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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (THE "EXCHANGE ACT")
for the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
for the transition period from to
Commission file number 1-10000
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
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NORTH CAROLINA 56-0898180
(State of incorporation) (I.R.S. Employer Identification No.)
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (704) 374-6565
Securities registered pursuant to Section 12(b) of the Exchange Act:
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TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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Common Stock, $3.33 1/3 par value (including rights New York Stock Exchange, Inc. ("NYSE")
attached thereto)
Series B Convertible Class A Preferred Stock, NYSE
No-par Value
Series D Adjustable Rate Cumulative Class A Preferred NYSE
Stock, No-par Value
Depositary Shares, each representing a 1/40th interest in NYSE
a share of Series F 10.64% Class A
Preferred Stock, No-par Value
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Securities registered pursuant to Section 12(g) of the Exchange Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
subsequent to the distribution of securities under a plan confirmed by a court.
Yes No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of January 31, 1996, there were 280,115,991 shares of the registrant's
Common Stock outstanding, $3.33 1/3 par value per share, and based on the last
reported sale price of $57.875 per share on the NYSE on such date, the aggregate
market value of the registrant's Common Stock held by those persons deemed by
the registrant to be nonaffiliates was approximately $16 billion.
DOCUMENTS INCORPORATED BY REFERENCE IN FORM 10-K
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INCORPORATED DOCUMENTS WHERE INCORPORATED IN FORM 10-K
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1. Certain portions of the Corporation's Summary Annual Part I -- Item 1.
Report to Stockholders for the year ended December 31,
1995 ("Summary Report").
2. Certain portions of the Corporation's 1995 Annual Part I -- Items 1 and 2; Part II -- Items 6, 7
Report (Historical Basis) ("Historical Report"). and 8.
3. Certain portions of the Corporation's 1995 Part I -- Items 1 and 2; Part II -- Items 5, 6, 7
Supplemental Annual Report ("Supplemental Report"). and 8.
4. Certain portions of the Corporation's Proxy Statement Part III -- Items 10, 11, 12 and 13.
for Annual Meeting of Stockholders to be held on April
16, 1996 ("Proxy Statement").
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PART I
ITEM 1. BUSINESS.
GENERAL
First Union Corporation (the "Corporation" or "FUNC") 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 (since November 1985), South Carolina (since March
1986), Georgia (since March 1986), Tennessee (since December 1987), Maryland
(since December 1992), Virginia (since December 1992), Washington, D.C. (since
December 1992), Pennsylvania (since January 1996), Delaware (since January
1996), New York (since January 1996), New Jersey (since January 1996) and
Connecticut (since January 1996). 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, investment banking, home equity lending, leasing,
insurance and securities brokerage, 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).
Since the 1985 Supreme Court decision upholding regional interstate banking
legislation, the Corporation has concentrated its efforts on building a large
regional banking organization in the eastern region of the United States. Since
November 1985, the Corporation has completed over 60 banking-related
acquisitions and currently has one pending banking-related acquisition,
including the more significant acquisitions (I.E., involving the acquisition of
$3.0 billion or more of assets or deposits) set forth in the following table.
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CONSIDERATION/
ASSETS/ ACCOUNTING
NAME (1) HEADQUARTERS DEPOSITS (2)(3) 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 Banking Corporation subsidiary banks
("Southeast Banks")............................ Florida 9.9 billion cash/notes September 1991
and preferred
stock/purchase
Resolution Trust Corporation ("RTC")
acquisitions................................... Florida, 5.3 billion cash/purchase 1991-1994
Georgia,
Virginia
Dominion Bankshares Corporation.................. Virginia 8.9 billion common stock and March 1993
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 3.6 billion common stock/ July 1995
purchase
First Fidelity Bancorporation ("FFB")............ New Jersey $35.3 billion common stock and January 1996
preferred
stock/pooling
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(1) Additional information relating to certain of the foregoing and other
acquisitions is set forth in the Supplemental Report in Note 2 on pages C-9
through C-11 and incorporated herein by reference.
(2) The dollar amounts indicated represent assets of the related organization as
of the last reporting period prior to acquisition, except (i) the dollar
amount relating to the RTC acquisitions, which represents deposits acquired
from the RTC, and (ii) the dollar amount relating to the Southeast Banks,
which represents the assets of the two banking subsidiaries of Southeast
Banking Corporation acquired from the Federal Deposit Insurance Corporation
(the "FDIC").
(3) In addition, the Corporation purchased Lieber & Company ("Lieber"), a mutual
fund advisory company with $3.4 billion in assets under management at the
time it was acquired in June 1994. Since such assets are not owned by
Lieber, they are not reflected on the Corporation's balance sheet.
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.
Additional information relating to the business of the Corporation and its
subsidiaries is set forth on pages 11 through 18 in the Summary Report and
incorporated herein by reference. Information relating to the Corporation only
is set forth in Note 15 on pages H-26 through H-29 in the Historical Report and
in Note 15 on pages C-27 through C-30 in the Supplemental Report and
incorporated herein by reference.
COMPETITION
The Corporation's subsidiaries face substantial competition in their
operations from banking and nonbanking institutions, including savings and loan
associations, credit unions, money market funds and other investment vehicles,
mutual fund advisory companies, brokerage firms, insurance companies, leasing
companies, credit card issuers, mortgage banking companies, investment banking
companies, finance companies and other types of financial institutions.
Based on the volume of permanent mortgages serviced on December 31, 1995,
the Corporation's mortgage banking subsidiary, First Union Mortgage Corporation,
was the 11th largest mortgage banking company in the United States.
SUPERVISION AND REGULATION
THE FOLLOWING DISCUSSION SETS FORTH CERTAIN OF THE MATERIAL ELEMENTS OF THE
REGULATORY FRAMEWORK APPLICABLE TO BANK HOLDING COMPANIES AND THEIR SUBSIDIARIES
AND PROVIDES CERTAIN SPECIFIC INFORMATION RELEVANT TO THE CORPORATION. TO THE
EXTENT THAT THE FOLLOWING INFORMATION DESCRIBES STATUTORY AND REGULATORY
PROVISIONS, IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PARTICULAR
STATUTORY AND REGULATORY PROVISIONS. A CHANGE IN APPLICABLE STATUTES,
REGULATIONS OR REGULATORY POLICY MAY HAVE A MATERIAL EFFECT ON THE BUSINESS OF
THE CORPORATION.
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 or
waiver 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.
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 banking
subsidiaries. The
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Corporation's 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.
Similar restrictions on dividends are in effect for the Corporation's subsidiary
banks which are not national banks.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of
December 31, 1995, the Corporation's subsidiaries, without obtaining affirmative
governmental approvals, could pay aggregate dividends of $367 million to FUNC
during 1996. During 1995, the Corporation's subsidiaries paid $793 million in
cash dividends to FUNC. On a combined FUNC and FFB basis, the Corporation's
subsidiaries, without obtaining affirmative governmental approvals, could pay
aggregate dividends of $468 million to the Corporation during 1996.
In addition, both the Corporation and its banking 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 national 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 banking 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
Under the risk-based capital requirements for bank holding companies, 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
goodwill ("tier 1 capital" and together with tier 2 capital "total capital").
The remainder may consist of subordinated debt, non-qualifying preferred stock
and a limited amount of the loan loss allowance ("tier 2 capital"). At December
31, 1995, the Corporation's tier 1 capital and total capital ratios were 6.15
percent and 10.44 percent, respectively. On a combined FUNC and FFB basis, at
December 31, 1995, the tier 1 capital and total capital ratios were 6.62 percent
and 11.33 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
December 31, 1995, was 5.15 percent. On a combined FUNC and FFB basis, the
leverage ratio at December 31, 1995 was 5.49 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
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.
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Each of the Corporation's subsidiary banks is subject to similar capital
requirements adopted by the Comptroller or other applicable regulatory agency.
Neither the Comptroller nor such applicable regulatory agency has advised any of
the Corporation's subsidiary banks of any specific minimum leverage ratios
applicable to them. The capital ratios of the bank subsidiaries of the
Corporation are set forth on page T-16 in the Historical Report and on page T-14
in the Supplemental Report and incorporated herein by reference.
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; SUPPORT OF SUBSIDIARY BANKS
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
("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 and the FDIC have each adopted regulations establishing
relevant capital measures and relevant capital levels. The relevant capital
measures are the total capital ratio, the 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
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 December 31, 1995, all of the
Corporation's subsidiary banks had capital levels that qualify them as being
"well capitalized" under such regulations, except FUNB-NC, which had a total
capital ratio of 9.92 percent. The Corporation expects to maintain these ratios
at the required levels by the retention of earnings and, if necessary, the
issuance of additional capital.
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
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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
Under federal law, 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 Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA"), authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation. In addition, beginning June 1, 1997,
the 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 the IBBEA and May 31, 1997. The 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 revised its regulations on insurance
assessments to establish a revised assessment rate schedule of four to 31 cents
per $100.00 of deposits in replacement of the then existing schedule of 23 to 31
cents per $100.00 of deposits for institutions whose deposits are subject to
assessment by the Bank Insurance Fund ("BIF"). The revised BIF schedule became
effective on June 1, 1995. Assessments collected at the previous assessment
schedule that exceeded the amount due under the revised schedule were refunded,
including interest, from the effective date of the revised schedule. As a
result, FUNC received a $26 million refund, including interest, in the third
quarter of 1995. On a combined FUNC and FFB basis, a $41 million refund was
received in 1995. As of December 31, 1995, FUNC had a BIF deposit assessment
base of $41 billion. On a combined FUNC and FFB basis, as of December 31, 1995,
the BIF deposit assessment base was $63 billion. On November 14, 1995, the FDIC
further reduced the rate structure for BIF by four cents per $100.00 of
deposits, starting in January 1996. As a result, the highest-rated institutions
will pay only the statutory annual minimum rate of $2,000.00 for FDIC insurance.
The rates for all other institutions will be reduced by four cents per $100.00
as well, leaving a premium range of three to 27 cents per $100.00 instead of the
current seven to 31 cents per $100.00 for such institutions. The deposits of
institutions insured by the Savings Association Insurance Fund ("SAIF") will
continue paying premiums on a risk-related basis of 23 to 31 cents per $100.00
of deposits. As of December 31, 1995, FUNC had a SAIF deposit assessment base of
$16 billion. On a combined FUNC and FFB basis, as of December 31, 1995, the SAIF
deposit assessment base was $20 billion.
Various legislative proposals regarding the future of the BIF and the SAIF
have been reported recently, including a one-time special assessment in the
range of 70 cents to 85 cents per $100.00 of assessable SAIF deposits.
FUNC does not know when and if any such proposal or any other related
proposal may be adopted.
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ADDITIONAL INFORMATION
Additional information related to certain regulatory and accounting matters
is set forth on pages 13 and 14 in the Supplemental Report and incorporated
herein by reference.
ITEM 2. PROPERTIES.
As of December 31, 1995, on a combined FUNC and FFB basis the Corporation
and its subsidiaries owned or leased 2,154 locations in 41 states, Washington,
D.C. and 4 foreign countries from which their business is conducted, including
a multi-story office complex in Charlotte, North Carolina, which serves as the
administrative headquarters of the Corporation. Listed below are the number of
banking and nonbanking locations that are leased or owned, as of
December 31, 1995:
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LEASED OWNED
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First Union National Bank of Florida............................................... 202 316
First Union National Bank of North Carolina........................................ 99 164
First Union National Bank of Georgia............................................... 39 92
First Union National Bank of South Carolina........................................ 8 55
First Union National Bank of Tennessee............................................. 8 42
First Union National Bank of Virginia.............................................. 51 103
First Union National Bank of Maryland.............................................. 20 4
First Union National Bank of Washington, D.C....................................... 27 1
First Union Home Equity Bank, N.A.................................................. 139 --
First Union National Bank (formerly First Fidelity Bank, N.A.)..................... 313 380
First Union Bank of Delaware....................................................... 3 --
First Union Bank of Connecticut.................................................... 56 12
Nonbanking locations............................................................... 20 --
Total............................................................................ 985 1,169
</TABLE>
The principal offices of each of the Corporation's subsidiary banks are all
leased.
Additional information relating to the Corporation's lease commitments is
set forth in Note 16 on page H-32 in the Historical Report and incorporated
herein by reference and in Note 16 on page C-33 in the Supplemental Report and
incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation and certain of its subsidiaries have been named as
defendants in various legal actions arising from their normal business
activities in which varying amounts are claimed. Although the amount of any
ultimate liability with respect to such matters cannot be determined, in the
opinion of management, based upon the opinions of counsel, any such liability
will not have a material effect on the consolidated financial position of the
Corporation and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In response to this item, the information set forth in response to Item 4
in the Corporation's Form 10-Q for the quarter ended September 30, 1995, is
incorporated herein by reference.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is listed on the NYSE. Table 6 on page T-4 in the
Supplemental Report sets forth information relating to the quarterly prices of,
and quarterly dividends paid on, the Common Stock for the two-year period ended
December 31, 1995, and is incorporated herein by reference. Prices shown
represent the high, low and quarter-end sale prices of the Common Stock as
reported on the New York Stock Exchange, Inc. Composite Transactions tape for
the periods indicated. As of December 31, 1995, there were 61,058 holders of
record of the Common Stock. On a combined FUNC and FFB basis, as of December
31, 1995, there were 89,257 holders of record of the Common Stock.
The Corporation's Series B Convertible Class A Preferred Stock, no-par
value ("Series B"), Series D Adjustable Rate Cumulative Class A Preferred Stock,
no-par value ("Series D"), and Series F 10.64% Class A Preferred Stock, no-par
value (evidenced by Depositary Receipts, each representing a 1/40th interest in
a share of such Series F 10.64% Class A Preferred Stock ("Series F Receipts"))
(together, the "Class A Preferred Stock"), were issued in connection with the
FFB acquisition, and they are listed on the NYSE. As of January 1, 1996, there
were 1,517 holders of record of the Series B, 19 holders of record of the
Series D and 671 holders of record of the Series F Receipts.
Subject to the prior rights of the holders of the Class A Preferred Stock,
holders of the Common Stock are entitled to receive such dividends as may be
legally declared by the Board of Directors of the Corporation (the "FUNC Board")
and, in the event of dissolution and liquidation, to receive the net assets of
the Corporation remaining after payment of all liabilities, in proportion to
their respective holdings. Additional information concerning certain limitations
on the payment of dividends by the Corporation and its subsidiaries is set forth
above under "Business -- Supervision and Regulation; Payment of Dividends" and
in Note 15 on page H-26 in the Historical Report and in Note 15 on page C-27 in
the Supplemental Report and is incorporated herein by reference.
Each outstanding share of Common Stock currently has attached to it one
right (a "FUNC Right") issued pursuant to a Shareholder Protection Rights
Agreement (as amended, the "FUNC Rights Agreement"). Each FUNC Right entitles
its registered holder to purchase one one-hundredth of a share of a junior
participating series of the Corporation's Class A Preferred Stock designed to
have economic and voting terms similar to those of one share of Common Stock,
for $110.00, subject to adjustment (the "Rights Exercise Price"), but only after
the earlier to occur (the "Separation Time") of: (i) the tenth business day
(subject to extension) after any person (an "Acquiring Person") (x) commences a
tender or exchange offer, which, if consummated, would result in such person
becoming the beneficial owner of 15 percent or more of the outstanding shares of
Common Stock, or (y) is determined by the Federal Reserve Board to "control" the
Corporation within the meaning of the BHCA, subject to certain exceptions; and
(ii) the tenth business day after the first date (the "Flip-in Date") of a
public announcement that a person has become an Acquiring Person. The FUNC
Rights will not trade separately from the shares of Common Stock unless and
until the Separation Time occurs.
The FUNC Rights Agreement provides that a person will not become an
Acquiring Person under the BHCA control test described above if either (i) the
Federal Reserve Board's control determination would not have been made but for
such person's failure to make certain customary passivity commitments, or such
person's violation of such commitments made, to the Federal Reserve Board, so
long as the Federal Reserve Board determines that such person no longer controls
the Corporation within 30 days (or 60 days in certain circumstances), or (ii)
the Federal Reserve Board's control determination was not based on such a
failure or violation and such person (x) obtains a noncontrol determination
within three years, and (y) is using its best efforts to allow the Corporation
to make any acquisition or engage in any legally permissible activity
notwithstanding such person's being deemed to control the Corporation for
purposes of the BHCA.
The FUNC Rights will not be exercisable until the business day following
the Separation Time. The FUNC Rights will expire on the earliest of: (i) the
Exchange Time (as defined below); (ii) the close of business on December 28,
2000; and (iii) the date on which the FUNC Rights are redeemed or terminated as
described below (in any such case, the "Expiration Time"). The Rights Exercise
Price and the number of FUNC Rights outstanding, or in certain circumstances the
securities purchasable upon exercise of the FUNC Rights, are subject to
adjustment upon the occurrence of certain events.
In the event that prior to the Expiration Time a Flip-in Date occurs, the
Corporation will take such action as shall be necessary to ensure and provide
that each FUNC Right (other than FUNC Rights beneficially owned by an Acquiring
Person or any affiliate, associate or transferee thereof, which FUNC Rights
shall become void) shall constitute the right to purchase, from the Corporation,
shares of Common Stock having an aggregate market price equal to twice the
Rights Exercise Price for an amount in cash equal to the then current Rights
Exercise Price. In addition, the FUNC Board may,
7
<PAGE>
at its option, at any time after a Flip-in Date and prior to the time that an
Acquiring Person becomes the beneficial owner of more than 50 percent of the
outstanding shares of Common Stock, elect to exchange all of the then
outstanding FUNC Rights for shares of Common Stock, at an exchange ratio of two
shares of Common Stock per FUNC Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the
Separation Time (the "Rights Exchange Rate"). Immediately upon such action by
the FUNC Board (the "Exchange Time"), the right to exercise the FUNC Rights will
terminate, and each FUNC Right will thereafter represent only the right to
receive a number of shares of Common Stock equal to the Rights Exchange Rate. If
the Corporation becomes obligated to issue shares of Common Stock upon exercise
of or in exchange for FUNC Rights, the Corporation, at its option, may
substitute therefor shares of junior participating Class A Preferred Stock upon
exercise of each FUNC Right at a rate of two one-hundredths of a share of junior
participating Class A Preferred Stock upon the exchange of each FUNC Right.
The FUNC Rights are redeemable by the Corporation at $0.01 per right,
subject to adjustment upon the occurrence of certain events, at any date prior
to the date on which they become exercisable and, in certain events, may be
canceled and terminated without any payment to the holders thereof. The FUNC
Rights have no voting rights and are not entitled to dividends.
The FUNC Rights will not prevent a takeover of the Corporation. The FUNC
Rights, however, may cause substantial dilution to a person or group that
acquires 15 percent or more of Common Stock (or that acquires "control" of the
Corporation within the meaning of the BHCA) unless the FUNC Rights are first
redeemed or terminated by the FUNC Board. Nevertheless, the FUNC Rights should
not interfere with a transaction that is in the best interests of the
Corporation and its stockholders because the FUNC Rights can be redeemed or
terminated, as hereinabove described, before the consummation of such
transaction.
The complete terms of the FUNC Rights are set forth in the FUNC Rights
Agreement. The foregoing description of the FUNC Rights and the FUNC Rights
Agreement is qualified in its entirety by reference to such document. A copy of
the FUNC Rights Agreement can be obtained upon written request to the Rights
Agent, First Union National Bank of North Carolina, Two First Union Center,
Charlotte, North Carolina 28288-1154.
Additional information relating to the Class A Preferred Stock and Common
Stock is set forth in Notes 11 and 12 on pages C-21 through C-23 in the
Supplemental Report and incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
In response to this Item, the information set forth in Table 1 on page T-1
in the Historical Report and in Table 1 on page T-1 in the Supplemental Report
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In response to this Item, the information set forth on pages 1 through T-24
in the Historical Report and on pages 1 through T-22 in the Supplemental Report
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In response to this Item, the information set forth on page T-4 and on
pages H-1 through H-34 in the Historical Report and on page T-4 and on pages
C-1 through C-35 in the Supplemental Report is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
8
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Corporation are elected to their offices for
one year terms at the meeting of the Board of Directors in April of each year.
The terms of any executive officers elected after such date expire at the same
time as the terms of the executive officers elected on such date. The names of
each of the current executive officers of the Corporation, their ages, their
current positions with the Corporation and certain subsidiaries and, if
different, their business experience during the past five years, are as follows:
Edward E. Crutchfield (54). Chairman and Chief Executive Officer, the
Corporation.
John R. Georgius (51). Vice Chairman, the Corporation, since January 1,
1996. President, the Corporation, from June 1990 to January 1, 1996.
Chairman and Chief Executive Officer, FUNB-NC, from October 1988 to February
1993.
Anthony P. Terracciano (57). President, the Corporation, since January 1,
1996. Mr. Terracciano, who was formerly Chairman of the Board, President and
Chief Executive Officer of FFB, was elected to his present office by the
FUNC Board pursuant to the FFB acquisition agreement.
B. J. Walker (65). Vice Chairman, the Corporation.
Robert T. Atwood (55). Executive Vice President and Chief Financial Officer,
the Corporation, since March 1991. Prior to that time, Mr. Atwood was a
partner with the accounting firm of Deloitte & Touche.
Marion A. Cowell, Jr. (61). Executive Vice President, Secretary and General
Counsel, the Corporation.
In addition to the foregoing, the information set forth in the Proxy
Statement under the heading "General Information and Nominees", and in the
paragraph under the heading "Section 16(a)" under "Other Matters Relating to
Executive Officers, Directors and Principal Stockholders" is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
In response to this Item the information set forth in the Proxy Statement
under the heading "Executive Compensation", excluding the information under the
subheadings "HR Committee Report on Executive Compensation" and "Performance
Graph", is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In response to this Item the information set forth in the Proxy Statement
relating to the ownership of Common Stock and Class A Preferred Stock by the
directors, executive officers and principal stockholders of the Corporation
under the headings "Voting Securities and Principal Holders" and "General
Information and Nominees" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In response to this Item the information set forth in the Proxy Statement
under the headings "General", "Santander" and "Certain Other Relationships"
under "Other Matters Relating to Executive Officers, Directors and Principal
Stockholders" is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The consolidated financial statements of the Corporation, including the
notes thereto and independent auditors' report thereon, are set forth on pages
H-1 through H-34 of the Historical Report and on pages C-1 through C-35 of the
Supplemental Report. All financial statement schedules are omitted since the
required information is either not applicable, is immaterial or is included in
the consolidated financial statements of the Corporation and notes thereto. A
list of the exhibits to this Form 10-K is set forth on the Exhibit Index
immediately preceding such exhibits and is incorporated herein by reference.
(b) During the quarter ended December 31, 1995, no reports on Form 8-K were
filed by the Corporation with the Securities and Exchange Commission.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST UNION CORPORATION
Date: March 12, 1996 By: MARION A. COWELL, JR.
MARION A. COWELL, JR.
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<C> <S>
EDWARD E. CRUTCHFIELD* Chairman and Chief Executive Officer and Director
EDWARD E. CRUTCHFIELD
ROBERT T. ATWOOD* Executive Vice President and Chief Financial Officer
ROBERT T. ATWOOD
JAMES H. HATCH* Senior Vice President and Corporate Controller (Principal
Accounting Officer)
JAMES H. HATCH
EDWARD E. BARR* Director
EDWARD E. BARR
G. ALEX BERNHARDT* Director
G. ALEX BERNHARDT
W. WALDO BRADLEY* Director
W. WALDO BRADLEY
ROBERT J. BROWN* Director
ROBERT J. BROWN
ROBERT D. DAVIS* Director
ROBERT D. DAVIS
R. STUART DICKSON* Director
R. STUART DICKSON
B. F. DOLAN* Director
B. F. DOLAN
RODDEY DOWD, SR.* Director
RODDEY DOWD, SR.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<C> <S>
JOHN R. GEORGIUS* Director
JOHN R. GEORGIUS
ARTHUR M. GOLDBERG* Director
ARTHUR M. GOLDBERG
WILLIAM H. GOODWIN, JR.* Director
WILLIAM H. GOODWIN, JR.
BRENTON S. HALSEY* Director
BRENTON S. HALSEY
HOWARD H. HAWORTH* Director
HOWARD H. HAWORTH
TORRENCE E. HEMBY, JR.* Director
TORRENCE E. HEMBY, JR.
FRANK M. HENRY* Director
FRANK M. HENRY
LEONARD G. HERRING* Director
LEONARD G. HERRING
JUAN RODRIGUEZ INCIARTE* Director
JUAN RODRIGUEZ INCIARTE
JACK A. LAUGHERY* Director
JACK A. LAUGHERY
MAX LENNON* Director
MAX LENNON
RADFORD D. LOVETT* Director
RADFORD D. LOVETT
JOSEPH NEUBAUER* Director
JOSEPH NEUBAUER
HENRY D. PERRY, JR.* Director
HENRY D. PERRY, JR.
RANDOLPH N. REYNOLDS* Director
RANDOLPH N. REYNOLDS
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<C> <S>
RUTH G. SHAW* Director
RUTH G. SHAW
LANTY L. SMITH* Director
LANTY L. SMITH
ANTHONY P. TERRACCIANO* Director
ANTHONY P. TERRACCIANO
DEWEY L. TROGDON* Director
DEWEY L. TROGDON
JOHN D. UIBLE* Director
JOHN D. UIBLE
B. J. WALKER* Director
B. J. WALKER
*By Marion A. Cowell, Jr., Attorney-in-Fact
MARION A. COWELL, JR.
<CAPTION>
MARION A. COWELL, JR.
</TABLE>
Date: March 12, 1996
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
<S> <C> <C>
(2) FFB acquisition agreement. Incorporated by reference to Exhibit (99) to
the Corporation's Current Report on Form 8-K
dated June 21, 1995.
(3)(a) Articles of Incorporation of the Corporation, as amended. Incorporated by reference to Exhibit (4) to
the Corporation's 1990 First Quarter Report
on Form 10-Q, to Exhibit (99)(a) to the
Corporation's 1993 First Quarter Report on
Form 10-Q and Exhibit (4) to the
Corporation's Current Report on Form 8-K
dated January 10, 1996.
(3)(b) Bylaws of the Corporation, as amended. Filed herewith.
(4)(a) Instruments defining the rights of the holders of the *
Corporation's long-term debt.
(4)(b) The Corporation's Shareholder Protection Rights Agreement,
as amended. Incorporated by reference to Exhibit (4)(b)
to the Corporation's Current Reports on Forms
8-K dated December 18, 1990 and October 20,
1992, and to Exhibit (99) to the
Corporation's Current Reports on Form 8-K
dated June 20, 1995 and June 21, 1995.
(4)(c) Deposit Agreement, dated as of January 1, 1996, between the Incorporated by reference to Exhibit (4)(b)
Corporation and First Union National Bank of North Carolina, to the Corporation's Current Report on Form
relating to the Corporation's Depositary Receipts, each 8-K dated January 10, 1996.
representing a 1/40th interest in a share of the Corporation's
Series F 10.64% Class A Preferred Stock.
(10)(a) The Corporation's Management Incentive Plan, as amended. Filed herewith.
(10)(b) The Corporation's Deferred Compensation Plan for Officers. Incorporated by reference to Exhibit (10)(b)
to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(c) The Corporation's Deferred Compensation Plan for Non-Employee Incorporated by reference to Exhibit (10)(c)
Directors. to the Corporation's 1989 Annual Report on
Form 10-K.
(10)(d) The Corporation's Supplemental Executive Long-Term Disability Incorporated by reference to Exhibit (10)(d)
Plan. to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(e) The Corporation's Supplemental Retirement Plan. Incorporated by reference to Exhibit (10)(f)
to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(f) The Corporation's Retirement Plan for Non-Employee Directors. Incorporated by reference to Exhibit (10)(g)
to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(g) The Corporation's 1984 Master Stock Compensation Plan. Incorporated by reference to Exhibit (28) to
the Corporation's Registration Statement No.
33-47447.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
<S> <C> <C>
(10)(h) The Corporation's 1988 Master Stock Compensation Plan. Incorporated by reference to Exhibit (28) to
the Corporation's Registration Statement No.
33-47447.
(10)(i) The Corporation's 1992 Master Stock Compensation Plan. Incorporated by reference to Exhibit (28) to
the Corporation's Registration Statement No.
33-47447.
(10)(j) Employment Agreement between the Corporation and Edward E. Incorporated by reference to Exhibit (10)(k)
Crutchfield, as amended. to the Corporation's 1994 Annual Report on
Form 10-K.
(10)(k) The Corporation's Management Long-Term Cash Incentive Plan. Incorporated by reference to Exhibit (10)(m)
to the Corporation's 1992 Annual Report on
Form 10-K.
(10)(l) Employment Agreement between the Corporation and Anthony P. Incorporated by reference to Exhibit (99)(c)
Terracciano. to the Corporation's Registration Statement
No. 33-62307.
(10)(m) Employment Agreement between the Corporation and Incorporated by reference to Exhibit (10) to
John R. Georgius. Amendment No. 1 to the Corporation's
Registration Statement No. 33-60835.
(10)(n) The Corporation's Elective Deferral Plan. Incorporated by reference to Exhibit (4) to
the Corporation's Registration Statement No.
33-60913.
(12)(a) Computations of consolidated ratios of earnings to fixed charges. Filed herewith.
(12)(b) Computations of consolidated ratios of earnings to fixed charges Filed herewith.
and preferred stock dividends.
(12)(c) Combined computations of consolidated ratios of earnings to fixed Filed herewith.
charges.
(12)(d) Combined computations of consolidated ratios of earnings to fixed Filed herewith.
charges and preferred stock dividends.
(13)(a) The Corporation's 1995 Summary Annual Report to Stockholders.** Filed herewith.
(13)(b) The Corporation's 1995 Annual Report (Historical Basis).** Filed herewith.
(13)(c) The Corporation's 1995 Supplemental Annual Report.** Filed herewith.
(21) List of the Corporation's subsidiaries. Filed herewith.
(23) Consent of KPMG Peat Marwick LLP. Filed herewith.
(24) Power of Attorney. Filed herewith.
(27) The Corporation's Financial Data Schedules.***
(99) First Union Corporation of Virginia and Subsidiaries Summarized Filed herewith.
Financial Information.
</TABLE>
* The Corporation agrees to furnish to the Securities and Exchange Commission
upon request, copies of the instruments,
including indentures, defining the rights of the holders of the long-term debt
of the Corporation and its subsidiaries.
** Except for those portions of the Summary Report, the Historical Report and
the Supplemental Report which are
expressly incorporated by reference in this Form 10-K, the Summary Report, the
Historical Report and the
Supplemental Report are furnished for the information of the Securities and
Exchange Commission only and are not to be
deemed "filed" as part of such Form 10-K.
*** Filing by Electronic Data Gathering, Analysis and Retrieval System only.
<PAGE>
EXHIBIT (3)(B)
BYLAWS
OF
FIRST UNION CORPORATION
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the corporation shall
be located at such place as the Board of Directors may fix from time to time.
SECTION 2. REGISTERED OFFICE. The registered office of the corporation
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
SECTION 3. OTHER OFFICES. The corporation may have offices at such other
places, either within or without the State of North Carolina, as the Board of
Directors may designate or as the affairs of the corporation may require from
time to time.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of shareholders shall be held at
the principal office of the corporation, or at such other place, either within
or without the State of North Carolina, as shall in each case be fixed by the
Chairman of the Board, the President, the Secretary or the Board of Directors
and designated in the notice of the meeting.
SECTION 2. ANNUAL MEETINGS. The annual meeting of shareholders shall be
held at 9:30 a.m. on the third Tuesday in April of each year, or at such other
time and on such other date as the Board of Directors may determine. The Board
of Directors shall appoint persons to act as Chairman and as Secretary of the
meeting.
SECTION 3. SUBSTITUTE ANNUAL MEETING. If the annual meeting shall not be
held on the day designated by these bylaws, a substitute annual meeting may be
called in accordance with the provisions of Section 4 of this Article II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
SECTION 4. SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by the Board of Directors, the Chairman of the Board or the
President. The Board of Directors shall appoint persons to act as Chairman and
as Secretary of the meeting.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the date, time, and
place of each shareholder meeting shall be given not less than 10 nor more than
60 days before the date of the meeting, by personal delivery, telegraph,
teletype, or other form of wire or wireless communication, facsimile
transmission, mail or private carrier, by or at the direction of the Board of
Directors, the Chairman of the Board or the President, to each shareholder
entitled to vote at such meeting; provided that such notice must be given to all
shareholders with respect to any meeting at which a merger or share exchange is
to be considered and in such other instances as required by law. If mailed, such
notice shall be deemed to be effective when deposited in the United States mail,
correctly addressed to the shareholder at the shareholder's address as it
appears on the current record of shareholders of the corporation, with postage
thereon prepaid.
In the case of a special meeting, the notice of meeting shall include a
description of the purpose or purposes for which the meeting is called. In the
case of an annual or substitute annual meeting, the notice of meeting need not
include a description of the purpose or purposes for which the meeting is
called, unless such a description is required by the provisions of the North
Carolina Business Corporation Act.
When a meeting is adjourned to a different date, time or place, notice need
not be given of the new date, time or place if (i) the new date, time or place
is announced at the meeting before adjournment, and (ii) a new record date is
not fixed for the adjourned meeting. If a new record date is fixed for the
adjourned meeting (which must be done if the new date is more than 120 days
after the date of the original meeting), notice of the adjourned meeting must be
given as provided in this section to persons who are shareholders as of the new
record date.
SECTION 6. WAIVER OF NOTICE. Any shareholder may waive notice of any
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder and delivered to the corporation for inclusion in the minutes or
filing with the corporate records. A shareholder's attendance, in person or by
proxy, at a meeting (i) waives objection to lack of
<PAGE>
notice or defective notice of the meeting, unless the shareholder or his proxy
at the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (ii) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder or his proxy objects to
considering the matter before it is voted upon.
SECTION 7. SHAREHOLDERS' LIST. Before each meeting of shareholders, the
Secretary shall prepare an alphabetical list of the shareholders entitled to
notice of such meeting. The list shall be arranged by voting group (and within
each voting group by class or series of shares) and show the address of and
number of shares held by each shareholder. The list shall be kept on file at the
principal office of the corporation or at a place identified in the meeting
notice in the city where the meeting will be held, for the period beginning two
business days after notice of the meeting is given and continuing through the
meeting and shall be available for inspection by any shareholder, his agent or
attorney, at any time during regular business hours. The list shall also be
available at the meeting and shall be subject to inspection by any shareholder,
his agent or attorney, at any time during the meeting or any adjournment
thereof.
SECTION 8. VOTING GROUP. All shares of one or more classes or series that
under the articles of incorporation or the North Carolina Business Corporation
Act are entitled to vote and be counted together collectively on a matter at a
meeting of shareholders, constitute a voting group. All shares entitled by the
articles of incorporation or the North Carolina Business Corporation Act to vote
generally on a matter are for that purpose a single voting group. Classes or
series of shares shall not be entitled to vote separately by voting group unless
expressly authorized by the articles of incorporation or specifically required
by law.
SECTION 9. QUORUM. Shares entitled to vote as a separate voting group may
take action on a matter at the meeting only if a quorum of those shares exists.
A majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by the vote of a majority of the
votes cast on the motion to adjourn. Subject to the provisions of Section 5 of
this Article II, at any adjourned meeting any business may be transacted that
might have been transacted at the original meeting if a quorum exists with
respect to the matter proposed.
SECTION 10. PROXIES. Shares may be voted either in person or by one or more
proxies authorized by a written appointment of proxy signed by the shareholder
or by his duly authorized attorney-in-fact. An appointment of proxy is valid for
11 months from the date of its execution, unless a different period is expressly
provided in the appointment form.
SECTION 11. VOTING OF SHARES. Subject to the provisions of the articles of
incorporation, each outstanding share shall be entitled to one vote on each
matter voted on at a meeting of shareholders.
Except in the election of directors as governed by the provisions of
Section 3 of Article III, if a quorum exists, action on a matter by a voting
group is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless a greater vote is required by
law, the articles of incorporation or these bylaws.
Absent special circumstances, shares of the corporation are not entitled to
vote if they are owned, directly or indirectly, by another corporation in which
the corporation owns, directly or indirectly, a majority of the shares entitled
to vote for directors of the second corporation; provided that this provision
does not limit the power of the corporation to vote its own shares held by it in
a fiduciary capacity.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action that is required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if one or more written consents, describing the action so taken, shall
be signed by all of the shareholders who would be entitled to vote upon such
action at a meeting and delivered to the corporation for inclusion in the
minutes or filing with the corporate records.
If the corporation is required by law to give notice to nonvoting
shareholders of action to be taken by unanimous written consent of the voting
shareholders, then the corporation shall give the nonvoting shareholders, if
any, written notice of the proposed action at least 10 days before the action is
taken.
SECTION 13. ACTIONS TO BE TAKEN AT AN ANNUAL MEETING OF SHAREHOLDERS. No
business shall be transacted at an annual meeting of shareholders, except such
business as shall be (i) specified in the notice of meeting given as provided in
2
<PAGE>
Section 5 of this Article II, (ii) otherwise brought before the meeting by or at
the direction of the Board of Directors, or (iii) otherwise brought before the
meeting by a shareholder of record of the corporation entitled to vote at the
meeting, in compliance with the procedure set forth in this Section 13. For
business to be brought before an annual meeting by a shareholder pursuant to
(iii) above, the shareholder must have given timely notice in writing to the
Secretary. To be timely, a shareholder's notice shall be delivered to, or mailed
and received at, the principal executive offices of the corporation not less
than 60 days nor more than 90 days prior to the meeting; provided, however, in
the event that less than 70 days' notice or prior public disclosure of the date
of the meeting is given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting or such public
disclosure was made. Notice shall be deemed to have been given more than 70 days
in advance of the annual meeting if the annual meeting is called on the date
indicated by Section 2 of this Article II without regard to when public
disclosure thereof is made. Notice of actions to be brought before the annual
meeting pursuant to (iii) above shall set forth, as to each matter the
shareholder proposes to bring before the meeting, (a) a brief description of the
business desired to be brought before the meeting and the reasons for bringing
such business before the meeting, and (b) as to the shareholder giving the
notice, (i) the name and address, as they appear on the corporation's books, of
such shareholder, (ii) the classes and number of shares of the corporation which
are owned of record or beneficially by such shareholder, and (iii) any material
interest of such shareholder in such business other than his interest as a
shareholder of the corporation. Notwithstanding anything in these bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the provisions set forth in this Section 13. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
any business was not properly brought before the meeting in accordance with the
provisions prescribed by these bylaws and, if he should so determine, he shall
so declare to the meeting and any such business not so properly brought before
the meeting shall not be transacted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors.
SECTION 2. NUMBER, TERM OF OFFICE AND QUALIFICATION. The number of
directors shall be determined by the Board of Directors in accordance with
Article 7 of the articles of incorporation. Each director shall continue in
office until the annual meeting of shareholders at which his term is to expire
and until his successor shall have been elected and qualified, or until his
death or until he shall resign or shall have been disqualified or removed in the
manner hereinafter provided. Directors need not be residents of the State of
North Carolina or shareholders of the corporation.
SECTION 3. CLASSIFICATION AND ELECTION. The Board of Directors shall be
classified in accordance with the provisions of Article 7 of the articles of
incorporation. Each class of directors shall be elected at the annual meeting of
shareholders at which the term of their predecessors is to expire and the
persons who shall receive the highest number of votes shall be elected
directors. If prior to voting for the election of directors, demand therefor
shall be made by or on behalf of any shares entitled to vote at such meeting,
the election of directors shall be by ballot.
SECTION 4. REMOVAL. The Board of Directors or any individual director may
be removed from office only in accordance with the provisions of Article 7 of
the articles of incorporation.
SECTION 5. VACANCIES. Any vacancies in the Board of Directors shall be
filled in accordance with the provisions of Article 7 of the articles of
incorporation.
SECTION 6. COMPENSATION. The Board of Directors may provide for the
compensation of directors for their services as such and for the payment or
reimbursement of any or all expenses incurred by them in connection with such
services.
SECTION 7. NOMINATIONS FOR ELECTION OF DIRECTORS. Only persons who are
nominated in accordance with the provisions set forth in these bylaws shall be
eligible to be elected as directors at an annual meeting of shareholders.
Nominations of persons for election to the Board of Directors may be made at
such meeting of shareholders (i) by or at the direction of the Board of
Directors, or (ii) by any shareholder of the corporation who is a shareholder of
record at the time of giving of notice provided for in this Section 7, who shall
be entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this Section 7. Such
nominations, other than those made by or at the direction of the Board, shall be
made pursuant to timely notice in writing to the Secretary. To be timely, a
shareholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the corporation not less
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than 60 days nor more than 90 days prior to the meeting; provided, however, in
the event that less than 70 days' notice or prior public disclosure of the date
of the meeting is given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting or such public
disclosure was made. Notice shall be deemed to have been given more than 70 days
in advance of the annual meeting if the annual meeting is called on the date
indicated by Section 2 of Article II of these bylaws without regard to when
public disclosure thereof is made. Such shareholder's notice shall set forth (a)
as to each person whom the shareholder proposes to nominate for election or
reelection as a director, information relating to such person similar in
substance to that required to be disclosed in solicitations of proxies for
election of directors pursuant to Items 7(a) and (b) of Regulation 14A under the
Securities Exchange Act of 1934, as amended, and such person's written consent
to being named as a nominee and to serving as a director if elected, and (b) as
to the shareholder giving the notice, (i) the name and address, as they appear
on the corporation's books, of such shareholder, and (ii) the class and number
of shares of the corporation which are owned of record or beneficially by such
shareholder. At the request of the Board of Directors, any person nominated by
the Board for election as a director shall furnish to the Secretary that
information required to be set forth in a shareholder's notice of nomination
which pertains to the nominee. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the provisions prescribed by these bylaws and, if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded. The foregoing provisions of this Section 7 shall not apply to
any director who is nominated and elected under specified circumstances by
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation.
ARTICLE IV
MEETINGS OF DIRECTORS
SECTION 1. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings. Such a meeting may be held by
teleconference call to the extent permitted by applicable law.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the President or by
any three directors. Such a meeting may be held either within or without the
State of North Carolina, as fixed by the person or persons calling the meeting.
Such a meeting may be held by teleconference call to the extent permitted by
applicable law.
SECTION 3. NOTICE OF MEETINGS. Regular meetings of the Board of Directors
may be held without notice. The person or persons calling a special meeting of
the Board of Directors shall, at least twenty-four hours before the meeting,
give or cause to be given notice thereof by any usual means of communication.
Such notice need not specify the purpose for which the meeting is called. Any
duly convened regular or special meeting may be adjourned by the directors to a
later time without further notice.
SECTION 4. WAIVER OF NOTICE. Any director may waive notice of any meeting
before or after the meeting. The waiver must be in writing, signed by the
director entitled to the notice and delivered to the corporation for inclusion
in the minutes or filing with the corporate records. A director's attendance at
or participation in a meeting waives any required notice of such meeting, unless
the director at the beginning of the meeting, or promptly upon arrival, objects
to holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
SECTION 5. QUORUM. Unless the articles of incorporation or these bylaws
provide otherwise, a majority of the number of directors fixed by or pursuant to
the articles of incorporation shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors.
SECTION 6. MANNER OF ACTING. Except as otherwise provided in the articles
of incorporation or these bylaws, including Section 9 of this Article IV, the
affirmative vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
SECTION 7. PRESUMPTION OF ASSENT. A director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (i) he
objects at the beginning of the meeting or promptly upon his arrival, to holding
the meeting or to transacting business at the meeting, (ii) his dissent or
abstention from the action taken is entered in the minutes of the meeting, or
(iii) he files
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written notice of his dissent or abstention with the presiding officer of the
meeting before its adjournment or with the corporation immediately after the
adjournment of the meeting. Such right of dissent or abstention is not available
to a director who votes in favor of the action taken.
SECTION 8. ACTION WITHOUT MEETING. Action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board. The action must be evidenced by one
or more written consents signed by each director before or after such action,
describing the action taken and included in the minutes or filed with the
corporate records.
SECTION 9. COMMITTEES OF THE BOARD. The Board of Directors may create an
Executive Committee and other committees of the Board and appoint members of the
Board of Directors to serve on them. The creation of a committee of the Board
and appointment of members to it must be approved by the greater of (i) a
majority of the number of directors in office when the action is taken, or (ii)
the number of directors required to take action pursuant to Section 6 of this
Article IV. Each committee of the Board must have two or more members and, to
the extent authorized by law and specified by the Board of Directors, shall have
and may exercise all of the authority of the Board of Directors in the
management of the corporation. Each committee member serves at the pleasure of
the Board of Directors. The provisions in these bylaws governing meetings,
action without meetings, notice, waiver of notice, quorum and voting
requirements of the Board of Directors apply to committees of the Board
established under this section.
ARTICLE V
OFFICERS
SECTION 1. NUMBER OF OFFICERS. The officers of the corporation may be a
Chairman of the Board, one or more Vice Chairmen (who shall not be required to
be directors of the corporation), a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers as may be appointed in accordance
with the provisions of this Article V. Any two or more offices may be held by
one person, but no individual may act in more than one capacity where action of
two or more officers is required.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. Each officer, except
such officers as may be appointed in accordance with the provisions of Section 3
of this Article V, shall be chosen by the Board of Directors and shall hold
office until the annual meeting of the Board of Directors held next after his
election or until his successor shall have been duly chosen and qualified or
until his death or until he shall resign or shall have been disqualified or
removed from office.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may delegate to any
officer the power to appoint any subordinate officer and to prescribe his
respective authority and duties.
SECTION 4. OFFICERS ACTING AS ASSISTANT SECRETARY. Any Senior Vice
President, Vice President or Assistant Vice President shall have, by virtue of
his office and by authority of these bylaws the authority from time to time to
act as an Assistant Secretary of the corporation and to such extent said
officers are appointed to the office of Assistant Secretary.
SECTION 5. REMOVAL. The officers specifically designated in Section 1 of
this Article V may be removed, either with or without cause, by vote of a
majority of the number of directors then in office. The officers appointed in
accordance with the provisions of Section 3 of this Article V may be removed,
either with or without cause, by a majority vote of the directors present at any
meeting or by any officer upon whom such power of removal may be conferred by
the Board of Directors. The removal of any person from office shall be without
prejudice to the contract rights, if any, of the person so removed.
SECTION 6. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board or the
President, or if he was appointed by an officer in accordance with Section 3 of
this Article V, by giving written notice to the officer who appointed him. Such
resignation shall take effect at the time specified therein, or if no time is
specified therein, at the time such resignation is received by the Chairman of
the Board, the President or the officer who appointed such officer, unless it
shall be necessary to accept such resignation before it becomes effective, in
which event the resignation shall take effect upon its acceptance by the Board
of Directors, the Chairman of the Board, the President or the officer who
appointed such officer. Unless otherwise specified therein, the acceptance of
any such resignation shall not be necessary to make it effective.
SECTION 7. VACANCIES. A vacancy in an office because of death, resignation,
removal, disqualification or any other cause, shall be filled for the unexpired
portion of the term in the manner prescribed by these bylaws for regular
appointments or elections to such office.
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SECTION 8. CHIEF EXECUTIVE OFFICER. The Chairman shall be the Chief
Executive Officer of the corporation unless some other officer is so designated
by the Board of Directors.
SECTION 9. DUTIES OF OFFICERS. The duties of all officers elected by the
Board of Directors shall be prescribed by the Board of Directors. Nevertheless,
the Board of Directors may delegate to the Chief Executive Officer the authority
to prescribe the duties of other officers of the corporation not inconsistent
with law, the articles of incorporation and these bylaws.
In case of the absence of any officer of the corporation or for any other
reason that the Board of Directors may deem sufficient, the Board of Directors
may delegate the powers or duties of such officer to any other officer or to any
director for the time being, provided a majority of the directors then in office
concurs therein.
SECTION 10. SALARIES OF OFFICERS. No officer of the corporation shall be
prevented from receiving a salary as such officer or from voting thereon by
reason of the fact that he is also a director of the corporation. The salaries
of the officers of the corporation, including such officers as may be directors
of the corporation, shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any officer who has been
given power to appoint subordinate officers, as provided in Section 3 of this
Article V, the authority to fix the salaries or other compensation of any such
officers appointed by him.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation. Such authority may
be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
the Board of Directors. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, issued in the name of the corporation, shall be signed by such
officer or officers, agent or agents of the corporation and in such manner as
shall from time to time be determined by the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
depositories as may be selected by or under the authority of the Board of
Directors.
ARTICLE VII
SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. The Board of Directors may authorize
the issuance of some or all of the shares of the corporation's classes or series
without issuing certificates to represent such shares. If shares are represented
by certificates, the certificates shall be in such form as required by law and
as determined by the Board of Directors. Certificates shall be signed, either
manually or in facsimile, by the Chairman of the Board, the President or a Vice
President and by the Secretary or Treasurer or an Assistant Secretary or an
Assistant Treasurer. All certificates for shares shall be consecutively numbered
or otherwise identified and entered into the stock transfer books of the
corporation. When shares are represented by certificates, the corporation shall
issue and deliver to each shareholder to whom such shares have been issued or
transferred, certificates representing the shares owned by him. When shares are
not represented by certificates, then within a reasonable time after the
issuance or transfer of such shares, the corporation shall send the shareholder
to whom such shares have been issued or transferred a written statement of the
information required by law to be on certificates.
SECTION 2. STOCK TRANSFER BOOKS. The corporation shall keep a book or set
of books, to be known as the stock transfer books of the corporation, containing
the name of each shareholder of record, together with such shareholder's address
and the number and class or series of shares held by him. Transfers of shares of
the corporation shall be made only on the stock transfer books of the
corporation by the holder of record thereof or by his legal representative, who
shall furnish proper evidence of authority to transfer, or by his attorney
authorized to effect such transfer by power of attorney
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duly executed and filed with the Secretary, and upon surrender for cancellation
of the certificate for such shares (if the shares are represented by
certificates).
SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors
may direct a new certificate to be issued in place of any certificate
theretofore issued by the corporation claimed to have been lost, stolen or
destroyed, upon receipt of an affidavit of such fact from the person claiming
the certificate to have been lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors shall require that the owner
of such lost, stolen or destroyed certificate, or his legal representative, give
the corporation a bond in such sum and with such surety or other security as the
Board may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate claimed to have been lost, stolen or
destroyed, except where the Board of Directors by resolution finds that in the
judgment of the directors the circumstances justify omission of a bond.
SECTION 4. FIXING RECORD DATE. The Board of Directors may fix a future date
as the record date for one or more voting groups in order to determine the
shareholders entitled to notice of a shareholders' meeting, to demand a special
meeting, to vote or to take any other action. Such record date may not be more
than 70 days before the meeting or action requiring a determination of
shareholders. A determination of shareholders entitled to notice of or to vote
at a shareholders' meeting is effective for any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
which it must do if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
If no record date is fixed by the Board of Directors for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
the close of business on the day before the first notice of the meeting is
delivered to shareholders shall be the record date for such determination of
shareholders.
The Board of Directors may fix a date as the record date for determining
shareholders entitled to a distribution or share dividend. If no record date is
fixed by the Board of Directors for such determination, it is the date the Board
of Directors authorizes the distribution or share dividend.
SECTION 5. HOLDER OF RECORD. Except as otherwise required by law, the
corporation may treat the person in whose name the shares stand of record on its
books as the absolute owner of the shares and the person exclusively entitled to
receive notification and distributions, to vote and to otherwise exercise the
rights, powers and privileges of ownership of such shares.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. DISTRIBUTIONS. The Board of Directors may from time to time
authorize, and the corporation may grant, distributions and share dividends to
its shareholders pursuant to law and subject to the provisions of the articles
of incorporation.
SECTION 2. SEAL. The corporate seal of the corporation shall consist of two
concentric circles between which is the name of the corporation and in the
center of which is inscribed SEAL; and such seal, as impressed or affixed on the
margin hereof, is hereby adopted as the corporate seal of the corporation.
SECTION 3. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by the Board of Directors.
SECTION 4. AMENDMENTS. Except as otherwise provided in these bylaws, the
articles of incorporation or the North Carolina Business Corporation Act, these
bylaws may be amended or repealed and new bylaws may be adopted by the
affirmative vote of a majority of the number of directors then in office at any
regular or special meeting of the Board of Directors. The Board of Directors
shall not have power to amend, repeal or adopt a bylaw (i) requiring more than a
majority of the voting shares for a quorum at a meeting of shareholders or more
than a majority of the votes cast to constitute action by the shareholders,
except where higher percentages are required by law, (ii) providing for the
management of the corporation other than by the Board of Directors or its
Executive Committee, (iii) increasing or decreasing the authorized number of
directors beyond the maximum number or minimum number set forth in Article 7 of
the articles of incorporation, or (iv) inconsistent with, or (as to any matter
covered by said Article 7) in a manner other than as prescribed by, Article 7 of
the articles of incorporation. The shareholders may amend or repeal the bylaws
and adopt new bylaws at any annual meeting or at a special meeting called for
such purpose provided that no bylaw may be so amended, repealed or adopted which
is inconsistent with, or (as to any matter covered by said Article 7) adopted in
a manner other than as prescribed by, Article 7 of the articles of incorporation
without the affirmative vote of the holders of not less than
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80% of the outstanding shares of capital stock of the corporation entitled to
vote in the election of directors, voting together as a single class. No bylaw
adopted or amended by the shareholders shall be altered or repealed by the Board
of Directors, except when the articles of incorporation or a bylaw adopted by
the shareholders authorizes the Board of Directors to adopt or repeal any such
bylaw.
SECTION 5. DEFINITIONS. Unless the context otherwise requires, terms used
in these bylaws shall have the meanings assigned to them in the North Carolina
Business Corporation Act to the extent defined therein.
SECTION 6. INAPPLICABILITY OF THE NORTH CAROLINA SHAREHOLDER PROTECTION
ACT. The provisions of The North Carolina Shareholder Protection Act (N.C.G.S.
(section mark) 55-9-01 through (section mark) 55-9-05) shall not be applicable
to the corporation, effective as of August 21, 1990, the date this bylaw was
adopted by the Board of Directors in accordance with Section 55-9-05 of such
Act.
SECTION 7. INAPPLICABILITY OF THE NORTH CAROLINA CONTROL SHARE ACQUISITION
ACT. The provisions of The North Carolina Control Share Acquisition Act
(N.C.G.S. (section mark) 55-9A-01 through (section mark) 55-9A-09) shall not be
applicable to the corporation, effective as of August 21, 1990, the date this
bylaw was adopted by the Board of Directors in accordance with Section 55-9A-09
of such Act.
SECTION 8. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies, and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Corporation by the Chairman of the Board, or the President, or any Vice
Chairman of the Board, any Vice President or Assistant Vice President, or the
Secretary or any Assistant Secretary; provided, however, that where required,
any such instrument shall be attested by one of such officers other than the
officer executing such instrument. Any such instruments may also be executed,
acknowledged, verified, delivered, or accepted on behalf of the Corporation in
such other manner and by such other officers as the Board of Directors may from
time to time direct. The provisions of this Section 8 are supplementary to any
other provisions of these Bylaws.
ARTICLE IX
INDEMNIFICATION
SECTION 1. DIRECTORS AND EXECUTIVE OFFICERS INDEMNITY. Each director and
executive officer of the Corporation shall be indemnified by the Corporation
against liability in any proceeding (including without limitation a proceeding
brought by or on behalf of the Corporation itself) arising out of his status as
such or his activities in either of the foregoing capacities, except for any
liability incurred on account of activities which were at the time taken known
or believed by such person to be clearly in conflict with the best interests of
the Corporation. Liabilities incurred by a director or executive officer of the
Corporation in defending a proceeding shall be paid by the Corporation in
advance of the final disposition of such proceeding upon receipt of an
undertaking by the director or executive officer to repay such amount if it
shall be determined, as provided in Section 5(a) hereof, that he is not entitled
to be indemnified by the Corporation against such liabilities.
The indemnity against liability in the preceding paragraph of this Section
1, including liabilities incurred in defending a proceeding, shall be automatic
and self-operative.
SECTION 2. ADDITIONAL INDEMNITY. Any director, officer or employee of the
Corporation who serves at the request of the Corporation as a director, officer,
employee or agent of a charitable, not-for-profit, religious, educational or
hospital corporation, partnership, joint venture, trust or other enterprise, or
a trade association, or as a trustee or administrator under an employee benefit
plan, or who serves at the request of the Corporation as a director, officer or
employee of a business corporation in connection with the administration of an
estate or trust by the Corporation, shall have the right to be indemnified by
the Corporation, subject to the provisions set forth in the following paragraph
of this Section 2, against liabilities in any manner arising out of or
attributable to such status or activities in any such capacity, except for any
liability incurred on account of activities which were at the time taken known
or believed by such person to be clearly in conflict with the best interests of
the Corporation, or of the corporation, partnership, joint venture, trust,
enterprise, association or plan being served by such person.
In the case of all persons except the directors and executive officers of
the Corporation, the determination of whether a person is entitled to
indemnification under the preceding paragraph of this Section 2 shall be made by
and in the sole discretion of the Chief Executive Officer of the Corporation. In
the case of the directors and executive officers of the
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Corporation, the indemnity against liability in the preceding paragraph of this
Section 2 shall be automatic and self-operative.
SECTION 3. DEFINITIONS. For purposes of this Article IX of these bylaws
only, the following terms shall have the meanings indicated:
(a) The term "Corporation" means First Union Corporation and its
direct and indirect wholly-owned (excluding directors' qualifying shares)
subsidiaries.
(b) The term "director" means an individual who is or was a director
of the Corporation.
(c) The term "executive officer" means an officer of the Corporation
who by resolution of the Board of Directors of the Corporation has been
determined to be an executive officer of the Corporation for purposes of
Regulation O of the Federal Reserve Board.
(d) The term "liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to
an employee benefit plan), or reasonable expenses, including counsel fees
and expenses, incurred with respect to a proceeding.
(e) The term "party" includes an individual who was, is, or is
threatened to be made a named defendant or respondent in a proceeding.
(f) The term "proceeding" means any threatened, pending, or completed
claim, action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
SECTION 4. SETTLEMENTS. The Corporation shall have no obligation to
indemnify any person for an amount paid in settlement of a proceeding unless the
Corporation consents in writing to such settlement.
SECTION 5. ADDITIONAL PROVISIONS.
(a) Notwithstanding anything to the contrary provided herein, no
person shall have a right to indemnification with respect to any liability
to the extent such person is entitled to receive payment therefor under any
insurance policy or from any corporation, partnership, joint venture,
trust, trade association, employee benefit plan, or other enterprise other
than the Corporation, or to the extent that a court of competent
jurisdiction determines that such indemnification is void or prohibited
under state or federal law.
(b) The right to indemnification herein provided for shall apply to
persons who are directors, officers, or employees of corporations or other
entities that are hereafter merged or otherwise combined with the
Corporation only after the effective date of such merger or other
combination and only as to their status and activities after such date.
(c) The right to indemnification herein provided for shall inure to
the benefit of the heirs and legal representatives of any person entitled
to such right.
(d) No revocation of, change in, or adoption of any resolution or
provision in the articles of incorporation or bylaws of the Corporation
inconsistent with, this bylaw shall adversely affect the rights of any
director, officer, or employee of the Corporation with respect to (i) any
proceeding commenced or threatened prior to such revocation, change, or
adoption, or (ii) any proceeding arising out of any act or omission
occurring prior to such revocation, change, or adoption, in either case,
without the written consent of such director, officer, or employee.
(e) The rights hereunder shall be in addition to and not exclusive of
any other rights to which a director, officer, or employee of the
Corporation may be entitled under any statute, agreement, insurance policy
or otherwise.
(f) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, or
employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, trade association, employee
benefit plan, or other enterprise, against any liability asserted against
such director, officer, or employee in any such capacity, or arising out of
their status as such, whether or not the Corporation would have the power
to indemnify such director, officer, or employee against such liability.
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EXHIBIT (10)(A)
FIRST UNION CORPORATION
MANAGEMENT INCENTIVE PLAN
I. PURPOSE:
Through recognition of both Corporate and individual performance, the Plan
is intended to provide significant and sustaining motivation to key Corporate
management personnel who are responsible for meeting growth and profit
objectives.
II. EFFECTIVE DATE:
The Plan shall be effective with the fiscal year beginning January 1, 1978,
and shall continue for each fiscal year thereafter until terminated.
III. ELIGIBILITY:
It is the Plan intent that primary participants will be limited to key
members of senior management selected by the Human Resources Committee. In
addition, management positions may be designated on a periodic basis by the
Human Resources Committee.
IV. PROCEDURE:
The following procedure will be used to determine award payments under the
Plan:
(A) FUNDING:
A management incentive pool will be developed on the following basis:
(Bullet) A contribution to the pool will be made only after a 12%
return on common equity, excluding any adjustment for
unrealized gains or losses on debt and equity securities
pursuant to Statement of Financial Accounting Standards
Number 115 (ROE) has been attained for a given fiscal
year, based on the net income of First Union Corporation
adjusted for unusual items to be determined at the
discretion of the Human Resources Committee ("Adjusted Net
Income for Pool Purposes").
(Bullet) The pool contribution would then be made on the basis of
the following table:
<TABLE>
<CAPTION>
ROE (BASED ON ADJUSTED % OF ADJUSTED NET
NET INCOME FOR POOL PURPOSES)* INCOME FOR POOL PURPOSES*
<S> <C>
12.00% 1.00
12.50 1.15
13.00 1.30
13.50 1.45
14.00 1.60
14.50 1.75
15.00 1.90
15.50 2.05
16.00 2.20
16.50 2.35
17.00 2.50
Greater than 17.00% 2.50
</TABLE>
(Bullet) The aforelisted funding requirements are general
guidelines that may be adjusted from time to time by the
Human Resources Committee of the Board. The Committee may,
at its discretion, make incentive payments notwithstanding
these guidelines at such time and to such individuals as
deemed appropriate based on unforeseen circumstances. In
addition, the evaluation of performance under the Plan
should take into consideration actions taken in support of
the Corporation's long-term growth strategy that may
negatively impact the Corporation's single year ROE
calculation.
* Each ten basis points increase in ROE between 12% and 17% shall result in a
three basis points increase in the corresponding % of Adjusted Net Income for
Pool Purposes.
<PAGE>
(B) (1) INDIVIDUAL AWARDS:
Participants will receive awards from the management incentive pool on
the basis of individual performance as determined by the Human Resources
Committee of the Board of Directors.
(2) INDIVIDUAL PERFORMANCE:
Performance used as a determinant for individual award grants will be
based upon achievement of predetermined goals and objectives and will be
supported by the Corporation's formally documented performance evaluation
system. The maximum potential award per individual shall be 200% of base
salary.
(3) COVERED OFFICERS:
Notwithstanding the foregoing, awards may only be granted to such
executive officers of First Union Corporation (the "Corporation") and its
subsidiaries as the Human Resource Committee may designate in writing as
Covered Officers ("Covered Officers"), on the following conditions:
(Bullet) Prior to April 1, 1994, as to awards for 1994, and prior
to January 1 of each year thereafter as to awards for each
such year, the Human Resources Committee shall determine
the Covered Officers and an ROE performance goal, based on
Adjusted Net Income for Award Purposes (as defined below),
for 1994 and each year thereafter that will need to be
attained by the Corporation in order for awards to be made
to the Covered Officers for each such year.
(Bullet) Each award shall be equal to 100% of the Covered Officer's
base salary as of December 31, 1994, as to 1994 awards,
and shall be equal to 200% of the Covered Officer's base
salary as of December 31 of each year thereafter as to
awards for each such year; provided, however, such award
may not exceed $3,000,000; and provided, further, the
Human Resources Committee, in its discretion, may reduce
the amount of any such award at any time before such award
is paid to a Covered Officer.
(Bullet) "Adjusted Net Income for Award Purposes" means the
Corporation's annual net income applicable to common
stockholders, adjusted to remove the effect of the
following:
(i) items to be disclosed under generally accepted accounting
principles, or that would be disclosed absent a materiality
concept, in the Corporation's annual income statement as
extraordinary gains or losses or as changes in accounting
principles;
(ii) net income or loss attributable to companies acquired in
acquisition transactions which are being treated as
poolings under generally accepted accounting principles to
the extent the income or loss is attributable to periods
prior to the consummation date of the transaction; and
(iii) restructuring charges to be recognized in the
Corporation's annual income statement as a result of
current and/or pending acquisition transactions.
(Bullet) In situations where net income applicable to common
stockholders is adjusted as a result of pooling
transactions noted above, the average equity of the
Corporation for the year, against which the Adjusted Net
Income for Award Purposes is compared to determine ROE,
shall be computed without taking into account the equity
of an acquired company for any time periods prior to
consummation of the transaction.
(4) In all cases, the recommended individual awards must be approved
by the Human Resources Committee. In addition, the total of all actual
awards made will be subject to any governmental wage guidelines which may
exist and individual awards will be subject to applicable tax withholdings.
To the extent contributions to the management incentive pool exceed
individual awards made under the Plan, such excess shall be held under the
Plan and shall be available to be granted to individuals under the Plan at
such time and in such amounts as may be determined in accordance with the
provisions of the Plan.
V. AWARD PAYMENT:
Except as may otherwise be determined by the Human Resources Committee
pursuant to the last paragraph of the preceding Article IV, awards made in a
given fiscal year will be paid during the first quarter of the year subsequent
to the
2
<PAGE>
fiscal year on which the award is based or at such other time or times as the
Human Resources Committee may determine. Participants must be employed as of
December 31 to receive a payment during the following year, except in the case
of retirement under the First Union Corporation Pension Plan, death, or
disability under the First Union Corporation Long-Term Disability Plan. In these
cases, the amount would be paid to the individual or beneficiary in the same
manner.
Notwithstanding the foregoing, awards to Covered Officers shall be made on
the January 31st following the year for which the awards are being made or at
any time thereafter; provided, however, awards may be made prior to such January
31st if such awards are discounted using the applicable short-term federal rate
in effect at the time of payment in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "Code"); and provided further,
however, awards may only be paid to Covered Officers after the Human Resources
Committee certifies in writing that the applicable ROE performance goal and any
other material conditions precedent to the payment of such awards have been
satisfied.
VI. ADMINISTRATION:
This Plan shall be administered by the Human Resources Committee of the
Board of Directors. As indicated previously, all actual awards made under the
Plan must be approved by the Human Resources Committee.
VII. MODIFICATION AND TERMINATION:
The Plan may be terminated at any time by the Board of Directors. This Plan
may be amended in whole or in part from time to time by the Human Resources
Committee of the Board of Directors, but no amendment shall operate to decrease
the awards previously made and due any participant.
Notwithstanding the foregoing, any amendment that changes the performance
goal provided for in Article IV (B) (3), including (i) the class of individuals
eligible to receive awards under such Article IV (B) (3), (ii) a description of
the business criteria on which the performance goal is based, and (iii) the
maximum limitation set forth in such Article IV (B) (3), shall be subject to the
approval of the stockholders of First Union Corporation, it being understood
that the determination by the Human Resources Committee of varying ROE goals
pursuant to such Article IV (B)(3) shall not be deemed to be a change in the
material terms of the performance goal.
Notwithstanding anything to the contrary contained in the Plan, if the
amendments to the Plan adopted by the Human Resources Committee on February 15,
1994, and reflected above, are not approved by the stockholders of the
Corporation, the Plan shall remain in full force and effect in accordance with
the terms and conditions of the Plan in effect prior to the adoption of such
amendments; provided, however, in such case no awards may thereafter be made
under the Plan to "covered employees" (as such term is defined in Section 162(m)
of the Code).
VIII. NONASSIGNABILITY:
Interests in the Plan may not be transferred or assigned by participants
other than by will or the laws of descent and distribution.
3
<PAGE>
EXHIBIT (12)(A)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $1,558,664 1,415,456 1,220,781 581,203 419,801
Fixed charges, excluding capitalized interest............... 1,080,776 669,978 517,742 456,867 698,898
(A.) Earnings............................................... $2,639,440 2,085,434 1,738,523 1,038,070 1,118,699
Interest, excluding interest on deposits.................... $1,032,363 619,698 467,181 405,297 652,393
One-third of rents.......................................... 48,413 50,280 50,561 51,570 46,505
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(B.) Fixed charges.......................................... $1,083,533 671,098 518,027 457,248 701,224
Consolidated ratios of earnings to fixed charges, excluding
interest on deposits (A./B.).............................. 2.44X 3.11 3.36 2.27 1.60
INCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $1,558,664 1,415,456 1,220,781 581,203 419,801
Fixed charges, excluding capitalized interest............... 3,159,467 2,111,226 1,841,000 2,072,538 2,789,501
(C.) Earnings............................................... $4,718,131 3,526,682 3,061,781 2,653,741 3,209,302
Interest, including interest on deposits.................... $3,111,054 2,060,946 1,790,439 2,020,968 2,742,996
One-third of rents.......................................... 48,413 50,280 50,561 51,570 46,505
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(D.) Fixed charges.......................................... $3,162,224 2,112,346 1,841,285 2,072,919 2,791,827
Consolidated ratios of earnings to fixed charges, including
interest on deposits (C./D.).............................. 1.49X 1.67 1.66 1.28 1.15
</TABLE>
<PAGE>
EXHIBIT (12)(B)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $1,558,664 1,415,456 1,220,781 581,203 419,801
Fixed charges, excluding preferred stock dividends
and capitalized interest.................................. 1,084,561 705,306 530,024 473,158 705,944
(A.) Earnings............................................... $2,643,225 2,120,762 1,750,805 1,054,361 1,125,745
Interest, excluding interest on deposits.................... 1,032,363 619,698 467,181 405,297 652,393
One-third of rents.......................................... 48,413 50,280 50,561 51,570 46,505
Preferred stock dividends*.................................. 10,814 102,036 37,182 48,270 41,615
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(B.) Fixed charges.......................................... $1,094,347 773,134 555,209 505,518 742,839
Consolidated ratios of earnings to fixed charges, excluding
interest on deposits (A./B.).............................. 2.42X 2.74 3.15 2.09 1.52
INCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $1,558,664 1,415,456 1,220,781 581,203 419,801
Fixed charges, excluding preferred stock dividends
and capitalized interest.................................. 3,163,252 2,146,554 1,853,282 2,088,829 2,796,546
(C.) Earnings............................................... $4,721,916 3,562,010 3,074,063 2,670,032 3,216,347
Interest, including interest on deposits.................... $3,111,054 2,060,946 1,790,439 2,020,968 2,742,996
One-third of rents.......................................... 48,413 50,280 50,561 51,570 46,505
Preferred stock dividends*.................................. 10,814 102,036 37,182 48,270 41,615
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(D.) Fixed charges.......................................... $3,173,038 2,214,382 1,878,467 2,121,189 2,833,442
Consolidated ratios of earnings to fixed charges, including
interest on deposits (C./D.).............................. 1.49X 1.61 1.64 1.26 1.14
</TABLE>
* Includes redemption premium of $41,355,000 in 1994.
<PAGE>
EXHIBIT (12)(C)
FIRST UNION CORPORATION
FIRST FIDELITY BANCORPORATION
COMBINED COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $2,218,601 2,087,887 1,795,265 977,302 699,815
Fixed charges, excluding capitalized interest............... 1,266,255 816,102 607,462 569,638 866,728
(A.) Earnings............................................... $3,484,856 2,903,989 2,402,727 1,546,940 1,566,543
Interest, excluding interest on deposits.................... $1,198,487 746,938 537,964 501,556 803,787
One-third of rents.......................................... 67,768 69,164 69,498 68,082 62,941
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(B.) Fixed charges.......................................... $1,269,012 817,222 607,747 570,019 869,054
Consolidated ratios of earnings to fixed charges, excluding
interest on deposits (A./B.).............................. 2.75X 3.55 3.95 2.71 1.80
INCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $2,218,601 2,087,887 1,795,265 977,302 699,815
Fixed charges, excluding capitalized interest............... 4,119,583 2,862,146 2,551,450 3,009,762 4,133,826
(C.) Earnings............................................... $6,338,184 4,950,033 4,346,715 3,987,064 4,833,641
Interest, including interest on deposits.................... $4,051,815 2,792,982 2,481,952 2,941,680 4,070,885
One-third of rents.......................................... 67,768 69,164 69,498 68,082 62,941
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(D.) Fixed charges.......................................... $4,122,340 2,863,266 2,551,735 3,010,143 4,136,152
Consolidated ratios of earnings to fixed charges, including
interest on deposits (C./D.).............................. 1.54X 1.73 1.70 1.32 1.17
</TABLE>
<PAGE>
EXHIBIT (12)(D)
FIRST UNION CORPORATION
FIRST FIDELITY BANCORPORATION
COMBINED COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $2,218,601 2,087,887 1,795,265 977,302 699,815
Fixed charges, excluding preferred stock dividends
and capitalized interest.................................. 1,281,312 861,573 628,840 591,458 878,337
(A.) Earnings............................................... $3,499,913 2,949,460 2,424,105 1,568,760 1,578,152
Interest, excluding interest on deposits.................... $1,198,487 746,938 537,964 501,556 803,787
One-third of rents.......................................... 67,768 69,164 69,498 68,082 62,941
Preferred stock dividends*.................................. 41,447 132,846 66,931 74,860 63,354
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(B.) Fixed charges.......................................... $1,310,459 950,068 674,678 644,879 932,408
Consolidated ratios of earnings to fixed charges, excluding
interest on deposits (A./B.).............................. 2.67X 3.10 3.59 2.43 1.69
INCLUDING INTEREST ON DEPOSITS
Pretax income from continuing operations.................... $2,218,601 2,087,887 1,795,265 977,302 699,815
Fixed charges, excluding preferred stock dividends
and capitalized interest.................................. 4,134,640 2,907,617 2,572,828 3,031,582 4,145,434
(C.) Earnings............................................... $6,353,241 4,995,504 4,368,093 4,008,884 4,845,249
Interest, including interest on deposits.................... $4,051,815 2,792,982 2,481,952 2,941,680 4,070,885
One-third of rents.......................................... 67,768 69,164 69,498 68,082 62,941
Preferred stock dividends*.................................. 41,447 132,846 66,931 74,860 63,354
Capitalized interest........................................ 2,757 1,120 285 381 2,326
(D.) Fixed charges.......................................... $4,163,787 2,996,112 2,618,666 3,085,003 4,199,506
Consolidated ratios of earnings to fixed charges, including
interest on deposits (C./D.).............................. 1.53X 1.67 1.67 1.30 1.15
</TABLE>
*Includes redemption premium of $41,355,000 in 1994.
First Union Corporation
1995 Summary Annual Report
(First Union logo appears here)
http://www.firstunion.com/
First Union Corporation 1995 Summary Annual Report
<PAGE>
What is this computer disk?
We hope you are intrigued by the digital compact disk that accompanies
this year's summary annual report.
This disk may be inserted into personal computers that have CD-ROM drives
to connect to First Union's site on the
Internet WEB and to purchase banking services on-line.
The disk also includes a multimedia presentation--text, video, sound and
interactive models--
that outlines First Union's strategic vision. We believe chances are
good that you--or someone you know--will be able
to use this disk. If you cannot, please share it with someone else.
In doing so, you may well be helping us to reach another valued customer.
(CD-ROM disk is inserted here. Description of CD-ROM disk follows written
portion of the Summary Annual Report.)
The information on the accompanying digital compact disk
includes information that is provided in paper format in this year's
summary annual report
and in First Union's 1995 Annual Report on Form 10-K filed with the
Securities and Exchange Commission,
as well as other information that is supplementary in nature.
<PAGE>
System Requirements
PC-Compatible:
486DX 66MHz
8 MB RAM
Microsoft Windows 3.1 or Windows 95
640 x 480 screen resolution, 256 colors
Double speed CD ROM
Macintosh or Power Mac:
8 MB RAM
System 7.1 or later
640 x 480 screen resolution, 256 colors
Double speed CDROM
(Photo depicting a CD ROM where it will appear, with the First Union
logo and the following:)
* 1995 Summary Annual Report
* Spread Sheet Files
* Internet Browser for PC
* Multimedia Presentation
Summary Annual Report
Our goal in presenting this 1995 Summary Annual Report is to provide
information
regarding First Union in a manner that
is meaningful and useful to the widest range of readers. The audited
financial
statements and more detailed analytical information are contained in the
First Union
Corporation 1995 Annual Report on Form 10-K, which is available free
of charge if you write to: Investor Relations, Two First Union Center,
Charlotte, North Carolina 28288-0206.
<PAGE>
TABLE OF CONTENTS
Financial Highlights
2
Letter from the Chairman
3
Products and Services
11
Index to Special Topics
19
Performance Review
20
Financial Tables
31
Management's Statement of
Financial Responsibility and
Independent Auditors' Report
39
Supplemental Consolidated
Balance Sheets
40
Supplemental Consolidated
Statements of Income
41
Glossary
42
Corporate and Bank Boards
of Directors
43
Principal Subsidiaries
46
Stockholder Information
47
Product Catalogue
48
KEY STATISTICAL DATA
(December 31, 1995)
Assets:
$131.9 BILLION
Loans:
$90.6 BILLION
Deposits:
$92.6 BILLION
Total Stockholders' Equity:
$9.0 BILLION
Market Capitalization:
$15.5 BILLION
Customer Relationships:
11 MILLION
Corporate Headquarters:
CHARLOTTE, N.C.
Bank Holding Company National Ranking by Assets:
6TH LARGEST
INTRODUCTION
First Union's longstanding commitment to customer service means that we must
be ready to offer our customers the service and products they want -- when,
where and how they want them. More and more of our customers are demanding
quick, technological solutions to their financial service needs. Some even
say they never want to go into a branch office again. Still other customers
require, and will continue to receive, the face-to-face service they prefer,
in a traditional branch setting. Meeting the needs of both types of customers
is a key component of our corporate strategy for the rest of the '90s.
BUSINESS PROFILE
First Union Corporation is a $132 billion-asset financial services company
with a leadership position in key markets. Our 45,000 employees serve
11 million customers primarily along the East Coast. Customers from
Connecticut to Florida will have the same access to their account
information, and will be able to purchase the same products at any of nearly
2,000 retail offices systemwide. We have the nation's fourth largest
automated teller machine network. Customers also can access our services
through the Internet or toll-free phone lines -- 24 hours a day, seven days a
week. Our Internet address is http://www.firstunion.com/ and our Direct Bank
nationwide toll-free phone number is 1-800-413-7898.
First Union provides full-service retail banking, commercial banking and
trust services in 12 states and Washington, D.C. In addition, through nearly
200 diversified offices nationwide, First Union provides other financial
services including access to the capital markets, mortgage banking, home
equity lending, leasing, insurance and securities brokerage services.
1
<PAGE>
STATISTICS
Earnings per Common Share
(Dollars per share)
(Bar graph appears with the following plot points:)
1990 1991 1992 1993 1994 1995
.97 2.34 2.53 4.30 4.72 5.04
Dividends per Common Stock
(In dollars)
(Bar graph appears with the following plot points:)
1990 1991 1992 1993 1994 1995
1.08 1.12 1.28 1.50 1.72 1.96
Book Value per Share
(In dollars)
(Bar graph appears with the following plot points:)
1990 1991 1992 1993 1994 1995
19.83 21.21 23.36 26.71 28.19 31.89
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Percent
Years Ended December 31, Increase
(Dollars in thousands except per share data) 1995 1994 (Decrease)
<S> <C> <C> <C>
NET INCOME $ 1,430,181 1,376,443 3.9%
DIVIDENDS ON PREFERRED STOCK 26,390 46,020 (42.7)
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS 1,403,791 1,330,423 5.5
(Before Redemption Premium)
REDEMPTION PREMIUM ON PREFERRED STOCK -- 41,355 --
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 1,403,791 1,289,068 8.9%
(After Redemption Premium)
PER SHARE COMMON DATA
Net income before redemption premium $ 5.04 4.72 6.8%
Net income after redemption premium 5.04 4.58 10.0
Cash dividends 1.96 1.72 14.0
Book value 31.89 28.19 13.1
Year-end price $ 55.625 41.375 34.4%
YEAR-END BALANCE SHEET ITEMS
Assets $131,879,873 113,529,201 16.2%
Securities available for sale 18,193,699 11,533,642 57.7
Investment securities 3,139,616 7,916,729 (60.3)
Loans, net of unearned income 90,562,880 77,830,993 16.4
Deposits 92,555,218 87,865,125 5.3
Common stockholders' equity 8,859,921 8,044,785 10.1
Total stockholders' equity $ 9,043,144 8,274,492 9.3
Common shares outstanding 277,846 285,361 (2.6)%
FINANCIAL RATIOS
Return on average assets 1.21% 1.29
Return on average common stockholders' 16.69 16.91
equity before redemption premium
Net interest margin 4.46 4.75
Net charge-offs to average loans, net .41 .40
Allowance as % of loans, net 1.66 2.03
Allowance as % of nonaccrual and restructured loans 233 248
Allowance as % of nonperforming assets 182 178
Nonperforming assets to loans, net and foreclosed properties .91 1.14
Dividend payout ratio on common shares 35.82% 34.16
</TABLE>
The information in this Summary Annual Report reflects the pooling of interests
acquisition of First Fidelity Bancorporation on January 1, 1996, as if First
Union and First Fidelity had been combined for all periods presented.
2
<PAGE>
LETTER FROM THE CHAIRMAN
A NEW STRATEGY FOR A NEW CENTURY
By almost any measure, First Union expanded rapidly in 1995 with significant
contributions from new and expanded lines of business such as capital
markets, mutual funds and card products, as well as solid growth in our
traditional lending operations. In addition, with First Fidelity
Bancorporation and other acquisitions, we created a unique East Coast
presence with $132 billion in assets--the nation's sixth largest banking
company--and 45,000 employees serving 11 million customers from Florida to
Connecticut.
In 1995 we rewarded longtime stockholders and new stockholders with the 18th
year of increased dividends, as well as earnings growth of 9 percent and book
value growth of 17 percent from 1994. We also welcomed our newest customers
with a broader product selection--everything from financial planning guidance
for individuals to sophisticated financial problem-solving partnerships with
commercial customers.
The individuals who have joined together in the Office of the Chairman--Tony
Terracciano, former chairman and chief executive officer of First Fidelity as
president; John Georgius as vice chairman; and myself continuing as chairman
and chief executive officer--are action-oriented, and we are committed to a
single vision for our new company as the premier retail/middle-market
organization in the country. We are equally committed to enhancing
stockholder value in the years ahead.
Our growth has given us the size, sophistication and scale to compete with
anyone--bank or nonbank--even as new competitors appear on the horizon.
The southern portion of our company--from Maryland to Florida--is in a dynamic,
fast-growing market with people and new businesses moving in at a rapid pace.
The Commerce Department projects that this region will continue to outpace
the nation in population, job and income growth for the rest of this decade.
GEOGRAPHIC REACH
(Photo of map depicting the states of New York, Connecticut,
Pennsylvania, New Jersey, Maryland, Delaware, Washington DC, Virginia,
North Carolina, Tennessee, South Carolina, Georgia and Florida)
Total Return on Common Stock
Compound Annual Growth Rate
(Assumes Dividends Reinvested)
(In dollars)
(A bar graph appears here with the following plot points:)
3 year 13% 5 year 35% 10 year 15%
91 95 89 95 84 95
1,000 1,430 1,000 4,406 1,000 3,876
Asset Growth
(Dollars in billions)
(A bar graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
83.7 89.5 95.3 104.5 113.5 131.9
3
<PAGE>
Greatest Concentration of Companies
with Annual Sales $20mm-$250mm+
The combined First Fidelity and First Union
region accounts for 37% of the nation's
middle-market companies.
(A bar graph appears here with the following plot points:)
First Fidelity Region 21,100
First Union Region 19,825
East North Central 19,361
Pacific 16,243
West South Central 11,041
West North Central 7,985
New England 6,880
East South Central 6,119
Mountain 5,314
First Union's region includes: Washington, D.C., Florida,
Georgia, Maryland, North Carolina, South Carolina,
Virginia and Tennessee. First Fidelity's region includes:
New Jersey, Pennsylvania, New York,
Connecticut and Delaware.
Source: Dun & Bradstreet
New Corporate
Facilities and Expansions
(1993-1995)
(A bar graph appears here with the following plot points:)
South Atlantic 4,099
East North Central 4,358
West South Central 2,457
East South Central 1,838
Pacific 956
West North Central 916
Middle Atlantic 790
Mountain 731
New England 182
Source: Site Selection Magazine
First Union is located primarily in the South Atlantic
and Middle Atlantic regions.
Per Capita Income by
Metropolitan Area
Four of the five metro areas with highest per
capita income are in the combined
First Union-First Fidelity market
Per Capita
Personal U.S.
Income Average
West Palm Beach
Boca Raton, FL MSA $30,901 154%
New York, Northern
New Jersey-Long
Island, NY-NJ-CT-
PA CMSA 27,259 136
San Francisco-Oakland-
San Jose, CA CMSA 26,019 129
Hartford,
CT NECMA 25,461 127
Washington-
Baltimore-MD-
VA-WVA CMSA 25,087 125%
U.S. Average $20,105
LETTER FROM THE CHAIRMAN
<TABLE>
<CAPTION>
<S> <C> <C>
(Photo of Anthony P. Terracciano) (Photo of Edward E. Crutchfield) (Photo of John R. Georgius)
Anthony P. Terracciano Edward E. Crutchfield John R. Georgius
PRESIDENT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, VICE CHAIRMAN,
FIRST UNION CORPORATION FIRST UNION CORPORATION FIRST UNION CORPORATION
</TABLE>
The northern part of the company is home to the nation's greatest
concentration of affluent individuals and of middle-market companies. It is a
perfect market for expanding First Union's retail and commercial investment
products and capital markets initiatives.
The new First Union has solid market share and customer relationships in a
region that comprises nearly 40 percent of the nation's middle-market
companies and that includes four of the nation's five metropolitan areas with
the highest per capita income.
Combined, the new First Union offers technological advances that yield
efficient processing. That means faster responses to loan requests, more
products from which to choose, and a commitment to delighting customers with
our efforts to help them reach their financial goals--whatever, wherever and
whenever the customer needs.
STRATEGIC RETROSPECTIVE
Ten years ago, our 1985 annual report described our outlook and strategy for
a dramatically changing banking industry and made several assumptions about
how to survive in the future. We said:
* Banks had to build the scope and scale to face new market forces--including
competitors from outside the banking industry;
* Bankers needed to become more entrepreneurial--more visionary and more
strategic in their thinking;
* Banks had to diversify their sources of earnings; and
* Asset quality needed to be tightly controlled, with lending criteria that
emphasized quality, service and pricing over "growth for growth's sake."
4
<PAGE>
LETTER FROM THE CHAIRMAN
A CONSOLIDATING INDUSTRY
As the banking industry's ranks thinned considerably during the past decade,
the truth of those assumptions has become even more clear--and is still valid.
Today, 25 of the companies that were among the 50 largest banking companies
ten years ago have disappeared--through bankruptcy or acquisition by other
banking companies. Industrywide, 6,800 bank mergers took place between 1980
and 1994. In 1995 alone, 420 acquisitions valued at more than $73 billion
were announced.
Many of those companies were unable to attain economies of scale, or generate
new sources of earnings, or they stretched too far on credit quality. But the
banking industry's biggest blunder was its failure to embrace change. For too
long, the banking industry defined itself too narrowly and allowed the limits
of regulation or imagination to drive customers away. Today the leaders of
the industry have redefined themselves as being in the "financial services
industry" with a more complete selection of innovative financial products and
services.
Ten years ago, most banking companies did not offer investment products for
individuals or access to the capital markets for commercial customers. You
could not buy a share of stock, or an insurance annuity, or other such "new
products" through your bank. But the free market, as always, had its way--and
in this case, customers voted with their feet, walking down the street to
brokerage firms to buy more sophisticated products to maximize their earnings
potential. The banking industry, in effect, trained its customers to go
elsewhere by not offering the products--or the returns--customers needed.
COMPETITIVE CHALLENGES
Over the past ten years, the nation's commercial banks have seen their share
of financial assets drop dramatically to 36 percent from 45 percent. Mutual
funds, a product that banks did not offer a generation ago, grew 121 percent
over the past five years while bank deposits grew 9 percent.
The same comparison could be made in other areas that the banking industry
once dominated. Four of the nation's ten largest mortgage loan servicers,
including the two largest, are unaffiliated with banks. The credit card
industry has been called the bank card industry, but today six nonbanks are
among the ten fastest-growing issuers in the country, and they accounted for
nearly 83 percent of the industry dollar growth in receivables from 1991 to
1994.
The leaders in the banking industry today are those companies that have
amassed the scope and scale to provide the resources, to afford the
technology and to attain a sizable customer base that enables them to spread
costs and keep unit prices competitive. The "winners" in the industry have
redefined themselves as financial services companies, able to compete with
bank and nonbank competitors alike.
Mutual Fund/Bank Deposit Growth
(Dollars in billions)
(A graph appears here with the following plot points:)
1980 1990 1992 1995
Mutual Funds 138.2 1,100.5 1,585.7 2,431.2
Commercial Banks 1,100.0 2,315.5 2,436.4 2,512.4
Share of Business Credit
(Percent)
(A graph appears here with the following plot points:)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95
Nonbanks 53.15 52.39 52.22 52.58 53.17 55.17 56.00 58.10 58.75 59.02 60.52 62.13 63.14 64.55 64.10 63.57
Commercial Banks 46.85 47.61 47.78 47.42 46.83 44.83 44.00 41.90 41.25 40.98 39.48 37.87 36.86 35.45 35.90 36.43
</TABLE>
Average ROA and ROE
10 Largest Banks (1985 vs. 1995)
(Percent)
(A graph appears here with the following plot points:)
ROA 85 ROA 95 ROE 85 ROE 95
.59 1.08 11.67 15.63
5
<PAGE>
Stock Price Performance
Since Year-End 1994
(A graph appears here with the following plot points:)
12/94 5/95 9/95 12/95
41-3/8 49 51 55-5/8
Stock Price Performance
5-year Trend
(A graph appears here with the following plot points:)
12/90 12/91 12/92 12/93 12/94 12/95
15-3/8 30 43-5/8 41-1/4 41-3/8 55-5/8
LETTER FROM THE CHAIRMAN
This point is underscored by performance, as the survivors of the shakeout in
the industry are increasingly more profitable, and they are providing better
returns for their stockholders. Ten years ago, the ten largest banking
companies in the United States had an average return on equity of 11.67
percent and an average return on assets of .59 percent. In 1995 those
averages were 15.63 percent and 1.08 percent.
A COMPETITIVE FIRST UNION
Ten years ago, before regional interstate banking was allowed, First Union was a
$7 billion-asset company--the 50th largest in the nation. We had 5,600 employees
and bank branches only in North Carolina. But we saw that we would not remain
profitable or competitive for long as the industry began to consolidate and as
we began to face challenges from outside competitors with lower cost structures.
We embarked on an acquisition program to gain the size and economies of scale we
believed necessary to compete. Today we can marshal the depth of resources of a
$132 billion-asset company to provide a full line of financial products that
customers want throughout the stages and needs of their lives.
In other words, we have achieved much of what we set out to do in 1985. In
addition, our January 1, 1996, acquisition of First Fidelity Bancorporation
has given us the ability to leverage our products over a broader customer
base and to increase the overall efficiency of our branch network.
We have built a company with the resources, the operating structure and the
customer base to compete today and in the future. We have done it through
more than 60 acquisitions of banking and nonbanking companies, and we have
done it while continuing to provide our stockholders with growth in earnings,
dividends, book value and share price that is among the best in the industry.
Since 1985 (on an originally reported basis), earnings per share have grown
at a 9 percent compound annual growth rate; dividends have grown at a 14
percent rate; and book value at a 9 percent rate.
RECORD 1995 RESULTS
In 1995, the newly combined First Union/First Fidelity earned a record $1.48
billion in net income applicable to common stockholders before merger-related
restructuring charges. Including the merger-related restructuring charges of
26 cents per share, or $73 million (after tax), the newly combined First
Union/First Fidelity earned $1.40 billion, or $5.04 per common share in 1995.
Earnings of $5.30 before the restructuring charges exceeded the company's
previously announced projection of $5.29 per share in 1995. These results
compare with a restated $1.33 billion in net income applicable to common
stockholders before a preferred stock redemption premium, or $4.72 per share,
in 1994. (The 1995 restructuring charges, principally severance contracts,
are part of the previously announced $270 million restructuring charges
related to the First Fidelity acquisition, the balance of which is expected
to be incurred primarily in the first and second quarters of 1996.)
6
<PAGE>
LETTER FROM THE CHAIRMAN
Results in 1995, before the restructuring charges, represent a return on
average assets of 1.27 percent and a return on average common stockholders'
equity of 17.55 percent. After the restructuring charges, the combined
company's return on average assets was 1.21 percent and the return on average
common stockholders' equity was 16.69 percent.
We entered 1996 with great momentum, and we are enthusiastic about the steps
we have taken as we begin to serve new customers with new products in our
northern markets. While we are proud of these achievements, this is no time
to rest on our laurels, and of course we have no intention of doing so. The
competitive factors cited earlier in this letter are even more fierce today.
But the toughest competition for the next five years will be for the hearts
and minds of customers who may choose from among an increasing number of
financial services and financial service providers. Our challenge is to meet
our customers' demand to provide better service and better access to our
services--24 hours a day, seven days a week.
A STRATEGIC SHIFT IN DIRECTION
This calls for a new strategy and a new sense of urgency to build a company
that will prosper as we enter the 21st century. Our focus for the next few
years will be primarily on increasing our existing businesses and on
attracting customers nationally through better electronic product delivery
channels.
Many observers have long prophesied the demise of bank branches. Some
industry observers have projected a 50 percent reduction in bank branches by
the turn of the century. First Union has worked hard to integrate and
consolidate branches along the way as we have acquired banks and thrifts. In
fact, if First Union and First Fidelity had kept all the branches acquired
since 1985, we would have 3,350 bank branches today. Instead, combined, we
have 1,964--a 40 percent reduction.
While the move to better product delivery channels will not happen overnight,
it is taking place faster than we would have predicted even a year or two
ago. For proof, we need look no further than the success of the
fastest-growing bank in Britain--First Direct--which has gained a half million
customers in just five years with no branches at all. Or, we could look at
the success of our own credit card portfolio, which has more than doubled in
the past two years through narrowly targeted, national, direct mail
solicitations. In other words, customers are redefining what convenience and
service looks like to them--and increasingly, that definition does not include
brick-and-mortar branches.
Over the next five years, we intend to lead the industry's transition from
traditional banking into financial services delivered through better channels
for the new century, whether that involves computers, television screens,
card products, display phones or other remote devices. We believe this will
be a technology- and a marketing-driven exercise, and thus we will be largely
focused internally over the next few years. You might even say that if,
theoretically, First Union's senior management
Stock Performance
(First Union compared to S&P 500, 1990-1995)
(A Graph appears here with the following plot points:)
12/90 12/91 12/92 12/93 12/94 12/95
FTU Return -- 104.09 206.83 199.71 212.83 337.79
S&P Index Return -- 30.34 40.25 54.33 56.42 114.99
First Union Stock Price vs. Book Value
(In dollars)
(A graph appears here with the following plot points:)
12/90 12/91 12/92 12/93 12/94 12/95
Stock Price 15.375 30.00 43.625 41.25 41.375 55.625
Book Value 20.72 22.54 26.08 28.90 29.71 31.89
7
<PAGE>
AVERAGE RETAIL BANKING TRANSACTION COST
(A bar graph appears here with the following plot points:)
Teller Trans. 1.07
Mail-In .73
Check .68
Smart Phone .35
ATM .27
Preauth. Debit .14
Source: Gemini Consulting
The majority of customers
over age 50 prefer to do their bank-
ing business at a branch.
Only 20 percent of customers under
age 25 prefer to use a branch.
LETTER FROM THE CHAIRMAN
has spent 80 percent of its time over the past ten years focused on
acquisitions and 20 percent of its time on internal growth, in the next five
years, those numbers will likely be reversed.
There are many reasons for this strategic shift in direction. One of our
objectives is to serve customers more efficiently and conveniently. Clearly,
the cost to serve customers in new ways may be far less than through the
traditional branch system. For example, industrywide, the cost of automated
teller machine transactions averages about 25 cents, while the same
transaction done through a teller costs about $1.
Even though you cannot force a change in customer preferences, you can
encourage customers to change if you give them something that is superior to
what is already available. That is what we intend to do--or we will have no
customers left.
In other words, we believe customers are rational and discriminating, and
they will change how they do business if we offer a truly better way or a
better value. They have proven that by moving their business from banks to
financial service venues that provide more value in terms of speed,
convenience, simplicity, price and quality of service.
Our goal is to provide what customers want, when they want it and where they
want it. More and more of our customers--particularly those under age 50--are
demanding quick, technological solutions to their financial service needs.
Some say they never want to go to a branch again. Still other customers
require, and will continue to receive, the face-to-face service they prefer,
in a traditional branch setting. Meeting the needs of both kinds of
customers--and providing the facilities and the technologies to support those
needs--are key components of our corporate strategy for the rest of the '90s.
THE TRANSITIONAL BANK
For that reason, our five-year strategic planning currently focuses on
building what we are calling the "transitional bank"--the bridge to the
financial services delivery channels of the future.
The truth is, it is not yet clear which direction our customers intend to go:
Will they want to bank by touch-tone or display telephone? By plastic cards
or by computer? At a video kiosk or with a hand-held remote device? The
possibilities are limitless--some not even yet imagined. We face a similar
dilemma to the one videocassette-recorder makers faced 15 years ago, trying
to determine whether customers would prefer a Beta or a VHS format. So we
must be ready to deliver individual service that is as easy to use as a
remote control device is for a television set--better service as defined by
the customer.
What we do know is that today's customers, and the generation behind them,
demand service that is better, faster and cheaper. Already, they conduct half
of their retail banking outside the branch;
8
<PAGE>
LETTER FROM THE CHAIRMAN
they prefer to use automated teller machines, and they want "one-stop
shopping"--one place where they can buy mutual funds, make deposits and move
money easily among accounts.
In addition, we are seeing an explosion in the acceptance of information
technology. In 1994 Americans spent $8 billion on personal computers, nearly
matching the $8.3 billion they spent for television sets.
Personal computer prices have declined rapidly, making them more accessible
for households at all income levels. Thirty-five million U.S. households have
a personal computer. This mass market acceptance has significant implications
for banks that do not change the way they conduct business.
A CHANGING FINANCIAL LANDSCAPE
This litany of changing trends is not intended to imply that we believe the
sky is falling. It is merely changing, and changing the way we view the
financial services landscape.
In this time of dramatic change, we believe First Union has some key
competitive advantages:
* We have built the nation's sixth largest banking company while
working hard to stay entrepreneurial by streamlining our operations to
remain closer to our customers and to keep unit costs low;
* We have built a strong company that has maintained growth through
good years and bad, as evidenced by our long-term growth in dividends and
book value; and
* We have built a company with 45,000 carefully recruited, talented
employees who have demonstrated adaptability in the face of rapid change
that took place while increasing from $7 billion to $132 billion in
assets in eleven years.
These advantages enable First Union to be in the position today to invest in
enhanced technology and in revenue initiatives to keep us competitive as we
approach the 21st century.
BANKING ON THE FUTURE
We believe the industry leaders of the future will be those institutions that
invest in the people, the technological solutions, the new products, the
sales and marketing methodology, and the better delivery channels that
customers demand.
First Union intends to remain in the forefront of the technology revolution
in financial service companies so we can serve our customers better and keep
our costs competitive. We believe that this, ultimately, is the best way to
serve our stockholders as well.
While we are focused on the future, let me assure you we will continue to
keep our eyes on the fundamentals. We will take advantage of opportunities to
increase operating efficiency, to improve
Bank Branch Consolidation
First Union/First Fidelity Consolidation History
(A bar graph appears with the following plot points:)
1985 1995
3,350* 1,964
40% Reduction
*Represents the number of branches
First Union/First Fidelity would have had if each
had kept all branches acquired since 1985.
"By the year 2000, $46.2 billion
of assets will be managed on-line
($29.9 billion of mutual funds
and $16.3 billion of deposits). In
addition, $6.9 billion in retail sales
[will be conducted] on-line by
2000." -- Forrester Research, in
PC Banking Revival
23 million personal computers were
sold in the United States in 1995.
9
<PAGE>
30 million to 40 million people
worldwide are "on-line" to
the Internet global computer
Information Superhighway.
It takes three seconds
to conduct a "smart" card
transaction compared
with 20 seconds for a
cash transaction.
LETTER FROM THE CHAIRMAN
credit quality and to further strengthen our company, particularly through
expanding lines of business such as mutual funds and with acquisitions that
complement our current businesses.
But our primary strategic focus is on internal growth, and on developing the
technology and marketing to create additional access for customers now and
for the new century. Today First Union serves customers through 2,000 retail
centers; through the nation's fourth largest automated teller machine
network; by telephone through centralized customer relationship centers
(encompassing our Direct Bank, which can be reached in all 50 states);
through the Internet global information network; and through 5 million
"smart" cards, debit cards and credit cards.
We are pleased that Tony Terracciano has joined us in the Office of the
Chairman as president of the corporation, and we appreciate the opportunity
that our entry into new markets gives us to serve customers in New Jersey,
New York, Connecticut, Pennsylvania, Maryland and Delaware. We would like to
welcome these new customers along with our new stockholders, our new
employees, and our new directors, Edward E. Barr, Arthur M. Goldberg, Frank
M. Henry, Juan Rodriguez Inciarte, Joseph Neubauer and Mr. Terracciano.
We believe we have put together a team whose performance in increasing
stockholder value at both First Fidelity and First Union speaks for itself.
I began this letter by talking about our strategy over the past ten years. We
have achieved the goals of that strategy largely because of the support of
our longtime stockholders, the guidance from our directors and the dedication
of our employees. Our success in 1995 was a direct result of that support.
Sincerely,
(Signature of Edward E. Crutchfield)
Edward E. Crutchfield
Chairman and Chief Executive Officer
First Union Corporation
February 24, 1996
10
<PAGE>
PRODUCTS AND SERVICES
First Union is reinventing the way we do business by continuing to focus on
efficiency and convenience--from the viewpoint of our customers. We
understand that customer satisfaction is a race with no fixed finish line--the
line keeps inching forward--and First Union intends to remain in the race for
the long haul.
We are building the bank of the future by listening to what customers want
and then refining the way we deliver our products and services to match their
preferences--while at the same time increasing our client base.
That base has its roots in North Carolina, our home region, where we have
built a model company based on sound fundamentals and a clear vision of what
a service orientation should accomplish. We recognized early on that a
"traditional" bank would not survive unless it evolved into a financial
services company that offered a full range of products and services.
Today the North Carolina bank is among the largest in First Union's system of
full-service banking units with assets of $27.4 billion and a proven record
of productivity and profitability. It ranks first with 20 percent of the
deposits in North Carolina. Consumer loan production per branch in the state
grew from an average $241,000 per month in 1993 to $336,000 per month in
1995.
Once regional interstate banking became possible in 1985, we built on our
strengths by exporting our brand of business in neighboring markets around
the Southeast.
Example: Florida, with a booming economy, offered us access to a strong
deposit base and a natural market for our growing family of capital
management products as well as trust services. Now, First Union National Bank
of Florida is the second largest bank in the state and the largest in the
First Union family. It holds a 17 percent deposit share in Florida, up from
less than 3 percent in 1985. Consumer loan production per branch increased
from $238,000 per month in 1993 to $309,000 per month in 1995.
Florida customers now can choose from more financial products and services
than ever before. With our primarily middle-market commercial focus, the
state's commercial customers benefit from our trade finance expertise and
access to capital markets products and services.
FULL-SERVICE BANKING UNITS
Florida
Assets: $36.6 billion
Loans, Net: $24.0 billion
Deposits: $29.8 billion
North Carolina
Assets: $27.4 billion
Loans, Net: $19.4 billion
Deposits: $15.8 billion
Georgia
Assets: $12.1 billion
Loans, Net: $9.3 billion
Deposits: $7.9 billion
Virginia
Assets: $11.0 billion
Loans, Net: $7.3 billion
Deposits: $7.2 billion
South Carolina
Assets: $3.2 billion
Loans, Net: $2.3 billion
Deposits: $2.6 billion
Washington, D.C.
Assets: $2.4 billion
Loans, Net: $586 million
Deposits: $1.7 billion
Tennessee
Assets: $2.3 billion
Loans, Net: $1.2 billion
Deposits: $1.7 billion
Maryland
Assets: $2.2 billion
Loans, Net: $1.1 billion
Deposits: $1.2 billion
New Jersey, New York and Pennsylvania
Assets: $32.7 billion
Loans, Net: $23.0 billion
Deposits: $25.8 billion
Delaware
Assets: $30 million
Loans, Net: $20 million
Deposits: $22 million
Connecticut
Assets: $2.9 billion
Loans, Net: $1.9 billion
Deposits: $2.1 billion
Asset and loan information
for Specialty Businesses is included in the Full-
Service Banking Units.
Their operations are integrated in our
banking states.
Assets and deposits are based on
December 31, 1995 regulatory reports.
11
<PAGE>
DEPOSIT SHARE IN KEY MARKETS
Florida
Deposit Share: 17%; Rank: 2nd
New Jersey
Deposit Share: 23%; Rank: 1st
North Carolina
Deposit Share: 20%; Rank: 1st
Georgia
Deposit Share: 10%; Rank: 4th
Virginia
Deposit Share: 12%; Rank: 3rd
South Carolina
Deposit Share: 7%; Rank: 4th
Washington, D.C.
Deposit Share: 18%; Rank: 3rd
Tennessee
Deposit Share: 3%; Rank: 7th
Maryland
Deposit Share: 5%; Rank: 5th
Northeast Pennsylvania
Deposit Share: 14%; Rank: 4th
Hudson Valley, New York
Deposit Share: 7%; Rank: 2nd
Fairfield County, Connecticut
Deposit Share: 4%; Rank: 5th
Deposit share and rank are based on all insured
deposits in domestic offices on June 30, 1995.
Contributions to Profitability by State
(A pie chart appears here with the following plot points:)
31% Florida
28% New Jersey, New York, Pennsylvania
14% North Carolina
9% Georgia
7% Virginia
3% South Carolina
2% Maryland
2% Tennessee
2% Washington, D.C.
Based on regulatory profits filed December 31, 1995.
Includes contributions embedded in our state banks from
Capital Markets Group, Capital Management Group and
Card Products. Excludes other nonbank subsidiaries.
PRODUCTS AND SERVICES
The story is similar in Virginia, a market we entered in 1992-93. The
Virginia bank now ranks third in deposit share in the state, and its assets
grew 22 percent between 1993 and 1995. Consumer loan production per branch in
the Virginia market improved from an average of $111,000 per month in 1993 to
$243,000 per month in 1995. In Georgia, First Union has a 10 percent deposit
share, ranking fourth in the state, and stands to gain from the state's
strong economy in this Olympic year. Our banks in South Carolina, Tennessee,
Maryland and Washington, D.C., also are poised for continued growth.
Our experiences in the Southeast are typical of First Union's approach to
business--and point to the substantial potential of our newest partner in the
Northeast.
We expect to convert First Fidelity's operations to our automated systems
quickly and with relative ease. Unlike many of our competitors who did not
continue to invest in technology as they grew, First Union integrates each
new acquisition into our single operating systems. Our customers will be able
to walk into a branch in New Haven, Connecticut; Naples, Florida; Roanoke,
Virginia; or anywhere in our marketplace--which now includes 12 states and
Washington, D.C.--and have the same access to their accounts as if they were
in their home branches.
That was not possible before interstate banking became permissible in
September 1995. Because of the groundwork we laid in creating single systems,
virtually all we had to do was "flip a switch" and interstate banking was
introduced in all of our existing markets on October 16, 1995.
Given the pace of change these days, we cannot predict what will capture our
customers' attention in the future or how they will prefer to do their
banking. Some may want to bank at home by computer or display phone. Others
may elect to use plastic cards at their local branches, or touch-screens on
their television sets, or automated teller machines (ATMs) at convenience
stores and service stations.
Our strategy, then, is to build a transitional bank that will bridge the
movement to better delivery channels in the future--when cards, telephones and
cyberspace will create banking without walls and without geographic
limitations. Our challenge is to do this while still meeting the needs of
customers who prefer dealing with a familiar person at the teller window.
THE TRANSITIONAL BANK
We are looking at new ways for customers to access our consumer bank--ways
that will be completely integrated. Customers soon will use the same
processes, see the same account information and receive the same good service
whether they use ATMs, traditional branches, home computers or interactive
video kiosks.
High-tech solutions are featured in the transitional bank because they offer
unprecedented flexibility--and we want our customers to be able to bank
anywhere, anytime. This ultimately will provide better service and help us
keep our costs low.
We have a variety of projects under way to ensure that we are ready with new,
technologically sophisticated delivery channels when our customers are ready
for them. These initiatives include advanced customer relationships in the
12
<PAGE>
PRODUCTS AND SERVICES
new consumer bank; the toll-free telephone Direct Bank; debit, stored value
and "smart" cards; and "remote" banking through the global computer network
known as the Internet.
CONSUMER BANK REDESIGN
Based on direct customer input, we are designing a new consumer bank
organized into four integrated areas:
* Retail centers (housed in traditional branches) to focus on
current customers by helping them select the tools they need to meet
their financial goals--whether that involves a certificate of deposit (CD)
or a mutual fund or some other instrument;
* Customer relationship centers to attract new customers and offer
existing customers operational, informational and account servicing
support through toll-free telephone lines;
* An external sales force to focus on prospecting for new business
among small-business and consumer clients; and
* Advanced self-service options to let customers use technology to
conduct the business they once did at the teller window.
We expect this redesign to pay off in a more efficient delivery channel. An
important part of this effort involves shifting the account "housekeeping"
burden from our current branches to customer relationship centers, which will
be dispersed throughout our region. For customers using a toll-free number to
call a center, conducting their personal banking will feel a lot like
ordering a product through a service-oriented catalogue retailer such as L.L.
Bean.
Our personal service representatives will sit at relationship screens where
they will be able to view the customer's complete banking profile--and be able
to provide seamless service for the entire time the customer is on the line.
The representatives also will be prompted to cross-sell based on customer
needs.
Selling also becomes important in branches, which will be set up as "retail
sales centers" that market directly to customers.
DIRECT BANK
Closely linked to the consumer bank effort is the Direct Bank, opened in 1995
and available by toll-free telephone to all 50 states. Customers of this
"branch without walls" either live outside First Union's franchise area or
prefer to do the lion's share of their banking without entering a branch.
They are assigned a permanent personal banker who conducts business--such as
taking consumer loan applications--over the phone. In 1995 the Direct Bank
opened more than 10,000 new accounts.
CARD PRODUCTS
As consumers have adopted card products not just as a credit vehicle but also
as a convenient way to pay for consumer goods and services, volume and
outstandings for the card industry have increased substantially.
Since 1993 we have more than doubled the size of our managed credit card
portfolio. This growth was achieved through targeted, national market
solicitations aimed at providing geographic diversity and attracting high
quality, revolving credit customers. First Union is one of the few banking
companies to increase its market share
SPECIALTY BUSINESSES
Capital Management Group*
Assets Under Care:
$51.2 billion
Assets Under Management:
$45.5 billion
Personal Trust Locations: 73
Full-Service Brokerage
Locations: 107
Capital Markets Group*
Assets: $16.7 billion
Loans, Net: $8.0 billion
Offices: 7
Card Products
Loan Receivables:**
$5.7 billion
Mortgage Lending
Loans Serviced: $51.5 billion
Origination Volume:
$3.8 billion
Locations: 26
States: 6
Home Equity Lending
Loans, Net: $10.9 billion
Locations: 143, plus 1,964
full-service banking locations
States: 35
*Asset and loan information for these Specialty
Businesses is included in the Full-Service Banking
Units listed on page II because their operations are
integrated in our franchise states. Assets and
deposits are based on December 31, 1995,
regulatory reports.
** Includes $2.0 billion of credit card receivables
managed by the Card Products Division. These
assets were securitized and sold in
September 1995.
(Photo of a phone appears here)
* First Union's Direct Bank can be
reached at 1-800-413-7898
13
<PAGE>
(Photo of a computer appears here)
* 35 million U.S. households
have computers
* First Union's Internet
address is
http://www.firstunion.com/
PRODUCTS AND SERVICES
in this business in 1995. In addition to direct mail solicitations, we are
one of the first banks to offer on-line credit card applications over the
Internet.
Managed credit card receivables increased 30 percent in 1995. Credit quality
is performing in line with our expectations as the portfolios continue to
season.
In addition to credit cards, our Card Products unit includes checkcards, ATM
cards and stored value cards. First Union had nearly 5 million actively used
card products in customers' hands nationwide at the end of 1995, an increase
of 75 percent since the card initiative began in 1993, including 27 percent
growth in 1995.
* Checkcards are plastic cards that can be used in place of checks
at participating merchant locations. We are among the nation's 10 largest
issuers of debit cards, including ATM cards. Monthly debit card purchase
transactions increased nearly 600 percent from 395,000 in 1993 to almost
3 million per month in 1995.
* Stored value cards are plastic cards embedded with computer chip
technology and used in place of cash. Some are disposable once the cash
allotment has been expended; others are "rechargeable" with cash at ATMs.
We envision a time when customers may "download" cash into their cards
directly from their homes through a remote device perhaps linked to their
telephones or computers.
* In 1995 First Union established the first stored value system ever
used at a major sports venue with the introduction of the "Spot Card" at
home games of the Jacksonville Jaguars NFL expansion team in Florida. The
cards were used to make purchases at concession stands and from vendors
carrying hand-held terminals. More than 20,000 cards in denominations of
$20, $50 and $100 were distributed during the inaugural season of 1995
and were used for 10 percent of all concessions and novelty sales during
the year.
* The Jaguars "Spot Card" is an example of a stored value card that
was used for one venue, or a "closed system." More significant in the
long term is the "open system" stored value card, which we introduced in
early 1996 in advance of the summer Olympics. We plan to issue at least 1
million cards before the games begin, and we have agreements with
national and regional merchants that will create more than 5,000 points
of sale. The cards will continue to be used at merchant locations in
Atlanta after the Olympics, and the open system also will be expanded to
other major metropolitan areas.
The Internet
We have been "on-line" since January 1995. By the second quarter of 1996,
customers will be able to open checking and savings accounts, verify balances
and review statements over the Internet. By the end of the year, we will
have a robust selection of functioning applications, including funds transfer
and bill paying.
We intend to be a driver of this technology, not a passenger. So we have
customized our own 'Net browser, which is included in the digital compact
disk you received with this report.
14
<PAGE>
PRODUCTS AND SERVICES
You also may order the browser on floppy computer disk by calling
1-800-WWW-FUNB.
The browser takes the customer directly to the First Union home page on the
World Wide Web. Through the browser, customers will be able to apply for a
credit card or access account information, or use it as a window to surf the
'Net.
First Union averages more than 10,000 visits to our Internet home page a day.
First Union's home page can be accessed over the Internet at http:
//www.firstunion.com/ or through the electronic mail address of
[email protected].
LINES OF BUSINESS
First Union's traditional banking functions are carried out by our network of
state banks, which have full authority to match the market and meet customer
needs, and to focus on geographic and product specialty areas. First Union
has been proactive in investing in new or expanded product areas that provide
added benefits to customers and more sources of revenue for our company.
These products and services also are sold through the state banks, which
leverage the existing branch system for new customers and additional business
for our current customers.
Capital Management
First Union's Capital Management Group is a collection of businesses that
focus on helping customers manage their assets and achieve their financial
goals. Although separate entities, the businesses share a common thread--they
primarily generate fee income. Included are personal trust, CAP Accounts,
IRAs, mutual funds, full and discount brokerage services, financial planning
services, corporate trust, private banking, insurance, investment services,
pension management and 401(k) plans.
* Our distinctive CAP Accounts (centralized investment management
accounts) have increased from $6.8 billion in assets under management in
1994 to $11.7 billion at the end of 1995, making them one of our most
successful and popular products. These accounts let customers combine
banking and investment activity and see their entire financial
relationship reported on a consolidated statement. A commercial CAP
Account also is available. We expect the number of CAP Accounts to
increase in 1996 as customers in the Northeast take advantage of this
account, which is a relatively new banking product for this market.
* First Union Brokerage Services in 1995 had $83.5 million in
revenues, 374 full-service brokers, 2,331 employees licensed to sell
mutual funds in our branches, and 531,000 brokerage accounts.
* First Union-managed mutual fund assets increased 89 percent in
1995, from $7.0 billion in 1994 to $13.2 billion at year-end 1995,
including our Evergreen Funds and the First Fidelity-managed mutual
funds. First Union now is the seventh largest bank-affiliated mutual fund
manager in the United States. We expect this upward trend to continue as
brokerage employees in our branches in the northern region of the company
become licensed to sell mutual funds (training for then-First Fidelity
employees began in August 1995). Eleven Evergreen mutual funds are rated
either four- or five-star by Morningstar, an independent ranking service.
(Picture of a First Union credit card)
* First Union has the nation's
fourth largest automated teller
machine network
(Picture of a First Union monthly statement)
* Check your IRA
balance on-line
* Combine your check-writing
ability and brokerage accounts in
one statement
15
<PAGE>
(Photo of a laptop computer appears here)
* First Union's Home Page
on the Internet goes live
January 1995
* First Union receives
credit card applications over the
Internet in July 1995
* First Union and MCI
offer an Internet browser in
November 1995
* Cash management customers
gain access to
WebInvisionSM on-line
in November 1995
PRODUCTS AND SERVICES
* We are among the country's largest bank managers of Individual
Retirement Accounts (IRAs), with $7.6 billion in assets
and 627,000 customers at year-end 1995. Unlike most banks, we align IRAs
with our capital management capabilities, which makes it easier for
customers to remain with First Union and adjust their IRAs to keep pace
with changing investment objectives over the long term.
* In 1995 annuity sales increased to $166 million from $113 million
in 1994. During 1996 we will introduce our first proprietary insurance
annuities, which bridge a gap between the security of a CD and the return
of a mutual fund. First Union has more than 1,000 branch employees in the
Southeast who are licensed to sell these products, and an additional 634
in the Northeast have been trained to sell them.
* Our business in third-party employee 401(k) and other
defined-benefit plans has $7.0 billion in assets, 829 corporate plans
and 235,000 plan participants.
Commercial Banking
During 1995 we realized the rewards of re-designing our lending process for
small businesses, which are companies with annual revenues under $5 million.
Since the redesign, First Union has originated an average of $53 million in
small-business loans monthly.
We ended 1995 with $640 million in outstandings, more than three times what
we had before the redesign.
In our new process, branches generate referrals to three centralized
small-business lending units, and customers receive an answer to their loan
requests within 24 hours. In fact, initial credit decisions in 1995 were made
in an average of 13 hours.
For our larger customers, the commercial bank assigns a three-part team to
each client--relationship managers, commercial underwriters and portfolio
managers. These team members are backed by customer service representatives
at two regional customer service centers whose goal is to handle telephone
inquiries in three minutes or less. Ninety-seven percent of calls were
answered within 20 seconds during 1995 as call volume increased from 52,000
per month at the beginning of the year to 63,000 per month by the end of the
year, when we began serving customers in the northern region. This support
allowed the relationship managers to spend more time helping their customers
grow their businesses--and nearly doubled the amount of revenue generated by
managers: $480,000 per relationship manager in 1995 compared with $250,000 in
1994.
With a successful track record in the southern First Union franchise, full
implementation of the new commercial bank system took place in the northern
area of the company on February 15, 1996. During 1996 we will teach all our
commercial bankers to become even more productive by acting as financial
consultants, anticipating customer needs and leveraging their expertise to
find appropriate solutions to customer problems.
16
<PAGE>
PRODUCTS AND SERVICES
Capital Markets
First Union's Capital Markets Group provides services including investment
banking, risk management, merchant banking, leveraged finance, leasing, real
estate financing and investment products. Teams of industry specialists and
product specialists as well as experienced corporate bankers offer customers
the advantages of First Union's relationship orientation, national presence
and long-term commitment. We continue our drive to offer sophisticated
financial services to our mid-sized commercial customer base through access
to the capital markets. Our goal is to provide these clients with access to
cost-efficient capital and financial services customized to their individual
needs.
The Capital Markets Group received a boost on May 30, 1995, when the Federal
Reserve Board approved our application to underwrite and distribute corporate
and public debt through our First Union Capital Markets Corp. subsidiary.
The announcement is important to our expansion into capital markets
activities, which began in January 1994.
In 1995 First Union Capital Markets Corp. acted as lead or co-manager in more
than 20 transactions with volume in excess of $4.5 billion. Our loan
syndications unit now ranks 12th in the nation.
Our merchant banking affiliate, First Union Capital Partners Inc., provides
equity and subordinated debt investments for large transactions--such as
buyouts and corporate expansion efforts. We ended 1995 with approximately
$400 million in capital deployed.
In addition:
* Equity commitments to affordable housing programs amounted to $121
million, more than double the commitments made in the previous five
years.
* We structured, arranged and acted as agent for the syndication of
a $175 million facility for a leader in the long-term health care and
institutional pharmaceutical services industry. The facility provided the
company flexibility in financing future acquisitions.
* We completed our first transaction for a client of First Fidelity,
an $80 million private placement.
Our International Group processed more than $5.7 billion in trade
transactions in 1995 through our growing network of 1,300 correspondent banks
in 140 countries. We opened a representative office in South Africa and
established a joint venture with Hong Kong Chinese Bank. We also formed a
partnership with First Factors Corp. to offer export factoring and financing
services. As the result of our merger with First Fidelity, First Union now
has a branch office in London, which should open the doors to even more
opportunities for trade finance customers and other customers in the
international arena in the future.
The Capital Markets Group ended 1995 with noninterest income equal to 54
percent of the group's total revenue, compared with 39 percent in 1994. In
addition to fee income, the Capital Markets Group also generates loans in
conjunction with our state banks. In 1995 loans booked on the Capital
Markets Group's balance sheet increased 44 percent from 1994.
(Photo of an automobile appears here)
* Use the First Union browser to
visit our "virtual shopping center"
to look for a new car, purchase
tickets or buy other products
17
<PAGE>
(Photo of house appears here)
* Apply for a home equity
loan or other consumer
loans on-line
PRODUCTS AND SERVICES
Home Equity Lending
At First Union Home Equity Bank (FUHEB), loan volume in 1995 increased to
$1.2 billion from $940 million in 1994, and loans increased by $627 million
to $3.0 billion--a 27 percent increase from 1994. For the fifth consecutive
year, delinquent loans accounted for less than 1 percent of loans in FUHEB's
portfolio. Average loan production in each branch was $605,000 at year-end
1995. FUHEB operates 143 locations in 35 states, offering fixed- and
variable-rate loans as well as home equity lines of credit. The bank has a
centralized processing unit that provides home equity loans in 13 additional
states.
Customers also may obtain home equity loans at First Union's full-service
banking locations. Home equity loans generated through the full-service
banking branches amounted to $7.9 billion in receivables in 1995.
FUHEB's wholesale unit, created in 1994, buys whole loans from groups of
mortgage correspondents, such as mortgage bankers, banks, mortgage companies
and credit unions. These wholesale loans increased from $62 million of "A"
credit loans in 1994 to $179 million in 1995. Loans at December 31, 1995,
amounted to $257 million. The unit also leverages the capability of FUHEB's
branch office network for origination of "B" and "C" credit loans, which can
be securitized and sold through First Union's Capital Markets Group.
FUHEB's strategy in a needs-driven market is to offer personal sales
relationships, efficient service and competitive rates, while maintaining
high credit quality.
Mortgage Lending
In 1995 the First Union Mortgage Corp. benefitted from its redesign effort,
which began in 1993. Customers may obtain mortgages through professional
retail originators, branch employees, telemarketing and a growing national
relocation program. Customers may select from various mortgage products
tailored to serve specific market niches and customer needs. Through our
branch system and a toll-free phone line, the mortgage bank is capitalizing
on a lower cost method of delivering mortgage products directly to our
customers.
In 1995 the cost per unit of loan origination fell by half, as volume
increased and costs were reduced. Plans in 1996 include a further lowering of
the cost of origination and expanding our market share. Our national
relocation group achieved a record year in loan production and added 12
corporations to the existing customer base.
First Union Mortgage Corp. provides servicing for originated and acquired
mortgages with a servicing portfolio that increased to $51.5 billion and
665,000 mortgages by December 31, 1995. Loans serviced per employee increased
27 percent between 1994 and 1995 to 1,100.
THE FUTURE
In pursuing growth through customer satisfaction, First Union will continue
to:
* Embrace both innovation and change by offering the most advanced
product selection in the financial services industry;
* Leverage our internal systems and people to create new business;
and
* Look for new distribution channels, as well as new products and
services to generate loan, deposit and fee income growth.
18
<PAGE>
LONG-TERM TRENDS
Dividend Growth
Current Dividend Annualized
(In dollars)
(A bar graph apears here with the following plot points:)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 Current
.28 .29 .31 .33 .36 .40 .45 .49 .58 .65 .77 .86 1.00 1.08 1.12 1.28 1.50 1.72 1.96 2.08
</TABLE>
Book Value per Share
Originally reported (adjusted for stock splits), not restated for
pooling of interests acquisitions.
(In dollars)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95
6.02 6.63 7.39 8.30 8.19 9.20 10.66 12.51 12.96 14.55 16.25 17.98 19.37 20.72 22.54 26.08 28.90 30.66 31.89
</TABLE>
INDEX TO SPECIAL TOPICS
<TABLE>
<CAPTION>
<S> <C>
GENERAL INFORMATION:
Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 33
Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 12
CAPITAL RESOURCES:
Regulatory Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28, 31
Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 27, 32, 33, 40
COMMON STOCK:
Book Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 7, 19, 32
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 3, 19, 28, 32, 41
Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 32
Shares, Number Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 41
Stockholders, Number of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
LIQUIDITY:
Debt Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
LOANS:
Average Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33, 34
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 25, 34, 37
Consumer, or Retail, Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . .24, 25, 34, 37
Geographic Concentrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Industry Concentrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25, 26
Loan Loss Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 26, 31, 40
Loan Loss Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26, 32, 34, 41
Mix at Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 25, 27, 31, 34, 42
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 25, 26, 31, 34, 42
Project Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 26
PROFITABILITY:
Earnings Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 6, 20, 31, 32, 41
Income Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 6, 20, 31, 32, 41
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21, 32, 41
Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 21, 31
Noninterest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23, 32, 41
Noninterest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 32, 34, 41
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 6, 20, 32, 41
Return on Average Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 21, 31
Return on Average Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . .2, 20, 32
RISK MANAGEMENT:
Asset Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Derivative Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29, 35, 42
Interest Rate Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Interest Rate Sensitivity Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECURITIES:
Available For Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 24, 32, 35, 40
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 24, 32, 36, 40
Trading Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
19
<PAGE>
Net Income
(Dollars in billions)
(A bar graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
.26 .57 .70 1.22 1.38 1.43
Return on Average Common Equity
(Percent)
(A bar graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
4.86 11.38 11.28 17.26 16.91 16.69
PERFORMANCE REVIEW
The following review is a discussion of the performance and financial condition
of First Union Corporation and First Fidelity
Bancorporation on a combined basis. All First Union historical financial data
have been restated for the pooling of interests acquisition of First
Fidelity, which was consummated on January 1, 1996.
The objective in this discussion is to provide the reader with a clear and
concise understanding of our performance and financial condition in 1995.
Audited financial statements and more detailed analytical information are
contained in the First Union Corporation 1995 Report on Form 10-K, which is
available free of charge from Investor Relations, Two First Union Center,
Charlotte, North Carolina 28288-0206.
EARNINGS HIGHLIGHTS
First Union's earnings in 1995, before merger-related restructuring charges,
increased to a record $1.48 billion, or $5.30 per common share. Including the
restructuring charges, earnings were $1.40 billion, or $5.04 per common
share. The merger-related restructuring charges in 1995 amounted to $73
million after tax, or 26 cents per common share. These results compare with
1994 results of $1.33 billion, or $4.72 per share, in net income applicable
to common stockholders before a preferred stock redemption premium. The 1995
merger-related restructuring charges, principally existing severance
contracts associated with the First Fidelity stockholder vote approving the
merger, are part of the previously announced $270 million after-tax
restructuring charges related to the First Fidelity merger. The balance of
the charges will be taken in 1996.
In the fourth quarter of 1995, earnings were $404 million before the
merger-related restructuring charges, or $1.45 per common share. After the
restructuring charges, the company earned $331 million, or $1.19 per common
share. These results compare with $335 million, or $1.17, in the fourth
quarter of 1994, before the preferred stock redemption premium.
Additional factors in the company's 1995 results compared with 1994 included:
* Noninterest income growth of 18 percent, to $1.8 billion,
excluding securities transactions.
* Tax-equivalent net interest income growth of 4 percent, to $4.7
billion.
* Loan growth of 16 percent, to $90.6 billion.
Virtually every fee income category experienced growth in 1995, with key
contributions from the Capital Markets Group, including merchant banking,
loan syndication and asset securitization volume, and from the Capital
Management Group, including mutual funds, trust and brokerage services.
Net loans were $90.6 billion at December 31, 1995, compared with $77.8
billion at year-end 1994. Net loans at year-end 1995 included $7.5 billion
from purchase acquisitions that closed during the year. Net loans do not
include $2.0 billion in credit card receivables that were securitized and
sold in September 1995. Loan growth was particularly strong in the consumer
portfolio, largely reflecting growth in direct consumer lending through the
retail branch system, home equity lending and through purchase accounting
acquisitions. Residential mortgage loans also increased, primarily through
purchase accounting acquisitions.
20
<PAGE>
PERFORMANCE REVIEW
Net charge-offs were .41 percent of average net loans in 1995, compared with
.40 percent in 1994. Nonperforming assets were $826 million, or .91 percent
of loans and foreclosed properties, at December 31, 1995, compared with $887
million, or 1.14 percent, at December 31, 1994.
Outlook
First Union now serves 11 million customers in the Eastern United States from
Connecticut to Florida. We are well on the way to integrating First
Fidelity's operations with First Union's, a process we expect to complete by
midyear 1996.
In addition, we are enthusiastic about the steps we have taken to serve new
customers with new products in our recently acquired northeastern markets and
to continue serving customers in our southeastern markets. The strong fee
income growth in 1995 helps validate our expectations for renewed earnings
momentum as we begin to offer First Union's broader product selection,
install expanded sales support systems and integrate our two companies. In
addition, we are seeing the results of our investments in capital markets,
capital management and other businesses that expand our traditional banking
base, and we are optimistic about the future growth of these businesses.
In 1995 First Union completed eight bank and thrift purchase accounting
acquisitions. These acquired institutions had combined assets of $10.3
billion, net loans of $7.5 billion and deposits of $7.3 billion. The acquired
institutions were primarily in Virginia and Florida, further enhancing our
customer base in those states.
In the first quarter of 1996, we completed two additional bank and thrift
purchase accounting acquisitions in North Carolina and Tennessee. We expect
to complete a third purchase accounting acquisition of a Florida thrift
during the second quarter of 1996. At year-end 1995, these three completed or
pending acquisitions had combined assets, net loans and deposits of $2.2
billion, $1.6 billion and $1.8 billion, respectively.
We continue to be alert to opportunities to enhance stockholder value through
acquisitions. With the completion of the First Fidelity acquisition, however,
our focus has shifted more to a strategy of internal growth and acquisitions
to expand existing lines of business. The significant
investments we have made in acquisitions, in technology and in expanded
products and services help position us to serve our 11 million customers in a
dynamic and diverse geographic marketplace.
However, we continue to evaluate acquisition opportunities that will provide
access to customers and markets that we believe complement our long-term
goals. Acquisition discussions and in some cases negotiations take place, and
future acquisitions involving cash, debt or equity securities may be
expected. Acquisitions typically involve the payment of a premium over book
and market values. Some dilution of First Union's book value and net income
per common share may occur in connection with some future acquisitions.
INCOME STATEMENT REVIEW
Net Interest Income
Tax-equivalent net interest income increased 4 percent compared with
1994, to $4.7 billion in 1995. The increase primarily reflected loan
growth, the repricing of variable rate assets, and purchase
acquisitions. The increase was tempered somewhat by reduced net yields.
Nonperforming loans reduce interest income because the contribution from
these loans is eliminated or sharply reduced. In 1995, $69 million in
gross interest income would have been recorded if all nonaccrual and
restructured loans had been current in accordance with their original
terms and had been outstanding throughout the period, or since
origination if held for part of the period. The amount of interest
income related to these assets and included in income in 1995 was $17
million.
Net Interest Margin
The net interest margin, which is the difference between the tax-equivalent
yield on earning assets and the rate paid on funds to support those assets,
was 4.46 percent in 1995, compared with 4.75 percent in 1994.
The margin decline in 1995 was primarily related to the addition of acquired
banks and thrifts with lower margins; the addition of short-term securities;
and the competitiveness of loan pricing. We also anticipate a further
contraction in the margin in future periods as a result of the $2.0 billion
credit card securitization, the impact of acquisitions and the generation of
lower-spread assets
Net Interest Income
(Tax-equivalent)
(Dollars in billions)
(A bar graph appears with the following plot points:)
1990 1991 1992 1993 1994 1995
2.9 3.1 3.8 4.3 4.6 4.7
Return on Average Assets
(Percent)
(A bar graph appears with the following plot points:)
1990 1991 1992 1993 1994 1995
.31 .68 .77 1.22 1.29 1.21
21
<PAGE>
Noninterest Income
(Dollars in billions)
(A bar graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
1.06 1.46 1.40 1.58 1.58 1.90
Components of Noninterest Income
(In millions) .................................. 1995 1994
Trading account profits ........................ $ 69 52
Service charges on
deposit accounts ............................. 616 580
Mortgage banking income ........................ 150 88
Capital management
income ....................................... 397 330
Securities available for
sale transactions ............................ 44 6
Investment security
transactions ................................. 5 4
Fees for other banking
services ..................................... 160 131
Merchant discounts ............................. 100 90
Insurance commissions .......................... 54 48
Sundry income .................................. $302 246
PERFORMANCE REVIEW
related to capital markets activities. It should be noted that the margin is
not our primary management focus or goal. Our goal is to continue increasing
net interest income.
The $2.0 billion credit card securitization is expected to have a minimal
financial impact on the results of operations. The securitization results in
a reclassification of interest income to fee income. Securitization
transactions are used as a management tool to increase liquidity and to
utilize capital more effectively.
Average interest-earning assets increased by $10.5 billion in 1995, resulting
in an increase in tax-equivalent interest income of $1.4 billion.
The average rate earned on earning assets was 8.27 percent in 1995, compared
with 7.67 percent in 1994. The average rate paid on interest-bearing
liabilities was 4.43 percent in 1995 and 3.46 percent in 1994.
We use securities and off-balance sheet transactions to manage interest rate
sensitivity. More information on these transactions is included in the Interest
Rate Risk Management section.
Noninterest Income
We are meeting the challenges of increasing competition and changing customer
demands and demographics by making discretionary investments designed to
enhance our prospects for future fee income growth. During the past few
years, we have significantly broadened our product lines, particularly in the
capital markets, capital management and card products areas, to provide
additional sources of fee income that complement our longstanding banking
products and services. These investments were reflected in the 18 percent
growth in noninterest income, excluding securities transactions, to $1.8
billion in 1995, compared with $1.6 billion in 1994.
Virtually all categories of noninterest income increased in 1995. Key
contributions came from capital markets activities, including merchant
banking, loan syndication and asset securitization volume. Noninterest income
related to capital markets activities was $265 million in 1995, compared
with $176 million in 1994. Additionally, capital management fee income,
including mutual funds, personal and corporate trust and brokerage
services, increased 20 percent in 1995 to $397 million from $330 million
in 1994. Assets under management, which include mutual funds and trust
services, increased in 1995 to $45.5 billion from an unrestated $23.2
billion in 1994. The growth in assets under management was primarily the
result of internal and external marketing and distribution strategies.
The First Union-advised Evergreen and First Fidelity family of mutual
funds has increased to $13.2 billion in assets under management, from an
unrestated $7.0 billion in 1994.
We anticipate continued growth in fee income as capital markets and capital
management products and services are marketed to a larger customer base.
Mortgage banking operations added $150 million to noninterest income in 1995
compared with $88 million in 1994. The increase was primarily driven by an
increase in the servicing portfolio as a result of purchase accounting
acquisitions. The mortgage loan servicing portfolio increased to $51.5
billion in 1995, compared with $34.2 billion in 1994. As a result of an
industrywide contraction of nearly 15 percent and a strategic decision to
exit certain loan origination facilities, total originations were $3.8
billion in 1995, compared with $4.9 billion in 1994. Mortgage banking has
traditionally been a cyclical, interest rate sensitive business. The ability
to generate substantial fee and other income in the future is somewhat
dependent on the level and direction of interest rates. We carefully monitor
sensitivity to the cyclical changes in our mortgage banking operations.
Securities gains were $49 million in 1995, compared with $10 million in 1996.
Other significant sources of noninterest income include service charges on
deposit accounts, which increased 6 percent in 1995. Insurance commissions
and fees for other banking services also increased in 1995 compared with
1994.
Trading Activities
Our Capital Markets Group also made a key contribution to noninterest income
through trading profits. Trading profits increased in 1995 to $69 million,
compared with $52 million in 1994. The increase was the result of general
market conditions and expanded trading volume. Trading activities are
undertaken to satisfy customers' risk management and investment needs and for
the corporation's own proprietary
22
<PAGE>
PERFORMANCE REVIEW
account. All trading activities are conducted within risk limits established
by the corporation's Funds Management Committee, and
all trading positions are marked to market daily.
Trading activities include fixed income securities, money market instruments,
foreign exchange, options, futures, forward rate agreements and swaps. With
the Federal Reserve Board's approval of expanded powers for First Union
Capital Markets Corp., our activities also include the trading and
underwriting of corporate debt securities.
At December 31, 1995, trading account assets were $1.9 billion, compared with
$1.3 billion at year-end 1994.
Noninterest Expense
Noninterest expense increased in 1995 to
$4.1 billion, compared with $3.7 billion in 1994. Our overhead efficiency
ratio in 1995 was 62 percent, compared with 61 percent in 1994. The overhead
efficiency ratio was adversely affected by merger-related charges of $94
million in 1995 and intangibles amortization expense of $229 million and $163
million in 1995 and 1994, respectively. Without the merger-related charges
and intangibles amortization expense, our overhead efficiency ratio would
have been 57 percent in 1995, compared with 58 percent in 1994. The overhead
efficiency ratio is affected by the significant investments and initiatives
under way in capital markets, capital management and other areas. These
investments and initiatives are designed to enhance noninterest income in
future periods.
Merger-related expenses of $94 million, or $73 million after-tax, were
recorded in the fourth quarter of 1995. These charges primarily reflect
existing severance contract obligations that were associated with the
First Fidelity stockholder approval of the First Union/First Fidelity
merger on October 3, 1995, and other direct costs related to the merger
that were incurred in 1995. The charges are part of the estimated $270
million after-tax merger-related charges, the remainder of which are
expected to be incurred primarily in the first and second quarters
of 1996.
The FDIC significantly reduced the insurance premiums it charges on federally
insured bank deposits in the third quarter of 1995, and in the fourth quarter
of 1995, reduced the premiums again, including a reduction to the statutory
minimum of $2,000.00 for "well capitalized" banks, effective January 1, 1996.
Premiums related to savings and loan association deposits held by banks will
continue to be assessed at the rate of 23 cents to 31 cents per $100.00 until
legislation pending before Congress to merge the Bank Insurance Fund and the
Savings Association Insurance Fund (SAIF) is enacted. The pending
legislation also includes a provision to recapitalize SAIF through a one-time
assessment. At December 31, 1995, we had $19.8 billion in SAIF deposits that
were subject to the potential one-time assessment. Based on the pending
legislation, the one-time assessment could be as high as $87 million after
tax.
The FDIC premium expense decreased from $184 million in 1994 to $120 million
in 1995. The expense savings in 1995 was largely offset by discretionary
investments in areas such as the company's retail delivery channels, capital
markets and capital management. We currently expect to invest the expected
savings that result from the FDIC premium reduction in 1996 in various
current and future discretionary investments, business initiatives and
technology programs.
BALANCE SHEET REVIEW
Earning Assets
In banking the primary types of earning assets are securities and loans. The
earnings from these assets are subject to two principal kinds of risks,
interest rate risk and credit risk.
Interest rate risk could result if rate indices related to sources and uses
of funds were mismatched. Our Funds Management Committee manages interest
rate risk, as well as credit risk associated with securities, under specific
policy standards, which are discussed in more detail in the Interest Rate
Risk Management section. In addition to certain securities, off-balance sheet
transactions such as interest rate swaps have been used to maintain interest
rate risk at acceptable levels in accordance with our policy standards.
The loan portfolio carries the potential credit risk of past due,
nonperforming or, ultimately, charged-off loans. We manage this risk
primarily through credit approval standards, which are discussed in more
detail in the Loans section.
Average earning assets in 1995 were $106.3 billion, an 11 percent increase
from $95.8 billion in 1994.
Noninterest Expense
(Dollars in billions)
(A bar graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
2.56 2.78 3.44 3.54 3.75 4.09
Year-End Earning Assets
(Dollars in billions)
(A bar graph appears here with the following plot points:)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Earning Assets 74.6 79.1 84.5 93.5 101.0 118.0
Loans, net 54.6 58.7 60.3 68.3 77.8 90.6
Investment Securities 17.0 13.6 12.2 7.9 7.9 3.1
Securities Available for Sale -- 1.3 6.0 14.4 11.5 18.2
Other 3.0 5.5 6.0 2.9 3.7 6.1
</TABLE>
23
<PAGE>
Year-End Securities Available for Sale
(A pie chart appears here with the following plot points:)
47% U.S. Government Agencies
26% Collateralized Mortgage Obligations
16% U.S. Treasury securities
11% Other
Year-End Investment Securities
(A pie chart appears here with the following plot points:)
40% U.S. Government Agencies
38% Municipals
19% Collateralized
Mortgage Obligations
3% Other
Year-End Loans
(A pie chart appears here with the following plot points:)
29% Real Estate - Mortgage
27% Commercial,
Financial and Agricultural
22% Installment Loans - Other
11% Commercial
Real Estate - Mortgage
4% Installment Loans - Bankcard
4% Other
3% Commercial Construction
PERFORMANCE REVIEW
Securities Available For Sale
Securities available for sale are used as a part of the corporation's
interest rate risk management strategy, and they may be sold in response to
changes in interest rates, changes in prepayment risk, liquidity needs, the
need to increase regulatory capital ratios and other factors. These
securities are carried at estimated fair value. Unrealized changes in fair
value are recognized as a separate component of stockholders' equity, net of
tax. Realized gains and losses are recognized in income at the time the
securities are sold. The available for sale portfolio consists of U.S.
Treasury, municipal, mortgage-backed and asset-backed securities as well as
collateralized mortgage obligations, corporate, foreign and equity
securities.
At December 31, 1995, we had securities available for sale with a market
value of $18.2 billion, compared with $11.5 billion at year-end 1994. The
market value of securities available for sale was $201 million above
amortized cost at the end of 1995. A $111 million after-tax unrealized gain
was included in stockholders' equity at December 31, 1995. In 1995 we took
advantage of market conditions to add $7.3 billion of securities to the
available for sale portfolio, which we believe will enhance earnings and
reduce exposure to falling interest rates indicated by our current outlook
for 1996. We also took advantage of a one-time exemption in the accounting
rules and transferred $5.9 billion of investment securities to the available
for sale portfolio. We believe the transfer will provide us with a greater
degree of flexibility in managing the overall balance sheet.
The average rate earned on securities available for sale in 1995 was 6.41
percent, compared with 5.54 percent in 1994. The average maturity of the
portfolio was 3.03 years at December 31, 1995.
Investment Securities
Investment securities are those securities that we intend to hold to
maturity. Sales of these securities are rare. These securities are carried at
amortized cost. The portfolio consists of U.S. Goverment agency, corporate,
municipal and mortgage-backed securities, and collateralized mortgage
obligations.
First Union's investment securities amounted to $3.1 billion at December 31,
1995, compared with $7.9 billion at year-end 1994. As part of the strategy to
reduce exposure to falling interest rates, we added $3.6 billion to the
investment securities portfolio. Additionally, the $5.9 billion of investment
securities was transferred to the available for sale portfolio.
The average rate earned on investment securities in 1995 was 7.54 percent,
compared with 7.23 percent in 1994. The average maturity of the portfolio was
5.15 years at December 31, 1995.
Loans
The loan portfolio represents our largest asset balance, and it is a
significant source of interest and fee income. The loan portfolio is subject
to both credit and interest rate risk. Our lending strategy stresses quality
growth, diversified by product, geography and industry. A common credit
underwriting structure is in place throughout the company.
The loan portfolio at December 31, 1995, was composed of 44 percent in
commercial loans and 56 percent in consumer loans. The portfolio mix did not
change significantly from year-end 1994. The commercial loan portfolio
includes general commercial loans, both secured and unsecured, and commercial
real estate loans. General commercial loans are typically working capital
loans to finance the inventory, receivables and other working capital needs
of commercial borrowers, and term loans to finance fixed assets or
acquisitions. Commercial real estate loans typically finance the construction
or purchase of commercial real estate. Consumer loans include mortgage,
credit card and installment loans. Consumer mortgage lending includes both
first and second mortgage loans.
Consistent with our longtime standard, we generally look for two repayment
sources for commercial real estate loans: cash flows from the project and
other resources of the borrower. Our commercial lenders focus principally on
middle-market companies, which we believe reduces the risk of credit loss
from any single borrower or group of borrowers. A majority of our commercial
loans are for less than $10 million.
Our consumer lenders emphasize credit judgments that focus on a customer's
debt obligations, ability and willingness to repay, and general economic
trends.
Net loans at December 31, 1995, were $90.6 billion, compared with $77.8
billion at year-end
24
<PAGE>
PERFORMANCE REVIEW
1994. Of this increase, $7.5 billion was related to purchase acquisitions,
with the rest coming from growth in all of our banking states and in
virtually all loan categories. Consumer loan growth was particularly strong
in 1995, primarily in direct lending and home equity lending. Net loans do
not include the $2.0 billion in credit card receivables that were securitized
and sold in September 1995. The financial impact of the securitization on the
results of operations is expected to be minimal, as discussed above.
The average rate earned on loans in 1995 was 8.71 percent, compared with 8.28
percent in 1994. The average prime rate in 1995 was 8.44 percent, compared
with 6.81 percent in 1994. Factors affecting loan rates between 1994 and 1995
included several increases in the prime rate throughout 1994; an increased
portion of the loan portfolio tied to rate indices other than the prime rate;
a larger portfolio of fixed and adjustable rate mortgages; and the repricing
of credit card portfolio introductory rates.
The Asset Quality section provides information about geographic exposure in
the loan portfolio.
Commercial Real Estate Loans
Commercial real estate loans amounted to 14 percent of the total portfolio at
December 31, 1995, compared with 15 percent at December 31, 1994. This
portfolio included commercial real estate mortgage loans of $10.0 billion at
December 31, 1995, and $9.5 billion at December 31, 1994.
ASSET QUALITY
Nonperforming Assets
Most of our assets are interest-bearing loans and investment securities. The
credit quality of these assets is crucial to the profitability of the
corporation.
Nonperforming assets are those assets that are not paying principal and/or
interest as contractually required. These assets reduce our income through
lower amounts of interest income and higher provisions for losses.
Asset quality is typically measured by the levels of nonperforming and past
due assets; the amount of charge-offs and provisions; and certain
credit-related ratios such as charge-offs to net loans; and nonperforming
assets to net loans and foreclosed properties.
At December 31, 1995, nonperforming assets were $826 million, or .91 percent
of net loans and foreclosed properties, compared with $887 million, or 1.14
percent, at December 31, 1994. The reduction in nonperforming assets was
primarily due to continued collection efforts and prudent management of the
nonperforming assets portfolio.
Loans or properties of less than $5 million each made up 73 percent, or $601
million, of nonperforming assets at December 31, 1995. Of the rest:
* Six loans or properties between $5 million and $10 million each
accounted for $46 million; and
* Eight loans or properties over $10 million each accounted for $179
million.
Fifty-nine percent of nonperforming assets were collateralized by real estate
at year-end 1995, compared with 66 percent at year-end 1994.
Past Due Loans
In addition to these nonperforming assets, at December 31, 1995, accruing
loans 90 days past due were $290 million, compared with $272 million at
December 31, 1994. Of these, $15 million were related to commercial and
commercial real estate loans, compared with $30 million at December 31, 1994.
Net Charge-Offs
Net charge-offs as a percentage of average net loans were .41 percent in
1995, compared with .40 percent in 1994. The increase in net charge-offs was
principally related to the maturing credit card portfolio. In 1996 we
anticipate an increase in the dollar level of charge-offs as credit card
receivables continue to increase and the portfolio seasons to a charge-off
ratio that is expected to be aligned with industry averages. We do not
believe the higher levels of net charge-offs are indicative of any
significant deterioration in the credit quality of the loan portfolio. We are
carefully monitoring trends in both the commercial and consumer loan
portfolios for signs of credit weakness. Additionally, we have evaluated our
credit policies in light of changing economic trends. All of these steps have
been taken with the goals of minimizing future credit losses and
deterioration, while allowing for maximum profitability.
Year-End Commercial Loans
Industry Classification Dollars in millions
Manufacturing ............................................... $ 4,920
Retail trade ................................................ 1,968
Wholesale trade ............................................. 1,574
Services .................................................... 5,308
Financial services .......................................... 3,073
Insurance ................................................... 435
Real estate-related ......................................... 1,593
Communication ............................................... 1,376
Transportation .............................................. 1,796
Public utilities ............................................ 619
Agriculture ................................................. 503
Construction ................................................ 424
Mining ...................................................... 368
Individuals ................................................. 848
Public administration ....................................... 483
Other ....................................................... 2,025
Total ....................................................... $27,313
(A pie chart appears here with the plot points listed above.)
Year-End Consumer Loans
45% Mortgage Loans to Individuals
23% Consumer Credit
9% Second Mortgages
9% Sales Finance
7% Bankcards
7% Mortgage Warehouse
and Securitized Mortgages
Commercial Real Estate Loans
Number
Project Type In millions of loans
Apartments ................................. $ 1,747 1,806
Condominiums ............................... 181 226
Land-improved .............................. 572 1,006
Land-unimproved ............................ 352 662
Lodging .................................... 272 218
Office buildings ........................... 3,186 5,393
Industrial buildings ....................... 1,082 1,799
Retail sales buildings ..................... 1,706 1,642
Single family .............................. 707 3,722
Other ...................................... 2,255 3,448
Total ...................................... $12,060 19,922
25
<PAGE>
Nonperforming Assets
(Dollars in billions)
(A bar graph appears here with the following plot points:)
1990 1991 1992 1993 1994 1995
2.2 2.6 2.0 1.4 .89 .83
Percentage of net loans
and foreclosed properties 3.91 4.45 3.36 2.06 1.14 .91
Year-End Nonperforming
Commercial Loans
Industry Classification Dollars in millions
Manufacturing ................................................. $121
Retail trade .................................................. 13
Wholesale trade ............................................... 7
Services ...................................................... 80
Financial services ............................................ 6
Real estate-related ........................................... 33
Transportation ................................................ 4
Agriculture ................................................... 28
Construction .................................................. 15
Mining ........................................................ 0
Individuals ................................................... 17
Other ......................................................... 11
Total ......................................................... $335
Year-End Nonaccrual Real Estate
Includes foreclosed properties.
Project Type Dollars in millions
Apartments .................................................... $ 24
Condominiums .................................................. 1
Industrial .................................................... 16
Land-improved ................................................. 15
Land-unimproved ............................................... 34
Lodging ....................................................... 3
Office buildings .............................................. 97
Retail ........................................................ 18
Single family ................................................. 162
Other ......................................................... 117
Total ......................................................... $487
PERFORMANCE REVIEW
Provision and Allowance for Loan Losses
The loan loss provision was $220 million in 1995, compared with $179 million
in 1994. The increase in the loan loss provision was based primarily on
current economic conditions, on the maturity and level of nonperforming
assets, and on projected levels of charge-offs.
We establish reserves based upon various other factors, including the results
of quantitative analyses of the quality of commercial loans and commercial
real estate loans. Reserves for commercial and commercial real estate loans
are based principally on loan grades, historical loss rates, borrowers'
creditworthiness, underlying cash flows from the project and from borrowers,
and analysis of other less quantifiable factors that might influence the
portfolio. Reserves for consumer loans are based principally on delinquencies
and historical loss rates. We analyze all loans in excess of $1 million that
are being monitored as potential credit problems to determine whether
supplemental, specific reserves are necessary.
The allowance for loan losses was $1.5 billion at December 31, 1995, compared
with $1.6 billion in 1994. The ratio of the allowance to nonperforming assets
was 182 percent and 178 percent at December 31, 1995 and 1994, respectively.
The ratio of the allowance to net loans was 1.66 percent at December 31,
1995, compared with 2.03 percent in 1994.
Geographic Exposure
The loan portfolio in the East Coast region of
the United States is spread primarily across 82 metropolitan statistical
areas with diverse economies. Atlanta, Georgia; Charlotte, North Carolina;
Miami, Jacksonville, West Palm Beach and Tampa, Florida; Newark, New Jersey;
Philadelphia, Pennsylvania; Westchester County, New York; and Washington,
D.C., are our largest markets. Substantially all of the $12.5 billion
commercial real estate portfolio at December 31, 1995, was located in our
banking region.
LIQUIDITY AND FUNDING SOURCES
Liquidity planning and management are necessary to ensure we maintain the
ability to fund operations cost-effectively and to meet current and future
obligations such as loan commitments and deposit outflows. In this process,
we focus on both assets and liabilities and on the manner in which they
combine to provide adequate liquidity to meet the corporation's needs.
Funding sources primarily include customer-based core deposits but also
include purchased funds and cash flows from operations. First Union is one of
the nation's largest core deposit-funded banking institutions. Our large
consumer deposit base, which is spread across the economically strong South
Atlantic region and high per-capita income Northeast region, creates considera
ble funding diversity and stability. Further, our acquisitions of bank and
thrift deposits have enhanced liquidity.
Asset liquidity is maintained through maturity management and through our
ability to liquidate assets, primarily assets held for sale. Another
significant source of asset liquidity is the potential to securitize assets
such as credit card receivables and auto, home equity, commercial and
mortgage loans. The securitization and sale of $2.0 billion in credit card
receivables at the end of the third quarter of 1995 had a significant,
positive effect on our liquidity position. Other off-balance sheet sources of
liquidity exist as well, such as a mortgage servicing portfolio for which the
estimated fair value exceeded book value by $186 million at December 31,
1995.
Cash Flows
Cash flows from operations are a significant source of liquidity. Net cash
provided from operations primarily results from net income adjusted for the
following noncash accounting items: the provisions for loan losses and
foreclosed properties; depreciation and amortization; and deferred income
taxes or benefits. This cash was available in 1995 to increase earning assets
or to reduce borrowings.
Core Deposits
Core deposits are a fundamental and cost-effective funding source for any
banking institution. Core deposits were $86.4 billion at December 31, 1995,
compared with $81.0 billion at December 31, 1994. Core deposits include
savings, negotiable order of withdrawal (NOW), money market,
noninterest-bearing and other consumer time deposits.
26
<PAGE>
PERFORMANCE REVIEW
The portion of core deposits in higher-rate, other consumer time deposits was
37 percent at December 31, 1995, and 34 percent at year-end 1994. Other
consumer time and other noncore deposits usually pay higher rates than
savings and transaction accounts, but they generally are not available for
immediate withdrawal and are less expensive to process.
Average core deposit balances were $81.6 billion in 1995, an increase of $4.8
billion from 1994. Average balances in savings and NOW, other consumer time
deposits and noninterest-bearing deposits were higher when compared with the
previous year, while money market deposits were lower. Deposits were
primarily affected by the purchase acquisitions. They can also be affected by
branch closings or consolidations, seasonal factors and the rates being
offered for deposits compared to other investment opportunities.
Purchased Funds
Purchased funds at December 31, 1995, were $25.7 billion, compared with $17.2
billion at year-end 1994. Purchased funds are acquired primarily through (i)
our large branch network, consisting principally of $100,000 and over
certificates of deposit, public funds and treasury deposits, and (ii)
national market sources, consisting of relatively short-term funding sources
such as federal funds, securities sold under repurchase agreements,
eurodollar time deposits, short-term bank notes and commercial paper, and
longer-term funding sources such as term bank notes, Federal Home Loan Bank
borrowings and corporate notes. In 1995 we began utilizing a newly
established $10 billion shelf as part of our ongoing bank note program, which
we will continue to use as a source of liquidity.
Average purchased funds in 1995 were $19.7 billion, an increase of 30 percent
from $15.1 billion in 1994. The increase was used primarily to fund loan
growth.
Long-Term Debt
Long-term debt was 79 percent of total stockholders' equity at December 31,
1995, compared with 51 percent at December 31, 1994. The increase in
long-term debt compared with year-end 1994 was primarily related to $1.2
billion of bank notes with varying rates and terms that mature by 1997.
Additionally, in 1995 we issued $300 million of three-year floating rate
senior notes and $1.0 billion of subordinated debentures and notes with rates
ranging from 6.55 percent to 7.50 percent and maturities of either 10 years
or 40 years. Proceeds from these debt issues have been used for general
corporate purposes.
Under a shelf registration statement filed with the Securities and Exchange
Commission, we currently have available for issuance $1.5 billion of senior
or subordinated debt securities. The sale of any additional debt securities
will depend on future market conditions, funding needs and other factors.
Debt Obligations
We have a $350 million, committed back-up line of credit that expires in
December 1998. This credit facility contains financial covenants that require
First Union to maintain a minimum level of tangible net worth, restrict
double leverage ratios and require capital levels at subsidiary banks to meet
regulatory standards. First Union has not used this line of credit. During
1996, $1.7 billion of long-term debt will mature, including bank notes
discussed above of $865 million. Funds for the payment of long-term debt will
come from operations or, if necessary, additional borrowings.
Stockholders' Equity
The management of capital in a regulated banking environment requires a
balance between maximizing leverage and return on equity to our stockholders
while maintaining sufficient capital levels and related ratios to satisfy
regulatory requirements. We have historically generated attractive returns on
equity to stockholders while maintaining sufficient regulatory capital
ratios.
At December 31, 1995, total stockholders' equity was $9.0 billion, compared
with $8.3 billion at December 31, 1994, and 278 million common shares were
outstanding compared with 285 million shares at December 31, 1994. In 1995 we
paid $965 million for the repurchase of 20 million shares of First Union
common stock principally related to business combinations. In February 1996,
the board of directors renewed its authorization for the purchase in the open
market from time to time of up to 15 million shares of First Union common stoc
k. The timing of any such repurchases would be based on our assessment of
First Union's capital structure and liquidity, the market price of our common
stock compared to our assessment of its underlying value, regulatory,
accounting and other factors. Repurchases would be made primarily in
Net Charge-Offs
(Percent)
(A bar graph appears here with the following plot points:)
1991 1995
Industry Average 1.62 .59
First Union 1.53 .41
*Average of the nation's 25 largest banking companies.
Net Charge-Offs by Loan Type
As a percentage of average net loans.
Industry Classification 1995 1994
Commercial,
financial and
agricultural .05 .12
Real estate .07 .11
Installment
loans-Bankcard .20 .09
Installment
loans-Other .09 .08
Total .41 .40
Comparison of Funding Sources
(Percent)
(A bar graph appears here with the following plot points:)
1993 1994 1995
Long-Term Debt 4% 4% 6%
Short-Term Borrowings 9% 10% 16%
Deposits 87% 86% 78%
27
<PAGE>
Core Deposits
(Dollars in billions)
(A bar graph appears with the following plot points:)
1990 1991 1992 1993 1994 1995
55.5 68.2 73.3 78.4 81.0 86.4
Regulatory Capital to Assets
(Percent)
(A bar graph appears with the following plot points:)
1995 Regulatory
Minimum-Well Capitalized First Union
Tier I 6.00 6.62
Total Capital 10.00 11.33
PERFORMANCE REVIEW
connection with future acquisitions and stock-based employee benefit plans.
In 1995 we announced a dividend increase for the 18th consecutive year,
resulting in dividends of $1.96 per common share. The current annualized
dividend rate is $2.08 per common share. The corporation paid $343
million in dividends to preferred and common stockholders in 1995.
At December 31, 1995, stockholders' equity reflected an $111 million
unrealized after-tax gain related to debt and equity securities. The
Securities Available for Sale section provides additional information
about debt and equity securities.
Regulatory Capital
Federal banking regulations require that bank holding companies and their
subsidiary banks maintain minimum levels of capital. These banking
regulations measure capital using three formulas relating to tier 1 capital,
total capital and leverage capital. The minimum level for the ratio of total
capital to risk-weighted assets (including certain off-balance sheet
financial instruments, such as standby letters of credit and interest rate
swaps) is currently 8 percent. At least half of total capital is to be
composed of common equity, retained earnings and a limited amount of
qualifying preferred stock, less certain intangible assets (tier 1 capital).
The rest may consist of a limited amount of subordinated debt, nonqualifying
preferred stock and a limited amount of the loan loss allowance (together
with tier 1 capital, total capital).
At December 31, 1995, the tier 1 and total capital ratios were 6.62 percent
and 11.33 percent, respectively, compared with 7.76 percent and 12.94 percent
at December 31, 1994. The reduction in the tier 1 and total capital ratios in
1995 was due primarily to the common stock repurchase program, the preferred
stock redemption and the increase in total assets and intangible assets.
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
equal to 3 percent for bank holding companies that meet specified criteria,
including having the highest regulatory rating. All other bank holding
companies are generally required to maintain a leverage ratio of at least 4
to 5 percent. The leverage ratio at December 31, 1995, was 5.49 percent,
compared with 6.12 percent at December 31, 1994.
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. The Federal Reserve Board also has
indicated it will continue to consider a tangible tier 1 leverage ratio
(deducting all intangibles) in evaluating proposals for expansion or new
activity. The Federal Reserve Board has not advised us of any specific
minimum leverage ratio applicable to us.
INTEREST RATE RISK MANAGEMENT
Managing interest rate risk is fundamental to banking. Banking institutions
manage the inherently different maturity and repricing characteristics of the
lending and deposit-taking lines of business to achieve a desired interest
rate sensitivity position and to limit exposure to interest rate risk. The
inherent maturity and repricing characteristics of our lending and deposit
activities create a naturally asset-sensitive structure. By using a
combination of on- and off-balance sheet financial instruments, we manage the
sensitivity of earnings to changes in interest rates within our established
policy guidelines.
The Financial Management Committee of the corporation's board of directors
reviews overall interest rate risk management activity. The corporation's
Funds Management Committee, which includes the three members of the Office of
the Chairman and senior executives from our Capital Markets Group, credit and
finance areas, oversees the interest rate risk management process and
approves policy guidelines. Balance sheet management and finance personnel
monitor the day-to-day exposure to changes in interest rates in response to
loan and deposit flows, and they make adjustments within established policy
guidelines.
We use three standard scenarios in analyzing interest rate sensitivity for
policy measurement: base-line, high rate and low rate. The base-line
scenario is our estimated most likely path for short-term interest rates over
the next 24 months. The high rate and low rate scenarios assume 100 basis
point shifts from the base-line scenario in the federal funds rate by the
fourth succeeding month and that rates remain 100
28
<PAGE>
PERFORMANCE REVIEW
basis points higher or lower throughout the rest of the 24-month period.
We determine interest rate sensitivity by the change in earnings per share
between the three scenarios over a 12-month policy measurement period.
Earnings per share as calculated by the earnings simulation model under the
base-line scenario becomes the standard. The measurement of interest rate
sensitivity is the percentage change in earnings per share calculated by the
model under high rate versus base-line and under low rate versus base-line.
The policy measurement period begins with the fourth month forward and ends
with the 15th month (i.e., a 12-month period). Our policy limit for maximum
negative impact on earnings per share resulting from either the high rate or
low rate scenario is 5 percent.
The model, updated at least monthly and more often as appropriate, captures
rate of change differentials such as federal funds rates versus savings
account rates; maturity effects such as calls on securities; and rate barrier
effects such as caps and floors on loans. It also captures changing balance
sheet levels, such as commercial and consumer loans (both floating and fixed
rate), noninterest-bearing deposits and investment securities. In addition,
it considers leads and lags that occur in long-term rates as short-term rates
move away from current levels; the elasticity in the repricing
characteristics of savings and money market deposits; and the effects of
prepayment volatility on various fixed rate assets such as residential
mortgages, mortgage-backed securities and consumer loans. These and certain
other effects are evaluated in developing the scenarios from which
sensitivity of earnings to changes in interest rates is determined.
Our estimate in January 1996 of future short-term interest rates was that the
federal funds rate would decline to 4.92 percent by December 1996 and then
rise gradually to 5.40 percent by December 1997. Based on the January 1996
outlook, if interest rates were to decline 100 basis points below the
estimated short-term rate scenario, i.e., follow the low rate scenario, the
model indicates that earnings during the policy measurement period would be
negatively affected by 1.6 percent. Our model indicates that earnings would
also be immaterially affected in our high rate scenario, i.e., a 100 point
increase in estimated short-term interest rates.
Interest Rate Sensitivity Assumptions
(A line graph appears here with the following plot points:)
1/96 4/96 12/96 3/97 12/97
High Rate 6.25 5.92 5.98 6.40
Base-Line 5.25 4.92 4.98 5.40
Low Rate 4.25 3.92 3.98 4.40
Policy Period
4/96-3/97
In addition to the three standard scenarios used to analyze rate sensitivity
over the policy measurement period, we also analyze the potential impact of
other, more extreme, interest rate scenarios. These alternate scenarios may
include interest rate paths higher, lower and more volatile than those used
for policy measurement. Because the interest rate sensitivity model is based
on numerous interest rate assumptions, projected changes in growth in balance
sheet categories and changes in other basic assumptions, actual results may
differ from our current simulated outlook.
While our interest rate sensitivity modeling assumes that management takes no
action, we regularly assess the viability of strategies to reduce
unacceptable risk to earnings and implement such strategies when we believe
those actions are prudent. We took actions in 1995 to mitigate the negative
effect on earnings of adverse changes in interest rates beyond the policy
measurement period. For example, in the fourth quarter of 1995, we
implemented a strategy to add off-balance sheet positions that we believe
will significantly reduce our potential asset sensitivity in 1997.
Off-Balance Sheet Derivatives
For Interest Rate Risk Management
As part of our overall interest rate risk management strategy, for many years
we have used off-balance sheet derivatives as a cost- and capital-efficient
way to modify the repricing or maturity characteristics of on-balance sheet
assets and liabilities. Our off-balance sheet derivative transactions used
for interest rate sensitivity management include interest rate swaps, futures
and options with indices that relate to the pricing of
29
<PAGE>
PERFORMANCE REVIEW
specific core assets and liabilities of the corporation. We believe we have
appropriately controlled the risk so that the derivatives used for rate
sensitivity management will not have any significant unintended effect on
corporate earnings. As a matter of policy we do not use highly leveraged
derivative instruments for interest rate risk management. The impact of
derivative products on our earnings and rate sensitivity is fully
incorporated in the earnings simulation model in the same manner as for on-bal
ance sheet instruments.
Our overall goal is to manage our rate sensitivity in ways that earnings are
not adversely affected materially whether rates go up or down. As a result of
interest rate fluctuations, off-balance sheet transactions (and securities)
will from time to time develop unrealized appreciation or depreciation in
market value when compared with their cost. The impact on net interest income
attributable to these off-balance sheet transactions, all of which are linked
to specific assets and liabilities as part of our overall interest rate risk
management strategy, will generally be offset by net interest income from
on-balance sheet assets and liabilities. The important consideration is
not the shifting of unrealized appreciation or depreciation between and
among on- and off-balance sheet instruments, but the prudent management
of interest rate sensitivity so that corporate earnings are not unduly
at risk as interest rates move up or down.
There was significant interest rate volatility between year-end 1993 and
year-end 1995, which was reflected in the dramatic change in the
market value of our securities portfolio and off-balance sheet positions. The
combined market value of those positions moved from an unrealized gain of
$903 million at December 31, 1993, to an unrealized loss of $1.1 billion at
December 31, 1994, and then back to an unrealized gain of $771 million at
December 31, 1995. Despite the large year-to-year fluctuations in market
value and related fluctuations in the net interest
income contribution from these positions, total net interest income continued
to increase. This is the outcome we strive to achieve in using portfolio
securities and off-balance sheet products in the conduct of asset and
liability management.
The fair value appreciation of off-balance sheet derivative financial
instruments used to manage our interest rate sensitivity was $390 million at
December 31, 1995, compared with fair value depreciation of $623 million at
December 31, 1994.
Although off-balance sheet derivative financial instruments do not expose the
corporation to credit risk equal to the notional amount, we are exposed to
credit risk equal to the extent of the fair value gain in an off-balance
sheet derivative financial instrument if the counterparty fails to perform.
We minimize the credit risk in these instruments by dealing only with high
quality counterparties. Each transaction is specifically approved for
applicable credit exposure.
In addition, our policy is to require that all swaps and options be governed
by an International Swaps and Derivatives Association Master Agreement.
Bilateral collateral arrangements are in place for substantially all dealer
counterparties.
Derivative collateral arrangements for dealer transactions and trading
activities are based on established thresholds of acceptable credit risks by
counterparty. Thresholds are determined based on the strength of the
individual counterparty and are bilateral. As of December 31, 1995, the total
credit risk in excess of thresholds was $275 million. The fair value of
collateral held was 100 percent of the total credit risk in excess of
thresholds. For nondealer transactions, the need for collateral is evaluated
on an individual transaction basis and is primarily dependent on the
financial strength of the counterparty.
30
<PAGE>
FINANCIAL TABLES
<TABLE>
<CAPTION>
Table 1
Selected Statistical Data
Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
PROFITABILITY
Net interest margin 4.46% 4.75 4.82 4.73 4.12 3.95
Net income per common share before 1994
redemption premium $ 5.04 4.72 4.30 2.53 2.34 .97
Return on common stockholders' equity
before 1994 redemption premium* 16.69% 16.91 17.26 11.28 11.38 4.86
Return on assets* 1.21 1.29 1.22 .77 .68 .31
Overhead efficiency ratio** 61.67 61.07 60.60 66.13 60.49 64.18
Dividend payout ratio on common shares 35.82 34.16 30.25 40.61 41.91 103.06
CAPITAL ADEQUACY***
Tier 1 capital to risk-weighted assets 6.62 7.76 9.14 9.22 7.56 6.53
ASSET QUALITY
Net charge-offs to loans, net* .41 .40 .78 1.03 1.53 1.05
Allowance for loan losses to loans, net 1.66 2.03 2.38 2.57 2.49 2.31
Allowance for loan losses to nonaccrual and
restructured loans 233 248 151 105 77 76
Allowance for loan losses to
nonperforming assets 182 178 115 76 55 58
Nonperforming assets to loans, net and
foreclosed properties .91% 1.14 2.06 3.36 4.45 3.91
</TABLE>
* Based on average balances.
** The overhead efficiency ratio is equal to noninterest expense divided by net
operating revenue. Net operating revenue is equal to the sum of
tax-equivalent net interest income and noninterest income.
*** Capital ratios for 1990-1994 are not restated for pooling of interests
acquisitions.
31
<PAGE>
FINANCIAL TABLES
Table 2
Consolidated Summaries of Income and Per Share Data
(In thousands except per share data)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income* $ 8,791,826 7,352,023 6,736,036 6,752,660 7,199,405 7,740,412
Interest expense 4,051,815 2,792,982 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income* 4,740,011 4,559,041 4,254,084 3,810,980 3,128,520 2,933,941
Provision for loan losses 220,000 179,000 369,753 642,708 946,284 923,409
Net interest income after provision for
loan losses* 4,520,011 4,380,041 3,884,331 3,168,272 2,182,236 2,010,532
Securities available for sale transactions 44,340 6,213 32,784 39,227 53,566 24,387
Investment security transactions 4,818 4,006 7,435 (2,881) 155,048 7,884
Noninterest income 1,847,350 1,565,694 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense** 4,092,469 3,746,857 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes* 2,324,050 2,209,097 1,929,773 1,121,296 867,820 507,434
Income taxes 788,420 711,444 578,912 278,514 129,843 59,868
Tax-equivalent adjustment 105,449 121,210 134,508 143,994 168,005 191,324
Net income 1,430,181 1,376,443 1,216,353 698,788 569,972 256,242
Dividends on preferred stock 26,390 46,020 45,553 53,040 51,746 47,151
Net income applicable to common
stockholders before redemption premium 1,403,791 1,330,423 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 $ 1,403,791 1,289,068 1,170,800 645,748 518,226 209,091
PER COMMON SHARE DATA
Net income before redemption premium $ 5.04 4.72 4.30 2.53 2.34 .97
Net income after redemption premium $ 5.04 4.58 4.30 2.53 2.34 .97
Average common shares 278,677,119 281,662,617 272,438,239 255,384,145 221,469,355 215,503,124
Average common stockholders' equity*** $ 8,412,020 7,869,710 6,781,863 5,723,532 4,554,234 4,301,110
Common stock price
High 58 7/8 47 5/8 51 1/2 44 7/8 30 7/8 21 3/4
Low 41 3/8 39 3/8 37 7/8 29 1/2 13 3/4 13 7/8
Year-end $ 55 5/8 41 3/8 41 1/4 43 5/8 30 15 3/8
To earnings ratio**** 11.04X 8.76 9.60 17.25 12.82 15.85
To book value 174% 147 154 187 141 78
Cash dividends $ 1.96 1.72 1.50 1.28 1.12 1.08
Book value $ 31.89 28.19 26.71 23.36 21.21 19.83
</TABLE>
*Tax-equivalent.
**Includes merger-related restructuring charges of $94,446,000 ($72,826,000
after tax) in 1995.
***Average common stockholders' equity excludes average net unrealized gains
or losses on debt and equity securities.
****Based on net income applicable to common stockholders before redemption
premium.
32
<PAGE>
FINANCIAL TABLES
Table 3
Six-Year Summary of Selected Financial Data
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES
Assets $ 118,142,086 106,413,103 99,610,438 90,620,843 83,822,199 81,932,407
Loans, net 83,265,397 70,725,906 62,996,378 58,700,311 54,844,025 54,912,823
Earning assets 106,271,199 95,804,496 88,318,927 80,719,367 75,836,666 74,358,421
Noninterest-bearing deposits 15,518,337 15,206,362 14,388,027 12,240,490 9,982,548 9,519,621
Interest-bearing deposits 71,756,304 65,553,721 62,442,362 59,706,209 54,620,072 49,349,973
Total stockholders' equity 8,545,238 8,273,139 7,302,152 6,280,407 5,083,574 4,765,413
YEAR-END BALANCES
Assets 131,879,873 113,529,201 104,549,554 95,308,328 89,488,406 83,698,754
Loans, net 90,562,880 77,830,993 68,263,088 60,301,462 58,725,097 54,581,023
Earning assets 118,009,250 101,000,926 93,460,247 84,464,149 79,139,634 74,642,201
Noninterest-bearing deposits 17,043,223 15,917,287 16,208,214 14,583,331 12,463,681 10,705,416
Interest-bearing deposits 75,511,995 71,947,838 65,677,219 61,572,469 59,931,092 50,568,962
Total stockholders' equity $ 9,043,144 8,274,492 7,946,053 6,716,813 5,805,579 4,782,825
INTERNAL CAPITAL GROWTH 10.45% 10.45 11.18 6.11 5.92 (.13)
</TABLE>
Table 4
Other Selected Six-Year Data*
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOAN PORTFOLIO
Permanent Loan Originations
Residential
Direct $ 2,879,420 3,569,451 6,276,720 4,549,392 2,206,796 1,832,758
Wholesale 428,071 933,214 2,431,455 2,641,656 2,657,534 2,092,646
Total 3,307,491 4,502,665 8,708,175 7,191,048 4,864,330 3,925,404
Income property 493,177 443,356 238,199 263,749 266,518 237,980
Total $ 3,800,668 4,946,021 8,946,374 7,454,797 5,130,848 4,163,384
Volume of Loans Serviced
Residential $ 50,047,000 32,677,000 32,786,000 22,528,000 22,161,000 17,878,000
Income property 1,458,000 1,537,000 1,972,000 1,848,000 1,951,000 1,534,000
Total $ 51,505,000 34,214,000 34,758,000 24,376,000 24,112,000 19,412,000
other data
Domestic banking offices 1,959 1,338 1,302 897 1,002 767
Foreign banking offices 5 2 1 1 2 1
ATMs 2,123 1,242 1,189 847 943 707
Employees 44,536 31,858 32,861 23,459 24,203 20,521
Common stockholders 89,257 54,236 58,670 37,955 33,456 34,951
* 1990-1994 not restated for pooling of interests acquisitions.
33
<PAGE>
FINANCIAL TABLES
Table 5
Selected Lines of Business*
(Dollars in thousands)
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
First Union Other
Card Home Equity Consumer Capital Capital Mortgage
Products Bank Banking Markets Management Banking
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income** $ 708,778 278,857 1,126,471 922,941 22,842 1,094,653
Interest expense 281,195 159,361 601,220 671,690 1,220 808,680
Provision for loan losses 212,708 6,361 62,166 29,354 124 25,137
Noninterest income 107,994 30,035 26,352 265,428 397,191 149,585
OTHER DATA
Net charge-offs 171,977 3,569 49,152 8,153 -- 5,439
Average loans, net 4,827,681 2,664,311 10,988,757 7,442,955 110,277 13,798,477
Nonperforming assets 13,066 10,640 82,414 118,177 -- 101,581
Average deposits -- -- -- 2,317,510 579,173 --
Assets under care -- -- -- -- 51,226,399 --
Assets under management -- -- -- -- 45,500,000 --
Loans serviced -- -- -- -- -- 51,505,000
Origination volume $ 6,397,661 1,224,558 6,162,978 -- -- 3,800,668
Locations 1,290 143 1,296 1,304 1,485 1,311
</TABLE>
* The information contained herein represents selected lines of business data
other than commercial lending and branch operations. Certain information is
prepared from internal management reports.
** Tax-equivalent.
34
<PAGE>
FINANCIAL TABLES
Table 6
Securities Available For Sale
(In thousands)
December 31, 1995
<TABLE>
<CAPTION>
Average
1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity
or Less Years Years Years Total Gains Losses Cost in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET VALUE
U.S. Treasury $ 1,507,112 1,443,582 4,440 3,799 2,958,933 (6,415) 7,036 2,959,554 1.58
U.S. Government agencies 795,915 5,978,720 1,724,404 4,925 8,503,964 (110,206) 8,318 8,402,076 3.75
Collateralized mortgage
obligations 847,785 3,727,165 179,355 940 4,755,245 (34,593) 18,082 4,738,734 2.49
State, county and municipal -- 2,149 1,384 9,375 12,908 -- 201 13,109 14.50
Other 241,536 951,782 96,173 673,158 1,962,649 (97,253) 14,029 1,879,425 3.50
Total $ 3,392,348 12,103,398 2,005,756 692,197 18,193,699 (248,467) 47,666 17,992,898 3.03
MARKET VALUE
Debt securities $ 3,392,348 12,103,398 2,005,756 104,120 17,605,622 (174,872) 46,818 17,477,568
Sundry securities -- -- -- 588,077 588,077 (73,595) 848 515,330
Total $ 3,392,348 12,103,398 2,005,756 692,197 18,193,699 (248,467) 47,666 17,992,898
AMORTIZED COST
Debt securities $ 3,374,168 12,014,119 1,984,974 104,307 17,477,568
Sundry securities -- -- -- 515,330 515,330
Total $ 3,374,168 12,014,119 1,984,974 619,637 17,992,898
WEIGHTED AVERAGE YIELD
U.S. Treasury 6.66% 5.39 7.67 8.02 6.06
U.S. Government agencies 6.69 6.67 6.57 6.82 6.67
Collateralized mortgage
obligations 7.19 6.97 7.27 6.18 6.59
State, county and municipal -- 8.80 10.24 10.28 10.03
Other 7.85 5.26 10.92 4.15 5.39
Consolidated 6.80% 6.40 6.81 6.09 6.42
</TABLE>
35
<PAGE>
FINANCIAL TABLES
Table 7
Investment Securities
(In thousands)
December 31, 1995
<TABLE>
<CAPTION>
Average
1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
or Less Years Years Years Total Gains Losses Value in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CARRYING VALUE
U.S. Government agencies $ 80,287 950,270 236,183 -- 1,266,740 32,411 (1,157) 1,297,994 3.59
Collateralized mortgage
obligations 59,410 546,111 -- -- 605,521 12,443 (1) 617,963 2.95
State, county and municipal 286,591 273,754 170,614 446,052 1,177,011 131,805 (3,226) 1,305,590 7.54
Other 3,825 2,600 16,821 67,098 90,344 7,713 (2) 98,055 11.54
Total $ 430,113 1,772,735 423,618 513,150 3,139,616 184,372 (4,386) 3,319,602 5.15
CARRYING VALUE
Debt securities $ 430,113 1,772,735 423,618 497,309 3,123,775 184,372 (4,386) 3,303,761
Sundry securities -- -- -- 15,841 15,841 -- -- 15,841
Total $ 430,113 1,772,735 423,618 513,150 3,139,616 184,372 (4,386) 3,319,602
MARKET VALUE
Debt securities $ 438,097 1,828,457 453,150 584,057 3,303,761
Sundry securities -- -- -- 15,841 15,841
Total $ 438,097 1,828,457 453,150 599,898 3,319,602
WEIGHTED AVERAGE YIELD
U.S. Government agencies 7.29% 7.71 7.87 -- 7.71
Collateralized mortgage
obligations 7.37 7.20 -- -- 7.22
State, county and municipal 9.55 10.84 11.25 11.80 10.95
Other 6.81 7.80 7.50 9.21 8.75
Consolidated 8.81% 8.03 9.22 11.46 8.86
</TABLE>
36
<PAGE>
FINANCIAL TABLES
Table 8
Loans
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 23,897,326 21,272,227 18,899,874 15,876,374 17,131,471 17,224,533
Nontaxable 750,958 781,257 791,194 874,284 1,078,161 1,447,655
Total commercial, financial
and agricultural 24,648,284 22,053,484 19,691,068 16,750,658 18,209,632 18,672,188
Real estate - construction and other 2,505,627 2,052,054 2,138,128 2,489,451 3,729,288 4,310,470
Real estate - mortgage 9,991,640 9,472,695 9,282,448 8,699,155 7,757,915 6,182,383
Lease financing 3,169,698 1,921,302 1,286,560 1,442,320 1,665,305 1,808,942
Foreign 649,760 526,325 416,664 391,791 368,287 356,190
Total commercial 40,965,009 36,025,860 32,814,868 29,773,375 31,730,427 31,330,173
RETAIL
Real estate - mortgage 27,273,991 21,061,449 18,206,600 14,322,721 11,873,683 9,212,001
Installment loans - Bankcard* 3,657,619 4,345,069 2,154,799 -- -- --
Installment loans - other 20,212,216 17,381,379 15,658,181 16,819,822 15,865,430 14,868,815
Total retail 51,143,826 42,787,897 36,019,580 31,142,543 27,739,113 24,080,816
Total loans 92,108,835 78,813,757 68,834,448 60,915,918 59,469,540 55,410,989
UNEARNED INCOME
Loans 476,591 419,429 335,081 383,895 467,288 545,305
Lease financing 1,069,364 563,335 236,279 230,561 277,155 284,661
Total unearned income 1,545,955 982,764 571,360 614,456 744,443 829,966
Loans, net $90,562,880 77,830,993 68,263,088 60,301,462 58,725,097 54,581,023
</TABLE>
* Information not available prior to 1993.
Table 9
Deposits
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
CORE DEPOSITS
Noninterest-bearing $ 17,043,223 15,917,287 16,208,214 14,583,331 12,463,681 10,705,416
Savings and NOW accounts 24,297,270 23,263,322 21,661,410 17,652,860 14,021,445 10,061,707
Money market accounts 13,112,918 14,376,098 15,024,464 13,835,528 12,833,961 11,115,590
Other consumer time 31,945,313 27,402,767 25,534,358 27,211,878 28,925,361 23,576,212
Total core deposits 86,398,724 80,959,474 78,428,446 73,283,597 68,244,448 55,458,925
Foreign 3,526,771 4,802,719 1,456,828 512,793 362,477 972,439
Other time 2,629,723 2,102,932 2,000,159 2,359,410 3,787,848 4,843,014
Total deposits $92,555,218 87,865,125 81,885,433 76,155,800 72,394,773 61,274,378
</TABLE>
37
<PAGE>
FINANCIAL TABLES
Table 10
Off-Balance Sheet Derivative Financial Instruments
(In thousands)
December 31, 1995
<TABLE>
<CAPTION>
Weighted
Average Rate
Notional Maturity
Amount Receive Pay In Years Comments
ASSET RATE CONVERSIONS
<S> <C> <C> <C> <C> <C>
Interest rate swaps $11,282,355 6.35% 5.83% 1.27 Converts floating rate loans to fixed
rate. Adds to liability sensitivity.
Similar characteristics to a fixed
income security funded with variable
rate liabilities.
Forward bullet interest rate swaps 6,120,000 5.97 -- 1.96 Converts floating rates on loans to
fixed rates at higher than current
yields in future periods.
LIABILITY RATE CONVERSIONS
Interest rate swaps 5,127,000 6.89 5.76 5.83 Converts fixed rate long-term debt to
floating rate by matching the maturity
of the swap to the debt issue. Rate
sensitivity remains unchanged due to the
direct linkage of the swap to the debt
issue.
Other financial instruments 180,000 -- -- 6.33 Miscellaneous purchased option-based
products for liability management
purposes.
ASSET HEDGES
Short eurodollar futures 1,016,000 -- 5.81 .29 Hedges market values of U.S. Treasury
notes in the available for sale
portfolio.
RATE SENSITIVITY HEDGES
Put options on eurodollar futures 4,252,000 -- 7.87 .33 Paid a premium for the right to lock in
the 3 month LIBOR reset rates on pay
variable rate swaps and short-term
liabilities.
Interest rate caps 67,200 -- -- .43 Purchased LIBOR caps to convert floating
rate liabilities to fixed rate if
short-term rates rise above 8 percent.
Short eurodollar futures 2,000,000 -- 5.60 .22 Locks in the 3 month LIBOR
reset rates on pay variable rate swaps.
Long eurodollar futures 23,355,000 5.56 -- 1.40 Converts floating rate, LIBOR-based
loans to fixed rate. Adds to liability
sensitivity. Similar characteristics to
fixed income security funded with
variable rate liabilities.
OFFSETTING POSITIONS
Interest rate floors 800,000 6.16 6.16 .45 Locks in gains which will be amortized
over the remaining life of the
contracts.
Prime/federal funds cap $ 4,000,000 5.90% 5.90% .27 Locks in losses which will be amortized
over the remaining life of the
contracts.
</TABLE>
38
<PAGE>
MANAGEMENT'S STATEMENT
OF FINANCIAL RESPONSIBILITY
Management of First Union Corporation and its subsidiaries (the Corporation) is
committed to the highest standards of quality customer service and the
enhancement of stockholder value. Management expects the Corporation's employees
to respect its customers and to assign the highest priority to customer needs.
The accompanying supplemental consolidated financial statements were prepared in
conformity with generally accepted accounting principles and include, as
necessary, best estimates and judgments by management. Other financial
information contained in this summary annual report is presented on a basis
consistent with the supplemental consolidated financial statements unless
otherwise indicated.
To ensure the integrity, objectivity and fairness of data in these supplemental
consolidated financial statements, management of the Corporation has established
and maintains an internal control structure that is supplemented by a program of
internal audits. The internal control structure is designed to provide
reasonable assurance that assets are safeguarded and transactions are executed,
recorded and reported in accordance with management's intentions and
authorizations and to comply with applicable laws and regulations. To enhance
the reliability of the internal control structure, management recruits and
trains highly qualified personnel, and maintains sound risk management practices
and efficient operations.
The supplemental consolidated financial statements have been audited by KPMG
Peat Marwick LLP, independent auditors, in accordance with generally accepted
auditing standards. KPMG Peat Marwick LLP reviews the results of its audit with
both management and the Audit Committee of the Board of Directors of the
Corporation. The Audit Committee, composed entirely of outside directors, meets
periodically with management, internal auditors and KPMG Peat Marwick LLP to
determine that each is fulfilling its responsibilities and to support actions to
identify, measure and control risks, augment internal controls and enhance
operational efficiency.
(Signature of Edward E. Crutchfield)
Edward E. Crutchfield
Chairman and Chief Executive Officer
(Signature of Robert T. Atwood)
Robert T. Atwood
Executive Vice President and
Chief Financial Officer
January 11, 1996
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
First Union Corporation
We have audited the supplemental consolidated balance sheets of First Union
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
supplemental consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1995. Such supplemental consolidated financial statements and our report thereon
dated January 11, 1996, expressing an unqualified opinion (which are not
presented herein), are included in the First Union Corporation 1995 Report on
Form 10-K (Form 10-K). The accompanying condensed supplemental consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on such condensed supplemental
consolidated financial statements in relation to the complete supplemental
consolidated financial statements. The pre-combination consolidated financial
statements for First Union Corporation are included in the Form 10-K.
The supplemental consolidated financial statements give retroactive effect to
the merger of First Union Corporation and First Fidelity Bancorporation on
January 1, 1996, which has been accounted for as a pooling of interests as
described in Note 2 to the supplemental consolidated financial statements.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation. The
supplemental consolidated financial statements do not extend through the date of
consummation. However, they will become the historical consolidated financial
statements of First Union Corporation and subsidiaries after financial
statements covering the date of consummation of the business combination are
issued.
In our opinion, the information set forth in the accompanying condensed
supplemental consolidated balance sheets as of December 31, 1995 and 1994, and
the related condensed supplemental consolidated statements of income for each of
the years in the three-year period ended December 31, 1995, is fairly stated in
all material respects in relation to the basic supplemental consolidated
financial statements from which it has been derived.
As discussed in Note 3 to the supplemental consolidated financial statements,
the Corporation adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
KPMG Peat Marwick LLP
(Signature of KPMG PEAT MARWICK LLP)
Charlotte, North Carolina
January 11, 1996
39
<PAGE>
FINANCIAL TABLES
Supplemental Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
(In thousands except per share data) 1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,312,076 5,822,693
Interest-bearing bank balances 79,235 980,693
Federal funds sold and securities purchased under resale agreements 4,152,754 1,421,700
Total cash and cash equivalents 10,544,065 8,225,086
Trading account assets 1,881,066 1,317,169
Securities available for sale (amortized cost $17,992,898 in 1995; $11,929,691 in 1994) 18,193,699 11,533,642
Investment securities (market value $3,319,602 in 1995; $7,791,991 in 1994) 3,139,616 7,916,729
Loans, net of unearned income ($1,545,955 in 1995; $982,764 in 1994) 90,562,880 77,830,993
Allowance for loan losses (1,507,798) (1,578,128)
Loans, net 89,055,082 76,252,865
Premises and equipment 2,553,170 2,193,974
Due from customers on acceptances 616,301 437,474
Mortgage servicing rights 148,933 134,421
Credit card premium 43,894 58,494
Other intangible assets 2,431,667 1,936,840
Other assets 3,272,380 3,522,507
Total assets $ 131,879,873 113,529,201
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 17,043,223 15,917,287
Interest-bearing deposits 75,511,995 71,947,838
Total deposits 92,555,218 87,865,125
Short-term borrowings 19,500,127 10,249,265
Bank acceptances outstanding 616,301 437,474
Other liabilities 3,044,136 2,460,708
Long-term debt 7,120,947 4,242,137
Total liabilities 122,836,729 105,254,709
Stockholders' equity
Preferred stock 183,223 229,707
Common stock, $3.33-1/3 par value; authorized 750,000,000 shares,
outstanding 277,845,768 shares in 1995; 285,360,745 shares in 1994 926,152 951,202
Paid-in capital 1,974,833 2,361,350
Retained earnings 5,847,922 5,021,730
Unrealized gain (loss) on debt and equity securities 111,014 (289,497)
Total stockholders' equity 9,043,144 8,274,492
Total liabilities and stockholders' equity $ 131,879,873 113,529,201
</TABLE>
40
<PAGE>
FINANCIAL TABLES
Supplemental Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands except per share data) 1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 7,222,842 5,824,217 5,215,845
Interest and dividends on securities available for sale 705,565 734,091 390,689
Interest and dividends on investment securities
Taxable income 401,145 352,689 697,084
Nontaxable income 109,111 134,178 132,801
Trading account interest 91,009 63,707 44,534
Other interest income 156,705 121,931 120,575
Total interest income 8,686,377 7,230,813 6,601,528
INTEREST EXPENSE
Interest on deposits 2,853,328 2,046,044 1,943,988
Interest on short-term borrowings 816,650 495,931 339,551
Interest on long-term debt 381,837 251,007 198,413
Total interest expense 4,051,815 2,792,982 2,481,952
Net interest income 4,634,562 4,437,831 4,119,576
Provision for loan losses 220,000 179,000 369,753
Net interest income after provision for loan losses 4,414,562 4,258,831 3,749,823
NONINTEREST INCOME
Trading account profits 69,407 51,672 59,939
Service charges on deposit accounts 615,552 580,271 572,625
Mortgage banking income 149,585 88,436 150,896
Capital management income 397,191 330,416 306,392
Securities available for sale transactions 44,340 6,213 32,784
Investment security transactions 4,818 4,006 7,435
Fees for other banking services 159,571 130,992 100,122
Merchant discounts 100,580 89,508 79,452
Insurance commissions 53,843 48,076 46,717
Sundry income 301,621 246,323 225,426
Total noninterest income 1,896,508 1,575,913 1,581,788
NONINTEREST EXPENSE
Personnel expense 1,962,152 1,772,842 1,623,949
Occupancy 352,551 352,721 341,847
Equipment rentals, depreciation and maintenance 320,036 270,157 233,572
Postage, printing and supplies 139,277 123,500 124,608
FDIC insurance 120,489 183,580 181,593
Professional fees 176,359 169,461 95,267
Owned real estate expense 13,981 34,544 69,050
Amortization 253,700 186,134 237,911
Merger-related restructuring charges 94,446 -- --
Sundry 659,478 653,918 628,549
Total noninterest expense 4,092,469 3,746,857 3,536,346
Income before income taxes 2,218,601 2,087,887 1,795,265
Income taxes 788,420 711,444 578,912
Net income 1,430,181 1,376,443 1,216,353
Dividends on preferred stock 26,390 46,020 45,553
Net income applicable to common stockholders
before redemption premium 1,403,791 1,330,423 1,170,800
Redemption premium on preferred stock -- 41,355 --
Net income applicable to common stockholders after
redemption premium $ 1,403,791 1,289,068 1,170,800
PER COMMON SHARE DATA
Net income before redemption premium $ 5.04 4.72 4.30
Net income after redemption premium 5.04 4.58 4.30
Cash dividends $ 1.96 1.72 1.50
Average common shares 278,677,119 281,662,617 272,438,239
</TABLE>
41
<PAGE>
GLOSSARY
ASSET SENSITIVITY:
When a company's asset, liability and off-balance sheet financial instruments
mix leans toward assets that would diminish net interest income in a flat or
declining interest rate environment.
COLLATERALIZED MORTGAGE
OBLIGATIONS (CMOS):
A group of mortgage pass-through securities that have been bundled, with the
cash flows paid out in a specific order or preference to different buyers.
DEBIT CARDS:
A method of payment that is tied to a customer's checking account. When used to
make a purchase, the bank-issued debit card (which looks like a credit card)
acts as a "plastic check," and money is deducted directly from the customer's
checking account.
DERIVATIVES:
A term used to include a broad base of financial instruments
that are, for the most part, "derived" from underlying securities traded in the
cash markets. Common examples include interest rate swaps, options and futures
contracts.
EARNINGS PER COMMON SHARE:
Net income, adjusted for preferred stock dividends, divided by the average
number of common shares outstanding.
FUTURES CONTRACT:
A contract to buy or sell a particular type of security or commodity to (or
from) the futures exchange at a specified future time. It is used to, in effect,
"lock in" net interest income over quarterly future periods.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA):
A U.S. Government-owned corporation that guarantees timely payment of principal
and interest on specified mortgage-backed certificates.
INDEX AMORTIZING INTEREST
RATE SWAP:
An interest rate swap in which the maturity date may extend, and the notional
amount may decrease based upon changes in certain interest rate indices.
INTEREST RATE SWAP:
A contractual transaction between two parties in the over-the-counter markets in
which each agrees to exchange interest rate payments for a specified period of
time. These payments are calculated on a "notional amount", and no exchange of
principal occurs. Such a transaction is commonly used to manage the asset or
liability sensitivity of a balance sheet by converting fixed rate assets or
liabilities to floating rates, or vice versa.
INTERNET:
A global network of computers providing access to the Information Superhighway.
LIABILITY SENSITIVITY:
When a company's asset, liability and off-balance sheet financial instruments
mix leans toward liabilities that would diminish net interest income in a rising
interest rate environment.
MANAGED CARD RECEIVABLES:
Include owned and securitized credit card receivables.
MARK-TO-MARKET:
A method of accounting for a corporation's assets or liabilities by recording
them at their current market values, rather than at their historical costs.
MORTGAGE BANKING INCOME:
Noninterest income related to mortgage banking activity.
MORTGAGE SERVICING PORTFOLIO:
Mortgage loans owned by others for which a company provides mortgage servicing.
NET CHARGE-OFFS:
The amount of loans written off as uncollectible, net of the recovery of loans
previously written off as uncollectible.
NET INTEREST MARGIN:
The difference between the tax-equivalent yield on earning assets and the rate
paid on funds to support those assets, divided by average earning assets.
NET OPERATING REVENUE:
The sum of tax-equivalent net interest income and noninterest income.
NONINTEREST EXPENSE:
All expenses other than interest.
NONINTEREST INCOME:
All income other than interest and dividend income.
NONPERFORMING ASSETS:
Assets on which income is not being accrued for financial reporting purposes;
restructured loans on which interest rates or terms of repayment have been
materially revised; and other real estate that has been acquired through loan
foreclosures, in-substance foreclosures or deeds received in lieu of loan
payments.
NOTIONAL AMOUNT:
The principal amount of a financial instrument on which a derivative transaction
is based. In an interest rate swap, for example, the "notional amount" is used
to calculate the interest rate cash flows to be exchanged. No exchange of
principal occurs.
OPTIONS:
A contractual agreement that allows but does not require a holder to buy (or
sell) a financial instrument at a predetermined price before a specified time.
Options may be traded through the exchanges or over-the-counter.
OVERHEAD EFFICIENCY RATIO:
Noninterest expense divided by net operating revenue.
POOLING OF INTERESTS:
An accounting method that restates historical financial information of the
surviving company in a merger as if the two entities were always one.
PURCHASE ACCOUNTING:
An accounting method that adds the fair market value of assets and liabilities
acquired to those of the acquiror at the time of acquisition. Historical
financial information of the acquiror is not restated.
RETURN ON ASSETS (ROA):
Net income as a percentage of average assets.
RETURN ON COMMON EQUITY (ROE):
Net income applicable to common stockholders as a percentage of average common
stockholders' equity, excluding unrealized gains or losses on securities.
SECURITY GAIN OR LOSS:
A gain or loss resulting from
the sale of a security at a price above or below the security's
carrying value.
SMART CARDS:
A plastic card containing microchips that store data. Although many kinds of
information can be embedded on a smart card (which looks like a credit card),
banks are primarily interested in storing cash value.
STOCKHOLDERS' EQUITY:
A balance sheet amount that represents the total investment in the corporation
by holders of preferred and common stock.
STORED VALUE CARDS:
Plastic cards embedded with computer chip technology and used in place of cash
or checks.
SWAPTIONS:
Options on swaps.
42
<PAGE>
FIRST UNION CORPORATION AND FULL-SERVICE BANKING SUBSIDIARIES
CORPORATION BOARD OF DIRECTORS AND COMMITTEES
FIRST UNION CORPORATION
EDWARD E. BARR*
Chairman, President and Chief
Executive Officer, Sun Chemical
Corporation
Fort Lee, New Jersey
G. ALEX BERNHARDT
President and Chief Executive Officer,
Bernhardt Furniture Company
Lenoir, North Carolina
W. WALDO BRADLEY
Chairman, Bradley Plywood Corporation
Savannah, Georgia
ROBERT J. BROWN
Chairman, President and Chief
Executive Officer, B&C Associates, Inc.
High Point, North Carolina
EDWARD E. CRUTCHFIELD
Chairman and Chief Executive Officer,
First Union Corporation
Charlotte, North Carolina
ROBERT D. DAVIS
Chairman, D.D.I., Inc.
Jacksonville, Florida
R. STUART DICKSON
Chairman of Executive Committee,
Ruddick Corporation
Charlotte, North Carolina
B.F. DOLAN
Investor
Charlotte, North Carolina
RODDEY DOWD SR.
Chairman, Charlotte Pipe and
Foundry Company
Charlotte, North Carolina
JOHN R. GEORGIUS
Vice Chairman, First Union Corporation
Charlotte, North Carolina
ARTHUR M. GOLDBERG*
Chairman, Chief Executive Officer and
President, Bally Entertainment
Corporation
Chicago, Illinois
WILLIAM H. GOODWIN JR.
Chairman, AMF Companies
Richmond, Virginia
BRENTON S. HALSEY
Chairman Emeritus,
James River Corporation
Richmond, Virginia
HOWARD H. HAWORTH
President, The Haworth Group
Charlotte, North Carolina
TORRENCE E. HEMBY JR.**
President, Beverly Crest Corporation
Charlotte, North Carolina
FRANK M. HENRY*
Chairman, Frank Martz
Coach Company
Wilkes-Barre, Pennsylvania
LEONARD G. HERRING
President and Chief Executive Officer,
Lowe's Companies, Inc.
North Wilkesboro, North Carolina
JUAN RODRIGUEZ INCIARTE*
Director and Executive Vice President,
Banco Santander, S.A.
Madrid, Spain
JACK A. LAUGHERY
Chairman, The Bagel Group, Inc.
Rocky Mount, North Carolina
MAX LENNON
President, Mars Hill College
Mars Hill, North Carolina
RADFORD D. LOVETT
Chairman, Commodores
Point Terminal Corporation
Jacksonville, Florida
JOSEPH NEUBAUER*
Chairman, President
and Chief Executive Officer,
ARAMARK Corporation
Philadelphia, Pennsylvania
HENRY D. PERRY JR.
Physician
Plantation, Florida
RANDOLPH N. REYNOLDS
Vice Chairman,
Reynolds Metals Company
Richmond, Virginia
RUTH G. SHAW
Senior Vice President, Corporate
Resources, and Chief Administrative
Officer, Duke Power Company
Charlotte, North Carolina
LANTY L. SMITH
Chairman and Chief Executive Officer,
Precision Fabrics Group, Inc.
Greensboro, North Carolina
ANTHONY P. TERRACCIANO*
President, First Union
Corporation
Newark, New Jersey
DEWEY L. TROGDON
Chairman, Cone Mills Corporation
Greensboro, North Carolina
JOHN D. UIBLE
Investor
Jacksonville, Florida
B.J. WALKER
Vice Chairman, First Union Corporation
Jacksonville, Florida
KENNETH G. YOUNGER**
Transportation Consultant
Gastonia, North Carolina
COMMITTEES OF THE CORPORATE
BOARD OF DIRECTORS***
Executive Committee
B.F. DOLAN, CHAIRMAN
EDWARD E. CRUTCHFIELD
ROBERT D. DAVIS
R. STUART DICKSON
ARTHUR M. GOLDBERG
WILLIAM H. GOODWIN JR.
LEONARD G. HERRING
RADFORD D. LOVETT
JOSEPH NEUBAUER
LANTY L. SMITH
ANTHONY P. TERRACCIANO
B.J. WALKER
Audit Committee
G. ALEX BERNHARDT, CHAIRMAN
HOWARD H. HAWORTH,
VICE CHAIRMAN
ROBERT J. BROWN
FRANK M. HENRY
HENRY D. PERRY JR.
RANDOLPH N. REYNOLDS
PETER J. SCHILD (STAFF)
Financial Management Committee
ROBERT D. DAVIS, CHAIRMAN
LANTY L. SMITH, VICE CHAIRMAN
RODDEY DOWD SR.
JOHN R. GEORGIUS
ARTHUR M. GOLDBERG
WILLIAM H. GOODWIN JR.
BRENTON S. HALSEY
JUAN RODRIGUEZ INCIARTE
JACK A. LAUGHERY
MAX LENNON
JOSEPH NEUBAUER
RUTH G. SHAW
JOHN D. UIBLE
MALCOLM T. MURRAY JR. (STAFF)
LOUIS A. SCHMITT JR. (STAFF)
Human Resources Committee
R. STUART DICKSON, CHAIRMAN
LEONARD G. HERRING,
VICE CHAIRMAN
EDWARD E. BARR
W. WALDO BRADLEY
B.F. DOLAN
TORRENCE E. HEMBY, JR.
RADFORD D. LOVETT
DEWEY L. TROGDON
DON R. JOHNSON (STAFF)
Nominating Committee
B.F. DOLAN, CHAIRMAN
R. STUART DICKSON,
VICE CHAIRMAN
EDWARD E. CRUTCHFIELD
WILLIAM H. GOODWIN JR.
LEONARD G. HERRING
RADFORD D. LOVETT
ANTHONY P. TERRACCIANO
FIRST UNION CORPORATION
EXECUTIVE OFFICERS
EDWARD E. CRUTCHFIELD
Chairman and Chief Executive Officer,
First Union Corporation
ANTHONY P. TERRACCIANO
President, First Union Corporation
JOHN R. GEORGIUS
Vice Chairman, First Union Corporation
B.J. WALKER
Vice Chairman, First Union Corporation
ROBERT T. ATWOOD
Executive Vice President
and Chief Financial Officer,
First Union Corporation
MARION A. COWELL JR.
Executive Vice President,
Secretary and General Counsel,
First Union Corporation
* Director as of January 1, 1996.
** Retiring director.
*** As of January 1, 1996.
43
<PAGE>
BANK BOARDS OF DIRECTORS
FIRST UNION NATIONAL BANK
OF FLORIDA
BOB D. ALLEN
President and Chief Executive Officer,
Consolidated-Tomoka Land Company
Daytona Beach, Florida
WILLIAM B. BOND
Investor
Jacksonville, Florida
E. BRUCE BOWER
President, The Florida Stock
and Land Company
Jacksonville, Florida
A. DANO DAVIS
Chairman and Principal Executive
Officer, Winn-Dixie Stores, Inc.
Jacksonville, Florida
ALEXANDER W. DREYFOOS JR.
Chairman and Owner,
Photo Electronics Corporation
West Palm Beach, Florida
J. NELSON FAIRBANKS
President and Chief Executive Officer,
United States Sugar Corporation
Clewiston, Florida
BYRON E. HODNETT
Chief Executive Officer,
First Union National Bank of Florida
Jacksonville, Florida
EDWARD W. LANE III
Attorney, Ulmer, Murchison,
Ashby & Taylor, P.A.
Jacksonville, Florida
JOHN F. LOWNDES
Attorney, Lowndes, Drosdick,
Doster, Kantor & Reed, P.A.
Orlando, Florida
W.A. MCGRIFF III
Investor
Jacksonville, Florida
JORGE MASCANOSA
Chairman, MasTec, Inc.
Miami Springs, Florida
JOHN A. MITCHELL III
Chairman, First Union National
Bank of Florida
Jacksonville, Florida
ORRIN D. MITCHELL
Orthodontist
Jacksonville, Florida
RAY C. OSBORNE
Attorney, Osborne,
Osborne & deClaire, P.A.
Boca Raton, Florida
HERBERT H. PEYTON
President, Gate Petroleum Company
Jacksonville, Florida
WILLIAM J. SCHOEN
Chairman, President and Chief
Executive Officer, Health
Management Associates, Inc.
Naples, Florida
MEL SEMBLER
Chairman, The Sembler Company
St. Petersburg, Florida
G. KENNEDY THOMPSON
President, First Union National
Bank of Florida
Jacksonville, Florida
B.J. WALKER
Vice Chairman, First Union Corporation
Jacksonville, Florida
J. WAYNE WEAVER
Chairman and Chief Executive Officer,
Jacksonville Jaguars, Ltd.
Jacksonville, Florida
CAROL GRAHAM WYLLIE
Executive Vice President,
The Graham Companies
Miami Lakes, Florida
FIRST FIDELITY BANK, N.A.*
(NOW FIRST UNION NATIONAL BANK)
LOUIS E. AZZATO
Director and Retired Chairman,
President and Chief Executive Officer,
Foster Wheeler Corporation
Clinton, New Jersey
EDWARD E. BARR
Chairman, President and
Chief Executive Officer,
Sun Chemical Corporation
Fort Lee, New Jersey
ROLAND K. BULLARD II
Senior Executive Vice President,
First Fidelity Bancorporation
Newark, New Jersey/Philadelphia,
Pennsylvania
LEE A. BUTZ
President, Alvin H. Butz, Inc.
Allentown, Pennsylvania
LUTHER R. CAMPBELL JR.
Partner, Campbell, Rappold &
Yurasits, LLP
Allentown, Pennsylvania
JOHN GILRAY CHRISTY
Chairman,
Chestnut Capital Corporation
Flourtown, Pennsylvania
JAMES G. CULLEN
Vice Chairman,
Bell Atlantic Corporation
Arlington, Virginia
E. JAMES FERLAND
Chairman, President and Chief
Executive Officer, Public Service
Enterprise Group Incorporated
Newark, New Jersey
ARTHUR M. GOLDBERG
Chairman, President and Chief
Executive Officer, Bally Entertainment
Corporation
Chicago, Illinois
LESLIE E. GOODMAN
Senior Executive Vice President,
First Fidelity Bancorporation
Newark, New Jersey/Philadelphia, Pennsylvania
FRANK M. HENRY
Chairman, Frank Martz
Coach Company
Wilkes-Barre, Pennsylvania
JOHN R. KENNEDY
President and Chief Executive Officer,
Federal Paper Board Company Inc.
Montvale, New Jersey
ROCCO J. MARANO
Director and Retired Chairman,
Blue Cross and Blue Shield of
New Jersey Inc.
Chatham, New Jersey
JAMES D. MORRISSEY JR.
President and Chief Operating Officer,
James D. Morrissey Inc.
Philadelphia, Pennsylvania
JOSEPH NEUBAUER
Chairman, President and
Chief Executive Officer,
ARAMARK Corporation
Philadelphia, Pennsylvania
PETER C. PALMIERI
Vice Chairman and Chief Credit Officer,
First Fidelity Bancorporation
Newark, New Jersey/Philadelphia,
Pennsylvania
DONALD C. PARCELLS
Senior Executive Vice President,
First Fidelity Bancorporation
Newark, New Jersey/Philadelphia, Pennsylvania
WOLFGANG SCHOELLKOPF
Vice Chairman and Chief Financial
Officer, First Fidelity Bancorporation
Newark, New Jersey/Philadelphia,
Pennsylvania
ROBERT MONTGOMERY SCOTT
President and Chief Executive Officer,
Philadelphia Museum of Art
Philadelphia, Pennsylvania
REBECCA STAFFORD
President, Monmouth University
West Long Branch, New Jersey
SEFTON STALLARD
General Partner, North American
Venture Capital Fund L.P.
New Vernon, New Jersey
ANTHONY P. TERRACCIANO
Chairman, President and Chief
Executive Officer, First
Fidelity Bancorporation
Newark, New Jersey/Philadelphia,
Pennsylvania
BERNARD C. WATSON
Chairman, The HMA Foundation, Inc.
Philadelphia, Pennsylvania
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
GEORGE E. BATTLE JR.
President of the Board of Bishops
of the AME Zion Church,
Charlotte, North Carolina
DANIEL T. BLUE JR.
Attorney, Thigpen, Blue,
Stephens and Fellers
Raleigh, North Carolina
B. MAYO BODDIE SR.
Chairman and Chief Executive Officer,
Boddie-Noell Enterprises, Inc.
Rocky Mount, North Carolina
RAYMOND A. BRYAN JR.
Chairman and Chief Executive Officer,
T.A. Loving Company
Goldsboro, North Carolina
JOHN F.A.V. CECIL
President, Biltmore Farms, Inc.
Biltmore, North Carolina
JOHN W. COPELAND
President, Ruddick Corporation
Charlotte, North Carolina
JOHN CROSLAND JR.
Chairman and President,
The Crosland Group, Inc.
Charlotte, North Carolina
J. WILLIAM DISHER
Chairman, Lance, Inc.
Charlotte, North Carolina
MALCOLM E. EVERETT III
Chairman, President and Chief
Executive Officer, First Union National
Bank of North Carolina
Charlotte, North Carolina
JAMES F. GOODMON
President and Chief Executive Officer,
Capitol Broadcasting Company, Inc.
Raleigh, North Carolina
SHELTON GORELICK
President, SGIC, Inc.
Charlotte, North Carolina
44
<PAGE>
BANK BOARDS OF DIRECTORS
CHARLES L. GRACE
President, Cummins Atlantic, Inc.
Charlotte, North Carolina
JAMES E.S. HYNES
Chairman, Hynes Sales Company
Charlotte, North Carolina
MACKEY J. MCDONALD
President and Chief Executive Officer,
VF Corporation
Wyomissing, Pennsylvania
EARL N. PHILLIPS JR.
President and Chief Executive Officer,
First Factors Corporation
High Point, North Carolina
J.G. POOLE JR.
Chairman and President,
Gregory Poole Equipment Company
Raleigh, North Carolina
JOHN P. ROSTAN III
General Partner,
Heritage Investments, LLP
Valdese, North Carolina
NELSON SCHWAB III
Managing Director, Carousel
Capital Company
Charlotte, North Carolina
CHARLES M. SHELTON
General Partner,
The Shelton Companies
Charlotte, North Carolina
GEORGE SHINN
Chairman, Shinn Enterprises Inc.
Charlotte, North Carolina
HARLEY F. SHUFORD JR.
Chairman, Shuford Industries
Hickory, North Carolina
STANLEY E. WRIGHT**
Retired President and Chief Executive
Officer, Raleigh Federal Savings Bank
Raleigh, North Carolina
FIRST UNION NATIONAL BANK
OF GEORGIA
JUANITA P. BARANCO
Executive Vice President,
Baranco Automotive, Inc.
Decatur, Georgia
W. FRANK BLOUNT
Chief Executive Officer,
Telstra Communications Inc.
Sydney, Australia
OTIS A. BRUMBY JR.
Publisher and Chief Executive Officer,
The Marietta Daily Journal
and Neighbor Newspapers Inc.
Marietta, Georgia
DAVID M. CARROLL
President and Chief Executive Officer,
First Union National Bank of Georgia
Atlanta, Georgia
JOHN E. CAY III
President and Chief Executive Officer,
Palmer & Cay/Carswell, Inc.
Savannah, Georgia
THOMAS W. COLE JR.
President, Clark Atlanta University
Atlanta, Georgia
EDWIN M. CRAWFORD
Chairman, President and Chief
Executive Officer, Charter
Medical Corporation
Atlanta, Georgia
JERE A. DRUMMOND
President and Chief Executive Officer,
BellSouth Telecommunications Inc.
Atlanta, Georgia
HARALD R. HANSEN
Chairman, First Union National
Bank of Georgia
Atlanta, Georgia
J. MADDEN HATCHER JR.
Attorney, Bradley & Hatcher
Columbus, Georgia
JAMES W. KEY
Investor
Columbus, Georgia
WYCK A. KNOX JR.
Attorney, Kilpatrick and Cody
Augusta, Georgia
DAVID L. KOLB
Chairman and Chief Executive Officer,
Mohawk Industries, Inc.
Atlanta, Georgia
J. ROBERT LOGAN
Partner, Georgia Ear Institute
Savannah, Georgia
ROBERT C. MCMAHAN
President and Chief Executive Officer,
Golden Point Group, Inc.
Tucker, Georgia
C.V. NALLEY III
President and Chief Executive Officer,
The Nalley Companies
Atlanta, Georgia
WALTON K. NUSSBAUM
Investor
Savannah, Georgia
THOMAS H. PACER
Executive Vice President and Head of
General Banking Group, First Union
National Bank of Georgia
Atlanta, Georgia
CARL E. SANDERS
Attorney, Troutman, Sanders
Atlanta, Georgia
HENRY C. SCHWOB
President, Schwob Realty Company
Columbus, Georgia
ARNOLD M. TENENBAUM
President, Chatham Steel Corporation
Savannah, Georgia
DAN M. VADEN JR.
President, Dan Vaden
Chevrolet-Geo, Inc.
Savannah, Georgia
FIRST UNION NATIONAL BANK
OF VIRGINIA
GEORGE R. ALDHIZER JR.
Attorney, Wharton, Aldhizer &
Weaver, P.L.C.
Harrisonburg, Virginia
DONALD S. BEYER JR.***
Vice President, Don Beyer Volvo
Falls Church, Virginia
J. RICHARD CARLING
Vice Chairman,
First Union National Bank of Virginia
Roanoke, Virginia
JAMES B. CRAWFORD
Chairman and Chief Executive Officer,
James River Coal Co., Inc.
Richmond, Virginia
WARNER N. DALHOUSE
Chairman, First Union National
Bank of Virginia
Roanoke, Virginia
ALICE W. HANDY
Treasurer, University of Virginia
Charlottesville, Virginia
ROBERT W. HELMS
Vice Chairman, First Union
National Bank of Virginia
Roanoke, Virginia
JAMES T. HOLLAND
President and Chief Executive Officer,
O'Sullivan Corporation
Winchester, Virginia
GLENN A. HUNSUCKER
President and Chief Operating Officer,
Bassett Furniture Industries Inc.
Bassett, Virginia
BENJAMIN P. JENKINS III
Chief Executive Officer and President,
First Union National Bank of Virginia
Roanoke, Virginia
WILLIAM E. LAVERY
President Emeritus, Virginia Polytechnic
Institute and State University
Blacksburg, Virginia
THOMAS L. ROBERTSON
President and Chief Executive Officer,
Carilion Health System
Roanoke, Virginia
WILLIAM G. SHENKIR
Professor, University of Virginia
Charlottesville, Virginia
DONALD G. SMITH
Chairman and Chief Executive Officer,
Roanoke Electric Steel Corporation
Roanoke, Virginia
GLENN O. THORNHILL JR.
Chairman and Chief Executive Officer,
Maid Bess Corporation
Salem, Virginia
PAUL E. TORGERSEN
President, Virginia Polytechnic Institute
and State University
Blacksburg, Virginia
FIRST UNION NATIONAL BANK
OF SOUTH CAROLINA
LOUIS P. BATSON JR.**
Chairman and Chief Executive Officer,
Louis P. Batson Company
Greenville, South Carolina
PETER C. BROWNING
President and Chief Operating Officer,
Sonoco Products Company
Hartsville, South Carolina
GEORGE C. FANT JR.
Investor
Columbia, South Carolina
KESTER S. FREEMAN
President and Chief Executive Officer,
Richland Memorial Hospital
Columbia, South Carolina
LYNN W. HODGE
Executive Vice President, First Union
National Bank of South Carolina
Greenwood, South Carolina
WILLIAM M. HULL JR.
President, Rock Hill Eye Clinic
Rock Hill, South Carolina
I.S. LEEVY JOHNSON
Attorney, Johnson, Toal &
Battiste, P.A.
Columbia, South Carolina
HARRY M. LIGHTSEY JR.
Attorney, McNair Law Firm
Columbia, South Carolina
* Directors of First Fidelity
at December 31, 1995
** As of January 11, 1996.
*** Retiring directors.
45
<PAGE>
BANK BOARDS OF DIRECTORS AND PRINCIPAL SUBSIDIARIES
STEVEN R. MCCLELLAN
Executive Vice President, First Union
National Bank of South Carolina
Greenville, South Carolina
JAMES E. MCDONALD
Attorney, Burns, McDonald,
Bradford, Patrick and Tinsley
Greenwood, South Carolina
PATRICK W. MCKINNEY
President, Kiawah Island
Real Estate Inc.
Charleston, South Carolina
F. CREIGHTON MCMASTER
Chief Executive Officer,
Winnsboro Petroleum Company Inc.
Winnsboro, South Carolina
RALPH L. OGDEN
Investor
Greenville, South Carolina
JOHN D. ORR
President, Orr Company
Florence, South Carolina
WILLIAM L. OTIS JR.
Chairman and Chief Executive Officer,
Columbia Lumber and
Manufacturing Co.
Columbia, South Carolina
JOSEPH P. RILEY JR.
Mayor, City of Charleston
Charleston, South Carolina
ALFRED B. ROBINSON
President, Robinson Company, Inc.
Easley, South Carolina
SUE A. SOMMER-KRESSE
Vice President for Enrollment
Management, College of Charleston
Charleston, South Carolina
SIDNEY B. TATE
Chairman, President and Chief
Executive Officer, First Union National
Bank of South Carolina
Greenville, South Carolina
FIRST UNION NATIONAL BANK
OF TENNESSEE
T.B. BOYD III
President and Chief Executive Officer,
National Baptist Publishing Board
Nashville, Tennessee
FRANK M. BUMSTEAD*
Chairman, Flood, Bumstead,
McCready & Sales Financial Inc.
Nashville, Tennessee
DAVIS H. CARR
Attorney, Boult, Cummings,
Conners and Berry
Nashville, Tennessee
HAYWOOD D. COCHRANE JR.**
President and Chief Executive Officer,
Allied Clinical Laboratories, Inc.
Nashville, Tennessee
COLLEEN CONWAY-WELCH
Dean, School of Nursing,
Vanderbilt University
Nashville, Tennessee
JOHN P. COOPER
Investor
Nashville, Tennessee
J. WILLIAM DENNY
President, Nashville Gas Division
of Piedmont Natural Gas Inc.
Nashville, Tennessee
LLOYD C. ELAM
Mental Health
Associates of Nashville
Nashville, Tennessee
WILLIAM M. JOHNSON
Investor
Sparta, Tennessee
DONALD M. MACLEOD
Executive Vice President, First Union
National Bank of Tennessee
Nashville, Tennessee
GAIL O. NEUMAN
Vice President and General Counsel,
Nissan Motor Manufacturing
Corporation, U.S.A.
Smyrna, Tennessee
RICHARD W. OLIVER
Professor, Owen Graduate School of
Management, Vanderbilt University
Nashville, Tennessee
ROBERT L. REID
Chairman, President and Chief
Executive Officer, First Union National
Bank of Tennessee
Nashville, Tennessee
JAMES E. ROBINSON
Chairman, Hodge-Hardy Agency, Inc.
Newport, Tennessee
THOMAS J. SHERRARD
Attorney, Sherrard & Roe
Nashville, Tennessee
REESE L. SMITH III*
President, Haury Smith Contractors Inc.
Nashville, Tennessee
JACK B. TURNER
President, Jack B. Turner &
Associates Inc.
Clarksville, Tennessee
GEORGE L. YOWELL
President, Tennessee Tomorrow, Inc.
Nashville, Tennessee
* As of February 20, 1996.
** Retiring directors.
FIRST UNION NATIONAL BANK
OF FLORIDA
A full-service commercial bank
with 555 offices.
225 Water Street
Jacksonville, Florida 32202
904-361-2265
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
A full-service commercial bank
with 250 offices.
One First Union Center
Charlotte, North Carolina 28288
704-374-6161
FIRST UNION NATIONAL BANK
OF GEORGIA
A full-service commercial bank
with 140 offices.
999 Peachtree Street, Suite 1200
Atlanta, Georgia 30309
404-827-7100
FIRST UNION NATIONAL BANK
OF VIRGINIA
A full-service commercial bank
with 163 offices.
213 South Jefferson Street
Roanoke, Virginia 24040
540-563-7000
FIRST UNION NATIONAL BANK
OF SOUTH CAROLINA
A full-service commercial bank
with 70 offices.
Insignia Financial Plaza,
One Insignia Place
Greenville, South Carolina 29601
864-255-8000
FIRST UNION NATIONAL BANK
OF TENNESSEE
A full-service commercial bank
with 52 offices.
150 Fourth Avenue North
Nashville, Tennessee 37219
615-251-9200
FIRST UNION NATIONAL BANK
OF WASHINGTON, D.C.
A full-service commercial bank
with 28 offices.
740 15th Street NW
Washington, D.C. 20005
703-821-7777
FIRST UNION NATIONAL BANK
OF MARYLAND
A full-service commercial bank
with 24 offices.
Congressional Plaza Branch
110 Congressional Lane
Rockville, Maryland 20852
301-650-1046
FIRST UNION NATIONAL BANK
(FORMERLY FIRST FIDELITY BANK, N.A.)
A full-service commercial bank
operating 610 offices in Maryland, New
Jersey, New York and Pennsylvania.
202A South Bridge Street
Elkton, Maryland 21921
410-392-2347
FIRST UNION BANK OF CONNECTICUT
(FORMERLY FIRST FIDELITY BANK)
A full-service commercial bank
with 65 offices.
300 Main Street
Stamford, Connecticut 06904
203-348-6211
FIRST UNION BANK OF DELAWARE
(FORMERLY FIRST FIDELITY BANK
OF DELAWARE)
A full-service commercial bank
with 2 offices.
One Rodney Square
920 King Street
Wilmington, Delaware 19801
302-888-7500
FIRST UNION BROKERAGE
SERVICES INC.
Securities brokerage firm.
One First Union Center
Charlotte, North Carolina 28288
704-374-6927
FIRST UNION CAPITAL MARKETS CORP.
Provides a wide range of securities
services in accordance with Federal Reserve
Board powers granted to subsidiaries of
bank holding companies.
One First Union Center
Charlotte, North Carolina 28288
704-383-8757
FIRST UNION HOME EQUITY BANK, N.A.
Offers home equity loans through
143 offices in 35 states.
1000 Louis Rose Place
Charlotte, North Carolina 28262
704-593-9300
FIRST UNION MORTGAGE CORPORATION
Offers a variety of mortgage banking
and insurance services through 26 offices
in 6 states.
Two First Union Center
Charlotte, North Carolina 28288
704-374-6161
FOREIGN OFFICES
NASSAU BRANCH
First Union National Bank
of North Carolina
Nassau, Bahamas
FIRST UNION BANK AND TRUST
(CAYMAN) LTD.
Cayman Islands
FIRST UNION NATIONAL BANK
London, England
46
<PAGE>
STOCKHOLDER INFORMATION
FINANCIAL INFORMATION
Analysts, stockholders and other investors seeking financial information about
First Union Corporation should contact Barbara Massa, senior vice president for
Corporate Communications and Investor Relations, at 704-374-2555 or Sean Fox,
vice president for Investor Relations, at 704-374-7060.
FAX-ON-DEMAND
Call 1-800-283-6214 for the latest news announcements through FAX-On-Demand.
INVESTOR RELATIONS
Our Investor Relations staff at 704-374-6782 also can provide information about
our dividend reinvestment program and direct deposit of dividends. Copies of our
1995 Form 10-K may be obtained from Investor Relations, Two First Union Center,
Charlotte, North Carolina 28288-0206.
STOCKHOLDER ACCOUNTS
If you have questions concerning your stockholder account, please call our
transfer agent, First Union National Bank of North Carolina, at 1-800-347-1246.
MEDIA CONTACT
News media seeking general information should contact R. Jeep Bryant, senior
vice president for Media Relations, at 704-374-2957.
FINANCIAL REPORT MAILING
PROCEDURES
Our goal is to reduce the expense associated with mailing financial reports to
stockholders by receiving authorization to mail only one per address. This
authorization is strictly voluntary.
ANNUAL MEETING
The annual meeting of stockholders will be held at 9:30 a.m. on Tuesday, April
16, 1996, in the auditorium on the 12th floor of Two First Union Center,
Charlotte, North Carolina.
STOCK LISTING
First Union Corporation common stock is traded on the New York Stock Exchange
under the symbol FTU; preferred stock is listed as FTU prB and FTU prF; and
depositary shares are listed as FTU prD.
EQUAL OPPORTUNITY EMPLOYER
First Union Corporation is an equal opportunity employer. All matters regarding
recruiting, hiring, training, compensation, benefits, promotions, transfers and
all other personnel policies will continue to be free from discriminatory
practices.
NAIC
First Union Corporation is a corporate sponsor of NAIC (National Association of
Investment Clubs) and participates in the Low-Cost Investment Plan.
INTERNET ADDRESS
Our Internet global computer address is: http://www.firstunion.com/ or via
electronic mail: [email protected].
FIRST UNION TOLL-FREE NUMBER
Customers nationwide who wish to open a First Union checking or savings account,
transfer funds, apply for mortgage, home equity or car loans, request credit
cards and conduct other banking transactions may call: 1-800-413-7898.
SECURITIES AND DEBT RATINGS
First Union Corporation's senior long-term debt is rated A by Standard & Poor's;
A1 by Moody's; and A+ by Thomson BankWatch. Subordinated debt is rated A- by
S&P; A2 by Moody's; and A by Thomson BankWatch. Commercial paper is rated A-1
by S&P; P-1 by Moody's; and TWB-1 by Thomson BankWatch.
First Union Corporation's subsidiary banks' ratings for short-term letters
of credit and certificates of deposit are P-1, A-1 and TBW-1 for Moody's,
S&P and Thomson BankWatch, respectively. Long-term senior debt and certificates
of deposit are rated A1 and A+ for Moody's and S&P, respectively, except
First Union National Bank of North Carolina, which Moody's rates Aa3.
47
<PAGE>
PRODUCT CATALOGUE
Buy financial products at your convenience with First Union through the Internet
or toll-free phone lines--24 hours a day, seven days a week. Internet address:
http://www.firstunion.com/ Nationwide toll-free phone number: 1-800-413-7898.
First Union's longstanding commitment to customer service means that we must be
ready to offer our customers the service and products they want--when, where and
how they want them. We are rapidly developing a variety of new tools and
delivery channels to allow us to be wherever customers want us, with whatever
products they desire. But we already offer the majority of products and services
that customers want through direct sales by personal computer or--like a
catalogue sales company--through toll-free phone lines.
The computer disk that accompanies this summary annual report allows customers
to connect to First Union's site on the Internet global computer network and,
throughout the course of 1996, to purchase an increasing selection of products
or services. Most of those products and services are already available through
one toll-free call to First Union's Direct Bank.
BANK VIA THE INTERNET
TODAY
Apply for a credit card; Apply for a consumer loan; Apply for a home equity
loan; Manage your commercial cash accounts; Check your IRA balance.
(Picture of Credit Card)
APRIL 1996
Check deposit account balance; Check savings account balance; Check credit card
balance; Check consumer loan status; Order checks; Get an interim account
statement.
(Picture of House)
DECEMBER 1996
Pay bills on-line; Transfer money between accounts.
(Picture of a Letter)
BANK VIA THE PHONE
TODAY
Apply for a mortgage; Apply for a home equity loan or prime equity line;
(Picture of a CheckBook)
Open a checking account; Apply for a car loan; Purchase a certificate of
deposit; Transfer money between accounts;
(Picture of a Car)
Open an IRA account; Open automated bill pay accounts; Purchase mutual funds.
(Picture of a Certificate of Deposit)
48
<PAGE>
Apple, Macintosh and System 7 are registered marks of Apple Computer, Inc.
Windows and MS-DOS are registered marks of Microsoft Corporation.
QuickTime and the QuickTime Logo are trademarks under license.
"This License allows you to use the Software and fonts on a single computer
and make one copy of the Software and fonts in machine-readable form for
backup purposes only."
Macromedia and Director are registered trademark of Macromedia, Inc.
Netscape navigator and Netscape Chat are trademarks of Netscape
Communications Corporation. Eudora is a registered trademark of the
Board of Trustees of the University of Illinois
licensed to Qualcomm Incorporated.
All other brand or product names are trademarks or registered
marks of their respective holders. Copyright (C) 1996
First Union Corporation and its licensors.
All rights reserved.
(Picture of QuickTime icon)
(Picture of Macromedia icon)
<PAGE>
(First Union Logo Appears Here)
First Union Corporation
1995 Summary Annual Report
Two First Union Center
Charlotte, NC 28288-0570
<PAGE>
(First Union Logo appears in upper right corner, four pictures appear
on front cover: one of a tree, one of a man at a computer, another of
a building with people walking toward it and last one of two hands
shaking)
To Return
Here, Click
First Union
Logo
To Begin,
Click On A
Subject
Quit
<PAGE>
DESCRIPTION OF FIRST UNION CD-ROM CONTENT
The following material is from a CD-ROM (the "First Union CD-ROM"),
which is enclosed in the written portion of the First Union Corporation
("First Union") 1995 Summary Annual Report. The information on the First Union
CD-ROM is, except as noted herein, a part of the 1995 Summary Annual Report.
As such, the First Union CD-ROM is not deemed "filed" with the Securities
and Exchange Commission. The First Union CD-Rom allows users to explore
detailed information about First Union by utilizing several mediums contained
on the disk. The First Union CD-Rom contains an electronic version of the
written portion of First Union's 1995 Summary Annual Report, spreadsheet files
with certain financial data from the 1995 Annual Report on Form 10-K, an
overview of First Union presented in an interactive multimedia format, and an
Internet Browser for accessing First Union's home pages from a PC.
The four sections contained on the First Union CD-ROM are:
1. 1995 Summary Annual Report - This electronic version of the written portion
of First Union's 1995 Summary Annual Report provides readers with the option
of viewing and storing the report on their PC or Macintosh computer. Enhanced
features like word search and bookmarking make this version more functional
than the traditional paper version.
2. Spread Sheet Files - The spread sheet files for certain financial tables
contained in First Union's 1995 Annual Report on Form 10-K. Shareholders
and analysts will find this feature useful as they can now easily integrate
First Union financials into their models. The Spread Sheet Files have been
extracted from financial statements filed with the Securities and Exchange
Commission as Exhibits (13)(b) and (13)(c) to the 1995 Annual Report on
Form 10-K.
3. Internet Browser for PC - This Internet browser connects users directly with
First Union's home pages and provides access to the Internet, as well as
electronic mail, through service provided by MCI. The First Union Internet
home page which is connected via the Internet Browser for PC contains
information relating to First Union products and services and neither the
contents of such home page nor the Internet Browser computer program is
deemed a part of the 1995 Summary Annual Report and therefore is not being
filed herewith.
4. Multimedia Presentation - This interactive presentation focuses on various
aspects of First Union, including First Union's history, management
philosophy, technology, business lines, and shareholder value through the use
of video, animation, graphics, charts, and text. The text of such Multimedia
Presentation is presented on the following pages.
<PAGE>
(Background drawing of tree, First Union logo upper right)
The History Of First Union
A Track Record of Strategic Growth
HISTORY
THE EARLY YEARS
THE EXPANSION YEARS
1995 OVERVIEW
Although we have enjoyed steady expansion for nearly nine decades,
First Union has never believed in growth solely for the sake of growth.
Our history proves that we take time necessary to examine the basics
before we expand, targeting those areas where our special strengths,
expand, targeting those areas where our special strengths, market presence
and proprietary innovations make the most difference.
<PAGE>
(Background photo of building, tree drawing upper left,
First Union logo upper right)
The Early Years:
Growth as A Bank
HISTORY
THE EARLY YEARS
Building A Foundation For The Future
First Union has grown from a roll top desk in a hotel lobby to one of the
most accessible banking organizations in the United States. We did not
achieve this type of success by accident. We achieved it by following the
basic principles set forth by our founder over 90 years ago.
<PAGE>
(Background photo of H.M. Victor, tree drawing upper left, First
Union logo upper right)
The Beginning
HISTORY
THE EARLY YEARS
A Well-Grounded Business Approach From The Start
First Union was founded in 1908 as Union National Bank by H.M. Victor in
Charlotte, N.C. Victor raised funds selling 1,000 shares of stock at $100
each. Known for his conservative lending approach, legend has it that when
he agreed to finance an auto loan, he held the keys until the loan was paid
off.
Victor believed in high credit quality, strong financial performance and
excellent customer service. This responsible approach brought Union National
successfully through several difficult economic eras, including the Great
Depression of the 1930s. These same principles guide present-day First Union
as we position ourselves for a future of continued growth.
<PAGE>
(Background photo of First National Bank, tree drawing upper left, First
Union logo upper right)
Post WWII
HISTORY
THE EARLY YEARS
Meeting The Needs Of A Growing Consumer And Corporate Base
Modern finance and technology revolutionized the world after World War II,
opening up borders, encouraging trade and triggering the largest cross-country
flows of currency in history. Union National met the challenges of these new
demands and its rapidly growing client base by merging with First National
Bank of Asheville, N.C. in 1958.
Not only did this merger form the basis for a modern-day First Union, it
also signaled the beginning of a new strategy that would prove increasingly
successful as the years went by. The strategy: identify a strong merger
partner with complementing strengths and unite to form an even stronger
organization focused on common goals.
<PAGE>
(Tree drawing upper left, First Union logo upper right,
background drawing of communication, technology, & agricultural symbols)
Early Innovations
HISTORY
THE EARLY YEARS
Responding To Market Needs With New Products And Technology
First Union became the first bank to open a branch office in Charlotte, N.C.
It later became the first bank in the region to offer a flat-fee checking
account and the first to offer a charge card - well before the advent of Visa
and MasterCard.
In 1986, First Union became the first bank in the nation to link its branches
by satellite for data transmission purposes. This innovative spirit endures
today in the form of our superior technological edge.
<PAGE>
(Background photo of C.C. Cameron & drawing of house, tree drawing upper
left, First Union logo upper right)
Focused On Growth
HISTORY
THE EARLY YEARS
C.C. Cameron
First Union
Chief Executive Officer
1968-1985
A $50 Billion Dollar Business Begins With Innovative Expansion
In 1964, First Union acquired Raleigh-based Cameron-Brown Company, a
national mortgage banking and insurance firm grandfathered by the
Bank Holding Company Act of 1956 to sell non-credit insurance and
mortgages on a national basis. With this acquisition, we became one of
the few banks in the nation to offer its customers a full line of insurance
and mortgage products.
Renamed First Union Mortgage Corporation in 1986, our mortgage banking
company now ranks among the nation's top 10 servicers of residential
loans with a portfolio exceeding $50 billion.
<PAGE>
(Tree drawing upper left, First Union logo upper right
The Expansion Years
HISTORY
EXPANSION YEARS
An Acceleration Of Planned Growth Creates A Regional Leader
Customer demands guided our growth efforts in the 1980s and beyond.
Through strategic mergers and well-chosen acquisitions, we expanded our
market base, consumer credit product lines, brokerage and mutual fund
products, and corporate lending and investment services.
<PAGE>
(Tree drawing upper left, First Union logo upper right)
The Expansion Years
HISTORY
EXPANSION YEARS
An Acceleration Of Planned Growth Creates A Regional Leader
(Area graph bottom center plotting asset growth data)
Asset Growth
(in billions)
1985 20.1
1986 26.8
1987 38.5
1988 41.4
1989 45.5
1990 54.6
1991 59.3
1992 63.8
1993 70.8
1994 77.3
1995 131.9
<PAGE>
(Tree drawing upper left, First Union logo upper right)
Our Vision
HISTORY
EXPANSION YEARS
There Will Always Be A Need For Better Ways Of Doing Business
More than ten years ago, First Union determined what it would take to
survive in the future: we needed to build our scope and scale; to become
more entrepreneurial and visionary; to diversify our sources of earnings;
and to manage our asset quality. Most important, we needed to maintain our
priorities on customer service and innovative investments for the future.
The remarkable decade of growth that followed this determination strengthened
our position as a regional financial services leader and brought us closer
to our main goal: becoming the prototype financial services company of
the future.
<PAGE>
(Tree drawing upper left, First Union logo upper right, background photo
of Edward Crutchfield, Northwestern Financial logo lower right)
Our Strategy
HISTORY
EXPANSION YEARS
Edward E. Crutchfield
Chairman and Chief Executive Officer
1985-present
Realizing A Vision Requires Leaders And Resources
In 1985, Ed Crutchfield became Chairman of First Union and launched the
interstate expansion program that has served the company so well. Heading
this initiative was an unprecedented merger with Northwestern Financial
Corporation of Greensboro, N.C. This event was the largest banking merger
in the history of North Carolina. It created the state's second largest bank
as well as First Union's flagship banking operation for the future.
<PAGE>
(Tree drawing upper left, First Union logo upper right, background -
The logos of six of the largest financial institutions which First Union has
acquired over the years move one by one to merge into the First Union logo
which then expands, filling the screen.)
1995: The Culmination Of Our Growth
HISTORY
1995 OVERVIEW
A Decade of Strategic Expansion Ends With A Historic Merger
1995 may well be remembered as the single most important year in First Union's
history, highlighted by our historic merger with First Fidelity that not only
dramatically increased our retail customer base, but also expanded our
geographic reach north to key high net worth retail and mid-size business
markets - catapulting First Union from a regional leader to a national
presence.
<PAGE>
(Tree drawing upper left, First Union logo upper right and center page)
1995: The Culmination Of Our Growth
HISTORY
1995 OVERVIEW
A Decade of Strategic Expansion Ends With A Historic Merger
<PAGE>
(Tree drawing upper left, First Union logo upper right, background map of
eastern seaboard. Interactive Map - When the user clicks on "First Fidelity
Region" or "First Union Region" the corresponding states on map are
highlighted.)
Combining Our Strengths
HISTORY
1995 OVERVIEW
The Financial Services Company Of The Future
First Union and First Fidelity have the combined market strength to take
full advantage of the technological developments, consolidation opportunities
and the changing financial services landscape to produce superior shareholder
returns both now and into the next century.
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(Tree drawing upper left, First Union logo upper right, shaded map of
eastern seaboard)
Combining Our Strengths
HISTORY
1995 OVERVIEW
The Financial Services Company Of The Future
FIRST FIDELITY REGION
FIRST UNION REGION
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(Tree drawing upper left, First Union logo upper right, background photo
of State Bank of Newark)
A Proven Partner
HISTORY
1995 OVERVIEW
First Fidelity's Own History And Approach Proves It a Worthy Partner
First Fidelity was founded in 1813 as the State Bank of Newark by
William S. Pennington, a revolutionary war veteran and a future
governor of New Jersey. Rapid growth followed the Civil War and by the 1930's,
First Fidelity was well-capitalized enough to ride out the Great Depression
without ever halting customer withdrawals. 1949 began a series of mergers
responsible for its present-day scope and strength. In the 1970's, it
expanded throughout New Jersey as First National Bancorporation. A 1984
merger with Fidelity Union created the name First Fidelity. In 1988, a
merger with Fidelcor of Philadelphia transformed First Fidelity into a
well-positioned, super-regional interstate banking company, setting the stage
for its future merger with First Union.
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(Tree drawing upper left, First Union logo upper right)
True Synergy
HISTORY
1995 OVERVIEW
Combining Forces - And Resources - For The Future
By combining forces, First Union and First Fidelity capitalized on their
common strategies of aggressive but carefully managed growth; their
similar focus on retail and middle-market customers; their complementing
technologies; and compatible management styles.
These consensus strengths will help First Union to effectively leverage its
expanded product and technological advantages over a larger customer base,
realizing economies of scale in the process.
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(Tree drawing upper left, First Union logo upper right)
True Synergy
HISTORY
1995 OVERVIEW
Combining Forces - And Resources - For The Future
First Union & First Fidelity's regions produce
35% of the nation's gross national product
(Pie chart bottom center plotting gross domestic product data)
(total $ in billions)
__ First Fidelity Region $901
__ First Union Region 815
__ E.N. Central 798
__ Pacific 854
__ W.S. Central 489
__ W.N. Central 326
__ New England (exlud.CT) 207
__ E.S. Central 243
__ Mountain 242
Total $4,875
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(Tree drawing upper left, First Union logo upper right)
The Future
HISTORY
1995 OVERVIEW
Shared Fundamentals Will Fuel Our Future Success
An important element of our future success will be the fundamental priorities
that our new management team shares. We intend to implement our ambitious
vision for continual growth through a prudent management strategy that
preserves the elements of our common value system: superior shareholder
returns and superior customer service.
Today, First Union, one of the nation's most accessible banks, is
well-prepared to take advantage of the competitive edge it has created.
We are ready and able to reap the rewards of nearly a century of strategic
growth, while carefully nurturing our strengths and resources.
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(Tree drawing upper left, First Union logo upper right)
The Future
HISTORY
1995 OVERVIEW
Shared Fundamentals Will Fuel Our Future Success
First Union & First Fidelity's regions account
for 37% of the nation's middle-class companies
(Pie chart bottom center plotting middle-class company data)
(total $ in billions)
__ First Fidelity Region 21,100
__ First Union Region 19,825
__ E.N. Central 19,361
__ Pacific 16,243
__ W.S. Central 11,041
__ W.N. Central 7,985
__ New England 6,880
__ E.S. Central 6,119
__ Mountain 5,214
Total 115,773
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(Background drawing of man standing by window in bank, First Union logo
upper right)
First Union Today
We Are Among The Most Accessible Banks In The Nation
FIRST UNION TODAY
TECHNOLOGY LEADER
MGMT PHILOSOPHY
BUSINESS REACH
COMMUNITY ACTION
With nearly 2,000 branches stretching from New York
to Key West and nearly 200 offices in 37 states, First Union
is clearly one of the most accessible banks in the U.S.
Altogether, our more than 44,000 employees provide a full
range of financial services to a total of 11 million
customers nationwide.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, computer keyboard, photo
of John R. Georgius, Vice Chairman, First Union Corporation)
Technological Strengths
A Philosophy Of Disciplined Re-Investment In Technology
FIRST UNION TODAY
TECHNOLOGY LEADER
SINGLE SYSTEM
PROJECT EMERALD
CUSTOMER CENTERS
DELIVERY CHANNELS
First Union is committed to innovations in tech-
nology. Our priorities are guided by three primary
concerns: long-term shareholder interests, benefits to
customers and business unit needs. Each project is
screened according to a cost/benefit analysis, and we
have the discipline to terminate initiatives if objectives
are not being met.
"Success, for us, is going to come from unparalleled execution, day in
and day out, with every single transaction, in the area of sales, service and
efficiency, and giving customers what they want. And our success is also going
to come from understanding and adapting to the changing service delivery and
product requirements of our customer base."
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, computer keyboard,
photo of Austin Adams bottom left)
Single Operating Platform
The Benefits Of A Single Operating Platform
FIRST UNION TODAY
TECHNOLOGY LEADER
SINGLE SYSTEM
Ten years ago, First Union began investing
in a single system and common products
and software. This effort to streamline and
consolidate operations has saved us several
hundred million dollars of annual operating
expenses since 1985.
"First Union has this competitive advantage:
Everyone in the company supports the idea that
operating systems must be built and maintained
through synergistic, cooperative effort."
Austin A. Adams
Executive Vice President for
Automation and Operations
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, woman sitting at computer)
Single Operating Platform
Providing First Union With A Competitive Advantage In Speed
FIRST UNION TODAY
TECHNOLOGY LEADER
SINGLE SYSTEM
Speed is the most important advantage to our single
system platform. These systems let us introduce new
products faster, provide more rapid service and more
easily access management information. This technology
also expedites bids for acquisitions and allows for quick
conversion to our platform. The average conversion time for
the eight bank-related acquisitions we completed in 1995 was
an impressive two months.
By July 1996, the entire combined company will be on our single
operating platform.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, woman sitting at computer)
Single Operating Platform
Providing First Union With A Competitive Advantage In Speed
FIRST UNION TODAY
TECHNOLOGY LEADER
SINGLE SYSTEM
CT NY NJ PA DE MD DC VA TN NC SC GA FL
Deposit Systems X X X X X X X X X X X X X
Branch Systems/ATMs X X X X X X X X X X X X X
Consumer Loans X X X X X X X X X X X X X
General Ledger X X X X X X X X X X X X X
Capital Management X X X X X X X X X X X X X
Mortgage Loans X X X X X X X X X X X X X
Human Resources X X X X X X X X X X X X X
(chart)
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, woman sitting at computer)
Single Operating Platform
Technological Savings Support Revenue-Building Initiatives
FIRST UNION TODAY
TECHNOLOGY LEADER
SINGLE SYSTEM
Our investment in single systems is paying off significantly. We
have been able to commit more dollars to revenue-building efforts:
$200 million in technology savings was redeployed into revenue
enhancements for our branch system in 1995.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union bank, Project Emerald logo bottom right)
Project Emerald
Our Premier Deposit System Is One Of The Largest In The U.S.
FIRST UNION TODAY
TECHNOLOGY LEADER
PROJECT EMERALD
Project Emerald is First Union's premier deposit system and the second
largest in the U.S. based on number of customers. It allows pricing of
up to 999 different products, with 10 tier price levels per product down
to the branch level.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union bank, Project Emerald logo bottom right)
Project Emerald
Product Flexibility Gives Us A Competitive Edge
FIRST UNION TODAY
TECHNOLOGY LEADER
PROJECT EMERALD
Project Emerald's flexibility allows us to quickly tailor products to
meet current consumer demand and distribute them to our 2,000 plus
branches instantly. This means we can maintain a competitive edge in
pricing and products while providing product line consistency across
our growing region.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union bank, Project Emerald logo bottom)
Project Emerald
Rapid Conversion Makes Banking History
FIRST UNION TODAY
TECHNOLOGY LEADER
PROJECT EMERALD
Project Emerald was completed in early 1994 and will go down in banking
history as the largest and fastest such conversion of its kind. Its
timeliness paid off, helping to dramatically reduce conversion times
for subsequent acquisitions. This same speed is evident in the conversion
schedule for our merger with the First Fidelity system: current plans
call for completion by July 1996.
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(Drawing of man at computer upper left, First Union logo upper right,
background photos of First Union building and parking lot)
Customer Relationship Center
Our Innovative Direct Bank Provides Consumers With Comprehensive
24-Hour Services
FIRST UNION TODAY
TECHNOLOGY LEADER
CUSTOMER CENTERS
As part of First Union's commitment to being the most helpful and convenient
customer service provider, we have put our technology to use in establishing
an innovative Customer Relationship Center we call the Direct Bank. The
Direct Bank can be reached via a toll-free 800 number 24 hours a day
throughout all 50 states.
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(Drawing of man at computer upper left, First Union logo upper right,
background drawings of house and car)
Customer Relationship Center
Offering Customers A Full Range Of Banking And Investment Services
FIRST UNION TODAY
TECHNOLOGY LEADER
CUSTOMER CENTERS
When a customer calls in to the Direct Bank, Customer Service Representatives
can access the customer's complete profile on a computer screen and answer
questions about the customer's account while the customer remains on the
phone.
Customer Service Representatives can also help anyone in the U.S. open a
checking or savings account; transfer funds; apply for a mortgage, home
equity or car loan; request a credit card and conduct other banking
transactions. New services to be added to the Direct Bank will allow
customers to purchase a wide variety of investment products, including
mutual funds and annuities.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of woman in bank)
Customer Relationship Center
Enthusiastic Response Shows Strong Consumer Acceptance Of
The Direct Bank Concept
FIRST UNION TODAY
TECHNOLOGY LEADER
CUSTOMER CENTERS
In the first 3 months of operation, the Direct Bank established
relationships with 1,300 customers, providing them with more than
2,000 products - including 109 mortgage loans worth more than $8 million -
while attracting nearly $5 million in deposits.
In a self-conducted survey, 98% of the Direct Bank's customers said they
would recommend us to others; on a 5.0 scale, the sales staff was rated 4.93
for courtesy and 4.98 for knowledge. When asked to compare their Direct
Bank experience to experiences at branch banking, customers gave the
Direct Bank a 4.6 rating.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of woman standing at First Union ATM)
Alternative Delivery Channels
First Union Leads The Way In Developing New Ways To Access Services
FIRST UNION TODAY
TECHNOLOGY LEADER
DELIVERY CHANNELS
The most visible indication of First Union's leadership position in
technology is our ability to create and capitalize on alternative
delivery channels. We have pioneered a number of popular products and services
such as smart cards, Internet banking and enhanced ATMs. We currently
have 18 pilot projects in development or scheduled for implementation.
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(Drawing of man at computer upper left, First Union logo upper right, photo
of keyboard bottom right)
Alternative Delivery Channels
First Union Was One Of The First Major Banks To Establish An Internet Presence
FIRST UNION TODAY
TECHNOLOGY LEADER
DELIVERY CHANNELS
In January 1995, First Union became one of the first major U.S. banks
to open a web page on the Internet. Today, our Website averages 25 credit
card applications and over 15,000 visits daily. We have also service
marked many of the everyday words used on the Internet, including
"Cyberbanking", "First Access Network", "CommunityCommerce" and several
others.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of telephone keypad)
Alternative Delivery Channels
We Intend To Maintain This Competitive Edge In The Years To Come
FIRST UNION TODAY
TECHNOLOGY LEADER
DELIVERY CHANNELS
In November 1995, through a combined effort with MCI, we began
distributing Internet browsers that open on the First Union web page.
By the end of 1996, we expect to have a diverse mix of Internet applications
operating. A cash management system called WebInVision has already made its
debut. Our goal is to maintain our competitive edge through enhanced
technology.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union bank branch)
Alternative Delivery Channels
Alternative Delivery Channels Fuel Customer Expansion
FIRST UNION TODAY
TECHNOLOGY LEADER
DELIVERY CHANNELS
Other alternative delivery channels now under development include two-way,
interactive videos in our branches which will be used to sell mutual funds,
mortgages and other products; home banking; stored value cards; debit cards;
and many other outlets. First Union will leverage the use of this new
technology as we expand our customer base through the next century.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of satellite dish)
Alternative Delivery Channels
Satellite System Streamlines Operations
FIRST UNION TODAY
TECHNOLOGY LEADER
DELIVERY CHANNELS
Our commitment to alternative delivery channels extends to management operations
as well. First Union was the first major U.S. bank to complete a satellite data
network between all branch banking locations. Consequently, we are the only
bank in the nation doing live, interactive broadcasts by satellite, including
training, sales and other informational programs.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Management Philosophy
Building On Our Strengths Through Internal Growth
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
STRATEGIC VISION
After a decade of strategic expansion, First Union is focusing primarily
on generating growth internally by expanding our new and existing lines
of business. While focused on internal growth, we also will be alert to
acquisition opportunities to expand these businesses. It is a time to
profit from, and to maximize, the strengths we have so carefully built.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building, photos of Anthony Terracciano,
Edward Crutchfield, & John Georgius across bottom)
Management Philosophy
Building On Our Strengths Through Internal Growth
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
STRATEGIC VISION
Anthony P. Terracciano
President,
First Union Corporation
"Now from the point of view of First Union, they have been making
significant investments in what I called `strategic infrastructure.' Not only
upgrading what they have now but getting ready for the changes that are coming
in this industry. CUT TO: And if you look at the performance of First Union as
we did in the '89 to '92 period, which was probably one of the most painful
periods of my life and one of the most painful periods in the life of this
industry, you've got to be impressed with the way these folks have blended
growth with prudence."
Edward E. Crutchfield
Chairman and Chief
Executive Officer,
First Union Corporation
"So the best thing you can do, I think, is to keep the organization
chart as-- as flat as you can. Stay in touch with what's happening on the
sidewalk out there. And simply -- try to pull bureaucratic behavior up by the
roots wherever you find it. CUT TO: The biggest concern I have about a big
company that we have become, is that we do not get bureaucratic, and that we do
not become a cold, impersonal type of company, like so many big companies have.
CUT TO: We'll go with-- with what the customer wants, rather than try to tell
the customer what we want him to do."
John R. Georgius
Vice Chairman,
First Union Corporation
"So you can't just put technology in and expect customers to come. You
have to put technology in and offer it to them in a way that will be appealing;
that will make them feel comfortable using those vehicles. And if we do that
right-- all of this technology will blend very nicely with our strategies. CUT
TO: So what we really want to do is have this technology serve the customer, so
that they can receive services from First Union, when they want it, where they
want it, and how they want it."
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building & people in meeting)
Mission Statement
First Union's Goal: To Become The Premier Financial Services Provider
Of The Future
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
MGMT APPROACH
VALUE STATEMENT
First Union intends to be a leader in the rapidly changing financial services
industry. We believe the key to success in this rapidly changing environment
is to provide customers what they want, where they want it and when they want
it.
We intend to reach our financial goals by enhancing earnings growth through
geographic and product diversity; by providing innovative financial solutions
and a broad selection of products; and by increasing the production and
profitability of our specialty businesses.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Management Approach
A Decade Of Product, Geographic And Services Expansion Has Prepared Us
For Success
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
MGMT APPROACH
In the years ahead, we plan to maximize the competitive advantages our decade
of expansion has created:
* An extensive and diversified customer base.
* Multiple sources of earnings as a result of our geographic and
product diversity.
* A flexible operating structure and a single operating system that
helps us introduce new products faster and serve customers better.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Management Approach
Technology And Knowledge-Based Marketing Fuel Internal Growth
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
MGMT APPROACH
For at least the next five years, First Union intends to focus primarily on
generating growth internally, by maximizing and maintaining our competitive
advantages in technology and by further developing the marketing tools
necessary to secure a future industry leadership position.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Management Approach
We Will Maintain Our Personal Customer Interactions
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
MGMT APPROACH
First Union is now able to offer products and services traditionally
provided only by Wall Street investment banking firms. But this does not
mean we have changed our focus on Main Street and the needs of our customers.
Our management approach includes the delegation of significant authority to
geographic and product specialty areas, which ensures that our local
bankers always have both the means and the authority to provide
complete customer satisfaction.
The only real difference is that customers no longer have a need to go
elsewhere to have all of their financial needs met.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Management Approach
We Use Technology To Increase - Not Replace - Personal Attention To
Customer Needs
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
MGMT APPROACH
Our technological endeavors support better analysis of customer needs and
better distribution of our services to customers. For example, First Union
now provides services ranging from financial planning for individuals to
sophisticated financial problem-solving solutions for commercial customers.
Staff at local branches have technological tools at their fingertips that allow
them to quickly identify the customers' needs and pinpoint the areas within
First Union best equipped to meet these needs.
This capability means we can meet client needs faster and more efficiently -
while freeing up the time of our representatives to provide personal attention
and customer service.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Management Approach
Closing In On A Position As The Industry Leader Of The Future
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
MGMT APPROACH
Our management approach will transform First Union into the industry
prototype of the future:
* A full-service financial organization capable of providing virtually
any service anywhere, delivered to the doorstep of the customer
and tailored to the customer's individual needs.
Our size, our scope and our resources put us in a strong position to become
the leading financial services company of the 21st century.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of 4 people in meeting)
Statement Of Values
We Put Our Commitment To Strong Relationships In Writing
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
VALUE STATEMENT
First Union places the highest priority on its relationships - with
customers, shareholders, employees and the communities we serve. To this end,
we have developed a formal Statement of Values that applies to everything
we do.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of 4 people in meeting)
Statement Of Values
Our Commitment To Customers Is Based On Absolute Satisfaction
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
VALUE STATEMENT
Our primary mission is to provide total customer satisfaction. We seek to
achieve this by always exceeding the customer's expectations and by enhancing
our customers' financial well-being.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of 4 people in meeting)
Statement Of Values
Our Commitment To Shareholders Is Based On Maintaining Financial Strength
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
VALUE STATEMENT
Our goal is to maintain a strong, mutually beneficial relationship with our
shareholders by outperforming our peers in building long-term shareholder
value. The other key aspect of maintaining this bond is to be a sound,
well-managed and innovative corporation.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of 4 people in meeting)
Statement Of Values
Our Commitment to Employees Is Absolute: They Are Our Most Important Asset
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
VALUE STATEMENT
First Union's employees are our most important asset. We believe in being
candid, open and honest in all of our interactions. We strive to ensure
that all employees understand our corporate vision as well as the strategies
and individual roles that support it. We foster and reward teamwork at all
levels and create a cooperative environment for setting goals, seeking input,
meeting personal objectives and encouraging individual responsibility.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of 4 people in meeting)
Statement Of Values
We Strive To Contribute to the Communities We Serve
FIRST UNION TODAY
MGMT PHILOSOPHY
MISSION STATEMENT
VALUE STATEMENT
First Union believes we have a responsibility to give back to the communities
we serve. We conduct our business with dedication to the highest ethical
standards. We provide financial support that stimulates development while
improving the quality of life in all our communities. We also encourage
employee participation in community improvement activities.
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(Drawing of man at computer upper left, First Union logo upper right,
background photos of person holding compact disc, ground view of
First Union building, photo of Edward Crutchfield)
Strategic Vision
In An Increasingly Competitive Marketplace, Only The Swift Will Survive
FIRST UNION
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
INDUSTRY CONSOL
TECHNOLOGY
CHNG DEMOGRAPHICS
KEY MKT SEGMENTS
Innovation, flexibility and financial strength are crucial to survival in the
increasingly competitive financial services industry. First Union is committed
to staying at the forefront of the financial services industry by monitoring
industry trends and customer preferences and responding rapidly to them.
In other words, we are not content with today's success. We continually
question what the marketplace will need tomorrow and then marshal our
resources to quickly provide it.
"We've got 2,000 branches. That's more branches than any bank in the
United States. We'll have a lot of branches for a long time. But we've gotta
give the customer an alternative to those branches. And if he likes the
alternative, we'll reduce the branches, if he doesn't, we won't."
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(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Industry Consolidation
We Are Ahead Of The Curve And Are Well-Prepared To Compete
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
INDUSTRY CONSOL
Today, the banking industry is undergoing tremendous consolidation - a trend
that is likely to continue into the next decade. We believe that First Union
will emerge as a winner from this period because we have redefined ourselves
as a total financial services company, able to compete with banks and
nonbanks alike.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Industry Consolidation
First Union's Goal: Emerge As An Industry Leader
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
INDUSTRY CONSOL
Of the 50 largest banking companies in business ten years ago, 26
have disappeared through bankruptcy or acquisition by other banking companies.
Industry-wide, 6,800 bank mergers took place between 1980 and 1994. In 1995
alone, 420 acquisitions valued at more than $73 billion were announced.
Only a few companies will be able to survive this trend. First Union intends
not only to survive, but to lead the industry as it moves away from the
confines of traditional banking toward the full-service prototype of financial
services companies.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Industry Consolidation
By Combining A Depth Of Resources And Knowledge With A Local Focus, We Are
In A Position To Succeed
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
INDUSTRY CONSOL
We have amassed the scope and scale to provide a full range of financial
products and services, to afford the technology required for fast, efficient
service, and to attain a sizable customer base that enables us to keep unit
costs low.
Just as important, we can leverage the depth of knowledge and resources
of a $132 billion asset company to support long-term customer relationships
at the local level.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Industry Consolidation
Meeting A Lifetime Of Financial Needs
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
INDUSTRY CONSOL
Today, First Union has built the depth and breadth of services required to
support a long-term approach to customer relationships. We can now form
partnerships with clients that allow us to provide a lifetime of services and
products. We can serve our personal customers throughout their lives as their
needs change, and corporate customers through all stages of their business
development.
In short, we have already achieved what many other banks are still attempting
to develop.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, photo of John Georgius)
Technology
We Make Technology Work For Us, Not Against Us
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
TECHNOLOGY
As we look ahead to the future, First Union has technology firmly on our
side. We have developed systems that enable us to create better products,
provide multiple delivery channels and keep unit prices competitive. In
addition, because we invested early in conversion to single systems, First
Union is ahead of most of its competitors in acquiring the technology that
will determine future success in this industry - and our largest investments
in technology are behind us.
"If you study customers very carefully, you'll find that they are very
rational in their decision making. And they're also very discriminating. And
what that means is, that if somebody offers them a better way to do business,
that they'll take it."
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, computer chips)
Technology
Using Technology Gives Our Branch System A Competitive Advantage
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
TECHNOLOGY
As bank consolidation continues, a likely outcome will be fewer bank branches.
Industry projections predict a 50% reduction in bank branches over the next
decade.
If First Union had kept every branch it acquired over the last 10 years, it
would have nearly twice the number of branches it has today. While reducing
the number of branches, we recognize the value of the local presence that our
branch system affords us. By using technology wisely in the years ahead, we
will continue to promote the efficiency and profitability of this strong
local-based asset.
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(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, computer chips)
Technology
A Unified Branch System Will Mean Better Service And Greater Market
Penetration
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
TECHNOLOGY
Technology is unifying our branch system so that it can operate with optimum
efficiency and accuracy. Because of our single operating platform, we can
introduce new products, information and systems to all of our branches at
the same time. This allows us to respond quickly and uniformly to industry
changes and maximize product sales throughout our branch network.
In addition, streamlining and centralizing branch support functions allows our
branch personnel to spend more time focusing on customers rather than on
performing administrative tasks.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of person holding compact disc, computer chips)
Technology
We Will Continue To Lead In Providing Better Delivery Channels
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
TECHNOLOGY
First Union's present leadership position in technology gives us a competitive
advantage as banking seeks out alternative delivery channels. In addition
to the many innovative telephone and computer-based services available today,
we now have nearly 20 technology pilot projects in various stages of
development, including neural net artificial intelligence - a technology that
learns from previous experience. This will allow us to make more accurate
predictions about customer behavior and product demand.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of senior citizens & two families)
Changing Demographics
We Are Well-Positioned To Capitalize On The Changing Face Of America
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
CHNG DEMOGRAPHICS
Changing demographics are rapidly altering the future of financial services.
At First Union, we anticipated this trend and have moved quickly to expand
our product lines and delivery channels. We intend to carefully monitor
demographics in the years ahead and to use our strengths and resources to
stay at the forefront of meeting our customer needs.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of three families)
Changing Demographics
A Growing Demand For Long-Term Financial Planning Creates Opportunity
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
CHNG DEMOGRAPHICS
As the nation's population ages and the baby boomer generation approaches
retirement age, there is a growing demand for day-to-day financial planning
as well as long-term investment opportunities. In fact, there are now 77
million baby boomers moving toward age 50 with a common need - how to
accumulate enough capital to last for years after retirement.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of senior citizens & two families)
Changing Demographics
We Are Responding With Long-Term Investment Products And Convenient
Retirement Plan Vehicles
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
CHNG DEMOGRAPHICS
This large demographic segment is demanding higher yielding instruments than
traditional bank deposits. Fortunately, we anticipated this development. By
the year 2000, our goal is to have $100 billion in mutual fund assets under
management.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of senior citizens & two families)
Changing Demographics
Another Key Component Of Our Approach: Better Delivery Of Services
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
CHNG DEMOGRAPHICS
The large baby boomer generation of consumers expects instant, easy access to
information and high-quality customer service - while even younger consumers
prefer to use alternative channels to the traditional branch delivery system.
Fortunately, our focus on these alternative delivery channels means we are
well-positioned to capture the loyalty of both of these key markets of the
future.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Key Market Segments
As We Move Into The Future, We Will Continue Doing What We Do Best
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
KEY MKT SEGMENTS
Despite a decade of change and expansion in our product and service lines,
we have no intention of abandoning the customer focus that has served us
so well in the past. We will continue to make the most of our competitive
advantages in such key market segments as middle-market companies and retail
customers.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Key Market Segments
The Need For Middle-Market Services Is Strong
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
KEY MKT SEGMENTS
First Union is located throughout the nation's fastest-growing geographic
region - one that is home to new industries and technologies, specialized
businesses and key segments of our population. Each of these market sectors
requires a special understanding - the kind gained only through one-on-one
contact and a strong, ongoing local presence.
We will make the most of these strengths by focusing primarily on financial
opportunities within our geographic region. We will also continue to make
selected investments in certain businesses to maintain scope and scale and
competitive pricing.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Key Market Segments
We Intend To Serve Middle-Market Companies Better Than Anyone Else In The
Nation
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
KEY MKT SEGMENTS
Our middle-market focus supports another key element of our strategic vision:
a commitment to building long-term relationships with our commercial and
corporate customers and a determination to meet their changing financial needs
in the years ahead. We intend to deliver a sophisticated and complete product
mix to this important client segment, backing it with personal attention
and a good understanding of their businesses and their markets.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union building)
Key Market Segments
We Will Offer Our Clients The Finest Financial Services
FIRST UNION TODAY
MGMT PHILOSOPHY
STRATEGIC VISION
KEY MKT SEGMENTS
As we grow our internal business lines and expand our customer base, First
Union intends to attract ever-increasing numbers of customers by offering
the finest services, the most tailored products and the highest level of
personal attention available from any financial service company.
<PAGE>
Business Reach
(First Union Logo appears in upper right corner, Interactive Map - Users
can choose to see First Union branch locations or office locations for
selected subsidiaries. Clicking on a specific state opens a box which lists
complete addresses of the locations in that state.)
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
CORP DEMOGRAPHICS
CONS DEMOGRAPHICS
First Union bank branch locations appear on this map
<PAGE>
Business Reach
(First Union Logo appears in upper right corner, Interactive Map - Users can
choose to see First Union branch locations or office locations for
selected subsidiaries. Clicking on a specific state opens a box which lists
complete addresses of the locations in that state.)
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
CORP DEMOGRAPHICS
CONS DEMOGRAPHICS
First Union Mortgage Corporation locations appear on this map
<PAGE>
Business Reach
(First Union Logo appears in upper right corner, Interactive Map - Users
can choose to see First Union branch locations or office locations for
selected subsidiaries. Clicking on a specific state opens a box which lists
complete addresses of the locations in that state.)
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
CORP DEMOGRAPHICS
CONS DEMOGRAPHICS
First Union Capital Markets Corp. locations appear on this map
<PAGE>
Business Reach
(First Union Logo appears in upper right corner, Interactive Map - Users can
choose to see First Union branch locations or office locations for
selected subsidiaries. Clicking on a specific state opens a box which lists
complete addresses of the locations in that state.)
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
CORP DEMOGRAPHICS
CONS DEMOGRAPHICS
First Union Home Equity Bank, N.A. locations appear on this map
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of Statue of Liberty, White House, 2-story house)
State Profiles
A Leading Presence In America's Fastest-Growing And Wealthiest Regions
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTHEAST
NORTH CENTRAL
SOUTH CENTRAL
SOUTHEAST
If First Union's southeastern corporate base were a nation unto itself, it
would rank as the world's 4th largest industrialized economy based on gross
state product. It outpaces the nation in population, personal income and
employment growth. The economic health and diversity of our combined 12
states and the District of Columbia provide great potential for continuing
growth in investment and banking services for individual and corporate
customers.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of Statue of Liberty)
Northeast Region
Growing Corporate And Consumer Markets
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTHEAST
Our Northeast Region incudes New York, New Jersey, Connecticut, Pennsylvania
and Delaware. Our merger with First Fidelity has created an impressive
presence for First Union in this established corporate and consumer market.
The Northeast Region is home to more middle-market companies and high
net-worth individuals than any other region in the country.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of Statue of Liberty)
Northeast Region
Concentration Of Wealth And Middle-Market Companies
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTHEAST
Connecticut, New Jersey and New York rank first, second and third respectively
as states having the highest per capita income in the U.S. Connecticut's per
capita income is $29,402 - 35% more than the national average. New Jersey's
per capita income is $28,038 - 29% more than the national average. New
York's per capita income is $25,999 - 19% more than the national average.
Delaware's per capita income ranks 11th in the nation and is 5% higher than
the nation as a whole. Pennsylvania's per capita income ranks 18th in the
nation and is 2% higher than the nation as a whole.
These five states represent over 19% of the total gross state product of the
U.S. This compares with 18% for First Union's seven other primary banking
states. 20% of all manufacturers, 16% of all retail and 18% of all wholesale
establishments are located in five northeastern states. 18% of all middle-
market companies are headquartered in these five states.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of White House)
North Central Region
The Commercial Center Of The Eastern Seaboard
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTH CENTRAL
Our strong presence in Virginia, Maryland and Washington, D.C. allows us to
serve a thriving high net-worth population. First Union is well-positioned
at the center of commerce along the Eastern Seaboard. This allows us to
better serve our import/export clients, taking advantage of the region's
many ports.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of countryside)
North Central Region
New Industrial Growth Is Fueling Virginia's Economy
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTH CENTRAL
Virginia continues to enjoy above average economic growth, with gross state
product rising 2.7% in 1995. The state has recruited new industries,
landing two huge semiconductor plants in Northern Virginia and Richmond and
a host of new firms in Hampton Roads. Defense and shipbuilding cutbacks
have proved less than anticipated. Norfolk has actually gained service
personnel over the near term and cutbacks in the region's industry have not
been severe. Overall employment growth in 1995 was 1.5%, or a gain of
45,000 jobs. Personal income grew 5.6% during the past year.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of riverside town)
North Central Region
New Job Gains Help Offset Government Cut-Backs In Maryland
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTH CENTRAL
Maryland's economy posted modest gains last year. Gross state product grew
0.8% in 1995, as businesses created 8,000 new jobs. Much of that increase,
however, was offset by federal government cutbacks. Despite this past year's
modest gains, unemployment remains low at 5% and personal income grew 5% in
1995.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of White House)
North Central Region
Washington's Unemployment Remains Below The National Average
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
NORTH CENTRAL
The Washington, D.C. area economy grew 1% in 1995. Private business created
more than 30,000 jobs, with particularly strong gains in the Northern
Virginia suburbs. The District of Columbia continues to struggle with
federal government cutbacks, which have eliminated more than 9,300 jobs
during the past year. Despite layoffs, the metro area's unemployment of 4%
is more than a full percentage point below the national average.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of downtown Nashville, Charlotte & Charleston)
South Central Region
Growing Population And Thriving Business Support Growth In Our Home Region
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTH CENTRAL
The South Central Region is home base for First Union and the site of strong
growth in our consumer and corporate services. This expansion is part of an
overall trend: North Carolina, South Carolina and Tennessee have all
experienced rapid growth in recent years. Individuals and corporations are
flocking to this region because of its high standard of living and favorable
business climate.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of downtown Charlotte)
South Central Region
North Carolina's Economy Continues To Grow
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTH CENTRAL
North Carolina's economy grew 4.5% during 1995, as businesses and local
governments created close to 75,000 new jobs. North Carolina has attracted
more new businesses and expansions of existing facilities during the 1990s
than any other state except Ohio and Texas. New arrivals include leading
companies in the electronics, communications and distribution industries.
Personal income grew 7% and the state's unemployment rate averaged just
4.3% in 1995.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of downtown Charleston)
South Central Region
South Carolina Recruits $5 Billion In New Business Projects During 1995
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTH CENTRAL
South Carolina overcame federal government cutbacks at the Charleston Naval
Base and Savannah River nuclear weapons plant during the past year, posting
gross state product growth of 5%. One reason for this success is that the
state has been one of the most prolific recruiters of new business during the
1990s, including over $5 billion in new projects during 1995. The influx
of new industry is helping to lessen the state's traditional dependence on
textiles and apparel. New industries include leading producers of automobiles,
steel, electronics and chemicals. Tourism is another business avenue, with
resorts in Hilton Head, Charleston and Myrtle Beach all reporting strong
gains. A total of 17,000 jobs were created in 1995, and personal income grew
6.5% over the past year.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of downtown Nashville)
South Central Region
New Industry And Strong Population Growth Lend Economic Strength To
Tennessee
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTH CENTRAL
Tennessee's economy decelerated to a modest pace during 1995, with gross
state product increasing 4%. Growth was much stronger in previous years,
led by rapid gains in the state's important motor vehicles industry. Such
growth helped drive the unemployment rate in Nashville down below 3%. The
state continues to attract new industry and is experiencing strong population
growth. Employment increased nearly 2.4% during 1995, and the unemployment
rate averaged just 4.8%. Personal income grew 6.4% over the past year.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of Atlanta & Florida)
Southeast Region
Visitors And New Business Bring Economic Growth To Our Southeast Region
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTHEAST
Between the 1996 Olympic Games in Atlanta and a renewed tourism boom in
Florida, the Southeast Region is undergoing strong economic growth. This
situation is opening up significant new banking and investment opportunities
for First Union, thanks to our impressive branch and office network throughout
this region.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of Atlanta)
Southeast Region
Georgia Prepares For The 1996 Olympic Games
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTHEAST
Georgia's economy experienced exceptional growth during 1995, mainly tied to
preparations for this summer's Olympic Games. The state's economy grew
4.5% and added just over 115,000 jobs. More than three-quarters of this
gain was in the Metro Atlanta area, which has added close to 100,000 jobs
during each of the previous three years. Personal income grew 7.1% over the
past year, and 7,500 new businesses were started. Georgia's robust economy
and overall favorable job prospects have led to rapid population growth in
recent years. The state's population has grown by over 700,000 since 1990,
making Georgia the nation's 10th most populous state.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of Florida)
Southeast Region
Tourism And Migration Bring Smiles To The Sunshine State
FIRST UNION TODAY
BUSINESS REACH
REGIONAL PROFILES
SOUTHEAST
Florida's gross state product grew 5% during 1995, as tourism rebounded to
record levels and in-migration accelerated. The Sunshine State hosted over
42 million visitors in 1995, and the state added nearly 200,000 new residents.
Most people moving to Florida are attracted by the state's favorable job
market, which saw nearly 200,000 jobs created during 1995. Personal income
grew 7.6% during the past year, and more than 30,000 new businesses were
started.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Corporate Demographics
Home To The Greatest Concentration Of Middle-Market Companies In America
FIRST UNION TODAY
BUSINESS REACH
CORP DEMOGRAPHICS
First Union's geographic base produces 35% of the nation's gross state product.
Together, First Union's regions account for 37% of the nation's middle-
market companies. We also have a strong presence in eight of the ten major
Atlantic Coast ports.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building, pie chart bottom center)
Corporate Demographics
Home To The Greatest Concentration Of Middle-Market Companies In America
FIRST UNION TODAY
BUSINESS REACH
CORP DEMOGRAPHICS
Concentration of Companies with
Annual Sales $20MM-$250MM+
($ in billions)
First Fidelity Region 21,100
First Union Region 19,825
East North Central 19,361
Pacific 16,243
West South Central 11,041
West North Central 7,985
East South Central 6,119
New England 6,880
Mountain 5,214
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Corporate Demographics
First Union Enjoys A Significant Home Court Advantage In Business-Rich Regions
FIRST UNION TODAY
BUSINESS REACH
CORP DEMOGRAPHICS
Our business reach within our geographic base is significant: First Union
enjoys relationships with 25% of the more than 100,000 corporations in the
South Atlantic region. First Fidelity has established business ties with
one of every three middle-market companies with sales up to $250 million in
New Jersey, Maryland, Pennsylvania, New York and Connecticut.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo ground view of First Union building)
Corporate Demographics
Other Factors Affecting First Union Corporate Prospects
FIRST UNION TODAY
BUSINESS REACH
CORP DEMOGRAPHICS
* During the 1990s, the Southeast * N.C., FL, VA and N.Y. were among
accounted for the bulk of foreign the top 10 states for new corporate
investment in new plants. facilities and expansion in 1995.
* A recent survey of international * The South Atlantic region outpaced
real estate investors identified all other regions over the past
Atlanta, Washington, D.C., and three years in attracting new or
Charlotte as three of the world's expanded corporate facilities.
top five cities for investment in
all types of commercial real estate.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of three families)
Consumer Demographics
Our Region Is Home To The Largest Concentration Of High Net Worth Individuals
In The Nation
FIRST UNION TODAY
BUSINESS REACH
CONS DEMOGRAPHICS
35% of the nation's population is located in our home region. Four of the
five metropolitan areas with the highest per capita income are located in
First Union states.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of three families)
Consumer Demographics
Our Region Is Home To The Largest Concentration Of High Net Worth Individuals
In The Nation
FIRST UNION TODAY
BUSINESS REACH
CONS DEMOGRAPHICS
Per Capita
Personal Income U.S. Average
Per Capita Income West Palm Beach/
by Metropolitan Boca Raton, Fl MSA $32,230 155%
Area
New York, Northern
New Jersey-Long
Island, NY-NJ-CT,
PA CMSA $28,122 135%
San Francisco-
Oakland-San Jose,
CA CMSA $27,293 131%
Hartford, CT MRCMA $26,147 126%
Washington-Baltimore
D.C.-MD-VA-W.V. CSMA $25,956 125%
U.S. Average $20,800
(graph)
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of three families)
Consumer Demographics
Excellent Regional Outlook For Growth In Personal Income And Consumer Demand
FIRST UNION TODAY
BUSINESS REACH
CONS DEMOGRAPHICS
* The average income for households in the First Fidelity region is 20% above
national average.
* FL, GA and N.C. were among the top five states to gain population from other
states in 1994.
* N.C., S.C. and GA were among the top 10 states over the past three years to
gain the most new jobs per one million population, with N.C. ranking #1.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of 3 families)
Consumer Demographics
We Will Mine Our Rich Sources For Potential Customers
FIRST UNION TODAY
BUSINESS REACH
CONS DEMOGRAPHICS
This year, our customers will be able to access First Union through nearly
2,000 retail centers; through the nation's third largest automated machine
network; through the Direct Bank, accessible in all 50 states; through
telephone banking; through the Internet; and through "smart" and debit cards.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of teacher and school children)
Community Involvement
Partnering With Communities
FIRST UNION TODAY
COMMUNITY ACTION
LENDING EFFORT
OUTREACH PROGRAMS
First Union has grown quickly in a very short time, and we are committed to
serving the needs of our communities. We support numerous national and
local charitable groups; our employees contribute many volunteer hours to
non-profit and educational programs; and through programs like Excellence in
Education and Matching Gifts, we provide financial support at all educational
levels. Our Community Reinvestment program also provides specific products
and services for low to moderate income customers.
Michael Floyd, an employee in First Union's Collections Department in Miami
Springs, FL, works with students at Holmes Elementary School in Dade County.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right)
Community Reinvestment
Helping Our Communities Prosper
FIRST UNION TODAY
COMMUNITY ACTION
LENDING EFFORT
At First Union we realize that when our communities prosper, we prosper. Our
desire to be a good corporate citizen includes special concern for those who
do not share in general economic prosperity. Serving these customers requires
programs and products tailored to meet their specific needs. A few of these
programs include:
* Affordable Home Mortgages
* Home Improvement Loans
* Small Business Loans
* Capital Markets Specialty Unit Programs
* Home Ownership Seminars
* Financial Management Programs
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of woman)
Community Reinvestment
Affordable Housing Makes Dream Home Possible In Tampa, FL
FIRST UNION TODAY
COMMUNITY ACTION
LENDING EFFORT
First Union was among the first banks in the country to create an Affordable
Home Mortgage product in 1989. The product has been modified and revised
several times in response to customer needs, helping customers throughout our
banking region make their dream of home ownership a reality.
First Union partnered with the city of Tampa and several non-profit agencies
to save 70 houses planned for demolition. The homes were moved to empty lots
owned by the city and made available at a reduced cost to lower income
families. First Union provided interim financing for the relocation and
renovation efforts as well as over $2 million in affordable home mortgage
loans. Vivian Wilson holds the deed to the house of her dreams.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of man and child)
Community Reinvestment
Safe, Affordable Housing In Downtown Atlanta, GA
FIRST UNION TODAY
COMMUNITY ACTION
LENDING EFFORT
The site on which the Courtyard at Maple affordable housing complex currently
sits was once an empty field, devoid of anything but a few rocks, an
occasional tree and litter. Today, with the help of First Union, it offers
people like Oria Keeby and his son, Tucari, a secure home with security
lights, attractive landscaping, a playground, clubhouse, swimming pool,
burglar alarms and other features not often found in affordable housing. A
complex financing package that included bond financing, tax credits and
property-tax abatement helped get this complex, near the Georgia Dome in
downtown Atlanta, off the ground.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of business owner and First Union executive)
Community Reinvestment
Building Businesses And A Winning Reputation in Asheville, N.C.
FIRST UNION TODAY
COMMUNITY ACTION
LENDING EFFORT
First Union has won the Asheville, North Carolina Minority Lender of the
Year award the last four years in a row. Ronald J. Blythe, Chairman of the
Minority Enterprise Development Committee, says "... over the years, First
Union has always gone the extra mile, bent over backwards and taken the
extra step to make loans to help minority businesses."
Before Roger Edgerton visited First Union's office, a large Southeastern
bank had already denied a loan request to expand his construction company.
With the help of Rick Hoyle and other First Union executives willing to take
the risk, Edgerton was granted a $60,000 line of credit that helped him
build the company that recently won him Asheville's Minority Business Owner
of the Year award.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photos of woman/child & man/child)
Community Reinvestment
Young Family Buys First Home In The Bronx, New York
FIRST UNION TODAY
COMMUNITY ACTION
LENDING EFFORT
First Fidelity provided a low-cost mortgage to the Santana family which
enabled them to purchase their first home in the Bronx, New York. First
Fidelity's Urban Bankers make home ownership a reality by helping prospective
first-time home buyers obtain low-cost mortgages in partnership with a
variety of nonprofit agencies.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of First Union banker and school children)
Community Outreach
Contributing Time And Money To Communities
FIRST UNION TODAY
COMMUNITY ACTION
OUTREACH PROGRAMS
First Union recognizes and welcomes its responsibility as a good corporate
citizen. Our goal is to enhance the quality of life for citizens in the
communities we serve. Outreach efforts include Corporate Contributions and
the Excellence in Education programs. These programs provide time as well as
many volunteer hours to our schools and charitable organizations.
First Union banker Joan Corcoran accompanies students from Park Elementary
School in Chesapeake, VA, on a field trip to a Christmas pageant.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right and
bottom right)
Corporate Contributions
Giving Back To Communities
FIRST UNION TODAY
COMMUNITY ACTION
OUTREACH PROGRAMS
First Union's charitable contributions are made through the First Union
Foundation. We contribute to charitable organizations in our full-service
banking markets in the areas of education, health and human services, culture
and the arts, and civic and community improvement. Organizations must be
recognized by the IRS as eligible to receive gifts that can be deducted as
charitable contributions on the donor's federal income tax.
Special consideration is given to innovative programs that help youth as well
as disadvantaged people become more productive and self-sufficient.
For more information Corporate Contributions Director
please contact: First Union Corporation
301 S. College Street
Charlotte, NC 28288-0143
The First Union Foundation
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
pencil icon at bottom right)
Excellence in Education
First Union's Commitment To Excellence In Education
FIRST UNION TODAY
COMMUNITY ACTION
OUTREACH PROGRAMS
First Union recognizes the importance of excellence in education and commits
corporate resources and employee talents to improving pre-school, elementary
and secondary education as well as adult literacy in the communities we serve.
In 1989, First Union Vice Chairman, John Georgius commissioned an internal
task force to develop a company program and long-term commitment to support
education. The team developed a "Time Away From Work" policy, which allows
employees up to four hours a month with pay to participate in school
activities as parents or volunteers. During the 1994 school year, more than
5,000 employees spent over 161,000 hours volunteering in schools and
educational organizations.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of teacher)
Excellence in Education
Employee Contributions To Education
FIRST UNION TODAY
COMMUNITY ACTION
OUTREACH PROGRAMS
The Educational Matching Gifts Program recognizes and encourages the
involvement of First Union employees in their communities. First Union
matches employee contributions to public and accredited private elementary
and secondary schools, as well as colleges and universities. In 1995,
First Union supported 523 schools through this program.
The First Union Excellence in Education Grants Program was created to foster
innovative and positive change in the educational system and to support
employees in their volunteer efforts for education. First Union employees who
are involved as parents or volunteers are encouraged to collaborate with local
educators in applying for grant funds.
First Union volunteer Peter Roulhac, Director of Community Programs in Dade
County, FL, talks with students at Holmes Elementary.
<PAGE>
(Drawing of man at computer upper left, First Union logo upper right,
background photo of coworkers)
Excellence in Education
First Union And Education - A Lifetime Commitment
FIRST UNION TODAY
COMMUNITY ACTION
OUTREACH PROGRAMS
"Nothing is more important to our well-being as a society than helping our
local schools educate today's children and tomorrow's employees. This is not
a short-term project. This is a lifetime commitment."
John Georgius, Vice Chairman, First Union Corporation
John Georgius talks with student anchors as part of a live satellite broad-
cast during Kids' Day at Work. The show, produced by students in Charlotte,
N.C., was shown company-wide to the more than 3,500 students who came to work
with their parents or mentors on August 9, 1995.
<PAGE>
(Background drawing of stocks, First Union logo upper right)
Shareholder Value
We Are Proud Of Our Performance Record - And Optimistic About Our Future
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
FINANCIAL STRENGTH
First Union has provided steady growth in shareholder returns and places a
premium on earning the support and respect of the investment community. Our
growth in dividends and book value ranks among the best in the industry.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of bank)
Shareholder Returns
First Union:
Producing Value
For Shareholders
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
DIVIDENDS
BOOK VALUE
EARNINGS
TOTAL RETURN
MARKET ACTIVITY
Five-Year Total
Return vs S&P 500
(graph appears here with the following plot points:)
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
FTU 0 104 207 200 213 338
S&P 0 30 40 54 56 115
Note: Past performance is no guarantee of future results. Stock price
appreciation plus reinvested dividends.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of bank)
Shareholder Returns
First Union:
Producing Value
For Shareholders
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
DIVIDENDS
BOOK VALUE
EARNINGS
TOTAL RETURN
MARKET ACTIVITY
Since the earliest decades of this century, First Union has prided itself on
a strong partnership with its shareholders. Our fundamental business
approach emphasizes protection of assets and growth of our income and
operations. This focus may be particularly attractive to investors seeking
a company that offers a history of rising dividends in addition to capital
appreciation potential.
<PAGE>
(Background drawing of handshake, First Union logo upper right,
background photo of stocks)
Dividends
First Union Has Increased Its
Dividend For 18
Consecutive Years
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
DIVIDENDS
Dividend History
(in dollars per share)
(Column chart)
(graph appears here with the following plot points:)
1978 $ 0.29 1988 $ 0.86
1979 0.31 1989 1.00
1980 0.33 1990 1.08
1981 0.36 1991 1.12
1982 0.40 1992 1.28
1983 0.45 1993 1.50
1984 0.49 1994 1.72
1985 0.58 1995 1.96
1986 0.65 Current 2.08
1987 0.77
Note: Originally reported, adjusted for splits. Past performance is no
guarantee of future results.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of stocks)
Dividends
First Union Has
Increased Its
Dividend For 18
Consecutive Years
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
DIVIDENDS
First Union's consistent record of rising dividends supports our prudent
management approach aimed at long-term growth of income. When
compounded, our dividends also contribute to our long-term total return
performance for our shareholders.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of business center)
Book Value
First Union's Book
Value Has
Increased 20 Of
The Last 21 Years
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
BOOK VALUE
Book Value Per
Share Growth
(in dollars)
(graph appears here with the following plot points:)
1974 $ 5.23 1985 $12.96
1975 5.48 1986 14.55
1976 5.82 1987 16.25
1977 6.02 1988 17.98
1978 6.63 1989 19.37
1979 7.39 1990 20.72
1980 8.30 1991 22.54
1981 8.19 1992 26.08
1982 9.20 1993 28.90
1983 10.66 1994 30.66
1984 12.51 1995 31.89
Note: Originally reported, except that 1995 reflects the consummation of the
First Fidelity merger, adjusted for splits. Past performance is no
guarantee of future results.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of business center)
Book Value
First Union's Book
Value Has Increased 20 Of
The Last 21 Years
SHAREHOLDER VALUE
SHAREHOLDER VALUE
BOOK VALUE
First Union has posted steadily rising book values during the past two
decades of growth. This strength illustrates our success in protecting
capital while simultaneously preparing First Union to take the lead in
the financial services industry of the future.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of dollar bill)
Earnings
First Union Has
Increased Its
Earnings Per Share
In 9 Of The
Last 10 Years
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
EARNINGS
Earnings per
Share History
(in dollars per share)
(graph appears here with the following plot points:)
85 86 87 88 89 90 91 92 93 94 95
2.16 2.53 2.55 2.76 2.40 2.52 2.55 3.72 4.73 5.22 5.30
Note: Originally reported, except that 1995 reflects the consummation of the
First Fidelity merger, adjusted for splits. Past performance is no
guarantee of future results.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of dollar bill)
Earnings
First Union Has
Increased Its
Earnings Per Share
In 9 Of The
Last 10 Years
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
EARNINGS
First Union prides itself on long-term earnings per share growth and
considers it a key barometer of our management ability. Our earnings
growth supports our positive trends in book value and dividend
growth and is a further indication of our sound financial standing.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of adding machine on Wall Street Journal)
Total Return
A 5-Year Average
Compounded Annual Growth
Rate of 34.4%
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
TOTAL RETURN
First Union has provided strong total return of 338% over the past five
years while simultaneously following an ambitious growth strategy.
In the years ahead, as we capitalize on a decade of growth, we believe
investors will share in our success as we take advantage of new business
lines and expanded market outlets.
<PAGE>
(Background drawing of handshake, First Union logo upper right,
background photo of adding machine on Wall Street Journal)
Total Return
A 5-Year Average
Compounded Annual Growth
Rate of 34.4%
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
TOTAL RETURN
(graph appears here with the following plot points:)
The Growth of a
$1,000 Investment
in First Union
Common Stock Total $ Value % Change Compound Annual
(12/31/95) (in dollar value) Growth Rate
$1,428 $4,385 $3,839 43% 338% 284% 12.6% 34.4% 14.4%
3 5 10 3 5 10 3 5 10
Years Ago Years Ago Years Ago
Note: Assumes dividends reinvested. All time ranges are through 12/31/95.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of adding machine on Wall Street Journal)
Total Return
A 5-Year Average
Compounded
Annual Growth
Rate of 34.4%
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
TOTAL RETURN
(Column chart)
First Union
S&P Tracking The Growth Of A $1,000 Investment in
First Union Common Stock vs. S&P 500
Interactive Chart - Clicking on a date on the left side of the chart
displays the compound annual return and the value (on 12/31/95) of a $1000
investment made on the selected date. The chart displays returns for both First
Union common stock and the S&P 500.
FIRST UNION TOTAL RETURN S&P 500 TOTAL RETURN
DATE VALUE CMPD ANN RET VALUE CMPD ANN RET
31-Dec-85 $3,839 14.4% $3,976 14.8%
31-Mar-86 $2,967 11.8% $3,497 13.7%
30-Jun-86 $2,861 11.7% $3,302 13.4%
30-Sep-86 $3,226 13.5% $3,558 14.7%
31-Dec-86 $3,330 14.3% $3,356 14.4%
31-Mar-87 $2,847 12.7% $2,759 12.3%
30-Jun-87 $3,138 14.4% $2,636 12.1%
30-Sep-87 $3,307 15.6% $2,473 11.6%
31-Dec-87 $3,994 18.9% $3,189 15.6%
31-Mar-88 $3,977 19.5% $3,014 15.3%
30-Jun-88 $3,267 17.1% $2,834 14.9%
30-Sep-88 $3,361 18.2% $2,825 15.4%
31-Dec-88 $3,379 19.0% $2,742 15.5%
31-Mar-89 $3,385 19.8% $2,554 14.9%
30-Jun-89 $2,884 17.7% $2,357 14.1%
30-Sep-89 $2,950 18.9% $2,123 12.8%
31-Dec-89 $3,480 23.1% $2,082 13.0%
31-Mar-90 $3,952 27.0% $2,146 14.2%
30-Jun-90 $3,691 26.8% $2,016 13.6%
30-Sep-90 $4,522 33.3% $2,342 17.6%
31-Dec-90 $4,385 34.4% $2,146 16.5%
31-Mar-91 $2,998 26.0% $1,879 14.2%
30-Jun-91 $2,942 27.1% $1,883 15.1%
30-Sep-91 $2,461 23.6% $1,785 14.6%
31-Dec-91 $2,144 21.0% $1,648 13.3%
31-Mar-92 $1,784 16.7% $1,694 15.1%
30-Jun-92 $1,671 15.8% $1,661 15.6%
30-Sep-92 $1,731 18.4% $1,611 15.8%
31-Dec-92 $1,428 12.6% $1,533 15.3%
31-Mar-93 $1,293 9.8% $1,469 15.0%
30-Jun-93 $1,266 9.9% $1,462 16.4%
30-Sep-93 $1,265 11.0% $1,426 17.1%
31-Dec-93 $1,440 20.0% $1,395 18.1%
31-Mar-94 $1,435 22.9% $1,439 23.1%
30-Jun-94 $1,283 18.1% $1,441 27.6%
30-Sep-94 $1,355 27.5% $1,375 29.0%
31-Dec-94 $1,401 40.1% $1,376 37.6%
31-Mar-95 $1,322 45.1% $1,254 35.2%
30-Jun-95 $1,254 57.3% $1,145 31.0%
30-Sep-95 $1,101 47.0% $1,060 26.3%
Note: Includes dividends and price appreciation. Past performance is no
guarantee of future results.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of Edward Crutchfield)
Market Activity
A Highly Liquid
Common Stock
With A History Of
Long-Term Price
Appreciation
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
MARKET ACTIVITY
(Combination column and line chart)
Quarter End Price Stock Price & Volume, Quarter End Volume
(in dollars) Dec. 1990 to Dec. 1995 (in millions)
Volume
(graph appears here with the following plot points:)
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
Volume 13.14 19.35 20.40 40.42 16.11 30.76
Price 15.375 30 43.625 41.25 41.375 55.625
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of Edward Crutchfield)
Market Activity
A Highly Liquid
Common Stock
With A History Of
Long-Term Price
Appreciation
SHAREHOLDER VALUE
SHAREHOLDER RETURNS
MARKET ACTIVITY
There were 278 million shares outstanding as of December 31, 1995,
giving First Union a market capitalization of $15.5 billion. Average daily
volume of shares traded was 440,000.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
ground view photo of First Union building)
Financial Strength
First Union: The
Sixth Largest Bank
Holding Company
In The U.S.
SHAREHOLDER VALUE
FINANCIAL STRENGTH
HIGHLIGHTS
BALANCE SHEET
BRANCH PRODUCTIVITY
CREDIT QUALITY
DEBT RATINGS
CAPITAL RATIOS
First Union Corporation has assets of $132 billion and over 11 million
customers. Our 1,964 branches constitute the nation's largest banking
network, serving customers from New York to Key West, Florida.
Through 190 offices in 36 states, we also provide other financial services,
ranging from mortgage banking and home equity lending to securities
brokerage, insurance products, investment management and investment banking
services.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of computer printout)
Highlights
1995 Results
Confirmed The
Strength Of Our
Financial Standing
SHAREHOLDER VALUE
FINANCIAL STRENGTH
HIGHLIGHTS
REVENUE GROWTH
RETURN ON ASSETS
RETURN/COMMON EQUITY
1995 was a landmark year for First Union, not only because of the merger
with First Fidelity, but also because of our strong financial performance.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of computer printout)
Revenue Growth
First Union's Net
Interest Income
Results From A
Diversified Earning
Asset Base
SHAREHOLDER VALUE
FINANCIAL STRENGTH
HIGHLIGHTS
REVENUE GROWTH
(graph appears here with the following plot points:)
Tax-Equivalent
Net Interest Income
($ in millions)
85 86 87 88 89 90 91 92 93 94 95
699 1,104 1,162 1,173 1,159 1,398 1,582 2,100 2,867 3,126 4,740
Note: Originally reported, not restated for mergers except that 1995 reflects
the consummation of the First Fidelity merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of computer printout)
Revenue Growth
First Union's
Noninterest Income
Has Grown And
Diversified Over
The Last Ten Years
SHAREHOLDER VALUE
FINANCIAL STRENGTH
HIGHLIGHTS
REVENUE GROWTH
(graph appears here with the following plot points:)
Noninterest
Income 1995
($ in millions)
85 86 87 88 89 90 91 92 93 94 95
239 477 447 445 410 551 859 845 1,165 1,166 1,897
Note: Originally reported, not restated for mergers except that 1995 reflects
the consummation of the First Fidelity merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of computer printout)
Return On Assets
First Union
Achieved A Return
On Assets Of
1.27% In 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
HIGHLIGHTS
RETURN ON ASSETS
(graph appears here with the following plot points:)
Return On Assets
10-Year History
(%)
85 86 87 88 89 90 91 92 93 94 95
1.18 1.22 1.10 1.06 0.84 0.79 0.77 1.07 1.20 1.27 1.27
Note: Originally reported not restated for mergers except that 1995 reflects
the consummation of the First Fidelity merger. 1995 ROA excludes the
impact of the $73 million after-tax, merger-related restructuring
charge.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of computer printout)
Return On
Common Equity
First Union
Achieved A Return
On Common Equity
Of 17.55% In 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
HIGHLIGHTS
RETURN/COMMON EQUITY
(graph appears here with the following plot points:)
Return On Common
Equity 10-Year History
(%)
85 86 87 88 89 90 91 92 93 94 95
18.03 18.68 16.54 16.16 12.77 12.50 11.85 15.26 17.42 17.04 17.55
Note: Originally reported, not restated for mergers except that 1995 reflects
consummation of the First Fidelity merger. 1995 ROCE excludes the
impact of the $73 million after-tax merger-related restructuring charge.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of building facade)
Balance Sheet
Composition
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BALANCE SHEET
SECURITIES FOR SALE
INVESTMENT SECURITIES
LOANS
DEPOSITS
As of December 31, 1995, the combined First Union and First Fidelity had:
Securities available for sale of $18.2 billion.
Investment securities of $3.1 billion.
Loans of $90.6 billion.
Deposits of $92.6 billion - 93% of which are "core deposits."
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of building facade)
Securities
Available For Sale
$18.0 Billion In
Securities Available
For Sale As Of
December 31, 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BALANCE SHEET
SECURITIES FOR SALE
(Pie chart appears here with the following plot points:)
Securities
Available for Sale
($ in millions)
U.S. Treasury 2,960
U.S. Government 8,402
Securities
Collateralized 4,739
Mortgage Obligations
State, County 13
and Municipal
Other 1,879
Total Book Value 17,993
Unrealized Gain 201
Total Market Value 18,194
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of building facade)
Investment
Securities
$3.1 Billion In
Investment
Securities As Of
December 31, 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BALANCE SHEET
INVESTMENT SECURITIES
(pie chart appears here with the following plot points)
Investment Securities
($ in millions)
U.S. Government
Securities 1,267
Collateralized
Mortgage Obligations 606
State, County
and Municipal 1,177
Other 90
Total Book Value 3,140
Unrealized Gain 180
Total Market Value 3,320
Note: Reflects the consummation of the First Fidelity merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of building facade)
Loans
Our $90.6 Billion
Loan Portfolio Is
Diversified Both By
Product And By
Geography
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BALANCE SHEET
LOANS
(pie chart appears here with the following plot points:)
Loans ($ in millions)
Commercial 24,648
Real Estate Const. 2,506
Real Estate Mortgage 9,992
Leasing 3,170
Foreign 650
Total Commercial: 40,965
Real Estate Mort. 27,274
Bank Card 3,658
Other Installment 20,212
Total Consumer: 51,144
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of building facade)
Deposits
93% "Core Deposits"
As Of
December 31, 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BALANCE SHEET
DEPOSITS
(pie chart appears here with the following plot points:)
Deposits ($ in millions)
Noninterest Bearing 17,043
Savings and NOW 24,297
Money Market Accts. 13,113
Other Consumer time 31,945
Total Core Deposits: 86,399
Foreign 3,527
Other Time 2,630
Non Core Deposits: 6,156
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
mezzotint of house)
Branch
Productivity
A History Of
Increasing Branch
Efficiency and
Productivity
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BRANCH PRODUCTIVITY
LOANS PER BRANCH
DEPOSITS PER BRANCH
First Union has more than doubled its loans and deposits per branch over the
last ten years.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
mezzotint of house)
Loans
Per Branch
First Union Has A Track
Record Of Increasing
Branch Lending Activity,
Efficiency and Productivity
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BRANCH PRODUCTIVITY
LOANS PER BRANCH
(graph appears here with the following plot points:)
Loans Per Branch
($ in millions)
85 86 87 88 89 90 91 92 93 94 95
18.8 19.4 21.3 27.0 32.8 34.2 32.0 35.4 36.0 40.3 46.1
Note: Originally reported, not restated for mergers except that 1995 reflects
the consummation of the First Fidelity merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
mezzotint of house)
Deposits
Per Branch
First Union Has A Track
Record Of Increasing
Deposits Gathered Through
Our Branch Network
SHAREHOLDER VALUE
FINANCIAL STRENGTH
BRANCH PRODUCTIVITY
DEPOSITS PER BRANCH
(graph appears here with the following plot points:)
Deposits Per Branch
($ in millions)
85 86 87 88 89 90 91 92 93 94 95
20.2 23.5 24.1 28.6 32.3 36.0 36.5 41.8 41.3 44.0 47.1
Note: Originally reported, not restated for mergers except that 1995 reflects
the consummation of the First Fidelity merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right)
Loan Portfolio
Quality
First Union
Consistently Ranks
Among The Top Bank
Holding Companies
In Portfolio Quality
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CREDIT QUALITY
NET CHARGE-OFFS
NON-PERFORMING ASSETS
As of December 31, 1995, First Union's Net Charge-Off Rate of
0.41% ranked it 10th among the 25 largest bank holding companies.
In addition, our already low Nonperforming Assets ratio has dropped
every year for five years in a row.
<PAGE>
(Background drawing of handshake, First Union logo upper right)
Net Charge-Offs
Ten Year Average Net
Charge-Offs As A
Percentage Of Average
Net Loans Were 0.58%
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CREDIT QUALITY
NET CHARGE-OFFS
At 0.58%, First Union's Ten-Year Average Net Charge-Off rate ranks among the
best in the industry.
Ten Year Average Rank Bank Holding Company 1986-1995
Net Charge-Off 1 WACHOVIA 0.56
2 FIRST UNION 0.58
3 SUNTRUST 0.61
4 KEYCORP 0.66
5 BARNETT BANKS 0.69
Note: Originally reported, not restated for mergers, expect that 1995 reflects
the consummation of the First Fidelity merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right)
Nonperforming
Assets
First Union Has
Steadily Improved
Asset Quality Over
The Last Five Years
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CREDIT QUALITY
NON-PERFORMING ASSETS
(graph appears here with the following plot points:)
First Union NPAs
As A Percentage Of
Net Loans And
Foreclosed Properties
(%)
91 92 93 94 95
3.71 2.87 1.95 1.03 0.91
Note: Originally reported, not restated for mergers except that 1995 reflects
the consummation of the First Fidelity Merger.
<PAGE>
(Background drawing of handshake, First Union logo upper right)
Debt Ratings
First Union's Merger
With First Fidelity
Has Strengthened
First Union's Credit
Standing
SHAREHOLDER VALUE
FINANCIAL STRENGTH
DEBT RATINGS
First Union's senior debt, subordinated debt and commercial paper all are
investment grade obligations according to Moody's, Standard & Poors,
Thomson Bankwatch and Fitch rating services.
Moody's S&P Thomson Bankwatch Fitch
Senior Debt A1 A A+ A+
Subordinated Debt A2 A- A+ --
Commercial Paper P-1 A-1 TWB-1 F1+
<Paper>
(Background drawing of handshake, First Union logo upper right, background
photo of government building)
Capital Ratios
Our Risk-Based
Capital Ratios As Of
December 31, 1995,
Were Strong
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CAPITAL RATIOS
TIER 1 RATIO
TOTAL CAPITAL RATIOS
LEVERAGE RATIO
First Union has Capital Ratios that exceed regulatory minimums,
evidence of our strong financial foundation.
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of government building)
Tier 1 Ratio
First Union And First Fidelity
Posted A Combined Tier 1
Capital Ratio Of 6.62%
As Of December 31, 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CAPITAL RATIOS
TIER 1 RATIO
(graph appears with the following points:)
Tier 1
Capital Ratio
(%)
Tier 1 Regulatory
Ratio Minimum
6.62 4
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of government building)
Total Capital Ratio
First Union And First Fidelity
Posted A Combined Total
Capital Ratio Of 11.33%
As Of December 31, 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CAPITAL RATIOS
TOTAL CAPITAL RATIOS
(graph appears here with the following plot points:)
Total
Capital Ratio
(%)
Total Capital Regulatory
Ratio Minimum
11.33 8
<PAGE>
(Background drawing of handshake, First Union logo upper right, background
photo of government building)
Leverage Ratio
First Union And First Fidelity
Posted A Combined
Leverage Ratio Of 5.49%
As Of December 31, 1995
SHAREHOLDER VALUE
FINANCIAL STRENGTH
CAPITAL RATIOS
LEVERAGE RATIO
(graph appears here with the following plot points:)
Leverage Ratio
(%)
Leverage Regulatory
Ratio Minimum
5.49 5
<PAGE>
(Drawing of building with columns, First Union logo upper right)
Business Lines
A Full Range of Financial Services For Corporations & Individuals
BUSINESS LINES
CAPITAL MARKETS
CAPITAL MANAGEMENT
CREDIT CARD PRODUCTS
MORTGAGE LENDING
BANKING
First Union offers individuals and corporations a full range of banking and
investment services. We specialize in providing tailored and well-coordinated
services combined with superior personal attention. We are deeply committed
to innovation, particularly in the areas of services and alternative delivery
channels.
<PAGE>
(Drawing of building steps upper left, background photo of columns,
First Union logo upper right, drawing of
columns upper left, photo of Jerry Schmitt & Dan Mathis)
Capital Markets Group
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
CAPITAL FORMATION
CORPORATE LENDING
INVESTMENT BANKING
CAPITAL PARTNERS
RISK MANAGEMENT
INT'L TRADE FINANCE
The Ability To Satisfy A Full Range Of Corporate Financing And Risk Management
Needs
"We have taken our commitment to servicing clients' needs to the next level by
building capital markets capabilities in house-with some of the most talented
resources in the industry. These capital markets solutions were needed by many
of our corporate customers. We have put ourselves in a position to meet those
needs which will benefit both our customers and First Union."
Jerry Schmitt
"We have been gratified with the level of client interest and acceptance of our
capital markets products and services over the past two years. Deal volume
since 1994 and a full pipeline for first quarter 1996 confirmed our
expectations of pent-up demand within our corporate customer base."
Dan Mathis
Jerry Schmitt & Dan Mathis
Executive Vice Presidents,
Managing Directors,
Capital Markets Group
<PAGE>
(Drawing of building steps upper left, First Union logo upper right,
background photo of columns)
Capital Markets Group
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
CAPITAL FORMATION
CORPORATE LENDING
INVESTMENT BANKING
CAPITAL PARTNERS
RISK MANAGEMENT
INT'L TRADE FINANCE
The Ability To Satisfy A Full Range Of Corporate Financing And Risk Management
Needs
In 1994, First Union committed to a major initiative designed to build our
resources in the capital markets area. This commitment was in direct response
to the demands of our corporate banking clients seeking capital market
solutions from a relationship-based financial services provider.
Today, our Capital Markets Group includes over 1,100 experienced professionals
with the ability to structure and execute financing solutions in all public and
private markets. We specialize in serving middle- to upper middle-market
companies across the U.S.
Our responsive solutions are as individual as our clients and are implemented
under the direction of experienced relationship managers and industry
specialists.
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Capital Markets Group
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
CAPITAL FORMATION
CORPORATE LENDING
INVESTMENT BANKING
CAPITAL PARTNERS
RISK MANAGEMENT
INT'L TRADE FINANCE
The Ability To Satisfy A Full Range Of Corporate Financing And Risk Management
Needs
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Capital Markets
Net Income History Pre-Tax Fee Income As
Net Income % Of Revenue
155 243 39 54
1994 1995 1994 1995
($ in millions) (%)
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Real Estate Financing
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
COMM. REAL ESTATE
CONSUMER MORTGAGE
AFFORDABLE HOUSING
Our Thorough Understanding Of The Industry Contributes To Effective
Financing Solutions
First Union offers a complete range of integrated investment banking
and financing services for companies engaged in real estate-related
activities. By calling on the expertise of our Capital Markets Group, we
can create customized financing solutions that include securitization of
both commercial real-estate and consumer mortgage products.
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Commercial Real Estate
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
COMM. REAL ESTATE
Serving A Wide Range Of Commercial Real Estate Clients
First Union specializes in commercial real estate lending and
securitization. Our client base includes public and private development
companies, financial services institutions holding real estate portfolios
and operating businesses active in real estate-intensive areas.
Thanks to our familiarity with the industry, we have been able to build
a rapid presence in this field. For example, during our start-up year of
1995, First Union participated in conduit financing of more than $650
million, more than any other conduit on Wall Street. 35 percent of that
commercial real estate business came from within our own franchise.
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Commercial Real Estate
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
COMM. REAL ESTATE
Securing Equity Capital For An Industry Leader
Recently, Merry Land & Investment Company, a leader in the real
estate investment trust industry, engaged First Union to secure equity
capital for its operations. First Union successfully placed $100 million
in cumulative convertible preferred stock in the market, providing
the company with the financing it needed to pursue new opportunities.
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Consumer Mortgages
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
CONSUMER MORTGAGE
Origination, Securitization And Placement
Working together, First Union Home Equity Bank and First Union
Capital Markets prove that synergy exists between consumer bankers
and investment bankers.
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Consumer Mortgages
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
CONSUMER MORTGAGE
Co-Managing A $130 Million Home Equity Offering
In November of 1995, First Union joined Lehman Brothers in
co-managing a $130 million home equity securities offering.
The deal marked First Union's first public offering involving home
equity loan asset-backed securities. This was First Union Capital
Markets Corporation's third major home equity securitization
transaction in 1995. Earlier in 1995, we had privately placed two
other home equity portfolios.
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Affordable Housing
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
AFFORDABLE HOUSING
Committed To The Financial Health Of Our Communities
First Union has joined forces with local organizations in numerous
communities within our operating region to provide the financing for
affordable housing programs. We are proud to be an industry leader
in contributing to home ownership opportunities for qualifying
individuals and families with incomes less than their area's medians.
During 1995, First Union made Affordable Housing equity investments
totalling $121 million, representing 3,431 housing units.
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Affordable Housing
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
AFFORDABLE HOUSING
Our Affordable Housing Activities Take Place In Communities Across The U.S.
Recently, The Resource Foundation (TRF) in Nashville turned to First
Union for help in purchasing 59 condominiums from the Resolution
Trust Corporation for sale to families and individuals with incomes of
80% or less than Nashville's median income.
First Union provided the financing needed as well as affordable
mortgages to qualified buyers that featured flexible terms and minimal
down payment requirements. For these people, the classic American
dream, once an unlikely wish, is now a reality.
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Affordable Housing
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
AFFORDABLE HOUSING
Saving 70 Homes In Tampa, Florida
Recently, a partnership formed by First Union, the City of Tampa
and several non-profit agencies was able to preserve houses originally
planned for demolition during the construction of Tampa's Veteran
Expressway.
A total of 70 homes were moved from the expressway site to empty lots
owned by the city and made available at a reduced cost to qualifying
lower income Tampa residents.
First Union provided over $2 million in affordable home mortgage loans
for the new owners.
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Affordable Housing
BUSINESS LINES
CAPITAL MARKETS
REAL ESTATE FINANCE
AFFORDABLE HOUSING
Building Homes For The Elderly
First Union is providing a $2.9 million construction loan and is structuring
the $3.0 million equity investment in Philadelphia's Yorktown Arms
Apartments. The 56 unit complex for the low and moderate income
elderly is a cooperation effort involving First Union and the
City of Philadelphia.
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Capital Formation
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
HIGH YIELD
INVESTMENT GRADE
PUBLIC FINANCE
Offering Access To Public Markets Under The Direction Of Experienced
Professionals
In June of 1995, First Union received final approval from the Federal
Reserve Board to underwrite debt and equity securities, making us one
of only ten U.S. bank holding companies capable of underwriting
corporate debt securities. In response, we have built a professional staff
including individuals from virtually every major investment bank on
Wall Street. Investment services are provided through our subsidiary,
First Union Capital Markets Corporation.
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High Yield Activity
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
HIGH YIELD
Client-Focused Solutions That Meet Capital Structure Requirements
Our High Yield area provides clients with origination and research
services coupled with sales and trading designed to help them raise
financing efficiently while meeting their particular capital structure
requirements.
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High Yield Activity
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
HIGH YIELD
Offering Demonstrated Expertise In Key Industries
In October 1995, First Union co-managed a $100 million offering for
GranCare Inc., a diversified health care company that operates nursing
homes and institutional pharmacies in addition to providing home and
hospice care, rehabilitative therapies, and laboratory and
radiological services.
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Investment Grade
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
INVESTMENT GRADE
Offering Our Corporate Clients Fixed-Income Expertise
First Union offers its corporate clients a full range of investment-grade
fixed-income expertise, including medium- and long-term traditional
taxable bond issues as well as tailored structures involving fixed- and
variable-rate preferred features. In 1995, First Union participated
in 29 investment-grade fixed-income offerings totaling more than
$4.25 billion.
Our services in this area are significantly enhanced by our industry
specialty groups, who contribute knowledge of company and market
requirements within their particular areas of expertise.
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Investment Grade
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
INVESTMENT GRADE
Over $100 Million In Debt Issued For TransLeasing International
In October 1995, First Union participated in the underwriting and
placement of $89.7 million in senior notes and $10.8 million in
subordinated notes for TransLeasing International.
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Public Finance
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
PUBLIC FINANCE
First Union Provides All Tax-Exempt Financing Services For Public Clients
First Union provides tax-exempt bond underwriting and financial
advisory services for municipalities, state and local governments,
universities, hospital authorities and other public entities seeking
financing for a variety of projects. In addition, First Union provides
municipal leasing for public entities.
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Public Finance
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
PUBLIC FINANCE
First Union Provides All Tax-Exempt Financing Services For Public Clients
(graph appears here with the following plot points:)
Senior Manager
Assignments
($ in millions) 325 495
1994 1995
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Public Finance
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
PUBLIC FINANCE
Leveraging A Strong Regional Presence With Municipal Expertise
Our strong regional presence and relationship-based service style
contributed to our success for this key area of capital financing.
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Public Finance
BUSINESS LINES
CAPITAL MARKETS
CAPITAL FORMATION
PUBLIC FINANCE
Over $150 Million In General Obligation Bonds For Charlotte
In September 1995, First Union acted as senior manager in bringing
$151.5 million in General Obligation Bonds to market for the City of
Charlotte, N.C.
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Corporate Lending
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
SPECIALIZED LENDING
LEVERAGED FINANCE
U.S. BANKING
LEASE FINANCING
Tailored Solutions That Respect Client Financial Abilities & Needs
Our Corporate Lending Group helps the customer use traditional loans
and capital markets solutions to achieve their financial goals. We offer
customized solutions and tailored programs that fit our clients' balance
sheet and financing requirements.
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Specialized Lending
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
SPECIALIZED LENDING
Helping Companies In Selected Industry Segments Maximize Their Potential
First Union has developed the special expertise to become the valued
financial partner to companies in selected industries.
We're proud to offer a full range of lending and investment banking
services to growing companies in such industries as Health Care,
Media/Communications, Financial Institutions, Mortgage Banking
and Sports Finance.
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Specialized Lending
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
SPECIALIZED LENDING
Proven Ability In The Past Means Promise For Tomorrow
In July of 1995, First Union arranged $75 million in revolving credit for
the Tampa Bay Devil Rays - a major league baseball franchise.
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Leveraged Finance
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
LEVERAGED FINANCE
Cost-Efficient Financing For Companies On The Move
First Union specializes in structuring and issuing cash-flow-based
senior debt to facilitate transactions such as leveraged buyouts,
recapitalizations, mergers and acquisitions, stock repurchases and
business expansions.
First Union's leveraged finance activity is characterized by strong credit
quality, low charge-offs, better than average margins and strong
contributions to fee income.
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Leveraged Finance
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
LEVERAGED FINANCE
Cost-Efficient Financing For Expanding Companies
Typically less expensive than other sources of capital, leveraged
financing requires a detailed knowledge of the borrower's corporate
financial structure and special industry considerations that may apply.
First Union's focus on key industries and highly personalized approach
to client relationships provide the expertise needed to structure effective
leveraged solutions.
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Leveraged Finance
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
LEVERAGED FINANCE
First Union's Leveraged Finance Group
Lason Systems:
Agent for $25 million senior debt facility in January of 1995
Playtex Products Inc.:
Commitment for $25 million Senior Credit Facility
Clayton, Dubbier & Rice:
Co-agented and committed $75 million in the $2.7 billion acquisition of
Riverwood International Corporation
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U.S. Banking
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
U.S. BANKING
Integrated Financial Services For U.S.-Based Corporations
First Union's U.S. Banking Group provides lending and capital markets
solutions to companies outside our geographic franchise. Our highly
skilled staff of professionals is capable of presenting our capital and
risk management products to our select clients.
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Lease Financing
BUSINESS LINES
CAPITAL MARKETS
CORPORATE LENDING
LEASE FINANCING
Capital Equipment Financing Customized To Client Needs
First Union can provide lease financing services to our corporate clients,
helping them gain access to the capital equipment they need for
immediate expansion without impairing their balance sheets.
Our creativity often results in greater capital flexibility and lower costs
while our leasing structures and terms can be customized to the client's
individual requirements.
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Investment Banking
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
ASSET SECURITIZATION
M&A
PRIVATE PLACEMENTS
LOAN SYNDICATION
Capital Formation & Advice For A Diverse Clientele
First Union assists companies in attaining their optimum financial structures
through a variety of services. We offer asset securitization, private
placement and loan syndication, public debt underwriting and distribution
services as well as a full range of corporate finance advice involving mergers
and acquisitions and business unit analysis.
Our Investment Banking specialists work with Relationship Managers to help
them identify the services and products that will best benefit their clients
and augment this expertise with input from a wide range of industry specialists.
This team approach provides a superior understanding of company- and
industry-specific needs, resulting in more effective investment banking
solutions.
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Asset Securitization
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
ASSET SECURITIZATION
Innovative Financing To Preserve Balance Sheet Strength
First Union serves companies with large pools of financial assets such as
receivables or consumer loans by providing asset securitization services.
The structured sale of securitized pools of assets provides our clients
with off-balance sheet financing, which in turn improves leverage and
return-on-assets ratios.
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Asset Securitization
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
ASSET SECURITIZATION
Securitized Funding Success In Both Lead And Co-Managed Deals
First Union's primary asset securitization activity in 1995 was
generated through securitized funding, with several lead and
co-managed deals also providing significant contributions to total
production. First Union was awarded competitive mandates from 15
clients for distribution value exceeding $1 billion over the next 5
quarters. Other key deals included:
* A $138 million securitization with Canadian-based Newcourt Receivables.
* A lead-managed public underwriting for Trans Leasing International's
issuance of $100 million in asset-backed securities.
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Asset Securitization
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
ASSET SECURITIZATION
Securitized Funding Success In Both Lead And Co-Managed Deals
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1995 Asset Securitization Securitized Lead- Co- Total
Funding* Managed Managed
Amount
($ in millions) 2,800 142 200 3,142
Deals
Closed 15 2 1 18
*Includes $2 billion of First Union credit cards structured
by Asset Securitization.
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Mergers and Acquisitions
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
M&A
Making The Most Of Our Middle-Market Expertise
First Union is pleased to be able to offer its middle-market clients
mergers and acquisitions services as well as on-going corporate
structuring advice or transactional assistance with divestitures and
corporate reorganizations.
Our focus on middle-market companies makes us a good match for
closely- or privately-held companies seeking to free up liquidity for
shareholders or implement expansion plans. We are also skilled in a
number of key middle-market industries, lending an added measure of
expertise in these areas.
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Private Placements
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
PRIVATE PLACEMENTS
First Union Offers An Outstanding Private Placement Track Record
First Union has an outstanding track record in structuring and
arranging the placement of corporate senior and subordinated debt,
preferred and common stock and other hybrid securities with institutional
investors. Our placements are customized transactions with negotiated
restrictions and covenants as well as flexible security provisions.
Our ability in this area is enhanced by our access to multiple resources,
a widespread potential investor base, our ability to structure flexible
debt terms and our experience.
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Private Placements
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
PRIVATE PLACEMENTS
We Offer Our Clients Comprehensive Private Placement Expertise
Our recently expanded capabilities in the Capital Markets area has
increased the range of our Private Placement products and increased our
ability to offer coordinated services. This comprehensive expertise can result
in faster and more convenient Private Placements for First Union clients.
In addition, First Union has amassed a wide network of institutional
investors with interest in long-term financings and can access a broad
market base. This puts us in an advantageous position to match a company's
financial needs with market preferences. We also have the ability and
experience needed to expand market appetite and increase competition among
investors to achieve the most favorable rates for our clients.
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Private Placements
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
PRIVATE PLACEMENTS
We Have Successfully Served Clients In A Number Of Industries
First Union's Private Placement expertise spans a wide spectrum of
industry lines. Recently, we have completed transactions for:
*$80 million in Senior Notes for Conair Corporation. Conair is an
international consumer products company.
*$60 million in Senior Secured Notes for Vancouver Basketball Limited
Partnership.
*$22 million in Senior Notes for WLR Foods. WRL is a Roanoke, Virginia
based food company.
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Loan Syndications
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
LOAN SYNDICATION
Offering Clients Experience & Market Access
First Union offers clients Loan Syndication services through the efforts
of a specialized team with years of experience structuring and placing
transactions. To our clients, this means the proven ability to create the
best structure at an appropriate price.
During 1995, First Union ranked 12th in "Agent Only" transactions
underwriting 58 deals worth $9.3 billion.
First Union was "Agent" or "Co-Agent" on 95 deals totalling $37 billion.
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Loan Syndications
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
LOAN SYNDICATION
Offering Clients A Broad Array Of Financing Alternatives
First Union's Loan Syndication capabilities offer customers a broad
array of possibilities. For example, we can originate large-dollar loans,
then distribute them to other banks, opening a window to a larger pool of
liquidity than an individual bank commitment could provide while offering
the identical terms and conditions contained in a single credit agreement.
First Union's size and industry standing is an advantage in this field.
It allows our clients to benefit from larger transactions and attracts a
greater pool of co-lenders.
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Loan Syndications)
Loan Syndications
BUSINESS LINES
CAPITAL MARKETS
INVESTMENT BANKING
LOAN SYNDICATION
First Union Is A Highly Active Syndications Agent
First Union's Loan Syndication experience includes the following sample
transactions completed in 1995:
*$600 million for Conseco Inc. in March of 1995. Conseco owns, operates and
provides services to companies primarily in the life insurance industry.
*$100 million syndicated for Rural/Metro Corporation in October of 1995.
*$500 million credit facility arranged for Darden Restaurants in May of 1995.
Darden is the largest casual-dining company in the U.S. and operator of the
Red Lobster and Olive Garden restaurant chains.
*$200 million syndicated for Insignia, completed in December of 1995.
"That call was on a Friday. And on Monday, we gave them a commitment
letter for a $500 million underwritten transaction. And they called us Monday
afternoon and said, `You're our new agent.' CUT TO: It's really teamwork, which
can sound cliche, but the investment banking business is very much a
team game."
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Capital Partners
BUSINESS LINES
CAPITAL MARKETS
CAPITAL PARTNERS
Innovative Financing Solutions For Leveraged Transactions
First Union Capital Partners is a merchant banking affiliate offering
equity and subordinated debt investment capital to finance leveraged
transactions. These transactions include management buyouts and
recapitalizations and other special situations.
Capital Partners works with management teams as a strong financial
partner by providing strategic advice and capital to build their
businesses and create long-term equity value for all shareholders.
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Capital Partners
BUSINESS LINES
CAPITAL MARKETS
CAPITAL PARTNERS
Capital For Growing Companies
Capital Partners makes equity investments in companies that require capital for
internal expansion or to complete strategic acquisitions. Capital Partners
acts as a supportive, long-term investor for superior management teams with
the vision to identify industry opportunities and the operating expertise to
successfully grow their businesses.
As of the end of 1995, Capital Partners had deployed over $400 million in
capital and had unrealized portfolio gains of $90 million.
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Capital Partners
BUSINESS LINES
CAPITAL MARKETS
CAPITAL PARTNERS
A Vital Component Of Our Client-Focused Services
Capital Partners often works with other areas of First Union Capital
Markets such as Leveraged Finance, Specialized Industries and Private
Placements in structuring comprehensive financing strategies that provide
optimum flexibility for our clients.
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Risk Management Products
BUSINESS LINES
CAPITAL MARKETS
RISK MANAGEMENT
High-Quality, Effective Risk Management Products
Today's business environment is volatile with many different risks.
Risks to corporate balance sheets and income statements from interest
rate or currency movements can be reduced or eliminated with the help
of First Union risk management professionals. We provide our clients
with a full range of risk management products including: swaps, floors,
caps, currency forwards and options.
Our services are designed to help clients hedge their exposure to interest
rate changes as well as currency movements.
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Risk Management Products
BUSINESS LINES
CAPITAL MARKETS
RISK MANAGEMENT
High-Quality, Effective Risk Management Products
(graph appears here with the following plot points:)
Derivatives Activity 31 38
Revenues
($ in millions)
1994 1995
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Risk Management Products
BUSINESS LINES
CAPITAL MARKETS
RISK MANAGEMENT
A Leading Market Maker In Derivatives Products
First Union is among a small group of market makers in such derivatives
as swaps, swaptions, caps and collars. To the customer, this results in
direct market pricing which can translate into significant savings.
We offer exceptional experience in helping mid-sized companies control
their exposure to a variety of risks. Our products are typically tailored
to each client's specific needs.
Our superior experience in evaluating and off-setting risk as a bank
gives us an advantage in the structuring of derivatives for our
client base.
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Risk Management Products
BUSINESS LINES
CAPITAL MARKETS
RISK MANAGEMENT
Our Growing Foreign Exchange Capability Adds Value To Our Services
As increasing numbers of firms conduct business off-shore, it is critical
to maximize return on capital despite fluctuating currency values. First
Union's foreign exchange capability helps companies with currency
exposure manage their foreign currency risk. First Union trades in all
major markets and most emerging markets.
Companies with foreign operations will be able to take advantage of
our multi-currency deposit and lending capabilities, currency hedging
capabilities as well as around-the-clock foreign exchange services.
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International Trade Finance
BUSINESS LINES
CAPITAL MARKETS
INT'L TRADE FINANCE
One Of Our Most Vital Areas Of Expertise
Global expertise, superior technology and a far-reaching correspondent
network allow First Union to offer a comprehensive array of international
banking services. Trade services, correspondent banking services,
structured trade finance and international corporate banking services are
all available to U.S. companies that do business globally, as well as to
foreign companies with U.S. subsidiaries.
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Risk Management Products
BUSINESS LINES
CAPITAL MARKETS
RISK MANAGEMENT
One of Our Most Vital Areas of Expertise
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First Union's
International Trade
Transaction Volume 4.0 5.7
($ in billions)
1994 1995
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International Trade Finance
BUSINESS LINES
CAPITAL MARKETS
INT'L TRADE FINANCE
Over 1,300 Correspondent Banking Partnerships In 140 Countries
First Union is constantly expanding its presence in the international
banking arena to keep pace with growing client demand. We have
now developed over 1,300 correspondent banking partnerships with
established banks to facilitate trade in 140 countries throughout
the world.
Our trade services include loans, cash management services, bankers'
acceptances, trade and standby Letters of Credit, foreign exchange,
international funds transfers, drafts and collections.
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International Trade Finance
BUSINESS LINES
CAPITAL MARKETS
INT'L TRADE FINANCE
Offering Expertise In All Areas Of Trade Finance
Our structured trade finance area can provide U.S. Government
guarantee and insurance programs, private finance programs for
transactions and risk-mitigation structuring.
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International Trade Finance
BUSINESS LINES
CAPITAL MARKETS
INT'L TRADE FINANCE
An Historic Partnership Is Formed With South Africa
First Union pioneered the first major global partnership with South
Africa. When trade sanctions were lifted, we were the first U.S. banking
company to sign a credit facility agreement with a South African bank,
in conjunction with the Export-Import Bank of the United States. This
facility is being used to support U.S. companies in exporting capital
goods to South Africa.
As a result, since year-end 1993, our International Division has handled
more than $200 million in trade transactions from South African banks,
as well as transactions for more than 250 U.S. exporters.
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International Trade Finance
BUSINESS LINES
CAPITAL MARKETS
INT'L TRADE FINANCE
Forging Ties With A Newly-Opened China
First Union's second historic global partnership is with The Hongkong
Chinese Bank Ltd. We have begun a joint venture that will support U.S.
companies with their trade in Asia.
The company - FUN HKCB Asia, Ltd. - is expected to process $1.0
billion in annual trade transactions by the end of the decade.
In November of 1995, First Union announced an alliance with First
Factors Corporation to facilitate factoring service to Asian exporters for
their sales to U.S. and Europe.
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Capital Management Group
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
INDIVIDUAL SERVICES
MUTUAL FUNDS
INSURANCE PRODUCTS
INVESTMENT MGMT
BROKERAGE
INSTITUTIONAL SVCS
A Conglomerate of
Asset-Management
Businesses Allied With One
Of The Nation's Strongest
Banking Companies
* Investment Services * Insurance
* Financial Planning * Corporate Trust
* Personal Trust * Brokerage
* IRAs * Private Banking
* CAP Accounts * Pension Management
* Mutual Funds * 401(k)
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Capital Management Group
A Conglomerate Of Asset-Management Businesses Allied With One Of The
Nation's Strongest Banking Companies
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
INDIVIDUAL SERVICES
MUTUAL FUNDS
INSURANCE PRODUCTS
INVESTMENT MGMT
BROKERAGE
INSTITUTIONAL SVCS
(PIE CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS:)
Assets Under Management
as of 12/31/95
($ in billions)
Employee Benefit Trust 9.9
Personal Trust, Endowments,
Foundations and Estates 15.9
Investment Agent 6.5
Mutual Funds 13.2
TOTAL 45.5
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An Integrated Service Approach
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Team Power Ensures Consistent, Appropriate Services
By approaching the needs of our clients from every angle rather than from
the vantage point of one business unit or representative, we provide clients
with well-coordinated investment and trust strategies.
"Our strategy in CMG is simple: to bring customers on board and then provide
so thoroughly for their financial needs - all through life - that they never
leave."
Don McMullen
Executive Vice President and
Head of Capital Management Group
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CMG Strategy
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Helping Customers Meet Their Goals
Banks traditionally offer customers checking and saving accounts, auto loans
and mortgages. Commercially, they offer lockbox services and small-business
loans. These are valuable services - but they are aimed at only a few of the
many financial goals customers set for themselves.
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CMG Strategy
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Beyond The Basics
In addition to the basics, customers on the retail side also need help
with: educating their children, investing their money, planning for
retirement and managing their growing assets.
Commercial customers need help such as: investment management, trusteeship
and record-keeping for pension plans, 401(k)s and their own stock and bond
offerings.
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CMG Strategy
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Don't Get Sidetracked!
We don't want customers to get sidetracked - going somewhere besides
First Union to purchase the financial products and services they need.
CMG'S goal is to bring customers on board to First Union and provide for
their financial needs so thoroughly that they never leave.
CMG Aims To...
* Help customers achieve their financial goals by anticipating
their needs.
* Offer a full range of value-added products and individualized
services.
* Build customer satisfaction and loyalty along the way.
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CMG Market Potential
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Aging Baby Boomers
77 million baby boomers are hurtling toward age 50. They want to live
comfortably for 20 years after retiring, so they need to maximize their
earnings potential now - and single-digit returns don't cut it. In
addition, between $8 trillion and $12 trillion will transfer across
generations in the next 15 years - making the baby boomers the first
generation to inherit substantial wealth.
This segment of the market will need investment products, financial
planning, and trust and estate planning services over the next four decades.
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CMG Market Potential
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Poised To Take Advantage Of Opportunities
CMG has:
* An array of financial products as complete as any in the industry.
* A distribution network stretching from Connecticut to the
Florida Keys - the nation's most accessible.
* A large sales force that is both knowledgeable and motivated.
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CMG Market Potential
BUSINESS LINES
CAPITAL MANAGEMENT
INTEGRATED APPROACH
Facts And Possibilities
Fact: First Union has 11 million customers...
... If 5% choose to open a CAP Account, we will have
210,000 customers.
... If 20% purchase a First Union IRA, we will have
2 million customers.
... If 30% use our Brokerage services, we will be serving
more than 3 million customers.
Fact: Investors in the U.S. have placed $3 trillion in mutual funds...
... If 3% of that money is invested in First Union funds,
our mutual fund assets will top $90 billion.
Fact: Employees in the U.S. currently have invested $1.2 trillion in
401(k) plans...
... If 2% of that money is invested in a First Union plan,
our 401(k) assets will top $24 billion.
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Individual Services
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
PRIVATE BANKING
FINANCIAL PLANNING
PERSONAL TRUST
IRAs
CAP ACCOUNT
A Variety Of Individual Services
First Union offers customers an array of products and
individualized services to help them meet their
long-term financial goals. These include Private
Banking, Financial Planning, Personal Trust,
Individual Retirement Accounts (IRAs) and
CAP Accounts (Centralized Asset Management Accounts).
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Private Banking
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
PRIVATE BANKING
A Relationship Orientation
First Union's relationship-based orientation puts us in a good position to
serve these clients who tend to value regular personal contact. Private
bankers can leverage the power of other First Union products and services,
such as mutual funds, trust services and insurance.
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Private Banking
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
PRIVATE BANKING
Targeting The First Union "Frequent Flier"
Private banking services are aimed at the frequent users of all First Union
products and services - individuals, families, corporations, partnerships,
professional groups or foundations with a common financial focus.
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Private Banking
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
PRIVATE BANKING
Our Strong Local Presence Equals Quality And Convenience
First Union's Private Banking arm provides its services through a
powerful distribution network that includes nearly 2,000 First Union branches
along the eastern seaboard.
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Financial Planning
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
FINANCIAL PLANNING
A Brand-New, Value-Added Service For Customers
Every Capital Management area within First Union is moving toward a financial
planning approach. A pilot program is scheduled for spring 1996.
Market Potential: Baby boomers, twenty-somethings and soon-to-be
retirees - all of whom require guidance in setting and meeting their
financial goals.
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Financial Planning
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
FINANCIAL PLANNING
Offering Every Customer A Solid Financial Plan
First Union offers a complete array of products to help implement the changing
needs of individuals as they move through the various stages of their lives.
These products include traditional loans, checking and savings accounts
tailored to a client's individual needs, certificates of deposit, mutual
funds, credit cards and other loan products.
These products are backed by customized strategies in such areas as tax and
trust planning and investment management.
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Personal Trust
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
PERSONAL TRUST
More Than 50 Years Of Expertise In Investment Management And Trustee Services
We help individuals with a full range of wealth management needs such as
estate planning, trusteeship and investment management through 55 locations
with 275 officers, administrators and salespeople servicing personal trusts.
Our wide-ranging presence allows us to provide the personal attention so
necessary to discreet and effective trust services. Our merger with
First Fidelity establishes a strong presence for personal trust administration
in the Northeast.
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Personal Trust
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
PERSONAL TRUST
Personal Trust Potential
With the coming wealth transfer of between $8 trillion and $12 trillion across
generations in the next 15 years, there is great potential in this business.
With the aging of the population, there is an increasing need for the tax-wise
estate planning we provide.
First Union is well-positioned to serve these customers, as we are in four of
the top five wealth markets in the U.S. - the New York City area, the
Washington, D.C. area, the West Palm Beach/Boca Raton area and the
Hartford, Conn. area.
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IRA Products
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
IRAs
First Union Is A National Leader In Providing IRA Products
First Union is the nation's Number 1 bank-based provider of Individual
Retirement Account (IRA) products. We have nearly $9.6 billion in IRA
assets under management.
We have 650,000 IRA customers and more than 1.2 million accounts.
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IRA Products
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
IRAs
Impressive IRA Asset Growth
We have averaged 20% annual asset growth in IRAs in the past decade.
Historical Growth of IRA Assets, 1985-1995
(GRAPH)
($ in millions)
85 230
86 458
87 622
88 791
89 941
90 1,593
91 2,048
92 2,603
93 5,099
94 5,393
95 9,600
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IRA Products
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
IRAs
IRA Potential: Total Choice In Self-Directed IRAs
First Union ties IRAs to our capital management capability, making it easy
for customers to have all their IRAs in one place, whether they want their
IRAs in CDs, mutual funds, brokerage or other investment products.
The market for this product is likely to expand with the aging of the
population along with the anticipated lifting of the federal caps and limits
from IRAs. We are well positioned to make the most of this potential.
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
A Complete Range Of Financial Service In A Single Account
First Union's CAP Account is an exciting asset management product that
combines checking, money market and brokerage functions into one account.
This centralized investment management approach offers customers simplicity,
convenience and greater earnings power on their liquid assets.
If 5% of our 11 million customers chose to open a CAP Account, we will have
210,000 customers.
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
A Complete Range Of Financial Service In A Single Account
Growth of CAP Accounts
(GRAPH)
89 3,119
90 3,443
91 4,158
92 14,586
93 18,868
94 81,167
95 147,000
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
Consumer Demand Is Fueling Strong Growth In CAP Assets
First Union currently has more than 147,000 CAP Accounts under management,
representing more than $11.7 billion in assets - more than the total asset
value of our company 10 years ago. These numbers grow daily as new customers
bring assets to First Union in search of a better banking and investment
product.
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
Consumer Demand Is Fueling Strong Growth In CAP Assets
Growth of CAP Account Assets
(GRAPH)
($ in billions)
89 .4
90 .5
91 .7
92 2.0
93 2.4
94 6.5
95 11.7
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
Consumer Demand Is Fueling Strong Growth In CAP Assets
Breakdown of CAP Account Assets Outstandings
(PIE CHART)
as of 12/31/95
($ in millions)
Insured Deposits 5,763
Tax-Exempt 406
Treasury 1,046
Money Market 615
Securities 3,828
Mutual Funds 53
Total Outstandings 11,713
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
A Quality Program For Our Priority Customers
To qualify for a CAP Account, a minimum balance of $15,000 in any combination
of cash, stocks, bonds, mutual funds, and/or other securities must be
maintained at First Union. In return, customers receive a variety of
advantages over traditional bank and investment accounts.
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CAP Accounts
BUSINESS LINES
CAPITAL MANAGEMENT
INDIVIDUAL SERVICES
CAP ACCOUNTS
A Quality Program For Our Priority Customers
CAP Account Features:
* Automatic daily sweep of * Special CD rates
assets
* Unlimited check writing * Free safe deposit box
* Single, consolidated * Personal Investment
monthly statement Counselor
* Overdraft protection * 24-hour toll-free telephone
assistance and information
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Mutual Funds
BUSINESS LINES
CAPITAL MANAGEMENT
MUTUAL FUNDS
First Union Offers Mutual Funds To Match Virtually Every Investment Goal
Since First Union introduced its proprietary mutual fund in 1985, we have
seen strong growth in consumer demand for these products, with mutual fund
assets growing to over $10 billion in 1995. First Union now offers its
customers access to a complete range of mutual funds through our family of
Evergreen Funds.
The Evergreen Funds include 31 proprietary mutual fund offerings covering the
entire risk-to-reward spectrum, allowing our clients to augment their personal
account investment strategies or build comprehensive investment portfolios by
strategically combining appropriate funds.
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Mutual Funds
BUSINESS LINES
CAPITAL MANAGEMENT
MUTUAL FUNDS
First Union Offers Mutual Funds To Match Virtually Every Investment Goal
Breakdown of Evergreen Funds Assets Under Management by Market Sector
as of 12/31/95
($ in millions)
International Growth 148
Domestic Growth 928
Growth & Income 4,569
Income 779
Tax-Free Income 519
Money Market 3,539
Total Assets 10,482
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Mutual Funds
BUSINESS LINES
CAPITAL MANAGEMENT
MUTUAL FUNDS
All Of Our Evergreen Funds Share A Focus On Quality
The well-respected Lieber & Co. serves as investment adviser for the
Evergreen Funds. Of the 31 funds in the Funds family, eleven currently
enjoy Morningstar ratings of 4 or 5 stars. And the entire family of funds
made it to the top ten of Barron's first-ever ranking of America's
mutual-fund groups, in February 1996.
All funds, regardless of objective, share a focus on quality and preservation
of shareholder capital. Careful attention is paid to risk management,
and all funds are managed within the stated risk-to-reward parameters outlined
in each prospectus.
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Mutual Funds
BUSINESS LINES
CAPITAL MANAGEMENT
MUTUAL FUNDS
All of Our Evergreen Funds Share a Focus on Quality
Fund Star Rating
The Evergreen Funds: Evergreen Fund ****
Morningstar Ratings Evergreen American Retirement Fund ****
as of 12/31/95 First Union Balanced Fund ****
First Union Fixed Income Fund ****
Evergreen Florida High Yield Muni Fund *****
Evergreen Foundation Fund *****
Evergreen Growth & Income Fund ****
First Union Managed Bond Fund ****
Evergreen Short-Intermediate Municipal Fund ****
Evergreen Short-Intermediate Municipal Fund (CA) ****
First Union Value Fund ****
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Mutual Funds
BUSINESS LINES
CAPITAL MANAGEMENT
MUTUAL FUNDS
A Superior Distribution Network Delivers Our Funds To A Wide Client Base
Mutual funds offer individual investors a number of financial benefits
useful in protecting their assets and growing their capital for the long-term.
First Union is committed to bringing these advantages to our broader customer
base. As a result, we have become experts at training branch personnel in
mutual funds sales. Since the beginning of 1994, over 2,700 branch employees
have been licensed to sell mutual funds.
A new Systematic Investment Plan lets customers automatically invest a set
amount in selected Evergreen Funds at regular intervals. No initial
investment is required.
Investors in the U.S. have placed $3 trillion in mutual funds. If 3% of that
money is invested in First Union's Evergreen Funds, our mutual funds assets
will top $90 billion.
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Insurance Products
BUSINESS LINES
CAPITAL MANAGEMENT
INSURANCE PRODUCTS
We Carry A Complete Range Of Credit And Supplemental Life Products
At First Union, we carry a complete range of credit and supplemental
life insurance products to meet the diverse needs of our clients. We are
able to provide a variety of competitive fixed and variable annuity plans
for tax-deferred savings and an array of life insurance products to satisfy
business, personal and estate planning objectives.
We are one of a few financial institutions allowed to establish our own agency
and help customers with insurance needs. This was made possible through
our acquisition of a licensed insurance company more than 30 years ago and we
were "grandfathered" when laws changed to restrict bank involvement in the
industry.
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Insurance Products
BUSINESS LINES
CAPITAL MANAGEMENT
INSURANCE PRODUCTS
New Products Open New Horizons For First Union And Our Clients
Annuities bridge a gap by offering customers an investment option between
the security of a certificate of deposit and the yield of a mutual fund.
The appeal of annuities to our client base caused us to mount a major
initiative to increase our product line in this area. Today, we offer
consumers a choice of insurance-based investment products and have more
under development for introduction within the next two years.
First Union has nearly 1,700 bank branch employees who are licensed to sell
annuity products.
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Insurance Products
BUSINESS LINES
CAPITAL MANAGEMENT
INSURANCE PRODUCTS
Pioneering New Products To Meet Growing Consumer Demand
Our momentum in the insurance area recently culminated in the introduction
of a proprietary fixed annuity product in the first quarter of 1996. This
new product provides investors with access to potentially higher market
returns backed by the safety net of a guaranteed minimum yield.
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Investment Management
BUSINESS LINES
CAPITAL MANAGEMENT
INVESTMENT MGMT
Investment Services Meet The Needs Of Today's Investors
First Union offers a full range of investment services through our
Capital Management Group, which currently oversees more than $45 billion
in assets under management.
These services are available to individuals seeking private account management
of their equity and fixed income assets as well as to corporations and
institutions seeking management of their capital and cash accounts. A
special unit provides pension fund management to our corporate and
institutional clients.
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Investment Management
BUSINESS LINES
CAPITAL MANAGEMENT
INVESTMENT MGMT
Our Equity Value Orientation Is Well-Suited For Long-Term Investors
First Union takes an equity value orientation approach to stock market
investing. We search out companies with strong fundamentals that are
currently undervalued in the marketplace as measured by a variety of
quantitative factors.
This conservative philosophy is well-suited for companies and institutions
seeking responsible management of their long-term assets. It is also a good
match for individuals looking to protect and grow their wealth over time in
order to reach such important goals as a secure retirement or funding a
child's college education.
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Investment Management
BUSINESS LINES
CAPITAL MANAGEMENT
INVESTMENT MGMT
Our Fixed Income Services Take Advantage Of First Union's Strong
Market Presence
First Union is a market maker in a number of fixed income securities as well
as a highly active participant in all bond markets. These activities provide
us with a window on market conditions and contribute to our effectiveness as
a fixed income money manager.
Our investment professionals are proficient in a variety of investment styles.
We offer management of both taxable and tax-exempt portfolios. Fixed income
strategies are tailored to each client's individual needs, including specific
yield curve or risk-to-return requirements.
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Brokerage
BUSINESS LINES
CAPITAL MANAGEMENT
BROKERAGE
Able To Serve Customers From Main Street To Wall Street
First Union has the 8th largest broker sales force in the nation. We have
101 full-service brokerage locations, with over 2,700 licensed employees.
Our success comes from our focus on individuals and middle-market companies
in America's fastest-growing regions. We back this focus with a strong
emphasis on lower costs and customer service.
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Brokerage
BUSINESS LINES
CAPITAL MANAGEMENT
BROKERAGE
Serving Our Investment Management And Self-Managed Clients
First Union provides brokerage services to its Investment Management clients
as well as individuals and companies trading on their own behalf.
Our direct access to traders on the floors of all major exchanges allows us
to quickly implement client orders, enhancing our ability to complete trades
within the requested terms.
If 30% of our 11 million customers use our Brokerage services, we will be
serving more than 3 million customers.
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Brokerage
BUSINESS LINES
CAPITAL MANAGEMENT
BROKERAGE
Service Can Make A Difference - We Know Because We Make A Difference
Every Day
First Union offers investors of all sizes an economical way to complete
their investment trades. Volume discounts are available for frequent
investors, as are other pricing plans.
Regardless of order size, all customers benefit from outstanding customer
service made possible by our relationship-based approach. Trade orders can
be placed over the phone or by computer, and confirmations are sent out
promptly - providing our clients with the information they need to maintain
control over their trading strategies.
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Institutional Services
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
PENSION FUND MGMT
CORPORATE TRUST
401(k)
A Variety Of Institutional Services
First Union offers its corporate and institutional clients a variety of
pension fund and trust services. These include Pension Fund Management,
Corporate Trust and 401(k) Services.
Our capabilities in this area are significantly enhanced by superior
technology. Years of development effort and investment have paid off in
state-of-the-art hardware and advanced proprietary software systems that
facilitate portfolio and account management, date processing and reporting
services.
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Pension Fund Management
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
PENSION FUND MGMT
We Specialize In Managing Retirement Assets For Midsize Organizations
First Union offers pension and fund investment management services to
its corporate and institutional clients. We specialize in providing
midsize companies, practices and partnerships of all sizes with the
highest-quality, institutional-caliber investment expertise combined
with a high-degree of personal attention and tailored portfolio terms.
We are particularly experienced in the growing field of 401(k) management
and can assist clients in planning and implementing a plan of their own.
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Pension Fund Management
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
PENSION FUND MGMT
We Can Accommodate The Needs Of Qualified Or Self-Directed Plans
First Union offers investment services for all types of plans, including
qualified and self-directed pension and profit-sharing programs. We
take a proactive approach to plan structure and asset management to ensure
full compliance with all applicable regulations. Our value-oriented equity
approach is designed to promote long-term performance and is well-suited
to the management of retirement assets.
Clients enjoy an unusual degree of direct contact with our portfolio
managers, remaining in command of their pension fund strategies without
worrying about daily management or administrative responsibilities.
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Pension Fund Management
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
PENSION FUND MGMT
First Union Also Provides All Services Related To Plan Design
And Administration
First Union offers its pension fund clients the choice of selecting services
on a consulting basis or choosing a bundled approach.
We can assist in the structuring of pension profit-sharing plans as well
as administration, recordkeeping and reporting.
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Corporate Trust
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
CORPORATE TRUST
Premier Provider Of Transfer Agent Services
* First Union's Corporate Trust area had more than $90 billion in
outstandings in 1995.
* We are one of the top ten Corporate Trust divisions in the U.S.,
with more than 7,000 bond issues (paying agent or trustees).
* We provide shareholder services for 250 corporate clients.
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Corporate Trust
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
CORPORATE TRUST
Complete Fiduciary Services For A Variety Of Corporate Needs
First Union provides a full range of fiduciary services to corporations,
including administrative, trustee and investment expertise pertaining
to corporate escrow and custody accounts and deferred compensation plans.
We are also a premier provider of transfer agents services for public
companies.
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Corporate Trust
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
CORPORATE TRUST
Our Personalized Approach Results In More Effective Corporate Strategies
First Union's regionally focused approach is a good fit with middle-market
companies seeking a proactive adviser as well as an administrator.
We can assist companies in managing their shareholder communications and
recordkeeping, as well as help set up and implement compensation, bonus
and profit sharing plans that maximize tax savings and create incentives
for long-term service among valued employees.
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401(k) Services
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
401(k)
First Union Specializes in Trust Services for 401(k)s and other
Pension Plans
First Union's Institutional Trust area offers a complete range of trust and
administrative services to employee benefit plans, including defined
benefit, profit sharing and 401(k) plans.
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401(k) Services
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
401(k)
We Specialize In Managing Retirement Assets For Midsize Organizations
401(k) Asset Growth,
1990-1995
Asset Base (GRAPH)
($ in millions) Number of Plan
Year Participants
1990 20
1991 105 90 1,200
1992 295 91 13,506
1993 710 92 24,757
1994 907 93 68,842
1995 2,163 94 87,321
95 120,000
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401(k) Services
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
401(k)
We Offer A Complete Range Of Customized Services
When it comes to trustee and recordkeeping services, First Union offers
its clients clearly superior technological capabilities that enhance our
ability to track plan data and account information. Using our technological
prowess, we provide services that satisfy the information needs of
participants at an affordable rate for the sponsor.
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401(k) Services
BUSINESS LINES
CAPITAL MANAGEMENT
INSTITUTIONAL SVCS
401(k)
Protecting The Long-Term Interests Of Sponsors And Participants
In line with our relationship-based approach to financial services, we
view our role as plan administrator in very proactive terms. We have
developed a daily valuation product that has received good customer
rating scores from participants as well as outside, third-party vendors.
Employees in the U.S. have invested $1.2 trillion in 401(k) plans. If 2%
of that money is invested in a First Union plan, our 401 (k) assets will
top $24 billion.
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Visa Card, First Union logo upper right)
Credit Card Products
First Union's Credit Card
Business Is Growing And Is
Well-Positioned For The Future
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
DEBIT CARDS
SMART CARDS
Superior technology, outstanding service and innovative products
have combined with rising consumer demand to support strong
growth in First Union's credit card business. In fact, managed card
receivables increased 36% in 1995 alone, with the number of card
accounts rising by 20%.
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Visa Card, First Union logo upper right)
Credit Card Products
First Union's Credit Card
Business Is Growing And Is
Well-Positioned For The Future
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
DEBIT CARDS
SMART CARDS
"Card products hold the key to customer relationships and have the potential to
offer unparalleled convenience and access to First Union customers. By
committing resources and talent to the development of new technology, we are
building a premier financial services organization without geographic limits
or boundaries."
Fred Winkler
Executive Vice President
Card Products Division
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Visa Card, First Union logo upper right)
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National Solicitation
Our Growth Has Been
Accompanied By Better-Than-
Average Credit Quality
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
MARKET STRATEGY
LOOKING AHEAD
At the end of 1993, First Union was ranked the 21st largest issuer in the
country; by the end of 1995, we had risen to 17th. Our cost to acquire
new accounts and our credit quality are better than national averages:
First Union posted a VISA and MasterCard charge-off rate of 3.5% as
of December 31, 1995.
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Visa Card, First Union logo upper right)
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National Solicitation
Our Growth Has Been
Accompanied By Better-Than-
Average Credit Quality
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
MARKET STRATEGY
LOOKING AHEAD
Top 20
Bank Card Issuers
By Outstandings
December 31, 1995
($ in billions)
13 BancOne 9.7
14 Bank Of America 9.2
15 Bank of New York 8.6
16 NationsBank 7.4
17 First Union 5.4
18 Wells Fargo 4.9
19 Wachovia 4.5
Source: The Nilson Report
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Visa Card, First Union logo upper right)
Overview
Our Goal:
Increased Market Share In
The Credit Card Industry
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
First Union is committed to becoming a major player in the credit card
industry by 1) providing the best in features and service; 2) offering
competitive prices and a wide array of products; and 3) developing the
most advanced systems in the industry for targeted marketing and
application processing. Growth in our card receivables tells us that this
strategy is working.
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Visa Card, First Union logo upper right)
Overview
Our Goal:
Increased Market Share In
The Credit Card Industry
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
First Union's
Credit Card Portfolio
Growth of
Managed Receivables
($ in millions)
(line graph appears here with the following plot points:)
12/93 3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95
2,160 2,061 2,836 3,237 3,988 4,078 4,529 4,875 5,444
Note: Managed Card Receivables include $2 billion of receivables that First
Union securitized and sold.
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Visa Card, First Union logo upper right)
Overview
Our Strengths: Superior
Products & Service
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
First Union issues Visa and MasterCards - the most popular card
brands in the world - to consumers across the nation. Competitive
rates and fees and ATM access are among the features valued by
our customers.
24-hour account information is provided through our Customer
Relationship Center, which can handle virtually any request within
minutes. Superior technological systems retrieve complete account
information at the start of each phone call and transfer it intact, if
needed, to speciality areas for immediate response.
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Visa Card, First Union logo upper right)
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Overview
Our Strengths: Superior
Products & Service
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
First Union's
Credit Card Portfolio
Chart shows growth in
the number of accounts
(in millions)
(line graph appears here with the following plot points:)
12/93 3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95
2,171 2,250 2,718 2,987 3,157 3,329 3,384 3,717 3,794
<PAGE>
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Visa Card, First Union logo upper right)
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Looking Ahead
The NOVA Partnership:
A Strategic Alliance
For The Future
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
OVERVIEW
We are augmenting our consumer card efforts with merchant processing
initiatives. First Union now holds a significant equity position in NOVA
Information Systems, Inc., a leading merchant processing company. The
NOVA alliance creates the 8th largest merchant processor in the nation,
with approximately $12 billion in bank card sales processed annually
and more than 90,000 participating merchants.
This partnership will allow us to increase our returns from merchant
processing while keeping processing costs down.
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Visa Card, First Union logo upper right)
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Market Strategy
High Quality Portfolio
*Strong Retention
*Momentum
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
MARKET STRATEGY
The credit card industry has become fiercely competitive in the 1990s.
Though millions of Visa cards & MasterCards have been issued worldwide,
credit cards still account for only a small percentage of consumer spending -
leaving plenty of room for expansion. To take advantage of this opportunity,
however, companies must offer value and target their markets carefully.
First Union focuses its solicitation efforts on high credit quality consumers
with revolving balances. These consumers recognize the value of the
competitive rates and the special features and promotions we offer. We retain
cardholders by providing the highest quality customer service - a trait
identified by consumers as the single most important reason to choose a
credit card company.
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Visa Card, First Union logo upper right)
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Market Strategy
High Quality Portfolio
*Strong Retention
*Momentum
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
MARKET STRATEGY
Components of Total
Consumer Installment Debt
($ in billions)
(graph appears here with the following plot points:)
<TABLE>
<CAPTION>
68 70 72 74 76 78 80 82 84 86 88 90 92 94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
auto 34,034 36,515 47,261 54,492 65,880 97,373 111,674 123,549 171,061 246,394 284,189 287,011 257,072 322,001
revolving 1,955 4,804 9,263 13,204 16,313 44,273 54,484 65,870 98,273 134,943 172,363 223,811 255,884 333,414
other 53,227 62,225 73,237 94,664 102,915 116,737 130,780 133,312 166,888 190,148 200,936 229,759 218,124 247,142
total 89,216 103,544 129,761 162,360 185,107 258,382 296,937 322,731 436,221 571,486 657,488 740,581 731,080 902,557
</TABLE>
Source: Federal Reserve
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Visa Card, First Union logo upper right)
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Market Strategy
Innovative Features Attract
New Cardholders -
And Lock In The Loyalty
Of Existing Customers
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
MARKET STRATEGY
First Union offers highly competitive card features and relies on
innovations in this area to gain attention and sustain new account
momentum. For example, we recently rolled out a unique "Time
Is Money" plan that allows consumers to earn their finance charges
back over time as a reward for account longevity.
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Visa Card, First Union logo upper right)
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Market Strategy
Lifestyle Marketing
Efforts Create
Enthusiasm and Loyalty
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
MARKET STRATEGY
First Union also relies on lifestyle marketing to attract new accounts.
In the affinity card area, our partners include colleges and professional
sports teams from across our market.
We also recently unveiled a highly successful "Pick Your Picture Card"
campaign that allows consumers to choose from hundreds of specially
designed theme cards featuring striking graphics of animals, sports and
other interests.
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Visa Card, First Union logo upper right)
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Looking Ahead
A New Century
Offers Opportunity
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
LOOKING AHEAD
As we approach the turn of the century, the use of stored value, debit
and credit cards is expected to grow and provide a convenient
alternative to cash. To take advantage of this growth, First Union will
continue to invest resources in card products over the next decade.
We intend to take the lead in developing alternative delivery channels
and are always searching for new talent, technology, and possible
outsourcing partnerships to achieve our objectives.
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Visa Card, First Union logo upper right)
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Looking Ahead
A New Century
Offers Opportunity
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
LOOKING AHEAD
Growth Rates
Of Consumer
Installment Credit
(%)
(Base Year 1978)
(graph appears here with the following plot points:)
78 80 82 84 86 88 90 92 94
Auto 100% 134% 148% 205% 296% 341% 345% 309% 387%
Revolving 100% 144% 174% 260% 357% 456% 592% 677% 882%
Other 100% 124% 126% 158% 180% 191% 218% 207% 234%
Source: Federal Reserve Data
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people walking towards it appears in upper left corner along with a First
Union Visa Card, and a First Union Visa Card appears in the lower center part
of page)
Looking Ahead
Alternative Delivery
Channels Provide Increasing
Points Of Access
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
LOOKING AHEAD
Bank Via The Internet
Internet Address: URL:http://www.firstunion.com
TODAY
Apply for a credit card; Apply for a consumer loan;
Apply for a home equity loan; Manage your
commercial cash accounts; Check your IRA balance.
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people walking towards it appears in upper left corner along with a First
Union Visa Card, and a picture of a house appears in the lower left corner)
Looking Ahead
Alternative Delivery
Channels Provide Increasing
Points Of Access
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
LOOKING AHEAD
Bank Via The Internet
Internet Address: URL:http://www.firstunion.com
APRIL 1996
Check deposit account balance; Check savings account balance;
Check credit card balance; Check consumer loan status;
Order Checks; Get an interim account statement.
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people walking towards it appears in upper left corner along with a First
Union Visa Card, and a picture of a bill appears in the lower middle of page)
Looking Ahead
Alternative Delivery
Channels Provide Increasing
Points Of Access
BUSINESS LINES
CREDIT CARD PRODUCTS
NATIONAL SOLICITATION
LOOKING AHEAD
Bank Via The Internet
Internet Address: URL:http://www.firstunion.com
DECEMBER 1996
Pay bills on-line; Transfer money between accounts.
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Visa Card, First Union logo upper right)
(background photo of a Visa CheckCard on entire page)
Debit Cards
Responding
To Strong
Consumer Demand
BUSINESS LINES
CREDIT CARD PRODUCTS
DEBIT CARDS
OVERVIEW
MARKET STRATEGY
LOOKING AHEAD
First Union is a leader in the dramatically growing field of debit cards.
Unlike credit cards, debit cards deduct the cost of each purchase directly
from the cardholder's checking account, functioning much like a plastic
check. 70% of all debit card owners report using the card as a frequent
replacement for cash or checks.
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Visa Card, First Union logo upper right)
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Overview
First Union CheckCard:
An Idea Whose
Time Has Come
BUSINESS LINES
CREDIT CARD PRODUCTS
DEBIT CARDS
OVERVIEW
The popularity of debit cards is fueled in part by the public's widespread
acceptance of ATM cards. By expanding the concept of direct debits from
a cardholder's checking account beyond ATM, First Union's CheckCard
helps contribute to growing acceptance of debit cards.
As an indication of their popularity, between October 1, 1994, and
September 30, 1995, Visa added 9.3 million debit card accounts while
MasterCard added 2.5 million.
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Visa Card, First Union logo upper right)
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Overview
First Union CheckCard:
An Idea Whose
Time Has Come
BUSINESS LINES
CREDIT CARD PRODUCTS
DEBIT CARDS
OVERVIEW
(line graph)
ATM Volume At First Union Growth Of
ATMs by FUNB Cardholders FUNB Check Cards
($ in millions) (%)
70 109 112 50 100
93 94 95 93-94 94-95
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Visa Card, First Union logo upper right)
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Market Strategy
Debit Cards: A Key
Financial Tool For
Today's Mobile Society
BUSINESS LINES
CREDIT CARD PRODUCTS
DEBIT CARDS
MARKET STRATEGY
The extraordinary acceptance by consumers is an indication that
debit cards are considered a useful financial tool regardless of other
card holdings.
We intend to capitalize on this demand by marketing CheckCard
to existing credit card customers. Our extensive branch and ATM
network gives us a significant competitive advantage.
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Visa Card, First Union logo upper right)
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Looking Ahead
A More Convenient
Alternative To Cash
BUSINESS LINES
CREDIT CARD PRODUCTS
DEBIT CARDS
LOOKING AHEAD
Because debit cards are convenient and cost effective, they are destined
to play a major role in society going forward.
Since cash and checks still account for 92% of U.S. point-of-sale dollar
volume, the potential for debit card growth is great. In addition, the
two primary outlets for debit card use today are gas stations and super-
markets, leaving plenty of room for expansion in terms of merchant
acceptance and use.
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Visa Card, First Union logo upper right)
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Looking Ahead
Increasing
Access Points
BUSINESS LINES
CREDIT CARD PRODUCTS
DEBIT CARDS
LOOKING AHEAD
We expect a significant increase in debit card access points over the next
few years. Partly through strategic alliances with other companies, we
intend to integrate the use of our debit card products with other
traditional and smart card uses.
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Visa Card, First Union logo upper right)
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Smart Cards
The Most Promising
Card Product
Of The Future
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
OVERVIEW
MARKET STRATEGY
LOOKING AHEAD
First Union is an industry pioneer in the development of "smart" cards
because we believe they offer consumers unequaled convenience and control.
"Smart" cards, also known as stored value cards, look like a credit
card but contain an embedded microchip that can hold cash value.
Value is automatically deducted from the card at point of sale. When
a disposable stored value card has been exhausted, it can be kept as
a collector's item or thrown away. With a rechargeable "smart" card,
value can be added or deducted from a First Union customer's
account at bank branches or at special ATMs.
<PAGE>
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Visa Card, First Union logo upper right)
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Overview
Stored-Value Cards:
Offering Unequaled
Convenience & Control
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
OVERVIEW
Stored value cards allow consumers to carry spending power without
carrying a lot of cash and enable merchants to accept cards without
worrying about credit approval or handling cash in the store.
Disposable stored value cards can be purchased by anyone, regardless of
bank affiliation or credit history. Convenience stores, gas stations, fast
food restaurants and vending machines are among the merchants best
suited for stored value acceptance.
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Visa Card, First Union logo upper right)
(background photo on entire page, picture of First Union stored value card)
Overview
A Major Effort
Is Well Under Way
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
OVERVIEW
In March 1995, First Union spearheaded the first ever widespread
stored value card program when it announced its First Union VisaCash
program targeting Atlanta's Olympic games and beyond. We have
partnered with major national merchants to advance the convenience
and acceptance of stored value cards in Atlanta and expect to issue
up to 1 million cards by the summer of 1996.
<PAGE>
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Visa Card, First Union logo upper right)
(background eight First Union Smart Cards move around the screen, joining
together to form the image of a jaguar, picture of First Union stored
value card)
Market Strategy
Capitalizing On
Strong Merchant &
Consumer Affinity
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
MARKET STRATEGY
First Union's marketing efforts in this area capitalize on bringing
together two key market segments: 1) consumers seeking the safety and
convenience of stored value cards, and 2) merchants who welcome the
credit certainty and lower transaction costs.
Sporting events have proved ideal for unrolling the technology as they
bring together receptive consumers and merchants in a contained
environment.
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Visa Card, First Union logo upper right)
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Market Strategy
The Spot Card:
A Successful Stored
Value Card In Jacksonville
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
MARKET STRATEGY
August 18, 1995, was a day of firsts for fans of the Jacksonville Jaguars
National Football League team. They witnessed the first home game of the
Jaguars in their newly renovated stadium and participated in the
first stored value card program ever to be introduced at a major sports
event. Using their aptly named "Spot Card," participating fans could
purchase food and other merchandise throughout the complex.
This achievement capped a 2-year effort by First Union. We provided all
services, including program and card design, marketing, merchant procedures,
and terminal and technical system design. Stadium outlets included pedestal
terminals as well as special belts linked to hand-held terminals that enabled
mobile vendors to accept the Spot Card.
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Visa Card, First Union logo upper right)
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Market Strategy
A Successful First
Season That Exceeded
All Expectations
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
MARKET STRATEGY
By the end of the football season, the "Spot Card" program was a
proven success. Over 600 different pieces of equipment were installed to
handle the activity from the more than 20,000 Spot Cards issued.
All together, First Union's Spot Card program generated more than
$700,000 in sales and comprised nearly 10% of all concession and novelty
sales for the year. These sales totals were double all previous estimates.
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Visa Card, First Union logo upper right)
(background photo on entire page, picture of First Union stored value card)
Looking Ahead
Capitalizing On A
Clear Competitive Edge
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
LOOKING AHEAD
The success of the Spot Card program in Jacksonville and the First
Union VisaCash effort in Atlanta have both focused tremendous
attention on our stored value capabilities and created opportunities for
First Union in this area.
In addition, we have embarked on strategic alliances with other
companies to encourage the widespread acceptance of stored value
cards across the U.S. For example, First Union has formed a
partnership with Diebold to retrofit all First Union ATMs for use in
restoring value on our smart cards, the first step in a campaign to
make stored value cards a viable, convenient alternative for everyone.
<PAGE>
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Visa Card, First Union logo upper right)
(background photo on entire page, picture of First Union stored value card)
Looking Ahead
A New Concept Debuts
Before The Eyes Of The World
BUSINESS LINES
CREDIT CARD PRODUCTS
SMART CARDS
LOOKING AHEAD
First Union has scheduled a massive stored value roll-out of First Union
VisaCash in the Atlanta area to coincide with the opening of the 1996
Olympics. Our stored value program will enable attendees to purchase
food, mementos and services throughout the Olympic complex as well
as at area merchants that display the VisaCash logo.
Following the Olympics, we intend to introduce stored value cards
in major metropolitan areas around the Southeast, with and eye toward
distribution throughout the South by 1998. The priority we place
on these efforts is an indication of our conviction that stored value cards
are the premier cash alternative of the future.
<PAGE>
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First Union Logo upper right)
First Union Mortgage Lending
First Union Mortgage
Lending Services Build
Foundations For Living
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP
HOME EQUITY BANK
First Union Mortgage Services includes First Union Mortgage
Corporation (FUMC) and First Union Home Equity Bank, N.A.
(FUHEB). Both organizations are dedicated to providing quality service
and solid loan products to customers throughout the United States.
<PAGE>
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First Union Logo upper right)
(Photo of Jim Maynor Lower left)
First Union Mortgage Lending
First Union Mortgage
Lending Services Build
Foundations For Living
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP
HOME EQUITY BANK
"First Union Mortgage Lending is focused on fulfilling
the dream of home ownership and enriching that
experience through lifetime partnerships with our
customers. Pursuant to this vision, we offer a product
selection as complete as any in the mortgage industry.
We intend to leverage our internal systems and people
to create new business relationships and to continue
to search for new means to fuel loan and service fee
income growth."
Jim Maynor
President, First Union
Mortgage Corporation
<PAGE>
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First Union Logo upper right)
First Union Mortgage Corporation
Nationwide Marketing
Strategy Keeps
First Union Mortgage
Corporation In The Lead
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP
First Union Mortgage Corporation offers various first mortgage programs
marketed through our branch network and 83 additional mortgage
origination offices. First Union continues to pursue partnerships with
Fortune 1000 companies and maintains relationships with Northern Telecom,
PepsiCo, General Mills, GTE and Kraft, to name a few.
At December 31, 1995, First Union is ranked as the 9th largest servicer
of mortgage loans in the United States with a servicing portfolio of
$51.5 billion.
<PAGE>
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First Union Logo upper right)
First Union Mortgage Corporation
Nationwide Marketing
Strategy Keeps
First Union Mortgage
Corporation In The Lead
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP
Ranking of the
top 10 mortgage
servicing companies
12/31/95
($in billions)
Rank Servicer Dec. 95 Volume
1 Norwest/Prudential Mortgage 147.00
2 Countrywide Funding 132.14
3 Chase Manhattan/Chemical 128.36
4 GE Capital Mortgage Corp. 109.50
5 Fleet Mortgage Group 103.61
6 NationsBank & Affiliates 81.43
7 GMAC Mortgage Group 65.22
8 BankAmerica 63.12
9 First Union Mortgage Corp. 51.50
10 Home Savings of America 49.56
Source: Inside Mortgage Finance, 1/26/96
<PAGE>
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First Union Logo upper right)
Recent Activity
Production And
Loan Servicing
Continue To Grow
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP
1995 was a great year for profitability, servicing, and overall improvements
at First Union Mortgage Corporation. Accomplishments for the year included:
-Total residential origination volume of $2.7 billion.
-Service portfolio up to $51.5 billion, nearly 51% growth
from 1994, with ten-year annual growth rate at 22%.
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First Union Logo upper right)
Recent Activity
Production And
Loan Servicing
Continue To Grow
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP.
Mortgage Loan
Servicing Portfolio
Volume of
Loans Serviced
12/31/95
($ in billions)
(chart graph)
8.2 9.8 10.8 10.6 15.3 19.4 24.1 24.4 34.8 34.2 51.5
85 86 87 88 89 90 91 92 93 94 95
Note: 22.6% annual rate of return over this ten year period.
*Includes $10.7 billion from First Fidelity portfolio.
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First Union Logo upper right)
Future Growth
Product Diversity And
Quality Service Are The Keys
To Long-Term Growth
BUSINESS LINES
MORTGAGE LENDING
MORTGAGE CORP
The focus of First Union's Residential Lending Team in 1996 is to lower
origination cost and increase market share within our banking
region. During 1995, the cost per unit of origination fell by over 50% as
volume increased and costs were reduced. Future growth will depend
on FUMC's ability to reach out to new customers with a variety of products
while continuing to maintain and grow its mortgage servicing
portfolio with quality loans.
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First Union Logo upper right)
First Union Home Equity Bank, N.A.
BUSINESS LINES
MORTGAGE LENDING
HOME EQUITY BANK
An Extensive Branch Network,
Active Wholesale Unit And
Prominent Affinity Relations
Help Increase Our Second
Mortgage Business
First Union Home Equity Bank provides equity financing to more than
100,000 homeowners throughout the nation. FUHEB operates 141
locations in 35 states and a central processing unit that provides home
equity loans in 13 additional states. FUHEB also purchases and sells
loans anywhere in the U.S. through its Wholesale Unit.
FUHEB offers second mortgage loans with fixed or adjustable rates as well
as lines of credit. FUHEB has established affinity relationships with
USAA, AFBA and two credit unions.
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First Union Logo upper right)
Recent Activity
Growth In Loan Outstandings
Continues To Increase As
Consumers Seek Alternative
BUSINESS LINES
MORTGAGE LENDING
HOME EQUITY BANK
FUHEB recently concluded one of its best years. Record-breaking
financial performance in 1995 included $1.228 billion in loan volume
and a loan growth rate of 25% or $600 million. Since 1987, loans have
increased from $727 million to $3 billion. FUHEB's goal is to increase
loans to $5 billion by 2000, indicating a 13.7% compound annual
growth rate.
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First Union Logo upper right)
Recent Activity
Growth In Loan Outstandings
Continues To Increase As
Consumers Seek Alternative
BUSINESS LINES
MORTGAGE LENDING
HOME EQUITY BANK
First Union Home
Equity Bank
Total Loans
Outstanding
Period End
Outstandings
($ in billions)
Percentage
Growth
Since 1990
(line graph starts)
1.4 1.6 1.8 2.0 2.3 3.0
14.3 28.6 42.9 64.3 114.3
90 91 92 93 94 95
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First Union Logo upper right)
Future Growth
Tremendous Market Potential
For Second Mortgages
Leads Strategic Planning
BUSINESS LINES
MORTGAGE LENDING
HOME EQUITY BANK
Less than 25% of the population has a second mortgage, and there is an
estimated $3.8 trillion in homeowner's equity in the national housing
market. FUHEB's potential, if it captures 0.5% of the national market,
is $19 billion in loan growth.
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business people along right hand side, First Union logo in upper right
hand corner)
Banking Services
BUSINESS LINES
BANKING
COMMERCIAL BANK
CONSUMER BANK
STATE BANKS
First Union Is One Of America's Strongest Banking Organizations
Banking has long been a core service of First Union. Today, through
a far-reaching branch network, our state banks offer a full range of
banking products to both consumers and corporate clients. We are
known for our innovative banking services, convenient delivery
channels and a high level of personal attention to client needs.
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business people along right hand side, First Union logo in upper right
hand corner, picture of Ben C. Maffitt III in the bottom left hand corner)
Commercial Bank
BUSINESS LINES
BANKING
COMMERCIAL BANK
RELATIONSHIP BASED
MIDDLE MRKT FOCUS
MARKET SEGMENTS
SMALL BUSINESS BNKG
CAP MKT SUPPORT
Leveraging Our Expertise To Find Appropriate Solutions To Customers' Needs
1995 marked the commercial bank's first full year of operation under our
redesigned lending systems. The new bank places renewed emphasis on
relationship-based selling, streamlined lending and approval processes, and a
commitment to superior customer service. Our approach is to provide seamless
service to every commercial customer, from the small-business client and our
traditional middle-market business to large corporate customers.
"We successfully redesigned our commercial bank with one thought in mind:
We want all of First Union's commercial customers to benefit from the
efficiency of our processes and the expertise of our relationship teams."
Ben C. Maffitt III
Senior Vice President
Commercial Banking Group
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business people along right hand side, First Union logo in upper right
hand corner, picture of Malcolm T. Murray Jr. in the bottom left hand corner)
Commercial Bank
BUSINESS LINES
BANKING
COMMERCIAL BANK
RELATIONSHIP BASED
MIDDLE MRKT FOCUS
MARKET SEGMENTS
SMALL BUSINESS BNKG
CAP MKT SUPPORT
Leveraging Our Expertise To Find Appropriate Solutions To Customers' Needs
The success of re-engineering is reflected in the bottom line.
In 1995, we nearly doubled the amount of revenue generated per relationship
manager: $480,000 per manager in 1995, compared with $250,000 per manager
in 1994.
On February 15, 1996, full implementation of the new commercial bank took
place in First Union's northeastern region. We anticipate that customers
in this region will also benefit from our enhanced product and service
resources.
"First Union places a premium on quality loan growth diversified by product,
geography and industry. And our strategy works: We can point with pride to
a long record of high credit quality and low levels of credit loss."
Malcolm T. Murray, Jr.
Executive Vice President
and Chief Credit Officer
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business people along right hand side, First Union logo in upper right
hand corner)
A Relationship-Based Business
BUSINESS LINES
BANKING
COMMERCIAL BANK
RELATIONSHIP BASED
Adding Value Through Consultation and Advice
Our commercial bank is founded on the principle of relationship-based
business. Rather than viewing customers in transactional terms, our
professionals are devoted to adding value to clients' businesses through
consulting and advisory relationships.
In the past, customers often interacted with a single member of the commercial
bank, who had to be such a generalist that it was difficult to meet all
of a client's diverse financial needs. The new commercial bank enhances our
commitment to forming partnerships with our customers.
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business people along right hand side, First Union logo in upper right
hand corner)
A Relationship-Based Business
BUSINESS LINES
BANKING
COMMERCIAL BANK
RELATIONSHIP BASED
A Three-Part Team Approach
The new organization brings the specialized expertise of three professionals
to every customer relationship.
The Relationship Manager drives the sales function, identifies customer
needs and serves as quarterback for the lending process.
The Underwriter structures solutions to our customers' needs and ensures that
our bank's credit policies are appropriately reflected.
The Portfolio Manager addresses the ongoing credit and financial needs
of our customers, monitors existing credits and identifies opportunities
for cross-selling other products.
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business people along right hand side, First Union logo in upper right
hand corner)
Middle Market Focus
BUSINESS LINES
BANKING
COMMERCIAL BANK
MIDDLE MRKT FOCUS
Northeast: The Nation's Highest Concentration Of Middle Market Companies
First Union's northeastern region represents the highest concentration of
middle market companies in the United States, a market advantage that fits
well with the middle market focus of our commercial bank.
In defining market segments and dedicating resources throughout our new
organization, a primary goal was to ensure that our new product
and service capabilities are readily accessible to our largest and most
lucrative commercial market. The middle market segment will receive
the dedicated attention of Relationship Team members who specialize
in addressing the specific financial needs of mid-sized companies.
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business people along right hand side, First Union logo in upper right
hand corner)
Market Segments
BUSINESS LINES
BANKING
COMMERCIAL BANK
MARKET SEGMENTS
Realigning The Market Segment Focus
Before we began the process of redesigning our commercial bank, First
Union removed all prior assumptions from the equation. Chief among
these was the traditional market segment structure of the bank. By
carefully asking the customers themselves what they want, we learned
from our research that serving our customers best meant completely
realigning our market-segment focus. We were able to clearly identify
four distinct market segments, based on a company's annual revenue -
each with a specific set of financial and service needs.
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business people along right hand side, First Union logo in upper right
hand corner)
Market Segments
BUSINESS LINES
BANKING
COMMERCIAL BANK
MARKET SEGMENTS
Four Distinct Market Segments
Company Revenue First Union Banking Area
<$5 million Small Business/
Community Banking
$5 million-$20 million Commercial Banking
$20 million-$100 million Middle Market Banking
>$100 million Corporate Banking
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business people along right hand side, First Union logo in upper right
hand corner)
Market Segments
BUSINESS LINES
BANKING
COMMERCIAL BANK
MARKET SEGMENTS
A More Efficient Banking Process
By focusing our resources to meet the specific needs of customers in each
market segment, we will bring our customers a more efficient banking
process, while allowing us to better and more appropriately deploy our
product and marketing resources.
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business people along right hand side, First Union logo in upper right
hand corner)
Small Business Banking
BUSINESS LINES
BANKING
COMMERCIAL BANK
SMALL BUSINESS BNKG
Reaping The Rewards Of A Streamlined Loan Process
First Union has redesigned our lending process for small businesses -
companies with revenues under $5 million. Customers now benefit from
the increased efficiency of a streamlined lending process.
Loan applications are taken over the phone in a single interview lasting
30-45 minutes, and applications are guaranteed a 24-hour turnaround.
In 1995, initial credit decisions averaged 13 hours, and customers had money
in hand in an average of 23 days.
The unit is staffed by professionals who quickly determine customer
lending needs and documentation requirements, allowing us to turn
initial requests into "on-the-books" loans quickly.
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business people along right hand side, First Union logo in upper right
hand corner)
Small Business Banking
BUSINESS LINES
BANKING
COMMERCIAL BANK
SMALL BUSINESS BNKG
Loans To Small Businesses Soar
In the new commercial bank, First Union has originated an average
of $53 million in small-business loans per month. We ended 1995 with $640
million in outstandings, more than three times the total outstandings prior
to the commercial bank redesign.
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business people along right hand side, First Union logo in upper right
hand corner)
Small Business Banking
BUSINESS LINES
BANKING
COMMERCIAL BANK
SMALL BUSINESS BNKG
Loans To Small Businesses Soar
(Here appears a graph of growth in Loans Outstanding 1995 of Small Business
Banking Division. Below are plot points)
Small Business
Banking Division
Growth In Loans
Outstanding, 1995
($ in millions) 117 251 370 640
1Q95 2Q95 3Q95 4Q95
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business people along right hand side, First Union logo in upper right
hand corner)
Small Business Banking
BUSINESS LINES
BANKING
COMMERCIAL BANK
SMALL BUSINESS BNKG
Potential In The Northern Region
The new small-business process has been introduced in First Union's northern
region. More than 50 experienced lending professionals are now
headquartered in Philadelphia, devoted to serving the financial needs
of small businesses throughout our northern franchise. Early results
indicate a high level of customer demand.
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business people along right hand side, First Union logo in upper right
hand corner)
Capital Markets Support
BUSINESS LINES
BANKING
COMMERCIAL BANK
CAP MKT SUPPORT
Training To Become Financial Consultants
A primary goal of re-engineering the commercial bank is to better serve
our commercial customers by offering the industry's broadest array
of financial products.
In 1996, all commercial bankers are taking part in a comprehensive
training initiative - known as Project XXIV - designed to bring our
professionals the product knowledge and consulting expertise needed
to meet all of our customers' financial needs. Training focuses on the
importance of viewing financial needs from a customer's perspective.
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business people along right hand side, First Union logo in upper right
hand corner)
Capital Markets Support
BUSINESS LINES
BANKING
COMMERCIAL BANK
CAP MKT SUPPORT
Project XXIV
Project XXIV will expand First Union's ability to cross-sell capital
markets products to the traditional commercial bank customer. Those
customers who in the past sought the expertise of Wall Street firms for their
non-traditional financial needs will now be aware of our extensive Capital
Markets resources and capabilities.
In short, Project XXIV will allow our commercial bankers to anticipate
customer needs and offer unsurpassed expertise in determining appropriate
financial solutions.
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(First Union Logo in upper right corner, drawing of people climbing stairs
in upper left, photo of H. Burt Melton, Executive Vice President for Consumer
Credit and Bank Related Services, background photo is of a woman reading
a paper)
Consumer Bank
BUSINESS LINES
BANKING
CONSUMER BANK
CONS BANK REDESIGN
CONSUMER ACCESS
BRANCH SYSTEM
First Point Of Access
First Union's full-service banking network includes nearly 2,000 offices--our
customers' traditional point of first access. Our strategies focus on providing
outstanding service and on expanding the number and variety of products
available through our branches.
"At First Union, we are focusing on finding new and better ways to deliver
our products and services. Whether it's technologically sophisticated `remote
banking' or enhanced customer relationship centers, we want to offer
customers added value."
H. Burt Melton
Executive Vice President
for Consumer Credit and
Bank Related Services
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background picture of business
woman in center of page, First Union logo in upper right hand corner)
Consumer Bank Redesign
BUSINESS LINES
BANKING
CONSUMER BANK
CONS BANK REDESIGN
Redefining Retail
We are designing a new, customer-driven consumer bank organized into four
integrated areas:
(1) retail centers to focus on helping current customers meet their
financial goals,
(2) customer relationship centers to find new customers and service accounts
over the telephone,
(3) an external sales force, to develop new business with small-business
and consumer clients and
(4) advanced self service options, to let customers use technology to
conduct the business they once did at the teller window.
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picture of business woman in center of page, First Union logo
in upper right hand corner)
Consumer Bank Redesign
BUSINESS LINES
BANKING
CONSUMER BANK
CONS BANK REDESIGN
Retooling For Customer Satisfaction
Pilot sites for the new retail centers in two North Carolina communities will
be operating in 1996. All aspects of the operations will be studied with an
eye toward efficiency and customer satisfaction. Once refinements occur,
implementation of the new bank will begin during 1996.
<PAGE>
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Georgius at bottom left hand corner,background picture of business
woman in center of page, First Union logo in upper right hand corner)
Consumer Bank Redesign
BUSINESS LINES
BANKING
CONSUMER BANK
CONS BANK REDESIGN
John Georgius, First Union Vice Chairman:
"The primary goal is to position the consumer bank so that we are acting from
a position of strength in the face of unprecedented change in the banking
industry. We want to make constructive changes in the way we serve customers -
at our customers' direction and in our customers' best interests."
John R. Georgius
Vice Chairman,
First Union Corporation
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picture in bottom left hand corner, background picture of business
woman in center of page, First Union logo in upper right hand corner)
Integrated Consumer Access
BUSINESS LINES
BANKING
CONSUMER BANK
CONSUMER ACCESS
Expanded Points Of Access
First Union intends to gain an increased share of the customer base
nationally through better electronic delivery channels. Our expanded
points of access include enhanced ATMs (we have the nation's third largest
ATM network), redesigned retail centers, centralized customer
relationship centers, the "direct" telephone bank and the Internet.
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picture of business woman in center of page, First Union logo in
upper right hand corner)
Integrated Consumer Access
BUSINESS LINES
BANKING
CONSUMER BANK
CONSUMER ACCESS
Banking Anywhere, Anytime
Customers will be able to walk into a branch anywhere in our marketplace
- - which includes 12 states and Washington, D.C. - and have the same access
to account information, the same products, and the same policies as if they
were in their home branches.
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picture of business woman in center of page, First Union logo in
upper right hand corner)
Integrated Consumer Access
BUSINESS LINES
BANKING
CONSUMER BANK
CONSUMER ACCESS
Bridging The Move to Future Delivery Channels
We can't predict how customers will prefer to do their banking in the
future. Some may want to bank at home by computer; others may elect
to use plastic cards at their local branches, or touch-screens on their
televisions, or ATMs at convenience stores.
Our strategy is to build a transitional bank that will bridge the movement to
better delivery channels in the future while meeting the needs of customers
who prefer dealing with a person at the teller window.
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picture of building in bottom left hand corner, background
picture of business woman in center of page, First Union logo in
upper right hand corner)
Branch System
BUSINESS LINES
BANKING
CONSUMER BANK
BRANCH SYSTEM
Leveraging Our Branches For Product Sales
First Union has the nation's most convenient and accessible branch system,
and we leverage that base for product sales among our 11 million customers.
Our bankers work to build long-term relationships with customers.
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picture of building in bottom left hand corner, background
picture of business woman in center of page, First Union logo in
upper right hand corner)
Branch System
BUSINESS LINES
BANKING
CONSUMER BANK
BRANCH SYSTEM
Benefits To Customers, Sources Of Revenue For Our Company
Our branches carry out not only traditional banking functions - deposit
services, lending - but also sales of new or expanded product areas we have
invested in to provide added benefits to customers and more sources of
revenue for our company. These include products and services from our
Capital Management Group and our Card Products Group.
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picture of building in bottom left hand corner, background
picture of business woman in center of page, First Union logo in
upper right hand corner)
Branch System
BUSINESS LINES
BANKING
CONSUMER BANK
BRANCH SYSTEM
Branches: Fertile Fields
Leveraging the capability of our existing branches isn't just focused on
increasing product sales. Branches also are fertile fields from which to
harvest credit cards, auto loans and mortgages, which can be retained or
securitized and sold to investors. We also are building a reliable
investor network for these products.
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a map of eastern seaboard along the right side, First Union logo in
upper right hand corner)
Geographic Reach
BUSINESS LINES
BANKING
STATE BANKS
NORTHERN REGION
VA, MD & WASH. D.C.
NORTH CAROLINA
SOUTH CAROLINA
TENNESSEE
GEORGIA
FLORIDA
Local And Interstate Banking: The Payoff For Our Customers
First Union believes that communities are best served by placing appropriate
decision making authority in the hands of our local bankers. Even though First
Union's network now spans from Florida to Connecticut, each banking office
retains a local focus.
First Union realizes the added value to customers of being able to bank across
state lines - which became possible on September 27, 1995. This capability is
our customers' big payoff for the investments we made in single operating
systems. Because of this, we were prepared for interstate banking far ahead of
most other banks.
First Union now offers seamless service to all customers no matter where they
are - making our array of products and services available to all customers in
every region.
<PAGE>
(drawing of people climbing stairs in upper left hand corner, bottom left
hand corner picture of Donald C. Parcells, map drawing of Northern region
toward upper right, First Union logo in upper right hand corner.)
Northern Region
BUSINESS LINES
BANKING
STATE BANKS
NORTHERN REGION
Leadership
"I can't think of an organization that's better positioned to be successful.
We have geographic coverage and can make the kind of investments smaller
companies can't afford. First Union is well focused and is pushing hard to be
more than just a traditional bank."
Donald C. Parcells
President And General Banking Executive
First Union North
<PAGE>
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of map of Northern region towards upper right hand side, First Union logo
in upper right hand corner)
Northern Region
BUSINESS LINES
BANKING
STATE BANKS
NORTHERN REGION
The Market And Its Potential
Serves New Jersey, New York, Connecticut, Pennsylvania and Delaware
* Assets, $36 billion
* Loans, $25 billion
* Deposits, $28 billion
* Deposit Share for Key Markets:
- New Jersey, 12.8%; Rank, 1st
- Hudson Valley, N.Y., 7.4%; Rank, 2nd
- N.E. Pennsylvania, 14%; Rank, 4th
- Fairfield County, Conn., 4.0%; Rank, 5th
<PAGE>
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map of Northern region towards upper right side, First Union logo in upper
right hand corner)
Northern Region
BUSINESS LINES
BANKING
STATE BANKS
NORTHERN REGION
The Market And Its Potential
Strategies:
* Bring First Union's products, services and capital resources to bear
on operations in the former First Fidelity region
* Serve our customers while increasing revenue through more efficient
processing, an expanded sales focus and a comprehensive approach
to serving our customers' individual financial needs
<PAGE>
(drawing of people climbing stairs in upper left hand corner, picture of
Ben Jenkins in bottom left hand corner, map drawing of VA, MD, DC towards
upper right, First Union logo in upper right hand side)
Virginia, Maryland And Washington, D.C.
BUSINESS LINES
BANKING
STATE BANKS
VA, MD & WASH. D.C.
Leadership
"Banks must be flexible and creative, remaking themselves as they go,
in order to thrive in tomorrow's marketplace."
Ben Jenkins
President And CEO
First Union National Bank Of Virginia
<PAGE>
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of VA, MD, DC towards upper right, First Union logo in upper right hand corner)
Virginia, Maryland And Washington, D.C.
BUSINESS LINES
BANKING
STATE BANKS
VA, MD & WASH. D.C.
The Market And Its Potential
Serves every major market in Virginia and Maryland - Richmond, Norfolk, Roanoke
and Baltimore - as well as the Washington, D.C., metropolitan area.
($ in billions) Virginia Maryland Wash., D.C.
Assets $11.0 $2.2 $2.4
Loans $7.3 $1.1 $0.6
Deposits $7.2 $1.2 $1.7
Deposit Share 12% 5% 18%
Rank 3rd 5th 3rd
(chart)
<PAGE>
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towards upper right, First Union logo in upper right hand corner)
Virginia, Maryland And Washington, D.C.
BUSINESS LINES
BANKING
STATE BANKS
VA, MD & WASH. D.C.
The Market And Its Potential
Strategies:
* Increase fee income by aggressively selling investment, cash
management and capital markets products
* Consolidate First Fidelity's Maryland franchise into First Union's
Maryland franchise and increase sales
* Make 1996 "the year of the customer" by encouraging employees to
seek innovative ways to serve our customers' financial needs
<PAGE>
(drawing of people climbing stairs in upper left corner, picture of Mac Everett
in bottom left hand corner, map drawing of NC towards upper right, First Union
logo in upper right hand corner)
North Carolina
BUSINESS LINES
BANKING
STATE BANKS
NORTH CAROLINA
Leadership
"Our willingness to embrace change in a way that responds to the needs of
the marketplace is the key to our success."
Mac Everett
Chairman, CEO And President
First Union National Bank Of North Carolina
<PAGE>
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upper right, First Union logo in upper right hand corner)
North Carolina
BUSINESS LINES
BANKING
STATE BANKS
NORTH CAROLINA
The Market And Its Potential
Serves entire state.
* Assets, $27.4 billion
* Loans, $19.4 billion
* Deposits, $15.8 billion
* Deposit Share, 20%; Rank, 1st
<PAGE>
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upper right, First Union logo in upper right hand corner)
North Carolina
BUSINESS LINES
BANKING
STATE BANKS
NORTH CAROLINA
The Market And Its Potential
Strategies:
* Position our bank in fast-growing markets in the state; the 1996
purchase of Raleigh Federal strengthens our market share in Raleigh
and gives us entry into other markets in eastern North Carolina
* Increase retail investment market share
* Differentiate ourselves from our competition by developing creative
solutions that meet the financial needs of our customers
* Raise the level of our relationship service and selling skills.
<PAGE>
(drawing of people climbing stairs in upper left, picture of Sid Tate in
in bottom left hand corner,
map drawing of SC towards upper right, First Union logo in upper right
hand corner)
South Carolina
BUSINESS LINES
BANKING
STATE BANKS
SOUTH CAROLINA
Leadership
"We're gaining momentum in the market. We're going to continue to deliver
superior products, unparalleled service and exceptional performance as we
become the bank of choice - and the employer of choice - in the state."
Sid Tate
Chairman And CEO
First Union Bank Of South Carolina
<PAGE>
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upper right, First Union logo in upper right hand corner)
South Carolina
BUSINESS LINES
BANKING
STATE BANKS
SOUTH CAROLINA
The Market And Its Potential
Serves South Carolina's major markets: Greenville, Columbia, Charleston, Rock
Hill and Greenwood.
* Assets, $3.2 billion
* Loans, $2.3 billion
* Deposits, $2.6 billion
* Deposit Share, 7%; Rank, 4th
<PAGE>
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upper right, First Union logo in upper right hand corner)
South Carolina
BUSINESS LINES
BANKING
STATE BANKS
SOUTH CAROLINA
The Market And Its Potential
Strategies:
* Increase annual earnings by 10% or greater
* Increase services to 3.5 services per household
* Increase ROE to 21%
<PAGE>
(drawing of people climbing stairs in upper left, map drawing of TN towards
upper right, picture of Bob Reid in bottom left hand corner,
First Union logo in upper right hand corner)
Tennessee
BUSINESS LINES
BANKING
STATE BANKS
TENNESSEE
Leadership
"We will deliver superior sales and service in order to delight each customer,
create pride in every employee, achieve our financial objectives for
shareholders, and add value to our communities."
Bob Reid
Chairman, President And CEO
First Union National Bank of Tennessee
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(drawing of people climbing stairs in upper left, map drawing of TN towards
upper right, First Union logo in upper right hand corner)
Tennessee
BUSINESS LINES
BANKING
STATE BANKS
TENNESSEE
The Market And Its Potential
Serves markets in eastern and middle Tennessee, including the Nashville
metropolitan area.
* Assets, $2.3 billion
* Loans, $1.2 billion
* Deposits, $1.7 billion
* Deposit Share, 3%; Rank, 7th
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(drawing of people climbing stairs in upper left, map drawing of TN towards
upper right, First Union logo in upper right hand corner)
Tennessee
BUSINESS LINES
BANKING
STATE BANKS
TENNESSEE
The Market And Its Potential
Strategies:
* Use customer feedback to measure how well we are meeting our
customers' financial needs
* Provide customers the opportunity to use alternative delivery
systems for financial products and services
* Ensure a smooth transition for recently acquired Brentwood National
customers to First Union
* Cross-sell First Union products services to existing customers to
better meet their financial needs
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(drawing of people climbing stairs in upper left, map drawing of GA towards
upper right, picture of David Carroll in bottom left hand corner,
First Union logo in upper right hand corner)
Georgia
BUSINESS LINES
BANKING
STATE BANKS
GEORGIA
Leadership
"Everything we do must be with the customer in mind. We must treat our
customers the way we want to be treated and ensure that every encounter is
first rate."
David Carroll
President And CEO
First Union National Bank of Georgia
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(drawing of people climbing stairs in upper left, map drawing of GA towards
upper right, First Union logo in upper right hand corner)
Georgia
BUSINESS LINES
BANKING
STATE BANKS
GEORGIA
The Market And Its Potential
Serves Georgia's six major markets: Atlanta, Augusta, Columbus, Macon/Albany/
Valdosta,Dalton/Rome/Newnan/Griffin and Savannah.
* Assets, $12.1 billion
* Loans, $9.3 billion
* Deposits, $7.9 billion
* Deposit Share, 10%; Rank, 4th
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(drawing of people climbing stairs in upper left, map drawing of GA towards
upper right, First Union logo in upper right hand corner)
Georgia
BUSINESS LINES
BANKING
STATE BANKS
GEORGIA
The Market And Its Potential
Strategies:
* Continue to grow the bank's key business segments: commercial
bank, consumer bank, affluent market, government banking and
commercial finance
* Focus on boosting deposit share in top 30 growth counties in the
state while maximizing profitability
* Increase noninterest income by bringing Capital Markets and Capital
Management capabilities to this growing market.
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(drawing of people climbing stairs in upper left, map drawing of FL towards
upper right, picture of Byron Hodnett in bottom left hand corner,
First Union logo in upper right hand corner)
Florida
BUSINESS LINES
BANKING
STATE BANKS
FLORIDA
Leadership
"Our growing base of traditional commercial and consumer banking services
gives us the strength to embrace and lead the change facing our industry.
Expansion of remote, terminal-based banking services will further enable
us to reach our customers in ways most convenient to them."
Byron Hodnett
CEO
First Union National Bank Of Florida
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(drawing of people climbing stairs in upper left, map drawing of FL towards
upper right, First Union logo in upper right hand corner)
Florida
BUSINESS LINES
BANKING
STATE BANKS
FLORIDA
The Market And Its Potential
Second largest bank in the state, reaching 95% of Florida's population
through 555 branches.
* Assets, $36.6 billion
* Loans, $24.0 billion
* Deposits, $29.8 billion
* Deposit Share, 19%; Rank, 2nd
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(drawing of people climbing stairs in upper left, map drawing of FL towards
upper right, First Union logo in upper right hand corner)
Florida
BUSINESS LINES
BANKING
STATE BANKS
FLORIDA
The Market And Its Potential
Strategies:
* Emphasize continued growth in commercial and consumer lending as
well as consumer deposits
* Expand Capital Markets products for commercial customers
* Expand the sale of investment products and annuities to customers
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Exhibit (13)(b)
FIRST UNION CORPORATION AND SUBSIDIARIES
1995 Annual Report
(Historical Basis)
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First Union Corporation and Subsidiaries
1995 Annual Report (Historical Basis)
Table of Contents
<TABLE>
<S> <C>
Management's Analysis of Operations.......................................................................................... 1
Financial Tables............................................................................................................. T-1
Six-Year Net Interest Income Summary......................................................................................... T-23
Management's Statement of Financial Responsibility........................................................................... H-1
Independent Auditors' Report................................................................................................. H-1
Consolidated Balance Sheets.................................................................................................. H-2
Consolidated Statements of Income............................................................................................ H-3
Consolidated Statements of Changes in Stockholders' Equity................................................................... H-4
Consolidated Statements of Cash Flows........................................................................................ H-5
Notes to Consolidated Financial Statements................................................................................... H-6
</TABLE>
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MANAGEMENT'S ANALYSIS OF OPERATIONS
EARNINGS HIGHLIGHTS
The following review is a discussion of the performance and financial condition
of First Union Corporation on a historical basis at December 31, 1995. On
January 1, 1996, First Union acquired First Fidelity Bancorporation, a New
Jersey and Pennsylvania-based bank holding company. The First Fidelity
acquisition has been accounted for on a pooling of interests basis. As a result,
First Union's historical financial statements, including such statements for
1995, have been restated to reflect the First Fidelity acquisition as if First
Union and First Fidelity had always been combined. First Union's restated 1995
financial statements reflecting the First Fidelity acquisition, including a
Management's Analysis of Operations related thereto, are included in First
Union's 1995 Report on Form 10-K and reference is made thereto for additional
information that is included in such statements and analyses. The following
discussion is qualified in its entirety by reference to such additional
information.
In 1995 First Union earned $1.0 billion, or $5.85 per common share after $16
million ($13 million after tax) in merger-related restructuring charges, which
were direct costs related to the First Fidelity merger that were incurred in
1995. These restructuring charges were a part of a previously announced $270
million after-tax restructuring charges related to the merger. First Fidelity
separately recorded an expense of $78 million ($60 million after tax) in 1995.
The estimated $197 million balance of after-tax restructuring charges will be
incurred primarily in the first and second quarters of 1996. These results
compared with 1994 results of $859 million in net income applicable to common
stockholders after a preferred stock redemption premium, or $4.98 per share.
In the fourth quarter of 1995, First Union earned $272 million, or $1.58 per
common share, after the restructuring charges, compared with $183 million, or
$1.04, in the fourth quarter of 1994, after the preferred stock redemption
premium.
During 1995, domestic banking operations, including trust operations, located in
Georgia, Florida, Maryland, North Carolina, South Carolina, Tennessee, Virginia
and Washington, D.C., and mortgage banking operations were our principal sources
of revenues. Foreign banking operations are immaterial.
Outlook
First Union now serves 11 million customers in the Eastern United States from
Connecticut to Florida. We are well on the way to integrating First Fidelity's
operations with First Union's, a process we expect to complete by midyear 1996.
In addition, we are enthusiastic about the steps we have taken to serve new
customers with new products in our recently acquired northeastern markets and to
continue serving customers in our southeastern markets. The strong fee income
growth in 1995 helps validate our expectations for renewed earnings momentum as
we begin to offer First Union's broader product selections, install expanded
sales support systems and integrate our two companies. In addition, we are
seeing the results of our investments in capital markets, capital management and
other businesses that expand our traditional banking base, and we are optimistic
about the future growth of these businesses.
On January 1, 1996, First Fidelity merged with and into a wholly owned
subsidiary of First Union; each outstanding share of First Fidelity common stock
and common stock equivalent was exchanged for 1.35 shares of First Union common
stock; and each share of the three outstanding series of First Fidelity
preferred stock was exchanged for one share of one of three corresponding new
series of First Union's class A preferred stock having substantially identical
terms as the relevant series of First Fidelity preferred stock.
At December 31, 1995, First Fidelity had assets of $35.3 billion, net loans of
$24.9 billion, deposits of $27.6 billion and net income applicable to common
stockholders of $398 million.
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The Stockholders' Equity section includes further information related to the
issuance of preferred and common stock in the First Fidelity merger and to First
Union's purchases in the open market of First Union common stock and First
Fidelity preferred and common stock.
In 1995 First Union completed eight bank and thrift purchase accounting
acquisitions. These acquired institutions had combined assets of $10.3 billion,
net loans of $7.5 billion and deposits of $7.3 billion. The acquired
institutions were primarily in Virginia and Florida, further enhancing our
customer base in those states.
In the first quarter of 1996, we completed two additional bank and thrift
purchase accounting acquisitions in North Carolina and Tennessee. We expect to
complete a third purchase accounting acquisition of a Florida thrift during the
second quarter of 1996. At year-end 1995, these three completed or pending
acquisitions had combined assets, net loans and deposits of $2.2 billion, $1.6
billion and $1.8 billion, respectively.
The Accounting and Regulatory Matters section provides information about
legislative, accounting and regulatory matters that have recently been adopted
or proposed.
INCOME STATEMENT REVIEW
Net Interest Income
Tax-equivalent net interest income increased 7 percent compared with 1994, to
$3.3 billion in 1995. The increase primarily reflected loan growth, the
repricing of variable rate assets, and purchase acquisitions. The increase was
tempered somewhat by reduced net yields.
Nonperforming loans reduce interest income because the contribution from these
loans is eliminated or sharply reduced. In 1995, $53 million in gross interest
income would have been recorded if all nonaccrual and restructured loans had
been current in accordance with their original terms and had been outstanding
throughout the period, or since origination if held for part of the period. The
amount of interest income related to these assets and included in income in 1995
was $14 million.
Net Interest Margin
The net interest margin, which is the difference between the tax-equivalent
yield on earning assets and the rate paid on funds to support those assets, was
4.41 percent in 1995, compared with 4.77 percent in 1994. The margin decline in
1995 was primarily related to the addition of acquired banks and thrifts with
lower margins; the addition of short-term securities; and the competitiveness of
loan pricing. We also anticipate a further contraction in the margin in future
periods as a result of a $2.0 billion credit card securitization and sale in
September 1995; the impact of acquisitions and the generation of lower-spread
assets related to capital markets activities. It should be noted that the margin
is not our primary management focus or goal. Our goal is to continue increasing
net interest income.
The $2.0 billion credit card securitization is expected to have a minimal
financial impact on the results of operations. The securitization results in a
reclassification of net interest income to fee income. Securitization
transactions are used as a management tool to increase liquidity and to utilize
capital more effectively.
Average interest-earning assets increased by $10.3 billion, resulting in an
increase in tax-equivalent interest income of $1.3 billion.
The average rate earned on earning assets was 8.52 percent in 1995, compared
with 7.92 percent in 1994. The average rate paid on interest-bearing liabilities
was 4.70 percent in 1995 and 3.69 percent in 1994.
We use securities and off-balance sheet transactions to manage interest rate
sensitivity. More information on these transactions is included in the Interest
Rate Risk Management section.
Noninterest Income
We are meeting the challenges of increasing competition and changing customer
demands and demographics
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by making discretionary investments designed to enhance our prospects for future
fee income growth. We have significantly broadened our product lines,
particularly in the capital markets, capital management and card products areas,
to provide additional sources of fee income that complement our longstanding
banking products and services. These investments were reflected in the 23
percent growth in noninterest income, excluding securities transactions, to $1.4
billion in 1995, compared with $1.2 billion in 1994.
Virtually all categories of noninterest income increased in 1995. Key
contributions came from capital markets activities, including merchant banking,
loan syndications and asset securitizations. Noninterest income related to
capital markets activities was $265 million in 1995, compared with $176 million
in 1994. Additionally, capital management fee income, including mutual funds,
personal and corporate trust and brokerage services, increased 28 percent in
1995 to $288 million from $225 million in 1994. Assets under management, which
include mutual funds and trust services, increased in 1995 to $27.9 billion from
$23.2 billion in 1994. The growth in assets under management was primarily the
result of internal and external marketing and distribution strategies. The First
Union-advised Evergreen family of mutual funds has increased to $10.4 billion in
assets under management at December 31, 1995, compared with $7.0 billion in
1994.
We anticipate continued growth in fee income as capital markets and capital
management products and services are marketed to a larger customer base.
Mortgage banking operations added $112 million to noninterest income in 1995
compared with $74 million in 1994. The increase was primarily driven by an
increase in the servicing portfolio as a result of the purchase accounting
acquisitions. The mortgage loan servicing portfolio increased to $51.5 billion
in 1995, compared with $34.2 billion in 1994. As a result of an industrywide
contraction of nearly 15 percent and a strategic decision to exit certain loan
origination facilities, total originations were $3.2 billion in 1995, compared
with $4.9 billion in 1994. Mortgage banking has traditionally been a cyclical,
interest rate sensitive business. The ability to generate substantial fee and
other income in the future is somewhat dependent on the level and direction of
interest rates. We carefully monitor our sensitivity to the cyclical changes in
our mortgage banking operations.
Securities gains were $22 million in 1995, compared with securities losses of $8
million in 1994. Other significant sources of noninterest income included
service charges on deposit accounts, which increased 8 percent in 1995.
Insurance commissions and fees for other banking services also increased in 1995
compared with 1994.
Trading Activities
Our Capital Markets Group also made a key contribution to noninterest income
through trading profits. Trading profits increased in 1995 to $60 million,
compared with $42 million in 1994. The increase was the result of general market
conditions and expanded trading volume. Trading activities are undertaken to
satisfy customers' risk management and investment needs and for the
corporation's own proprietary account. All trading activities are conducted
within risk limits established by the corporation's Funds Management Committee,
and all trading positions are marked to market daily. Trading activities include
fixed income securities, money market instruments, foreign exchange, options,
futures, forward rate agreements and swaps. With the Federal Reserve Board's
approval of expanded powers for First Union Capital Markets Corp., our
activities also include the trading and underwriting of corporate debt
securities.
Trading account assets were $1.8 billion at year-end 1995, compared with $1.2
billion at year-end 1994.
Noninterest Expense
Noninterest expense increased in 1995 to $3.0 billion, compared with $2.7
billion in 1994. Our overhead efficiency ratio in 1995 and 1994 was 62 percent.
The overhead efficiency ratio was adversely affected by the merger-related
charges, which were discussed earlier, of $16 million in 1995 and intangibles
amortization expense of $171 million and $121 million in 1995 and 1994,
respectively. Without the merger-related charges and intangibles amortization
expense, our overhead efficiency ratio would have been 58 percent in 1995,
compared with 60 percent in 1994. The overhead efficiency ratio was affected
somewhat by the significant
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investments and initiatives under way in capital markets, capital management and
other areas. These investments and initiatives are designed to enhance
noninterest income in future periods.
The FDIC significantly reduced the insurance premiums it charges on federally
insured bank deposits in the third quarter of 1995, and in the fourth quarter of
1995, reduced the premiums again, including a reduction to the statutory minimum
of $2,000.00 for "well capitalized" banks, effective January 1, 1996. Premiums
related to savings and loan association deposits held by banks will continue to
be assessed at the rate of 23 cents to 31 cents per $100.00 until legislation
pending before Congress to merge the Bank Insurance Fund and the Savings
Association Insurance Fund (SAIF) is enacted. The pending legislation also
includes a provision to recapitalize SAIF through a one-time assessment. At
December 31, 1995, we had $16.3 billion in SAIF deposits that are subject to the
potential one-time assessment. Based on the pending legislation, the one-time
assessment could be as high as $72 million after tax. The FDIC premium expense
decreased from $120 million in 1994 to $84 million in 1995. The expense savings
in 1995 were largely offset by discretionary investments in areas such as the
company's retail delivery channels, capital markets and capital management. We
currently expect to invest the expected savings that results from the FDIC
premium reduction in 1996 in various current and future discretionary
investments, business initiatives and technology programs. The Accounting and
Regulatory Matters section includes more information on the reduced FDIC
insurance premiums.
Amortization of intangibles represents the amortization of goodwill and other
identifiable intangibles, primarily related to purchase accounting acquisitions.
These intangibles are amortized over periods ranging from six years to 25 years.
Amortization is a noncash charge to income, and therefore liquidity and funds
management activities are not affected. At December 31, 1995, we had $1.6
billion in other intangible assets, compared with $1.2 billion at December 31,
1994. Other intangible assets include primarily goodwill and core deposit
intangibles.
Costs related to environmental matters were not material.
Income Taxes
Income taxes were $546 million in 1995, compared with $490 million in 1994. The
increase resulted primarily from increased income before income taxes.
BALANCE SHEET REVIEW
Earning Assets
In banking the primary types of earning assets are securities and loans. The
earnings from these assets are subject to two principal kinds of risks, interest
rate risk and credit risk. Interest rate risk could result if rate indices
related to sources and uses of funds were mismatched. Our Funds Management
Committee manages interest rate risk, as well as credit risk associated with
securities, under specific policy standards, which are discussed in more detail
in the Interest Rate Risk Management section. In addition to certain securities,
off-balance sheet transactions such as interest rate swaps have been used to
maintain interest rate risk at acceptable levels in accordance with our policy
standards.
The loan portfolio carries the potential credit risk of past due, nonperforming
or, ultimately, charged-off loans. We manage this risk primarily through credit
approval standards, which are discussed in more detail in the Loans section.
Average earning assets in 1995 were $75.8 billion, a 16 percent increase from
$65.5 billion in 1994.
Securities Available For Sale
Securities available for sale are used as a part of the corporation's interest
rate risk management strategy. They may be sold in response to changes in
interest rates, changes in prepayment risk, liquidity needs, the need to
increase regulatory capital ratios and other factors. These securities are
carried at estimated fair value. Unrealized changes in fair value are recognized
as a separate component of stockholders' equity, net of tax. Realized gains and
losses are recognized in income at the time the securities are sold. The
available for sale
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portfolio consists of U.S. Treasury, municipal and mortgage-backed and
asset-backed securities as well as collateralized mortgage obligations,
corporate, foreign and equity securities.
At December 31, 1995, we had securities available for sale with a market value
of $12.7 billion, compared with $7.8 billion at year-end 1994. The market value
of securities available for sale was $182 million above amortized cost at the
end of 1995. A $111 million after-tax unrealized gain was included in
stockholders' equity at December 31, 1995. In 1995 we took advantage of market
conditions to add $6.9 billion of securities to the available for sale
portfolio, which we believe will enhance earnings and reduce the exposure to
falling interest rates indicated by our current outlook for 1996. We also took
advantage of a one-time exemption in the accounting rules and transferred $2.0
billion of investment securities to the available for sale portfolio. We believe
the transfer will provide us with a greater degree of flexibility in managing
our overall balance sheet. Table 9 provides information related to unrealized
gains and losses and to realized gains and losses on these securities.
The average rate earned on securities available for sale in 1995 was 6.47
percent, compared with 5.51 percent in 1994. The average maturity of the
portfolio was 3.25 years at December 31, 1995.
Investment Securities
Investment securities are those securities that we intend to hold to maturity.
Sales of these securities are rare. These securities are carried at amortized
cost. The portfolio consists of U.S. Government agency, corporate, municipal,
and mortgage-backed securities, and collateralized mortgage obligations. First
Union's investment securities amounted to $2.5 billion at December 31, 1995,
compared with $3.7 billion at year-end 1994. As part of the strategy to reduce
exposure to falling interest rates, we added $1.5 billion to the investment
securities portfolio. Additionally, $2.0 billion of investment securities was
transferred to the available for sale portfolio.
The average rate earned on investment securities in 1995 was 8.61 percent,
compared with 9.03 percent in 1994. The average maturity of the portfolio was
5.16 years at December 31, 1995.
Table 10 provides information related to unrealized gains and losses and to
realized gains and losses on these securities.
Loans
The loan portfolio represents our largest asset balance, and it is a significant
source of interest and fee income. The loan portfolio is subject to both credit
and interest rate risk. Our lending strategy stresses quality growth,
diversified by product, geography and industry. A common credit underwriting
structure is in place throughout the company.
The loan portfolio at December 31, 1995, was composed of 45 percent in
commercial loans and 55 percent in consumer loans. The portfolio mix did not
change significantly from year-end 1994. The commercial loan portfolio includes
general commercial loans, both secured and unsecured, and commercial real estate
loans. General commercial loans are typically working capital loans to finance
the inventory, receivables and other working capital needs of commercial
borrowers, and term loans to finance fixed assets or acquisitions. Commercial
real estate loans typically finance the construction or purchase of commercial
real estate. Consumer loans include mortgage, credit card and installment loans.
Consumer mortgage lending includes both first and second mortgage loans.
Consistent with our longtime standard, we generally look for two repayment
sources for commercial real estate loans: cash flows from the project and other
resources of the borrower. Our commercial lenders focus principally on
middle-market companies, which we believe reduces the risk of credit loss from
any single borrower or group of borrowers. A majority of our commercial loans
are for less than $10 million. Our consumer lenders emphasize credit judgments
that focus on a customer's debt obligations, ability and willingness to repay,
and general economic trends.
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Net loans at December 31, 1995, were $65.6 billion, compared with $54.0 billion
at year-end 1994. Of this increase, $7.5 billion was related to purchase
acquisitions, with the rest coming from loan growth in all of our banking states
and in virtually all loan categories. Consumer loan growth was particularly
strong in 1995, primarily in direct lending and home equity lending. Net loans
do not include the $2.0 billion in credit card receivables that were securitized
and sold in September 1995. The financial impact of the credit card
securitization on the results of operations is expected to be minimal, as
discussed above.
At December 31, 1995, unused loan commitments related to commercial and consumer
loans were $19.0 billion and $12.5 billion, respectively. Commercial and standby
letters of credit were $2.7 billion. At December 31, 1995, loan participations
sold to other lenders amounted to $1.1 billion and were recorded as a reduction
of gross loans.
The average rate earned on loans in 1995 was 8.98 percent, compared with 8.55
percent in 1994. The average prime rate in 1995 was 8.83 percent, compared with
7.15 percent in 1994. Factors affecting loan rates between 1994 and 1995
included several increases in the prime rate throughout 1994; an increased
portion of the loan portfolio tied to rate indices other than the prime rate; a
larger portfolio of fixed and adjustable rate mortgages; and the repricing of
credit card portfolio introductory rates.
The Asset Quality section provides information about geographic exposure in the
loan portfolio.
Commercial Real Estate Loans
Commercial real estate loans amounted to 12 percent of the total portfolio at
December 31, 1995, compared with 13 percent at December 31, 1994. This portfolio
included commercial real estate mortgage loans of $6.0 billion at December 31,
1995, and $5.4 billion at December 31, 1994.
ASSET QUALITY
Nonperforming Assets
Most of our assets are interest-bearing loans and securities. The credit quality
of these assets is crucial to the profitability of the corporation.
Nonperforming assets are those assets that are not paying principal and/or
interest as contractually required. These assets reduce our income through lower
amounts of interest income and higher provisions for losses. Asset quality is
typically measured by the levels of nonperforming and past due assets; the
amount of charge-offs and provisions; and certain credit-related ratios such as
charge-offs to net loans; and nonperforming assets to net loans and foreclosed
properties.
At December 31, 1995, nonperforming assets were $602 million, or .92 percent of
net loans and foreclosed properties, compared with $558 million, or 1.03
percent, at December 31, 1994.
Segregated assets, which are not included in nonperforming assets and which
relate to the acquisition of the Southeast Banks in 1991, were $106 million at
December 31, 1995, or $93 million net of a $13 million allowance for losses on
segregated assets. This compared with $187 million, or $165 million net of a $22
million allowance, at December 31, 1994. Under a loss-sharing arrangement, FDIC
reimbursements substantially minimize any losses associated with the acquired
Southeast Banks loan portfolio. Segregated assets are included in other assets.
Loans or properties of less than $5 million each made up 71 percent, or $424
million, of nonperforming assets at December 31, 1995. Of the rest:
(bullet) Five loans or properties between $5 million and $10 million each
accounted for $37 million; and
(bullet) Seven loans or properties over $10 million each accounted for $141
million.
Fifty-four percent of nonperforming assets were collateralized primarily by
real estate at year-end 1995, compared with 72 percent at year-end 1994.
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Past Due Loans
In addition to these nonperforming assets, at December 31, 1995, accruing loans
90 days past due were $147 million, compared with $140 million at December 31,
1994. Of these, $11 million were related to commercial and commercial real
estate loans, compared with $27 million at December 31, 1994. At December 31,
1995, we were closely monitoring certain loans for which borrowers were
experiencing increased levels of financial stress. None of these loans were
included in nonperforming assets or in accruing loans past due 90 days, and the
aggregate amount of these loans is not significant.
Net Charge-offs
Net charge-offs as a percentage of average net loans were .40 percent in 1995,
compared with .33 percent in 1994. The increase in net charge-offs was
principally related to the maturing credit card portfolio. In 1996 we anticipate
an increase in the dollar level of charge-offs as credit card receivables
continue to increase and the portfolio seasons to a charge-off ratio that is
expected to be aligned with industry averages. We do not believe that the higher
levels of net charge-offs are indicative of any significant deterioration in the
credit quality of the loan portfolio. We are carefully monitoring trends in both
the commercial and consumer loan portfolios for signs of credit weakness.
Additionally, we have evaluated our credit policies in light of changing
economic trends. All of these steps have been taken with the goals of minimizing
future credit losses and deterioration, while allowing for maximum
profitability. Table 13 provides information on net charge-offs by category.
Provision and Allowance for Loan Losses
The loan loss provision was $180 million in 1995, compared with $100 million in
1994. The increase in the loan loss provision was based primarily on current
economic conditions, on the maturity and level of nonperforming assets, and on
projected levels of charge-offs.
We establish reserves based upon various other factors, including the results of
quantitative analyses of the quality of commercial loans and commercial real
estate loans. Reserves for commercial and commercial real estate loans are based
principally on loan grades, historical loss rates, borrowers' creditworthiness,
underlying cash flows from the project and from borrowers, and analysis of other
less quantifiable factors that might influence the portfolio. Reserves for
consumer loans are based principally on delinquencies and historical loss rates.
We analyze all loans in excess of $1 million that are being monitored as
potential credit problems to determine whether supplemental, specific reserves
are necessary.
The allowance for loan losses was $967 million at December 31, 1995, compared
with $979 million at December 31, 1994. The ratio of the allowance for loan
losses to nonperforming assets was 161 percent and 175 percent at December 31,
1995 and 1994, respectively. The ratio of the allowance to net loans was 1.47
percent at December 31, 1995, compared with 1.81 percent at December 31, 1994.
At December 31, 1995, impaired loans, which are included in nonaccrual loans,
amounted to $340 million. Included in the allowance for loan losses is $44
million related to $259 million of impaired loans at December 31, 1995. The rest
of the impaired loans are recorded at or below fair value. The Accounting and
Regulatory Matters section provides further information about impaired loans.
Geographic Exposure
The loan portfolio in the South Atlantic region of the United States is spread
primarily across 57 metropolitan statistical areas with diverse economies.
Washington, D.C.; Charlotte, North Carolina; Atlanta, Georgia; and Miami,
Jacksonville, West Palm Beach and Tampa, Florida, are our largest markets, but
no individual metropolitan market contains more than 8 percent of the commercial
loan portfolio. Substantially all of the $8.2 billion commercial real estate
portfolio at December 31, 1995, was located in our banking region.
LIQUIDITY AND FUNDING SOURCES
Liquidity planning and management are necessary to ensure we maintain the
ability to fund operations cost-effectively and to meet current and future
obligations such as loan commitments and deposit outflows. In this process, we
focus on both assets and liabilities and on the manner in which they combine to
provide adequate liquidity to meet the corporation's needs.
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Funding sources primarily include customer-based core deposits but also include
purchased funds and cash flows from operations. First Union is one of the
nation's largest core deposit-funded banking institutions. Our large consumer
deposit base, which is spread across the economically strong South Atlantic
region and high per-capita income Northeast region, creates considerable funding
diversity and stability. Further, our acquisitions of bank and thrift deposits
have enhanced liquidity.
Asset liquidity is maintained through maturity management and through our
ability to liquidate assets, primarily assets held for sale. Another significant
source of asset liquidity is the potential to securitize assets such as credit
card receivables and auto, home equity, commercial and mortgage loans. The
securitization and sale of $2.0 billion in credit card receivables at the end of
the third quarter of 1995 had a significant, positive effect on our liquidity
position. Other off-balance sheet sources of liquidity exist as well, such as a
mortgage servicing portfolio for which the estimated fair value exceeded book
value by $179 million at December 31, 1995.
Cash Flows
Cash flows from operations are a significant source of liquidity. Net cash
provided from operations primarily results from net income adjusted for the
following noncash accounting items: the provisions for loan losses and
foreclosed properties; depreciation and amortization; and deferred income taxes
or benefits. This cash was available in 1995 to increased earning assets or to
reduce borrowings.
Core Deposits
Core deposits are a fundamental and cost-effective funding source for any
banking institution. Core deposits were $59.8 billion at December 31, 1995,
compared with $53.2 billion at December 31, 1994. Core deposits include savings,
negotiable order of withdrawal (NOW), money market, noninterest-bearing and
other consumer time deposits.
In 1995 and 1994, average noninterest-bearing deposits were 19 percent and 20
percent, respectively, of average core deposits. The Net Interest Income
Summaries provide additional information about average core deposits.
The portion of core deposits in higher-rate, other consumer time deposits was 38
percent at December 31, 1995, and 35 percent at year-end 1994. Other consumer
time and other noncore deposits usually pay higher rates than savings and
transaction accounts, but they generally are not available for immediate
withdrawal, and they are less expensive to process.
Average core deposit balances were $54.9 billion in 1995, an increase of $4.9
billion from 1994. Average balances in savings and NOW, other consumer time
deposits and noninterest-bearing deposits were higher when compared with the
previous year, while money market deposits were lower. Deposits were primarily
affected by the purchase acquisitions. Deposits can also be affected by branch
closings or consolidations, seasonal factors and the rates being offered
compared to other investment opportunities.
Purchased Funds
Purchased funds at December 31, 1995, were $21.8 billion, compared with $13.3
billion at year-end 1994. Purchased funds are acquired primarily through (i) our
large branch network, consisting principally of $100,000 and over certificates
of deposit, public funds and treasury deposits, and (ii) national market
sources, consisting of relatively short-term funding sources such as federal
funds, securities sold under repurchase agreements, eurodollar time deposits,
short-term bank notes and commercial paper, and longer-term funding sources such
as term bank notes, Federal Home Loan Bank borrowings and corporate notes. In
1995 we began utilizing a newly established $10 billion shelf as part of our
ongoing bank note program, which we expect to continue to use as a source of
liquidity. Average purchased funds in 1995 were $16.8 billion, an increase of 33
percent from $12.6 billion in 1994. The increase was used primarily to fund loan
growth.
Long-Term Debt
Long-term debt was 105 percent of total stockholders' equity at December 31,
1995, compared with 64 percent at December 31, 1994. The increase in long-term
debt compared with year-end 1994 was primarily
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related to $1.2 billion of bank notes with varying rates and terms that mature
by 1997. Additionally, in 1995 we issued $300 million of three-year floating
rate senior notes and $1.0 billion of subordinated debentures and notes with
rates ranging from 6.55 percent to 7.50 percent and maturities of either 10
years or 40 years. Proceeds from these debt issues have been used for general
corporate purposes.
Under a shelf registration statement filed with the Securities and Exchange
Commission, we currently have available for issuance $1.5 billion of senior or
subordinated debt securities. The sale of any additional debt securities will
depend on future market conditions, funding needs and other factors.
Debt Obligations
We have a $350 million, committed back-up line of credit that expires in
December 1998. This credit facility contains financial covenants that require
First Union to maintain a minimum level of tangible net worth, restrict double
leverage ratios and require capital levels at subsidiary banks to meet
regulatory standards. First Union has not used this line of credit. During 1996,
$1.5 billion of long-term debt will mature, including bank notes discussed above
of $865 million. Funds for the payment of long-term debt will come from
operations or, if necessary, additional borrowings.
Stockholders' Equity
The management of capital in a regulated banking environment requires a balance
between maximizing leverage and return on equity to stockholders while
maintaining sufficient capital levels and related ratios to satisfy regulatory
requirements. We have historically generated attractive returns on equity to
stockholders while maintaining sufficient regulatory capital ratios.
At December 31, 1995, total stockholders' equity was $6.2 billion, compared with
$5.4 billion at December 31, 1994, and 172 million common shares were
outstanding, compared with 176 million shares at December 31, 1994. In 1995 we
paid $965 million for the repurchase of 20 million shares of First Union common
stock pursuant to board of directors authorizations in February 1995 and June
1995. Of these repurchases in the open market, 14.0 million shares were related
to completed or pending stock-for-stock purchase accounting acquisitions, 4.8
million shares were related to the First Fidelity acquisition and 1.2 million
shares were related to stock options. In February 1996, the board of directors
renewed its authorization for the purchase in the open market from time to time
of up to 15 million shares of First Union common stock. The timing of any such
repurchases would be based on our assessment of First Union's capital structure
and liquidity, the market price of our common stock compared to our assessment
of its underlying value, regulatory, accounting and other factors. Repurchases
would be made primarily in connection with future acquisitions and stock-based
employee benefit plans.
In 1995 we announced a dividend increase for the 18th consecutive year,
resulting in dividends of $1.96 per common share. The current annualized
dividend rate is $2.08 per common share. The corporation paid $343 million in
dividends to preferred and common stockholders in 1995. The reduction in
dividends paid in 1995 compared with 1994 was related to the redemption of
preferred stock in early 1995.
At December 31, 1995, stockholders' equity reflected an $111 million unrealized
after-tax gain related to debt and equity securities. The Securities Available
for Sale section provides additional information about debt and equity
securities.
Subsidiary Dividends
Our banking subsidiaries are the largest source of parent company dividends.
Capital requirements established by regulators limit dividends that these and
certain other of our subsidiaries can pay. The Office of the Comptroller of the
Currency (OCC) generally limits a national bank's dividends in two principal
ways: first, dividends cannot exceed the bank's undivided profits, less
statutory bad debt in excess of a bank's allowance for loan losses; and second,
in any year dividends may not exceed a bank's net profits for that year, plus
its retained earnings from the preceding two years, less any required transfers
to surplus. Under these and other limitations, our subsidiaries had $367 million
available for dividends at December 31, 1995, without prior approval from the
OCC. Our subsidiaries paid $793 million in dividends to the corporation in 1995.
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Regulatory Capital
Federal banking regulations require that bank holding companies and their
subsidiary banks maintain minimum levels of capital. These banking regulations
measure capital using three formulas relating to tier 1 capital, total capital
and leverage capital. The minimum level for the ratio of total capital to
risk-weighted assets (including certain off-balance-sheet financial instruments,
such as standby letters of credit and interest rate swaps) is currently 8
percent. At least half of total capital is to be composed of common equity,
retained earnings and a limited amount of qualifying preferred stock, less
certain intangible assets (tier 1 capital). The rest may consist of a limited
amount of subordinated debt, nonqualifying preferred stock and a limited amount
of the loan loss allowance (together with tier 1 capital, total capital).
At December 31, 1995, the tier 1 and total capital ratios were 6.15 percent and
10.44 percent, respectively, compared with 7.76 percent and 12.94 percent at
December 31, 1994. The reduction in the tier 1 and total capital ratios in 1995
was due primarily to the common stock repurchase program, the preferred stock
redemption and the increase in total assets and intangible assets.
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
equal to 3 percent for bank holding companies that meet specified criteria,
including having the highest regulatory rating. All other bank holding companies
are generally required to maintain a leverage ratio of at least 4 to 5 percent.
The leverage ratio at December 31, 1995, was 5.15 percent compared with 6.12
percent at December 31, 1994.
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. The Federal Reserve Board has indicated it will
continue to consider a tangible tier 1 leverage ratio (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised us of any specific minimum leverage ratio
applicable to us.
Each subsidiary bank is subject to similar capital requirements adopted by the
OCC. Each subsidiary bank listed in Table 19 had a leverage ratio in excess of
5.17 percent at December 31, 1995. None of our subsidiary banks has been advised
of any specific minimum capital ratios applicable to it.
The regulatory agencies also have adopted regulations establishing capital tiers
for banks. Banks in the highest capital tier, or "well capitalized," must have a
leverage ratio of 5 percent, a tier 1 capital ratio of 6 percent and a total
capital ratio of 10 percent. At December 31, 1995, the subsidiary banks listed
in Table 19 met the capital and leverage ratio requirements for "well
capitalized" banks, except First Union National Bank of North Carolina, which
had a total capital ratio of 9.92 percent. At the end of February 1996, First
Union National Bank of North Carolina was "well capitalized." We expect to
maintain these ratios at the required levels by the retention of earnings and,
if necessary, the issuance of additional capital. Failure to meet certain
capital ratio or leverage ratio requirements could subject a bank to a variety
of enforcement remedies, including termination of deposit insurance by the FDIC.
The Accounting and Regulatory Matters section provides more information about
proposed changes in risk-based capital standards.
INTEREST RATE RISK MANAGEMENT
Managing interest rate risk is fundamental to banking. Banking institutions
manage the inherently different maturity and repricing characteristics of the
lending and deposit-taking lines of business to achieve a desired interest rate
sensitivity position and to limit exposure to interest rate risk. The inherent
maturity and repricing characteristics of our lending and deposit activities
create a naturally asset-sensitive structure. By using a combination of on- and
off-balance sheet financial instruments, we manage the sensitivity of earnings
to changes in interest rates within our established policy guidelines.
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The Financial Management Committee of the corporation's board of directors
reviews overall interest rate risk management activity. The corporation's Funds
Management Committee, which includes the corporation's chief executive officer,
president and senior executives from our Capital Markets Group, credit and
finance areas, oversees the interest rate risk management process and approves
policy guidelines. Balance sheet management and finance personnel monitor the
day-to-day exposure to changes in interest rates in response to loan and deposit
flows, and they make adjustments within established policy guidelines.
We measure interest rate sensitivity by estimating the amount of earnings per
share at risk based on the modeling of future changes in interest rates. Our
model captures all assets and liabilities and off-balance sheet financial
instruments, and combines various assumptions affecting rate sensitivity and
changes in balance sheet mix into an earnings outlook that incorporates our view
of the interest rate environment most likely over the next 24 months. Balance
sheet management and finance personnel review and update continuously the
underlying assumptions included in the earnings simulation model. The results of
the model are reviewed by the Funds Management Committee. The model is updated
at least monthly and more often as appropriate.
We believe our earnings simulation model is a more relevant depiction of
interest rate risk than traditional gap tables because it captures multiple
effects excluded in less sophisticated presentations, and it includes
significant variables that we identify as being affected by interest rates. For
example, our model captures rate of change differentials, such as federal funds
rates versus savings account rates; maturity effects, such as calls on
securities; and rate barrier effects, such as caps and floors on loans. It also
captures changing balance sheet levels, such as commercial and consumer loans
(both floating and fixed rate); noninterest-bearing deposits and investment
securities. In addition, it considers leads and lags that occur in long-term
rates as short-term rates move away from current levels; the elasticity in the
repricing characteristics of savings and money market deposits; and the effects
of prepayment volatility on various fixed-rate assets such as residential
mortgages, mortgage-backed securities and consumer loans. These and certain
other effects are evaluated in developing the scenarios from which sensitivity
of earnings to changes in interest rates is determined.
We use three standard scenarios in analyzing interest rate sensitivity for
policy measurement. The base-line scenario is our estimated most likely path for
future short-term interest rates over the next 24 months. The measurement of
interest rate sensitivity is the percentage change in earnings per share
calculated by the model under "high rate" and under "low rate" scenarios. The
"high rate" and "low rate" scenarios assume 100 basis point shifts from the
base-line scenario in the federal funds rate by the fourth succeeding month and
that the rate remains 100 basis points higher or lower than the base-line
through the rest of the 24-month period. Our policy limit for the maximum
negative impact on earnings per share resulting from high rate or low rate
scenarios is 5 percent. The policy measurement period begins with the fourth
month forward and ends with the 15th month (i.e., a 12-month period.)
Our estimate in January 1996 of future short-term interest rates was that the
federal funds rate would decline to 4.92 percent by December 1996 and then rise
gradually to 5.40 percent by December 1997. Based on the January 1996 outlook,
if interest rates were to decline 100 basis points below the estimated
short-term rate scenario, i.e., follow the low rate scenario, the model
indicates that earnings during the policy measurement period would be negatively
affected by 1.6 percent. Our model indicates that earnings would also be
immaterially affected in our high rate scenario, i.e., a 100 point increase in
estimated short-term interest rates.
The January 1996 outlook indicates that 1997 earnings would be negatively
affected by 2.0 percent if interest rates fell 100 basis points below the
base-line scenario, and earnings would be affected slightly positively in the
high rate scenario.
In addition to the three standard scenarios used to analyze rate sensitivity
over the policy measurement period, we also analyze the potential impact of
other, more extreme interest rate scenarios. These alternate scenarios may
include interest rate paths both higher, lower and more volatile than those used
for policy measurement. Because the interest rate sensitivity model is based on
numerous interest rate assumptions, projected changes in growth in balance sheet
categories and changes in other basic assumptions, actual results may differ
from
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our current simulated outlook.
Our interest rate sensitivity analysis is based on multiple interest rate
scenarios, projected changes in growth in balance sheet categories and other
assumptions. Changes in management's outlook related to interest rates, and
their effect on our balance sheet mix of assets and liabilities and other market
factors, may cause actual results to differ from our current simulated outlook.
While our interest rate sensitivity modeling assumes that management takes no
action, we regularly assess the viability of strategies to reduce unacceptable
risks to earnings and implement such strategies when we believe those actions
are prudent. We took actions in 1995 to mitigate the negative effect on earnings
of adverse changes in interest rates beyond the policy measurement period. For
example, in the fourth quarter of 1995, we implemented a strategy to add
off-balance sheet positions that we believe will significantly reduce our
potential asset sensitivity in 1997. As new monthly outlooks become available,
management will continue to formulate strategies to protect earnings from the
potential negative effects of changing assumptions and interest rates.
Off-Balance Sheet Derivatives For Interest Rate Risk Management
As part of our overall interest rate risk management strategy, for many years we
have used off-balance sheet derivatives as a cost- and capital-efficient way to
modify the repricing or maturity characteristics of on-balance sheet assets and
liabilities. Our off-balance sheet derivative transactions used for interest
rate sensitivity management include interest rate swaps, futures and options
with indices that relate to the pricing of specific core assets and liabilities
of the corporation. We believe we have appropriately controlled the risk so that
the derivatives used for rate sensitivity management will not have any
significant unintended effect on corporate earnings. As a matter of policy we do
not use highly leveraged derivative instruments for interest rate risk
management. The impact of derivative products on our earnings and rate
sensitivity is fully incorporated in the earnings simulation model in the same
manner as on-balance sheet instruments.
Our overall goal is to manage our rate sensitivity in ways that earnings are not
adversely affected materially whether rates go up or down. As a result of
interest rate fluctuations, off-balance sheet transactions (and securities) will
from time to time develop unrealized appreciation or depreciation in market
value when compared with their cost. The impact on net interest income
attributable to these off-balance sheet transactions, all of which are linked to
specific assets and liabilities as part of our overall interest rate risk
management strategy, will generally be offset by net interest income from
on-balance sheet assets and liabilities. The important consideration is not the
shifting of unrealized appreciation or depreciation between and among on- and
off-balance sheet instruments, but the prudent management of interest rate
sensitivity so that corporate earnings are not unduly at risk as interest rates
move up or down.
There was significant interest rate volatility between year-end 1993 and
year-end 1995, which was reflected in the dramatic change in the market value of
our securities portfolio and off-balance sheet positions. The combined market
value of those positions moved from an unrealized gain of $747 million at
December 31, 1993, to an unrealized loss of $712 million at December 31, 1994,
and then back to an unrealized gain of $695 million at December 31, 1995.
Despite the large year-to-year fluctuations in market value and related
fluctuations in the net interest income contribution from these positions, total
net interest income continued to increase. This is the outcome we strive to
achieve in using portfolio securities and off-balance sheet products in the
conduct of asset and liability management.
The fair value appreciation of off-balance sheet derivative financial
instruments used to manage our interest rate sensitivity was $359 million at
December 31, 1995, compared with fair value depreciation of $422 million at
December 31, 1994.
The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses related to terminated
positions. The amount of deferred gains and losses was $9 million and $11
million, respectively, as of December 31, 1995. These net losses will reduce net
interest income by $2 million in 1996. In 1995 net interest income was reduced
by $18 million of net deferred losses.
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Although off-balance sheet derivative financial instruments do not expose the
corporation to credit risk equal to the notional amount, we are exposed to
credit risk equal to the extent of the fair value gain in an off-balance sheet
derivative financial instrument if the counterparty fails to perform. We
minimize the credit risk in these instruments by dealing only with high quality
counterparties. Each transaction is specifically approved for applicable credit
exposure.
In addition, our policy is to require that all swaps and options be governed by
an International Swaps and Derivatives Association Master Agreement. Bilateral
collateral arrangements are in place for substantially all dealer
counterparties. Derivative collateral arrangements for dealer transactions and
trading activities are based on established thresholds of acceptable credit risk
by counterparty. Thresholds are determined based on the strength of the
individual counterparty and are bilateral. As of December 31, 1995, the total
credit risk in excess of thresholds was $275 million. The fair value of
collateral held was 100 percent of the total credit risk in excess of
thresholds. For nondealer transactions, the need for collateral is evaluated on
an individual transaction basis, and it is primarily dependent on the financial
strength of the counterparty.
ACCOUNTING AND REGULATORY MATTERS
The Financial Accounting Standards Board (FASB) has issued Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An estimate of the future cash flows expected to result
from the use of the asset and its eventual disposition should be performed
during a review for recoverability. An impairment loss (based on the fair value
of the asset) is recognized if the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset. Additionally, Standard No. 121 requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell, except for certain assets.
These assets will continue to be reported at the lower of carrying amount or net
realizable value. The periodic effect on net income, if any, has not been
determined. This Standard is required for fiscal years beginning after December
15, 1995.
The FASB has also issued Standard No. 123, "Accounting for Stock-Based
Compensation," which requires that the fair value of employee stock-based
compensation plans be recorded as a component of compensation expense in the
statement of income as of the date of grant of awards related to such plans or
that the impact of such fair value on net income and earnings per share be
disclosed on a pro forma basis in a footnote to financial statements for awards
granted after December 15, 1994, if the accounting for such awards continues to
be in accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25). The corporation will continue such
accounting under the provisions of APB 25. This Standard is required for fiscal
years beginning after December 15, 1995.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA), among other provisions, imposes liability on a bank insured by the
FDIC for certain obligations to the FDIC incurred in connection with other
insured banks under common control with such bank.
The Federal Deposit Insurance Corporation Improvement Act, among other things,
requires a revision of risk-based capital standards. The new standards are
required to incorporate interest rate risk, concentration of credit risk and the
risks of nontraditional activities and to reflect the actual performance and
expected risk of loss of multifamily mortgages. The Risk-Based Capital section
provides information on risk assessment classifications.
On August 8, 1995, the FDIC revised its regulations on insurance assessments to
establish a revised assessment rate schedule of 4 to 31 cents per $100.00 of
deposits in replacement of the then existing schedule of 23 to 31 cents per
$100.00 of deposits subject to assessment by the Bank Insurance Fund (BIF). The
FDIC maintained the current assessment rate schedule of 23 to 31 cents per
$100.00 of deposits for institutions whose deposits are subject to assessment by
the Savings Association Insurance Fund (SAIF). The revised BIF schedule became
effective on June 1, 1995. Assessments collected at the previous assessment
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schedule that exceeded the amount due under the new schedule were refunded, with
interest, from the effective date of the new schedule. As a result, a $26
million refund, including interest, was received in 1995. On November 14, 1995,
the FDIC further reduced the rate structure for BIF deposits by 4 cents per
$100.00 of deposits, beginning in January 1996. As a result, the highest-rated
institutions will pay only the statutory annual minimum rate of $2,000.00 for
FDIC insurance. Adequately capitalized banks will pay a rate of 3 cents per
$100.00 of deposits. As of December 31, 1995, the corporation's BIF deposit
assessment base was $40.7 billion and the corporation's SAIF deposit assessment
base was $16.3 billion. Various legislative proposals related to the future of
the BIF and SAIF have been under consideration. Several of these proposals,
including a proposal previously approved by Congress that is understood to have
the support of the President, include a one-time special assessment for SAIF
deposits (in the range of 70 cents to 85 cents per $100.00 of assessable SAIF
deposits, with a discount for certain SAIF deposits held by BIF member banks)
and a subsequent comparable and reduced level of annual premiums for SAIF
deposits. It is not known when and if any such proposal or any other related
proposal may be adopted.
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.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA)
authorized interstate acquisitions of banks and bank holding companies without
geographic limitation beginning September 27, 1995. Beginning June 1, 1997, a
bank may merge with a bank in another state as long as neither of the states opt
out of interstate branching between the date of enactment of IBBEA and May 31,
1997. IBBEA further provides that a state may enact laws permitting interstate
merger transactions before June 1, 1997.
Various other legislative proposals concerning the banking industry are pending
in Congress. Given the uncertainty of the legislative process, we cannot assess
the impact of any such legislation on our financial condition or results of
operations.
EARNINGS AND BALANCE SHEET ANALYSIS
(1994 compared with 1993)
Net income applicable to common stockholders increased in 1994 to $900 million
before a redemption premium on preferred stock, or 14 percent from $793 million
in 1993. On a per common share basis, earnings before the redemption premium
were $5.22 in 1994, compared with $4.73 in 1993. After the redemption premium,
net income applicable to common stockholders was $859 million, or $4.98 per
common share in 1994. The redemption premium was related to the redemption of
the corporation's series 1990 preferred stock.
Key factors in our 1994 performance were a 9 percent growth in tax-equivalent
net interest income; 15 percent loan growth; and continued improvement in credit
quality. Tax-equivalent net interest income was $3.1 billion in 1994, compared
with $2.9 billion in 1993. Net loans increased by $7.2 billion since year-end
1993. Commercial loans increased throughout our banking region. Consumer loan
growth was led by direct consumer loans through the retail bank branches and
credit cards.
Credit quality improvements included a $358 million net decrease in
nonperforming assets compared with year-end 1993, to $558 million, or 1.03
percent of net loans and foreclosed properties at December 31, 1994. Another key
measure of credit quality is charge-offs, and net charge-offs in 1994 were .33
percent of average net loans, compared with .58 percent in 1993.
Nonperforming loans reduced interest income because the contribution from these
loans is eliminated or sharply reduced. In 1994, $48 million in gross interest
income would have been recorded if all nonaccrual and restructured loans had
been current in accordance with their original terms and had been outstanding
throughout the period, or since origination if held for part of the period. The
amount of interest income related
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to these assets and included in income in 1994 was $6 million. However, the $358
million net decrease in nonperforming assets since year-end 1993 reduced the
negative impact on interest income in 1994.
The net interest margin was 4.77 percent in 1994, compared with 4.78 percent in
1993. The average rate earned on earning assets was 7.92 percent in 1994,
compared with 7.77 percent in 1993. The average rate paid on interest-bearing
liabilities was 3.69 percent in 1994 and 3.44 percent in 1993.
Noninterest income was $1.16 billion in 1994, compared with $1.20 billion in
1993, when the mortgage servicing environment was more robust. Noninterest
income included $84 million in 1994 and $48 million in 1993 from the disposition
of segregated assets acquired in connection with First Union's 1993 acquisition
of First American Metro Corp.
At December 31, 1994, trading account assets were $1.2 billion, compared with
$652 million at year-end 1993. Investments in commercial paper, federal agency
securities, U.S. Treasury notes and revaluation gains accounted for most of the
increase in trading account assets from year-end 1993. These assets are carried
at market value.
Noninterest expense was $2.68 billion in 1994, compared with $2.52 billion in
1993. The increase reflected growth in personnel, advertising and other expenses
related to our card products, capital management and capital markets initiatives
undertaken to improve prospects for revenue growth, as well as expenses related
to acquisitions. Partially offsetting these increases was a decline in mortgage
servicing amortization. Costs related to environmental matters were not
material.
Income taxes were $490 million in 1994, compared with $403 million in 1993. The
increase resulted primarily from an increase in income before taxes.
Average earning assets in 1994 were $65.5 billion, a 9 percent increase from
$59.9 billion in 1993.
At December 31, 1994, we had securities available for sale with a market value
of $7.8 billion, compared with a market value of $11.9 billion at year-end 1993.
The market value of securities available for sale was $302 million below
amortized cost at year-end 1994. As a result, a $214 million after-tax
unrealized loss was recorded as a reduction of stockholders' equity at December
31, 1994. The average rate earned on securities available for sale in 1994 was
5.51 percent, compared with 5.03 percent in 1993. The average maturity of the
portfolio was 3.82 years at December 31, 1994.
Investment securities amounted to $3.7 billion at December 31, 1994, compared
with $2.7 billion at year-end 1993. The average rate earned on investment
securities in 1994 was 9.03 percent, compared with 7.07 percent in 1993. The
average maturity of the portfolio was 6.34 years at December 31, 1994. Gains and
losses in this portfolio in 1994 were primarily related to premiums received on
the call of certain securities prior to their maturity, and sales of securities
downgraded in creditworthiness.
Net loans at December 31, 1994, were $54.0 billion, compared with $46.9 billion
at year-end 1993. Consumer loan growth largely reflected strength in direct
lending. The fastest growth in our consumer loan portfolio was in
higher-yielding credit card products. This was the result of a targeted,
national solicitation effort that increased credit card outstandings 98 percent
in 1994. The increase also included $1.2 billion from 1994 purchase accounting
acquisitions.
The loan portfolio at December 31, 1994, was composed of 46 percent in
commercial loans and 54 percent in consumer loans. The portfolio mix did not
change significantly from year-end 1993. At December 31, 1994, unused loan
commitments related to commercial and consumer loans were $14.5 billion and $9.8
billion, respectively. Commercial and standby letters of credit were $2.1
billion. At December 31, 1994, loan
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participations sold to other lenders amounted to $1.3 billion, and they were
recorded as a reduction of gross loans.
The average rate earned on loans in 1994 was 8.55 percent, compared with 8.50
percent in 1993. The average prime rate in 1994 was 7.15 percent, compared with
6.00 percent in 1993. Loan yields lagged the increases in the prime rate.
Commercial real estate loans amounted to 13 percent of the total portfolio at
December 31, 1994, and 16 percent at December 31, 1993. This portfolio included
commercial real estate mortgage loans of $5.4 billion at December 31, 1994, and
$5.8 billion at December 31, 1993. This portfolio declined in 1994 primarily as
customers took advantage of the low-rate environment to move out of floating
rate debt into permanent, long-term financing.
At December 31, 1994, nonperforming assets were $558 million, or 1.03 percent of
net loans and foreclosed properties, compared with $916 million, or 1.95
percent, at December 31, 1993. Loans or properties of less than $5 million each
made up 83 percent, or $465 million, of nonperforming assets at December 31,
1994. Of the rest, seven loans or properties between $5 million and $10 million
each accounted for $47 million; and three loans or properties over $10 million
each accounted for $46 million. Seventy-two percent of nonperforming assets were
collateralized by real estate at December 31, 1994.
In addition to these nonperforming assets, at December 31, 1994, accruing loans
90 days past due were $140 million, compared with $71 million at December 31,
1993. The increase in past due loans was attributable in part to the 1994
purchase accounting acquisitions.
Net charge-offs as a percentage of average net loans were .33 percent in 1994,
compared with .58 percent in 1993.
At December 31, 1994, acquired Southeast Banks segregated assets amounted to
$187 million, or $165 million net of a $22 million allowance, compared with $380
million, or $347 million net of a $33 million allowance, at December 31, 1993.
Segregated assets are included in other assets.
Core deposits were $53.2 billion at December 31, 1994, compared with $50.9
billion at December 31, 1993. This increase in core deposits primarily reflected
deposits acquired in the 1994 purchase accounting acquisitions. In both 1993 and
1994, average noninterest-bearing deposits were 20 percent of average core
deposits. The portion of core deposits in higher-rate, other consumer time
deposits was 35 percent at December 31, 1994, and 33 percent at year-end 1993.
Average core deposit balances in 1994 increased $2.0 billion from 1993 to $50.0
billion. Average balances in savings and NOW, money market and
noninterest-bearing deposits were higher when compared with the previous year,
while other consumer time deposits were lower. Core deposits were primarily
affected by the 1994 acquisitions, and also were affected by branch closings or
consolidations, seasonal factors and the rates being offered for deposits
compared to other investment opportunities.
Purchased funds at December 31, 1994, were $13.3 billion compared with $10.1
billion at year-end 1993. Average purchased funds in 1994 were $12.6 billion, an
increase of 19 percent from $10.6 billion in 1993.
Net cash provided from operations amounted to $627 million in 1994, compared
with $683 million in 1993. This cash was available in 1994 to increase earning
assets or to reduce borrowings by $304 million and to pay dividends of $323
million. In 1993 we reduced overnight investments at the parent company level to
pay $154 million to acquire Georgia Federal Bank, FSB, and $452 million to
acquire First American.
Long-term debt was 64 percent of total stockholders' equity at December 31,
1994, compared with 59 percent at December 31, 1993. In 1994, we issued $450
million of subordinated debt with rates ranging from 6.375 percent to 8.77
percent and maturities of either 10 or 15 years. Proceeds from these debt issues
were used for general corporate purposes.
16
<PAGE>
In 1994 we redeemed $15 million of convertible subordinated debt that First
Union assumed in the August 1994, acquisition of BancFlorida Financial
Corporation, which was converted into approximately 437,000 shares of First
Union common stock prior to redemption. In 1993, we redeemed $134 million of
floating rate debt at par plus accrued interest.
At December 31, 1994, common stockholders' equity was $5.4 billion, a 10 percent
increase from $4.9 billion at December 31, 1993. Total stockholders' equity was
$5.4 billion, compared with $5.2 billion at year-end 1993. In 1994 we paid $218
million for the purchase in the open market of 5 million shares of common stock
related to acquisitions and the conversion of debentures.
In December 1994, the board of directors elected to redeem all of the 6.3
million outstanding shares of our Series 1990 cumulative perpetual adjustable
rate preferred stock. The redemption occurred on March 31, 1995, at a redemption
price of $51.50 per share. We recorded a redemption premium of $41 million in
the fourth quarter of 1994, representing the difference between the $44.96 book
value of the series 1990 preferred stock and the $51.50 redemption price.
At December 31, 1994, stockholders' equity included a $214 million unrealized
after-tax loss related to debt and equity securities.
In 1993, in connection with three pooling of interests acquisitions, we issued
29 million shares of common stock and 527,000 shares of a new series of
convertible class A preferred stock, which were convertible into 680,000 shares
of First Union common stock. In the second quarter of 1993, we redeemed the
convertible class A preferred stock, most of which was converted into common
stock before redemption.
Our subsidiaries had $397 million available for dividends at December 31, 1994.
Our subsidiaries paid $682 million in dividends to the corporation in 1994.
At December 31, 1994, the corporation's tier 1 and total capital ratios were
7.76 percent and 12.94 percent, respectively. The corporation's leverage ratio
at December 31, 1994, was 6.12 percent. Each subsidiary bank had a leverage
ratio in excess of 5.68 percent at December 31, 1994. At December 31, 1994, our
deposit-taking subsidiary banks met the capital and leverage ratio requirements
for "well capitalized" banks.
The fair value depreciation of off-balance sheet derivative financial
instruments used to manage our interest rate sensitivity was $422 million at
December 31, 1994, compared with the fair value appreciation of $369 million at
December 31, 1993.
The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses. The amount of
deferred gains and losses from off-balance sheet instruments used to manage
interest rate risk was $15 million and $35 million, respectively, as of December
31, 1994. The $20 million in net deferred losses reduced net interest income by
$18 million in 1995.
17
<PAGE>
Table 1
CONSOLIDATED SUMMARIES OF INCOME, PER SHARE, AND BALANCE SHEET DATA
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands except per share data) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income $ 6,373,830 5,094,661 4,556,332 4,479,385 4,647,440 4,829,520
Interest income* $ 6,456,118 5,187,404 4,657,100 4,583,916 4,767,943 4,966,954
Interest expense 3,111,054 2,060,946 1,790,439 2,020,968 2,742,996 3,094,334
Net interest income* 3,345,064 3,126,458 2,866,661 2,562,948 2,024,947 1,872,620
Provision for loan losses 180,000 100,000 221,753 414,708 648,284 425,409
Net interest income after
provision for loan losses* 3,165,064 3,026,458 2,644,908 2,148,240 1,376,663 1,447,211
Securities available for sale
transactions 17,191 (11,507) 25,767 34,402 -- --
Investment security transactions 4,818 4,006 7,435 (2,881) 155,048 7,884
Noninterest income 1,429,251 1,166,470 1,165,086 1,032,651 914,511 690,672
Noninterest expense** 2,975,372 2,677,228 2,521,647 2,526,678 1,905,918 1,680,973
Income before income taxes* 1,640,952 1,508,199 1,321,549 685,734 540,304 464,794
Income taxes 545,588 490,076 403,260 196,152 71,070 64,993
Tax-equivalent adjustment 82,288 92,743 100,768 104,531 120,503 137,434
Net income 1,013,076 925,380 817,521 385,051 348,731 262,367
Dividends on preferred stock 7,029 25,353 24,900 31,979 34,570 33,868
Net income applicable to common
stockholders before redemption 1,006,047 900,027 792,621 353,072 314,161 228,499
premium
Redemption premium on preferred stock -- 41,355 -- -- -- --
Net income applicable to common
stockholders after redemption premium $ 1,006,047 858,672 792,621 353,072 314,161 228,499
PER COMMON SHARE DATA
Net income before redemption premium $ 5.85 5.22 4.73 2.23 2.24 1.68
Net income after redemption premium $ 5.85 4.98 4.73 2.23 2.24 1.68
Average common shares 172,023,779 172,543,467 167,691,739 158,683,206 140,003,166 135,621,838
Average common stockholders' equity*** $ 5,726,724 5,282,412 4,550,048 3,889,256 3,131,716 2,937,441
Common stock price
High 58 7/8 47 5/8 51 1/2 44 7/8 30 7/8 21 3/4
Low 49 5/8 39 3/8 37 7/8 29 1/2 13 3/4 13 7/8
Year-end $ 55 5/8 41 3/8 41 1/4 43 5/8 30 15 3/8
To earnings ratio**** 9.51 X 7.93 8.72 19.61 13.39 9.15
To book value 155 % 135 143 173 120 70
Cash dividends $ 1.96 1.72 1.50 1.28 1.12 1.08
Book value 35.87 30.66 28.90 25.25 23.23 21.81
BALANCE SHEET DATA
Assets 96,740,496 77,313,505 70,786,969 63,828,031 59,273,177 54,588,410
Long-term debt $ 6,444,327 3,428,514 3,061,944 3,151,260 2,630,930 1,850,860
</TABLE>
* Tax-equivalent.
** Includes merger-related restructuring charges of $16,447,000
($13,072,000 after tax) in the fourth quarter of 1995.
*** Average common stockholders' equity excludes average net
unrealized gains or losses on debt and equity securities.
**** Based on net income applicable to common stockholders before
redemption premium.
T-1
<PAGE>
Table 2
NONINTEREST INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Trading account profits $ 59,989 41,583 43,007 22,908 20,053 13,599
Service charges on deposit accounts 471,315 435,212 420,285 386,118 293,075 248,891
Mortgage banking income 112,011 73,934 138,608 155,800 135,557 97,809
Capital management income 288,060 224,525 201,875 177,375 133,126 104,864
Securities available for sale transactions 17,191 (11,507) 25,767 34,402 - -
Investment security transactions 4,818 4,006 7,435 (2,881) 155,048 7,884
Fees for other banking services* 96,619 69,252 52,836 33,845 - -
Merchant discounts 70,745 62,840 55,732 54,703 48,126 47,987
Insurance commissions 48,241 45,071 43,876 44,047 46,081 46,748
Sundry income 282,271 214,053 208,867 157,855 238,493 130,774
Total $1,451,260 1,158,969 1,198,288 1,064,172 1,069,559 698,556
</TABLE>
* Information not available prior to 1992.
Table 3
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Personnel expense
Salaries $1,210,686 1,039,699 938,409 886,702 735,564 695,152
Other benefits 252,867 247,667 217,490 178,600 137,617 126,995
Total 1,463,553 1,287,366 1,155,899 1,065,302 873,181 822,147
Occupancy 240,098 238,128 229,118 238,728 213,424 178,338
Equipment rentals, depreciation
and maintenance 274,412 228,372 189,589 167,063 132,858 123,026
Advertising 48,129 38,584 22,541 23,082 19,488 19,055
Telephone 65,986 58,331 53,023 51,000 43,470 46,557
Travel 68,948 53,521 42,330 33,937 25,084 25,017
Postage 55,359 48,874 39,538 40,747 35,616 29,251
Printing and office supplies 63,571 54,865 53,304 35,310 27,936 32,497
FDIC insurance 83,680 119,708 118,429 107,392 77,808 44,185
Other insurance 20,374 14,883 18,233 20,641 18,530 19,474
Professional fees 77,273 66,878 52,251 61,810 40,109 28,430
Data processing 26,778 24,499 41,440 31,906 20,419 19,149
Owned real estate expense 11,931 22,294 40,633 176,109 90,181 35,735
Mortgage servicing amortization 24,749 23,525 106,942 37,422 27,149 23,448
Other amortization 171,499 121,083 100,145 83,455 66,139 75,184
Merger-related restructuring charges 16,447 - - - - -
Sundry 262,585 276,317 258,232 352,774 194,526 159,480
Total $2,975,372 2,677,228 2,521,647 2,526,678 1,905,918 1,680,973
Overhead efficiency ratio* 62.03 % 62.47 62.03 69.66 61.59 65.38
</TABLE>
*The overhead efficiency ratio is equal to noninterest expense divided
by net operating revenue. Net operating revenue is equal to the sum
of tax-equivalent net interest income and noninterest income.
T-2
<PAGE>
Table 4
SELECTED LINES OF BUSINESS*
<TABLE>
<CAPTION>
Year Ended December 31, 1995
First Union Other
Card Home Equity Consumer Capital Capital Mortgage
(Dollars in thousands) Products Bank Banking Markets Management Banking
<C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Interest income** $ 708,778 278,857 1,126,471 922,941 22,842 1,094,653
Interest expense 281,195 159,361 601,220 671,690 1,220 808,680
Provision for loan losses 212,708 6,361 62,166 29,354 124 25,137
Noninterest income 107,994 30,035 26,352 265,428 288,060 112,011
Other Data
Net charge-offs 171,977 3,569 49,152 8,153 - 5,439
Average loans, net 4,827,681 2,664,311 10,988,757 7,442,955 110,277 13,798,477
Nonperforming assets 13,066 10,640 82,414 118,177 - 101,581
Average deposits - - - 2,317,510 579,173 -
Assets under care - - - - 51,226,399 -
Assets under management - - - - 27,900,000 -
Loans serviced - - - - - 51,505,000
Origination volume $ 6,397,661 1,224,558 6,162,978 - - 3,167,057
Locations 1,290 143 1,296 1,304 1,485 1,311
</TABLE>
*The information contained herein represents selected lines of
business data other than commercial lending and branch operations.
Certain information is prepared from internal management reports.
**Tax-equivalent.
Table 5
INTERNAL CAPITAL GROWTH AND DIVIDEND PAYOUT RATIOS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
INTERNAL CAPITAL GROWTH*
Assets to stockholders' equity 14.78X 13.29 14.07 14.51 15.89 16.07
X
Return on assets 1.21% 1.27 1.20 .63 .63 .50
Return on total stockholders' equity (a) 17.69% 16.66 16.89 9.14 10.06 8.09
X
Earnings retained 66.11% 65.07 67.13 46.45 48.48 29.68
Internal capital growth (a) 11.69% 10.84 11.34 4.24 4.88 2.40
DIVIDEND PAYOUT RATIOS ON
Common shares 33.50% 34.54 31.71 49.34 46.18 65.92
Preferred and common shares 33.89% 34.93 32.87 53.55 51.52 70.32
Return on common stockholders' equity
before redemption premium** (a) 17.57% 17.04 17.42 9.08 10.03 7.78
Return on common stockholders' equity
after redemption premium** (a) 17.57% 16.26 17.42 9.08 10.03 7.78
</TABLE>
(a) The determination of these ratios exclude average net unrealized
gains or losses on debt and equity securities.
* Based on average balances and net income.
** Based on average balances and net income applicable to common
stockholders.
T-3
<PAGE>
Table 6
SELECTED QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
(In thousands except
per share data) Fourth Third Second First Fourth Third Second First
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Net Income
Interest income $1,699,456 1,673,957 1,552,525 1,447,892 1,389,470 1,307,377 1,235,206 1,162,608
Interest expense 871,667 832,840 738,338 668,209 610,172 530,858 483,913 436,003
Net interest income 827,789 841,117 814,187 779,683 779,298 776,519 751,293 726,605
Provision for loan losses 54,500 49,000 44,000 32,500 25,000 25,000 25,000 25,000
Net interest income after 773,289 792,117 770,187 747,183 754,298 751,519 726,293 701,605
provision for loan losses
Securities available for sale 7,600 4,713 1,243 3,635 (9,926) (2,946) (2,935) 4,300
transactions
Investment security transactions 777 2,591 1,233 217 411 2,286 694 615
Noninterest income 438,367 362,842 326,503 301,539 311,419 303,259 276,011 275,781
Noninterest expense* 804,982 770,949 714,739 684,702 703,948 682,219 651,220 639,841
Income before income taxes* 415,051 391,314 384,427 367,872 352,254 371,899 348,843 342,460
Income taxes 143,036 136,298 135,291 130,963 120,705 130,147 119,223 120,001
Net income 272,015 255,016 249,136 236,909 231,549 241,752 229,620 222,459
Dividends on preferred stock - - - 7,029 6,831 6,595 6,201 5,726
Net income applicable to common
stockholders before redemption premium 272,015 255,016 249,136 229,880 224,718 235,157 223,419 216,733
Redemption premium on preferred stock - - - - 41,355 - - -
Net income applicable to common
stockholders after redemption premium $ 272,015 255,016 249,136 229,880 183,363 235,157 223,419 216,733
Per Common Share Data
Net income before redemption premium $ 1.58 1.50 1.45 1.32 1.28 1.35 1.32 1.27
Net income after redemption premium 1.58 1.50 1.45 1.32 1.04 1.35 1.32 1.27
Cash dividends .52 .52 .46 .46 .46 .46 .40 .40
Common stock price
High 58 7/8 51 3/8 49 3/4 45 1/8 45 1/4 47 1/4 47 5/8 43 3/4
Low 49 5/8 45 1/4 42 7/8 41 3/8 39 3/8 43 1/4 41 1/4 39 3/4
Quarter-end $ 55 5/8 51 45 1/4 43 3/8 41 3/8 43 1/4 46 1/8 41 5/8
Selected Ratios**
Return on assets*** 1.19% 1.16 1.25 1.24 1.22 1.31 1.28 1.28
Return on common stockholders' equity
before redemption premium**** 18.08 17.71 17.71 16.71 15.92 17.29 17.53 17.54
Return on common stockholders' equity
after redemption premium**** 18.08 17.71 17.71 16.71 12.99 17.29 17.53 17.54
Stockholders' equity to assets 6.58% 6.55 6.96 7.01 7.49 7.62 7.39 7.60
</TABLE>
* Includes merger-related restructuring charges of $16,447,000
($13,072,000 after tax) in the fourth quarter of 1995.
** Based on average balances.
*** Based on net income.
**** Based on net income applicable to common stockholders, excluding
average net unrealized gains (losses) on debt and equity securities.
T-4
<PAGE>
Table 7
SELECTED SIX-YEAR DATA*
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOAN PORTFOLIO
PERMANENT LOAN ORIGINATIONS
Residential
Direct $ 2,529,742 3,569,451 6,276,720 4,549,392 2,206,796 1,832,758
Wholesale 144,138 933,214 2,431,455 2,641,656 2,657,534 2,092,646
Total 2,673,880 4,502,665 8,708,175 7,191,048 4,864,330 3,925,404
Income property 493,177 443,356 238,199 263,749 266,518 237,980
Total $ 3,167,057 4,946,021 8,946,374 7,454,797 5,130,848 4,163,384
VOLUME OF LOANS SERVICED
Residential $ 50,047,000 32,677,000 32,786,000 22,528,000 22,161,000 17,878,000
Income property 1,458,000 1,537,000 1,972,000 1,848,000 1,951,000 1,534,000
Total $ 51,505,000 34,214,000 34,758,000 24,376,000 24,112,000 19,412,000
NUMBER OF OFFICES
Banking 1,285 1,340 1,303 898 1,004 768
Other 190 222 222 235 209 285
Total offices 1,475 1,562 1,525 1,133 1,213 1,053
OTHER DATA
ATMs 1,415 1,242 1,189 847 943 707
Employees 32,971 31,858 32,861 23,459 24,203 20,521
Common stockholders 61,058 54,236 58,670 37,955 33,456 34,951
</TABLE>
* 1990-1994 not restated for pooling of interests acquisitions.
T-5
<PAGE>
Table 8
GROWTH THROUGH ACQUISITIONS
<TABLE>
<CAPTION>
Loans,
(In thousands) Assets net Deposits
<S> <C> <C> <C>
December 31, 1989, as reported $ 45,506,847 31,600,776 31,531,770
1990 acquisition 7,946,973 4,174,478 5,727,330
Growth in operations 1,134,590 275,465 935,168
December 31, 1990, as reported 54,588,410 36,050,719 38,194,268
1991 acquisitions 12,322,456 7,025,621 9,921,421
Reduction in operations (7,637,689) (1,692,760) (939,466)
December 31, 1991, as reported 59,273,177 41,383,580 47,176,223
1992 acquisitions 3,739,039 1,773,797 3,645,316
Growth (reduction) in operations 815,815 (1,233,610) (1,670,574)
December 31, 1992, as reported 63,828,031 41,923,767 49,150,965
1993 acquisitions 7,785,479 4,380,362 6,302,873
Growth (reduction) in operations (826,541) 572,048 (1,711,427)
December 31, 1993, as reported 70,786,969 46,876,177 53,742,411
1994 acquisitions 4,595,762 1,238,703 4,026,375
Growth in operations 1,930,774 5,914,872 1,189,487
December 31, 1994, as reported 77,313,505 54,029,752 58,958,273
1995 acquisitions 10,254,013 7,537,477 7,252,524
Growth (reduction) in operations 9,172,978 4,061,215 (1,210,496)
December 31, 1995, as reported $ 96,740,496 65,628,444 65,000,301
</TABLE>
Acquisitions (those greater than $3.0 billion in acquired assets
and/or deposits) include the purchase acquisitions
of Florida National Banks of Florida, Inc. in 1990 and the Southeast
Banks transaction in 1991; the pooling of interests
acquisition of Dominion Bankshares Corporation in 1993; the purchase
acquisitions of Georgia Federal Savings
Bank, FSB and First American Metro Corp. in 1993; and the purchase
acquisition of American Savings of Florida, FSB
in 1995.
T-6
<PAGE>
Table 9
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
Average
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity
(In thousands) or Less Years Years Years Total Gains Losses Cost in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $ 1,374,773 867,427 - - 2,242,200 (2,847) 6,370 2,245,723 1.29
U.S. Government agencies 129,910 4,864,394 1,487,637 639 6,482,580 (88,831) 2,397 6,396,146 4.19
CMOs 143,852 2,068,606 79,596 - 2,292,054 (24,974) 13,602 2,280,682 2.70
Other 157,390 882,308 86,549 573,882 1,700,129 (93,230) 5,102 1,612,001 2.91
Total $ 1,805,925 8,682,735 1,653,782 574,521 12,716,963 (209,882) 27,471 12,534,552 3.25
Market Value
Debt securities $ 1,805,925 8,682,735 1,653,782 70,643 12,213,085 (139,913) 27,202 12,100,374
Sundry securities - - - 503,878 503,878 (69,969) 269 434,178
Total $ 1,805,925 8,682,735 1,653,782 574,521 12,716,963 (209,882) 27,471 12,534,552
Amortized Cost
Debt securities $ 1,801,221 8,588,759 1,639,547 70,847 12,100,374
Sundry securities - - - 434,178 434,178
Total $ 1,801,221 8,588,759 1,639,547 505,025 12,534,552
Weighted Average Yield
U.S. Treasury 6.70 % 5.31 - - 6.16
U.S. Government agencies 7.04 6.69 6.35 6.89 6.62
CMOs 7.19 6.97 7.47 - 7.00
Other 7.93 6.16 11.20 5.10 6.28
Consolidated 6.87 % 6.57 6.67 5.10 6.56
</TABLE>
<TABLE>
<CAPTION>
Average
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity
(In thousands) or Less Years Years Years Total Gains Losses Cost in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $ 1,156,159 1,035,790 - - 2,191,949 - 81,975 2,273,924 1.89
U.S. Government agencies 153,675 469,468 2,031,111 546 2,654,800 (404) 171,580 2,825,976 6.31
CMOs 90,066 1,091,930 58,524 - 1,240,520 (49) 44,627 1,285,098 2.96
Other 84,757 1,282,076 20,299 278,078 1,665,210 (51,633) 56,017 1,669,594 2.75
Total $ 1,484,657 3,879,264 2,109,934 278,624 7,752,479 (52,086) 354,199 8,054,592 3.82
Market Value
Debt securities $ 1,484,657 3,879,264 2,109,934 24,069 7,497,924 (3,243) 346,011 7,840,692
Sundry securities - - - 254,555 254,555 (48,843) 8,188 213,900
Total $ 1,484,657 3,879,264 2,109,934 278,624 7,752,479 (52,086) 354,199 8,054,592
Amortized Cost
Debt securities $ 1,486,608 4,061,240 2,264,716 28,128 7,840,692
Sundry securities - - - 213,900 213,900
Total $ 1,486,608 4,061,240 2,264,716 242,028 8,054,592
Weighted Average Yield
U.S. Treasury 7.29 % 5.60 - - 6.46
U.S. Government agencies 6.90 5.40 5.89 6.02 5.86
CMOs 5.10 5.21 5.36 - 5.21
Other 7.27 6.99 5.90 4.40 6.62
Consolidated 7.12 % 5.92 5.88 4.40 6.08
</TABLE>
T-7
<PAGE>
<TABLE>
<CAPTION>
Average
December 31, 1993 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Treasury $ 3,177,119 1,249,298 - - 4,426,417 3,609 (7,315) 4,422,711 1.34
U.S. Government agencies 114,531 1,646,429 1,494,136 555 3,255,651 43,814 (270) 3,299,195 4.29
CMOs 1,006,973 1,226,569 - - 2,233,542 13,389 (8,825) 2,238,106 1.33
Other 438,585 1,121,571 35,474 233,702 1,829,332 95,296 (255) 1,924,373 2.40
Total $ 4,737,208 5,243,867 1,529,610 234,257 11,744,942 156,108 (16,665) 11,884,385 2.32
Carrying Value
Debt securities $ 4,737,208 5,243,867 1,529,610 860 11,511,545 119,624 (16,445) 11,614,724
Sundry securities - - - 233,397 233,397 36,484 (220) 269,661
Total $ 4,737,208 5,243,867 1,529,610 234,257 11,744,942 156,108 (16,665) 11,884,385
Market Value
Debt securities $ 4,742,741 5,328,847 1,542,264 872 11,614,724
Sundry securities - - - 269,661 269,661
Total $ 4,742,741 5,328,847 1,542,264 270,533 11,884,385
Weighted Average Yield
U.S. Treasury 3.84 % 5.23 - - 4.23
U.S. Government agencies 3.36 6.45 6.00 6.68 6.14
CMOs 5.03 5.13 - - 5.09
Other 5.17 7.71 5.74 7.68 7.06
Consolidated 4.21 % 6.12 6.00 7.68 5.36
</TABLE>
Included in "U.S. Government agencies" and "Other" at December 31,
1995, are $1,101,704,000 of securities that are denominated in
currencies other than the U.S. dollar. The currency exchange rates were
hedged utilizing both on and off-balance sheet instruments to minimize
the exposure to currency revaluation risks. At December 31, 1995, these
securities had a weighted average maturity of 2.92 years and a weighted
average yield of 6.10 percent. The weighted average U.S. equivalent
yield for comparative purposes of these securities was 7.50 percent
based on a weighted average funding cost differential of 1.40 percent.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. The aging of mortgage-backed
securities is based on their weighted average maturities. Average
maturity in years excludes preferred and common stocks and money market
funds.
Weighted average yields are based on amortized cost. Yields related to
securities exempt from both federal and state income taxes, federal
income taxes only or state income taxes only are stated on a fully
tax-equivalent basis. They are reduced by the nondeductible portion of
interest expense, assuming a federal tax rate of 35 percent; a North
Carolina state tax rate of 7.75 percent in 1995, 7.8275 percent in
1994, and 7.905 percent in 1993; a Georgia and Tennessee state tax rate
of 6 percent; a South Carolina state tax rate of 4.5 percent; a Florida
state tax rate of 5.5 percent; a Maryland state tax rate of 7 percent;
and a Washington , D.C. tax rate of 9.975 percent in 1995 and 10.25
percent in 1994 and 1993, respectively.
There were commitments to purchase securities at a cost of $358,825,000
that had a market value of $360,254,000 at December 31, 1995.
Commitments to sell securities at December 31, 1995 had a carrying value
of $321,089,000. There were commitments to purchase securities at a
cost of $5,551,000 that had a market value of $5,547,000 at December 31,
1994. There were no commitments to sell securities. Securities
available for sale at December 31, 1993 include the carrying value of
$513,390,000 of securities which have been sold for future settlement.
Gross gains and losses from sales are accounted for on a trade date
basis. Gross gains and losses realized on the sale of debt securities
in 1995 were $36,655,000 and $33,755,000, respectively and on sundry
securities $14,365,000 and $74,000, respectively. Gross gains and
losses realized on the sale of debt securities in 1994 were $27,017,000
and $43,813,000, respectively, and on sundry securities $5,998,000 and
$709,000, respectively. Gross gains and losses realized on the sale of
debt securities in 1993 were $28,818,000 and $9,553,000, respectively,
and on sundry securities $6,570,000 and $68,000, respectively.
T-8
<PAGE>
Table 10
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
Average
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Government agencies $ 15,624 805,739 147,234 - 968,597 23,005 (935) 990,667 3.52
CMOs 47,339 546,111 - - 593,450 12,443 (1) 605,892 3.00
State, county and municipal 179,761 151,460 122,491 364,296 818,008 115,107 (2,950) 930,165 8.12
Other 1,008 - 6,156 67,098 74,262 6,771 (2) 81,031 12.98
Total $ 243,732 1,503,310 275,881 431,394 2,454,317 157,326 (3,888) 2,607,755 5.16
Carrying Value
Debt securities $ 243,732 1,503,310 275,881 415,553 2,438,476 157,326 (3,888) 2,591,914
Sundry securities - - - 15,841 15,841 - - 15,841
Total $ 243,732 1,503,310 275,881 431,394 2,454,317 157,326 (3,888) 2,607,755
Market Value
Debt securities $ 247,076 1,545,715 300,156 498,967 2,591,914
Sundry securities - - - 15,841 15,841
Total $ 247,076 1,545,715 300,156 514,808 2,607,755
Weighted Average Yield
U.S. Government agencies 6.17 % 7.71 7.94 - 7.72
CMOs 7.28 7.20 - - 7.21
State, county and municipal 9.64 11.27 11.58 12.13 11.34
Other 5.70 - 7.42 9.21 9.01
Consolidated 8.94 % 7.88 9.55 11.67 8.84
</TABLE>
<TABLE>
<CAPTION>
Average
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Government agencies $ - 100,853 1,201,803 14,474 1,317,130 5,528 (39,881) 1,282,777 7.28
CMOs - 910,733 92,516 - 1,003,249 - (26,786) 976,463 3.70
State, county and municipal 369,189 267,835 151,533 437,523 1,226,080 78,676 (4,698) 1,300,058 7.06
Other - 2,036 6,178 175,196 183,410 3,022 (3,196) 183,236 13.33
Total $ 369,189 1,281,457 1,452,030 627,193 3,729,869 87,226 (74,561) 3,742,534 6.34
Carrying Value
Debt securities $ 369,189 1,281,457 1,452,030 517,532 3,620,208 87,226 (74,561) 3,632,873
Sundry securities - - - 109,661 109,661 - - 109,661
Total $ 369,189 1,281,457 1,452,030 627,193 3,729,869 87,226 (74,561) 3,742,534
Market Value
Debt securities $ 376,983 1,269,819 1,423,936 562,135 3,632,873
Sundry securities - - - 109,661 109,661
Total $ 376,983 1,269,819 1,423,936 671,796 3,742,534
Weighted Average Yield
U.S. Government agencies - % 7.83 7.32 6.80 7.35
CMOs - 6.49 6.80 - 6.52
State, county and municipal 11.74 10.65 11.52 12.38 11.70
Other - 6.76 7.42 7.81 7.79
Consolidated 11.74% 7.47 7.73 10.97 8.58
</TABLE>
T-9
<PAGE>
<TABLE>
<CAPTION>
Average
December 31, 1993 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Treasury $ 550 - - - 550 - (1) 549 .04
U.S. Government agencies 311,750 814,667 30,232 - 1,156,649 44,054 (1,222) 1,199,481 1.87
State, county and municipal 80,863 508,477 242,072 511,523 1,342,935 183,230 (756) 1,525,409 8.03
Other - - 6,200 186,142 192,342 13,358 - 205,700 8.00
Total $ 393,163 1,323,144 278,504 697,665 2,692,476 240,642 (1,979) 2,931,139 5.19
Carrying Value
Debt securities $ 393,163 1,323,144 278,504 511,530 2,506,341 227,730 (1,979) 2,732,092
Sundry securities - - - 186,135 186,135 12,912 - 199,047
Total $ 393,163 1,323,144 278,504 697,665 2,692,476 240,642 (1,979) 2,931,139
Market Value
Debt securities $ 401,304 1,399,666 311,652 619,470 2,732,092
Sundry securities - - - 199,047 199,047
Total $ 401,304 1,399,666 311,652 818,517 2,931,139
Weighted Average Yield
U.S. Treasury 2.88% - - - 2.88
U.S. Government agencies 4.95 7.14 6.60 - 6.53
State, county and municipal 10.61 11.49 11.48 12.24 11.72
Other - - 7.77 8.09 8.08
Consolidated 6.11% 8.81 10.87 11.14 9.23
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. The aging of mortgage-backed
securities is based on their weighted average maturities.
Yields related to securities exempt from both federal and state income
taxes, federal income taxes only or state income taxes only are stated
on a fully tax-equivalent basis. They are reduced by the nondeductible
portion of interest expense, assuming a federal tax rate of 35 percent;
a North Carolina state tax rate of 7.75 percent in 1995, 7.8275 percent
in 1994, and 7.905 percent in 1993; a Georgia and Tennessee state tax
rate of 6 percent; a South Carolina state tax rate of 4.5 percent; a
Florida state tax rate of 5.5 percent; a Maryland state tax rate of 7
percent; and a Washington, D.C. tax rate of 9.975 percent in 1995, and
10.25 percent in 1994 and 1993, respectively.
There were no commitments to purchase or sell investment securities at
December 31, 1995, 1994 or 1993. Gross gains and losses realized on
repurchase agreement underdeliveries and calls of investment securities
in 1995 were $5,705,000 and $887,000, respectively. In 1994 such gross
gains and losses were $4,050,000 and $44,000, respectively. In 1993
such gross gains and losses were $7,837,000 and $402,000, respectively.
T-10
<PAGE>
Table 11
LOANS
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Commercial
Commercial, financial and agricultural
Taxable $ 17,737,919 15,198,651 12,509,283 10,532,842 10,854,321 9,946,557
Nontaxable 721,386 709,092 724,442 738,834 936,416 1,054,246
Total commercial, financial
and agricultural 18,459,305 15,907,743 13,233,725 11,271,676 11,790,737 11,000,803
Real estate - construction and other 2,260,193 1,734,095 1,664,694 1,886,319 3,014,877 3,380,426
Real estate - mortgage 5,953,377 5,437,496 5,834,894 5,782,780 5,421,698 4,067,445
Lease financing 2,829,628 1,613,763 962,599 1,033,809 1,109,525 1,184,196
Foreign 519,970 415,857 304,267 274,800 233,601 190,621
Total commercial 30,022,473 25,108,954 22,000,179 20,249,384 21,570,438 19,823,491
Retail
Real estate - mortgage 20,143,480 15,014,775 13,318,058 10,775,107 9,406,329 7,173,064
Installment loans - Bankcard* 3,383,903 3,959,657 1,995,568 - - -
Installment loans - other 13,252,126 10,618,696 9,896,431 11,260,708 10,850,557 9,485,633
Total retail 36,779,509 29,593,128 25,210,057 22,035,815 20,256,886 16,658,697
Total loans 66,801,982 54,702,082 47,210,236 42,285,199 41,827,324 36,482,188
Unearned Income
Loans 148,544 145,691 129,830 186,173 247,016 245,363
Lease financing 1,024,994 526,639 204,229 175,259 196,728 186,106
Total unearned income 1,173,538 672,330 334,059 361,432 443,744 431,469
Loans, net $ 65,628,444 54,029,752 46,876,177 41,923,767 41,383,580 36,050,719
</TABLE>
*Information not available prior to 1993.
T-11
<PAGE>
Table 12
CERTAIN LOAN MATURITIES AND SENSITIVITY
TO CHANGES IN INTEREST RATES
<TABLE>
<CAPTION>
December 31, 1995
Commercial, Commercial
Financial Real Estate: Commercial
and Construction Real Estate:
(In thousands) Agricultural and Other Mortgage Foreign Total
<S> <C> <C> <C> <C> <C>
Fixed Rate
1 year or less $ 1,303,638 64,820 231,910 365,835 1,966,203
1-5 years 1,736,458 111,845 1,098,345 26,495 2,973,143
After 5 years 902,013 129,039 826,568 5,408 1,863,028
Total 3,942,109 305,704 2,156,823 397,738 6,802,374
Adjustable Rate
1 year or less 5,358,626 741,844 735,740 95,286 6,931,496
1-5 years 6,221,800 914,710 2,222,118 24,380 9,383,008
After 5 years 2,936,770 297,935 838,696 2,566 4,075,967
Total 14,517,196 1,954,489 3,796,554 122,232 20,390,471
Total $ 18,459,305 2,260,193 5,953,377 519,970 27,192,845
</TABLE>
T-12
<PAGE>
Table 13
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of year $ 978,795 1,020,191 940,804 851,830 702,685 355,442
Provision for loan losses 180,000 100,000 221,753 414,708 648,284 425,409
Reversal of tax effect of acquired bank
related net charge-offs included in
the provision for loan losses - - - - (16,386) -
Allowance of divested subsidiary and
other sales - - - - - (7,769)
Allowance of loan acquired or sold, net 48,226 21,520 109,321 50,141 83,770 173,660
Transfer to allowance for segregated
asset losses - - - (20,000) (13,000) -
Loan losses, net (240,510) (162,916) (251,687) (355,875) (553,523) (244,057)
Balance, end of year $ 966,511 978,795 1,020,191 940,804 851,830 702,685
(as % of loans, net) 1.47 % 1.81 2.18 2.24 2.06 1.95
(as % of nonaccrual and restructured loans) 193 245 147 96 72 77
(as % of nonperforming assets) 161 % 175 111 70 50 56
LOAN LOSSES
Commercial, financial and agricultural $ 53,222 67,804 121,373 142,600 189,648 116,060
Real estate - construction and other 1,178 8,897 25,829 52,524 164,044 49,183
Real estate - mortgage 37,751 54,108 66,105 80,934 118,555 4,196
Installment loans - Bankcard* 163,217 65,760 55,610 - - -
Installment loans - other 70,972 58,358 60,643 130,493 124,536 108,117
Total 326,340 254,927 329,560 406,551 596,783 277,556
LOAN RECOVERIES
Commercial, financial and agricultural 43,291 48,314 29,681 21,252 15,924 12,991
Real estate - construction and other 5,413 2,834 5,718 1,254 1,882 1,633
Real estate - mortgage 7,869 12,554 15,866 4,926 4,097 847
Installment loans - Bankcard* 11,537 9,605 7,160 - - -
Installment loans - other 17,720 18,704 19,448 23,244 21,357 18,028
Total 85,830 92,011 77,873 50,676 43,260 33,499
Loan losses, net $ 240,510 162,916 251,687 355,875 553,523 244,057
(as % of average loans, net) .40 % .33 .58 .86 1.48 .68
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 276,987 155,752 242,241 407,583 494,649 300,334
Real estate and other loans 223,587 241,886 425,101 498,973 574,324 574,732
Total nonaccrual loans 500,574 397,638 667,342 906,556 1,068,973 875,066
Restructured loans 599 1,872 26,544 68,935 116,893 38,867
Foreclosed properties 100,468 158,464 222,503 375,559 530,524 330,984
Total nonperforming assets $ 601,641 557,974 916,389 1,351,050 1,716,390 1,244,917
(as % of loans, net and foreclosed properties) .92 % 1.03 1.95 3.19 4.10 3.42
Accruing loans past due 90 days $ 146,764 140,081 71,307 85,513 144,075 194,605
</TABLE>
*Information not available prior to 1993.
T-13
<PAGE>
Table 14
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
Loans Loans Loans Loans Loans
% % % % %
Total Total Total Total Total
(In millions) Amt. Loans Amt. Loans Amt. Loans Amt. Loans Amt. Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $246 28% $224 29% $ 188 28% $316 27% $337 28%
Real estate - construction and other 45 3 58 3 73 4 140 4 148 7
Real estate - mortgage 146 39 175 37 200 41 199 39 164 35
Installment loans - Bankcard 169 5 133 7 76 4 - - - -
Installment loans - other 124 20 107 20 149 21 142 27 124 26
Lease financing 4 4 2 3 2 2 2 2 3 3
Foreign 3 1 4 1 - - 1 1 1 1
Unallocated 230 - 276 - 332 - 141 - 75 -
Total $967 100% $979 100% $1,020 100% $941 100% $852 100%
</TABLE>
Beginning in 1993, the allocation for loan losses is based on the
Corporation's loss migration process. The unallocated portion of the
allowance for loan losses at December 31, 1992, would have been
increased by $37 million had the migration model been available in 1992.
The allocation of the allowance for loan losses to the respective
classifications is not necessarily indicative of future losses or future
allocations. Information related to Bankcards is not available prior to
1993.
See the "Loans" and "Allowance for Loan Losses" discussion in
Management's Analysis of Operations and in Note 1 to the consolidated
financial statements.
Table 15
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Mortgage Servicing Rights $ 102,365 84,898 87,350 183,196 196,796 173,915
Credit Card Premium $ 43,894 58,494 75,588 71,140 73,792 24,785
Other Intangible Assets
Goodwill $ 1,176,667 754,417 712,485 643,978 676,046 685,602
Deposit base premium 450,211 437,025 255,359 175,707 179,152 176,043
Other 5,325 7,465 10,468 18,285 15,324 9,508
Total $ 1,632,203 1,198,907 978,312 837,970 870,522 871,153
</TABLE>
T-14
<PAGE>
Table 16
ALLOWANCE FOR FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Foreclosed properties $ 124,058 193,290 278,694 478,887 561,476
Allowance for foreclosed properties, beginning
of year 34,826 56,191 103,328 30,952 799
Provision for foreclosed properties (3,756) 4,503 23,730 111,260 36,467
Transfer from (to) allowance for segregated
assets 78 1,722 (1,998) - -
Dispositions, net (7,558) (27,590) (68,869) (38,884) (6,314)
Allowance for foreclosed properties, end of year 23,590 34,826 56,191 103,328 30,952
Foreclosed properties, net $ 100,468 158,464 222,503 375,559 530,524
Table 17
DEPOSITS
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Core Deposits
Noninterest-bearing $ 11,788,401 10,523,538 10,861,207 9,213,646 7,836,183 6,267,894
Savings and NOW accounts 15,739,529 13,991,987 12,010,636 9,825,918 7,954,985 5,633,720
Money market accounts 9,360,061 10,118,963 11,131,334 9,930,789 8,832,272 6,950,226
Other consumer time 22,899,251 18,544,324 16,897,062 18,014,195 19,181,341 14,856,718
Total core deposits 59,787,242 53,178,812 50,900,239 46,984,548 43,804,781 33,708,558
Foreign 2,962,870 4,069,587 1,240,448 249,429 125,159 642,592
Other time 2,250,189 1,709,874 1,601,724 1,916,988 3,246,283 3,843,118
Total deposits $ 65,000,301 58,958,273 53,742,411 49,150,965 47,176,223 38,194,268
</TABLE>
Table 18
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
<TABLE>
<CAPTION>
December 31, 1995
Time Other
(In thousands) Certificates Time
<S> <C> <C>
Maturity of
3 months or less $ 2,729,041 76,972
Over 3 months through 6 months 1,220,833
Over 6 months through 12 months 1,014,013
Over 12 months 1,142,507
Total $ 6,106,394 76,972
T-15
<PAGE>
Table 19
CAPITAL RATIOS
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED CAPITAL RATIOS*
Qualifying capital
Tier 1 capital $ 4,439,185 4,466,670 4,342,664 3,189,276 2,441,839 1,901,657
Total capital 7,533,356 7,450,602 6,960,671 4,948,156 3,799,073 3,153,733
Adjusted risk-based assets 72,135,721 57,593,799 47,529,159 34,573,794 32,314,244 29,121,464
Adjusted leverage ratio assets $ 86,169,989 73,011,243 70,785,664 48,671,501 45,955,064 38,833,477
Ratios
Tier 1 capital 6.15 % 7.76 9.14 9.22 7.56 6.53
Total capital 10.44 12.94 14.64 14.31 11.76 10.83
Leverage 5.15 6.12 6.13 6.55 5.31 4.90
Stockholders' equity to assets
Year-end 6.36 6.98 7.36 6.99 6.51 6.05
Average 6.76 % 7.52 7.11 6.89 6.29 6.22
BANK CAPITAL RATIOS
Tier 1 capital
First Union National Bank of
Florida 7.39 % 7.95 9.13 9.38 8.79 6.44
Georgia 6.69 8.26 9.58 8.14 6.06 6.51
Maryland 11.36 20.53 15.78 - - -
North Carolina 6.31 7.32 8.24 7.22 6.45 6.87
South Carolina 8.42 7.88 7.55 7.88 6.85 6.46
Tennessee 11.12 12.76 12.43 24.03 6.57 7.50
Virginia 7.41 9.21 10.77 - - -
Washington, D.C. 13.77 16.75 14.23 - - -
First Union Home Equity Bank 7.50 7.60 - - - -
Total capital
First Union National Bank of
Florida 10.72 10.76 10.83 11.10 10.61 8.56
Georgia 10.62 11.18 12.62 11.05 7.62 8.23
Maryland 12.62 21.81 17.07 - - -
North Carolina 9.92 10.69 11.35 10.60 7.99 8.39
South Carolina 11.79 12.15 11.82 10.89 8.25 7.84
Tennessee 12.38 14.02 13.69 25.29 7.84 8.55
Virginia 10.57 13.11 13.08 - - -
Washington, D.C. 15.03 18.03 15.52 - - -
First Union Home Equity Bank 10.09 12.10 - - - -
Leverage
First Union National Bank of
Florida 5.18 5.91 5.79 5.62 4.91 4.91
Georgia 5.54 5.69 5.67 6.58 4.91 4.78
Maryland 9.32 12.82 9.04 - - -
North Carolina 5.72 6.10 5.52 5.46 4.91 4.97
South Carolina 6.24 5.77 5.56 5.93 5.39 4.82
Tennessee 7.64 8.47 8.05 25.10 7.34 8.22
Virginia 6.17 7.10 6.89 - - -
Washington, D.C. 6.32 8.33 6.06 - - -
First Union Home Equity Bank 6.48 % 7.22 - - - -
</TABLE>
* Risk-based capital ratio guidelines require a minimum ratio of tier 1
capital to risk-weighted assets of 4.00 percent and a minimum ratio
of total capital to risk-weighted assets of 8.00 percent. The minimum
leverage ratio of tier 1 capital to adjusted average quarterly assets
is from 3.00 to 5.00 percent. The 1990-1992 capital ratios presented
herein have not been restated to reflect pooling of interests acquisitions.
T-16
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31,1995 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value
<S> <C> <C> <C> <C> <C>
Asset Rate Conversions
Interest rate swaps $ 8,327,656 6.67 % 5.80 % 1.30
Carrying amount $ 20,516
Unrealized gross gain 104,589
Unrealized gross loss (6,645)
Total 118,460
Forward bullet
interest rate swaps 6,120,000 5.97 - 1.96
Carrying amount -
Unrealized gross gain 38,428
Unrealized gross loss -
Total 38,428
Total asset rate conversions $ 14,447,656 6.38 % 5.80 % 1.58 $ 156,888
Liability Rate Conversions
Interest rate swaps $ 3,367,000 7.07 % 5.72 % 7.82
Carrying amount $ 5,416
Unrealized gross gain 186,869
Unrealized gross loss (4,071)
Total 188,214
Other financial instruments 180,000 - - 6.33
Carrying amount (2,224)
Unrealized gross gain -
Unrealized gross loss (130)
Total (2,354)
Total liability rate conversions $ 3,547,000 7.07 % 5.72 % 7.74 $ 185,860
Asset Hedges
Short eurodollar futures $ 1,016,000 - % 5.81 % .29
Carrying amount $ -
Unrealized gross gain -
Unrealized gross loss (1,391)
Total (1,391)
Total asset hedges $ 1,016,000 - % 5.81 % .29 $ (1,391)
</TABLE>
<TABLE>
<CAPTION>
December 31,1995
(In thousands) Comments
<S> <C>
Asset Rate Conversions
Interest rate swaps Converts floating rate loans to fixed rate. Adds to liability
Carrying amount sensitivity. Similar characteristics to a fixed income security
Unrealized gross gain funded with variable rate liabilities. Includes $4.1 billion of
Unrealized gross loss indexed amortizing swaps, with $628 million maturing
Total within 3 years and $3.5 billion within 4.75 years.
Forward bullet
interest rate swaps Converts floating rates on loans to fixed rates at higher
Carrying amount than current yields in future periods. $63 million effective
Unrealized gross gain March 1996; $6.0 billion effective December 1996; $57
Unrealized gross loss million effective March 1997.
Total
Total asset rate conversions
Liability Rate Conversions
Interest rate swaps Converts $3.3 billion of fixed rate long-term debt to floating rate
Carrying amount by matching the maturity of the swap to the debt issue. Rate
Unrealized gross gain sensitivity remains unchanged due to the direct linkage of the
Unrealized gross loss swap to the debt issue. Also converts $42 million of fixed rate
Total CD's to variable rate.
Other financial instruments Miscellaneous purchased option-based products for liability
Carrying amount management purposes include $5 million of options on
Unrealized gross gain swaps, $25 million of eurodollar caps and $150 million of
Unrealized gross loss eurodollar floors.
Total
Total liability rate
conversions
Asset Hedges
Short eurodollar futures Hedges market values of U.S. Treasury notes in the available-
Carrying amount for-sale portfolio. $788 million effective March 1996; $164 million
Unrealized gross gain effective June 1996; $64 million effective September 1996.
Unrealized gross loss
Total
Total asset hedges
</TABLE>
(Continued)
T-17
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1995 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value
<S> <C> <C> <C> <C> <C>
Rate Sensitivity Hedges
Put options on eurodollar futures $ 4,252,000 - % 7.87 % .33
Carrying amount $ 624
Unrealized gross gain -
Unrealized gross loss (624)
Total -
Interest rate caps 67,200 - - .43
Carrying amount 81
Unrealized gross gain 6
Unrealized gross loss (50)
Total 37
Short eurodollar futures 2,000,000 - 5.60 .22
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (1,378)
Total (1,378)
Long eurodollar futures 23,355,000 5.56 - 1.40
Carrying amount -
Unrealized gross gain 19,255
Unrealized gross loss -
Total 19,255
Total rate sensitivity hedges $ 29,674,200 5.56 % 7.14 % 1.16 $ 17,914
Offsetting Positions
Interest rate floors $ 800,000 6.16 % 6.16 % .45
Carrying amount $ (524)
Unrealized gross gain 2,362
Unrealized gross loss (1,838)
Total -
Prime/federal funds cap 4,000,000 5.90 5.90 .27
Carrying amount 448
Unrealized gross gain 1,353
Unrealized gross loss (1,801)
Total -
Total offsetting positions $ 4,800,000 5.95 % 5.95 % .30 $ -
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
(In thousands) Comments
<S> <C>
Rate Sensitivity Hedges
Put options on eurodollar futures Paid a premium for the right to lock in the 3 month LIBOR reset
Carrying amount rates on pay variable rate swaps and short-term liabilities.
Unrealized gross gain $2.4 billion effective March 1996; $1.9 billion effective June 1996.
Unrealized gross loss
Total
Interest rate caps Purchased LIBOR caps; $50 million converts floating rate liabilities
Carrying amount to fixed if short-term rates rise above 8 percent; $17 million
Unrealized gross gain uncaps a LIBOR-based, asset-backed security at 11.72 percent.
Unrealized gross loss
Total
Short eurodollar futures Locks in the 3 month LIBOR reset rates on pay variable rate
Carrying amount swaps. Effective March 1996.
Unrealized gross gain
Unrealized gross loss
Total
Long eurodollar futures Converts floating rate LIBOR - based loans to fixed rate. Adds to
Carrying amount liability sensitivity. Similar characteristics to fixed income security
Unrealized gross gain funded with variable rate liabilities. $4.9 billion effective December
Unrealized gross loss 1996; $5.0 billion effective March 1997; $4.9 billion effective
Total June 1997; $8.6 billion effective September 1997.
Total rate sensitivity hedges
Offsetting Positions
Interest rate floors Consists of $800 million of interest rate floors, of which $400
Carrying amount million were purchased and offset by $400 million sold, locking
Unrealized gross gain in gains to be amortized over the remaining life of the contracts.
Unrealized gross loss
Total
Prime/federal funds cap In December 1994, the corporation offset an existing federal funds
Carrying amount cap (purchased) and a prime rate cap (written) position by
Unrealized gross gain simultaneously purchasing a prime rate cap and writing a federal
Unrealized gross loss funds cap at strikes of 6.00 percent and 3.25 percent, respectively.
Total The notional amount of each cap is $1.0 billion. Locks in losses to
Total offsetting positions be amortized over the remaining life of the contracts.
</TABLE>
* Includes only off-balance sheet derivative financial instruments
related to interest rate risk management activities.
Prime Rate - The base rate on corporate loans posted by at least 75 percent
of the nation's 30 largest banks as defined in The Wall Street Journal.
London Interbank Offered Rates (LIBOR) - The average of interbank
offered rates on dollar deposits in the London market, based on
quotations at five major banks. Weighted average pay rates are
generally based upon one to six month LIBOR. Pay rates related to
forward interest rate swaps are set on the future effective date. Pay
rates reset at predetermined reset dates over the life of the
contract. Rates shown are the rates in effect as of December 31,
1995. Weighted average receive rates are fixed rates at the time the
contract was transacted. Carrying amount includes accrued interest
receivable/payable and unamortized premiums paid/received.
(Continued)
T-18
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value
<S> <C> <C> <C> <C> <C>
Asset Rate Conversions
Interest rate swaps $ 7,022,116 5.78 % 6.32 % 2.22
Carrying amount $ 5,784
Unrealized gross gain 2,659
Unrealized gross loss (321,716)
Total (313,273)
Forward interest rate swaps 1,200,000 7.93 - 1.63
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (7,071)
Total (7,071)
Total asset rate conversions $ 8,222,116 6.10 % 6.32 % 2.14 $ (320,344)
Liability Rate Conversions
Interest rate swaps $ 2,370,500 7.27 % 6.77 % 7.68
Carrying amount $ 15,487
Unrealized gross gain 1,685
Unrealized gross loss (160,195)
Total (143,023)
Other financial instruments 392,000 - - 3.46
Carrying amount 1,902
Unrealized gross gain -
Unrealized gross loss (1,792)
Total 110
Total liability rate conversions $ 2,762,500 7.27 % 6.77 % 7.08 $ (142,913)
Asset Hedge
Short T-Bill futures $ 1,200,000 - % 7.01 % .42
Carrying amount $ -
Unrealized gross gain 555
Unrealized gross loss -
Total 555
Total asset hedge $ 1,200,000 - % 7.01 % .42 $ 555
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
(In thousands) Comments
<S> <C>
Asset Rate Conversions
Interest rate swaps Converts floating rate loans to fixed rate. Adds to liability
Carrying amount sensitivity. Similar characteristics to a fixed income security
Unrealized gross gain funded with variable rate liabilities. Includes $2.1 billion of
Unrealized gross loss indexed amortizing swaps, all of which mature within four years.
Total
Forward interest rate swaps Converts floating rates on loans to fixed rates at higher than current
Carrying amount yields for future periods. $200 million effective March 1995 and $1.0
Unrealized gross gain billion effective September 1995. Put options on forward swaps
Unrealized gross loss referenced under "Rate Sensitivity Hedges" are linked to this item.
Total
Total asset rate conversions
Liability Rate Conversions
Interest rate swaps Converts fixed rate long-term debt to floating rate by matching
Carrying amount maturity of the swap to the debt issue. Rate sensitivity remains
Unrealized gross gain unchanged due to the linkage of the swap to the debt issue.
Unrealized gross loss
Total
Other financial instruments Miscellaneous option-based products for liability management
Carrying amount purposes include $35 million of options on swaps,
Unrealized gross gain $207 million eurodollar caps and $150 million of eurodollar
Unrealized gross loss floors. These instruments were assumed as a result of certain
Total of the corporation's acquisitions.
Total liability rate conversions
Asset Hedge
Short T-Bill futures Converts the maturity of $200 million U.S. Treasury bills in the
Carrying amount available for sale portfolio from June 1995 to March 1995 and
Unrealized gross gain $1.0 billion U.S. Treasury bills from September 1995 to June 1995.
Unrealized gross loss
Total
Total asset hedge
</TABLE>
(Continued)
T-19
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value
<S> <C> <C> <C> <C> <C>
Rate Sensitivity Hedges
Put options on eurodollar futures $ 27,181,000 - % 8.05 % .56
Carrying amount $ 21,524
Unrealized gross gain 12,322
Unrealized gross loss -
Total 33,846
Put options on forward swaps 1,000,000 - 8.08 .72
Carrying amount 3,721
Unrealized gross gain 3,514
Unrealized gross loss -
Total 7,235
Interest rate cap 50,000 - - 1.16
Carrying amount 356
Unrealized gross gain -
Unrealized gross loss (181)
Total 175
Long eurodollar futures 25,000 5.31 - .20
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (120)
Total (120)
Total rate sensitivity hedges $ 28,256,000 5.31 % 8.05 % .56 $ 41,136
Offsetting Positions
Interest rate floors $ 800,000 6.44 % 6.44 % 1.45
Carrying amount $ (1,675)
Unrealized gross gain 2,336
Unrealized gross loss (661)
Total -
Prime/federal funds cap 4,000,000 4.63 4.63 1.27
Carrying amount 1,611
Unrealized gross gain 23
Unrealized gross loss (2,120)
Total (486)
Total offsetting positions $ 4,800,000 4.93 % 4.93 % 1.30 $ (486)
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
(In thousands) Comments
<S> <C>
Rate Sensitivity Hedges
Put options on eurodollar futures Paid a premium for the right to lock in the 3 month LIBOR
Carrying amount reset rates on pay variable rate swap and short-term liabilities
Unrealized gross gain $1.7 billion effective March 1995; $12.5 billion effective June 1995;
Unrealized gross loss and $13.0 billion effective September 1995.
Total
Put options on forward swaps Paid a premium for the right to terminate $1.0 billion of forward
Carrying amount interest rate swaps based on interest rates in effect in September
Unrealized gross gain 1995. Reduces liability sensitivity.
Unrealized gross loss
Total
Interest rate cap Purchased cap to convert floating rate liabilities to fixed rate if
Carrying amount short-term rates rise above 8 percent.
Unrealized gross gain
Unrealized gross loss
Total
Long eurodollar futures Locks in the rate of the future placement of 3 month eurodollar
Carrying amount deposits.
Unrealized gross gain
Unrealized gross loss
Total
Total rate sensitivity hedges
Offsetting Positions
Interest rate floors Consists of $800 million of interest rate floors, of which $400
Carrying amount million were purchased and offset by $400 million sold,
Unrealized gross gain locking in gains to be amortized over the remaining life of
Unrealized gross loss the contracts.
Total
Prime/federal funds cap In December 1994, the corporation offset an existing federal funds
Carrying amount cap (purchased) and a prime rate cap (written) position by
Unrealized gross gain simultaneously purchasing a prime rate cape and writing a federal
Unrealized gross loss funds cap at strikes of 6.00 percent and 3.25 percent, respectively.
Total The notional amount of each cap is $1.0 billion. Locks in losses to
Total offsetting positions be amortized over the remaining life of the contracts.
*Includes only off-balance sheet derivative financial instruments
related to interest rate risk management activities. Prime Rate - The
base rate on corporate loans posted by at least 75 percent of the
nation's 30 largest banks as defined in The Wall Street Journal. London
Interbank Offered Rates (LIBOR) - The average of interbank offered
rates on dollar deposits in the London market, based on quotations at
five major banks. Weighted average pay rates are generally based upon
one to six month LIBOR. Pay rates related to forward interest rate
swaps are set on the future effective date. Pay rates reset at
predetermined reset dates over the life of the contract. Rates shown
are the rates in effect as of December 31, 1994. Weighted average
receive rates are fixed rates at the time the contract was transacted.
Carrying amount includes accrued interest receivable/payable and
unamortized premiums paid/received.
T-20
Table 21
OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES*
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 1 Year 1 -2 2 -5 5 -10 After 10
(In thousands) or Less Years Years Years Years Total
<S> <C> <C> <C> <C> <C> <C>
Asset Rate Conversions
Notional amount $ 3,762,656 9,643,000 1,042,000 - - 14,447,656
Weighted average receive rate 6.82% 6.31 5.42 - - 6.38
Estimated fair value $ 50,256 110,669 (4,037) - - 156,888
Liability Rate Conversions
Notional amount $ 130,000 10,000 582,000 2,325,000 500,000 3,547,000
Weighted average receive rate 8.08% 7.64 6.35 7.31 6.68 7.07
Estimated fair value $ 2,496 303 8,867 159,414 14,780 185,860
Asset Hedges
Notional amount $ 1,016,000 - - - - 1,016,000
Weighted average receive rate - % - - - - -
Estimated fair value $ (1,391) - - - - (1,391)
Rate Sensitivity Hedges
Notional amount $ 11,169,000 18,505,200 - - - 29,674,200
Weighted average receive rate 5.31% 5.62 - - - 5.56
Estimated fair value $ 1,203 16,711 - - - 17,914
Offsetting Positions
Notional amount $ 4,800,000 - - - - 4,800,000
Weighted average receive rate 5.95% - - - - 5.95
Estimated fair value $ - - - - - -
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 1 Year 1 -2 2 -5 5 -10 After 10
(In thousands) or Less Years Years Years Years Total
<S> <C> <C> <C> <C> <C> <C>
Asset Rate Conversions
Notional amount $ 1,606,523 3,287,490 3,328,103 - - 8,222,116
Weighted average receive rate 5.62% 7.09 5.34 - - 6.10
Estimated fair value $ (7,227) (35,412) (277,705) - - (320,344)
Liability Rate Conversions
Notional amount $ 557,500 130,000 250,000 1,075,000 750,000 2,762,500
Weighted average receive rate 7.80% 8.08 6.72 7.73 6.52 7.27
Estimated fair value $ (4,249) (85) (12,192) (19,095) (107,292) (142,913)
Asset Hedges
Notional amount $ 1,200,000 - - - - 1,200,000
Weighted average receive rate -% - - - - -
Estimated fair value $ 555 - - - - 555
Rate Sensitivity Hedges
Notional amount $ 28,206,000 50,000 - - - 28,256,000
Weighted average receive rate 5.31% - - - 5.31
Estimated fair value $ 40,961 175 - - - 41,136
Offsetting Positions
Notional amount $ - 4,800,000 - - - 4,800,000
Weighted average receive rate -% 4.93 - - - 4.93
Estimated fair value $ - (486) - - - (486)
</TABLE>
*Includes only off-balance sheet derivative financial instruments
related to interest rate risk management activities.
Pay rates are generally based upon one to six month LIBOR and reset at
predetermined reset dates. Current pay rates are not necessarily indicative
of future pay rates and therefore have been excluded from the above
table. Weighted average pay rates are indicated in Table 20.
T-21
<PAGE>
Table 22
OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
<TABLE>
<CAPTION>
Rate
Asset Rate Liability Rat Basis Asset Sensitivity Offsetting
(In thousands) Conversions Conversions Protection Hedge Hedges Positions Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 15,229,540 3,241,173 6,000,000 - 23,543,000 800,000 48,813,713
Additions 2,200,000 455,000 - 8,700,000 44,907,643 2,000,000 58,262,643
Maturities/Amortizations (7,007,424) (933,673) - (3,000,000) (34,694,643) - (45,635,740)
Offsets - - (2,000,000) - - 2,000,000 -
Terminations (2,200,000) - (4,000,000) (4,500,000) (5,500,000) - (16,200,000)
Balance, December 31, 1994 8,222,116 2,762,500 - 1,200,000 28,256,000 4,800,000 45,240,616
Additions 9,620,000 1,565,000 - 4,245,000 55,466,631 - 70,896,631
Maturities/Amortizations (2,970,069) (780,500) - (3,429,000) (48,625,705) - (55,805,274)
Terminations (424,391) - - (1,000,000) (5,422,726) - (6,847,117)
Balance, December 31, 1995 $ 14,447,656 3,547,000 - 1,016,000 29,674,200 4,800,000 53,484,856
</TABLE>
*Includes only off-balance sheet derivative financial instruments
related to interest rate risk management activities.
Table 23
INTEREST DIFFERENTIAL
<TABLE>
<CAPTION>
1995 Compared to 1994 1994 Compared to 1993
Interest Interest
Income/ Variance Income/ Variance
Expense Attributable to** Expense Attributable to**
(in thousands) Variance Rate Volume Variance Rate Volume
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Interest-bearing bank balances $ (17,200) 660 (17,860) 18,229 7,195 11,034
Federal funds sold and securities
purchased under resale agreements 70,174 29,625 40,549 38,959 9,101 29,858
Trading account assets* 29,878 4,296 25,582 19,771 14,163 5,608
Securities available for sale* (15,685) 90,705 (106,390) 218,031 41,294 176,737
Investment securities*
US Government and other 63,445 5,950 57,495 (270,052) 38,266 (308,318)
State, county, and municipal (28,034) (2,484) (25,550) 18,231 (3,010) 21,241
Total 35,411 3,466 31,945 (251,821) 35,256 (287,077)
Loans* 1,166,136 235,324 930,812 487,135 61,739 425,396
Total earning assets $ 1,268,714 364,076 904,638 530,304 168,748 361,556
Interest-Bearing Liabilities
Deposits 637,443 413,666 223,777 117,990 55,563 62,427
Short-term Borrowings 284,187 146,204 137,983 113,566 71,007 42,559
Long-term debt 128,478 15,990 112,488 38,951 27,044 11,907
Total interest-bearing liabilities 1,050,108 575,860 474,248 270,507 153,614 116,893
Net interest income $ 218,606 (211,784) 430,390 259,797 15,134 244,663
</TABLE>
* Income related to securities and loans exempt from both federal and
state income taxes, federal income taxes only or state income stated
on a fully tax-equivalent basis. It is reduced by the
nondeductible portion of interest expense, assuming a federal income
tax rate of 35 percent; a North Carolina state tax rate of 7.75 percent
in 1995 and 7.8275 percent in 1994; a Georgia and Tennessee state tax
rate of 6 percent; a South Carolina state tax rate of 4.5 percent; a
Florida state tax rate of 5.5 percent; a Maryland state tax rate of 7
percent; and a Washington, D.C. tax rate of 9.975 percent in 1995 and
10.25 percent in 1994, respectively.
** Changes attributable to rate/volume are allocated to both rate and
volume on an equal basis.
T-22
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
YEAR ENDED 1995 YEAR ENDED 1994
Interest Average Interest Average
Average Income/ Rates Average Income/ Rates
(In thousands) Balances Expense Earned/Paid Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing bank balances $ 419,033 22,350 5.33 % $ 757,440 39,550 5.22%
Federal funds sold and securities
purchased under resale agreements 2,191,729 125,903 5.74 1,366,180 55,729 4.08
Trading account assets (a) (d) 1,440,539 90,495 6.28 1,021,681 60,617 5.93
Securities available for sale (a) (d) 8,491,694 549,797 6.47 10,267,532 565,482 5.51
Investment securities (a) (d)
U.S. Government and other 2,521,782 189,030 7.50 1,740,203 125,585 7.22
State, county and municipal 1,043,874 117,963 11.30 1,267,845 145,997 11.52
Total investment securities 3,565,656 306,993 8.61 3,008,048 271,582 9.03
Loans (a) (b) (d)
Commercial
Commercial, financial and
agricultural 16,938,337 1,367,717 8.07 13,803,412 1,123,333 8.14
Real estate - construction and
other 2,002,213 184,694 9.22 1,608,090 129,173 8.03
Real estate - mortgage 5,800,425 513,375 8.85 5,828,345 462,942 7.94
Lease financing 1,129,058 112,202 9.94 658,776 62,628 9.51
Foreign 489,040 33,750 6.90 428,724 22,498 5.25
Total commercial 26,359,073 2,211,738 8.39 22,327,347 1,800,574 8.06
Retail
Real estate - mortgage 17,018,103 1,313,465 7.72 13,810,015 1,019,955 7.39
Installment loans - Bankcard (c) 4,009,190 583,525 14.55 2,775,476 391,603 14.11
Installment loans - other 12,286,211 1,251,852 10.19 10,142,377 982,312 9.69
Total retail 33,313,504 3,148,842 9.45 26,727,868 2,393,870 8.96
Total loans 59,672,577 5,360,580 8.98 49,055,215 4,194,444 8.55
Total earning assets 75,781,228 6,456,118 8.52 65,476,096 5,187,404 7.92
Cash and due from banks 3,270,917 3,045,410
Other assets 4,942,134 4,149,188
Total assets $ 83,994,279 $ 72,670,694
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 14,337,680 410,931 2.87 12,452,101 285,151 2.29
Money market accounts 9,351,684 263,131 2.81 10,576,097 254,863 2.41
Other consumer time 20,692,285 1,116,485 5.40 16,968,029 742,381 4.38
Foreign 2,594,526 150,015 5.78 1,625,575 75,956 4.67
Other time 2,170,145 138,129 6.36 1,607,283 82,897 5.16
Total interest-bearing deposits49,146,320 2,078,691 4.23 43,229,085 1,441,248 3.33
Federal funds purchased and securities
sold under repurchase agreements 8,620,601 502,019 5.82 7,270,734 317,225 4.36
Commercial paper 879,889 50,846 5.78 661,327 28,166 4.26
Other short-term borrowings 2,512,054 152,239 6.06 1,419,477 75,526 5.32
Long-term debt 4,976,516 327,259 6.58 3,213,607 198,781 6.19
Total interest-bearing
liabilities 66,135,380 3,111,054 4.70 55,794,230 2,060,946 3.69
Noninterest-bearing deposits 10,486,371 10,015,666
Other liabilities 1,690,417 1,393,526
Stockholders' equity 5,682,111 5,467,272
Total liabilities and
stockholders' equity $ 83,994,279 $ 72,670,694
Interest income and rate earned $ 6,456,118 8.52 % $ 5,187,404 7.92 %
Interest expense and rate paid 3,111,054 4.11 2,060,946 3.15
Net interest income and margin $ 3,345,064 4.41 % $ 3,126,458 4.77 %
</TABLE>
(a) Yields related to securities and loans exempt from both federal and
state income taxes, federal income taxes only or state income
taxes only are stated on a fully tax-equivalent basis. They are
reduced by the nondeductible portion of interest expense, assuming
a federal income tax rate of 35 percent in 1993 through 1995, and
34 percent in 1991 and 1992; a North Carolina state tax rate of
7.75 percent in 1995, 7.8275 percent in 1994, 7.905 percent in
1993, 7.9825 percent in 1992, and 8.06 percent in 1991; a Georgia
and Tennessee state rate of 6 percent; a South Carolina state tax
rate of 4.5 percent; a Florida state tax rate of 5.5 percent in
1991 through 1995; a Maryland state tax rate of 7 percent in 1993
through 1995; and a Washington, D.C. tax rate of 9.975 percent in
1995 and 10.25 percent in 1994 and 1993, respectively.
T-23
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED 1993 YEAR ENDED 1992 YEAR ENDED 1991
Interest Average Interest Average Interest Average
Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balances Expense Earned/Paid Balances Expense Earned/Paid Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 520,591 21,321 4.10 % $ 980,669 41,938 4.28 % $ 758,101 48,186 6.36 %
537,021 16,770 3.12 1,177,119 43,475 3.69 1,047,764 59,919 5.72
913,864 40,846 4.47 478,887 26,126 5.46 533,278 36,293 6.81
6,912,046 347,451 5.03 3,042,895 196,681 6.46 - - -
6,313,607 395,637 6.27 5,519,744 399,510 7.24 8,152,492 701,326 8.60
1,085,412 127,766 11.77 1,280,231 154,617 12.08 1,745,204 208,444 11.94
7,399,019 523,403 7.07 6,799,975 554,127 8.15 9,897,696 909,770 9.19
11,742,520 925,951 7.89 11,162,012 883,415 7.91 11,105,933 1,035,158 9.32
2,083,646 124,689 5.98 2,559,774 158,515 6.19 3,146,087 238,419 7.58
5,333,306 399,671 7.49 5,406,634 435,121 8.05 4,479,356 423,430 9.45
531,539 55,193 10.38 793,152 61,850 7.80 892,027 91,898 10.30
263,896 12,940 4.90 205,090 11,101 5.41 179,259 10,642 5.94
19,954,907 1,518,444 7.61 20,126,662 1,550,002 7.70 19,802,662 1,799,547 9.09
10,892,980 839,434 7.71 9,455,411 838,786 8.87 7,340,466 714,093 9.73
1,962,346 300,357 15.31 - - - - - -
10,821,177 1,049,074 9.69 11,688,918 1,332,781 11.40 10,171,230 1,200,135 11.80
23,676,503 2,188,865 9.24 21,144,329 2,171,567 10.27 17,511,696 1,914,228 10.93
43,631,410 3,707,309 8.50 41,270,991 3,721,569 9.02 37,314,358 3,713,775 9.95
59,913,951 4,657,100 7.77 53,750,536 4,583,916 8.53 49,551,197 4,767,943 9.62
3,340,993 2,607,487 2,174,704
4,846,278 4,787,951 3,369,538
$ 68,101,222 $ 61,145,974 $ 55,095,439
10,567,006 232,231 2.20 8,700,338 241,814 2.78 6,185,016 266,152 4.30
10,320,835 232,402 2.25 9,570,397 272,261 2.84 7,767,466 390,125 5.02
17,594,023 761,623 4.33 17,718,372 924,498 5.22 16,363,843 1,138,030 6.95
576,590 20,905 3.63 145,149 13,247 9.13 379,836 35,824 9.43
1,650,325 76,097 4.61 3,154,821 163,851 5.19 3,810,814 260,472 6.84
40,708,779 1,323,258 3.25 39,289,077 1,615,671 4.11 34,506,975 2,090,603 6.06
7,214,686 267,751 3.71 4,458,239 177,371 3.98 6,910,230 409,300 5.92
321,310 8,356 2.60 337,860 10,530 3.12 609,657 36,402 5.97
799,077 31,245 3.91 659,541 29,725 4.51 521,765 32,708 6.27
3,006,560 159,829 5.32 2,789,653 187,671 6.73 2,187,595 173,983 7.95
52,050,412 1,790,439 3.44 47,534,370 2,020,968 4.25 44,736,222 2,742,996 6.13
9,540,069 7,884,629 5,975,458
1,671,344 1,513,079 916,322
4,839,397 4,213,896 3,467,437
68,101,222 $ 61,145,974 $ 55,095,439
$ 4,657,100 7.77 % $ 4,583,916 8.53 % $ 4,767,943 9.62 %
1,790,439 2.99 2,020,968 3.76 2,742,996 5.54
$ 2,866,661 4.78 % $ 2,562,948 4.77 % $ 2,024,947 4.08 %
</TABLE>
(b) The loan averages include loans on which the accrual of interest has
been discontinued and are stated net of unearned income.
(c) Information not available prior to 1993.
(d) Tax-equivalent adjustments included in trading account assets,
securities available for sale, investment securities, commercial,
financial and agricultural loans, and lease financing are (in thousands)
$5,069, $12,815, $42,064, $18,860 and $3,480 in 1995, respectively;
and $3,372, $15,486, $52,779, $18,653 and $2,453 in 1994, respectively.
T-24
<PAGE>
MANAGEMENT'S STATEMENT OF FINANCIAL RESPONSIBILITY
First Union Corporation and Subsidiaries
Management of First Union Corporation and its subsidiaries (the Corporation)
is committed to the highest standards in quality customer service and the
enhancement of stockholder value. Management expects the Corporation's employees
to respect its customers and to assign the highest priority to customer needs.
The accompanying consolidated financial statements were prepared in
conformity with generally accepted accounting principles and include, as
necessary, best estimates and judgments by management. Other financial
information contained in this annual report is presented on a basis consistent
with the consolidated financial statements unless otherwise indicated.
To ensure the integrity, objectivity and fairness of data in these
consolidated financial statements, management of the Corporation has established
and maintains an internal control structure that is supplemented by a program of
internal audits. The internal control structure is designed to provide
reasonable assurance that assets are safeguarded and transactions are executed,
recorded and reported in accordance with management's intentions and
authorizations and to comply with applicable laws and regulations. To enhance
the reliability of the internal control structure, management recruits and
trains highly qualified personnel, and maintains sound risk management practices
and efficient operations.
The consolidated financial statements have been audited by KPMG Peat Marwick
LLP, independent auditors, in accordance with generally accepted auditing
standards. KPMG Peat Marwick LLP reviews the results of its audit with both
management and the Audit Committee of the Board of Directors of the Corporation.
The Audit Committee, composed entirely of outside directors, meets periodically
with management, internal auditors and KPMG Peat Marwick LLP to determine that
each is fulfilling its responsibilities and to support actions to identify,
measure and control risks, augment internal controls and enhance operational
efficiency.
Edward E. Crutchfield
Chairman and Chief Executive Officer
Robert T. Atwood
Executive Vice President and
Chief Financial Officer
January 11, 1996
INDEPENDENT AUDITORS' REPORT
First Union Corporation and Subsidiaries
Board of Directors and Stockholders
First Union Corporation
We have audited the consolidated balance sheets of First Union Corporation
and subsidiaries as of December 31, 1995 and 1994, 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, 1995. These consolidated
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First Union
Corporation and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the consolidated financial statements, the
Corporation adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", on January 1, 1994.
KPMG Peat Marwick LLP
Charlotte, North Carolina
January 11, 1996
H-1
<PAGE>
CONSOLIDATED BALANCE SHEETS
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31,
(In thousands except share data) 1995
<S> <C>
Assets
Cash and due from banks $ 4,239,737
Interest-bearing bank balances 44,284
Federal funds sold and securities purchased under resale agreements 4,122,754
Total cash and cash equivalents 8,406,775
Trading account assets 1,804,391
Securities available for sale (amortized cost $12,534,552 in 1995; $8,054,592 in 1994) 12,716,963
Investment securities (market value $2,607,755 in 1995; $3,742,534 in 1994) 2,454,317
Loans, net of unearned income ($1,173,538 in 1995; $672,330 in 1994) 65,628,444
Allowance for loan losses (966,511)
Loans, net 64,661,933
Premises and equipment 2,137,993
Due from customers on acceptances 479,799
Mortgage servicing rights 102,365
Credit card premium 43,894
Other intangible assets 1,632,203
Other assets 2,299,863
Total assets $96,740,496
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 11,788,401
Interest-bearing deposits 53,211,900
Total deposits 65,000,301
Short-term borrowings 16,598,072
Bank acceptances outstanding 479,799
Other liabilities 2,065,551
Long-term debt 6,444,327
Total liabilities 90,588,050
Stockholders' equity
Common stock, $3.33 1/3 par value; authorized 750,000,000 shares, outstanding
171,537,433 shares in 1995; 176,033,912 shares in 1994 571,791
Paid-in capital 1,208,717
Retained earnings 4,261,307
Unrealized gain (loss) on debt and equity securities 110,631
Total stockholders' equity 6,152,446
Total liabilities and stockholders' equity $96,740,496
<CAPTION>
1994
(In thousands except share data)
<S> <C>
Assets
Cash and due from banks 3,740,691
Interest-bearing bank balances 945,126
Federal funds sold and securities purchased under resale agreements 1,371,025
Total cash and cash equivalents 6,056,842
Trading account assets 1,206,675
Securities available for sale (amortized cost $12,534,552 in 1995; $8,054,592 in 1994) 7,752,479
Investment securities (market value $2,607,755 in 1995; $3,742,534 in 1994) 3,729,869
Loans, net of unearned income ($1,173,538 in 1995; $672,330 in 1994) 54,029,752
Allowance for loan losses (978,795)
Loans, net 53,050,957
Premises and equipment 1,756,297
Due from customers on acceptances 218,849
Mortgage servicing rights 84,898
Credit card premium 58,494
Other intangible assets 1,198,907
Other assets 2,199,238
Total assets 77,313,505
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 10,523,538
Interest-bearing deposits 48,434,735
Total deposits 58,958,273
Short-term borrowings 7,532,343
Bank acceptances outstanding 218,849
Other liabilities 1,778,009
Long-term debt 3,428,514
Total liabilities 71,915,988
Stockholders' equity
Common stock, $3.33 1/3 par value; authorized 750,000,000 shares, outstanding
171,537,433 shares in 1995; 176,033,912 shares in 1994 586,779
Paid-in capital 1,433,422
Retained earnings 3,591,581
Unrealized gain (loss) on debt and equity securities (214,265)
Total stockholders' equity 5,397,517
Total liabilities and stockholders' equity 77,313,505
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
H-2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands except per share data) 1995 1994
<S> <C> <C>
Interest Income
Interest and fees on loans $ 5,338,240 4,173,338
Interest and dividends on securities available for sale 536,982 549,996
Interest and dividends on investment securities
Taxable income 186,662 122,968
Nontaxable income 78,267 95,835
Trading account interest 85,426 57,245
Other interest income 148,253 95,279
Total interest income 6,373,830 5,094,661
Interest Expense
Interest on deposits 2,078,691 1,441,248
Interest on short-term borrowings 705,104 420,917
Interest on long-term debt 327,259 198,781
Total interest expense 3,111,054 2,060,946
Net interest income 3,262,776 3,033,715
Provision for loan losses 180,000 100,000
Net interest income after provision for loan losses 3,082,776 2,933,715
Noninterest Income
Trading account profits 59,989 41,583
Service charges on deposit accounts 471,315 435,212
Mortgage banking income 112,011 73,934
Capital management income 288,060 224,525
Securities available for sale transactions 17,191 (11,507)
Investment security transactions 4,818 4,006
Fees for other banking services 96,619 69,252
Merchant discounts 70,745 62,840
Insurance commissions 48,241 45,071
Sundry income 282,271 214,053
Total noninterest income 1,451,260 1,158,969
Noninterest Expense
Personnel expense 1,463,553 1,287,366
Occupancy 240,098 238,128
Equipment rentals, depreciation and maintenance 274,412 228,372
Postage, printing and supplies 118,930 103,739
FDIC insurance 83,680 119,708
Professional fees 77,273 66,878
Owned real estate expense 11,931 22,294
Amortization 196,248 144,608
Merger-related restructuring charges 16,447 --
Sundry 492,800 466,135
Total noninterest expense 2,975,372 2,677,228
Income before income taxes 1,558,664 1,415,456
Income taxes 545,588 490,076
Net income 1,013,076 925,380
Dividends on preferred stock 7,029 25,353
Net income applicable to common stockholders before redemption premium 1,006,047 900,027
Redemption premium on preferred stock -- 41,355
Net income applicable to common stockholders after redemption premium $ 1,006,047 858,672
Per Common Share Data
Net income before redemption premium $ 5.85 5.22
Net income after redemption premium 5.85 4.98
Cash dividends $ 1.96 1.72
Average common shares 172,023,779 172,543,467
<CAPTION>
1993
(In thousands except per share data)
<S> <C>
Interest Income
Interest and fees on loans 3,683,945
Interest and dividends on securities available for sale 320,860
Interest and dividends on investment securities
Taxable income 391,364
Nontaxable income 84,043
Trading account interest 38,029
Other interest income 38,091
Total interest income 4,556,332
Interest Expense
Interest on deposits 1,323,258
Interest on short-term borrowings 307,352
Interest on long-term debt 159,829
Total interest expense 1,790,439
Net interest income 2,765,893
Provision for loan losses 221,753
Net interest income after provision for loan losses 2,544,140
Noninterest Income
Trading account profits 43,007
Service charges on deposit accounts 420,285
Mortgage banking income 138,608
Capital management income 201,875
Securities available for sale transactions 25,767
Investment security transactions 7,435
Fees for other banking services 52,836
Merchant discounts 55,732
Insurance commissions 43,876
Sundry income 208,867
Total noninterest income 1,198,288
Noninterest Expense
Personnel expense 1,155,899
Occupancy 229,118
Equipment rentals, depreciation and maintenance 189,589
Postage, printing and supplies 92,842
FDIC insurance 118,429
Professional fees 52,251
Owned real estate expense 40,633
Amortization 207,087
Merger-related restructuring charges --
Sundry 435,799
Total noninterest expense 2,521,647
Income before income taxes 1,220,781
Income taxes 403,260
Net income 817,521
Dividends on preferred stock 24,900
Net income applicable to common stockholders before redemption premium 792,621
Redemption premium on preferred stock --
Net income applicable to common stockholders after redemption premium 792,621
Per Common Share Data
Net income before redemption premium 4.73
Net income after redemption premium 4.73
Cash dividends 1.50
Average common shares 167,691,739
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
H-3
<PAGE>
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
Unrealized Gain
(Loss) on Debt
Preferred Stock Common Stock Paid-in Retained and Equity
(In thousands except per share data) Shares Amount Shares Amount Capital Earnings Securities
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 6,846 $ 44,774 164,849 $549,497 1,396,701 2,468,191 --
Net income -- -- -- -- -- 817,521 --
Purchase of Class A Series A preferred stock (6) (134) -- -- -- -- --
Purchase of common stock -- -- (88) (294) (3,557) -- --
Common stock issued for stock
options exercised -- -- 1,557 5,189 51,529 -- --
Common stock issued through dividend
reinvestment plan -- -- 3,271 10,904 133,829 -- --
Converted debentures -- -- 27 90 248 -- --
Converted preferred stock (522) (13,047) 673 2,242 10,801 -- --
Pre-merger transactions of pooled banks -- (1) 49 163 1,724 -- --
Cash dividends paid
By First Union Corporation at
$2.50 per Class A Series A preferred
share -- -- -- -- -- (337) --
7.78% per Series 1990 preferred share -- -- -- -- -- (24,563) --
$1.50 per common share -- -- -- -- -- (243,845) --
Balance at December 31, 1993 6,318 31,592 170,338 567,791 1,591,275 3,016,967 --
Stockholders' equity of pooled banks not
restated prior to 1994 -- -- 4,169 13,897 36,610 13,844 --
Net income -- -- -- -- -- 925,380 --
Redemption of preferred stock (6,318) (31,592) -- -- (252,449) (41,355) --
Purchase of common stock primarily for
purchase accounting acquisitions -- -- (5,034) (16,780) (200,774) -- --
Common stock issued for stock
options exercised -- -- 1,800 6,000 61,958 -- --
Common stock issued through dividend
reinvestment plan -- -- 763 2,544 29,296 -- --
Common stock issued for purchase
accounting acquisition -- -- 3,561 11,870 149,203 -- --
Converted debentures -- -- 437 1,457 18,303 -- --
Cash dividends paid
By First Union Corporation at
8.03% per Series 1990 preferred share -- -- -- -- -- (25,353) --
$1.72 per common share -- -- -- -- -- (297,902) --
Unrealized loss on debt and equity
securities -- -- -- -- -- -- (214,265)
Balance at December 31, 1994 -- -- 176,034 586,779 1,433,422 3,591,581 (214,265)
Net income -- -- -- -- -- 1,013,076 --
Purchase of common stock primarily for
acquisitions -- -- (19,839) (66,130) (898,854) -- --
Common stock issued for stock
options exercised -- -- 1,990 6,633 70,364 -- --
Common stock issued through dividend
reinvestment plan -- -- 807 2,690 35,094 -- --
Common stock issued for purchase accounting
acquisitions -- -- 12,545 41,819 568,691 -- --
Cash dividends paid
By First Union Corporation at
8.90% per Series 1990 preferred share -- -- -- -- -- (7,029) --
$1.96 per common share -- -- -- -- -- (336,321) --
Unrealized gain on debt and equity securities -- -- -- -- -- -- 324,896
Balance at December 31, 1995 -- $ -- 171,537 $571,791 1,208,717 4,261,307 110,631
<CAPTION>
(In thousands except per share data) Total
<S> <C>
Balance at December 31, 1992 4,459,163
Net income 817,521
Purchase of Class A Series A preferred stock (134)
Purchase of common stock (3,851)
Common stock issued for stock
options exercised 56,718
Common stock issued through dividend
reinvestment plan 144,733
Converted debentures 338
Converted preferred stock (4)
Pre-merger transactions of pooled banks 1,886
Cash dividends paid
By First Union Corporation at
$2.50 per Class A Series A preferred
share (337)
7.78% per Series 1990 preferred share (24,563)
$1.50 per common share (243,845)
Balance at December 31, 1993 5,207,625
Stockholders' equity of pooled banks not
restated prior to 1994 64,351
Net income 925,380
Redemption of preferred stock (325,396)
Purchase of common stock primarily for
purchase accounting acquisitions (217,554)
Common stock issued for stock
options exercised 67,958
Common stock issued through dividend
reinvestment plan 31,840
Common stock issued for purchase
accounting acquisition 161,073
Converted debentures 19,760
Cash dividends paid
By First Union Corporation at
8.03% per Series 1990 preferred share (25,353)
$1.72 per common share (297,902)
Unrealized loss on debt and equity
securities (214,265)
Balance at December 31, 1994 5,397,517
Net income 1,013,076
Purchase of common stock primarily for
acquisitions (964,984)
Common stock issued for stock
options exercised 76,997
Common stock issued through dividend
reinvestment plan 37,784
Common stock issued for purchase accounting
acquisitions 610,510
Cash dividends paid
By First Union Corporation at
8.90% per Series 1990 preferred share (7,029)
$1.96 per common share (336,321)
Unrealized gain on debt and equity securities 324,896
Balance at December 31, 1995 6,152,446
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
H-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Operating Activities
Net income $ 1,013,076 925,380
Adjustments to reconcile net income to net cash provided (used) by operating
activities
Accretion and amortization of securities discounts and premiums, net (5,332) (19,583)
Provision for loan losses 180,000 100,000
Provision for foreclosed properties (3,756) 4,503
Gain on sale of mortgage servicing rights -- --
Securities available for sale transactions (17,191) 11,507
Investment security transactions (4,818) (4,006)
Depreciation and amortization 417,606 321,420
Deferred income taxes (benefits) 240,136 200,990
Trading account assets, net (597,716) (554,205)
Mortgage loans held for resale (102,267) 879,715
Loss on sales of premises and equipment 13,523 9,387
Gain on sale of First American segregated assets (18,639) (84,260)
Other assets, net (47,966) 604,786
Other liabilities, net (109,078) 248,520
Net cash provided by operating activities 957,578 2,644,154
Investing Activities
Increase (decrease) in cash realized from
Sales of securities available for sale 5,618,973 13,255,786
Maturities of securities available for sale 1,099,462 2,796,323
Purchases of securities available for sale (6,869,362) (12,466,200)
Sales and calls of investment securities 32,964 39,437
Maturities of investment securities 751,157 485,993
Purchases of investment securities (1,490,523) (886,589)
Origination of loans, net (6,240,810) (7,237,982)
Sales of loans 2,000,000 250,804
Sales of premises and equipment 37,368 66,635
Purchases of premises and equipment (554,829) (432,022)
Sales of mortgage servicing rights -- --
Purchases of mortgage servicing rights (16,587) (7,561)
Other intangible assets, net 57 37,441
Purchases of banking organizations, net of acquired cash equivalents (418,513) 2,317,118
Net cash used by investing activities (6,050,643) (1,780,817)
Financing Activities
Increase (decrease) in cash realized from
Purchases (sales) of deposits, net (1,210,495) 1,189,487
Securities sold under repurchase agreements and other short-term borrowings, net 7,139,553 (5,606)
Issuances of long-term debt 3,346,251 572,287
Payments of long-term debt (638,758) (212,126)
Sales of common stock 114,781 99,798
Purchases of preferred stock -- --
Redemption of preferred stock -- (325,396)
Purchases of common stock (964,984) (217,554)
Cash dividends paid (343,350) (323,255)
Net cash provided (used) by financing activities 7,442,998 777,635
Increase (decrease) in cash and cash equivalents 2,349,933 1,640,972
Cash and cash equivalents, beginning of year 6,056,842 4,415,870
Cash and cash equivalents, end of year $ 8,406,775 6,056,842
Cash Paid For
Interest $ 3,023,042 2,026,740
Income taxes 336,438 227,379
Noncash Items
Increase (decrease) in securities available for sale 1,973,719 (400,314)
Increase (decrease) in investment securities (1,973,719) 400,314
Decrease in other assets -- --
Increase in foreclosed properties and a decrease in loans 30,199 29,675
Conversion of preferred stock to common stock -- --
Increase in other intangible assets and stockholders' equity for converted
debentures -- 19,760
Issuance of common stock for purchase accounting acquisitions 610,510 161,073
Effect on stockholders' equity of an unrealized gain (loss) on debt and equity
securities included in
Securities available for sale 484,524 (302,113)
Other assets (deferred income taxes) $ 159,628 (87,848)
<CAPTION>
1993
(In thousands)
<S> <C>
Operating Activities
Net income 817,521
Adjustments to reconcile net income to net cash provided (used) by operating
activities
Accretion and amortization of securities discounts and premiums, net (4,297)
Provision for loan losses 221,753
Provision for foreclosed properties 23,730
Gain on sale of mortgage servicing rights (973)
Securities available for sale transactions (25,767)
Investment security transactions (7,435)
Depreciation and amortization 359,359
Deferred income taxes (benefits) 78,159
Trading account assets, net (483,202)
Mortgage loans held for resale (312,090)
Loss on sales of premises and equipment 7,764
Gain on sale of First American segregated assets (48,147)
Other assets, net 1,044,223
Other liabilities, net (921,719)
Net cash provided by operating activities 748,879
Investing Activities
Increase (decrease) in cash realized from
Sales of securities available for sale 13,043,607
Maturities of securities available for sale 5,637,948
Purchases of securities available for sale (18,384,416)
Sales and calls of investment securities 244,473
Maturities of investment securities 2,414,793
Purchases of investment securities (3,060,327)
Origination of loans, net (563,530)
Sales of loans --
Sales of premises and equipment 65,255
Purchases of premises and equipment (247,442)
Sales of mortgage servicing rights 1,300
Purchases of mortgage servicing rights (11,423)
Other intangible assets, net 19,709
Purchases of banking organizations, net of acquired cash equivalents 22,493
Net cash used by investing activities (817,560)
Financing Activities
Increase (decrease) in cash realized from
Purchases (sales) of deposits, net (1,711,427)
Securities sold under repurchase agreements and other short-term borrowings, net 1,017,826
Issuances of long-term debt 1,044,657
Payments of long-term debt (1,161,031)
Sales of common stock 203,337
Purchases of preferred stock (138)
Redemption of preferred stock --
Purchases of common stock (3,851)
Cash dividends paid (268,745)
Net cash provided (used) by financing activities (879,372)
Increase (decrease) in cash and cash equivalents (948,053)
Cash and cash equivalents, beginning of year 5,363,923
Cash and cash equivalents, end of year 4,415,870
Cash Paid For
Interest 1,775,759
Income taxes 398,705
Noncash Items
Increase (decrease) in securities available for sale 4,569,363
Increase (decrease) in investment securities (4,536,780)
Decrease in other assets 32,583
Increase in foreclosed properties and a decrease in loans 51,885
Conversion of preferred stock to common stock 13,044
Increase in other intangible assets and stockholders' equity for converted
debentures --
Issuance of common stock for purchase accounting acquisitions --
Effect on stockholders' equity of an unrealized gain (loss) on debt and equity
securities included in
Securities available for sale --
Other assets (deferred income taxes) --
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
H-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
First Union Corporation (the Parent Company) is a bank holding company whose
principal wholly-owned subsidiaries are national banking associations using the
name First Union National Bank, First Union Capital Markets Corp., an investment
banking firm, and First Union Mortgage Corporation, a mortgage banking firm.
The accounting and reporting policies of First Union Corporation and
subsidiaries (the Corporation) are in accordance with generally accepted
accounting principles and conform to general practices within the banking and
mortgage banking industries. In consolidation, all significant intercompany
accounts and transactions are eliminated.
The Corporation's principal sources of revenue emanate from its domestic
banking, including trust operations, capital markets activity and mortgage
banking operations, located primarily in Florida, Georgia, Maryland, North
Carolina, South Carolina, Tennessee, Virginia and Washington, D.C. Its foreign
banking operations are immaterial.
Management of the Corporation has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and due from banks, interest-bearing
balances in other banks and federal funds sold and securities purchased under
resale agreements. Generally, both cash and cash equivalents are considered to
have maturities of three months or less, and accordingly, the carrying amount of
such instruments is deemed to be a reasonable estimate of fair value.
SECURITIES
The classification of securities is determined at the date of purchase.
Gains or losses on the sale of securities are recognized on a specific
identification, trade date basis.
Trading account assets, primarily debt securities, and interest rate
futures, options, caps and floors and forward contracts, are adjusted to market
value. Included in noninterest income are realized and unrealized gains and
losses resulting from such adjustments and from recording the effects of sales
of trading account securities.
Securities available for sale, primarily debt securities, are recorded at
market value with a corresponding adjustment net of tax recorded as a component
of stockholders' equity. Securities available for sale are used as a part of the
Corporation's interest rate risk management strategy and may be sold in response
to changes in interest rates, changes in prepayment risk, and other factors.
Investment securities, primarily debt securities, are stated at cost, net of
the amortization of premium and the accretion of discount. The Corporation
intends and has the ability to hold such securities until maturity.
The market value of securities, including securities sold not owned, is
generally based on quoted market prices or dealer quotes. If a quoted market
price is not available, market value is estimated using quoted market prices for
similar securities.
INTEREST RATE SWAPS, FLOORS AND CAPS
The Corporation uses interest rate swaps, floors and caps for interest rate
risk management, in connection with providing risk management services to
customers and for trading for its own account.
Interest rate swaps, floors and caps used to achieve interest rate risk
management objectives are designated as hedges of specific assets and
liabilities. The net interest payable or receivable on swaps, caps, and floors
is accrued and recognized as an adjustment to interest income or interest
expense of the related asset or liability. Premiums paid for purchased caps and
floors are amortized over the term of the floors and caps as a yield adjustment
of the related asset or liability. Floors and caps are written only to adjust
the amount or term of purchased floors and caps to more effectively reduce
interest rate risk, and a net written position is not created. Premiums received
on floors and caps offset the premium paid on the caps and floors they adjust.
Upon the early termination of swaps, floors and caps, the net proceeds received
or paid, including premiums, are deferred and included in other assets or
liabilities and amortized over the shorter of the remaining contract life or the
maturity of the related asset or liability. Upon disposition or settlement of
the asset or liability being hedged, deferral accounting is discontinued and any
related premium or market value is recognized in earnings.
Interest rate swaps, floors and caps entered into for trading purposes and
sold to customers are accounted for on a mark-to-market basis with both realized
and unrealized gains and losses recognized as trading profits. The fair value of
these financial instruments represent the estimated amount the Corporation would
receive or pay to terminate the contracts or agreements and is determined using
a valuation model which considers current market yields and other relevant
variables.
INTEREST RATE FUTURES, FORWARD AND OPTION CONTRACTS
The Corporation uses interest rate futures, forward and option contracts,
other than caps and floors, for interest rate risk management and in connection
with hedging interest rate products sold to customers.
Interest rate futures and option contracts are used to hedge interest rate
risk arising from specific financial
H-6
<PAGE>
instruments. Gains and losses on interest rate futures are deferred and included
in the carrying value of the related assets or liabilities and amortized over
the estimated lives of those assets and liabilities as a yield adjustment.
Premiums paid for option contracts are included in other assets and are
amortized over the option term as a yield adjustment of the related asset or
liability. Upon the early termination of futures contracts, the deferred amounts
are amortized over the remaining maturity of the related asset or liability.
Upon disposition or settlement of the asset or liability being hedged, deferral
accounting is discontinued and any related premium or market value is recognized
in earnings.
Interest rate futures, forward and option contracts used to hedge risk
management products sold to customers are marked to market and both the realized
and unrealized gains and losses recognized as trading profits. The market value
of these financial instruments is based on dealer or exchange quotes.
LOANS
Commercial, financial and agricultural loans include industrial revenue
bonds, highly leveraged transaction loans and certain other loans that are made
primarily on the strength of the borrower's general credit standing and ability
to generate repayment cash flows from income sources even though such bonds and
loans may be secured by real estate or other assets.
Commercial real estate construction and mortgage loans represent interim and
permanent financing of commercial properties that are secured by real estate.
Retail real estate mortgage loans represent 1-4 family first mortgage loans.
Bankcard installment loans represent unsecured revolving lines of credit.
Retail installment loans represent all other consumer loans, including home
equity and second mortgage loans.
Mortgage notes held for sale are valued at the lower of cost or market as
determined by outstanding commitments from investors or current investor yield
requirements calculated on the aggregate loan basis. Gains or losses resulting
from sales of mortgage notes are recognized when the proceeds are received from
investors.
In many lending transactions, collateral is taken to provide an additional
measure of security. Generally, the cash flow or earning power of the borrower
represents the primary source of repayment and collateral liquidation a
secondary source of repayment. The Corporation determines the need for
collateral on a case-by-case or product-by-product basis. Factors considered
include the current and prospective creditworthiness of the customer, terms of
the instrument and economic conditions.
Unearned income is generally accreted to interest income using the constant
yield method. Interest income is recorded on an accrual basis.
The Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosure," on January 1, 1995. The adoption of the
Standards required no increase to the allowance for loan losses and had no
impact on net income in 1995. The impact to historical and current amounts
related to in-substance foreclosures was not material, and accordingly,
historical amounts have not been restated.
A loan is considered to be impaired when based on current information, it is
probable that the Corporation will not receive all amounts due in accordance
with the contractual terms of a loan agreement. The discounted expected cash
flow method is used in determining the value of impaired loans.
When the ultimate collectibility of an impaired loan's principal is in
doubt, wholly or partially, all cash receipts are applied to principal. Once the
recorded principal balance has been reduced to zero, future cash receipts are
applied to interest income, to the extent that any interest has been foregone.
Future cash receipts are recorded as recoveries of any amounts previously
charged off. When this doubt does not exist, cash receipts are applied under the
contractual terms of the loan agreement.
A loan is also considered impaired if its terms are modified in a troubled
debt restructuring after January 1, 1995. For these accruing impaired loans,
cash receipts are typically applied to principal and interest receivable in
accordance with the terms of the restructured loan agreement. Interest income is
recognized on these loans using the accrual method of accounting. As of December
31, 1995, there were no accruing impaired loans.
The accrual of interest is generally discontinued on all loans, except
consumer loans, that become 90 days past due as to principal or interest unless
collection of both principal and interest is assured by way of
collateralization, guarantees or other security. Generally, loans past due 180
days or more are placed on nonaccrual status regardless of security. Consumer
loans and bankcard products that become approximately 120 days and 180 days past
due, respectively, are generally charged to the allowance for loan losses. When
borrowers demonstrate over an extended period the ability to repay a loan in
accordance with the contractual terms of a loan the Corporation has classified
as nonaccrual, such loan is returned to accrual status.
Fair values are estimated for loans with similar financial characteristics.
These loans are segregated by type of loan, considering credit risk and
prepayment characteristics. Each loan category is further segmented into fixed
and adjustable rate categories.
The fair values of performing loans for all portfolios are calculated by
discounting estimated cash flows through expected maturity dates. These cash
flows are discounted using estimated market yields that reflect the credit and
interest rate risks inherent in each category of loans. Such
H-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
market yields also reflect a component for the estimated cost of servicing the
portfolio. A prepayment assumption is used as an estimate of the number of loans
which will be repaid prior to their scheduled maturity.
For performing residential mortgage loans, fair values are estimated using a
discounted cash flow analysis utilizing yields of comparable mortgage-backed
securities. The loan portfolio is segmented into homogeneous pools based on loan
types, coupon rates, maturities, prepayment characteristics and credit risk.
These pools are compared with similar mortgage-backed securities to arrive at an
appropriate discount rate; whole loan liquidity and risk characteristics are
considered within the comparison.
Fair values of nonperforming loans greater than $1,000,000 are calculated by
estimating the timing and amount of cash flows. These cash flows are discounted
using estimated market yields commensurate with the risk associated with
estimating such cash flows. Estimates of cash flows are made using knowledge of
the borrower and available market data. It is not considered practicable to
calculate a fair value for nonperforming loans less than $1,000,000.
Accordingly, they are included in fair value disclosures at net cost.
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. Generally, for fixed rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair value of commitments and letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is the amount that is considered adequate to
provide for potential losses in the portfolio. Management's evaluation of the
adequacy of the allowance is based on a review of individual loans, recent loss
experience, current economic conditions, the risk characteristics of the various
classifications of loans, the fair value of underlying collateral and other
factors.
Management believes that the allowances for losses on loans and real estate
owned are adequate. While management uses available information to recognize
losses on loans and real estate owned, future additions to the allowances may be
necessary based on changes in economic conditions.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Corporation's bank subsidiaries'
allowances for losses on loans and real estate owned. Such agencies may require
such subsidiaries to recognize changes to the allowances based on their
judgments about information available to them at the time of their examination.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line
basis for financial purposes and on straight-line and accelerated bases for tax
purposes, using estimated lives generally as follows: buildings, 10 to 50 years;
furniture and equipment, 3 to 10 years; and leasehold improvements and
capitalized leases, over the lives of the respective leases.
INTANGIBLE ASSETS
Generally, goodwill is being amortized on a straight-line basis over 25
years. The Corporation's unamortized goodwill is periodically reviewed to ensure
that conditions are not present that indicate the recorded amount of goodwill is
not recoverable from future undiscounted cash flows. The review process includes
an evaluation of the earnings history of each subsidiary, its contribution to
the Corporation, capital levels and other factors. If events or changes in
circumstances indicate further evaluation is warranted, the undiscounted net
cash flows of the operations to which goodwill relates are estimated. If the
estimated undiscounted net cash flows are less than the carrying amount of
goodwill, a loss is recognized to reduce goodwill's carrying value to the amount
recoverable, and when appropriate the amortization period also is reduced.
Unamortized goodwill associated with disposed assets is charged to current
earnings. Credit card premiums are being amortized principally over the period
of benefit not to exceed 10 years using the sum-of-the-years' digits method.
Deposit base premiums are amortized principally over a 10-year period using
accelerated methods. Annually, the fair value of the unamortized balance of such
premiums is determined on a discounted cash flow basis, and if such value is
less than such balance, the difference is charged to noninterest expense.
FORECLOSED PROPERTIES
Foreclosed properties are included in other assets and represent other real
estate that has been acquired through loan or in-substance foreclosures or deeds
received in lieu of loan payments. Generally such properties are appraised
annually and are recorded at the lower of cost or fair value less estimated
selling costs. When appropriate, adjustments to cost are charged or credited to
the allowance for foreclosed properties.
MORTGAGE LOAN ADMINISTRATION AND ORIGINATION
The Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights", on a prospective
basis only on July 1, 1995. The adoption of the Standard resulted in an increase
to noninterest income of $8,500,000 in 1995.
When the Corporation acquires mortgage servicing rights through either the
purchase or origination of mortgage loans
H-8
<PAGE>
and sells or securitizes those loans with servicing rights retained, the total
cost of the mortgage loans is allocated to the mortgage servicing rights and
the loans (without the mortgage servicing rights) based on their relative
fair values.
Mortgage servicing fees are recorded on an accrual basis. Mortgage servicing
rights are amortized over the life of the related mortgages, in proportion to
estimated net servicing income. Quarterly, an appropriate carrying value of the
unamortized balance of such mortgage servicing rights is determined by the
Corporation, based principally on a disaggregated, discounted cash flow method.
The loans and associated servicing rights are segmented by predominant risk
characteristics to include loan type, investor and interest rate. Additionally,
quarterly, based principally on an aggregated discounted method, an appropriate
carrying value of the unamortized deferred excess servicing fee balance is
determined by the Corporation. If such values are less than such balances, the
differences are included as a reduction of mortgage banking income.
Placement fees for services rendered in arranging permanent financing for
income property loans are earned when the permanent commitment issued by the
lender is approved and accepted by the borrower.
Loan origination, commitment and certain other fees and certain direct loan
origination costs are being deferred and the net amount is being amortized as an
adjustment of the related loan's yield, generally over the contractual life of
the related loan, or if the related loan is held for resale, until the loan is
sold.
PENSION AND SAVINGS PLANS
Substantially all employees with one year of service are eligible for
participation in a non-contributory, defined benefit pension plan and a matching
savings plan. Pension cost is determined annually by an actuarial valuation,
which includes service costs for the current year and amortization of amounts
related to prior years. The Corporation's funding policy is to contribute to the
pension plan the amount required to fund the benefits expected to be earned for
the current year and to amortize amounts related to prior years using the
projected unit credit valuation method. The difference between the pension cost
included in current income and the funded amount is included in other assets or
other liabilities, as appropriate. Actuarial assumptions are evaluated annually.
The matching savings plan permits eligible employees to make basic
contributions to the plan of up to 6 percent of base compensation, and
supplemental contributions of up to 9 percent of base compensation. Annually,
upon approval of the Board of Directors, employee basic contributions may be
matched up to 6 percent of the employee's base compensation.
INCOME TAXES
The operating results of the Parent Company and its eligible subsidiaries
are included in a consolidated federal income tax return. Each subsidiary pays
its allocation of federal income taxes to the Parent Company, or receives
payment from the Parent Company to the extent that tax benefits are realized.
Where state income tax laws do not permit consolidated income tax returns,
applicable state income tax returns are filed. As more fully described in Note
14 to the consolidated financial statements, the Corporation has adopted the
method of accounting for income taxes set forth in Statement of Financial
Accounting Standard No. 109.
INCOME PER COMMON SHARE
Income per common share is determined by dividing net income applicable to
common stockholders by the weighted average number of shares of common stock
outstanding. Common stock equivalents have not been material.
NOTE 2:
ACQUISITIONS
In 1995, various banking subsidiaries of the Parent Company acquired eight
financial institutions and certain other assets which in the aggregate amounted
to the addition of $10,254,013,000 in assets, $7,537,477,000 in net loans and
$7,252,524,000 in deposits. The purchase method of accounting, which requires no
restatements of the Corporation's historical financial statements and the
inclusion of the acquired company's financial information on a fair value basis
only from the date of consummation, was used in these transactions. With respect
to these transactions, the Parent Company issued 12,545,000 shares of its common
stock in exchange for the common stock of certain of the acquired financial
institutions and paid cash for the other financial institutions and assets which
in the aggregate amounted to a cost of $623,338,000. These transactions resulted
in an increase to stockholders' equity of $610,510,000, and the increase was
reduced by the Parent Company's purchase in the open market of 11,637,000 shares
of its common stock at a cost of $526,968,000 in 1995 and the purchase of
908,000 shares at a cost of $37,297,000 in 1994. These transactions also
resulted in an increase to goodwill of $476,229,000, which will be amortized on
a straight-line basis over 25 years, and deposit base premium of $114,023,000,
which will be amortized on an accelerated basis over 10 years.
In 1994, various banking subsidiaries of the Parent Company acquired three
financial institutions which were accounted for as pooling of interests
transactions. In the aggregate, these transactions added $477,647,000 in assets,
$381,436,000 in net loans, $372,052,000 in deposits, $64,351,000 in
stockholders' equity and involved the issuance of 4,169,000 shares of the Parent
Company's common stock. The Corporation's consolidated financial statements were
not restated in prior periods to reflect these 1994 pooling of interests
transactions.
Also in 1994, various banking subsidiaries of the Parent Company acquired
one financial institution and certain loans and deposits which in the aggregate
amounted to the addition of $4,118,115,000 in assets, $857,267,000 in net loans
and $3,654,323,000 in deposits. The purchase method of
H-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
accounting was used in these transactions. With respect to these transactions,
the Parent Company issued 3,561,000 shares and 437,000 shares of its common
stock in exchange for the common stock and convertible debentures, respectively,
of the acquired financial institution and paid cash for the loans and deposits
which in the aggregate amounted to a cost of $365,778,000. These transactions
resulted in an increase to stockholders' equity of $180,833,000, and the
increase was reduced by the Parent Company's purchase in the open market of
3,998,000 shares of its common stock at a cost of $174,584,000. These
transactions also resulted in an increase to goodwill of $90,708,000, which will
be amortized on a straight-line basis over 25 years, and deposit base premium of
$250,365,000, which will be amortized on an accelerated basis over 10 years.
At December 31, 1995, various banking affiliates of the Parent Company had
agreements to acquire three financial institutions which at that date had
aggregate assets of $2,224,283,000, net loans of $1,634,118,000 and deposits of
$1,816,997,000. With respect to these transactions, the Parent Company has
agreed to issue approximately 2,372,000 shares of its common stock in exchange
for the common stock of two of the three financial institutions, subject to
adjustment under certain conditions, and an affiliate of the Parent Company will
pay approximately $188,000,000 in cash for the third financial institution.
These transactions will be accounted for as purchases. Two of these transactions
were consummated in January 1996.
On January 1, 1996, the Corporation acquired First Fidelity Bancorporation
(First Fidelity), a multi-bank holding company based in New Jersey. The merger
will be accounted for as a pooling of interests. At December 31, 1995, First
Fidelity had assets of $35,332,885,000, net loans of $24,934,436,000, deposits
of $27,554,917,000 and net income applicable to common stockholders of
$397,744,000. Acquisitions completed by First Fidelity are not material, and
accordingly, have not been included herein.
As a result of the merger, each of the 78,746,915 net outstanding shares of
First Fidelity common stock was converted into 1.35 shares of the Corporation's
common stock and common stock equivalents, with cash being paid for fractional
share interests. In addition, the 2,963,820 net outstanding shares of First
Fidelity Series B Convertible Preferred Stock were converted into a like number
of shares of the Corporation's Series B Convertible Class A Preferred Stock
having substantially identical terms as the First Fidelity Series B, the 350,000
outstanding shares of First Fidelity Series D Adjustable Rate Cumulative
Preferred Stock were converted into a like number of shares of the Corporation's
Series D Adjustable Rate Cumulative Class A Preferred Stock having substantially
identical terms as the First Fidelity Series D, and the 2,965,200 net
outstanding FFB Depositary Receipts (each representing a 1/40th interest in a
share of First Fidelity Series F 10.64% Preferred Stock (74,130 net outstanding
shares)) were converted into a like number of the Corporation's Depositary
Receipts (each representing a 1/40th interest in the Corporation's Series F
10.64% Class A Preferred Stock) having substantially identical terms as the
First Fidelity Series F.
Additionally, restructuring charges related to direct costs of the First
Fidelity merger of $16,447,000 ($13,072,000 after tax) are included as a
component of noninterest expense in 1995. First Fidelity separately recorded an
expense of $77,999,000 ($59,754,000 after tax) in 1995. It is anticipated that
on a combined basis $197,000,000 of after-tax restructuring charges related to
the First Fidelity merger will be taken in the first half of 1996.
The information below indicates on a pro forma basis, amounts as if the
purchase accounting acquisitions discussed above (completed and pending at
December 31, 1995) had been acquired as of January 1, 1994, the First Fidelity
pooling of interests merger for all years presented, and historical amounts as
reported by the Corporation.
H-10
<PAGE>
<TABLE>
<CAPTION>
(In thousands except per share Years Ended December 31,
data) 1995 1994 1993
<S> <C> <C> <C>
(Unaudited)
Interest income $9,243,418 7,937,133 6,601,528
Interest expense 4,426,056 3,246,946 2,481,952
Net interest income 4,817,362 4,690,187 4,119,576
Provision for loan losses 237,349 180,643 369,753
Net interest income after
provision for loan losses 4,580,013 4,509,544 3,749,823
Securities available for
sale transactions 39,911 8,860 32,784
Investment security
transactions 4,818 4,006 7,435
Noninterest income 1,899,339 1,620,712 1,541,569
Noninterest expense 4,360,762 4,070,027 3,536,346
Income before income taxes 2,163,319 2,073,095 1,795,265
Income taxes 778,573 709,028 578,912
Net income 1,384,746 1,364,067 1,216,353
Dividends on preferred stock 26,390 46,020 45,553
Net income available to
common stockholders before
redemption premium 1,358,356 1,318,047 1,170,800
Redemption premium on
preferred stock -- 41,355 --
Net income applicable to
common stockholders after
redemption premium $1,358,356 1,276,692 1,170,800
Net income per common share
before redemption premium $ 4.83 4.63 4.30
Net income per common share
after redemption premium $ 4.83 4.48 4.30
Corporation as Reported
Net interest income $3,262,776 3,033,715 2,765,893
Net income 1,013,076 925,380 817,521
Net income applicable to
common stockholders before
redemption premium 1,006,047 900,027 792,621
Net income applicable to
common stockholders after
redemption premium 1,006,047 858,672 792,621
Net income per common share
before redemption premium 5.85 5.22 4.73
Net income per common share
after redemption premium $ 5.85 4.98 4.73
</TABLE>
The following assumptions were applied in arriving at the pro forma results;
cost of funds of 5.77 percent and 4.08 percent for 1995 and 1994, respectively;
applying a straight-line depreciation method over useful lives ranging from 10
to 25 years; goodwill amortized over 25 years using the straight-line method;
credit card relationships amortized over a 6.3-year period and other intangibles
amortized over a 10-year period using the sum-of-the-years' digits method; and
various other assets amortized over seven-to-ten years using both the
straight-line and sum-of-the-years' digits methods.
H-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 3:
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $1,374,773 867,427 -- -- 2,242,200 (2,847) 6,370
U.S. Government agencies 129,910 4,864,394 1,487,637 639 6,482,580 (88,831) 2,397
Collateralized mortgage
obligations 143,852 2,068,606 79,596 -- 2,292,054 (24,974) 13,602
Other 157,390 882,308 86,549 573,882 1,700,129 (93,230) 5,102
Total $1,805,925 8,682,735 1,653,782 574,521 12,716,963 (209,882) 27,471
Market Value
Debt securities $1,805,925 8,682,735 1,653,782 70,643 12,213,085 (139,913) 27,202
Sundry securities -- -- -- 503,878 503,878 (69,969) 269
Total $1,805,925 8,682,735 1,653,782 574,521 12,716,963 (209,882) 27,471
Amortized Cost
Debt securities $1,801,221 8,588,759 1,639,547 70,847 12,100,374
Sundry securities -- -- -- 434,178 434,178
Total $1,801,221 8,588,759 1,639,547 505,025 12,534,552
<CAPTION>
December 31, 1995 Amortized
(In thousands) Cost
<S> <C>
Market Value
U.S. Treasury 2,245,723
U.S. Government agencies 6,396,146
Collateralized mortgage
obligations 2,280,682
Other 1,612,001
Total 12,534,552
Market Value
Debt securities 12,100,374
Sundry securities 434,178
Total 12,534,552
Amortized Cost
Debt securities
Sundry securities
Total
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $1,156,159 1,035,790 -- -- 2,191,949 -- 81,975
U.S. Government agencies 153,675 469,468 2,031,111 546 2,654,800 (404) 171,580
Collateralized mortgage
obligations 90,066 1,091,930 58,524 -- 1,240,520 (49) 44,627
Other 84,757 1,282,076 20,299 278,078 1,665,210 (51,633) 56,017
Total $1,484,657 3,879,264 2,109,934 278,624 7,752,479 (52,086) 354,199
Market Value
Debt securities $1,484,657 3,879,264 2,109,934 24,069 7,497,924 (3,243) 346,011
Sundry securities -- -- -- 254,555 254,555 (48,843) 8,188
Total $1,484,657 3,879,264 2,109,934 278,624 7,752,479 (52,086) 354,199
Amortized Cost
Debt securities $1,486,608 4,061,240 2,264,716 28,128 7,840,692
Sundry securities -- -- -- 213,900 213,900
Total $1,486,608 4,061,240 2,264,716 242,028 8,054,592
<CAPTION>
December 31, 1994 Amortized
(In thousands) Cost
<S> <C>
Market Value
U.S. Treasury 2,273,924
U.S. Government agencies 2,825,976
Collateralized mortgage
obligations 1,285,098
Other 1,669,594
Total 8,054,592
Market Value
Debt securities 7,840,692
Sundry securities 213,900
Total 8,054,592
Amortized Cost
Debt securities
Sundry securities
Total
</TABLE>
H-12
<PAGE>
Securities available for sale with an aggregate amortized cost of
$5,181,431,000 at December 31, 1995, are pledged to secure U.S. Government and
other public deposits and for other purposes as required by various statutes or
agreements.
Expected maturities differ from contractual maturities since issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Generally, the aging of mortgage-backed securities included in U.S.
Government agencies and collateralized mortgage obligations is based on their
weighted average maturities at December 31, 1995 and 1994.
At December 31, 1995 and 1994, collateralized mortgage obligations had a
weighted average yield based on amortized cost of 7.00 percent and 5.21 percent,
respectively.
Included in U.S. Government agencies and Other at December 31, 1995, are
$1,101,704,000 of securities available for sale that are denominated in
currencies other than the U.S. dollar. The currency exchange rates were hedged
to minimize the exposure to currency revaluation risks. At December 31, 1995,
these securities had a weighted average maturity of 2.92 years and a weighted
average yield of 6.10 percent. The weighted average U.S. equivalent yield for
comparative purposes of these securities was 7.50 percent based on a weighted
average funding cost differential of 1.40 percent.
Securities available for sale at December 31, 1995, do not include
commitments to purchase $358,825,000 of additional securities that at December
31, 1995, had a market value of $360,254,000.
Securities available for sale at December 31, 1995, include the carrying
value of $321,089,000 of securities which have been sold for future settlement.
Related gains and losses are accounted for on a trade date basis.
There were commitments to purchase securities at a cost of $5,551,000 that
had a market value of $5,547,000 at December 31, 1994. There were no commitments
to sell securities.
Gross gains and losses realized on the sale of debt securities in 1995 were
$36,655,000 and $33,755,000, respectively, and on sundry securities $14,365,000
and $74,000, respectively.
Gross gains and losses realized on the sale of debt securities in 1994 were
$27,017,000 and $43,813,000, respectively, and on sundry securities $5,998,000
and $709,000, respectively.
Gross gains and losses realized on the sale of debt securities in 1993 were
$28,818,000 and $9,553,000, respectively, and on sundry securities $6,570,000
and $68,000, respectively.
The Financial Accounting Standards Board has issued Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", that
requires that debt and equity securities held: (i) to maturity be classified as
such and reported at amortized cost; (ii) for current resale be classified as
trading securities and reported at fair value, with unrealized gains and losses
included in current earnings; and (iii) for any other purpose be classified as
securities available for sale and reported at fair value, with unrealized gains
and losses excluded from current earnings and reported as a separate component
of stockholders' equity. It was adopted by the Corporation on January 1, 1994.
The effect of the foregoing will cause fluctuations in stockholders' equity
based on changes in values of debt and equity securities.
At December 31, 1995, stockholders' equity includes an after-tax amount of
$110,631,000 based on appreciation in the securities available for sale
portfolio of $182,411,000, and on an unamortized after-tax gain of $71,780,000.
A transfer of $1,973,719,000 of investment securities to the securities
available for sale portfolio as permitted by the Financial Accounting Standards
Board only for the year ended December 31, 1995, was completed in the fourth
quarter of 1995.
At December 31, 1994, stockholders' equity decreased by an after-tax amount
of $214,265,000 based on depreciation in the securities available for sale
portfolio of $302,113,000 and on a transfer of securities from securities
available for sale to investment securities with an unrealized loss of
$28,374,000.
H-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 4:
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Government agencies $ 15,624 805,739 147,234 -- 968,597 23,005 (935)
Collateralized mortgage
obligations 47,339 546,111 -- -- 593,450 12,443 (1)
State, county and
municipal 179,761 151,460 122,491 364,296 818,008 115,107 (2,950)
Other 1,008 -- 6,156 67,098 74,262 6,771 (2)
Total $243,732 1,503,310 275,881 431,394 2,454,317 157,326 (3,888)
Carrying Value
Debt securities $243,732 1,503,310 275,881 415,553 2,438,476 157,326 (3,888)
Sundry securities -- -- -- 15,841 15,841 -- --
Total $243,732 1,503,310 275,881 431,394 2,454,317 157,326 (3,888)
Market Value
Debt securities $247,076 1,545,715 300,156 498,967 2,591,914
Sundry securities -- -- -- 15,841 15,841
Total $247,076 1,545,715 300,156 514,808 2,607,755
<CAPTION>
December 31, 1995 Market
(In thousands) Value
<S> <C>
Carrying Value
U.S. Government agencies 990,667
Collateralized mortgage
obligations 605,892
State, county and
municipal 930,165
Other 81,031
Total 2,607,755
Carrying Value
Debt securities 2,591,914
Sundry securities 15,841
Total 2,607,755
Market Value
Debt securities
Sundry securities
Total
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Government agencies $ -- 100,853 1,201,803 14,474 1,317,130 5,528 (39,881)
Collateralized mortgage
obligations -- 910,733 92,516 -- 1,003,249 -- (26,786)
State, county and
municipal 369,189 267,835 151,533 437,523 1,226,080 78,676 (4,698)
Other -- 2,036 6,178 175,196 183,410 3,022 (3,196)
Total $369,189 1,281,457 1,452,030 627,193 3,729,869 87,226 (74,561)
Carrying Value
Debt securities $369,189 1,281,457 1,452,030 517,532 3,620,208 87,226 (74,561)
Sundry securities -- -- -- 109,661 109,661 -- --
Total $369,189 1,281,457 1,452,030 627,193 3,729,869 87,226 (74,561)
Market Value
Debt securities $376,983 1,269,819 1,423,936 562,135 3,632,873
Sundry securities -- -- -- 109,661 109,661
Total $376,983 1,269,819 1,423,936 671,796 3,742,534
<CAPTION>
December 31, 1994 Market
(In thousands) Value
<S> <C>
Carrying Value
U.S. Government agencies 1,282,777
Collateralized mortgage
obligations 976,463
State, county and
municipal 1,300,058
Other 183,236
Total 3,742,534
Carrying Value
Debt securities 3,632,873
Sundry securities 109,661
Total 3,742,534
Market Value
Debt securities
Sundry securities
Total
</TABLE>
Investment securities with an aggregate carrying value of $1,766,343,000 at
December 31, 1995, are pledged to secure U.S. Government and other public
deposits and for other purposes as required by various statutes or agreements.
Expected maturities differ from contractual maturities since borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Generally, the aging of mortgage-backed securities included in U.S.
Government agencies and collateralized mortgage obligations is based on their
weighted average maturities at December 31, 1995 and 1994.
H-14
<PAGE>
At December 31, 1995 and 1994, collateralized mortgage obligations had a
weighted average yield of 7.21 percent and 6.52 percent, respectively.
There were no commitments to purchase or sell investment securities at
December 31, 1995 and 1994.
Gross gains and losses realized on repurchase agreement underdeliveries and
calls of investment securities in 1995 were $5,705,000 and $887,000,
respectively.
In 1994 such gross gains and losses were $4,050,000 and $44,000,
respectively.
In 1993 such gross gains and losses were $7,837,000 and $402,000,
respectively.
See Note 3 for information related to accounting rules for debt and equity
securities and a transfer of investment securities to the securities available
for sale portfolio.
NOTE 5:
LOANS
<TABLE>
<CAPTION>
(In thousands) 1995
<S> <C>
Commercial
Commercial, financial and agricultural $18,459,305
Real estate-construction and other 2,260,193
Real estate-mortgage 5,953,377
Lease financing 2,829,628
Foreign 519,970
Total commercial 30,022,473
Retail
Real estate-mortgage 20,143,480
Installment loans-Bankcard 3,383,903
Installment loans-other 13,252,126
Total retail 36,779,509
Total $66,801,982
<CAPTION>
(In thousands) 1994
<S> <C>
Commercial
Commercial, financial and agricultural 15,907,743
Real estate-construction and other 1,734,095
Real estate-mortgage 5,437,496
Lease financing 1,613,763
Foreign 415,857
Total commercial 25,108,954
Retail
Real estate-mortgage 15,014,775
Installment loans-Bankcard 3,959,657
Installment loans-other 10,618,696
Total retail 29,593,128
Total 54,702,082
</TABLE>
Directors and executive officers of the Parent Company and their related
interests were indebted to the Corporation in the aggregate amounts of
$264,305,000 and $280,186,000 at December 31, 1995 and 1994, respectively. From
January 1 through December 31, 1995, directors and executive officers of the
Parent Company and their related interests borrowed $50,342,000 and repaid
$66,223,000. In the opinion of management, these loans do not involve more than
the normal risk of collectibility, nor do they present other unfavorable
features.
At December 31, 1995 and 1994, nonaccrual and restructured loans amounted to
$501,173,000 and $399,510,000, respectively. Interest related to nonaccrual and
restructured loans for the years ended December 31, 1995, 1994 and 1993 amounted
to $53,145,000, $47,626,000 and $78,463,000, respectively. Interest collected on
such loans and included in the results of operations for each of the years in
the three-year period then ended amounted to $13,775,000, $6,254,000 and
$24,281,000, respectively.
At December 31, 1995, impaired loans, which are included in nonaccrual
loans, amounted to $339,500,000. Included in the allowance for loan losses is
$44,410,000 related to $258,757,000 of impaired loans at December 31, 1995. The
rest of the impaired loans are recorded at or below fair value. At December 31,
1995, the average recorded investment in impaired loans was $329,637,000 and
$14,320,000 of interest income was recognized on loans while they were impaired.
All of this income was recognized using a cash-basis method of accounting.
Loan fair values are disclosed in Note 17.
H-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 6:
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Balance, beginning of
year $ 978,795 1,020,191 940,804
Provision for loan
losses 180,000 100,000 221,753
Allowance of loans
acquired or sold,
net 48,226 21,520 109,321
1,207,021 1,141,711 1,271,878
Less
Loan losses 326,340 254,927 329,560
Less loan
recoveries 85,830 92,011 77,873
Loan losses, net 240,510 162,916 251,687
Balance, end of year $ 966,511 978,795 1,020,191
</TABLE>
NOTE 7:
PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Land $ 377,399 336,566 328,250
Buildings 1,269,721 1,071,738 985,010
Equipment 1,575,931 1,258,024 1,083,530
Capitalized leases 15,952 12,577 12,441
3,239,003 2,678,905 2,409,231
Less accumulated
depreciation and
amortization 1,101,010 922,608 884,376
Total $2,137,993 1,756,297 1,524,855
Net premises and
equipment pledged
as security for
mortgage notes $ 59,256 69,621 83,761
Depreciation and
amortization $ 219,617 176,812 152,273
</TABLE>
NOTE 8:
FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Foreclosed properties $124,058 193,290 278,694
Allowance for foreclosed
properties, beginning of
year 34,826 56,191 103,328
Provision for foreclosed
properties (3,756) 4,503 23,730
Transfer from (to)
allowance for segregated
assets 78 1,722 (1,998)
Dispositions, net (7,558) (27,590) (68,869)
Allowance for foreclosed
properties, end of year 23,590 34,826 56,191
Foreclosed properties, net $100,468 158,464 222,503
</TABLE>
H-16
<PAGE>
NOTE 9:
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
AND OTHER SHORT-TERM BORROWINGS
The following is a schedule of securities sold under repurchase agreements,
which includes accrued interest, and other short-term borrowings of the
Corporation at December 31, 1995, 1994 and 1993, and the related maximum amount
outstanding at the end of any month during the periods:
<TABLE>
<CAPTION>
Maximum Outstanding
(In thousands) 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Securities sold under repurchase
agreements $9,985,337 5,458,661 5,102,045 9,985,337 7,613,617 6,740,066
Other Short-Term Borrowings
Federal funds purchased $2,085,771 293,732 695,627 3,220,952 2,487,862 2,890,658
Fixed and variable rate bank
notes 2,586,000 -- -- 2,586,000 -- --
Interest-bearing demand
deposits issued to the U.S.
Treasury 267,794 377,526 843,069 704,131 723,891 875,642
Commercial paper 941,968 391,216 270,666 1,132,039 1,102,557 421,079
Other 731,202 1,011,208 342,771 1,908,248 1,703,899 451,317
Total $6,612,735 2,073,682 2,152,133
</TABLE>
At December 31, 1995, 1994 and 1993, the combined weighted average interest
rates related to federal funds purchased and securities sold under repurchase
agreements were 5.53 percent, 6.32 percent and 3.17 percent, respectively.
Maturities related to federal funds purchased and securities sold under
repurchase agreements in each of the years in the three-year period then ended
were not greater than 230 days.
At December 31, 1995, the weighted average interest rate and maturity for
fixed and variable rate bank notes were 5.70 percent and 90 days, respectively.
At December 31, 1995, 1994 and 1993, the weighted average interest rates for
commercial paper were 5.55 percent, 5.41 percent and 2.70 percent, respectively.
Weighted average maturities for commercial paper issued at December 31, 1995,
1994 and 1993, approximated 24, 4 and 5 days, respectively.
Included in "Other" are Federal Home Loan Bank borrowings and securities
sold short of $438,530,000 and $229,667,000, respectively at December 31, 1995,
and $497,247,000 and $445,361,000, respectively, at December 31, 1994.
Substantially all short-term borrowings are due within 90 days, and
accordingly, the carrying amount of such borrowings is deemed to be a reasonable
estimate of fair value.
H-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 10:
LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
Debentures and Notes Issued by the Parent Company
7 1/2 percent debentures, due in annual installments of not less
than $1,000 through December 1, 2002, net of debentures held
of $10,381 in 1995* $ 15,619 15,697 15,619 14,551
Floating rate extendible notes, due June 15, 2005** 10,100 10,100 100,000 100,000
11 percent notes, due May 1, 1996*** 18,360 18,963 18,360 19,099
Floating rate notes, due November 13, 1996** 150,000 150,000 150,000 150,000
5.95 percent notes, due July 1, 1995 (par value $150,000)*** -- -- 149,921 149,010
6 3/4 percent notes, due January 15, 1998 (par value
$250,000)*** 249,001 255,075 248,511 239,175
Floating rate notes, due February 24, 1998 (par value
$300,000)*** 299,810 299,810 -- --
Fixed rate medium-term senior notes with varying rates and terms
to 1996* 200 200 32,700 32,741
Fixed rate medium-term subordinated notes with varying rates and
terms to 2001* 54,000 63,812 54,000 56,925
Floating rate subordinated notes, due July 22, 2003 (par value
$150,000)*** 149,206 149,206 149,101 149,101
11 percent and variable rate subordinated notes, due in 1996*** 17,951 18,665 17,951 18,585
8 1/8 percent subordinated notes, due December 15, 1996*** 100,000 102,230 100,000 99,700
9.45 percent subordinated notes, due June 15, 1999 (par value
$250,000)*** 250,000 278,450 250,000 259,369
9.45 percent subordinated notes, due August 15, 2001 (par value
$150,000)*** 147,906 172,260 147,535 155,865
8 1/8 percent subordinated notes, due June 24, 2002 (par value
$250,000)*** 248,679 277,225 248,475 242,425
8 percent subordinated notes, due November 15, 2002 (par value
$225,000)*** 223,280 248,063 223,037 216,833
7 1/4 percent subordinated notes, due February 15, 2003 (par
value $150,000)*** 148,889 158,610 148,733 137,595
6 5/8 percent subordinated notes, due July 15, 2005 (par value
$250,000)*** 248,189 255,400 247,999 215,075
6 percent subordinated notes, due October 30, 2008 (par value
$200,000)*** 197,242 204,444 197,028 155,700
6 3/8 percent subordinated notes, due January 15, 2009 (par
value $150,000)*** 147,669 148,965 147,495 120,150
8 percent subordinated notes, due August 15, 2009 (par value
$150,000) 148,655 164,670 148,559 139,335
8.77 percent subordinated notes, due November 15, 2004 (par
value $150,000) 148,590 164,850 148,430 148,890
7 1/2 percent subordinated debentures, due April 15, 2035 (par
value $250,000) 246,194 276,950 -- --
7.05 percent subordinated notes, due August 1, 2005 (par value
$250,000)*** 248,065 262,725 -- --
6 7/8 percent subordinated notes, due September 15, 2005 (par
value $250,000)*** 248,350 260,000 -- --
6.55 percent subordinated debentures, due October 15, 2035 (par
value $250,000) 248,417 259,575 -- --
Total debentures and notes issued by the Parent Company 3,964,372 4,215,945 2,943,454 2,820,124
</TABLE>
H-18
<PAGE>
<TABLE>
<CAPTION>
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
Debentures and Notes of Subsidiaries
Bank notes with varying rates and terms to 1997 1,165,000 1,165,000 100,000 100,000
9 7/8 percent subordinated capital notes, due May 15, 1999 (par
value $75,000) 74,542 84,883 74,404 78,608
9 5/8 percent subordinated capital notes, due June 15, 1999 (par
value $75,000) 74,957 84,295 74,945 77,970
10 1/2 percent collateralized mortgage obligations, due in 2014 48,545 54,338 60,010 61,510
Debentures and notes with varying rates and terms to 2015 36,163 38,817 7,275 6,726
Total debentures and notes of subsidiaries 1,399,207 1,427,333 316,634 324,814
Other Debt
Notes payable to the FDIC, net of discount of $103 in 1995 and
$2,935 in 1994, due September 19, 1996 76,138 76,138 117,271 117,271
Advances from the Federal Home Loan Bank 958,150 958,162 4,696 3,728
Mortgage notes and other debt of subsidiaries with varying rates
and terms 38,381 43,189 41,153 42,909
Capitalized lease obligations calculated at rates generally
ranging from 7.5 percent to 15.2 percent 8,079 9,065 5,306 5,183
Total other debt 1,080,748 1,086,554 168,426 169,091
Total $6,444,327 6,729,832 3,428,514 3,314,029
</TABLE>
* Redeemable at the option of the Parent Company.
** Redeemable in whole or in part at the option of the Parent Company.
*** Not redeemable prior to maturity.
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Corporation for debt of the same remaining maturities.
The interest rate on the floating rate extendible notes is 5.9625 percent to
March 15, 1996.
The interest rate on the floating rate notes due November 13, 1996, is 6
percent to February 29, 1996.
The interest rate on the floating rate notes due February 24, 1998, is
6.05469 percent to February 24, 1996.
The fixed rate medium-term senior and subordinated notes are issued
periodically. Interest rates, maturities, redemption and other terms are
determined at the date of issuance. At December 31, 1995, the Parent Company had
issued medium-term senior notes with a fixed rate of 6.69 percent and
subordinated notes with fixed rates of interest ranging from 9.49 percent to
9.93 percent.
In February 1996, $1,500,000,000 of senior or subordinated debt securities
remained available for issuance under a shelf registration statement filed with
the Securities and Exchange Commission.
The interest rate on the floating rate subordinated notes is 6.0625 percent
to January 22, 1996.
The interest rate on variable rate subordinated notes of $858,000 is 6.32
percent to March 31, 1996.
The 8 percent subordinated notes due August 15, 2009, are redeemable in
whole and not in part at the option of the Parent Company on August 15, 2004.
The 8.77 percent subordinated notes are redeemable in whole or in part at
the option of Parent Company on November 15, 1999.
Holders of the 7 1/2 percent subordinated debentures and the 6.55 percent
subordinated debentures may elect to redeem a part or all of their debentures on
April 15, 2005 and October 15, 2005, respectively, otherwise such debentures are
not redeemable prior to maturity.
At December 31, 1995, bank notes of $965,000,000 had floating rates of
interest ranging from 5.50 percent to 6.02141 percent, and $200,000,000 of the
notes had an interest rate of 5.43 percent, which changes daily based on changes
in the federal funds interest rate.
The 9 7/8 percent (which were assumed by the Parent Company in 1995) and
9 5/8 percent subordinated capital notes that were issued by an acquired bank
holding company may not be redeemed prior to maturity, except upon the
occurrence of certain events.
The 10 1/2 percent collateralized mortgage obligations were issued by a
wholly-owned subsidiary of an acquired savings bank. The obligations consist of
Class A-4 bonds collateralized by mortgage participation certificates (FHLMC
Certificates) issued by the Federal Home Loan Mortgage Corporation. Maturity of
the bonds depends on the rate of payments made
H-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
on the FHLMC Certificates. The bonds are redeemable upon the occurrence of
certain events.
Notes payable to the FDIC result from funding assistance from the Federal
Deposit Insurance Corporation for Southeast Banks segregated assets.The discount
amount, which is based on an imputed interest rate of 8 3/4 percent, will be
accreted into interest expense under the interest method to September 19, 1996.
The Corporation's acquired savings banks had aggregate advances from the
Federal Home Loan Bank of $958,150,000 at December 31, 1995, with interest rates
ranging from 1 percent to 7 percent and maturity dates to July 19, 2016.
The weighted average rate paid for long-term debt in 1995, 1994 and 1993 was
6.58 percent, 6.19 percent and 5.32 percent, respectively. Interest rate swap
agreements entered at the time of issuance of certain long-term debt reduced
related interest expense.
Long-term debt maturing in each of the five years subsequent to December 31,
1995 is as follows: 1996, $1,529,606,000; 1997, $871,552,000; 1998,
$588,326,000; 1999, $415,584,000; and 2000, $138,093,000.
NOTE 11:
PREFERRED STOCK
The Corporation is authorized to issue up to 40,000,000 shares of Class A
Preferred Stock, no-par value, and 10,000,000 shares of Preferred Stock, no-par
value, each in one or more series. In connection with the First Fidelity merger,
the Corporation has issued three new series of preferred stock which are
described in Note 2.
The Series 1990 Preferred Stock was issued in connection with the
acquisition of Florida National Banks of Florida, Inc. by the Corporation in
January 1990. On December 20, 1994, the Corporation elected to redeem all of the
outstanding shares of its Series 1990 Preferred Stock. A redemption premium of
$41,355,000, representing the difference between a $44.96 per share book value
and the $51.50 redemption price was deducted from net income applicable to
common stockholders in 1994. At December 31, 1994, $325,396,000 was placed in
trust with an affiliated bank.
On June 18, 1993, the Corporation redeemed all of the outstanding shares of
Series A, $2.50 Cumulative Convertible Preferred Stock at the redemption price
of $25.00 per share (plus accrued and unpaid dividends), substantially all of
which were converted into 522,000 shares of common stock.
NOTE 12:
COMMON STOCK
<TABLE>
<CAPTION>
Option Prices Balance, Forfeitures Balance,
or Market Beginning Grants or New Exercises and Other End of
Values of 1995 Shares or Purchases Reductions 1995
<S> <C> <C> <C> <C> <C> <C>
1969 Plan
Options granted $11.59 48 -- -- -- 48
Available 52,976 -- -- -- 52,976
1984 Master Stock Plan
Options granted $20.25-$28.13 331,367 -- (134,451) -- 196,916
Available 507,669 -- -- -- 507,669
1988 Master Stock Plan
Options granted $14.75-$35.88 1,182,083 -- (166,102) (1,540) 1,014,441
Restricted stock granted $14.75-$22.88 240,504 -- (146,264) (1,530) 92,710
Available 1,112,508 -- -- 1,540 1,114,048
1992 Master Stock Plan
Options granted $44.75-$46.13 1,296,660 955,345 (74,219) (26,010) 2,151,776
Restricted stock granted $44.75-$46.13 758,102 607,330 (175,986) (13,214) 1,176,232
Available 2,826,705 (1,562,675) -- 26,010 1,290,040
1994 Employee Plan $38.36 2,508,795 -- (985,843) (139,456) 1,383,496
Dividend Reinvestment Plan -- 4,829,313 -- (807,659) -- 4,021,654
Option plans of acquired
companies $5.91-$41.97 231,910 497,838 (200,989) (4,032) 524,727
<CAPTION>
Exercisable
<S> <C>
1969 Plan
Options granted 48
Available --
1984 Master Stock Plan
Options granted 196,916
Available --
1988 Master Stock Plan
Options granted 1,014,441
Restricted stock granted --
Available --
1992 Master Stock Plan
Options granted 1,203,001
Restricted stock granted --
Available --
1994 Employee Plan 1,383,496
Dividend Reinvestment Plan --
Option plans of acquired
companies 524,727
</TABLE>
Under the terms of the 1969 Plan and the 1984, 1988 and 1992 Master Stock
Plans, stock options may be periodically granted to key personnel at a price not
less than the fair market value of the shares at the date of grant. Options
granted under the 1969 Plan must be exercised or forfeited on a prorated basis
over a fifteen-year period, or a ten-year period if the options are incentive
stock options. The exercise periods for options granted under the 1984, 1988 and
1992 Master Stock Plans are determined at the date of grant and are for periods
no longer than ten years.
H-20
<PAGE>
Restricted stock may also be granted under the 1984, 1988 and 1992 Master
Stock Plans. The stock is subject to certain restrictions over a five-year
period, during which time the holder is entitled to full voting rights and
dividend privileges.
Employees, based on their eligibility and compensation, were granted options
to purchase shares of common stock under the 1994 Employee Stock Purchase Plan
at a price equal to 85 percent of the fair market value of the shares as of the
Plan date. From the Plan date and generally for approximately a two-year period
thereafter, employees have the option to purchase all or a portion of the
optioned shares. The Plan provides that as of June 30, 1996 (the Final Purchase
Date), the option price will be the lesser of 85 percent of the fair market
value as of the Plan date or 85 percent of the fair market value as of the Final
Purchase Date.
Under the terms of the Dividend Reinvestment Plan, a participating
stockholder's cash dividends and optional cash payments were used to purchase
original issue common stock from the Parent Company.
Under the terms of the Parent Company's merger agreements with certain
acquired companies, all options with respect to their common stock were
converted into options to purchase Parent Company common stock.
In accordance with a Shareholder Protection Rights Agreement dated December
18, 1990, the Parent Company issued a dividend of one right for each share of
Parent Company common stock outstanding or reserved for issuance as of December
18, 1990, or 117,450,463 rights, on December 28, 1990. These rights continue to
attach to all common stock issued after December 18, 1990.
The rights will become exercisable if any person or group commences a tender
or exchange offer that would result in their becoming the beneficial owner of 15
percent or more of the Parent Company's common stock or any person is determined
by the Federal Reserve Board to "control" the Corporation within the meaning of
the Bank Holding Company Act.
The rights also will become exercisable if a person or group acquires
beneficial ownership of 15 percent or more of the Parent Company's common stock.
Each right (other than rights owned by such person or group) will entitle its
holder to purchase, for an exercise price of $110, a number of shares of the
Parent Company's common stock (or at the option of the Board of Directors,
shares of junior participating Class A preferred stock) having a market value of
twice the exercise price. If any person or group acquires beneficial ownership
of between 15 percent and 50 percent of the Parent Company's common stock, the
Parent Company's Board of Directors may, at its option, exchange for each
outstanding right (other than rights owned by such person or group) either two
shares of common stock or two one-hundredths of a share of junior participating
Class A preferred stock having economic and voting terms similar to two shares
of common stock.
The rights are subject to adjustment if certain events occur, and they will
expire on December 28, 2000, if not redeemed or terminated sooner.
NOTE 13:
PERSONNEL EXPENSE
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Salaries $1,210,686 1,039,699 938,409
Pension cost 22,299 24,107 13,571
Savings plan 38,464 34,768 31,241
Other benefits 192,104 188,792 172,678
Total $1,463,553 1,287,366 1,155,899
</TABLE>
Pension expense for the Corporation's nonqualified defined benefits plan was
$4,982,000 in 1995. The accumulated benefit obligation for the nonqualified plan
was $21,280,000, including vested benefits of $21,096,000. The plan has no
assets. The assumed rates used in actuarial computations were the same as those
utilized in the qualified pension plans.
The Corporation has tax-qualified defined benefit pension plans covering
substantially all of its employees with one year of service. The benefits are
based on years of service and the employee's highest five year average
compensation. Contributions are made each year into a trust in an amount which
is determined by an actuary to meet the minimum requirements of ERISA and to
fall at or below the maximum amount which can be deducted on the Corporation's
tax return.
At December 31, 1995, plan assets primarily include U.S. Government and
Government agency securities and equity securities. Also included are 1,088,266
shares of the Parent Company's common stock. All plan assets are held by First
Union National Bank of North Carolina (the Bank) in a Bank-administered trust
fund.
In 1994 and 1993, pension cost includes settlement losses of $514,000 and
$2,378,000, respectively, related to the purchase of annuities for certain
retirees.
The following tables set forth the plan's funded status and certain amounts
recognized in the Corporation's consolidated financial statements at December
31, 1995, 1994 and 1993, respectively:
H-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Actuarial Present Value of Benefit Obligations
Accumulated benefit obligation including vested benefits of $376,295,000, 1995;
$304,842,000, 1994; and $346,186,000, 1993 $ 406,898 324,329 379,868
Projected benefit obligation for service rendered to date $(537,762) (454,623) (509,332)
Plan assets at fair value 635,207 553,255 555,196
Plan assets in excess of projected benefit obligation 97,445 98,632 45,864
Prior service cost 141 164 2,201
Unrecognized net loss from past experience different from that assumed and effects
of
changes in assumptions 84,319 49,112 89,055
Unrecognized net transition asset (17,064) (19,908) (22,867)
Prepaid pension cost included in other assets $ 164,841 128,000 114,253
Assumed Rates Used in Actuarial Computations
Discount rate at beginning of year 8.25% 7 8-8.5
Discount rate at end of year 7.5 8.25 7
Weighted average rate of increase in future compensation levels 4.5 5 4.5
Long-term average rate of return 8.5% 8.5 9.5
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Pension Cost
Service cost-benefits earned during the period $ 29,236 33,425 25,649
Interest cost on projected benefit obligation 35,792 35,364 29,128
Actual (return) loss on plan assets (82,531) 10,986 (44,145)
Net amortization and deferral 34,820 (56,182) 561
Settlement loss -- 514 2,378
Net pension cost $ 17,317 24,107 13,571
</TABLE>
The Corporation and its subsidiaries provide certain health care and life
insurance benefits for retired employees. Substantially all of the Corporation's
employees may become eligible for these benefits if they reach retirement age
while working for the Corporation. Life insurance benefits are provided through
an insurance company. Medical and other benefits are provided through a
tax-exempt trust formed by the Corporation. The Corporation recognizes the cost
of providing these benefits by expensing annual insurance premiums, trust
funding allocations and administrative expenses.
The amount expensed for group insurance expense for active employees in
1995, 1994 and 1993 was $66,581,000, $59,210,000 and $69,841,000, respectively.
H-22
<PAGE>
The following tables set forth the status of postretirement benefits other
than pensions and certain amounts recognized in the Corporation's consolidated
financial statements at December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
<S> <C> <C>
Actuarial Present Value of Postretirement Benefits Obligation
Retirees $ 78,875 63,604
Fully eligible active participants 2,242 2,711
Other active participants 27,705 22,875
Accumulated postretirement benefit obligation $108,822 89,190
Projected benefit obligation in excess of plan assets $108,822 89,190
Unrecognized net transition obligation (60,363) (63,914)
Unrecognized net gain (loss) from past experience different from that assumed
and effects of changes in assumptions 13,805 24,070
Accrued postretirement benefit cost $ 62,264 49,346
Assumed Rates Used in Actuarial Computations
Weighted average discount rate 7.5% 8.25
Rate of increase in future compensation levels, depending on age 4.5 5
Health care cost trend rate
Prior to age 65 (for 1996, grading to 7 percent in 2004) 11.67 12.25
After age 65 (for 1996, grading to 6 percent in 2004) 10.67% 11.25
Effect of One Percent Increase in Health Care Cost Trend Rate
Service costs $ -- --
Interest costs 353 384
Accumulated postretirement benefit obligation $ 5,516 5,283
Postretirement Costs
Service cost-benefits earned during the period $ 1,866 2,151
Interest cost on projected benefit obligation 7,159 6,784
Amortization of transition obligation 2,711 3,543
Net cost $ 11,736 12,478
<CAPTION>
1993
<S> <C>
Actuarial Present Value of Postretirement Benefits Obligation
Retirees 81,993
Fully eligible active participants 3,097
Other active participants 26,544
Accumulated postretirement benefit obligation 111,634
Projected benefit obligation in excess of plan assets 111,634
Unrecognized net transition obligation (67,221)
Unrecognized net gain (loss) from past experience different from that assumed
and effects of changes in assumptions (6,993)
Accrued postretirement benefit cost 37,420
Assumed Rates Used in Actuarial Computations
Weighted average discount rate 7
Rate of increase in future compensation levels, depending on age 4.5
Health care cost trend rate
Prior to age 65 (for 1996, grading to 7 percent in 2004) 12.83
After age 65 (for 1996, grading to 6 percent in 2004) 11.83
Effect of One Percent Increase in Health Care Cost Trend Rate
Service costs --
Interest costs 391
Accumulated postretirement benefit obligation 6,232
Postretirement Costs
Service cost-benefits earned during the period 1,605
Interest cost on projected benefit obligation 6,646
Amortization of transition obligation 4,309
Net cost 12,560
</TABLE>
The Financial Accounting Standards Board has issued Standard No. 112,
"Employers' Accounting for Postemployment Benefits", which requires accrual of a
liability for all types of benefits paid to former or inactive employees after
employment but before retirement. The Corporation adopted this accounting
Standard beginning January 1, 1994. Benefits subject to this accounting
pronouncement include salary continuation, supplemental unemployment benefits,
severance benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation of such benefits as
health care and life insurance coverage. The effect of initially applying this
new accounting Standard in 1994 resulted in additional personnel expense of
$12,948,000. The result of complying with this Standard in 1995 was not
material.
H-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 14:
INCOME TAXES
The provision for income taxes charged to operations is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Current Income Taxes
Federal $277,955 238,362
State 27,497 50,724
Total 305,452 289,086
Deferred Income Tax Expense
Federal 204,775 185,590
State 35,361 15,400
Total 240,136 200,990
Total $545,588 490,076
<CAPTION>
1993
(In thousands)
<S> <C>
Current Income Taxes
Federal 276,379
State 48,722
Total 325,101
Deferred Income Tax Expense
Federal 74,002
State 4,157
Total 78,159
Total 403,260
</TABLE>
The federal income tax rates and amounts are reconciled with the effective
income tax rates and amounts as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
% of % of % of
Pre-tax Pre-tax Pre-tax
(In thousands) Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes $1,558,664 $1,415,456 $1,220,781
Tax at federal income tax rate $ 545,532 35.0% $ 495,410 35.0% $ 427,273 35.0%
Reasons for difference in federal
income tax rate and effective
rate
Tax-exempt interest, net of cost
to carry (37,505) (2.4) (41,209) (2.9) (44,986) (3.7)
State income taxes, net of
federal tax benefit 40,858 2.6 42,981 3.0 34,371 2.8
Goodwill amortization 16,404 1.1 12,740 .9 11,873 1.0
Adjustment to deferred income tax
assets and liabilities for
enacted changes in tax laws and
rates -- -- -- -- (15,875) (1.3)
Change in the beginning-of-the-
year deferred tax assets
valuation
allowance 3,031 .2 1,889 .1 (3,604) (.3)
Other items, net (22,732) (1.5) (21,735) (1.5) (5,792) (.5)
Total $ 545,588 35.0% $ 490,076 34.6% $ 403,260 33.0%
</TABLE>
H-24
<PAGE>
The sources and tax effects of temporary differences that give rise to
significant portions of deferred income tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Deferred Income Tax Liabilities
Depreciation $ 61,863 47,296
Unrealized gain on debt and equity securities 59,457 --
Intangible assets 65,967 54,903
Leasing activity 477,298 260,763
Prepaid insurance premiums 2,170 17,554
Prepaid pension asset 55,642 50,868
Thrift loan loss reserve recapture 72,103 27,152
Purchase accounting adjustments (primarily loans and securities) 19,121 21,127
Other 37,120 31,424
Total deferred income tax liabilities 850,741 511,087
Deferred Income Tax Assets
Provision for loan losses, net (358,241) (366,049)
Accrued expenses, deductible when paid (222,696) (169,545)
Unrealized loss on debt and equity securities -- (115,219)
Foreclosed properties (12,006) (26,627)
Sale and leaseback transactions (17,227) (18,825)
Deferred income (14,489) (16,731)
Net operating loss carryforwards (27,225) (50,795)
First American segregated assets (19,769) (10,004)
Loan products (8,817) (916)
Other (29,777) (33,201)
Total deferred income tax assets (710,247) (807,912)
Deferred tax assets valuation allowance 43,570 37,421
Net deferred income tax liabilities (assets) $ 184,064 (259,404)
<CAPTION>
1993
(In thousands)
<S> <C>
Deferred Income Tax Liabilities
Depreciation 48,710
Unrealized gain on debt and equity securities --
Intangible assets 72,943
Leasing activity 159,085
Prepaid insurance premiums --
Prepaid pension asset 44,757
Thrift loan loss reserve recapture 24,889
Purchase accounting adjustments (primarily loans and securities) 24,236
Other 39,375
Total deferred income tax liabilities 413,995
Deferred Income Tax Assets
Provision for loan losses, net (369,384)
Accrued expenses, deductible when paid (125,506)
Unrealized loss on debt and equity securities --
Foreclosed properties (52,637)
Sale and leaseback transactions (22,276)
Deferred income (13,987)
Net operating loss carryforwards (53,271)
First American segregated assets (76,003)
Loan products (11,940)
Other (30,476)
Total deferred income tax assets (755,480)
Deferred tax assets valuation allowance 22,173
Net deferred income tax liabilities (assets) (319,312)
</TABLE>
Changes to the deferred tax assets valuation allowance are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Balance, beginning of year $ 37,421 22,173
Current year deferred provision, change in deferred tax assets valuation
allowance 3,031 1,889
Purchase acquisitions 3,118 13,359
Deferred tax assets valuation allowance, end of year $ 43,570 37,421
<CAPTION>
1993
(In thousands)
<S> <C>
Balance, beginning of year 20,024
Current year deferred provision, change in deferred tax assets valuation
allowance (3,604)
Purchase acquisitions 5,753
Deferred tax assets valuation allowance, end of year 22,173
</TABLE>
A portion of the current year change in the net deferred tax liability
(asset) relates to unrealized gains and losses on debt and equity securities
available for sale. Under Standard No. 115, the related 1995 and 1994 deferred
tax expense (benefit) of $174,676,000 and $(115,219,000), respectively, have
been recorded directly to stockholders' equity. Purchase acquisitions also
increased the net deferred tax liability in the amount of $28,656,000 in 1995,
while increasing the net deferred tax asset by $25,863,000 in 1994 and
$109,803,000 in 1993.
The realization of deferred tax assets may be based on utilization of
carrybacks to prior taxable periods, anticipation of future taxable income in
certain periods and the utilization of tax planning strategies. Management has
determined that it is more likely than not that the deferred tax assets can be
supported by carrybacks to federal taxable income in excess of $2,400,000,000 in
the three-year federal carryback period and by expected future taxable income
which will far exceed amounts necessary to fully realize remaining deferred tax
assets resulting from net operating loss carryforwards and the scheduling of
temporary differences. The valuation allowance primarily relates to certain
state temporary differences and federal and state net operating loss
carryforwards. To the extent that the valuation allowance attributable to the
purchase acquisitions in the amount of $22,230,000 is subsequently recognized,
such income tax benefit will reduce goodwill.
At December 31, 1995, the Corporation has net operating loss carryforwards
of $64,000,000 that are available to offset future federal taxable income
through 2007, subject to annual limitations. The Corporation also has net
operating loss carryforwards of $50,000,000 that are available to offset future
state taxable income through 2010. These carryforwards were primarily acquired
with the acquisition of FAMC.
H-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
Income tax expense (benefit) related to securities available for sale
transactions was $4,326,000, $(4,656,000) and $9,559,000 in 1995, 1994 and 1993,
respectively. Income tax expense related to investment security transactions was
$1,787,000, $1,455,000 and $2,658,000 in 1995, 1994 and 1993, respectively.
The Corporation adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes", at January 1, 1993, and applied the provisions of
Standard No. 109 retroactively to January 1, 1992. In accordance with Standard
No. 109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Standard No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Internal Revenue Service is examining the Corporation's federal income
tax returns for the years 1991 through 1993 and is examining federal income tax
returns for certain acquired subsidiaries for periods prior to acquisition. In
1994, the Internal Revenue Service examination of the Corporation's federal
income tax returns for the years 1986 through 1990 was settled with no material
impact to the Corporation's financial position or results of operations. In
1995, 1994 and 1993, tax liabilities for certain acquired subsidiaries for
periods prior to their acquisition by the Corporation were settled with the
Internal Revenue Service with no significant impact on the Corporation's
financial position or results of operations.
NOTE 15:
FIRST UNION CORPORATION
(PARENT COMPANY)
The Parent Company's principal assets are its investments in its
subsidiaries, interest-bearing balances with bank subsidiaries, securities
purchased under resale agreements, securities available for sale and loans to
subsidiaries. The significant sources of income of the Parent Company are
dividends from its subsidiary bank holding companies, interest and fees charged
on loans made to its subsidiaries, interest on eurodollars purchased from bank
subsidiaries, interest on securities available for sale and fees charged to its
subsidiaries for providing various services.
In addition, the Parent Company serves as the primary source of funding for
the mortgage banking and other activities of its nonbank subsidiaries. Lines of
credit in the amount of $350,000,000 are available to the Parent Company at an
annual facility fee of 8.00 to 18.75 basis points and a utilization fee of 6.25
basis points. The facility fee is based on the daily average commitment amount
and the utilization fee is based on the daily average principal amount
outstanding. Generally, interest rates will be determined at the time credit
line usage occurs and will vary based on the type of loan extended to the Parent
Company.
Certain regulatory and other requirements restrict the lending of funds by
the bank subsidiaries to the Parent Company and to the Parent Company's nonbank
subsidiaries and the amount of dividends that can be paid to the Parent Company
by the bank subsidiaries and certain of the Parent Company's other subsidiaries.
On December 31, 1995, the Parent Company was indebted to subsidiary banks in the
amount of $260,676,000 that, under the terms of revolving credit agreements, was
secured by certain interest-bearing balances, securities available for sale,
loans, premises and equipment and payable on demand. On such date, a subsidiary
bank had loans outstanding to Parent Company nonbank subsidiaries amounting to
$135,929,000 that, under the terms of a revolving credit agreement, was secured
by securities available for sale and certain loans and payable on demand.
Additionally, the Parent Company is the guarantor of certain publicly issued
debt of an acquired subsidiary in the amount of $75,000,000.
Industry regulators limit dividends that can be paid by the Corporation's
subsidiaries. National banks are limited in their ability to pay dividends in
two principal ways: first, dividends cannot exceed the bank's undivided profits,
less statutory bad debt in excess of the bank's allowance for loan losses, and
second, in any year dividends may not exceed a bank's net profits for that year,
plus its retained earnings from the preceding two years, less any required
transfers to surplus. The Parent Company's subsidiaries, including its bank
subsidiaries, had available retained earnings of $366,964,000 at December 31,
1995, for the payment of dividends to the Parent Company without such regulatory
or other restrictions.
Subsidiary net assets of $6,241,582,000 were restricted from being
transferred to the Parent Company at December 31, 1995, under such regulatory or
other restrictions.
At December 31, 1995 and 1994, the estimated fair value of the Parent
Company's loans was $2,361,334,000 and $1,755,517,000, respectively.
H-26
<PAGE>
The Parent Company's condensed balance sheets as of December 31, 1995 and
1994, and the related condensed statements of income and cash flows for the
three-year period ended December 31, 1995, are as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) 1995
<S> <C>
Assets
Cash and due from banks $ 290
Interest-bearing balances with bank subsidiary 1,305,210
Securities purchased under resale agreements 200,000
Total cash and cash equivalents 1,505,500
Securities available for sale (amortized cost $190,246 in 1995; $151,505 in 1994) 258,889
Loans, net of unearned income ($648 in 1995; $591 in 1994) 76,961
Allowance for loan losses (1,325)
Loans, net 75,636
Loans due from subsidiaries
Banks 1,704,541
Bank holding companies 128,683
Other subsidiaries 446,918
Investments in wholly-owned subsidiaries
Arising from investments in equity in undistributed net income of subsidiaries
Banks 4,520,514
Bank holding companies 2,138,829
Other subsidiaries 467,909
7,127,252
Arising from purchase accounting acquisitions 97,989
Total investments in wholly-owned subsidiaries 7,225,241
Other assets 531,388
Total assets $11,876,796
Liabilities and Stockholders' Equity
Commercial paper 941,968
Other short-term borrowings 460,676
Other liabilities 282,792
Long-term debt 4,038,914
Stockholders' equity 6,152,446
Total liabilities and stockholders' equity $11,876,796
<CAPTION>
(In thousands) 1994
<S> <C>
Assets
Cash and due from banks 300
Interest-bearing balances with bank subsidiary 958,126
Securities purchased under resale agreements 100,000
Total cash and cash equivalents 1,058,426
Securities available for sale (amortized cost $190,246 in 1995; $151,505 in 1994) 193,131
Loans, net of unearned income ($648 in 1995; $591 in 1994) 72,791
Allowance for loan losses (1,325)
Loans, net 71,466
Loans due from subsidiaries
Banks 1,030,000
Bank holding companies 272,731
Other subsidiaries 382,191
Investments in wholly-owned subsidiaries
Arising from investments in equity in undistributed net income of subsidiaries
Banks 1,417,590
Bank holding companies 4,226,554
Other subsidiaries 298,748
5,942,892
Arising from purchase accounting acquisitions 107,680
Total investments in wholly-owned subsidiaries 6,050,572
Other assets 235,574
Total assets 9,294,091
Liabilities and Stockholders' Equity
Commercial paper 395,533
Other short-term borrowings 300,000
Other liabilities 257,589
Long-term debt 2,943,452
Stockholders' equity 5,397,517
Total liabilities and stockholders' equity 9,294,091
</TABLE>
H-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 134,037 72,350 55,379
Interest income on securities available for sale 3,908 4,139 2,377
Other interest income from subsidiaries 84,169 77,583 42,225
Total interest income 222,114 154,072 99,981
Interest Expense
Short-term borrowings 70,795 43,540 22,041
Long-term debt 234,319 163,072 110,956
Total interest expense 305,114 206,612 132,997
Net interest income (83,000) (52,540) (33,016)
Provision for loan losses -- 1,408 3,665
Net interest income after provision for loan losses (83,000) (53,948) (36,681)
Noninterest income
Dividends from subsidiaries
Banks 507,953 155,800 --
Bank holding companies 275,425 526,212 406,682
Other subsidiaries 10,000 6 6
Securities available for sale transactions 9,809 5,525 --
Sundry income 319,709 194,396 156,612
Noninterest expense (279,121) (185,932) (140,883)
Income before income tax benefits and equity in undistributed net income of
subsidiaries 760,775 642,059 385,736
Income tax benefits (14,151) (14,889) (6,700)
Income before equity in undistributed net income of subsidiaries 774,926 656,948 392,436
Equity in undistributed net income of subsidiaries 238,150 268,432 425,085
Net income 1,013,076 925,380 817,521
Dividends on preferred stock 7,029 25,353 24,900
Net income applicable to common stockholders before redemption premium 1,006,047 900,027 792,621
Redemption premium on preferred stock -- 41,355 --
Net income applicable to common stockholders after redemption premium $1,006,047 858,672 792,621
</TABLE>
H-28
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Operating Activities
Net income $1,013,076 925,380 817,521
Adjustments to reconcile net income to net cash provided (used) by operating
activities
Equity in undistributed net income of subsidiaries (238,150) (268,432) (425,085)
Provision for loan losses -- 1,408 3,665
Accretion and revaluation losses on securities available for sale (3,546) (4,295) 2,431
Securities available for sale transactions (9,809) (5,525) --
Depreciation and amortization 5,560 2,888 3,602
Deferred income taxes (benefits) 1,000 (19,272) 1,382
Trading account assets, net -- 10,285 8,811
Other assets, net (293,990) (40,501) (26,363)
Other liabilities, net 1,177 100,189 (33,570)
Net cash provided by operating activities 475,318 702,125 352,394
Investing Activities
Increase (decrease) in cash realized from
Sales of securities available for sale 99,240 14,284 4,763
Purchases of securities available for sale (124,626) (89,297) (1,153)
Advances to subsidiaries, net (595,220) (539,359) (198,771)
Investments in subsidiaries 70,369 (134,583) (700,353)
Longer-term loans originated or acquired (101,291) (68,999) (49,921)
Principal repaid on longer-term loans 97,121 62,675 7,746
Purchases of premises and equipment, net (7,100) (6,248) (816)
Net cash used by investing activities (561,507) (761,527) (938,505)
Financing Activities
Increase (decrease) in cash realized from
Commercial paper 546,435 124,867 (71,126)
Other short-term borrowings, net 160,676 100,000 (6,215)
Issuances of long-term debt 1,292,105 444,403 989,975
Payments of long-term debt (272,400) (38,000) (394,488)
Sales of common stock 114,781 99,798 203,337
Purchases of preferred stock -- -- (134)
Redemption of preferred stock -- (325,396) --
Purchases of common stock (964,984) (217,554) (3,855)
Cash dividends paid (343,350) (323,255) (268,745)
Net cash provided (used) by financing activities 533,263 (135,137) 448,749
Increase (decrease) in cash and cash equivalents 447,074 (194,539) (137,362)
Cash and cash equivalents, beginning of year 1,058,426 1,252,965 1,390,327
Cash and cash equivalents, end of year $1,505,500 1,058,426 1,252,965
Cash Paid For
Interest $ 288,436 190,624 114,904
Income taxes 338,461 243,099 326,000
Noncash Items
Effect on stockholders' equity of an unrealized gain (loss) on debt and equity
securities included in
Parent Company
Securities available for sale 27,016 41,626 --
Other liabilities 24,025 14,569 --
Parent Company subsidiaries
Securities available for sale 457,508 (343,739) --
Other assets 135,603 (102,417) --
Increase in securities available for sale and a decrease in investment securities -- -- 32,583
Increase in investments in subsidiaries due to acquisitions of institutions for
common stock 610,510 225,424 --
Assumption of long-term debt of liquidated affiliate $ 74,473 -- --
</TABLE>
H-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 16:
OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing
needs of its customers, to reduce its own exposure to fluctuations in interest
rates and to conduct lending activities. These financial instruments include
commitments to extend credit; standby and commercial letters of credit; forward
and futures contracts; interest rate swaps; options, interest rate caps, floors,
collars and swaptions; foreign currency and exchange rate swap commitments;
commodity swaps; and commitments to purchase and sell securities. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amounts recognized in the consolidated financial
statements.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contract amount
of those instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. For forward and futures contracts, interest rate swaps, options,
interest rate caps, floors, collars and swaptions, the contract or notional
amounts do not represent the exposure to credit loss. The Corporation controls
the credit risk of its forward and futures contracts, interest rate swap
agreements, foreign currency and exchange rate swaps, and securities
transactions through collateral arrangements, credit approvals, limits and
monitoring procedures.
Our policy requires all swaps and options to be governed by an International
Swaps and Derivatives Association Master Agreement. Bilateral collateral
agreements are in place for substantially all dealer counterparties. Collateral
for dealer transactions is delivered by either party when the credit risk
associated with a particular transaction, or group of transactions to the extent
netting exists, exceeds defined thresholds of credit risk. Thresholds are
determined based on the strength of the individual counterparty and are
bilateral. As of December 31, 1995, the total credit risk in excess of
thresholds was $275,250,000. The fair value of collateral held was 100 percent
of the total credit risk in excess of the thresholds.
For non-dealer transactions, the need for collateral is evaluated on an
individual transaction basis and is primarily dependent on the financial
strength of the counterparty.
The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses. The amount of
deferred gains and losses was $8,830,000 and $10,606,000, respectively, at
December 31, 1995. These net losses will reduce net interest income by
$1,776,000 in 1996.
The FASB has issued Standard No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments", which requires improved
disclosures about derivative financial instruments -- futures, forward, swap or
option contracts, or other financial instruments with similar characteristics.
It also amends existing requirements of FASB Standard No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentration of Credit Risk", and FASB Standard No.
107, "Disclosures about Fair Value of Financial Instruments". It requires that a
distinction be made between financial instruments held or issued for the
purposes of trading or other than trading. For derivative financial instruments
held or issued for trading, disclosure of average fair values and of net trading
gains or losses is required. For derivative financial instruments held or issued
for purposes other than trading, it requires disclosure about those purposes,
about how the instruments are reported in financial statements, and, if the
purpose is hedging anticipated transactions, about the anticipated transactions,
the classes of derivative financial instruments used to hedge those
transactions, the amounts of hedging gains and losses deferred, and the
transactions or other events that result in recognition of the deferred gains or
losses in income. The Standard encourages, but does not require, quantitative
information about interest rate or other market risks of derivative financial
instruments, and also of other assets and liabilities, that is consistent with
the way the entity manages or adjusts risks and that is useful for comparing the
results of applying the entity's strategies to its objectives for holding or
issuing the derivative financial instruments. The Standard amends Standard No.
105 to require disaggregation of information about financial instruments with
off-balance sheet risk of accounting loss by class, business activity, risk or
other category that is consistent with the entity's management of those
instruments. The Standard also amends Standard No. 107 to require that fair
value information be presented without combining, aggregating or netting the
fair value of derivative financial instruments with the fair value of
nonderivative financial instruments and be presented together, with the related
carrying amounts in the body of the financial statements, a single footnote or a
summary table in a form that makes it clear whether the amounts represent assets
or liabilities.The Corporation has adopted this Standard, and information
related thereto can be found on the next page and in Tables 20 through 22 on
pages T-17 through T-22, which are incorporated herein by reference.
At December 31, 1995 and 1994, off-balance sheet derivative financial
instruments and their related fair values are as follows:
H-30
<PAGE>
<TABLE>
<CAPTION>
1995 1994
Contract or Contract or
Carrying Estimated Notional Carrying Estimated Notional
(In thousands) Amount Fair Value Amount Amount Fair Value Amount
<S> <C> <C> <C> <C> <C> <C>
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to extend credit $ -- 100,664 31,492,679 -- 76,786 24,280,571
Standby and commercial letters of credit -- 26,781 2,745,170 -- 20,423 2,123,312
Financial Instruments Whose Contract or
Notional Amounts Exceed the Amount of
Credit Risk
Forward and Futures Contracts
Trading and dealer activities 37,811 37,811 15,539,953 800,375 800,375 5,064,618
Interest rate risk management
Asset rate conversions -- 38,428 6,120,000 -- (7,071) 1,200,000
Asset hedge -- (1,391) 1,016,000 -- 555 1,200,000
Rate sensitivity hedges -- 17,877 25,355,000 -- (120) 25,000
Interest Rate Swap Agreements
Trading and dealer activities (118,032) (118,032) 10,287,396 7,508 7,508 5,533,468
Interest rate risk management
Asset rate conversions 20,516 118,460 8,327,656 5,784 (313,273) 7,022,116
Liability rate conversions 5,416 188,214 3,367,000 15,487 (143,023) 2,370,500
Purchased Options, Interest Rate Caps,
Floors, Collars and Swaptions
Trading and dealer activities 47,725 50,759 5,360,742 18,288 18,288 1,622,279
Interest rate risk management
Liability rate conversions (2,224) (2,354) 180,000 1,902 110 392,000
Rate sensitivity hedges 705 37 4,319,200 25,601 41,256 28,231,000
Offsetting positions 561 2,475 2,400,000 (124) (2,282) 2,400,000
Written Options, Interest Rate Caps,
Floors, Collars and Swaptions
Trading and dealer activities (36,890) (36,890) 7,743,202 (24,653) (24,653) 1,455,631
Interest rate risk management
Offsetting positions (637) (2,475) 2,400,000 60 1,796 2,400,000
Foreign Currency and Exchange Rate Swap
Commitments
Trading and dealer activities (562) (562) 1,528,744 (19,323) (19,323) 3,453,525
Foreign currency risk management 231 231 42,628 18,680 18,680 1,679,905
Commodity Swaps
Trading and dealer activities 797 797 29,810 (152) (152) 4,308
Commitments to Purchase Securities 1,744 1,744 567,256 (842) (842) 780,418
Commitments to Sell Securities $ (806) (806) 659,383 693 693 842,744
</TABLE>
H-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby and commercial letters of credit are conditional commitments issued
by the Corporation to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. Except for short-term guarantees of $1,340,936,000 guarantees
extend for more than one year and expire in varying amounts primarily through
2019. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The Corporation
holds various assets as collateral supporting those commitments for which
collateral is deemed necessary.
Forward and futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movements in securities values and
interest rates.
The Corporation enters into a variety of interest rate
contracts -- including options, interest rate caps, floors, collars and
swaptions written, and interest rate swap agreements -- in its trading
activities and in managing its interest rate exposure. Interest rate caps,
floors, collars and swaptions written by the Corporation enable customers to
transfer, modify or reduce their interest rate risk. Interest rate options are
contracts that allow the holder of the option to purchase or sell a financial
instrument at a specified price and within a specified period of time from the
seller or writer of the option. As a writer of options, the Corporation receives
a premium at the outset and then bears the risk of an unfavorable change in the
price of the financial instrument underlying the option.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Entering into interest rate swap agreements
involves not only the risk of dealing with counterparties and their ability to
meet the terms of the contracts but also the interest rate risk associated with
unmatched positions. Notional principal amounts often are used to express the
volume of these transactions, but the amounts potentially subject to credit risk
are much smaller. The Corporation also acts as an intermediary in arranging
interest rate swap transactions for customers.
Generally, futures contracts are exchanged traded and all other off-balance
instruments are transacted in the over-the-counter markets.
In the normal course of business, the Corporation has entered into certain
transactions which have recourse options. These recourse options if acted upon
would not have a material impact on the Corporation's financial position.
Substantially all time drafts accepted by December 31, 1995, met the
requirements for discount with Federal Reserve Banks. Average daily Federal
Reserve balance requirements for the year ended December 31, 1995, amounted to
$1,074,224,000. Minimum operating lease payments due in each of the five years
subsequent to December 31, 1995, are as follows: 1996, $113,697,000; 1997,
$105,391,000; 1998, $98,014,000; 1999, $90,837,000; 2000, $83,972,000; and
subsequent years, $709,901,000. Rental expense for all operating leases for the
three years ended December 31, 1995, was $145,239,000, 1995; $150,894,000, 1994;
and $151,242,000, 1993.
As of December 31, 1995, the Corporation's Bank Insurance Fund (BIF) deposit
assessment base was $40,733,825,000 and the Corporation's Savings Association
Insurance Fund (SAIF) deposit assessment base was $16,300,659,000. Various
legislative proposals related to the future of the BIF and SAIF have been under
consideration. Several of these proposals, including a proposal previously
approved by Congress that is understood to have the support of the President,
include a one-time special assessment for SAIF deposits (in the range of 70
cents to 85 cents per $100.00 of assessable SAIF deposits, with a discount for
certain SAIF deposits held by BIF member banks) and a subsequent comparable and
reduced level of annual premiums for SAIF deposits. It is not known when and if
any such proposal or any other related proposal may be adopted.
The Parent Company and certain of its subsidiaries have been named as
defendants in various legal actions arising from their normal business
activities in which damages in various amounts are claimed. Although the amount
of any ultimate liability with respect to such matters cannot be determined, in
the opinion of management, based upon the opinions of counsel, any such
liability will not have a material effect on the Corporation's consolidated
financial position.
H-32
<PAGE>
NOTE 17:
CARRYING AMOUNTS AND FAIR VALUE
OF FINANCIAL INSTRUMENTS
Information about the fair value of on-balance sheet financial instruments
at December 31, 1995 and 1994, which should be read in conjunction with Note 16
and certain other notes to the consolidated financial statements presented
elsewhere herein, is set forth below.
<TABLE>
<CAPTION>
1995 1994
Carrying Estimated Carrying Estimated
(In thousands) Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $ 8,406,775 8,406,775 6,056,842 6,056,842
Trading account assets 1,804,391 1,804,391 1,206,675 1,206,675
Securities available for sale 12,716,963 12,716,963 7,752,479 7,752,479
Investment securities 2,454,317 2,607,755 3,729,869 3,742,534
Loans
Commercial, financial and agricultural 18,412,611 18,698,176 15,867,615 15,905,366
Real estate-construction and other 2,249,093 2,313,849 1,726,469 1,755,830
Real estate-commercial mortgage 5,942,652 6,075,736 5,427,864 5,439,404
Lease financing 1,804,634 1,804,634 1,087,124 1,087,124
Foreign 519,970 522,363 415,857 415,602
Real estate-mortgage 20,122,680 20,668,077 14,981,418 14,504,275
Installment loans-Bankcard 3,383,903 3,396,894 3,959,640 4,064,859
Installment loans-other 13,192,901 13,405,913 10,563,765 10,342,894
Loans, net of unearned income 65,628,444 66,885,642 54,029,752 53,515,354
Allowance for loan losses (966,511) -- (978,795) --
Loans, net 64,661,933 66,885,642 53,050,957 53,515,354
Other assets $ 2,097,423 2,101,950 1,275,883 1,292,086
Financial Liabilities
Deposits
Noninterest-bearing deposits 11,788,401 11,788,401 10,523,538 10,523,538
Interest-bearing deposits
Savings and NOW accounts 15,739,529 15,739,529 13,991,987 13,991,987
Money market accounts 9,360,061 9,360,061 10,118,963 10,118,963
Other consumer time 22,899,251 23,294,473 18,544,324 18,594,249
Foreign 2,962,870 2,962,870 4,069,587 4,069,587
Other time 2,250,189 2,266,870 1,709,874 1,715,877
Total deposits 65,000,301 65,412,204 58,958,273 59,014,201
Short-term borrowings 16,598,072 16,598,072 7,532,343 7,532,343
Other liabilities 2,127,151 2,127,151 1,450,496 1,450,496
Long-term debt $ 6,444,327 6,729,832 3,428,514 3,314,029
</TABLE>
Estimated fair values for the commercial loan portfolio were based on
weighted average discount rates ranging from 7.07 percent to 7.62 percent and
7.45 percent to 10.06 percent at December 31, 1995 and 1994, respectively, and
for the retail portfolio from 9.44 percent to 13.00 percent and 10.19 percent to
12.12 percent, respectively.
Nonperforming loans of less than $1,000,000 each, which amounted to
$97,353,000 and $120,120,000 at December 31, 1995 and 1994, respectively, are
included in estimated fair value at their net costs.
The fair value of noninterest-bearing deposits, savings and NOW accounts,
and money market accounts is the amount payable on demand at December 31, 1995
and 1994. The fair
H-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
value of fixed-maturity certificates of deposit is estimated based on the
discounted value of contractual cash flows using the rates currently offered for
deposits of similar remaining maturities. The fair value estimates above do not
include the benefit that results from the low-cost funding provided by deposit
liabilities compared to the cost of borrowing funds in the market. This value,
which includes such cost assumptions related to interest rates, deposit run-off,
maintenance costs and float opportunity costs, is presented below on a
discounted cash flow basis. The value related to the recorded cost of acquired
deposits is also included therein.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments. For
example, the Corporation has a substantial trust department that contributes net
fee income annually. The trust department is not considered a financial
instrument, and its value has not been incorporated into the fair value
estimates. Other significant assets and liabilities that are not considered
financial assets or liabilities include the mortgage banking operation,
brokerage network, deferred tax assets, premises and equipment, and goodwill. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates. Fair value of off-balance sheet
derivative financial instruments has not been considered in determining
on-balance sheet fair value estimates.
H-34
<PAGE>
Exhibit (13)(c)
FIRST UNION CORPORATION AND SUBSIDIARIES
1995 SUPPLEMENTAL ANNUAL REPORT
(Restated to reflect the pooling of interests accounting acquisition of First
Fidelity Bancorporation on January 1, 1996.)
<PAGE>
First Union Corporation and Subsidiaries
1995 Supplemental Annual Report
Table of Contents
<TABLE>
<S> <C>
Management's Analysis of Operations.......................................................................................... 1
Financial Tables............................................................................................................. T-1
Six-Year Net Interest Income Summary......................................................................................... T-21
Management's Statement of Financial Responsibility........................................................................... C-1
Independent Auditors' Report................................................................................................. C-1
Consolidated Balance Sheets.................................................................................................. C-2
Consolidated Statements of Income............................................................................................ C-3
Consolidated Statements of Changes in Stockholders' Equity................................................................... C-4
Consolidated Statements of Cash Flows........................................................................................ C-5
Notes to Consolidated Financial Statements................................................................................... C-6
</TABLE>
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS
EARNINGS HIGHLIGHTS
THE FOLLOWING REVIEW IS A DISCUSSION OF THE PERFORMANCE AND FINANCIAL CONDITION
OF FIRST UNION CORPORATION AND FIRST FIDELITY BANCORPORATION ON A COMBINED
BASIS. ALL FIRST UNION HISTORICAL FINANCIAL DATA HAVE BEEN RESTATED FOR THE
POOLING OF INTERESTS ACQUISITION OF FIRST FIDELITY, WHICH WAS CONSUMMATED ON
JANUARY 1, 1996.
First Union's earnings in 1995, before merger-related restructuring charges,
increased to a record $1.48 billion, or $5.30 per common share. Including the
restructuring charges, earnings were $1.40 billion, or $5.04 per common share.
The merger-related restructuring charges in 1995 amounted to $73 million after
tax, or 26 cents per common share. These results compare with 1994 results of
$1.33 billion, or $4.72 per share, in net income applicable to common
stockholders before a preferred stock redemption premium. The 1995 merger-
related restructuring charges, principally existing severance contracts
associated with the First Fidelity stockholder vote approving the merger, are
part of the previously announced $270 million after-tax restructuring charges
related to the First Fidelity merger. The estimated $197 million balance of
after-tax restructuring charges will be incurred primarily in the first and
second quarters of 1996.
In the fourth quarter of 1995, earnings were $404 million before the
merger-related restructuring charges, or $1.45 per common share. After the
restructuring charges, the company earned $331 million, or $1.19 per common
share. These results compare with $335 million, or $1.17, in the fourth quarter
of 1994, before the preferred stock redemption premium.
Additional factors in our 1995 results compared with 1994 results included:
o Noninterest income growth of 18 percent, to $1.8 billion, excluding securities
transactions.
o Tax-equivalent net interest income growth of 4 percent, to $4.7 billion.
o Loan growth of 16 percent, to $90.6 billion.
Virtually every fee income category experienced growth in 1995, with key
contributions from the Capital Markets Group, including merchant banking, loan
syndication and asset securitization volume, and from the Capital Management
Group, including mutual funds, trust and brokerage services.
Net loans were $90.6 billion at December 31, 1995, compared with $77.8 billion
at year-end 1994. Net loans at year-end 1995 included $7.5 billion from purchase
acquisitions that closed during the year. Net loans do not include $2.0 billion
in credit card receivables that were securitized and sold in September 1995.
Loan growth was particularly strong in the consumer portfolio, largely
reflecting growth in direct consumer lending through the retail branch system,
home equity lending and through purchase accounting acquisitions. Residential
mortgage loans also increased primarily through purchase accounting
acquisitions.
Net charge-offs were .41 percent of average net loans in 1995, compared with .40
percent in 1994. Nonperforming assets were $826 million, or .91 percent of loans
and foreclosed properties, at December 31, 1995, compared with $887 million, or
1.14 percent, at December 31, 1994.
Domestic banking operations, including trust operations, located in Connecticut,
Delaware, Florida, Georgia, Maryland, New Jersey, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C., and
mortgage banking operations are our principal sources of revenues. Foreign
banking operations are immaterial.
OUTLOOK
First Union now serves 11 million customers in the Eastern United States from
Connecticut to Florida. We are well on the way to integrating First Fidelity's
operations with First Union's, a process we expect to complete by midyear 1996.
In addition, we are enthusiastic about the steps we have taken to serve new
customers with new products in our recently acquired northeastern markets and to
continue serving customers in our southeastern markets. The strong fee income
growth in 1995 helps validate our expectations for renewed earnings momentum as
we begin to offer First Union's broader product selection, install expanded
sales
1
<PAGE>
support systems and integrate our two companies. In addition, we are seeing the
results of our investments in capital markets, capital management and other
businesses that expand our traditional banking base, and we are optimistic about
the future growth of these businesses.
On January 1, 1996, First Fidelity merged with and into a wholly owned
subsidiary of First Union; each outstanding share of First Fidelity common stock
and common stock equivalent was exchanged for 1.35 shares of First Union common
stock; and each share of the three outstanding series of First Fidelity
preferred stock was exchanged for one share of one of three corresponding new
series of First Union's class A preferred stock having substantially identical
terms as the relevant series of First Fidelity preferred stock.
The STOCKHOLDERS' EQUITY section includes further information related to the
issuance of preferred and common stock in the First Fidelity merger and to First
Union's purchases in the open market of First Union common stock and First
Fidelity preferred and common stock.
In 1995 First Union completed eight bank and thrift purchase accounting
acquisitions. These acquired institutions had combined assets of $10.3 billion,
net loans of $7.5 billion and deposits of $7.3 billion. The acquired
institutions were primarily in Virginia and Florida, further enhancing our
customer base in those states.
In the first quarter of 1996, we completed two additional bank and thrift
purchase accounting acquisitions in North Carolina and Tennessee. We expect to
complete a third purchase accounting acquisition of a Florida thrift during the
second quarter of 1996. At year-end 1995, these three completed or pending
acquisitions had combined assets, net loans and deposits of $2.2 billion, $1.6
billion and $1.8 billion, respectively.
We continue to be alert to opportunities to enhance stockholder value through
acquisitions. With the completion of the First Fidelity acquisition, however,
our focus has shifted more to a strategy of internal growth and acquisitions to
expand existing lines of business. The significant investments we have made in
acquisitions, in technology and in expanded products and services helped
position us to serve our 11 million customers in a dynamic and diverse
geographic marketplace.
However, we continue to evaluate acquisition opportunities that will provide
access to customers and markets that we believe complement our long-term goals.
Acquisition discussions and in some cases negotiations also take place, and
future acquisitions involving cash, debt or equity securities may be expected.
Acquisitions typically involve the payment of a premium over book and market
values. Some dilution of First Union's book value and net income per common
share may occur in connection with some future acquisitions.
The ACCOUNTING AND REGULATORY MATTERS section provides information about
legislative, accounting and regulatory matters that have recently been adopted
or proposed.
INCOME STATEMENT REVIEW
NET INTEREST INCOME
Tax-equivalent net interest income increased 4 percent compared with 1994, to
$4.7 billion in 1995. The increase primarily reflected loan growth, the
repricing of variable rate assets, and purchase acquisitions. The increase was
tempered somewhat by reduced net yields.
Nonperforming loans reduce interest income because the contribution from these
loans is eliminated or sharply reduced. In 1995, $69 million in gross interest
income would have been recorded if all nonaccrual and restructured loans had
been current in accordance with their original terms and had been outstanding
throughout the period, or since origination if held for part of the period. The
amount of interest income related to these assets and included in income in 1995
was $17 million.
NET INTEREST MARGIN
The net interest margin, which is the difference between the tax-equivalent
yield on earning assets and the rate paid on funds to support those assets, was
4.46 percent in 1995, compared with 4.75 percent in 1994. The margin decline in
1995 was primarily related to the addition of acquired banks and thrifts with
lower margins;
2
<PAGE>
the addition of short-term securities; and the competitiveness of loan pricing.
We also anticipate a further contraction in the margin in future periods as a
result of the $2.0 billion credit card securitization, the impact of
acquisitions and the generation of lower-spread assets related to capital
markets activities. It should be noted that the margin is not our primary
management focus or goal. Our goal is to continue increasing net interest
income.
The $2.0 billion credit card securitization is expected to have a minimal
financial impact on the results of operations. The securitization results in a
reclassification of net interest income to fee income. Securitization
transactions are used as a management tool to increase liquidity and to utilize
capital more effectively.
Average interest-earning assets increased by $10.5 billion, resulting in an
increase in tax-equivalent interest income of $1.4 billion.
The average rate earned on earning assets was 8.27 percent in 1995, compared
with 7.67 percent in 1994. The average rate paid on interest-bearing liabilities
was 4.43 percent in 1995 and 3.46 percent in 1994.
We use securities and off-balance sheet transactions to manage interest rate
sensitivity. More information on these transactions is included in the INTEREST
RATE RISK MANAGEMENT section.
NONINTEREST INCOME
We are meeting the challenges of increasing competition and changing customer
demands and demographics by making discretionary investments to enhance our
prospects for future fee income growth. We have significantly broadened our
product lines, particularly in the capital markets, capital management and card
products areas, to provide additional sources of fee income that complement our
longstanding banking products and services. These investments were reflected in
the 18 percent growth in noninterest income, excluding securities transactions,
to $1.8 billion in 1995, compared with $1.6 billion in 1994.
Virtually all categories of noninterest income increased in 1995. Key
contributions came from capital markets activities, including merchant banking,
loan syndications and asset securitizations. Noninterest income related to
capital markets activities was an unrestated $265 million in 1995, compared with
$176 million in 1994. Additionally, capital management fee income, including
mutual funds, personal and corporate trust and brokerage services, increased 20
percent in 1995 to $397 million from $330 million in 1994. Assets under
management, which include mutual funds and trust services, increased in 1995 to
$45.5 billion from an unrestated $23.2 billion in 1994. The growth in assets
under management was primarily the result of internal and external marketing and
distribution strategies. The First Union-advised Evergreen and First Fidelity
family of mutual funds increased to $13.2 billion in assets under management at
December 31, 1995, from an unrestated $7.0 billion in 1994. We anticipate
continued growth in fee income as capital markets and capital management
products and services are marketed to a larger customer base.
Mortgage banking operations added $150 million to noninterest income in 1995
compared with $88 million in 1994. The increase was primarily driven by an
increase in the servicing portfolio as a result of the purchase accounting
acquisitions. The mortgage loan servicing portfolio increased to $51.5 billion
in 1995, compared with $34.2 billion in 1994. As a result of an industrywide
contraction of nearly 15 percent and a strategic decision to exit certain loan
origination facilities, total originations were $3.8 billion in 1995, compared
with $4.9 billion in 1994. Mortgage banking has traditionally been a cyclical,
interest rate sensitive business. The ability to generate substantial fee and
other income in the future is somewhat dependent on the level and direction of
interest rates. We carefully monitor sensitivity to cyclical changes in mortgage
banking operations.
Securities gains were $49 million in 1995, compared with $10 million in 1994.
Other significant sources of noninterest income included service charges on
deposit accounts, which increased 6 percent in 1995. Insurance commissions and
fees for other banking services also increased in 1995 compared with 1994.
TRADING ACTIVITIES
Our Capital Markets Group also made a key contribution to noninterest income
through trading profits. Trading
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profits increased in 1995 to $69 million, compared with $52 million in 1994. The
increase was the result of general market conditions and expanded trading
volume. Trading activities are undertaken to satisfy customers' risk management
and investment needs and for the corporation's own proprietary account. All
trading activities are conducted within risk limits established by the
corporation's Funds Management Committee, and all trading positions are marked
to market daily. Trading activities include fixed income securities, money
market instruments, foreign exchange, options, futures, forward rate agreements
and swaps. With the Federal Reserve Board's approval of expanded powers for
First Union Capital Markets Corp., our activities also include the trading and
underwriting of corporate debt securities. Trading account assets were $1.9
billion at year-end 1995, compared with $1.3 billion at year-end 1994.
NONINTEREST EXPENSE
Noninterest expense increased in 1995 to $4.1 billion, compared with $3.7
billion in 1994. Our overhead efficiency ratio in 1995 was 62 percent, compared
with 61 percent in 1994. The overhead efficiency ratio was adversely affected by
merger-related charges, which were discussed earlier, of $94 million in 1995 and
intangibles amortization expense of $229 million and $163 million in 1995 and
1994, respectively. Without the merger-related charges and intangibles
amortization expense, our overhead efficiency ratio would have been 57 percent
in 1995, compared with 58 percent in 1994. The overhead efficiency ratio was
affected somewhat by the significant investments and initiatives under way in
capital markets, capital management and other areas. These investments and
initiatives are designed to enhance noninterest income in future periods.
The FDIC significantly reduced the insurance premiums it charges on federally
insured bank deposits in the third quarter of 1995, and in the fourth quarter of
1995, reduced the premiums again, including a reduction to the statutory minimum
of $2,000.00 for "well capitalized" banks, effective January 1, 1996. Premiums
related to savings and loan association deposits held by banks will continue to
be assessed at the rate of 23 cents to 31 cents per $100.00 until legislation
pending before Congress to merge the Bank Insurance Fund and the Savings
Association Insurance Fund (SAIF) is enacted. The pending legislation also
includes a provision to recapitalize SAIF through a one-time assessment. At
December 31, 1995, we had $19.8 billion in SAIF deposits that were subject to
the potential one-time assessment. Based on the pending legislation, the
one-time assessment could be as high as $87 million after tax. The FDIC premium
expense decreased from $184 million in 1994 to $120 million in 1995. The expense
savings in 1995 were largely offset by discretionary investments in areas such
as the company's retail delivery channels, capital markets and capital
management. We currently expect to invest the expected savings that result from
the FDIC premium reduction in 1996 in various current and future discretionary
investments, business initiatives and technology programs. The ACCOUNTING AND
REGULATORY MATTERS section includes more information on the reduced FDIC
insurance premiums.
Amortization of intangibles represents the amortization of goodwill and other
identifiable intangibles, primarily related to purchase accounting acquisitions.
These intangibles are amortized over periods ranging from six to 25 years.
Amortization is a noncash charge to income, and therefore liquidity and funds
management activities are not affected. At December 31, 1995, we had $2.4
billion in other intangible assets, compared with $1.9 billion at December 31,
1994. Other intangible assets include primarily goodwill and core deposit
intangibles.
Costs related to environmental matters were not material.
INCOME TAXES
Income taxes were $788 million in 1995, compared with $711 million in 1994. The
increase resulted primarily from increased income before income taxes.
BALANCE SHEET REVIEW
EARNING ASSETS
In banking the primary types of earning assets are securities and loans. The
earnings from these assets are subject to two principal kinds of risks, interest
rate risk and credit risk. Interest rate risk could result if rate indices
related to sources and uses of funds were mismatched. Our Funds Management
Committee manages
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interest rate risk, as well as credit risks associated with securities, under
specific policy standards, which are discussed in more detail in the INTEREST
RATE RISK MANAGEMENT section. In addition to certain securities, off- balance
sheet transactions such as interest rate swaps have been used to maintain
interest rate risk at acceptable levels in accordance with our policy standards.
The loan portfolio carries the potential credit risk of past due, nonperforming
or, ultimately, charged-off loans. We manage this risk primarily through credit
approval standards, which are discussed in the LOANS section.
Average earning assets in 1995 were $106.3 billion, an 11 percent increase from
$95.8 billion in 1994.
SECURITIES AVAILABLE FOR SALE
Securities available for sale are used as a part of the corporation's interest
rate risk management strategy. They may be sold in response to changes in
interest rates, changes in prepayment risk, liquidity needs, the need to
increase regulatory capital ratios and other factors. These securities are
carried at estimated fair value. Unrealized changes in fair value are recognized
as a separate component of stockholders' equity, net of tax. Realized gains and
losses are recognized in income at the time the securities are sold. The
available for sale portfolio consists of U.S. Treasury, municipal and
mortgage-backed and asset-backed securities as well as collateralized mortgage
obligations, corporate, foreign and equity securities.
At December 31, 1995, we had securities available for sale with a market value
of $18.2 billion, compared with $11.5 billion at year-end 1994. The market value
of securities available for sale was $201 million above amortized cost at the
end of 1995. A $111 million after-tax unrealized gain was included in
stockholders' equity at December 31, 1995. In 1995 we took advantage of market
conditions to add $7.3 billion of securities to the available for sale
portfolio, which we believe will enhance earnings and reduce the exposure to
falling interest rates indicated by our current outlook for 1996. We also took
advantage of a one-time exemption in the accounting rules and transferred $5.9
billion of investment securities to the available for sale portfolio. We believe
the transfer will provide us with a greater degree of flexibility in managing
our overall balance sheet. Table 9 provides information related to unrealized
gains and losses and to realized gains and losses on these securities.
The average rate earned on securities available for sale in 1995 was 6.41
percent, compared with 5.54 percent in 1994. The average maturity of the
portfolio was 3.03 years at December 31, 1995.
INVESTMENT SECURITIES
Investment securities are those securities that we intend to hold to maturity.
Sales of these securities are rare. These securities are carried at amortized
cost. The portfolio consists of U.S. Government agency, corporate, municipal and
mortgage-backed securities, and collateralized mortgage obligations. First
Union's investment securities amounted to $3.1 billion at December 31, 1995,
compared with $7.9 billion at year-end 1994. As part of the strategy to reduce
exposure to falling interest rates, we added $3.6 billion to the investment
securities portfolio. Additionally, $5.9 billion of investment securities was
transferred to the available for sale portfolio.
The average rate earned on investment securities in 1995 was 7.54 percent,
compared with 7.23 percent in 1994. The average maturity of the portfolio was
5.15 years at December 31, 1995.
Table 10 provides information related to unrealized gains and losses and to
realized gains and losses on these securities.
LOANS
The loan portfolio represents our largest asset balance, and is a significant
source of interest and fee income. The loan portfolio is subject to both credit
and interest rate risk. Our lending strategy stresses quality growth,
diversified by product, geography and industry. A common credit underwriting
structure is in place throughout the company.
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The loan portfolio at December 31, 1995, was composed of 44 percent in
commercial loans and 56 percent in consumer loans. The portfolio mix did not
change significantly from year-end 1994. The commercial loan portfolio includes
general commercial loans, both secured and unsecured, and commercial real estate
loans. General commercial loans are typically working capital loans to finance
the inventory, receivables and other working capital needs of commercial
borrowers, and term loans to finance fixed assets or acquisitions. Commercial
real estate loans typically finance the construction or purchase of commercial
real estate. Consumer loans include mortgage, credit card and installment loans.
Consumer mortgage lending includes both first and second mortgage loans.
Consistent with our longtime standard, we generally look for two repayment
sources for commercial real estate loans: cash flows from the project and other
resources of the borrower. Our commercial lenders focus principally on
middle-market companies, which we believe reduces the risk of credit loss from
any single borrower or group of borrowers. A majority of our commercial loans
are for less than $10 million. Our consumer lenders emphasize credit judgments
that focus on a customer's debt obligations, ability and willingness to repay,
and general economic trends.
Net loans at December 31, 1995, were $90.6 billion, compared with $77.8 billion
at year-end 1994. Of this increase, $7.5 billion was related to purchase
acquisitions, with the rest coming from loan growth in all of our banking states
and in virtually all loan categories. Consumer loan growth was particularly
strong in 1995, primarily in direct lending and home equity lending. Net loans
do not include the $2.0 billion in credit card receivables that were securitized
and sold in September 1995. The financial impact of the credit card
securitization on the results of operations is expected to be minimal, as
discussed above.
At December 31, 1995, unused loan commitments related to commercial and consumer
loans were $22.4 billion and $16.1 billion, respectively. Commercial and standby
letters of credit were $3.6 billion. At December 31, 1995, loan participations
sold to other lenders amounted to $1.5 billion and were recorded as a reduction
of gross loans.
The average rate earned on loans in 1995 was 8.71 percent, compared with 8.28
percent in 1994. The average prime rate in 1995 was 8.44 percent, compared with
6.81 percent in 1994. Factors affecting loan rates between 1994 and 1995
included several increases in the prime rate throughout 1994; an increased
portion of the loan portfolio tied to rate indices other than the prime rate; a
larger portfolio of fixed and adjustable rate mortgages; and the repricing of
credit card portfolio introductory rates.
The ASSET QUALITY section provides information about geographic exposure in the
loan portfolio.
COMMERCIAL REAL ESTATE LOANS
Commercial real estate loans amounted to 14 percent of the total portfolio at
December 31, 1995, compared with 15 percent at December 31, 1994. This portfolio
included commercial real estate mortgage loans of $10.0 billion at December 31
1995, and $9.5 billion at December 31, 1994.
ASSET QUALITY
NONPERFORMING ASSETS
Most of our assets are interest-bearing loans and securities. The credit quality
of these assets is crucial to the profitability of the corporation.
Nonperforming assets are those assets that are not paying principal and/or
interest as contractually required. These assets reduce our income through lower
amounts of interest income and higher provisions for losses. Asset quality is
typically measured by the levels of nonperforming and past due assets; the
amount of charge-offs and provisions; and certain credit-related ratios such as
charge-offs to net loans; and nonperforming assets to net loans and foreclosed
properties.
At December 31, 1995, nonperforming assets were $826 million, or .91 percent of
net loans and foreclosed properties, compared with $887 million, or 1.14
percent, at December 31, 1994. The reduction in nonperforming assets was
primarily due to continued collection efforts and prudent management of the
nonperforming assets portfolio.
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Segregated assets, which are not included in nonperforming assets and which
relate to the acquisition of the Southeast Banks in 1991 and Howard shared loans
acquired in the First Fidelity merger, were $165 million at December 31, 1995,
or $151 million net of a $14 million allowance for losses on segregated assets.
This compared with $259 million, or $233 million net of a $26 million allowance,
at December 31, 1994. Under loss-sharing arrangements, FDIC reimbursements
substantially minimize any losses associated with these loan portfolios.
Segregated assets are included in other assets.
Loans or properties of less than $5 million each made up 73 percent, or $601
million, of nonperforming assets at December 31, 1995. Of the rest:
o Six loans or properties between $5 million and $10 million each accounted for
$46 million; and o Eight loans or properties over $10 million each accounted for
$179 million.
Fifty-nine percent of nonperforming assets were collateralized primarily by real
estate at year-end 1995, compared with 66 percent at year-end 1994.
PAST DUE LOANS
In addition to these nonperforming assets, at December 31, 1995, accruing loans
90 days past due were $290 million, compared with $272 million at December 31,
1994. Of these, $15 million were related to commercial and commercial real
estate loans, compared with $30 million at December 31, 1994. At December 31,
1995, we were closely monitoring certain loans for which borrowers were
experiencing increased levels of financial stress. None of these loans were
included in nonperforming assets or in accruing loans past due 90 days, and the
aggregate amount of these loans is not significant.
NET CHARGE-OFFS
Net charge-offs as a percentage of average net loans were .41 percent in 1995,
compared with .40 percent in 1994. The increase in net charge-offs was
principally related to the maturing credit card portfolio. In 1996 we anticipate
an increase in the dollar level of charge-offs as credit card receivables
continue to increase and the portfolio seasons to a charge-off ratio that is
expected to be aligned with industry averages. We do not believe that the higher
levels of net charge-offs are indicative of any significant deterioration in the
credit quality of the loan portfolio. We are carefully monitoring trends in both
the commercial and consumer loan portfolios for signs of credit weakness.
Additionally, we have evaluated our credit policies in light of changing
economic trends. All of these steps have been taken with the goals of minimizing
future credit losses and deterioration, while allowing for maximum
profitability. Table 13 provides information on net charge-offs by category.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The loan loss provision was $220 million in 1995, compared with $179 million in
1994. The increase in the loan loss provision was based primarily on current
economic conditions, on the maturity and level of nonperforming assets, and on
projected levels of charge-offs.
We establish reserves based upon various other factors, including the results of
quantitative analyses of the quality of commercial loans and commercial real
estate loans. Reserves for commercial and commercial real estate loans are based
principally on loan grades, historical loss rates, borrowers' creditworthiness,
underlying cash flows from the project and from borrowers, and analysis of other
less quantifiable factors that might influence the portfolio. Reserves for
consumer loans are based principally on delinquencies and historical loss rates.
We analyze all loans in excess of $1 million that are being monitored as
potential credit problems to determine whether supplemental, specific reserves
are necessary.
The allowance for loan losses was $1.5 billion at December 31, 1995, compared
with $1.6 billion in 1994. The ratio of the allowance for loan losses to
nonperforming assets was 182 percent and 178 percent at December 31, 1995 and
1994, respectively. The ratio of the allowance to net loans was 1.66 percent at
December 31, 1995, compared with 2.03 percent in 1994.
At December 31, 1995, impaired loans, which are included in nonaccrual loans,
amounted to $471 million. Included in the allowance for loan losses is $83
million related to $359 million of impaired loans at December
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31, 1995. The rest of the impaired loans are recorded at or below fair value.
The ACCOUNTING AND REGULATORY MATTERS section provides further information about
impaired loans.
GEOGRAPHIC EXPOSURE
The loan portfolio in the East Coast region of the United States is spread
primarily across 82 metropolitan statistical areas with diverse economies.
Atlanta, Georgia; Charlotte, North Carolina; Miami, Jacksonville, West Palm
Beach and Tampa, Florida; Newark, New Jersey; Philadelphia, Pennsylvania;
Westchester County, New York; and Washington, D.C., are our largest markets.
Substantially all of the $12.5 billion commercial real estate portfolio at
December 31, 1995, was located in our banking region.
LIQUIDITY AND FUNDING SOURCES
Liquidity planning and management are necessary to ensure we maintain the
ability to fund operations cost- effectively and to meet current and future
obligations such as loan commitments and deposit outflows. In this process, we
focus on both assets and liabilities and on the manner in which they combine to
provide adequate liquidity to meet the corporation's needs.
Funding sources primarily include customer-based core deposits but also include
purchased funds and cash flows from operations. First Union is one of the
nation's largest core deposit-funded banking institutions. Our large consumer
deposit base, which is spread across the economically strong South Atlantic
region and high per-capita income Northeast region, creates considerable funding
diversity and stability. Further, our acquisitions of bank and thrift deposits
have enhanced liquidity.
Asset liquidity is maintained through maturity management and through our
ability to liquidate assets, primarily assets held for sale. Another significant
source of asset liquidity is the potential to securitize assets such as credit
card receivables and auto, home equity, commercial and mortgage loans. The
securitization and sale of $2.0 billion in credit card receivables at the end of
the third quarter of 1995 had a significant positive effect on our liquidity
position. Other off-balance sheet sources of liquidity exist as well, such as a
mortgage servicing portfolio for which the estimated fair value exceeded book
value by $186 million at December 31, 1995.
CASH FLOWS
Cash flows from operations are a significant source of liquidity. Net cash
provided from operations primarily results from net income adjusted for the
following noncash accounting items: the provisions for loan losses and
foreclosed properties; depreciation and amortization; and deferred income taxes
or benefits. This cash was available in 1995 to increased earning assets or to
reduce borrowings.
CORE DEPOSITS
Core deposits are a fundamental and cost-effective funding source for any
banking institution. Core deposits were $86.4 billion at December 31, 1995,
compared with $81.0 billion at December 31, 1994. Core deposits include savings,
negotiable order of withdrawal (NOW), money market, noninterest-bearing and
other consumer time deposits.
In 1995 and 1994, average noninterest-bearing deposits were 19 percent and 20
percent, respectively, of average core deposits. The NET INTEREST INCOME
SUMMARIES provide additional information about average core deposits.
The portion of core deposits in higher-rate, other consumer time deposits was 37
percent at December 31, 1995, and 34 percent at year-end 1994. Other consumer
time and other noncore deposits usually pay higher rates than savings and
transaction accounts, but they generally are not available for immediate
withdrawal, and they are less expensive to process.
Average core deposit balances were $81.6 billion in 1995, an increase of $4.8
billion from 1994. Average balances in savings and NOW, other consumer time
deposits and noninterest-bearing deposits were higher when compared with the
previous year, while money market deposits were lower. Deposits were primarily
affected by the purchase acquisitions. Deposits can also be affected by branch
closings or consolidations, seasonal factors and the rates being offered
compared to other investment opportunities.
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PURCHASED FUNDS
Purchased funds at December 31, 1995, were $25.7 billion, compared with $17.2
billion at year-end 1994. Purchased funds are acquired primarily through (i) our
large branch network, consisting principally of $100,000 and over certificates
of deposit, public funds and treasury deposits, and (ii) national market
sources, consisting of relatively short-term funding sources such as federal
funds, securities sold under repurchase agreements, eurodollar time deposits,
short-term bank notes and commercial paper, and longer-term funding sources such
as term bank notes, Federal Home Loan Bank borrowings and corporate notes. In
1995 we began utilizing a newly established $10 billion shelf as part of our
ongoing bank note program, which we expect to continue to use as a source of
liquidity. Average purchased funds in 1995 were $19.7 billion, an increase of 30
percent from $15.1 billion in 1994. The increase was used primarily to fund loan
growth.
LONG-TERM DEBT
Long-term debt was 79 percent of total stockholders' equity at December 31,
1995, compared with 51 percent at December 31, 1994. The increase in long-term
debt compared with year-end 1994 was primarily related to $1.2 billion of bank
notes with varying rates and terms that mature by 1997. Additionally, in 1995 we
issued $300 million of three-year floating rate senior notes and $1.0 billion of
subordinated debentures and notes with rates ranging from 6.55 percent to 7.50
percent and maturities of either 10 years or 40 years. Proceeds from these debt
issues have been used for general corporate purposes.
Under a shelf registration statement filed with the Securities and Exchange
Commission, we currently have available for issuance $1.5 billion of senior or
subordinated debt securities. The sale of any additional debt securities will
depend on future market conditions, funding needs and other factors.
DEBT OBLIGATIONS
We have a $350 million, committed back-up line of credit that expires in
December 1998. This credit facility contains financial covenants that require
First Union to maintain a minimum level of tangible net worth, restrict double
leverage ratios and require capital levels at subsidiary banks to meet
regulatory standards. First Union has not used this line of credit. During 1996,
$1.7 billion of long-term debt will mature, including bank notes discussed above
of $865 million. Funds for the payment of long-term debt will come from
operations or, if necessary, additional borrowings.
STOCKHOLDERS' EQUITY
The management of capital in a regulated banking environment requires a balance
between maximizing leverage and return on equity to our stockholders while
maintaining sufficient capital levels and related ratios to satisfy regulatory
requirements. We have historically generated attractive returns on equity to
stockholders while maintaining sufficient regulatory capital ratios.
At December 31, 1995, total stockholders' equity was $9.0 billion, compared with
$8.3 billion at December 31, 1994, and 278 million common shares were
outstanding, compared with 285 million shares at December 31, 1994. In 1995 we
paid $965 million for the repurchase of 20 million shares of First Union common
stock pursuant to board of directors authorizations in February 1995 and June
1995. Of these repurchases in the open market, 14.0 million shares were related
to completed or pending stock-for-stock purchase accounting acquisitions, 4.8
million shares were related to the First Fidelity acquisition and 1.2 million
shares were related to stock options. First Fidelity paid $234 million for the
purchase of 5.4 million shares of its common stock in 1995 which were primarily
related to stock options. In February 1996, the board of directors renewed its
authorization for the purchase in the open market from time to time of up to 15
million shares of First Union common stock. The timing of any such repurchases
would be based on our assessment of First Union's capital structure and
liquidity, the market price of our common stock compared to our assessment
of its underlying value, regulatory, accounting and other factors. Repurchases
would be made primarily in connection with future acquisitions and
stock-based employee benefit plans.
In 1995 we announced a dividend increase for the 18th consecutive year,
resulting in dividends of $1.96 per common share. The current annualized
dividend rate is $2.08 per common share. The corporation paid $343 million in
dividends to preferred and common stockholders in 1995.
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At December 31, 1995, stockholders' equity reflected an $111 million unrealized
after-tax gain related to debt and equity securities. The SECURITIES AVAILABLE
FOR SALE section provides additional information about debt and equity
securities.
SUBSIDIARY DIVIDENDS
Our banking subsidiaries are the largest source of parent company dividends.
Capital requirements established by regulators limit dividends that these and
certain other of our subsidiaries can pay. The Office of the Comptroller of the
Currency (OCC) generally limits a national bank's dividends in two principal
ways: first, dividends cannot exceed the bank's undivided profits, less
statutory bad debt in excess of a bank's allowance for loan losses; and second,
in any year dividends may not exceed a bank's net profits for that year, plus
its retained earnings from the preceding two years, less any required transfers
to surplus. Under these and other limitations, our subsidiaries had $468 million
available for dividends at December 31, 1995, without prior approval from the
OCC. Our subsidiaries paid $793 million in dividends to the corporation in 1995.
The reduction in dividends paid in 1995 compared with 1994 was related to the
redemption of preferred stock in early 1995.
REGULATORY CAPITAL
Federal banking regulations require that bank holding companies and their
subsidiary banks maintain minimum levels of capital. These banking regulations
measure capital using three formulas relating to tier 1 capital, total capital
and leverage capital. The minimum level for the ratio of total capital to
risk-weighted assets (including certain off-balance-sheet financial instruments,
such as standby letters of credit and interest rate swaps) is currently 8
percent. At least half of total capital is to be composed of common equity,
retained earnings and a limited amount of qualifying preferred stock, less
certain intangible assets (tier 1 capital). The rest may consist of a limited
amount of subordinated debt, nonqualifying preferred stock and a limited amount
of the loan loss allowance (together with tier 1 capital, total capital).
At December 31, 1995, the tier 1 and total capital ratios were 6.62 percent and
11.33 percent, respectively, compared with 7.76 percent and 12.94 percent at
December 31, 1994. The reduction in the tier 1 and total capital ratios in 1995
was due primarily to the common stock repurchase program, the preferred stock
redemption and the increase in total assets and intangible assets.
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
equal to 3 percent for bank holding companies that meet specified criteria,
including having the highest regulatory rating. All other bank holding companies
are generally required to maintain a leverage ratio of at least 4 to 5 percent.
The leverage ratio at December 31, 1995, was 5.49 percent, compared with 6.12
percent at December 31, 1994.
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. The Federal Reserve Board has indicated it will
continue to consider a tangible tier 1 leverage ratio (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised us of any specific minimum leverage ratio
applicable to us.
Each subsidiary bank is subject to similar capital requirements adopted by the
OCC. Each subsidiary bank listed in Table 19 had a leverage ratio in excess of
5.17 percent at December 31, 1995. None of our subsidiary banks has been advised
of any specific minimum capital ratios applicable to it.
The regulatory agencies also have adopted regulations establishing capital tiers
for banks. Banks in the highest capital tier, or "well capitalized," must have a
leverage ratio of 5 percent, a tier 1 capital ratio of 6 percent and a total
capital ratio of 10 percent. At December 31, 1995, the subsidiary banks listed
in Table 19 met the capital and leverage ratio requirements for "well
capitalized" banks, except First Union National Bank of North Carolina, which
had a total capital ratio of 9.92 percent. At the end of February 1996, First
Union National Bank of North Carolina was "well capitalized." We expect to
maintain these ratios at the required levels by the retention of earnings and,
if necessary, the issuance of additional capital. Failure to meet certain
capital ratio or
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leverage ratio requirements could subject a bank to a variety of enforcement
remedies, including termination of deposit insurance by the FDIC.
The ACCOUNTING AND REGULATORY MATTERS section provides more information about
proposed changes in risk- based capital standards.
INTEREST RATE RISK MANAGEMENT
Managing interest rate risk is fundamental to banking. Banking institutions
manage the inherently different maturity and repricing characteristics of the
lending and deposit-taking lines of business to achieve a desired interest rate
sensitivity position and to limit exposure to interest rate risk. The inherent
maturity and repricing characteristics of our lending and deposit activities
create a naturally asset-sensitive structure. By using a combination of on- and
off-balance sheet financial instruments, we manage the sensitivity of earnings
to changes in interest rates within our established policy guidelines.
The Financial Management Committee of the corporation's board of directors
reviews overall interest rate risk management activity. The corporation's Funds
Management Committee, which includes the three members of the Office of the
Chairman and senior executives from our Capital Markets Group, credit and
finance areas, oversees the interest rate risk management process and approves
policy guidelines. Balance sheet management and finance personnel monitor the
day-to-day exposure to changes in interest rates in response to loan and deposit
flows. They make adjustments within established policy guidelines.
We measure interest rate sensitivity by estimating the amount of earnings per
share at risk based on the modeling of future changes in interest rates. Our
model captures all assets and liabilities and off-balance sheet financial
instruments, and combines various assumptions affecting rate sensitivity and
changes in balance sheet mix into an earnings outlook that incorporates our view
of the interest rate environment most likely over the next 24 months. Balance
sheet management and finance personnel review and update continuously the
underlying assumptions included in the earnings simulation model. The results of
the model are reviewed by the Funds Management Committee. The model is updated
at least monthly and more often as appropriate.
We believe our earnings simulation model is a more relevant depiction of
interest rate risk than traditional gap tables because it captures multiple
effects excluded in less sophisticated presentations, and it includes
significant variables that we identify as being affected by interest rates. For
example, our model captures rate of change differentials, such as federal funds
rates versus savings account rates; maturity effects, such as calls on
securities; and rate barrier effects, such as caps and floors on loans. It also
captures changing balance sheet levels, such as commercial and consumer loans
(both floating and fixed rate); noninterest-bearing deposits and investment
securities. In addition, it considers leads and lags that occur in long-term
rates as short-term rates move away from current levels; the elasticity in the
repricing characteristics of savings and money market deposits; and the effects
of prepayment volatility on various fixed-rate assets such as residential
mortgages, mortgage-backed securities and consumer loans. These and certain
other effects are evaluated in developing the scenarios from which sensitivity
of earnings to changes in interest rates is determined.
We use three standard scenarios in analyzing interest rate sensitivity for
policy measurement. The base-line scenario is our estimated most likely path for
future short-term interest rates over the next 24 months. The measurement of
interest rate sensitivity is the percentage change in earnings per share
calculated by the model under "high rate" and under "low rate" scenarios. The
"high rate" and "low rate" scenarios assume 100 basis point shifts from the
base-line scenario in the federal funds rate by the fourth succeeding month and
that the rate remains 100 basis points higher or lower than the base-line
through the rest of the 24-month period. Our policy limit for the maximum
negative impact on earnings per share resulting from high rate or low rate
scenarios is 5 percent. The policy measurement period begins with the fourth
month forward and ends with the 15th month (i.e., a 12-month period.)
Our estimate in January 1996 of future short-term interest rates was that the
federal funds rate would decline to 4.92 percent by December 1996 and then rise
gradually to 5.40 percent by December 1997. Based on the January 1996 outlook,
if interest rates were to decline 100 basis points below the estimated
short-term rate scenario, i.e., follow the low rate scenario, the model
indicates that earnings during the policy measurement
11
<PAGE>
period would be negatively affected by 1.6 percent. Our model indicates that
earnings would also be immaterially affected in our high rate scenario, i.e., a
100 point increase in estimated short-term interest rates.
The January 1996 outlook indicates that 1997 earnings would be negatively
affected by 2.0 percent if interest rates fell 100 basis points below the
base-line scenario, and earnings would be affected slightly positively in the
high rate scenario.
In addition to the three standard scenarios used to analyze rate sensitivity
over the policy measurement period, we also analyze the potential impact of
other, more extreme interest rate scenarios. These alternate scenarios may
include interest rate paths both higher, lower and more volatile than those used
for policy measurement. Because the interest rate sensitivity model is based on
numerous interest rate assumptions, projected changes in growth in balance sheet
categories and changes in other basic assumptions, actual results may differ
from our current simulated outlook.
Our interest rate sensitivity analysis is based on multiple interest rate
scenarios, projected changes in growth in balance sheet categories and other
assumptions. Changes in management's outlook related to interest rates, and
their effect on our balance sheet mix of assets and liabilities and other market
factors, may cause actual results to differ from our current simulated outlook.
While our interest rate sensitivity modeling assumes that management takes no
action, we regularly assess the viability of strategies to reduce unacceptable
risks to earnings and implement such strategies when we believe those actions
are prudent. We took actions in 1995 to mitigate the negative effect on earnings
of adverse changes in interest rates beyond the policy measurement period. For
example, in the fourth quarter of 1995, we implemented a strategy to add
off-balance sheet positions that we believe will significantly reduce our
potential asset sensitivity in 1997. As new monthly outlooks become available,
management will continue to formulate strategies to protect earnings from the
potential negative effects of changing assumptions and interest rates.
OFF-BALANCE SHEET DERIVATIVES FOR INTEREST RATE RISK MANAGEMENT
As part of our overall interest rate risk management strategy, for many years we
have used off-balance sheet derivatives as a cost- and capital-efficient way to
modify the repricing or maturity characteristics of on-balance sheet assets and
liabilities. Our off-balance sheet derivative transactions used for interest
rate sensitivity management include interest rate swaps, futures and options
with indices that relate to the pricing of specific core assets and liabilities
of the corporation. We believe we have appropriately controlled the risk so that
the derivatives used for rate sensitivity management will not have any
significant unintended effect on corporate earnings. As a matter of policy we do
not use highly leveraged derivative instruments for interest rate risk
management. The impact of derivative products on our earnings and rate
sensitivity is fully incorporated in the earnings simulation model in the same
manner as on-balance sheet instruments.
Our overall goal is to manage our rate sensitivity in ways that earnings are not
adversely affected materially whether rates go up or down. As a result of
interest rate fluctuations, off-balance sheet transactions (and securities) will
from time to time develop unrealized appreciation or depreciation in market
value when compared with their cost. The impact on net interest income
attributable to these off-balance sheet transactions, all of which are linked to
specific assets and liabilities as part of our overall interest rate risk
management strategy, will generally be offset by net interest income from
on-balance sheet assets and liabilities. The important consideration is not the
shifting of unrealized appreciation or depreciation between and among on- and
off-balance sheet instruments, but the prudent management of interest rate
sensitivity so that corporate earnings are not unduly at risk as interest rates
move up or down.
There was significant interest rate volatility between year-end 1993 and
year-end 1995, which was reflected in the dramatic change in the market value of
our securities portfolio and off-balance sheet positions. The combined market
value of those positions moved from an unrealized gain of $903 million at
December 31, 1993, to an unrealized loss of $1.1 billion at December 31, 1994,
and then back to an unrealized gain of $771 million at December 31, 1995.
Despite the large year-to-year fluctuations in market value and related
fluctuations in the net interest income contribution from these positions, total
net interest income continued to
12
<PAGE>
increase. This is the outcome we strive to achieve in using portfolio securities
and off-balance sheet products in the conduct of asset and liability management.
The fair value appreciation of off-balance sheet derivative financial
instruments used to manage our interest rate sensitivity was $390 million at
December 31, 1995, compared with fair value depreciation of $623 million at
December 31, 1994.
The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses related to terminated
positions. The amount of deferred gains and losses was $9 million and $11
million, respectively, as of December 31, 1995. These net losses will reduce net
interest income by $2 million in 1996. In 1995 net interest income was reduced
by $18 million of net deferred losses.
Although off-balance sheet derivative financial instruments do not expose the
corporation to credit risk equal to the notional amount, we are exposed to
credit risk equal to the extent of the fair value gain in an off-balance sheet
derivative financial instrument if the counterparty fails to perform. We
minimize the credit risk in these instruments by dealing only with high quality
counterparties. Each transaction is specifically approved for applicable credit
exposure.
In addition, our policy is to require that all swaps and options be governed by
an International Swaps and Derivatives Association Master Agreement. Bilateral
collateral arrangements are in place for substantially all dealer
counterparties. Derivative collateral arrangements for dealer transactions and
trading activities are based on established thresholds of acceptable credit risk
by counterparty. Thresholds are determined based on the strength of the
individual counterparty and are bilateral. As of December 31, 1995, the total
credit risk in excess of thresholds was $275 million. The fair value of
collateral held was 100 percent of the total credit risk in excess of
thresholds. For nondealer transactions, the need for collateral is evaluated on
an individual transaction basis, and is primarily dependent on the financial
strength of the counterparty.
ACCOUNTING AND REGULATORY MATTERS
The Financial Accounting Standards Board (FASB) has issued Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An estimate of the future cash flows expected to result
from the use of the asset and its eventual disposition should be performed
during a review for recoverability. An impairment loss (based on the fair value
of the asset) is recognized if the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset. Additionally, Standard No. 121 requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell, except for certain assets.
These assets will continue to be reported at the lower of carrying amount or net
realizable value. The periodic effect on net income, if any, has not been
determined. This Standard is required for fiscal years beginning after December
15, 1995.
The FASB has also issued Standard No. 123, "Accounting for Stock-Based
Compensation," which requires that the fair value of employee stock-based
compensation plans be recorded as a component of compensation expense in the
statement of income as of the date of grant of awards related to such plans or
that the impact of such fair value on net income and earnings per share be
disclosed on a pro forma basis in a footnote to financial statements for awards
granted after December 15, 1994, if the accounting for such awards continues to
be in accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25). The corporation will continue such
accounting under the provisions of APB 25. This Standard is required for fiscal
years beginning after December 15, 1995.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA), among other provisions, imposes liability on a bank insured by the
FDIC for certain obligations to the FDIC incurred in connection with other
insured banks under common control with such bank.
13
<PAGE>
The Federal Deposit Insurance Corporation Improvement Act, among other things,
requires a revision of risk- based capital standards. The new standards are
required to incorporate interest rate risk, concentration of credit risk and the
risks of nontraditional activities and to reflect the actual performance and
expected risk of loss of multifamily mortgages. The RISK-BASED CAPITAL section
provides information on risk assessment classifications.
On August 8, 1995, the FDIC revised its regulations on insurance assessments to
establish a revised assessment rate schedule of 4 to 31 cents per $100.00 of
deposits in replacement of the then existing schedule of 23 to 31 cents per
$100.00 of deposits subject to assessment by the Bank Insurance Fund (BIF). The
FDIC maintained the current assessment rate schedule of 23 to 31 cents per
$100.00 of deposits for institutions whose deposits are subject to assessment by
the Savings Association Insurance Fund (SAIF). The revised BIF schedule became
effective on June 1, 1995. Assessments collected at the previous assessment
schedule that exceeded the amount due under the new schedule were refunded, with
interest, from the effective date of the new schedule. As a result, a $41
million refund, including interest, was received in 1995. On November 14, 1995,
the FDIC further reduced the rate structure for BIF deposits by 4 cents per
$100.00 of deposits, beginning January 1996. As a result, the highest-rated
institutions will pay only the statutory annual minimum rate of $2,000.00 for
FDIC insurance. Adequately capitalized banks will pay a rate of 3 cents per
$100.00 of deposits. As of December 31, 1995, the corporation's BIF deposit
assessment base was $63.4 billion and the corporation's SAIF deposit assessment
base was $19.8 billion. Various legislative proposals related to the future of
the BIF and SAIF have been under consideration. Several of these proposals,
including a proposal previously approved by Congress that is understood to have
the support of the President, include a one-time special assessment for SAIF
deposits (in the range of 70 cents to 85 cents per $100.00 of assessable SAIF
deposits, with a discount for certain SAIF deposits held by BIF member banks)
and a subsequent comparable and reduced level of annual premiums for SAIF
deposits. It is not known when and if any such proposal or any other related
proposal may be adopted.
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.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA)
authorized interstate acquisitions of banks and bank holding companies without
geographic limitation beginning September 27, 1995. Beginning June 1, 1997, a
bank may merge with a bank in another state as long as neither of the states opt
out of interstate branching between the date of enactment of IBBEA and May 31,
1997. IBBEA further provides that a state may enact laws permitting interstate
merger transactions before June 1, 1997.
Various other legislative proposals concerning the banking industry are pending
in Congress. Given the uncertainty of the legislative process, we cannot assess
the impact of any such legislation on our financial condition or results of
operations.
EARNINGS AND BALANCE SHEET ANALYSIS
(1994 COMPARED WITH 1993)
Combined net income applicable to common stockholders increased in 1994 to $1.33
billion before a redemption premium on preferred stock, or 14 percent from $1.17
billion in 1993. On a per common share basis, earnings before redemption premium
were $4.72 in 1994, compared with $4.30 in 1993. After the redemption premium,
net income applicable to common stockholders was $1.29 billion, or $4.58 per
common share in 1994. The redemption premium was related to the redemption of
the corporation's series 1990 preferred stock.
Key factors in our 1994 performance were a 7 percent growth in tax-equivalent
net interest income; 14 percent loan growth; and continued improvement in credit
quality. Tax-equivalent net interest income was $4.6 billion in 1994, compared
with $4.3 billion in 1993. Net loans increased by $9.6 billion since year-end
1993. Commercial loans increased throughout our banking region. Consumer loan
growth was led by direct consumer
14
<PAGE>
loans through the retail bank branches and credit cards.
Credit quality improvement included a $524 million net decrease in nonperforming
assets compared with year-end 1993, to $887 million, or 1.14 percent of net
loans and foreclosed properties at December 31, 1994. Another key measure of
credit quality is charge-offs, and net charge-offs in 1994 were .40 percent of
average net loans, compared with .78 percent in 1993.
Nonperforming loans reduced interest income since the contribution from these
loans is eliminated or sharply reduced. In 1994, $70 million in gross interest
income would have been recorded if all nonaccrual and restructured loans had
been current in accordance with their original terms and had been outstanding
throughout the period, or since origination if held for part of the period. The
amount of interest income related to these assets and included in income in 1994
was $10 million. However, the $524 million net decrease in nonperforming assets
since year-end 1993 reduced the negative impact on interest income in 1994.
The net interest margin was 4.75 percent in 1994, compared with 4.82 percent in
1993. The average rate earned on earning assets was 7.67 percent in 1994,
compared with 7.63 percent in 1993. The average rate paid on interest-bearing
liabilities was 3.46 percent in 1994 and 3.29 percent in 1993.
Noninterest income was $1.6 billion in both 1994 and 1993. Noninterest income
included $84 million in 1994 and $48 million in 1993 from the disposition of
segregated assets acquired in connection with First Union's 1993 acquisition of
First American Metro Corp.
At December 31, 1994, trading account assets were $1.3 billion, compared with
$802 million at year-end 1993. Investments in commercial paper, federal agency
securities, U.S. Treasury notes and revaluation gains accounted for most of the
increase in trading account assets from year-end 1993. These assets are carried
at market value.
Noninterest expense was $3.7 billion in 1994, compared with $3.5 billion in
1993. The increase reflected growth in personnel, advertising and other expenses
related to our card products, capital management and capital markets initiatives
undertaken to improve prospects for revenue growth, as well as expenses related
to acquisitions. Partially offsetting these increases was a decline in mortgage
servicing amortization. Costs related to environmental matters were not
material.
Income taxes were $711 million in 1994, compared with $579 million in 1993. The
increase resulted primarily from an increase in income before taxes.
Average earning assets in 1994 were $95.8 billion, an 8 percent increase from
$88.3 billion in 1993.
At December 31, 1994, we had securities available for sale with a market value
of $11.5 billion, compared with a market value of $14.5 billion at year-end
1993. The market value of securities available for sale was $396 million below
amortized cost at year-end 1994. As a result, a $289 million after-tax
unrealized loss was recorded as a reduction of stockholders' equity at December
31, 1994. The average rate earned on securities available for sale in 1994 was
5.54 percent, compared with 5.02 percent in 1993. The average maturity of the
portfolio was 3.40 years at December 31, 1994.
Investment securities amounted to $7.9 billion at both December 31, 1994, and
December 31, 1993. The average rate earned on investment securities in 1994 was
7.23 percent, compared with 6.99 percent in 1993. The average maturity of the
portfolio was 4.50 years at December 31, 1994. Gains and losses in this
portfolio in 1994 were primarily related to premiums received on the call of
certain securities prior to their securities' maturity, and sales of securities
downgraded in creditworthiness.
Net loans at December 31, 1994, were $77.8 billion, compared with $68.3 billion
at year-end 1993. Consumer loan growth largely reflected strength in direct
lending. The fastest growth in our consumer loan portfolio was in
higher-yielding credit card products. This was the result of a targeted,
national solicitation effort that increased credit card outstandings 102 percent
in 1994. The increase also included $1.2 billion from First
15
<PAGE>
Union's 1994 purchase accounting acquisitions.
The loan portfolio at December 31, 1994, was composed of 46 percent in
commercial loans and 54 percent in consumer loans. The portfolio mix did not
change significantly from year-end 1993. At December 31, 1994, unused loan
commitments related to commercial and consumer loans were $17.6 billion and
$13.2 billion, respectively. Commercial and standby letters of credit were $3.1
billion. At December 31, 1994, loan participations sold to other lenders
amounted to $1.7 billion, and were recorded as a reduction of gross loans.
The average rate earned on loans in 1994 was 8.28 percent, compared with 8.33
percent in 1993. The average prime rate in 1994 was 6.81 percent, compared with
6.00 percent in 1993. Loan yields lagged the increases in the prime rate.
Commercial real estate loans amounted to 15 percent of the total portfolio at
December 31, 1994, and 17 percent at December 31, 1993. This portfolio included
commercial real estate mortgage loans of $9.5 billion at December 31, 1994, and
$9.3 billion at December 31, 1993.
At December 31, 1994, nonperforming assets were $887 million, or 1.14 percent of
net loans and foreclosed properties, compared with $1.4 billion, or 2.06
percent, at December 31, 1993. Loans or properties of less than $5 million each
made up 84 percent, or $747 million, of nonperforming assets at December 31,
1994. Of the rest, nine loans or properties between $5 million and $10 million
each accounted for $61 million; and four loans or properties over $10 million
each accounted for $79 million. Sixty-six percent of nonperforming assets were
collateralized by real estate at December 31, 1994.
In addition to these nonperforming assets, at December 31, 1994, accruing loans
90 days past due were $272 million, compared with $213 million at December 31,
1993. The increase in past due loans was attributable in part to the 1994
purchase accounting acquisitions.
Net charge-offs as a percentage of average net loans were .40 percent in 1994,
compared with .78 percent in 1993.
At December 31, 1994, acquired Southeast Banks segregated assets and Howard
shared loans amounted to $259 million, or $233 million net of a $26 million
allowance, compared with $635 million, or $595 million net of a $40 million
allowance, at December 31, 1993. Segregated assets are included in other assets.
Core deposits were $81.0 billion at December 31, 1994, compared with $78.4
billion at December 31, 1993. This increase in core deposits primarily reflected
deposits acquired in the 1994 purchase accounting acquisitions. In 1994 average
noninterest-bearing deposits were 20 percent of average core deposits, compared
with 19 percent in 1993. The portion of core deposits in higher-rate, other
consumer time deposits was 34 percent at December 31, 1994, and 33 percent at
year-end 1993. Average core deposit balances in 1994 increased $2.9 billion from
1993 to $76.8 billion. Average balances in savings and NOW, money market and
noninterest-bearing deposits were higher when compared with the previous year,
while other consumer time deposits were lower. Core deposits were primarily
affected by the 1994 acquisitions, and also were affected by branch closings or
consolidations, seasonal factors and the rates being offered for deposits
compared to other investment opportunities.
Purchased funds at December 31, 1994, were $17.2 billion compared with $12.3
billion at year-end 1993. Average purchased funds in 1994 were $15.1 billion, an
increase of 22 percent from $12.4 billion in 1993.
Long-term debt was 51 percent of total stockholders' equity at December 31,
1994, compared with 46 percent at December 31, 1993. In 1994 we issued $200
million of two-year floating rate senior notes and $450 million of subordinated
debt with rates ranging from 6.375 percent to 8.77 percent and maturities of
either 10 or 15 years. Proceeds from these debt issues were used for general
corporate purposes.
In 1994 we redeemed $15 million of convertible subordinated debt that First
Union assumed in the August 1994 acquisition of BancFlorida Financial
Corporation, which was converted into approximately 437,000 shares
16
<PAGE>
of First Union common stock prior to redemption. In 1993 we redeemed $134
million of floating rate debt at par plus accrued interest.
At December 31, 1994, common stockholders' equity was $8.0 billion, an 8 percent
increase from $7.4 billion at December 31, 1993. Total stockholders' equity was
$8.3 billion, compared with $7.9 billion at year-end 1993. In 1994 we paid $218
million for the purchase in the open market of 5 million shares of common stock
related to acquisitions and the conversion of debentures.
In December 1994, the board of directors elected to redeem all of the 6.3
million outstanding shares of our series 1990 cumulative perpetual adjustable
rate preferred stock. The redemption occurred on March 31, 1995, at a redemption
price of $51.50 per share. We recorded a redemption premium of $41 million in
the fourth quarter of 1994, representing the difference between the $44.96 book
value of the series 1990 preferred stock and the $51.50 redemption price.
At December 31, 1994, stockholders' equity included a $289 million unrealized
after-tax loss related to debt and equity securities.
In 1993, in connection with three pooling of interests acquisitions, we issued
29 million shares of common stock and 527,000 shares of a new series of
convertible class A preferred stock, which were convertible into 680,000 shares
of First Union common stock. In the second quarter of 1993, we redeemed the
convertible class A preferred stock, most of which was converted into common
stock before redemption.
At December 31, 1994, the corporation's tier 1 and total capital ratios were
7.76 percent and 12.94 percent, respectively. The corporation's leverage ratio
at December 31, 1994, was 6.12 percent. Each subsidiary bank had a leverage
ratio in excess of 5.68 percent at December 31, 1994. At December 31, 1994, our
deposit- taking subsidiary banks met the capital and leverage ratio requirements
for "well capitalized" banks.
The fair value depreciation of off-balance sheet derivative financial
instruments used to manage our interest rate sensitivity was $623 million at
December 31, 1994, compared with the fair value appreciation of $495 million at
December 31, 1993.
The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses. The amount of
deferred gains and losses from off-balance sheet instruments used to manage
interest rate risk was $15 million and $35 million, respectively, as of December
31, 1994. The $20 million of net deferred losses reduced net interest income by
$18 million in 1995.
17
<PAGE>
Table 1
CONSOLIDATED SUMMARIES OF INCOME, PER SHARE, AND BALANCE SHEET DATA
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------
(In thousands except per share data) 1995 1994 1993 1992 1991 1990
- ------------------------------------------- ------------ ------------ -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income $ 8,686,377 7,230,813 6,601,528 6,608,666 7,031,400 7,549,088
========================================================= ============ ============== ============= ============ ============
Interest income* $ 8,791,826 7,352,023 6,736,036 6,752,660 7,199,405 7,740,412
Interest expense 4,051,815 2,792,982 2,481,952 2,941,680 4,070,885 4,806,471
- ------------------------------------------- ------------ ------------ -------------- ------------- ------------ ------------
Net interest income* 4,740,011 4,559,041 4,254,084 3,810,980 3,128,520 2,933,941
Provision for loan losses 220,000 179,000 369,753 642,708 946,284 923,409
- ------------------------------------------- ------------ ------------ -------------- ------------- ------------ ------------
Net interest income after
provision for loan losses* 4,520,011 4,380,041 3,884,331 3,168,272 2,182,236 2,010,532
Securities available for sale
transactions 44,340 6,213 32,784 39,227 53,566 24,387
Investment security transactions 4,818 4,006 7,435 (2,881) 155,048 7,884
Noninterest income 1,847,350 1,565,694 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense** 4,092,469 3,746,857 3,536,346 3,443,524 2,777,665 2,564,124
- ------------------------------------------- ------------ ------------ -------------- ------------- ------------ ------------
Income before income taxes* 2,324,050 2,209,097 1,929,773 1,121,296 867,820 507,434
Income taxes 788,420 711,444 578,912 278,514 129,843 59,868
Tax-equivalent adjustment 105,449 121,210 134,508 143,994 168,005 191,324
- ------------------------------------------- ------------ ------------ -------------- ------------- ------------ ------------
Net income 1,430,181 1,376,443 1,216,353 698,788 569,972 256,242
Dividends on preferred stock 26,390 46,020 45,553 53,040 51,746 47,151
- ------------------------------------------- ------------ ------------ -------------- ------------- ------------ ------------
Net income applicable to common
stockholders before redemption premium 1,403,791 1,330,423 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 $ 1,403,791 1,289,068 1,170,800 645,748 518,226 209,091
========================================================= ============ ============== ============= ============ ============
PER COMMON SHARE DATA
Net income before redemption premium $ 5.04 4.72 4.30 2.53 2.34 .97
Net income after redemption premium $ 5.04 4.58 4.30 2.53 2.34 .97
Average common shares 278,677,119 281,662,617 272,438,239 255,384,145 221,469,355 215,503,124
Average common stockholders' equity*** $ 8,412,020 7,869,710 6,781,863 5,723,532 4,554,234 4,301,110
Common stock price
High 58 7/8 47 5/8 51 1/2 44 7/8 30 7/8 21 3/4
Low 41 3/8 39 3/8 37 7/8 29 1/2 13 3/4 13 7/8
Year-end $ 55 5/8 41 3/8 41 1/4 43 5/8 30 15 3/8
To earnings ratio**** 11.04 X 8.76 9.60 17.25 12.82 15.85
To book value 174 % 147 154 187 141 78
Cash dividends $ 1.96 1.72 1.50 1.28 1.12 1.08
Book value 31.89 28.19 26.71 23.36 21.21 19.83
BALANCE SHEET DATA
Assets 131,879,873 113,529,201 104,549,554 95,308,328 89,488,406 83,698,754
Long-term debt $ 7,120,947 4,242,137 3,675,002 3,732,768 3,549,815 2,967,847
========================================================= ============ ============== ============= ============ ============
</TABLE>
*Tax-equivalent.
**Includes merger-related restructuring charges of $94,446,000
($72,826,000 after tax) in the fourth quarter of 1995.
***Average common stockholders' equity excludes average net unrealized gains
or losses on debt and equity securities.
****Based on net income applicable to common stockholders before redemption
premium.
T-1
<PAGE>
Table 2
NONINTEREST INCOME
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------
(In thousands) 1995 1994 1993 1992 1991 1990
- ------------------------------------------- ----------- ------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Trading account profits $ 69,407 $ 51,672 59,939 39,593 32,305 22,397
Service charges on deposit accounts 615,552 580,271 572,625 525,428 407,481 344,463
Mortgage banking income 149,585 88,436 150,896 164,832 143,734 109,404
Capital management income 397,191 330,416 306,392 263,771 216,910 187,717
Securities available for sale transactions 44,340 6,213 32,784 39,227 53,566 24,387
Investment security transactions 4,818 4,006 7,435 (2,881) 155,048 7,884
Fees for other banking services* 159,571 130,992 100,122 79,891 -- --
Merchant discounts 100,580 89,508 79,452 75,316 64,216 63,629
Insurance commissions 53,843 48,076 46,717 45,959 48,755 51,205
Sundry income 301,621 246,323 225,426 165,412 341,234 249,940
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Total $1,896,508 $1,575,913 1,581,788 1,396,548 1,463,249 1,061,026
========== ========== ========== ========== ========== ==========
</TABLE>
* Information not available prior to 1992.
Table 3
NONINTEREST EXPENSE
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------
(In thousands) 1995 1994 1993 1992 1991 1990
- ---------------------------------------------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Personnel expense
Salaries $1,615,310 $1,435,702 1,321,416 1,218,612 1,053,789 1,034,820
Other benefits 346,842 337,140 302,533 255,531 210,385 203,362
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,962,152 1,772,842 1,623,949 1,474,143 1,264,174 1,238,182
Occupancy 352,551 352,721 341,847 345,997 317,238 280,537
Equipment rentals, depreciation and maintenance 320,036 270,157 233,572 208,481 174,909 182,401
Advertising 72,205 64,737 44,390 37,545 31,967 34,984
Telephone 86,798 76,249 71,392 69,679 64,120 66,431
Travel 78,330 61,336 50,157 39,813 30,133 31,367
Postage 63,450 55,697 54,619 55,207 49,167 41,147
Printing and office supplies 75,827 67,803 69,989 48,351 36,541 46,818
FDIC insurance 120,489 183,580 181,593 163,623 126,263 69,818
Other insurance 24,756 19,707 24,548 26,549 25,596 26,901
Professional fees 176,359 169,461 95,267 98,240 79,073 62,225
Data processing 71,025 72,138 89,640 78,864 67,388 33,182
Owned real estate expense 13,981 34,544 69,050 205,963 110,471 64,371
Mortgage servicing amortization 24,749 23,525 106,942 37,422 27,149 23,448
Other amortization 228,951 162,609 130,969 106,283 84,992 91,508
Merger-related restructuring charges 94,446 -- -- -- -- --
Sundry 326,364 359,751 348,422 447,364 288,484 270,804
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total $4,092,469 $3,746,857 3,536,346 3,443,524 2,777,665 2,564,124
========== ========== ========== ========== ========== ==========
Overhead efficiency ratio* 61.67% 61.07 60.60 66.13 60.49 64.18
========== ========== ========== ========== ========== ==========
</TABLE>
*The overhead efficiency ratio is equal to noninterest expense divided by net
operating revenue. Net operating revenue is equal to the sum of tax-equivalent
net interest income and noninterest income.
T-2
<PAGE>
Table 4
SELECTED LINES OF BUSINESS*
- ------------------------------
<TABLE>
<CAPTION>
First Union Other
Card Home Equity Consumer Capital Capital Mortgage
(Dollars in thousands) Products Bank Banking Markets Management Banking
- ------------------------------ ----------- ----------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Interest income** $ 708,778 278,857 1,126,471 922,941 22,842 1,094,653
Interest expense 281,195 159,361 601,220 671,690 1,220 808,680
Provision for loan losses 212,708 6,361 62,166 29,354 124 25,137
Noninterest income 107,994 30,035 26,352 265,428 397,191 149,585
- ------------------------------ ---------- ------------- --------- ----------- ------------ -------------
Other Data
Net charge-offs 171,977 3,569 49,152 8,153 - 5,439
Average loans, net 4,827,681 2,664,311 10,988,757 7,442,955 110,277 13,798,477
Nonperforming assets 13,066 10,640 82,414 118,177 - 101,581
Average deposits - - - 2,317,510 579,173 -
Assets under care - - - - 51,226,399 -
Assets under management - - - - 45,500,000 -
Loans serviced - - - - - 51,505,000
Origination volume $ 6,397,661 1,224,558 6,162,978 - - 3,800,668
Locations 1,290 143 1,296 1,304 1,485 1,311
============================== ========== ============ ========== =========== ============ =============
</TABLE
*The information contained herein represents
selected lines of business data other than commercial
lending and branch operations. Certain
information is prepared from internal management
reports.
**Tax-equivalent.
Table 5
INTERNAL CAPTIAL GROWTH AND DIVIDEND PAYOUT RATIOS
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
INTERNAL CAPITAL GROWTH*
Assets to stockholders' equity 13.83 X 12.86 13.64 14.43 16.49 17.19
X
Return on assets 1.21 % 1.29 1.22 .77 .68 .31
Return on total stockholders' equity (a) 16.59 % 16.44 16.66 11.13 11.21 5.38
X
Earnings retained 63.00 % 63.57 67.14 54.88 52.81 (2.50)
Internal capital growth (a) 10.45 % 10.45 11.18 6.11 5.92 (.13)
DIVIDEND PAYOUT RATIOS ON
Common shares 35.82 % 34.16 30.25 40.61 41.91 103.06
Preferred and common shares 37.00 % 36.43 32.86 45.12 47.19 102.50
Return on common stockholders' equity
before redemption premium** (a) 16.69 % 16.91 17.26 11.28 11.38 4.86
Return on common stockholders' equity
after redemption premium** (a) 16.69 % 16.38 17.26 11.28 11.38 4.86
</TABLE>
(a) The determination of these ratios exclude average net unrealized gains
or losses on debt and equity securities.
* Based on average balances and net income.
** Based on average balances and net income applicable to common stockholders.
T-3
<PAGE>
Table 6
SELECTED QUARTERLY DATA
- --------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
(In thousands except
per share data) Fourth Third Second First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Net Income
Interest income $ 2,278,414 2,252,435 2,132,530 2,022,998 1,952,073 1,844,459 1,757,056 1,677,225
Interest expense 1,111,571 1,068,367 976,328 895,549 823,355 714,878 654,326 600,423
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 1,166,843 1,184,068 1,156,202 1,127,449 1,128,718 1,129,581 1,102,730 1,076,802
Provision for loan losses 64,500 59,000 54,000 42,500 40,000 45,000 45,000 49,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after 1,102,343 1,125,068 1,102,202 1,084,949 1,088,718 1,084,581 1,057,730 1,027,802
provision for loan losses
Securities available for sale 15,701 9,718 8,213 10,708 (5,917) 1,957 1,791 8,382
transactions
Investment security transactions 777 2,591 1,233 217 411 2,286 694 615
Noninterest income 545,343 466,754 431,442 403,811 417,804 400,595 372,387 374,908
Noninterest expense* 1,137,294 1,018,641 979,992 956,542 976,559 945,850 917,203 907,245
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes* 526,870 585,490 563,098 543,143 524,457 543,569 515,399 504,462
Income taxes 191,508 204,909 198,704 193,299 177,322 186,799 174,186 173,137
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 335,362 380,581 364,394 349,844 347,135 356,770 341,213 331,325
Dividends on preferred stock 4,084 4,956 5,113 12,237 12,039 11,777 11,347 10,857
- ------------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common
stockholders before redemption premium 331,278 375,625 359,281 337,607 335,096 344,993 329,866 320,468
Redemption premium on preferred stock - - - - 41,355 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common
stockholders after redemption premium $ 331,278 375,625 359,281 337,607 293,741 344,993 329,866 320,468
====================================================================================================================================
Per Common Share Data
Net income before redemption premium $ 1.19 1.36 1.30 1.19 1.17 1.21 1.19 1.15
Net income after redemption premium 1.19 1.36 1.30 1.19 1.03 1.21 1.19 1.15
Cash dividends .52 .52 .46 .46 .46 .46 .40 .40
Common stock price
High 58 7/8 51 3/8 49 3/4 45 1/8 45 1/4 47 1/4 47 5/8 43 3/4
Low 49 5/8 45 1/4 42 7/8 41 3/8 39 3/8 43 1/4 41 1/4 39 3/4
Quarter-end $ 55 5/8 51 45 1/4 43 3/8 41 3/8 43 1/4 46 1/8 41 5/8
====================================================================================================================================
Selected Ratios**
Return on assets*** 1.06 % 1.25 1.28 1.27 1.25 1.33 1.30 1.30
Return on common stockholders' equity
before redemption premium**** 15.13 17.84 17.32 16.52 16.04 17.03 17.31 17.34
Return on common stockholders' equity
after redemption premium**** 15.13 17.84 17.32 16.52 14.06 17.03 17.31 17.34
Stockholders' equity to assets 7.11 % 7.07 7.39 7.40 7.74 7.89 7.67 7.79
====================================================================================================================================
First Union Corporation, As Originally
Reported
Net interest income $ 827,789 841,117 814,187 779,683 779,298 776,519 751,293 726,605
Net income 272,015 255,016 249,136 236,909 231,549 241,752 229,620 222,459
Net income applicable to common
stockholders before redemption premium 272,015 255,016 249,136 229,880 224,718 235,157 223,419 216,733
Net income applicable to common
stockholders after redemption premium 272,015 255,016 249,136 229,880 183,363 235,157 223,419 216,733
Net income per common share
before redemption premium 1.58 1.50 1.45 1.32 1.28 1.35 1.32 1.27
Net income per common share
after redemption premium $ 1.58 1.50 1.45 1.32 1.04 1.35 1.32 1.27
====================================================================================================================================
</TABLE>
*Includes merger-related restructuring charges of
$94,446,000 ($72,826,000 after tax) in the fourth
quarter of 1995.
**Based on average balances.
***Based on net income.
****Based on net income applicable to common
stockholders, excluding average net unrealized gains
(losses) on debt and equity securities.
T-4
<PAGE>
Table 7
SELECTED SIX-YEAR DATA*
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in thousands) 1995 1994 1993 1992 1991 1990
- --------------------------------------- ----------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOAN PORTFOLIO
PERMANENT LOAN ORIGINATIONS
Residential
Direct $ 2,879,420 3,569,451 6,276,720 4,549,392 2,206,796 1,832,758
Wholesale 428,071 933,214 2,431,455 2,641,656 2,657,534 2,092,646
- --------------------------------------- ----------------------------- ----------------------------------------------------------
Total 3,307,491 4,502,665 8,708,175 7,191,048 4,864,330 3,925,404
Income property 493,177 443,356 238,199 263,749 266,518 237,980
- --------------------------------------- ----------------------------- ----------------------------------------------------------
Total $ 3,800,668 4,946,021 8,946,374 7,454,797 5,130,848 4,163,384
====================================================================== ==========================================================
VOLUME OF LOANS SERVICED
Residential $ 50,047,000 32,677,000 32,786,000 22,528,000 22,161,000 17,878,000
Income property 1,458,000 1,537,000 1,972,000 1,848,000 1,951,000 1,534,000
- --------------------------------------- ----------------------------- ----------------------------------------------------------
Total $ 51,505,000 34,214,000 34,758,000 24,376,000 24,112,000 19,412,000
====================================================================== ==========================================================
NUMBER OF OFFICES
Banking 1,964 1,340 1,303 898 1,004 768
Other 190 222 222 235 209 285
- --------------------------------------- ----------------------------- ----------------------------------------------------------
Total offices 2,154 1,562 1,525 1,133 1,213 1,053
======================================= ============================= ==========================================================
OTHER DATA
ATMs 2,123 1,242 1,189 847 943 707
Employees 44,536 31,858 32,861 23,459 24,203 20,521
Common stockholders 89,257 54,236 58,670 37,955 33,456 34,951
======================================= ============================= ==========================================================
</TABLE>
*1990-1994 not restated for pooling of interests acquisitions.
Table 8
GROWTH THROUGH ACQUISITIONS
- ------------------------------------------------
<TABLE>
<CAPTION>
Loans,
(In thousands) Assets net Deposits
- ------------------------------------- ----------------------------------------
<S> <C> <C> <C>
December 31, 1989, as reported $ 45,506,847 31,600,776 31,531,770
Pooling of interests acquisition 30,727,815 19,631,808 22,872,460
- ------------------------------------- ----------------------------------------
December 31, 1989, as restated 76,234,662 51,232,584 54,404,230
1990 acquisition 7,946,973 4,174,478 5,727,330
Growth in operations (482,881) (826,039) 1,142,818
- ------------------------------------- ----------------------------------------
December 31, 1990, as reported 83,698,754 54,581,023 61,274,378
1991 acquisitions 12,322,456 7,025,621 9,921,421
Reduction in operations (6,532,804) (2,881,547) 1,198,974
- ------------------------------------- ----------------------------------------
December 31, 1991, as reported 89,488,406 58,725,097 72,394,773
1992 acquisitions 3,739,039 1,773,797 3,645,316
Growth (reduction) in operations 2,080,883 (197,432) 115,711
- ------------------------------------- ----------------------------------------
December 31, 1992, as reported 95,308,328 60,301,462 76,155,800
1993 acquisitions 7,785,479 4,380,362 6,302,873
Growth (reduction) in operations 1,455,747 3,581,264 (573,240)
- ------------------------------------- ----------------------------------------
December 31, 1993, as reported 104,549,554 68,263,088 81,885,433
1994 acquisitions 4,595,762 1,238,703 4,026,375
Growth in operations 4,383,885 8,329,202 1,953,317
- ------------------------------------- --------------- ------------------------
December 31, 1994, as reported 113,529,201 77,830,993 87,865,125
1995 acquisitions 10,254,013 7,537,477 7,252,524
Growth (reduction) in operations 8,096,659 5,194,410 (2,562,431)
- ------------------------------------- ----------------------------------------
December 31, 1995, as reported $ 131,879,873 90,562,880 92,555,218
===============================================================================
</TABLE>
Acquisitions (those greater than $3.0 billion in acquired assets and/or
deposits) include the purchase acquisitions of Florida National Banks of
Florida, Inc. in 1990 and the Southeast Banks transaction in 1991; the pooling
of interests acquisition of Dominion Bankshares Corporation in 1993; the
purchase acquisitions of Georgia Federal Savings Bank, FSB and First American
Metro Corp. in 1993; the purchase acquisition of American Savings of Florida,
FSB in 1995; and the pooling of interests acquisition of First Fidelity
Bancorporation on on January 1, 1996. Acquisitions consummated by acquired
companies are not included herein.
T-5
<PAGE>
Table 9
SECURITIES AVAILABLE FOR SALE
- --------------------------------------------------------
<TABLE>
<CAPTION>
Average
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity
(In thousands) or Less Years Years Years Total Gains Losses Cost in Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $1,507,112 1,443,582 4,440 3,799 2,958,933 (6,415) 7,036 2,959,554 1.58
U.S. Government agencies 795,915 5,978,720 1,724,404 4,925 8,503,964 (110,206) 8,318 8,402,076 3.75
CMOs 847,785 3,727,165 179,355 940 4,755,245 (34,593) 18,082 4,738,734 2.49
State, county and municipal - 2,149 1,384 9,375 12,908 - 201 13,109 14.50
Other 241,536 951,782 96,173 673,158 1,962,649 (97,253) 14,029 1,879,425 3.50
- ---------------------------------- ---------------------------------------------------------------------------------------------
Total $3,392,348 12,103,398 2,005,756 692,197 18,193,699 (248,467) 47,666 17,992,898 3.03
====================================================================================================================
Market Value
Debt securities $3,392,348 12,103,398 2,005,756 104,120 17,605,622 (174,872) 46,818 17,477,568
Sundry securities - - - 588,077 588,077 (73,595) 848 515,330
- ---------------------------------- ---------------------------------------------------------------------------------
Total $3,392,348 12,103,398 2,005,756 692,197 18,193,699 (248,467) 47,666 17,992,898
====================================================================================================================
Amortized Cost
Debt securities $3,374,168 12,014,119 1,984,974 104,307 17,477,568
Sundry securities - - - 515,330 515,330
- ---------------------------------- ---------------------------------------------------
Total $3,374,168 12,014,119 1,984,974 619,637 17,992,898
======================================================================================
Weighted Average Yield
U.S. Treasury 6.66% 5.39 7.67 8.02 6.06
U.S. Government agencies 6.69 6.67 6.57 6.82 6.67
CMOs 7.19 6.97 7.27 6.18 6.59
State, county and municipal - 8.80 10.24 10.28 10.03
Other 7.85 5.26 10.92 4.15 5.39
Consolidated 6.80% 6.40 6.81 6.09 6.42
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Average
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity
(In thousands) or Less Years Years Years Total Gains Losses Cost in Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $1,213,646 2,953,338 2,970 - 4,169,954 (9) 154,020 4,323,965 1.70
U.S. Government agencies 370,462 1,195,754 2,548,803 126,771 4,241,790 (9,804) 199,197 4,431,183 5.34
CMOs 107,156 1,166,164 75,407 21,928 1,370,655 (257) 45,777 1,416,175 3.04
State, county and municipal - 1,750 1,348 10,122 13,220 (24) 417 13,613 8.50
Other 85,333 1,294,705 20,345 337,640 1,738,023 (56,823) 63,555 1,744,755 2.83
- ------------------------------------ ------------------------------ --------- ----------- --------------------------------------
Total $1,776,597 6,611,711 2,648,873 496,461 11,533,642 (66,917) 462,966 11,929,691 3.40
=================================================================== ========= =========== ======================================
Market Value
Debt securities $1,776,597 6,611,711 2,648,873 182,344 11,219,525 (12,884) 454,023 11,660,664
Sundry securities - - - 314,117 314,117 (54,033) 8,943 269,027
- ------------------------------------ ------------------------------ --------- ----------- ------------------------------
Total $1,776,597 6,611,711 2,648,873 496,461 11,533,642 (66,917) 462,966 11,929,691
=================================================================== ========= =========== ==============================
Amortized Cost
Debt securities $1,788,551 6,883,740 2,809,470 178,903 11,660,664
Sundry securities - - - 269,027 269,027
- ------------------------------------ ------------------------------ --------- -----------
Total $1,788,551 6,883,740 2,809,470 447,930 11,929,691
=================================================================== ========= ===========
Weighted Average Yield
U.S. Treasury 7.26% 5.65 6.05 - 6.10
U.S. Government agencies 6.61 6.08 5.89 6.99 6.03
CMOs 5.47 5.33 5.32 6.34 5.35
State, county and municipal - 9.09 8.08 10.54 10.11
Other 7.24 6.97 5.91 4.88 6.62
Consolidated 7.01% 5.93 5.87 5.64 6.07
=================================================================== =======================
</TABLE>
T-6
<PAGE>
<TABLE>
<CAPTION>
Average
December 31, 1993 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
- ---------------------------------- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Treasury $3,335,359 2,355,889 8,445 3,336 5,703,029 3,609 (49,334) 5,657,304 1.35
U.S. Government agencies 281,106 2,216,818 1,878,133 633 4,376,690 44,412 (6,403) 4,414,699 3.98
CMOs 1,017,691 1,377,790 106 - 2,395,587 13,852 (9,157) 2,400,282 1.40
State, county and municipal - 1,577 1,589 11,037 14,203 441 - 14,644 8.65
Other 453,981 1,124,617 35,680 297,876 1,912,154 99,616 (6,748) 2,005,022 2.47
- ---------------------------------- ---------------------------------------------------------------------------------------
Total $5,088,137 7,076,691 1,923,953 312,882 14,401,663 161,930 (71,642) 14,491,951 2.31
==================================================================================================================================
Carrying Value
Debt securities $5,088,137 7,076,691 1,923,953 16,433 14,105,214 123,032 (64,947) 14,163,299
Sundry securities - - - 296,449 296,449 38,898 (6,695) 328,652
- ---------------------------------- ----------------------------------------------------------------------------------------
Total $5,088,137 7,076,691 1,923,953 312,882 14,401,663 161,930 (71,642) 14,491,951
===========================================================================================================================
Market Value
Debt securities $5,089,468 7,120,270 1,937,263 16,298 14,163,299
Sundry securities - - - 328,652 328,652
- ---------------------------------- ------------------------------------------------------------
Total $5,089,468 7,120,270 1,937,263 344,950 14,491,951
===============================================================================================
Weighted Average Yield
U.S. Treasury 3.95% 5.21 4.53 8.24 4.47
U.S. Government agencies 4.86 6.32 5.67 6.71 5.95
CMOs 5.05 5.28 3.85 - 5.18
State, county and municipal - 8.30 6.04 10.56 9.83
Other 5.15 7.70 5.74 7.54 7.03
Consolidated 4.33% 5.97 5.67 7.66 5.39
================================== ===========================================================
</TABLE>
Included in "U.S. Government agencies" and "Other" at December 31, 1995, are
$1,101,704,000 of securities that are denominated in currencies other than the
U.S. dollar. The currency exchange rates were hedged utilizing both on and
off-balance sheet instruments to minimize the exposure to currency revaluation
risks. At December 31, 1995, these securities had a weighted average maturity of
2.92 years and a weighted average yield of 6.10 percent. The weighted average
U.S. equivalent yield for comparative purposes of these securities was 7.50
percent based on a weighted average funding cost differential of 1.40 percent.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. The aging of mortgage-backed securities is based on their
weighted average maturities. Average maturity in years excludes preferred and
common stocks and money market funds.
Weighted average yields are based on amortized cost. Yields related to
securities exempt from both federal and state income taxes, federal income taxes
only or state income taxes only are stated on a fully tax-equivalent basis. They
are reduced by the nondeductible portion of interest expense, assuming a federal
tax rate of 35 percent; a North Carolina state tax rate of 7.75 percent in 1995,
7.8275 percent in 1994, and 7.905 percent in 1993; a Georgia and Tennessee state
tax rate of 6 percent; a South Carolina state tax rate of 4.5 percent; a Florida
state tax rate of 5.5 percent; a Maryland state tax rate of 7 percent; and a
Washington, D.C. tax rate of 9.975 percent in 1995 and 10.25 percent in 1994 and
1993, respectively.
There were commitments to purchase securities at a cost of $358,825,000 that had
a market value of $360,254,000 at December 31, 1995. Commitments to sell
securities at December 31, 1995 had a carrying value of $321,089,000. There were
commitments to purchase securities at a cost of $5,551,000 that had a market
value of $5,547,000 at December 31, 1994. There were no commitments to sell
securities. Securities available for sale at December 31, 1993 include the
carrying value of $513,390,000 of securities which have been sold for future
settlement. Gross gains and losses from sales are accounted for on a trade date
basis. Gross gains and losses realized on the sale of debt securities in 1995
were $68,980,000 and $41,654,000, respectively and on sundry securities
$17,091,000 and $77,000, respectively. Gross gains and losses realized on the
sale of debt securities in 1994 were $37,924,000 and $44,607,000, respectively,
and on sundry securities $14,557,000 and $1,661,000, respectively. Gross gains
and losses realized on the sale of debt securities in 1993 were $36,353,000 and
$10,195,000, respectively, and on sundry securities $6,802,000 and $176,000,
respectively.
T-7
<PAGE>
<TABLE>
<CAPTION>
Table 10
INVESTMENT SECURITIES
- --------------------------------------------------------
Average
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Government agencies $ 80,287 950,270 236,183 - 1,266,740 32,411 (1,157) 1,297,994 3.59
CMOs 59,410 546,111 - - 605,521 12,443 (1) 617,963 2.95
State, county and municipal 286,591 273,754 170,614 446,052 1,177,011 131,805 (3,226) 1,305,590 7.54
Other 3,825 2,600 16,821 67,098 90,344 7,713 (2) 98,055 11.54
- ----------------------------------------- --------------------------------------------------------------------------------
Total $ 430,113 1,772,735 423,618 513,150 3,139,616 184,372 (4,386) 3,319,602 5.15
====================================================================================================================================
Carrying Value
Debt securities $ 430,113 1,772,735 423,618 497,309 3,123,775 184,372 (4,386) 3,303,761
Sundry securities - - - 15,841 15,841 - - 15,841
- ----------------------------------------- ---------------------------------------------------------------------------------
Total $ 430,113 1,772,735 423,618 513,150 3,139,616 184,372 (4,386) 3,319,602
============================================================================================================================
Market Value
Debt securities $ 438,097 1,828,457 453,150 584,057 3,303,761
Sundry securities - - - 15,841 15,841
- ----------------------------------------- --------------------------------------------------
Total $ 438,097 1,828,457 453,150 599,898 3,319,602
=============================================================================================
Weighted Average Yield
U.S. Government agencies 7.29% 7.71 7.87 - 7.71
CMOs 7.37 7.20 - - 7.22
State, county and municipal 9.55 10.84 11.25 11.80 10.95
Other 6.81 7.80 7.50 9.21 8.75
Consolidated 8.81% 8.03 9.22 11.46 8.86
========================================= ==================================================
</TABLE>
<TABLE>
<CAPTION>
Average
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Treasury $ 56,236 255,455 3,986 3,481 319,158 94 (14,788) 304,464 2.66
U.S. Government agencies 837,468 1,396,876 1,409,971 16,409 3,660,724 10,676 (136,301) 3,535,099 4.20
CMOs 149,476 1,280,403 145,952 5,346 1,581,177 17 (63,111) 1,518,083 3.37
State, county and municipal 528,855 449,800 225,968 542,472 1,747,095 95,491 (8,890) 1,833,696 6.13
Other 133,127 185,587 20,827 269,034 608,575 7,759 (15,685) 600,649 5.91
---------- ---------- ---------- ---------- ---------- --------- --------- ---------- -----
Total $1,705,162 3,568,121 1,806,704 836,742 7,916,729 114,037 (238,775) 7,791,991 4.50
========== ========== ========== ========== ========== ========= ========= ========== =====
Carrying Value
Debt securities $1,705,162 3,568,121 1,806,704 658,592 7,738,579 110,485 (235,398) 7,613,666
Sundry securities -- -- -- 178,150 178,150 3,552 (3,377) 178,325
---------- ---------- ---------- ---------- ---------- --------- --------- ----------
Total $1,705,162 3,568,121 1,806,704 836,742 7,916,729 114,037 (238,775) 7,791,991
========== ========== ========== ========= ========== ========= ========== ==========
Market Value
Debt securities $1,667,535 3,473,709 1,769,848 702,574 7,613,666
Sundry securities -- -- -- 178,325 178,325
---------- ---------- ---------- --------- ----------
Total $1,667,535 3,473,709 1,769,848 880,899 7,791,991
========== ========== ========== ========= ==========
Weighted Average Yield
U.S. Treasury 4.52% 7.26 8.90 4.48 4.57
U.S. Government agencies 5.52 6.38 7.32 6.89 6.55
CMOs 5.64 6.24 6.57 6.86 6.22
State, county and municipal 10.27 9.74 10.97 12.20 10.83
Other 5.28 6.36 7.22 7.41 6.62
Consolidated 6.95% 7.72 10.51 6.62 7.35
========= ========== ========== ======== =====
</TABLE>
T-8
<PAGE>
<TABLE>
<CAPTION>
Average
December 31, 1993 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Treasury $ 122,178 267,080 2,498 3,585 395,341 460 (39) 395,762 1.63
U.S. Government agencies 1,540,583 2,646,578 166,280 3,209 4,356,650 81,740 (5,342) 4,433,048 1.96
CMOs 79,311 322,388 41,095 -- 442,794 579 (248) 443,125 2.74
State, county and municipal 162,145 660,358 391,032 693,556 1,907,091 227,178 (1,187) 2,133,082 7.26
Other 197,327 379,998 13,629 241,633 832,587 15,755 (981) 847,361 2.91
---------- ---------- --------- --------- --------- --------- -------- ---------- -----
Total $2,101,544 4,276,402 614,534 941,983 7,934,463 325,712 (7,797) 8,252,378 3.37
========== ========== ========= ========= ========= ========= ======== ========== =====
Carrying Value
Debt securities $2,101,544 4,276,402 614,534 709,726 7,702,206 312,732 (7,797) 8,007,141
Sundry securities -- -- -- 232,257 232,257 12,980 -- 245,237
---------- ---------- --------- --------- --------- --------- -------- ----------
Total $2,101,544 4,276,402 614,534 941,983 7,934,463 325,712 (7,797) 8,252,378
========== ========== ========= ========= ========= ========= ========= ==========
Market Value
Debt securities $2,133,939 4,367,756 665,643 839,803 8,007,141
Sundry securities -- -- -- 245,237 245,237
---------- ---------- --------- --------- ---------
Total $2,133,939 4,367,756 665,643 1,085,040 8,252,378
========== ========== ========= ========= =========
Weighted Average Yield
U.S. Treasury 4.95% 7.81 9.41 4.24 4.53
U.S. Government agencies 5.83 6.30 7.66 8.00 6.19
CMOs 6.18 5.30 6.64 -- 5.58
State, county and municipal 9.07 10.68 11.15 12.21 11.19
Other 5.79 6.01 7.73 7.85 6.52
Consolidated 6.04% 9.81 11.07 6.75 7.31
========== ========== ========== ========= =======
</TABLE>
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. The aging of mortgage-backed securities is based on their
weighted average maturities.
Yields related to securities exempt from both federal and state income taxes,
federal income taxes only or state income taxes only are stated on a fully
tax-equivalent basis. They are reduced by the nondeductible portion of interest
expense, assuming a federal tax rate of 35 percent; a North Carolina state tax
rate of 7.75 percent in 1995, 7.8275 percent in 1994, and 7.905 percent in 1993;
a Georgia and Tennessee state tax rate of 6 percent; a South Carolina state tax
rate of 4.5 percent; a Florida state tax rate of 5.5 percent; a Maryland state
tax rate of 7 percent; and a Washington, D.C. tax rate of 9.975 percent in 1995,
and 10.25 percent in 1994 and 1993, respectively.
There were no commitments to purchase or sell investment securities at December
31, 1995, 1994 or 1993. Gross gains and losses realized on repurchase agreement
underdeliveries and calls of investment securities in 1995 were $5,705,000 and
$887,000, respectively. In 1994 such gross gains and losses were $4,050,000 and
$44,000, respectively. In 1993 such gross gains and losses were $7,837,000 and
$402,000, respectively.
T-9
<PAGE>
<TABLE>
<CAPTION>
Table 11
LOANS
- --------------------------------------------------------
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial
Commercial, financial and agricultural
Taxable $23,897,326 21,272,227 18,899,874 15,876,374 17,131,471 17,224,533
Nontaxable 750,958 781,257 791,194 874,284 1,078,161 1,447,655
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Total commercial, financial
and agricultural 24,648,284 22,053,484 19,691,068 16,750,658 18,209,632 18,672,188
Real estate - construction and other 2,505,627 2,052,054 2,138,128 2,489,451 3,729,288 4,310,470
Real estate - mortgage 9,991,640 9,472,695 9,282,448 8,699,155 7,757,915 6,182,383
Lease financing 3,169,698 1,921,302 1,286,560 1,442,320 1,665,305 1,808,942
Foreign 649,760 526,325 416,664 391,791 368,287 356,190
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Total commercial 40,965,009 36,025,860 32,814,868 29,773,375 31,730,427 31,330,173
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Retail
Real estate - mortgage 27,273,991 21,061,449 18,206,600 14,322,721 11,873,683 9,212,001
Installment loans - Bankcard* 3,657,619 4,345,069 2,154,799 -- -- --
Installment loans - other** 20,212,216 17,381,379 15,658,181 16,819,822 15,865,430 14,868,815
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Total retail 51,143,826 42,787,897 36,019,580 31,142,543 27,739,113 24,080,816
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Total loans 92,108,835 78,813,757 68,834,448 60,915,918 59,469,540 55,410,989
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Unearned Income
Loans 476,591 419,429 335,081 383,895 467,288 545,305
Lease financing 1,069,364 563,335 236,279 230,561 277,155 284,661
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Total unearned income 1,545,955 982,764 571,360 614,456 744,443 829,966
- ------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Loans, net $90,562,880 77,830,993 68,263,088 60,301,462 58,725,097 54,581,023
=========== =========== =========== =========== =========== ===========
</TABLE>
*Information not available prior to 1993.
**Installment loans-other include (in thousands) $2,358,021; $1,742,947;
$1,095,565; $798,167; $504,763 and $491,944 of retail leasing loans at
December 31, 1995, 1994, 1993, 1992, 1991 and 1990, respectively, that were
acquired in the First Fidelity merger.
Table 12
CERTAIN LOAN MATURITIES AND SENSITIVITY
TO CHANGES IN INTEREST RATES
- --------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
Commercial, Commercial
Financial Real Estate: Commercial
and Construction Real Estate:
(In thousands) Agricultural and Other Mortgage Foreign Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed Rate
1 year or less $ 3,681,155 85,147 604,198 371,760 4,742,260
1-5 years 2,640,865 119,322 2,169,059 26,495 4,955,741
After 5 years 1,161,769 145,373 1,813,942 23,258 3,144,342
- ---------------------------------------- ------------- --------------- --------------- --------------- ---------------
Total 7,483,789 349,842 4,587,199 421,513 12,842,343
- ---------------------------------------- ------------- --------------- --------------- --------------- ---------------
Adjustable Rate
1 year or less 7,127,580 863,293 1,049,147 174,033 9,214,053
1-5 years 6,913,406 992,954 2,897,502 30,751 10,834,613
After 5 years 3,123,509 299,538 1,457,792 23,463 4,904,302
- ---------------------------------------- ------------- --------------- --------------- --------------- ---------------
Total 17,164,495 2,155,785 5,404,441 228,247 24,952,968
- ---------------------------------------- ------------- --------------- --------------- --------------- ---------------
Total $ 24,648,284 2,505,627 9,991,640 649,760 37,795,311
======================================== ============= =============== =============== =============== ===============
</TABLE>
T-10
<PAGE>
Table 13
ALLOWANCE FOR LOAN LOSSES AND
NONPERFORMING ASSETS
- --------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of year $ 1,578,128 1,622,374 1,551,157 1,461,429 1,258,857 744,226
Provision for loan losses 220,000 179,000 369,753 642,708 946,284 923,409
Reversal of tax effect of acquired bank-
related net charge-offs included in
the provision for loan losses -- -- -- -- (16,386) --
Allowance of divested subsidiary and other sales -- -- -- -- (10,800) (7,769)
Allowance of loans acquired or sold, net 48,666 58,606 191,037 70,861 133,170 173,660
Transfer to allowance for segregated asset losses -- -- -- (20,000) (13,000) --
Loan losses, net (338,996) (281,852) (489,573) (603,841) (836,696) (574,669)
----------- ----------- ----------- ----------- ----------- ----------
Balance, end of year $ 1,507,798 1,578,128 1,622,374 1,551,157 1,461,429 1,258,857
=========== =========== =========== =========== =========== ==========
(as % of loans, net) 1.66 2.03 2.38 2.57 2.49 2.31
=========== =========== =========== =========== =========== ==========
(as % of nonaccrual and restructured loans) 233 248 151 105 77 76
=========== =========== =========== =========== =========== ==========
(as % of nonperforming assets) 182 178 115 76 55 58
=========== =========== =========== =========== =========== ==========
LOAN LOSSES
Commercial, financial and agricultural $ 108,092 150,986 232,029 276,740 365,333 319,971
Real estate - construction and other 3,823 15,901 75,761 108,517 209,691 157,459
Real estate - mortgage 70,906 79,741 134,522 108,778 130,394 11,137
Installment loans - Bankcard* 179,942 73,018 63,783 -- -- --
Installment loans - other 100,018 95,046 107,081 207,812 211,764 159,764
----------- ----------- ----------- ----------- ----------- -----------
Total 462,781 414,692 613,176 701,847 917,182 648,331
----------- ----------- ----------- ----------- ----------- -----------
LOAN RECOVERIES
Commercial, financial and agricultural 63,408 67,971 47,003 40,968 33,251 42,806
Real estate - construction and other 5,994 3,574 8,921 2,103 3,994 3,229
Real estate - mortgage 12,100 16,141 18,996 6,182 4,752 1,524
Installment loans - Bankcard* 13,861 11,376 9,927 -- -- --
Installment loans - other 28,422 33,778 38,756 48,753 38,489 26,103
----------- ----------- ----------- ----------- ----------- -----------
Total 123,785 132,840 123,603 98,006 80,486 73,662
----------- ----------- ----------- ----------- ----------- -----------
Loan losses, net $ 338,996 281,852 489,573 603,841 836,696 574,669
=========== =========== =========== =========== =========== ===========
(as % of average loans, net) .41 .40 .78 1.03 1.53 1.05
=========== =========== =========== =========== =========== ===========
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 335,507 280,409 422,641 641,645 826,051 727,587
Real estate and other loans 308,574 336,796 609,711 735,632 898,642 882,407
----------- ----------- ----------- ----------- ----------- -----------
Total nonaccrual loans 644,081 617,205 1,032,352 1,377,277 1,724,693 1,609,994
Restructured loans 3,772 19,125 40,415 104,539 177,679 39,997
Foreclosed properties 178,484 250,498 338,370 564,928 742,941 506,172
----------- ----------- ----------- ----------- ----------- -----------
Total nonperforming assets $ 826,337 886,828 1,411,137 2,046,744 2,645,313 2,156,163
=========== =========== =========== =========== =========== ===========
(as % of loans, net and foreclosed properties) .91 1.14 2.06 3.36 4.45 3.91
=========== =========== =========== =========== =========== ===========
Accruing loans past due 90 days $ 289,866 271,607 212,792 240,012 289,481 291,153
=========== =========== =========== =========== =========== ===========
</TABLE>
*Information not available prior to 1993.
T-11
<PAGE>
Table 14
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
---------- --------------- --------------- --------------- ---------------
Loans Loans Loans Loans Loans
% % % % %
Total Total Total Total Total
(In millions) Amt. Loans Amt. Loans Amt. Loans Amt. Loans Amt. Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------- -------------------------------------------------------------------------------
Commercial, financial and agricultural $412 27% $ 504 28% $ 413 28% $ 573 27% $ 648 30%
Real estate-construction and other 57 3 93 3 171 3 256 4 234 6
Real estate - mortgage 298 40 292 39 370 40 264 38 197 33
Installment loans - Bankcard 243 4 188 5 101 3 - - - -
Installment loans - other 224 22 194 22 220 23 299 28 283 27
Lease financing 9 3 7 2 7 2 7 2 8 3
Foreign 35 1 24 1 8 1 11 1 16 1
Unallocated 230 - 276 - 332 - 141 - 75 -
==================================================== ===============================================================================
Total $1,508 100% $1,578 100% $1,622 100% $1,551 100% $1,461 100%
==================================================== ===============================================================================
</TABLE>
Beginning in 1993, the allocation for loan losses is based on the Corporation's
loss migration process. The unallocated portion of the allowance for loan losses
at December 31, 1992, would have been increased by $37 million had the migration
model been available in 1992. The allocation of the allowance for loan losses to
the respective classifications is not necessarily indicative of future losses or
future allocations. Information related to Bankcards is not available prior to
1993.
See the "Loans" and "Allowance for Loan Losses" discussion in Management's
Analysis of Operations and in Note 1 to the supplemental consolidated financial
statements.
<PAGE>
Table 15
INTANGIBLE ASSETS
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
- ------------------------------- ---------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Servicing Rights $ 148,933 134,421 91,431 186,785 196,796 173,915
========== =============== ========== ========== ========== ==========
Credit Card Premium $ 43,894 58,494 75,588 71,140 73,792 24,785
========== =============== ========== ========== ========== ==========
Other Intangible Assets
Goodwill $1,883,362 1,381,720 1,038,423 840,079 887,811 914,333
Deposit base premium 535,373 535,531 367,209 285,207 216,621 191,097
Other 12,932 19,589 26,854 34,497 25,489 14,807
- ------------------------------- ---------- --------------- ---------- ---------- ---------- ----------
Total $2,431,667 1,936,840 1,432,486 1,159,783 1,129,921 1,120,237
========== =============== ========== ========== ========== ==========
</TABLE>
T-12
<PAGE>
Table 16
ALLOWANCE FOR FORECLOSED PROPERTIES
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991
- -------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Foreclosed properties $ 202,686 292,076 401,183 674,021 781,199
- -------------------------------------------------------- ------------- ------------------------------------------
Allowance for foreclosed properties, beginning of year 41,578 62,813 109,093 38,258 10,920
Provision for foreclosed properties (2,756) 13,753 46,530 132,415 45,755
Transfer from (to) allowance for segregated assets 78 2,178 4,651 - -
Dispositions, net (14,698) (37,166) (97,461) (61,580) (18,417)
- -------------------------------------------------------- -----------------------------------------------------
Allowance for foreclosed properties, end of year 24,202 41,578 62,813 109,093 38,258
- -------------------------------------------------------- -----------------------------------------------------
Foreclosed properties, net $ 178,484 250,498 338,370 564,928 742,941
======================================================== ========================================================
</TABLE>
Table 17
DEPOSITS
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
- ---------------------------- ------------ ------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Core Deposits
Noninterest-bearing $17,043,223 15,917,287 16,208,214 14,583,331 12,463,681 10,705,416
Savings and NOW accounts 24,297,270 23,263,322 21,661,410 17,652,860 14,021,445 10,061,707
Money market accounts 13,112,918 14,376,098 15,024,464 13,835,528 12,833,961 11,115,590
Other consumer time 31,945,313 27,402,767 25,534,358 27,211,878 28,925,361 23,576,212
- --------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total core deposits 86,398,724 80,959,474 78,428,446 73,283,597 68,244,448 55,458,925
Foreign 3,526,771 4,802,719 1,456,828 512,793 362,477 972,439
Other time 2,629,723 2,102,932 2,000,159 2,359,410 3,787,848 4,843,014
- --------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total deposits $92,555,218 87,865,125 81,885,433 76,155,800 72,394,773 61,274,378
========== ========== ========== ========== ========== ==========
</TABLE>
Table 18
TIME DEPOSITS IN AMOUNT OF $100,000 OR MORE
- --------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
---------------------------
Time Other
(In thousands) Certificates Time
- -------------------------------------------- -------------- -------------
<S> <C> <C>
Maturity of
3 months or less $ 2,961,453 390,340
Over 3 months through 6 months 1,313,023 33,295
Over 6 months through 12 months 1,096,910 27,348
Over 12 months 1,340,372 20,921
- -------------------------------------------- --------------- ------------
Total $ 6,711,758 471,904
============================================ ================== ============
</TABLE>
T-13
<PAGE>
Table 19
CAPITAL RATIOS
- --------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993 1992 1991 1990
- ------------------------------------------- -------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED CAPITAL RATIOS*
Qualifying Capital
Tier 1 capital $ 6,551,148 4,466,670 4,342,664 3,189,276 2,441,839 1,901,657
Total capital 11,212,378 7,450,602 6,960,671 4,948,156 3,799,073 3,153,733
Adjusted risk-based assets 98,966,217 57,593,799 47,529,159 34,573,794 32,314,244 29,121,464
Adjusted leverage ratio assets $ 119,420,752 73,011,243 70,785,664 48,671,501 45,955,064 38,833,477
Ratios
Tier 1 capital 6.62% 7.76 9.14 9.22 7.56 6.53
Total capital 11.33 12.94 14.64 14.31 11.76 10.83
Leverage 5.49 6.12 6.13 6.55 5.31 4.90
Stockholders' Equity to Assets
Year-end 6.86 6.98 7.36 6.99 6.51 6.05
Average 7.23% 7.52 7.11 6.89 6.29 6.22
=========================================== ============================= ============= ============= ============= =============
BANK CAPITAL RATIOS
Tier 1 capital
First Union National Bank of
Florida 7.39% 7.95 9.13 9.38 8.79 6.44
Georgia 6.69 8.26 9.58 8.14 6.06 6.51
Maryland 11.36 20.53 15.78 - - -
North Carolina 6.31 7.32 8.24 7.22 6.45 6.87
South Carolina 8.42 7.88 7.55 7.88 6.85 6.46
Tennessee 11.12 12.76 12.43 24.03 6.57 7.50
Virginia 7.41 9.21 10.77 - - -
Washington, D.C. 13.77 16.75 14.23 - - -
First Union National Bank 9.16 - - - - -
First Union Bank of Connecticut 12.60 - - - - -
First Union Bank of Delaware 25.45 - - - - -
First Union Home Equity Bank 7.50 7.60 - - - -
Total capital
First Union National Bank of
Florida 10.72 10.76 10.83 11.10 10.61 8.56
Georgia 10.62 11.18 12.62 11.05 7.62 8.23
Maryland 12.62 21.81 17.07 - - -
North Carolina 9.92 10.69 11.35 10.60 7.99 8.39
South Carolina 11.79 12.15 11.82 10.89 8.25 7.84
Tennessee 12.38 14.02 13.69 25.29 7.84 8.55
Virginia 10.57 13.11 13.08 - - -
Washington, D.C. 15.03 18.03 15.52 - - -
First Union National Bank 10.95 - - - - -
First Union Bank of Connecticut 13.88 - - - - -
First Union Bank of Delaware 26.74 - - - - -
First Union Home Equity Bank 10.09 12.10 - - - -
Leverage
First Union National Bank of
Florida 5.18 5.91 5.79 5.62 4.91 4.91
Georgia 5.54 5.69 5.67 6.58 4.91 4.78
Maryland 9.32 12.82 9.04 - - -
North Carolina 5.72 6.10 5.52 5.46 4.91 4.97
South Carolina 6.24 5.77 5.56 5.93 5.39 4.82
Tennessee 7.64 8.47 8.05 25.10 7.34 8.22
Virginia 6.17 7.10 6.89 - - -
Washington, D.C. 6.32 8.33 6.06 - - -
First Union National Bank 7.43 - - - - -
First Union Bank of Connecticut 8.30 - - - - -
First Union Bank of Delaware 17.20 - - - - -
First Union Home Equity Bank 6.48% 7.22 - - - -
=========================================== ============================= ============= ============= ============= =============
</TABLE>
* Risk-based capital ratio guidelines require a minimum ratio of tier 1
capital to risk-weighted assets of 4.00 percent and a minimum ratio of total
capital to risk-weighted assets of 8.00 percent. The minimum leverage ratio
of tier 1 capital to adjusted average quarterly assets is from 3.00 to 5.00
percent. The 1990-1994 capital ratios presented herein have not been
restated to reflect pooling of interests acquisitions.
T-14
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1995 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C> <C>
Asset Rate Conversions
Interest rate swaps $11,282,355 6.35 % 5.83 % 1.27 Converts floating rate loans to fixed rate.
Carrying amount $ 19,713 Adds to liability sensitivity. Similar
Unrealized gross gain 113,314 characteristics to a fixed income security
Unrealized gross loss (22,237) funded with variable rate liabilities.
Total 110,790 Includes $6.3 billion of indexed amortizing
swaps, with $2.8 billion maturing within 3
years and $3.5 billion within 4.75 years.
Forward bullet
interest rate swaps 6,120,000 5.97 - 1.96 Converts floating rates on loans to fixed
Carrying amount - rates at higher than current yields in future
Unrealized gross gain 38,428 periods. $63 million effective March 1996;
Unrealized gross loss - $6.0 billion effective December 1996; $57
Total 38,428 million effective March 1997.
Total asset rate conversions $17,402,355 6.22 % 5.83 % 1.51 $149,218
Liability Rate Conversions
Interest rate swaps $ 5,127,000 6.89 % 5.76 % 5.83 Converts $5.1 billion of fixed rate long-term
Carrying amount $ 9,627 debt to floating rate by matching the
Unrealized gross gain 224,927 maturity of the swap to the debt issue. Rate
Unrealized gross loss (7,718) sensitivity remains unchanged due to the
Total 226,836 direct linkage of the swap to the debt issue.
Also converts $42 million of fixed
rate CD's to variable rate.
Other financial instruments 180,000 - - 6.33 Miscellaneous purchased option-based products
Carrying amount (2,224) for liability management purposes include $5
Unrealized gross gain - million of options on swaps, $25 million of
Unrealized gross loss (130) eurodollar caps and $150 million of
Total (2,354) eurodollar floors.
Total liability rate conversions $ 5,307,000 6.89 % 5.76 % 5.84 $224,482
Asset Hedges
Short eurodollar futures $ 1,016,000 - % 5.81 % .29 Hedges market values of U.S. Treasury notes
Carrying amount $ - in the available-for-sale portfolio. $788
Unrealized gross gain - million effective March 1996; $164 million
Unrealized gross loss (1,391) effective June 1996; $64 million effective
Total (1,391) September 1996.
Total asset hedges $ 1,016,000 - % 5.81 % .29 $(1,391)
</TABLE>
(Continued)
T-15
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1995 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C> <C>
Rate Sensitivity Hedges
Put options on eurodollar futures $ 4,252,000 - % 7.87 % .33 (1)
Carrying amount $ 624
Unrealized gross gain -
Unrealized gross loss (624)
Total -
Interest rate cap 67,200 - - .43 (2)
Carrying amount 81
Unrealized gross gain 6
Unrealized gross loss (50)
Total 37
Short eurodollar futures 2,000,000 - 5.60 .22 (3)
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (1,378)
Total (1,378)
Long eurodollar futures 23,355,000 5.56 - 1.40 (4)
Carrying amount -
Unrealized gross gain 19,255
Unrealized gross loss -
Total 19,255
Total rate sensitivity hedges $ 29,674,200 5.56 % 7.14 % 1.16 $ 17,914
Offsetting Positions
Interest rate floors $ 800,000 6.16 % 6.16 % .45 (5)
Carrying amount $ (524)
Unrealized gross gain 2,362
Unrealized gross loss (1,838)
Total -
Prime/federal funds cap 4,000,000 5.90 5.90 .27 (6)
Carrying amount 448
Unrealized gross gain 1,353
Unrealized gross loss (1,801)
Total -
Total offsetting positions $ 4,800,000 5.95 % 5.95 % .30 $ -
</TABLE>
(1) Paid a premium for the right to lock in the 3 month LIBOR reset
rates on pay variable rate swaps and short-term liabilities
$2.4 billion effective March 1996; $1.9 billion effective June 1996.
(2) Purchased LIBOR caps; $50 million converts floating rate liabilities
to fixed if short-term rates rise above 8 percent; $17 million
uncaps a LIBOR-based, asset-backed security at 11.72 percent.
(3) Locks in the 3 month LIBOR reset rates on pay variable rate
swaps. Effective March 1996.
(4) Converts floating rate LIBOR - based loans to fixed rate. Adds to
liability sensitivity. Similar characteristics to fixed income security
funded with variable rate liabilities. $4.9 billion effective December
1996; $5.0 billion effective March 1997; $4.9 billion effective
June 1997; $8.6 billion effective September 1997.
(5) Consists of $800 million of interest rate floors, of which $400
million were purchased and offset by $400 million sold, locking
in gains to be amortized over the remaining life of the contracts.
(6) In December 1994, the corporation offset an existing federal funds
cap (purchased) and a prime rate cap (written) position by
simultaneously purchasing a prime rate cap and writing a federal
funds cap at strikes of 6.0 percent and 3.25 percent, respectively.
The notional amount of each cap is $1.0 billion. Lock in losses to
be amortized over the remaining life of the contracts.
* Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities. Prime Rate - The base rate on
corporate loans posted by at least 75 percent of the nation's 30 largest
banks as defined in The Wall Street Journal. London Interbank Offered Rates
(LIBOR) - The average of interbank offered rates on dollar deposits in the
London market, based on quotations at five major banks. Weighted average pay
rates are generally based upon one to six month LIBOR. Pay rates related to
forward interest rate swaps are set on the future effective date. Pay rates
reset at predetermined reset dates over the life of the contract. Rates shown
are the rates in effect as of December 31, 1995. Weighted average receive
rates are fixed rates at the time the contract was transacted. Carrying
amount includes accrued interest receivable/payable and unamortized premiums
paid/received.
T-16
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C> <C>
Asset Rate Conversions
Interest rate swaps $ 10,322,216 5.71 % 6.13 % 2.08 (1)
Carrying amount $ 8,917
Unrealized gross gain 12,699
Unrealized gross loss (476,815)
Total (455,199)
Forward interest rate swaps 1,200,000 7.93 - 1.63 (2)
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (7,071)
Total (7,071)
Total asset rate conversions $ 11,522,216 5.94 % 6.13 % 2.04 $ (462,270)
Liability Rate Conversions
Interest rate swaps $ 4,026,500 6.90 % 6.49 % 5.20 (3)
Carrying amount $ 18,960
Unrealized gross gain 1,685
Unrealized gross loss (220,348)
Total (199,703)
Other financial instruments 392,000 - - 3.46 (4)
Carrying amount 1,902
Unrealized gross gain -
Unrealized gross loss (1,792)
Total 110
Total liability rate conversions $ 4,418,500 6.90 % 6.49 % 5.04 $ (199,593)
Asset Hedges
Short T-bill futures $ 1,200,000 - % 7.01 % .42 (5)
Carrying amount $ -
Unrealized gross gain 555
Unrealized gross loss -
Total 555
Long Eurodollar futures 800,000 6.50 - .43 (6)
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (2,410)
Total (2,410)
Total asset hedges $ 2,000,000 6.50 % 7.01 % .42 $ (1,855)
</TABLE>
(1) Converts floating rate loans to fixed rate. Adds to liability
sensitivity. Similar characteristics to a fixed income security
funded with variable rate liabilities. Includes $4.3 billion of
indexed amortizing swaps, all of which mature within four years.
(2) Converts floating rates on loans to fixed rates at higher than current
yields for future periods. $200 million effective March 1995 and $1.0
billion effective September 1995. Put options on forward swaps
referenced under "Rate Sensitivity Hedges" are linked to this item.
(3) Converts fixed rate long-term debt to floating rate by matching
maturity of the swap to the debt issue. Rate sensitivity remains
unchanged due to the linkage of the swap to the debt issue.
(4) Miscellaneous option-based products for liability management
purposes include $35 million of options on swaps,
$207 million eurodollar caps and $150 million of eurodollar
floors. These instruments were assumed as a result of certain
of the corporation's acquisitions.
(5) Converts the maturity of $200 million U.S. Treasury bills in the
available for sale portfolio from June 1995 to March 1995 and
$1.0 billion U.S. Treasury bills from September 1995 to June 1995.
(6) Locks in the rate of a portion of the Mortgage-backed securities
portfolio.
T-17
<PAGE>
Table 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
December 31, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comment
<S> <C> <C> <C> <C> <C> <C>
Rate Sensitivity Hedges
Put options on eurodollar futures $ 27,181,000 - % 8.05 % .56 (1)
Carrying amount $ 21,524
Unrealized gross gain 12,322
Unrealized gross loss -
Total 33,846
Put options on forward swaps 1,000,000 - 8.08 .72 (2)
Carrying amount 3,721
Unrealized gross gain 3,514
Unrealized gross loss -
Total 7,235
Interest rate cap 50,000 - - 1.16 (3)
Carrying amount 356
Unrealized gross gain -
Unrealized gross loss (181)
Total 175
Long eurodollar futures 25,000 5.31 - .20 (4)
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (120)
Total (120)
Total rate sensitivity hedges $ 28,256,000 5.31 % 8.05 % .56 $ 41,136
Offsetting Positions
Interest rate floors $ 800,000 6.44 % 6.44 % 1.45 (5)
Carrying amount $ (1,675)
Unrealized gross gain 2,336
Unrealized gross loss (661)
Total -
Prime/federal funds cap 4,000,000 4.63 4.63 1.27 (6)
Carrying amount 1,611
Unrealized gross gain 23
Unrealized gross loss (2,120)
Total (486)
Total offsetting positions $ 4,800,000 4.93 % 4.93 % 1.30 $ (486)
</TABLE>
(1) Paid a premium for the right to lock in the 3 month LIBOR
reset rates on pay variable rate swaps and short-term liabilities.
$1.7 billion effective March 1995; $12.5 billion efffective June 1995;
and $13.0 billion effective September 1995.
(2) Paid a premium for the right to terminate $1.0 billion of forward
interest rate swaps based on interest rates in effect in September
1995. Reduces liability sensitivity.
(3) Purchased cap to convert floating rate liabilities to fixed rate if
short-term rates rise above 8 percent.
(4) Locks in the rate of the future placement of 3 month eurodollar
deposits.
(5) Consists of $800 million of interest rate floors, of which $400
million were purchased and offset by $400 million sold,
locking in gains to be amortized over the remaining life of
the contracts.
(6) In December 1994, the corporation offset an existing federal funds
cap (purchased) and a prime rate cap (written) position by
simultaneously purchasing a prime rate cap and writing a federal
funds cap at strikes of 6.00 percent and 3.25 percent, respectively.
The notional amount of each cap is $1.0 billion. Locks in losses to
be amortized over the remaining life of the contracts.
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities. Prime Rate - The base rate on
corporate loans posted by at least 75 percent of the nation's 30 largest
banks as defined in The Wall Street Journal. London Interbank Offered Rates
(LIBOR) - The average of interbank offered rates on dollar deposits in the
London market, based on quotations at five major banks. Weighted average
pay rates are generally based upon one to six month LIBOR. Pay rates related
to forward interest rate swaps are set on the future effective date.
Pay rates reset at predetermined reset dates over the life of the contract.
Rates shown are the rates in effect as of December 31, 1994. Weighted average
receive rates are fixed rates at the time the contract was transacted.
Carrying amount includes accrued interest receivable/payable and unamortized
premiums paid/received.
T-18
<PAGE>
Table 21
OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES*
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995 1 Year 1 -2 2 -5 5 -10 After 10
(In thousands) or Less Years Years Years Years Total
- --------------------------------- ------------ ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Asset Rate Conversions
Notional amount $ 6,249,009 10,026,072 1,127,274 -- -- 17,402,355
Weighted average receive rate 6.26 % 6.27 5.49 -- -- 6.22
Estimated fair value $ 43,801 109,675 (4,258) -- -- 149,218
------------ ------------ ------------ ------------ ------------ ------------
Liability Rate Conversions
Notional amount $ 854,000 408,000 1,070,000 2,475,000 500,000 5,307,000
Weighted average receive rate 6.59 % 6.82 6.44 7.27 6.68 6.89
Estimated fair value $ 18,383 9,037 19,576 162,706 14,780 224,482
------------ ------------ ------------ ------------ ------------ ------------
Asset Hedges
Notional amount $ 1,016,000 -- -- -- -- 1,016,000
Weighted average receive rate -- % -- -- -- -- --
Estimated fair value $ (1,391) -- -- -- -- (1,391)
------------ ------------ ------------ ------------ ------------ ------------
Rate Sensitivity Hedges
Notional amount $ 11,169,000 18,505,200 -- -- -- 29,674,200
Weighted average receive rate 5.31 % 5.62 -- -- -- 5.56
Estimated fair value $ 1,203 16,711 -- -- -- 17,914
------------ ------------ ------------ ------------ ------------ ------------
Offsetting Positions
Notional amount $ 4,800,000 -- -- -- -- 4,800,000
Weighted average receive rate 5.95 % -- -- -- -- 5.95
Estimated fair value $ -- -- -- -- -- --
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 1 Year 1 -2 2 -5 5 -10 After 10
(In thousands) or Less Years Years Years Years Total
- --------------------------------- ------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Asset Rate Conversions
Notional amount $ 2,036,623 3,807,490 5,678,103 -- -- 11,522,216
Weighted average receive rate 5.81 % 7.19 5.15 -- -- 5.94
Estimated fair value $ (25,724) (57,775) (378,771) -- -- (462,270)
------------ ------------ ------------ ------------ ------------ ------------
Liability Rate Conversions
Notional amount $ 1,116,500 344,000 983,000 1,225,000 750,000 4,418,500
Weighted average receive rate 6.98 % 6.23 6.60 7.58 6.52 6.90
Estimated fair value $ (23,382) (7,410) (37,280) (24,229) (107,292) (199,593)
------------ ------------ ------------ ------------ ------------ ------------
Asset Hedges
Notional amount $ 2,000,000 -- -- -- -- 2,000,000
Weighted average receive rate 6.50 % -- -- -- -- 6.50
Estimated fair value $ (1,855) -- -- -- -- (1,855)
------------ ------------ ------------ ------------ ------------ ------------
Rate Sensitivity Hedges
Notional amount $ 28,206,000 50,000 -- -- -- 28,256,000
Weighted average receive rate 5.31 % -- -- -- -- 5.31
Estimated fair value $ 40,961 175 -- -- -- 41,136
------------ ------------ ------------ ------------ ------------ ------------
Offsetting Positions
Notional amount $ -- 4,800,000 -- -- -- 4,800,000
Weighted average receive rate -- % 4.93 -- -- -- 4.93
Estimated fair value $ -- (486) -- -- -- (486)
============ ============ ============ ============ ============ ============
</TABLE>
* Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities. Pay rates are generally based upon
one to six month LIBOR and reset at predetermined reset dates. Current pay
rates are not necessarily indicative of future pay rates and therefore have
been excluded from the above table. Weighted average pay rates are indicated
in Table 20.
T-19
<PAGE>
Table 22
OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Rate
Asset Rate Liability Rate Basis Asset Sensitivity Offsetting
(In thousands) Conversions Conversions Protection Hedges Hedges Positions Total
- ------------------------ -------------- -------------- ------------ ------------ ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 18,334,640 4,408,173 6,000,000 750,000 23,543,000 800,000 53,835,813
Additions 2,877,000 2,153,000 -- 11,050,000 44,907,643 2,000,000 62,987,643
Maturities/Amortizations (7,295,424) (1,656,673) -- (3,000,000) (34,694,643) -- (46,646,740)
Offsets -- -- (2,000,000) -- -- 2,000,000 --
Terminations (2,394,000) (486,000) (4,000,000) (6,800,000) (5,500,000) -- (19,180,000)
------------ ----------- ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1994 11,522,216 4,418,500 -- 2,000,000 28,256,000 4,800,000 50,996,716
Additions 9,760,147 2,298,000 -- 4,245,000 55,466,631 -- 71,769,778
Maturities/Amortizations (3,455,617) (1,409,500) -- (4,229,000) (48,625,705) -- (57,719,822)
Terminations (424,391) -- -- (1,000,000) (5,422,726) -- (6,847,117)
------------ ----------- ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 $ 17,402,355 5,307,000 -- 1,016,000 29,674,200 4,800,000 58,199,555
============ =========== ============ ============ ============ ============ ============
</TABLE>
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Table 23
INTEREST DIFFERENTIAL
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 Compared to 1994 1994 Compared to 1993
Interest Interest
Income/ Variance Income/ Variance
Expense Attributable to** Expense Attributable to**
(in thousands) Variance Rate Volume Variance Rate Volume
- ----------------------------------------------- ------------ ---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Interest-bearing bank balances $ (39,098) 3,005 (42,103) (22,585) 12,223 (34,808)
Federal funds sold and securities
purchased under resale agreements 73,872 30,735 43,137 23,941 11,435 12,506
Trading account assets* 28,908 5,638 23,270 20,186 16,072 4,114
Securities available for sale* (31,547) 107,631 (139,178) 332,088 56,844 275,244
Investment securities*:
US Government and other 48,207 40,922 7,285 (346,051) (24,064) (321,987)
State, county, and municipal (39,635) (4,407) (35,228) 4,482 (5,301) 9,783
- ----------------------------------------------------------- --------- --------- ----------- ----------- -----------
Total 8,572 36,515 (27,943) (341,569) (29,365) (312,204)
- ----------------------------------------------------------- --------- --------- ----------- ----------- -----------
Loans* 1,399,096 333,910 1,065,186 603,926 (38,113) 642,039
- ----------------------------------------------------------- --------- --------- ----------- ----------- -----------
Total earning assets $ 1,439,803 517,434 922,369 615,987 29,096 586,891
=========================================================== ========= ========= =========== =========== ===========
Interest- Bearing Liabilities
Deposits 807,284 587,167 220,117 102,056 5,068 96,988
Short-term borrowings 320,719 174,795 145,924 156,380 89,061 67,319
Long-term debt 130,830 20,865 109,965 52,594 28,385 24,209
- ----------------------------------------------------------- --------- --------- ----------- ----------- -----------
Total interest-bearing liabilities 1,258,833 782,827 476,006 311,030 122,514 188,516
=========================================================== ========= ========= =========== =========== ===========
Net interest income $ 180,970 (265,393) 446,363 304,957 (93,418) 398,375
=========================================================== ========= ========= =========== =========== ===========
</TABLE>
* Income related to securities and loans exempt from both federal and state
income taxes, federal income taxes only or state income taxes only is stated
on a fully tax-equivalent basis. It is reduced by the nondeductible portion
of interest expense, assuming a federal income tax rate of 35 percent; a
North Carolina state tax rate of 7.75 percent in 1995 and 7.8275 percent in
1994; a Georgia and Tennessee state tax rate of 6 percent; a South Carolina
state tax rate of 4.5 percent; a Florida state tax rate of 5.5 percent; a
Maryland state tax rate of 7 percent; and a Washington, D.C. tax rate of
9.975 percent in 1995 and 10.25 percent in 1994, respectively.
** Changes attributable to rate/volume are allocated to both rate and
volume on an equal basis.
T-20
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 1995 YEAR ENDED 1994
-------------------- -------------------
Interest Average Interest Average
Average Income/ Rates Average Income/ Rates
(In thousands) Balances Expense Earned/Paid Balances Expense Earned/Paid
- --------------------------------------- --------------- ------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing bank balances $ 475,771 25,946 5.45% $ 1,272,933 65,044 5.11 %
Federal funds sold and securities
purchased under resale agreements 2,265,686 130,759 5.77 1,390,819 56,887 4.09
Trading account assets (a) (d) 1,537,655 96,677 6.29 1,154,787 67,769 5.87
Securities available for sale (a) (d) 11,211,947 718,499 6.41 13,541,857 750,046 5.54
Investment securities (a) (d)
U.S. Government and other 6,026,734 403,513 6.70 5,912,052 355,306 6.01
State, county and municipal 1,488,009 162,780 10.94 1,806,142 202,415 11.21
Total investment securities 7,514,743 566,293 7.54 7,718,194 557,721 7.23
Loans (a) (b) (d)
Commercial
Commercial, financial and
agricultural 22,634,368 1,792,003 7.92 19,796,537 1,548,958 7.82
Real estate - construction and
other 2,265,962 210,524 9.29 1,980,354 153,918 7.77
Real estate - mortgage 9,826,476 872,605 8.88 9,441,337 766,483 8.12
Lease financing 1,416,042 130,647 9.23 860,642 76,580 8.90
Foreign 613,855 43,243 7.04 547,675 29,583 5.40
Total commercial 36,756,703 3,049,022 8.30 32,626,545 2,575,522 7.89
Retail
Real estate - mortgage 23,389,576 1,785,710 7.63 19,171,920 1,406,905 7.34
Installment loans - Bankcard (c) 4,370,403 631,555 14.45 2,949,165 415,630 14.09
Installment loans - other 18,748,715 1,787,365 9.53 15,978,276 1,456,499 9.12
Total retail 46,508,694 4,204,630 9.04 38,099,361 3,279,034 8.61
Total loans 83,265,397 7,253,652 8.71 70,725,906 5,854,556 8.28
Total earning assets 106,271,199 8,791,826 8.27 95,804,496 7,352,023 7.67
Cash and due from banks 5,003,881 4,861,732
Other assets 6,867,006 5,746,875
Total assets $118,142,086 $106,413,103
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 23,047,127 588,161 2.55 21,785,954 463,870 2.13
Money market accounts 13,269,875 387,635 2.92 14,619,988 351,943 2.41
Other consumer time 29,779,347 1,538,455 5.17 25,215,788 1,042,233 4.13
Foreign 3,088,832 178,146 5.77 1,968,960 90,856 4.61
Other time 2,571,123 160,931 6.26 1,963,031 97,142 4.95
Total interest-bearing deposits 71,756,304 2,853,328 3.98 65,553,721 2,046,044 3.12
Federal funds purchased and securities
sold under repurchase agreements 10,324,539 595,920 5.77 8,868,625 382,268 4.31
Commercial paper 1,053,037 60,111 5.71 849,588 35,278 4.15
Other short-term borrowings 2,649,027 160,619 6.06 1,463,162 78,385 5.36
Long-term debt 5,707,257 381,837 6.69 4,009,128 251,007 6.26
Total interest-bearing
liabilities 91,490,164 4,051,815 4.43 80,744,224 2,792,982 3.46
Noninterest-bearing deposits 15,518,337 15,206,362
Other liabilities 2,588,347 2,189,378
Stockholders' equity 8,545,238 8,273,139
Total liabilities and
stockholders' equity $118,142,086 $106,413,103
Interest income and rate earned $ 8,791,826 8.27 % $ 7,352,023 7.67 %
Interest expense and rate paid 4,051,815 3.81 2,792,982 2.92
Net interest income and margin $ 4,740,011 4.46 % $ 4,559,041 4.75 %
</TABLE>
(a)Yields related to securities and loans exempt from both federal and state
income taxes, federal income taxes only or state income taxes only are stated
on a fully tax-equivalent basis. They are reduced by the nondeductible
portion of interest expense, assuming a federal income tax rate of 35 percent
in 1993 through 1995, and 34 percent in 1991 and 1992; a North Carolina state
tax rate of 7.75 percent in 1995, 7.8275 percent in 1994, 7.905 percent in
1993, 7.9825 percent in 1992, and 8.06 percent in 1991; a Georgia and
Tennessee state rate of 6 percent; a South Carolina state tax rate of 4.5
percent; a Florida state tax rate of 5.5 percent in 1991 through 1995; a
Maryland state tax rate of 7 percent in 1993 through 1995; and a Washington,
D.C. tax rate of 9.975 percent in 1995 and 10.25 percent in 1994 and 1993,
respectively.
T-21
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED 1993 YEAR ENDED 1992 YEAR ENDED 1991
-------------------- ----------------------- -----------------------
Interest Average Interest Average Interest Average
Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balances Expense Earned/Paid Balances Expense Earned/Paid Balances Expense Earned/Paid
- ----------------- ------------- --------------- ------------- ----------- ------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,007,712 87,629 4.36 % $ 3,069,633 146,462 4.77 % $ 2,308,668 151,533 6.56 %
1,045,429 32,946 3.15 2,105,693 77,053 3.66 2,008,998 119,697 5.96
1,074,861 47,583 4.43 613,521 33,044 5.39 640,336 44,571 6.96
8,327,713 417,958 5.02 3,042,895 196,681 6.46 - - -
11,146,829 701,357 6.29 11,118,731 813,188 7.31 13,382,040 1,187,609 8.87
1,720,005 197,933 11.51 2,068,583 237,659 11.49 2,652,599 275,742 10.40
-------------- ----------- ------------- ------------ ------------ -------------
12,866,834 899,290 6.99 13,187,314 1,050,847 7.97 16,034,639 1,463,351 9.13
-------------- ----------- ------------- ------------ ------------ -------------
17,630,957 1,363,711 7.73 17,301,641 1,397,324 8.08 18,138,917 1,684,488 9.29
2,543,279 152,094 5.98 2,945,597 173,411 5.89 3,494,022 259,836 7.44
8,474,559 661,130 7.80 8,066,965 667,087 8.27 7,100,245 655,025 9.23
793,381 76,840 9.69 1,093,294 86,712 7.93 1,259,617 128,215 10.18
384,786 18,664 4.85 329,076 19,077 5.80 307,222 21,690 7.06
-------------- ----------- ------------- ------------ ------------ -------------
29,826,962 2,272,439 7.62 29,736,573 2,343,611 7.88 30,300,023 2,749,254 9.07
-------------- ----------- ------------- ------------ ------------ -------------
14,864,444 1,168,278 7.86 12,317,891 1,104,654 8.97 9,406,448 945,393 10.05
2,128,802 324,510 15.24 - - - - - -
16,176,170 1,485,403 9.18 16,645,847 1,800,308 10.82 15,137,554 1,725,606 11.40
-------------- ----------- ------------- ------------ ------------ -------------
33,169,416 2,978,191 8.98 28,963,738 2,904,962 10.03 24,544,002 2,670,999 10.88
-------------- ----------- ------------- ------------ ------------ -------------
62,996,378 5,250,630 8.33 58,700,311 5,248,573 8.94 54,844,025 5,420,253 9.88
-------------- ----------- ------------- ------------ ------------ -------------
88,318,927 6,736,036 7.63 80,719,367 6,752,660 8.37 75,836,666 7,199,405 9.49
=========== ========= ======================= ============= =========
5,092,753 4,252,712 3,737,676
6,198,758 5,648,764 4,247,857
-------------- ------------- ------------
$ 99,610,438 $ 90,620,843 $ 83,822,199
============== ============= ============
18,857,865 407,579 2.16 15,390,096 458,106 2.98 11,700,049 521,608 4.46
14,264,113 328,167 2.30 13,553,818 401,394 2.96 11,589,761 589,395 5.09
26,444,207 1,091,109 4.13 26,809,254 1,373,684 5.12 26,251,514 1,803,055 6.87
798,027 27,789 3.48 361,863 22,381 6.18 622,583 51,370 8.25
2,078,150 89,344 4.30 3,591,178 184,559 5.14 4,456,165 301,670 6.77
-------------- ----------- ------------- ------------ ------------ -------------
62,442,362 1,943,988 3.11 59,706,209 2,440,124 4.09 54,620,072 3,267,098 5.98
8,206,273 294,962 3.59 5,536,779 212,780 3.84 8,084,685 471,766 5.84
484,074 12,772 2.64 483,358 15,207 3.15 765,575 44,595 5.83
810,033 31,817 3.93 749,590 33,108 4.42 541,955 34,101 6.29
3,597,957 198,413 5.51 3,527,853 240,461 6.82 3,192,477 253,325 7.94
-------------- ----------- ------------- ------------ ------------ -------------
75,540,699 2,481,952 3.29 70,003,789 2,941,680 4.20 67,204,764 4,070,885 6.06
=========== ========= ======================= ============= =========
14,388,027 12,240,490 9,982,548
2,379,560 2,096,157 1,551,313
7,302,152 6,280,407 5,083,574
-------------- ------------- ------------
$ 99,610,438 $ 90,620,843 $ 83,822,199
============== ============= ============
$ 6,736,036 7.63 % $ 6,752,660 8.37 % $ 7,199,405 9.49 %
2,481,952 2.81 2,941,680 3.64 4,070,885 5.37
----------- --------- ----------------------- ------------- ---------
$ 4,254,084 4.82 % $ 3,810,980 4.73 % $ 3,128,520 4.12 %
=========== ========= ======================= ============= =========
</TABLE>
(b)The loan averages include loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
(c)Information not available prior to 1993.
(d)Tax-equivalent adjustments included in trading account assets, securities
available for sale, investment securities, commercial, financial and
agricultural loans, and lease financing are (in thousands) $5,668, $12,934,
$56,037, $27,330 and $3,480 in 1995, respectively; and $4,062, $15,955,
$70,854, $27,886 and $2,453 in 1994, respectively.
T-22
<PAGE>
MANAGEMENT'S STATEMENT OF FINANCIAL RESPONSIBILITY
First Union Corporation and Subsidiaries
Management of First Union Corporation and its
subsidiaries (the Corporation) is committed to the highest standards in quality
customer service and the enhancement of stockholder value. Management expects
the Corporation's employees to respect its customers and to assign the highest
priority to customer needs.
The accompanying supplemental consolidated financial statements were
prepared in conformity with generally accepted accounting principles and
include, as necessary, best estimates and judgments by management. Other
financial information contained in this supplemental annual report is presented
on a basis consistent with the supplemental consolidated financial statements
unless otherwise indicated.
To ensure the integrity, objectivity and fairness of data in these
supplemental consolidated financial statements, management of the Corporation
has established and maintains an internal control structure that is supplemented
by a program of internal audits. The internal control structure is designed to
provide reasonable assurance that assets are safeguarded and transactions are
executed, recorded and reported in accordance with management's intentions and
authorizations and to comply with applicable laws and regulations. To enhance
the reliability of the internal control structure, management recruits and
trains highly qualified personnel, and maintains sound risk management practices
and efficient operations.
The supplemental consolidated financial statements have been audited by KPMG
Peat Marwick LLP, independent auditors, in accordance with generally accepted
auditing standards. KPMG Peat Marwick LLP reviews the results of its audit with
both management and the Audit Committee of the Board of Directors of the
Corporation. The Audit Committee, composed entirely of outside directors, meets
periodically with management, internal auditors and KPMG Peat Marwick LLP to
determine that each is fulfilling its responsibilities and to support actions to
identify, measure and control risks, augment internal controls and enhance
operational efficiency.
Edward E. Crutchfield
Chairman and Chief Executive Officer
Robert T. Atwood
Executive Vice President and
Chief Financial Officer
January 11, 1996
INDEPENDENT AUDITORS' REPORT
First Union Corporation and Subsidiaries
Board of Directors and Stockholders
First Union Corporation
We have audited the supplemental consolidated balance sheets of First Union
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
supplemental consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1995. These supplemental consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these supplemental consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The supplemental consolidated financial statements give retroactive effect
to the merger of First Union Corporation and First Fidelity Bancorporation on
January 1, 1996, which has been accounted for as a pooling of interests as
described in Note 2 to the supplemental consolidated financial statements.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
First Union Corporation and subsidiaries after financial statements covering the
date of consummation of the business combination are issued.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
First Union Corporation and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles applicable after financial statements are issued for a
period which includes the date of consummation of the business combination.
As discussed in Note 3 to the supplemental consolidated financial
statements, the Corporation adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
KPMG Peat Marwick LLP
Charlotte, North Carolina
January 11, 1996
C-1
<PAGE>
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31,
(In thousands except share data) 1995
<S> <C>
Assets
Cash and due from banks $ 6,312,076
Interest-bearing bank balances 79,235
Federal funds sold and securities purchased under resale agreements 4,152,754
Total cash and cash equivalents 10,544,065
Trading account assets 1,881,066
Securities available for sale (amortized cost $17,992,898 in 1995; $11,929,691 in 1994) 18,193,699
Investment securities (market value $3,319,602 in 1995; $7,791,991 in 1994) 3,139,616
Loans, net of unearned income ($1,545,955 in 1995; $982,764 in 1994) 90,562,880
Allowance for loan losses (1,507,798)
Loans, net 89,055,082
Premises and equipment 2,553,170
Due from customers on acceptances 616,301
Mortgage servicing rights 148,933
Credit card premium 43,894
Other intangible assets 2,431,667
Other assets 3,272,380
Total assets $131,879,873
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 17,043,223
Interest-bearing deposits 75,511,995
Total deposits 92,555,218
Short-term borrowings 19,500,127
Bank acceptances outstanding 616,301
Other liabilities 3,044,136
Long-term debt 7,120,947
Total liabilities 122,836,729
Stockholders' equity
Preferred stock 183,223
Common stock, $3.33 1/3 par value; authorized 750,000,000 shares, outstanding
277,845,768 shares in 1995; 285,360,745 shares in 1994 926,152
Paid-in capital 1,974,833
Retained earnings 5,847,922
Unrealized gain (loss) on debt and equity securities 111,014
Total stockholders' equity 9,043,144
Total liabilities and stockholders' equity $131,879,873
<CAPTION>
1994
(In thousands except share data)
<S> <C>
Assets
Cash and due from banks 5,822,693
Interest-bearing bank balances 980,693
Federal funds sold and securities purchased under resale agreements 1,421,700
Total cash and cash equivalents 8,225,086
Trading account assets 1,317,169
Securities available for sale (amortized cost $17,992,898 in 1995; $11,929,691 in 1994) 11,533,642
Investment securities (market value $3,319,602 in 1995; $7,791,991 in 1994) 7,916,729
Loans, net of unearned income ($1,545,955 in 1995; $982,764 in 1994) 77,830,993
Allowance for loan losses (1,578,128)
Loans, net 76,252,865
Premises and equipment 2,193,974
Due from customers on acceptances 437,474
Mortgage servicing rights 134,421
Credit card premium 58,494
Other intangible assets 1,936,840
Other assets 3,522,507
Total assets 113,529,201
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 15,917,287
Interest-bearing deposits 71,947,838
Total deposits 87,865,125
Short-term borrowings 10,249,265
Bank acceptances outstanding 437,474
Other liabilities 2,460,708
Long-term debt 4,242,137
Total liabilities 105,254,709
Stockholders' equity
Preferred stock 229,707
Common stock, $3.33 1/3 par value; authorized 750,000,000 shares, outstanding
277,845,768 shares in 1995; 285,360,745 shares in 1994 951,202
Paid-in capital 2,361,350
Retained earnings 5,021,730
Unrealized gain (loss) on debt and equity securities (289,497)
Total stockholders' equity 8,274,492
Total liabilities and stockholders' equity 113,529,201
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
C-2
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands except per share data) 1995 1994
<S> <C> <C>
Interest Income
Interest and fees on loans $ 7,222,842 5,824,217
Interest and dividends on securities available for sale 705,565 734,091
Interest and dividends on investment securities
Taxable income 401,145 352,689
Nontaxable income 109,111 134,178
Trading account interest 91,009 63,707
Other interest income 156,705 121,931
Total interest income 8,686,377 7,230,813
Interest Expense
Interest on deposits 2,853,328 2,046,044
Interest on short-term borrowings 816,650 495,931
Interest on long-term debt 381,837 251,007
Total interest expense 4,051,815 2,792,982
Net interest income 4,634,562 4,437,831
Provision for loan losses 220,000 179,000
Net interest income after provision for loan losses 4,414,562 4,258,831
Noninterest Income
Trading account profits 69,407 51,672
Service charges on deposit accounts 615,552 580,271
Mortgage banking income 149,585 88,436
Capital management income 397,191 330,416
Securities available for sale transactions 44,340 6,213
Investment security transactions 4,818 4,006
Fees for other banking services 159,571 130,992
Merchant discounts 100,580 89,508
Insurance commissions 53,843 48,076
Sundry income 301,621 246,323
Total noninterest income 1,896,508 1,575,913
Noninterest Expense
Personnel expense 1,962,152 1,772,842
Occupancy 352,551 352,721
Equipment rentals, depreciation and maintenance 320,036 270,157
Postage, printing and supplies 139,277 123,500
FDIC insurance 120,489 183,580
Professional fees 176,359 169,461
Owned real estate expense 13,981 34,544
Amortization 253,700 186,134
Merger-related restructuring charges 94,446 --
Sundry 659,478 653,918
Total noninterest expense 4,092,469 3,746,857
Income before income taxes 2,218,601 2,087,887
Income taxes 788,420 711,444
Net income 1,430,181 1,376,443
Dividends on preferred stock 26,390 46,020
Net income applicable to common stockholders before redemption premium 1,403,791 1,330,423
Redemption premium on preferred stock -- 41,355
Net income applicable to common stockholders after redemption premium $ 1,403,791 1,289,068
Per Common Share Data
Net income before redemption premium $ 5.04 4.72
Net income after redemption premium 5.04 4.58
Cash dividends $ 1.96 1.72
Average common shares 278,677,119 281,662,617
<CAPTION>
1993
(In thousands except per share data)
<S> <C>
Interest Income
Interest and fees on loans 5,215,845
Interest and dividends on securities available for sale 390,689
Interest and dividends on investment securities
Taxable income 697,084
Nontaxable income 132,801
Trading account interest 44,534
Other interest income 120,575
Total interest income 6,601,528
Interest Expense
Interest on deposits 1,943,988
Interest on short-term borrowings 339,551
Interest on long-term debt 198,413
Total interest expense 2,481,952
Net interest income 4,119,576
Provision for loan losses 369,753
Net interest income after provision for loan losses 3,749,823
Noninterest Income
Trading account profits 59,939
Service charges on deposit accounts 572,625
Mortgage banking income 150,896
Capital management income 306,392
Securities available for sale transactions 32,784
Investment security transactions 7,435
Fees for other banking services 100,122
Merchant discounts 79,452
Insurance commissions 46,717
Sundry income 225,426
Total noninterest income 1,581,788
Noninterest Expense
Personnel expense 1,623,949
Occupancy 341,847
Equipment rentals, depreciation and maintenance 233,572
Postage, printing and supplies 124,608
FDIC insurance 181,593
Professional fees 95,267
Owned real estate expense 69,050
Amortization 237,911
Merger-related restructuring charges --
Sundry 628,549
Total noninterest expense 3,536,346
Income before income taxes 1,795,265
Income taxes 578,912
Net income 1,216,353
Dividends on preferred stock 45,553
Net income applicable to common stockholders before redemption premium 1,170,800
Redemption premium on preferred stock --
Net income applicable to common stockholders after redemption premium 1,170,800
Per Common Share Data
Net income before redemption premium 4.30
Net income after redemption premium 4.30
Cash dividends 1.50
Average common shares 272,438,239
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
C-3
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
Unrealized Gain
(Loss) on Debt
Preferred Stock Common Stock Paid-in Retained and Equity
(In thousands except per share data) Shares Amount Shares Amount Capital Earnings Securities
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992, as
originally reported 6,846 $ 44,774 164,849 $549,497 1,396,701 2,468,191 --
Preferred and common stock issued for
pooled bank acquired January 1, 1996 5,312 232,172 100,046 333,486 755,527 936,465 --
Balance at December 31, 1992, as restated 12,158 276,946 264,895 882,983 2,152,228 3,404,656 --
Net income -- -- -- -- -- 1,216,353 --
Purchase of Class A Series A preferred
stock (6) (134) -- -- -- -- --
Purchase of common stock -- -- (3,879) (12,930) (110,428) -- --
Common stock issued for stock
options exercised -- -- 2,339 7,797 69,779 (4,366) --
Common stock issued through dividend
reinvestment plan -- -- 3,518 11,727 141,007 (230) --
Common stock issued for purchase accounting
acquisitions -- -- 5,328 17,760 148,329 -- --
Converted debentures and preferred stock (592) (14,798) 774 2,580 12,551 -- --
Pre-merger transactions of pooled banks -- -- 5,229 17,429 98,892 361 --
Cash dividends paid
By First Union Corporation at
$2.50 per Class A Series A preferred
share -- -- -- -- -- (337) --
7.78% per Series 1990 preferred share -- -- -- -- -- (24,563) --
$1.50 per common share -- -- -- -- -- (243,845) --
By acquired bank on
Preferred shares -- -- -- -- -- (20,653) --
Common shares -- -- -- -- -- (110,336) --
Unrealized gain on debt and equity
securities -- -- -- -- -- -- 27,295
Balance at December 31, 1993 11,560 262,014 278,204 927,346 2,512,358 4,217,040 27,295
Stockholders' equity of pooled banks not
restated prior to 1994 -- -- 4,169 13,897 36,610 13,844 --
Net income -- -- -- -- -- 1,376,443 --
Redemption of preferred stock (6,318) (31,592) -- -- (252,449) (41,355) --
Purchase of common stock primarily for
purchase accounting acquisitions -- -- (11,067) (36,890) (380,731) -- --
Common stock issued for stock
options exercised -- -- 2,318 7,727 79,387 (4,760) --
Common stock issued through dividend
reinvestment plan -- -- 1,246 4,153 43,676 (231) --
Common stock issued for purchase
accounting acquisition -- -- 3,607 12,023 150,617 -- --
Converted debentures and preferred stock (29) (715) 467 1,557 18,918 -- --
Pre-merger transactions of pooled bank -- -- 6,417 21,389 152,964 (52,926) --
Cash dividends paid
By First Union Corporation at
8.03% per Series 1990 preferred share -- -- -- -- -- (25,353) --
$1.72 per common share -- -- -- -- -- (297,902) --
By acquired bank on
Preferred shares -- -- -- -- -- (20,667) --
Common shares -- -- -- -- -- (142,403) --
Unrealized loss on debt and equity
securities -- -- -- -- -- -- (316,792)
Balance at December 31, 1994 5,213 229,707 285,361 951,202 2,361,350 5,021,730 (289,497)
Net income -- -- -- -- -- 1,430,181 --
Purchase of common stock primarily for
acquisitions -- -- (25,435) (84,783) (1,113,843) -- --
Common stock issued for stock
options exercised -- -- 6,619 22,063 232,847 (51,890) --
Common stock issued through dividend
reinvestment plan -- -- 1,004 3,347 41,171 825 --
Converted preferred stock (1,574) (39,364) 1,658 5,527 57,982 (23,740) --
Common stock issued for purchase
accounting acquisitions -- -- 12,545 41,817 568,693 -- --
Pre-merger transactions of pooled bank (251) (7,120) (3,906) (13,021) (173,367) -- --
Cash dividends paid
By First Union Corporation at
8.90% per Series 1990 preferred share -- -- -- -- -- (7,029) --
$1.96 per common share -- -- -- -- -- (336,321) --
By acquired bank on
Preferred shares -- -- -- -- -- (19,361) --
Common shares -- -- -- -- -- (166,473) --
Unrealized gain on debt and equity securities -- -- -- -- -- -- 400,511
Balance at December 31, 1995 3,388 $ 183,223 277,846 $926,152 1,974,833 5,847,922 111,014
<CAPTION>
(In thousands except per share data) Total
<S> <C>
Balance at December 31, 1992, as
originally reported 4,459,163
Preferred and common stock issued for
pooled bank acquired January 1, 1996 2,257,650
Balance at December 31, 1992, as restated 6,716,813
Net income 1,216,353
Purchase of Class A Series A preferred
stock (134)
Purchase of common stock (123,358)
Common stock issued for stock
options exercised 73,210
Common stock issued through dividend
reinvestment plan 152,504
Common stock issued for purchase accounting
acquisitions 166,089
Converted debentures and preferred stock 333
Pre-merger transactions of pooled banks 116,682
Cash dividends paid
By First Union Corporation at
$2.50 per Class A Series A preferred
share (337)
7.78% per Series 1990 preferred share (24,563)
$1.50 per common share (243,845)
By acquired bank on
Preferred shares (20,653)
Common shares (110,336)
Unrealized gain on debt and equity
securities 27,295
Balance at December 31, 1993 7,946,053
Stockholders' equity of pooled banks not
restated prior to 1994 64,351
Net income 1,376,443
Redemption of preferred stock (325,396)
Purchase of common stock primarily for
purchase accounting acquisitions (417,621)
Common stock issued for stock
options exercised 82,354
Common stock issued through dividend
reinvestment plan 47,598
Common stock issued for purchase
accounting acquisition 162,640
Converted debentures and preferred stock 19,760
Pre-merger transactions of pooled bank 121,427
Cash dividends paid
By First Union Corporation at
8.03% per Series 1990 preferred share (25,353)
$1.72 per common share (297,902)
By acquired bank on
Preferred shares (20,667)
Common shares (142,403)
Unrealized loss on debt and equity
securities (316,792)
Balance at December 31, 1994 8,274,492
Net income 1,430,181
Purchase of common stock primarily for
acquisitions (1,198,626)
Common stock issued for stock
options exercised 203,020
Common stock issued through dividend
reinvestment plan 45,343
Converted preferred stock 405
Common stock issued for purchase
accounting acquisitions 610,510
Pre-merger transactions of pooled bank (193,508)
Cash dividends paid
By First Union Corporation at
8.90% per Series 1990 preferred share (7,029)
$1.96 per common share (336,321)
By acquired bank on
Preferred shares (19,361)
Common shares (166,473)
Unrealized gain on debt and equity securities 400,511
Balance at December 31, 1995 9,043,144
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
C-4
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
First Union Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Operating Activities
Net income $ 1,430,181 1,376,443
Adjustments to reconcile net income to net cash provided (used) by operating
activities
Accretion and amortization of securities discounts and premiums, net (32,155) (11,192)
Provision for loan losses 220,000 179,000
Provision for foreclosed properties (2,756) 13,753
Gain on sale of mortgage servicing rights -- --
Securities available for sale transactions (44,340) (6,213)
Investment security transactions (4,818) (4,006)
Depreciation and amortization 545,337 419,149
Deferred income taxes 372,082 315,230
Trading account assets, net (563,897) (514,812)
Mortgage loans held for resale (102,267) 879,715
Loss on sales of premises and equipment 11,364 5,154
Gain on sale of First American segregated assets (18,639) (84,260)
Other assets, net 124,411 482,489
Other liabilities, net 50,901 263,420
Net cash provided by operating activities 1,985,404 3,313,870
Investing Activities
Increase (decrease) in cash realized from
Sales of securities available for sale 7,910,049 14,274,729
Maturities of securities available for sale 1,671,832 3,725,025
Purchases of securities available for sale (7,328,065) (15,637,053)
Sales and calls of investment securities 32,964 39,437
Maturities of investment securities 2,459,216 2,964,869
Purchases of investment securities (3,642,118) (1,602,496)
Origination of loans, net (7,468,244) (7,869,008)
Sales of loans 2,000,000 250,804
Sales of premises and equipment 47,220 77,071
Purchases of premises and equipment (597,042) (486,877)
Sales of mortgage servicing rights -- --
Purchases of mortgage servicing rights (21,912) (7,561)
Other intangible assets, net (39,550) 37,441
Purchases of banking organizations, net of acquired cash equivalents 524,669 2,009,964
Net cash used by investing activities (4,450,981) (2,223,655)
Financing Activities
Increase (decrease) in cash realized from
Sales of deposits, net (3,624,458) (567,485)
Securities sold under repurchase agreements and other short-term borrowings, net 7,324,686 878,552
Issuances of long-term debt 3,346,251 772,287
Payments of long-term debt (775,761) (212,429)
Sales of common stock 248,363 251,379
Purchases of preferred stock (7,120) --
Redemption of preferred stock -- (325,396)
Cash received (paid) on conversion of preferred stock 405 --
Purchases of common stock (1,198,626) (417,621)
Cash dividends paid (529,184) (486,325)
Net cash provided (used) by financing activities 4,784,556 (107,038)
Increase (decrease) in cash and cash equivalents 2,318,979 983,177
Cash and cash equivalents, beginning of year 8,225,086 7,241,909
Cash and cash equivalents, end of year $10,544,065 8,225,086
Cash Paid For
Interest $ 3,953,325 2,685,879
Income taxes 450,047 328,321
Noncash Items
Increase (decrease) in securities available for sale 5,890,516 (414,266)
Increase (decrease) in investment securities (5,905,408) 414,266
Increase (decrease) in other assets 14,892 --
Increase in foreclosed properties and a decrease in loans 61,031 76,165
Conversion of preferred stock to common stock 39,364 715
Increase in other intangible assets and stockholders' equity for converted
debentures -- 19,760
Issuance of common stock for purchase accounting acquisitions 610,510 162,640
Effect on stockholders' equity of an unrealized gain (loss) on debt and equity
securities included in
Securities available for sale 596,850 (396,049)
Other assets (deferred income taxes) $ 196,339 (79,257)
<CAPTION>
1993
(In thousands)
<S> <C>
Operating Activities
Net income 1,216,353
Adjustments to reconcile net income to net cash provided (used) by operating
activities
Accretion and amortization of securities discounts and premiums, net (13,964)
Provision for loan losses 369,753
Provision for foreclosed properties 46,530
Gain on sale of mortgage servicing rights (973)
Securities available for sale transactions (32,784)
Investment security transactions (7,435)
Depreciation and amortization 437,614
Deferred income taxes 164,612
Trading account assets, net (404,745)
Mortgage loans held for resale (312,090)
Loss on sales of premises and equipment 7,365
Gain on sale of First American segregated assets (48,147)
Other assets, net 1,295,397
Other liabilities, net (1,005,304)
Net cash provided by operating activities 1,712,182
Investing Activities
Increase (decrease) in cash realized from
Sales of securities available for sale 13,456,048
Maturities of securities available for sale 5,637,948
Purchases of securities available for sale (18,384,416)
Sales and calls of investment securities 244,473
Maturities of investment securities 7,682,753
Purchases of investment securities (8,857,219)
Origination of loans, net (1,109,774)
Sales of loans --
Sales of premises and equipment 76,098
Purchases of premises and equipment (302,691)
Sales of mortgage servicing rights 1,300
Purchases of mortgage servicing rights (11,423)
Other intangible assets, net 19,709
Purchases of banking organizations, net of acquired cash equivalents 663,879
Net cash used by investing activities (883,315)
Financing Activities
Increase (decrease) in cash realized from
Sales of deposits, net (5,218,742)
Securities sold under repurchase agreements and other short-term borrowings, net 1,246,405
Issuances of long-term debt 1,194,657
Payments of long-term debt (1,279,481)
Sales of common stock 342,396
Purchases of preferred stock (134)
Redemption of preferred stock --
Cash received (paid) on conversion of preferred stock (5)
Purchases of common stock (123,358)
Cash dividends paid (399,734)
Net cash provided (used) by financing activities (4,237,996)
Increase (decrease) in cash and cash equivalents (3,409,129)
Cash and cash equivalents, beginning of year 10,651,038
Cash and cash equivalents, end of year 7,241,909
Cash Paid For
Interest 2,499,339
Income taxes 506,979
Noncash Items
Increase (decrease) in securities available for sale 6,876,380
Increase (decrease) in investment securities (6,843,797)
Increase (decrease) in other assets (32,583)
Increase in foreclosed properties and a decrease in loans 167,075
Conversion of preferred stock to common stock 15,136
Increase in other intangible assets and stockholders' equity for converted
debentures --
Issuance of common stock for purchase accounting acquisitions 166,089
Effect on stockholders' equity of an unrealized gain (loss) on debt and equity
securities included in
Securities available for sale --
Other assets (deferred income taxes) 27,295
</TABLE>
See accompanying Notes to Supplemental Consolidated Financial Statements.
C-5
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
First Union Corporation (the Parent Company) is a bank holding company whose
principal wholly-owned subsidiaries are national banking associations using the
name First Union National Bank, First Union Capital Markets Corp., an investment
banking firm, and First Union Mortgage Corporation, a mortgage banking firm.
The accounting and reporting policies of First Union Corporation and
subsidiaries (the Corporation) are in accordance with generally accepted
accounting principles and conform to general practices within the banking and
mortgage banking industries. In consolidation, all significant intercompany
accounts and transactions are eliminated.
The Corporation's principal sources of revenue emanate from its domestic
banking, including trust operations, capital markets activity and mortgage
banking operations, located primarily in Connecticut, Delaware, Florida,
Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Virginia and Washington, D.C. Its foreign banking
operations are immaterial.
Management of the Corporation has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these supplemental consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and due from banks, interest-bearing
balances in other banks and federal funds sold and securities purchased under
resale agreements. Generally, both cash and cash equivalents are considered to
have maturities of three months or less, and accordingly, the carrying amount of
such instruments is deemed to be a reasonable estimate of fair value.
SECURITIES
The classification of securities is determined at the date of purchase.
Gains or losses on the sale of securities are recognized on a specific
identification, trade date basis.
Trading account assets, primarily debt securities, and interest rate
futures, options, caps and floors and forward contracts, are adjusted to market
value. Included in noninterest income are realized and unrealized gains and
losses resulting from such adjustments and from recording the effects of sales
of trading account securities.
Securities available for sale, primarily debt securities, are recorded at
market value with a corresponding adjustment net of tax recorded as a component
of stockholders' equity. Securities available for sale are used as a part of the
Corporation's interest rate risk management strategy and may be sold in response
to changes in interest rates, changes in prepayment risk, and other factors.
Investment securities, primarily debt securities, are stated at cost, net of
the amortization of premium and the accretion of discount. The Corporation
intends and has the ability to hold such securities until maturity.
The market value of securities, including securities sold not owned, is
generally based on quoted market prices or dealer quotes. If a quoted market
price is not available, market value is estimated using quoted market prices for
similar securities.
INTEREST RATE SWAPS, FLOORS AND CAPS
The Corporation uses interest rate swaps, floors and caps for interest rate
risk management, in connection with providing risk management services to
customers and for trading for its own account.
Interest rate swaps, floors and caps used to achieve interest rate risk
management objectives are designated as hedges of specific assets and
liabilities. The net interest payable or receivable on swaps, caps, and floors
is accrued and recognized as an adjustment to interest income or interest
expense of the related asset or liability. Premiums paid for purchased caps and
floors are amortized over the term of the floors and caps as a yield adjustment
of the related asset or liability. Floors and caps are written only to adjust
the amount or term of purchased floors and caps to more effectively reduce
interest rate risk, and a net written position is not created. Premiums received
on floors and caps offset the premium paid on the caps and floors they adjust.
Upon the early termination of swaps, floors and caps, the net proceeds received
or paid, including premiums, are deferred and included in other assets or
liabilities and amortized over the shorter of the remaining contract life or the
maturity of the related asset or liability. Upon disposition or settlement of
the asset or liability being hedged, deferral accounting is discontinued and any
related premium or market value is recognized in earnings.
Interest rate swaps, floors and caps entered into for trading purposes and
sold to customers are accounted for on a mark-to-market basis with both realized
and unrealized gains and losses recognized as trading profits. The fair value of
these financial instruments represent the estimated amount the Corporation would
receive or pay to terminate the contracts or agreements and is determined using
a valuation model which considers current market yields and other relevant
variables.
INTEREST RATE FUTURES, FORWARD AND OPTION CONTRACTS
The Corporation uses interest rate futures, forward and option contracts,
other than caps and floors, for interest rate risk management and in connection
with hedging interest rate products sold to customers.
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Interest rate futures and option contracts are used to hedge interest rate
risk arising from specific financial instruments. Gains and losses on interest
rate futures are deferred and included in the carrying value of the related
assets or liabilities and amortized over the estimated lives of those assets and
liabilities as a yield adjustment. Premiums paid for option contracts are
included in other assets and are amortized over the option term as a yield
adjustment of the related asset or liability. Upon the early termination of
futures contracts, the deferred amounts are amortized over the remaining
maturity of the related asset or liability. Upon disposition or settlement of
the asset or liability being hedged, deferral accounting is discontinued and any
related premium or market value is recognized in earnings.
Interest rate futures, forward and option contracts used to hedge risk
management products sold to customers are marked to market and both the realized
and unrealized gains and losses recognized as trading profits. The market value
of these financial instruments is based on dealer or exchange quotes.
LOANS
Commercial, financial and agricultural loans include industrial revenue
bonds, highly leveraged transaction loans and certain other loans that are made
primarily on the strength of the borrower's general credit standing and ability
to generate repayment cash flows from income sources even though such bonds and
loans may be secured by real estate or other assets.
Commercial real estate construction and mortgage loans represent interim and
permanent financing of commercial properties that are secured by real estate.
Retail real estate mortgage loans represent 1-4 family first mortgage loans.
Bankcard installment loans represent unsecured revolving lines of credit.
Retail installment loans represent all other consumer loans, including home
equity and second mortgage loans.
Mortgage notes held for sale are valued at the lower of cost or market as
determined by outstanding commitments from investors or current investor yield
requirements calculated on the aggregate loan basis. Gains or losses resulting
from sales of mortgage notes are recognized when the proceeds are received from
investors.
In many lending transactions, collateral is taken to provide an additional
measure of security. Generally, the cash flow or earning power of the borrower
represents the primary source of repayment and collateral liquidation a
secondary source of repayment. The Corporation determines the need for
collateral on a case-by-case or product-by-product basis. Factors considered
include the current and prospective creditworthiness of the customer, terms of
the instrument and economic conditions.
Unearned income is generally accreted to interest income using the constant
yield method. Interest income is recorded on an accrual basis.
The Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosure," on January 1, 1995. The adoption of the
Standards required no increase to the allowance for loan losses and had no
impact on net income in 1995. The impact to historical and current amounts
related to in-substance foreclosures was not material, and accordingly,
historical amounts have not been restated.
A loan is considered to be impaired when based on current information, it is
probable that the Corporation will not receive all amounts due in accordance
with the contractual terms of a loan agreement. The discounted expected cash
flow method is used in determining the value of impaired loans.
When the ultimate collectibility of an impaired loan's principal is in
doubt, wholly or partially, all cash receipts are applied to principal. Once the
recorded principal balance has been reduced to zero, future cash receipts are
applied to interest income, to the extent that any interest has been foregone.
Future cash receipts are recorded as recoveries of any amounts previously
charged off. When this doubt does not exist, cash receipts are applied under the
contractual terms of the loan agreement.
A loan is also considered impaired if its terms are modified in a troubled
debt restructuring after January 1, 1995. For these accruing impaired loans,
cash receipts are typically applied to principal and interest receivable in
accordance with the terms of the restructured loan agreement. Interest income is
recognized on these loans using the accrual method of accounting. As of December
31, 1995, there were no accruing impaired loans.
The accrual of interest is generally discontinued on all loans, except
consumer loans, that become 90 days past due as to principal or interest unless
collection of both principal and interest is assured by way of
collateralization, guarantees or other security. Generally, loans past due 180
days or more are placed on nonaccrual status regardless of security. Consumer
loans and bankcard products that become approximately 120 days and 180 days past
due, respectively, are generally charged to the allowance for loan losses. When
borrowers demonstrate over an extended period the ability to repay a loan in
accordance with the contractual terms of a loan the Corporation has classified
as nonaccrual, such loan is returned to accrual status.
Fair values are estimated for loans with similar financial characteristics.
These loans are segregated by type of loan, considering credit risk and
prepayment characteristics. Each loan category is further segmented into fixed
and adjustable rate categories.
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NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
The fair values of performing loans for all portfolios are calculated by
discounting estimated cash flows through expected maturity dates. These cash
flows are discounted using estimated market yields that reflect the credit and
interest rate risks inherent in each category of loans. Such market yields also
reflect a component for the estimated cost of servicing the portfolio. A
prepayment assumption is used as an estimate of the number of loans which will
be repaid prior to their scheduled maturity.
For performing residential mortgage loans, fair values are estimated using a
discounted cash flow analysis utilizing yields of comparable mortgage-backed
securities. The loan portfolio is segmented into homogeneous pools based on loan
types, coupon rates, maturities, prepayment characteristics and credit risk.
These pools are compared with similar mortgage-backed securities to arrive at an
appropriate discount rate; whole loan liquidity and risk characteristics are
considered within the comparison.
Fair values of nonperforming loans greater than $1,000,000 are calculated by
estimating the timing and amount of cash flows. These cash flows are discounted
using estimated market yields commensurate with the risk associated with
estimating such cash flows. Estimates of cash flows are made using knowledge of
the borrower and available market data. It is not considered practicable to
calculate a fair value for nonperforming loans less than $1,000,000.
Accordingly, they are included in fair value disclosures at net cost.
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. Generally, for fixed rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair value of commitments and letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is the amount that is considered adequate to
provide for potential losses in the portfolio. Management's evaluation of the
adequacy of the allowance is based on a review of individual loans, recent loss
experience, current economic conditions, the risk characteristics of the various
classifications of loans, the fair value of underlying collateral and other
factors.
Management believes that the allowances for losses on loans and real estate
owned are adequate. While management uses available information to recognize
losses on loans and real estate owned, future additions to the allowances may be
necessary based on changes in economic conditions.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Corporation's bank subsidiaries'
allowances for losses on loans and real estate owned. Such agencies may require
such subsidiaries to recognize changes to the allowances based on their
judgments about information available to them at the time of their examination.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line
basis for financial purposes and on straight-line and accelerated bases for tax
purposes, using estimated lives generally as follows: buildings, 10 to 50 years;
furniture and equipment, 3 to 10 years; and leasehold improvements and
capitalized leases, over the lives of the respective leases.
INTANGIBLE ASSETS
Generally, goodwill is being amortized on a straight-line basis over periods
ranging from 15 to 25 years. The Corporation's unamortized goodwill is
periodically reviewed to ensure that conditions are not present that indicate
the recorded amount of goodwill is not recoverable from future undiscounted cash
flows. The review process includes an evaluation of the earnings history of each
subsidiary, its contribution to the Corporation, capital levels and other
factors. If events or changes in circumstances indicate further evaluation is
warranted, the undiscounted net cash flows of the operations to which goodwill
relates are estimated. If the estimated undiscounted net cash flows are less
than the carrying amount of goodwill, a loss is recognized to reduce goodwill's
carrying value to the amount recoverable, and when appropriate the amortization
period also is reduced. Unamortized goodwill associated with disposed assets is
charged to current earnings. Credit card premiums are being amortized
principally over the period of benefit not to exceed 10 years using the
sum-of-the-years' digits method. Deposit base premiums are amortized principally
over a 10-year period using accelerated methods. Annually, the fair value of the
unamortized balance of such premiums is determined on a discounted cash flow
basis, and if such value is less than such balance, the difference is charged to
noninterest expense.
FORECLOSED PROPERTIES
Foreclosed properties are included in other assets and represent other real
estate that has been acquired through loan or in-substance foreclosures or deeds
received in lieu of loan payments. Generally such properties are appraised
annually and are recorded at the lower of cost or fair value less estimated
selling costs. When appropriate, adjustments to cost are charged or credited to
the allowance for foreclosed properties.
MORTGAGE LOAN ADMINISTRATION AND ORIGINATION
The Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights", on a prospective
basis only on
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July 1, 1995. The adoption of the Standard resulted in an increase to
noninterest income of $13,300,000 in 1995.
When the Corporation acquires mortgage servicing rights through either the
purchase or origination of mortgage loans and sells or securitizes those loans
with servicing rights retained, the total cost of the mortgage loans is
allocated to the mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values.
Mortgage servicing fees are recorded on an accrual basis. Mortgage servicing
rights are amortized over the life of the related mortgages, in proportion to
estimated net servicing income. Quarterly, an appropriate carrying value of the
unamortized balance of such mortgage servicing rights is determined by the
Corporation, based principally on a disaggregated, discounted cash flow method.
The loans and associated servicing rights are segmented by predominant risk
characteristics to include loan type, investor and interest rate. Additionally,
quarterly, based principally on an aggregated discounted method, an appropriate
carrying value of the unamortized deferred excess servicing fee balance is
determined by the Corporation. If such values are less than such balances, the
differences are included as a reduction of mortgage banking income.
Placement fees for services rendered in arranging permanent financing for
income property loans are earned when the permanent commitment issued by the
lender is approved and accepted by the borrower.
Loan origination, commitment and certain other fees and certain direct loan
origination costs are being deferred and the net amount is being amortized as an
adjustment of the related loan's yield, generally over the contractual life of
the related loan, or if the related loan is held for resale, until the loan is
sold.
PENSION AND SAVINGS PLANS
Substantially all employees with one year of service are eligible for
participation in a non-contributory, defined benefit pension plan and a matching
savings plan. Pension cost is determined annually by an actuarial valuation,
which includes service costs for the current year and amortization of amounts
related to prior years. The Corporation's funding policy is to contribute to the
pension plan the amount required to fund the benefits expected to be earned for
the current year and to amortize amounts related to prior years using the
projected unit credit valuation method. The difference between the pension cost
included in current income and the funded amount is included in other assets or
other liabilities, as appropriate. Actuarial assumptions are evaluated annually.
The matching savings plan permits eligible employees to make basic
contributions to the plan of up to 6 percent of base compensation, and
supplemental contributions of up to 9 percent of base compensation. Annually,
upon approval of the Board of Directors, employee basic contributions may be
matched up to 6 percent of the employee's base compensation.
INCOME TAXES
The operating results of the Parent Company and its eligible subsidiaries
are included in a consolidated federal income tax return. Each subsidiary pays
its allocation of federal income taxes to the Parent Company, or receives
payment from the Parent Company to the extent that tax benefits are realized.
Where state income tax laws do not permit consolidated income tax returns,
applicable state income tax returns are filed. As more fully described in Note
14 to the supplemental consolidated financial statements, the Corporation has
adopted the method of accounting for income taxes set forth in Statement of
Financial Accounting Standard No. 109.
INCOME PER COMMON SHARE
Income per common share is determined by dividing net income applicable to
common stockholders by the weighted average number of shares of common stock
outstanding. Common stock equivalents have not been material.
NOTE 2:
ACQUISITIONS
The supplemental consolidated financial statements give retroactive effect
to the pooling of interests acquisition of First Fidelity Bancorporation (First
Fidelity) as more fully described below. As a result, the supplemental
consolidated balance sheets as of December 31, 1995 and 1994, and the related
supplemental consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1995, are presented as if the combining companies had been consolidated for all
periods presented. As required by generally accepted accounting principles, the
supplemental consolidated financial statements will become the historical
consolidated financial statements upon issuance of the consolidated financial
statements for the period that includes the date of the acquisition. The
supplemental consolidated statements of changes in stockholders' equity reflect
the accounts of the Corporation as if the additional preferred and common stock
had been issued during all the periods presented. The supplemental consolidated
financial statements, including the notes thereto, should be read in conjunction
with the historical consolidated financial statements of the Corporation
included in the Corporation's 1995 annual report on Form 10-K and of First
Fidelity included in the Corporation's Form 8-K dated June 30, 1995.
In 1995, various banking subsidiaries of the Parent Company acquired eight
financial institutions and certain other assets which in the aggregate amounted
to the addition of $10,254,013,000 in assets, $7,537,477,000 in net loans and
$7,252,524,000 in deposits. The purchase method of accounting, which requires no
restatements of the Corporation's historical financial statements and the
inclusion of the acquired company's financial information on a fair value basis
only from the date of consummation, was used in these
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NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
transactions. With respect to these transactions, the Parent Company issued
12,545,000 shares of its common stock in exchange for the common stock of
certain of the acquired financial institutions and paid cash for the other
financial institutions and assets which in the aggregate amounted to a cost of
$623,338,000. These transactions resulted in an increase to stockholders' equity
of $610,510,000, and the increase was reduced by the Parent Company's purchase
in the open market of 11,637,000 shares of its common stock at a cost of
$526,968,000 in 1995 and the purchase of 908,000 shares at a cost of $37,297,000
in 1994. These transactions also resulted in an increase to goodwill of
$476,229,000, which will be amortized on a straight-line basis over 25 years,
and deposit base premium of $114,023,000, which will be amortized on an
accelerated basis over 10 years.
In 1994, various banking subsidiaries of the Parent Company acquired three
financial institutions which were accounted for as pooling of interests
transactions. In the aggregate, these transactions added $477,647,000 in assets,
$381,436,000 in net loans, $372,052,000 in deposits, $64,351,000 in
stockholders' equity and involved the issuance of 4,169,000 shares of the Parent
Company's common stock. The Corporation's supplemental consolidated financial
statements were not restated in prior periods to reflect these 1994 pooling of
interests transactions.
Also in 1994, various banking subsidiaries of the Parent Company acquired
one financial institution and certain loans and deposits which in the aggregate
amounted to the addition of $4,118,115,000 in assets, $857,267,000 in net loans
and $3,654,323,000 in deposits. The purchase method of accounting was used in
these transactions. With respect to these transactions, the Parent Company
issued 3,561,000 shares and 437,000 shares of its common stock in exchange for
the common stock and convertible debentures, respectively, of the acquired
financial institution and paid cash for the loans and deposits which in the
aggregate amounted to a cost of $365,778,000. These transactions resulted in an
increase to stockholders' equity of $180,833,000, and the increase was reduced
by the Parent Company's purchase in the open market of 3,998,000 shares of its
common stock at a cost of $174,584,000. These transactions also resulted in an
increase to goodwill of $90,708,000, which will be amortized on a straight-line
basis over 25 years, and deposit base premium of $250,365,000, which will be
amortized on an accelerated basis over 10 years.
At December 31, 1995, various banking affiliates of the Parent Company had
agreements to acquire three financial institutions which at that date had
aggregate assets of $2,224,283,000, net loans of $1,634,118,000 and deposits of
$1,816,997,000. With respect to these transactions, the Parent Company has
agreed to issue approximately 2,372,000 shares of its common stock in exchange
for the common stock of two of the three financial institutions, subject to
adjustment under certain conditions, and an affiliate of the Parent Company will
pay approximately $188,000,000 in cash for the third financial institution.
These transactions will be accounted for as purchases. Two of these transactions
were consummated in January 1996.
On January 1, 1996, the Corporation acquired First Fidelity, a multi-bank
holding company based in New Jersey. The merger was accounted for as a pooling
of interests. At December 31, 1995, First Fidelity had assets of
$35,332,885,000, net loans of $24,934,436,000, deposits of $27,554,917,000 and
net income applicable to common stockholders of $397,744,000. Acquisitions
completed by First Fidelity are not material, and accordingly have not been
included herein.
As a result of the merger, each of the 78,746,915 net outstanding shares of
First Fidelity common stock was converted into 1.35 shares of the Corporation's
common stock and common stock equivalents, with cash being paid for fractional
share interests. In addition, the 2,963,820 net outstanding shares of First
Fidelity Series B Convertible Preferred Stock were converted into a like number
of shares of the Corporation's Series B Convertible Class A Preferred Stock
having substantially identical terms as the First Fidelity Series B, the 350,000
outstanding shares of First Fidelity Series D Adjustable Rate Cumulative
Preferred Stock were converted into a like number of shares of the Corporation's
Series D Adjustable Rate Cumulative Class A Preferred Stock having substantially
identical terms as the First Fidelity Series D, and the 2,965,200 net
outstanding FFB Depositary Receipts (each representing a 1/40th interest in a
share of First Fidelity Series F 10.64% Preferred Stock (74,130 net outstanding
shares)) were converted into a like number of the Corporation's Depositary
Receipts (each representing a 1/40th interest in the Corporation's Series F
10.64% Class A Preferred Stock) having substantially identical terms as the
First Fidelity Series F.
Additionally, restructuring charges primarily related to direct costs and
existing severance contracts associated with the First Fidelity merger of
$94,446,000 ($72,826,000 after tax) are included as a component of noninterest
expense in 1995. It is anticipated that approximately $197,000,000 of after-tax
restructuring charges related to the First Fidelity merger will be taken in the
first half of 1996.
The information below indicates on a pro forma basis, amounts as if the
purchase accounting acquisitions discussed above (completed and pending at
December 31, 1995) had been acquired as of January 1, 1994, the First Fidelity
pooling of interests merger for all years presented, and historical amounts as
reported by the Corporation.
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<PAGE>
<TABLE>
<CAPTION>
(In thousands except per share Years Ended December 31,
data) 1995 1994 1993
<S> <C> <C> <C>
(Unaudited)
Interest income $9,243,418 7,937,133 6,601,528
Interest expense 4,426,056 3,246,946 2,481,952
Net interest income 4,817,362 4,690,187 4,119,576
Provision for loan losses 237,349 180,643 369,753
Net interest income after
provision for loan losses 4,580,013 4,509,544 3,749,823
Securities available for sale
transactions 39,911 8,860 32,784
Investment security
transactions 4,818 4,006 7,435
Noninterest income 1,899,339 1,620,712 1,541,569
Noninterest expense 4,360,762 4,070,027 3,536,346
Income before income taxes 2,163,319 2,073,095 1,795,265
Income taxes 778,573 709,028 578,912
Net income 1,384,746 1,364,067 1,216,353
Dividends on preferred stock 26,390 46,020 45,553
Net income available to common
stockholders before
redemption premium 1,358,356 1,318,047 1,170,800
Redemption premium on
preferred stock -- 41,355 --
Net income applicable to
common stockholders after
redemption premium $1,358,356 1,276,692 1,170,800
Net income per common share
before redemption premium $ 4.83 4.63 4.30
Net income per common share
after redemption premium $ 4.83 4.48 4.30
Corporation as Reported
Net interest income $3,262,776 3,033,715 2,765,893
Net income 1,013,076 925,380 817,521
Net income applicable to
common stockholders before
redemption premium 1,006,047 900,027 792,621
Net income applicable to
common stockholders after
redemption premium 1,006,047 858,672 792,621
Net income per common share
before redemption premium 5.85 5.22 4.73
Net income per common share
after redemption premium $ 5.85 4.98 4.73
</TABLE>
The following assumptions were applied in arriving at the pro forma results;
cost of funds of 5.77 percent and 4.08 percent for 1995 and 1994, respectively;
applying a straight-line depreciation method over useful lives ranging from 10
to 25 years; goodwill amortized over 25 years using the straight-line method;
credit card relationships amortized over a 6.3-year period and other intangibles
amortized over a 10-year period using the sum-of-the-years' digits method; and
various other assets amortized over seven-to-ten years using both the
straight-line and sum-of-the-years' digits methods.
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<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 3:
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $1,507,112 1,443,582 4,440 3,799 2,958,933 (6,415) 7,036
U.S. Government agencies 795,915 5,978,720 1,724,404 4,925 8,503,964 (110,206) 8,318
Collateralized mortgage
obligations 847,785 3,727,165 179,355 940 4,755,245 (34,593) 18,082
State, county and municipal -- 2,149 1,384 9,375 12,908 -- 201
Other 241,536 951,782 96,173 673,158 1,962,649 (97,253) 14,029
Total $3,392,348 12,103,398 2,005,756 692,197 18,193,699 (248,467) 47,666
Market Value
Debt securities $3,392,348 12,103,398 2,005,756 104,120 17,605,622 (174,872) 46,818
Sundry securities -- -- -- 588,077 588,077 (73,595) 848
Total $3,392,348 12,103,398 2,005,756 692,197 18,193,699 (248,467) 47,666
Amortized Cost
Debt securities $3,374,168 12,014,119 1,984,974 104,307 17,477,568
Sundry securities -- -- -- 515,330 515,330
Total $3,374,168 12,014,119 1,984,974 619,637 17,992,898
<CAPTION>
December 31, 1995 Amortized
(In thousands) Cost
<S> <C>
Market Value
U.S. Treasury 2,959,554
U.S. Government agencies 8,402,076
Collateralized mortgage
obligations 4,738,734
State, county and municipal 13,109
Other 1,879,425
Total 17,992,898
Market Value
Debt securities 17,477,568
Sundry securities 515,330
Total 17,992,898
Amortized Cost
Debt securities
Sundry securities
Total
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Market Value
U.S. Treasury $1,213,646 2,953,338 2,970 -- 4,169,954 (9) 154,020
U.S. Government agencies 370,462 1,195,754 2,548,803 126,771 4,241,790 (9,804) 199,197
Collateralized mortgage
obligations 107,156 1,166,164 75,407 21,928 1,370,655 (257) 45,777
State, county and municipal -- 1,750 1,348 10,122 13,220 (24) 417
Other 85,333 1,294,705 20,345 337,640 1,738,023 (56,823) 63,555
Total $1,776,597 6,611,711 2,648,873 496,461 11,533,642 (66,917) 462,966
Market Value
Debt securities $1,776,597 6,611,711 2,648,873 182,344 11,219,525 (12,884) 454,023
Sundry securities -- -- -- 314,117 314,117 (54,033) 8,943
Total $1,776,597 6,611,711 2,648,873 496,461 11,533,642 (66,917) 462,966
Amortized Cost
Debt securities $1,788,551 6,883,740 2,809,470 178,903 11,660,664
Sundry securities -- -- -- 269,027 269,027
Total $1,788,551 6,883,740 2,809,470 447,930 11,929,691
<CAPTION>
December 31, 1994 Amortized
(In thousands) Cost
<S> <C>
Market Value
U.S. Treasury 4,323,965
U.S. Government agencies 4,431,183
Collateralized mortgage
obligations 1,416,175
State, county and municipal 13,613
Other 1,744,755
Total 11,929,691
Market Value
Debt securities 11,660,664
Sundry securities 269,027
Total 11,929,691
Amortized Cost
Debt securities
Sundry securities
Total
</TABLE>
C-12
<PAGE>
Securities available for sale with an aggregate amortized cost of
$7,219,019,000 at December 31, 1995, are pledged to secure U.S. Government and
other public deposits and for other purposes as required by various statutes or
agreements.
Expected maturities differ from contractual maturities since issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Generally, the aging of mortgage-backed securities included in U.S.
Government agencies and collateralized mortgage obligations is based on their
weighted average maturities at December 31, 1995 and 1994.
At December 31, 1995 and 1994, collateralized mortgage obligations had a
weighted average yield based on amortized cost of 6.59 percent and 5.35 percent,
respectively.
Included in U.S. Government agencies and Other at December 31, 1995, are
$1,101,704,000 of securities available for sale that are denominated in
currencies other than the U.S. dollar. The currency exchange rates were hedged
to minimize the exposure to currency revaluation risks. At December 31, 1995,
these securities had a weighted average maturity of 2.92 years and a weighted
average yield of 6.10 percent. The weighted average U.S. equivalent yield for
comparative purposes of these securities was 7.50 percent based on a weighted
average funding cost differential of 1.40 percent.
Securities available for sale at December 31, 1995, do not include
commitments to purchase $358,825,000 of additional securities that at December
31, 1995, had a market value of $360,254,000.
Securities available for sale at December 31, 1995, include the carrying
value of $321,089,000 of securities which have been sold for future settlement.
Related gains and losses are accounted for on a trade date basis.
There were commitments to purchase securities at a cost of $5,551,000 that
had a market value of $5,547,000 at December 31, 1994. There were no commitments
to sell securities.
Gross gains and losses realized on the sale of debt securities in 1995 were
$68,980,000 and $41,654,000, respectively, and on sundry securities $17,091,000
and $77,000, respectively.
Gross gains and losses realized on the sale of debt securities in 1994 were
$37,924,000 and $44,607,000, respectively, and on sundry securities $14,557,000
and $1,661,000, respectively.
Gross gains and losses realized on the sale of debt securities in 1993 were
$36,353,000 and $10,195,000, respectively, and on sundry securities $6,802,000
and $176,000, respectively.
The Financial Accounting Standards Board has issued Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", that
requires that debt and equity securities held: (i) to maturity be classified as
such and reported at amortized cost; (ii) for current resale be classified as
trading securities and reported at fair value, with unrealized gains and losses
included in current earnings; and (iii) for any other purpose be classified as
securities available for sale and reported at fair value, with unrealized gains
and losses excluded from current earnings and reported as a separate component
of stockholders' equity. The effect of the foregoing will cause fluctuations in
stockholders' equity based on changes in values of debt and equity securities.
At December 31, 1995, stockholders' equity includes an after-tax amount of
$111,014,000 based on appreciation in the securities available for sale
portfolio of $200,801,000, and on an unamortized after-tax gain of $89,787,000.
A transfer of $5,890,516,000 of investment securities to the securities
available for sale portfolio as permitted by the Financial Accounting Standards
Board only for the year ended December 31, 1995 was completed in the fourth
quarter of 1995.
At December 31, 1994, stockholders' equity includes an after-tax amount of
$289,497,000 based on depreciation in the securities available for sale
portfolio of $396,049,000, net of an unamortized after-tax loss of $106,552,000.
C-13
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 4:
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
December 31, 1995 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Government agencies $ 80,287 950,270 236,183 -- 1,266,740 32,411 (1,157)
Collateralized mortgage
obligations 59,410 546,111 -- -- 605,521 12,443 (1)
State, county and
municipal 286,591 273,754 170,614 446,052 1,177,011 131,805 (3,226)
Other 3,825 2,600 16,821 67,098 90,344 7,713 (2)
Total $430,113 1,772,735 423,618 513,150 3,139,616 184,372 (4,386)
Carrying Value
Debt securities $430,113 1,772,735 423,618 497,309 3,123,775 184,372 (4,386)
Sundry securities -- -- -- 15,841 15,841 -- --
Total $430,113 1,772,735 423,618 513,150 3,139,616 184,372 (4,386)
Market Value
Debt securities $438,097 1,828,457 453,150 584,057 3,303,761
Sundry securities -- -- -- 15,841 15,841
Total $438,097 1,828,457 453,150 599,898 3,319,602
<CAPTION>
December 31, 1995 Market
(In thousands) Value
<S> <C>
Carrying Value
U.S. Government agencies 1,297,994
Collateralized mortgage
obligations 617,963
State, county and
municipal 1,305,590
Other 98,055
Total 3,319,602
Carrying Value
Debt securities 3,303,761
Sundry securities 15,841
Total 3,319,602
Market Value
Debt securities
Sundry securities
Total
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994 1 Year 1-5 5-10 After 10 Gross Unrealized
(In thousands) or Less Years Years Years Total Gains Losses
<S> <C> <C> <C> <C> <C> <C> <C>
Carrying Value
U.S. Treasury $ 56,236 255,455 3,986 3,481 319,158 94 (14,788)
U.S. Government
agencies 837,468 1,396,876 1,409,971 16,409 3,660,724 10,676 (136,301)
Collateralized
mortgage
obligations 149,476 1,280,403 145,952 5,346 1,581,177 17 (63,111)
State, county and
municipal 528,855 449,800 225,968 542,472 1,747,095 95,491 (8,890)
Other 133,127 185,587 20,827 269,034 608,575 7,759 (15,685)
Total $1,705,162 3,568,121 1,806,704 836,742 7,916,729 114,037 (238,775)
Carrying Value
Debt securities $1,705,162 3,568,121 1,806,704 658,592 7,738,579 110,485 (235,398)
Sundry securities -- -- -- 178,150 178,150 3,552 (3,377)
Total $1,705,162 3,568,121 1,806,704 836,742 7,916,729 114,037 (238,775)
Market Value
Debt securities $$1,667,535 3,473,709 1,769,848 702,574 7,613,666
Sundry securities -- -- -- 178,325 178,325
Total $$1,667,535 3,473,709 1,769,848 880,899 7,791,991
<CAPTION>
December 31, 1994 Market
(In thousands) Value
<S> <C>
Carrying Value
U.S. Treasury 304,464
U.S. Government
agencies 3,535,099
Collateralized
mortgage
obligations 1,518,083
State, county and
municipal 1,833,696
Other 600,649
Total 7,791,991
Carrying Value
Debt securities 7,613,666
Sundry securities 178,325
Total 7,791,991
Market Value
Debt securities
Sundry securities
Total
</TABLE>
Investment securities with an aggregate carrying value of $2,213,277,000 at
December 31, 1995, are pledged to secure U.S. Government and other public
deposits and for other purposes as required by various statutes or agreements.
Expected maturities differ from contractual maturities since borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Generally, the aging of mortgage-backed securities included in U.S.
Government agencies and collateralized mortgage
C-14
<PAGE>
obligations is based on their weighted average maturities at December 31, 1995
and 1994.
At December 31, 1995 and 1994, collateralized mortgage obligations had a
weighted average yield of 7.22 percent and 6.22 percent, respectively.
There were no commitments to purchase or sell investment securities at
December 31, 1995 and 1994.
Gross gains and losses realized on repurchase agreement underdeliveries and
calls of investment securities in 1995 were $5,705,000 and $887,000,
respectively.
In 1994 such gross gains and losses were $4,050,000 and $44,000,
respectively.
In 1993 such gross gains and losses were $7,837,000 and $402,000,
respectively.
See Note 3 for information related to accounting rules for debt and equity
securities and a transfer of investment securities to the available for sale
portfolio.
NOTE 5:
LOANS
<TABLE>
<CAPTION>
(In thousands) 1995
<S> <C>
Commercial
Commercial, financial and agricultural $24,648,284
Real estate-construction and other 2,505,627
Real estate-mortgage 9,991,640
Lease financing 3,169,698
Foreign 649,760
Total commercial 40,965,009
Retail
Real estate-mortgage 27,273,991
Installment loans-Bankcard 3,657,619
Installment loans-other 20,212,216
Total retail 51,143,826
Total $92,108,835
<CAPTION>
(In thousands) 1994
<S> <C>
Commercial
Commercial, financial and agricultural 22,053,484
Real estate-construction and other 2,052,054
Real estate-mortgage 9,472,695
Lease financing 1,921,302
Foreign 526,325
Total commercial 36,025,860
Retail
Real estate-mortgage 21,061,449
Installment loans-Bankcard 4,345,069
Installment loans-other 17,381,379
Total retail 42,787,897
Total 78,813,757
</TABLE>
Installment loans -- other include $2,358,021,000 and $1,742,947,000 of
retail leasing loans at December 31, 1995 and 1994, respectively, that were
acquired in the First Fidelity merger.
Directors and executive officers of the Parent Company and their related
interests were indebted to the Corporation in the aggregate amounts of
$887,313,000 and $703,493,000 at December 31, 1995 and 1994, respectively. From
January 1 through December 31, 1995, directors and executive officers of the
Parent Company and their related interests borrowed $770,277,000 and repaid
$586,457,000. In the opinion of management, these loans do not involve more than
the normal risk of collectibility, nor do they present other unfavorable
features.
At December 31, 1995 and 1994, nonaccrual and restructured loans amounted to
$647,853,000 and $636,330,000, respectively. Interest related to nonaccrual and
restructured loans for the years ended December 31, 1995, 1994 and 1993 amounted
to $69,194,000, $70,163,000 and $111,666,000, respectively. Interest collected
on such loans and included in the results of operations for each of the years in
the three-year period then ended amounted to $17,016,000, $9,582,000 and
$27,350,000, respectively.
At December 31, 1995, impaired loans, which are included in nonaccrual
loans, amounted to $470,592,000. Included in the allowance for loan losses is
$82,966,000 related to $358,611,000 of impaired loans at December 31, 1995. The
rest of the impaired loans are recorded at or below fair value. At December 31,
1995, the average recorded investment in impaired loans was $491,728,000 and
$14,920,000 of interest income was recognized on loans while they were impaired.
All of this income was recognized using a cash-basis method of accounting.
Loan fair values are disclosed in Note 17.
C-15
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 6:
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Balance, beginning of
year $1,578,128 1,622,374 1,551,157
Provision for loan
losses 220,000 179,000 369,753
Allowance of loans
acquired or sold,
net 48,666 58,606 191,037
1,846,794 1,859,980 2,111,947
Less
Loan losses 462,781 414,692 613,176
Less loan
recoveries 123,785 132,840 123,603
Loan losses, net 338,996 281,852 489,573
Balance, end of year $1,507,798 1,578,128 1,622,374
</TABLE>
NOTE 7:
PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Land $ 457,003 419,165 403,916
Buildings 1,761,503 1,588,842 1,453,926
Equipment 1,864,570 1,545,679 1,326,455
Capitalized leases 40,119 13,327 12,441
4,123,195 3,567,013 3,196,738
Less accumulated
depreciation and
amortization 1,570,025 1,373,039 1,267,675
Total $2,553,170 2,193,974 1,929,063
Net premises and
equipment pledged
as security for
mortgage notes $ 59,256 69,621 83,761
Depreciation and
amortization $ 268,084 221,393 198,809
</TABLE>
NOTE 8:
FORECLOSED PROPERTIES
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Foreclosed properties $202,686 292,076 401,183
Allowance for foreclosed
properties, beginning of
year 41,578 62,813 109,093
Provision for foreclosed
properties (2,756) 13,753 46,530
Transfer from (to)
allowance for segregated
assets 78 2,178 4,651
Dispositions, net (14,698) (37,166) (97,461)
Allowance for foreclosed
properties, end of year 24,202 41,578 62,813
Foreclosed properties, net $178,484 250,498 338,370
</TABLE>
C-16
<PAGE>
NOTE 9:
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
AND OTHER SHORT-TERM BORROWINGS
The following is a schedule of securities sold under repurchase agreements,
which includes accrued interest, and other short-term borrowings of the
Corporation at December 31, 1995, 1994 and 1993, and the related maximum amount
outstanding at the end of any month during the periods:
<TABLE>
<CAPTION>
Maximum Outstanding
(In thousands) 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Securities sold under repurchase
agreements $11,017,983 6,887,295 5,896,177 11,017,983 8,368,484 7,542,148
Other Short-Term Borrowings
Federal funds purchased $ 3,385,212 1,335,892 1,307,261 3,385,212 3,094,431 3,064,202
Fixed and variable rate bank
notes 2,586,000 -- -- 2,586,000 -- --
Interest-bearing demand
deposits issued to the U.S.
Treasury 365,245 377,526 843,069 764,155 723,248 875,676
Commercial paper 1,162,293 620,997 482,451 1,293,439 1,542,612 598,375
Other 983,394 1,027,555 345,345 2,020,760 1,879,440 483,349
Total $ 8,482,144 3,361,970 2,978,126
</TABLE>
At December 31, 1995, 1994 and 1993, the combined weighted average interest
rates related to federal funds purchased and securities sold under repurchase
agreements were 5.52 percent, 6.04 percent and 3.09 percent, respectively.
Maturities related to federal funds purchased and securities sold under
repurchase agreements in each of the years in the three-year period then ended
were not greater than 230 days.
At December 31, 1995, the weighted average interest rate and maturity for
fixed and variable rate bank notes were 5.70 percent and 90 days, respectively.
At December 31, 1995, 1994 and 1993, the weighted average interest rates for
commercial paper were 5.49 percent, 5.24 percent and 2.69 percent, respectively.
Weighted average maturities for commercial paper issued at December 31, 1995,
1994 and 1993, approximated 21, 4 and 5 days, respectively.
Included in "Other" are Federal Home Loan Bank borrowings and securities
sold short of $438,530,000 and $229,667,000, respectively at December 31, 1995,
and $497,247,000 and $445,361,000, respectively, at December 31, 1994.
Substantially all short-term borrowings are due within 90 days, and
accordingly, the carrying amount of such borrowings is deemed to be a reasonable
estimate of fair value.
C-17
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 10:
LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
Debentures and Notes Issued by the Parent Company
7 1/2 percent debentures, due in annual installments of not less
than $1,000 through December 1, 2002, net of debentures held
of $10,381 in 1995* $ 15,619 15,697 15,619 14,551
Floating rate extendible notes, due June 15, 2005** 10,100 10,100 100,000 100,000
11 percent notes, due May 1, 1996*** 18,360 18,963 18,360 19,099
Floating rate notes, due November 13, 1996** 150,000 150,000 150,000 150,000
5.95 percent notes, due July 1, 1995 (par value $150,000)*** -- -- 149,921 149,010
6 3/4 percent notes, due January 15, 1998 (par value
$250,000)*** 249,001 255,075 248,511 239,175
Floating rate notes, due February 24, 1998 (par value
$300,000)*** 299,810 299,810 -- --
Fixed rate medium-term senior notes with varying rates and terms
to 1996* 200 200 32,700 32,741
Fixed rate medium-term subordinated notes with varying rates and
terms to 2001* 54,000 63,812 54,000 56,925
Floating rate subordinated notes, due July 22, 2003 (par value
$150,000)*** 149,206 149,206 149,101 149,101
11 percent and variable rate subordinated notes, due in 1996*** 17,951 18,665 17,951 18,585
8 1/8 percent subordinated notes, due December 15, 1996*** 100,000 102,230 100,000 99,700
9.45 percent subordinated notes, due June 15, 1999 (par value
$250,000)*** 250,000 278,450 250,000 259,369
9.45 percent subordinated notes, due August 15, 2001 (par value
$150,000)*** 147,906 172,260 147,535 155,865
8 1/8 percent subordinated notes, due June 24, 2002 (par value
$250,000)*** 248,679 277,225 248,475 242,425
8 percent subordinated notes, due November 15, 2002 (par value
$225,000)*** 223,280 248,063 223,037 216,833
7 1/4 percent subordinated notes, due February 15, 2003 (par
value $150,000)*** 148,889 158,610 148,733 137,595
6 5/8 percent subordinated notes, due July 15, 2005 (par value
$250,000)*** 248,189 255,400 247,999 215,075
6 percent subordinated notes, due October 30, 2008 (par value
$200,000)*** 197,242 204,444 197,028 155,700
6 3/8 percent subordinated notes, due January 15, 2009 (par
value $150,000)*** 147,669 148,965 147,495 120,150
8 percent subordinated notes, due August 15, 2009 (par value
$150,000) 148,655 164,670 148,559 139,335
8.77 percent subordinated notes, due November 15, 2004 (par
value $150,000) 148,590 164,850 148,430 148,890
7 1/2 percent subordinated debentures, due April 15, 2035 (par
value $250,000) 246,194 276,950 -- --
7.05 percent subordinated notes, due August 1, 2005 (par value
$250,000)*** 248,065 262,725 -- --
6 7/8 percent subordinated notes, due September 15, 2005 (par
value $250,000)*** 248,350 260,000 -- --
6.55 percent subordinated debentures, due October 15, 2035 (par
value $250,000) 248,417 259,575 -- --
Total debentures and notes issued by the Parent Company 3,964,372 4,215,945 2,943,454 2,820,124
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
Debentures and Notes of Subsidiaries
Bank notes with varying rates and terms to 1997 1,165,000 1,165,000 100,000 100,000
Floating rate senior notes, due August 2, 1996 (par value
$200,000)*** 200,000 200,000 200,000 199,760
6.80 percent subordinated notes, due June 15, 2003 (par value
$150,000)*** 150,000 155,400 150,000 133,140
9 5/8 percent subordinated notes, due August 15, 1999 (par value
$150,000)*** 150,000 168,045 150,000 156,240
9 3/4 percent subordinated notes, due May 25, 1995 (par value
$136,750)*** -- -- 136,750 138,008
8 1/2 percent subordinated capital notes, due April 1, 1998 (par
value $150,000)*** 149,150 157,577 149,150 149,120
Floating rate subordinated note, due March 15, 1997 (par value
$25,000)*** 25,000 25,000 25,000 24,970
9 7/8 percent subordinated capital notes, due May 15, 1999 (par
value $75,000) 74,542 84,883 74,404 78,608
9 5/8 percent subordinated capital notes, due June 15, 1999 (par
value $75,000) 74,957 84,295 74,945 77,970
10 1/2 percent collateralized mortgage obligations, due in 2014 48,545 54,338 60,010 61,510
Debentures and notes with varying rates and terms to 2015 37,031 39,685 8,143 7,594
Total debentures and notes of subsidiaries 2,074,225 2,134,223 1,128,402 1,126,920
Other Debt
Notes payable to the FDIC, net of discount of $103 in 1995 and
$2,935 in 1994, due September 19, 1996 76,138 76,138 117,271 117,271
Advances from the Federal Home Loan Bank 958,150 958,162 4,696 3,728
Mortgage notes and other debt of subsidiaries with varying rates
and terms 39,983 44,791 43,008 44,764
Capitalized lease obligations calculated at rates generally
ranging from 7.5 percent to 15.2 percent 8,079 9,065 5,306 5,183
Total other debt 1,082,350 1,088,156 170,281 170,946
Total $7,120,947 7,438,324 4,242,137 4,117,990
</TABLE>
* Redeemable at the option of the Parent Company.
** Redeemable in whole or in part at the option of the Parent Company.
*** Not redeemable prior to maturity.
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Corporation for debt of the same remaining maturities.
The interest rate on the floating rate extendible notes is 5.9625 percent to
March 15, 1996.
The interest rate on the floating rate notes due November 13, 1996, is 6
percent to February 29, 1996.
The interest rate on the floating rate notes due February 24, 1998, is
6.05469 percent to February 24, 1996.
The fixed rate medium-term senior and subordinated notes are issued
periodically. Interest rates, maturities, redemption and other terms are
determined at the date of issuance. At December 31, 1995, the Parent Company had
issued medium-term senior notes with a fixed rate of 6.69 percent and
subordinated notes with fixed rates of interest ranging from 9.49 percent to
9.93 percent.
In February 1996, $1,500,000,000 of senior or subordinated debt securities
remained available for issuance under a shelf registration statement filed with
the Securities and Exchange Commission.
The interest rate on the floating rate subordinated notes is 6.0625 percent
to January 22, 1996.
The interest rate on variable rate subordinated notes of $858,000 is 6.32
percent to March 31, 1996.
The 8 percent subordinated notes due August 15, 2009, are redeemable in
whole and not in part at the option of the Parent Company on August 15, 2004.
C-19
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
The 8.77 percent subordinated notes are redeemable in whole or in part at
the option of Parent Company on November 15, 1999.
Holders of the 7 1/2 percent subordinated debentures and the 6.55 percent
subordinated debentures may elect to redeem a part or all of their debentures on
April 15, 2005 and October 15, 2005, respectively. Otherwise such debentures are
not redeemable prior to maturity.
At December 31, 1995, bank notes of $965,000,000 had floating rates of
interest ranging from 5.50 percent to 6.02141 percent, and $200,000,000 of the
notes had an interest rate of 5.43 percent, which changes daily based on changes
in the federal funds interest rate.
The interest rate on the floating rate senior notes was 5.9375 percent at
December 31, 1995.
The interest rate on the floating rate subordinated note is 6.0781 percent
to March 5, 1996.
The floating rate subordinated note may not be redeemed prior to maturity,
except upon the occurrence of certain events.
The 9 7/8 percent(which were assumed by the Parent Company) and 9 5/8
percent subordinated capital notes may not be redeemed prior to maturity, except
upon the occurrence of certain events.
The 10 1/2 percent collateralized mortgage obligations were issued by a
wholly-owned subsidiary of an acquired savings bank. The obligations consist of
Class A-4 bonds collateralized by mortgage participation certificates (FHLMC
Certificates) issued by the Federal Home Loan Mortgage Corporation. Maturity of
the bonds depends on the rate of payments made on the FHLMC Certificates. The
bonds are redeemable upon the occurrence of certain events.
Notes payable to the FDIC result from funding assistance from the Federal
Deposit Insurance Corporation (FDIC) for Southeast Banks segregated assets.The
discount amount, which is based on an imputed interest rate of 8 3/4 percent,
will be accreted into interest expense under the interest method to September
19, 1996.
The Corporation's acquired savings banks had aggregate advances from the
Federal Home Loan Bank of $958,150,000 at December 31, 1995, with interest rates
ranging from 1 percent to 7 percent and maturity dates to July 19, 2016.
The weighted average rate paid for long-term debt in 1995, 1994 and 1993 was
6.69 percent, 6.26 percent and 5.51 percent, respectively. Interest rate swap
agreements entered at the time of issuance of certain long-term debt reduced
related interest expense.
Long-term debt maturing in each of the five years subsequent to December 31,
1995 is as follows: 1996, $1,729,855,000; 1997, $896,800,000; 1998,
$738,581,000; 1999, $566,452,000; and 2000, $138,093,000.
C-20
<PAGE>
NOTE 11:
PREFERRED STOCK
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands) Shares Amount Shares Amount Shares Amount Shares
<S> <C> <C> <C> <C> <C> <C> <C>
Series A $2.50 Cumulative
Balance as originally reported -- $ -- -- -- 528 13,182 528
Purchases of preferred stock -- -- -- -- (6) (134) --
Conversions of preferred stock into
common stock -- -- -- -- (522) (13,047) --
Pre-merger transactions of acquired bank
holding company -- -- -- -- -- (1) --
Balance, end of year -- -- -- -- -- -- 528
Series 1990
Balance as originally reported -- -- 6,318 31,592 6,318 31,592 6,318
Redemption of preferred stock -- -- (6,318) (31,592) -- -- --
Balance, end of year -- -- -- -- 6,318 31,592 6,318
Balance as originally reported -- -- -- -- 6,318 31,592 6,846
Pre-merger transactions of acquired bank
holding company
Series B $2.15 Cumulative Convertible
Balance as reported 4,788 119,707 4,817 120,422 4,887 122,172 4,887
Purchases of preferred stock (250 ) (6,250) -- -- -- -- --
Conversions of preferred stock into
common stock (1,574) (39,364) (29 ) (715) (70 ) (1,750) --
Balance, end of year 2,964 74,093 4,788 119,707 4,817 120,422 4,887
Series D Adjustable Rate Cumulative 350 35,000 350 35,000 350 35,000 350
Series F 10.64% Cumulative
Balance as reported 75 75,000 75 75,000 75 75,000 75
Purchases of preferred stock (1 ) (870) -- -- -- -- --
Balance, end of year 74 74,130 75 75,000 75 75,000 75
Total (1,825) (46,484) (29 ) (715) (70 ) (1,750) --
Balance, end of year 3,388 $183,223 5,213 229,707 11,560 262,014 12,158
<CAPTION>
1992
Amount
(In thousands)
<S> <C>
Series A $2.50 Cumulative
Balance as originally reported 13,182
Purchases of preferred stock --
Conversions of preferred stock into
common stock --
Pre-merger transactions of acquired bank
holding company --
Balance, end of year 13,182
Series 1990
Balance as originally reported 31,592
Redemption of preferred stock --
Balance, end of year 31,592
Balance as originally reported 44,774
Pre-merger transactions of acquired bank
holding company
Series B $2.15 Cumulative Convertible
Balance as reported 122,172
Purchases of preferred stock --
Conversions of preferred stock into
common stock --
Balance, end of year 122,172
Series D Adjustable Rate Cumulative 35,000
Series F 10.64% Cumulative
Balance as reported 75,000
Purchases of preferred stock --
Balance, end of year 75,000
Total --
Balance, end of year 276,946
</TABLE>
The Corporation is authorized to issue up to 40,000,000 shares of Class A
Preferred Stock, no-par value, and 10,000,000 shares of Preferred Stock, no-par
value, each in one or more series. In connection with the First Fidelity merger,
the Corporation has issued three new series of preferred stock which are
described in Note 2.
The Series 1990 Preferred Stock was issued in connection with the
acquisition of Florida National Banks of Florida, Inc. by the Corporation in
January 1990. On December 20, 1994, the Corporation elected to redeem all of the
outstanding shares of its Series 1990 Preferred Stock. The redemption occurred
on March 31, 1995, at the redemption price of $51.50 per share. A redemption
premium of $41,355,000, representing the difference between a $44.96 per share
book value and the $51.50 redemption price was deducted from net income
applicable to common stockholders in 1994. At December 31, 1994, $325,396,000
was placed in trust with an affiliated bank. The final dividend payable was paid
on March 31, 1995, to stockholders of record on March 15, 1995.
On June 18, 1993, the Corporation redeemed all of the outstanding shares of
Series A, $2.50 Cumulative Convertible Preferred Stock at the redemption price
of $25.00 per share (plus accrued and unpaid dividends), substantially all of
which were converted into 522,000 shares of common stock.
C-21
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 12:
COMMON STOCK
<TABLE>
<CAPTION>
Option Prices Balance, Forfeitures Balance,
or Market Beginning Grants or New Exercises and Other End of
Values of 1995 Shares or Purchases Reductions 1995
<S> <C> <C> <C> <C> <C> <C>
1969 Plan
Options granted $11.59 48 -- -- -- 48
Available 52,976 -- -- -- 52,976
1984 Master Stock Plan
Options granted $20.25-$28.13 331,367 -- (134,451) -- 196,916
Available 507,669 -- -- -- 507,669
1988 Master Stock Plan
Options granted $14.75-$35.88 1,182,083 -- (166,102) (1,540) 1,014,441
Restricted stock granted $14.75-$22.88 240,504 -- (146,264) (1,530) 92,710
Available 1,112,508 -- -- 1,540 1,114,048
1992 Master Stock Plan
Options granted $44.75-$46.13 1,296,660 955,345 (74,219) (26,010) 2,151,776
Restricted stock granted $44.75-$46.13 758,102 607,330 (175,986) (13,214) 1,176,232
Available 2,826,705 (1,562,675) -- 26,010 1,290,040
1994 Employee Plan $38.36 2,508,795 -- (985,843) (139,456) 1,383,496
Dividend Reinvestment Plan -- 4,829,313 -- (807,659) -- 4,021,654
Option plans of acquired
companies $5.91-$50.60 6,766,403 1,415,744 (4,816,603) (143,023) 3,222,521
<CAPTION>
Exercisable
<S> <C>
1969 Plan
Options granted 48
Available --
1984 Master Stock Plan
Options granted 196,916
Available --
1988 Master Stock Plan
Options granted 1,014,441
Restricted stock granted --
Available --
1992 Master Stock Plan
Options granted 1,203,001
Restricted stock granted --
Available --
1994 Employee Plan 1,383,496
Dividend Reinvestment Plan --
Option plans of acquired
companies 1,860,560
</TABLE>
Under the terms of the 1969 Plan and the 1984, 1988 and 1992 Master Stock
Plans, stock options may be periodically granted to key personnel at a price not
less than the fair market value of the shares at the date of grant. Options
granted under the 1969 Plan must be exercised or forfeited on a prorated basis
over a fifteen-year period, or a ten-year period if the options are incentive
stock options. The exercise periods for options granted under the 1984, 1988 and
1992 Master Stock Plans are determined at the date of grant and are for periods
no longer than ten years.
Restricted stock may also be granted under the 1984, 1988 and 1992 Master
Stock Plans. The stock is subject to certain restrictions over a five-year
period, during which time the holder is entitled to full voting rights and
dividend privileges.
Employees, based on their eligibility and compensation, were granted options
to purchase shares of common stock under the 1994 Employee Stock Purchase Plan
at a price equal to 85 percent of the fair market value of the shares as of the
Plan date. From the Plan date and generally for approximately a two-year period
thereafter, employees have the option to purchase all or a portion of the
optioned shares. The Plan provides that as of June 30, 1996 (the Final Purchase
Date), the option price will be the lesser of 85 percent of the fair market
value as of the Plan date or 85 percent of the fair market value as of the Final
Purchase Date.
Under the terms of the Dividend Reinvestment Plan, a participating
stockholder's cash dividends and optional cash payments were used to purchase
original issue common stock from the Parent Company.
Under the terms of the Parent Company's merger agreements with certain
acquired companies, all options with respect to their common stock were
converted into options to purchase Parent Company common stock.
In accordance with a Shareholder Protection Rights Agreement dated December
18, 1990, the Parent Company issued a dividend of one right for each share of
Parent Company common stock outstanding or reserved for issuance as of December
18, 1990, or 117,450,463 rights, on December 28, 1990. These rights continue to
attach to all common stock issued after December 18, 1990.
The rights will become exercisable if any person or group commences a tender
or exchange offer that would result in their becoming the beneficial owner of 15
percent or more of the Parent Company's common stock or any person is determined
by the Federal Reserve Board to "control" the Corporation within the meaning of
the Bank Holding Company Act.
The rights also will become exercisable if a person or group acquires
beneficial ownership of 15 percent or more of the Parent Company's common stock.
Each right (other than rights owned by such person or group) will entitle its
holder to purchase, for an exercise price of $110, a number of shares of the
Parent Company's common stock (or at the option of the Board of Directors,
shares of junior participating Class A preferred stock) having a market value of
twice the exercise price. If any person or group acquires beneficial ownership
of between 15 percent and 50 percent of the Parent Company's common stock, the
Parent Company's Board of Directors may,
C-22
<PAGE>
at its option, exchange for each outstanding right (other than rights owned by
such person or group) either two shares of common stock or two one-hundredths of
a share of junior participating Class A preferred stock having economic and
voting terms similar to two shares of common stock.
The rights are subject to adjustment if certain events occur, and they will
expire on December 28, 2000, if not redeemed or terminated sooner.
NOTE 13:
PERSONNEL EXPENSE
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Salaries $1,615,310 1,435,702 1,321,416
Pension cost 24,875 27,521 13,441
Savings plan 53,289 47,993 43,224
Other benefits 268,678 261,626 245,868
Total $1,962,152 1,772,842 1,623,949
</TABLE>
Pension expense for nonqualified plans was $9,602,000, $4,504,000 and
$3,396,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
In 1994 and 1993, the expense was related to First Fidelity.
Accumulated benefit obligation for the nonqualified plans was $52,435,000,
$27,776,000 and $26,613,000 for the years ended December 31, 1995, 1994 and
1993, respectively, including vested benefits of $51,114,000, $27,004,000 and
$25,960,000, respectively. Such plans have no assets. The assumed rates used in
actuarial computations were the same as those utilized in the qualified pension
plans.
The Corporation has tax-qualified defined benefit pension plans covering
substantially all of its employees with one year of service. The benefits are
based on years of service and the employee's highest five year average
compensation. Contributions are made each year into a trust in an amount which
is determined by an actuary to meet the minimum requirements of ERISA and to
fall at or below the maximum amount which can be deducted on the Corporation's
tax return.
At December 31, 1995, plan assets primarily include U.S. Government and
Government agency securities and equity securities. Also included are 1,533,766
shares of the Parent Company's common stock. All plan assets are held by First
Union National Bank of North Carolina (the Bank) in a Bank-administered trust
fund.
In 1994 and 1993, pension cost includes settlement losses of $514,000 and
$2,378,000, respectively, related to the purchase of annuities for certain
retirees.
The following tables set forth the plan's funded status and certain amounts
recognized in the Corporation's consolidated financial statements at December
31, 1995, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Actuarial Present Value of Benefit Obligations
Accumulated benefit obligation including vested benefits of $591,058,000, 1995;
$461,797,000, 1994; and $485,549,000, 1993 $ 643,012 494,188 532,685
Projected benefit obligation for service rendered to date $(838,092) (656,499) (712,666)
Plan assets at fair value 971,182 836,994 844,553
Plan assets in excess of projected benefit obligation 133,090 180,495 131,887
Prior service cost 40,483 8,198 13,351
Unrecognized net loss from past experience different from that assumed and effects
of
changes in assumptions 131,699 81,937 115,398
Unrecognized net transition asset (20,519) (24,267) (28,131)
Prepaid pension cost included in other assets $ 284,753 246,363 232,505
Assumed Rates Used in Actuarial Computations
Discount rate at beginning of year 8.25-8.75% 7-7.5 8-8.75
Discount rate at end of year 7.5 8.25-8.75 7-7.5
Weighted average rate of increase in future compensation levels 4.5 4-5 4-4.5
Long-term average rate of return 8.5-9.75% 8.5-9.75 9.5-9.75
</TABLE>
C-23
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Pension Cost
Service cost-benefits earned during the period $ 38,105 43,781 32,457
Interest cost on projected benefit obligation 52,498 50,277 38,498
Actual (return) loss on plan assets (135,288) 12,400 (62,279)
Net amortization and deferral 59,958 (83,955) (1,009)
Settlement loss -- 514 2,378
Net pension cost $ 15,273 23,017 10,045
</TABLE>
The Corporation and its subsidiaries provide certain health care and life
insurance benefits for retired employees. Substantially all of the Corporation's
employees may become eligible for these benefits if they reach retirement age
while working for the Corporation. Life insurance benefits are provided through
an insurance company. Medical and other benefits are provided through a
tax-exempt trust formed by the Corporation. The Corporation recognizes the cost
of providing these benefits by expensing annual insurance premiums, trust
funding allocations and administrative expenses.
The amount expensed for group insurance expense for active employees in
1995, 1994 and 1993 was $94,831,000, $84,064,000 and $99,740,000, respectively.
The following tables set forth the status of postretirement benefits other
than pensions and certain amounts recognized in the Corporation's consolidated
financial statements at December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Actuarial Present Value of Postretirement Benefits Obligation
Retirees $191,337 158,469
Fully eligible active participants 4,440 8,649
Other active participants 43,536 32,540
Accumulated postretirement benefit obligation $239,313 199,658
Projected benefit obligation in excess of plan assets $239,313 199,658
Unrecognized net transition obligation (60,363) (63,914)
Unrecognized prior service cost 10,880 --
Unrecognized net gain (loss) from past experience different from that assumed
and effects of changes in assumptions (31,432) 9,321
Accrued postretirement benefit cost $158,398 145,065
Assumed Rates Used in Actuarial Computations
Weighted average discount rate 7.5% 8.25-8.75
Rate of increase in future compensation levels, depending on age 4-9 4-5
Health care cost trend rate
11.67-
Prior to age 65 (for 1996, grading to 7 percent in 2004) 12.25 12.25-12.5
10.67-%
After age 65 (for 1996, grading to 6 percent in 2004) 11.25 10-11.25
Effect of One Percent Increase in Health Care Cost Trend Rate
Service costs $ 81 --
Interest costs 967 1,084
Accumulated postretirement benefit obligation $ 14,470 13,783
Postretirement Costs
Service cost-benefits earned during the period $ 2,876 3,262
Interest cost on projected benefit obligation 15,717 15,416
Amortization of transition obligation 2,711 3,674
Net cost $ 21,304 22,352
<CAPTION>
December 31,
1993
<S> <C>
Actuarial Present Value of Postretirement Benefits Obligation
Retirees 175,946
Fully eligible active participants 13,075
Other active participants 38,267
Accumulated postretirement benefit obligation 227,288
Projected benefit obligation in excess of plan assets 227,288
Unrecognized net transition obligation (67,221)
Unrecognized prior service cost --
Unrecognized net gain (loss) from past experience different from that assumed
and effects of changes in assumptions (27,526)
Accrued postretirement benefit cost 132,541
Assumed Rates Used in Actuarial Computations
Weighted average discount rate 7-7.5
Rate of increase in future compensation levels, depending on age 4-4.5
Health care cost trend rate
Prior to age 65 (for 1996, grading to 7 percent in 2004) 12.83-13.5
After age 65 (for 1996, grading to 6 percent in 2004) 11-11.83
Effect of One Percent Increase in Health Care Cost Trend Rate
Service costs --
Interest costs 991
Accumulated postretirement benefit obligation 12,132
Postretirement Costs
Service cost-benefits earned during the period 2,474
Interest cost on projected benefit obligation 14,038
Amortization of transition obligation 4,309
Net cost 20,821
</TABLE>
C-24
<PAGE>
The Financial Accounting Standards Board has issued Standard No. 112,
"Employers' Accounting for Postemployment Benefits", which requires accrual of a
liability for all types of benefits paid to former or inactive employees after
employment but before retirement. The Corporation adopted this accounting
Standard beginning January 1, 1994. Benefits subject to this accounting
pronouncement include salary continuation, supplemental unemployment benefits,
severance benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation of such benefits as
health care and life insurance coverage. The effect of initially applying this
new accounting Standard was not material, and the result of complying with this
Standard in 1995 was not material.
NOTE 14:
INCOME TAXES
The provision for income taxes charged to operations is as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Current Income Taxes
Federal $383,635 313,261
State 32,703 82,953
Total 416,338 396,214
Deferred Income Tax Expense (Benefits)
Federal 326,118 325,917
State 45,964 (10,687)
Total 372,082 315,230
Total $788,420 711,444
<CAPTION>
(In thousands) Years Ended December 31,
1993
<S> <C>
Current Income Taxes
Federal 364,320
State 49,980
Total 414,300
Deferred Income Tax Expense (Benefits)
Federal 160,455
State 4,157
Total 164,612
Total 578,912
</TABLE>
The federal income tax rates and amounts are reconciled with the effective
income tax rates and amounts as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
% of % of % of
Pre-tax Pre-tax Pre-tax
(In thousands) Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes $2,218,601 $2,087,887 $1,795,265
Tax at federal income tax rate $ 776,510 35.0% $ 730,761 35.0% $ 628,342 35.0%
Reasons for difference in federal
income tax rate and effective
rate
Tax-exempt interest, net of cost
to carry (53,194) (2.4) (60,536) (2.9) (68,095) (3.8)
State income taxes, net of
federal tax benefit 51,134 2.3 46,973 2.2 35,189 2.0
Goodwill amortization 30,662 1.4 22,245 1.1 17,867 1.0
Adjustment to deferred income tax
assets and liabilities for
enacted changes in tax laws and
rates -- -- -- -- (18,588) (1.0)
Change in the beginning-of-the-
year deferred tax assets
valuation
allowance 3,031 .1 1,889 .1 (3,604) (.2)
Other items, net (19,723) (.9) (29,888) (1.4) (12,199) (.7)
Total $ 788,420 35.5% $ 711,444 34.1% $ 578,912 32.3%
</TABLE>
C-25
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
The sources and tax effects of temporary differences that give rise to
significant portions of deferred income tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Deferred Income Tax Liabilities
Depreciation $ 67,074 52,772
Unrealized gain on debt and equity securities 59,664 --
Intangible assets 77,326 66,040
Leasing activity 761,964 466,950
Prepaid insurance premiums 3,763 28,892
Prepaid pension asset 83,010 78,314
Thrift loan loss reserve recapture 72,103 27,152
Other 58,187 40,945
Total deferred income tax liabilities 1,183,091 761,065
Deferred Income Tax Assets
Provision for loan losses, net (535,542) (574,809)
Accrued expenses, deductible when paid (265,911) (215,623)
Unrealized loss on debt and equity securities -- (155,729)
Foreclosed properties (12,006) (30,796)
Sale and leaseback transactions (17,227) (18,825)
Deferred income (15,864) (18,106)
Purchase accounting adjustments (primarily loans and securities) (63,099) (33,814)
Net operating loss carryforwards (38,400) (58,039)
First American segregated assets (19,769) (10,004)
Loan products (3,467) (2,169)
Other (33,041) (46,559)
Total deferred income tax assets (1,004,326) (1,164,473)
Deferred tax assets valuation allowance 43,570 37,421
Net deferred income tax liabilities (assets) $ 222,335 (365,987)
<CAPTION>
(In thousands) Years Ended December 31,
1993
<S> <C>
Deferred Income Tax Liabilities
Depreciation 49,709
Unrealized gain on debt and equity securities 14,698
Intangible assets 84,286
Leasing activity 279,618
Prepaid insurance premiums 1,239
Prepaid pension asset 72,632
Thrift loan loss reserve recapture 24,889
Other 56,906
Total deferred income tax liabilities 583,977
Deferred Income Tax Assets
Provision for loan losses, net (531,380)
Accrued expenses, deductible when paid (176,735)
Unrealized loss on debt and equity securities --
Foreclosed properties (68,403)
Sale and leaseback transactions (22,276)
Deferred income (15,283)
Purchase accounting adjustments (primarily loans and securities) (9,529)
Net operating loss carryforwards (61,072)
First American segregated assets (76,003)
Loan products (18,234)
Other (51,716)
Total deferred income tax assets (1,030,631)
Deferred tax assets valuation allowance 22,173
Net deferred income tax liabilities (assets) (424,481)
</TABLE>
Changes to the deferred tax assets valuation allowance are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994
<S> <C> <C>
Balance, beginning of year $37,421 22,173
Current year deferred provision, change in deferred tax assets valuation allowance 3,031 1,889
Purchase acquisitions 3,118 13,359
Deferred tax assets valuation allowance, end of year $43,570 37,421
<CAPTION>
Years Ended December 31,
1993
(In thousands)
<S>
Balance, beginning of year 20,024
Current year deferred provision, change in deferred tax assets valuation allowance (3,604)
Purchase acquisitions 5,753
Deferred tax assets valuation allowance, end of year 22,173
</TABLE>
A portion of the current year change in the net deferred tax liability
(asset) relates to unrealized gains and losses on debt and equity securities
available for sale. Under Standard No. 115, the related 1995 and 1994 deferred
tax expense (benefit) of $215,393,000 and $(170,427,000), respectively, have
been recorded directly to stockholders' equity. Purchase acquisitions also
increased the net deferred tax liability in the amount of $847,000 in 1995,
while increasing the net deferred tax asset by $86,309,000 in 1994 and
$154,679,000 in 1993.
The realization of deferred tax assets may be based on utilization of
carrybacks to prior taxable periods, anticipation of future taxable income in
certain periods and the utilization of tax planning strategies. Management has
determined that it is more likely than not that the deferred tax assets can be
supported by carrybacks to federal taxable income in excess of $2,400,000,000 in
the three-year federal carryback period and by expected future taxable income
which will far exceed amounts necessary to fully realize remaining deferred tax
assets resulting from net operating loss carryforwards and the scheduling of
temporary differences. The valuation allowance primarily relates to certain
state temporary differences and federal and state net operating loss
carryforwards. To the extent that the valuation allowance attributable to the
purchase acquisitions in the amount of $22,230,000 is subsequently recognized,
such income tax benefit will reduce goodwill.
At December 31, 1995, the Corporation has net operating loss carryforwards
of $82,000,000 which are available to offset future federal taxable income
through 2007, subject to annual limitations. The Corporation also has net
operating loss carryforwards of $142,000,000 that are available to offset future
state taxable income through 2010.
Income tax expense related to securities available for sale transactions was
$13,828,000, $1,546,000 and $9,559,000 in
C-26
<PAGE>
1995, 1994 and 1993, respectively. Income tax expense related to investment
security transactions was $1,787,000, $1,455,000 and $5,044,000 in 1995, 1994
and 1993, respectively.
The Corporation adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes", at January 1, 1993, and applied the provisions of
Standard No. 109 retroactively to January 1, 1992. In accordance with Standard
No. 109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Standard No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Internal Revenue Service is examining the Corporation's federal income
tax returns for the years 1991 through 1993 and is examining federal income tax
returns for certain acquired subsidiaries for periods prior to acquisition. In
1995 and 1994, the Internal Revenue Service examination of the Corporation's
federal income tax returns for years through 1990 was settled with no material
impact to the Corporation's financial position or results of operations. In
1995, 1994 and 1993, tax liabilities for certain acquired subsidiaries for
periods prior to their acquisition by the Corporation were settled with the
Internal Revenue Service with no significant impact on the Corporation's
financial position or results of operations.
NOTE 15:
FIRST UNION CORPORATION
(PARENT COMPANY)
The Parent Company's principal assets are its investments in its
subsidiaries, interest-bearing balances with bank subsidiaries, securities
purchased under resale agreements, securities available for sale and loans to
subsidiaries. The significant sources of income of the Parent Company are
dividends from its subsidiary bank holding companies, interest and fees charged
on loans made to its subsidiaries, interest on eurodollars purchased from bank
subsidiaries, interest on securities available for sale and fees charged to its
subsidiaries for providing various services.
In addition, the Parent Company serves as the primary source of funding for
the mortgage banking and other activities of its nonbank subsidiaries. Lines of
credit in the amount of $350,000,000 are available to the Parent Company at an
annual facility fee of 8.00 to 18.75 basis points and a utilization fee of 6.25
basis points. The facility fee is based on the daily average commitment amount
and the utilization fee is based on the daily average principal amount
outstanding. Generally, interest rates will be determined at the time credit
line usage occurs and will vary based on the type of loan extended to the Parent
Company.
Certain regulatory and other requirements restrict the lending of funds by
the bank subsidiaries to the Parent Company and to the Parent Company's nonbank
subsidiaries and the amount of dividends that can be paid to the Parent Company
by the bank subsidiaries and certain of the Parent Company's other subsidiaries.
On December 31, 1995, the Parent Company was indebted to subsidiary banks in the
amount of $260,676,000 that, under the terms of revolving credit agreements, was
secured by certain interest-bearing balances, securities available for sale,
loans, premises and equipment and payable on demand. On such date, a subsidiary
bank had loans outstanding to Parent Company nonbank subsidiaries amounting to
$135,929,000 that, under the terms of a revolving credit agreement, was secured
by securities available for sale and certain loans and payable on demand.
Additionally, the Parent Company is the guarantor of certain publicly issued
debt of an acquired subsidiary in the amount of $75,000,000.
Industry regulators limit dividends that can be paid by the Corporation's
subsidiaries. National banks are limited in their ability to pay dividends in
two principal ways: first, dividends cannot exceed the bank's undivided profits,
less statutory bad debt in excess of the bank's allowance for loan losses, and
second, in any year dividends may not exceed a bank's net profits for that year,
plus its retained earnings from the preceding two years, less any required
transfers to surplus. The Parent Company's subsidiaries, including its bank
subsidiaries, had available retained earnings of $467,564,000 at December 31,
1995, for the payment of dividends to the Parent Company without such regulatory
or other restrictions.
Subsidiary net assets of $9,132,280,000 were restricted from being
transferred to the Parent Company at December 31, 1995, under such regulatory or
other restrictions.
At December 31, 1995 and 1994, the estimated fair value of the Parent
Company's loans was $2,361,334,000 and $1,755,517,000, respectively.
C-27
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
The Parent Company's condensed balance sheets as of December 31, 1995 and
1994, and the related condensed statements of income and cash flows for the
three-year period ended December 31, 1995, are as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) 1995
<S> <C>
Assets
Cash and due from banks $ 290
Interest-bearing balances with bank subsidiary 1,305,210
Securities purchased under resale agreements 200,000
Total cash and cash equivalents 1,505,500
Securities available for sale (amortized cost $190,246 in 1995; $151,505 in 1994) 258,889
Loans, net of unearned income ($648 in 1995; $591 in 1994) 76,961
Allowance for loan losses (1,325)
Loans, net 75,636
Loans due from subsidiaries
Banks 1,704,541
Bank holding companies 128,683
Other subsidiaries 446,918
Investments in wholly-owned subsidiaries
Arising from investments in equity in undistributed net income of subsidiaries
Banks 4,520,514
Bank holding companies 5,029,527
Other subsidiaries 467,909
10,017,950
Arising from purchase accounting acquisitions 97,989
Total investments in wholly-owned subsidiaries 10,115,939
Other assets 531,388
Total assets $14,767,494
Liabilities and Stockholders' Equity
Commercial paper 941,968
Other short-term borrowings 460,676
Other liabilities 282,792
Long-term debt 4,038,914
Stockholders' equity 9,043,144
Total liabilities and stockholders' equity $14,767,494
<CAPTION>
(In thousands) 1994
<S> <C>
Assets
Cash and due from banks 300
Interest-bearing balances with bank subsidiary 958,126
Securities purchased under resale agreements 100,000
Total cash and cash equivalents 1,058,426
Securities available for sale (amortized cost $190,246 in 1995; $151,505 in 1994) 193,131
Loans, net of unearned income ($648 in 1995; $591 in 1994) 72,791
Allowance for loan losses (1,325)
Loans, net 71,466
Loans due from subsidiaries
Banks 1,030,000
Bank holding companies 272,731
Other subsidiaries 382,191
Investments in wholly-owned subsidiaries
Arising from investments in equity in undistributed net income of subsidiaries
Banks 1,417,590
Bank holding companies 7,103,529
Other subsidiaries 298,748
8,819,867
Arising from purchase accounting acquisitions 107,680
Total investments in wholly-owned subsidiaries 8,927,547
Other assets 235,574
Total assets 12,171,066
Liabilities and Stockholders' Equity
Commercial paper 395,533
Other short-term borrowings 300,000
Other liabilities 257,589
Long-term debt 2,943,452
Stockholders' equity 8,274,492
Total liabilities and stockholders' equity 12,171,066
</TABLE>
C-28
<PAGE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 134,037 72,350 55,379
Interest income on securities available for sale 3,908 4,139 2,377
Other interest income from subsidiaries 84,169 77,583 42,225
Total interest income 222,114 154,072 99,981
Interest Expense
Short-term borrowings 70,795 43,540 22,041
Long-term debt 234,319 163,072 110,956
Total interest expense 305,114 206,612 132,997
Net interest income (83,000) (52,540) (33,016)
Provision for loan losses -- 1,408 3,665
Net interest income after provision for loan losses (83,000) (53,948) (36,681)
Noninterest income
Dividends from subsidiaries
Banks 507,953 155,800 --
Bank holding companies 275,425 526,212 406,682
Other subsidiaries 10,000 6 6
Securities available for sale transactions 9,809 5,525 --
Sundry income 319,709 194,396 156,612
Noninterest expense (279,121) (185,932) (140,883)
Income before income tax benefits and equity in undistributed net income of
subsidiaries 760,775 642,059 385,736
Income tax benefits (14,151) (14,889) (6,700)
Income before equity in undistributed net income of subsidiaries 774,926 656,948 392,436
Equity in undistributed net income of subsidiaries 655,255 719,495 823,917
Net income 1,430,181 1,376,443 1,216,353
Dividends on preferred stock 26,390 46,020 45,553
Net income applicable to common stockholders before redemption premium 1,403,791 1,330,423 1,170,800
Redemption premium on preferred stock -- 41,355 --
Net income applicable to common stockholders after redemption premium $1,403,791 1,289,068 1,170,800
</TABLE>
C-29
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Operating Activities
Net income $1,430,181 1,376,443 1,216,353
Adjustments to reconcile net income to net cash provided (used) by operating
activities
Equity in undistributed net income of subsidiaries (655,255) (719,495) (823,917)
Provision for loan losses -- 1,408 3,665
Accretion and revaluation losses on securities available for sale (3,546) (4,295) 2,431
Securities available for sale transactions (9,809) (5,525) --
Depreciation and amortization 5,560 2,888 3,602
Deferred income taxes (benefits) 1,000 (19,272) 1,382
Trading account assets, net -- 10,285 8,811
Other assets, net (293,990) (40,501) (26,363)
Other liabilities, net 1,177 100,189 (33,570)
Net cash provided by operating activities 475,318 702,125 352,394
Investing Activities
Increase (decrease) in cash realized from
Sales of securities available for sale 99,240 14,284 4,763
Purchases of securities available for sale (124,626) (89,297) (1,153)
Advances to subsidiaries, net (595,220) (539,359) (198,771)
Investments in subsidiaries 362,978 76,973 (588,915)
Longer-term loans originated or acquired (101,291) (68,999) (49,921)
Principal repaid on longer-term loans 97,121 62,675 7,746
Purchases of premises and equipment, net (7,100) (6,248) (816)
Net cash used by investing activities (268,898) (549,971) (827,067)
Financing Activities
Increase (decrease) in cash realized from
Commercial paper 546,435 124,867 (71,126)
Other short-term borrowings, net 160,676 100,000 (6,215)
Issuances of long-term debt 1,292,105 444,403 989,975
Payments of long-term debt (272,400) (38,000) (394,488)
Sales of common stock 248,363 251,379 342,396
Purchases of preferred stock (7,120) -- (134)
Redemption of preferred stock -- (325,396) --
Cash received (paid) on conversion of preferred stock 405 -- (5)
Purchases of common stock (1,198,626) (417,621) (123,358)
Cash dividends paid (529,184) (486,325) (399,734)
Net cash provided (used) by financing activities 240,654 (346,693) 337,311
Increase (decrease) in cash and cash equivalents 447,074 (194,539) (137,362)
Cash and cash equivalents, beginning of year 1,058,426 1,252,965 1,390,327
Cash and cash equivalents, end of year $1,505,500 1,058,426 1,252,965
Cash Paid For
Interest $ 288,436 190,624 114,904
Income taxes 338,461 243,099 326,000
Noncash Items
Effect on stockholders' equity of an unrealized gain (loss) on debt and equity
securities included in
Parent Company
Securities available for sale 27,016 41,626 --
Other liabilities 24,025 14,569 --
Parent Company subsidiaries
Securities available for sale 457,508 (343,739) --
Other assets 135,603 (102,417) --
Assumption of long-term debt of liquidated affiliate 74,473 -- --
Increase in securities available for sale and a decrease in investment securities -- -- 32,583
Increase in investments in subsidiaries due to acquisitions of institutions for
common stock $ 610,510 162,640 166,089
</TABLE>
C-30
<PAGE>
NOTE 16:
OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing
needs of its customers, to reduce its own exposure to fluctuations in interest
rates and to conduct lending activities. These financial instruments include
commitments to extend credit; standby and commercial letters of credit; forward
and futures contracts; interest rate swaps; options, interest rate caps, floors,
collars and swaptions; foreign currency and exchange rate swap commitments;
commodity swaps; and commitments to purchase and sell securities. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amounts recognized in the supplemental consolidated
financial statements.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contract amount
of those instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. For forward and futures contracts, interest rate swaps, options,
interest rate caps, floors, collars and swaptions, the contract or notional
amounts do not represent the exposure to credit loss. The Corporation controls
the credit risk of its forward and futures contracts, interest rate swap
agreements, foreign currency and exchange rate swaps, and securities
transactions through collateral arrangements, credit approvals, limits and
monitoring procedures.
Our policy requires all swaps and options to be governed by an International
Swaps and Derivatives Association Master Agreement. Bilateral collateral
agreements are in place for substantially all dealer counterparties. Collateral
for dealer transactions is delivered by either party when the credit risk
associated with a particular transaction, or group of transactions to the extent
netting exists, exceeds defined thresholds of credit risk. Thresholds are
determined based on the strength of the individual counterparty and are
bilateral. As of December 31, 1995, the total credit risk in excess of
thresholds was $275,250,000. The fair value of collateral held was 100 percent
of the total credit risk in excess of the thresholds.
For non-dealer transactions, the need for collateral is evaluated on a
individual transaction basis and is primarily dependent on the financial
strength of the counterparty.
The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses. The amount of
deferred gains and losses was $8,830,000 and $10,606,000, respectively, at
December 31, 1995. These net losses will reduce net interest income by
$1,776,000 in 1996.
The FASB has issued Standard No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments", which requires improved
disclosures about derivative financial instruments -- futures, forward, swap or
option contracts, or other financial instruments with similar characteristics.
It also amends existing requirements of FASB Standard No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentration of Credit Risk", and FASB Standard No.
107, "Disclosures about Fair Value of Financial Instruments". It requires that a
distinction be made between financial instruments held or issued for the
purposes of trading or other than trading. For derivative financial instruments
held or issued for trading, disclosure of average fair values and of net trading
gains or losses is required. For derivative financial instruments held or issued
for purposes other than trading, it requires disclosure about those purposes,
about how the instruments are reported in financial statements, and, if the
purpose is hedging anticipated transactions, about the anticipated transactions,
the classes of derivative financial instruments used to hedge those
transactions, the amounts of hedging gains and losses deferred, and the
transactions or other events that result in recognition of the deferred gains or
losses in income. The Standard encourages, but does not require, quantitative
information about interest rate or other market risks of derivative financial
instruments, and also of other assets and liabilities, that is consistent with
the way the entity manages or adjusts risks and that is useful for comparing the
results of applying the entity's strategies to its objectives for holding or
issuing the derivative financial instruments. The Standard amends Standard No.
105 to require disaggregation of information about financial instruments with
off-balance sheet risk of accounting loss by class, business activity, risk or
other category that is consistent with the entity's management of those
instruments. The Standard also amends Standard No. 107 to require that fair
value information be presented without combining, aggregating or netting the
fair value of derivative financial instruments with the fair value of
nonderivative financial instruments and be presented together, with the related
carrying amounts in the body of the financial statements, a single footnote or a
summary table in a form that makes it clear whether the amounts represent assets
or liabilities. The Corporation has adopted this Standard, and information
related thereto can be found on the next page and in Tables 20 through 22 on
pages T-15 through T-20, which are incorporated herein by reference.
At December 31, 1995 and 1994, off-balance sheet derivative financial
instruments and their related fair values are as follows:
C-31
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994
Contract or Contract or
Carrying Estimated Notional Carrying Estimated Notional
(In thousands) Amount Fair Value Amount Amount Fair Value Amount
<S> <C> <C> <C> <C> <C> <C>
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to extend credit $ -- 144,574 38,462,518 -- 117,480 30,739,996
Standby and commercial letters of credit -- 35,705 3,651,166 -- 30,464 3,085,975
Financial Instruments Whose Contract or
Notional Amounts Exceed the Amount of
Credit Risk
Forward and Futures Contracts
Trading and dealer activities 37,811 37,811 15,539,953 801,043 801,043 5,715,894
Interest rate risk management
Asset rate conversions -- 38,428 6,120,000 -- (7,071) 1,200,000
Asset hedge -- (1,391) 1,016,000 -- (1,855) 2,000,000
Rate sensitivity hedges -- 17,877 25,355,000 -- (120) 25,000
Interest Rate Swap Agreements
Trading and dealer activities (117,450) (117,529) 10,773,748 7,511 7,511 5,700,504
Interest rate risk management
Asset rate conversions 19,713 110,790 11,282,355 8,917 (455,199) 10,322,216
Liability rate conversions 9,627 226,836 5,127,000 18,960 (199,703) 4,026,500
Purchased Options, Interest Rate Caps,
Floors, Collars and Swaptions
Trading and dealer activities 47,768 50,802 5,401,256 18,300 18,300 1,664,279
Interest rate risk management
Liability rate conversions (2,224) (2,354) 180,000 1,902 110 392,000
Rate sensitivity hedges 705 37 4,319,200 25,601 41,256 28,231,000
Offsetting positions 561 2,475 2,400,000 (124) (2,282) 2,400,000
Written Options, Interest Rate Caps,
Floors, Collars and Swaptions
Trading and dealer activities (36,890) (36,890) 7,778,202 (24,641) (24,641) 1,497,631
Interest rate risk management
Offsetting positions (637) (2,475) 2,400,000 60 1,796 2,400,000
Foreign Currency and Exchange Rate Swap
Commitments
Trading and dealer activities (562) (562) 1,528,744 (19,323) (19,323) 3,453,525
Foreign currency risk management 231 231 42,628 18,680 18,680 1,679,905
Commodity Swaps
Trading and dealer activities 797 797 29,810 (152) (152) 4,308
Commitments to Purchase Securities 1,744 1,744 567,256 (842) (842) 789,774
Commitments to Sell Securities $ (806) (806) 659,383 693 693 842,894
</TABLE>
C-32
<PAGE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby and commercial letters of credit are conditional commitments issued
by the Corporation to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. Except for short-term guarantees of $2,251,226,000 guarantees
extend for more than one year and expire in varying amounts primarily through
2019. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The Corporation
holds various assets as collateral supporting those commitments for which
collateral is deemed necessary.
Forward and futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movements in securities values and
interest rates.
The Corporation enters into a variety of interest rate
contracts -- including options, interest rate caps, floors, collars and
swaptions written, and interest rate swap agreements -- in its trading
activities and in managing its interest rate exposure. Interest rate caps,
floors, collars and swaptions written by the Corporation enable customers to
transfer, modify or reduce their interest rate risk. Interest rate options are
contracts that allow the holder of the option to purchase or sell a financial
instrument at a specified price and within a specified period of time from the
seller or writer of the option. As a writer of options, the Corporation receives
a premium at the outset and then bears the risk of an unfavorable change in the
price of the financial instrument underlying the option.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Entering into interest rate swap agreements
involves not only the risk of dealing with counterparties and their ability to
meet the terms of the contracts but also the interest rate risk associated with
unmatched positions. Notional principal amounts often are used to express the
volume of these transactions, but the amounts potentially subject to credit risk
are much smaller. The Corporation also acts as an intermediary in arranging
interest rate swap transactions for customers.
Generally, futures contracts are exchanged traded and all other off-balance
instruments are transacted in the over-the-counter markets.
In the normal course of business, the Corporation has entered into certain
transactions which have recourse options. These recourse options if acted upon
would not have a material impact on the Corporation's financial position.
Substantially all time drafts accepted by December 31, 1995, met the
requirements for discount with Federal Reserve Banks. Average daily Federal
Reserve balance requirements for the year ended December 31, 1995, amounted to
$1,369,332,000. Minimum operating lease payments due in each of the five years
subsequent to December 31, 1995, are as follows: 1996, $157,253,000; 1997,
$138,203,000; 1998, $126,882,000; 1999, $114,645,000; 2000, $104,746,000; and
subsequent years, $828,801,000. Rental expense for all operating leases for the
three years ended December 31, 1995, was $178,836,000, 1995; $184,335,000, 1994;
and $187,635,000, 1993.
As of December 31, 1995, the Corporation's Bank Insurance Fund (BIF) deposit
assessment base was $63,380,657,000 and the Corporation's Savings Association
Insurance Fund (SAIF) deposit assessment base was $19,767,525,000. Various
legislative proposals related to the future of the BIF and SAIF have been under
consideration. Several of these proposals, including a proposal previously
approved by Congress that is understood to have the support of the President,
include a one-time special assessment for SAIF deposits (in the range of 70
cents to 85 cents per $100.00 of assessable SAIF deposits, with a discount for
certain SAIF deposits held by BIF member banks) and a subsequent comparable and
reduced level of annual premiums for SAIF deposits. It is not known when and if
any such proposal or any other related proposal may be adopted.
The Parent Company and certain of its subsidiaries have been named as
defendants in various legal actions arising from their normal business
activities in which damages in various amounts are claimed. Although the amount
of any ultimate liability with respect to such matters cannot be determined, in
the opinion of management, based upon the opinions of counsel, any such
liability will not have a material effect on the Corporation's consolidated
financial position.
C-33
<PAGE>
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
First Union Corporation and Subsidiaries
December 31, 1995, 1994 and 1993
NOTE 17:
CARRYING AMOUNTS AND FAIR VALUE
OF FINANCIAL INSTRUMENTS
Information about the fair value of on-balance sheet financial instruments
at December 31, 1995 and 1994, which should be read in conjunction with Note 16
and certain other notes to the supplemental consolidated financial statements
presented elsewhere herein, is set forth below.
<TABLE>
<CAPTION>
1995 1994
Carrying Estimated Carrying Estimated
(In thousands) Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash equivalents $10,544,065 10,544,065 8,225,086 8,225,086
Trading account assets 1,881,066 1,881,066 1,317,169 1,317,169
Securities available for sale 18,193,699 18,193,699 11,533,642 11,533,642
Investment securities 3,139,616 3,319,602 7,916,729 7,791,991
Loans
Commercial, financial and agricultural 24,599,673 24,875,278 22,004,117 21,917,748
Real estate-construction and other 2,494,527 2,561,737 2,044,428 2,057,891
Real estate-commercial mortgage 9,980,011 10,169,618 9,461,943 9,231,438
Lease financing 4,178,144 4,178,144 2,888,454 2,888,454
Foreign 649,760 650,846 526,325 526,070
Real estate-mortgage 27,251,034 27,827,083 21,027,179 20,332,389
Installment loans-Bankcard 3,657,619 3,703,456 4,345,069 4,496,520
Installment loans-other 17,752,112 18,063,147 15,533,478 15,334,491
Loans, net of unearned income 90,562,880 92,029,309 77,830,993 76,785,001
Allowance for loan losses (1,507,798) -- (1,578,128) --
Loans, net 89,055,082 92,029,309 76,252,865 76,785,001
Other assets $ 3,158,944 3,163,471 2,576,523 2,592,726
Financial Liabilities
Deposits
Noninterest-bearing deposits 17,043,223 17,043,223 15,917,287 15,917,287
Interest-bearing deposits
Savings and NOW accounts 24,297,270 24,297,270 23,263,322 23,263,322
Money market accounts 13,112,918 13,112,918 14,376,098 14,376,098
Other consumer time 31,945,313 32,317,040 27,402,767 27,361,053
Foreign 3,526,771 3,526,771 4,802,719 4,802,719
Other time 2,629,723 2,646,404 2,102,932 2,108,935
Total deposits 92,555,218 92,943,626 87,865,125 87,829,414
Short-term borrowings 19,500,127 19,500,127 10,249,265 10,249,265
Other liabilities 3,115,063 3,115,063 2,195,178 2,195,178
Long-term debt $ 7,120,947 7,438,324 4,242,137 4,117,990
</TABLE>
Estimated fair values for the commercial loan portfolio were based on
weighted average discount rates ranging from 7.07 percent to 8.50 percent and
7.45 percent to 10.24 percent at December 31, 1995 and 1994, respectively, and
for the retail portfolio from 6.92 percent to 13.00 percent and 8.08 percent to
12.12 percent, respectively.
Nonperforming loans of less than $1,000,000 each, which amounted to
$197,303,000 and $264,486,000 at December 31, 1995 and 1994, respectively, are
included in estimated fair value at their net costs.
The fair value of noninterest-bearing deposits, savings and NOW accounts,
and money market accounts is the amount payable on demand at December 31, 1995
and 1994. The fair
C-34
<PAGE>
value of fixed-maturity certificates of deposit is estimated based on the
discounted value of contractual cash flows using the rates currently offered for
deposits of similar remaining maturities. The fair value estimates above do not
include the benefit that results from the low-cost funding provided by deposit
liabilities compared to the cost of borrowing funds in the market. This value,
which includes such cost assumptions related to interest rates, deposit run-off,
maintenance costs and float opportunity costs, is presented below on a
discounted cash flow basis. The value related to the recorded cost of acquired
deposits is also included therein.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments. For
example, the Corporation has a substantial trust department that contributes net
fee income annually. The trust department is not considered a financial
instrument, and its value has not been incorporated into the fair value
estimates. Other significant assets and liabilities that are not considered
financial assets or liabilities include the mortgage banking operation,
brokerage network, deferred tax assets, premises and equipment, and goodwill. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates. Fair value of off-balance sheet
derivative financial instruments has not been considered in determining
on-balance sheet fair value estimates.
C-35
<PAGE>
EXHIBIT (21)
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES*
ABCA, Inc.
Citrus County Land Corp.
Citrus County Service Corp.
Davis Boulevard Service Corporation
Melbourne Atlantic Venture Partners (20%)
Naples Financial Services, Inc.
Austin Ventures IV-A, L. P. (6.42%)
BancFlorida Investment Services, Inc.
Capitol Finance Group, Inc.
Canaan Ventures II (19.60%)
Center Street Capital Management, L. P. (5.39%)
Chartwell Capital, L. P. (17.95%)
Coral Gables Service Corporation
DB & P, Inc.
DeMuth, Folger & Wetherill, L. P. (9.88%)
Education Financing Services, LLC (19.318%)
First Card Corporation
First Union Capital Markets Corp.
First Union Community Development Corporation
Arbor Village, L.P. (99%)
Athens Rental Housing, L.P. (99%)
BR Limited Partnership (99%)
Creative Choice Homes IX, Ltd. (99%)
Green Ridge Associates, LLC (99%)
Housing Equity Fund of Virginia I, L.P. (6.945%)
Parkchester Limited Partnership (99%)
Roanoke Community Development Corporation (27.778%)
Statesboro Rental Housing, L. P. (99%)
Vestcor-WR Associates, Ltd. (99%)
Waterford Manor, L. P. (99%)
First Union Corporation of Georgia
DFS Services, Inc.
First Union National Bank of Georgia**
Ashton of Richmond Hill, L. P. (99%)
DF Southeastern Mortgage, Inc.
GABK Holdings, Inc.
GF Mortgage Corporation
HHS Property Corporation
Sandlewood Terrace of Ludowici L.P. (99%)
The Atlanta Business Community Development Corporation (21.7%)
Georgia Associated Services, Inc.
Rainforest Associates (50%)
GF Title Corporation
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
First Union Corporation of New Jersey
Baltimore Bancorp
First Fidelity Incorporated
Execufirst Bancorp, Inc. (24.4%)
First Executive Bank
FCC-PR, Inc.
Fidelcor Business Credit Corporation
Comwest Capital Corporation
Fidelcor Life Insurance Company
First Fidelity Community Development Corporation
First Union National Bank (95.1%) (4.9% Common Stock & 100% Preferred
Stock owned by Baltimore
Bancorp)
ABERDEEN/FIDOREO LS, INC.
Acadia Holdings, Inc.
AIRPORT ROAD/FIDOREO, INC.
Alpha JBD Holding, Inc.
Arch Street Real Estate, Inc.
Atlantic Residential Mortgage Corporation
BARNAGAT/FIDOREO, INC.
BELMONT AVENUE/FIDOREO, INC.
BEST PARKING/FIDOREO, INC.
BGMCO PA, Inc.
BOB Title Holdings, Inc.
BOB Title I, Inc.
BOB Title II, Inc.
BOB Title III, Inc.
BOB Title IV, Inc.
BOB Title VII, Inc.
BOB Title IX, Inc.
BOB Title X, Inc.
BOB Title XI, Inc.
BOB Title XII, Inc.
BOB Title XIII, Inc.
BOB Title XIX, Inc.
BOB Title XXI, Inc.
BOB Title XXIV, Inc.
BOB Title XXV, Inc.
BOB Title XXVI, Inc.
BOB Title XXVII, Inc.
BOB Title XXVIII, Inc.
Bob Title XXX, Inc.
Bob Title XXXI, Inc.
Bob Title XXXV, Inc.
BOCA/FIDOREO LS, INC.
BREWERS BRIDGE/FIDOREO, INC.
BRICK INDUSTRIAL/FIDOREO, INC.
BRICK TOWNSHIP/FIDOREO LS, INC.
Bucks/DHS Real Estate, Inc.
CALAIS/FIDOREO LS, INC.
CENTER/FIDOREO LS, INC.
CHI ES Holding, Inc.
COMBO/FIDOREO LS, INC.
COMMERCE/FIDOREO LS, INC.
CORNWALL WOODS/FIDOREO, INC.
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
CRAWFORDS CORNER/FIDOREO, INC.
CRL Real Estate, Inc.
Crompond/FNY, Inc.
CSQ Real Estate, Inc.
DANA/FIDOREO, INC.
DELRAY/FIDOREO LS, INC.
Develcor NJ, Inc.
Develcor PA, Inc.
DFD Real Estate, Inc.
East Fishkill Investors Corporation
East Hempfield Dana, Inc.
ESCONDIDO-HOVBUILT/FIDOREO, INC.
ESTATES/FIDOREO, INC.
Fairview Holdings, Inc.
FAWN LAKES/FIDOREO, INC.
FB General Real Estate, Inc.
FF South, Inc.
FFBIC, Inc.
FFBIC New York, Inc.
FFBIC New York II, Inc.
FFL Services Corporation
Ficor Duval, Inc.
Ficor FL, Inc.
Ficor NJ, Inc.
Fidelity Overseas Investment, Inc.
First Avenue King of Prussia, Inc.
First Fidelity Brokers, Inc.
First Fidelity Building Corporation
First Fidelity Insurance Services, Inc.
First Fidelity International Bank
First Fidelity Leasing Group, Inc.
First Fidelity Private Capital, Inc.
First Fidelity Urban Investment Corporation
Allentown Development Company, Inc. (24%)
FLORHAM/FIDOREO LS, INC.
FOIL, Inc.
FOREST MOUNTAIN/FIDOREO LS, INC.
FREEHOLD/FIDOREO, INC.
GJA R/E Corp.
Global Processing Alliance, Inc. (50%)
GOLD/FIDOREO LS, INC.
GRANA/MBNA Real Estate, Inc.
GREENBRIAR/FIDOREO, INC.
HELEN STREET/FIDOREO, INC.
HOHOKUS/FIDOREO LS, INC.
HOPP/FIDOREO, INC.
HOVBUILT VILLAS/FIDOREO, INC.
HSB Leasing, Inc.
HUGUENOT/FIDOREO LS, INC.
Industrial Valley Real Estate Co.
Interchange Land, Inc.
JERSEY CENTER/FIDOREO, INC.
KNICKER/FIDOREO LS, INC.
KOGEL ISLAND/FIDOREO, INC.
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
KRAMER/FIDOREO LS, INC.
LANDING CREEK/FIDOREO, INC.
LCI/MBNA, Inc.
LIFESTYLE/FIDOREO, INC.
LINDEN/FIDOREO, INC.
LIVINGSTON AVENUE/FIDOREO, INC.
MACCULLOCH/FIDOREO, INC.
MACK/FIDOREO, INC.
MANCHESTER PLACE/FIDOREO, INC.
MARABON/FIDOREO, INC.
MARKET TOWERS/ FIDOREO, INC.
MBNA OREO/SAUCON I, Inc.
MBNO Real Estate, Inc.
MDKD/FIDOREO, INC.
MIDDLE ISLAND/FIDOREO, INC.
Monroe Flex, Inc.
MONTE ROSA/FIDOREO, INC.
MSB Properties, Inc.
MSB Properties Six, Inc.
MT. EPHRAM/FIDOREO LS, INC.
MULTI/FIDOREO, INC.
Multi I/FNY, Inc.
MULTI II/FIDOREO, INC.
Northco Acquisition, Inc.
OCEAN/FIDOREO, INC.
Old York Road Real Estate, Inc.
ORANGE NORTH/FIDOREO, INC.
P. Newburgh Ridge, Inc.
P. The Hill, Inc.
PARK AVENUE/FIDOREO, INC.
Park Avenue Investors, Inc.
PAROG, Inc.
PAYROLL/FIDOREO, INC.
PERRY STREET/FIDOREO, INC.
PICATINNY/FIDOREO LS, INC.
Port Park/FNY, Inc.
PWSB, Inc.
WCSB, Inc.
PWSB Bridle Land Corp.
PWSB Edwards, Inc.
R.H. Properties/MBNA, Inc.
Raven Properties, Inc.
REISS/FIDOREO, INC.
Rosewood/MBNA Real Estate, Inc.
Sand Soto Florida, Inc.
SBRC Service Corporation
S.B.R.C. Land Corp.
SCOTCH/FIDOREO LS, INC.
Sellit, Inc.
Settlers Notch/Noreo, Inc.
SGF/FIDOREO, INC.
SHARK/FIDOREO, INC.
SHORE/FIDOREO, INC.
Skyhawk Agency, Inc.
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
Sound Shore Investors, Inc.
Southampton OSB, Inc.
SPRING/FIDOREO, INC.
Springhouse Real Estate, Inc.
SURREY DOWNS/FIDOREO, INC.
TAYLORR LAKES/FIDOREO, INC.
The Howard Mortgage Group, Inc.
THIRTY-THREE UNION/FIDOREO, INC.
Three Ninety Nine Corp.
TINTON FALLS/FIDOREO, INC.
Towson Service Corporation
Turnpike/MBNA, Inc.
UNITED/FIDOREO, INC.
UPPER SADDLE RIVER/FIDOREO LS, INC.
UVC LAND/FIDOREO, INC.
VERO/FIDOREO LS, INC.
W. & J. McCur, Inc.
WALDWICK/FIDOREO LS, INC.
WATERVIEW/FIDOREO, INC.
WAYNE/FIDOREO, INC.
Merchants Realty Company
Northeast Bancorp Inc. (1% Class A Preferred)
Waller House Corporation
First Union Bank of Delaware
First Fidelity Insurance Services of Delaware, Inc.
Atlantic Independent Insurance Agency, Inc.
Northeast Bancorp, Inc.
Fairfield Properties, Inc.
First Union Bank of Connecticut
EIGHTEEN/UNIONOREO, INC.
FIFTEEN/UNIONOREO, INC.
FIFTY/UNIONOREO, INC.
FIFTY-EIGHT/UNIONOREO, INC.
FIFTY-FIVE/UNIONOREO, INC.
FIFTY-FOUR/UNIONOREO, INC.
FIFTY-SEVEN/UNIONOREO, INC.
FIFTY-SIX/UNIONOREO, INC.
FORTY/UNIONOREO, INC.
FORTY-EIGHT/UNIONOREO, INC.
FORTY-FIVE/UNIONOREO, INC.
FORTY-FOUR/UNIONOREO, INC.
FORTY-NINE/UNIONOREO, INC.
FORTY-ONE/UNIONOREO, INC.
FORTY-SEVEN/UNIONOREO, INC.
FORTY-SIX/UNIONOREO, INC.
FORTY-TWO/UNIONOREO, INC.
MULTI I/UNIONOREO, INC.
NINETEEN/UNIONOREO, INC.
Nor Con, Inc.
Nor Con II, Inc.
Nor Con III, Inc.
Nor Con IV, Inc.
SALERNO/UNIONOREO, INC.
THIRTY-EIGHT/UNIONOREO, INC.
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
THIRTY-ONE/UNIONOREO, INC.
TWELVE/UNIONOREO, INC.
TWENTY-THREE/UNIONOREO, INC.
Union Financial Services Corporation
East Hartford Clearing Company
Fairfield Clearing Company
Union Trust Brokerage Services, Inc.
Washington Clearing Company
First Union Services, Inc. (formerly First Union Corporation of North Carolina)
First Union Corporation of South Carolina
First Union National Bank of South Carolina**
Business Development Corporation of South Carolina (8.7%)
SCBK Holdings, Inc.
First Union Corporation of Virginia****
Ameribanc Development Corporation
Ameribanc Financial Corporation
Ameribanc Service Corporation
Atlantic Venture Partners II, L.P. (5.44%)
First American Service Corporation
First American Development Corp.
Long, Travers & FASC (40%)
New Rivers Towers Limited Partnership (95% owned by First American
Service Corporation; 5% owned by
RTP, Inc.)
Rebecca Corporation
RTP, Inc.
Woodlawn Joint Venture (40% owned by First American Service Corporation;
30% owned by
First Union National Bank of Virginia)
First Union National Bank of Maryland**
First American Properties of Maryland, Inc.
First Union National Bank of Tennessee**
ACB Services, Inc.
Professional Asset Management in Tennessee, Inc.
The Exchange Building Limited Partnership (99%)
First Union National Bank of Virginia**
Arbor Glenn L.P. (99%)
CFF Financial Corporation
Fairfax County Redevelopment and Housing Authority/HCDC One L.P. (99%)
Fairfax County Redevelopment and Housing Authority/HCDC Two L.P. (99%)
First Union Capital Partners, Inc.
Atlantic Spinners, Inc. (12.5%)
Chattem, Inc. (22.9%)
Cybergenics Holding, Inc. (30.9%)
FrontierVision, L. P. (14.1%)
Heartland Port Enterprises (22.9%)
Meigher Communications, L. P. (13.2%)
Prism Radio Partners, L.P. (12.79%)
TreBay Medical Corporation (30.77%)
Homes for Fredericksburg Limited Partnership (99%)
Housing Equity Fund of Virginia II, L.P. (38.5%)
International Progress, Inc. (50%)
Mountain Falls Park, Inc.
Lafayette Family L.P. (99%)
Salem Run Associates, L. P. (99%)
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
Shenandoah Valley Properties L.P. (99%)
Craigmont II, L.P. (99%)
Elkmont Partners, L.P. (99%)
Grottoes Partners L.P. (99%)
Willow Lake Partners, L.P. (99%)
WNB Corporation
William Byrd Hotel Associates, L. P. (99%)
First Union National Bank of Washington, D.C.**
First Properties Associates, Inc.
TRSTE, Inc.
Virginia Suburban Corporation
Walden Golf Club, Inc.
Walden Golf Club Management Company
First Union Development Corporation
The First Service Corporation of South Carolina
Arrowwood Associates (50%)
First Union Export Trading Company
First Union Futures Corporation
First Union FPS, Inc.
First Union Home Equity Bank, N. A.
First Union Mortgage Corporation
Argo Partnership, L. P. (8%)
Farmington, Incorporated
Ghent-Farmington Associates (50%)
First Union Title Corporation
R.B.C. Corporation
Slate Stone Hills, Incorporated
The Fairfax Corporation
Interchange Partners (50%)
North Ridge, Inc. (50%)
Real Estate Consultants of the South, Inc.
Water Street Insurance Agency, Inc.
First Union National Bank of Florida**
Alden Pond, Inc.
American Southern Mortgage Corporation
American Southern Financial Group, L.C. (50%)
Bart, Inc.
Cantebury of Hilliard, Ltd. (99%)
CIMC, Inc.
Ellenton Housing Associates, Ltd. (99%)
First Union Bank and Trust Company (Cayman) Ltd.
Floral Oaks Apartments, Ltd. (99%)
FNB Properties, Inc.
Ft. Lauderdale Hotel Holding Company
General Homes Corp. (9.205%)***
Greenleaf Village of Groveland, Ltd. (89%)
Horizon Appraisal Services, Inc.
Jacksonville Affordable Housing, Ltd. (98%)
Kaufman, Alsberg & Co.
Lantana Associates, Ltd. (99%)
O.R.E.O., Inc.
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
Ravenwood of Kissimmee, Ltd. (99%)
Rosemont Manor Ltd. (99%)
River Reach of Orange County, Ltd. (99%)
Spinnaker Reach Apartments of Duval, Ltd. (99%)
Spring Gate Manor Limited (99%)
Steeplechase Apartments, Ltd. (99%)
Taroc, Inc.
TWC Eighty-Eight, Ltd. (99%)
Venice Service Corp.
Bartow Operations, Inc.
Mid-Island Service Corp.
Port Charlotte Service Corp.
Wiggins Service Corporation, Inc.
Villa Biscayne of South Dade, Ltd. (99%)
West Brickell Apartments, Ltd. (99%)
Westville, Ltd. (99%)
WSI, Inc.
First Union National Bank of North Carolina**
100 Block Associates Limited Partnership (93.75%)
Barrett Place Limited Partnership (99%)
Builders Acceptance Corporation
CT I Limited Partnership (99%)
Evergreen Asset Management Corp.
First Stratford Partnership (40%)
First Union Brokerage Services, Inc.
First Union Commercial Corporation
First Union Rail Corporation
First Wells Fargo Leasing Partnership (90%)
Multiplex Leasing Partners (90%)
First Union Commercial Leasing Group, L.L.C. (99% owned by First Union
National Bank of North Carolina;
1% owned by First Union Commercial Corporation)
First Union International Banking Corporation
Besso Holdings Limited (6.55%)
First Union HKCB Asia, Ltd. (50%)
First Union Investment Corporation
First Union Mortgage Securities, Inc.
Gainsborough Corporation
GGL, Inc.***
C4 Media Cable South, Limited Partnership (50%)***
Novaten Communications, Inc. (50%)***
Glen Royall Mill Limited Partnership (99%)
Lieber I Corp.
Lieber & Company (99% owned by Lieber I Corp.; 1% owned by Lieber II
Corp.)
Lieber II Corp.
MHD, Inc.***
NNI Bell Street Limited Partnership (99%)
Yorktown Arms Development Limited Partnership (99%)
First Union Transportation Services, Inc.
FUI, Inc.
General Financial Life Insurance Company
Internet, Inc. (18.594%) (5.194% owned by First Union National Bank)
<PAGE>
FIRST UNION CORPORATION
LIST OF SUBSIDIARIES* -- CONTINUED
Meritor Service Corporation of Florida, Inc.
NAFCO Equipment Corporation
Phillips-Smith Specialty Retail Group III, L. P. (7.14%)
Queen City Special Company B
Southeast Switch, Inc. (15%)
Tryon Management, Inc.
Washington Bankshares, Inc.
* Wholly-owned unless otherwise indicated. Includes entities in which First
Union Corporation or a subsidiary has an investment in excess of 5%.
** Wholly-owned except for directors' qualifying shares.
*** Interest acquired or subsidiary formed in connection with debts previously
contracted other than those involving other real estated owned (OREO).
**** Washington Bankshares, Inc. received 134 shares of Class B stock of First
Union Corporation of Virginia in connection with the merger of its
subsidiary, First American Bank, N.A., into Dominion Bank of Washington,
N.A. (now First Union National Bank of Washington, D.C.)
<PAGE>
EXHIBIT (23)
CONSENT OF KPMG PEAT MARWICK LLP
THE BOARD OF DIRECTORS
First Union Corporation
We consent to the incorporation by reference in the Registration Statements
on Form S-8 (No. 2-42050); Form S-8 (No. 33-47447); Form S-8 (No. 33-51964);
Form S-8 (No. 33-54148); Form S-8 (No. 33-54274); Form S-3 (No. 33-50103); Form
S-8 (33-53103); Form S-8 (33-54739); Form S-8 (33-54905); Form S-3 (33-56927);
Form S-8 (No. 33-60835); Form S-8 (No. 33-62399); Form S-8 (No. 33-62307); Form
S-8 (No. 33-63387); Form S-8 (No. 33-65501); Form S-8 (No. 33-60913) and Form
S-3 (33-61941) of First Union Corporation of (i) our report dated January 11,
1996, relating to the consolidated balance sheets of First Union Corporation and
subsidiaries as of December 31, 1995 and 1994, 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, 1995, which report appears
in the 1995 Annual Report to Stockholders (Historical Basis) which is
incorporated by reference in First Union Corporation's 1995 Form 10-K; and (ii)
our report dated January 11, 1996, relating to the supplemental consolidated
balance sheets of First Union Corporation and subsidiaries as of December 31,
1995 and 1994, and the related supplemental consolidated statements of income,
changes in stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1995, which report appears in the 1995
Supplemental Annual Report to Stockholders which is incorporated by reference in
First Union Corporation's 1995 Form 10-K. Each report refers to a change in
the method of accounting for investments.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
March 12, 1996
<PAGE>
EXHIBIT (24)
FIRST UNION CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned directors and officers
of FIRST UNION CORPORATION (the "Corporation") hereby constitute and appoint
Marion A. Cowell, Jr. and Kent S. Hathaway, and each of them severally, the true
and lawful agents and attorneys-in-fact of the undersigned with full power and
authority in said agents and the attorneys-in-fact, and in any one of them, to
sign for the undersigned and in their respective names as directors and officers
of the Corporation, the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1995, to be filed with the Securities and Exchange
Commission, and to sign any and all amendments to such Annual Report.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<C> <S>
EDWARD E. CRUTCHFIELD Chairman and Chief Executive Officer and Director
EDWARD E. CRUTCHFIELD
ROBERT T. ATWOOD Executive Vice President and Chief Financial Officer
ROBERT T. ATWOOD
JAMES H. HATCH Senior Vice President and Controller (Principal
Accounting Officer)
JAMES H. HATCH
EDWARD E. BARR Director
EDWARD E. BARR
G. ALEX BERNHARDT Director
G. ALEX BERNHARDT
W. WALDO BRADLEY Director
W. WALDO BRADLEY
ROBERT J. BROWN Director
ROBERT J. BROWN
ROBERT D. DAVIS Director
ROBERT D. DAVIS
R. STUART DICKSON Director
R. STUART DICKSON
B. F. DOLAN Director
B. F. DOLAN
RODDEY DOWD, SR. Director
RODDEY DOWD, SR.
JOHN R. GEORGIUS Director
JOHN R. GEORGIUS
ARTHUR M. GOLDBERG Director
ARTHUR M. GOLDBERG
</TABLE>
<PAGE>
SIGNATURE CAPACITY
WILLIAM H. GOODWIN, JR. Director
WILLIAM H. GOODWIN, JR.
BRENTON S. HALSEY Director
BRENTON S. HALSEY
HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
TORRENCE E. HEMBY, JR. Director
TORRENCE E. HEMBY, JR.
FRANK M. HENRY Director
FRANK M. HENRY
LEONARD G. HERRING Director
LEONARD G. HERRING
JUAN RODRIGUEZ INCIARTE Director
JUAN RODRIGUEZ INCIARTE
JACK A. LAUGHERY Director
JACK A. LAUGHERY
MAX LENNON Director
MAX LENNON
RADFORD D. LOVETT Director
RADFORD D. LOVETT
JOSEPH NEUBAUER Director
JOSEPH NEUBAUER
HENRY D. PERRY, JR. Director
HENRY D. PERRY, JR.
RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
RUTH G. SHAW Director
RUTH G. SHAW
LANTY L. SMITH Director
LANTY L. SMITH
ANTHONY P. TERRACCIANO Director
ANTHONY P. TERRACCIANO
DEWEY L. TROGDON Director
DEWEY L. TROGDON
<PAGE>
SIGNATURE CAPACITY
JOHN D. UIBLE Director
JOHN D. UIBLE
B. J. WALKER Director
B. J. WALKER
Dated: February 20, 1996
Charlotte, North Carolina
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
In first column Year End December 31, 1995 figures for the Historical
Basis appear and in the second column Year End December 31, 1995 figures
for the Supplemental Combined Basis appears.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> DEC-31-1995 DEC-31-1995
<CASH> 4,239,737 6,312,076
<INT-BEARING-DEPOSITS> 44,284 79,235
<FED-FUNDS-SOLD> 4,122,754 4,152,754
<TRADING-ASSETS> 1,804,391 1,881,066
<INVESTMENTS-HELD-FOR-SALE> 12,716,963 18,193,699
<INVESTMENTS-CARRYING> 2,454,317 3,139,616
<INVESTMENTS-MARKET> 2,607,755 3,319,602
<LOANS> 66,801,982 92,108,835
<ALLOWANCE> (966,511) (1,507,798)
<TOTAL-ASSETS> 96,740,496 131,879,873
<DEPOSITS> 65,000,301 92,555,218
<SHORT-TERM> 16,598,072 19,500,127
<LIABILITIES-OTHER> 2,065,551 3,044,136
<LONG-TERM> 6,444,327 7,120,947
571,791 926,152
0 0
<COMMON> 0 183,223
<OTHER-SE> 5,580,655 7,933,769
<TOTAL-LIABILITIES-AND-EQUITY> 96,740,496 131,879,873
<INTEREST-LOAN> 5,338,240 7,222,842
<INTEREST-INVEST> 801,911 1,215,821
<INTEREST-OTHER> 148,253 156,705
<INTEREST-TOTAL> 6,373,830 8,686,377
<INTEREST-DEPOSIT> 2,078,691 2,853,328
<INTEREST-EXPENSE> 3,111,054 4,051,815
<INTEREST-INCOME-NET> 3,262,776 4,634,562
<LOAN-LOSSES> 180,000 220,000
<SECURITIES-GAINS> 22,009 49,158
<EXPENSE-OTHER> 2,975,372 4,092,469
<INCOME-PRETAX> 1,558,664 2,218,601
<INCOME-PRE-EXTRAORDINARY> 1,013,076 1,430,181
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,013,076 1,430,181
<EPS-PRIMARY> 5.85 5.04
<EPS-DILUTED> 5.85 5.04
<YIELD-ACTUAL> 4.41 4.46
<LOANS-NON> 500,574 644,081
<LOANS-PAST> 146,764 289,866
<LOANS-TROUBLED> 599 3,772
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 978,795 1,578,128
<CHARGE-OFFS> 326,340 462,781
<RECOVERIES> 85,830 123,785
<ALLOWANCE-CLOSE> 966,511 1,507,798
<ALLOWANCE-DOMESTIC> 733,653 1,242,940
<ALLOWANCE-FOREIGN> 2,752 34,752
<ALLOWANCE-UNALLOCATED> 230,106 230,106
</TABLE>
<PAGE>
EXHIBIT (99)
FIRST UNION CORPORATION OF VIRGINIA AND SUBSIDIARIES
SUMMARIZED FINANCIAL INFORMATION
(UNAUDITED)
In connection with the merger of Dominion Bankshares Corporation into First
Union Corporation of Virginia ("FUNC-VA"), a wholly-owned subsidiary of First
Union Corporation (the "Corporation"), on March 1, 1993, FUNC-VA assumed, and
subsequently the Corporation guaranteed, FUNC-VA's publicly held 9 5/8%
Subordinated Capital Notes Due 1999. Set forth below is summarized consolidated
financial information for FUNC-VA and subsidiaries for the periods indicated.
CONSOLIDATED STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
(IN THOUSANDS) 1995 1994
<S> <C> <C>
Net interest income................................................................................... $536,582 506,949
Income before income taxes............................................................................ 279,853 201,961
Net income............................................................................................ $183,089 131,423
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1995 1994
<S> <C> <C>
Assets......................................................................................... $17,077,175 13,327,766
Securities available for sale.................................................................. 3,423,704 2,410,244
Investment securities.......................................................................... 528,285 376,072
Loans, net of unearned income.................................................................. 10,149,438 7,820,643
Stockholder's equity........................................................................... $ 1,377,638 1,074,019
</TABLE>
