SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
---------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
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Commission File Number: 1-9839
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FIRST FIDELITY BANCORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2826775
- ----------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2673 Main Street
P.O. Box 6980
Lawrenceville, NJ 08648-0980
- ----------------------------------------------------------------------
(Address of principal (Zip Code)
executive office)
(609)-895-6800
----------------------------------------------------
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
- ----------------------------- -----------------------------
Common Stock, $1.00 Par Value 79,870,086 Shares
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Part I - Financial Information
------------------------------
Item 1 - Financial Statements
- -----------------------------
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(thousands, except per share amounts) Three Months Ended
March 31
--------------------
1994 1993
-------- --------
INTEREST INCOME
Interest and fees on loans......................... $394,146 $371,907
Interest on federal funds sold and securities
purchased under agreements to resell............. 118 6,829
Interest and dividends on securities:
Taxable interest income.......................... 96,715 94,338
Tax-exempt interest income....................... 10,509 12,736
Dividends........................................ 1,195 1,163
Interest on bank deposits.......................... 10,359 21,963
Interest on trading account securities............. 1,575 1,535
-------- --------
Total Interest Income.......................... 514,617 510,471
-------- --------
INTEREST EXPENSE
Interest on:
Deposits......................................... 143,107 166,821
Short-term borrowings............................ 10,480 7,396
Long-term debt................................... 10,833 10,553
-------- --------
Total Interest Expense......................... 164,420 184,770
-------- --------
Net Interest Income.......................... 350,197 325,701
Provision for possible credit losses................. 24,000 45,000
-------- --------
Net Interest Income after Provision
for Possible Credit Losses....................... 326,197 280,701
-------- --------
NON-INTEREST INCOME
Trust Income....................................... 27,263 23,246
Service charges on deposit accounts................ 37,284 35,768
Other service charges, commissions and fees........ 23,695 18,624
Trading revenue.................................... 3,651 4,157
Net securities transactions........................ 4,082 3,677
Other income....................................... 7,234 3,541
-------- --------
Total Non-Interest Income........................ 103,209 89,013
-------- --------
NON-INTEREST EXPENSE
Salaries and benefits expense...................... 122,139 107,946
Occupancy expense.................................. 31,934 28,551
Equipment expense.................................. 10,928 10,033
Other expenses..................................... 102,403 91,791
-------- --------
Total Non-Interest Expense....................... 267,404 238,321
-------- --------
3 of 44
Income before income taxes and cumulative effect of
changes in accounting principles................... 162,002 131,393
Income taxes......................................... 53,136 38,780
-------- --------
Income before cumulative effect of changes in
accounting principles.............................. 108,866 92,613
Cumulative effect of changes in accounting
principles, net of tax............................. - 2,373
-------- --------
Net Income........................................... 108,866 94,986
Dividends on Preferred Stock......................... 5,131 5,244
-------- --------
Net Income Applicable to Common Stock................ $103,735 $89,742
======== ========
Per common share:
Primary
Income before cumulative effect of changes in
accounting principles.............................. $1.26 $1.11
Cumulative effect of changes in accounting
principles, net of tax............................. - .03
Net income - primary................................. 1.26 1.14
Fully diluted
Income before cumulative effect of changes in
accounting principles.............................. $1.23 $1.09
Cumulative effect of changes in accounting
principles, net of tax............................. - .03
Net income - fully diluted........................... 1.23 1.12
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 4 of 44
CONSOLIDATED STATEMENTS OF CONDITION
March 31 December 31
1994 1993
(thousands) (unaudited)
----------- -----------
ASSETS
Cash and due from banks............................ $2,069,777 $1,831,270
Interest-bearing time deposits..................... 611,196 979,769
Securities held to maturity........................ 5,055,789 5,241,987
(market value of $5,081,179 at March 31, 1994
and $5,321,239 at December 31, 1993)
Securities available for sale...................... 2,743,903 2,656,721
Trading account securities at market value......... 183,757 149,887
Federal funds sold and securities purchased under
agreements to resell............................. 191,180 15,000
Loans, net of unearned income...................... 21,445,793 21,386,911
Less: Reserve for possible credit losses......... (597,356) (602,183)
----------- -----------
Net loans...................................... 20,848,437 20,784,728
Premises and equipment............................. 404,075 404,208
Customers' acceptance liability.................... 188,805 187,903
Other assets....................................... 1,551,548 1,511,112
----------- -----------
Total Assets................................. $33,848,467 $33,762,585
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand deposits.................................. $5,779,395 $5,347,007
Savings/NOW deposits............................. 9,600,985 9,650,774
Money market deposit accounts.................... 3,823,981 3,893,130
Other consumer time deposits..................... 8,429,488 8,637,296
Corporate certificates of deposit................ 359,731 398,435
Deposits in overseas offices....................... 255,261 216,380
----------- -----------
Total Deposits................................. 28,248,841 28,143,022
Short-term borrowings.............................. 1,233,273 1,620,125
Acceptances outstanding............................ 191,858 196,117
Other liabilities.................................. 597,464 451,835
Long-term debt..................................... 812,991 613,058
----------- -----------
Total Liabilities............................ 31,084,427 31,024,157
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STOCKHOLDERS' EQUITY
Preferred stock.................................... 230,422 230,422
Common stock ($1.00 par)
Authorized: 150,000,000 shares
Issued: 80,935,596 shares at March 31, 1994 and
79,937,719 shares at December 31, 1993......... 80,936 79,938
Surplus............................................ 1,230,138 1,202,373
Retained earnings.................................. 1,237,268 1,227,368
Less treasury stock, at cost: 333,031 shares at
March 31, 1994 and 36,714 shares
at December 31, 1993........................... (14,724) (1,673)
----------- -----------
Total Common Stockholders' Equity............ 2,533,618 2,508,006
----------- -----------
Total Stockholders' Equity................... 2,764,040 2,738,428
----------- -----------
Total Liabilities and Stockholders' Equity... $33,848,467 $33,762,585
=========== ===========
See accompanying notes to consolidated financial statements.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 6 of 44
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended
March 31
-------------------------
(thousands) 1994 1993
----------- -----------
Cash flows from operating activities:
Net income......................................... $108,866 $94,986
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses............... 24,000 45,000
Depreciation, amortization and accretion........... 6,164 16,909
Deferred income tax provision...................... 5,047 (1,512)
Gain on sale of assets............................. (1,072) (3,618)
Net securities transactions (gains)................ (4,082) (3,677)
Proceeds from sales of trading account
securities....................................... 2,435,352 1,832,444
Purchases of trading account securities............ (2,466,551) (1,849,047)
(Increase) decrease in accrued interest receivable. (3,501) 14,648
Increase (decrease) in accrued interest payable.... 12,163 (4,110)
Change in current taxes payable.................... 53,732 (55,358)
Other, net......................................... 79,752 79,407
Cumulative effect of changes in accounting
principles, net of tax........................... - (2,373)
---------- ----------
Net cash provided by operating activities...... 249,870 163,699
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity................................. 901,570 490,230
Purchases of securities held to maturity........... (668,577) (441,835)
Proceeds from sales of securities available
for sale......................................... 162,720 58,354
Proceeds from maturities of securities
available for sale............................... 175,537 -
Purchases of securities available for sale......... (474,477) -
Net (disbursements) from lending activities........ (45,398) (121,159)
Purchases of premises and equipment................ (12,889) (24,723)
Proceeds from sales of premises and equipment...... 2,759 5,600
Net change in acceptances.......................... (5,161) (2,642)
Net cash paid on acquisitions...................... (14,392) -
---------- ----------
Net cash provided by/(used in)
investing activities......................... 21,692 (36,175)
Cash flows from financing activities:
Change in demand, savings/NOW and money market
deposits......................................... 253,649 (1,372,325)
Change in corporate certificates of deposit and
deposits in overseas offices..................... 177 (76,729)
Change in other consumer time deposits............. (232,454) (463,411)
Change in short-term borrowings.................... (391,750) 702,598
Issuance of long-term debt......................... 200,000 -
Payments on long-term debt......................... (67) (1,082)
Purchases of treasury stock........................ (82,695) -
Issuance of common stock........................... 66,396 9,455
Dividends paid..................................... (38,704) (29,702)
---------- ----------
Net cash (used in) financing activities........ (225,448) (1,231,196)
---------- ----------
7 of 44
Net change in cash and cash equivalents........ 46,114 (1,103,672)
Cash and cash equivalents at beginning
of period (A)................................ 2,826,039 5,287,115
---------- ----------
Cash and cash equivalents at end
of period (A)................................ $2,872,153 $4,183,443
========== ==========
Supplemental disclosures:
Total amount of interest paid for the period....... $152,257 $188,880
========== ==========
Total amount of income taxes paid for
the period....................................... $4,000 $10,032
========== ==========
Total amount of loans transferred to OREO.......... $13,934 $33,412
========== ==========
Total amount of loans transferred to
assets held for sale............................. $8,835 $ -
========== ==========
(A) Reconciliation: March 31 December 31
---------------------- ----------------------
1994 1993 1993 1992
---------- ---------- ---------- ----------
Cash and due from banks......... $2,069,777 $1,437,001 $1,831,270 $1,913,177
Interest-bearing time deposits.. 611,196 1,951,016 979,769 2,635,938
Federal funds sold and
securities purchased under
agreements to resell.......... 191,180 795,426 15,000 738,000
---------- ---------- ---------- ----------
Total cash and cash
equivalents................... $2,872,153 $4,183,443 $2,826,039 $5,287,115
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
8 of 44
SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) In Management's opinion, the financial information, which is
unaudited, reflects all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the
financial information as of March 31, 1994 and for the three
months ended March 31, 1994 and March 31, 1993 in conformity with
generally accepted accounting principles. These financial
statements should be read in conjunction with First Fidelity
Bancorporation's ("First Fidelity" or "the Company" herein) 1993
Annual Report on Form 10-K.
(2) Primary earnings per share is based on the weighted average
number of common shares outstanding during each period, including
the assumed exercise of dilutive stock options and warrants,
using the treasury stock method. Primary earnings per share also
reflects provisions for dividend requirements on all outstanding
shares of the Company's preferred stock.
Fully diluted earnings per share is based on the weighted average
number of common shares outstanding during each period, including
the assumed conversion of convertible preferred stock into common
stock and the assumed exercise of dilutive stock options and
warrants using the treasury stock method. Fully diluted earnings
per share also reflects provisions for dividend requirements on
non-convertible preferred stock.
Item 2
- ------
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and related
notes and with the statistical information and financial data
appearing in this report as well as the Company's 1993 Annual Report
on Form 10-K. Results of operations for the three months ended March
31, 1994 are not necessarily indicative of results to be attained for
any other period.
Summary
- -------
First Fidelity recorded net income of $108.9 million, or $1.26
per common share on a primary basis and $1.23 per common share on a
fully-diluted basis, for the first quarter of 1994. These results
compare to net income before the cumulative effect of changes in
accounting principles of $92.6 million or $1.11 per common share on a
primary basis and $1.09 per common share on a fully-diluted basis for
the first quarter of 1993.
The earnings improvement for the current quarter, compared to the
first quarter of 1993, resulted from stronger net interest income, a
lower provision for possible credit losses and higher non-interest
income, partly offset by higher non-interest expense and an increased
provision for income taxes. Net interest income increased $24.5
million to $350.2 million as a result of increased earning assets, due
primarily to acquisitions during the last nine months of 1993. This
increase in earning assets was partially offset by a slight reduction
9 of 44
in net interest margin, reflecting, in part, recent acquisitions. The
provision for possible credit losses was $24.0 million in the first
quarter of 1994, down from $45.0 million in the first quarter of 1993,
reflecting management's evaluation of the adequacy of the level of the
reserve for possible credit losses in light of improving asset quality
trends, current economic conditions, the continued decline in non-
performing loans and lower charge-offs. Non-performing assets totaled
$457.1 million at March 31, 1994, compared to $641.4 million at March
31, 1993. Increases of $14.2 million in non-interest income and $29.1
million in non-interest expense were primarily the result of
acquisitions consummated after the first quarter of 1993. The $14.4
million increase in income taxes resulted primarily from higher pre-
tax income.
Return on average stockholders' equity for the current quarter
was 16.11% compared to 16.88% for the first quarter of last year.
Return on average common stockholders' equity was 16.75% in the
current quarter as compared to 17.75% for the same period of 1993.
These ratios declined as the increase in net income for the first
quarter of 1994 was more than offset by increases in average
stockholders' equity and average common stockholders' equity. Return
on average assets for the first quarter of 1994 improved to 1.32%
compared to 1.28% a year earlier.
Recent Acquisitions:
On January 31, 1994, First Fidelity acquired Greenwich Financial
Corporation and its 7 branch subsidiary, Greenwich Federal
Savings and Loan Association (total assets of approximately $425
million and total deposits of approximately $255 million), for
$41.9 million in cash.
On March 25, 1994, the Company acquired BankVest, Inc. and its 2
branch subsidiary, First Peoples National Bank of Edwardsville,
Pennsylvania (total assets of approximately $100 million and
total deposits of approximately $85 million), for $19.7 million
in cash.
On May 12, 1994, First Fidelity acquired The Savings Bank of
Rockland County ("Rockland") for $5.9 million in cash. Rockland,
which reported assets of $177 million and deposits of $169
million at March 31, 1994, has 4 offices, all in Rockland County,
New York.
Each of these acquisitions was accounted for using the "purchase"
method.
Pending Acquisitions:
On January 27, 1994, First Fidelity entered into a definitive
agreement to acquire First Inter-Bancorp Inc., of Fishkill, New
York and its 16 branch, federally-chartered savings bank
subsidiary, Mid-Hudson Savings Bank FSB (together, "Mid-Hudson")
for approximately $56 million in cash. Mid-Hudson, which
operates throughout Dutchess, Ulster, Orange and Putnam Counties,
New York, reported $511 million in assets and $450 million in
10 of 44
deposits at March 31, 1994. The acquisition is subject to
approval by regulators and the shareholders of Mid-Hudson.
Completion of the acquisition is expected before the end of 1994.
On March 21, 1994, the Company entered into a definitive
agreement to acquire Baltimore Bancorp, of Baltimore, Maryland
and its 42 branch commercial bank subsidiary, Bank of Baltimore,
for approximately $346 million in cash. Bank of Baltimore, which
operates primarily in Baltimore, Montgomery, Anne Arundel and
Prince Georges counties, Maryland, reported $2.2 billion in
assets and $1.9 billion in deposits at March 31, 1994. The
acquisition is subject to approval by regulators and the
shareholders of Baltimore Bancorp. This acquisition is expected
to close prior to the end of 1994.
Each of the recent and pending acquisitions described above is
expected to have an additive effect on earnings per share within 18
months of its consummation, assuming the absence of significant
adverse economic conditions. These acquisitions are not expected to
have a material adverse impact on liquidity or capital levels.
Consolidation/Acquisition Strategy:
First Fidelity is continually evaluating acquisition
opportunities, and frequently conducts due diligence activities
in connection with possible acquisitions both on an assisted and
unassisted basis. Acquisition candidates that may be under
consideration at any time include, without limitation, depository
institutions, financial service companies, thrift or savings type
associations and related companies. Companies which First
Fidelity may be considering in connection with its acquisition
strategy would generally be based in markets in which First
Fidelity presently operates or in markets in proximity to one of
First Fidelity's then existing markets. First Fidelity
contemplates that any such acquisition would be financed through
working capital and/or the issuance of equity and debt
securities.
On April 26, 1994, the United States Senate approved a bill (S.
1963) which would authorize nationwide interstate branching and
interstate bank acquisitions one year after enactment. Earlier in the
year, the U.S. House of Representatives had approved a similar bill
(H.R. 3841). The bills allow states to opt out of interstate
branching provisions. Although it is uncertain what provisions the
final law, if any, will have, the Company anticipates that, in the
event that a law in the form proposed by the House and Senate is
enacted, there may very well be further consolidation in the banking
industry.
On January 11, 1994, the Company consolidated (the "Bank
Consolidation") its two largest subsidiary banks, First Fidelity Bank,
N.A., New Jersey and First Fidelity Bank, N.A., Pennsylvania (formerly
Fidelity Bank, N.A. ("Fidelity")) into a new entity, First Fidelity
Bank, N.A. ("First Fidelity Bank"). This Bank Consolidation was
effected following the relocation of the head office of Fidelity from
Philadelphia, Pennsylvania to Salem, New Jersey, which location became
the resulting head office of First Fidelity Bank.
Capital Markets: 11 of 44
On January 20, 1994, the Company announced a 13.5% increase in
its quarterly dividend on the Common Stock, or $.05 per share, to
$.42 per share. The dividend was paid to holders of record on
January 31, 1994.
On February 2, 1994, the Company sold to the public $200 million
of floating rate senior notes due August 2, 1996. The notes bear
interest at .10% per annum above the London Interbank Offered
Rate ("LIBOR") for three-month eurodollar deposits.
During 1993, the Board of Directors (the "Board") authorized the
Company to acquire up to 2% of its outstanding Common Stock in
each calendar year. On March 7, 1994, the Board authorized the
Company to acquire up to an additional 1.3 million shares of its
Common Stock during 1994. As of April 30, 1994, the Company had
acquired a total of 2.4 million shares in 1994 pursuant to the
open market repurchase program (exclusive of shares acquired to
fund certain benefit plans).
During the first quarter of 1994, Santander exercised the third
tranche of its warrants pursuant to the Investment Agreement,
dated March 18, 1991, (the "Investment Agreement") between the
Company and Santander and acquired 2,376,250 shares of First
Fidelity Common Stock at $25.50 per share, for total
consideration of $60.6 million. Over half of the shares of
Common Stock issued to Santander pursuant to its warrants
exercise (1.4 million shares) came from treasury stock,
representing Common Stock recently repurchased by First Fidelity
on the open market at market prices (the average price paid was
$44.03 per share). Santander has notified the Company that it
intends to exercise the final tranche of warrants (for 2,376,250
shares of Common Stock) during the second quarter of 1994.
In May, 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan". SFAS 114 requires
that "impaired" loans be measured based on the present value of
expected future cash flows, discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan is
collateral dependent. Although management is continuing to review
SFAS 114 and the expected changes to that standard, it does not
currently expect that the adoption of SFAS 114, which is required for
fiscal years beginning after December 15, 1994, will have a material
effect on the Company's financial statements.
RESULTS OF OPERATIONS
Net Interest Income
- -------------------
The following table reflects the significant components of net
interest income for the three months ended March 31, 1994 and 1993.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 12 of 44
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Three months ended March 31, 1994
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial.................................. $6,761,761 $115,314 6.82%
Installment................................. 5,784,851 117,991 8.27
Mortgage.................................... 8,509,999 161,761 7.60
Loans in overseas offices..................... 116,415 1,455 5.07
----------- --------
Total Loans............................... 21,173,026 396,521 7.52
Taxable mortgage-backed securities (3)........ 4,768,320 63,324 5.31
Other taxable securities...................... 2,546,850 34,715 5.45
Tax-exempt securities......................... 563,042 15,285 10.86
Time deposits with banks...................... 870,978 10,359 4.76
Federal funds sold and securities
purchased under agreements to resell........ 18,247 118 2.59
Trading account............................... 151,564 1,652 4.36
----------- --------
Total Earning Assets.................... 30,092,027 521,974 6.96
Reserve for possible credit losses.............. (613,158)
Cash and due from banks......................... 1,827,972
Other assets.................................... 2,070,804
-----------
Total Assets.......................... $33,377,645
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................. $5,399,835
-----------
Interest-bearing Liabilities
Savings/NOW deposits.......................... 9,787,188 44,473 1.84
Money market deposit accounts................. 3,719,806 20,943 2.28
Other consumer time deposits.................. 8,269,072 73,121 3.59
Corporate certificates of deposit............. 373,700 2,932 3.18
Deposits in overseas offices.................. 214,469 1,638 3.05
Short-term borrowings......................... 1,428,578 10,480 2.93
Long-term debt................................ 742,046 10,833 5.84
----------- --------
Total Interest-bearing Liabilities.......... 24,534,859 164,420 2.71
Other liabilities............................... 701,502
Preferred stockholders' equity.................. 230,422
Common stockholders' equity..................... 2,511,027
----------- --------
Total Liabilities and
Stockholders' Equity.................... $33,377,645 164,420
=========== --------
Net interest income/spread...................... $357,554 4.25
========
Net interest margin............................. 4.75
Tax equivalent adjustment....................... $7,357
========
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(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 35%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 14 of 44
NET INTEREST INCOME SUMMARY
(dollars in thousands - taxable equivalent basis) (1)
Three months ended March 31, 1993
Interest Average
Average Income/ Interest
ASSETS Balance Expense Rate
Earning Assets (2) ----------- -------- -------
Loans in domestic offices
Commercial.................................. $6,200,789 $119,115 7.68%
Installment................................. 5,350,876 116,350 8.82
Mortgage.................................... 6,417,933 137,839 8.59
Loans in overseas offices..................... 119,375 1,610 5.47
----------- --------
Total Loans............................... 18,088,973 374,914 8.33
Taxable mortgage-backed securities (3)........ 3,878,208 67,028 6.91
Other taxable securities...................... 1,781,944 28,683 6.44
Tax-exempt securities......................... 699,605 18,325 10.48
Time deposits with banks...................... 1,975,590 21,963 4.45
Federal funds sold and securities
purchased under agreements to resell........ 855,012 6,829 3.19
Trading account............................... 148,605 1,595 4.29
----------- --------
Total Earning Assets.................... 27,427,937 519,337 7.60
Reserve for possible credit losses.............. (628,322)
Cash and due from banks......................... 1,565,270
Other assets.................................... 1,817,449
-----------
Total Assets.......................... $30,182,334
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits................................. $4,513,766
-----------
Interest-bearing Liabilities
Savings/NOW deposits.......................... 7,764,825 47,559 2.48
Money market deposit accounts................. 3,769,661 25,441 2.74
Other consumer time deposits.................. 8,994,761 89,056 4.02
Corporate certificates of deposit............. 404,067 3,061 3.07
Deposits in overseas offices.................. 211,315 1,704 3.23
Short-term borrowings......................... 1,088,689 7,396 2.72
Long-term debt................................ 580,925 10,553 7.27
----------- --------
Total Interest-bearing Liabilities.......... 22,814,243 184,770 3.28
Other liabilities............................... 571,650
Preferred stockholders' equity.................. 232,137
Common stockholders' equity..................... 2,050,538
----------- --------
Total Liabilities and
Stockholders' Equity.................... $30,182,334 184,770
=========== --------
Net interest income/spread...................... $334,567 4.32
========
Net interest margin............................. 4.87
Tax equivalent adjustment....................... $8,866
========
15 of 44
(1) In this table, and in other data presented herein on a taxable equivalent
basis, income that is exempt from federal income taxes or taxed at a
preferential rate, such as interest on state and municipal securities, has
been adjusted to a taxable equivalent basis using a federal income tax
rate of 34%.
(2) Includes non-performing loans. The effect of including such loans is to
reduce the average rate earned on the Company's loans.
(3) Includes Collateralized Mortgage Obligations.
16 of 44
Taxable-equivalent net interest income for the first quarter of
1994 was $357.6 million, compared to $334.6 million for the first
quarter of 1993. The increase was primarily due to higher average
earning assets, partially offset by a slight decrease in net interest
margin. Average earnings assets increased to $30.1 billion in the
first quarter of 1994 from $27.4 billion in the first quarter of 1993.
Net interest margin decreased to 4.75% from 4.87% in the first quarter
of 1993. The increase in average earning assets was largely the
result of higher average total loans, taxable mortgage-backed
securities and other taxable securities, partially offset by a
reduction in time deposits with banks and federal funds sold and
securities purchased under agreements to resell. Increases in average
mortgage, commercial and installment loans resulted from acquisitions
and from growth in selected categories, partially offset by
prepayments and normal paydowns. The 12 basis point decline in the
net interest margin from the first quarter of 1993 to the first
quarter of 1994 was primarily due to refinancings and maturing higher
yielding assets being replaced by lower yielding assets and the
integration of acquired banks which had been operating with lower net
interest margins.
First Fidelity expects that its net interest margin percentage
may continue to decline modestly in 1994, as higher yielding assets
mature and are replaced by lower yielding assets, as deposit rates
trend higher and as acquisitions initially tend to reduce the overall
average margin. The Company expects that these negative effects will
be partially offset by lower levels of non-performing assets,
increasing loan demand and First Fidelity's large core deposit base,
which is both relatively rate insensitive and low cost. On April 19,
1994, the Company raised its prime rate to 6.75% in response to the
rising interest rate environment.
Core deposits (demand deposits, savings and NOW accounts, money
market deposits and other consumer time deposits) averaged $27.2
billion in the first quarter of 1994, compared to $25.0 billion for
the same quarter of 1993. This increase was attributable to
acquisitions, partially offset by deposit run-off, which, in the
Company's view, has been moderating as fewer consumers appear to be
shifting funds to alternative market instruments.
Non-Interest Income
- -------------------
Non-interest income was $103.2 million for the first quarter of
1994, compared to $89.0 million for the first quarter of 1993. Trust
income increased to $27.3 million in the first quarter of 1994 from
$23.2 million in the same quarter of 1993, primarily as a result of
acquisitions and trust marketing campaigns conducted through account
relationships and the branch network. Service charges on deposit
accounts increased to $37.3 million in the first quarter of 1994 from
$35.8 million for the first quarter of 1993. The increase was
primarily due to additional deposit accounts from acquisitions. Other
service charges, commissions and fees were $23.7 million, up $5.1
million compared to the same quarter in 1993, primarily as a result of
increased revenues from credit card services and commission income
earned on branch-based investment sales. The $3.7 million increase in
other income resulted primarily from net gains on the sale of various
assets.
Non-Interest Expense 17 of 44
- --------------------
In July, 1993, First Fidelity and Bankers Trust Company formed a
bank service corporation, Global Processing Alliance, Inc. ("GPA"),
which is primarily involved in providing check-processing and related
services, and which is 50%-owned by each company. As of January,
1994, GPA became operational and First Fidelity's check-processing
expenses, which were previously reflected in each expense category
(i.e., salaries and benefits, occupancy, equipment and other
expenses), are now reported in "other expenses". Non-interest expense
increased $29.1 million, or 12%, in the first quarter of 1994 compared
to the same quarter in 1993. Salaries and benefits expense was $122.1
million in the first quarter of 1994, an increase of $14.2 million, or
13%, from the prior year's level for the same quarter, primarily
reflecting additional personnel expenses associated with acquisitions.
Occupancy expense increased $3.4 million, or 12%, compared to the
first quarter of 1993, due primarily to severe weather conditions and
acquisitions. Other expenses for the first quarter of 1994 increased
$10.6 million, or 12%, from the prior year's first quarter. The
increase in other expenses primarily resulted from the
reclassification of check-processing expenses as noted above. In
addition, there was a reduction in other expenses related to other
real estate owned ("OREO") of $3.8 million from the 1993 first
quarter, while the amortization of intangibles increased by $2.4
million over the prior year's first quarter, to $9.5 million, due to
acquisitions.
Income Taxes
- ------------
Income taxes increased to $53.1 million in the first quarter of
1994 from $38.8 million in the first quarter of 1993. The increase
resulted primarily from the higher level of pre-tax income. Other
factors affecting the increase were the increase in the corporate
income tax rate and lower tax-exempt income. The effective tax rates
for the three months ended March 31, 1994 and 1993 were 32.8% and
29.5%, respectively.
FINANCIAL CONDITION
Liquidity and Funding
- ---------------------
The Company's liquidity position remained strong during the first
quarter of 1994. Total assets grew by $85.9 million, from $33,763
million at December 31, 1993 to $33,848 million at March 31, 1994.
Total loans increased $58.9 million, securities decreased $65.1
million, money market assets decreased by $192.4 million, cash and due
from banks increased $238.5 million and other assets increased by
$40.4 million.
Core deposits were $27.6 billion at March 31, 1994, an increase
of $105.6 million from December 31, 1993. The increase was due to
core deposits acquired in recent acquisitions, partially offset by
modest deposit run-off. In addition, short-term borrowings decreased
$386.9 million, other liabilities increased $145.6 million and long-
term debt increased $199.9 million.
At March 31, 1994 and December 31, 1993, core deposits
represented 129% of total loans, as both total loans and core deposits
increased.
The Company has other potential sources of liquidity, including
its ability to enter into repurchase agreements, primarily using
18 of 44
investment securities as collateral. Management believes that First
Fidelity's liquidity position is strong, based on its levels of cash,
cash equivalents and core deposits, the stability of its other funding
sources and the support provided by its capital base.
Cash and cash equivalents (cash and due from banks, interest-
bearing time deposits, federal funds sold and securities purchased
under agreements to resell) are the Company's most liquid assets. At
March 31, 1994, cash and cash equivalents were $2.9 billion, an
increase of $46.1 million (2%) from December 31, 1993. Financing
activities absorbed $225.4 million in cash and cash equivalents, as
the Company paid down short-term borrowings. The Company increased
its long-term debt during the first quarter of 1994 by $199.9 million
from December 31, 1993 levels, by issuing floating rate senior notes.
Operating activities provided $249.9 million of cash and cash
equivalents for the three months ended March 31, 1994. Cash and cash
equivalents of $21.7 million were provided by investing activities.
As part of its ongoing management of interest rate sensitivity,
the Company employed $5.4 billion (notional value) of swaps at March
31, 1994, for hedging purposes (continuing its program of adjusting
the Company's sensitivity to floating rate loans and certain fixed
rate liabilities), compared to $4.3 billion (notional value) at
December 31, 1993. Futures contracts decreased from $750 million
(notional value) at December 31, 1993 to $250 million (notional value)
at March 31, 1994, due to maturities.
Capital
- -------
The Federal Reserve Board (the "FRB") measures capital adequacy
for bank holding companies on the basis of a risk-based capital
framework and a leverage ratio. The minimum ratio of total risk-based
capital to risk-adjusted assets (including certain off balance-sheet
items, such as standby letters of credit) is 8%. At least half of the
total capital must be common equity and qualifying perpetual preferred
stock, less goodwill and certain identifiable intangible assets, such
as core deposit intangibles, acquired after February 18, 1992 ("Tier I
capital"). The remainder ("Tier II capital") may consist of mandatory
convertible debt securities, a designated amount of qualifying
subordinated debt, other preferred stock and a portion of the reserve
for possible credit losses. At March 31, 1994, the Company's Tier I
and total capital ratios were 10.03% and 13.45%, respectively.
In addition, the FRB has established minimum leverage ratio
guidelines for bank holding companies. These guidelines currently
provide for a minimum leverage ratio (Tier I capital to quarterly
average total assets less goodwill and certain identifiable intangible
assets, such as core deposit intangibles acquired after February 18,
1992) of 3% for bank holding companies that meet certain criteria,
including that they maintain the highest regulatory rating. All other
bank holding companies are required to maintain a leverage ratio of 3%
plus an additional cushion of at least 1 to 2 percentage points.
First Fidelity's Tier I leverage ratio at March 31, 1994, was 7.07%.
The FRB has not advised First Fidelity of any specific minimum
leverage ratio under these guidelines which would be applicable to the
Company. The guidelines also indicate that, when appropriate,
including when a bank holding company is undertaking expansion,
19 of 44
engaging in new activities or otherwise facing unusual or abnormal
risk, the FRB will consider a "tangible Tier I leverage ratio"
(deducting all intangibles) in making an overall assessment of capital
adequacy.
The Company's subsidiary banks are subject to capital
requirements which generally are similar to those affecting the
Company. As of March 31, 1994 and December 31, 1993, the Company and
its subsidiary banks had capital in excess of all regulatory minimums,
including the higher minimum capital and leverage ratios agreed to by
the Company in connection with various acquisitions.
The Federal Deposit Insurance Corporation Improvement Act
("FDICIA") established a capital-based supervisory system of prompt
corrective action for all depository institutions. The bank
regulatory agencies' implementing rule under FDICIA defines "well
capitalized" institutions (the highest possible rating) as those whose
capital ratios equal or exceed all of the following: Tier I Risk-
Based Ratio, 6.0%, Total Risk-Based Ratio, 10.0% and Tier I Leverage
Ratio, 5.0%. At December 31, 1993 and March 31, 1994, the Company and
all of its subsidiary banks' capital ratios exceeded each of these
minimum percentages.
The following table presents information regarding the Company's
risk-based capital at March 31, 1994 and December 31, 1993, calculated
using the FRB guidelines.
March 31 December 31
(thousands) 1994 1993
----------- ----------- -----------
Tier I:
Common stockholders' equity
(excluding fair value adjustment).... $ 2,539,341 $ 2,480,711
Qualifying perpetual
preferred stock...................... 230,422 230,422
Less: goodwill and other intangibles... (442,294) (412,534)
----------- -----------
Total Tier I capital............... 2,327,469 2,298,599
----------- -----------
Tier II:
Allowable portion of the reserve for
possible credit losses............... 294,029 291,878
Includable subordinated debt........... 327,350 327,350
Mandatory convertible debt securities.. 174,150 174,150
----------- -----------
Total Tier II capital.............. 795,529 793,378
----------- -----------
Total risk-based capital........... $ 3,122,998 $ 3,091,977
=========== ==========
Risk-adjusted assets..................... $23,214,636 $23,033,788
=========== ===========
20 of 44
Regulatory March 31 December 31
Minimums 1994 1993
---------- ---------- -----------
Tier I Capital/Risk-
Adjusted Assets................ 4.00% 10.03% 9.98%
Total Risk-based Capital/
Risk-Adjusted Assets........... 8.00% 13.45% 13.42%
Tier I Capital/Average Total
Assets less Goodwill
(Leverage Ratio)............... 3.00% 7.07% 7.22%
to 5.00%
Stockholders' equity at March 31, 1994 was $2,764.0 million
compared to $2,738.4 million at December 31, 1993. Changes during the
first quarter of 1994 resulted from the following:
(millions)
----------
Balance, December 31, 1993.............................. $2,738.4
Net income............................................ 108.9
Common Stock issued:
Private placement--Santander exercise of warrants... 60.6
Stock options and dividend reinvestment plan........ 5.8
Other............................................... 1.6
Purchases of treasury stock........................... (82.7)
Dividends on Common and Preferred Stock............... (38.7)
Fair value adjustment--securities available for sale.. (33.0)
Other................................................. 3.1
--------
Balance, March 31, 1994................................. $2,764.0
========
The change in unrealized gains and losses on securities
classified as available for sale is reported as a separate component
of stockholders' equity, net of taxes, as noted above.
Capital ratios were relatively unchanged at March 31, 1994,
compared to December 31, 1993, primarily due to the retention of
earnings, offset by a higher level of risk-adjusted assets. The
decrease in the Company's Tier I leverage ratio from 7.22% at December
31, 1993 to 7.07% at March 31, 1994 was due primarily to a higher
level of quarterly average total assets, which was only partially
offset by the increase in stockholders' equity.
ASSET QUALITY 21 of 44
Non-Performing Assets
- ---------------------
Non-performing assets, which include non-accruing loans,
restructured loans and OREO, net of the OREO reserve, were $457.1
million at March 31, 1994, compared to $494.7 million at December 31,
1993. The following table presents non-performing asset and
contractually past due loan information at March 31, 1994 and December
31, 1993 (contractually past due loan amounts are not included in
non-performing loan or non-performing asset totals).
(thousands) March 31 December 31
----------- 1994 1993
Non-performing assets (a): ---------- -----------
Non-accruing loans:
Domestic:
Real estate..................... $155,801 $184,610
Other........................... 178,794 168,487
Foreign........................... 11,944 11,913
-------- --------
Total........................... 346,539 365,010
Restructured loans.................. 5,422 13,871
-------- --------
Total Non-Performing Loans........ 351,961 378,881
Other real estate owned:
Foreclosed property............... 96,139 103,344
In-substance foreclosures......... 15,430 19,145
-------- --------
Total........................... 111,569 122,489
Less reserve...................... (6,391) (6,622)
-------- --------
Net............................. 105,178 115,867
-------- --------
Total Non-Performing Assets... $457,139 $494,748
======== ========
Contractually past due but still
accruing loans (b):
Consumer.......................... $136,665 $133,112
Other............................. 9,493 8,373
Total Contractually Past Due -------- --------
But Still Accruing Loans...... $146,158 $141,485
======== ========
Non-performing loans/loans (a)........ 1.64% 1.77%
Non-performing assets/loans
and other real estate owned (a)..... 2.12% 2.30%
Reserve for possible credit losses/
non-performing loans (a)............ 170% 159%
Reserve for possible credit losses/
non-performing assets (a)........... 131% 122%
- -----------------
(a) Non-performing assets and non-performing loans exclude loans
classified as contractually past due 90 days or more and still
accruing, assets subject to FDIC loss-sharing provisions and
assets classified as held for sale, which are included in other
assets.
(b) Accruing loans past due 90 days or more.
22 of 44
Non-performing loans totaled $352.0 million at March 31, 1994,
compared to $378.9 million at December 31, 1993. The decline in total
non-performing loans primarily reflected charge-offs and repayments
resulting from continuing workout and collection efforts, as well as a
decreased volume of loans migrating to non-accrual status.
Restructured loans were $5.4 million at March 31, 1994, down from
$13.9 million at December 31, 1993. The decrease in restructured
loans was primarily due to the return to accruing status of certain
loans whose rates and terms are consistent with market rates and
terms, where continued performance is expected and where a sufficient
period of satisfactory performance by the borrowers in accordance with
the modified terms has occurred.
At March 31, 1994, OREO, net of a $6.4 million OREO reserve,
totaled $105.2 million compared to $115.9 million at December 31,
1993. The March 31, 1994 balance consisted of foreclosed property of
$96.1 million and in-substance foreclosures of $15.4 million.
Loans that were 90 days or more past due but still accruing
totaled $146.2 million compared to $141.5 million at December 31,
1993. Management's determination regarding the accrual of interest on
these loans is based on the availability and sufficiency of collateral
and the status of collection efforts. In the present environment,
certain of such loans could become non-performing assets or result in
charge-offs in the future.
In connection with the acquisition of assets from The Howard
Savings Bank on October 2, 1992, the Company obtained certain assets
subject to a loss-sharing arrangement with the FDIC. At March 31,
1994, such loans (classified as "segregated assets") totaled $200.5
million. The FDIC has agreed to assume 80 percent of the first $130
million of losses and associated expenses and 95 percent thereafter on
segregated assets. The Company's total net exposure on such assets
was approximately $14.3 million at March 31, 1994. First Fidelity's
related reserve for possible losses was $6.0 million at March 31,
1994.
The Company pursues an accelerated disposition approach for
certain assets. Such assets (classified as "assets held for sale")
increased from $88.4 million at December 31, 1993 to $90.9 million at
March 31, 1994, including $10.5 million of additions related to the
acquisition of Greenwich Financial Corporation in the first quarter of
1994. Assets held for sale are carried at the lower of adjusted cost
or fair value.
Neither segregated assets nor assets held for sale are included
in the non-performing asset and contractually past due loan totals
presented above.
While the Company believes it has responded appropriately to the
current economic environment, management remains sensitive to the
evolving economic situation and its potential impact on asset quality
and the reserve for possible credit losses.
Provision and Reserve for Possible Credit Losses 23 of 44
- ------------------------------------------------
The following table presents information regarding the Company's
provision and reserve for possible credit losses and charge-off
experience.
Three Months Ended
March 31
--------------------
(thousands) 1994 1993
----------- -------- --------
Balance at beginning of period.............. $602,183 $610,353
Provision................................... 24,000 45,000
Charge-offs................................. (41,531) (61,458)
Recoveries.................................. 9,859 10,284
-------- --------
Net charge-offs........................... (31,672) (51,174)
-------- --------
Acquired reserves........................... 2,845 -
-------- --------
Balance at end of period.................... $597,356 $604,179
======== ========
At March 31, 1994, the reserve for possible credit losses was
$597.4 million, or 2.79% of total loans, compared to $602.2 million,
or 2.82% of total loans, at December 31, 1993. The reserve was 170%
of non-performing loans at March 31, 1994, compared to 159% at
December 31, 1993.
The provision for possible credit losses for the first quarter of
1994 was $24.0 million, compared to a first quarter 1993 provision of
$45.0 million. The levels of the provision and reserve for possible
credit losses are based on management's ongoing assessment of the
Company's credit exposure and consideration of a number of relevant
variables. These variables include prevailing and anticipated
domestic and international economic conditions, assigned risk ratings
on credit exposures, the diversification and size of the loan
portfolio, the results of the most recent regulatory examinations
available to the Company, the current and projected financial status
and creditworthiness of borrowers, certain off balance sheet credit
risks, the nature and level of non-performing assets and loans that
have been identified as potential problems, the adequacy of
collateral, past and expected loss experience and other factors deemed
relevant by management. The Company's risk rating system and the
quarterly reporting process for problem and vulnerable credits are
utilized by management in determining the adequacy of the Company's
reserve for possible credit losses.
Net charge-offs were $31.7 million in the first quarter of 1994,
compared to $51.2 million in the first quarter of 1993. In the first
quarter of 1994 and 1993, respectively, net charge-offs included $19.4
million and $25.6 million related to commercial borrowers, $2.9
million and $14.8 million in commercial real estate-related credits
and $9.4 million and $10.8 million of consumer credits.
OREO Reserve 24 of 44
- ------------
The following table sets forth information regarding the
Company's provision and reserve for OREO:
Three Months Ended
March 31
------------------
(thousands) 1994 1993
----------- ------ ------
Balance at beginning of period................ $6,622 $5,765
Provision..................................... 3,250 6,800
Acquired reserves............................. 456 -
Charge-offs and write-downs................... (3,937) (5,563)
------ ------
Balance at end of period...................... $6,391 $7,002
====== ======
An OREO reserve is maintained at a level sufficient to absorb
unidentified declines in the fair value of OREO properties between
periodic appraisals, and for estimated selling costs.
25 of 44
Part II - Other Information
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
First Fidelity's Annual Meeting of Shareholders was held on April
19, 1994.
Proxies for the meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended. There was no
solicitation in opposition to management's nominees as listed in the
proxy statement, and all such nominees were elected.
With respect to management's nominees, voting was as follows:
John Gilray Christy, For - 65,789,959, Against - 415,326; Gonzalo de
Las Heras, For - 65,775,359, Against - 429,926; E. James Ferland, For
- - 65,793,085, Against - 412,200; Arthur M. Goldberg, For - 65,781,662,
Against - 423,623; John R. Kennedy, For - 65,788,240, Against -
417,045; Joseph Neubauer, For - 65,792,043, Against - 413,255; Rebecca
Stafford, For - 65,777,500, Against - 427,785; and Bernard C. Watson,
For - 65,788,986, Against - 416,299. There were no abstentions or
broker non-votes in connection with election of director nominees.
Proxies also were solicited at the annual meeting for amendment
of the Company's Stock Option and Restricted Stock Plan (the "Plan").
The amendments included: (i) an increase in the number of shares of
the Company's Common Stock issuable pursuant to the Plan from
6,600,000 shares to 8,600,000 shares, (ii) the establishment of
258,000 shares as the maximum number of shares that may be granted to
any employee during any calendar year and (iii) a requirement that a
minimum target level of fully diluted earnings per share be attained
as a condition for granting of certain deferred cash incentive awards
to executives in connection with the Plan. Such proposal was adopted
with 54,747,584 shares voting For, 10,870,970 shares voting Against,
and 586,731 shares Abstaining (including 0 broker non-votes).
In addition, proxies were solicited for approval of material
performance standards under the Company's Annual Incentive Plan (the
"Incentive Plan"). The proposal was designed to qualify payments made
under the Incentive Plan as "performance-based compensation" under
Section 162(m) of the Internal Revenue Code of 1986, as amended. Such
proposal was adopted with 59,722,749 shares voting For, 5,874,708
shares voting Against, and 607,828 shares Abstaining (including 0
broker non-votes).
Proxies also were solicited at the annual meeting for
ratification of KPMG Peat Marwick as independent auditors of the
Company. The proposal was adopted with 65,683,339 shares voting For,
250,169 shares voting Against, and 271,777 shares Abstaining
(including 0 broker non-votes).
In addition, a shareholder proposal, which management opposed,
requesting the Company's Board of Directors to take certain actions
with respect to the nominating of Directors was defeated, with
7,175,437 shares voting For, 52,383,954 shares voting Against, and
1,564,594 shares Abstaining (including 5,081,300 broker non-votes).
Item 6. Exhibits and Reports on Form 8-K 26 of 44
--------------------------------
(a) Exhibits as required by Item 601 of Regulation S-K.
(10) Amended and Restated First Fidelity Bancorporation
Stock Option and Restricted Stock Plan.
(11) Statement regarding computation of per share earnings.
(28) Letter from the Company's independent accountants
referred to in Paragraph (d) of Rule 10-01 of
Regulation S-X.
(b) Reports on Form 8-K filed during the first quarter:
During the quarter ended March 31, 1994, the Company filed a
Current Report on Form 8-K, updating the Form 8-K dated May
4, 1993, pertaining to the acquisition of Northeast Bancorp,
Inc.
27 of 44
SIGNATURES
----------
Pursuant to the requirements 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 FIDELITY BANCORPORATION
Wolfgang Schoellkopf
Vice Chairman
Chief Financial Officer
Date: May 12, 1994
Anthony R. Burriesci
Executive Vice President
Corporate Controller
Date: May 12, 1994
28 of 44
FIRST FIDELITY BANCORPORATION
EXHIBIT 10
STOCK OPTION AND RESTRICTED STOCK PLAN
ARTICLE I
Purpose and Scope of Plan
1.1 Amendment and Restatement:
This Plan constitutes an amendment and restatement of the First
Fidelity Bancorporation 1982 Stock Option Plan, known as the "First
Fidelity Bancorporation Stock Option and Restricted Stock Plan".
1.2 Purposes:
The purpose of the Plan is to promote the long-term success of
First Fidelity Bancorporation by providing financial incentives to key
employees who are in positions to make significant contributions
toward such success. The Plan is designed to encourage key employees
to acquire a proprietary interest in the Company and thereby to align
their interests with those of the Company's stockholders, to continue
employment with the Company, and to render superior performance during
such employment.
1.3 Definitions:
Unless the content clearly indicates otherwise, the following
terms have the meanings set forth below:
"Award" shall mean a restricted stock award granted pursuant
to Article III hereof. "Awardee" means the individual to whom an
Award is granted by the Committee pursuant to the Plan. "Award
Date", as used with respect to a particular Award, means the date
as of which such Award is granted by the Committee pursuant to
the Plan.
"Board of Directors" means the Board of Directors of the
Company.
"Change in Control Event" means any of the following events:
(a) the acquisition by any one person, within the
meaning of Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, or more than one person, acting as a
group, (other than the Company, its affiliates and benefit
plans sponsored by the Company or its affiliates) of
ownership of stock of the Company possessing 20% or more of
the total voting power of the Company, other than an
acquisition of stock by the Banco de Santander Group if, and
only so long as, the Banco de Santander Group (a) does not
constitute an Acquiring Person and (b) is and continues to
be in compliance with Sections 8.01, 8.04, 8.05 and 8.06 of
the Investment Agreement, without giving effect to any
waiver, amendment or modification of such sections and
notwithstanding the expiration or termination of the
Investment Agreement; provided that, for purposes of this
clause, (i) "Banco de Santander Group" shall mean Banco de
Santander, Sociedad Anonima de Credito ("Banco de
29 of 44
Santander"), its "Affiliates" and "Associates" (as such
terms are defined in the Investment Agreement) and any
Defined Financial Institution, (ii) "Investment Agreement"
shall mean the Investment Agreement, dated as of March 18,
1991, between Banco de Santander and the Company as in
effect on March 18, 1991 without giving effect to any
waiver, amendment or modification thereof, (iii) "Acquiring
Person" shall have the meaning given to such term in
Exhibit D to the Investment Agreement and (iv) "Defined
Financial Institution" shall mean a financial Institution
of the type described in clause (iii) of the definition of
"Acquiring Person" set forth in Exhibit D to the Investment
Agreement;
(b) the approval by the stockholders of the Company of
(i) any consolidation or merger of the Company in which the
holders of voting stock of the Company immediately before
the consolidation or merger will not own 50% or more of the
voting shares of the continuing or surviving corporation
immediately after such consolidation or merger, or (ii) any
sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially
all of the assets of the Company, or
(c) a change of 25% (rounded to the next whole person)
in the membership of the Board of Directors of the Company
within a 12-month period, unless the election or nomination
for election by stockholders of each new director within
such period was approved by the vote of 85% (rounded to the
next whole person) of the directors then still in office at
the beginning of the 12-month period.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Human Resources Committee of the Board
of Directors, which committee shall be composed of not less than
three directors who have not been eligible to receive stock,
stock options, stock appreciation rights or deferred cash
incentive awards under the Plan or any other plan of the Company
or its affiliates entitling the participants therein to acquire
stock, stock options, stock appreciation rights or deferred cash
incentive awards, at any time within a period of one year
immediately preceding the date of their appointment to such
committee.
"Common Stock" means the common stock of the Company, $1.00
par value, or such other class of shares or other securities as
to which the provisions of the Plan may be applicable.
"Company" mean First Fidelity Bancorporation (formerly,
"FFB, Inc.").
"Deferred Cash Incentive Agreement" means a written
instrument specifying the terms and conditions of a Deferred Cash
Incentive Award, as provided in Section 4.2 of the Plan.
"Deferred Cash Incentive Award" means an award granted
pursuant to Article IV of the Plan.
30 of 44
"Fair Market Value" of a share of Common Stock on any particular
date is the mean between the highest and lowest sales price of a share
of Common Stock on the New York Stock Exchange Composite Transaction
Report; provided, that (i) if no sales of Common Stock are included on
the Composite Tape for such date, or (ii) if in the opinion of the
Committee the sales of Common Stock on such date are insufficient to
constitute a representative market, the Fair Market Value of a share
of Common Stock on such date shall be deemed equal to the mean between
the highest and lowest sales price of a share of Common Stock on the
Composite Tape for the first preceding date on which sales of Common
Stock are included and to which clause (ii) does not apply. In any
event, in case of the grant of an Incentive Stock Option, "Fair Market
Value" shall be determined in a manner consistent with the
requirements imposed under Section 422 of the Code.
"Grant Date," as used with respect to a particular Option, means
the date as of which such Option is granted by the Committee pursuant
to the Plan.
"Grantee" means the individual to whom an Option has been granted
by the Committee pursuant to the Plan.
"Option" means an option, granted by the Committee pursuant to
Article II, to purchase shares of Common Stock and which shall be
designated as either an "Incentive Stock Option" or "Supplemental
Stock Option".
"Incentive Stock Option" means an option that qualifies as an
Incentive Stock Option as described in Section 422 of the Code.
"Supplemental Stock Option" means any Option granted under the
Plan other than an Incentive Stock Option.
"Option Agreement" means a written instrument evidencing an
Option, as provided in Section 2.2(a) of the Plan.
"Option Period" means, with respect to Incentive Stock Options,
the period beginning on the Grant Date and ending the day prior to the
tenth anniversary of the Grant Date and means, with respect to
Supplemental Stock Options, the period beginning on the Grant Date and
ending on the day following the tenth anniversary of the Grant Date.
"Plan" means the Company's 1982 Stock Option Plan as amended and
restated and as it may be further amended and restated from time to
time in the future. The title of the Plan shall be as set forth in
Section 1.1 hereof.
"Retirement," as applied to a Grantee, means the Grantee's
termination of employment at a time when the Grantee receives an
immediately payable retirement benefit under the Company's Employees'
Pension Plan.
"SAR" shall mean a stock appreciation right granted by the
Committee pursuant to Section 2.4 of the Plan.
"Termination of Employment" shall mean the last day of active
employment with the Company or any participating subsidiary or
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affiliate, without regard to the payment of severance or other
continuation pay.
"Total and Permanent Disability," as applied to a Grantee, means
that the Grantee: (i) has established to the satisfaction of the
Company that the Grantee is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not
less than 12 months, all within the meaning of Section 22(e)(3) of the
Code; and (ii) has satisfied any requirement imposed by the Committee.
1.4 Aggregate Limitation:
(a) The aggregate number of shares of Common Stock with respect
to which Options, SARs and Awards may be granted shall not exceed
8,600,000 shares of Common Stock, subject to adjustment in accordance
with Section 5.1. The aggregate number of shares of Common Stock with
respect to which Options, SARs and Awards may be granted to any one
Grantee or Awardee, as applicable, shall not exceed 258,000 shares in
any calendar year, subject to adjustment in accordance with
Section 5.1.
(b) Any shares of Common Stock to be delivered by the Company
upon the exercise of Options or SARs or the realization of Awards
shall be issued from authorized but unissued shares of Common Stock or
from treasury stock acquired by the Company at the discretion of the
Board of Directors.
(c) In the event that any Option or SAR expires, lapses, or
otherwise terminates prior to being fully exercised, any shares of
Common Stock allocable to the unexercised portion of such Option or
SAR may again be made subject to an Option, a SAR or an Award. In the
event that any Award lapses prior to realization thereof, any shares
of Common Stock allocable to such Award may again be made subject to
an Option, a SAR or an Award. An Option that terminates upon the
exercise of a related SAR shall be deemed to have been exercised at
the time of exercise of the SAR and the shares of Common Stock subject
thereto shall not be available for further grants.
(d) For purposes of paragraph (a) of this Section 1.4, the
payment of a Deferred Cash Incentive Award shall not be deemed to
result in the issuance of any shares of Common Stock in addition to
those issued pursuant to the exercise of the related Option.
1.5 Administration of the Plan:
(a) The Plan shall be administered by the Committee, which shall
have the authority:
(i) to determine key employees of the Company to whom, and
the times at which, Options, Awards, SARs and Deferred Cash
Incentive Awards shall be granted, the number of shares of Common
Stock to be subject to each such Option, Award and SAR, and the
amount of each such Deferred Cash Incentive Award, taking into
account the nature of the services rendered by the particular
employee, the employee's potential contribution to the long-term
32 of 44
success of the Company and such other factors as the Committee in
its discretion shall deem relevant;
(ii) to interpret the Plan, to make factual determinations
and to establish rules and regulations relating to it and all
actions taken by the Committee shall be conclusive and binding on
all parties;
(iii) to prescribe the terms and provisions of the
agreements for the grant of Options, Awards, SARs and Deferred
Cash Incentive Awards; and
(iv) to make all other determinations necessary or
advisable in order to administer the Plan.
(b) All decisions of the Committee upon questions concerning the
Plan, any Option, any Award, any SAR or any Deferred Cash Incentive
Award may be taken in its sole discretion and shall be conclusive and
binding on all parties.
(c) No person acting under this Section 1.5 shall be held liable
for any action or determination made in good faith with respect to the
Plan or any grant of an Option or SAR or any Award under the Plan and
the Company shall indemnify and hold harmless each such person from
any liability, cost or expense (including reasonable counsel fees)
incurred in connection with such person's performance hereunder.
1.6 Eligibility:
The Committee shall designate from time to time the key employees
of the Company who are to be granted Options, Awards, SARs and
Deferred Cash Incentive Awards. In no event may a member of the
Committee or any non-employee Director be granted an Option, an Award,
a SAR or a Deferred Cash Incentive Award.
1.7 Effective Date and Duration of Plan:
The Plan initially became effective upon its adoption by the
Board of Directors of First Fidelity Incorporated. Unless previously
terminated by the Board of Directors, the Plan shall terminate on
February 11, 1997. The Plan, as amended and restated shall become
effective January 1, 1994; provided, however, that the amendments to
Section 1.4(a) as well as the amendments designed to cause the Plan to
comply with section 162(m) of the Code, shall become effective only if
approved by the affirmative vote of the holders of a majority of
shares of Common Stock present or represented and entitled to vote at
the annual meeting of shareholders to be held on April 19, 1994.
ARTICLE II
Stock Options
2.1 Grant of Options:
The Committee may, from time to time, subject to the provisions
of the Plan, grant Options to key employees to purchase shares of
Common Stock allotted in accordance with Section 1.4. The Committee
may designate any Option granted as either an Incentive Stock Option
33 of 44
or a Supplemental Stock Option, or the Committee may designate a
portion of the Option as an "Incentive Stock Option" and the remaining
portion as a "Supplemental Stock Option." Any portion of an Option
that is not designated as an "Incentive Stock Option" shall be a
"Supplemental Stock Option" and shall satisfy the requirements of
Section 2.2, but shall not be subject to the requirements of Section
2.3.
2.2 Option Requirements:
(a) An Option shall be evidenced by an Option Agreement
specifying the number of shares of Common Stock that may be purchased
by its exercise and containing such terms and conditions consistent
with the Plan as the Committee shall determine.
(b) An Option shall not be granted on or after February 11,
1997.
(c) An Option shall not be exercisable after the expiration of
the Option Period.
(d) The Committee may provide, in the instrument evidencing an
Option, for the lapse of the Option, prior to the expiration of the
Option Period, upon the occurrence of any event specified by the
Committee.
(e) The option price per share of Common Stock shall be equal to
the Fair Market Value of a share of Common Stock on the Grant Date.
(f) An Option and any related SAR shall not be transferable
other than by will or the laws of descent and distribution and, during
the Grantee's lifetime, an Option and any related SAR shall be
exercisable only by the Grantee; except that the Committee may permit:
(i) exercise, during the Grantee's lifetime, by Grantee's
guardian or legal representative; and
(ii) transfer, upon Grantee's death, to beneficiaries
designated by Grantee in a manner authorized by the Company;
provided, that the Committee determines that such exercise and
such transfer are consonant with requirements for exemption from
Section 16(b) of the Securities Exchange Act of 1934, as amended,
and, with respect to an Incentive Stock Option, the requirements
of Section 422(b)(5) of the Code.
(g) Unless otherwise provided by the Committee or in this Plan,
an Option shall not be exercisable until the earliest of one year
after its Grant Date or the date of Retirement, death or Total and
Permanent Disability of the Grantee. Pursuant to the terms of an
Option Agreement or Deferred Cash Incentive Agreement or otherwise,
the Committee may, at the time of grant or any time thereafter,
(i) provide irrevocably that an Option or Deferred Cash Incentive
Award shall become fully exercisable immediately and automatically
upon the occurrence of a Change in Control Event or (ii) change the
date on which an outstanding Option or any related Deferred Cash
Incentive Award become exercisable; provided, however, that an
34 of 44
exercise date designated in an Option Agreement or in a Deferred Cash
Incentive Agreement may not be changed to a later date without the
consent of the Grantee. In the event of Retirement, the Option to
exercise shall lapse at the earlier of (i) the last day of the Option
Period for such Option or (ii) three years after the date of
Retirement. In the event of voluntary Termination of Employment at
the election of the employee or termination for cause, as determined
pursuant to the Company's normal employment practices, at the election
of the Committee, all Options shall lapse on the date of termination;
provided, however, that the Committee shall have authority to permit
exercise until the earlier of the last day of the Option Period for
the applicable Option or three months after employment is terminated.
In the event of Termination of Employment by the Company without
cause, as determined pursuant to the Company's normal employment
practices, all Options shall lapse on the earlier of the last day of
the Option Period for the applicable Option or six months after
Termination of Employment. In the event of Termination of Employment
due to death or Total and Permanent Disability, the Option shall lapse
at the earlier of the last day of the Option Period for such Option or
three years after Termination of Employment due to such causes. In no
event shall an Option be exercisable after the last day of its Option
Period or be exercisable for more shares than the number of shares
which could be purchased if the Option were exercised on the date of
Termination of Employment.
(h) A person electing to exercise an Option shall give written
notice, in such form as the Committee may require, of such election to
the Company and shall tender to the Company the full purchase price of
the shares of Common Stock for which the election is made. Payment of
the purchase price shall be made in cash or in such other form as the
Committee may approve, including shares of Common Stock of the Company
valued at their Fair Market Value on the date of exercise of
the Option.
2.3 Additional Incentive Stock Option Requirements:
(a) An Incentive Stock Option shall not be granted to an
individual who, on the date of grant, owns stock possessing
more than ten percent of the total combined voting power of
all classes of stock of the Company or any subsidiary or
parent corporation.
(b) The Fair Market Value (determined at the time that the
Incentive Stock Options are granted) of Common Stock with
respect to which Incentive Stock Options (granted on or
after January 1, 1987) are exercisable for the first time by
any person during any calendar year (under this Plan and all
other plans of the Company and its parent and subsidiary
corporations) cannot be greater than $100,000.
(c) An Incentive Stock Option granted prior to January 1, 1987
shall not be exercisable while there is outstanding (within
the meaning of Section 422A(c)(7) of the Internal Revenue
Code of 1954, as amended) any other "incentive stock option"
(within the meaning of Subsection (b) of Section 422A of
such Code), which was granted before the granting of such
Incentive Stock Option to the Grantee and which was granted
to enable the Grantee to purchase stock in the Company or in
35 of 44
a corporation which (on the Grant Date) is a parent or
subsidiary corporation of the Company or in a predecessor
corporation of any of such corporations.
2.4 Stock Appreciation Rights:
The Committee may, in its discretion, grant stock appreciation
rights (hereinafter, "SAR") to the holders of Options granted under
the Plan. A SAR shall be subject to the following terms and
conditions:
(a) Each SAR shall relate to a specific Option or portion of an
Option granted under the Plan and may be granted at the same
time that the Option is granted or at any time thereafter
prior to the last day on which the Option may be exercised.
SARs will be subject to such terms and conditions as the
Committee may specify.
(b) A SAR shall entitle a Grantee, upon surrender of the
unexpired Option, or a portion thereof, to receive from the
Company an amount equal to the Fair Market Value, on the
surrender date, of shares which the Grantee would have been
entitled to purchase on that date pursuant to the Option or
portion thereof surrendered, less
(i) the amount which the Grantee would have been required
to pay to purchase such shares, or
(ii) if higher, the Fair Market Value of a share as of the
date of grant of the SAR but only where the SAR is
granted after the Option to which it relates and a
lesser purchase price would result in the disallowance
of the Company's expense deduction upon exercise of the
SAR pursuant to Section 162(m) of the Code.
The amount shall be paid at the sole discretion of the Committee
to Grantees all in Common Stock, all in cash, or any combination of
the two. No fractional shares shall be issued as a result of
exercising a SAR under this Section 2.4. A Grantee wishing to
exercise a right shall give written notice of such exercise to the
Company. The date that the Company receives such notice shall be the
date on which the Option or portion thereof is deemed surrendered.
(c) A SAR shall be exercisable only for the same number of
shares, and only at the same times, as the Option or a
portion of an Option to which it relates. Accordingly, a
SAR shall lapse at such time as the related Option is
exercised or lapses pursuant to the terms of the Plan.
However, in no event shall an SAR be exercisable during the
first six months after being granted, except that an SAR
shall be exercisable at the time of death or disability of
the Grantee if the Option to which the SAR relates is then
exercisable.
36 of 44
ARTICLE III
Stock Awards
3.1 Grant of Awards:
An Award will consist of Common Stock to be transferred to an
Awardee without other payment therefor upon completion of the
restriction period relating to such Award and satisfaction of any
performance criteria established by the Committee. Notwithstanding
the fact that such shares are not transferred to the Awardee until the
completion of a restriction period or the satisfaction of specified
criteria, all dividends paid with respect to such shares shall be
distributed currently to the Awardee as additional compensation.
3.2 Agreement:
Each Award granted under the Plan shall be evidenced by an Award
Agreement between the Company and the Awardee which shall set forth
the following conditions:
(a) Restriction Period. Each Award Agreement shall state
the date upon which the shares awarded shall fully vest. The
period from the Award Date to the date on which an Award vests is
described herein as the "Restriction Period".
(b) Performance Criteria. If the Committee determines that
the vesting of a particular Award should be conditioned upon
satisfaction of certain performance criteria, such condition
shall be described in the applicable Award Agreement.
(c) Time of Issue. Shares shall be issued promptly after
the conclusion of the Restriction Period, provided that such
issuance is consistent with Sections 3.2(d) and 3.2(e) hereof and
provided that any applicable performance criteria have been
satisfied.
(d) Termination of Employment. Except in the case of Total
and Permanent Disability or death of an Awardee, or at the
election of the Committee, Retirement, no shares shall be issued
to an Awardee whose employment relationship with the Company
terminates for any voluntary or involuntary reason prior to the
conclusion of the Restriction Period pertaining to those shares.
If such termination should occur after the conclusion of the
Restriction Period, but prior to the date of issue of the awarded
shares, the awarded shares shall be issued to the Awardee as
though he/she were still employed at the date of issue.
(e) Awardee's Retirement, Disability or Death. If an
Awardee incurs a Termination of Employment by reason of death or
Total and Permanent Disability, or at the election of the
Committee, Retirement, prior to the conclusion of the Restriction
Period or after the conclusion of the Restriction Period but
prior to the date of issue of the awarded shares, the awarded
shares shall be issued to the Awardee or, in the case of an
Awardee's death, the decreased Awardee's estate promptly after
the conclusion of the Restriction Period.
37 of 44
(f) Change in Control Event. The Committee shall have the
authority to provide, either at the time an Award is granted or
thereafter, that all restrictions and performance criteria
pertaining to an Award shall lapse upon the occurrence of a
Change in Control Event and that the awarded shares shall be
promptly issued to the Awardee.
(g) Withholding of Taxes. At the time an Award vests or is
granted, the Company may withhold from an Award any taxes that it
is required to withhold in connection with the granting of
the Award.
3.3 Non-Assignability:
No Award shall be assignable or transferable by a participant
otherwise than by will or the laws of descent and distribution.
ARTICLE IV
Deferred Cash Incentive Awards
4.1 Granting of Deferred Cash Incentive Awards:
Deferred Cash Incentive Awards, as described in Section 4.2 of
the Plan, may be granted by the Committee in conjunction with all or
any part of any Option granted under the Plan, either at the time of
the grant of such Option or at any time thereafter during the term of
such Option. Each Deferred Cash Incentive Award shall be subject to
such conditions as specified by the Committee which is described in
Section 5.10 and certification by such Committee that such conditions
have been met.
4.2 Deferred Cash Incentive Agreements:
A Deferred Cash Incentive Award shall entitle the holder of an
Option to receive from the Company an amount of cash equal to the
aggregate exercise price of all Options exercised by such holder in
accordance with the terms of a written "Deferred Cash Incentive
Agreement" executed by the Company and the Grantee. A Deferred Cash
Incentive Agreement shall specify the conditions under which a
Deferred Cash Incentive Award becomes payable, the conditions under
which a Deferred Cash Incentive Award is forfeited and any other terms
and conditions as the Committee may from time to time determine.
Under no circumstances may a Deferred Cash Incentive Award be applied
to any purpose other than the payment of (i) the exercise price of a
properly exercised related Option, or (ii) taxes attributable to the
receipt of shares of Common Stock or of a payment pursuant to a
Deferred Cash Incentive Award.
38 of 44
ARTICLE V
General Provisions
5.1 Adjustment Provisions:
(a) If:
(i) any recapitalization, reclassification, split-up,
or consolidation of Common Stock is effected;
(ii) the outstanding shares of Common Stock are
exchanged, in connection with the merger or consolidation of
the Company or a sale by the Company of all or a part of its
assets, for a different number or class of shares of stock
or other securities of the Company or for shares of the
stock or other securities of any other corporation;
(iii) new, different, or additional shares or other
securities of the Company or of another corporation are
received by the holders of Common Stock; or
(iv) any distribution is made to the holders of Common
Stock other than a cash dividend;
then the Committee shall make appropriate adjustments
to:
(i) the number and class of shares or other
securities that may be issued or transferred pursuant
to Options, SARs and Awards; or
(ii) the purchase price to be paid per share
under outstanding Options and the amount of outstanding
Deferred Cash Incentive Awards.
In any event, however, no fractional shares shall be
issued.
(b) Upon the dissolution or liquidation of the Company
other than within two years following a Change in Control Event,
the Plan shall terminate, and all Options, SARs, Awards and
Deferred Cash Incentive Awards previously granted shall lapse on
the date of such dissolution or liquidation of the Company.
(c) Adjustments under Subsection (a) shall be made
according to the sole discretion of the Committee, and its
decision shall be binding and conclusive.
(d) Except as provided in Subsections (a) and (b), the
issuance by the Company of shares of stock of any class shall not
affect the outstanding Options, SARs, Awards and Deferred Cash
Incentive Awards.
5.2 Additional Conditions:
Any shares of Common Stock issued or transferred under any
provision of the Plan may be issued or transferred subject to such
39 of 44
conditions, in addition to those specifically provided in the Plan, as
the Committee or the Company may impose.
5.3 No Right to Employment:
Nothing in the Plan or in any instrument executed pursuant
thereto shall confer upon any employee any right to continue in the
employ of the Company or shall affect the right of the Company to
terminate the employment of any employee with or without cause.
5.4 Legal Restrictions:
(a) The Company will not be obligated to issue shares of
Common Stock or make any payment if counsel to the Company
determines that such issuance or payment would violate any law or
regulation of any governmental authority or any agreement between
the Company and any national securities exchange upon which the
Common Stock is listed. In connection with any stock issuance or
transfer, the person acquiring the shares shall, if required by
the Company, give assurances satisfactory to counsel to the
Company regarding such matters as the Company may deem desirable
to assure compliance with all legal requirements. The Company
shall in no event be obligated to take any action in order to
cause the exercise of any Option or SAR or the issuance of Common
Stock upon realization of any SAR.
(b) The Plan, the exercise of Options and the obligations
of the Company to issue or transfer shares of Common Stock under
Options or Awards shall be subject to all applicable law and
required approvals including governmental or regulatory agencies.
With respect to persons subject to section 16 of the Securities
Exchange Act of 1934, it is the intent of the Company that the
Plan and all transactions under the Plan shall comply with all
applicable conditions of Rule 16b-3 or any successor provisions
under such Act. The Committee may revoke any Option or Award if
it is contrary to law or modify any Option or Award to bring it
into compliance with any valid or mandatory government
regulations.
5.5 No Rights as Shareholders:
No Grantee, and no beneficiary or other person claiming through a
Grantee, shall have any interest in any shares of Common Stock
allocated for the purposes of the Plan or subject to any Option, SAR
or Award until such shares of Common Stock shall have been transferred
to the Grantee or such person. Furthermore, the existence of the
Options, SARs, Awards or Deferred Cash Incentive Awards shall not
affect: the right or power of the Company or its stockholders to make
adjustments, recapitalizations, reorganizations, or other changes in
the Company's capital structure or its business; any issue of bonds,
debentures, or preferred or prior preference stocks affecting the
Common Stock or the rights thereof; the dissolution or liquidation of
the Company, or the sale or transfer of any part of its assets or
businesses; or any other corporate act, whether of a similar character
or otherwise.
5.6 Choice of Laws: 40 of 44
The validity, interpretation, and administration of the Plan and
of any rules, regulations, determinations, or decisions made
thereunder, and the right of any and all persons having or claiming to
have any interest therein or thereunder, shall be determined
exclusively in accordance with the laws of the State of New Jersey.
Without limiting the generality of the foregoing, the period
within which any action in connection with the Plan must be commenced
shall be governed by the laws of the State of New Jersey, without
regard to the place where the act or omission complained of took
place, the residence of any party to such action, or the place where
the action may be brought.
5.7 Amendment, Suspension, and Termination of the Plan:
The Board of Directors (or any committee thereof) may at any time
terminate, suspend, or amend the Plan; however, no such amendment
shall, without the approval of the shareholders of the Company:
(i) increase the aggregate number of shares that may be
issued in connection with Options, Awards and SARs;
(ii) change the Option exercise price;
(iii) increase the maximum period during which Options and
SARs may be exercised;
(iv) extend the effective period of the Plan; or
(v) materially modify the requirements as to eligibility
for participation in the Plan.
5.8 Payment of Withholding Taxes:
At any time when a participant in the Plan is required to pay to
the Company an amount required to be withheld under applicable income
tax laws in connection with the grant or exercise of any Option, SAR,
Award or Deferred Cash Incentive Award, the participant may satisfy
this obligation in whole or in part by electing (the "Election") to
have the Company withhold an appropriate number of shares from the
issuance of shares to which he would otherwise be entitled, or by
paying the withholding amount to the Company in cash or tendering
already owned shares to the Company, such number of shares to be
withheld or tendered, as the case may be, having a Fair Market Value,
calculated on the date that the amount of tax to be withheld shall be
determined ("Tax Date"), equal to the amount required to be withheld.
(a) Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or
terminate the right to make Elections, or may provide with
respect to any Option, SAR, Award or Deferred Cash Incentive
Award that the right to make Elections shall not apply to such
Option, SAR, Award or Deferred Cash Incentive Award. An Election
is irrevocable.
(b) If a participant is an officer or director of the
Company within the meaning of Section 16 of the Securities
41 of 44
Exchange Act of 1934, then an Election is subject to the
following additional requirements:
(i) No Election shall be effective for a Tax Date
which occurs within six months of the grant of an Option,
SAR, Award or Deferred Cash Incentive Award, except that
this limitation shall not apply in the event death or Total
and Permanent Disability of the participant occurs prior to
the expiration of the six month period.
(ii) The Election must be made either six months prior
to the Tax Date or must be made during a period beginning on
the third business day following the date of release for
publication of the Company's quarterly or annual summary
statements of earnings and ending on the twelfth business
day following such date.
5.9 Funded Status of the Plan:
The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other
segregation of assets to assure the payment pursuant to any Option,
SAR, Award or Deferred Cash Incentive Award under the Plan.
5.10 Approval by Outside Directors:
(a) Options and SARs granted under the Plan after February
17, 1993, shall not be exercisable until after approval of the
Plan and such Options or SARs by a Committee of the Board of
Directors which is comprised solely of two or more directors who
at the time of the action taken are:
(i) not employees of the Company (or related
entities);
(ii) not former employees still receiving compensation
for prior services (other than benefits under a tax-
qualified pension plan);
(iii) not officers of the Company (or related
entities) at any time; and
(iv) not receiving compensation for personal services
in any capacity other than as a director.
(b) Deferred Cash Incentive Awards made pursuant to the Plan
on or after January 1, 1994 to certain officers, as specified by
the Committee described in subsection (a), shall be made subject
to performance criteria specified by such Committee and subject
to such Committee's certification that each of such officers has
satisfied the applicable performance criteria.
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EXHIBIT 11
Three Months
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) Ended
COMPUTATION OF EARNINGS PER SHARE March 31
------------
1994
------------
Net income.................................................. $108,866,000
Less: Total preferred dividends............................. 5,131,000
------------
A. Net income applicable to common stock....................... $103,735,000
============
Net income.................................................. $108,866,000
Less: Non-convertible preferred dividends................... 2,542,000
------------
B. Net income for fully diluted earnings per share............. $106,324,000
============
Primary Earnings Per Share:
---------------------------
Average shares outstanding.................................. 79,648,000
Dilutive average shares outstanding under options
and warrants.............................................. 7,407,255
Exercise prices............................................. $15.44 to
$44.06
Assumed proceeds on exercise................................ $193,686,382
Market value per share...................................... $44.11
Less: Treasury stock purchased with the assumed proceeds
from exercise of options and warrants..................... 4,391,295
------------
C. Adjusted average shares - Primary........................... 82,663,960
------------
Primary Earnings Per Share (A/C)............................ $1.26
============
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Fully Diluted Earnings Per Share:
---------------------------------
Average shares outstanding.................................. 79,648,000
Dilutive average shares outstanding under options
and warrants.............................................. 7,412,973
Exercise prices............................................. $15.44 to
$44.31
Assumed proceeds on exercise................................ $193,939,817
Market value per share...................................... $44.38
Less: Treasury stock purchased with the assumed proceeds
from exercise of options and warrants..................... 4,370,475
------------
Adjusted average shares..................................... 82,690,498
Common shares from the assumed conversion of Convertible
Preferred Stock........................................... 3,757,654
------------
D. Adjusted average shares - Fully diluted..................... 86,448,152
------------
Fully Diluted Earnings Per Share (B/D)...................... $1.23
============
44 of 44
EXHIBIT 28
KPMG Peat Marwick
Certified Public Accountants
345 Park Avenue
New York, NY 10154
Independent Accountant's Report
-------------------------------
The Board of Directors
First Fidelity Bancorporation:
We have reviewed the accompanying consolidated statement of condition
of First Fidelity Bancorporation and subsidiaries as of March 31,
1994, and the related consolidated statements of income and cash flows
for the three-month period then ended. These financial statements are
the responsibility of First Fidelity Bancorporation's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express an
opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated statement of condition of First
Fidelity Bancorporation and subsidiaries as of December 31, 1993
(presented herein) and the related consolidated statements of income
and cash flows for the year then ended (not presented herein); and in
our report dated January 14, 1994, except for the sixth paragraph of
Note 11 which was dated February 2, 1994, we expressed an unqualified
opinion on those consolidated financial statements.
KPMG Peat Marwick
April 14, 1994
