature
of the rights of the Holders.
The Senior Indenture contains a provision entitling the Senior Trustee,
subject to the duty of the Senior Trustee upon the occurrence and continuation
of an Event of Default to act with the required standard of care, to be
indemnified by the Holders of any series of Outstanding Securities thereunder
before proceeding to exercise any right or power under the Indenture at the
request of the Holders of such series of Securities. (SECTION 603). The Senior
Indenture provides that the Holders of a majority in principal amount of
Outstanding Securities thereunder of any series may direct the time, method and
place of conducting any proceeding for any remedy available to the Senior
Trustee, or exercising any trust or other power conferred on the Senior Trustee,
with respect to the Securities of such series, provided that the Senior Trustee
may decline to act if such direction is contrary to law or the Senior Indenture
or would involve the Senior Trustee in personal liability. (SECTION 512).
The Corporation will file annually with the Senior Trustee a certificate as
to compliance with all conditions and covenants in the Senior Indenture.
(SECTION 1007).
THE SUBORDINATED INDENTURE
Payment of principal of the Subordinated Debt Securities may be accelerated
only upon an Event of Default (as defined below). There is no right of
acceleration in the case of a default in the payment of interest or the payment
of principal prior to the date of maturity or a default in the performance of
any other covenant of the Corporation in the Subordinated Indenture, unless the
terms of a particular series of Subordinated Debt Securities specifically
provide otherwise, in which case any such extension of such right of
acceleration will be described in the Applicable Prospectus Supplement(s).
An Event of Default is defined in the Subordinated Indenture as, with
respect to Subordinated Debt Securities of any series issued thereunder, certain
events involving the bankruptcy, insolvency or reorganization of the Corporation
and any other Event of Default which may be provided for with respect to the
Subordinated Debt Securities of that series. (SECTION 501). A Default, with
respect to Securities of that series, is defined in the Subordinated Indenture
to include: (i) any Event of Default; (ii) a default in the payment of principal
or premium, if any, of any Security of that series at its Maturity; (iii)
default in the payment of any interest when due, continued for 30 days; (iv) a
default in any required designation of funds as Available Funds; or (v) default
in the performance, or breach, of any other covenant of the Corporation in the
Subordinated Indenture or in the Securities of that series, continued for 90
days after written notice to the Corporation by the Subordinated Trustee or to
the Corporation and the Subordinated Trustee by the Holders of not less than 25
percent in aggregate principal amount of the Outstanding Securities of such
series. (SECTION 503). If an Event of Default with respect to the Securities of
any series occurs and is continuing, either the Subordinated Trustee or the
Holders of not less than 25 percent in aggregate principal amount of the
Outstanding Securities of that series may accelerate the maturity
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of all Outstanding Securities of such series. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of that series may
waive an Event of Default resulting in acceleration of the Securities of such
series, but only if all Events of Default have been remedied and all payments
due on the Securities of that series (other than those due as a result of
acceleration) have been made and certain other conditions have been met.
(SECTION 502). Subject to the provisions of the Subordinated Indenture relating
to the duties of the Subordinated Trustee, in case a Default shall occur and be
continuing, the Subordinated Trustee will be under no obligation to exercise any
of its rights or powers under the Subordinated Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Subordinated Trustee reasonable indemnity.
(SECTION 603). Subject to such provisions for the indemnification of the
Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Subordinated Trustee or exercising any trust or power conferred on the
Subordinated Trustee. (SECTION 512). The Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series may waive any past
default under the Subordinated Indenture with respect to such series, except a
default in the payment of principal or interest or a default in respect of a
covenant in the Subordinated Indenture which cannot be modified without the
consent of the Holder of each Outstanding Security of the series affected.
(SECTION 513). See the penultimate paragraph under "General" above. In the event
of the bankruptcy, insolvency or reorganization of the Corporation, the claims
of the Holders would be subject as to enforcement to the broad equity power of a
federal bankruptcy court, and to the determination by that court of the nature
of the rights of the Holders.
The Corporation will file annually with the Subordinated Trustee a
certificate as to compliance with all conditions and covenants in the
Subordinated Indenture. (SECTION 1007).
MODIFICATION AND WAIVER
Certain modifications and amendments of each of the Senior Indenture or the
Subordinated Indenture may be made by the Corporation and the Trustee under the
Applicable Indenture only with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of each
series issued under such Indenture and affected by the modification or
amendment, provided that no such modification or amendment may, without the
consent of the Holder of each Outstanding Security issued under such Indenture
and affected thereby: (i) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any such Security; (ii) reduce the
principal amount of, or the premium, if any, or the interest on, any such
Security (including in the case of an Original Issue Discount Security the
amount payable upon acceleration of the maturity thereof); (iii) change the
place of payment where, or the coin or currency or currency unit in which, any
principal of, or premium, if any, or interest on, any such Security is payable;
(iv) impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date); (v) reduce the above-stated percentage of
Outstanding Securities of any series the consent of the Holders of which is
necessary to modify or amend the Applicable Indenture; or (vi) modify the
foregoing requirements or reduce the percentage of aggregate principal amount of
Outstanding Securities of any series required to be held by Holders seeking to
waive compliance with certain provisions of the Applicable Indenture or seeking
to waive certain defaults. (SECTION 902).
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series may on behalf of the Holders of all
Securities of that series waive, insofar as that series is concerned, compliance
by the Corporation with certain restrictive provisions of the Applicable
Indenture. (SECTION 1008). The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of any series may on behalf of
the Holders of all Securities of that series waive any past default under the
Applicable Indenture with respect to that series, except a default in the
payment of the principal of, or premium, if any, or interest on any Security of
that series or in respect of a covenant or provision which under the Applicable
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Security issued thereunder of the series affected. (SECTION
513).
Certain modifications and amendments of each of the Senior Indenture and
the Subordinated Indenture may be made by the Corporation and the Trustee under
the Applicable Indenture without the consent of Holders of the Outstanding
Securities issued under such Indenture. (SECTION 901).
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Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities issued under such
Indenture have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or are present at a meeting of Holders of
Securities for quorum purposes, (i) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof, and (ii) the principal
amount of a Security denominated in a foreign currency or currency unit shall be
the U.S. dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount of such Security or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent, determined on the
date of original issuance of such Security, of the amount determined as provided
in (i) above. (SECTION 101).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures each provide that the Corporation may not consolidate with
or merge into any other corporation or transfer its properties and assets
substantially as an entirety to any Person unless (i) the corporation formed by
such consolidation or into which the Corporation is merged or the Person to
which the properties and assets of the Corporation are so transferred shall be a
corporation organized and existing under the laws of the United States, any
State thereof or Washington, D.C. and shall expressly assume by supplemental
indenture the payment of the principal of and premium, if any, and interest on
the Senior Debt Securities or the Subordinated Debt Securities, as the case may
be, and the performance of the other covenants of the Corporation under the
Applicable Indenture; (ii) immediately after giving effect to such transaction,
no Event of Default or Default, as applicable, and no event which, after notice
or lapse of time or both, would become an Event of Default or Default, as
applicable, shall have occurred and be continuing; and (iii) certain other
conditions are met. (SECTION 801).
TRUSTEES
Either or both of the Trustees may resign or be removed with respect to one
or more series of Securities and a successor Trustee may be appointed to act
with respect to such series. (SECTION 610). In the event that two or more
persons are acting as Trustee with respect to different series of Securities,
each such Trustee shall be a Trustee of a trust under the related Indenture
separate and apart from the trust administered by any other such Trustee
(SECTION 611), and any action described herein to be taken by the "Trustee" may
then be taken by each such Trustee with respect to, and only with respect to,
the one or more series of Securities for which it is Trustee.
In the normal course of business, the Corporation and its subsidiaries
conduct banking transactions with the Trustees, and the Trustees conduct banking
transactions with the Corporation and its subsidiaries.
VALIDITY OF OFFERED DEBT SECURITIES
The validity of any Offered Debt Securities will be passed upon for the
Corporation by Marion A. Cowell, Jr., Esq., Executive Vice President, Secretary
and General Counsel of the Corporation, and for any underwriters or agents by
Sullivan & Cromwell, 125 Broad Street, New York, New York. Sullivan & Cromwell
will rely upon the opinion of Mr. Cowell as to matters of North Carolina law,
and Mr. Cowell will rely upon the opinion of Sullivan & Cromwell as to matters
of New York law. Mr. Cowell owns shares of the Corporation's Common Stock and
holds options to purchase additional shares of such Common Stock. Sullivan &
Cromwell regularly performs legal services for the Corporation and its
subsidiaries. Certain members of Sullivan & Cromwell performing these legal
services own shares of the Corporation's Common Stock.
EXPERTS
The consolidated balance sheets of the Corporation as of December 31, 1994
and 1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1994, included in the Corporation's 1994 Annual Report
to Stockholders which is incorporated by reference in the Corporation's 1994
Annual Report on Form 10-K and incorporated by reference herein, have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The aforementioned report of KPMG Peat Marwick LLP covering the
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Corporation's consolidated financial statements refers to a change in the method
of accounting for investments in 1994.
The consolidated statements of condition of First Fidelity as of December
31, 1994 and 1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1994, included in First Fidelity's 1994 Annual Report
on Form 10-K and incorporated by reference herein, have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
aforementioned report of KPMG Peat Marwick LLP covering First Fidelity's
consolidated financial statements refers to changes in the methods of accounting
for income taxes, postretirement benefits other than pensions, postemployment
benefits, and investments in 1993.
PLAN OF DISTRIBUTION
The Corporation may sell Debt Securities to or through underwriters,
including First Union Capital Markets Corp., an affiliate of the Corporation, to
be designated from time to time, and also may sell Debt Securities directly to
other purchasers or through agents. The distribution of the Debt Securities may
be effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
The Debt Securities will be new issues of securities with no established
trading market. It has not presently been established whether the underwriters,
if any, of the Debt Securities will make a market in the Debt Securities. If a
market in the Debt Securities is made by any such underwriters, such market
making may be discontinued at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debt Securities.
This Prospectus and the related Prospectus Supplement may be used by First
Union Capital Markets Corp., an affiliate of the Corporation, in connection with
offers and sales related to market-making transactions in the Debt Securities.
First Union Capital Markets Corp. may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale or otherwise.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Corporation or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Corporation and any profit on
the resale of Debt Securities by them may be deemed to be underwriting discounts
and commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Corporation will be
described, in the Applicable Prospectus Supplement(s) relating to such Debt
Securities.
Unless otherwise indicated in the Applicable Prospectus Supplement(s), the
obligations of any such underwriters to purchase the Debt Securities will be
subject to certain conditions precedent, and each of the underwriters with
respect to a sale of Debt Securities will be obligated to purchase all of its
Debt Securities if any are purchased. Unless otherwise indicated in the
Applicable Prospectus Supplement(s), any such agent involved in the offer and
sale of the Debt Securities in respect of which this Prospectus is being
delivered will be acting on a best efforts basis for the period of its
appointment.
Under agreements which may be entered into by the Corporation,
underwriters, agents and their controlling persons who participate in the
distribution of Debt Securities may be entitled to indemnification by the
Corporation against certain liabilities, including liabilities under the
Securities Act.
If so indicated in the Applicable Prospectus Supplement(s) relating to any
Offered Debt Securities, the Corporation will authorize dealers or other persons
acting as the Corporation's agents to solicit offers by certain institutions to
purchase any Offered Debt Securities from the Corporation pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
such contracts may be made include commercial
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<PAGE>
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Corporation. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of any Offered Debt Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such other agents will not have any responsibility
in respect of the validity or performance of such contracts.
The participation of First Union Capital Markets Corp. in the offer and
sale of the Debt Securities will comply with the requirements of Schedule E to
the Bylaws of the National Association of Securities Dealers, Inc. (the "NASD").
No NASD member participating in offers and sales will execute a transaction in
the Debt Securities in a discretionary account without the prior specific
written approval of such member's customer.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for, the
Corporation and its subsidiaries, the Senior Trustee and the Subordinated
Trustee, in the ordinary course of business.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Description of Certain Terms of the Notes...... S-2
Use of Proceeds................................ S-3
Recent Developments............................ S-3
Pro Forma Computations of Consolidated Ratios
of Earnings to Fixed Charges................. S-5
Selected Consolidated Financial Data........... S-5
Pro Forma Financial Information................ S-7
Underwriting................................... S-13
Experts........................................ S-14
<CAPTION>
PROSPECTUS
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Corporation................................ 3
Use of Proceeds................................ 4
Consolidated Ratios of Earnings to Fixed
Charges...................................... 4
Certain Regulatory Considerations.............. 4
Description of the Debt Securities............. 8
Validity of Offered Debt Securities............ 16
Experts........................................ 16
Plan of Distribution........................... 17
</TABLE>
$250,000,000
FIRST UNION CORPORATION
6 7/8% SUBORDINATED NOTES
DUE SEPTEMBER 15, 2005
(First Union logo appears here)
FIRST UNION CAPITAL MARKETS
CORP.
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
