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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (THE "EXCHANGE ACT")
for the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
for the transition period from to
Commission file number 1-10000
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0898180
(State of incorporation) (I.R.S. Employer Identification No.)
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 374-6565
Securities registered pursuant to Section 12(b) of the Exchange Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
Common Stock, $3.33 1/3 par value (including rights New York Stock Exchange, Inc. ("NYSE")
attached thereto)
Series B Convertible Class A Preferred Stock, NYSE
No-par Value
Series D Adjustable Rate Cumulative Class A Preferred NYSE
Stock, No-par Value
Depositary Shares, each representing a 1/40th interest in NYSE
a share of Series F 10.64% Class A
Preferred Stock, No-par Value
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
subsequent to the distribution of securities under a plan confirmed by a court.
Yes No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of January 31, 1996, there were 280,115,991 shares of the registrant's
Common Stock outstanding, $3.33 1/3 par value per share, and based on the last
reported sale price of $57.875 per share on the NYSE on such date, the aggregate
market value of the registrant's Common Stock held by those persons deemed by
the registrant to be nonaffiliates was approximately $16 billion.
DOCUMENTS INCORPORATED BY REFERENCE IN FORM 10-K
INCORPORATED DOCUMENTS WHERE INCORPORATED IN FORM 10-K
1. Certain portions of the Corporation's Summary Annual Part I -- Item 1.
Report to Stockholders for the year ended December 31,
1995 ("Summary Report").
2. Certain portions of the Corporation's 1995 Annual Part I -- Items 1 and 2; Part II -- Items 6, 7
Report (Historical Basis) ("Historical Report"). and 8.
3. Certain portions of the Corporation's 1995 Part I -- Items 1 and 2; Part II -- Items 5, 6, 7
Supplemental Annual Report ("Supplemental Report"). and 8.
4. Certain portions of the Corporation's Proxy Statement Part III -- Items 10, 11, 12 and 13.
for Annual Meeting of Stockholders to be held on April
16, 1996 ("Proxy Statement").
PART I
ITEM 1. BUSINESS.
GENERAL
First Union Corporation (the "Corporation" or "FUNC") was incorporated
under the laws of North Carolina in 1967 and is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA").
Pursuant to a corporate reorganization in 1968, First Union National Bank of
North Carolina ("FUNB-NC") and First Union Mortgage Corporation, a mortgage
banking firm acquired by FUNB-NC in 1964, became subsidiaries of the
Corporation.
In addition to North Carolina, the Corporation also operates banking
subsidiaries in Florida (since November 1985), South Carolina (since March
1986), Georgia (since March 1986), Tennessee (since December 1987), Maryland
(since December 1992), Virginia (since December 1992), Washington, D.C. (since
December 1992), Pennsylvania (since January 1996), Delaware (since January
1996), New York (since January 1996), New Jersey (since January 1996) and
Connecticut (since January 1996). In addition to providing a wide range of
commercial and retail banking and trust services through its banking
subsidiaries, the Corporation also provides various other financial services,
including mortgage banking, investment banking, home equity lending, leasing,
insurance and securities brokerage, through other subsidiaries.
The Corporation's principal executive offices are located at One First
Union Center, Charlotte, North Carolina 28288-0013 (telephone number (704)
374-6565).
Since the 1985 Supreme Court decision upholding regional interstate banking
legislation, the Corporation has concentrated its efforts on building a large
regional banking organization in the eastern region of the United States. Since
November 1985, the Corporation has completed over 60 banking-related
acquisitions and currently has one pending banking-related acquisition,
including the more significant acquisitions (I.E., involving the acquisition of
$3.0 billion or more of assets or deposits) set forth in the following table.
CONSIDERATION/
ASSETS/ ACCOUNTING
NAME (1) HEADQUARTERS DEPOSITS (2)(3) TREATMENT COMPLETION DATE
Atlantic Bancorporation.......................... Florida $3.8 billion common stock/ November 1985
pooling
Northwestern Financial Corporation............... North Carolina 3.0 billion common stock/ December 1985
pooling
First Railroad & Banking Company of Georgia...... Georgia 3.7 billion common stock/ November 1986
pooling
Florida National Banks of Florida, Inc........... Florida 7.9 billion cash and preferred January 1990
stock/purchase
Southeast Banking Corporation subsidiary banks
("Southeast Banks")............................ Florida 9.9 billion cash/notes September 1991
and preferred
stock/purchase
Resolution Trust Corporation ("RTC")
acquisitions................................... Florida, 5.3 billion cash/purchase 1991-1994
Georgia,
Virginia
Dominion Bankshares Corporation.................. Virginia 8.9 billion common stock and March 1993
preferred
stock/pooling
Georgia Federal Bank, FSB........................ Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp........................ Virginia 4.6 billion cash/purchase June 1993
American Savings of Florida, F.S.B............... Florida 3.6 billion common stock/ July 1995
purchase
First Fidelity Bancorporation ("FFB")............ New Jersey $35.3 billion common stock and January 1996
preferred
stock/pooling
1
(1) Additional information relating to certain of the foregoing and other
acquisitions is set forth in the Supplemental Report in Note 2 on pages C-9
through C-11 and incorporated herein by reference.
(2) The dollar amounts indicated represent assets of the related organization as
of the last reporting period prior to acquisition, except (i) the dollar
amount relating to the RTC acquisitions, which represents deposits acquired
from the RTC, and (ii) the dollar amount relating to the Southeast Banks,
which represents the assets of the two banking subsidiaries of Southeast
Banking Corporation acquired from the Federal Deposit Insurance Corporation
(the "FDIC").
(3) In addition, the Corporation purchased Lieber & Company ("Lieber"), a mutual
fund advisory company with $3.4 billion in assets under management at the
time it was acquired in June 1994. Since such assets are not owned by
Lieber, they are not reflected on the Corporation's balance sheet.
The Corporation is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values, and therefore some dilution of the
Corporation's book value and net income per common share may occur in connection
with any future transactions.
Additional information relating to the business of the Corporation and its
subsidiaries is set forth on pages 11 through 18 in the Summary Report and
incorporated herein by reference. Information relating to the Corporation only
is set forth in Note 15 on pages H-26 through H-29 in the Historical Report and
in Note 15 on pages C-27 through C-30 in the Supplemental Report and
incorporated herein by reference.
COMPETITION
The Corporation's subsidiaries face substantial competition in their
operations from banking and nonbanking institutions, including savings and loan
associations, credit unions, money market funds and other investment vehicles,
mutual fund advisory companies, brokerage firms, insurance companies, leasing
companies, credit card issuers, mortgage banking companies, investment banking
companies, finance companies and other types of financial institutions.
Based on the volume of permanent mortgages serviced on December 31, 1995,
the Corporation's mortgage banking subsidiary, First Union Mortgage Corporation,
was the 11th largest mortgage banking company in the United States.
SUPERVISION AND REGULATION
THE FOLLOWING DISCUSSION SETS FORTH CERTAIN OF THE MATERIAL ELEMENTS OF THE
REGULATORY FRAMEWORK APPLICABLE TO BANK HOLDING COMPANIES AND THEIR SUBSIDIARIES
AND PROVIDES CERTAIN SPECIFIC INFORMATION RELEVANT TO THE CORPORATION. TO THE
EXTENT THAT THE FOLLOWING INFORMATION DESCRIBES STATUTORY AND REGULATORY
PROVISIONS, IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PARTICULAR
STATUTORY AND REGULATORY PROVISIONS. A CHANGE IN APPLICABLE STATUTES,
REGULATIONS OR REGULATORY POLICY MAY HAVE A MATERIAL EFFECT ON THE BUSINESS OF
THE CORPORATION.
GENERAL
As a bank holding company, the Corporation is subject to regulation under
the BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not directly or indirectly acquire the ownership or
control of more than five percent of the voting shares or substantially all of
the assets of any company, including a bank, without the prior approval or
waiver of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"). In addition, bank holding companies are generally prohibited
under the BHCA from engaging in nonbanking activities, subject to certain
exceptions.
The earnings of the Corporation's subsidiaries, and therefore the earnings
of the Corporation, are affected by general economic conditions, management
policies and the legislative and governmental actions of various regulatory
authorities, including the Federal Reserve Board and the Comptroller of the
Currency (the "Comptroller"). In addition, there are numerous governmental
requirements and regulations which affect the activities of the Corporation and
its subsidiaries.
PAYMENT OF DIVIDENDS
The Corporation is a legal entity separate and distinct from its banking
and other subsidiaries. A major portion of the revenues of the Corporation
result from amounts paid as dividends to the Corporation by its banking
subsidiaries. The
2
Corporation's banking subsidiaries are subject to legal limitations on the
amount of dividends they can pay. The prior approval of the Comptroller is
required if the total of all dividends declared by a national bank in any
calendar year will exceed the sum of such bank's net profits for that year and
its retained net profits for the preceding two calendar years, less any required
transfers to surplus. Federal law also prohibits national banks from paying
dividends which would be greater than the bank's undivided profits after
deducting statutory bad debt in excess of the bank's allowance for loan losses.
Similar restrictions on dividends are in effect for the Corporation's subsidiary
banks which are not national banks.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of
December 31, 1995, the Corporation's subsidiaries, without obtaining affirmative
governmental approvals, could pay aggregate dividends of $367 million to FUNC
during 1996. During 1995, the Corporation's subsidiaries paid $793 million in
cash dividends to FUNC. On a combined FUNC and FFB basis, the Corporation's
subsidiaries, without obtaining affirmative governmental approvals, could pay
aggregate dividends of $468 million to the Corporation during 1996.
In addition, both the Corporation and its banking subsidiaries are subject
to various general regulatory policies and requirements relating to the payment
of dividends, including requirements to maintain adequate capital above
regulatory minimums. The appropriate federal regulatory authority is authorized
to determine under certain circumstances relating to the financial condition of
a national bank or bank holding company that the payment of dividends would be
an unsafe or unsound practice and to prohibit payment thereof. The Comptroller
has indicated that paying dividends that deplete a national bank's capital base
to an inadequate level would be an unsound and unsafe banking practice. The
Comptroller and the Federal Reserve Board have each indicated that banking
organizations should generally pay dividends only out of current operating
earnings.
BORROWINGS BY THE CORPORATION
There are also various legal restrictions on the extent to which the
Corporation and its nonbank subsidiaries can borrow or otherwise obtain credit
from its banking subsidiaries. In general, these restrictions require that any
such extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of the Corporation or such nonbank
subsidiaries, to ten percent of the lending bank's capital stock and surplus,
and as to the Corporation and all such nonbank subsidiaries in the aggregate, to
20 percent of such lending bank's capital stock and surplus.
CAPITAL
Under the risk-based capital requirements for bank holding companies, the
minimum requirement for the ratio of capital to risk-weighted assets (including
certain off-balance-sheet activities, such as standby letters of credit) is
eight percent. At least half of the total capital is to be composed of common
equity, retained earnings and qualifying perpetual preferred stock, less
goodwill ("tier 1 capital" and together with tier 2 capital "total capital").
The remainder may consist of subordinated debt, non-qualifying preferred stock
and a limited amount of the loan loss allowance ("tier 2 capital"). At December
31, 1995, the Corporation's tier 1 capital and total capital ratios were 6.15
percent and 10.44 percent, respectively. On a combined FUNC and FFB basis, at
December 31, 1995, the tier 1 capital and total capital ratios were 6.62 percent
and 11.33 percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio requirements for bank holding companies. These requirements provide for a
minimum leverage ratio of tier 1 capital to adjusted average quarterly assets
("leverage ratio") equal to three percent for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies will generally be required to maintain a leverage
ratio of from at least four to five percent. The Corporation's leverage ratio at
December 31, 1995, was 5.15 percent. On a combined FUNC and FFB basis, the
leverage ratio at December 31, 1995 was 5.49 percent. The requirements also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the requirements indicate that the Federal Reserve Board
will continue to consider a "tangible tier 1 leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised the Corporation of any specific minimum tier 1
leverage ratio applicable to it.
3
Each of the Corporation's subsidiary banks is subject to similar capital
requirements adopted by the Comptroller or other applicable regulatory agency.
Neither the Comptroller nor such applicable regulatory agency has advised any of
the Corporation's subsidiary banks of any specific minimum leverage ratios
applicable to them. The capital ratios of the bank subsidiaries of the
Corporation are set forth on page T-16 in the Historical Report and on page T-14
in the Supplemental Report and incorporated herein by reference.
Banking regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations, including a proposal to add an
interest rate risk component to risk-based capital requirements.
FIRREA; SUPPORT OF SUBSIDIARY BANKS
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, imposes liability on an institution the deposits
of which are insured by the FDIC, such as the Corporation's subsidiary banks,
for certain potential obligations to the FDIC incurred in connection with other
FDIC-insured institutions under common control with such institution.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's stockholders, pro rata,
and to the extent necessary, if any such assessment is not paid by any
stockholder after three months notice, to sell the stock of such stockholder to
make good the deficiency. Under Federal Reserve Board policy, the Corporation is
expected to act as a source of financial strength to each of its subsidiary
banks and to commit resources to support each of such subsidiaries. This support
may be required at times when, absent such Federal Reserve Board policy, the
Corporation may not find itself able to provide it.
Any capital loans by a bank holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized" and "critically undercapitalized". A depository institution's
capital tier will depend upon where its capital levels compare to various
relevant capital measures and certain other factors, as established by
regulation.
The Comptroller and the FDIC have each adopted regulations establishing
relevant capital measures and relevant capital levels. The relevant capital
measures are the total capital ratio, the tier 1 capital ratio and the leverage
ratio. Under the regulations, a bank will be: (i) "well capitalized" if it has a
total capital ratio of ten percent or greater, a tier 1 capital ratio of six
percent or greater and a leverage ratio of five percent or greater and is not
subject to any order or written directive by any such regulatory authority to
meet and maintain a specific capital level for any capital measure; (ii)
"adequately capitalized" if it has a total capital ratio of eight percent or
greater, a tier 1 capital ratio of four percent or greater and a leverage ratio
of four percent or greater (three percent in certain circumstances) and is not
"well capitalized"; (iii) "undercapitalized" if it has a total capital ratio of
less than eight percent, a tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
circumstances); (iv) "significantly undercapitalized" if it has a total capital
ratio of less than six percent, a tier 1 capital ratio of less than three
percent or a leverage ratio of less than three percent; and (v) "critically
undercapitalized" if its tangible equity is equal to or less than two percent of
average quarterly tangible assets. As of December 31, 1995, all of the
Corporation's subsidiary banks had capital levels that qualify them as being
"well capitalized" under such regulations, except FUNB-NC, which had a total
capital ratio of 9.92 percent. The Corporation expects to maintain these ratios
at the required levels by the retention of earnings and, if necessary, the
issuance of additional capital.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
"undercapitalized". "Undercapitalized" depository institutions are subject to
growth limitations and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's
4
capital. In addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that the
institution will comply with such capital restoration plan. The aggregate
liability of the parent holding company is limited to the lesser of (i) an
amount equal to five percent of the depository institution's total assets at the
time it became "undercapitalized", and (ii) the amount which is necessary (or
would have been necessary) to bring the institution into compliance with all
capital standards applicable with respect to such institution as of the time it
fails to comply with the plan. If a depository institution fails to submit an
acceptable plan, it is treated as if it is "significantly undercapitalized".
"Significantly undercapitalized" depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become "adequately capitalized", requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the appointment of a
receiver or conservator.
DEPOSITOR PREFERENCE STATUTE
Under federal law, deposits and certain claims for administrative expenses
and employee compensation against an insured depository institution would be
afforded a priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, in the "liquidation
or other resolution" of such an institution by any receiver.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA"), authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation. In addition, beginning June 1, 1997,
the IBBEA authorizes a bank to merge with a bank in another state as long as
neither of the states has opted out of interstate branching between the date of
enactment of the IBBEA and May 31, 1997. The IBBEA further provides that states
may enact laws permitting interstate bank merger transactions prior to June 1,
1997. A bank may establish and operate a DE NOVO branch in a state in which the
bank does not maintain a branch if that state expressly permits DE NOVO
branching. Once a bank has established branches in a state through an interstate
merger transaction, the bank may establish and acquire additional branches at
any location in the state where any bank involved in the interstate merger
transaction could have established or acquired branches under applicable federal
or state law. A bank that has established a branch in a state through DE NOVO
branching may establish and acquire additional branches in such state in the
same manner and to the same extent as a bank having a branch in such state as a
result of an interstate merger. If a state opts out of interstate branching
within the specified time period, no bank in any other state may establish a
branch in the opting out state, whether through an acquisition or DE NOVO.
FDIC INSURANCE ASSESSMENTS
On August 8, 1995, the FDIC revised its regulations on insurance
assessments to establish a revised assessment rate schedule of four to 31 cents
per $100.00 of deposits in replacement of the then existing schedule of 23 to 31
cents per $100.00 of deposits for institutions whose deposits are subject to
assessment by the Bank Insurance Fund ("BIF"). The revised BIF schedule became
effective on June 1, 1995. Assessments collected at the previous assessment
schedule that exceeded the amount due under the revised schedule were refunded,
including interest, from the effective date of the revised schedule. As a
result, FUNC received a $26 million refund, including interest, in the third
quarter of 1995. On a combined FUNC and FFB basis, a $41 million refund was
received in 1995. As of December 31, 1995, FUNC had a BIF deposit assessment
base of $41 billion. On a combined FUNC and FFB basis, as of December 31, 1995,
the BIF deposit assessment base was $63 billion. On November 14, 1995, the FDIC
further reduced the rate structure for BIF by four cents per $100.00 of
deposits, starting in January 1996. As a result, the highest-rated institutions
will pay only the statutory annual minimum rate of $2,000.00 for FDIC insurance.
The rates for all other institutions will be reduced by four cents per $100.00
as well, leaving a premium range of three to 27 cents per $100.00 instead of the
current seven to 31 cents per $100.00 for such institutions. The deposits of
institutions insured by the Savings Association Insurance Fund ("SAIF") will
continue paying premiums on a risk-related basis of 23 to 31 cents per $100.00
of deposits. As of December 31, 1995, FUNC had a SAIF deposit assessment base of
$16 billion. On a combined FUNC and FFB basis, as of December 31, 1995, the SAIF
deposit assessment base was $20 billion.
Various legislative proposals regarding the future of the BIF and the SAIF
have been reported recently, including a one-time special assessment in the
range of 70 cents to 85 cents per $100.00 of assessable SAIF deposits.
FUNC does not know when and if any such proposal or any other related
proposal may be adopted.
5
ADDITIONAL INFORMATION
Additional information related to certain regulatory and accounting matters
is set forth on pages 13 and 14 in the Supplemental Report and incorporated
herein by reference.
ITEM 2. PROPERTIES.
As of December 31, 1995, on a combined FUNC and FFB basis the Corporation
and its subsidiaries owned or leased 2,154 locations in 41 states, Washington,
D.C. and 4 foreign countries from which their business is conducted, including
a multi-story office complex in Charlotte, North Carolina, which serves as the
administrative headquarters of the Corporation. Listed below are the number of
banking and nonbanking locations that are leased or owned, as of
December 31, 1995:
LEASED OWNED
First Union National Bank of Florida............................................... 202 316
First Union National Bank of North Carolina........................................ 99 164
First Union National Bank of Georgia............................................... 39 92
First Union National Bank of South Carolina........................................ 8 55
First Union National Bank of Tennessee............................................. 8 42
First Union National Bank of Virginia.............................................. 51 103
First Union National Bank of Maryland.............................................. 20 4
First Union National Bank of Washington, D.C....................................... 27 1
First Union Home Equity Bank, N.A.................................................. 139 --
First Union National Bank (formerly First Fidelity Bank, N.A.)..................... 313 380
First Union Bank of Delaware....................................................... 3 --
First Union Bank of Connecticut.................................................... 56 12
Nonbanking locations............................................................... 20 --
Total............................................................................ 985 1,169
The principal offices of each of the Corporation's subsidiary banks are all
leased.
Additional information relating to the Corporation's lease commitments is
set forth in Note 16 on page H-32 in the Historical Report and incorporated
herein by reference and in Note 16 on page C-33 in the Supplemental Report and
incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation and certain of its subsidiaries have been named as
defendants in various legal actions arising from their normal business
activities in which varying amounts are claimed. Although the amount of any
ultimate liability with respect to such matters cannot be determined, in the
opinion of management, based upon the opinions of counsel, any such liability
will not have a material effect on the consolidated financial position of the
Corporation and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In response to this item, the information set forth in response to Item 4
in the Corporation's Form 10-Q for the quarter ended September 30, 1995, is
incorporated herein by reference.
6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is listed on the NYSE. Table 6 on page T-4 in the
Supplemental Report sets forth information relating to the quarterly prices of,
and quarterly dividends paid on, the Common Stock for the two-year period ended
December 31, 1995, and is incorporated herein by reference. Prices shown
represent the high, low and quarter-end sale prices of the Common Stock as
reported on the New York Stock Exchange, Inc. Composite Transactions tape for
the periods indicated. As of December 31, 1995, there were 61,058 holders of
record of the Common Stock. On a combined FUNC and FFB basis, as of December
31, 1995, there were 89,257 holders of record of the Common Stock.
The Corporation's Series B Convertible Class A Preferred Stock, no-par
value ("Series B"), Series D Adjustable Rate Cumulative Class A Preferred Stock,
no-par value ("Series D"), and Series F 10.64% Class A Preferred Stock, no-par
value (evidenced by Depositary Receipts, each representing a 1/40th interest in
a share of such Series F 10.64% Class A Preferred Stock ("Series F Receipts"))
(together, the "Class A Preferred Stock"), were issued in connection with the
FFB acquisition, and they are listed on the NYSE. As of January 1, 1996, there
were 1,517 holders of record of the Series B, 19 holders of record of the
Series D and 671 holders of record of the Series F Receipts.
Subject to the prior rights of the holders of the Class A Preferred Stock,
holders of the Common Stock are entitled to receive such dividends as may be
legally declared by the Board of Directors of the Corporation (the "FUNC Board")
and, in the event of dissolution and liquidation, to receive the net assets of
the Corporation remaining after payment of all liabilities, in proportion to
their respective holdings. Additional information concerning certain limitations
on the payment of dividends by the Corporation and its subsidiaries is set forth
above under "Business -- Supervision and Regulation; Payment of Dividends" and
in Note 15 on page H-26 in the Historical Report and in Note 15 on page C-27 in
the Supplemental Report and is incorporated herein by reference.
Each outstanding share of Common Stock currently has attached to it one
right (a "FUNC Right") issued pursuant to a Shareholder Protection Rights
Agreement (as amended, the "FUNC Rights Agreement"). Each FUNC Right entitles
its registered holder to purchase one one-hundredth of a share of a junior
participating series of the Corporation's Class A Preferred Stock designed to
have economic and voting terms similar to those of one share of Common Stock,
for $110.00, subject to adjustment (the "Rights Exercise Price"), but only after
the earlier to occur (the "Separation Time") of: (i) the tenth business day
(subject to extension) after any person (an "Acquiring Person") (x) commences a
tender or exchange offer, which, if consummated, would result in such person
becoming the beneficial owner of 15 percent or more of the outstanding shares of
Common Stock, or (y) is determined by the Federal Reserve Board to "control" the
Corporation within the meaning of the BHCA, subject to certain exceptions; and
(ii) the tenth business day after the first date (the "Flip-in Date") of a
public announcement that a person has become an Acquiring Person. The FUNC
Rights will not trade separately from the shares of Common Stock unless and
until the Separation Time occurs.
The FUNC Rights Agreement provides that a person will not become an
Acquiring Person under the BHCA control test described above if either (i) the
Federal Reserve Board's control determination would not have been made but for
such person's failure to make certain customary passivity commitments, or such
person's violation of such commitments made, to the Federal Reserve Board, so
long as the Federal Reserve Board determines that such person no longer controls
the Corporation within 30 days (or 60 days in certain circumstances), or (ii)
the Federal Reserve Board's control determination was not based on such a
failure or violation and such person (x) obtains a noncontrol determination
within three years, and (y) is using its best efforts to allow the Corporation
to make any acquisition or engage in any legally permissible activity
notwithstanding such person's being deemed to control the Corporation for
purposes of the BHCA.
The FUNC Rights will not be exercisable until the business day following
the Separation Time. The FUNC Rights will expire on the earliest of: (i) the
Exchange Time (as defined below); (ii) the close of business on December 28,
2000; and (iii) the date on which the FUNC Rights are redeemed or terminated as
described below (in any such case, the "Expiration Time"). The Rights Exercise
Price and the number of FUNC Rights outstanding, or in certain circumstances the
securities purchasable upon exercise of the FUNC Rights, are subject to
adjustment upon the occurrence of certain events.
In the event that prior to the Expiration Time a Flip-in Date occurs, the
Corporation will take such action as shall be necessary to ensure and provide
that each FUNC Right (other than FUNC Rights beneficially owned by an Acquiring
Person or any affiliate, associate or transferee thereof, which FUNC Rights
shall become void) shall constitute the right to purchase, from the Corporation,
shares of Common Stock having an aggregate market price equal to twice the
Rights Exercise Price for an amount in cash equal to the then current Rights
Exercise Price. In addition, the FUNC Board may,
7
at its option, at any time after a Flip-in Date and prior to the time that an
Acquiring Person becomes the beneficial owner of more than 50 percent of the
outstanding shares of Common Stock, elect to exchange all of the then
outstanding FUNC Rights for shares of Common Stock, at an exchange ratio of two
shares of Common Stock per FUNC Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the
Separation Time (the "Rights Exchange Rate"). Immediately upon such action by
the FUNC Board (the "Exchange Time"), the right to exercise the FUNC Rights will
terminate, and each FUNC Right will thereafter represent only the right to
receive a number of shares of Common Stock equal to the Rights Exchange Rate. If
the Corporation becomes obligated to issue shares of Common Stock upon exercise
of or in exchange for FUNC Rights, the Corporation, at its option, may
substitute therefor shares of junior participating Class A Preferred Stock upon
exercise of each FUNC Right at a rate of two one-hundredths of a share of junior
participating Class A Preferred Stock upon the exchange of each FUNC Right.
The FUNC Rights are redeemable by the Corporation at $0.01 per right,
subject to adjustment upon the occurrence of certain events, at any date prior
to the date on which they become exercisable and, in certain events, may be
canceled and terminated without any payment to the holders thereof. The FUNC
Rights have no voting rights and are not entitled to dividends.
The FUNC Rights will not prevent a takeover of the Corporation. The FUNC
Rights, however, may cause substantial dilution to a person or group that
acquires 15 percent or more of Common Stock (or that acquires "control" of the
Corporation within the meaning of the BHCA) unless the FUNC Rights are first
redeemed or terminated by the FUNC Board. Nevertheless, the FUNC Rights should
not interfere with a transaction that is in the best interests of the
Corporation and its stockholders because the FUNC Rights can be redeemed or
terminated, as hereinabove described, before the consummation of such
transaction.
The complete terms of the FUNC Rights are set forth in the FUNC Rights
Agreement. The foregoing description of the FUNC Rights and the FUNC Rights
Agreement is qualified in its entirety by reference to such document. A copy of
the FUNC Rights Agreement can be obtained upon written request to the Rights
Agent, First Union National Bank of North Carolina, Two First Union Center,
Charlotte, North Carolina 28288-1154.
Additional information relating to the Class A Preferred Stock and Common
Stock is set forth in Notes 11 and 12 on pages C-21 through C-23 in the
Supplemental Report and incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
In response to this Item, the information set forth in Table 1 on page T-1
in the Historical Report and in Table 1 on page T-1 in the Supplemental Report
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In response to this Item, the information set forth on pages 1 through T-24
in the Historical Report and on pages 1 through T-22 in the Supplemental Report
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In response to this Item, the information set forth on page T-4 and on
pages H-1 through H-34 in the Historical Report and on page T-4 and on pages
C-1 through C-35 in the Supplemental Report is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Corporation are elected to their offices for
one year terms at the meeting of the Board of Directors in April of each year.
The terms of any executive officers elected after such date expire at the same
time as the terms of the executive officers elected on such date. The names of
each of the current executive officers of the Corporation, their ages, their
current positions with the Corporation and certain subsidiaries and, if
different, their business experience during the past five years, are as follows:
Edward E. Crutchfield (54). Chairman and Chief Executive Officer, the
Corporation.
John R. Georgius (51). Vice Chairman, the Corporation, since January 1,
1996. President, the Corporation, from June 1990 to January 1, 1996.
Chairman and Chief Executive Officer, FUNB-NC, from October 1988 to February
1993.
Anthony P. Terracciano (57). President, the Corporation, since January 1,
1996. Mr. Terracciano, who was formerly Chairman of the Board, President and
Chief Executive Officer of FFB, was elected to his present office by the
FUNC Board pursuant to the FFB acquisition agreement.
B. J. Walker (65). Vice Chairman, the Corporation.
Robert T. Atwood (55). Executive Vice President and Chief Financial Officer,
the Corporation, since March 1991. Prior to that time, Mr. Atwood was a
partner with the accounting firm of Deloitte & Touche.
Marion A. Cowell, Jr. (61). Executive Vice President, Secretary and General
Counsel, the Corporation.
In addition to the foregoing, the information set forth in the Proxy
Statement under the heading "General Information and Nominees", and in the
paragraph under the heading "Section 16(a)" under "Other Matters Relating to
Executive Officers, Directors and Principal Stockholders" is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
In response to this Item the information set forth in the Proxy Statement
under the heading "Executive Compensation", excluding the information under the
subheadings "HR Committee Report on Executive Compensation" and "Performance
Graph", is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In response to this Item the information set forth in the Proxy Statement
relating to the ownership of Common Stock and Class A Preferred Stock by the
directors, executive officers and principal stockholders of the Corporation
under the headings "Voting Securities and Principal Holders" and "General
Information and Nominees" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In response to this Item the information set forth in the Proxy Statement
under the headings "General", "Santander" and "Certain Other Relationships"
under "Other Matters Relating to Executive Officers, Directors and Principal
Stockholders" is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The consolidated financial statements of the Corporation, including the
notes thereto and independent auditors' report thereon, are set forth on pages
H-1 through H-34 of the Historical Report and on pages C-1 through C-35 of the
Supplemental Report. All financial statement schedules are omitted since the
required information is either not applicable, is immaterial or is included in
the consolidated financial statements of the Corporation and notes thereto. A
list of the exhibits to this Form 10-K is set forth on the Exhibit Index
immediately preceding such exhibits and is incorporated herein by reference.
(b) During the quarter ended December 31, 1995, no reports on Form 8-K were
filed by the Corporation with the Securities and Exchange Commission.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST UNION CORPORATION
Date: March 12, 1996 By: MARION A. COWELL, JR.
MARION A. COWELL, JR.
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the date indicated.
SIGNATURE CAPACITY
EDWARD E. CRUTCHFIELD* Chairman and Chief Executive Officer and Director
EDWARD E. CRUTCHFIELD
ROBERT T. ATWOOD* Executive Vice President and Chief Financial Officer
ROBERT T. ATWOOD
JAMES H. HATCH* Senior Vice President and Corporate Controller (Principal
Accounting Officer)
JAMES H. HATCH
EDWARD E. BARR* Director
EDWARD E. BARR
G. ALEX BERNHARDT* Director
G. ALEX BERNHARDT
W. WALDO BRADLEY* Director
W. WALDO BRADLEY
ROBERT J. BROWN* Director
ROBERT J. BROWN
ROBERT D. DAVIS* Director
ROBERT D. DAVIS
R. STUART DICKSON* Director
R. STUART DICKSON
B. F. DOLAN* Director
B. F. DOLAN
RODDEY DOWD, SR.* Director
RODDEY DOWD, SR.
10
SIGNATURE CAPACITY
JOHN R. GEORGIUS* Director
JOHN R. GEORGIUS
ARTHUR M. GOLDBERG* Director
ARTHUR M. GOLDBERG
WILLIAM H. GOODWIN, JR.* Director
WILLIAM H. GOODWIN, JR.
BRENTON S. HALSEY* Director
BRENTON S. HALSEY
HOWARD H. HAWORTH* Director
HOWARD H. HAWORTH
TORRENCE E. HEMBY, JR.* Director
TORRENCE E. HEMBY, JR.
FRANK M. HENRY* Director
FRANK M. HENRY
LEONARD G. HERRING* Director
LEONARD G. HERRING
JUAN RODRIGUEZ INCIARTE* Director
JUAN RODRIGUEZ INCIARTE
JACK A. LAUGHERY* Director
JACK A. LAUGHERY
MAX LENNON* Director
MAX LENNON
RADFORD D. LOVETT* Director
RADFORD D. LOVETT
JOSEPH NEUBAUER* Director
JOSEPH NEUBAUER
HENRY D. PERRY, JR.* Director
HENRY D. PERRY, JR.
RANDOLPH N. REYNOLDS* Director
RANDOLPH N. REYNOLDS
11
SIGNATURE CAPACITY
RUTH G. SHAW* Director
RUTH G. SHAW
LANTY L. SMITH* Director
LANTY L. SMITH
ANTHONY P. TERRACCIANO* Director
ANTHONY P. TERRACCIANO
DEWEY L. TROGDON* Director
DEWEY L. TROGDON
JOHN D. UIBLE* Director
JOHN D. UIBLE
B. J. WALKER* Director
B. J. WALKER
*By Marion A. Cowell, Jr., Attorney-in-Fact
MARION A. COWELL, JR.
MARION A. COWELL, JR.
Date: March 12, 1996
12
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
(2) FFB acquisition agreement. Incorporated by reference to Exhibit (99) to
the Corporation's Current Report on Form 8-K
dated June 21, 1995.
(3)(a) Articles of Incorporation of the Corporation, as amended. Incorporated by reference to Exhibit (4) to
the Corporation's 1990 First Quarter Report
on Form 10-Q, to Exhibit (99)(a) to the
Corporation's 1993 First Quarter Report on
Form 10-Q and Exhibit (4) to the
Corporation's Current Report on Form 8-K
dated January 10, 1996.
(3)(b) Bylaws of the Corporation, as amended. Filed herewith.
(4)(a) Instruments defining the rights of the holders of the *
Corporation's long-term debt.
(4)(b) The Corporation's Shareholder Protection Rights Agreement,
as amended. Incorporated by reference to Exhibit (4)(b)
to the Corporation's Current Reports on Forms
8-K dated December 18, 1990 and October 20,
1992, and to Exhibit (99) to the
Corporation's Current Reports on Form 8-K
dated June 20, 1995 and June 21, 1995.
(4)(c) Deposit Agreement, dated as of January 1, 1996, between the Incorporated by reference to Exhibit (4)(b)
Corporation and First Union National Bank of North Carolina, to the Corporation's Current Report on Form
relating to the Corporation's Depositary Receipts, each 8-K dated January 10, 1996.
representing a 1/40th interest in a share of the Corporation's
Series F 10.64% Class A Preferred Stock.
(10)(a) The Corporation's Management Incentive Plan, as amended. Filed herewith.
(10)(b) The Corporation's Deferred Compensation Plan for Officers. Incorporated by reference to Exhibit (10)(b)
to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(c) The Corporation's Deferred Compensation Plan for Non-Employee Incorporated by reference to Exhibit (10)(c)
Directors. to the Corporation's 1989 Annual Report on
Form 10-K.
(10)(d) The Corporation's Supplemental Executive Long-Term Disability Incorporated by reference to Exhibit (10)(d)
Plan. to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(e) The Corporation's Supplemental Retirement Plan. Incorporated by reference to Exhibit (10)(f)
to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(f) The Corporation's Retirement Plan for Non-Employee Directors. Incorporated by reference to Exhibit (10)(g)
to the Corporation's 1988 Annual Report on
Form 10-K.
(10)(g) The Corporation's 1984 Master Stock Compensation Plan. Incorporated by reference to Exhibit (28) to
the Corporation's Registration Statement No.
33-47447.
EXHIBIT NO. DESCRIPTION LOCATION
(10)(h) The Corporation's 1988 Master Stock Compensation Plan. Incorporated by reference to Exhibit (28) to
the Corporation's Registration Statement No.
33-47447.
(10)(i) The Corporation's 1992 Master Stock Compensation Plan. Incorporated by reference to Exhibit (28) to
the Corporation's Registration Statement No.
33-47447.
(10)(j) Employment Agreement between the Corporation and Edward E. Incorporated by reference to Exhibit (10)(k)
Crutchfield, as amended. to the Corporation's 1994 Annual Report on
Form 10-K.
(10)(k) The Corporation's Management Long-Term Cash Incentive Plan. Incorporated by reference to Exhibit (10)(m)
to the Corporation's 1992 Annual Report on
Form 10-K.
(10)(l) Employment Agreement between the Corporation and Anthony P. Incorporated by reference to Exhibit (99)(c)
Terracciano. to the Corporation's Registration Statement
No. 33-62307.
(10)(m) Employment Agreement between the Corporation and Incorporated by reference to Exhibit (10) to
John R. Georgius. Amendment No. 1 to the Corporation's
Registration Statement No. 33-60835.
(10)(n) The Corporation's Elective Deferral Plan. Incorporated by reference to Exhibit (4) to
the Corporation's Registration Statement No.
33-60913.
(12)(a) Computations of consolidated ratios of earnings to fixed charges. Filed herewith.
(12)(b) Computations of consolidated ratios of earnings to fixed charges Filed herewith.
and preferred stock dividends.
(12)(c) Combined computations of consolidated ratios of earnings to fixed Filed herewith.
charges.
(12)(d) Combined computations of consolidated ratios of earnings to fixed Filed herewith.
charges and preferred stock dividends.
(13)(a) The Corporation's 1995 Summary Annual Report to Stockholders.** Filed herewith.
(13)(b) The Corporation's 1995 Annual Report (Historical Basis).** Filed herewith.
(13)(c) The Corporation's 1995 Supplemental Annual Report.** Filed herewith.
(21) List of the Corporation's subsidiaries. Filed herewith.
(23) Consent of KPMG Peat Marwick LLP. Filed herewith.
(24) Power of Attorney. Filed herewith.
(27) The Corporation's Financial Data Schedules.***
(99) First Union Corporation of Virginia and Subsidiaries Summarized Filed herewith.
Financial Information.
* The Corporation agrees to furnish to the Securities and Exchange Commission
upon request, copies of the instruments,
including indentures, defining the rights of the holders of the long-term debt
of the Corporation and its subsidiaries.
** Except for those portions of the Summary Report, the Historical Report and
the Supplemental Report which are
expressly incorporated by reference in this Form 10-K, the Summary Report, the
Historical Report and the
Supplemental Report are furnished for the information of the Securities and
Exchange Commission only and are not to be
deemed "filed" as part of such Form 10-K.
*** Filing by Electronic Data Gathering, Analysis and Retrieval System only.