EXHIBIT 13
First Union Corporation
Two First Union Center
Charlotte, NC 28288-0570
Contents
Financial Highlights
1
Letter from the Chairman
3
Strategies and Markets
6
Index to Special Topics
9
Management's Analysis
of Operations
10
Financial Tables
23
Glossary
86
Principal Subsidiaries
87
Corporate Management
Committee
88
Corporate Board
of Directors and
Bank Boards of Directors
90
Stockholder Information
92
This publication is
produced on 100 percent recycled paper and is
recyclable. The majority
of this paper has been
made from 135 tons of
office paper recycled from
First Union Corporation
headquarters in
Charlotte, North Carolina, and First Union National Bank of Florida
offices
in Jacksonville, Florida.
Financial Highlights
Percent
Years Ended December 31 Increase
(Dollars in thousands except per share data) 1993 1992 (Decrease)
Net Income $817,521 385,051 112.3%
Dividends on
Preferred Stock 24,900 31,979 (22.1)
Net Income Applicable
to Common Stockholders $792,621 353,072 124.5%
Per Common Share Data
Net income $4.73 2.23 112.1%
Cash dividends 1.50 1.28 17.2
Book value 28.90 25.25 14.5
Year-end price $41.25 43.625 (5.4)%
Per Series 1990
Preferred Share Data
Year-end price $52.375 53.625 (2.3)
Cash dividends $3.8876 4.3626 (10.9)
Dividend rate 7.78% 8.73 (10.9)
Year-End Balance
Sheet Items
Assets $70,786,969 63,828,031 10.9%
Securities available for sale 11,744,942 5,203,344 125.7
Investment securities 2,692,476 6,633,338 (59.4)
Loans, net of unearned income 46,876,177 41,923,767 11.8
Deposits 53,742,411 49,150,965 9.3
Common stockholders' equity 4,923,584 4,161,948 18.3
Total stockholders' equity $5,207,625 4,459,163 16.8
Common shares outstanding 170,337,619 164,849,340 3.3%
Financial Ratios
Return on average assets 1.20% .63
Return on average common stockholders' equity 17.42 9.08
Net interest margin 4.78 4.77
Net charge-offs to average loans, net .58 .86
Allowance as % of loans, net 2.18 2.24
Allowance as % of nonaccrual and
restructured loans 147 96
Allowance as % of nonperforming assets 111 70
Nonperforming assets to loans, net and
foreclosed properties 1.95 3.19
Dividend payout ratio on common shares 31.71% 49.34
Certain ratios related to nonperforming assets, net charge-offs and the
allowance for loan losses were favorably affected because of the
inclusion of the acquired Southeast Banks' performing loan portfolio
in the calculation of the ratios.
1
Statistics
Dividends Per Common Share
(Dollars per share)
(Dividends Per Common Share bar chart appears here--see appendix)
*Annualized, based on first quarter 1994 dividend of 40 cents per
common share.
Asset Growth
(Dollars in billions)
(Asset Growth bar chart appears here--see appendix)
Prior years restated for pooling of interest acquisitions.
Net Income Per Common Share
(Dollars per share)
(Net Income Per Common Share bar chart appears here--see appendix)
Prior years restated for pooling of interest acquisitions.
Book Value Growth
(In dollars)
(Book Value Growth bar chart appears here--see appendix)
Prior years restated for pooling of interest acquisitions.
Return on Average Assets
(In percent)
(Return on Average Assets bar chart appears here--see appendix)
Prior years restated for pooling of interest acquisitions.
Return on Average Common Equity
(In percent)
(Return on Average Common Equity bar chart--see appendix)
Prior years restated for pooling of interest acquisitions.
Overhead Efficiency Ratio
(In percent)
(Overhead Efficiency Ratio bar chart appears here--see appendix)
Prior years restated for pooling of interest acquisitions.
*Includes $162 million restructuring charge related
to acquisitions.
2
Letter from the Chairman
(Picture of Edward E. Crutchfield, Jr.)
Edward E. Crutchfield, Jr., Chairman and Chief Executive Officer
Your company earned a record $793 million in 1993, a 124 percent
increase from 1992. On a per share basis, net income applicable to
common stockholders increased to $4.73 from $2.23. This was a year
of solid performance by almost any measure,
but we are particularly proud of achieving:
(bullet) A return on average common equity of 17.42 percent;
(bullet) A return on average assets of 1.20 percent; and
(bullet) Net charge-offs--a key indicator of credit quality--of 58
basis points.
In addition First Union's board of directors increased dividends 25
percent from year-end 1992,
to $1.60 per share on an annualized basis. This marks the seventeenth
consecutive year of increased
dividends, which have been paid every year since 1914.
Our 1993 performance reflects our long-term focus on increasing and
diversifying our sources
of income, controlling costs and increasing efficiency. We also
benefited from a favorable interest
rate environment and an improving economy, which helped us to reduce
our credit-related costs.
These factors continue to give us optimism for the future, and the
revenue growth and loan
demand we are seeing increase our confidence for 1994. At this stage
in the economic cycle, our
strategic focus is on developing new sources of revenue and loan
growth--and on redefining
ourselves as a full-service financial institution.
We are broadening the definition of full-service financial provider to
include many capital
markets services. It is a role similar to European-style "universal
banks."
Anticipating the Needs of Customers--
and Delighting Them
It is startling to realize that just 30 years ago, the banking
industry had a healthy 50 percent of all the financial assets in this
country. Today, that share has dropped to about 25 percent. That is a
50 percent loss of market share in roughly a generation--a far worse
record than the auto industry and many others that might have been
labeled "troubled industries."
That is the background for the continuing consolidation and
restructuring in the financial services
Business Profile
First Union Corporation, with headquarters in
Charlotte, North Carolina, had assets of $70.8 billion
at December 31, 1993. It is the nation's ninth largest bank holding
company, based on total assets.
(bullet)
Our 32,861 employees serve a customer base of more than 7 million. Our
1,302 banking branches in the economically diverse South Atlantic
states constitute the nation's third largest bank branch network,
providing full-service investment
banking, retail banking, commercial banking and trust services.
Through 222 diversified offices nationwide, we also provide other
financial services including mortgage banking, home equity lending,
leasing, insurance and
securities brokerage services.
Strategic Priorities
(bullet) Provide our customers
unparalleled service, convenience and responsiveness;
(bullet) Balance earnings power through geographic and product
diversity;
(bullet) Provide the most innovative capital market and
creative financing solutions to our corporate and
commercial customers;
(bullet) Provide a modern array
of products and personal service for our individual customers;
(bullet) Increase the production
of our specialty businesses;
(bullet) Maximize operating
efficiency; and
(bullet) Emphasize capital strength and loan quality, with growth in
loans, deposits
and investment products.
3
industry--and the recognition that new strategies are necessary.
During this era of change, we are keenly aware that companies that
stop listening to their customers and their employees will not
survive. There are many examples of companies that stopped listening.
Their attitude appeared to be, "We will sell to
customers what we want to sell them--what is most profitable for us."
As a result, these companies missed their "wake-up call" a dozen years
ago.
For the banking industry, our "wake-up call" has come from inroads by
competitors outside our industry: the AT&Ts offering credit cards ...
the Merrill Lynches offering mutual funds... the GEs and Salomon
Brothers offering sophisticated credit
products to corporate customers and taking those assets from bank
balance sheets.
Pressure on the banking industry also is being driven by changing
demographics, as the post-war "baby boom" generation moves from its
high borrowing years to its high saving years, marked by keen interest
in investment products.
Our customers may not care whether they are dealing with a traditional
bank or a brokerage house; they are looking for the services and
products they want and need, whatever the source. Our 1,300 "retail
stores" offer both traditional banking
products and any financial product offered by a brokerage house--all
under one roof.
Our mission is to be the best place for companies and individuals to
obtain the financial services and products they want--and then to
delight them with our efforts to help them achieve their specific
financial goals.
As the nation's ninth largest banking company with $71 billion in
assets and $5 billion in equity capital, we have achieved the critical
mass to be a major participant in the financial services industry.
When an individual wants an equity mutual fund, or a corporate
treasurer seeks to hedge foreign currency exposure, or a state
or municipality wants to issue general obligation bonds, or any
customer has any financial need, our vision is for them to think,
"I bet First Union offers that."
In effect, we are drawing a line in the sand and telling our nonbank
competitors: No more ... you will take no more of our good customers.
Capital Markets Services
for Corporations
We are competing head-to-head with the major brokerage and investment
banking firms to serve corporations and public entities.
We have the "home court" advantage of already being established in
excellent markets with more than 100,000 corporations and
entrepreneurs who need the alternative financing solutions that we can
provide.
We have the expertise, the products and the relationships--and now, an
aggressive new marketing strategy for bringing the "providers" and
"seekers" of capital together.
Senior loans--just plain old bank loans--will still be the best
solution for most of these companies, most of the time.
But increasingly, we see customers turning to First Union because they
want a strong financial partner bringing them capital and information
to add value to their businesses.
We intend to provide our customers with the best solution--regardless
of the source of capital.
We offer alternative financing solutions such as syndicated loans,
private placements, securitization of assets, mezzanine
financing and equity capital. We also offer derivatives, foreign
exchange and other risk management products, and merger and
acquisition assistance.
To meet these needs of our corporate customers, we have
restructured several units to create a formal Capital Markets Group.
The mission of the Capital Markets Group is to sharpen our ability
to bring sources of capital and creative financing solutions to our
corporate and commercial customers.
Let me give you a few examples of how this strategic focus will
benefit our customers.
In the past our commercial bankers focused on providing secured,
floating rate commercial loans in amounts that were
typically less than $30 million. As some of our customers grew,
their financial needs changed and expanded. Some sought larger, multi-
bank commercial loan facilities. Others chose a public offering of
notes. Others wanted to hedge their interest expense by fixing or
capping their interest rate.
Today, our large capital base and specialized product and service
capabilities (such as our syndications and derivatives groups)
position First Union to meet each of these new customer requirements.
An example of First Union's capabilities is the guidance
and access to capital we can provide for a company that requires $100
million to finance an acquisition. In the past, that
customer might have turned to one of several money center banks or
Wall Street investment banks. Today, we can give
advice on the acquisition, provide a bridge loan to quickly
complete the acquisition, and arrange an optimal long-term financing
plan.
First Union is one of the few firms capable of providing these
sophisticated corporate, commercial and investment banking
services to our customers. We intend to be the best.
4
Financial Services
for Individuals
Along with this corporate and commercial focus, we also intend to be
the best at providing a modern array of products and services to our
individual customers.
We have responded rapidly to meet our customers' increasing demand for
mutual funds and other investment products. Our mutual funds
initiative grew intensive in 1993 as we agreed to acquire Lieber &
Company, a New York-based investment management
organization that is the adviser to the top-performing, $3.3 billion
Evergreen Funds. We also began developing a sales force to rival those
of the nation's largest brokerage firms. By year-end 1993,
the sales of investment products amounted to $51 million in com-
missions. We plan to have two people per branch--or about 2,600--
licensed to sell mutual funds.
With the Lieber acquisition, our family of mutual funds will more than
double to 31 in 1994, with a variety of offerings, including nine
equity funds, five money market funds, thirteen fixed income funds and
four balanced funds, to meet individual
investment needs.
Whether our customers need one of our discount brokerage products,
mutual funds, money market accounts or stocks, bonds or annuities,
they can easily get these products through a 1-800 phone call or a
visit to a local First Union office. Of course, we remain
committed to being the best at offering checking and savings accounts,
certificates of deposit, credit cards and other traditional products.
Constancy in Our
Fundamentals
A key lesson in recent years in the financial services industry is
that change will be constant. But another constant is our
determination to keep an eye on the fundamentals. We are committed to
maintaining efficiency, sales and service, credit
quality, capital strength and stability.
We also remain committed to helping our stockholders achieve their
investment potential, and we are proud of our record. First Union's
five-year compound dividend growth rate is more than 10 percent. In
addition, First Union's book value has
increased nearly $11 per share, or 61 percent, over the last five
years--from $17.98 per share as originally reported at year-end 1988
to $28.90 per share at December 31, 1993.
As we grow and change, we continue to gauge the point at which the
problems of "bigness" might overwhelm the advantages of size. That is
one of the questions I have been discussing during "town meetings"
with small groups of employees throughout our
seven banking states and the District of Columbia. We are determined
that no matter our size, we will provide personal service to each
customer.
Frankly, I am in awe of our employees' efforts, not just during 1993,
but for the past several years. Our people have worked inexhaustibly
to reduce the level of nonperforming assets by $435 million in the
past year. They focused their talent and their creativity on
developing new financing solutions for our customers. They rapidly
consolidated five 1993 merger partners representing $21 billion in
assets into our system in less than a year. They completed the
installation of a standard, multistate deposit
system, giving us a competitive advantage over our peers. And they
have diligently served our customers every day, striving to achieve
the highest levels of service.
An Exceptional Team,
an Extraordinary Year
Our success this year is the result of the exceptional teamwork and
extraordinary creativity of this dedicated group of people. They have
my admiration and gratitude. For their commitment and the support of
our directors, stockholders and customers,
I also extend my sincere appreciation.
I would like to welcome William H. Goodwin Jr. and Randolph N.
Reynolds, who joined the corporate board of directors in December
1993. I also want to express my deep appreciation for the service of
James D. McComas, first as a member of the board of
Dominion Bankshares, and since April 1993, as a First Union board
member. Mr. McComas died on February 10, 1994.
Sincerely,
(Signature of Edward E. Crutchfield Jr.)
Edward E. Crutchfield Jr.
Chairman and Chief Executive Officer
February 25, 1994
5
Strategies and Markets
(Picture of John R. Georgius)
John R. Georgius, President, First Union Corporation
Our strategy is fun-
damental: Provide unparalleled customer service, convenience and
responsiveness, and through these efforts,
be the premier provider of financial services in our markets. This means
we put our customers' needs first. It also means managing our businesses
in ways that help our customers grow and help build our communities. It
also underscores our commitment to enhancing our value for stockholders.
In the year just past, we assimilated five acquisition partners and
installed our standard computer systems, operating philosophy, policies
and procedures. We began to leverage the efficiency and revenue potential
we have developed in our seven banking states and the District of
Columbia. And we worked to instill our sales culture in our new markets.
In the year ahead, we will bring into sharper focus our business
strategies for building tomorrow's revenues. Our goal is to provide
customers with the new products and services they want and to remain
competitive in the marketplace.
Our growth of the past eight years has given us both the financial and the
intellectual capital to meet customer-driven demands for investment
products, as well as traditional banking products.
For example:
(bullet) We have built the most competitive Foreign Exchange operation in the
Southeast, with a team of experienced traders who can provide pricing and
expert advice 24 hours a day. Our foreign exchange operation assisted
more than 350 corporate customers in some 54,000 transactions in 1993.
This operation is increasingly important in our region, which outpaces the
rest of the nation in attracting foreign-owned corporations. Our five
senior foreign exchange professionals have a combined tenure of 75 years.
(bullet) After nearly a decade of using derivatives to manage interest rate
risk on our own behalf, in March of 1993 we established a Derivatives Products
business. In 1993 we assisted 300 corporate customers in some 500 transactions
to manage interest rate risk, reduce the cost of financing their businesses
and expand the financing opportunities available to them. Our ten senior
derivatives professionals have a combined 77 years
in the business.
(bullet) Our Capital Partners Group has been in operation for six years, and
its top three senior managers have a combined 40 years in the business.
Through merchant banking, this group contributed $52 million in gains
from the sale of equity positions in 1993, and $87 million over the past
six years. Merchant banking also contributes to net interest income and
fee income, and has generated about $700 million in loans in our
commercial portfolio.
(bullet) We also have developed financing specialists in such fields as trade
finance, communications, health care, energy,
lease finance, transportation, mortgage banking and insurance. First Union
is the only bank in the Southeast with an insurance industry specialization
and one of only a handful in the country.
(bullet) After eight years of offering our own proprietary mutual funds,
in 1993 we began rapidly developing a licensed sales force to sell mutual
funds. We expect to increase our range of financial offerings with the
pending acquisition of Lieber & Company, adviser to the Evergreen Funds.
As we expand the financial
services First Union delivers, we remain focused on our reason for being:
to serve individual customers and thereby enhance our value for
stockholders.
When you want to discuss
a financial need, your First Union banker will be a source of information
and solutions to help your
business or your personal assets
grow. With our specialists attuned
to markets, rates and financial
structures, we will bring ideas to
you. We can help you translate your business or personal financial needs
into a financial plan.
New Directions
Our strategies of the past
decade have focused on providing a geographically diversified network of
convenient locations, with a broad range of products and services that are
competitively priced.
Our banking region is an excellent "business incubator." It is home to more
than ninety thousand companies with sales over $3 million and almost
twenty thousand companies with sales greater than $20 million. We are
committed to helping our customers continue to grow, and we intend to
keep them
as customers when they grow large enough to require more sophisticated
financial instruments.
In the past year, we have created many more points of service by entering
the strong markets of Virginia, Maryland and Washington, D.C. and
expanding our existing operations in Georgia, South Carolina, Tennessee,
Florida and our home base of North Carolina. We have focused on leveraging
the banking relationship with cross-sales of other products our customers
might need, such as mutual
6
funds, credit cards, insurance,
capital management or cash management services, mortgage loans
or equity lines of credit.
We have kept loan and deposit product costs competitive for our
customers as our branches have grown more efficient and productive. For
example, our North Carolina bank has more than doubled deposits per
branch in the past eight years, from $18 million
in 1986 to $41 million at year-end 1993, and increased loans per branch
160 percent to $51 million per branch.
Our North Carolina bank's
efficiency and profitability is the model for the rest of our banking
states. North Carolina has $15.9 billion in assets, not including
the Corporate Banking Group
and First Union Home Equity
Corporation, and is first in deposit share in the state. It will grow further
in 1994 when the acquisition
of American Bancshares Inc., of Monroe, with assets of $235 million, is
completed.
Our largest and fastest-growing bank is in Florida. The Florida bank, with
its strong deposit base and growing population, has nearly $28 billion in
assets. It is second in deposit share in Florida. It will expand along
Florida's southwest coast in 1994 with the pending acquisition of
BancFlorida Financial Corporation, a $1.5 billion savings bank with well-
located branches in three of the four fastest growing areas of the nation.
The Florida bank has quickly become a key contributor to our profitability
and has increasingly become more efficient as it has
assimilated 24 in-market mergers
in the past eight years. At year-end 1993, deposits per branch increased
65 percent to $45 million and loans per branch doubled, to $37 million
over the past eight years.
Our Georgia bank more
than doubled in size in 1993 with the acquisitions of Georgia Federal
Bank, with $3.7 billion in assets
and based in Atlanta, and DFSoutheastern Inc. of Decatur, with
$2.7 billion in assets. It is third in deposit share statewide. Deposits
per branch increased more than
50 percent to $46 million and loans per branch grew by more than a third
to $38 million at year-end 1993 compared with year-end 1992.
The South Carolina bank also grew by nearly 58 percent in assets in 1993
with the acquisition of South Carolina Federal Corporation of Columbia,
with $823 million in assets. South Carolina is fourth in deposit share in
the state. Deposits per branch grew by 28 percent to $27 million and loans
per branch grew 26 percent, to $26 million, at year-end 1993 compared
with year-end 1992.
Our newest banking franchise is in the Virginia, Maryland and Washington,
D.C., area, where we have been operating since the March 1993 acquisition
of Roanoke-based Dominion Bankshares Corporation, with $8.8 billion in
assets. This acquisition and the mid- year acquisition of First American
Metro Corp. of McLean, Virginia, with assets of $4.4 billion, ranks First
Union second in deposit share in the Virginia, Maryland and Washington,
D.C. area.
These contiguous states have strong demographic and economic trends.
Virginia, especially, offers the bonus of per capita personal income that is
high and growing. In Virginia, deposits per branch were $37 million and
loans per branch were $26 million at year-end 1993.
The Dominion acquisition also sharply increased our asset size in
Tennessee, where we had
operated out of one office in Nashville. At year-end 1993, Tennessee
had $2.0 billion in assets, $28 million in deposits per branch and $17
million in loans per branch.
We are confident that all of our acquired branches will soon be performing
up to First Union standards as we instill our sales culture and full line of
products. With all of
our systems integrated and new branches fully consolidated, these
branches will have a greater impact on revenue in 1994.
More Points
of Service
We also have focused on maximizing the capability of our bank branch
network through joint initiatives with such specialty businesses as our
Capital Management Group, First Union Mortgage Corporation, First Union
Home Equity Corporation, credit cards and others.
The Capital Management Group teamed with the line bank in a mutual fund
initiative to train and license about two people per branch to sell mutual
funds. If all 2,600 people were licensed today, First Union would, in
effect, have the nation's eighth largest brokerage sales force.
Capital Management also paved the way to expand its range of financial
offerings with the agreement to buy Lieber & Company. This acquisition,
which is expected to close during the first half of 1994, will nearly
double the mutual fund assets managed by First Union to $6.9 billion, and
provide our individual customers with a broader range of mutual funds,
including stock, bond and money market funds. Even without the branch
licensing system fully in place in 1993, our net mutual fund sales were
$841 million.
First Union Mortgage Corporation is preparing to maximize mortgage
production in our banking states by offering a broader range of mortgage
products, sales support and competitive pricing through our bank and
mortgage company branches.
FUMC's automated application handling system is being installed in the
bank branches to reduce the amount of time that bank branch personnel
need to originate a loan. The mortgage company's servicenters will
provide the processing, underwriting and closing functions for all
mortgage loans.
Our mortgage company itself has 53 branches offering about 30 products.
FUMC originates loans directly through its branches, as well as through
telemarketing efforts, relocation and portfolio protection teams,
independent brokers and affinity relationships with such groups as United
Services Automobile Association (USAA).
FUMC originated a record $6.4 billion in residential loans in 1993, many
resulting from the 20-year lows in interest rates that created an
unprecedented level of refinancing activity over the past two years.
In addition to its Raleigh, North Carolina, operations, FUMC expanded to a
Mortgage Loan Servicing Group site in Roanoke, Virginia, to help serve
nearly half a million customers representing a mortgage servicing
portfolio of $34.8 billion. First Union is the nation's 11th
largest mortgage servicer.
Our customers who participated in the waves of refinancing activity in
1992 and 1993 are likely to leverage their home equity in the years ahead.
First Union Home Equity
Corporation prepared for that in 1993 by adding sales offices to develop
local markets. FUHEC now has
151 sales offices in 37 states across the
7
nation. FUHEC is a model for the
rest of the corporation in what a customer-focused operation can
accomplish.
Its loan originations were
up 8 percent and loans outstanding
11 percent at year-end 1993 com-
pared with year-end 1992, even with the significant refinancing activity
last year.
Another specialty business
with customer-driven strategies,
and a new name, is First Union's Card Products Division
(formerly BankCard). This division was renamed to reflect its management
of debit cards, automated teller machine cards and credit cards.
With new leadership in 1993, Card Products developed an aggressive
strategic plan to take advantage of the potential in our banking markets
and neighboring states. Card Products increased loans serviced by 30
percent and had $2.4 billion in outstandings
at year-end 1993.
A Strong Foundation
We believe that one of our greatest strengths as a company is the strong
and diversified base we have built in the South Atlantic region, which has
limitless potential for continued growth and diversification.
We rank second in deposit share with 14 percent of the market in this
region. This region encompasses the world's fifth largest economy, with
one of every four new jobs in the nation over the last decade created here.
The key to this healthy job environment is the continued movement, or
"in-migration," of people into the South Atlantic states from other parts
of the nation.
During the last decade, the South Atlantic states gained 3.3 million in
population in-migration. Our projected in-migration rate of 4.1 million
people over the next decade is significantly better than any other region in
the nation.
In addition, the South Atlantic region outpaced every other region
in the number of new and expanded corporate facilities attracted over the
last three years.
Between 1991 and 1993, the South Atlantic region attracted more than
3,300 new or expanded plants and offices, 35 percent more than
any other region and 29 percent of all new corporate locations in the
United States. The South Atlantic region
attracted 45 percent of all new and expanded foreign-based facilities
during this time period.
These statistics are even more notable when you consider that the South
Atlantic region represents only 18 percent of the U.S. population.
Our banking region is projected to continue to outpace the rest of the
nation in population, employment and personal income growth throughout
the '90s.
Opportunities
and Optimism
In short, we believe we are
well-positioned in the best markets
in the country, with the resources, management talent, technological
advantage, market position and products to accomplish our goal
of being responsive and attuned to our customers' needs.
We remain committed to
keeping an eye on the fundamentals of controlling costs,
managing risks, increasing sales, operating
efficiently and providing the best customer service.
With this framework, we believe our banking franchise provides an
excellent foundation for efficiency
and profitability in the years ahead.
FLORIDA
ASSETS: $27.8 billion
BRANCHES: 488
DEPOSITS: Share: 19%; Rank: 2nd
LOANS, NET: $17.8 billion
DEPOSITS: $22.0 billion
NORTH CAROLINA
ASSETS: $22.0 billion*
BRANCHES: 266
DEPOSITS: Share: 22%; Rank: 1st
LOANS, NET: $13.6 billion
DEPOSITS: $10.9 billion
GEORGIA
ASSETS: $9.3 billion
BRANCHES: 163
DEPOSITS: Share: 12%; Rank: 3rd
LOANS, NET: $6.2 billion
DEPOSITS: $7.4 billion
SOUTH CAROLINA
ASSETS: $2.3 billion
BRANCHES: 67
DEPOSITS: Share: 8%; Rank: 4th
LOANS, NET: $1.8 billion
DEPOSITS: $1.8 billion
TENNESSEE
ASSETS: $2.0 billion
BRANCHES: 63
DEPOSITS: Share: 4%; Rank: 7th
LOANS, NET: $1.1 billion
DEPOSITS: $1.7 billion
VIRGINIA
ASSETS: $9.1 billion
BRANCHES: 193
DEPOSITS: Share: 12%; Rank: 3rd
LOANS, NET: $5.0 billion
DEPOSITS: $7.1 billion
MARYLAND
ASSETS: $1.4 billion
BRANCHES: 32
DEPOSITS: Share: 3%; Rank: 10th
LOANS, NET: $.6 billion
DEPOSITS: $1.1 billion
WASHINGTON, D.C.
ASSETS: $1.5 billion
BRANCHES: 30
DEPOSITS: Share: 11%; Rank: 4th
LOANS, NET: $.4 billion
DEPOSITS: $1.2 billion
CORPORATE BANKING GROUP
LOANS, NET: $4.1 billion
OFFICES: 4
CAPITAL MANAGEMENT GROUP
TRUST ASSETS UNDER CARE: $43.0 billion
TRUST ASSETS UNDER MANAGEMENT: $19.3 billion
PERSONAL TRUST LOCATIONS: 54
BROKERAGE LOCATIONS: 77
CONSOLIDATED RETAIL CONSUMER LOAN PORTFOLIO
MORTGAGE LOANS TO INDIVIDUALS: $13.3 billion
SECOND MORTGAGES: $4.2 billion
CARD PRODUCTS: $2.5 billion
OTHER CONSUMER LOANS: $5.2 billion
FIRST UNION MORTGAGE CORPORATION
LOANS SERVICED: $34.8 billion
ORIGINATION VOLUME: $6.4 billion
LOCATIONS: 53
STATES: 16
FIRST UNION HOME EQUITY CORPORATION
LOANS, NET: $2.0 billion
LOCATIONS: 151
STATES: 37
*These assets include the Corporate Banking Group and other subsidiaries
organized under the North Carolina bank.
Assets and deposits based on regulatory reports filed December 31, 1993.
Deposit share and rank based on all insured deposits in domestic offices
on September 30, 1993.
Primary Banking Market in South Atlantic U.S.
(Primary Banking Market in South Atlantic U.S. map appears here--see appendix)
8
Financial Reports
First Union Corporation and Subsidiaries
Contents
Management's Analysis of Operations 10
Financial Tables 23
Six-Year Net Interest Income Summary 50
Management's Statement of Financial Responsibility 52
Consolidated Balance Sheets 53
Consolidated Statements of Income 54
Consolidated Statements of Changes
in Stockholders' Equity 55
Consolidated Statements of Cash Flows 56
Notes to Consolidated Financial Statements 57
Independent Auditors' Report 85
Glossary 86
Principal Subsidiaries 87
Corporate Management Committee 88
Boards of Directors 90
Stockholder Information 92
Index to Special Topics
Accounting Policies 19, 57
Annual Meeting 92
Capital Resources:
Risk-based Capital 17, 18, 23, 42
Stockholders' Equity 1, 3, 17, 18, 23, 42, 53, 55
Common Stock:
Book Value 1, 2, 24
Income Per Share 1, 2, 3, 10, 23, 24, 28, 54, 59
Market Price 1, 24, 28
Description of Business 3, 6, 87
Dividends 1, 2, 3, 17, 23, 24, 27, 28, 54, 55
Earnings Performance 1, 2, 3, 54
Employees 3, 43, 73
Income Taxes 12, 24, 54, 59, 74
Interest Rate Risk Management 18, 81
Derivative Transactions 19, 45, 47, 48, 81
Interest Rate Sensitivity Model 18, 44
Liquidity:
Debt Ratings 92
Loans:
Asset Quality 14, 23, 37
Average Balances 50
Charge-offs 1, 15, 16, 37, 66
Commercial Real Estate 13, 14, 16, 35, 64
Geographic Concentrations 16
Industry Classifications 13
Project Type 14, 16
Consumer Loan Portfolio 13, 14, 35, 64
First American Segregated Assets 15, 40
Highly Leveraged Transactions 14, 64
Loan Loss Allowance 15, 37, 38, 53, 58, 66
Loan Loss Provision 15, 24, 28, 37, 54, 66
Mix at Year-End 13
Nonperforming Assets 1, 10, 14, 15, 23, 37, 67
Southeast Banks Segregated Assets 15, 39, 53, 67
Net Interest Income 10, 11, 24, 28, 49, 50, 54
Net Interest Margin 1, 11, 20, 23, 50
Noninterest Expense 12, 24, 26, 28, 50, 54
Noninterest Income 11, 24, 25, 28, 54
Preferred Stock 1, 17, 24, 28, 43, 53, 71
Quarterly Data 28
Results of Operations 1, 3, 10, 23, 27, 29, 56
Return on Average Assets 1, 2, 3, 10, 23, 27, 28
Return on Average Stockholders' Equity 1, 2, 3, 10, 23, 27, 28
Securities:
Available For Sale 1, 13, 24, 28, 30, 50, 53, 54, 61
Investment 1, 13, 24, 28, 32, 50, 53, 54, 63
Shares, Number Outstanding 1, 53, 55
Stockholders, Number of 43
Trading Activities 12
9
Year-End Earning Assets
(Dollars in billions)
(Year-End Earning Assets bar chart appears here--see appendix)
Management's Analysis of Operations
First Union Corporation and Subsidiaries
Earnings Highlights
First Union reported record earnings applicable to common stockholders
of $793 million in 1993, a 124 percent increase from
a restated $353 million in 1992.
Net income per common share increased 112 percent, to $4.73 from $2.23.
The increase in net income per common share from the originally reported
1992 results of $3.72 was 27 percent.
All historical financial data have been restated for the pooling
of interests accounting acquisitions of South Carolina Federal Corporation
and DFSoutheastern, Inc., on January 15, 1993, and Dominion Bankshares
Corporation on March 1, 1993. The 1993 results also reflect the purchase
accounting acquisitions of Georgia Federal Bank, FSB, from June 12, 1993,
and First American Metro Corp. from June 23, 1993.
Net income applicable to common stockholders in the fourth quarter of
1993 was $190 million,
or $1.12 per common share, compared with a restated $11 million,
or 5 cents per common share, in
the same period a year ago. The increase in net income per common share
from the originally reported fourth quarter 1992 results of
95 cents was 18 percent.
First Union's return on average common equity was 17.42 percent and the
return on average assets was 1.20 percent in 1993, compared with 9.08
percent and .63 percent, respectively, in 1992.
Key factors in First Union's 1993 earnings performance, including the
contributions from the two second quarter purchase accounting
acquisitions, were:
(bullet)A 12 percent increase in tax-equivalent net interest income,
reflecting growth in loans, investments and off-balance sheet financial
instruments.
(bullet)A 13 percent increase in non-interest income, including increases in
merchant banking, capital management and trading account income;
(bullet)Lower credit-related costs, including a decline in the loan loss
provision; and
(bullet)A slight decline in noninterest expense, which includes $74 million in
additional mortgage servicing amortization related to increased
refinancing activity in 1993 and $162 million in restructuring charges in
1992.
Credit quality continued to strengthen in 1993. Nonperforming assets
declined to their lowest level in three years, to $916 million, or 1.95
percent of net loans and foreclosed properties, at December 31, 1993,
compared with $1.35 billion, or 3.19 percent, a year ago. Net charge-offs
as a percentage of average net loans were .58 percent in 1993, compared
with .86 percent in 1992. The loan loss provision declined to $222 million
in 1993, compared with $415 million in 1992. The loan loss allowance at
December 31, 1993, was $1.02 billion, or 111 percent of nonperforming
assets, compared with $941 million, or 70 percent, at year-end 1992.
Domestic banking operations, including trust operations, located in North
and South Carolina, Georgia, Florida, Maryland, Tennessee, Virginia and
Washington, D.C., and mortgage banking operations are our principal
sources of revenues. Foreign banking operations are immaterial.
The Net Interest Income
section provides information about lost interest income related to non-
accrual and restructured loans;
the Asset Quality section includes further information about the loan loss
provision; and the Noninterest Expense section
provides information about
expenses related to accelerated mortgage refinancing activity.
Outlook
We are encouraged by loan growth, especially in North Carolina, Florida
and our Corporate Banking Group. Average net loans increased 6 percent on
an annualized basis between the end of the third and fourth quarters of
1993. Loan growth in 1993 reflected loan portfolios acquired with the
purchase accounting acquisitions and, in recent months, increased activity
from both commercial and retail lending, including mortgages.
Our full-service bank branches are complemented by our ability to offer a
growing array of nontraditional products and services such
as mutual funds through licensed brokers and access to capital markets
for corporate customers. The opportunity to cross-sell these products to
an expanded customer base is an important part of our strategy.
In 1994, we expect to benefit further from cost savings related to our
five completed 1993 acquisitions, which have been consolidated into the
large branch network we have built in our seven banking states and
Washington, D.C.
In addition, First Union expects to complete two pooling of interests
acquisitions during 1994.
On October 18, 1993, we agreed to acquire Lieber & Company, an
investment management firm that is the adviser to the Evergreen Funds, a
$3.3 billion family
of mutual funds with headquarters in Purchase, New York. In this
acquisition, we agreed to issue approximately 3.1 million shares of First
Union common stock, subject to adjustment under certain circumstances.
Assuming a First Union common stock price of $42 per share and the
issuance of 3.1 million shares of First Union common stock, the
transaction value would be approximately $130 million.
On November 17, 1993, First
10
Union agreed to acquire American Bancshares
Inc., the parent corporation of American Commercial Savings Banks Inc.
SSB, which has assets of $235 million and is based in Monroe, North
Carolina. In this acquisition, we agreed to issue approximately 518,000
shares of First Union common stock, subject to adjustment under certain
circumstances. Assuming a First Union common stock price of $42 per
share and the issuance of 518,000 shares of First Union common stock,
the transaction value would be approximately $22 million.
In addition, on January 17, 1994, First Union agreed to acquire BancFlorida
Financial Corporation, the parent company of BancFlorida, FSB, which has
assets of $1.5 billion and is based in Naples, Florida. This acquisition is
expected to be accounted for as a purchase. In the BancFlorida acquisition,
we agreed to issue shares of First Union common stock. Assuming a First
Union common stock price of $42 per share prior to closing, First Union
would issue approximately 4 million shares and the transaction value would
be approximately $168 million. We currently expect
to repurchase in the open market approximately one-half of the common
shares issued in the acquisition, subject to market conditions and other
factors.
We currently expect consummation of the Lieber acquisition in the second
quarter of 1994, and the American Commercial and BancFlorida
acquisitions in the third quarter of 1994, all subject to regulatory
approvals and other conditions of closing.
We expect these acquisitions to have minor impact on 1994 earnings and
to be additive to earnings within 12 months of consummation.
We continue to be alert to opportunities to enhance stockholder value. We
are evaluating acquisition opportunities, and teams of experienced
bankers from all areas of the corporation frequently conduct 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. Some dilution
of First Union's book value and net income per common share might occur
in connection with any future acquisitions.
We remain committed to making acquisitions that we expect will add to
net income per common share within 12 months of consummation.
The Stockholders' Equity section provides information concerning the
issuance of additional stock in connection with the South Carolina
Federal, DFSoutheastern and Dominion acquisitions.
The Accounting and Regulatory Matters section provides information about
various legislative, accounting and regulatory proposals.
Net Interest Income
Tax-equivalent net interest income, the largest contributor to earnings,
was $2.9 billion in 1993, compared with $2.6 billion in 1992, largely
reflecting additions to earning assets.
The level of nonperforming loans has offset some interest income growth
because interest income from these loans is eliminated or sharply
reduced. In 1993, gross interest income of $78 million would have been
recorded if all nonaccrual and restructured loans had been current in
accordance with their original terms and had been outstanding throughout
the period or since origination, if held for part of the period. The amount
of interest income related to these assets and included in income in 1993
was $24 million. However, the reduction of $435 million in nonperforming
assets helped contribute to interest income in 1993.
Net Interest
Margin
The net interest margin, which is the difference between the tax-
equivalent yield on earning assets and the rate paid on funds to support
those assets, was 4.78 percent
in 1993, compared with 4.77 percent in 1992. The margin remained flat
since year-end 1992 primarily because of the addition of acquired banks
with lower margins; the addition of short-term securities, which
contribute to net interest income although they reduce the margin; and the
impact of refinancing activity.
The average rate earned on earning assets was 7.77 percent in 1993,
compared with 8.53 percent in 1992. The average rate paid on interest-
bearing liabilities was 3.44 percent in 1993 and 4.25 percent in 1992.
We use securities and off-balance sheet transactions to manage interest
rate sensitivity. More information on these transactions is included in the
Interest Rate Risk Management section.
Noninterest Income
Developing new sources of fee income has been one of our key long-term
strategies for dealing with changes in the banking industry. Noninterest
income was $1.20 billion in 1993, compared with $1.06 billion in 1992.
Noninterest income increased from 1992 primarily as a result of $52
million in gains from the sale of equity positions held by our merchant
banking operations and $48 million from the disposition of First American
segregated
Net Interest Income
(Dollars in billions)
(Net Interest Income bar chart appears here--see appendix)
11
Management's Analysis of Operations
First Union Corporation and Subsidiaries
Noninterest Income
(Dollars in billions)
(Noninterest Income bar chart appears here--see appendix)
Noninterest Expense
(Dollars in billions)
(Noninterest Expense bar chart appears here--see appendix)
assets, as well as increases in
trading account profits, capital management income and discount gains. In
addition, service charges on deposit accounts increased during this period
primarily because
of the addition of deposits from acquired banks. The Trading
Activities section provides additional information about trading account
profits.
The 1993 results included the sale of acquired banks' securities
portfolios, which accounted for
most of the $33 million in securities gains, compared with $32 million
in 1992.
Trading Activities
Trading activities are undertaken primarily to satisfy customers'
investment and risk management needs. Additionally, trading is done for
the corporation's own account.
Trading activities have historically included fixed income securities,
money market instruments, foreign exchange, options, futures and forward
rate agreements. In March of 1993, we established a derivatives products
group to provide customers with the
ability to structure off-balance sheet derivative financial instruments
tailored to their specific management objectives.
The derivative transactions tailored for our customers, which consisted
almost exclusively
of interest rate swaps, produced revenues of $15 million during 1993. All
trading activities are
conducted within risk limits established by the Funds Management
Committee.
Trading account profits were $43 million in 1993, compared with $23
million in 1992.
At December 31, 1993, trading account assets were $652 million
compared with $169 million at year-end 1992. These assets are carried at
market value.
Noninterest Expense
Noninterest expense was
$2.52 billion during 1993, compared with $2.53 billion in 1992,
a slight decrease despite the impact of our acquisitions. Noninterest
expense includes an additional $74 million of mortgage servicing
amortization in 1993 and $162 million in restructuring charges in 1992.
The additional amortization was a result of an accelerated pace of
refinancing activity during 1993 because of the low interest rate
environment. In addition, the adoption of accounting for post-retirement
benefits other than pensions amounted to $13 million in 1993.
Costs related to owned real estate decreased to $41 million
in 1993, from $176 million in 1992, largely because of the sale
of owned real estate, a reduced foreclosed properties provision
and lower writedowns of foreclosed properties. Costs related to owned
real estate include items such as legal expenses associated with
collection, foreclosure, provisions and writedowns, disposition of
foreclosed properties and costs incurred to maintain foreclosed
properties.
Costs related to environmental matters were not material.
Income
Taxes
Income taxes were $403 million in 1993, compared with $196 million in
1992. The increase came primarily from an increase in income before
taxes. In addition,
the Omnibus Budget Reconciliation Act, enacted in August 1993, increased
the corporate tax rate by one percent, retroactive to January 1, 1993. As a
result of the increase, income taxes in 1993 increased
$10 million. This increase was
offset by a $16 million one-time tax benefit resulting from the repricing
of deferred tax assets and the elimination of deferred tax liabilities
related to certain intangible assets.
A cumulative tax effect of
$9 million related to the 1993 retroactive adoption of new accounting for
income tax rules was insignificant, and accordingly is included in 1992
income taxes.
Earning
Assets
In banking the primary types of earning assets are securities and loans.
The earnings from these assets are subject to two kinds of risk, interest
rate risk and credit risk. Interest rate risk could result if fixed rate
sources of funds and fixed rate uses of funds were mismatched.
Our Funds Management
Committee manages interest rate risk under specific policy standards,
which are discussed in more detail in the Interest Rate Risk Management
section. In addition to certain securities, off-balance sheet transactions
such as interest rate swaps have been used to maintain interest rate risk
at acceptable levels in accordance with our policy standards.
The loan portfolio carries
the potential credit risk of past due, nonperforming or, ultimately,
charged-off loans. We manage
this risk primarily through credit approval standards, which are
discussed in more detail in the Loans section.
Average earning assets in 1993 were $59.9 billion. This
was an 11 percent increase from
$53.8 billion in 1992. Year-end 1993 earning assets were $63.0 billion, a
12 percent increase
from $56.2 billion in 1992. The increase was primarily attributable to
acquisitions.
12
Securities Available
For Sale
Securities available for sale are a part of the corporation's interest rate
risk management strategy and may be sold in response to changes in
interest rates, changes in prepayment risk, liquidity management and
other factors. They are accounted for on a lower of cost or market value
basis.
At December 31, 1993, we had $11.7 billion in securities available for
sale, compared with $5.2 billion at year-end 1992. The market value of
securities available for sale was $139 million above their book value at
year-end 1993. Portfolio activity in 1993 was largely merger-related. In
addition, we added short-term Treasuries and collateralized mortgage
obligations to counteract the effects of the refinancing activity during the
past year. The increase since 1992 also reflects a $4.6 billion
reclassification primarily from the investment securities portfolio, which
better supports our current interest rate risk management strategy. Table
8 provides information related to unrealized and realized gains and losses.
The average yield earned on securities available for sale in 1993 was 5.03
percent, compared with 6.46 percent in 1992. The average maturity of the
portfolio was 2.32 years at December 31, 1993.
The Accounting And Regulatory Matters section provides information
related to the accounting for debt and equity securities.
Investment Securities
First Union's investment securities amounted to $2.7 billion at December
31, 1993, and $6.6 billion at year-end 1992. The primary reason for the
decrease since year-end 1992 was the reclassification of
securities to the securities available for sale portfolio discussed above.
The average yield earned on investment securities in 1993 was 7.07
percent, compared with 8.15 percent in 1992. The average maturity of the
portfolio was 5.19 years at December 31, 1993.
The Accounting And Regulatory Matters section provides information
related to the accounting for debt and equity securities.
Loans
Our lending strategy stresses quality growth, diversified by product,
geography and industry. A common credit underwriting structure is in
place throughout the company, and a special real estate credit group
reviews large commercial real estate loans before approval. Consistent
with our long-time standard, we generally look for two repayment sources
for commercial real estate loans: cash flows from both the project itself
and the borrower.
Our commercial lenders focus principally on middle-market companies. A
majority of our commercial loans range from $50,000 to $10 million. We
offer a broad range of financial products and sophisticated applications to
meet our customers' needs, including access to sources of capital and
creative financing solutions for our corporate and commercial customers.
Our consumer lenders emphasize credit judgments that focus on a
customer's debt obligations, ability and willingness to repay, and general
economic trends.
Net loans at December 31, 1993, were $46.9 billion, compared with $41.9
billion at year-end 1992. The increase primarily reflects loans acquired
with the second quarter purchase accounting acquisitions, as well as
increased lending activity.
Loan growth in North Carolina and Florida, particularly related to
corporate, commercial, consumer mortgage and direct lending, more than
offset loan runoff associated with the 1993 acquisitions.
The loan portfolio at December 31, 1993, was composed of 47 percent
commercial loans and 53 percent consumer loans. The portfolio mix and
concentration have not changed significantly from year-end 1992.
Consumer loans--installment loans, credit card loans and one-to four-
family mortgages--were $25.2 billion, compared with $22.0 billion at
year-end 1992.
Unused loan commitments related to commercial loans were $10.5 billion.
Unused loan commitments related to consumer loans were $6.7 billion.
Commercial and standby letters of credit were $1.4 billion.
At December 31, 1993, loan participations sold to other lenders amounted
to $1.1 billion and were recorded as a reduction of gross loans.
The average yield earned on loans in 1993 was 8.50 percent, compared
with 9.02 percent in 1992. The average prime rate in 1993 was 6.00
percent, compared with 6.26 percent in 1992.
The Asset Quality section provides information about geographic exposure
in the loan portfolio and a loss-sharing arrangement with the Federal
Deposit Insurance Corporation (FDIC) covering the Southeast Banks
commercial and consumer loan portfolios acquired from the FDIC in
1991.
Commercial
Real Estate
Loans
Commercial real estate loans as a percentage of the total portfolio de-
creased to 16 percent at December 31, 1993, from 18 percent at year-end
1992. This portfolio included commercial real estate mortgage loans of
$5.8 billion at December 31, 1993, and at year-end 1992.
Year-End Securities Available For Sale
(Year-End Securities Available For Sale pie chart appears here--see appendix)
*CMOs: Collateralized mortgage obligations
Year-End Investment Securities
(Year-End Investment Securities pie chart appears here--see appendix)
Year-End Loans
(Year-End Loans pie chart appears here--see appendix)
13
Management's Analysis of Operations
First Union Corporation and Subsidiaries
Year-End Consumer Loans
(Year-End Consumer Loans pie chart appears here--see appendix)
Year-End Commercial Loans
(Industry Classification)
(Year-End Commercial Loans chart appears here--see appendix)
Commercial Real Estate Loans
(Project Type)
(Commercial Real Estate Loans chart appears here--see appendix)
Highly Leveraged Transactions
An HLT loan generally is defined as a loan amounting to more than $20
million involving a buyout, acquisition or recapitalization of an existing
business, in which the loan substantially increases a company's leverage
ratio. At December 31, 1993, outstanding HLT loans amounted to $786
million, compared with $856 million at year-end 1992.
Asset Quality
The following portion of the asset quality discussion is divided into two
sections to reflect the loss-sharing arrangement between First Union and
the FDIC in connection with the 1991 Southeast Banks transaction.
The first section relates to First Union's nonperforming assets, past due
loans, net charge-offs and loan loss allowance, excluding those related to
acquired Southeast Banks nonperforming assets. The acquired First
American segregated assets also are discussed below.
The second section relates solely to the same categories segregated for
the acquired Southeast Banks portfolio. Certain ratios related to First
Union's nonperforming assets and net charge-offs have been
favorably affected because
Southeast Banks and First American segregated assets portfolios have not
been included in the determination of these ratios.
Under the terms of the loss-sharing arrangement, the FDIC reimburses
First Union for 85 percent of any losses associated with the acquired
Southeast Banks commercial and consumer loan portfolio, except revolving
consumer credit, for which reimbursement declines five percent per year
to 65 percent in 1996.
The FDIC provides virtually cost-free funding for the acquired Southeast
Banks nonperforming assets. This was initially accomplished through
five-year revolving notes issued by First Union to the FDIC in an amount
equal to the Southeast Banks segregated assets, excluding a discount
adjustment to value the notes based on a market rate of interest. The
notes bear interest at 1/8th of one percent per year.
However, effective in the first quarter of 1992, in accordance with the
FDIC assistance agreements, the FDIC began paying a market rate of
interest on the amount of additions to Southeast Banks segregated assets
in lieu of First Union increasing the notes by the amount of future
Southeast Banks segregated assets.
First Union Nonperforming
Assets
Nonperforming assets at December 31, 1993, were $916 million, or 1.95
percent of net loans and foreclosed properties, compared with $1.35
billion, or 3.19 percent, at December 31, 1992.
The Quarterly Nonperforming Assets By Business Unit table on the next
page provides additional information about nonperforming assets.
Loans or properties of less than $5 million each made up 81 percent, or
$746 million, of nonperforming assets at December 31, 1993.
Of the rest:
(bullet)11 loans or properties between $5 million and $10 million each
accounted for $82 million; and
(bullet)Six loans or properties over $10 million each accounted for
$88 million.
Seventy-one percent of the nonperforming assets was secured by real
estate at December 31, 1993, compared with 65 percent at year-end 1992.
First Union
Past Due Loans
In addition to nonperforming assets, at December 31, 1993, accruing loans
90 days past due were $71
14
million, compared with $86 million at
December 31, 1992. Of these loans at December 31, 1993, $20 million
were related to commercial and commercial real estate loans.
First Union
Net Charge-offs
Net charge-offs as a percentage of average net loans were .58 percent in
1993, compared with .86 percent in 1992. Table 12 provides information
on net charge-offs by category.
First Union
Provision And
Allowance For
Loan Losses
The loan loss provision was $222 million in 1993, compared with $415
million in 1992. The decrease in the loan loss provision was based
primarily upon current economic conditions, lower levels of
nonperforming assets, the maturity of the nonperforming assets portfolio,
and current and projected lower levels of charge-offs.
Reserve levels are continually evaluated in relation to the changing
economic environment. In addition, we establish reserves based upon
various other factors, including the results of quantitative analyses of the
quality of commercial loans and commercial real estate loans. Reserves
for commercial and commercial real estate loans are based principally on
loan grades, historical loss rates, deterioration of the borrowers'
creditworthiness, and analysis of other less quantifiable factors that
might influence the portfolio. Reserves for consumer loans are based
principally on delinquencies and historical loss rates. We analyze all loans
in excess of $500,000 that are being monitored as potential credit
problems to determine whether supplemental, specific reserves are
necessary.
The loan loss allowance as a percentage of net loans has decreased
slightly and allowance coverage of nonaccrual and restructured loans and
nonperforming assets has increased, as indicated in Table 12. This was a
result of growth in loans and a $435 million decline in nonperforming
assets. These amounts exclude the acquired Southeast Banks and First
American segregated assets. The Southeast Banks Segregated Assets
section provides information related to a separate $33 million allowance.
First American
Segregated Assets
Discounted nonperforming assets and certain performing loans amounting
to $288 million acquired with First American, which were designated for
early disposition and classified in the balance sheet as a separate
segregated asset portfolio, declined 51 percent from June 30, 1993, to
$141 million at December 31, 1993. These acquired First American
segregated assets were recorded at fair value at the date of acquisition in
accordance with our plans for disposition. Table 16 provides information
related to First American segregated assets.
Southeast Banks
Segregated Assets
Because of the loss-sharing arrangement with the FDIC, the acquired
Southeast Banks nonperforming assets, as well as any acquired Southeast
Banks assets that become nonperforming, are disclosed separately in the
balance sheet. This segregated asset portfolio includes nonaccrual loans
and foreclosed properties, net of the allowance for segregated assets as
indicated in Table 15.
At December 31, 1993, acquired Southeast Banks segregated assets
amounted to $380 million, or $347 million net of the $33 million
allowance referred to above, compared with $576 million, or $531 million
net of a $45 million allowance, at December 31, 1992.
Quarterly Nonperforming Assets By Business Unit*
(Quarterly Nonperforming Assets By Business Unit* graph appears here--
see appendix)
*Excludes acquired Southeast Banks and First American segregated assets.
**Reflects the impact of acquisitions consummated during 1993.
***The Corporate Banking Group, a part of the North Carolina bank, makes loans
primarily outside our regional banking market.
****First Union Mortgage Corporation, First Union Home Equity Corporation
and other units.
Nonperforming Assets*
(Percent of net loans and foreclosed properties)
(Nonperforming Assets* bar graph appears here--see appendix)
*Excludes segregated assets.
Year-End Nonperforming Commercial Loans
(Industry Classification)
(Year-End Nonperforming Commercial Loans chart appears here--see appendix)
15
Management's Analysis of Operations
First Union Corporation and Subsidiaries
Net Charge-Offs*
(Percent of average net loans)
(Net Charge-Offs* bar chart appears here--see appendix)
*Excludes Southeast Banks--related net charge-offs.
Net Charge-offs By Loan Type*
(Net Charge-offs By Loan Type chart appears here--see appendix)
*As a percentage of average net loans.
Year-End Nonaccrual Commercial Real Estate*
(Project Type)
(Year-End Nonaccrual Commercial Real Estate chart appears here--see appendix)
*Includes foreclosed properties.
Southeast Banks
Past Due Loans
Accruing loans 90 days past due included in the acquired Southeast Banks
performing loan portfolio decreased 29 percent from $40 million at
December 31, 1992, to $28 million at December 31, 1993. These loans are
subject to the terms of the FDIC loss-sharing agreement.
Southeast Banks
Net Charge-offs
Net charge-offs of $14 million, representing First Union's approximately
15 percent share of the losses on acquired Southeast Banks loans, were
deducted from the allowance for segregated assets in 1993, compared
with $29 million in 1992.
Geographic
Exposure
The loan portfolio in the South Atlantic region of the United States is
spread primarily across 58 metropolitan statistical areas with diverse
economies. Washington, D.C.; Charlotte, North Carolina; Atlanta, Georgia;
and Miami, Jacksonville, West Palm Beach and Tampa, Florida, are our
largest markets, but no individual metropolitan market contains more than
8 percent of the commercial loan portfolio.
Substantially all of the $7.5 billion commercial real estate portfolio at
December 31, 1993, was located in our banking region, which includes
North Carolina, South Carolina, Georgia, Florida, Virginia, Maryland,
Tennessee and the District of Columbia.
Core
Deposits
Core deposits were $50.9 billion at December 31, 1993, compared with
$47.0 billion at year-end 1992. The increase in core deposits primarily
reflects deposits acquired in the acquisitions of Georgia
Federal and First American in the second quarter of 1993. Core deposits
include savings, negotiated order of withdrawal (NOW), money market and
noninterest-bearing accounts, and other consumer time deposits.
Average noninterest-bearing deposits were 20 percent of average core
deposits in 1993, compared with 18 percent in 1992. The Net Interest
Income Summaries provide additional information about average core
deposits.
The portion of core deposits in higher-rate, other consumer time deposits
decreased to 33 percent at December 31, 1993, from 38 percent at year-
end 1992. As market rates have declined, some customers have shifted
their other consumer time deposits either into other deposit products or
other investments. We expect declines in other consumer time deposit
balances as long as rates stay at their current levels.
The rates paid on higher cost and core deposit categories have declined as
interest rates in general have declined. During this period, we have
remained competitive with the rates paid by other banks for such
deposits. Pricing for these deposits, in general, has been neither in the
lowest nor highest range when compared with similar institutions.
Other consumer time and other noncore deposits usually pay higher rates
than savings and transaction accounts, but they generally are not available
for immediate withdrawal and are less expensive to process.
Purchased
Funds
Purchased funds have increased as First Union's assets have grown.
Purchased funds at December 31, 1993, were $10.1 billion, compared with
$7.2 billion at year-end 1992. We purchase funds primarily to
make short-term investments that have attractive yields. Primarily, we
fund these investments with federal funds, securities sold under
repurchase agreements, and eurodollar time deposits.
Average purchased funds in 1993 were $10.6 billion, an increase of 21
percent from 1992.
Long-Term Debt
Long-term debt was 59 percent of total stockholders' equity at December
31, 1993, and 71 percent at December 31, 1992.
During 1993, we issued $250 million of five-year, 6.75 percent senior
notes; $150 million of ten-year, 7.25 percent subordinated notes; $250
million of 12-year, 6.625 percent subordinated notes; $150 million of 10-
year, floating rate subordinated notes; and $200 million of 15-year, 6.00
percent subordinated notes. On January 18, 1994, we issued $150 million
of 15-year, 6.375 percent subordinated notes. Proceeds from these debt
issues were designated for general corporate purposes.
Also in 1993, we redeemed $134 million of floating rate debt. The debt
was called at par value plus accrued interest.
Under a shelf registration statement filed with the Securities and
Exchange Commission, we currently have available for issuance $650
million of senior or subordinated debt securities. The sale of any
additional debt securities will depend on future market conditions,
funding needs and other factors.
Debt
Obligations
We have a $300 million committed back-up line of credit that expires in
June 1994. The credit facility contains financial covenants that require
First Union to maintain a minimum level of tangible net worth, restrict
double leverage ratios and require capital levels at subsid-
16
iary banks to
meet regulatory standards. First Union is in compliance with these
requirements and has not used this line of credit.
In 1994, $69 million of long-term debt will mature. Maturing in 1995 is
$210 million, and in 1996, $588 million, which includes the notes payable
to the FDIC of $276 million. We expect the notes payable to the FDIC will
decrease over the remaining three-year period through cash flows
generated by the acquired loans, the sale of the Southeast Banks
segregated assets and FDIC reimbursements.
The Asset Quality section provides additional information related to the
funding of Southeast Banks segregated assets.
Stockholders' Equity
At December 31, 1993, common stockholders' equity was $4.92 billion, an
18 percent increase from year-end 1992. Total stockholders' equity was
$5.21 billion, compared with $4.46 billion at year-end 1992. The increase
in equity since year-end 1992 was primarily the result of retained
earnings and capital raised through the dividend reinvestment and
employee stock option and purchase plans.
Series 1990 preferred stock cash dividends of 7.78 percent per annum
were paid for the year ended December 31, 1993. We paid $269 million in
dividends to preferred and common stockholders in 1993.
During 1993, in connection with three pooling of interests acquisitions,
we issued 29 million shares of common stock and 527,000 shares of a new
series of convertible class A preferred stock, which were convertible into
680,000 shares of First Union common stock. In the second quarter of
1993, we redeemed the convertible class A preferred stock, most of which
was converted into common stock prior to redemption.
Subsidiary Dividends
Our banking subsidiaries are the largest source of parent company
dividends. Capital requirements established by regulators limit dividends
that these and certain other of our subsidiaries can pay. The Comptroller
of the Currency (OCC) generally limits a national bank's dividends in two
principal ways: first, dividends cannot exceed the bank's undivided profits,
less statutory bad debt in excess of a bank's allowance for loan losses;
and second, in any year dividends may not exceed a bank's net profits for
that year, plus its retained earnings from the preceding two years, less
any required transfers to surplus.
Under these and other limitations, our subsidiaries had $510
million available for dividends at December 31, 1993. During 1993, our
subsidiaries paid $407 million in dividends to the corporation.
Risk-Based Capital
The minimum requirement for the ratio of total capital to risk-weighted
assets (including certain off-balance-sheet activities, such as standby
letters of credit and interest rate swaps) is currently 8 percent. At least
half of the total capital is to be composed of common equity, retained
earnings and a limited amount of qualifying preferred stock, less certain
intangible assets (tier 1 capital). The rest may consist of a limited
amount of subordinated debt, nonqualifying preferred stock and a limited
amount of the loan loss allowance (together with tier 1 capital, total
capital).
At December 31, 1993, the corporation's tier 1 and total capital ratios
were 9.14 percent and 14.64 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 equal to 3 percent for bank holding companies that meet
specified criteria, including having the highest regulatory rating. All other
bank holding companies will generally be required to maintain a leverage
ratio from at least 4 to 5 percent. The corporation's leverage ratio at
December 31, 1993, was 6.13 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. The Federal
Reserve Board also has indicated it will continue to consider a tangible
tier 1 leverage ratio (deducting all intangibles) in evaluating proposals
for expansion or new activity. The Federal Reserve Board has not advised
us of any specific minimum leverage ratio applicable to us.
Each subsidiary bank is subject to similar capital requirements adopted by
the OCC. Each subsidiary bank listed in Table 20 had a leverage ratio in
excess of 5.51 percent at December 31, 1993. None of our subsidiary
banks has been advised of any specific minimum capital ratios applicable
to it.
The regulatory agencies also have adopted regulations establishing
capital tiers for banks. Banks in the highest capital tier, or "well
capitalized," must have a leverage ratio of 5 percent, a tier 1 capital
ratio of 6 percent and a total capital ratio of 10 percent.
At December 31, 1993, the subsidiary national banks listed in Table 20
met the capital ratio and leverage ratio requirements for well capitalized
banks. We expect to maintain these banks' ratios at the required levels by
the retention of earnings and, if necessary, the issuance of additional
capital.
Comparison of Funding Sources
(Comparison of Funding Sources bar chart appears here--see appendix)
Stockholders' Equity To Assets
(Percent)
(Stockholders' Equity To Assets bar chart appears here--see appendix)
Risk-Based Capital To Assets
(Percent)
(Risk-Based Capital To Assets bar chart appears here--see appendix)
17
Management's Analysis of Operations
First Union Corporation and Subsidiaries
Interest Rate Sensitivity Assumptions
(Interest Rate Sensitivity Assumptions line chart appears here--see appendix)
Failure to meet certain capital ratio or leverage ratio requirements could
subject a bank to a variety of enforcement remedies, including
termination of deposit insurance by the FDIC.
The Accounting and Regulatory Matters section provides more information
about proposed changes in risk-based capital standards.
Interest Rate
Risk Management
Managing interest rate risk is fundamental to banking. Banking
institutions manage the inherently different maturity and repricing
characteristics of the lending and deposit-taking lines of business to
achieve a desired interest rate sensitivity position and to limit their
exposure to interest rate risk. Our inherent maturity and repricing
characteristics of lending and deposit activities create a naturally asset-
sensitive structure. By using
a combination of on- and off-balance sheet instruments we manage
interest rate sensitivity within our policy guidelines.
The Financial Management Committee of the corporation's board of
directors reviews the corporation's overall interest rate risk management
activity. The Funds Management Committee, which includes the chief
executive officer and senior executives from our funds management,
credit and finance areas, oversees the interest rate risk management
process and approves policy guidelines. The Funds Management Group
monitors the day to day exposure to changes in interest rates in response
to loan and deposit flows and makes adjustments within established
policy guidelines.
We believe that interest rate risk is best measured by the amount of
earnings at risk given specified changes in interest rates. We have been
modeling rate sensitivity with succeeding generations of an earnings
simulation model since the early 1970s. The model captures all earning
assets, interest-bearing liabilities and all off-balance sheet financial
instruments and combines the various factors affecting rate sensitivity
into an earnings outlook that incorporates our view of the short-term
interest rate environment most likely for the next 24 months. The Funds
Management Committee reviews and continuously updates the underlying
assumptions included in the earnings simulation model.
Our interest rate sensitivity
analysis is based on multiple interest rate scenarios and projected
changes in balance sheet categories and other relevant assumptions.
Changes in management's outlook and other market factors may cause
actual results to differ from our current simulated outlook.
We believe our earnings simulation model is a more relevant depiction of
interest rate risk than traditional gap tables because it captures multiple
effects excluded in less sophisticated presentations, and it includes
significant variables that we identify as being affected by interest rates.
For example, our model captures rate of change differentials, such as
federal funds rates versus savings account rates; maturity effects, such
as calls on securities; and rate barrier effects, such as caps and floors on
loans. It also captures changing balance sheet levels, such as loans and
investment securities; and floating rate loans that may be tied or related
to prime, LIBOR, CD rates, treasury notes, federal funds or other rate
indices, which do not necessarily move identically as short-term rates
change. In addition it captures leads and lags that occur in long-term
rates as short-term rates move away from current levels; and the effects
of prepayment volatility on various fixed rate assets such as residential
mortgages, mortgage-backed securities and consumer loans. These and
certain other effects are evaluated in developing the multiple scenarios
from which sensitivity of earnings to changes in interest rates is
determined.
We determine sensitivity of earnings to changes in interest rates by
assessing the impact on net income of multiple rising and falling interest
rate scenarios. The model is updated at least monthly and more often if
desired.
We use three scenarios in analyzing interest rate sensitivity. The base
line scenario is our estimated most likely path for future short-term
interest rates for the next 24 months. Our estimate at December 31, 1993,
of the most likely path for future short-term interest rates was that the
federal funds rate would gradually increase to 3.65 percent by year-end
1994 and to 4.75 percent over the next 24 months. The Federal Reserve's
tightening of interest rates on February 4, 1994, was consistent with our
base line scenario outlook. The "high rate" and "low rate" scenarios
assume 100 basis point shifts from the base line scenario in the federal
funds rate by month four and remain 100 basis points higher or lower
through month twenty-four. Additionally, other scenarios are run monthly
to examine the effects of more severe rate movements.
We determine interest sensitivity by the change in earnings per share
between the three scenarios over a 12-month policy measurement period.
The earnings per share as calculated by the earnings simulation model
under the base line scenario becomes the standard. The measurement of
rate sensitivity is the percentage change in earnings per share calculated
by the model under high rate versus base line and under low rate versus
base line. The policy measurement period begins with the fourth month
forward and ends with the fifteenth month. The scenarios do not include
the adjustments that management would make as rate expectations
change.
Based upon the December 1993 outlook, if interest rates were to rise to
follow the high rate scenario, which means a full 100 basis point increase
over the base line (already a rising rate scenario), then earnings during
the policy measurement period would be negatively affected by 3 percent.
Our January 1994 earnings simulation model indicated rate sensitivity of
less than 1 percent in both the high and low rate scenarios, assuming no
other actions were taken. Our policy limit for the maximum negative
impact
18
on earnings per share resulting from either the high rate or low
rate scenario is 5 percent.
We believe traditional gap tables have inherent limitations on their
ability to accurately portray interest rate sensitivity. Notwithstanding
these inherent limitations we present such a table in view of common
banking industry practice.
We have modified the presentation of off-balance sheet items as of
December 31, 1993, to reflect management's analysis of the impact of the
economic consequences of all the terms of our off-balance sheet financial
instruments. Because savings, NOW and money market accounts
theoretically can be repriced at any time, all such balances have been
included in the 1-90 day category. If these amounts were to be spread
based upon expected repricing characteristics, or if they were treated as
nonsensitive, as many in the industry do, the cumulative gap ratio would
be significantly reduced.
Off-Balance
Sheet Derivatives
Within our overall interest
rate risk management strategy, for many years we have used off-balance
sheet derivatives as a cost-and capital-efficient way to manage interest
rate sensitivity by modifying the repricing or maturity characteristics of
on-balance sheet assets
and liabilities. Our off-balance
sheet derivative transactions used
for interest rate sensitivity management take place predominantly in the
interest rate market and primarily include futures contracts, forward
obligations, interest rate swaps and options.
The notional amount of off-balance sheet derivative financial instruments
used to manage our interest rate risk sensitivity amounted to $48.8
billion and $43.5 billion at December 31, 1993 and 1992, respectively. The
related fair value of the off-balance sheet derivative financial
instruments was $369 million and $192 million at December 31, 1993 and
1992, respectively.
Although off-balance sheet derivative financial instruments
do not expose the corporation to credit risk equal to the notional amount,
we are exposed to credit risk to the extent of the fair value gain in an
off-balance sheet derivative financial instrument if the counterparty fails
to perform. We minimize the credit risk in these instruments by dealing
only with highly rated counterparties who have credit ratings of
investment grade as rated by the major rating agencies. Each transaction
is specifically approved for applicable credit exposure.
Before 1993 our policy did not require the delivery of collateral for all
off-balance sheet financial instruments that presented credit risk to the
corporation. During 1993 we adopted a policy that requires all off-balance
sheet financial instruments governed by an International Swap Dealers
Association interest rate and currency agreement to be subject to a
bilateral security arrangement.
Collateral for these transactions is to be delivered by either party when
the credit risk associated with a particular transaction, or group of
transactions to the extent right of offset exists, exceeds acceptable
thresholds of credit risk. Thresholds are determined based on the strength
of the individual counterparty and are bilateral. As of February 1994 the
total credit risk in excess of thresholds was $313 million, for which we
held collateral with a fair value of $285 million.
Liquidity
We manage liquidity--the ability to raise funds primarily through deposits,
purchased funds or the issuance of debt or capital--through the selection
of the asset mix and the maturity mix of liabilities.
As part of this process, we continually evaluate funding needs and
alternatives. For example, we have focused efforts for some time
in our large branch network toward raising more deposits. This reduces
dependency on national market sources to help meet funding requirements.
In addition, acquired bank and savings bank deposits have enhanced overall
liquidity.
We use these deposits and other funding sources to fund
loans and investments, meet deposit withdrawals and maintain reserve
requirements.
During 1993, three major rating agencies upgraded First Union's debt
ratings, including the rating on our commercial paper. We may use
commercial paper in the future more than we have in recent years if it is
an attractive alternative to other funding sources. In recent years, we
have mainly issued commercial paper in order to maintain a presence in
this market and to accommodate customer investment preferences. The
issuance of commercial paper amounted to $271 million at year-end 1993,
compared with $298 million at year-end 1992.
Net cash provided from operations primarily results from net income
adjusted for the following noncash accounting items: the provisions for
loan losses and foreclosed properties, depreciation and amortization, and
deferred income taxes or benefits. These items amounted to $683 million
in 1993, compared with $704 million in 1992. This cash was available
during 1993 to increase earning assets, to reduce borrowings by $414
million and to pay dividends of $269 million.
During 1993 we reduced overnight investments at the parent company
level to pay $154 million to acquire Georgia Federal and $452 million to
acquire First American.
Several off-balance sheet assets could be used to increase liquidity and
provide additional financial flexibility. These include
a mortgage servicing portfolio
with an estimated fair value of
$154 million over book value at December 31, 1993.
Accounting and Regulatory Matters
The Financial Accounting Standards Board (FASB) has issued Standard No.
112, "Employers' Accounting for Postemployment Benefits," which
requires accrual of a liability for all types of benefits paid to former or
inactive employees after employment but before retirement. The
corporation adopted this accounting standard beginning January 1, 1994.
Benefits subject to this accounting pronouncement include salary
continuation, supplemental unemployment benefits, severance benefits,
disability-related benefits (including workers' compensation), job
training and counseling, and continuation of such benefits as health care
and life insurance coverage. The effect of initially applying this new
accounting standard in 1994 will be approximately $14 million. The
recurring reduction of income before income taxes is expected to be
insignificant.
The FASB also has issued Standard No. 114, "Accounting by Creditors for
Impairment of a Loan," which requires that creditors value all specifically
reviewed loans for which it is probable that the creditor will be unable to
collect all amounts due according to the terms of the loan agreement at
either the present value of expected cash flows, market price of the loan,
if available, or value of the underlying collateral.
19
Management's Analysis of Operations
First Union Corporation and Subsidiaries
Expected cash flows are
required to be discounted at the loan's effective interest rate. We
estimate the initial application of this accounting standard in 1995 will
not require an increase to the existing allowance for loan losses. The
periodic effect on net income has not been fully determined. This Standard
is required for fiscal years beginning after December 15, 1994. The FASB
is discussing the possibility of amending this accounting standard. It is
not clear at this time what form such an amendment, if any, would take.
We will continue to monitor future developments.
The FASB also issued Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," that requires that debt and
equity securities held: (i) to maturity be classified as such and reported at
amortized cost; (ii) for current resale be classified as trading securities
and reported at fair value, with unrealized gains and losses included in
current earnings; and (iii) for any other purpose be classified as securities
available for sale and reported at fair value, with unrealized gains and
losses excluded from current earnings and reported as a separate
component of stockholders' equity. It is required for fiscal years beginning
after December 15, 1993. The effect of the foregoing will cause
fluctuations in stockholders' equity based on changes in values of debt and
equity securities. If this Standard had been adopted at December 31, 1993,
stockholders' equity would have been increased by an after-
tax amount of $93 million based
on appreciation in the securities available for sale portfolio of
$139 million.
The FASB has issued an
exposure draft, "Accounting for Stock-based Compensation," that
proposes that the fair value of
an award of equity instruments to employees be recognized as additional
equity at the date the award is granted. Amounts attributable
to future service would be recognized as an asset and amortized
to personnel expense over the period of employee service. If the
award is for past services, personnel expense would be charged in the
period in which the award is granted. Pro forma disclosure of the effects
on net income and income per share for awards granted
after December 31, 1993, would
be required. The actual fair value adjustments to net income would
be effective for awards granted after December 31, 1996. The effect of
the provisions of this proposed accounting standard on net income and
total stockholders' equity would depend upon the nature
of stock-based compensation, if
any, awarded by the corporation in future years.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA), among other provisions, imposes liability on a bank insured by
the FDIC for certain obligations to the FDIC incurred in connection with
other insured banks under common control.
FDICIA also requires a revision of risk-based capital standards.
The new standards are required to incorporate interest rate risk,
concentration of credit risk and the
risks of nontraditional activities
and to reflect the actual performance and expected risk of loss
of multi-family mortgages. The Risk-Based Capital section provides more
information on risk assessment classifications.
Legislation has been enacted providing that deposits and certain claims
for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other
general unsecured claims against such an institution, including federal
funds and letters of credit, in the "liquidation or other resolution" of such
an institution by any receiver.
Various other legislative proposals concerning the banking industry are
pending in Congress. Given the uncertainty of the legislative process, we
cannot assess the impact of any such legislation on our financial condition
or results of operations.
Earnings And Balance Sheet Analysis
(1992 compared with 1991)
The following analysis of the 1992 and 1991 earnings and balance sheets
includes financial data that has been restated for the pooling of interests
accounting acquisitions of South Carolina Federal Corp. and
DFSoutheastern, Inc., on January 15, 1993, and Dominion Bankshares Corp.
on March 1, 1993.
In addition, certain amounts in 1992 have been restated to reflect the
cumulative effect of a change in accounting principle primarily related to
the 1993 retroactive adoption of new accounting for income tax rules.
First Union earned $353 million in net income applicable
to common stockholders in 1992,
a 12 percent increase from $314 million in 1991. On a per common share
basis, earnings in 1992 were $2.23 compared with $2.24 in 1991.
Key factors in First Union's earnings performance, in addition
to the contribution from the FDIC-assisted Southeast Banks transaction of
September 1991, included:
(bullet)Strength in the net interest
margin. The margin benefited
from decreased funding costs and the impact of off-balance sheet
transactions.
(bullet)Credit quality improvement,
accompanied by a decline in the loan loss provision.
(bullet)Growth in fee income, reflecting increased mortgage servicing, cash
management and capital management accounts.
The 1992 results also include
a fourth quarter 1992 restructuring charge of $162 million related to the
acquisitions in 1993.
Tax-equivalent net interest income, the largest contributor
to earnings, was $2.56 billion in 1992 compared with $2.02 billion
in 1991. The increase resulted primarily from a higher net inter-
est margin--the profit margin associated with investment, lending,
deposit and borrowing activities. Results in 1992 also included net
interest income related to the Southeast Banks transaction
for the entire year.
High levels of nonperforming assets have offset some
of this growth because interest
income from these assets is eliminated or sharply reduced. In
1992, $71 million in gross interest income would have been recorded
if all nonaccrual and restructured loans had been current in accordance
with their original terms
and had been outstanding throughout the period or since origina-
tion, if held for part of the period. The amount of interest income
recorded on these assets in 1992 was $14 million.
The net interest margin increased to 4.77 percent in 1992, compared with
4.08 percent in 1991.
The average rate earned on earning assets was 8.53 percent in 1992,
compared with 9.62 percent
in 1991. The average rate paid
on interest-bearing liabilities was 4.25 percent in 1992 and 6.13 percent
in 1991.
The net interest margin increased even though the spread between the
prime rate, which affects the pricing of variable rate loan products, and
the federal funds rate, which affects the cost of deposits and
20
borrowings, narrowed from 2.78 percent in 1991 to 2.74 percent in 1992.
The increase in the net interest margin from 1991 occurred primarily
because the average rate earned on earning assets declined 109 basis
points, while the rate paid on interest-bearing liabilities declined 188
basis points. This caused a 79 basis point increase in the spread between
the rate earned on earning assets and the rate paid on interest-bearing
liabilities. The margin increase was only 69 basis points because non-
interest-bearing sources of funds contribute less to the net interest
margin as interest rates decline.
Noninterest income was $1.06 billion in 1992, compared with $1.07 billion
in 1991. The decrease from 1991 reflected investment security gains
taken in 1991 compared with 1992, and was partially offset by increases
of 32 percent in service charges on deposit accounts and 33 percent in
capital management income. Included in 1992 was a $34 million gain from
the sale of securities available for sale and a $3 million loss from the
sale of investment securities, compared with $155 million in gains from
the sale of investment securities, $39 million from the sale of mortgage
servicing rights and $15 million from the sale of a consumer finance
subsidiary in 1991.
A growing source of income
is our merchant banking business, which contributed $21 million in 1992,
compared with $13 million in 1991.
The mortgage servicing portfolio was $24.4 billion
at December 31, 1992, compared with $24.1 billion
at December 31, 1991. The mortgage servicing portfolio grew primarily
through acquisitions during 1992. The mortgage loans
in the portfolio are owned by others, but our mortgage banking subsidiary
services the loans for a fee.
Mortgage banking income
for 1992 was $156 million, compared with $136 million in 1991.
Noninterest expense was
$2.5 billion in 1992, compared with $1.9 billion in 1991. The increase
from 1991 primarily reflects acquisition-related expenses in the form of
higher personnel expense, equipment rentals, depreciation and
maintenance. Additionally, owned real estate expenses, FDIC insurance
expense and amortization expense also increased. Noninterest sundry
expense also included a fourth quarter 1992 restructuring charge
of $162 million.
During 1992, FDIC insurance expense increased to $107 million,
a 38 percent increase from 1991.
Costs related to owned real estate were $176 million in 1992, compared
with $90 million in 1991.
Income taxes increased to $196 million in 1992 from $71 million in 1991.
This increase was due primarily to an increase in income before taxes. The
1992 effective tax rate was 33.8 percent, compared with 16.9 percent in
1991. This increase, and the difference between the effective rate and the
federal statutory rate of 34 percent, was primarily due to the increase in
income before taxes and an increase in state taxes, a decrease in income
exempt from taxes, and a reduction in the Florida National-related
charge-offs and consolidation expenses that were accounted for under
purchase accounting treatment.
Average earning assets in 1992 were $53.8 billion compared with $49.5
billion in 1991. Year-end 1992 earning assets were $56.2 billion,
compared with $51.9 billion in 1991. The increase was primarily
attributable to acquisitions.
At December 31, 1992, we had
$5.2 billion in securities available
for sale. At year-end 1992, the market value of securities available for
sale was $54 million above their book value. Information related to
unrealized gains and losses and realized gains and losses is provided in
Table 8.
The average yield earned on securities available for sale in 1992 was 6.46
percent. The average maturity of the portfolio was 2.41 years at December
31, 1992.
At December 31, 1992, we had $6.6 billion in investment securities.
The average yield earned on investment securities in 1992 was 8.15
percent, compared with 9.19 percent in 1991. The average maturity of the
portfolio was 5.24 years at December 31, 1992, compared
with 6.80 years at year-end 1991.
Net loans were $41.9 billion
at December 31, 1992, compared with $41.4 billion at year-end 1991. The
increase primarily reflected the loan portfolio acquired with the Meritor
Savings, FA acquisition on December 3, 1992. Net loans at year-end 1992
included $4.4 billion of acquired Southeast Banks performing loans, down
from $6.2 billion
at year-end 1991. The decline was primarily attributable to maturing
loans. At December 31, 1992, the estimated fair value of the loan
portfolio was $42.2 billion.
The loan portfolio at December 31, 1992, was composed of 48 percent
commercial loans and 52 percent
consumer loans. The portfolio mix
and concentration did not change
significantly from year-end 1991.
Consumer loans increased 9 percent from year-end 1991. The increase
reflected increased residential mortgage originations and securitized
credit card receivables that were repurchased during 1992.
Unused loan commitments, primarily related to commercial loans, were
$13.6 billion at year-end 1992 and 1991. Commercial and standby letters
of credit were $1.4 billion at year-end 1992 and 1991.
The average yield earned
on loans in 1992 was 9.02 percent, compared with 9.95 percent in 1991.
The average prime rate during 1992 was 6.26 percent and during 1991,
it was 8.46 percent. Loan yields
decreased less than the prime rate primarily because of the effect of
fixed rate loans on the total loan portfolio yield.
At year-end 1992, 79 percent of our commercial loans, excluding leases,
were floating rate loans.
Commercial real estate loans amounted to 18 percent of the total
portfolio, or $7.7 billion at December 31, 1992, compared with 20 percent,
or $8.4 billion at December 31, 1991. This portfolio includes commercial
real estate mortgage loans of $5.8 billion.
At December 31, 1992, outstanding HLT loans amounted to $856 million,
compared with $1.2 billion at year-end 1991.
Nonperforming assets at December 31, 1992, were $1.35 billion, or 3.19
percent of net loans and foreclosed properties, compared with $1.72
billion, or 4.10 percent, at December 31, 1991.
Sixty-five percent of the nonperforming assets were secured by real
estate at December 31, 1992 and 1991.
The level of nonperforming assets can be attributed primarily to lower
commercial real estate values and sluggish economic activity.
In addition to these nonperforming assets, at December 31, 1992,
accruing loans 90 days past due were $86 million, compared with $144
million at December 31, 1991.
Net charge-offs as a percentage of average net loans were .86 percent in
1992, compared with 1.48 percent during 1991.
Included in 1992 net charge-offs were $114 million from Florida and $40
million from North Carolina.
The loan loss provision was $415 million in 1992, compared with $648
million in 1991. The decrease in the provision was based primarily upon
current economic conditions, lower levels of nonperforming
assets, the maturity of
the nonperforming asset portfolio,
21
Management's Analysis of Operations
First Union Corporation and Subsidiaries
and current and projected lower levels
of charge-offs. Reserve levels are continually evaluated in relation to
the changing economic environment.
The allowance for loan losses of $941 million at December 31, 1992,
marked an increase from previous reporting periods as indicated in Table
12. The increase at year-end 1992 primarily reflected the addition of the
acquired reserves.
Since December 31, 1991, the loan loss allowance has increased
as a percentage of net loans, non-
accrual and restructured loans, and nonperforming assets, as indicated in
Table 12. These percentages include the acquired Southeast Banks
performing loans and exclude the acquired Southeast Banks segregated
assets.
At December 31, 1992, acquired Southeast Banks segregated assets
amounted to $576 million, or $531 million net of the $45 million
allowance referred to above, compared with $695 million, or $641 million
net of a $54 million allowance, at December 31, 1991.
Accruing loans 90 days
past due included in the acquired Southeast Banks performing loan
portfolio were $40 million at December 31, 1992, compared with $215
million at December 31, 1991. These loans are subject to the terms of the
FDIC loss-sharing arrangement.
Net charge-offs of $29 million, representing First Union's approximately
15 percent share of the losses on acquired Southeast Banks loans, were
deducted from the allowance for segregated assets in 1992.
Core deposits were $47.0 billion at December 31, 1992, compared with
$43.8 billion at year-end 1991, primarily reflecting the acquisition of
deposits from Meritor Savings, FA and from the Resolution Trust
Corporation in 1992.
Compared with 1991, average noninterest-bearing deposits increased
from 16 percent to 18 percent of average core deposits
in 1992. The Six-Year Net Interest Income Summary provides additional
information about average core deposits.
The portion of core deposits
in higher-rate, other consumer time deposits decreased from 44 percent
at year-end 1991 to 38 percent at December 31, 1992. Initially, this
portion increased with acquisitions of savings bank deposits because
these institutions in general tend
to have a higher percentage of their deposits in other consumer time than
commercial banks typically have. However, as market rates have declined
and the difference between yields on time deposits and savings and
transaction accounts has diminished, some customers have shifted their
other consumer time deposits either into other deposit products or into
other investments.
At December 31, 1992, other consumer time deposits were six percent
lower than at year-end 1991. At the same time, noninterest-bearing
deposits and savings and NOW deposits were 21 percent higher than at
year-end 1991.
Average purchased funds in 1992 were $8.8 billion, compared with $12.2
billion in 1991.
Long-term debt was 71 percent
of total stockholders' equity at December 31, 1992, and 68 percent at
year-end 1991.
The increase resulted from debt issuances in 1992 to take advantage of
the low interest rate environment, with the proceeds being used for
general corporate purposes.
Common stockholders' equity was $4.16 billion at year-end 1992,
compared with $3.72 billion at year-end 1991. Total stockholders' equity
was $4.46 billion at year-end 1992, compared with $3.86 billion at year-
end 1991. The increase in equity was the result of capital raised through a
common stock offering, retained earnings and capital raised through the
dividend reinvestment and employee stock option and purchase plans. This
increase was partially offset by the redemption of $100 million of
preferred stock.
Series 1990 preferred stock
cash dividends averaging 8.73 percent were paid for the year
ended December 31, 1992. We
paid $198 million in dividends
to preferred and common stockholders in 1992.
Our subsidiaries had $280
million available for dividends at December 31, 1992. During 1992, our
subsidiaries paid $121 million
in cash dividends.
At December 31, 1992, the corporation's tier 1 and total capital ratios
(without giving effect to proposed changes in the treatment of certain
intangibles) were 9.22 percent and 14.31 percent, respectively.
At December 31, 1992, the subsidiary national banks met the FDIC capital
ratio and leverage ratio requirements for well capitalized banks.
Net cash provided from operations primarily results from net income
adjusted for the following noncash accounting items: the provision for
loan losses and foreclosed properties, depreciation and amortization, and
deferred income tax benefits. These items decreased from $799 million in
1991 to $704 million in 1992. This cash was available during 1992 to
increase earning assets and to reduce borrowings by $498 million and to
pay dividends of $206 million.
22
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 1
SELECTED STATISTICAL DATA
YEARS ENDED DECEMBER 31,
1993 1992 1991 1990 1989 1988
Profitability
Net interest margin 4.78% 4.77 4.08 3.99 4.15 4.52
Net income per common share $ 4.73 2.23 2.24 1.68 2.62 2.89
Return on common stockholders'
equity* 17.42% 9.08 10.03 7.78 12.78 15.63
Return on assets* 1.20 .63 .63 .50 .82 1.00
Overhead efficiency ratio** 62.03 69.66 61.59 65.38 66.48 65.06
Dividend payout ratio on common
shares 31.71 49.34 46.18 65.92 39.09 30.89
Capital Adequacy***
Tier 1 capital to risk-weighted
assets 9.14 9.22 7.56 6.53 -- --
Asset Quality****
Net charge-offs to loans, net* .58 .86 1.48 .68 .39 .54
Allowance for loan losses to loans,
net 2.18 2.24 2.06 1.95 1.12 1.18
Allowance for loan losses to
nonaccrual and restructured
loans 147 96 72 77 131 150
Allowance for loan losses to
nonperforming assets 111 70 50 56 89 103
Nonperforming assets to loans, net
and foreclosed properties 1.95 3.19 4.10 3.42 1.25 1.14
One-Year Growth*
Loans, net 5.72 10.60 4.00 21.59 14.91 17.11
Core deposits 9.45 20.89 14.22 23.38 7.80 8.24
Stockholders' equity 14.84 21.53 6.87 17.05 9.95 8.62
Internal capital 11.34% 4.24 4.88 2.40 7.74 10.74
* Based on average balances.
** The overhead efficiency ratio is equal to noninterest expense divided by net
operating revenue. Net operating revenue is equal to the sum of
tax-equivalent net interest income and noninterest income.
*** Capital ratios for 1990-1992 are not restated.
**** Excluding Southeast Banks and First American segregated assets.
23
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 2
CONSOLIDATED SUMMARIES OF INCOME,
PER SHARE AND BALANCE SHEET DATA
YEARS ENDED DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1993 1992 1991 1990 1989 1988
Consolidated Summaries of Income
Interest income $ 4,556,332 4,479,385 4,647,440 4,829,520 4,179,100 3,525,970
Interest income* $ 4,657,100 4,583,916 4,767,943 4,966,954 4,327,254 3,682,644
Interest expense 1,790,439 2,020,968 2,742,996 3,094,334 2,703,623 2,078,624
Net interest income* 2,866,661 2,562,948 2,024,947 1,872,620 1,623,631 1,604,020
Provision for loan losses 221,753 414,708 648,284 425,409 139,291 107,551
Net interest income after provision
for loan losses* 2,644,908 2,148,240 1,376,663 1,447,211 1,484,340 1,496,469
Securities available for sale
transactions 25,767 34,402 -- -- -- --
Investment security transactions 7,435 (2,881) 155,048 7,884 19,018 36,677
Noninterest income 1,165,086 1,032,651 914,511 690,672 532,295 522,973
Noninterest expense 2,521,647 2,526,678 1,905,918 1,680,973 1,445,836 1,407,715
Income before income taxes 1,321,549 685,734 540,304 464,794 589,817 648,404
Income taxes 403,260 196,152 71,070 64,993 87,840 98,442
Tax-equivalent adjustment 100,768 104,531 120,503 137,434 148,154 156,674
Net income 817,521 385,051 348,731 262,367 353,823 393,288
Dividends on preferred stock 24,900 31,979 34,570 33,868 1,380 1,392
Net income applicable to common
stockholders $ 792,621 353,072 314,161 228,499 352,443 391,896
Per Common Share Data
Net income $ 4.73 2.23 2.24 1.68 2.62 2.89
Average common shares 167,691,739 158,683,206 140,003,166 135,621,838 134,446,048 135,549,174
Average common stockholders' equity $ 4,550,048 3,889,256 3,131,716 2,937,441 2,758,156 2,507,201
Common stock price:
High 51 1/2 44 7/8 30 7/8 21 3/4 26 3/4 23 3/4
Low 37 7/8 29 1/2 13 3/4 13 7/8 19 7/8 19 3/8
Period-end $ 41 1/4 43 5/8 30 15 3/8 20 5/8 22 1/8
To earnings ratio** 8.72X 19.61 13.39 9.15 7.87 7.66
To book value 143% 173 120 70 101 117
Cash dividends $ 1.50 1.28 1.12 1.08 1.00 .86
Book value 28.90 25.25 23.23 21.81 20.49 18.98
Per Preferred Share Data
Series 1990 preferred stock price:
High 55 1/2 55 1/2 51 1/4 46 -- --
Low 52 51 39 1/8 41 1/8 -- --
Period-end 52 3/8 53 5/8 51 41 1/8 -- --
Cash dividends $ 3.8876 4.3626 4.6252 4.6049 -- --
Dividend rate 7.78% 8.73 9.25 9.99 -- --
Balance Sheet Data
Assets $ 70,786,969 63,828,031 59,273,177 54,588,410 45,506,847 41,446,746
Long-term debt $ 3,061,944 3,151,260 2,630,930 1,850,860 1,514,834 1,201,431
*Tax-equivalent.
**Based on net income per common share.
24
TABLE 3
NONINTEREST INCOME
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
Trading account profits $ 43,007 22,908 20,053 13,599 8,411 4,837
Service charges on deposit accounts 420,285 386,118 293,075 248,891 184,966 163,154
Mortgage banking income 138,608 155,800 135,557 97,809 68,695 69,151
Gain on sale of mortgage servicing
rights 973 10,637 39,186 9,823 23,500 41,070
Capital management income 201,875 177,375 133,126 104,864 76,365 70,424
Securities available for sale
transactions 25,767 34,402 -- -- -- --
Investment security transactions 7,435 (2,881) 155,048 7,884 19,018 36,677
Merchant discounts 55,732 54,703 48,126 47,987 40,859 38,456
Insurance commissions 43,876 44,047 46,081 46,748 36,957 33,484
Sundry income 260,730 181,063 199,307 120,951 92,542 102,397
Total $ 1,198,288 1,064,172 1,069,559 698,556 551,313 559,650
25
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 4
NONINTEREST EXPENSE
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
Personnel Expense
Salaries $ 938,409 886,702 735,564 695,152 623,337 617,411
Other benefits 217,490 178,600 137,617 126,995 114,061 95,214
Total 1,155,899 1,065,302 873,181 822,147 737,398 712,625
Occupancy 229,118 238,728 213,424 178,338 146,791 144,352
Equipment rentals, depreciation and
maintenance 189,589 167,063 132,858 123,026 99,392 98,078
Advertising 22,541 23,082 19,488 19,055 23,237 27,013
Telephone 53,023 51,000 43,470 46,557 38,913 41,282
Travel 42,330 33,937 25,084 25,017 21,813 25,251
Postage 39,538 40,747 35,616 29,251 26,063 27,040
Printing and office supplies 53,304 35,310 27,936 32,497 30,074 33,206
FDIC insurance 118,429 107,392 77,808 44,185 26,017 23,373
Other insurance 18,233 20,641 18,530 19,474 16,115 15,170
Professional fees 52,251 61,810 40,109 28,430 25,301 25,348
Data processing 41,440 31,906 20,419 19,149 33,361 35,157
Owned real estate expense 40,633 176,109 90,181 35,735 17,036 12,402
Mortgage servicing amortization 106,942 37,422 27,149 23,448 16,552 7,537
Other amortization 100,145 83,455 66,139 75,184 36,561 37,978
Sundry 258,232 352,774 194,526 159,480 151,212 141,903
Total $ 2,521,647 2,526,678 1,905,918 1,680,973 1,445,836 1,407,715
Overhead efficiency ratio* 62.03% 69.66 61.59 65.38 66.48 65.06
* The overhead efficiency ratio is equal to noninterest expense divided by net
operating revenue. Net operating revenue is equal to the sum of tax-equivalent
net interest income and noninterest income.
26
TABLE 5
INTERNAL CAPITAL GROWTH
AND DIVIDEND PAYOUT RATIOS
YEARS ENDED DECEMBER 31,
1993 1992 1991 1990 1989 1988
Internal Capital Growth*
Assets to stockholders' equity 14.07X 14.51 15.89 16.07 15.59 15.65
X
Return on assets 1.20% .63 .63 .50 .82 1.00
Return on total stockholders' equity 16.89% 9.14 10.06 8.09 12.76 15.60
X
Earnings retained 67.13% 46.45 48.48 29.68 60.67 68.87
Internal capital growth 11.34% 4.24 4.88 2.40 7.74 10.74
Dividend Payout Ratio On
Common shares 31.71% 49.34 46.18 65.92 39.09 30.89
Preferred and common shares 32.87% 53.55 51.52 70.32 39.33 31.13
Return on common stockholders' equity** 17.42% 9.08 10.03 7.78 12.78 15.63
* Based on average balances and net income.
** Based on average balances and net income applicable to common stockholders.
27
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 6
SELECTED QUARTERLY DATA
(UNAUDITED)
1993 1992
(IN THOUSANDS EXCEPT
PER SHARE DATA) FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
Consolidated Net Income
Interest income $1,171,521 1,171,626 1,113,283 1,099,902 1,103,281 1,106,728 1,144,749 1,124,627
Interest expense 463,394 470,491 428,987 427,567 438,321 475,961 538,070 568,616
Net interest income 708,127 701,135 684,296 672,335 664,960 630,767 606,679 556,011
Provision for loan losses 49,973 50,001 61,450 60,329 79,304 83,297 117,140 134,967
Net interest income after
provision for loan losses 658,154 651,134 622,846 612,006 585,656 547,470 489,539 421,044
Securities available for sale
transactions 2,804 4,142 1,505 17,316 (1,286) 17,278 8,909 9,501
Investment security transactions 3,049 815 3,571 -- 769 1,435 (3,805) (1,280)
Noninterest income 317,727 287,998 305,356 254,005 255,196 255,252 256,213 265,990
Noninterest expense 687,922 664,388 591,042 578,295 783,505 594,097 565,061 584,015
Income before income taxes 293,812 279,701 342,236 305,032 56,830 227,338 185,795 111,240
Income taxes 98,469 84,286 115,465 105,040 39,394 65,130 55,284 36,344
Net income 195,343 195,415 226,771 199,992 17,436 162,208 130,511 74,896
Dividends on preferred stock 5,489 6,240 6,167 7,004 6,887 7,322 7,776 9,994
Net income applicable to common
stockholders $ 189,854 189,175 220,604 192,988 10,549 154,886 122,735 64,902
Per Common Share Data
Net income $ 1.12 1.12 1.32 1.17 .05 .96 .78 .43
Cash dividends .40 .40 .35 .35 .35 .31 .31 .31
Common stock price:
High 48 1/8 49 5/8 51 1/2 50 7/8 44 7/8 40 39 3/4 38 1/4
Low 37 7/8 43 1/2 40 42 1/4 35 7/8 35 34 3/4 29 1/2
Quarter-end $ 41 1/4 47 5/8 48 1/2 47 3/4 43 5/8 36 1/4 37 7/8 35 3/4
Per Preferred Share Data
Series 1990 preferred stock
price:
High $ 53 7/8 55 1/2 55 1/8 55 3/8 54 3/4 55 1/2 54 1/4 52 7/8
Low 52 53 1/4 53 1/8 53 52 3/8 53 1/2 51 7/8 51
Quarter-end 52 3/8 53 1/2 54 7/8 53 53 5/8 54 3/8 53 7/8 52 1/4
Cash dividends $ .8688 .9875 .9750 1.0563 1.0375 1.1063 1.1250 1.0938
Dividend rate 6.95% 7.90 7.80 8.45 8.30 8.85 9.00 8.75
Selected Ratios*
Return on assets** 1.07% 1.08 1.39 1.28 .11 1.06 .85 .51
Return on common stockholders'
equity*** 15.55 16.11 19.93 18.41 1.01 15.25 12.94 7.45
Stockholders' equity to assets 7.10% 6.92 7.23 7.20 7.14 7.14 6.69 6.55
First Union Corporation, As
Originally Reported
Net interest income $ -- -- -- -- 541,785 523,575 493,933 448,867
Net income -- -- -- -- 134,791 147,126 125,436 107,859
Net income applicable to common
stockholders -- -- -- -- 128,236 140,136 117,992 98,198
Net income per common share $ -- -- -- -- .95 1.06 .90 .81
The information included herein should be read in conjunction with the
acquisitions discussion in Note 2 to the consolidated financial statements.
* Based on average balances.
** Based on net income.
*** Based on net income applicable to common stockholders.
28
TABLE 7
GROWTH THROUGH ACQUISITIONS
STOCKHOLDERS' NET
(IN THOUSANDS) ASSETS LOANS, NET DEPOSITS EQUITY INCOME
December 31, 1987, as reported $ 27,629,481 15,388,490 17,425,316 1,794,405 283,122
Pooling of interests acquisitions 10,904,462 8,089,149 8,492,443 635,739 86,588
December 31, 1987, as restated 38,533,943 23,477,639 25,917,759 2,430,144 369,710
1988 acquisition 939,454 498,578 871,281 -- --
Growth in operations 1,973,349 4,155,409 2,691,528 249,320 393,288
December 31, 1988, as reported 41,446,746 28,131,626 29,480,568 2,679,464 393,288
Growth in operations 4,060,101 3,469,150 2,051,202 203,222 353,823
December 31, 1989, as reported 45,506,847 31,600,776 31,531,770 2,882,686 353,823
1990 acquisition 7,946,973 4,174,478 5,727,330 324,702 --
Growth in operations 1,134,590 275,465 935,168 92,984 262,367
December 31, 1990, as reported 54,588,410 36,050,719 38,194,268 3,300,372 262,367
1991 acquisitions 12,322,456 7,025,621 9,921,421 -- --
Growth (reduction) in operations (7,637,689) (1,692,760) (939,466) 560,425 348,731
December 31, 1991, as reported 59,273,177 41,383,580 47,176,223 3,860,797 348,731
1992 acquisitions 3,739,039 1,773,797 3,645,316 -- --
Growth (reduction) in operations 815,815 (1,233,610) (1,670,574) 598,366 385,051
December 31, 1992, as reported 63,828,031 41,923,767 49,150,965 4,459,163 385,051
1993 acquisitions 7,785,479 4,380,362 6,302,873 -- --
Growth (reduction) in operations (826,541) 572,048 (1,711,427) 748,462 817,521
December 31, 1993, as reported $ 70,786,969 46,876,177 53,742,411 5,207,625 817,521
Acquisitions (those greater than $1.0 billion in acquired assets and/or
deposits) include the purchase acquisitions of Florida Commercial Banks, Inc. in
1988; Florida National Banks of Florida, Inc. in 1990; the Florida Federal
Savings, FSB and Southeast Banks transactions in 1991; and the Flagler Savings
and Loan Association transaction and PSFS Thrift Holding Company acquisition in
1992; the pooling of interests acquisitions of South Carolina Federal
Corporation, DFSoutheastern, Inc. and Dominion Bankshares Corporation in 1993;
and the Georgia Federal Bank, FSB and First American Metro Corp. purchase
acquisitions in 1993. Stockholders' equity includes public offerings of common
stock amounting to $234,934,000 in 1991 and $330,045,000 in 1992.
29
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 8
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1993 1 YEAR 1-5 AFTER 10 GROSS UNREALIZED
(IN THOUSANDS) OR LESS YEARS 5-10 YEARS YEARS TOTAL GAINS LOSSES MARKET VALUE
Carrying Value
U.S. Treasury $ 3,177,119 1,249,298 -- -- 4,426,417 3,609 (7,315) 4,422,711
U.S. Government
agencies 114,531 1,646,429 1,494,136 555 3,255,651 43,814 (270) 3,299,195
Collateralized
mortgage
obligations 1,006,973 1,226,569 -- -- 2,233,542 13,389 (8,825) 2,238,106
Other 438,585 1,121,571 35,474 233,702 1,829,332 95,296 (255) 1,924,373
Total $ 4,737,208 5,243,867 1,529,610 234,257 11,744,942 156,108 (16,665) 11,884,385
Carrying Value
Debt securities $ 4,737,208 5,243,867 1,529,610 860 11,511,545 119,624 (16,445) 11,614,724
Sundry securities -- -- -- 233,397 233,397 36,484 (220) 269,661
Total $ 4,737,208 5,243,867 1,529,610 234,257 11,744,942 156,108 (16,665) 11,884,385
Market Value
Debt securities $ 4,742,741 5,328,847 1,542,264 872 11,614,724
Sundry securities -- -- -- 269,661 269,661
Total $ 4,742,741 5,328,847 1,542,264 270,533 11,884,385
Weighted Average Yield
U.S. Treasury 3.84% 5.23 -- -- 4.23
U.S. Government
agencies 3.36 6.45 6.00 6.68 6.14
Collateralized
mortgage
obligations 5.03 5.13 -- -- 5.09
Other 5.17 7.71 5.74 7.68 7.06
Consolidated 4.21% 6.12 6.00 7.68 5.36
AVERAGE
MATURITY
(IN THOUSANDS) IN YEARS
Carrying Value
U.S. Treasury 1.34
U.S. Government
agencies 4.29
Collateralized
mortgage
obligations 1.33
Other 2.40
Total 2.32
Carrying Value
Debt securities
Sundry securities
Total
Market Value
Debt securities
Sundry securities
Total
Weighted Average Yield
U.S. Treasury
U.S. Government
agencies
Collateralized
mortgage
obligations
Other
Consolidated
30
DECEMBER 31, 1992 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $2,352,822 316,405 130 241 2,669,598 9,767 (763) 2,678,602
U.S. Government agencies 32,644 206,864 60,710 212,878 513,096 13,179 (905) 525,370
Collateralized mortgage
obligations 299,755 501,431 40,217 31,562 872,965 1,812 (2,260) 872,517
State, county and
municipal 50,708 240,672 -- 2,186 293,566 26,456 (9) 320,013
Other 220,913 416,013 98,380 118,813 854,119 11,408 (5,062) 860,465
Total $2,956,842 1,681,385 199,437 365,680 5,203,344 62,622 (8,999) 5,256,967
Carrying Value
Debt securities $2,956,842 1,681,385 199,437 257,139 5,094,803 57,706 (8,521) 5,143,988
Sundry securities -- -- -- 108,541 108,541 4,916 (478) 112,979
Total $2,956,842 1,681,385 199,437 365,680 5,203,344 62,622 (8,999) 5,256,967
Market Value
Debt securities $2,964,538 1,714,200 199,863 265,438 5,144,039
Sundry securities -- -- -- 112,928 112,928
Total $2,964,538 1,714,200 199,863 378,366 5,256,967
Weighted Average Yield
U.S. Treasury 3.63% 5.82 8.46 7.88 3.89
U.S. Government agencies 5.13 7.21 8.06 8.51 7.72
Collateralized mortgage
obligations 6.17 4.73 7.09 7.95 5.45
State, county and
municipal 13.08 13.03 -- 12.95 13.03
Other 5.05 7.72 7.57 9.29 7.23
Consolidated 4.18% 7.17 7.62 8.74 5.60
AVERAGE
MATURITY IN
(IN THOUSANDS) IN YEARS
Carrying Value
U.S. Treasury .56
U.S. Government agencies 11.63
Collateralized mortgage
obligations 2.35
State, county and
municipal 2.24
Other 2.80
Total 2.41
Carrying Value
Debt securities
Sundry securities
Total
Market Value
Debt securities
Sundry securities
Total
Weighted Average Yield
U.S. Treasury
U.S. Government agencies
Collateralized mortgage
obligations
State, county and
municipal
Other
Consolidated
1991
CARRYING MARKET
(IN THOUSANDS) VALUE VALUE
U.S. Government Agencies
1 year or less $ 122,506 125,174
1-5 years 490,025 500,695
5-10 years 560,431 572,635
After 10 years 149,989 154,066
Total $1,322,951 1,352,570
Gross Unrealized
Gains $ 32,288
Losses $ 2,669
Average maturity in years 5.93
WEIGHTED
AVERAGE
(IN THOUSANDS) YIELD
U.S. Government Agencies
1 year or less 7.92%
15 years 7.91
510 years 7.91
After 10 years 8.20
Total 7.94%
Gross Unrealized
Gains
Losses
Average maturity in years
Included in Other at December 31, 1993, are $1,231,447,000 of securities that
are denominated in currencies other than the U.S. dollar. The currency exchange
rates were hedged utilizing both on and off-balance sheet instruments to
minimize the exposure to currency revaluation risks. At December 31, 1993, these
securities had a weighted average maturity of 2.78 years and a weighted average
yield of 7.82 percent. The weighted average U.S. equivalent yield for
comparative purposes of these securities was 5.59 percent based on a weighted
average funding cost differential of (2.23) percent.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. The aging of mortgage-backed securities is based on their
weighted average maturities at December 31, 1993 and 1992. Average maturity in
years excludes preferred and common stocks and money market funds.
Yields related to securities exempt from both federal and state income taxes
(primarily state, county and municipal securities), federal income taxes only or
state income taxes only are stated on a fully tax-equivalent basis. They are
reduced by the nondeductible portion of interest expense, assuming a federal tax
rate of 35 percent in 1993 and 34 percent in 1992 and 1991; a North Carolina
state tax rate of 7.905 percent in 1993, 7.9825 percent in 1992 and 8.06 percent
in 1991; a Georgia and Tennessee state tax rate of 6 percent; a South Carolina
state tax rate of 4.5 percent; a Florida effective state tax rate of 5.5
percent; a Maryland state tax rate of 7 percent in 1993; and a Washington, D.C.
tax rate of 10.25 percent in 1993, respectively.
Securities available for sale at December 31, 1993, do not include commitments
to purchase $267,813,000 of additional securities that at December 31, 1993, had
a market value of $267,969,000. Securities available for sale at December 31,
1993 and 1992, include the carrying value of $513,390,000 and $54,892,000,
respectively, of securities which have been sold for future settlement. Related
gains and losses are accounted for on a trade date basis. Gross gains and losses
realized on the sale of debt securities in 1993 were $28,818,000 and $9,553,000,
respectively, and on sundry securities gross gains and losses realized were
$6,570,000 and $68,000, respectively. Gross gains and losses realized on the
sale of debt securities in 1992 were $42,014,000 and $7,419,000, respectively,
and on sundry securities gross gains and losses realized were $230,000 and
$423,000, respectively.
31
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 9
INVESTMENT SECURITIES
DECEMBER 31, 1993 1 YEAR 1-5 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS 5-10 YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $ 550 -- -- -- 550 -- (1) 549
U.S. Government agencies 311,750 814,667 30,232 -- 1,156,649 44,054 (1,222) 1,199,481
State, county and
municipal 80,863 508,477 242,072 511,523 1,342,935 183,230 (756) 1,525,409
Other -- -- 6,200 186,142 192,342 13,358 -- 205,700
Total $ 393,163 1,323,144 278,504 697,665 2,692,476 240,642 (1,979) 2,931,139
Carrying Value
Debt securities $ 393,163 1,323,144 278,504 511,530 2,506,341 227,730 (1,979) 2,732,092
Sundry securities -- -- -- 186,135 186,135 12,912 -- 199,047
Total $ 393,163 1,323,144 278,504 697,665 2,692,476 240,642 (1,979) 2,931,139
Market Value
Debt securities $ 401,304 1,399,666 311,652 619,470 2,732,092
Sundry securities -- -- -- 199,047 199,047
Total $ 401,304 1,399,666 311,652 818,517 2,931,139
Weighted Average Yield
U.S. Treasury 2.88% -- -- -- 2.88
U.S. Government agencies 4.95 7.14 6.60 -- 6.53
State, county and
municipal 10.61 11.49 11.48 12.24 11.72
Other -- -- 7.77 8.09 8.08
Consolidated 6.11% 8.81 10.87 11.14 9.23
AVERAGE
MATURITY
(IN THOUSANDS) IN YEARS
Carrying Value
U.S. Treasury .04
U.S. Government agencies 1.87
State, county and
municipal 8.03
Other 8.00
Total 5.19
Carrying Value
Debt securities
Sundry securities
Total
Market Value
Debt securities
Sundry securities
Total
Weighted Average Yield
U.S. Treasury
U.S. Government agencies
State, county and
municipal
Other
Consolidated
32
DECEMBER 31, 1992 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $ 53,985 258,553 -- -- 312,538 1,451 (1,212) 312,777
U.S. Government agencies 26,265 1,983,165 1,311,018 5,147 3,325,595 61,527 (4,541) 3,382,581
Collateralized mortgage
obligations 137,364 1,238,654 -- 3,527 1,379,545 6,708 (9,337) 1,376,916
State, county and municipal 4,230 118,399 257,274 641,842 1,021,745 123,997 (1,181) 1,144,561
Other 159,501 161,670 4,454 268,290 593,915 15,874 (1,558) 608,231
Total $ 381,345 3,760,441 1,572,746 918,806 6,633,338 209,557 (17,829) 6,825,066
Carrying Value
Debt securities $ 381,345 3,760,441 1,572,746 652,688 6,367,220 197,901 (16,447) 6,548,674
Sundry securities -- -- -- 266,118 266,118 11,656 (1,382) 276,392
Total $ 381,345 3,760,441 1,572,746 918,806 6,633,338 209,557 (17,829) 6,825,066
Market Value
Debt securities $ 379,517 3,814,483 1,617,925 736,749 6,548,674
Sundry securities -- -- -- 276,392 276,392
Total $ 379,517 3,814,483 1,617,925 1,013,141 6,825,066
Weighted Average Yield
U.S. Treasury 3.99% 4.81 -- -- 4.67
U.S. Government agencies 6.47 8.36 8.06 6.66 8.22
Collateralized mortgage
obligations 5.67 6.06 -- 7.43 6.03
State, county and municipal 9.55 12.09 11.55 12.24 12.04
Other 3.85 6.87 7.39 8.37 6.74
Consolidated 4.77% 7.41 8.63 11.06 8.05
AVERAGE
MATURITY
(IN THOUSANDS) IN YEARS
Carrying Value
U.S. Treasury 2.02
U.S. Government agencies 4.88
Collateralized mortgage
obligations 2.45
State, county and municipal 12.30
Other 1.76
Total 5.24
Carrying Value
Debt securities
Sundry securities
Total
Market Value
Debt securities
Sundry securities
Total
Weighted Average Yield
U.S. Treasury
U.S. Government agencies
Collateralized mortgage
obligations
State, county and municipal
Other
Consolidated
33
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1991 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $ 17,802 8,392 -- 5,490 31,684 738 (15) 32,407
U.S. Government agencies 58,192 1,582,691 1,083,043 397,900 3,121,826 95,589 (10,976) 3,206,439
Collateralized mortgage
obligations 10,716 1,413,297 754 377 1,425,144 30,797 (297) 1,455,644
State, county and municipal 116,535 389,851 304,101 832,341 1,642,828 169,696 (3,687) 1,808,837
Other 97,107 515,039 147,887 353,731 1,113,764 13,654 (22,242) 1,105,176
Total $300,352 3,909,270 1,535,785 1,589,839 7,335,246 310,474 (37,217) 7,608,503
Carrying Value
Debt securities $271,077 3,908,673 1,533,399 1,250,172 6,963,321 304,041 (29,176) 7,238,186
Sundry securities 29,275 597 2,386 339,667 371,925 6,433 (8,041) 370,317
Total $300,352 3,909,270 1,535,785 1,589,839 7,335,246 310,474 (37,217) 7,608,503
Market Value
Debt securities $272,356 4,022,791 1,583,006 1,360,033 7,238,186
Sundry securities 29,242 499 1,995 338,581 370,317
Total $301,598 4,023,290 1,585,001 1,698,614 7,608,503
Weighted Average Yield
U.S. Treasury 7.05% 7.21 -- 8.05 7.26
U.S. Government agencies 7.53 8.90 8.90 8.53 8.83
Collateralized mortgage
obligations 7.39 8.03 8.36 8.22 8.03
State, county and municipal 11.48 12.37 11.45 12.05 11.97
Other 8.91 7.66 8.23 9.70 8.49
Consolidated 9.47% 8.77 9.34 10.63 9.32
AVERAGE
MATURITY
(IN THOUSANDS) IN YEARS
Carrying Value
U.S. Treasury 3.35
U.S. Government agencies 8.00
Collateralized mortgage
obligations 2.01
State, county and municipal 10.41
Other 3.39
Total 6.80
Carrying Value
Debt securities
Sundry securities
Total
Market Value
Debt securities
Sundry securities
Total
Weighted Average Yield
U.S. Treasury
U.S. Government agencies
Collateralized mortgage
obligations
State, county and municipal
Other
Consolidated
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties. The aging of mortgage-backed securities is based on their
weighted average maturities at December 31, 1993, 1992 and 1991. Average
maturity in years excludes preferred and common stocks and money market funds.
Yields related to securities exempt from both federal and state income taxes,
federal income taxes only or state income taxes only are stated on a fully
tax-equivalent basis. They are reduced by the nondeductible portion of interest
expense, assuming a federal tax rate of 35 percent in 1993 and 34 percent in
1992 and 1991; a North Carolina state tax rate of 7.905 percent in 1993, 7.9825
percent in 1992 and 8.06 percent in 1991; a Georgia and Tennessee state tax rate
of 6 percent; a South Carolina state tax rate of 4.5 percent; a Florida
effective state tax rate of 5.5 percent; a Maryland state tax rate of 7 percent
in 1993; and a Washington, D.C. tax rate of 10.25 percent in 1993, respectively.
There were no commitments to purchase or sell investment securities at December
31, 1993. Gross gains and losses realized on the sale of debt securities in 1993
were $2,722,000 and $318,000, respectively, and on sundry securities $5,115,000
and $84,000, respectively. Gross gains and losses realized on the sale of debt
securities in 1992 were $19,035,000 and $19,100,000, respectively, and on sundry
securities $615,000 and $3,431,000, respectively. Gross gains and losses
realized on the sale of debt securities in 1991 were $156,505,000 and
$2,533,000, respectively, and on sundry securities $1,516,000 and $440,000,
respectively.
34
TABLE 10
LOANS
DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
First Union Corporation
Commercial
Commercial, financial and agricultural:
Taxable $ 12,509,283 10,532,842 10,854,321 9,946,557 8,065,193 7,614,729
Nontaxable 724,442 738,834 936,416 1,054,246 1,072,448 1,230,224
Total commercial, financial and
agricultural 13,233,725 11,271,676 11,790,737 11,000,803 9,137,641 8,844,953
Real estate-construction and other 1,664,694 1,886,319 3,014,877 3,380,426 2,732,422 2,108,967
Real estate-mortgage 5,834,894 5,782,780 5,421,698 4,067,445 4,431,718 3,875,655
Lease financing 962,599 1,033,809 1,109,525 1,184,196 1,143,820 936,775
Foreign 304,267 274,800 233,601 190,621 147,680 144,235
Total commercial 22,000,179 20,249,384 21,570,438 19,823,491 17,593,281 15,910,585
Retail
Real estate-mortgage* 13,318,058 10,775,107 9,406,329 7,173,064 6,245,386 5,373,773
Installment loans to individuals 11,891,999 11,260,708 10,850,557 9,485,633 8,101,924 7,190,499
Total retail 25,210,057 22,035,815 20,256,886 16,658,697 14,347,310 12,564,272
Total loans 47,210,236 42,285,199 41,827,324 36,482,188 31,940,591 28,474,857
Unearned Income
Loans 129,830 186,173 247,016 245,363 173,467 200,096
Lease financing 204,229 175,259 196,728 186,106 166,348 143,135
Total unearned income 334,059 361,432 443,744 431,469 339,815 343,231
Loans, net $ 46,876,177 41,923,767 41,383,580 36,050,719 31,600,776 28,131,626
Acquired Southeast Banks Loans**
Commercial
Commercial, financial and agricultural:
Taxable $ 532,388 775,016 1,240,007 -- -- --
Nontaxable 52,977 55,322 81,757 -- -- --
Total commercial, financial and
agricultural 585,365 830,338 1,321,764 -- -- --
Real estate-construction and other 87,954 160,785 322,513 -- -- --
Real estate-mortgage 695,243 862,903 1,228,902 -- -- --
Foreign 1,448 21,578 56,364 -- -- --
Total commercial 1,370,010 1,875,604 2,929,543 -- -- --
Retail
Real estate-mortgage 806,576 1,141,022 1,736,044 -- -- --
Installment loans to individuals 911,395 1,410,242 1,643,044 -- -- --
Total retail 1,717,971 2,551,264 3,379,088 -- -- --
Total loans 3,087,981 4,426,868 6,308,631 -- -- --
Unearned Income 1,757 10,104 59,755 -- -- --
Loans, net $ 3,086,224 4,416,764 6,248,876 -- -- --
The information included herein should be read in conjunction with the Loans
discussion in Note 1 to the consolidated financial statements.
*At December 31, 1993, $446,117,000 of securitized retail real estate mortgage
loans had a market value of $471,775,000.
**For a five-year period which began September 19, 1991, the FDIC will reimburse
First Union for 85 percent of all net charge-offs related to acquired
Southeast Banks loans except for installment loan reimbursements, which will
decline 5 percent per year to 65 percent by 1996.
35
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 11
CERTAIN LOAN MATURITIES AND SENSITIVITY
TO CHANGES IN INTEREST RATES
DECEMBER 31, 1993
COMMERCIAL,
FINANCIAL REAL ESTATE:
AND CONSTRUCTION REAL ESTATE:
(IN THOUSANDS) AGRICULTURAL AND OTHER MORTGAGE FOREIGN TOTAL
Fixed Rate
1 year or less $ 709,856 58,845 492,676 180,983 1,442,360
1-5 years 926,503 82,653 877,299 14,783 1,901,238
After 5 years 185,019 26,909 259,231 -- 471,159
Total 1,821,378 168,407 1,629,206 195,766 3,814,757
Adjustable Rate
1 year or less 7,020,312 785,748 1,481,829 108,325 9,396,214
1-5 years 3,521,542 638,283 2,379,647 176 6,539,648
After 5 years 870,493 72,256 344,212 -- 1,286,961
Total 11,412,347 1,496,287 4,205,688 108,501 17,222,823
Total $ 13,233,725 1,664,694 5,834,894 304,267 21,037,580
36
TABLE 12
ALLOWANCE FOR LOAN LOSSES
AND NONPERFORMING ASSETS*
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
Allowance for Loan Losses
Balance, beginning of year $ 940,804 851,830 702,685 355,442 331,058 337,620
Provision for loan losses 221,753 414,708 648,284 425,409 139,291 107,551
Reversal of tax effect of acquired bank
related net charge-offs included in
the provision for loan losses -- -- (16,386) -- -- --
Allowance of divested subsidiary and
other sales -- -- -- (7,769) (2,392) 1,231
Allowance of acquired loans and credit
cards 109,321 50,141 83,770 173,660 3,321 23,640
Transfer to allowance for segregated
asset losses -- (20,000) (13,000) -- -- --
Loan losses, net (251,687) (355,875) (553,523) (244,057) (115,836) (138,984)
Balance, end of year $ 1,020,191 940,804 851,830 702,685 355,442 331,058
(as % of loans, net) 2.18% 2.24 2.06 1.95 1.12 1.18
(as % of nonaccrual and restructured
loans) 147 96 72 77 131 150
(as % of nonperforming assets) 111% 70 50 56 89 103
Loan Losses
Commercial, financial and agricultural $ 121,373 142,600 189,648 116,060 56,153 100,357
Real estate-construction and other 25,829 52,524 164,044 49,183 17,009 12,858
Real estate-mortgage 66,105 80,934 118,555 4,196 6,034 1,588
Installment loans to individuals 116,253 130,493 124,536 108,117 64,472 52,687
Total 329,560 406,551 596,783 277,556 143,668 167,490
Loan Recoveries
Commercial, financial and agricultural 29,681 21,252 15,924 12,991 11,440 13,500
Real estate-construction and other 5,718 1,254 1,882 1,633 1,106 1,544
Real estate-mortgage 15,866 4,926 4,097 847 507 126
Installment loans to individuals 26,608 23,244 21,357 18,028 14,779 13,336
Total 77,873 50,676 43,260 33,499 27,832 28,506
Loan losses, net $ 251,687 355,875 553,523 244,057 115,836 138,984
(as % of average loans, net) .58% .86 1.48 .68 .39 .54
Nonperforming Assets
Nonaccrual loans
Commercial loans $ 242,241 407,583 494,649 300,334 122,407 125,564
Real estate loans 425,101 498,973 574,324 574,732 122,540 80,433
Total nonaccrual loans 667,342 906,556 1,068,973 875,066 244,947 205,997
Restructured loans 26,544 68,935 116,893 38,867 25,849 14,512
Foreclosed properties 222,503 375,559 530,524 330,984 126,531 102,014
Total nonperforming assets $ 916,389 1,351,050 1,716,390 1,244,917 397,327 322,523
(as % of loans, net and foreclosed
properties) 1.95% 3.19 4.10 3.42 1.25 1.14
Accruing loans past due 90 days $ 71,307 85,513 144,075 194,605 68,155 70,671
*Any loans classified by regulatory examiners as loss, doubtful, substandard or
special mention that have not been disclosed hereunder, or under the Loans or
Asset Quality narrative discussions do not (i) represent or result from trends
or uncertainties that management expects will materially impact future
operating results, liquidity or capital resources, or (ii) represent material
credits about which management is aware of any information that causes
management to have serious doubts as to the ability of such borrowers to
comply with the loan repayment terms. Southeast Banks and First American
segregated assets are not included herein.
37
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
TABLE 13
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
DECEMBER 31,
1993 1992 1991 1990
LOANS LOANS LOANS LOANS
% % % %
TOTAL TOTAL TOTAL TOTAL
(IN MILLIONS) AMT. LOANS AMT. LOANS AMT. LOANS AMT. LOANS AMT.
Commercial, financial
and agricultural $ 187.9 28.0% $ 316.5 26.7% $ 337.2 28.2% $ 254.4 30.2% $ 105.5
Real estate-construction
and other 73.5 3.5 139.5 4.5 147.9 7.2 195.1 9.3 44.2
Real estate-mortgage 199.9 40.6 198.9 39.2 164.4 35.4 96.9 30.8 51.9
Installment loans to
individuals 225.4 25.2 142.3 26.6 123.8 25.9 111.3 26.0 79.2
Lease financing 1.7 2.1 2.1 2.4 3.1 2.7 2.2 3.2 2.8
Foreign .3 .6 .7 .6 .5 .6 .5 .5 .8
Unallocated 331.5 -- 140.8 -- 74.9 -- 42.3 -- 71.0
Total $ 1,020.2 100.0% $ 940.8 100.0% $ 851.8 100.0% $ 702.7 100.0% $ 355.4
1989
LOANS
%
TOTAL
(IN MILLIONS) LOANS
Commercial, financial
and agricultural 28.6%
Real estate-construction
and other 8.5
Real estate-mortgage 33.4
Installment loans to
individuals 25.4
Lease financing 3.6
Foreign .5
Unallocated --
Total 100.0%
Beginning in 1993, the allocation of the allowance for loan losses is based on
the Corporation's loss migration modelling process. The unallocated portion of
the allowance for loan losses at December 31, 1992 would have been $178.4
million had the migration model been available in 1992. The allocation of the
allowance for loan losses to the respective loan classifications is not
necessarily indicative of future losses or future allocations.
See the Loans and Allowance for Loan Losses discussions in Note 1 to the
consolidated financial statements.
TABLE 14
INTANGIBLE ASSETS
DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
Mortgage servicing rights $ 87,350 183,196 196,796 173,915 140,065 47,622
Credit card premium $ 75,588 71,140 73,792 24,785 20,148 7,271
Other Intangible Assets
Goodwill $712,485 643,978 676,046 685,602 260,800 280,956
Deposit base premium 255,359 175,707 179,152 176,043 117,188 138,770
Other 10,468 18,285 15,324 9,508 11,974 24,989
Total $978,312 837,970 870,522 871,153 389,962 444,715
38
TABLE 15
SOUTHEAST BANKS SEGREGATED ASSETS
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Segregated Assets $ 380,515 576,257 694,832
Allowance for Segregated Asset Losses
Balance, beginning of year 45,362 54,000 --
Initial allowance -- -- 50,000
Transfer from allowance for loan losses -- 20,000 13,000
Transfer from allowance for foreclosed properties 1,998 -- --
Segregated asset losses, net (14,047) (28,638) (9,000)
Balance, end of year 33,313 45,362 54,000
Segregated assets, net $ 347,202 530,895 640,832
Segregated Asset Losses
Commercial, financial and agricultural $ 3,615 6,265 3,595
Real estateconstruction and other 208 1,713 859
Real estatemortgage 4,482 9,311 1,521
Installment loans to individuals 11,113 16,347 4,261
Total 19,418 33,636 10,236
Segregated Asset Recoveries
Commercial, financial and agricultural 1,695 954 218
Real estateconstruction and other -- -- --
Real estatemortgage 634 371 23
Installment loans to individuals 3,042 3,673 995
Total 5,371 4,998 1,236
Segregated asset losses, net $ 14,047 28,638 9,000
Segregated Assets
Nonaccrual loans:
Commercial loans $ 67,064 145,324 352,201
Real estate loans 187,432 304,866 313,774
Total nonaccrual loans 254,496 450,190 665,975
Foreclosed properties 126,019 126,067 28,857
Total segregated assets 380,515 576,257 694,832
Less FDIC loss-sharing* (323,438) (489,818) (590,607)
Total $ 57,077 86,439 104,225
Accruing loans past due 90 days $ 28,493 40,374 215,248
* For a five-year period that began September 19, 1991, the FDIC will reimburse
First Union for 85 percent of all net charge-offs related to acquired
Southeast Banks loans except for installment loan reimbursements, which will
decline 5 percent per year to 65 percent by 1996.
39
Financial Tables
First Union Corporation and Subsidiaries
TABLE 16
FIRST AMERICAN SEGREGATED ASSETS
DECEMBER 31,
(IN THOUSANDS) 1993
Commercial
Commercial, financial and agricultural $ 123,569
Real estate-construction and other 67,414
Real estate-mortgage 53,939
Total commercial 244,922
Retail real estate-mortgage 989
Foreclosed properties 64,119
Total 310,030
Less discount (169,378)
First American segregated assets, net $ 140,652
TABLE 17
ALLOWANCE FOR FORECLOSED PROPERTIES
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Foreclosed properties $278,694 478,887 561,476
Allowance for foreclosed properties, beginning of year 103,328 30,952 799
Provision for foreclosed properties 23,730 111,260 36,467
Transfer to allowance for segregated assets (1,998) -- --
Dispositions, net (68,869) (38,884) (6,314)
Allowance for foreclosed properties, end of year 56,191 103,328 30,952
Foreclosed properties, net $222,503 375,559 530,524
40
TABLE 18
DEPOSITS
DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
Core Deposits
Noninterest-bearing $10,861,207 9,213,646 7,836,183 6,267,894 5,060,239 5,371,019
Savings and NOW accounts 12,010,636 9,825,918 7,954,985 5,633,720 4,739,910 4,822,135
Money market accounts 11,131,334 9,930,789 8,832,272 6,950,226 6,057,247 5,869,178
Other consumer time 16,897,062 18,014,195 19,181,341 14,856,718 11,443,744 9,349,253
Total core deposits 50,900,239 46,984,548 43,804,781 33,708,558 27,301,140 25,411,585
Foreign 1,240,448 249,429 125,159 642,592 593,861 690,316
Other time 1,601,724 1,916,988 3,246,283 3,843,118 3,636,769 3,378,667
Total deposits $53,742,411 49,150,965 47,176,223 38,194,268 31,531,770 29,480,568
TABLE 19
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
DECEMBER 31, 1993
TIME OTHER
(IN THOUSANDS) CERTIFICATES TIME
Maturity Of
3 months or less $ 1,555,028 85,786
Over 3 months through 6 months 619,993 --
Over 6 months through 12 months 614,846 --
Over 12 months 1,027,817 --
Total $ 3,817,684 85,786
41
Financial Tables
First Union Corporation and Subsidiaries
TABLE 20
CAPITAL RATIOS
DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991 1990 1989 1988
Consolidated Capital Ratios*
Qualifying Capital
Tier 1 capital $ 4,342,664 3,189,276 2,441,839 1,901,657 -- --
Total capital 6,960,671 4,948,156 3,799,073 3,153,733 -- --
Adjusted risk-based assets 47,529,159 34,573,794 32,314,244 29,121,464 -- --
Adjusted leverage ratio assets $ 70,785,664 48,671,501 45,955,064 38,833,477 -- --
Ratios
Tier 1 capital 9.14% 9.22 7.56 6.53 -- --
Total capital 14.64 14.31 11.76 10.83 -- --
Leverage 6.13 6.55 5.31 4.90 -- --
Stockholders' Equity to Assets
Year-end 7.36 6.99 6.51 6.05 6.33 6.46
Average 7.11% 6.89 6.29 6.22 6.41 6.39
Bank Capital Ratios*
Tier 1 Capital
First Union National Bank of:
North Carolina 8.24% 7.22 6.45 6.87 -- --
South Carolina 7.55 7.88 6.85 6.46 -- --
Georgia 9.58 8.14 6.06 6.51 -- --
Florida 9.13 9.38 8.79 6.44 -- --
Washington, D.C. 14.23 -- -- -- -- --
Maryland 15.78 -- -- -- -- --
Tennessee 12.43 24.03 6.57 7.50 -- --
Virginia 10.77 -- -- -- -- --
Total Capital
First Union National Bank of:
North Carolina 11.35 10.60 7.99 8.39 -- --
South Carolina 11.82 10.89 8.25 7.84 -- --
Georgia 12.62 11.05 7.62 8.23 -- --
Florida 10.83 11.10 10.61 8.56 -- --
Washington, D.C. 15.52 -- -- -- -- --
Maryland 17.07 -- -- -- -- --
Tennessee 13.69 25.29 7.84 8.55 -- --
Virginia 13.08 -- -- -- -- --
Leverage
First Union National Bank of:
North Carolina 5.52 5.46 4.91 4.97 -- --
South Carolina 5.56 5.93 5.39 4.82 -- --
Georgia 5.67 6.58 4.91 4.78 -- --
Florida 5.79 5.62 4.91 4.91 -- --
Washington, D.C. 6.06 -- -- -- -- --
Maryland 9.04 -- -- -- -- --
Tennessee 8.05 25.10 7.34 8.22 -- --
Virginia 6.89% -- -- -- -- --
* Risk-based capital ratio guidelines require a minimum ratio of Tier 1 capital
to risk-weighted assets of 4.00 percent and a minimum ratio of total capital
to risk-weighted assets of 8.00 percent. The minimum leverage ratio of Tier 1
capital to adjusted average quarterly assets is from 3.00 to 5.00 percent. The
1990-1992 capital ratios presented herein have not been restated to reflect
pooling of interests acquisitions.
42
TABLE 21
SELECTED SIX-YEAR DATA*
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1993 1992 1991 1990 1989 1988
First Union Mortgage Corporation
Permanent Loan
Originations
Residential
Direct $ 3,701,476 2,690,028 1,370,988 1,105,261 1,372,353 1,548,033
Wholesale 2,431,455 2,641,656 2,657,534 2,092,646 1,655,153 652,018
Total 6,132,931 5,331,684 4,028,522 3,197,907 3,027,506 2,200,051
Income property 248,524 263,749 266,518 237,980 394,037 407,525
Total $ 6,381,455 5,595,433 4,295,040 3,435,887 3,421,543 2,607,576
Volume of Loans Serviced
Residential $32,786,000 22,528,000 22,161,000 17,878,000 13,854,000 9,254,000
Income property 1,972,000 1,848,000 1,951,000 1,534,000 1,444,000 1,350,000
Total $34,758,000 24,376,000 24,112,000 19,412,000 15,298,000 10,604,000
Number of Offices
Banking
North Carolina 266 269 269 272 269 273
South Carolina 67 53 53 56 56 67
Georgia 163 114 115 124 128 137
Florida 488 460 564 314 209 220
Washington, D.C. 30 -- -- -- -- --
Maryland 32 -- -- -- -- --
Tennessee 63 1 1 1 1 2
Virginia 193 -- -- -- -- --
Foreign 1 1 2 1 2 2
Total banking offices 1,303 898 1,004 768 665 701
Savings banks -- 45 -- -- -- --
Home equity lending 151 130 144 158 166 172
Mortgage banking 53 43 47 54 51 71
Consumer finance -- -- 1 56 56 200
Other 18 17 17 17 9 20
Total offices 1,525 1,133 1,213 1,053 947 1,164
Other Data
ATMs 1,189 847 943 707 532 551
Employees 32,861 23,459 24,203 20,521 17,733 19,761
Common stockholders 58,670 37,955 33,456 34,951 36,166 38,024
Series 1990 preferred
stockholders 2,984 3,117 2,969 2,982 -- --
* 1988-1992 not restated for 1993 pooling of interest acquisitions.
43
Financial Tables
First Union Corporation and Subsidiaries
TABLE 22
INTEREST RATE GAP
DECEMBER 31, 1993
NON-
SENSITIVE
AND
SENSITIVE
INTEREST SENSITIVITY IN DAYS OVER FIVE
(IN THOUSANDS) 1-90 91-180 181-365 TOTAL 1-2 YEARS 2-5 YEARS YEARS
Earning Assets
Interest-bearing bank balances $ 711,935 118 100 712,153 -- -- --
Federal funds sold and securities
purchased under resale
agreements 351,754 -- -- 351,754 -- -- --
Trading account assets 652,470 -- -- 652,470 -- -- --
Securities available for sale:
U.S. Government and other 1,520,886 3,086,460 1,292,600 5,899,946 1,413,763 3,540,278 890,955
Investment securities:
U.S. Government and other 150,041 84,189 129,448 363,678 140,208 436,157 409,499
State, county and municipal 24,130 7,210 29,408 60,748 326,412 200,362 755,412
Loans*:
Commercial and commercial real
estate 17,586,933 308,740 439,994 18,335,667 625,711 1,305,851 426,888
Residential mortgages 2,659,641 1,387,138 2,502,811 6,549,590 1,715,945 2,488,550 2,526,566
Installment loans to individuals 4,876,206 424,963 812,792 6,113,961 1,604,919 2,572,236 1,547,761
Lease financing 80,200 33,456 67,009 180,665 301,455 74,714 201,537
Foreign 265,202 3,251 5,109 273,562 7,909 16,347 6,343
Total earning assets 28,879,398 5,335,525 5,279,271 39,494,194 6,136,322 10,634,495 6,764,961
Interest-Bearing Liabilities
Interest-bearing deposits:
Savings and NOW accounts 12,010,636 -- -- 12,010,636 -- -- --
Money market accounts 11,131,334 -- -- 11,131,334 -- -- --
Other consumer time 4,967,782 3,568,071 3,280,616 11,816,469 2,649,657 2,384,360 46,576
Foreign 1,240,448 -- -- 1,240,448 -- -- --
Other time 716,207 177,071 269,780 1,163,058 241,353 93,336 103,977
Short-term borrowings 7,254,178 -- -- 7,254,178 -- -- --
Long-term debt 260,854 161,002 46,712 468,568 344,638 555,801 1,692,937
Total interest-bearing
liabilities 37,581,439 3,906,144 3,597,108 45,084,691 3,235,648 3,033,497 1,843,490
Off-Balance Sheet Financial
Instruments 3,140,713 1,172,754 3,789,327 8,102,794 (2,548,219) (4,169,575) (1,385,000)
Total interest-bearing
liabilities and off-balance
sheet financial instruments 40,722,152 5,078,898 7,386,435 53,187,485 687,429 (1,136,078) 458,490
Interest sensitivity gap $(11,842,754) 256,627 (2,107,164) (13,693,291) 5,448,893 11,770,573
Cumulative gap $(11,842,754) (11,586,127) (13,693,291) (13,693,291) (8,244,398) 3,526,175
Ratio of cumulative gap to total
earning assets (18.79% (18.38) (21.73) (21.73) (13.08) 5.59
(IN THOUSANDS) TOTAL
Earning Assets
Interest-bearing bank balances 712,153
Federal funds sold and securities
purchased under resale
agreements 351,754
Trading account assets 652,470
Securities available for sale:
U.S. Government and other 11,744,942
Investment securities:
U.S. Government and other 1,349,542
State, county and municipal 1,342,934
Loans*:
Commercial and commercial real
estate 20,694,117
Residential mortgages 13,280,651
Installment loans to individuals 11,838,877
Lease financing 758,371
Foreign 304,161
Total earning assets 63,029,972
Interest-Bearing Liabilities
Interest-bearing deposits:
Savings and NOW accounts 12,010,636
Money market accounts 11,131,334
Other consumer time 16,897,062
Foreign 1,240,448
Other time 1,601,724
Short-term borrowings 7,254,178
Long-term debt 3,061,944
Total interest-bearing
liabilities 53,197,326
Off-Balance Sheet Financial
Instruments --
Total interest-bearing
liabilities and off-balance
sheet financial instruments 53,197,326
Interest sensitivity gap
Cumulative gap
Ratio of cumulative gap to total
earning assets
The information included herein should be read in conjunction with the
discussion appearing under Interest Rate Risk Management and with Tables 23-26.
*Loans are stated net of unearned income. Since savings, NOW and money market
accounts theoretically can be repriced at any time, all such balances have been
included in 1-90 days. If these amounts were spread based upon expected
repricing characteristics, or if they were treated as nonsensitive, as many in
the industry do, the cumulative gap ratio would be significantly reduced.
44
TABLE 23
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
WEIGHTED AVERAGE ESTIMATED
DECEMBER 31, 1993 NOTIONAL RATE MATURITY FAIR
(IN THOUSANDS) AMOUNT RECEIVE PAY IN YEARS VALUE
Asset Rate Conversions
Interest rate swaps $12,029,540 5.63% 3.52% 1.59
Carrying amount $ 27,205
Unrealized gross gain 178,339
Unrealized gross loss (15,063)
Total 190,481
Forward interest rate swaps 3,200,000 5.13 -- 1.90
Unrealized gross gain 12,153
Unrealized gross loss (1,576)
Total 10,577
Other financial instruments 850,000 5.13 4.94 2.43
Carrying amount (2,161)
Unrealized gross gain 18,733
Unrealized gross loss (16,571)
Total 1
Total asset rate conversions $16,079,540 5.50% 3.61% 1.70 $201,059
Liability Rate Conversions
Interest rate swaps $ 2,462,173 7.57% 3.46% 5.94
Carrying amount $ 44,071
Unrealized gross gain 110,626
Unrealized gross loss (12,072)
Total 142,625
Other financial instruments 779,000 4.00 3.38 2.46
Carrying amount (3,250)
Unrealized gross gain 5,651
Unrealized gross loss (116)
Total 2,285
Total liability rate
conversions $ 3,241,173 7.37% 3.46% 5.10 $144,910
Basis Protection
Prime/federal funds caps $ 5,000,000 -- -- 2.25
Carrying amount $ 6,621
Unrealized gross gain 6,762
Unrealized gross loss --
Total 13,383
Forward prime/federal funds
swap 500,000 -- -- 2.29
Unrealized gross gain 136
Unrealized gross loss --
Total 136
Forward prime/libor swaps 500,000 -- -- 2.47
Unrealized gross gain 295
Unrealized gross loss --
Total 295
Total basis protection $ 6,000,000 -- -- 2.27 $ 13,814
DECEMBER 31, 1993
(IN THOUSANDS) COMMENTS
Asset Rate Conversions
Interest rate swaps
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Converts floating rate assets to fixed rate.
Adds to liability sensitivity. Similar
characteristics to a fixed income security.
Includes $4.1 billion of indexed amortizing
swaps of which $2.0 billion to mature in
1994 if 3 month LIBOR remains below 7
percent and $2.1 billion to mature within
five years.
Forward interest rate swaps
Unrealized gross gain
Unrealized gross loss
Total
Enables Corporation to, in effect, extend
maturities at higher than current yields for
future periods; $1.0 billion effective March
1994, $2.0 billion effective December 1994
and $200 million effective March 1995.
Other financial instruments
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Total asset rate conversions
Includes $800 million of interest rate
floors, of which $400 million were purchased
and offset by $400 million sold, locking in
gains to be amortized over the remaining
life of the contracts.
Liability Rate Conversions
Interest rate swaps
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Converts fixed rate long-term debt to
floating rate by matching maturity of the
swap to the debt issue. Maintains neutral
rate sensitivity.
Other financial instruments
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Miscellaneous option-based products for
liability management purposes include $280
million of written and purchased options on
swaps, $349 million eurodollar caps and $150
million eurodollar floors.
Total liability rate
conversions
Basis Protection
Prime/federal funds caps
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Simultaneous purchase and sale of caps ($2.5
billion each) to protect against a narrowing
in the spread between prime and federal
funds. Protection occurs with prime rate
greater than 6 percent and federal funds
rate greater than 3.25 percent.
Forward prime/federal funds
swap
Unrealized gross gain
Unrealized gross loss
Total
Swap to hedge against a narrowing in the
spread between the prime rate and federal
funds; pay rate equals the average prime
rate less 233 basis points versus receiving
the federal funds rate.
Forward prime/libor swaps
Unrealized gross gain
Unrealized gross loss
Total
Total basis protection
Swap to hedge against a narrowing in the
spread between the prime rate and 3 month
LIBOR; pay rate equals the average prime
rate less 212 basis points versus receiving
3 month LIBOR.
(CONTINUED)
45
Financial Tables
First Union Corporation and Subsidiaries
TABLE 23
OFF-BALANCE SHEET
DERIVATIVE FINANCIAL INSTRUMENTS* (CONTINUED)
WEIGHTED AVERAGE ESTIMATED
DECEMBER 31, 1993 NOTIONAL RATE MATURITY FAIR
(IN THOUSANDS) AMOUNT RECEIVE PAY IN YEARS VALUE
Rate Sensitivity Hedges
Short eurodollar futures $ 4,000,000 -- % 3.54% .33
Unrealized gross gain $ 1,363
Unrealized gross loss --
Total 1,363
Put options on eurodollar
futures 17,368,000 -- 4.01 .38
Carrying amount 5,791
Unrealized gross gain --
Unrealized gross loss (2,073)
Total 3,718
Put options on forward swaps 2,000,000 -- 5.14 .59
Carrying amount 5,058
Unrealized gross gain 386
Unrealized gross loss (1,138)
Total 4,306
Long eurodollar futures 125,000 4.82 -- .70
Unrealized gross gain 207
Unrealized gross loss --
Total 207
Total rate sensitivity hedges $23,493,000 4.82% 4.02% .39 $ 9,594
DECEMBER 31, 1993
(IN THOUSANDS) COMMENTS
Rate Sensitivity Hedges
Short eurodollar futures
Unrealized gross gain
Unrealized gross loss
Total
Reduces liability sensitivity by locking in
floating pay rate of the interest rate swaps;
$2.0 billion mature in each of the second and
third quarters of 1994.
Put options on eurodollar
futures
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Paid a premium for the right to lock in the 3
month LIBOR reset rates on receive fixed
interest rate swaps; $7.7 billion effective
March 1994; $7.2 billion effective June 1994;
$2.5 billion effective September 1994.
Beneficial in rising short-term rate
environment.
Put options on forward swaps
Carrying amount
Unrealized gross gain
Unrealized gross loss
Total
Paid a premium for the right to terminate $2.0
billion of forward interest rate swaps based
on interest rates at settlement date. Reduces
liability sensitivity.
Long eurodollar futures
Unrealized gross gain
Unrealized gross loss
Total
Total rate sensitivity hedges
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Prime Rate -- The base rate on corporate loans posted by at least 75 percent of
the nation's 30 largest banks as defined in The Wall Street Journal.
London Interbank Offered Rates (LIBOR) -- The average of interbank offered rates
on dollar deposits in the London market, based on quotations at five major
banks.
Weighted average pay rates are generally based upon one to six month LIBOR. Pay
rates reset at predetermined reset dates over the life of the contract. Rates
shown are the pay rates in effect as of December 31, 1993. Weighted average
receive rates are fixed rates set at the time the contract was entered into.
Carrying amount includes accrued interest receivable/payable, unamortized
premiums paid/received and any related margin accounts.
46
TABLE 24
OFF-BALANCE SHEET DERIVATIVES --
EXPECTED MATURITIES*
DECEMBER 31, 1993 1 YEAR 1-5 5-10 AFTER 10
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL
Asset Rate Conversions
Notional amount $ 7,002,246 9,067,294 10,000 -- 16,079,540
Weighted average receive rate 5.65% 5.40 3.50 -- 5.50
Estimated fair value $ 123,520 78,575 (1,036) -- 201,059
Liability Rate Conversions
Notional amount $ 940,673 925,500 925,000 450,000 3,241,173
Weighted average receive rate 9.00% 7.45 6.96 6.10 7.37
Estimated fair value $ 18,060 43,489 93,109 (9,748) 144,910
Basis Protection
Notional amount $ -- 6,000,000 -- -- 6,000,000
Weighted average receive rate --% -- -- -- --
Estimated fair value $ -- 13,814 -- -- 13,814
Rate Sensitivity Hedges
Notional amount $ 23,493,000 -- -- -- 23,493,000
Weighted average receive rate 4.82% -- -- -- 4.82
Estimated fair value $ 9,594 -- -- -- 9,594
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Pay rates are generally based upon one to six month LIBOR and reset at
predetermined reset dates. Current pay rates are not necessarily indicative of
future pay rates and therefore have been excluded from the above table.
47
Financial Tables
First Union Corporation and Subsidiaries
TABLE 25
OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
RATE
ASSET RATE LIABILITY RATE BASIS SENSITIVITY
(IN THOUSANDS) CONVERSIONS CONVERSIONS PROTECTION HEDGES TOTAL
Balance, December 31, 1992 $ 14,384,883 2,328,807 -- 26,834,000 43,547,690
Additions 7,317,818 1,692,000 6,000,000 26,520,000 41,529,818
Maturities/Amortizations (3,306,161) (579,634) -- (29,861,000) (33,746,795)
Terminations (2,317,000) (200,000) -- -- (2,517,000)
Balance, December 31, 1993 $ 16,079,540 3,241,173 6,000,000 23,493,000 48,813,713
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
48
TABLE 26
INTEREST DIFFERENTIAL
(IN THOUSANDS) 1993 COMPARED TO 1992 1992 COMPARED TO 1991
INTEREST VARIANCE INTEREST VARIANCE
INCOME/ ATTRIBUTABLE TO ** INCOME/ ATTRIBUTABLE
EXPENSE Rate Volume EXPENSE TO **
VARIANCE VARIANCE Rate Volume
Earning Assets
Interest-bearing bank balances $ (20,617) (1,358) (19,259) (6,248) (18,080) 11,832
Federal funds sold and securities
purchased under resale agreements (26,705) (4,890) (21,815) (16,444) (22,532) 6,088
Trading account assets* 14,720 (6,866) 21,586 (10,167) (6,833) (3,334)
Securities available for sale* 150,770 (71,520) 222,290 196,681 (63,073) 259,754
Investment securities*:
U.S. Government and other (3,873) (57,476) 53,603 (301,816) (93,297) (208,519)
State, county and municipal (26,851) (3,620) (23,231) (53,827) 2,019 (55,846)
Total (30,724) (61,096) 30,372 (355,643) (91,278) (264,365)
Loans* (14,260) (244,015) 229,755 7,794 (403,070) 410,864
Total earning assets $ 73,184 (389,745) 462,929 (184,027) (604,866) 420,839
Interest-Bearing Liabilities
Deposits (292,413) (305,807) 13,394 (474,932) (656,136) 181,204
Short-term borrowings 89,726 (21,654) 111,380 (260,784) (134,464) (126,320)
Long-term debt (27,842) (40,904) 13,062 13,688 (30,505) 44,193
Total interest-bearing liabilities (230,529) (368,365) 137,836 (722,028) (821,105) 99,077
Net interest income $ 303,713 (21,380) 325,093 538,001 216,239 321,762
*Income related to securities and loans exempt from both federal and state
income taxes, federal income taxes only or state income taxes only is stated
on a fully tax-equivalent basis. It is reduced by the nondeductible portion of
interest expense, assuming a federal income tax rate of 35 percent in 1993 and
34 percent in 1992; a North Carolina state tax rate of 7.905 percent in 1993
and 7.9825 percent in 1992; a Georgia and Tennessee state tax rate of 6
percent; a South Carolina state tax rate of 4.5 percent; a Florida effective
state tax rate of 5.5 percent; a Maryland state tax rate of 7 percent in 1993;
and a Washington, D.C. tax rate of 10.25 percent in 1993, respectively.
**Changes attributable to rate/volume are allocated to both rate and volume on
an equal basis.
49
SIX-YEAR NET INTEREST INCOME SUMMARY
FIRST UNION CORPORATION AND SUBSIDIARIES
1993 1992
AVERAGE
INTEREST RATES INTEREST
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/
(IN MILLIONS) BALANCES EXPENSE PAID BALANCES EXPENSE
Assets
Interest-bearing bank balances $ 521 21.3 4.10% $ 981 41.9
Federal funds sold and securities purchased under resale
agreements 537 16.8 3.12 1,177 43.5
Trading account assets (a) 914 40.8 4.47 479 26.1
Securities available for sale (a) 6,912 347.5 5.03 3,043 196.7
Investment securities (a):
U.S. Government and other 6,314 395.6 6.27 5,520 399.5
State, county and municipal 1,085 127.8 11.77 1,280 154.6
Total investment securities 7,399 523.4 7.07 6,800 554.1
Loans (a) (b):
Commercial:
Commercial, financial and agricultural 11,742 926.0 7.89 11,162 883.4
Real estate-construction and other 2,084 124.7 5.98 2,560 158.5
Real estate-mortgage 5,333 399.6 7.49 5,407 435.1
Lease financing 532 55.2 10.38 793 61.9
Foreign 264 12.9 4.90 205 11.1
Total commercial 19,955 1,518.4 7.61 20,127 1,550.0
Retail:
Real estate-mortgage 10,893 839.5 7.71 9,455 838.8
Installment loans to individuals 12,783 1,349.4 10.56 11,689 1,332.8
Total retail 23,676 2,188.9 9.24 21,144 2,171.6
Total loans 43,631 3,707.3 8.50 41,271 3,721.6
Total earning assets 59,914 4,657.1 7.77 53,751 4,583.9
Cash and due from banks 3,341 2,607
Other assets 4,846 4,788
Total assets $ 68,101 $ 61,146
Liabilities and Stockholders' Equity
Interest-bearing deposits:
Savings and NOW accounts 10,567 232.2 2.20 8,700 241.8
Money market accounts 10,321 232.4 2.25 9,570 272.3
Other consumer time 17,594 761.6 4.33 17,718 924.5
Foreign 577 20.9 3.63 145 13.2
Other time 1,650 76.1 4.61 3,155 163.9
Total interest-bearing deposits 40,709 1,323.2 3.25 39,288 1,615.7
Federal funds purchased and securities sold under
repurchase agreements 7,215 267.8 3.71 4,458 177.4
Commercial paper 321 8.4 2.60 338 10.5
Other short-term borrowings 799 31.2 3.91 660 29.7
Long-term debt 3,007 159.8 5.32 2,790 187.7
Total interest-bearing liabilities 52,051 1,790.4 3.44 47,534 2,021.0
Noninterest-bearing deposits 9,540 7,885
Other liabilities 1,671 1,513
Stockholders' equity 4,839 4,214
Total liabilities and stockholders' equity $ 68,101 $ 61,146
Interest income and rate earned $ 4,657.1 7.77% $ 4,583.9
Interest expense and rate paid 1,790.4 2.99 2,021.0
Net interest income and margin $ 2,866.7 4.78% $ 2,562.9
Tax-equivalent adjustment included in:
Trading account assets $ 2.8 $ 2.0
Securities available for sale 26.6 11.2
Investment securities 48.0 60.3
Commercial, financial and agricultural loans 20.9 28.5
Lease financing 2.5 2.5
Total $ 100.8 $ 104.5
AVERAGE
RATES
EARNED/
(IN MILLIONS) PAID
Assets
Interest-bearing bank balances 4.28%
Federal funds sold and securities purchased under resale
agreements 3.69
Trading account assets (a) 5.46
Securities available for sale (a) 6.46
Investment securities (a):
U.S. Government and other 7.24
State, county and municipal 12.08
Total investment securities 8.15
Loans (a) (b):
Commercial:
Commercial, financial and agricultural 7.91
Real estate-construction and other 6.19
Real estate-mortgage 8.05
Lease financing 7.80
Foreign 5.41
Total commercial 7.70
Retail:
Real estate-mortgage 8.87
Installment loans to individuals 11.40
Total retail 10.27
Total loans 9.02
Total earning assets 8.53
Cash and due from banks
Other assets
Total assets
Liabilities and Stockholders' Equity
Interest-bearing deposits:
Savings and NOW accounts 2.78
Money market accounts 2.84
Other consumer time 5.22
Foreign 9.13
Other time 5.19
Total interest-bearing deposits 4.11
Federal funds purchased and securities sold under
repurchase agreements 3.98
Commercial paper 3.12
Other short-term borrowings 4.51
Long-term debt 6.73
Total interest-bearing liabilities 4.25
Noninterest-bearing deposits
Other liabilities
Stockholders' equity
Total liabilities and stockholders' equity
Interest income and rate earned 8.53%
Interest expense and rate paid 3.76
Net interest income and margin 4.77%
Tax-equivalent adjustment included in:
Trading account assets
Securities available for sale
Investment securities
Commercial, financial and agricultural loans
Lease financing
Total
50
1991 1990 1989 1988
AVERAGE AVERAGE AVERAGE
INTEREST RATES INTEREST RATES INTEREST RATES INTEREST
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/ AVERAGE INCOME/
BALANCES EXPENSE PAID BALANCES EXPENSE PAID BALANCES EXPENSE PAID BALANCES EXPENSE
$ 758 48.2 6.36% $ 351 29.5 8.41% $ 233 21.3 9.16% $ 548 43.2
1,048 59.9 5.72 737 62.7 8.50 479 44.2 9.23 543 40.5
533 36.3 6.81 529 44.4 8.40 465 41.6 8.94 92 8.5
-- -- -- -- -- -- -- -- -- -- --
8,152 701.3 8.60 7,557 673.9 8.92 6,341 565.8 8.92 6,405 562.5
1,745 208.4 11.94 1,946 229.1 11.77 2,100 248.3 11.83 2,206 263.1
9,897 909.7 9.19 9,503 903.0 9.50 8,441 814.1 9.64 8,611 825.6
11,106 1,035.3 9.32 10,421 1,109.1 10.64 8,914 1,017.0 11.41 8,645 885.6
3,146 238.4 7.58 3,222 314.2 9.75 2,444 283.5 11.60 1,849 196.5
4,479 423.4 9.45 4,866 519.4 10.67 4,358 498.3 11.43 3,270 340.0
892 91.9 10.30 928 97.9 10.56 927 100.5 10.84 816 87.3
179 10.6 5.94 166 10.0 6.05 144 8.9 6.18 153 9.5
19,802 1,799.6 9.09 19,603 2,050.6 10.46 16,787 1,908.2 11.37 14,733 1,518.9
7,340 714.1 9.73 6,547 663.9 10.14 5,349 546.4 10.21 4,519 446.1
10,171 1,200.1 11.80 9,728 1,212.9 12.47 7,372 951.5 12.91 6,426 799.8
17,511 1,914.2 10.93 16,275 1,876.8 11.53 12,721 1,497.9 11.77 10,945 1,245.9
37,313 3,713.8 9.95 35,878 3,927.4 10.95 29,508 3,406.1 11.54 25,678 2,764.8
49,549 4,767.9 9.62 46,998 4,967.0 10.57 39,126 4,327.3 11.06 35,472 3,682.6
2,175 2,285 2,022 1,986
3,371 2,842 2,076 2,005
$ 55,095 $ 52,125 $ 43,224 $ 39,463
6,185 266.2 4.30 5,409 251.2 4.64 4,568 214.5 4.70 4,445 209.0
7,767 390.1 5.02 6,909 412.4 5.97 5,330 331.8 6.22 5,640 307.9
16,364 1,138.0 6.95 13,939 1,105.2 7.93 11,170 938.3 8.40 8,973 676.8
380 35.8 9.43 386 40.6 10.51 507 37.5 7.38 729 45.8
3,811 260.5 6.84 4,051 335.9 8.29 3,546 316.1 8.91 2,591 199.9
34,507 2,090.6 6.06 30,694 2,145.3 6.99 25,121 1,838.2 7.32 22,378 1,439.4
6,910 409.3 5.92 8,184 645.9 7.89 6,640 572.4 8.62 6,117 416.8
610 36.4 5.97 1,365 109.5 8.02 988 88.2 8.93 1,082 79.9
522 32.7 6.27 634 52.7 8.31 580 51.8 8.93 601 46.3
2,188 174.0 7.95 1,587 140.9 8.88 1,555 153.0 9.85 1,121 96.2
44,737 2,743.0 6.13 42,464 3,094.3 7.29 34,884 2,703.6 7.75 31,299 2,078.6
5,975 5,516 4,683 4,831
916 901 885 812
3,467 3,244 2,772 2,521
$ 55,095 $ 52,125 $ 43,224 $ 39,463
$ 4,767.9 9.62% $ 4,967.0 10.57% $ 4,327.3 11.06% $ 3,682.6
2,743.0 5.54 3,094.3 6.58 2,703.6 6.91 2,078.6
$ 2,024.9 4.08% $ 1,872.7 3.99% $ 1,623.7 4.15% $ 1,604.0
AVERAGE
RATES
EARNED/
PAID
7.89%
7.46
9.26
- --
8.78
11.93
9.59
10.24
10.63
10.40
10.70
6.23
10.31
9.87
12.45
11.38
10.77
10.38
4.70
5.46
7.54
6.29
7.71
6.43
6.81
7.38
7.70
8.59
6.64
10.38%
5.86
4.52%
(a) Yields related to securities and loans exempt from both federal and state
income taxes, federal income taxes only or state income taxes only are
stated on a fully tax-equivalent basis. They are reduced by the
nondeductible portion of interest expense, assuming a federal income tax
rate of 35 percent in 1993 and 34 percent in 1988 through 1992; a North
Carolina state tax rate of 7.905 percent in 1993, 7.9825 percent in 1992,
8.06 percent in 1991 and 7 percent in 1988 through 1990; a Georgia and
Tennessee state tax rate of 6 percent; a South Carolina state tax rate of
4.5 percent; a Florida effective state tax rate of 5.5 percent in 1991
through 1993 and 3.3 percent in 1988 through 1990; a Maryland state tax rate
of 7 percent in 1993; and a Washington, D.C. tax rate of 10.25 percent in
1993, respectively.
(b) The loan averages include loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
51
MANAGEMENT'S STATEMENT OF FINANCIAL RESPONSIBILITY
FIRST UNION CORPORATION AND SUBSIDIARIES
Management of First Union Corporation and its subsidiaries (the Corporation)
is committed to quality customer service, enhanced stockholder value, financial
stability and integrity in all dealings. Management has prepared the
accompanying consolidated financial statements in conformity with generally
accepted accounting principles. The consolidated financial statements include
amounts that are based on management's best estimates and judgments. Other
financial information contained in this annual report is presented on a basis
consistent with the consolidated financial statements unless indicated
otherwise.
To ensure the integrity, objectivity and fairness of data in these
consolidated financial statements, management of the Corporation has established
and maintains an internal control structure that is supplemented by a program of
internal audits. The internal control structure is designed to provide
reasonable assurance that assets are safeguarded and transactions are executed,
recorded and reported in accordance with management's intentions and
authorizations. To enhance the reliability of the internal control structure,
management recruits and trains highly qualified personnel, and maintains sound
risk management practices and efficient operations.
The consolidated financial statements have been audited by KPMG Peat
Marwick, independent auditors, in accordance with generally accepted auditing
standards. KPMG Peat Marwick reviews the results of its audit with both
management and the Audit Committee of the Board of Directors of the Corporation.
The Audit Committee, composed entirely of outside directors, meets periodically
with management, internal auditors and KPMG Peat Marwick (separately and
jointly) to determine that each is fulfilling its responsibilities and to
consider recommendations for enhancing risk management practices, operations and
internal controls.
(Signature of Edward E. Crutchfield, Jr.)
Edward E. Crutchfield Jr.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
(Signature of Robert T. Atwood)
Robert T. Atwood
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
January 17, 1994
52
CONSOLIDATED BALANCE SHEETS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1993 1992
Assets
Cash and due from banks $ 3,351,963 3,142,426
Interest-bearing bank balances 712,153 1,440,858
Federal funds sold and securities purchased under resale agreements 351,754 780,639
Total cash and cash equivalents 4,415,870 5,363,923
Trading account assets 652,470 169,268
Securities available for sale (market value $11,884,385 in 1993; $5,256,967 in 1992) 11,744,942 5,203,344
Investment securities (market value $2,931,139 in 1993; $6,825,066 in 1992) 2,692,476 6,633,338
Loans, net of unearned income ($334,059 in 1993; $361,432 in 1992) 46,876,177 41,923,767
Allowance for loan losses (1,020,191) (940,804)
Loans, net 45,855,986 40,982,963
Premises and equipment 1,524,855 1,334,505
Due from customers on acceptances 246,095 167,225
Mortgage servicing rights 87,350 183,196
Credit card premium 75,588 71,140
Other intangible assets 978,312 837,970
Southeast segregated assets 347,202 530,895
First American segregated assets 140,652 --
Other assets 2,025,171 2,350,264
Total assets $ 70,786,969 63,828,031
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing deposits 10,861,207 9,213,646
Interest-bearing deposits 42,881,204 39,937,319
Total deposits 53,742,411 49,150,965
Short-term borrowings 7,254,178 5,065,337
Bank acceptances outstanding 246,095 167,225
Other liabilities 1,274,716 1,834,081
Long-term debt 3,061,944 3,151,260
Total liabilities 65,579,344 59,368,868
Stockholders' equity:
Preferred stock:
Class A, authorized 40,000,000 shares:
Series A, 11% cumulative perpetual; $25.00 stated and liquidation value; none issued -- --
Series A, $2.50 cumulative convertible, no-par value; $25.00 stated and liquidation
value; outstanding 527,302 shares in 1992 -- 13,182
Series B, none issued -- --
Series 1990 cumulative perpetual adjustable rate, no-par value; $5.00 liquidation value;
authorized
10,000,000 shares, outstanding 6,318,350 shares in 1993; 6,318,351 shares in 1992 31,592 31,592
Common stock, $3.33 1/3 par value; authorized 250,000,000 shares, outstanding 170,337,619
shares in 1993; 164,849,340 shares in 1992 567,791 549,497
Paid-in capital 1,591,275 1,396,701
Retained earnings 3,016,967 2,468,191
Total stockholders' equity 5,207,625 4,459,163
Total liabilities and stockholders' equity $ 70,786,969 63,828,031
See accompanying Notes to Consolidated Financial Statements.
53
CONSOLIDATED STATEMENTS OF INCOME
FIRST UNION CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1993 1992 1991
Interest Income
Interest and fees on loans $ 3,683,945 3,690,543 3,677,321
Interest and dividends on securities available for sale 320,860 185,488 --
Interest and dividends on investment securities:
Taxable income 391,364 391,556 687,777
Non-taxable income 84,043 102,232 140,319
Trading account interest 38,029 24,153 33,918
Other interest income 38,091 85,413 108,105
Total interest income 4,556,332 4,479,385 4,647,440
Interest Expense
Interest on deposits 1,323,258 1,615,671 2,090,603
Interest on short-term borrowings 307,352 217,626 478,410
Interest on long-term debt 159,829 187,671 173,983
Total interest expense 1,790,439 2,020,968 2,742,996
Net interest income 2,765,893 2,458,417 1,904,444
Provision for loan losses 221,753 414,708 648,284
Net interest income after provision for loan losses 2,544,140 2,043,709 1,256,160
Noninterest Income
Trading account profits 43,007 22,908 20,053
Service charges on deposit accounts 420,285 386,118 293,075
Mortgage banking income 138,608 155,800 135,557
Capital management income 201,875 177,375 133,126
Securities available for sale transactions 25,767 34,402 --
Investment security transactions 7,435 (2,881) 155,048
Merchant discounts 55,732 54,703 48,126
Insurance commissions 43,876 44,047 46,081
Sundry income 261,703 191,700 238,493
Total noninterest income 1,198,288 1,064,172 1,069,559
Noninterest Expense
Personnel expense 1,155,899 1,065,302 873,181
Occupancy 229,118 238,728 213,424
Equipment rentals, depreciation and maintenance 189,589 167,063 132,858
Postage, printing and supplies 92,842 76,057 63,552
FDIC insurance 118,429 107,392 77,808
Owned real estate expense 40,633 176,109 90,181
Amortization 207,087 120,877 93,288
Sundry 488,050 575,150 361,626
Total noninterest expense 2,521,647 2,526,678 1,905,918
Income before income taxes 1,220,781 581,203 419,801
Income taxes 403,260 196,152 71,070
Net income 817,521 385,051 348,731
Dividends on preferred stock 24,900 31,979 34,570
Net income applicable to common stockholders $ 792,621 353,072 314,161
Per Common Share Data
Net income $ 4.73 2.23 2.24
Cash dividends $ 1.50 1.28 1.12
Average common shares 167,691,739 158,683,206 140,003,166
See accompanying Notes to Consolidated Financial Statements.
54
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
FIRST UNION CORPORATION AND SUBSIDIARIES
PREFERRED STOCK COMMON STOCK PAID-IN RETAINED
(IN THOUSANDS EXCEPT PER SHARE DATA) SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
Balance at December 31, 1990
As originally reported 6,750 $ 33,748 109,173 $ 363,909 435,013 1,732,902
Preferred and common stock issued for pooled banks
acquired in 1993 543 13,571 27,604 92,013 239,167 390,049
Balance at December 31, 1990, as restated 7,293 47,319 136,777 455,922 674,180 2,122,951
Net income -- -- -- -- -- 348,731
Issuance of Class A Series A preferred stock 6,000 150,000 -- -- -- --
Purchase of Class A Series A preferred stock (2,000) (50,000) -- -- -- --
Purchase of Series 1990 preferred stock (432) (2,156) -- -- (17,776) --
Purchase of common stock -- -- (65) (217) (1,376) --
Common stock issued in public offering -- -- 8,625 28,750 206,184 --
Common stock issued for stock options exercised -- -- 810 2,699 14,415 --
Common stock issued through dividend reinvestment plan -- -- 2,486 8,290 48,428 --
Converted debentures -- -- 35 117 127 --
Pre-merger transactions of pooled banks (10) (255) 444 1,477 5,350 (2,701)
Cash dividends paid:
By First Union Corporation at:
11% per Class A Series A preferred share -- -- -- -- -- (3,758)
9.25% per Series 1990 preferred share -- -- -- -- -- (29,467)
$1.12 per common share -- -- -- -- -- (126,029)
By acquired banks on:
Preferred shares -- -- -- -- -- (1,345)
Common shares -- -- -- -- -- (19,063)
Balance at December 31, 1991 10,851 144,908 149,112 497,038 929,532 2,289,319
Net income -- -- -- -- -- 385,051
Purchase of Class A Series A preferred stock (4,000) (100,000) -- -- -- --
Purchase of common stock -- -- (206) (686) (7,133) --
Common stock issued in public offering -- -- 9,775 32,583 297,462 --
Common stock issued for stock options exercised -- -- 1,442 4,806 32,938 --
Common stock issued through dividend reinvestment plan -- -- 3,779 12,595 128,227 --
Converted debentures -- -- 198 660 714 --
Pre-merger transactions of pooled banks (5) (134) 749 2,501 14,961 --
Cash dividends paid:
By First Union Corporation at:
11% per Class A Series A preferred share -- -- -- -- -- (3,086)
8.73% per Series 1990 preferred share -- -- -- -- -- (27,564)
$1.28 per common share -- -- -- -- -- (167,601)
By acquired banks on:
Preferred shares -- -- -- -- -- (1,329)
Common shares -- -- -- -- -- (6,599)
Balance at December 31, 1992 6,846 44,774 164,849 549,497 1,396,701 2,468,191
Net income -- -- -- -- -- 817,521
Purchase of Class A Series A preferred stock (6) (134) -- -- -- --
Purchase of common stock -- -- (88) (294) (3,557) --
Common stock issued for stock options exercised -- -- 1,557 5,189 51,529 --
Common stock issued through dividend reinvestment plan -- -- 3,271 10,904 133,829 --
Converted debentures -- -- 27 90 248 --
Converted preferred stock (522) (13,047) 673 2,242 10,801 --
Pre-merger transactions of pooled banks -- (1) 49 163 1,724 --
Cash dividends paid:
By First Union Corporation at:
$2.50 per Class A Series A preferred share -- -- -- -- -- (337)
7.78% per Series 1990 preferred share -- -- -- -- -- (24,563)
$1.50 per common share -- -- -- -- -- (243,845)
Balance at December 31, 1993 6,318 $ 31,592 170,338 $ 567,791 1,591,275 3,016,967
(IN THOUSANDS EXCEPT PER SHARE DATA) TOTAL
Balance at December 31, 1990
As originally reported 2,565,572
Preferred and common stock issued for pooled banks
acquired in 1993 734,800
Balance at December 31, 1990, as restated 3,300,372
Net income 348,731
Issuance of Class A Series A preferred stock 150,000
Purchase of Class A Series A preferred stock (50,000)
Purchase of Series 1990 preferred stock (19,932)
Purchase of common stock (1,593)
Common stock issued in public offering 234,934
Common stock issued for stock options exercised 17,114
Common stock issued through dividend reinvestment plan 56,718
Converted debentures 244
Pre-merger transactions of pooled banks 3,871
Cash dividends paid:
By First Union Corporation at:
11% per Class A Series A preferred share (3,758)
9.25% per Series 1990 preferred share (29,467)
$1.12 per common share (126,029)
By acquired banks on:
Preferred shares (1,345)
Common shares (19,063)
Balance at December 31, 1991 3,860,797
Net income 385,051
Purchase of Class A Series A preferred stock (100,000)
Purchase of common stock (7,819)
Common stock issued in public offering 330,045
Common stock issued for stock options exercised 37,744
Common stock issued through dividend reinvestment plan 140,822
Converted debentures 1,374
Pre-merger transactions of pooled banks 17,328
Cash dividends paid:
By First Union Corporation at:
11% per Class A Series A preferred share (3,086)
8.73% per Series 1990 preferred share (27,564)
$1.28 per common share (167,601)
By acquired banks on:
Preferred shares (1,329)
Common shares (6,599)
Balance at December 31, 1992 4,459,163
Net income 817,521
Purchase of Class A Series A preferred stock (134)
Purchase of common stock (3,851)
Common stock issued for stock options exercised 56,718
Common stock issued through dividend reinvestment plan 144,733
Converted debentures 338
Converted preferred stock (4)
Pre-merger transactions of pooled banks 1,886
Cash dividends paid:
By First Union Corporation at:
$2.50 per Class A Series A preferred share (337)
7.78% per Series 1990 preferred share (24,563)
$1.50 per common share (243,845)
Balance at December 31, 1993 5,207,625
See accompanying Notes to Consolidated Financial Statements.
55
CONSOLIDATED STATEMENTS OF CASH FLOWS
FIRST UNION CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Operating Activities
Net income $ 817,521 385,051 348,731
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
Accretion and amortization of securities discounts and premiums, net (4,297) 24,618 18,176
Provision for loan losses 221,753 414,708 648,284
Provision for foreclosed properties 23,730 111,260 36,467
Gain on sale of mortgage servicing rights (973) (10,637) (39,186)
Securities available for sale transactions (25,767) (34,402) --
Investment security transactions (7,435) 2,881 (155,048)
Depreciation and amortization 359,359 252,271 201,578
Deferred income taxes (benefits) 78,159 (73,953) (87,223)
Trading account assets, net (483,202) (60,091) 327,300
Mortgage loans held for resale (312,090) (384,772) (433,803)
(Gain) loss on sales of premises and equipment 7,764 22,656 4,327
Gain on sale of First American segregated assets (48,147) -- --
Other assets, net 1,044,223 383,446 (802,290)
Other liabilities, net (921,719) 126,968 (39,119)
Net cash provided by operating activities 748,879 1,160,004 28,194
Investing Activities
Increase (decrease) in cash realized from:
Sales of securities available for sale 13,043,607 5,031,961 235,213
Maturities of securities available for sale 5,637,948 2,020,875 10,077
Purchases of securities available for sale (18,384,416) (5,832,268) (63,704)
Sales and calls of investment securities 244,473 1,523,408 9,267,461
Maturities of investment securities 2,414,793 1,964,588 1,283,268
Purchases of investment securities (3,060,327) (7,513,015) (6,934,782)
Origination of loans, net (563,530) 563,419 772,705
Sales of loans -- 1,610,712 1,000,944
Purchases of loans -- (747,704) (195,087)
Sales of premises and equipment 65,255 29,344 29,026
Purchases of premises and equipment (247,442) (392,952) (236,004)
Sales of mortgage servicing rights 1,300 1,500 53,330
Purchases of mortgage servicing rights (11,423) (25,910) (79,196)
Other intangible assets, net 19,709 (4,057) 10,411
Purchases of banking organizations, net of acquired cash equivalents 22,493 1,404,564 2,622,547
Net cash provided (used) by investing activities (817,560) (365,535) 7,776,209
Financing Activities
Increase (decrease) in cash realized from:
Sales of deposits, net (1,711,427) (1,670,574) (939,466)
Securities sold under repurchase agreements and other short-term borrowings,
net 1,017,826 638,347 (7,113,749)
Issuances of long-term debt 1,044,657 1,036,690 430,796
Payments of long-term debt (1,161,031) (514,986) (183,602)
Sales of preferred stock -- -- 150,000
Sales of common stock 203,337 525,939 312,637
Purchases of preferred stock (138) (100,000) (69,932)
Purchases of common stock (3,851) (7,819) (1,593)
Cash dividends paid (268,745) (206,179) (179,662)
Net cash used by financing activities (879,372) (298,582) (7,594,571)
Increase (decrease) in cash and cash equivalents (948,053) 495,887 209,832
Cash and cash equivalents, beginning of year 5,363,923 4,868,036 4,658,204
Cash and cash equivalents, end of year $ 4,415,870 5,363,923 4,868,036
Cash Paid For
Interest $ 1,775,759 2,180,662 2,743,704
Income taxes 398,705 260,499 122,785
Noncash Items
Increase in securities available for sale 4,569,363 4,947,423 --
Decrease in investment securities 4,536,780 -- --
Decrease in other assets 32,583 -- --
Increase in foreclosed properties 51,885 186,226 309,490
Issuance of notes payable to the FDIC, net of discount -- -- 533,120
Conversion of preferred stock to common stock $ 13,044 -- --
See accompanying Notes to Consolidated Financial Statements.
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
First Union Corporation (the Parent Company) is a bank holding company whose
principal wholly-owned subsidiaries are national banking associations using the
name First Union National Bank and First Union Mortgage Corporation, a mortgage
banking firm.
The accounting and reporting policies of First Union Corporation and
subsidiaries (the Corporation) are in accordance with generally accepted
accounting principles and conform to general practices within the banking and
mortgage banking industries. In consolidation, all significant intercompany
accounts and transactions are eliminated.
The Corporation's principal sources of revenues emanate from its domestic
banking, including trust operations, and mortgage banking operations located
primarily in North and South Carolina, Georgia, Florida, Tennessee, Virginia,
Maryland and Washington, D.C. Its foreign banking operations are immaterial.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and due from banks, interest-bearing
balances in other banks and federal funds sold and securities purchased under
resale agreements. Generally, both cash and cash equivalents are considered to
have maturities of three months or less, and accordingly, the carrying amount of
such instruments is deemed to be a reasonable estimate of fair value.
SECURITIES
The classification of securities is determined at the date of purchase.
Gains or losses on the sale of securities are recognized on a specific
identification, trade date basis.
Trading account assets, primarily debt securities, and interest rate
futures, options, caps and floors and forward contracts, are adjusted to market
value. Included in noninterest income are realized and unrealized gains and
losses resulting from such adjustments and from recording the effects of sales
of trading account securities on a trade date basis.
Securities available for sale, primarily debt securities, are recorded at
the lower of aggregate cost or market value. Securities available for sale will
be used as a part of the Corporation's interest rate risk management strategy
and may be sold in response to changes in interest rates, changes in prepayment
risk, and other factors.
Investment securities, primarily debt securities, are stated at cost, net of
the amortization of premium and the accretion of discount. The Corporation
intends and has the ability to hold such securities on a long-term basis or
until maturity.
The market value of securities, including securities sold not owned, is
generally based on quoted market prices or dealer quotes. If a quoted market
price is not available, market value is estimated using quoted market prices for
similar securities.
INTEREST RATE SWAPS, FLOORS AND CAPS
The Corporation uses interest rate swaps, floors and caps for interest rate
risk management, in connection with providing risk management services to
customers and for trading for its own account.
Interest rate swaps, floors and caps used to achieve interest rate risk
management objectives are accounted for on an accrual basis and the net interest
differential, including premiums paid, if any, is recognized as an adjustment to
interest income or interest expense of the related asset or liability. Upon the
early termination of these derivative instruments, the net proceeds received or
paid are deferred and amortized over the shorter of the remaining contract life
or the maturity of the related asset or liability.
Interest rate swaps, floors and caps entered into for trading purposes and
sold to customers are accounted for on a mark to market basis with both realized
and unrealized gains and losses recognized as trading profits. The market value
of these financial instruments represent the amount the Corporation would
receive or pay to terminate the contracts or agreements and is determined using
a valuation model which considers current market yields, counterparty credit
risk and other relevant variables.
INTEREST RATE FUTURES, FORWARD AND OPTION CONTRACTS
The Corporation uses interest rate futures, forward and option contracts for
interest rate risk management and in connection with hedging interest rate
products sold to customers.
Gains and losses on interest rate futures and option contracts are deferred
and amortized over the corresponding period hedged and the premium paid for
option contracts is amortized over the option period as a yield adjustment to
the related asset or liability.
Interest rate futures, forward and option contracts used to hedge interest
rate products sold to customers are marked to market and both the realized and
unrealized gains and losses recognized as trading profits. The market value of
these financial instruments is based on dealer or exchange quotes.
LOANS
Commercial, financial and agricultural loans include industrial revenue
bonds, highly leveraged transaction loans and certain other loans that are made
primarily on the strength of the borrower's general credit standing and ability
to generate repayment cash flows from income sources even though such bonds and
loans may be secured by real estate or other assets.
Commercial real estate construction and mortgage loans represent interim and
permanent financing of commercial properties that are secured by real estate.
Retail real estate mortgage loans represent 14 family first mortgage loans.
Retail installment loans to individuals represent all other consumer loans,
including home equity and second mortgage loans.
Mortgage notes held for sale are valued at the lower of cost or market as
determined by outstanding commitments from investors or current investor yield
requirements calculated on the aggregate loan basis. Gains or losses resulting
from sales of mortgage notes are recognized when the proceeds are received from
investors.
In many lending transactions, collateral is taken to provide an additional
measure of security. Generally, the cash flow or earning power of the borrower
represents the primary source of repayment and collateral liquidation a
secondary source of repayment. The Corporation determines the need for
collateral on a case-by-case or product-by-product basis. Factors considered
include the current and prospective creditworthiness of the customer, terms of
the instrument and economic conditions.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
Unearned income, arising principally from discount-basis loans or the
deferral of loan fees and related expenses, is generally transferred to interest
income using the constant yield or an accelerated method. Interest income on all
other loans is recorded on an accrual basis.
The accrual of interest is generally discontinued on all loans, except
consumer loans, that become 90 days past due as to principal or interest unless
collection of both principal and interest is assured by way of
collateralization, guarantees or other security. Generally, loans past due 180
days or more are placed on nonaccrual status regardless of security. Consumer
loans that become approximately 120 days past due are generally charged to the
allowance for loan losses. When borrowers demonstrate over an extended period
the ability to repay a loan in accordance with the contractual terms of a loan
the Corporation has classified as nonaccrual, such loan is returned to accrual
status.
Fair values are estimated for loans with similar financial characteristics.
These loans are segregated by type of loan, considering credit risk and
prepayment characteristics. Each loan category is further segmented into fixed
and adjustable rate categories.
The fair values of performing loans for all portfolios, except residential
mortgage and credit card loans, are calculated by discounting estimated cash
flows through expected maturity dates. These cash flows are discounted using
estimated market yields that reflect the credit and interest rate risks inherent
in each category of loans. Such market yields also reflect a component for the
estimated cost of servicing the portfolio. A prepayment assumption is used as an
estimate of the number of loans which will be repaid prior to their scheduled
maturity.
For performing residential mortgage loans, fair values are estimated by
segmenting the loan portfolio into homogeneous pools based on loan types, coupon
rates, maturities, prepayment assumptions and credit risk, and comparing the
values of the individual pools to mortgage-backed securities with similar
characteristics. For credit card portfolios, cash flows and maturities are
estimated based on contractual interest rates and historical experience and are
discounted using secondary market yields adjusted for differences in servicing
and credit losses.
Fair values of nonperforming loans greater than $1,000,000 are calculated by
estimating the timing and amount of cash flows. These cash flows are discounted
using estimated market yields commensurate with the risk associated with
estimating such cash flows. Estimates of cash flows are made using knowledge of
the borrower and available market data. It is not considered practicable to
calculate a fair value for nonperforming loans less than $1,000,000.
Accordingly, they are included in fair value disclosures at net cost.
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. Generally, for fixed rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair value of commitments and letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is the amount that is considered adequate to
provide for potential losses in the portfolio. Management's evaluation of the
adequacy of the allowance is based on a review of individual loans, recent loss
experience, current economic conditions, the risk characteristics of the various
classifications of loans, the fair value of underlying collateral and other
factors.
Management believes that the allowances for losses on loans and real estate
owned are adequate. While management uses available information to recognize
losses on loans and real estate owned, future additions to the allowances may be
necessary based on changes in economic conditions.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Corporation's bank subsidiaries'
allowances for losses on loans and real estate owned. Such agencies may require
such subsidiaries to recognize changes to the allowances based on their
judgments about information available to them at the time of their examination.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line
basis for financial purposes and on straight-line and accelerated bases for tax
purposes, using estimated lives generally as follows: buildings, 10 to 50 years;
furniture and equipment, 3 to 10 years; and leasehold improvements and
capitalized leases, over the lives of the respective leases.
OTHER INTANGIBLE ASSETS
Generally, goodwill is being amortized on a straight-line basis over a
25-year period. Credit card premiums are being amortized principally over a
6.3-year period using the sum-of-the-years' digits method. Deposit base premiums
are being amortized principally over a 10-year period using the straight-line
method prior to 1991 and using accelerated methods thereafter. Annually, the
fair value of the unamortized balance of such premiums is determined
independently, and if such value is less than such balance, the difference is
charged to noninterest expense.
FORECLOSED PROPERTIES
Foreclosed properties are included in other assets and represent other real
estate that has been acquired through loan or in-substance foreclosures or deeds
received in lieu of loan payments. Generally such properties are appraised
annually and are recorded at the lower of cost or fair value less estimated
selling costs. When appropriate, adjustments to cost are charged or credited to
the allowance for foreclosed properties.
MORTGAGE LOAN ADMINISTRATION AND ORIGINATION
Mortgage servicing fees are recorded on an accrual basis. Acquisition costs
of mortgage servicing contracts purchased are amortized over 10 years for loans
with maturities of over 15 years and 7 years for loans with maturities of 15
years or less, or the remaining life of the related mortgages, whichever is
shorter, in proportion to estimated net servicing income. Quarterly, an
appropriate carrying value of the unamortized balance of such acquisition costs
is determined by the Corporation and annually by an independent party, based
principally on an aggregated discounted method. Additionally, quarterly, based
principally on an aggregated discounted method, an appropriate carrying value of
the unamortized deferred excess servicing fee balance is determined by the
Corporation. If such values are less than such balances, the differences are
included as a reduction of mortgage banking income.
58
Placement fees for services rendered in arranging permanent financing for
income property loans are earned when the permanent commitment issued by the
lender is approved and accepted by the borrower.
Loan origination, commitment and certain other fees and certain direct loan
origination costs are being deferred and the net amount is being amortized as an
adjustment of the related loan's yield, generally over the contractual life of
the related loans, or if the related loan is held for resale, until the loan is
sold.
Mortgage-backed securities guaranteed by the Government National Mortgage
Association under the provisions of the National Housing Act have been issued.
In keeping with the economic substance of these transactions, the issuance of
the mortgage-backed security and the simultaneous placement of the related
mortgage pool in trust have been accounted for as a sale of the mortgages. The
issued mortgage-backed securities and the related mortgage pools are not
considered to be assets and liabilities of the Corporation.
PENSION AND SAVINGS PLANS
Substantially all employees with one year of service are eligible for
participation in a non-contributory, defined benefit pension plan and a matching
savings plan. Pension cost is determined annually by an actuarial valuation,
which includes service costs for the current year and amortization of amounts
related to prior years. The Corporation's funding policy is to contribute to the
pension plan the amount required to fund the benefits expected to be earned for
the current year and to amortize amounts related to prior years using the
projected unit credit valuation method. The difference between the pension cost
included in current income and the funded amount is included in other assets or
other liabilities, as appropriate. Actuarial assumptions are evaluated annually.
The matching savings plan permits eligible employees to make basic
contributions to the plan of up to 6 percent of base compensation, and
supplemental contributions of up to 9 percent of base compensation. Annually,
upon approval of the Board of Directors, employee basic contributions may be
matched up to 6 percent of the employee's base compensation.
INCOME TAXES
The operating results of the Parent Company and its eligible subsidiaries
are included in a consolidated federal income tax return. Each subsidiary pays
its allocation of federal income taxes to the Parent Company, or receives
payment from the Parent Company to the extent that tax benefits are realized.
Where state income tax laws do not permit consolidated income tax returns,
applicable state income tax returns are filed. As more fully described in Note
15 to the consolidated financial statements, the Corporation has adopted the
method of accounting for income taxes set forth in Statement of Financial
Accounting Standard No. 109.
INCOME PER COMMON SHARE
Income per common share is determined by dividing net income applicable to
common stockholders by the weighted average number of shares of common stock
outstanding.
NOTE 2:
STATEMENT PRESENTATION AND OTHER MATTERS
As described more fully in Note 15 to the consolidated financial statements,
the Corporation adopted new accounting for income tax rules. Certain other
amounts for 1992 and 1991 were reclassified to conform with statement
presentation for 1993. These reclassifications have no effect on stockholders'
equity or net income as previously reported.
On January 15, 1993, the acquisitions of South Carolina Federal Corporation
(SCF) and DFSoutheastern, Inc. (Decatur) were consummated, and on March 1, 1993,
the acquisition of Dominion Bankshares Corporation (Dominion) was consummated.
The following describes each of these acquisitions.
The Parent Company entered into an Agreement and Plan of Merger on June 10,
1992, providing for the pooling of interests acquisition of SCF, a South
Carolina-based savings and loan holding company, and the exchange of .76 shares
of Parent Company common stock for each share of SCF common stock. At December
31, 1992, and for the year then ended, SCF had assets of $823,056,000, net loans
of $675,355,000, deposits of $618,801,000, stockholders' equity of $41,632,000,
a net loss of $10,375,000, and had outstanding 2,808,000 shares of common stock.
The Parent Company entered into an Agreement and Plan of Merger on June 28,
1992, providing for the pooling of interests acquisition of Decatur, a
Georgia-based savings and loan holding company, and the exchange of .82 shares
of Parent Company common stock for each share of Decatur common stock. At
December 31, 1992, and for the year then ended, Decatur had assets of
$2,659,742,000, net loans of $2,017,452,000, deposits of $1,944,542,000,
stockholders' equity of $116,226,000, a net loss of $10,932,000 and had
outstanding 4,769,000 shares of common stock.
The Parent Company entered into an Agreement and Plan of Merger on September
20, 1992, providing for the pooling of interests acquisition of Dominion, a
Virginia-based bank holding company, and the exchange of .58 shares of Parent
Company common stock for each share of Dominion common stock and one share of a
new series of Series A $2.50 Cumulative Convertible Class A Preferred Stock,
stated and liquidation value of $25.00 (the Convertible Preferred) for each
share of Dominion convertible preferred stock. Dividends on the Convertible
Preferred were paid quarterly at the annual rate of $2.50. The Convertible
Preferred was redeemed by the Parent Company on June 18, 1993 at the redemption
price of $25.00. Substantially all of the Convertible Preferred was converted
into 2.2222 times .58 shares of Parent Company common stock. At December 31,
1992, and for the year then ended, Dominion had assets of $8,810,605,000, net
loans of $5,864,223,000, deposits of $7,198,092,000, stockholders' equity of
$472,662,000, a net loss applicable to common stockholders of $104,594,000 and
had outstanding 527,000 shares of preferred stock and 39,228,000 shares of
common stock.
On June 12, 1993, Georgia Federal Bank, FSB, (GFB), a Georgia-based savings
bank was purchased by the Parent Company for $153,870,000 in cash, after the
payment of $115,000,000 in dividends from GFB to its parent company. Immediately
prior to the acquisition, GFB had assets of $3,700,635,000, net loans of
$2,064,157,000, deposits of $2,518,458,000, stockholders' equity of $182,139,000
and a net loss of $6,169,000. As a result of the GFB acquisition deposit base
premium was increased by $51,481,000 and is
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
being amortized over a 10-year period using the sum-of-the years' digits method.
On June 23, 1993, First American Metro Corp. (FAMC), a Virginia-based bank
holding company, was purchased by the Parent Company for $452,420,000 in cash.
Immediately prior to the acquisition, FAMC had assets of $4,403,955,000, net
loans of $2,604,610,000, deposits of $3,758,581,000, stockholders' equity of
$364,701,000 and a net loss of $4,281,000. As a result of the FAMC acquisition,
goodwill, deposit base premium and credit card premium were increased by
$109,398,000, $79,241,000 and $23,000,000, respectively. These amounts are being
amortized on a straight-line basis over 25 years, and over 10-and 6.3-year
periods, respectively, using the sum-of-the-years' digits method.
During 1992, various banking subsidiaries of the Parent Company acquired in
the aggregate $3,739,039,000 of assets in purchase accounting transactions at a
cost of $129,018,000. These transactions included Flagler Federal Savings and
Loan Association and PSFS Thrift Holding Company with assets at the date of
consummation of $1,526,470,000 and $1,172,212,000, respectively. The resulting
goodwill of $822,000 and deposit base premium of $17,960,000 will be amortized
on a straight-line basis over 15 years and on an accelerated basis over 10
years, respectively.
Included in noninterest sundry expense in 1992 are restructuring charges of
$162,105,000 related to the SCF, Decatur and Dominion acquisitions.
The information below indicates on a pro forma basis, amounts as if GFB and
FAMC had been acquired as of January 1, 1992; historical amounts as reported by
the Corporation; and such historical amounts restated for the SCF, Decatur and
Dominion acquisitions.
(IN THOUSANDS EXCEPT PER YEARS ENDED DECEMBER 31,
SHARE DATA) 1993 1992 1991
ProForma -- GFB and FAMC
(Unaudited)
Interest income $4,808,536 5,234,314 --
Interest expense 1,923,786 2,412,777 --
Net interest income 2,884,750 2,821,537 --
Provision for loan losses 238,613 487,480 --
Noninterest income 1,248,497 1,321,287 --
Noninterest expense 2,697,038 2,976,469 --
Income before income
taxes 1,197,596 678,875 --
Income taxes 402,342 239,108 --
Net income 795,254 439,767 --
Dividends on preferred
stock 24,900 31,979 --
Net income available to
common stockholders $ 770,354 407,788 --
Net income per common
share $ 4.59 2.57 --
Corporation as Reported
Net interest income $ -- 2,008,160 1,475,501
Net income -- 515,212 318,737
Net income applicable to
common stockholders -- 484,562 285,512
Net income per common
share -- 3.72 2.55
As Restated for SCF,
Decatur and Dominion
Net interest income -- 2,458,417 1,904,444
Net income -- 385,015 348,731
Net income applicable to
common stockholders -- 353,072 314,161
Net income per common
share $ -- 2.23 2.24
The following assumptions were applied in arriving at the above pro forma
results; cost of funds of 3.12 percent and 3.69 percent for 1993 and 1992,
respectively; applying a straight-line depreciation method over useful lives
ranging from 10 to 25 years; goodwill amortized over 25 years using the
straight-line method; credit card relationships amortized over a 6.3-year period
and other intangibles amortized over a 10-year period using the sum-of-the-
years' digits method; and various other assets amortized over seven years using
both the straight-line and sum-of-the-years' digits methods.
On September 19, 1991, First Union National Bank of Florida purchased
certain assets and assumed certain deposits and other liabilities of Southeast
Bank, National Association and Southeast Bank of West Florida. See Note 8 to the
consolidated financial statements for additional information related to these
acquisitions.
During 1991, First Union Florida purchased the deposits amounting to
$2,261,069,000 and other liabilities amounting to $30,199,000 of three savings
banks acquired by the Resolution Trust Corporation for $12,061,000. The purchase
price was recorded as deposit base premium and is being amortized over a 10-year
period using the sum-of-the-years' digits method. Cash acquired in these
transactions amounted to $2,266,463,000.
On October 18, 1993, the Parent Company agreed to acquire Lieber & Company
(Lieber), an investment management firm that is the adviser to the Evergreen
Funds, a $3,300,000,000 family of mutual funds with headquarters in Purchase,
New York. In this acquisition, which is expected to be accounted for as a
pooling of interests, the Parent Company agreed to issue approximately 3,100,000
shares of Parent Company common stock, subject to adjustment under certain
circumstances.
On November 17, 1993, the Parent Company agreed to acquire American
Bancshares, Inc. (ABI), the parent corporation of American Commercial Savings
Banks Inc. SSB, which had assets of $235,403,000 at December 31, 1993, and is
based in Monroe, North Carolina. In this acquisition, which is expected to be
accounted for as a pooling of interests, the Parent Company agreed to issue
approximately 518,000 shares of Parent Company common stock, subject to
adjustment under certain circumstances.
In addition, on January 17, 1994, the Parent Company agreed to acquire
BancFlorida Financial Corporation (BancFlorida), the parent company of
BancFlorida, FSB, which had assets of $1,527,075,000 at December 31, 1993, and
is based in Naples, Florida. The Parent Company agreed to issue approximately
4,000,000 shares of Parent Company common stock, subject to adjustment under
certain conditions. The Parent Company currently plans to purchase in the open
market approximately one-half of the common shares issued in the acquisition.
This acquisition is expected to be accounted for as a purchase.
The Parent Company currently expects consummation of the Leiber and ABI
acquisitions in the second quarter of 1994, and the BancFlorida acquisition in
the third quarter of 1994, all subject to regulatory approvals and other
conditions of closing.
60
NOTE 3:
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1993 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES
Carrying Value
U.S. Treasury $ 3,177,119 1,249,298 -- -- 4,426,417 3,609 (7,315)
U.S. Government
agencies 114,531 1,646,429 1,494,136 555 3,255,651 43,814 (270)
Collateralized
mortgage
obligations 1,006,973 1,226,569 -- -- 2,233,542 13,389 (8,825)
Other 438,585 1,121,571 35,474 233,702 1,829,332 95,296 (255)
Total $ 4,737,208 5,243,867 1,529,610 234,257 11,744,942 156,108 (16,665)
Carrying Value
Debt securities $ 4,737,208 5,243,867 1,529,610 860 11,511,545 119,624 (16,445)
Sundry securities -- -- -- 233,397 233,397 36,484 (220)
Total $ 4,737,208 5,243,867 1,529,610 234,257 11,744,942 156,108 (16,665)
Market Value
Debt securities $ 4,742,741 5,328,847 1,542,264 872 11,614,724
Sundry securities -- -- -- 269,661 269,661
Total $ 4,742,741 5,328,847 1,542,264 270,533 11,884,385
DECEMBER 31, 1993 MARKET
(IN THOUSANDS) VALUE
Carrying Value
U.S. Treasury 4,422,711
U.S. Government
agencies 3,299,195
Collateralized
mortgage
obligations 2,238,106
Other 1,924,373
Total 11,884,385
Carrying Value
Debt securities 11,614,724
Sundry securities 269,661
Total 11,884,385
Market Value
Debt securities
Sundry securities
Total
DECEMBER 31, 1992 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $2,352,822 316,405 130 241 2,669,598 9,767 (763) 2,678,602
U.S. Government
agencies 32,644 206,864 60,710 212,878 513,096 13,179 (905) 525,370
Collateralized
mortgage
obligations 299,755 501,431 40,217 31,562 872,965 1,812 (2,260) 872,517
State, county and
municipal 50,708 240,672 -- 2,186 293,566 26,456 (9) 320,013
Other 220,913 416,013 98,380 118,813 854,119 11,408 (5,062) 860,465
Total $2,956,842 1,681,385 199,437 365,680 5,203,344 62,622 (8,999) 5,256,967
Carrying Value
Debt securities $2,956,842 1,681,385 199,437 257,139 5,094,803 57,706 (8,521) 5,143,988
Sundry securities -- -- -- 108,541 108,541 4,916 (478) 112,979
Total $2,956,842 1,681,385 199,437 365,680 5,203,344 62,622 (8,999) 5,256,967
Market Value
Debt securities $2,964,538 1,714,200 199,863 265,438 5,144,039
Sundry securities -- -- -- 112,928 112,928
Total $2,964,538 1,714,200 199,863 378,366 5,256,967
Securities available for sale with an aggregate carrying value of
$5,677,679,000 at December 31, 1993, are pledged to secure U.S. Government and
other public deposits and for other purposes as required by various statutes or
agreements.
Expected maturities differ from contractual maturities since borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Generally, the aging of mortgage-backed securities included in U.S.
Government agencies and collateralized mortgage obligations is based on their
weighted average maturities at December 31, 1993 and 1992.
At December 31, 1993 and 1992, collateralized mortgage obligations
had a weighted average yield of 5.09 percent and 5.45 percent, respectively.
Included in Other at December 31, 1993, are $1,231,447,000 of securities
available for sale that are denominated in currencies other than the U.S.
dollar. The currency exchange rates were hedged utilizing both on and off-
balance sheet instruments to minimize the exposure to currency revaluation
risks. At December 31, 1993, these securities had a weighted average
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
maturity of 2.78 years and a weighted average yield of 7.82 percent. The
weighted average U.S. equivalent yield for comparative purposes of these
securities was 5.59 percent based on a weighted average funding cost
differential of (2.23) percent.
Securities available for sale at December 31, 1993, do not include
commitments to purchase $267,813,000 of additional securities that at December
31, 1993, had a market value of $267,969,000.
Securities available for sale at December 31, 1993 and 1992, include the
carrying value of $513,390,000 and $54,892,000, respectively, of securities
which have been sold for future settlement. Related gains and losses are
accounted for on a trade date basis.
Gross gains and losses realized on the sale of debt securities during 1993
were $28,818,000 and $9,553,000, respectively, and on sundry securities
$6,570,000 and $68,000, respectively.
Gross gains and losses realized on the sale of debt securities during 1992
were $42,014,000 and $7,419,000, respectively, and on sundry securities $230,000
and $423,000, respectively.
The Financial Accounting Standards Board has issued Standard No. 115,
Accounting for Certain Investments in Debt and Equity Securities, that requires
that debt and equity securities held: (i) TO MATURITY be classified as such and
reported at amortized cost; (ii) FOR CURRENT RESALE be classified as trading
securities and reported at fair value, with unrealized gains and losses included
in current earnings; and (iii) FOR ANY OTHER PURPOSE be classified as securities
available for sale and reported at fair value, with unrealized gains and losses
excluded from current earnings and reported as a separate component of
stockholders' equity. It is required for fiscal years beginning after December
15, 1993. The effect of the foregoing will cause fluctuations in stockholders'
equity based on changes in values of debt and equity securities. If this
Standard had been adopted at December 31, 1993, stockholders' equity would have
been increased by an after-tax amount of $93,427,000 based on appreciation in
the securities available for sale portfolio of $139,443,000. Securities
available for sale at December 31, 1993, include an increase of $4,569,363,000
related to the reclassification of securities from the investment securities
portfolio and other assets.
62
NOTE 4:
INVESTMENT SECURITIES
DECEMBER 31, 1993 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $ 550 -- -- -- 550 -- (1) 549
U.S. Government
agencies 311,750 814,667 30,232 -- 1,156,649 44,054 (1,222) 1,199,481
State, county and
municipal 80,863 508,477 242,072 511,523 1,342,935 183,230 (756) 1,525,409
Other -- -- 6,200 186,142 192,342 13,358 -- 205,700
Total $ 393,163 1,323,144 278,504 697,665 2,692,476 240,642 (1,979) 2,931,139
Carrying Value
Debt securities $ 393,163 1,323,144 278,504 511,530 2,506,341 227,730 (1,979) 2,732,092
Sundry securities -- -- -- 186,135 186,135 12,912 -- 199,047
Total $ 393,163 1,323,144 278,504 697,665 2,692,476 240,642 (1,979) 2,931,139
Market Value
Debt securities $ 401,304 1,399,666 311,652 619,470 2,732,092
Sundry securities -- -- -- 199,047 199,047
Total $ 401,304 1,399,666 311,652 818,517 2,931,139
DECEMBER 31, 1992 1 YEAR 1-5 5-10 AFTER 10 GROSS UNREALIZED MARKET
(IN THOUSANDS) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES VALUE
Carrying Value
U.S. Treasury $ 53,985 258,553 -- -- 312,538 1,451 (1,212) 312,777
U.S. Government
agencies 26,265 1,983,165 1,311,018 5,147 3,325,595 61,527 (4,541) 3,382,581
Collateralized
mortgage
obligations 137,364 1,238,654 -- 3,527 1,379,545 6,708 (9,337) 1,376,916
State, county and
municipal 4,230 118,399 257,274 641,842 1,021,745 123,997 (1,181) 1,144,561
Other 159,501 161,670 4,454 268,290 593,915 15,874 (1,558) 608,231
Total $ 381,345 3,760,441 1,572,746 918,806 6,633,338 209,557 (17,829) 6,825,066
Carrying Value
Debt securities $ 381,345 3,760,441 1,572,746 652,688 6,367,220 197,901 (16,447) 6,548,674
Sundry securities -- -- -- 266,118 266,118 11,656 (1,382) 276,392
Total $ 381,345 3,760,441 1,572,746 918,806 6,633,338 209,557 (17,829) 6,825,066
Market Value
Debt securities $ 379,517 3,814,483 1,617,925 736,749 6,548,674
Sundry securities -- -- -- 276,392 276,392
Total $ 379,517 3,814,483 1,617,925 1,013,141 6,825,066
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
Investment securities with an aggregate carrying value of $2,562,740,000 at
December 31, 1993, are pledged to secure U.S. Government and other public
deposits and for other purposes as required by various statutes or agreements.
Expected maturities differ from contractual maturities since borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties. Generally, the aging of mortgage-backed securities included in U.S.
Government agencies is based on their weighted average maturities at December
31, 1993 and 1992.
At December 31, 1992, collateralized mortgage obligations had a weighted
average yield of 6.03 percent.
Investment securities at December 31, 1992, do not include commitments to
purchase $533,491,000 of additional securities that at
December 31, 1992, had a market value of $536,618,000.
Gross gains and losses realized on the sale or call of debt securities
during 1993 were $2,722,000 and $318,000, respectively, and on sundry securities
$5,115,000 and $84,000, respectively.
Gross gains and losses realized on the sale of debt securities during 1992
were $19,035,000 and $19,100,000, respectively, and on sundry securities
$615,000 and $3,431,000, respectively.
Gross gains and losses realized on the sale of debt securities during 1991
were $156,505,000 and $2,533,000, respectively, and on sundry securities
$1,516,000 and $440,000, respectively.
See Note 3 for information related to new accounting rules for debt and
equity securities.
NOTE 5:
LOANS
(IN THOUSANDS) 1993 1992
Commercial
Commercial, financial and agricultural $ 13,233,725 11,271,676
Real estate-construction and other 1,664,694 1,886,319
Real estate-mortgage 5,834,894 5,782,780
Lease financing 962,599 1,033,809
Foreign 304,267 274,800
Total commercial 22,000,179 20,249,384
Retail
Real estate-mortgage 13,318,058 10,775,107
Installment loans to individuals 11,891,999 11,260,708
Total retail 25,210,057 22,035,815
Total $ 47,210,236 42,285,199
64
The carrying amounts and fair values of loans with similar financial
characteristics at December 31, 1993 and 1992 are as follows:
DECEMBER 31, 1993
WEIGHTED AVERAGE ESTIMATED CALCULATED
CARRYING AVERAGE MATURITY DISCOUNT
(IN THOUSANDS) AMOUNT COUPON (YRS) (1) RATE (2) FAIR VALUE
Commercial
Adjustable $ 11,229,811 5.89% 2.35 4.87% $ 11,476,977
Fixed 1,782,814 7.71 4.20 6.57 1,872,778
Real Estate
Residential:
Adjustable 6,709,116 6.78 -- -- 6,839,247
Fixed 6,512,620 8.38 -- -- 6,713,341
Commercialmortgage:
Adjustable 4,105,146 6.89 4.11 5.62 4,314,654
Fixed 1,581,213 8.39 4.32 7.18 1,659,192
Commercial-construction and other:
Adjustable 1,434,099 6.59 2.17 5.54 1,488,161
Fixed 155,094 7.91 3.39 7.12 176,825
Other 1,060,657 5.18 .26 -- 1,061,084
Direct and Indirect Installment Loans to Individuals
Adjustable 3,302,642 8.08 6.97 7.70 3,329,282
Fixed 5,950,637 9.51 6.56 8.57 6,134,807
Revolving loans to individuals 2,363,625 13.81 -- 10.54 2,578,423
Unallocated allowance for loans losses (331,488) --% -- --% --
Total $ 45,855,986 $ 47,644,771
(1) Average maturity represents in terms of years the expected average cash flow
period, which in some instances is different than the stated maturity.
(2) Management has made estimates of fair value discount rates that it believes
to be reasonable. However, because there is no readily available market for
many of these financial instruments, management has no basis to determine
whether the fair value presented above would be indicative of the value
negotiated in an actual sale.
DECEMBER 31, 1992
CARRYING CALCULATED
(IN THOUSANDS) AMOUNT FAIR VALUE
Commercial
Adjustable $9,085,750 9,218,482
Fixed 1,845,878 1,875,646
Real Estate
Residential:
Adjustable 5,365,594 5,460,353
Fixed 5,305,985 5,414,323
Commercialmortgage:
Adjustable 4,040,196 4,206,640
Fixed 1,556,623 1,594,766
Commercial-construction and other:
Adjustable 1,473,495 1,510,382
Fixed 282,124 280,735
Other 1,130,648 1,130,734
Direct and Indirect Installment Loans to Individuals
Adjustable 3,419,834 3,547,279
Fixed 5,017,269 5,179,220
Revolving loans to individuals 2,600,442 2,734,941
Unallocated allowance for loans losses (140,875) --
Total $40,982,963 42,153,501
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
The fair value estimate for credit card loans is based on the value of
existing loans at December 31, 1993 and 1992. This estimate does not include the
value that relates to estimated cash flows from new loans generated from
existing cardholders over the remaining life of the portfolio, but is disclosed
as unaudited supplemental information in Note 18.
Directors and executive officers of the Parent Company and their related
interests were indebted to the Corporation in the aggregate amounts of
$243,562,000 and $176,516,000 at December 31, 1993 and 1992, respectively. From
January 1 through December 31, 1993, directors and executive officers of the
Parent Company and their related interests borrowed $144,219,000 and repaid
$77,173,000. In the opinion of management, these loans do not involve more than
the normal risk of collectibility, nor do they present other unfavorable
features.
At December 31, 1993 and 1992, nonaccrual and restructured loans amounted to
$693,886,000 and $975,491,000, respectively. Interest related to nonaccrual and
restructured loans for the years ended December 31, 1993, 1992 and 1991 amounted
to $78,463,000, $71,370,000 and $120,630,000, respectively. Interest collected
on such loans and included in the results of operations for each of the years in
the three-year period then ended amounted to $24,281,000, $14,481,000 and
$34,606,000, respectively.
At December 31, 1993, $446,117,000 of securitized retail real estate
mortgage loans had a market value of $471,775,000.
Included in loans at December 31, 1993, are $3,086,224,000 of acquired
Southeast Banks loans which, under the terms of the Assistance Agreement, are
subject to FDIC assistance if such loans become nonaccrual before September 20,
1996. Such nonaccrual loans are reclassified to Southeast segregated assets.
At year-end 1993, the Corporation was closely monitoring 34 loans amounting
to $76,985,000 in which borrowers were experiencing increased levels of
financial stress. None of these loans were included in nonperforming assets at
year-end 1993 or in accruing loans past due 90 days.
The Financial Accounting Standards Board (FASB) also has issued Standard No.
114, Accounting by Creditors for Impairment of a Loan, which requires that all
creditors value all specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due according to the terms of
the loan agreement at either the present value of expected cash flows, market
price or value of collateral. This discounting would be done at the loan's
effective interest rate. The Corporation estimates the initial application of
this accounting standard in 1995 will not require an increase to the existing
allowance for loan losses. The periodic effect on net income has not been fully
determined. This Standard is required for fiscal years beginning after December
15, 1994. The FASB is discussing the possibility of amending this accounting
standard. It is not clear at this time what form such an amendment, if any,
would take. The Corporation will continue to monitor future developments.
NOTE 6:
ALLOWANCE FOR LOAN LOSSES
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Balance, beginning of
year $ 940,804 851,830 702,685
Provision for loan
losses 221,753 414,708 648,284
Reversal of tax
effect of acquired
bank related net
charge-offs
included in the
provision for loan
losses -- -- (16,386)
Transfer to allowance
for segregated
asset losses -- (20,000) (13,000)
Allowance of acquired
loans and credit
cards 109,321 50,141 83,770
1,271,878 1,296,679 1,405,353
Less:
Loan losses 329,560 406,551 596,783
Less loan
recoveries 77,873 50,676 43,260
Loan losses, net 251,687 355,875 553,523
Balance, end of year $ 1,020,191 940,804 851,830
NOTE 7:
PREMISES AND EQUIPMENT
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Land $ 328,250 286,283 219,840
Buildings 985,010 865,177 733,782
Equipment 1,083,530 879,609 766,821
Capitalized leases 12,441 12,806 16,331
2,409,231 2,043,875 1,736,774
Less accumulated
depreciation and
amortization 884,376 709,370 631,545
Total $ 1,524,855 1,334,505 1,105,229
Net premises and
equipment
pledged as
security for
mortgage notes $ 83,761 59,546 67,764
Depreciation and
amortization $ 152,273 129,945 111,019
66
NOTE 8:
SOUTHEAST SEGREGATED ASSETS
On September 19, 1991, Southeast Bank, National Association, and Southeast
Bank of West Florida (together, the Southeast Banks), the bank subsidiaries of
Southeast Banking Corporation (Southeast), were closed by their primary banking
regulators and the Federal Deposit Insurance Corporation (the FDIC) was
appointed Receiver of the respective banks (the Bank Closing).
Immediately following the Bank Closing, First Union National Bank of Florida
(First Union Florida), a subsidiary of the Parent Company, purchased from the
FDIC as Receiver $9,874,424,000 in assets and assumed $8,979,909,000 in deposits
and certain other liabilities of the Southeast Banks (the Southeast Acquisition)
pursuant to Assistance Agreements (together, the Assistance Agreement) between
First Union Florida and the FDIC.
First Union Florida paid $81,000,000 to the FDIC as a net premium for the
Southeast Acquisition. As a result of the Southeast Acquisition, deposit base
premium, credit card premium and other intangibles were increased by
$18,739,000, $28,677,000 and $7,668,000, respectively. These amounts are being
amortized over 10-, 6.3-and 15.1-year periods, respectively, using the
sum-of-the-years' digits method.
Segregated assets are those Southeast Banks loans acquired by First Union
Florida as of Bank Closing that were or have become nonaccrual or a foreclosed
property. All such loans are subject to the loss-sharing and funding provisions
of the Assistance Agreement.
Southeast segregated assets at December 31, 1993, were $347,202,000. This
amount included gross segregated assets of $380,515,000 and an allowance for
segregated assets of $33,313,000. From December 31, 1992, the allowance for
segregated assets of $45,362,000 was increased by a transfer from the allowance
for foreclosed properties of $1,998,000 and decreased by net charge-offs of
$14,047,000.
Southeast segregated assets at December 31, 1992, were $530,895,000. This
amount included gross segregated assets of $576,257,000 and an allowance for
segregated assets of $45,362,000. From December 31, 1991, the allowance for
segregated assets of $54,000,000 was increased by a transfer from the allowance
for loan losses of $20,000,000 and decreased by net charge-offs of $28,638,000.
Under the loss-sharing provisions of the Assistance Agreement, the FDIC will
pay to First Union Florida with respect to assets acquired from the Southeast
Banks, on a quarterly basis, 85 percent of all net charge-offs on acquired
commercial loans and 85 percent of charge-offs on acquired consumer loans other
than consumer revolving credit loans, during the five-year period commencing
with Bank Closing. For consumer revolving credit loans (composed principally of
credit card receivables and revolving home equity loans), the FDIC will
reimburse First Union Florida for 85 percent of all charge-offs in the first
year following Bank Closing, 80 percent in the second year, 75 percent in the
third year, 70 percent in the fourth year and 65 percent in the fifth year. Such
charge-offs include losses on sales of assets and foreclosed properties and
accrued interest for up to 180 days. In addition, the FDIC will reimburse First
Union Florida for 85 percent of the aggregate amount of the actual direct
expenses that were charged against First Union Florida's income with respect to
foreclosed properties derived from loans on the books of the Southeast Banks as
of Bank Closing.
During the sixth and seventh years following Bank Closing, First Union
Florida will pay to the FDIC an amount equal to 85 percent of the gross amount
of recoveries during such period on charge-offs of such commercial loans that
occurred prior to the expiration of the first five years following Bank Closing.
During the seven-year period following Bank Closing, First Union Florida
will pay to the FDIC an amount equal to the sum of (i) 65 percent of any
recoveries on charge-offs of such consumer loans, other than such residential
mortgage loans, and (ii) 85 percent of any recoveries on charge-offs of such
residential mortgage loans, in each case with respect to charge-offs that
occurred prior to the expiration of the first five years after Bank Closing.
First Union Florida will generally be required to administer assets entitled
to loss-sharing protection in the same manner as assets held by First Union
Florida as to which no loss sharing exists.
NOTE 9:
FORECLOSED PROPERTIES
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Foreclosed properties $ 278,694 478,887 561,476
Allowance for foreclosed
properties, beginning of
year 103,328 30,952 799
Provision for foreclosed
properties 23,730 111,260 36,467
Transfer to allowance for
segregated assets (1,998) -- --
Dispositions, net (68,869) (38,884) (6,314)
Allowance for foreclosed
properties, end of year 56,191 103,328 30,952
Foreclosed properties, net $ 222,503 375,559 530,524
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
NOTE 10:
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND OTHER SHORT-TERM BORROWINGS
The following is a schedule of securities sold under repurchase agreements,
which includes accrued interest, and other short-term borrowings of the
Corporation at December 31, 1993, 1992 and 1991, and the related maximum amount
outstanding at the end of any month during the periods:
MAXIMUM OUTSTANDING
(IN THOUSANDS) 1993 1992 1991 1993 1992 1991
Securities sold under repurchase
agreements $ 5,102,045 3,425,325 3,562,079 6,740,066 4,627,891 8,140,415
Other Short-Term Borrowings
Federal funds purchased $ 695,627 573,376 410,439 2,890,658 1,645,557 2,569,485
Interest-bearing demand
deposits issued to the U.S.
Treasury 843,069 632,557 79,341 875,642 908,841 957,230
Commercial paper 270,666 297,951 342,536 421,079 360,825 947,345
Other 342,771 136,128 16,592 451,317 319,337 212,664
Total $ 2,152,133 1,640,012 848,908
At December 31, 1993, 1992 and 1991, the weighted average interest rates for
commercial paper were 2.70 percent, 2.62 percent and 3.56 percent, respectively.
Weighted average maturities for commercial paper issued at December 31, 1993,
1992 and 1991, approximated 5, 4 and 5 days, respectively. At December 31, 1993,
1992 and 1991, the combined weighted average interest rates related to federal
funds purchased and securities sold under repurchase agreements were 3.17
percent, 3.17 percent and 4.50 percent, respectively. Maturities related to
federal funds purchased and securities sold under repurchase agreements in each
of the years in the three-year period then ended were not greater than 269 days.
Substantially all short-term borrowings are due within 90 days, and
accordingly, the carrying amount of such borrowings is deemed to be a reasonable
estimate of fair value.
68
NOTE 11:
LONG-TERM DEBT
1993 1992
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
(IN THOUSANDS) AMOUNT VALUE AMOUNT VALUE
Debentures and Notes Issued by the Parent Company
7 1/2 percent debentures, due in annual installments of not less
than $1,000 through December 1, 2002, net of debentures held
of $12,381 in 1993 $ 15,619 15,716 15,619 15,448
Floating rate extendible notes, due June 15, 2005 100,000 100,000 100,000 100,000
11 percent notes, due May 1, 1996 18,360 21,355 64,612 69,317
Floating rate notes, due November 13, 1996 150,000 150,000 150,000 150,000
9 1/4 percent notes -- -- 225,000 235,055
5.95 percent notes, due July 1, 1995 149,762 154,050 149,604 151,406
6 3/4 percent notes, due January 15, 1998 248,021 261,750 -- --
Fixed rate medium-term senior notes with varying rates and terms
to 1996 72,200 75,120 106,800 109,823
Fixed rate medium-term subordinated notes with varying rates and
terms to 2001 54,000 61,760 54,000 59,798
Floating rate subordinated notes -- -- 50,000 50,000
Floating rate subordinated notes, due July 22, 2003 149,003 149,003 -- --
11 percent and variable rate subordinated notes, due in 1996 17,954 20,939 56,590 61,348
8 1/8 percent subordinated notes, due December 15, 1996 100,000 107,910 100,000 105,688
9.45 percent subordinated notes, due June 15, 1999 250,000 290,700 250,000 274,297
9.45 percent subordinated notes, due August 15, 2001 147,164 181,500 146,792 164,203
8 1/8 percent subordinated notes, due June 24, 2002 248,271 278,000 248,067 255,078
8 percent subordinated notes, due November 15, 2002 222,788 248,175 222,540 226,547
7 1/4 percent subordinated notes, due February 15, 2003 148,671 157,965 -- --
6 5/8 percent subordinated notes, due July 15, 2005 247,807 249,725 -- --
6 percent subordinated notes, due October 30, 2008 197,115 185,400 -- --
Debentures and Notes of Subsidiaries
Floating rate subordinated notes -- -- 49,819 50,000
9 7/8 percent subordinated capital notes, due May 15, 1999 74,267 87,709 74,130 78,656
Floating rate subordinated notes -- -- 34,458 32,391
9 5/8 percent subordinated capital notes, due June 15, 1999 74,931 88,231 74,920 71,080
10 1/2 percent collateralized mortgage obligations, due in 1996 72,115 75,000 -- --
Debentures and notes with varying rates and terms to 2002 7,400 7,847 17,006 17,055
2,765,448 2,967,855 2,189,957 2,277,190
Other Debt
Notes payable to the FDIC, net of discount of $14,659 in 1993
and $40,722 in 1992, due September 19, 1996 260,846 260,846 430,380 430,380
Advances from the Federal Home Loan Bank 4,453 4,578 480,220 485,755
Mortgage notes and other debt of subsidiaries with varying rates
and terms 25,575 28,874 44,454 46,336
Capitalized lease obligations calculated at rates generally
ranging from 7.3 percent to 13.5 percent 5,622 4,594 6,249 4,573
296,496 298,892 961,303 967,044
Total $ 3,061,944 3,266,747 3,151,260 3,244,234
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Corporation for debt of the same remaining maturities.
The 7 1/2 percent debentures are redeemable at the option of the Parent
Company.
The floating rate (3 1/2 percent to March 15, 1994) extendible notes are
redeemable in whole or in part at the option of the Parent Company.
In 1993, $46,252,000 of the 11 percent notes matured. The remaining 11
percent notes may not be redeemed by the Parent Company prior to maturity.
The floating rate (3 5/8 percent to February 22, 1994) notes are redeemable
in whole or in part at the option of the Parent Company.
The 9 1/4 percent notes matured in 1993.
The 5.95 percent notes and 6 3/4 percent notes may not be redeemed prior to
maturity.
The fixed rate medium-term senior and subordinated notes are issued
periodically. Interest rates, maturities, redemption and other terms are
determined at the date of issuance. At December 31, 1993, the Parent Company had
issued medium-term senior and subordinated notes with fixed rates of interest
ranging from 6.15 percent to 9.43 percent and from 9.49 percent to 9.93 percent,
respectively. Medium-term senior notes of $34,600,000 matured in 1993. The notes
are redeemable at the option of the Parent Company. At December 31, 1993,
$650,000,000 of senior or subordinated debt securities remained available for
issuance under a shelf registration statement filed with the Securities and
Exchange Commission in August 1993.
The floating rate (4 1/8 percent to January 22, 1994) subordinated notes may
not be redeemed prior to maturity.
In 1996, $17,096,000 of the 11 percent subordinated notes and $858,000 of
the variable rate (4.07 percent to March 31, 1994) subordinated notes are due,
respectively. In 1993, $38,636,000 of the 11 percent subordinated notes matured.
The Parent Company expects to pay all, or a substantial portion, of the
subordinated notes from the issuance or sale of equity securities.
The Parent Company expects to pay all, or a substantial portion, of the
8 1/8 percent subordinated notes due December 15, 1996, which may not be
redeemed prior to maturity, with proceeds from the issuance or sale of equity
securities.
The 9.45 percent subordinated notes, the 8 1/8 percent subordinated notes
due June 24, 2002, the 8 percent subordinated notes, the 7 1/4 percent
subordinated notes, the 6 5/8 percent subordinated notes and the 6 percent
subordinated notes may not be redeemed prior to maturity.
The 9 7/8 percent subordinated capital notes that were issued by an acquired
bank holding company may not be redeemed prior to maturity except upon the
occurrence of certain events.
The 9 5/8 percent subordinated capital notes may not be redeemed prior to
maturity, except upon the occurrence of certain events.
In 1993, floating rate subordinated notes in the net amount of $134,277,000,
were redeemed. Redemption costs were not material.
The 10 1/2 percent collateralized mortgage obligations were issued by a
wholly-owned subsidiary of an acquired savings bank. The obligations consist of
Class A-4 bonds collateralized by mortgage participation certificates (FHLMC
Certificates) issued by the Federal Home Loan Mortgage Corporation. Maturity of
the bonds depends on the rate of payments made on the FHLMC Certificates. The
bonds are redeemable upon the occurrence of certain events.
Notes payable to the FDIC result from funding assistance for Southeast Banks
segregated assets which is provided by the FDIC's acceptance of five-year
revolving notes issued by First Union Florida. The annual rate of interest on
the notes is 1/8th of 1 percent. In accordance with the funding assistance
provisions of the Assistance Agreement, these notes at December 31, 1993,
amounted to $275,505,000, less a discount of $14,659,000 based on an imputed
interest rate of 8 3/4 percent, or a net amount of $260,846,000. At December 31,
1992, these notes amounted to $471,102,000, less a discount of $40,722,000 based
on an imputed interest rate of 8 3/4 percent, or a net amount of $430,380,000.
The discount amount will be accreted into interest expense under the interest
method to September 19, 1996.
The principal amount of the notes will reflect, and the FDIC will make a
payment to First Union Florida in the amount of, the book value of (i) any loan
on the books of the Southeast Banks as of the Bank Closing that is placed on
nonaccrual status by First Union Florida during the five years following the
Bank Closing; and (ii) foreclosed properties not on the books of the Southeast
Banks as of the Bank Closing but that derives from a loan on the books of the
Southeast Banks as of such date. In lieu of such notes, within 179 days from the
Bank Closing, First Union Florida elected to receive a fee with respect to
nonaccrual loans and foreclosed properties which become such after such 179-day
period, in an amount equal to the three-month U.S. Treasury bill rate times the
average balance of such loans and foreclosed properties, less any payments on
such nonaccrual loans that are recorded as a payment of interest on the books of
First Union Florida.
In the event that any nonaccrual loan is sold, charged off or removed from
nonaccrual status, First Union Florida will make a payment of principal on the
notes in an amount equal to (i) the then current book value of such loan, in the
case of a sale, (ii) the gross amount of any charge-offs, or (iii) the then
current book value of such loan in the event it is removed from nonaccrual
status.
On the fifth anniversary of the Bank Closing, First Union Florida will pay
the FDIC the outstanding principal amount of the notes, if any, together with
any accrued and unpaid interest as of such date.
The Corporation's acquired savings banks had aggregate advances from the
Federal Home Loan Bank of $4,453,000 at December 31, 1993, with interest rates
ranging from 6 percent to 7 percent and maturity dates to May 14, 2013. At
December 31, 1992, the Corporation included in net income a loss of $6,351,000
(net of income tax benefit of $3,272,000) relating to the early extinguishment
of advances from the Federal Home Loan Bank. The loss includes an accrual of
early extinguishment penalties incurred in January 1993 relating to the
prepayment of certain Federal Home Loan Bank advances outstanding at December
31, 1992.
The weighted average rate paid for long-term debt in 1993 and 1992 was 5.32
percent and 6.73 percent, respectively. Interest rate swap agreements entered at
the time of issuance of certain long-term debt reduced related interest expense.
Long-term debt maturing in each of the five years subsequent to December 31,
1993 is as follows: 1994, $68,705,000; 1995, $210,420,000; 1996, $588,025,000;
1997, $3,003,000; and 1998, $271,031,000.
70
NOTE 12:
PREFERRED STOCK
TOTAL
SERIES A, SERIES A, PREFERRED
11% CUMULATIVE $2.50 CUMULATIVE SERIES 1990 STOCK
(IN THOUSANDS) SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
Balance at December
31, 1990, as
originally reported -- $ -- -- $ -- 6,750 $ 33,748 6,750
Preferred stock issued
for pooled bank
holding company
acquired in 1993 -- -- 543 13,571 -- -- 543
Issuance to FDIC 6,000 150,000 -- -- -- -- 6,000
Purchase of preferred
stock (2,000) (50,000) -- -- (432) (2,156) (2,432)
Pre-merger
transactions of
acquired bank
holding company -- -- (10) (255) -- -- (10)
Balance at December
31, 1991 4,000 100,000 533 13,316 6,318 31,592 10,851
Purchase of preferred
stock (4,000) (100,000) -- -- -- -- (4,000)
Pre-merger
transactions of
acquired bank
holding company -- -- (5) (134) -- -- (5)
Balance at December
31, 1992 -- -- 528 13,182 6,318 31,592 6,846
Purchase of preferred
stock -- -- (6) (134) -- -- (6)
Conversion of
preferred stock into
common stock -- -- (522) (13,047) -- -- (522)
Pre-merger
transactions of
acquired bank
holding company -- -- -- (1) -- -- --
Balance at December
31, 1993 -- $ -- -- $ -- 6,318 $ 31,592 6,318
(IN THOUSANDS) AMOUNT
Balance at December
31, 1990, as
originally reported $ 33,748
Preferred stock issued
for pooled bank
holding company
acquired in 1993 13,571
Issuance to FDIC 150,000
Purchase of preferred
stock (52,156)
Pre-merger
transactions of
acquired bank
holding company (255)
Balance at December
31, 1991 144,908
Purchase of preferred
stock (100,000)
Pre-merger
transactions of
acquired bank
holding company (134)
Balance at December
31, 1992 44,774
Purchase of preferred
stock (134)
Conversion of
preferred stock into
common stock (13,047)
Pre-merger
transactions of
acquired bank
holding company (1)
Balance at December
31, 1993 $ 31,592
The Corporation is authorized to issue up to 40,000,000 shares of Class A
Preferred Stock, no-par value, and 10,000,000 shares of Preferred Stock, no-par
value, each in one or more series.
On June 18, 1993, the Corporation redeemed all of the outstanding shares of
Series A, $2.50 Cumulative Convertible Preferred Stock at the redemption price
of $25.00 per share (plus accrued and unpaid dividends), substantially all of
which were converted into shares of common stock.
The Class A Series A Preferred Stock was issued to the FDIC in connection
with the Southeast Acquisition. The Class A Series A Preferred Stock was
redeemable at the option of the Corporation at any time prior to September 26,
1992, at a redemption price of $25.00 per share, plus accrued and unpaid
dividends. On November 21, 1991, the Corporation redeemed 2,000,000 shares of
the 6,000,000 shares originally issued, at the redemption price of $25.00 per
share, or $50,000,000, plus accrued and unpaid dividends. On April 10, 1992, the
Corporation redeemed the remaining 4,000,000 shares at the redemption price of
$25.00 per share, or $100,000,000, plus accrued and unpaid dividends.
The Series 1990 Preferred Stock was issued in connection with the
acquisition of Florida National Banks of Florida, Inc. by the Corporation in
January 1990. The Series 1990 Preferred Stock has a liquidation preference of
$5.00 per share, plus accrued and unpaid dividends. The Series 1990 Preferred
Stock is redeemable at the Corporation's option, at $51.50 per share on any
dividend payment date after January 29, 1995, and after January 29, 2000, at
$50.00 per share, in each case plus accrued and unpaid dividends. The Series
1990 Preferred Stock is not convertible.
The Series 1990 Preferred Stock pays cumulative quarterly dividends,
calculated on the basis of a price of $50.00 per share which are reset quarterly
at a rate of one percent per annum above the highest of (i) a three-month U.S.
Treasury bill rate, (ii) a U.S. Treasury 10-year constant maturity rate, or
(iii) a U.S. Treasury 30-year constant maturity rate. In no event will such rate
be less than 6.75 percent per annum or more than 13.75 percent per annum.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
NOTE 13:
COMMON STOCK
OPTION PRICES BALANCE, GRANTS OR FORFEITURES BALANCE,
OR MARKET BEGINNING NEW EXERCISES AND OTHER END OF
VALUES OF 1993 SHARES OR PURCHASES REDUCTIONS 1993 EXERCISABLE
1969 Plan
Granted $11.59 8,585 -- (8,537) -- 48 48
Available 52,976 -- -- -- 52,976 --
1984 Master Stock Plan
Options granted $13.75$28.13 520,307 -- (107,928) -- 412,379 412,379
Available 507,669 -- -- -- 507,669 --
1988 Master Stock Plan
Options granted $14.75$35.88 1,484,747 -- (203,107) (2,975) 1,278,665 1,278,665
Restricted stock
granted $14.75$35.88 648,822 -- (214,881) (5,896) 428,045 --
Available 1,109,173 -- -- 2,975 1,112,148 --
1992 Master Stock Plan
Options granted $45.00 -- 605,965 -- (1,980) 603,985 --
Restricted stock
granted $45.00 -- 422,685 (10,480) (7,880) 404,325 --
Available 5,000,000 (1,028,650) -- 1,980 3,973,330 --
1992 Employee Plan $33.04 1,864,297 -- (770,118) (104,243) 989,936 989,936
Dividend Reinvestment
Plan -- 4,862,907 4,000,000 (3,271,336) -- 5,591,571 --
Option plans of acquired
companies $5.98$41.97 414,412 -- (138,253) (19,327) 256,832 256,832
Convertible debentures -- 28,334 -- (27,126) (1,208) -- --
Convertible preferred
stock -- 679,627 -- (672,602) (7,025) -- --
Total 17,181,856 4,000,000 (5,424,368) (145,579) 15,611,909
Under the terms of the 1969, 1984, 1988 and 1992 Plans, stock options may be
periodically granted to key personnel at a price not less than the fair market
value of the shares at the date of grant. Options granted under the 1969 Plan
must be exercised or forfeited on a prorated basis over a fifteen-year period,
or a ten-year period if the options are incentive stock options. The exercise
periods for options granted under the 1984, 1988 and 1992 Plans are determined
at the date of grant and are for periods no longer than ten years.
Restricted stock may also be granted under the 1984, 1988 and 1992 Plans.
The stock is subject to certain restrictions over a five-year period, during
which time the holder is entitled to full voting rights and dividend privileges.
Employees, based on their eligibility and compensation, were granted options
to purchase shares of common stock under the 1992 Employee Stock Purchase Plan
at a price equal to 85 percent of the fair market value of the shares as of the
Plan date. From the Plan date and generally for approximately a two-year period
thereafter, employees have the option to purchase all or a portion of the
optioned shares. The Plan provides that as of June 30, 1994 (the Final Purchase
Date), the option price will be the lesser of 85 percent of the fair market
value as of the Plan date or 85 percent of the fair market value as of the Final
Purchase Date.
Under the terms of the Dividend Reinvestment Plan, a participating
stockholder's cash dividends and optional cash payments were used to purchase
original issue common stock from the Parent Company.
Under the terms of the Parent Company's merger agreements with certain
acquired companies, all options with respect to their common stock were
converted into options to purchase Parent Company common stock.
On April 9, 1992, the Parent Company received net proceeds of $330,045,000
from the public sale of 9,775,000 shares of its common stock, which were used to
redeem the Class A Series A Preferred Stock and for general corporate purposes.
In accordance with a Shareholder Protection Rights Agreement dated December
18, 1990, the Parent Company issued a dividend of one right for each share of
Parent Company common stock outstanding or reserved for issuance as of December
18, 1990, or 117,450,463 rights, on December 28, 1990.
The rights will become exercisable if any person or group commences a tender
or exchange offer which would result in their becoming the beneficial owner of
15 percent or more of the Parent Company's common stock. Each right (other than
rights owned by such person or group) will entitle its holder to purchase one
one-hundredth of a share of junior participating Class A preferred stock having
economic and voting terms similar to those of one share of Parent Company common
stock for an exercise price of $110.
The rights also will become exercisable if a person or group acquires
beneficial ownership of 15 percent or more of the Parent Company's common stock.
Each right (other than rights owned by such person or group) will entitle its
holder to purchase, for an exercise price of $110, a number of shares of the
Parent Company's common stock (or at the option of the Board of Directors,
shares of junior participating Class A preferred stock) having a market value of
twice the exercise price. If any person or group acquires beneficial ownership
of between 15 percent and 50 percent of the Parent Company's common stock, the
Parent Company's Board of Directors may, at its option, exchange for each
outstanding right (other than rights owned by such person or group) either two
shares of common stock or two one-hundredths of a share of junior participating
Class A preferred stock having economic and voting terms similar to two shares
of common stock.
The rights are subject to adjustment if certain events occur, and they will
expire on December 28, 2000, if not redeemed or terminated sooner.
72
NOTE 14:
PERSONNEL EXPENSE
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Salaries $ 938,409 886,702 735,564
Pension cost 13,571 11,182 6,761
Savings plan 31,241 24,361 19,144
Other benefits 172,678 143,057 111,712
Total $ 1,155,899 1,065,302 873,181
In addition to providing pension benefits, the Corporation and its
subsidiaries provide certain health care and life insurance benefits for retired
employees. Substantially all of the Corporation's employees may become eligible
for these benefits if they reach retirement age while working for the
Corporation. Life insurance benefits are provided through an insurance company.
Medical and other benefits are provided through a tax-exempt trust formed by the
Corporation. The Corporation recognizes the cost of providing these benefits by
expensing annual insurance premiums, trust funding allocations and
administrative expenses. The amount expensed in 1993, 1992 and 1991 was
$69,841,000, $51,876,000 and $46,807,000, respectively. The cost of providing
these benefits for 3,411 retirees in 1993, 2,779 retirees in 1992 and 2,504
retirees in 1991 is not separable from the cost of providing benefits for the
32,861 active employees in 1993, 29,750 active employees in 1992 and 30,933
active employees in 1991, respectively.
The Corporation has a defined benefit pension plan covering substantially
all of its employees with one year of service. The benefits are based on years
of service, the employee's average compensation during the last five years of
employment and the employee's primary Social Security benefit. Contributions are
intended to provide not only for benefits attributed to service to date but also
for those expected to be earned in the future. Additionally, certain defined
pension plans of acquired institutions will be merged into the Corporation's
plan during 1994. Accordingly, the following information combines the respective
plans' financial information with the Corporation's plan for the three years
ended December 31, 1993.
At December 31, 1993, plan assets primarily include U.S. Treasury notes.
Also included are 59,187 shares and 1,087,857 shares of the Parent Company's
preferred and common stock, respectively. All plan assets are held by First
Union National Bank of North Carolina (the Bank) in a Bank-administered trust
fund.
In 1993, 1992 and 1991, pension cost includes settlement gains (loss) of
$(2,378,000), $1,038,000 and $2,846,000, respectively, related to the purchase
of annuities for certain retirees.
The following tables set forth the plan's funded status and certain amounts
recognized in the Corporation's consolidated financial statements at December
31, 1993, 1992 and 1991 respectively:
DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits of $346,186,000,
1993; $207,887,000, 1992; and $174,271,000, 1991 $ 379,868 229,147 192,825
Projected benefit obligation for service rendered to date $ (509,332) (334,126) (286,301)
Plan assets at fair value 555,196 374,383 346,211
Plan assets in excess of projected benefit obligation 45,864 40,257 59,910
Prior service cost 2,201 2,638 3,068
Unrecognized net (gain) loss from past experience different from that assumed
and effects of changes in assumptions 89,055 8,470 (6,097)
Unrecognized net assets (22,867) (25,380) (30,635)
Prepaid pension cost included in other assets $ 114,253 25,985 26,246
Assumed rates used in actuarial computations:
Weighted-average discount rate 7% 8-8.5 8-9
Rate of increase in future compensation levels, depending on age 4.5 4.5-9.5 4.75-10.25
Long-term weighted average rate of return 9.5% 8-10 8-10
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Service cost-benefits earned during the period $ 25,649 24,554 18,702
Interest cost on projected benefit obligation 29,128 24,193 22,362
Actual return on plan assets (44,145) (38,353) (32,254)
Net amortization and deferral 561 1,826 797
Settlement (gain) loss 2,378 (1,038) (2,846)
Net pension cost $ 13,571 11,182 6,761
In accordance with Financial Accounting Standards Board Standard No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, in 1993
the Corporation began amortizing a transition obligation of $98,788,000 over a
20-year period on a straight-line basis.
The following tables set forth the status of postretirement benefits and
certain amounts recognized in the Corporation's consolidated financial
statements at December 31, 1993:
DECEMBER 31,
(IN THOUSANDS) 1993
Actuarial Present Value of Postretirement
Benefits Obligation
Retirees $ 81,993
Fully eligible active participants 11,761
Other active participants 17,880
Accumulated benefit obligation $ 111,634
Projected benefit obligation in excess of plan
assets $ 111,634
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions (3,366)
Unrecognized net transition obligation (93,848)
Accrued postretirement benefit cost $ 14,420
Assumed Rates Used in Actuarial Computations
Weighted average discount rate 7%
Rate of increase in future compensation
levels, depending on age 4.5
Health care cost trend rate:
Prior to age 65 (for 1994, grading
levelly to 7 percent
in 2004) 12.83
After age 65 (for 1994, grading levelly
to 6 percent
in 2004) 11.83%
Effect of One Percent Increase in Health Care
Cost Trend Rate in 1993
Service costs $ --
Interest costs 391
Accumulated benefit obligation $ 6,232
Postretirement Costs
Service cost-benefits earned during the
period $ 1,605
Interest cost on projected benefit
obligation 6,646
Amortization of transition obligation 4,309
Net cost $ 12,560
The Corporation's retirees are eligible to participate in postretirement
benefits offered by the Corporation.
The Financial Accounting Standards Board has issued Standard No. 112,
Employers' Accounting for Postemployment Benefits, which requires accrual of a
liability for all types of benefits paid to former or inactive employees after
employment but before retirement. The Company adopted this accounting standard
beginning January 1, 1994. Benefits subject to this accounting pronouncement
include salary continuation, supplemental unemployment benefits, severance
benefits, disability-related benefits (including workers' compensation), job
training and counseling, and continuation of such benefits as health care and
life insurance coverage. The effect of initially applying this new accounting
standard in 1994 will be approximately $14,000,000. The recurring reduction of
income before income taxes is expected to be insignificant.
NOTE 15:
INCOME TAXES
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 109, Accounting for Income Taxes. Statement 109 requires
a change from the deferred method of accounting for income taxes under APB
Opinion 11 to the asset and liability method of accounting for income taxes.
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Corporation adopted Statement 109 at January 1, 1993, and has applied
the provisions of adopting Statement 109 retroactively to January 1, 1992. The
insignificant effect of Statement 109 resulted in additional income tax expense
of $8,519,000 and is reflected in the 1992 financial statements as a component
of income taxes.
74
The provision for income taxes charged to operations is as follows:
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Current Income Taxes
Federal $ 276,379 224,759 137,414
State 48,722 45,346 20,879
Total 325,101 270,105 158,293
Deferred Income Tax Expense (Benefit)
Federal 74,002 (60,606) (80,682)
State 4,157 (13,347) (6,541)
Total 78,159 (73,953) (87,223)
Total $ 403,260 196,152 71,070
The federal income tax rates and amounts are reconciled with the effective
income tax rates and amounts as follows:
YEARS ENDED DECEMBER 31,
1993 1992 1991
% OF % OF % OF
PRE-TAX PRE-TAX PRE-TAX
(IN THOUSANDS) AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
Income before income taxes $ 1,220,781 $581,203 $419,801
Tax at federal income tax rate $ 427,273 35.0% $197,609 34.0% $142,732 34.0%
Reasons for difference in federal
income tax rate and effective
rate:
Tax-exempt interest (50,359) (4.1) (56,104) (9.7) (72,149) (17.2)
Florida National purchase
accounting adjustments -- -- -- -- (25,456) (6.0)
Cost to carry tax-exempt assets 5,373 .4 7,355 1.3 10,598 2.5
State income taxes, net of
federal tax benefit 34,371 2.8 21,119 3.6 8,117 1.9
Goodwill amortization 11,873 1.0 10,397 1.8 9,829 2.3
Adjustment to deferred income tax
assets and liabilities for
enacted changes in tax laws
and rates (15,875) (1.3) -- -- -- --
Change in the
beginning-of-the-year deferred
tax assets valuation allowance (3,604) (.3) 10,440 1.8 -- --
Other items, net (5,792) (.5) 5,336 1.0 (2,601) (.6)
Total $ 403,260 33.0% $196,152 33.8% $ 71,070 16.9%
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
The sources and tax effects of temporary differences that give rise to
significant portions of deferred income tax liabilities (assets) for periods
after the adoption of Statement 109 are as follows:
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992
Deferred Income Tax Liabilities
Depreciation $ 48,710 55,479
Futures contracts 16,270 17,290
Intangible assets 72,943 49,671
Leasing activity 159,085 115,889
Loan products -- 4,031
Prepaid pension asset 44,757 8,593
Thrift loan loss reserve recapture 24,889 10,824
Purchase accounting adjustments (primarily loans and securities) 24,236 --
Other 23,105 21,430
Deferred income tax liabilities 413,995 283,207
Deferred Income Tax Assets
Provision for loan losses, net (369,384) (336,360)
Accrued expenses, deductible when paid (125,506) (115,261)
Foreclosed properties (52,637) (54,106)
Sale and leaseback transactions (22,276) (23,430)
Deferred income (13,987) (11,184)
Purchase accounting adjustments (primarily loans and securities) -- (17,932)
Net operating loss carryforwards (53,271) --
First American segregated assets (76,003) --
Loan products (11,940) --
Other (30,476) (32,626)
Deferred income tax assets (755,480) (590,899)
Deferred tax assets valuation allowance 22,173 20,024
Net deferred income tax assets $(319,312) (287,668)
The sources and tax effects of timing differences resulting in net deferred
income tax benefits for the period prior to the adoption of Statement 109 are as
follows:
YEAR ENDED
DECEMBER 31,
(IN THOUSANDS) 1991
Provision for loan losses, net $(54,852)
Accrued expenses, deductible when paid (3,221)
Foreclosed properties (11,757)
Alternative minimum tax credit carryforward (2,272)
Interest income (2,964)
Other items, net (12,157)
Total $(87,223)
76
Changes to the deferred tax assets valuation allowance are as follows:
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992
Balance, beginning of year $ 20,024 9,584
Current year deferred provision, change in deferred tax valuation allowance (3,604) 10,440
Current year purchase acquisitions 5,753 --
Deferred tax assets valuation allowance, end of year $ 22,173 20,024
The realization of net deferred tax assets may be based on utilization of
carrybacks to prior taxable periods, anticipation of future taxable income in
certain periods and the utilization of tax planning strategies. Management has
determined that it is more likely than not that the net deferred tax asset can
be supported by carrybacks to federal taxable income in excess of $2,000,000,000
in the three-year federal carryback period and by expected future taxable income
which will far exceed amounts necessary to fully realize remaining deferred tax
assets resulting from net operating loss carryforwards and the scheduling of
temporary differences. The valuation allowance primarily relates to certain
state temporary differences and federal and state net operating loss
carryforwards. To the extent that the valuation allowance attributable to the
purchase acquisitions in the amount of $5,753,000 is subsequently recognized,
such income tax benefit will reduce goodwill.
At December 31, 1993, the Corporation has net operating loss carryforwards
of $138,000,000 which are available to offset future federal taxable income
through 1997. The Corporation also has net operating loss carryforwards of
$44,000,000 which are available to offset future state taxable income through
1997. These carryforwards were acquired with the acquisition of FAMC, and their
utilization is subject to annual limitations.
Income taxes related to securities available for sale transactions were
$9,559,000 and $11,668,000 in 1993 and 1992, respectively. Income tax expense
(benefit) related to investment security transactions was $2,658,000 in 1993,
$(2,794,000) in 1992, and $52,347,000 in 1991.
The Internal Revenue Service is examining the Corporation's federal income
tax returns for the years 1986 through 1990 and is examining federal income tax
returns for certain acquired subsidiaries for periods prior to acquisition. In
1991 and 1993, tax liabilities for certain acquired subsidiaries for periods
prior to their acquisition by the Corporation were settled with the Internal
Revenue Service with no significant impact on the Corporation's financial
position or results of operations.
NOTE 16:
FIRST UNION CORPORATION
(PARENT COMPANY)
The Parent Company's principal assets are its investments in its
subsidiaries, interest-bearing balances with a bank subsidiary, securities
available for sale and loans to subsidiaries. The significant sources of income
of the Parent Company are dividends from its subsidiary bank holding companies,
interest and fees charged on loans made to its subsidiaries, interest on
eurodollars purchased from bank subsidiaries, interest on securities available
for sale and fees charged to its subsidiaries for providing various services.
In addition, the Parent Company serves as the primary source of funding for
the mortgage banking and other activities of its nonbank subsidiaries. Lines of
credit in the amount of $300,000,000 are available to the Parent Company at an
annual facility fee of 18.75 to 37.5 basis points and a utilization fee of 6.25
to 12.5 basis points. The facility fee is based on the daily average commitment
amount and the utilization fee is based on the daily average principal amount
outstanding. Generally, interest rates will be determined at the time credit
line usage occurs and will vary based on the type of loan extended to the Parent
Company.
Certain regulatory and other requirements restrict the lending of funds by
the bank subsidiaries to the Parent Company and to the Parent Company's nonbank
subsidiaries and the amount of dividends that can be paid to the Parent Company
by the bank subsidiaries and certain of the Parent Company's other subsidiaries.
On December 31, 1993, the Parent Company was indebted to subsidiary banks in the
amount of $200,000,000 that, under the terms of revolving credit agreements, was
secured by certain interest-bearing balances, securities available for sale,
loans, premises and equipment and payable on demand. On such date, subsidiary
banks had loans outstanding to the Parent Company's nonbank and bank holding
company subsidiaries amounting to $225,510,000 that, under the terms of
revolving credit agreements, were secured by securities available for sale and
certain loans and payable on demand.
Industry regulators limit dividends that can be paid by the Corporation's
subsidiaries. National banks are limited in their ability to pay dividends in
two principal ways: first, dividends cannot exceed the bank's undivided profits,
less statutory bad debt in excess of the bank's allowance for loan losses, and
second, in any year dividends may not exceed a bank's net profits for that year,
plus its retained earnings from the preceding two years, less any required
transfers to surplus. The Parent Company's subsidiaries, including its bank
subsidiaries, had available retained earnings of $509,573,000 at December 31,
1993, for the payment of dividends to the Parent Company without such regulatory
or other restrictions.
Subsidiary net assets of $4,979,153,000 were restricted from being
transferred to the Parent Company at December 31, 1993, under such regulatory or
other restrictions.
The Corporation's securities available for sale portfolios are centrally
managed and valued on an aggregate lower of cost or market basis. Accordingly,
in 1992 the Parent Company's securities available for sale portfolio was not
reduced to its market value.
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
At December 31, 1993 and 1992, the estimated fair value of the Parent
Company's loans was $1,224,833,000 and $976,785,000, respectively.
The Parent Company's condensed balance sheets as of December 31, 1993 and
1992, and the related condensed statements of income and cash flows (which
excludes a noncash reclassification of $32,583,000 from other assets to
securities available for sale in 1993) for the three-year period ended December
31, 1993, are as follows:
CONDENSED BALANCE SHEETS
(IN THOUSANDS) 1993 1992
Assets
Cash and due from banks $ 225 342
Interest-bearing balances with bank subsidiary 1,252,740 1,389,985
Total cash and cash equivalents 1,252,965 1,390,327
Trading account assets 10,285 19,096
Securities available for sale (market value $105,292 in 1993; $37,567 in 1992) 66,672 40,130
Loans, net of unearned income ($1,203 in 1993; $471 in 1992) 67,872 29,197
Allowance for loan losses (1,322) (1,157)
Loans, net 66,550 28,040
Loans due from subsidiaries:
Banks 450,500 310,500
Bank holding companies 290,784 252,448
Other subsidiaries 404,279 383,844
Investments in wholly-owned subsidiaries:
Arising from investments in equity in undistributed net income of subsidiaries:
Banks 1,245,411 989,117
Bank holding companies 4,045,885 3,320,449
Other subsidiaries 254,378 99,695
5,545,674 4,409,261
Arising from purchase accounting acquisitions 117,781 128,756
Total investments in wholly-owned subsidiaries 5,663,455 4,538,017
Other assets 172,128 180,891
Total assets $ 8,377,618 7,143,293
Liabilities and Stockholders' Equity
Commercial paper 270,667 341,793
Other short-term borrowings 200,000 206,215
Other liabilities 162,590 196,498
Long-term debt 2,536,736 1,939,624
Stockholders' equity 5,207,625 4,459,163
Total liabilities and stockholders' equity $ 8,377,618 7,143,293
78
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Interest Income
Interest and fees on loans $ 55,379 49,060 51,421
Interest income on securities available for sale 2,377 1,311 --
Interest income on investment securities -- 1,221 19,675
Other interest income from subsidiaries 42,225 37,016 43,536
Total interest income 99,981 88,608 114,632
Interest Expense
Short-term borrowings 22,041 29,849 54,000
Long-term debt 110,956 88,317 91,285
Total interest expense 132,997 118,166 145,285
Net interest income (33,016) (29,558) (30,653)
Provision for loan losses 3,665 42 --
Net interest income after provision for loan losses (36,681) (29,600) (30,653)
Noninterest income
Dividends from subsidiaries:
Banks -- 57,000 100,000
Bank holding companies 406,682 50,000 63,000
Other subsidiaries 6 23,858 20,323
Investment security transactions -- -- (2,285)
Sundry income 156,612 135,750 78,794
Noninterest expense (140,883) (141,202) (56,696)
Income before income taxes (benefits) and equity in undistributed net income of
subsidiaries 385,736 95,806 172,483
Income taxes (benefits) (6,700) (8,577) 864
Income before equity in undistributed net income of subsidiaries 392,436 104,383 171,619
Equity in undistributed net income of subsidiaries 425,085 280,668 177,112
Net income 817,521 385,051 348,731
Dividends on preferred stock 24,900 31,979 34,570
Net income applicable to common stockholders $ 792,621 353,072 314,161
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
(IN THOUSANDS) 1993 1992 1991
Operating Activities
Net income $ 817,521 385,051 348,731
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
Equity in undistributed net income of subsidiaries (425,085) (280,668) (177,112)
Provision for loan losses 3,665 42 --
Investment security transactions -- -- 2,285
Accretion and revaluation losses on securities available for sale 2,431 2,374 779
Depreciation and amortization 3,602 2,168 1,062
Deferred income taxes (benefits) 1,382 (8,611) 1,758
Trading account assets, net 8,811 (8,768) (10,328)
Other assets, net (26,363) (22,011) (13,961)
Other liabilities, net (33,570) 60,748 21,055
Net cash provided by operating activities 352,394 130,325 174,269
Investing Activities
Increase (decrease) in cash realized from:
Sales of securities available for sale 4,763 -- --
Purchases of securities available for sale (1,153) -- --
Sales of investment securities -- -- 221,830
Purchases of investment securities -- -- (64)
Advances to subsidiaries, net (198,771) (244,641) (63,410)
Investments in subsidiaries (700,353) (132,588) 10,905
Purchase of subsidiary -- -- (437,000)
Longer-term loans originated or acquired (49,921) (18,250) (28,224)
Principal repaid on longer-term loans 7,746 15,470 9,848
Purchases of premises and equipment, net (816) (1,960) (1,463)
Net cash used by investing activities (938,505) (381,969) (287,578)
Financing Activities
Increase (decrease) in cash realized from:
Commercial paper (71,126) 3,523 (498,176)
Other short-term borrowings, net (6,215) (78,967) 100,910
Issuances of long-term debt 989,975 641,229 304,330
Payments of long-term debt (394,488) (18,520) (86)
Sales of preferred stock -- -- 150,000
Sales of common stock 203,337 525,939 312,637
Purchases of preferred stock (138) (100,000) (69,932)
Purchases of common stock (3,851) (7,819) (1,593)
Cash dividends paid (268,745) (206,179) (179,662)
Net cash provided by financing activities 448,749 759,206 118,428
Increase (decrease) in cash and cash equivalents (137,362) 507,562 5,119
Cash and cash equivalents, beginning of year 1,390,327 882,765 877,646
Cash and cash equivalents, end of year $ 1,252,966 1,390,327 882,765
Cash Paid For
Interest $ 114,904 122,292 133,768
Income taxes $ 326,000 216,000 115,364
80
NOTE 17:
OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing
needs of its customers, to reduce its own exposure to fluctuations in interest
rates and to conduct lending activities. These financial instruments include
commitments to extend credit; standby and commercial letters of credit; forward
and futures contracts; interest rate swaps; options, interest rate caps, floors,
collars and swaptions; commitments to purchase foreign currency and exchange
rate swaps; and commitments to purchase and sell securities. These instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the consolidated financial statements.
The Corporation's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contract amount
of those instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. For forward and futures contracts, interest rate swaps, options,
interest rate caps, floors, collars and swaptions, the contract or notional
amounts do not represent the exposure to credit loss. The Corporation controls
the credit risk of its forward and futures contracts, interest rate swap
agreements, foreign currency and exchange rate swaps, and securities
transactions through collateral arrangements, credit approvals, limits and
monitoring procedures.
Generally, the Corporation may require collateral, margin deposits or other
security to support financial instruments with credit or interest rate risk.
At December 31, 1993 and 1992, off-balance sheet derivative financial
instruments and their related fair values are as follows:
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
1993 1992*
1993 CONTRACT OR 1992* CONTRACT OR
CARRYING ESTIMATED NOTIONAL CARRYING ESTIMATED NOTIONAL
(IN THOUSANDS) AMOUNT FAIR VALUE AMOUNT AMOUNT FAIR VALUE AMOUNT
Financial Instruments Whose Contract
Amounts Represent Credit Risk
Commitments to extend credit $ -- 49,181 17,245,126 -- 35,453 13,569,247
Standby and commercial letters of
credit -- 14,353 1,390,820 -- 13,048 1,406,853
Financial Instruments Whose Contract or
Notional Amounts Exceed the Amount of
Credit Risk
Forward and Futures Contracts
Trading and dealer activities 24,369 24,369 12,384,621 7 7 2,161,506
Interest rate risk management -- (20,728) 26,607,000
Asset rate conversions -- 10,577 3,200,000
Basis protection -- 431 1,000,000
Rate sensitivity hedges -- 1,570 4,125,000
Interest Rate Swap Agreements
Trading and dealer activities 8,707 8,707 2,336,719 70 70 477,954
Interest rate risk management 26,421 150,692 9,639,630
Asset rate conversions 27,205 190,481 12,029,540
Liability rate conversions 44,071 142,625 2,462,173
Purchased Options, Interest Rate
Caps, Floors, Collars and
Swaptions
Trading and dealer activities 9,054 10,173 1,715,436 9,107 9,090 705,727
Interest rate risk management 44,321 73,524 6,174,000
Asset rate conversions 1,862 19,933 450,000
Liability rate conversions 2,375 2,285 529,000
Basis protection 6,621 13,383 2,500,000
Rate sensitivity hedges 10,849 8,024 19,368,000
Written Options, Interest Rate Caps,
Floors, Collars and Swaptions
Trading and dealer activities (8,168) (8,168) 3,242,889 (7,239) (7,239) 1,267,703
Interest rate risk management (10,410) (11,948) 1,127,000
Asset rate conversions (4,023) (19,932) 400,000
Liability rate conversions (5,625) -- 250,000
Basis protection -- -- 2,500,000
Commitments to Purchase Foreign
Currency and Exchange Rate Swaps
Trading and dealer activities (9,893) (9,893) 3,000,502 (5,559) (5,559) 1,436,907
Foreign currency risk
management 25,997 25,997 2,052,494 6,648 6,648 771,066
Commitments to Purchase Securities -- 769 1,047,813 -- 5,797 768,541
Commitments to Sell Securities $ -- 851 2,246,147 -- 5,778 1,609,871
*Prior year data has not been reclassified since certain data is unavailable.
82
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Standby and commercial letters of credit are conditional commitments issued
by the Corporation to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. Except for short-term guarantees of $938,123,000, guarantees
extend for more than one year and expire in decreasing amounts primarily through
2001. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The Corporation
holds various assets as collateral supporting those commitments for which
collateral is deemed necessary.
Forward and futures contracts are contracts for delayed delivery of
securities or money market instruments in which the seller agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movements in securities values and
interest rates.
The Corporation enters into a variety of interest rate contracts --
including options, interest rate caps, floors, collars and swaptions written,
and interest rate swap agreements -- in its trading activities and in managing
its interest rate exposure. Interest rate caps, floors, collars and swaptions
written by the Corporation enable customers to transfer, modify or reduce their
interest rate risk. Interest rate options are contracts that allow the holder of
the option to purchase or sell a financial instrument at a specified price and
within a specified period of time from the seller or writer of the option. As a
writer of options, the Corporation receives a premium at the outset and then
bears the risk of an unfavorable change in the price of the financial instrument
underlying the option.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Entering into interest rate swap agreements
involves not only the risk of dealing with counterparties and their ability to
meet the terms of the contracts but also the interest rate risk associated with
unmatched positions. Notional principal amounts often are used to express the
volume of these transactions, but the amounts potentially subject to credit risk
are much smaller. The Corporation also acts as an intermediary in arranging
interest rate swap transactions for customers.
The Corporation has entered into certain sales transactions for which the
buyers have recourse options. The return of these assets to the Corporation
would not have a material impact on the Corporation's financial position.
Substantially all time drafts accepted by December 31, 1993, met the
requirements for discount with Federal Reserve Banks. Average daily Federal
Reserve balance requirements for the year ended December 31, 1993, amounted to
$1,477,345,000. Minimum operating lease payments due in each of the five years
subsequent to December 31, 1993, are as follows: 1994, $111,971,000; 1995,
$108,679,000; 1996, $103,174,000; 1997, $93,488,000; 1998, $89,430,000; and
subsequent years, $639,589,000. Rental expense for all operating leases for the
three years ended December 31, 1992, was $151,242,000, 1993; $154,711,000, 1992;
and $139,516,000, 1991.
The Parent Company and certain of its subsidiaries have been named as
defendants in various legal actions arising from their normal business
activities in which damages in various amounts are claimed. Although the amount
of any ultimate liability with respect to such matters cannot be determined, in
the opinion of management, based upon the opinions of counsel, any such
liability will not have a material effect on the Corporation's consolidated
financial position.
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST UNION CORPORATION AND SUBSIDIARIES
DECEMBER 31, 1993, 1992 AND 1991
NOTE 18:
CARRYING AMOUNTS AND FAIR VALUE
OF FINANCIAL INSTRUMENTS
Information about the fair value of on balance sheet financial instruments
at December 31, 1993 and 1992, which should be read in conjunction with Note 17
and certain other notes to the consolidated
financial statements presented elsewhere herein, is set forth below.
1993 1992
CARRYING ESTIMATED CARRYING ESTIMATED
(IN THOUSANDS) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
Financial Assets
Cash and cash equivalents $ 4,415,870 4,415,870 5,363,923 5,363,923
Trading account assets 652,470 652,470 169,268 169,268
Securities available for sale 11,744,942 11,884,385 5,203,344 5,256,967
Investment securities 2,692,476 2,931,139 6,633,338 6,825,066
Loans, net of unearned income 46,876,177 47,644,771 41,923,767 42,153,501
Allowance for loan losses (1,020,191) -- (940,804) --
Loans, net 45,855,986 47,644,771 40,982,963 42,153,501
Segregated assets 332,593 332,593 404,828 404,828
Other assets $ 1,285,105 1,313,567 1,103,352 1,167,830
Financial Liabilities
Deposits:
Noninterest-bearing deposits 10,861,207 10,861,207 9,213,646 9,213,646
Interest-bearing deposits:
Savings and NOW accounts 12,010,636 12,010,636 9,825,918 9,825,918
Money market accounts 11,131,334 11,131,334 9,930,788 9,930,788
Other consumer time 16,897,062 17,152,717 18,014,196 18,226,350
Foreign 1,240,448 1,240,448 249,429 249,451
Other time 1,601,724 1,606,787 1,916,988 1,986,983
Total deposits 53,742,411 54,003,129 49,150,965 49,433,136
Short-term borrowings 7,254,178 7,254,178 5,065,337 5,065,337
Other liabilities 1,022,467 1,022,467 655,050 655,050
Long-term debt $ 3,061,944 3,266,747 3,151,260 3,244,234
The fair value of noninterest-bearing deposits, savings and NOW accounts,
and money market accounts is the amount payable on demand at December 31, 1993
and 1992. The fair value of fixed-maturity certificates of deposit is estimated
based on the discounted value of contractual cash flows using the rates
currently offered for deposits of similar remaining maturities. The fair value
estimates above do not include the benefit that results from the low-cost
funding provided by deposit liabilities compared to the cost of borrowing funds
in the market. This value, which includes such cost assumptions related to
interest rates, deposit run-off, maintenance costs and float opportunity costs,
is presented below on a discounted cash flow basis. The value related to the
recorded cost of acquired deposits is also included therein.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial instruments. For
example, the Corporation has a substantial trust department that contributes net
fee income annually. The trust department is not considered a financial
instrument, and its value has not been incorporated into the fair value
estimates. Other significant assets and liabilities that are not considered
financial assets or liabilities include the mortgage banking operation,
brokerage network, deferred tax assets, premises and equipment, and goodwill. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates. Fair value of off-balance sheet
derivative financial instruments has not been considered in determining on
balance sheet fair value estimates.
84
In respect of the foregoing, the Corporation has decided to voluntarily
disclose certain nonfinancial instrument relationships, which are not intended
to indicate the fair value of the Corporation, as follows:
ESTIMATED FAIR VALUE
(IN THOUSANDS) 1993
(UNAUDITED)
Mortgage servicing $ 240,168
Credit card relationships 214,851
Core deposits $1,740,000
The fair value of mortgage servicing related to loans that the Corporation
does not own, including rights for purchased servicing, is estimated on a
discounted cash flow basis. The calculation is based on loan types, coupon
rates, current interest rates, prepayment assumptions, service fees, service
cost and late fees.
The fair value attributable to the ongoing credit cardholder relationships
has been estimated on a discounted cash flow basis after taking into
consideration estimated portfolio income and expense to be realized over the
life of the relationships, charge-off rates and the cost of alternative funds.
The value related to the recorded cost of acquired credit cardholder
relationships is also included therein.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Corporation's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the
Corporation's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
INDEPENDENT AUDITORS' REPORT
FIRST UNION CORPORATION AND SUBSIDIARIES
Board of Directors and Stockholders
First Union Corporation:
We have audited the consolidated balance sheets of First Union Corporation
and subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1993, included on pages 53
through 85 herein. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the financial position of First Union
Corporation and subsidiaries at December 31, 1993 and 1992, and the results of
their operations and cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
(Signature of KPMG Peat Marwick)
KPMG Peat Marwick
Charlotte, North Carolina
January 17, 1994
85
Glossary
Asset Sensitivity:
When a company's asset, liability
and off-balance sheet financial
instruments mix leans toward assets that would diminish net interest
income in a flat or declining interest
rate environment.
Collateralized
Mortgage Obligations:
Or CMOs, a group of mortgage pass-through securities that have been
bundled, with the cash flows paid
out in a specific order or preference
to different buyers.
Derivatives:
A term used to cover a broad base of financial instruments that are,
for the most part, "derived" from underlying securities traded in
the cash markets. Common examples include interest rate swaps, options
and futures contracts.
Earnings Per
Common Share:
Net income, adjusted for preferred stock dividends, divided by the
average number of common shares outstanding.
Futures Contract:
A contract to buy or sell a particular
type of security or commodity to (or from) the futures exchange at a
specified future period of time. It is used to,
in effect, "lock in" net interest income over quarterly future periods.
Government
National Mortgage Association (gnma):
A U.S. Government-owned corporation that guarantees
timely payment of principal and interest on specified
mortgage-backed certificates.
Index Amortizing Interest Rate Swap:
An interest rate swap where the maturity date may increase and
the notional amount may decrease based upon changes in certain
interest rate indices.
Interest
Rate Swap:
A contractual transaction between two parties in which each agrees
to exchange interest rate payments for a specified period of time.
These payments are calculated on a "notional amount" and no exchange
of principal occurs. Such a transaction is commonly used to manage the
asset or liability sensitivity of a balance sheet by converting fixed
rate assets or liabilities to floating, or vice versa.
Liability
Sensitivity:
When a company's asset, liability and off-balance sheet financial
instruments mix leans toward
liabilities that would diminish net interest income in a rising
interest rate environment.
Lower of Cost
or Market:
A method of accounting for a corporation's assets or liabilities
by recording them at the lower of their current market values or
their historical costs.
Mark-to-Market:
A method of accounting for a corporation's assets or liabilities
by recording them at their current market values, rather than at
their historical costs.
Mortgage Banking Income:
Noninterest income related to the corporation's mortgage banking activity.
Mortgage Servicing
Portfolio:
Mortgage loans owned by others
for which First Union Mortgage
Corporation provides mortgage
servicing.
Net Charge-offs:
The amount of loans written off
as uncollectible, net of the recovery
of loans previously written off as uncollectible.
Net Interest Margin:
The difference between the yield
on earning assets and the rate paid on funds to support those assets,
divided by average earning assets.
Net Operating
Revenue:
The sum of tax-equivalent net interest income and noninterest income.
Noninterest Expense:
All expenses other than interest.
Noninterest Income:
All income other than interest and dividend income.
Nonperforming Assets:
Assets on which income is not being accrued for financial reporting
purposes; restructured loans on which interest rates or terms of
repayment have been materially revised; and other real estate that
has been acquired through loan foreclosures,
in-substance foreclosures or deeds received in lieu of loan payments.
Notional Amount:
The principal amount of the financial instrument on which a derivative
transaction is based. In an interest rate swap, for example, the
"notional amount" is used to calculate the interest rate cash flows
to be exchanged. No exchange of principal occurs.
Options:
A contractual agreement that allows but does not require a holder to
buy (or sell) a financial instrument at a predetermined price before a
specified time.
Overhead
Efficiency Ratio:
Noninterest expense divided by net operating revenue.
Pooling of Interests:
An accounting method that, following a merger, restates historical
financial information of the surviving company as if the two entities
were always one.
Purchase Accounting:
An accounting method that adds
the fair market value of assets and liabilities acquired to those
of the acquirer at the time of an acquisition. Historical financial
information of the acquirer is not restated.
Purchased Mortgage Servicing Rights:
The servicing function for mortgage loans owned by others. This
servicing function earns fee income.
Return on Assets (roa):
Net income as a percentage of
average assets.
Return on Common Equity (roe):
Net income applicable to common stockholders as a percentage of
average common stockholders' equity.
Security Gain
or Loss:
A gain or loss resulting from the
sale of a security at a price above or
below the security's carrying value.
Stockholders' Equity:
A balance sheet amount that represents the total investment in the
corporation by holders of preferred and common stock.
Swaptions:
Options on swaps.
86
Principal Subsidiaries
First Union Corporation
First Union National Bank
of North Carolina
A full service commercial bank with
266 offices.
One First Union Center
Charlotte, North Carolina 28288
704-374-6161
First Union National Bank
of Florida
A full service commercial bank with
488 offices.
225 Water Street
Jacksonville, Florida 32202
904-361-2265
First Union National Bank
of Georgia
A full service commercial bank with
163 offices.
999 Peachtree Street, Suite 1200
Atlanta, Georgia 30309
404-827-7100
First Union National Bank
of Maryland
A full service commercial bank with
32 offices.
Congressional Plaza Branch
110 Congressional Lane
Rockville, Maryland 20852
301-961-5230
First Union National Bank
of South Carolina
A full service commercial bank with
67 offices.
Insignia Financial Plaza
One Insignia Place
Greenville, South Carolina 29601
803-255-8000
First Union National Bank
of Tennessee
A full service commercial bank with
63 offices.
150 Fourth Avenue North
Nashville, Tennessee 37219
615-271-1500
First Union National Bank
of Virginia
A full service commercial bank with
193 offices.
213 South Jefferson Street
Roanoke, Virginia 24040
703-580-7465
First Union National Bank
of Washington, D.C.
A full service commercial bank with
30 offices.
740 15th Street NW
Washington, D.C. 20005
202-637-7644
First Union Mortgage
Corporation
Offers a variety of mortgage banking and
insurance services through 53 offices in
16 states.
Two First Union Center
Charlotte, North Carolina 28288
704-374-6787
First Union Home Equity
Corporation
Offers home equity loans through
151 offices in 37 states.
128 South Tryon Street
Charlotte, North Carolina 28202
704-331-6500
First Union Brokerage
Services Inc.
Provides brokerage services at reduced
commissions.
One First Union Center
Charlotte, North Carolina 28288
704-374-6927
First Union Commercial
Corporation
Provides leasing and other asset-based
financing services.
One First Union Center
Charlotte, North Carolina 28288
704-374-6000
First Union Securities Inc.
Provides a wide range of securities activities
in accordance with Federal Reserve Board
powers granted to bank holding companies.
One First Union Center
Charlotte, North Carolina 28288
704-374-6264
Foreign Office
First Union National Bank of North Carolina
Nassau Branch
Nassau, Bahamas
First Union Across the Nation
(First Union Across The Nation map appears here--see appendix)
87
Corporate Management Committee
First Union Corporation
(Photo)
James A. (Jim) Abbott
President and Chief Executive Officer, First Union Mortgage Corporation
Mr. Abbott joined Cameron-Brown Company in 1963
and served in several management positions in residential lending before
being named president of Cameron-Brown in 1980. Cameron-Brown, which
had been a subsidiary of First Union since 1964,
was renamed First Union Mortgage Corporation in 1987.
(Photo)
Austin A. Adams
Executive Vice President for Automation and Operations, First Union
Corporation
Mr. Adams, head
of Automation and Operations since 1985, joined First Union with the
merger of Northwestern Financial Corporation. His current
responsibilities include automation, servicenter, branch operations,
purchasing, productivity
and security.
(Photo)
Robert T. (Bob) Atwood
Executive Vice
President and Chief Financial Officer, First Union Corporation
Mr. Atwood joined First Union as chief financial officer in March 1991. He
previously was a partner with the international accounting firm of
Deloitte & Touche, where he served in a variety of management positions.
He began his accounting career in Atlanta
in 1962.
(Photo)
David M. Carroll
Vice Chairman and General Banking Group Executive,
First Union National Bank of Virginia
Mr. Carroll was named vice chairman and General Banking Group executive
of the Virginia bank in January 1993. He joined First Union in 1981 as a
credit analyst. He has held a variety of leadership positions in First
Union's North Carolina, South Carolina and Georgia banks
and the Corporate Banking Group.
(Photo)
Marion A. Cowell Jr.
Executive Vice President, Secretary and General Counsel, First Union
Corporation
Mr. Cowell has served in his current capacity since 1978. From 1972 to
1978 he was general counsel for Cameron-Brown Company of Raleigh, a
First Union subsidiary since renamed First Union Mortgage Corporation.
From 1964 to 1972 he was in private law practice in Durham, North
Carolina.
(Photo)
Edward E. (Ed) Crutchfield Jr.
Chairman and Chief
Executive Officer, First Union Corporation
Mr. Crutchfield joined First Union in 1965. After serving in positions
including loan administration, investments, retail banking and
management and development, he was named president of First Union
National Bank of North Carolina. Mr. Crutchfield was named chief executive
officer of the bank in 1978, president of the corporation in 1983, chief
executive officer in 1984 and chairman in 1985.
(Photo)
Warner N. Dalhouse
Chairman and Chief Executive Officer, First Union National Bank of
Virginia
Mr. Dalhouse was chairman and chief executive officer of Dominion
Bankshares Corporation before joining First Union with the Dominion ac-
quisition on March 1, 1993. He was named Dominion's president and chief
executive officer in 1981 and Dominion's chairman in 1989. He began his
banking career in 1956.
(Photo)
Frank H. Dunn Jr.
Chairman and Chief Executive Officer, First Union National Bank of North
Carolina
Mr. Dunn joined First Union in 1964. He served as city and area executive
in several North Carolina cities before assuming leadership for the
Western North Carolina region in 1978 and both the Western and Central
regions in 1983. He was named vice chairman in 1987, president in 1988
and chairman and chief executive officer in 1993.
(Photo)
Malcolm E. (Mac) Everett III
President, First Union National Bank of North Carolina
Mr. Everett joined First Union in 1978 as vice president and head of trust
sales and marketing in the Capital Management Group. He was named head
of the Capital Management Group's retail investment services and
president of First Union Securities Corporation in 1983, and central
regional executive of the North Carolina bank in 1988. He was named
president of the North Carolina bank in 1993.
(Photo)
John R. Georgius
President, First Union Corporation
Mr. Georgius began his banking career in 1963 and joined First Union in
1975. He was named head of the Trust Division in 1979, executive vice
president for the bank's General Banking Group in 1981, vice chairman of
the bank in 1983 and president in 1984. He was named vice chairman of
the corporation in 1987 and president in 1990.
(Photo)
Harald R. Hansen
Chairman, President and Chief Executive Officer, First Union National Bank
of Georgia
Mr. Hansen was named chairman and chief executive officer of First Union
National Bank of Georgia in 1987. After joining First Union in 1969, he
served as head of Trust, in city and regional executive positions in North
Carolina and as executive vice president for the World Banking Group.
(Photo)
James H. (Jim) Hatch
Senior Vice President and Controller, First Union Corporation
Mr. Hatch joined First Union in 1976 as vice president of the North
Carolina bank's accounting department.
He was named corporate controller in December 1988. As senior vice
president in the Finance Division, Mr. Hatch also serves as principal
accounting officer for the Corporation and
its subsidiaries. His responsibilities include overseeing corporate
accounting and stockholder and regulatory reporting functions.
(Photo)
Byron E. Hodnett
Chief Executive
Officer, First Union National Bank of Florida
Mr. Hodnett joined First Union National Bank of North Carolina in 1972 and
has served in various managerial positions. He also served as executive
vice president of Northwestern Financial Corporation from 1982 until its
1985 merger with First Union. Mr. Hodnett was named president of First
Union in Florida in 1987 and to his current position in 1992.
(Photo)
Benjamin P. (Ben) Jenkins III
President and Chief Operating Officer, First Union National Bank of
Virginia, Washington, D.C.
and Maryland
Mr. Jenkins joined First Union in 1971 as an account officer in the National
Division of First Union National Bank of North Carolina. He has served in a
number of leadership roles in North Carolina, South Carolina and Georgia.
(Photo)
Don R. Johnson
Executive Vice President for Human Resources, First Union Corporation
Mr. Johnson joined First Union in 1972 and has served in consumer banking
executive roles in North and South Carolina, headed the general office
group at the headquarters of First Union National Bank
of South Carolina and served as executive vice president for consumer
credit, marketing, finance, human resources, operations, and sales
finance in South Carolina. He was named to his current position in 1989.
(Photo)
R. Stanley (Stan) Kryder
Executive Vice President and General Banking Group Executive, First Union
National Bank of Georgia
Mr. Kryder was named executive vice president of General Banking for
First Union National Bank of Georgia in December 1992. He previously held
leadership positions with the Florida and the South Carolina banks. Before
joining First Union, Mr. Kryder held positions in corporate banking in
Florida and Georgia.
88
(Photo)
Donald M. (Don) MacLeod
Executive Vice President and Head of General Banking Group, First Union
National Bank of Tennessee
Mr. MacLeod assumed his current position in 1993 after heading the
corporation's Commercial and Professional Products Group with
responsibility for the bank's Commercial Systems and Cash Management
Division as well as the Business, Private and Community Banking efforts.
He joined First Union in 1987 after holding Cash Management and national
lending leadership positions elsewhere.
(Photo)
Mark B. Mahoney
Senior Vice President and Managing Director, Specialized Industries,
First Union National Bank of North Carolina
Mr. Mahoney joined First Union's Corporate Banking Group in 1991 from
Citicorp's Leveraged Capital Group and Capital Markets Division. He is
responsible for all lending and corporate finance origination activities,
including securitizations involved in the health care, insurance, mortgage
banking, communications, lease finance, transportation and energy
industries.
(Photo)
Barbara K. Massa
Senior Vice President for Corporate Communications and Investor
Relations and Director of Community Reinvestment, First Union
Corporation
Ms. Massa joined First Union in 1973 as a credit analyst, then served as a
commercial credit officer, corporate banking officer and senior lender. She
was vice president and manager for investor relations when she assumed
her current position in 1986. She was appointed director of community
reinvestment in 1989.
(Photo)
Daniel W. (Dan) Mathis
Executive Vice President and Managing Director, Capital Markets Group,
First Union Corporation
Mr. Mathis joined First Union in 1972 as an account officer and has served
as manager of the New York service office, manager of Commercial Loan
Services and manager of the Domestic Banking Division. He was named
executive vice president in 1986 and vice chairman of the North Carolina
bank in 1989. He assumed his current position in January 1994.
(Photo)
H. Burt Melton
Executive Vice President for Consumer Credit and Bank Related Services,
First Union Corporation
Mr. Melton joined First Union in 1966, and has served as a branch manager,
commercial loan officer, branch supervisor, city executive, regional
executive and group executive. He was named head of Bank Related
Services in 1987 and assumed responsibility for Con- sumer Credit in
1990.
(Photo)
John A. (Jack) Mitchell III
Chairman, First Union National Bank of Florida
Mr. Mitchell joined First Union in 1985 with the merger of Northwestern
Financial Corporation. He became chief credit officer for the South
Carolina bank in
1986 and manager of Human Resources for the corporation in 1987. He was
named executive vice president and chief credit officer in Florida in 1989,
president in 1991 and chairman in 1992.
(Photo)
Malcolm T. (Mal) Murray Jr.
Executive Vice President and Chief Credit Officer, First Union Corporation
Mr. Murray joined First Union in 1967 and has served in various credit
policy and administrative leadership positions before being named
to his current position in 1978.
(Photo)
Robert L. (Bob) Reid
Chairman, Chief Executive Officer
and President, First Union National Bank of Tennessee
Mr. Reid served in a variety of commercial and retail bank leadership
positions with First Union National Bank of North Carolina before being
named to his current position in 1993. He joined First Union in 1978 in the
bank's management training program.
(Photo)
Alvin T. (Al) Sale
Senior Vice President for Marketing and Strategic Planning, First Union
Corporation
Mr. Sale joined First Union in 1982 as director of marketing and strategic
planning. He is chairman and management committee member of the
Southeast Switch automated banking network and serves as a director of
Interlink.
(Photo)
Louis A. (Jerry) Schmitt Jr.
Executive Vice President and Managing Director, Capital Markets Group,
First Union Corporation
Mr. Schmitt joined First Union in 1971 in the International Division. In
1974, he became head of foreign trading activities in the Funds
Management Group. In 1980, Mr. Schmitt was named Treasury Division
Head, responsible for balance sheet man-agement and various trading
activities. He was named head of Funds Management in 1990 and to his
current position in January 1994.
(Photo)
Kenneth R. (Ken) Stancliff
Senior Vice President and Treasurer, First Union Corporation
Mr. Stancliff joined First Union in 1973 as a financial analyst. He has held
several management positions in First Union's Finance Group, and is
currently responsible for financial planning and mergers and acquisitions.
He was named to his current position in December 1988.
(Photo)
Sidney B. (Sid) Tate
Chairman, President and Chief Executive Officer, First Union National Bank
of
South Carolina
Mr. Tate joined First Union National Bank of North Carolina in 1973 as a
corporate banking calling officer in the National Division and has served
as manager of Consumer and Equipment Leasing, manager of Factoring and
Commercial Finance, head of Human Resources and regional executive for
First Union National Bank of Georgia. Mr. Tate was named to his current
position in 1987.
(Photo)
G. Kennedy (Ken) Thompson
President, First Union National Bank of Florida
Mr. Thompson joined First Union in 1976, and has served as a commercial
loan officer, manager of the New York Loan Production Office, head of the
Southeastern Division of the Corporate Banking Group and senior vice
president for Human Resources. He was named executive vice president
in Florida in 1987 and vice chairman in 1991. He was named to his current
position in 1992.
(Photo)
Richard K. (Dick) Wagoner
Executive Vice President, General Trust Officer and Head of the Capital
Management Group, First Union Corporation
Mr. Wagoner joined First Union in 1973 as an experienced portfolio
manager and served as chief investment officer before being named to his
current position in 1981. A certified financial analyst, he has more than
25 years' experience in investments.
(Photo)
B.J. (Billy) Walker
Vice Chairman, First Union Corporation
Mr. Walker served as president and chief executive officer of Atlantic
Bancorporation before joining First Union with the 1985 Atlantic
acquisition. Before becoming Atlantic's president and chief executive
officer in 1976, Mr. Walker held several managerial positions. He served as
chairman and chief executive officer of
First Union National Bank of Florida until March 1991.
(Photo)
Larry J. Wertz
Executive Vice
President and Chief Financial Officer, First Union National Bank of Florida
Mr. Wertz joined First Union in 1974 and has served in a variety of
managerial positions in Finance, Marketing and Retail Banking. He was
named to his current position in 1986.
89
Boards of Directors
First Union Corporation and Banking Subsidiaries
First Union
Corporation
G. Alex Bernhardt
President and Chief Executive Officer,
Bernhardt Furniture Company
Lenoir, North Carolina
W. Waldo Bradley
Chairman, Bradley Plywood Corporation
Savannah, Georgia
Robert J. Brown
Chairman, President and Chief Executive
Officer, B&C Associates, Inc.
High Point, North Carolina
Edward E. Crutchfield Jr.
Chairman and Chief Executive Officer,
First Union Corporation
Charlotte, North Carolina
Warner N. Dalhouse
Chairman and Chief Executive Officer,
First Union Corporation of Virginia
Roanoke, Virginia
Robert D. Davis
Chairman, D.D.I., Inc.
Jacksonville, Florida
R. Stuart Dickson
Chairman of Executive Committee,
Ruddick Corporation
Charlotte, North Carolina
B.F. Dolan
Investor
Charlotte, North Carolina
Roddey Dowd Sr.
Chairman, Charlotte Pipe & Foundry Co.
Charlotte, North Carolina
John R. Georgius
President, First Union Corporation
Charlotte, North Carolina
William H. Goodwin Jr.
Chairman, AMF Companies
Richmond, Virginia
Brenton S. Halsey
Chairman Emeritus, James River Corporation
Richmond, Virginia
Howard H. Haworth
President, The Haworth Group
Morganton, North Carolina
Torrence E. Hemby Jr.
President, Beverly Crest Corporation
Charlotte, North Carolina
Leonard G. Herring
President and Chief Executive Officer,
Lowe's Companies, Inc.
North Wilkesboro, North Carolina
Jack A. Laughery
Chairman, Hardee's Food Systems Inc.
Rocky Mount, North Carolina
Max Lennon
President, Clemson University
Clemson, South Carolina
Radford D. Lovett
Chairman, Commodores Point
Terminal Corporation
Jacksonville, Florida
James D. McComas*
President, Virginia Polytechnic
Institute and State University
Blacksburg, Virginia
Henry D. Perry Jr.
Physician
Plantation, Florida
Randolph N. Reynolds
Vice Chairman,
Reynolds Metals Company
Richmond, Virginia
Ruth G. Shaw
Vice President, Duke Power Company
Charlotte, North Carolina
Lanty L. Smith
Chairman and Chief Executive Officer,
Precision Fabrics Group, Inc.
Greensboro, North Carolina
Dewey L. Trogdon
Chairman, Cone Mills Corporation
Greensboro, North Carolina
John D. Uible
Investor
Jacksonville, Florida
B.J. Walker
Vice Chairman, First Union Corporation
Jacksonville, Florida
Kenneth G. Younger
Chairman and Chief Executive Officer,
Carolina Freight Corporation
Cherryville, North Carolina
First Union Corporation
Executive Officers
Edward E. Crutchfield Jr.
Chairman and Chief Executive
Officer, First Union Corporation
John R. Georgius
President, First Union Corporation
B.J. Walker
Vice Chairman, First Union Corporation
Robert T. Atwood
Executive Vice President and Chief Financial Officer, First Union
Corporation
Marion A. Cowell Jr.
Executive Vice President, Secretary and General Counsel, First Union
Corporation
Committees of the
Corporate Board
of Directors
Executive
Committee
B.F. Dolan, Chairman
Edward E. Crutchfield Jr.
Robert D. Davis
R. Stuart Dickson
Leonard G. Herring
Lanty L. Smith
B.J. Walker
Audit
Committee
W. Waldo Bradley, Chairman
Robert D. Davis, Vice Chairman
G. Alex Bernhardt
Roddey Dowd Sr.
Howard H. Haworth
Randolph N. Reynolds
Ruth G. Shaw
Howard L. Arthur Jr. (staff)
Robert T. Atwood (staff)
Financial
Management
Committee
Henry D. Perry Jr., Chairman
Lanty L. Smith, Vice Chairman
Robert J. Brown
John R. Georgius
William H. Goodwin Jr.
Jack A. Laughery
Max Lennon
James D. McComas*
John D. Uible
Kenneth G. Younger
Malcolm T. Murray Jr. (staff)
Louis A. Schmitt Jr. (staff)
Human Resources
Committee
R. Stuart Dickson, Chairman
Leonard G. Herring, Vice Chairman
B.F. Dolan
Brenton S. Halsey
Torrence E. Hemby Jr.
Radford D. Lovett
Dewey L. Trogdon
Don R. Johnson (staff)
Nominating Committee
B.F. Dolan, Chairman
R. Stuart Dickson, Vice Chairman
Edward E. Crutchfield Jr.
Leonard G. Herring
Radford D. Lovett
First Union National Bank of North Carolina
B. Mayo Boddie
Chairman and Chief Executive Officer,
Boddie-Noell Enterprises, Inc.
Rocky Mount, North Carolina
Raymond A. Bryan Jr.
Chairman and Chief Executive Officer,
T.A. Loving Company
Goldsboro, North Carolina
John F.A.V. Cecil
President, Biltmore Dairy Farms, Inc.
Biltmore, North Carolina
John W. Copeland
President, American & Efird, Inc.
Mount Holly, North Carolina
John Crosland Jr.
Chairman and President,
The Crosland Group, Inc.
Charlotte, North Carolina
J. William Disher
Chairman, President and
Chief Executive Officer
Lance, Inc.
Charlotte, North Carolina
Frank H. Dunn Jr.
Chairman and Chief Executive Officer,
First Union National Bank of
North Carolina
Charlotte, North Carolina
Malcolm E. Everett III
President, First Union National Bank
of North Carolina
Charlotte, North Carolina
James F. Goodmon
President and Chief Executive Officer,
Capitol Broadcasting Company, Inc.
Raleigh, North Carolina
Shelton Gorelick
President, SGIC, Inc.
Charlotte, North Carolina
Charles L. Grace
President, Cummins Atlantic, Inc.
Charlotte, North Carolina
James E.S. Hynes
Chairman, Hynes Sales Company
Charlotte, North Carolina
Daniel W. Mathis
Vice Chairman,
First Union National Bank of
North Carolina
Charlotte, North Carolina
Earl N. Phillips Jr.
President and Chief Executive Officer,
First Factors Corporation
High Point, North Carolina
J.G. Poole Jr.
Chairman and President,
Gregory Poole Equipment Company
Raleigh, North Carolina
John P. Rostan III
Senior Vice President and Director,
Waldensian Bakeries, Inc.
Valdese, North Carolina
Nelson Schwab III
Chairman,
Paramount Parks
Charlotte, North Carolina
Charles M. Shelton Sr.
General Partner, The Shelton Companies
Charlotte, North Carolina
George Shinn
Chairman, Shinn Enterprises Inc.
Charlotte, North Carolina
Harley F. Shuford Jr.
President and Chief Executive Officer,
Century Furniture Company
Hickory, North Carolina
First Union National Bank of Florida
Bob D. Allen
President and Chief Executive Officer,
Consolidated-Tomoka Land Company
Daytona Beach, Florida
William B. Bond
Investor
Jacksonville, Florida
E. Bruce Bower
Investor
Jacksonville, Florida
A. Dano Davis
Chairman and Principal Executive Officer, Winn-Dixie Stores, Inc.
Jacksonville, Florida
Alexander W. Dreyfoos Jr.
Chairman and Owner,
WPEC TV-12/Photo Electronics Corporation
West Palm Beach, Florida
Byron E. Hodnett
Chief Executive Officer,
First Union National Bank of Florida
Jacksonville, Florida
Edward W. Lane III
Attorney,
Ulmer, Murchison, Ashby & Taylor, P.A.
Jacksonville, Florida
John F. Lowndes
Attorney,
Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
Orlando, Florida
W.A. McGriff III
Investor
Jacksonville, Florida
John A. Mitchell III
Chairman,
First Union National Bank of Florida
Jacksonville, Florida
Orrin D. Mitchell
Orthodontist
Jacksonville, Florida
Ray C. Osborne
Attorney,
Osborne, Hankins, MacLaren & Redgrave
Boca Raton, Florida
Herbert H. Peyton
President, Gate Petroleum Company
Jacksonville, Florida
90
William J. Schoen
Chairman, President and Chief
Executive Officer,
Health Management Associates, Inc.
Naples, Florida
G. Kennedy Thompson
President,
First Union National Bank of Florida
Jacksonville, Florida
John D. Uible
Investor
Jacksonville, Florida
B.J. Walker
Vice Chairman, First Union Corporation
Jacksonville, Florida
Carol Graham Wyllie
Executive Vice President,
The Graham Companies
Miami Lakes, Florida
First Union National Bank of Georgia
Juanita P. Baranco
Vice President,
Baranco Pontiac-GMC-Subaru Inc.
Decatur, Georgia
W. Frank Blount
Chief Executive Officer,
Australian & Overseas
Telecommunications Corporation
Sydney, Australia
Otis A. Brumby Jr.
Chief Executive Officer and Chairman,
The Marietta Daily Journal and
Neighbor Newspapers Inc.
Marietta, Georgia
John E. Cay III
President,
Palmer & Cay/Carswell, Inc.
Savannah, Georgia
Jere A. Drummond
President, Customer Operations,
BellSouth Telecommunications Inc.
Atlanta, Georgia
Harald R. Hansen
Chairman, President and Chief
Executive Officer,
First Union National Bank of Georgia
Atlanta, Georgia
J. Madden Hatcher Jr.
Attorney
Columbus, Georgia
Leroy Keith
President, Morehouse College
Atlanta, Georgia
James W. Key
Investor
Columbus, Georgia
Wyckliffe A. Knox Jr.
Attorney, Kilpatrick and Cody
Augusta, Georgia
R. Stanley Kryder
Executive Vice President,
First Union National Bank of Georgia
Atlanta, Georgia
J. Robert Logan
Managing Partner and Vice President,
Logan and Hoffman
Savannah, Georgia
Grover C. Maxwell Jr.
Investor
Greenville, North Carolina
J. Greeley McGowin II
Investor
Savannah, Georgia
Robert C. McMahan
President and Chief Executive Officer,
Fernbank Museum of Natural History
Atlanta, Georgia
C.V. Nalley III
President and Chief Executive Officer,
The Nalley Companies
Atlanta, Georgia
Walton K. Nussbaum
Chairman, St. Joseph's Hospital
Savannah, Georgia
Carl E. Sanders
Attorney, Troutman, Sanders, Lockerman
& Ashmore
Atlanta, Georgia
Henry C. Schwob
President, Schwob Realty Company
Columbus, Georgia
Arnold M. Tenenbaum
President, Chatham Steel Corporation
Savannah, Georgia
Dan M. Vaden Jr.
President, Dan Vaden Chevrolet-Geo, Inc.
Savannah, Georgia
First Union National Bank of South Carolina
Louis P. Batson Jr.
Chairman and Chief Executive Officer,
Louis P. Batson Company
Greenville, South Carolina
Peter C. Browning**
Executive Vice President,
Sonoco Products Company
Hartsville, South Carolina
Rex L. Carter
Attorney,
Carter, Smith, Merriam, Rogers & Traxler
Greenville, South Carolina
George C. Fant Jr.
Investor
Columbia, South Carolina
I.S. Leevy Johnson
Attorney, Johnson, Toal & Battiste, P.A.
Columbia, South Carolina
James F. Kane
Dean Emeritus and Professor of Business,
University of South Carolina
Columbia, South Carolina
Harry M. Lightsey Jr.
Attorney, McNair and Sanford, P.A.
Columbia, South Carolina
Patrick W. McKinney
President, Kiawah Island Real Estate Inc.
Charleston, South Carolina
F. Creighton McMaster
Chief Executive Officer,
Winnsboro Petroleum Company
Winnsboro, South Carolina
Ralph L. Ogden
President, Liberty Life Insurance Company
Greenville, South Carolina
John D. Orr
President, Orr Company
Florence, South Carolina
William L. Otis Jr.
Chairman and Chief Executive Officer,
Columbia Lumber and Manufacturing Co. Columbia, South Carolina
Joseph P. Riley Jr.
Mayor, City of Charleston
Charleston, South Carolina
Alfred B. Robinson
President, Robinson Company
Easley, South Carolina
Sidney B. Tate
Chairman, President and Chief
Executive Officer,
First Union National Bank of South Carolina
Greenville, South Carolina
First Union National Bank of Tennessee
T.B. Boyd III
President and Chief Executive Officer,
National Baptist Publishing Board
Nashville, Tennessee
Davis H. Carr
Attorney, Boult, Cummings, Conners and Berry
Nashville, Tennessee
Haywood D. Cochrane Jr.
President and Chief Executive Officer,
Allied Clinical Laboratories, Inc.
Nashville, Tennessee
Colleen Conway-Welch
Dean of the School of Nursing,
Vanderbilt University
Nashville, Tennessee
John P. Cooper
Investor
Shelbyville, Tennessee
J. William Denny
President, Nashville Gas Division of Piedmont Natural Gas Inc.
Nashville, Tennessee
Lloyd C. Elam
Professor of Psychiatry, Meharry Medical College
Nashville, Tennessee
William M. Johnson
Investor
Nashville, Tennessee
Donald M. MacLeod
Executive Vice President, First Union National Bank of Tennessee
Nashville, Tennessee
Gail O. Neuman
Vice President and General Counsel,
Nissan Motor Manufacturing
Corporation, U.S.A.
Smyrna, Tennessee
Richard W. Oliver
Professor of Management,
Vanderbilt University
Nashville, Tennessee
Robert L. Reid
Chairman, President and Chief
Executive Officer,
First Union National Bank of Tennessee
Nashville, Tennessee
James E. Robinson
Chairman, Hodge Hardy Agency, Inc.
Newport, Tennessee
Thomas J. Sherrard
Attorney, Sherrard & Roe
Nashville, Tennessee
Jack B. Turner
President, Jack B. Turner & Associates Inc.
Clarksville, Tennessee
George L. Yowell
Vice Chairman, First Union National Bank of Tennessee
Nashville, Tennessee
First Union National Bank of Virginia
George R. Aldhizer Jr.
Attorney, Wharton, Aldhizer & Weaver
Harrisonburg, Virginia
Donald S. Beyer Jr.
Vice President, Don Beyer Motors, Inc.
Falls Church, Virginia
M. Caldwell Butler
Attorney, Woods, Rogers & Hazlegrove
Roanoke, Virginia
J. Richard Carling
Vice Chairman,
First Union National Bank of Virginia
Roanoke, Virginia
David M. Carroll
Vice Chairman,
First Union National Bank of Virginia
Roanoke, Virginia
David L. Caudill
Vice Chairman,
First Union National Bank of Virginia
Roanoke, Virginia
Warner N. Dalhouse
Chairman and Chief Executive Officer,
First Union Corporation of Virginia
Roanoke, Virginia
P. Wesley Foster
President/Owner,
Long & Foster Real Estate Inc.
Fairfax, Virginia
James T. Holland
President, O'Sullivan Corporation
Winchester, Virginia
Glenn A. Hunsucker
President,
Bassett Furniture Industries Inc.
Bassett, Virginia
Benjamin P. Jenkins III
President and Chief Operating Officer,
First Union National Bank of Virginia
Roanoke, Virginia
William E. Lavery
President Emeritus, Virginia Polytechnic Institute
Blacksburg, Virginia
Thomas L. Robertson
President and Chief Executive Officer,
Carilion Health System
Roanoke, Virginia
William G. Shenkir
Professor, University of Virginia
Charlottesville, Virginia
Donald G. Smith
Chairman and Chief Executive Officer,
Roanoke Electric Steel Corporation
Roanoke, Virginia
Glenn O. Thornhill Jr.
President and Chief Executive Officer,
Maid Bess Corporation
Salem, Virginia
John W. Vaughan
Investor
Roanoke, Virginia
* Mr. McComas, who retired January 1, 1994,
died on February 10, 1994.
**Effective January 1, 1994
91
Stockholder Information
Financial Information
Analysts, stockholders and other
investors seeking financial information about First Union Corporation
should contact Barbara Massa, senior vice president for Corporate
Communications, at 704-374-2555 or Sean Fox, vice president for
Investor Relations, at 704-374-7060. Call 1-800-283-6214 for the
latest news announcements through FAX-On-Demand.
Investor Relations
Our Investor Relations staff, at
704-374-6782, also can provide
information about our dividend
reinvestment program and direct deposit of dividends.
Copies of our Form 10-K may be obtained from Investor
Relations, Two First Union Center, Charlotte, North Carolina 28288-0206.
Stockholder Accounts
If you have questions concerning your stockholder account, please
call our transfer agent, First Union National Bank of North Carolina,
at 1-800-347-1246.
Media Contact
News media seeking general information should contact
R. Jeep Bryant, vice president for Media
Relations, at 704-374-2957.
Financial Report Mailing Procedures
Our goal is to reduce the expense associated with mailing
financial reports to stockholders by receiving authorization
to mail only one per address. This authorization
is strictly voluntary. Please check
the appropriate box on the postage paid Stockholder Information card that
appears at the back of this annual report.
Annual Meeting
The annual meeting of stockholders will be held at 9:30 a.m.
Tuesday, April 19, 1994, in the auditorium
on the 12th floor of Two First Union Center, Charlotte, North Carolina.
Stock Listing
First Union Corporation common stock is traded on the New York
Stock Exchange under the symbol FTU. First Union Corporation
series 1990 cumulative perpetual adjustable rate preferred stock
is traded on the New York Stock Exchange under the
symbol FTUpr.
Equal Opportunity Employer
First Union Corporation is an
equal opportunity employer.
All matters regarding recruiting, hiring, training, compensation,
benefits, promotions, transfers
and all other personnel policies
will continue to be free from
discriminatory practices.
NAIC
First Union Corporation is a corporate sponsor of NAIC (National
Association of Investment Clubs)
and participates in the Low-Cost
Investment Plan.
Securities and Debt Ratings
Standard Thomson
(as of December 31, 1993) Moody's & Poor's Bankwatch
Securities Issues by FUNC:
Senior Debt:
(bullet) 71/2 percent debentures,
due December 1, 2002 A2 A A+
(bullet) Floating rate extendible notes,
due June 15, 2005 A2 A A+
(bullet) 11 percent, due May 1, 1996 A2 A A+
(bullet) Floating rate, due November 13, 1996 A2 A A+
(bullet) 5.95 percent, due July 1, 1995 A2 A A+
(bullet) 63/4 percent, due January 15, 1998 A2 A A+
(bullet) Medium-term notes A2 A A+
Subordinated Notes:
(bullet) 11 percent, due 1996 A3 A- A
(bullet) 81/8 percent, due December 15, 1996 A3 A- A
(bullet) 9.45 percent, due June 15, 1999 A3 A- A
(bullet) 9.45 percent, due August 15, 2001 A3 A- A
(bullet) 81/8 percent, due June 24, 2002 A3 A- A
(bullet) 8 percent, due November 15, 2002 A3 A- A
(bullet) 71/4 percent, due February 15, 2003 A3 A- A
(bullet) 65/8 percent, due July 15, 2005 A3 A- A
(bullet) 6 percent, due October 30, 2008 A3 A- A
(bullet) Medium-term notes A3 A- A
Preferred Stock:
(bullet) Series 1990 cumulative perpetual
adjustable rate preferred stock "a2" BBB+ A-
Debt Issued by Subsidiaries
of FUNC:
(bullet) $100 million deposit note program
issued by FUNB-NC Aa3 A --
(bullet) Commercial paper P-1 A-1 TBW-1
(bullet) FUNB-VA senior debt -- A --
(bullet) FUNB-VA subordinated debt -- A- --
(bullet) FUNB-FL subordinated debt -- A- --
Short-Term Certificates
of Deposits Issued by:
(bullet) FUNB-NC P-1 A-1 TBW-1
(bullet) FUNB-FL P-1 A-1 TBW-1
(bullet) FUNB-GA P-1 A-1 TBW-1
(bullet) FUNB-VA P-1 A-1 TBW-1
Long-Term Certificates
of Deposits Issued by:
(bullet) FUNB-NC Aa3 A+ --
(bullet) FUNB-FL A1 A+ --
(bullet) FUNB-GA A1 A+ --
(bullet) FUNB-VA A1 A+ --
Letters of Credit Issued
by FUNB-NC and FUNB-FL:
(bullet) Short-term P-1 A-1 --
(bullet) Long-term Aa3 A+ --
Thomson Bankwatch rates First Union Corporation B/C.
FUNC - First Union Corporation
FUNB-NC - First Union National Bank of North Carolina
FUNB-FL - First Union National Bank of Florida
FUNB-GA - First Union National Bank of Georgia
FUNB-VA - First Union National Bank of Virginia
92
Stockholder Information
First Union's Investor Relations staff can provide information about direct
deposit of dividends and our dividend reinvestment program. Please check
the appropriate item below:
(circle) Direct Deposit of Dividends
(circle) Dividend Reinvestment and Stock
Purchase Plan (Common Stock)
Also, please check the appropriate item below if
you would like to eliminate duplicate mailings or
change the address at which you would like to receive
stockholder mailings:
(circle) Eliminate duplicate mailings
(circle) Address change
Name
Company Name
(If Applicable)
Broker
(If Applicable)
Address
City
State
ZIP
Signature
(Please sign this card if you are changing your address
or eliminating duplicate mailings.)
First Union Business Products And Services
First Union's bankers are knowledgeable and ready to match our products
and services to the specific needs of your business, whether large or
small. Our products are designed to make the overall financial management
of your business easier. For more information concerning these products,
please drop this card in the mail.
Name
Address
City, State, ZIP
Business Phone
Sales Size
Line of Business
Yes! I would like to learn more about the
business products and services First Union
has to offer. Please send me more information
about the following:
(circle) Small Business Services
(circle) Cash Management Services
(circle) Corporate Trust Services
(circle) Investment Services
(circle) Employee Benefit and Pension
Planning Services
(circle) International Services
(circle) Capital Markets Services
(circle) Commercial Loans
(circle) Money Market Investments
(circle) Foreign Exchange
(circle) Business Visa
(circle) Commercial Deposit Products
(circle) Commercial CAP Account
(An Asset Management Account)
First Union Investment Options
First Union has Investment Specialists to help you find the right
investment
options to meet your goal, whether it's current income or retirement,
minimizing taxes or providing for a college education. To learn more about
the investments
we offer, just complete this card and drop it in the mail, or call 1-800-
326-4434.
Name
Address
City, State, ZIP
Home Phone
Business Phone
Best Time to Call
Yes! I would like to learn more about the many investment opportunities
available through
First Union. Please send me information on
the following:
(circle) First Union Funds*
(circle) Personal Trust Services
(circle) Annuities
(circle) CAP Account
(An Asset Management Account)
(circle) First Union Money Market Accounts
(circle) Brokerage Services
(circle) IRAs
(circle) First Union Certificates of Deposit
* The investment adviser to First Union Funds is the Capital Management
Group of First Union National Bank of North Carolina. First Union Funds are
offered through
First Union Brokerage Services, Inc. (FUBS) (Member NASD, Member SIPC),
a brokerage affiliate of First Union Corporation.
More complete information about First Union Funds is set forth in the
prospectus, which contains important information including fees and
expenses.
The prospectus should be read carefully before investing or sending money.
First Union Funds are sponsored and distributed by Federated Securities
Corp., which is independent of First Union. Investments in First Union
Funds are not endorsed or guaranteed by First Union, are not deposits or
obligations of First Union and are not insured or otherwise protected by
the FDIC or any other government agency and involve investment risk,
including possible loss of principal.
****************************************************************************
APPENDIX
****************************************************************************
There are seven graphs on page 2. Graphs and plot points are as follows:
DIVIDENDS PER COMMON SHARE
(Dollars per share)
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994*
.29 .31 .33 .36 .40 .45 .49 .58 .65 .77 .86 1.00 1.08 1.12 1.28 1.50 1.60
*Annualized, based on first quarter 1994 dividend of 40 cents per common share.
ASSET GROWTH
(Dollars in billions)
1989 1990 1991 1992 1993
45.5 54.6 59.3 63.8 70.8
Prior years restated for pooling of interest acquisitions.
NET INCOME PER
COMMON SHARE
1989 1990 1991 1992 1993
2.62 1.68 2.24 2.23 4.73
Prior years restated for pooling of interest acquisitions.
BOOK VALUE GROWTH
(In dollars)
1989 1990 1991 1992 1993
20.49 21.81 23.23 25.25 28.90
Prior years restated for pooling of interest acquisitions.
RETURN ON AVERAGE ASSETS
(In percent)
1989 1990 1991 1992 1993
.82 .50 .63 .63 1.20
Prior years restated for pooling of interest acquisitions.
RETURN ON AVERAGE COMMON EQUITY
(In percent)
1989 1990 1991 1992 1993
12.78 7.78 10.03 9.08 17.42
Prior years restated for pooling of interest acquisitions.
OVERHEAD EFFICIENCY RATIO
(In percent)
1989 1990 1991 1992* 1993
66.48 65.38 61.59 69.66 62.03
Prior years restated for pooling of interest acquisitions.
*Includes $162 million restructuring charge related to acquisitions.
**********************************
There is a photo of Edward E. Crutchfield, Jr. at the top of PAGE 3.
On PAGE 5 there is a signature for Edward E. Crutchfield, Jr., Chairman
and CEO at the end of the Letter from the Chairman.
There is a photo of John R. Georgius, President, FUNB at the top of PAGE 6.
At the bottom right hand corner of PAGE 8 there is a 3D map of the Eastern
United States entitled Primary Banking Market in South Atlantic U.S. There
is a legend with 3 divisions. These are specified on the map with symbols. The
divisions are First Union Banking Office, First Union Mortgage Corporation
and First Union Home Equity Corporation.
*************************
There is a graph at the top left of PAGE 10:
YEAR-END
EARNING ASSETS
(Dollars in billions)
Loans, net
Investment Securities
Securities Available For Sale
Other
1989 1990 1991 1992 1993
40.7 48.6 51.9 56.2 63.0
There is a graph at the top right of PAGE 11:
NET INTEREST INCOME*
(Dollars in billions)
1989 1990 1991 1992 1993
1.624 1.873 2.025 2.563 2.867
*Tax-equivalent.
There are two graphs on the left side of PAGE 12:
NONINTEREST INCOME
(Dollars in billions)
1989 1990 1991 1992 1993
.551 .699 1.070 1.064 1.198
NONINTEREST EXPENSE
(Dollars in billions)
1989 1990 1991 1992 1993
1.446 1.681 1.906 2.527 2.522
There are three pie charts on the right side of PAGE 13:
YEAR-END SECURITIES
AVAILABLE FOR SALE
38% U.S. Treasury Securities
28% U.S. Government Agencies
19% CMOs*
13% Other Bonds
2% Other
*CMOs: Collateralized mortgage obligations.
YEAR-END INVESTMENT
SECURITIES
50% Municipal Securities
43% U.S. Government Agencies
7% Other
YEAR-END LOANS
28% Retail Real Estate - Mortgage
26% Commercial, Financial and Agricultural
25% Installment Loans to Individuals
12% Commercial Real Estate - Mortgage
4% Commercial Real Estate - Construction and Other
3% Other
2% Highly Leveraged Transactions
There is a pie chart and 2 tables on the top left of PAGE 14.
YEAR-END
CONSUMER LOANS
38% Mortgage Loans to Individuals
19% Consumer Direct
10% Bank Cards
9% Mortgage Warehouse and Securitized Mortgages
9% Consumer Indirect
8% Second Mortgage
7% Equity Credit
YEAR-END
COMMERCIAL LOANS
(Industry Classification)
(In millions)
Manufacturing $2,194
Retail trade 1,205
Wholesale trade 733
Services 2,693
Financial services 1,476
Insurance 292
Real estate-related 1,001
Communications 838
Transportation 615
Public utilities 127
Agriculture 335
Construction 317
Mining 163
Individuals 817
Public administration 329
Other 1,161
Total $14,296
COMMERCIAL
REAL ESTATE LOANS
(Project Type)
(In millions) Outstandings Number of Loans
Apartments $ 983 1,317
Condominiums 72 222
Healthcare facilities 159 202
Land-improved 522 1,019
Land-unimproved 361 927
Lodging 164 157
Office buildings 1,664 4,418
Industrial buildings 217 684
Recreational property 97 83
Retail sales building 303 884
Shopping centers 1,000 765
Single family 456 3,513
Warehouse 575 1,289
Other 927 2,314
Total $7,500 17,794
********************************
There are 3 graphs on the top right of PAGE 15:
QUARTERLY NONPERFORMING ASSETS
BY BUSINESS UNIT*
Percent of Net
Business Unit Loans
And Foreclosed
Properties
(Dollars in millions) December 31,
4Q93 3Q93 2Q93 1Q93 4Q92 1993 1992
Florida $347 471 529 575 615 2.26% 4.11
North Carolina 81 92 103 112 116 1.12 1.70
Georgia** 134 223 208 152 120 2.17 2.51
Virginia** 161 184 180 181 228 3.30 4.10
South Carolina** 43 51 57 42 39 2.27 2.02
Tennessee** 29 36 32 40 37 2.62 3.17
Maryland 29 23 23 34 33 4.76 3.41
District of Columbia 9 8 7 9 9 2.48 1.45
Corporate Banking*** 57 95 104 91 119 1.35 3.55
Other units**** $ 26 27 30 32 35 .49% .71
*Excludes acquired Southeast Banks and First American segregated assets.
**Reflects the impact of acquisitions consummated during 1993.
***The Corporate Banking Group, a part of the North Carolina bank, makes loans
primarily outside our regional banking market.
****First Union Mortgage Corporation, First Union Home Equity Corporation and
other units.
NONPERFORMING ASSETS*
(Percent of net loans and foreclosed properties)
1989 1990 1991 1992 1993
1.25 3.42 4.10 3.19 1.95
*Excludes segregated assets.
YEAR-END NONPERFORMING COMMERCIAL LOANS
(Industry Classification)
(In millions) Outstandings
Manufacturing $ 20
Retail trade 20
Wholesale trade 26
Services 56
Real estate-related 27
Communications 19
Construction 10
Individuals 34
Other 30
Total $242
*****************************
There are 3 graphs on the left side of PAGE 16.
NET CHARGE-OFFS*
(Percent of average net loans)
1989 1990 1991 1992 1993
.39 .68 1.48 .86 .58
*Excludes Southeast Banks-related net charge-offs.
NET CHARGE-OFFS BY LOAN TYPE*
(Percent) 1993 1992 1991
Commercial, financial
and agricultural .73 1.00 1.43
Real estate .38 .73 1.85
Installment .70 .92 1.01
Total .58 .86 1.48
*As a percentage of average net loans.
YEAR-END NONACCRUAL COMMERCIAL REAL ESTATE*
(Project Type)
(In millions) Outstandings
Apartments $ 27
Land-improved 60
Land-unimproved 51
Lodging 14
Office buildings 93
Manu/industrial buildings 16
Retail sales buildings 25
Shopping centers 95
Single family 49
Warehouses 29
Other 189
Total $648
*Includes foreclosed properties.
****************************
There are three charts on the right side of PAGE 17:
COMPARISON OF FUNDING SOURCES
Deposits '92-86% '93-84%
Short-Term Borrowings '92-9% '93-11%
Long-Term Debt '92-5% '93-5%
1992 1993
100% 100%
STOCKHOLDERS' EQUITY
TO ASSETS
(Percent)
1989 1990 1991 1992 1993
6.33 6.05 6.51 6.99 7.36
RISK-BASED CAPITAL TO ASSETS
(Percent)
1993 Regulatory Minimum
First Union
Tier 1 Total Capital
4.00 9.14 8.00 14.64
***********************
There is a graph at the top center of PAGE 18:
INTEREST RATE SENSITIVITY ASSUMPTIONS
Federal
Funds Policy Measurement Period
Rate 3/94-2/95
6% 5.75%
5% 4.65% 4.85% 4.75%
4% 4.18% 3.65% 3.85% 3.75%
3% 3.18% 2.65% 2.85%
2% 2.18%
DEC 93 MAR 94 DEC 94 FEB 95 NOV 95
********************************************
APPENDIX
On PAGE 52 in the Management's Statement of Fiscal Responsibility there are
signatures for Edward E. Crutchfield Jr. and Robert T. Atwood at the end of
statement.
On PAGE 85 in the Independent Auditors' Report there is a signature for KPMG
Peat Marwick at the bottom left of the page above the name KPMG
Peat Marwick.
On PAGE 87 the bottom half of the page is a map of the United States
entitled FIRST UNION ACROSS THE NATION and has locations of:
First Union Mortgage Corporation
First Union Home Equity Corporation
First Union Banking Office
Banking Offices-1,302
In the South Atlantic region, First Union has banking offices in Florida,
Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia
and Washington, D.C.
Non-Banking Offices-222
On a national scale, First Union has 53 mortgage offices, 151 home equity
offices and 18 other offices, including brokerage services.
**************************
On PAGE 88 there are two rows of photos of the members of
the Corporate Management Committee with names and captions underneath.
On PAGE 89 there are two rows of photos of the members of
the Corporate Management Committee with names and captions underneath.
**************************
There are 3 BUSINESS REPLY MAIL cards with indicias and bars, etc. inserted
in the book.