-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KM/iuENTRtoEXLahn5PB5e1ag5CaOBDSNhuZFz9Iw7pWnH2IqoiG1lG2w+1QRP8Y b6YvLe49S9taUAVy8KvrHg== 0000950168-96-000831.txt : 19960515 0000950168-96-000831.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950168-96-000831 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION CORP CENTRAL INDEX KEY: 0000036995 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560898180 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10000 FILM NUMBER: 96564525 BUSINESS ADDRESS: STREET 1: ONE FIRST UNION CTR CITY: CHARLOTTE STATE: NC ZIP: 28288-0630 BUSINESS PHONE: 7043746565 MAIL ADDRESS: STREET 1: FIRST UNION CORPORA STREET 2: ONE FIRST UNION CENTER CITY: CHARLOTTE STATE: NC ZIP: 28288-0630 FORMER COMPANY: FORMER CONFORMED NAME: CAMERON FINANCIAL CORP DATE OF NAME CHANGE: 19750522 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION NATIONAL BANCORP INC DATE OF NAME CHANGE: 19721115 10-Q 1 FUNB 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-10000 FIRST UNION CORPORATION (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-0898180 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
FIRST UNION CORPORATION ONE FIRST UNION CENTER CHARLOTTE, NORTH CAROLINA 28288-0013 (Address of principal executive offices) (Zip Code) (704) 374-6565 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 282,475,526 shares of Common Stock, par value $3.33 1/3 per share, were outstanding as of April 30, 1996. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The following unaudited consolidated financial statements of First Union Corporation (the "Corporation" or "FUNC") within Item 1 include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation of such consolidated financial statements for the periods indicated. 1 FIRST UNION CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENTS OF CASH FLOWS The Consolidated Balance Sheets of First Union Corporation and Subsidiaries at March 31, 1996, March 31, 1995, and December 31, 1995, respectively, set forth on page T-21 of the Corporation's First Quarter Financial Supplement for the three months ended March 31, 1996 (the "Financial Supplement"), are incorporated herein by reference. The Consolidated Statements of Income of First Union Corporation and Subsidiaries for the three months ended March 31, 1996 and 1995, set forth on page T-22 of the Financial Supplement, are incorporated herein by reference. The Consolidated Statements of Cash Flows of First Union Corporation and Subsidiaries for the three months ended March 31, 1996 and 1995, set forth on page T-23 of the Financial Supplement, are incorporated herein by reference. A copy of the Financial Supplement is being filed as Exhibit (19) to this Report. 2 PART II. OTHER INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's Discussion and Analysis of Financial Condition and Results of Operations appears on pages 2 through 13 and T-1 through T-23 of the Financial Supplement and is incorporated herein by reference. A copy of the Financial Supplement is being filed as Exhibit (19) to this Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the annual meeting of the stockholders of the Corporation held on April 16, 1996, the following proposals were approved: 1. Proposal to elect the following individuals as directors of the Corporation:
FOR WITHHELD Class I: Robert J. Brown.................................................. 235,227,832 1,040,945 Edward E. Crutchfield............................................ 235,391,522 905,427 R. Stuart Dickson................................................ 235,395,538 900,512 Juan Rodriguez Inciarte.......................................... 235,271,318 997,429 Max Lennon....................................................... 235,176,861 1,091,886 Joseph Neubauer.................................................. 235,372,482 896,297 Ruth G. Shaw..................................................... 235,355,086 913,693 Anthony P. Terracciano........................................... 235,312,531 954,645 B. J. Walker..................................................... 235,378,636 889,975 Class II: Arthur M. Goldberg............................................... 235,300,062 968,717 Class III: Edward E. Barr................................................... 235,375,480 893,300 Frank M. Henry................................................... 235,370,815 897,965
2. Proposal to approve the Corporation's 1996 Employee Stock Purchase Plan:
FOR AGAINST ABSTAIN 195,710,062 8,768,436 2,838,770
3. Proposal to approve the Corporation's 1996 Master Stock Compensation Plan:
FOR AGAINST ABSTAIN 187,224,806 8,877,872 3,464,665
4. Proposal to ratify the appointment of KPMG Peat Marwick LLP as auditors for the Corporation:
FOR AGAINST ABSTAIN 226,079,959 572,143 970,222
3 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits.
EXHIBIT NO. DESCRIPTION (4) Instruments defining the rights of security holders, including indentures.* (10) The Corporation's 1996 Master Stock Compensation Plan. (12)(a) Computations of Consolidated Ratios of Earnings to Fixed Charges. (12)(b) Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends. (19) The Corporation's First Quarter 1996 Financial Supplement. (27) The Corporation's Financial Data Schedule.** (99) First Union Corporation of Virginia and Subsidiaries Summarized Financial Information.
* The Corporation agrees to furnish to the Commission upon request, copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries. ** Filing by Electronic Data Gathering, Analysis and Retrieval System only. (b) Reports on Form 8-K. During the quarter ended March 31, 1996, Current Reports on Form 8-K, dated January 10, 1996 and February 9, 1996, were filed with the Commission by the Corporation. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FIRST UNION CORPORATION Date: May 14, 1996 By: /s/JAMES H. HATCH JAMES H. HATCH SENIOR VICE PRESIDENT AND CORPORATE CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION (4) Instruments defining the rights of security holders, including indentures.* (10) The Corporation's 1996 Master Stock Compensation Plan. (12)(a) Computations of Consolidated Ratios of Earnings to Fixed Charges. (12)(b) Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends. (19) The Corporation's First Quarter 1996 Financial Supplement. (27) The Corporation's Financial Data Schedule.** (99) First Union Corporation of Virginia and Subsidiaries Summarized Financial Information.
* The Corporation agrees to furnish to the Commission upon request, copies of the instruments, including indentures, defining the rights of the holders of the long-term debt of the Corporation and its consolidated subsidiaries. ** Filing by Electronic Data Gathering, Analysis and Retrieval System only. EX-10 2 EXHIBIT 10 EXHIBIT (10) FIRST UNION CORPORATION 1996 MASTER STOCK COMPENSATION PLAN SECTION 1. ESTABLISHMENT, PURPOSE AND EFFECTIVE DATE OF PLAN 1.1 ESTABLISHMENT. First Union Corporation, a North Carolina corporation, hereby establishes a master stock compensation plan for key Employees, which shall be known as the "1996 MASTER STOCK COMPENSATION PLAN". It is intended that certain of the Options issued pursuant to the Plan may constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code (the "Code"). The Plan also shall provide for the issuance of nonstatutory stock options and shares of Restricted Stock. 1.2 PURPOSE. The purpose of the Plan is to advance the interests of the Corporation by encouraging and providing for the acquisition of an equity interest in the success of the Corporation by key Employees through the grant of incentive stock options, nonstatutory stock options, and shares of Restricted Stock. The Plan will help enable the Corporation to attract and retain the services of key Employees upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent. 1.3 EFFECTIVE DATE. The Plan shall become effective on April 16, 1996, subject to approval by the shareholders of the Corporation. SECTION 2. DEFINITIONS 2.1 DEFINITIONS. Whenever used herein, the following terms shall have their respective meanings set forth below: (a) "Adjusted Net Income" means the Corporation's net income applicable to common shareholders as it appears on an income statement of the Corporation prepared in accordance with generally accepted accounting principles, adjusted to remove the effect of the following: (i) items disclosed under generally accepted accounting principles, or that would be disclosed absent a materiality concept, in the Corporation's income statement as extraordinary gains or losses or as changes in accounting principles; (ii) net income or loss attributable to companies acquired in acquisition transactions which are being treated as poolings under generally accepted accounting principles to the extent the income or loss is attributable to periods prior to the consummation date of the transaction; and (iii) restructuring charges recognized in the Corporation's income statement as a result of current and/or pending acquisition transactions. (b) "Base Salary" means the annual base salary being paid to a Covered Officer as of December 31 of a particular year. (c) "Board" means the Board of Directors of the Corporation. (d) "Change of Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended from time to time (the "Exchange Act"); provided, however, that, without limitation, such a Change of Control shall be deemed to have occurred if (i) any one person, or more than one person acting as a group, acquires ownership of Stock that, together with Stock held by such person or group, possesses more than 50 percent of the total Fair Market Value or total voting power of the Stock, (ii) any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of Stock possessing 20 percent or more of the total voting power of the Stock or (iii) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of such appointment or election. 1 (e) "Committee" means the Human Resources Committee of the Board consisting of three or more members of the Board and, for so long the Board may determine (i) who qualify as "outside directors" under Section 162(m) of the Code and the regulations thereunder, and (ii) who are not, and who have not been at any time within one year prior to appointment to the Committee, eligible to receive Stock under the Plan or any similar plan of the Corporation. (f) "Corporation" means First Union Corporation, and shall include any subsidiary, 50% or more of the outstanding voting stock of which is owned directly or indirectly by the Corporation, unless the context otherwise requires. (g) "Covered Officers" means such executive officers of the Corporation as the Committee may designate in writing as Covered Officers. (h) "Early Retirement" means termination of a Participant's employment upon satisfaction of the requirements for early retirement under the Corporation's Pension Plan, provided the Participant has also attained age fifty and had ten or more years of service. (i) "Employee" means the Chairman of the Board, any Vice Chairman of the Board, the President, Secretary or Treasurer of the Corporation, any Vice President of the Corporation, and any other individual who performs similar policy making functions of the Corporation. (j) "Fair Market Value" means the closing price of the Stock on the New York Stock Exchange Composite Transactions tape on a particular date. (k) "Leave of Absence" means an absence from work that requires a Participant to be away from work for an extended period of time, as determined by the Committee in its sole discretion, which determination shall be final, conclusive, and not subject to appeal. (l) "Normal Retirement" means termination of a Participant's employment upon satisfaction of the requirements for normal retirement under the terms of the Corporation's Pension Plan. (m) "Option" means the right to purchase Stock pursuant to the terms of the Plan at a stated price for a specified period of time. For purposes of the Plan an Option may be either (i) an incentive stock option within the meaning of Section 422 of the Code or (ii) a nonstatutory stock option. (n) "Participant" means an Employee designated by the Committee to participate in the Plan. (o) "Period of Restriction" means the period during which the transfer of shares of Restricted Stock is restricted pursuant to Section 8 of the Plan. (p) "Restricted Stock" means Stock granted to a Participant pursuant to Section 8 of the Plan. (q) "ROE" means the Corporation's Adjusted Net Income as a percentage of average common shareholders' equity, excluding any adjustment for unrealized gains or losses on debt and equity securities pursuant to the Statement of Financial Accounting Standards 115. In situations where net income applicable to common shareholders is adjusted as a result of pooling transactions referred to under Section 2.1(a) above, the average equity of the Corporation for the period against which the Adjusted Net Income is compared to determine ROE, shall be computed without taking into account the equity of an acquired company for any time periods prior to the consummation date of the transaction. (r) "Retirement" means Early Retirement or Normal Retirement. (s) "Stock" means the Common Stock of the Corporation. 2.2 GENDER AND NUMBER. Except when otherwise indicated by the context, words in the masculine gender when used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular. SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 ELIGIBILITY AND PARTICIPATION. Participants shall be selected by the Committee from among those Employees who, in the opinion of the Committee, are in a position to contribute materially to the Corporation's continued growth and development and to its long-term financial success, including, without limitation, Participants in certain 2 incentive plans of the Corporation pursuant to which, in the sole discretion of the Committee, such Participants may receive all or a portion of such incentive compensation in shares of Restricted Stock and/or Options. SECTION 4. ADMINISTRATION 4.1 ADMINISTRATION. The Committee shall be responsible for administration of the Plan. The Committee, by majority action thereof, is authorized to select Employees for participation in the Plan, make decisions concerning the timing, pricing and amount of grants or awards under the Plan, interpret the Plan, prescribe, amend, and rescind rules and regulations relating to the Plan, provide for conditions and assurances deemed necessary or advisable to protect the interests of the Corporation, and make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations, or other actions made or taken by the Committee pursuant to the provisions of the Plan shall be final and binding and conclusive for all purposes and upon all persons whomsoever. SECTION 5. STOCK SUBJECT TO PLAN 5.1 NUMBER. The total number of shares of Stock subject to issuance under the Plan may not exceed 14,000,000 subject to adjustment as provided by Subsection 5.3. Of this total number, up to 6,800,000 shares of Stock may be granted as shares of Restricted Stock. 5.2 UNUSED STOCK. In the event any shares of Stock that are subject to an Option which, for any reason, expires or is terminated unexercised as to such shares, such shares again shall become available for issuance under the Plan. Any shares of Restricted Stock that are forfeited pursuant to the Plan shall also become available for reissuance under the Plan. 5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any change in the outstanding shares of Stock that occurs after approval of the Plan by the shareholders of the Corporation, by reason of a Stock dividend or split, recapitalization, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of Stock subject to (i) the limitation set forth in Subsection 7.1, and (ii) each outstanding Option, and its stated option price, shall be appropriately adjusted by the Committee, whose determination shall be final, conclusive and not subject to appeal; provided, however, that fractional shares shall be rounded to the nearest whole share. In such event, the Committee shall also make any appropriate adjustments in the number and type of shares subject to Restricted Stock grants then outstanding, pursuant to the terms of such grants or otherwise. SECTION 6. DURATION OF PLAN 6.1 DURATION OF PLAN. The Plan shall remain in effect, subject to the Board's right to earlier terminate the Plan pursuant to Subsection 11.1, until all Stock subject to it shall have been purchased or acquired pursuant to the provisions hereof. Notwithstanding the foregoing, no Option or shares of Restricted Stock may be granted on or after the tenth (10th) anniversary of the Plan's effective date. SECTION 7. TERMS OF OPTIONS 7.1 GRANT OF OPTIONS. Subject to the provisions of Subsections 3.1 and 5.1, Options may be granted to Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Options granted to each Participant; provided, however, that no Participant shall be granted Options to purchase more than 200,000 shares of Stock, subject to adjustment as set forth in Subsection 5.3, during any fiscal year. The Committee also shall determine whether an Option is to be an incentive stock option within the meaning of Section 422 of the Code or a nonstatutory stock option. 7.2 OPTION TERMS. The terms of each Option shall be determined by the Committee on the date of grant, including the type of Option granted, the Option price, the duration of the Option, the number of shares of Stock to which the Option pertains, the date or dates on which the Option is exercisable and any other terms of the Option. 7.3 OPTION PRICE. No Option shall have an Option price that is less than the Fair Market Value of the Stock on the date the Option is granted. 7.4 DURATION OF OPTIONS. Each Option shall expire at such time as the Committee shall determine at the time it is granted; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 3 7.5 EXERCISE OF OPTIONS. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for all Participants. 7.6 RESTRICTIONS ON STOCK TRANSFERABILITY. The Committee shall impose such restrictions on any shares of Stock acquired pursuant to the exercise of an Option as it may deem advisable, including, without limitation, restrictions under applicable federal securities law, under the requirements of any stock exchange upon which such shares of Stock are then listed, and under any blue sky or state securities laws applicable to such shares. 7.7 PAYMENT. The Option price upon exercise of any Option shall be payable to the Corporation in full either (i) in cash or its equivalent, (ii) by tendering shares of previously owned Stock having a Fair Market Value at the time of exercise equal to the total Option price, or (iii) by a combination of (i) and (ii). The proceeds from any such cash payments shall be added to the general funds of the Corporation and shall be used for general corporate purposes. 7.8 TERMINATION OF EMPLOYMENT DUE TO DEATH OR RETIREMENT. If the employment of a Participant by the Corporation shall terminate by the Corporation by reason of death or Retirement, any then outstanding Options granted to such Participant shall become immediately exercisable upon such termination. Unless the Committee determines otherwise, any such outstanding Options will be forfeited on the expiration date of such Options or within three years after such date of termination of employment, whichever period is shorter. 7.9 TERMINATION OF EMPLOYMENT OTHER THAN FOR DEATH OR RETIREMENT. Unless the Committee determines otherwise, if the employment of a Participant by the Corporation shall terminate for any reason other than death or Retirement, any then outstanding but unexercisable Options granted to such Participant will be forfeited upon such termination. Any then outstanding and exercisable Options granted to such Participant will be forfeited on the expiration date of such Options or three months after such date of termination of employment, whichever period is shorter; provided, however, the Committee may in its sole discretion, cause any such outstanding Options to become immediately exercisable at any time prior to the expiration date of such Options or within three months after such date of termination of employment, whichever period is shorter. 7.10 TREATMENT OF INCENTIVE STOCK OPTIONS. Unless the Committee determines otherwise, in the case of any outstanding Options granted to a Participant that are incentive stock options, the tax treatment prescribed under Section 422 of the Code shall not be available if such Options are not exercised (i) within three months after the date of termination of employment of such Participant by the Corporation due to Retirement, (ii) within one year after such date of termination of employment due to permanent and total disability, as defined in Section 22(e)(3) of the Code, (iii) with respect to a Participant who is on a Leave of Absence and whose right to work is not guaranteed by contract or statute, within three months of the 91st day after the commencement of such Leave of Absence, (iv) with respect to a Participant who is on a Leave of Absence and whose right to return to work is guaranteed by contract or statute, within the later of (a) three months following the date such Participant's right to return to work is no longer guaranteed either by statute or contract or (b) the time period provided in (iii) above, or (v) within three months following termination of employment for any other reason. For purposes of this Section 7.10, an employee will be deemed to have a termination of employment on the date that the employee ceases to perform actual services for the Corporation as an employee. 7.11 NONTRANSFERABILITY OF OPTIONS. Unless the Committee determines otherwise, no Option granted to a Participant may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by such Participant, otherwise than by will or by the laws of descent and distribution. Further, all Options granted to a Participant shall be exercisable during his lifetime only by such Participant. SECTION 8. RESTRICTED STOCK 8.1 GRANT OF RESTRICTED STOCK. (a) Subject to Subsections 3.1 and 5.1 and paragraph (b) of this Subsection 8.1, the Committee, at any time and from time to time, may grant shares of Restricted Stock to such Participants and in such amounts as it shall determine. The terms of each grant of shares of Restricted Stock shall be in writing. Certificates for shares of Restricted Stock shall either be issued and delivered to or held by the Corporation for Participants, or such shares may be recorded on the shareholder records of the Corporation by the Transfer Agent of the Stock without the issuance of such certificates. 4 (b) Unless the Committee determines otherwise, shares of Restricted Stock may only be granted to a Covered Officer under the following conditions: (i) Prior to April 1 of each year, the Committee shall determine the Covered Officers and an ROE performance goal for such year that will need to be attained in order to permit shares of Restricted Stock to be granted to the Covered Officers in the following year; and (ii) the value of shares of Restricted Stock granted to a Covered Officer (calculated by multiplying the Fair Market Value on the date of grant times the number of shares of Restricted Stock granted) shall equal 200% of the Covered Officer's Base Salary for the calendar year preceding the date of grant; provided, however, such value may not exceed $3,000,000; and provided, further, the Committee may, in its discretion, reduce the number of such shares of Restricted Stock to be granted. 8.2 TRANSFERABILITY. Except as provided in this Section 8 and Subsection 12.2, shares of Restricted Stock granted to a Participant may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by such Participant for such period of time as shall be determined by the Committee and specified in the Restricted Stock grant, or upon earlier satisfaction of other conditions specified by the Committee in its sole discretion and set forth in the Restricted Stock grant. 8.3 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Section 8 and Subsection 12.2, shares of Restricted Stock granted to a Participant shall become freely transferable by such Participant after the last day of the Period of Restriction relating to such shares. 8.4 OTHER RESTRICTIONS. The Committee shall impose such other restrictions on any shares of Restricted Stock as it may deem advisable, including, without limitation, restrictions under applicable federal or state securities laws. 8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates pursuant to subsection 8.4 hereof, each certificate representing shares of Restricted Stock granted pursuant to the Plan shall bear the following legend: "The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in First Union Corporation's 1996 Master Stock Compensation Plan, rules of administration adopted pursuant to such Plan, and a Restricted Stock Award letter dated . A copy of the Plan, such rules, and such Restricted Stock Award letter may be obtained from the Secretary of First Union Corporation." Once the shares are released from the restrictions set forth in subsection 8.2 hereof, the Participant shall be entitled to have the legend required by this subsection 8.5 removed from his stock certificates. 8.6 VOTING RIGHTS. During the Period of Restriction, Participants holding shares of Restricted Stock may exercise full voting rights with respect to such shares. 8.7 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Participants holding shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such shares while they are so held. If any such dividends or distributions are paid in shares of Stock, such shares shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they are paid. 8.8 TERMINATION OF EMPLOYMENT DUE TO NORMAL RETIREMENT OR DEATH. Unless the Committee determines otherwise, if the employment of a Participant by the Corporation shall terminate because of Normal Retirement or death, any remaining Period of Restriction applicable to shares of Restricted Stock granted to such Participant shall automatically terminate and, except as otherwise provided in Subsection 8.4, such shares of Restricted Stock shall be free of restrictions and freely transferable. 8.9 TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN DEATH OR NORMAL RETIREMENT. Unless the Committee determines otherwise, if the employment of a Participant by the Corporation shall terminate for any reason other than those set forth in Subsection 8.8, then any shares of Restricted Stock subject to restrictions pursuant to Subsection 8.2 on the date of such termination shall automatically be forfeited and returned to the Corporation; provided, however, if such employment terminates due to Early Retirement or any involuntary termination by the 5 Corporation other than as set forth in Subsection 8.8 or this Subsection 8.9, the Committee may, in its sole discretion, waive the automatic forfeiture of any or all such shares of Restricted Stock and/or may add such new restrictions to such shares of Restricted Stock as it deems appropriate. 8.10 NONTRANSFERABILITY OF RESTRICTED STOCK. No shares of Restricted Stock granted to a Participant may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by such Participant, otherwise than by will or by the laws of descent and distribution until the termination of the applicable Period of Restriction. All rights with respect to shares of Restricted Stock granted to a Participant shall be exercisable during his lifetime only by such Participant. SECTION 9. BENEFICIARY DESIGNATION 9.1 BENEFICIARY DESIGNATION. Each Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his lifetime. In the absence of any such designation, benefits remaining unpaid at a Participant's death shall be paid to his estate. SECTION 10. RIGHTS OF EMPLOYEES 10.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Employee's employment by the Corporation at any time, nor confer upon any Employee any right to continue in the employ of the Corporation. SECTION 11. AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN 11.1 AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN. The Board may at any time terminate, and from time to time may amend or modify the Plan; provided, however, no such action of the Board, without approval of the shareholders, may: (a) increase the total amount of Stock which may be issued under the Plan, except as provided in Subsection 5.3; (b) change the class of Employees eligible to receive Options or shares of Restricted Stock; (c) change the provisions of the Plan regarding the Option price, except as permitted by Subsection 5.3; (d) materially increase the cost of the Plan; (e) extend the period during which Options or shares of Restricted Stock may be granted; (f) extend the maximum period after the date of grant during which Options may be exercised; or (g) change the material terms of the performance goal provided for in Subsection 8.1(b), including (i) the class of individuals eligible to receive shares of Restricted Stock or distributions under such Subsection, (ii) a description of the business criteria on which the performance goal is based, or (iii) the maximum limitation set forth in Subsection 8.1(b)(ii), it being understood that the determination by the Committee of varying ROE goals pursuant to Subsection 8.1(b) shall not be deemed to be a change in the material terms of the performance goal. No amendment, modification or termination of the Plan shall in any manner adversely affect any Options or shares of Restricted Stock theretofore granted to any Participant, without the consent of such Participant. SECTION 12. MERGER OR CONSOLIDATION 12.1 TREATMENT OF OPTIONS. In the event of (i) any merger, consolidation, or acquisition where the shareholders of the Corporation on the effective date of such merger, consolidation, or acquisition do not own at least 50% of the outstanding shares of voting stock of the surviving corporation, or (ii) any Change of Control, all outstanding Options, whether or not then exercisable, will become exercisable for the remaining terms of such Options, subject to the provisions set forth under the Plan. In addition, the Committee, in its sole discretion, shall have the right, prior to such merger, consolidation, acquisition, or Change of Control, to allow Participants holding such outstanding Options to elect to receive, in settlement thereof, an amount in cash equal to the Fair Market Value of the 6 shares of Stock subject to such Options at the close of business on such effective date or the date of such Change of Control, as applicable, less the exercise price of such Options multiplied by the number of shares of Stock subject to such Options. 12.2 TREATMENT OF RESTRICTED STOCK. In the event of (i) any merger, consolidation, or acquisition where the shareholders of the Corporation on the effective date of such merger, consolidation, or acquisition do not own at least 50% of the outstanding shares of voting stock of the surviving corporation, or (ii) any Change of Control, all restrictions shall lapse on all outstanding shares of Restricted Stock granted to Participants and thereafter such shares shall be freely transferable by such Participant, subject to applicable federal or state securities laws. SECTION 13. TAX WITHHOLDING 13.1 TAX WITHHOLDING. Whenever shares of Stock are to be issued under the Plan, the Corporation shall have the right to require the recipient of such shares to remit to the Corporation an amount sufficient to satisfy federal, state, and local withholding tax requirements. Participants may elect, subject to disapproval by the Committee, to satisfy the foregoing tax withholding requirements, in whole or in part, by having the Corporation withhold shares of Stock having a Fair Market Value equal to the amount required to be withheld. The foregoing elections are subject to the following restrictions: (i) they must be made on or prior to the date the amount of tax to be withheld is determined (the "Tax Date"), (ii) they must be irrevocable, and (iii) they must be subject to the disapproval of the Committee. Elections by Participants who are subject to Section 16(b) of the Exchange Act are subject to the following additional restrictions: such elections must be made (i) six months or more prior to the Tax Date, (ii) in a "window period" beginning on the third business day after release of the Corporation's quarterly or annual earnings to the public following the date of grant as to which the election relates and prior to the Tax Date (which must be at least six months following such date of grant) and ending on the twelfth business day following the date of such release, or (iii) outside of such window period but to take effect in such a window period. 13.2 ISO TAX WITHHOLDING/REPORTING. The Corporation shall have the right to effect income, social security and medicare tax withholding and reporting as may be required under applicable law upon the disposition by an employee of stock acquired upon the exercise of an option qualifying as an incentive stock option under Section 422 of the Code at the time of exercise. SECTION 14. INDEMNIFICATION 14.1 INDEMNIFICATION. Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Corporation against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Corporation's approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Corporation an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Corporation's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Corporation may have to indemnify them or hold them harmless. SECTION 15. REQUIREMENTS OF LAW 15.1 REQUIREMENTS OF LAW. The granting of Options or shares of Restricted Stock and the issuance of shares of Stock upon the exercise of an Option shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 15.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of North Carolina. 7 EX-12 3 EXHIBIT 12(A) EXHIBIT (12)(A) FIRST UNION CORPORATION COMPUTATIONS OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, (DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992 1991 EXCLUDING INTEREST ON DEPOSITS: Pretax income from continuing operations............................ $ 375,911 2,218,601 2,087,887 1,795,265 977,302 699,815 Fixed charges, excluding capitalized interest.............................. 399,204 1,266,255 816,102 607,462 569,638 866,728 (A.) Earnings........................... $ 775,115 3,484,856 2,903,989 2,402,727 1,546,940 1,566,543 Interest, excluding interest on deposits.............................. $ 382,038 1,198,487 746,938 537,964 501,556 803,787 One-third of rents...................... 17,166 67,768 69,164 69,498 68,082 62,941 Capitalized interest.................... 1,350 2,757 1,120 285 381 2,326 (B.) Fixed charges...................... $ 400,554 1,269,012 817,222 607,747 570,019 869,054 Consolidated ratios of earnings to fixed charges, excluding interest on deposits (A./B.)...................... 1.94X 2.75 3.55 3.95 2.71 1.80 INCLUDING INTEREST ON DEPOSITS: Pretax income from continuing operations............................ $ 375,911 2,218,601 2,087,887 1,795,265 977,302 699,815 Fixed charges, excluding capitalized interest.............................. 1,144,584 4,119,583 2,862,146 2,551,450 3,009,762 4,133,826 (C.) Earnings........................... $1,520,495 6,338,184 4,950,033 4,346,715 3,987,064 4,833,641 Interest, including interest on deposits.............................. $1,127,418 4,051,815 2,792,982 2,481,952 2,941,680 4,070,885 One-third of rents...................... 17,166 67,768 69,164 69,498 68,082 62,941 Capitalized interest.................... 1,350 2,757 1,120 285 381 2,326 (D.) Fixed charges...................... $1,145,934 4,122,340 2,863,266 2,551,735 3,010,143 4,136,152 Consolidated ratios of earnings to fixed charges, including interest on deposits (C./D.)................... 1.33X 1.54 1.73 1.70 1.32 1.17
EX-12 4 EXHIBIT 12(B) EXHIBIT (12)(B) FIRST UNION CORPORATION COMPUTATIONS OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, (DOLLARS IN THOUSANDS) 1996 1995 1994 1993 1992 1991 EXCLUDING INTEREST ON DEPOSITS: Pretax income from continuing operations............................ $ 375,911 2,218,601 2,087,887 1,795,265 977,302 699,815 Fixed charges, excluding preferred stock dividends and capitalized interest.... 401,341 1,281,312 861,573 628,840 591,458 878,337 (A.) Earnings........................... $ 777,252 3,499,913 2,949,460 2,424,105 1,568,760 1,578,152 Interest, excluding interest on deposits.............................. $ 382,038 1,198,487 746,938 537,964 501,556 803,787 One-third of rents...................... 17,166 67,768 69,164 69,498 68,082 62,941 Preferred stock dividends*.............. 6,037 41,447 132,846 66,931 74,860 63,354 Capitalized interest.................... 1,350 2,757 1,120 285 381 2,326 (B.) Fixed charges...................... $ 406,591 1,310,459 950,068 674,678 644,879 932,408 Consolidated ratios of earnings to fixed charges, excluding interest on deposits (A./B.)...................... 1.91X 2.67 3.10 3.59 2.43 1.69 INCLUDING INTEREST ON DEPOSITS: Pretax income from continuing operations............................ $ 375,911 2,218,601 2,087,887 1,795,265 977,302 699,815 Fixed charges, excluding preferred stock dividends and capitalized interest.... 1,146,721 4,134,640 2,907,617 2,572,828 3,031,582 4,145,434 (C.) Earnings........................... $1,522,632 6,353,241 4,995,504 4,368,093 4,008,884 4,845,249 Interest, including interest on deposits.............................. $1,127,418 4,051,815 2,792,982 2,481,952 2,941,680 4,070,885 One-third of rents...................... 17,166 67,768 69,164 69,498 68,082 62,941 Preferred stock dividends*.............. 6,037 41,447 132,846 66,931 74,860 63,354 Capitalized interest.................... 1,350 2,757 1,120 285 381 2,326 (D.) Fixed charges...................... $1,151,971 4,163,787 2,996,112 2,618,666 3,085,003 4,199,506 Consolidated ratios of earnings to fixed charges, including interest on deposits (C./D.)................... 1.32X 1.53 1.67 1.67 1.30 1.15
*Includes redemption premium of $41,355,000 in 1994. EX-19 5 EXHIBIT 19 FIRST UNION CORPORATION AND SUBSIDIARIES FIRST QUARTER FINANCIAL SUPPLEMENT THREE MONTHS ENDED MARCH 31, 1996 FIRST UNION CORPORATION AND SUBSIDIARIES FIRST QUARTER FINANCIAL SUPPLEMENT THREE MONTHS ENDED MARCH 31, 1996 (Unaudited) TABLE OF CONTENTS
Page Selected Financial Data............................................................................. 1 Management's Analysis of Operations................................................................. 2 Consolidated Summaries of Income, Per Share Data and Balance Sheet Data T-1 Noninterest Income.................................................................................. T-2 Noninterest Expense................................................................................. T-2 Selected Lines of Business.......................................................................... T-3 Internal Capital Growth and Dividend Payout Ratios.................................................. T-3 Selected Quarterly Data............................................................................. T-4 Securities Available for Sale....................................................................... T-5 Investment Securities............................................................................... T-6 Loans............................................................................................... T-7 Allowance for Loan Losses and Nonperforming Assets.................................................. T-8 Intangible Assets................................................................................... T-9 Allowance for Foreclosed Properties................................................................. T-9 Deposits............................................................................................ T-10 Time Deposits in Amounts of $100,000 or More........................................................ T-10 Long-Term Debt...................................................................................... T-11 Changes in Stockholders' Equity..................................................................... T-12 Capital Ratios...................................................................................... T-13 Off-Balance Sheet Derivative Financial Instruments.................................................. T-14 Off-Balance Sheet Derivatives-Expected Maturities................................................... T-16 Off-Balance Sheet Derivatives Activity.............................................................. T-16 Net Interest Income Summaries Five Quarters Ended March 31, 1996............................................................. T-17 Year-to-date December 31, 1995; September 30, and June 30, 1995................................ T-19 Consolidated Balance Sheets Five Quarters Ended March 31, 1996............................................................. T-21 Consolidated Statements of Income................................................................... T-22 Consolidated Statements of Cash Flows............................................................... T-23 SELECTED FINANCIAL DATA
Three Months Ended March 31, (In thousands except per share data) 1996 1995 FINANCIAL HIGHLIGHTS Net income $ 242,850 349,844 Dividends on preferred stock 3,900 12,237 Net income applicable to common stockholders 238,950 337,607 After-tax restructuring charges 181,095 - Net income applicable to common stockholders before merger-related restructuring charges $ 420,045 337,607 PER COMMON SHARE DATA Net income $ 0.85 1.19 Net income before merger-related, after tax restructuring charges 1.50 1.19 Net income before merger-related, after tax restructuring charges and intangible amortization expense 1.68 1.35 Cash dividends 0.52 0.46 Quarter-end price 60.375 43.375 Book value $ 31.80 29.18 PERFORMANCE HIGHLIGHTS Return on average assets (a) (b) 0.75% 1.27 Return on average common equity (a) (c) 10.76 16.52 Before merger-related after-tax restructuring charges Return on average assets (a) (b) 1.30 1.27 Return on average common equity (a) (c) 18.67 16.52 Dividend payout ratio on common shares 61.18 35.58 Net interest margin (a) 4.19 4.65 ASSET QUALITY Allowance as % of loans, net 1.60 1.94 Allowance as % of nonaccrual and restructured loans 197 243 Allowance as % of nonperforming assets 171 178 Net charge-offs to average loans, net 0.66 0.37 Nonperforming assets to loans, net and foreclosed properties 0.93 1.09 CAPITAL Tier 1 capital to risk-weighted assets 7.00 7.89 Stockholders' equity to assets 6.98% 7.39
(a) Annualized. (b) Based on net income. (c) Based on net income applicable to common stockholders and average common stockholders' equity excluding average net unrealized gains and losses on debt and equity securities. 1 MANAGEMENT'S ANALYSIS OF OPERATIONS EARNINGS HIGHLIGHTS First Union's net income applicable to common stockholders was $239 million in the first quarter of 1996, compared with $338 million in the first quarter of 1995 and $331 million in the fourth quarter of 1995. On a per common share basis, earnings were $.85 compared with $1.19 in both the first quarter of 1995 and in the fourth quarter of 1995. The first quarter of 1996 results include $181 million after-tax, or 65 cents per share, and the fourth quarter of 1995 results include $73 million after-tax, or 26 cents, in restructuring charges related to the January 1, 1996, First Fidelity Bancorporation pooling of interests acquisition. First Union's earnings, before restructuring charges, increased in the first quarter of 1996 to $420 million, compared with $338 million in the first quarter of 1995 and $404 million in the fourth quarter of 1995. On a per common share basis, earnings before the restructuring charges were $1.50 compared with $1.19 in the first quarter of 1995 and $1.45 in the fourth quarter of 1995. The first quarter 1996 results represented a return on common equity of 10.76 percent and a return on assets of .75 percent. Excluding the restructuring charges, the first quarter of 1996 results represented a return on common equity of 18.67 percent and a return on assets of 1.30 percent. Highlights of the first quarter 1996 results compared with the first quarter of 1995 included: o 7 percent growth in tax-equivalent net interest income; o 27 percent growth in noninterest income (excluding securities transactions); and o An overhead efficiency ratio of 54 percent, excluding restructuring charges and amortization of intangibles. Domestic banking operations, including trust operations, located in Connecticut, Delaware, Florida, Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C., and mortgage banking operations are our principal sources of revenues. Foreign banking operations are immaterial. OUTLOOK The strong results of the first quarter give us a great deal of optimism for the rest of 1996. Significant contributions to revenue growth came from areas in which First Union continues to make discretionary investments, including the Capital Management Group and Capital Markets Group. The company maintained strong expense control as evidenced by an overhead efficiency ratio (excluding the restructuring charges and amortization of intangibles) of 54 percent. Sales of mutual funds, asset management accounts and other investment-related products and services were particularly encouraging in our new northern markets. In the first quarter of 1996, we completed two bank and thrift purchase accounting acquisitions in North Carolina and Tennessee, and in the second quarter of 1996, we expect to complete a third purchase accounting acquisition of a Florida thrift. At March 31, 1996, these three acquisitions had combined assets, net loans and deposits of $2.1 billion, $1.4 billion and $1.8 billion, respectively. We continue to be alert to opportunities to enhance stockholder value through acquisitions. With the completion of the First Fidelity acquisition, however, our focus has shifted more to a strategy of internal growth and acquisitions to expand existing lines of business. The significant investments we have made in acquisitions, in technology and in expanded products and services position us to serve our 11 million customers in a dynamic and diverse geographic marketplace. However, we continue to evaluate acquisition opportunities that will provide access to customers and markets that we believe complement our long-term goals. Acquisition discussions and in some cases negotiations also take place, and future acquisitions involving cash, debt or equity securities may be expected. Acquisitions typically involve the payment of a premium over book and market values. Some dilution of First Union's book value and net income per common share may occur in connection with some future acquisitions. 2 The ACCOUNTING AND REGULATORY MATTERS section provides information about legislative, accounting and regulatory matters that have recently been adopted or proposed. INCOME STATEMENT REVIEW NET INTEREST INCOME Tax-equivalent net interest income increased 7 percent from the first quarter of 1995 to $1.2 billion in the first quarter of 1996. The increase primarily reflected growth in average loans, the repricing of variable rate assets, and purchase accounting acquisitions. Nonperforming loans reduce interest income because the contribution from these loans is eliminated or sharply reduced. In the first quarter of 1996, $22 million in gross interest income would have been recorded if all nonaccrual and restructured loans had been current in accordance with their original terms and had been outstanding throughout the period, or since origination if held for part of the period. The amount of interest income related to these assets and included in income in the first quarter of 1996 was $4 million. NET INTEREST MARGIN The net interest margin, which is the difference between the tax-equivalent yield on earning assets and the rate paid on funds to support those assets, was 4.19 percent in the first quarter of 1996, compared with 4.65 percent in the first quarter of 1995 and 4.20 percent in the fourth quarter of 1995. The margin decline was primarily related to the addition of acquired banks and thrifts with lower margins and to the generation of lower-spread assets related to capital markets activities. It should be noted that the margin is not our primary management focus or goal. Our goal is to continue increasing net interest income. The average rate earned on earning assets was 8.02 percent in the first quarter of 1996, compared with 8.25 percent in first quarter 1995. The average rate paid on interest-bearing liabilities was 4.40 percent in the first quarter of 1996 and 4.21 percent in first quarter 1995. We use securities and off-balance sheet transactions to manage interest rate sensitivity. More information on these transactions is included in the INTEREST RATE RISK MANAGEMENT section. NONINTEREST INCOME We are meeting the challenges of increasing competition and changing customer demands and demographics by making discretionary investments to enhance our prospects for income growth. We have significantly broadened our product lines, particularly in the capital markets, capital management and card products areas, to provide additional sources of fee income that complement our longstanding banking products and services. These investments were reflected in the 27 percent growth in noninterest income, excluding securities transactions, to $511 million in the first quarter of 1996, compared with $404 million in the first quarter of 1995. Virtually all categories of noninterest income increased in the first quarter of 1996 compared with the first quarter of 1995. Key contributors included 201 percent growth in income related to Capital Markets activities, to $90 million in the first quarter of 1996 from $30 million in the first quarter of 1995. Capital Markets activities include asset securitizations, risk management products, international trade finance, loan syndications, private placements, merchant banking, other financing alternatives and trading activities, which are discussed below. Additionally, Capital Management fee income, including mutual funds, personal and corporate trust and brokerage services, increased 22 percent in the first quarter of 1996 to $115 million from $94 million in the first quarter of 1995. Other significant sources of noninterest income included service charges on deposit accounts, which increased 10 percent, and insurance commissions, which increased 56 percent, from the first quarter of 1995. TRADING ACTIVITIES Our Capital Markets Group also made a key contribution to noninterest income through trading profits. Trading profits increased in the first quarter of 1996 to $21 million, compared with $4 million in the first quarter of 3 1995. The increase was the result of general market conditions and expanded trading volume. Trading activities are undertaken to satisfy customers' risk management and investment needs and for the corporation's own proprietary account. All trading activities are conducted within risk limits established by the corporation's Credit/Market Risk Committee, and all trading positions are recorded at estimated fair value daily. Trading activities include fixed income securities, money market instruments, foreign exchange, options, futures, forward rate agreements and swaps, and the trading and underwriting of debt securities. Trading account assets were $3.3 billion at March 31, 1996, compared with $1.9 billion at year-end 1995. NONINTEREST EXPENSE Noninterest expense increased in the first quarter of 1996 to $1.3 billion, or $1.0 billion excluding merger- related restructuring charges, compared with $957 million in the first quarter of 1995. Our overhead efficiency ratio in the first quarter of 1996 was 73 percent, compared with 61 percent in the first quarter of 1995. The overhead efficiency ratio was adversely affected by the merger-related charges of $281 million in the first quarter of 1996 and by intangibles amortization expense of $62 million in the first quarter of 1996 and $52 million in the first quarter of 1995. Without the merger-related charges and intangibles amortization expense, our overhead efficiency ratio was 54 percent in the first quarter of 1996 and 58 percent in the first quarter of 1995. The overhead efficiency ratio was affected somewhat by the significant investments and initiatives under way in capital markets, capital management and other areas. These investments and initiatives are designed to enhance noninterest income in future periods. Professional fees declined to $6 million in the first quarter of 1996 from $42 million in the first quarter of 1995, primarily as a result of terminating certain service contracts. In the fourth quarter of 1995, First Union and First Fidelity each recorded pre-tax, merger-related restructuring charges respectively of $16 million and $78 million, or an aggregate of $73 million after tax, and First Union recorded $281 million ($181 million after tax) of such charges in the first quarter of 1996. The $375 million of pre-tax, merger-related restructuring charges ($254 million after tax) primarily related to severance and change in control obligations, fixed asset write-downs and vacant space accruals, accelerated disposition of owned real estate, service contract terminations, professional fees and other miscellaneous items, none of which individually exceeded $8 million after tax. At March 31, 1996, $204 million of such charges had been paid and $47 million was related to noncash charges. The remaining accrual of $124 million at March 31, 1996, will be paid by January 1997. The FDIC significantly reduced the insurance premiums it charges on federally insured bank deposits to the statutory minimum of $2,000.00 for "well capitalized" banks, effective January 1, 1996. Premiums related to savings and loan association deposits acquired by banks will continue to be assessed at the rate of 23 cents to 31 cents per $100.00. Pending before Congress is legislation to merge the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) as well as a provision to recapitalize SAIF through a one-time assessment. At March 31, 1996, we had $23.1 billion in SAIF deposits that were subject to the potential one-time assessment. Based on the legislation as currently written, the one-time assessment could be as high as $105 million after tax. The FDIC premium expense decreased from $46 million in the first quarter of 1995 to $12 million in the first quarter of 1996. The expense savings in the first quarter of 1996 were largely offset by discretionary investments in areas such as the company's retail delivery channels, capital markets and capital management. We currently expect to invest the expected savings that result from the FDIC premium reduction in 1996 in various current and future discretionary investments, business initiatives and technology programs. The ACCOUNTING AND REGULATORY MATTERS section includes more information on the reduced FDIC insurance premiums. Amortization of intangibles represents the amortization of other intangible assets, which includes primarily goodwill and deposit base premium, and credit card premium related to purchase accounting acquisitions. These intangibles are amortized over periods ranging from six to 25 years. Amortization is a noncash charge to income; therefore, liquidity and funds management activities are not affected. At March 31, 1996, and December 31, 1995, we had $2.4 billion in other intangible assets. Costs related to environmental matters were not material. 4 BALANCE SHEET REVIEW SECURITIES AVAILABLE FOR SALE Securities available for sale are used as a part of the corporation's interest rate risk management strategy. They may be sold in response to changes in interest rates, changes in prepayment risk, liquidity needs, the need to increase regulatory capital ratios and other factors. These securities are carried at estimated fair value. Unrealized changes in fair value are recognized as a separate component of stockholders' equity, net of tax. Realized gains and losses are recognized in income at the time the securities are sold. The available for sale portfolio consists of U.S. Treasury, municipal and mortgage-backed and asset-backed securities as well as collateralized mortgage obligations, corporate, foreign and equity securities. Securities available for sale transactions resulted in a gain of $15 million in the first quarter of 1996, compared with a gain of $11 million in the first quarter of 1995. At March 31, 1996, we had securities available for sale with a market value of $17.2 billion, compared with $18.2 billion at year-end 1995. The market value of securities available for sale was $48 million below amortized cost at March 31, 1996. A $39 million after-tax unrealized loss reduced stockholders' equity at March 31, 1996. The average rate earned on securities available for sale in the first quarter of 1996 was 6.54 percent, compared with 6.38 percent in first quarter 1995. The average maturity of the portfolio was 3.70 years at March 31, 1996. INVESTMENT SECURITIES Investment securities are those securities that we intend to hold to maturity. Sales of these securities are rare. These securities are carried at amortized cost. The portfolio consists of U.S. Government agency, corporate, municipal and mortgage-backed securities, and collateralized mortgage obligations. First Union's investment securities amounted to $2.9 billion at March 31, 1996, compared with $3.1 billion at year-end 1995. The average rate earned on investment securities in the first quarter of 1996 was 8.62 percent, compared with 7.58 percent in the first quarter of 1995. The average maturity of the portfolio was 5.66 years at March 31, 1996. LOANS The loan portfolio, which represents our largest asset balance, is a significant source of interest and fee income. The loan portfolio is subject to both credit and interest rate risk. Our lending strategy stresses quality growth, diversified by product, geography and industry. A common credit underwriting structure is in place throughout the company. The loan portfolio at March 31, 1996, was composed of 44 percent in commercial loans and 56 percent in consumer loans. The portfolio mix did not change significantly from year-end 1995. The commercial loan portfolio includes general commercial loans, both secured and unsecured, and commercial real estate loans. General commercial loans are typically working capital loans to finance the inventory, receivables and other working capital needs of commercial borrowers, and term loans to finance fixed assets or acquisitions. Commercial real estate loans typically finance the construction or purchase of commercial real estate. Consumer loans include mortgage, credit card and installment loans. Consumer mortgage lending includes both first and second mortgage loans. Consistent with our longtime standard, we generally look for two repayment sources for commercial real estate loans: cash flows from the project and other resources of the borrower. Our commercial lenders focus principally on middle-market companies, which we believe reduces the risk of credit loss from any single borrower or group of borrowers. A majority of our commercial loans are for less than $10 million. Consumer lending through our full-service bank branches is managed using an automated underwriting system that combines statistical predictors of risk and industry standards for acceptable levels of customer debt capacity 5 and collateral valuation. These guidelines are continually monitored for overall effectiveness and compliance with fair lending practices. Net loans at March 31, 1996, were $90.0 billion, compared with $90.6 billion at year-end 1995. Average net loans for the first quarter of 1996 were $89.3 billion, compared with $87.9 billion for the fourth quarter of 1995. Consumer lending outpaced commercial loan growth, which decreased slightly due to repositioning of short-term assets in the acquired First Fidelity portfolio. Consumer lending, particularly credit cards and direct lending, continue to be the highest-yielding portfolios. At March 31, 1996, unused loan commitments related to commercial and consumer loans were $20.6 billion and $16.6 billion, respectively. Commercial and standby letters of credit were $3.7 billion. At March 31, 1996, loan participations sold to other lenders amounted to $616 million and were recorded as a reduction of gross loans. The average rate earned on loans in the first quarter of 1996 was 8.52 percent, compared with 8.71 percent in the first quarter of 1995. The average prime rate in the first quarter of 1996 was 8.34 percent, compared with 8.83 percent in the first quarter of 1995. Factors affecting loan rates between the first quarter of 1996 and year-end 1995 included an increased portion of the loan portfolio tied to rate indices other than the prime rate; a larger portfolio of fixed and adjustable rate mortgages; and the repricing of credit card portfolio introductory rates. The ASSET QUALITY section provides information about geographic exposure in the loan portfolio. COMMERCIAL REAL ESTATE LOANS Commercial real estate loans amounted to 13 percent of the total portfolio at March 31, 1996, compared with 14 percent at December 31, 1995. This portfolio included commercial real estate mortgage loans of $9.7 billion at March 31, 1996, and $10.0 billion at December 31, 1995. ASSET QUALITY NONPERFORMING ASSETS At March 31, 1996, nonperforming assets were $842 million, or .93 percent of net loans and foreclosed properties, compared with $826 million, or .91 percent, at December 31, 1995. The increase in nonperforming assets was primarily related to modest increases in mortgage delinquency rates and to conforming the nonperforming asset policies of First Fidelity to First Union. The impact of the policy change was most significant in the consumer mortgage portfolios. Loans or properties of less than $5 million each made up 77 percent, or $650 million, of nonperforming assets at March 31, 1996. Of the rest: o 8 loans or properties between $5 million and $10 million each accounted for $56 million; and o 7 loans or properties over $10 million each accounted for $136 million. Forty-eight percent of nonperforming assets were collateralized primarily by real estate at March 31, 1996, compared with 50 percent at year-end 1995. PAST DUE LOANS In addition to these nonperforming assets, at March 31, 1996, accruing loans 90 days past due were $275 million, compared with $290 million at December 31, 1995. Of these, $20 million were related to commercial and commercial real estate loans at March 31, 1996, and $15 million at December 31, 1995. At March 31, 1996, we were closely monitoring certain loans for which borrowers were experiencing increased levels of financial stress. None of these loans were included in nonperforming assets or in accruing loans past due 90 days, and the aggregate amount of these loans is not significant. 6 NET CHARGE-OFFS Net charge-offs as a percentage of average net loans were .66 percent in the first quarter of 1996, compared with .49 percent in the fourth quarter of 1995 and .37 percent in the first quarter of 1995. The increase in net charge-offs in the first quarter of 1996 was principally related to a single, large commercial credit and to the maturing credit card portfolio. The credit quality of the card portfolio is performing as our model had anticipated, and this performance is consistent with predictable and typical seasoning of the various solicitation vintages. We anticipate a continuing increase in the dollar level of charge-offs from the credit card portfolio as credit card receivables continue to increase and the portfolio continues to season. We do not believe that the higher levels of net charge-offs are indicative of any significant deterioration in the credit quality of the loan portfolio. We are carefully monitoring trends in both the commercial and consumer loan portfolios for signs of credit weakness. Additionally, we have evaluated our credit policies in light of changing economic trends. All of these steps have been taken with the goals of minimizing future credit losses and deterioration, while allowing for maximum profitability. Table 10 provides information on net charge-offs by category. PROVISION AND ALLOWANCE FOR LOAN LOSSES The loan loss provision was $70 million in the first quarter of 1996, compared with $42 million in the first quarter of 1995. The increase in the loan loss provision was based primarily on current economic conditions, on the maturity and level of nonperforming assets, and on projected levels of charge-offs. We establish reserves based upon various other factors, including the results of quantitative analyses of the quality of commercial loans and commercial real estate loans. Reserves for commercial and commercial real estate loans are based principally on loan grades, historical loss rates, borrowers' creditworthiness, underlying cash flows from the project and from borrowers, and analysis of other less quantifiable factors that might influence the portfolio. Reserves for consumer loans are based principally on delinquencies and historical loss rates. We analyze all loans in excess of $1 million that are being monitored as potential credit problems to determine whether supplemental, specific reserves are necessary. The allowance for loan losses was $1.44 billion at March 31, 1996, compared with $1.51 billion at year-end 1995. The ratio of the allowance for loan losses to nonaccrual and restructured loans was 197 percent at March 31, 1996, and 233 percent at year-end 1995. The ratio of the allowance to net loans was 1.60 percent at March 31, 1996, compared with 1.66 percent at year-end 1995. In the first quarter of 1996, we reallocated the acquired First Fidelity allowance for loan losses based on First Union's policies and procedures. As a result, the unallocated portion of the combined allowance for loan losses increased from $230 million at December 31, 1995, to $436 million at March 31, 1996. At March 31, 1996, impaired loans, which are included in nonaccrual loans, amounted to $438 million. A loan is considered to be impaired when, based on current information, it is probable that we will not receive all amounts due in accordance with the contractual terms of a loan agreement. Included in the allowance for loan losses is $51 million related to $268 million of impaired loans. The rest of impaired loans are recorded at or below cost. In the first three months of 1996, the average recorded investment in impaired loans was $439 million and $3 million of interest income was recognized on loans while they were impaired. All of this income was recognized using a cash-basis method of accounting. GEOGRAPHIC EXPOSURE The loan portfolio in the East Coast region of the United States is spread primarily across 82 metropolitan statistical areas with diverse economies. Atlanta, Georgia; Charlotte and Greensboro, North Carolina; Miami, Jacksonville, West Palm Beach and Tampa, Florida; Bergen County and Newark, New Jersey; Philadelphia, Pennsylvania; and Washington, D.C., are our largest markets. Substantially all of the $12.3 billion commercial real estate portfolio at March 31, 1996, was located in our banking region. LIQUIDITY AND FUNDING SOURCES Liquidity planning and management are necessary to ensure we maintain the ability to fund operations cost- effectively and to meet current and future obligations such as loan commitments and deposit outflows. In this 7 process, we focus on both assets and liabilities and on the manner in which they combine to provide adequate liquidity to meet the corporation's needs. Funding sources primarily include customer-based core deposits but also include purchased funds and cash flows from operations. First Union is one of the nation's largest core deposit-funded banking institutions. Our large consumer deposit base, which is spread across the economically strong South Atlantic region and high per-capita income Northeast region, creates considerable funding diversity and stability. Further, our acquisitions of bank and thrift deposits have enhanced liquidity. Asset liquidity is maintained through maturity management and through our ability to liquidate assets, primarily assets held for sale. Another significant source of asset liquidity is the potential to securitize assets such as credit card receivables and auto, home equity, commercial and mortgage loans. We securitized $995 million of credit card receivables in March 1996 and an additional $324 million in April 1996 through public offerings led by First Union Capital Markets Corp. Other off-balance sheet sources of liquidity exist as well, such as a mortgage servicing portfolio for which the estimated fair value exceeded book value by $190 million at March 31, 1996. CORE DEPOSITS Core deposits are a fundamental and cost-effective funding source for any banking institution. Core deposits were $86.2 billion at March 31, 1996, compared with $86.4 billion at December 31, 1995. Core deposits include savings, negotiable order of withdrawal (NOW), money market, noninterest-bearing and other consumer time deposits. The portion of core deposits in higher-rate, other consumer time deposits was 36 percent at March 31, 1996, and 37 percent at year-end 1995. Other consumer time and other noncore deposits usually pay higher rates than savings and transaction accounts, but they generally are not available for immediate withdrawal, and they are less expensive to process. In the first quarter of 1996 and in the fourth quarter of 1995, average noninterest-bearing deposits were 19 percent of average core deposits. The NET INTEREST INCOME SUMMARIES provide additional information about average core deposits. Average core deposit balances were $86.0 billion in the first quarter of 1996, an increase of $1.4 billion from the fourth quarter of 1995. Average balances in savings and NOW, money market and noninterest-bearing deposits were higher when compared with the previous quarter, while other consumer time deposits were lower. Deposits can be affected by branch closings or consolidations, seasonal factors and the rates being offered compared to other investment opportunities. PURCHASED FUNDS Purchased funds at March 31, 1996, were $24.7 billion, compared with $25.7 billion at year-end 1995. Purchased funds are acquired primarily through (i) our large branch network, consisting principally of $100,000 and over certificates of deposit, public funds and treasury deposits, and (ii) national market sources, consisting of relatively short-term funding sources such as federal funds, securities sold under repurchase agreements, eurodollar time deposits, short-term bank notes and commercial paper, and longer-term funding sources such as term bank notes, Federal Home Loan Bank borrowings and corporate notes. Average purchased funds in the first quarter of 1996 were $26.1 billion, an increase of 19 percent from $22.0 billion in the fourth quarter of 1995. The increase was used primarily to purchase held-for-sale portfolio securities. CASH FLOWS Cash flows from operations are a significant source of liquidity. Net cash provided from operations primarily results from net income adjusted for the following noncash accounting items: the provisions for loan losses and foreclosed properties; depreciation and amortization; and deferred income taxes or benefits. This cash was available in the first quarter of 1996 to increase earning assets or to reduce borrowings. 8 LONG-TERM DEBT Long-term debt was 83 percent of total stockholders' equity at March 31, 1996, compared with 79 percent at December 31, 1995. The increase in long-term debt compared with year-end 1995 was primarily related to $300 million of bank notes with varying rates and terms that mature by 2036. Additionally, in the first quarter of 1996 we issued $260 million of subordinated notes with rates ranging from 7.00 percent to 7.18 percent and maturities of either 10 years or 15 years. Proceeds from these debt issues have been used for general corporate purposes. Under a shelf registration statement filed with the Securities and Exchange Commission, we currently have available for issuance $1.2 billion of senior or subordinated debt securities. The sale of any additional debt securities will depend on future market conditions, funding needs and other factors. DEBT OBLIGATIONS We have a $350 million, committed back-up line of credit that expires in December 1998. This credit facility contains financial covenants that require First Union to maintain a minimum level of tangible net worth, restrict double leverage ratios and require capital levels at subsidiary banks to meet regulatory standards. First Union has not used this line of credit. During 1996, $1.5 billion of long-term debt will mature, including bank notes discussed above of $835 million. Funds for the payment of long-term debt will come from operations or, if necessary, additional borrowings. STOCKHOLDERS' EQUITY At March 31, 1996, total stockholders' equity was $9.1 billion, compared with $9.0 billion at December 31, 1995, and 281 million common shares were outstanding, compared with 278 million shares at December 31, 1995. In February 1996, the board of directors renewed its existing authorization for the purchase in the open market from time to time of up to 15 million shares of First Union common stock. Repurchases would be made primarily in connection with future acquisitions and stock-based employee benefit plans. On April 16, 1996, First Union called for redemption on July 1, 1996, all 350,000 outstanding shares of its Series D Adjustable Rate Cumulative Class A Preferred Stock and all 2,965,000 outstanding depositary shares, each representing a 1/40th interest in a share, of its Series F 10.64 percent Class A Preferred Stock. The redemption price for the Series D is $100.00 per share and for the depositary shares is $25.00 per share. In the first quarter of 1995, we redeemed all of the 6.3 million outstanding shares of Series 1990 cumulative perpetual adjustable rate preferred stock at a redemption price of $51.50 per share. The corporation paid $149 million in dividends to preferred and common stockholders in the first quarter of 1996. At March 31, 1996, stockholders' equity was reduced by a $39 million unrealized after-tax loss related to debt and equity securities. The SECURITIES AVAILABLE FOR SALE section provides additional information about debt and equity securities. Preferred dividends were $4 million in the first quarter of 1996, compared with $12 million in the first quarter of 1995. SUBSIDIARY DIVIDENDS Our banking subsidiaries are the largest source of parent company dividends. Capital requirements established by regulators limit dividends that these and certain other of our subsidiaries can pay. The Office of the Comptroller of the Currency (OCC) generally limits a national bank's dividends in two principal ways: first, dividends cannot exceed the bank's undivided profits, less statutory bad debt in excess of a bank's allowance for loan losses; and second, in any year dividends may not exceed a bank's net profits for that year, plus its retained earnings from the preceding two years, less any required transfers to surplus. Under these and other limitations, our subsidiaries had $687 million available for dividends at March 31, 1996, without prior approval from the OCC. Our subsidiaries paid $288 million in dividends to the corporation in the first quarter of 1996. REGULATORY CAPITAL Federal banking regulations require that bank holding companies and their subsidiary banks maintain minimum levels of capital. These banking regulations measure capital using three formulas relating to tier 1 capital, total 9 capital and leverage capital. The minimum level for the ratio of total capital to risk-weighted assets (including certain off-balance-sheet financial instruments, such as standby letters of credit and interest rate swaps) is currently 8 percent. At least half of total capital is to be composed of common equity, retained earnings and a limited amount of qualifying preferred stock, less certain intangible assets (tier 1 capital). The rest may consist of a limited amount of subordinated debt, nonqualifying preferred stock and a limited amount of the loan loss allowance (together with tier 1 capital, total capital). At March 31, 1996, the tier 1 and total capital ratios were 7.00 percent and 11.91 percent, respectively, compared with 6.70 percent and 11.45 percent at December 31, 1995. In addition, the Federal Reserve Board has established minimum leverage ratio requirements for bank holding companies. These requirements provide for a minimum leverage ratio of tier 1 capital to adjusted average quarterly assets equal to 3 percent for bank holding companies that meet specified criteria, including having the highest regulatory rating. All other bank holding companies are generally required to maintain a leverage ratio of at least 4 to 5 percent. The leverage ratio at March 31, 1996, was 5.56 percent, compared with 5.49 percent at December 31, 1995. The requirements also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal Reserve Board has indicated it will continue to consider a tangible tier 1 leverage ratio (deducting all intangibles) in evaluating proposals for expansion or new activity. The Federal Reserve Board has not advised us of any specific minimum leverage ratio applicable to us. Each subsidiary bank is subject to similar capital requirements adopted by the OCC. Each subsidiary bank listed in Table 17 had a leverage ratio in excess of 5.35 percent at March 31, 1996. 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 March 31, 1996, the deposit-taking subsidiary banks listed in Table 17 met the capital and leverage ratio requirements for "well capitalized" banks. We expect to maintain these ratios at the required levels by the retention of earnings and, if necessary, the issuance of additional capital. Failure to meet certain capital ratio or leverage ratio requirements could subject a bank to a variety of enforcement remedies, including termination of deposit insurance by the FDIC. First Union Home Equity Bank, N.A. is not a deposit-taking bank. The ACCOUNTING AND REGULATORY MATTERS section provides more information about proposed changes in risk- based capital standards. INTEREST RATE RISK MANAGEMENT Managing interest rate risk is fundamental to banking. Banking institutions manage the inherently different maturity and repricing characteristics of the lending and deposit-taking lines of business to achieve a desired interest rate sensitivity position and to limit exposure to interest rate risk. The inherent maturity and repricing characteristics of our day-to-day lending and deposit activities create a naturally asset-sensitive structure. By using a combination of on- and off-balance sheet financial instruments, we manage the sensitivity of earnings to changes in interest rates within our established policy guidelines. The Credit/Market Risk Committee of the corporation's board of directors reviews overall interest rate risk management activity. The corporation's Funds Management Committee, which includes the three members of the Office of the Chairman of the corporation, and senior executives from our Capital Markets Group, credit and finance areas, oversees the interest rate risk management process and approves policy guidelines. Balance sheet management and finance personnel monitor the day-to-day exposure to changes in interest rates in response to loan and deposit flows. They make adjustments within established policy guidelines. 10 We measure interest rate sensitivity by estimating the amount of earnings per share at risk based on the modeling of future changes in interest rates. Our model captures all assets and liabilities and off-balance sheet financial instruments, and combines various assumptions affecting rate sensitivity and changes in balance sheet mix into an earnings outlook that incorporates our view of the interest rate environment most likely over the next 24 months. Balance sheet management and finance personnel review and update continuously the underlying assumptions included in the earnings simulation model. The results of the model are reviewed by the Funds Management Committee. The model is updated at least monthly and more often as appropriate. We believe our earnings simulation model is a more relevant depiction of interest rate risk than traditional gap tables because it captures multiple effects excluded in less sophisticated presentations, and it includes significant variables that we identify as being affected by interest rates. For example, our model captures rate of change differentials, such as federal funds rates versus savings account rates; maturity effects, such as calls on securities; and rate barrier effects, such as caps and floors on loans. It also captures changing balance sheet levels, such as commercial and consumer loans (both floating and fixed rate); noninterest-bearing deposits and investment securities. In addition, our model considers leads and lags that occur in long-term rates as short-term rates move away from current levels; the elasticity in the repricing characteristics of savings and money market deposits; and the effects of prepayment volatility on various fixed-rate assets such as residential mortgages, mortgage-backed securities and consumer loans. These and certain other effects are evaluated in developing the scenarios from which sensitivity of earnings to changes in interest rates is determined. We use three standard scenarios in analyzing interest rate sensitivity for policy measurement. The base-line scenario is our estimated most likely path for future short-term interest rates over the next 24 months. The measurement of interest rate sensitivity is the percentage change in earnings per share calculated by the model under "high rate" and under "low rate" scenarios. The "high rate" and "low rate" scenarios assume 100 basis point shifts from the base-line scenario in the federal funds rate by the fourth succeeding month and that the rate remains 100 basis points higher or lower than the base-line through the rest of the 24-month period. Our policy limit for the maximum negative impact on earnings per share resulting from high rate or low rate scenarios is 5 percent. The policy measurement period begins with the fourth month forward and ends with the 15th month (i.e., a 12-month period.) Our estimate in April 1996 of future short-term interest rates was that the federal funds rate would remain unchanged at 5.25 percent through January 1998 and would then rise gradually over the rest of the forecast period. Based on the April 1996 outlook, if interest rates were to rise 100 basis points above the estimated short-term rate scenario, i.e., follow the high rate scenario, the model indicates that earnings during the policy measurement period would be negatively affected by 3.7 percent. Our model indicates that earnings would benefit by 2.6 percent in our low rate scenario, i.e., a 100 point decline in estimated short-term interest rates. In addition to the three standard scenarios used to analyze rate sensitivity over the policy measurement period, we also analyze the potential impact of other, more extreme interest rate scenarios. These alternate scenarios may include interest rate paths both higher, lower and more volatile than those used for policy measurement. Because the interest rate sensitivity model is based on numerous interest rate assumptions, projected changes in growth in balance sheet categories and changes in other basic assumptions, actual results may differ from our current simulated outlook. While our interest rate sensitivity modeling assumes that management takes no action, we regularly assess the viability of strategies to reduce unacceptable risks to earnings and implement such strategies when we believe those actions are prudent. For example, we have implemented strategies to add on- and off-balance sheet positions to reduce our potential asset sensitivity in 1998 and 1999. As new monthly outlooks become available, management will continue to formulate strategies to protect earnings from the potential effects of changes in interest rates. OFF-BALANCE SHEET DERIVATIVES FOR INTEREST RATE RISK MANAGEMENT As part of our overall interest rate risk management strategy, for many years we have used off-balance sheet derivatives as a cost- and capital-efficient way to modify the repricing or maturity characteristics of on-balance sheet assets and liabilities. Our off-balance sheet derivative transactions used for interest rate sensitivity 11 management include interest rate swaps, futures and options with indices that relate to the pricing of specific financial instruments of the corporation. We believe we have appropriately controlled the risk so that the derivatives used for rate sensitivity management will not have any significant unintended effect on corporate earnings. As a matter of policy we do not use highly leveraged derivative instruments for interest rate risk management. The impact of derivative products on our earnings and rate sensitivity is fully incorporated in the earnings simulation model in the same manner as on-balance sheet instruments. Our overall goal is to manage our rate sensitivity in ways that earnings are not adversely affected materially whether rates go up or down. As a result of interest rate fluctuations, off-balance sheet transactions (and securities) will from time to time develop unrealized appreciation or depreciation in market value when compared with their cost. The impact on net interest income attributable to these off-balance sheet transactions, all of which are linked to specific financial instruments as part of our overall interest rate risk management strategy, will generally be offset by net interest income from on-balance sheet assets and liabilities. The important consideration is not the shifting of unrealized appreciation or depreciation between and among on- and off-balance sheet instruments, but the prudent management of interest rate sensitivity so that corporate earnings are not unduly at risk as interest rates move up or down. For example, there was significant interest rate volatility between year-end 1993 and the end of the first quarter of 1996, which was reflected in the dramatic change in the market value of our securities portfolio and off-balance sheet positions. The combined market value of those positions moved from an unrealized gain of $903 million at December 31, 1993, to an unrealized loss of $1.1 billion at December 31, 1994, and then back to an unrealized gain of $771 million at December 31, 1995. The unrealized gain in these positions at March 31, 1996, was $137 million. Despite these large year-to-year and quarterly fluctuations in market value and related fluctuations in the net interest income contribution from these positions, total net interest income continued to increase. This is the outcome we strive to achieve in using portfolio securities and off-balance sheet products to balance the income effects of core loans and deposits. The fair value appreciation of off-balance sheet derivative financial instruments used to manage our interest rate sensitivity was $52 million at March 31, 1996, compared with fair value appreciation of $390 million at December 31, 1995. The carrying amount of financial instruments used for interest rate risk management includes amounts for deferred gains and losses related to terminated positions. The amount of deferred gains and losses was $5 million and $3 million, respectively, at March 31, 1996. Although off-balance sheet derivative financial instruments do not expose the corporation to credit risk equal to the notional amount, we are exposed to credit risk equal to the extent of the fair value gain in an off-balance sheet derivative financial instrument if the counterparty fails to perform. We minimize the credit risk in these instruments by dealing only with high quality counterparties. Each transaction is specifically approved for applicable credit exposure. In addition, our policy is to require that all swaps and options be governed by an International Swaps and Derivatives Association Master Agreement. Bilateral collateral arrangements are in place for substantially all dealer counterparties. Derivative collateral arrangements for dealer transactions and trading activities are based on established thresholds of acceptable credit risk by counterparty. Thresholds are determined based on the strength of the individual counterparty and are bilateral. As of March 31, 1996, the total credit risk in excess of thresholds was $113 million. The fair value of collateral held was 98 percent of the total credit risk in excess of thresholds. For nondealer transactions, the need for collateral is evaluated on an individual transaction basis, and is primarily dependent on the financial strength of the counterparty. ACCOUNTING AND REGULATORY MATTERS On January 1, 1996, the corporation adopted Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 12 may not be recoverable. Additionally, Standard No. 121 requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell, except for certain assets. The corporation's January 1, 1996, adoption of this Standard had no impact on net income. On January 1, 1996, the corporation also adopted Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation," which requires that the fair value of employee stock-based compensation plans be recorded as a component of compensation expense in the statement of income as of the date of grant of awards related to such plans or that the impact of such fair value on net income and earnings per share be disclosed on a pro forma basis in a footnote to financial statements for awards granted after December 15, 1994, if the accounting for such awards continues to be in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). The corporation will continue such accounting under the provisions of APB 25 and disclose the pro forma information as required. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), among other provisions, imposes liability on a bank insured by the FDIC for certain obligations to the FDIC incurred in connection with other insured banks under common control with such bank. The Federal Deposit Insurance Corporation Improvement Act, among other things, requires a revision of risk- based capital standards. The new standards are required to incorporate interest rate risk, concentration of credit risk and the risks of nontraditional activities and to reflect the actual performance and expected risk of loss of multifamily mortgages. The RISK-BASED CAPITAL section provides information on risk assessment classifications. Various legislative proposals related to the future of the Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF) have been under consideration. Several of these proposals include a one-time special assessment for SAIF deposits and a subsequent comparable and reduced level of annual premiums for SAIF deposits. It is not known when and if any such proposal or any other related proposal may be adopted. Legislation has been enacted providing that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution would be afforded a priority over other general unsecured claims against such an institution, including federal funds and letters of credit, in the "liquidation or other resolution" of such an institution by any receiver. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA) authorized interstate acquisitions of banks and bank holding companies without geographic limitation beginning September 27, 1995. Beginning June 1, 1997, a bank may merge with a bank in another state as long as neither of the states opt out of interstate branching between the date of enactment of IBBEA and May 31, 1997. IBBEA further provides that a state may enact laws permitting interstate merger transactions before June 1, 1997. Various other legislative proposals concerning the banking industry are pending in Congress. Given the uncertainty of the legislative process, we cannot assess the impact of any such legislation on our financial condition or results of operations. 13 TABLE 1 CONSOLIDATED SUMMARIES OF INCOME, PER SHARE AND BALANCE SHEET DATA
Twelve Months 1996 1995 Ended March 31, FIRST Fourth Third Second First (In thousands except per share data) 1996 QUARTER Quarter Quarter Quarter Quarter CONSOLIDATED SUMMARIES OF INCOME Interest income $ 9,002,859 2,339,480 2,278,414 2,252,435 2,132,530 2,022,998 Interest income* $ 9,104,386 2,364,254 2,301,623 2,277,504 2,161,005 2,051,694 Interest expense 4,283,684 1,127,418 1,111,571 1,068,367 976,328 895,549 Net interest income* 4,820,702 1,236,836 1,190,052 1,209,137 1,184,677 1,156,145 Provision for loan losses 247,500 70,000 64,500 59,000 54,000 42,500 Net interest income after provision for loan losses* 4,573,202 1,166,836 1,125,552 1,150,137 1,130,677 1,113,645 Securities available for sale transactions 48,215 14,583 15,701 9,718 8,213 10,708 Investment security transactions 5,401 800 777 2,591 1,233 217 Noninterest income 1,954,620 511,081 545,343 466,754 431,442 403,811 Noninterest expense** 4,428,542 1,292,615 1,137,294 1,018,641 979,992 956,542 Income before income taxes* 2,152,896 400,685 550,079 610,559 591,573 571,839 Income taxes 728,182 133,061 191,508 204,909 198,704 193,299 Tax-equivalent adjustment 101,527 24,774 23,209 25,069 28,475 28,696 Net income 1,323,187 242,850 335,362 380,581 364,394 349,844 Dividends on preferred stock 18,053 3,900 4,084 4,956 5,113 12,237 Net income applicable to common stockholders $ 1,305,134 238,950 331,278 375,625 359,281 337,607 PER COMMON SHARE DATA Net income $ 4.70 0.85 1.19 1.36 1.30 1.19 Cash dividends $ 2.02 0.52 0.52 0.52 0.46 0.46 Average common shares - 280,374,291 278,526,745 275,484,290 278,118,886 282,566,184 Average common stockholders' equity*** Quarter-to-date $ - 8,930,379 8,685,245 8,351,428 8,321,636 8,286,051 Year-to-date - 8,930,379 8,412,020 8,319,942 8,303,939 8,286,051 Common stock price 12.85 High 62 7/8 62 7/8 58 7/8 51 3/8 49 3/4 45 1/8 Low 42 7/8 51 1/2 49 5/8 45 1/4 42 7/8 41 3/8 Period-end $ 60 3/8 60 3/8 55 5/8 51 45 1/4 43 3/8 To earnings ratio**** 12.85 X 12.85 11.04 10.16 9.29 9.11 To book value 190 % 190 174 166 149 149 Book value $ 31.80 31.80 31.89 30.68 30.42 29.18 BALANCE SHEET DATA Assets 130,581,264 130,581,264 131,879,873 121,918,643 118,462,474 113,253,413 Long-term debt $ 7,539,045 7,539,045 7,120,947 6,717,374 6,053,033 4,615,040
*Tax-equivalent. **Includes merger-related restructuring charges of $281,229,000 ($181,095,000 after tax) in the first quarter of 1996 and $94,446,000 ($72,826,000 after tax) in the fourth quarter of 1995. ***Quarter-to-date and year-to-date average common stockholders' equity excludes average net unrealized gains or losses on debt and equity securities. ****Based on net income applicable to common stockholders. T-1 TABLE 2 NONINTEREST INCOME
Twelve Months 1996 1995 Ended March 31, FIRST Fourth Third Second First (In thousands) 1996 QUARTER Quarter Quarter Quarter Quarter Trading account profits $ 85,488 20,524 34,537 18,004 12,423 4,443 Service charges on deposit accounts 630,436 160,730 159,102 156,476 154,128 145,846 Mortgage banking income 152,282 37,191 39,978 39,489 35,624 34,494 Capital management income 418,282 114,873 107,636 100,506 95,267 93,782 Securities available for sale transactions 48,215 14,583 15,701 9,718 8,213 10,708 Investment security transactions 5,401 800 777 2,591 1,233 217 Fees for other banking services 155,327 33,040 39,786 41,926 40,575 37,284 Insurance commissions 60,655 19,032 17,384 12,686 11,553 12,220 Sundry income 452,150 125,691 146,920 97,667 81,872 75,742 Total $ 2,008,236 526,464 561,821 479,063 440,888 414,736
TABLE 3 NONINTEREST EXPENSE
Twelve Months 1996 1995 Ended March 31, FIRST Fourth Third Second First (In thousands) 1996 QUARTER Quarter Quarter Quarter Quarter Personnel expense Salaries $ 1,650,798 412,421 437,198 413,088 388,091 376,933 Other benefits 368,825 112,925 82,845 85,971 87,084 90,942 Total 2,019,623 525,346 520,043 499,059 475,175 467,875 Occupancy 356,704 93,299 87,097 89,984 86,324 89,146 Equipment rentals, depreciation and maintenance 336,150 93,232 87,609 80,749 74,560 77,118 Advertising 66,278 11,026 16,165 20,685 18,402 16,953 Telecommunications 92,467 25,446 22,746 23,732 20,543 19,777 Travel 84,765 21,856 22,201 20,301 20,407 15,421 Postage 61,792 18,947 13,869 15,913 13,063 20,605 Printing and office supplies 82,775 23,381 20,687 20,026 18,681 16,433 FDIC insurance 86,559 12,211 19,240 8,166 46,942 46,141 Other insurance 26,488 7,873 8,093 4,780 5,742 6,141 Professional fees 140,805 6,424 51,542 41,528 41,311 41,978 External data processing 90,008 35,744 16,795 19,143 18,326 16,761 Owned real estate expense 9,543 338 3,732 2,737 2,736 4,776 Mortgage servicing amortization 30,901 10,976 6,954 7,673 5,298 4,824 Other intangibles amortization 238,276 61,784 61,820 59,814 54,858 52,459 Merger-related restructuring charges 375,675 281,229 94,446 - - - Sundry 329,733 63,503 84,255 104,351 77,624 60,134 Total $ 4,428,542 1,292,615 1,137,294 1,018,641 979,992 956,542
T-2 TABLE 4 SELECTED LINES OF BUSINESS*
March 31, 1996 First Union Other Card Home Equity Consumer Capital Capital Mortgage (Dollars in thousands) Products Bank Banking Markets Management Banking INCOME STATEMENT DATA Interest income** $ 220,585 76,634 431,148 321,167 8,361 468,005 Interest expense 81,414 43,893 243,314 244,056 233 332,243 Noninterest income 25,237 5,444 7,103 90,473 114,873 37,191 OTHER DATA Net charge-offs 78,538 1,240 29,048 47,687 - 3,205 Average loans, net 6,091,614 3,068,037 18,288,987 9,420,580 140,061 24,156,898 Nonperforming assets 24,877 9,759 64,631 118,450 - 131,057 Average deposits - - - 2,753,978 676,677 - Assets under care - - - - 110,638,786 - Assets under management - - - - 41,328,014 - Loans serviced - - - - - 49,900,000 Origination volume $ 1,569,104 316,988 2,070,483 - - 987,611 Locations 1,982 141 1,987 1,304 1,530 2,016
*The information contained herein represents selected lines of business data other than commercial lending and branch operations. Certain information is prepared from internal management reports. Average loans, net for the Card Products Division includes $2.0 billion of securitized credit cards managed by the Division. Mortgage banking includes mortgage loans managed by affiliated banks. **Tax-equivalent. TABLE 5 INTERNAL CAPITAL GROWTH AND DIVIDEND PAYOUT RATIOS
1996 1995 FIRST Fourth Third Second First QUARTER Quarter Quarter Quarter Quarter Assets to stockholders' equity 14.20 X 14.06 14.15 13.54 13.52 X Return on assets 0.75 % 1.06 1.25 1.28 1.27 Return on total stockholders' equity (a) 10.72% 15.00 17.65 17.10 16.66 X Earnings retained 38.09% 57.84 65.39 66.05 62.17 Internal capital growth (a) 4.08 % 8.67 11.54 11.29 10.36 DIVIDEND PAYOUT RATIOS ON Common shares 61.18% 41.44 33.75 33.01 35.58 Preferred and common shares 61.91% 42.16 34.61 33.95 37.83 Return on common stockholders' equity ** (a) 10.76% 15.13 17.84 17.32 16.52
(a) The determination of these ratios exclude average net unrealized gains or losses on debt and equity securities. * Based on average balances and net income. ** Based on average balances and net income applicable to common stockholders. T-3 TABLE 6 SELECTED QUARTERLY DATA
1996 1995 FIRST Fourth Third Second First (Dollars in thousands) QUARTER Quarter Quarter Quarter Quarter FIRST UNION MORTGAGE CORPORATION PERMANENT LOAN ORIGINATIONS Residential Direct** $ 946,071 738,709 1,028,900 656,745 455,066 Wholesale 41,540 75,987 118,986 136,537 96,561 Total $ 1,074,814 1,080,301 1,239,608 885,082 595,677 VOLUME OF RESIDENTIAL LOANS SERVICED $ 49,900,000 50,047,000 48,802,000 45,930,000 42,996,000 FIRST UNION CORPORATION NUMBER OF OFFICES Banking 1,981 1,964 1,969 1,978 1,990 Other 208 190 192 193 192 Total offices 2,189 2,154 2,161 2,171 2,182 OTHER DATA ATMs 2,142 2,123 1,350 * 1,227 * 1,247 * Employees 44,968 44,536 44,483 44,204 44,381
* Not restated for pooling of interests acquisition. ** Includes originations of affiliated banks. T-4 TABLE 7 SECURITIES AVAILABLE FOR SALE
March 31, 1996 Average 1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity (In thousands) or Less Years Years Years Total Gains Losses Cost in Years MARKET VALUE U.S. Treasury $ 1,073,665 1,892,201 13,126 20,884 2,999,876 (4,035) 25,760 3,021,601 2.06 U.S. Government agencies 36,249 2,831,484 5,017,509 690 7,885,932 (37,774) 45,984 7,894,142 4.96 CMOs 224,634 3,534,408 177,999 - 3,937,041 (9,593) 21,498 3,948,946 2.39 State, county and municipal 369 998 1,049 8,053 10,469 - 1,608 12,077 11.42 Other 207,488 1,471,445 29,624 636,010 2,344,567 (22,390) 26,898 2,349,075 3.75 Total $ 1,542,405 9,730,536 5,239,307 665,637 17,177,885 (73,792) 121,748 17,225,841 3.70 MARKET VALUE Debt securities $ 1,540,973 9,730,536 5,239,307 71,175 16,581,991 (70,430) 120,305 16,631,866 Sundry securities 1,432 - - 594,462 595,894 (3,362) 1,443 593,975 Total $ 1,542,405 9,730,536 5,239,307 665,637 17,177,885 (73,792) 121,748 17,225,841 AMORTIZED COST Debt securities $ 1,538,048 9,748,057 5,256,966 88,795 16,631,866 Sundry securities 1,432 - - 592,543 593,975 Total $ 1,539,480 9,748,057 5,256,966 681,338 17,225,841 WEIGHTED AVERAGE YIELD U.S. Treasury 6.27 % 5.71 8.73 11.18 5.95 U.S. Government agencies 5.78 6.52 6.73 7.16 6.65 CMOs 7.42 6.89 7.41 - 6.95 State, county and municipal 4.61 9.02 10.96 10.67 10.38 Other 8.29 5.59 10.58 4.96 5.71 Consolidated 6.69 % 6.36 6.78 5.22 6.47
Included in "U.S. Government agencies" and "Other" at March 31, 1996, are $1,745,837,000 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 March 31, 1996, these securities had a weighted average maturity of 3.36 years and a weighted average yield of 5.39 percent. The weighted average U.S. equivalent yield for comparative purposes of these securities was 7.26 percent based on a weighted average funding cost differential of (1.87) 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 March 31, 1996. 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; and tax rates of 7.75 percent in North Carolina; 5.5 percent in Florida; 4.5 percent in South Carolina; 6 percent in Georgia and Tennessee; 7 percent in Maryland; 9.975 percent in Washington, D.C.; 4.87 percent in Delaware; 6.5 percent in New Jersey; and 10.75 percent in Connecticut. There were commitments to purchase securities at a cost of $1,352,417,000 that had a market value of $1,351,012,000 at March 31, 1996. There were commitments to sell securities at a cost of $260,329,000 that had a market value of $259,568,000 at March 31, 1996. Gross gains and losses from sales are accounted for on a trade date basis. Gross gains and losses realized on the sale of debt securities in the first three months of 1996 were $31,922,000 and $17,435,000, respectively, and gross gains realized on the sale of sundry securities were $96,000. T-5 TABLE 8 INVESTMENT SECURITIES
March 31, 1996 Average 1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity (In thousands) or Less Years Years Years Total Gains Losses Value in Years CARRYING VALUE U.S. Government agencies $ 243 840,122 335,837 - 1,176,202 24,153 (3,561) 1,196,794 5.07 CMOs 39,853 524,304 - - 564,157 6,051 (680) 569,528 2.74 State, county and municipal 269,440 240,013 157,264 421,070 1,087,787 102,436 (1,568) 1,188,655 7.45 Other 2,240 5,917 15,716 74,598 98,471 6,502 (29) 104,944 10.96 Total $ 311,776 1,610,356 508,817 495,668 2,926,617 139,142 (5,838) 3,059,921 5.66 CARRYING VALUE Debt securities $ 311,776 1,610,356 508,817 472,003 2,902,952 139,142 (5,829) 3,036,265 Sundry securities - - - 23,665 23,665 - (9) 23,656 Total $ 311,776 1,610,356 508,817 495,668 2,926,617 139,142 (5,838) 3,059,921 MARKET VALUE Debt securities $ 316,716 1,648,368 530,329 540,852 3,036,265 Sundry securities - - - 23,656 23,656 Total $ 316,716 1,648,368 530,329 564,508 3,059,921 WEIGHTED AVERAGE YIELD U.S. Government agencies 7.82% 7.55 7.62 - 7.57 CMOs 7.28 7.65 - - 7.62 State, county and municipal 10.83 10.84 11.22 11.78 11.26 Other 5.00 7.66 7.94 8.71 8.44 Consolidated 10.33% 8.07 8.75 11.32 8.98
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 March 31, 1996. 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; and tax rates of 7.75 percent in North Carolina; 5.5 percent in Florida; 4.5 percent in South Carolina; 6 percent in Georgia and Tennessee; 7 percent in Maryland; 9.975 percent in Washington, D.C.; 4.87 percent in Delaware; 6.5 percent in New Jersey; and 10.75 percent in Connecticut. There were no commitments to purchase or sell investment securities at March 31, 1996. Gross gains and losses realized on repurchase agreement underdeliveries and calls of investment securities in the first three months of 1996 were $1,220,000 and $420,000, respectively. T-6 TABLE 9 LOANS
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter COMMERCIAL Commercial, financial and agricultural Taxable $ 22,524,478 23,897,326 23,323,127 22,382,091 22,269,402 Nontaxable 939,305 750,958 737,257 815,758 726,833 Total commercial, financial and agricultural 23,463,783 24,648,284 24,060,384 23,197,849 22,996,235 Real estate - construction and other 2,598,673 2,505,627 2,424,185 2,220,687 2,142,247 Real estate - mortgage 9,733,868 9,991,640 9,788,173 9,946,577 9,692,486 Lease financing 3,598,730 3,169,698 2,855,883 2,586,522 2,283,062 Foreign 763,584 649,760 575,005 557,367 525,513 Total commercial 40,158,638 40,965,009 39,703,630 38,509,002 37,639,543 RETAIL Real estate - mortgage 27,203,799 27,273,991 25,070,937 22,932,561 20,401,269 Installment loans - Bankcard 3,497,078 3,657,619 3,197,873 4,881,537 4,459,123 Installment loans - other* 20,759,483 20,212,216 19,626,445 18,999,391 18,505,903 Total retail 51,460,360 51,143,826 47,895,255 46,813,489 43,366,295 Total loans 91,618,998 92,108,835 87,598,885 85,322,491 81,005,838 UNEARNED INCOME Loans 435,643 476,591 448,567 442,050 447,521 Lease financing 1,193,307 1,069,364 960,775 860,787 698,069 Total unearned income 1,628,950 1,545,955 1,409,342 1,302,837 1,145,590 Loans, net $ 89,990,048 90,562,880 86,189,543 84,019,654 79,860,248
*Installment loans-other include (in thousands) $2,406,276; $2,358,021; $2,080,514; $1,913,647; and $1,814,529 of retail leasing loans at the end of the first quarter of 1996 and the fourth, third, second and first quarters of 1995, respectively, that were acquired in the First Fidelity merger. T-7 TABLE 10 ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter ALLOWANCE FOR LOAN LOSSES Balance, beginning of quarter $ 1,507,798 1,456,306 1,534,572 1,550,223 1,578,128 Provision for loan losses 70,000 64,500 59,000 54,000 42,500 Allowance of loans acquired or sold, net 6,168 94,152 (66,412) 20,486 440 Loan losses, net (148,121) (107,160) (70,854) (90,137) (70,845) Balance, end of quarter $ 1,435,845 1,507,798 1,456,306 1,534,572 1,550,223 (as % of loans, net) 1.60 % 1.66 1.69 1.83 1.94 (as % of nonaccrual and restructured loans) 197 % 233 236 244 243 (as % of nonperforming assets) 171 % 182 178 182 178 LOAN LOSSES Commercial, financial and agricultural $ 64,505 39,717 18,331 27,870 22,174 Real estate - construction and other 3,607 1,029 7 725 2,062 Real estate - mortgage 12,526 21,798 14,897 23,687 10,524 Installment loans - Bankcard 55,010 38,203 49,464 51,256 41,019 Installment loans - other 36,077 31,529 23,638 21,862 22,989 Total 171,725 132,276 106,337 125,400 98,768 LOAN RECOVERIES Commercial, financial and agricultural 12,029 12,433 18,639 19,935 12,401 Real estate - construction and other 846 421 2,527 1,592 1,454 Real estate - mortgage 1,773 2,371 3,353 2,713 3,663 Installment loans - Bankcard 2,249 3,551 3,792 3,395 3,123 Installment loans - other 6,707 6,340 7,172 7,628 7,282 Total 23,604 25,116 35,483 35,263 27,923 Loan losses, net $ 148,121 107,160 70,854 90,137 70,845 (as % of average loans, net)* 0.66 % 0.49 0.33 0.44 0.37 NONPERFORMING ASSETS Nonaccrual loans Commercial loans $ 330,357 330,626 285,474 297,581 309,020 Consumer loans 107,209 80,753 75,318 59,785 56,022 Real estate loans 289,689 232,702 254,252 267,934 267,408 Total nonaccrual loans 727,255 644,081 615,044 625,300 632,450 Restructured loans 594 3,772 1,865 3,270 4,595 Foreclosed properties 114,146 178,484 200,886 216,616 234,465 Total nonperforming assets $ 841,995 826,337 817,795 845,186 871,510 (as % of loans, net and foreclosed properties) 0.93 % 0.91 0.95 1.00 1.09 Accruing loans past due 90 days $ 274,666 289,866 241,598 234,242 329,069
*Annualized. Any loans classified by regulatory examiners as loss, doubtful, substandard or special mention that have not been disclosed herein 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. T-8 TABLE 11 INTANGIBLE ASSETS
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter MORTGAGE SERVICING RIGHTS $ 147,157 148,933 149,330 148,125 127,956 CREDIT CARD PREMIUM $ 44,947 43,894 47,403 51,005 54,703 OTHER INTANGIBLE ASSETS Goodwill $ 1,912,093 1,883,362 1,740,386 1,654,140 1,368,988 Deposit base premium 513,964 535,373 542,432 535,664 517,997 Other 9,023 12,932 13,634 14,604 15,582 Total $ 2,435,080 2,431,667 2,296,452 2,204,408 1,902,567
TABLE 12 ALLOWANCE FOR FORECLOSED PROPERTIES
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter Foreclosed properties $ 136,151 202,686 228,615 249,561 272,849 Allowance for foreclosed properties, beginning of quarter 24,202 27,729 32,945 38,384 41,578 Provision for foreclosed properties (882) 475 (2,250) (1,696) 715 Transfer from (to) allowance for segregated assets 115 (106) 192 40 (48) Dispositions, net (1,430) (3,896) (3,158) (3,783) (3,861) Allowance for foreclosed properties, end of quarter 22,005 24,202 27,729 32,945 38,384 Foreclosed properties, net $ 114,146 178,484 200,886 216,616 234,465
T-9 TABLE 13 DEPOSITS
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter CORE DEPOSITS Noninterest-bearing $ 16,725,597 17,043,223 15,598,097 16,049,504 15,523,593 Savings and NOW accounts 25,149,422 24,297,270 22,787,821 22,945,394 22,946,413 Money market accounts 13,149,260 13,112,918 13,286,726 13,046,757 13,032,726 Other consumer time 31,178,734 31,945,313 31,244,025 29,859,887 27,640,222 Total core deposits 86,203,013 86,398,724 82,916,669 81,901,542 79,142,954 Foreign 1,438,602 3,526,771 1,821,483 3,321,095 3,305,534 Other time 2,876,189 2,629,723 2,656,705 2,438,310 2,298,656 Total deposits $ 90,517,804 92,555,218 87,394,857 87,660,947 84,747,144
TABLE 14 TIME DEPOSITS IN AMOUNT OF $100,000 OR MORE
March 31, 1996 Time Other (In thousands) Certificates Time MATURITY OF 3 months or less $ 3,460,467 76,972 Over 3 months through 6 months 1,221,031 0 Over 6 months through 12 months 1,138,755 0 Over 12 months 1,328,251 0 Total $ 7,148,504 76,972
T-10 TABLE 15 LONG-TERM DEBT
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter DEBENTURES AND NOTES ISSUED BY THE PARENT COMPANY 7-1/2% debentures due 2002 $ 15,619 15,619 15,619 15,619 15,619 Floating rate extendible notes due 2005 10,100 10,100 10,100 10,100 100,000 11% notes due 1996 18,360 18,360 18,360 18,360 18,360 Floating rate notes due 1996 - 150,000 150,000 150,000 150,000 5.95% notes due 1995 - - - 150,000 149,960 6-3/4% notes due 1998 249,123 249,001 248,878 248,756 248,634 Floating rate notes due 1998 299,832 299,810 299,788 299,766 299,744 Fixed rate medium-term senior notes, varying rates and terms to 1996 - 200 200 200 200 Fixed rate medium-term subordinated notes, varying rates and terms to 2001 54,000 54,000 54,000 54,000 54,000 Floating rate subordinated notes due 2003 149,233 149,206 149,180 149,153 149,127 11% subordinated and variable rate notes due 1996 17,951 17,951 17,951 17,951 17,951 8-1/8% subordinated notes due 1996 100,000 100,000 100,000 100,000 100,000 9.45% subordinated notes due 1999 250,000 250,000 250,000 250,000 250,000 9.45% subordinated notes due 2001 147,999 147,906 147,813 147,721 147,628 8-1/8% subordinated notes due 2002 248,730 248,679 248,629 248,577 248,526 8% subordinated notes due 2002 223,342 223,280 223,224 223,161 223,099 7-1/4% subordinated notes due 2003 148,928 148,889 148,850 148,811 148,772 6-5/8% subordinated notes due 2005 248,237 248,189 248,142 248,094 248,046 6% subordinated notes due 2008 197,296 197,242 197,189 197,135 197,081 6-3/8% subordinated notes due 2009 147,712 147,669 147,625 147,581 147,538 8% subordinated notes due 2009 148,679 148,655 148,631 148,607 148,583 8.77% subordinated notes due 2004 148,630 148,590 148,550 148,510 148,470 7-1/2% subordinated debentures due 2035 246,243 246,194 246,144 246,095 - 7.05% subordinated notes due 2005 248,116 248,065 248,014 - - 6-7/8% subordinated notes due 2005 248,392 248,350 248,307 - - 6.55% subordinated debentures due 2035 248,457 248,417 - - - 7% subordinated notes due 2006 198,300 - - - - 7.18% subordinated notes due 2011 58,740 - - - - Total debentures and notes issued by the Parent Company 4,072,019 3,964,372 3,715,194 3,368,197 3,211,338 DEBENTURES AND NOTES OF SUBSIDIARIES Subordinated bank notes with varying rates and terms to 2036 1,465,000 1,165,000 1,365,000 1,175,000 225,000 Floating rate senior notes due 1996 200,000 200,000 200,000 200,000 200,000 6.80% subordinated notes due 2003 150,000 150,000 150,000 150,000 150,000 9-5/8% subordinated notes due 1999 150,000 150,000 150,000 150,000 150,000 9-3/4% subordinated notes due 1995 - - - - 136,750 8-1/2% subordinated notes due 1998 149,150 149,150 149,150 149,150 149,150 Floating rate subordinated notes due 1997 25,000 25,000 25,000 25,000 25,000 9-7/8% subordinated capital notes due 1999 74,576 74,542 74,507 74,473 74,439 9-5/8% subordinated capital notes due 1999 74,961 74,957 74,955 74,951 74,948 10-1/2% collateralized mortgage obligations due 2014 45,942 48,545 51,273 54,070 56,919 Debentures and notes with varying rates and terms to 2015 42,896 37,031 18,476 8,143 8,143 9-1/2% mortgage backed bonds - - 3,500 3,500 - Total debentures and notes of subsidiaries 2,377,525 2,074,225 2,261,861 2,064,287 1,250,349 OTHER DEBT Notes payable to FDIC due 1996 51,430 76,138 83,969 92,355 99,887 Advances from the Federal Home Loan Bank 958,150 958,150 607,846 482,846 4,846 Mortgage notes and other debt 55,207 39,983 40,264 40,322 43,424 Capitalized leases 24,714 8,079 8,240 5,026 5,196 Total other debt 1,089,501 1,082,350 740,319 620,549 153,353 Total $ 7,539,045 7,120,947 6,717,374 6,053,033 4,615,040
T-11 TABLE 16 CHANGES IN STOCKHOLDERS' EQUITY*
Twelve Months 1996 1995 Ended March 31, FIRST Fourth Third Second First (In thousands) 1996 QUARTER Quarter Quarter Quarter Quarter Balance, beginning of period $ 8,373,606 9,043,144 8,562,624 8,675,245 8,373,606 8,274,492 Net income 1,323,187 242,850 335,362 380,581 364,394 349,844 Purchase of common stock (804,705) (37,092) (215,887) (495,019) (56,707) (197,371) Common stock issued for stock options exercised 96,027 25,198 14,990 18,502 37,337 6,168 Common stock issued through dividend reinvestment plan 31,073 10,241 7,485 6,876 6,471 16,952 Common stock for purchase accounting acquisitions 734,434 123,924 357,657 252,853 - - Pre-merger transaction of pooled bank (127,978) - 71,711 (146,385) (53,304) (89,570) Cash dividends paid By First Union Corporation on Preferred stock (3,900) (3,900) - - - (7,029) Common stock (401,856) (145,195) (91,203) (86,700) (78,758) (79,660) By acquired bank on Preferred stock (14,153) - (4,084) (4,956) (5,113) (5,208) Common stock (126,017) - (46,095) (40,065) (39,857) (40,456) Unrealized gain (loss) on debt and equity securities 29,845 (149,607) 50,584 1,692 127,176 145,444 Balance, end of period $ 9,109,563 9,109,563 9,043,144 8,562,624 8,675,245 8,373,606
*Preferred and common stock transactions related to an acquired company are included in pre-merger transactions of pooled bank. T-12 TABLE 17 CAPITAL RATIOS
1996 1995 FIRST Fourth Third Second First (In thousands) QUARTER Quarter Quarter Quarter Quarter CONSOLIDATED CAPITAL RATIOS* Qualifying capital Tier 1 capital $ 6,749,366 6,551,148 6,266,720 6,591,212 6,714,192 Total capital 11,478,593 11,198,355 10,701,459 10,567,302 10,538,569 Adjusted risk-based assets 96,357,575 97,830,366 91,958,148 90,200,656 85,124,074 Adjusted leverage ratio assets $ 121,384,576 119,420,752 116,090,265 110,566,962 108,622,857 Ratios Tier 1 capital 7.00% 6.70 6.81 7.31 7.89 Total capital 11.91 11.45 11.64 11.72 12.38 Leverage 5.56 5.49 5.45 5.96 6.18 Stockholders' equity to assets Quarter-end 6.98 6.86 7.02 7.32 7.39 Average 7.04% 7.11 7.07 7.39 7.40 BANK CAPITAL RATIOS Tier 1 capital First Union National Bank of Florida 7.73% 7.57 8.18 6.55 7.94 Georgia 8.22 6.69 6.46 8.72 8.61 Maryland 12.18 11.36 15.88 20.14 20.78 North Carolina 6.60 6.46 6.56 6.65 7.13 South Carolina 8.14 8.42 7.33 7.86 8.24 Tennessee 11.43 11.12 11.85 11.62 12.34 Virginia 8.51 7.41 7.61 6.81 8.97 Washington, D.C. 11.66 13.77 18.67 17.46 16.55 First Union National Bank 10.01 9.16 9.63 9.92 10.23 First Union Bank of Connecticut 11.91 12.60 12.85 12.69 12.63 First Union Bank of Delaware 22.84 25.45 23.86 20.17 17.95 First Union Home Equity Bank 7.08 7.50 6.89 5.28 6.49 Total capital First Union National Bank of Florida 11.72 10.97 11.54 10.01 10.70 Georgia 12.82 10.62 10.56 11.52 11.46 Maryland 13.44 12.62 17.15 21.42 22.07 North Carolina 10.55 10.15 10.29 10.32 10.32 South Carolina 11.33 11.79 11.09 11.79 12.40 Tennessee 12.69 12.38 13.11 12.88 13.60 Virginia 11.86 10.57 11.25 10.39 12.80 Washington, D.C. 12.94 15.03 19.94 18.74 17.83 First Union National Bank 11.87 10.95 11.44 11.83 12.15 First Union Bank of Connecticut 13.17 13.88 14.14 13.97 13.91 First Union Bank of Delaware 24.12 26.74 25.15 21.45 19.22 First Union Home Equity Bank 9.46 10.09 9.47 8.28 10.34 Leverage First Union National Bank of Florida 5.36 5.18 5.56 5.15 5.75 Georgia 5.56 5.54 6.02 6.40 6.06 Maryland 7.08 9.32 13.11 13.08 13.44 North Carolina 5.64 5.72 5.87 5.81 6.25 South Carolina 6.18 6.24 5.85 5.94 5.75 Tennessee 7.21 7.64 8.19 7.71 7.88 Virginia 6.67 6.17 5.69 5.28 6.95 Washington, D.C. 5.69 6.32 8.50 7.70 7.11 First Union National Bank 7.59 7.43 7.67 7.59 7.66 First Union Bank of Connecticut 8.18 8.30 8.35 8.22 8.06 First Union Bank of Delaware 19.91 17.20 14.79 16.55 15.38 First Union Home Equity Bank 6.53 % 6.48 6.22 5.53 6.22
*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. T-13 TABLE 18 OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
Weighted Average Rate Estimated March 31, 1996 Notional Maturity** Fair (In thousands) Amount Receive Pay In Years Value Comments ASSET RATE CONVERSIONS Interest rate swaps $ 8,016,880 6.37% 5.50% 1.30 (1) Carrying amount $ 9,739 Unrealized gross gain 41,474 Unrealized gross loss (30,533) Total 20,680 Forward bullet interest rate swaps 6,057,000 5.95 - 1.72 (2) Carrying amount - Unrealized gross gain 805 Unrealized gross loss (9,742) Total (8,937) Total asset rate conversions $ 14,073,880 6.19% 5.50% 1.48 $ 11,743 LIABILITY RATE CONVERSIONS Interest rate swaps $ 5,365,000 6.80% 5.54% 6.44 (3) Carrying amount $ 9,658 Unrealized gross gain 95,795 Unrealized gross loss (59,148) Total 46,305 Other financial instruments 150,000 - - 7.31 (4) Carrying amount 1,611 Unrealized gross gain - Unrealized gross loss (984) Total 627 Total liability rate conversions $ 5,515,000 6.80% 5.54% 6.46 $ 46,932 ASSET HEDGES Short eurodollar futures $ 228,000 -% 5.69% .29 (5) Carrying amount $ - Unrealized gross gain - Unrealized gross loss (139) Total (139) Total asset hedges $ 228,000 -% 5.69% .29 $ (139)
(1) Converts floating rate loans to fixed rate. Adds to liability sensitivity. Similar characteristics to a fixed income security funded with variable rate liabilities. Includes $5.1 billion of indexed amortizing swaps, with $1.6 billion maturing within 2 years and and $3.5 billion within 4.5 years. (2) Converts floating rates on loans to fixed rates at higher than current yields in future periods. $6.0 billion effective December 1996; $57 million effective March 1997. (3) Converts $3.7 billion of fixed rate long-term debt to floating rate by matching the maturity of the swap to the debt issue. Rate sensitivity remains unchanged due to the direct linkage of the swap to the debt issue. Also converts $1.3 billion of fixed rate CD's to variable rate and $358 million of fixed rate bank notes to floating rate. (4) Miscellaneous purchased option-based products for liability management purposes includes $150 million floor offsetting a corresponding rate floor in long-term debt. (5) Hedges market values of U.S. Treasury notes in the available-for-sale portfolio. $164 million effective June 1996; $64 million effective September 1996. (Continued) T-14 TABLE 18 OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
Weighted Average Rate Estimated March 31, 1996 Notional Maturity** Fair (In thousands) Amount Receive Pay In Years Value Comments RATE SENSITIVITY HEDGES Put options on eurodollar futures $ 1,890,000 - % 7.79% .22 (1) Carrying amount $ 215 Unrealized gross gain - Unrealized gross loss (215) Total - Interest rate caps 185,200 5.45 7.47 3.41 (2) Carrying amount 1,510 Unrealized gross gain 823 Unrealized gross loss - Total 2,333 Pay fixed swaptions 7,500,000 - 6.50 .71 (3) Carrying amount 4,153 Unrealized gross gain 14,554 Unrealized gross loss - Total 18,707 Long eurodollar futures 29,355,000 5.74 - 1.41 (4) Carrying amount - Unrealized gross gain - Unrealized gross loss (27,725) Total (27,725) Total rate sensitivity hedges $ 38,930,200 5.74% 6.77% 1.23 $ (6,685) OFFSETTING POSITIONS Interest rate floors $ 800,000 5.96% 5.96% .21 (5) Carrying amount $ (241) Unrealized gross gain 1,175 Unrealized gross loss (934) Total - Prime/federal funds cap 4,000,000 5.73 5.73 .02 (6) Carrying amount 39 Unrealized gross gain 355 Unrealized gross loss (394) Total - Total offsetting positions $ 4,800,000 5.77% 5.77% .05 $ -
(1) Paid a premium for the right to lock in the 3 month LIBOR reset rates on pay variable rate swaps and short-term liabilities. Effective June 1996. (2) Paid a premium for the right to lock in 3 month LIBOR rates on $168 million in short-term liabilities; $17 million uncaps a LIBOR-based, asset- backed security at 11.72 percent. (3) Paid a premium for the right to pay fixed on interest rate swaps for one year, effective December 1996. Reduces liability sensitivity of one year fixed rates above 6.50 percent. (4) Converts floating rate LIBOR - based loans to fixed rate. Adds to liability sensitivity. Similar characteristics to fixed income security funded with variable rate liabilities. $4.9 billion effective December 1996; $5.0 billion effective March 1997; $4.9 billion effective June 1997; $8.6 billion effective September 1997; $1.0 billion effective December 1997, March 1998, June 1998 and September 1998; $500 million effective December 1998, March 1999, June 1999 and September 1999. (5) Consists of $800 million of interest rate floors, of which $400 million were purchased and offset by $400 million sold, locking in gains to be amortized over the remaining life of the contracts. (6) In December 1994, the corporation offset an existing federal funds cap (purchased) and a prime rate cap (written) position by simultaneously purchasing a prime rate cap and writing a federal funds cap at strikes of 6.00 percent and 3.25 percent, respectively. The notional amount of each cap is $1.0 billion. Lock in losses to be amortized over the remaining life of the contracts. *Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. **Estimated maturity approximates duration except for forward bullets, average duration of 1.0 years; long eurodollar futures, average duration of .25 years; and short eurodollar futures, average duration of .25 years. Prime Rate - The base rate on corporate loans posted by at least 75 percent of the nation's 30 largest banks as defined in The Wall Street Journal. London Interbank Offered Rates (LIBOR) - The average of interbank offered rates on dollar deposits in the London market, based on quotations at five major banks. Weighted average pay rates are generally based upon one to six month LIBOR. Pay rates related to forward interest rate swaps are set on the future effective date. Pay rates reset at predetermined reset dates over the life of the contract. Rates shown are the rates in effect as of March 31, 1996. Weighted average receive rates are fixed rates at the time the contract was transacted. Carrying amount includes accrued interest receivable/payable and unamortized premiums paid/received. T-15 TABLE 19 OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES*
March 31, 1996 1 Year 1 -2 2 -5 5 -10 After 10 (In thousands) or Less Years Years Years Years Total ASSET RATE CONVERSIONS Notional amount $ 3,046,597 9,947,000 1,080,283 - - 14,073,880 Weighted average receive rate 6.23 % 6.27 5.35 - - 6.19 Estimated fair value $ 4,100 16,289 (8,646) - - 11,743 LIABILITY RATE CONVERSIONS Notional amount $ 532,000 968,000 480,000 2,975,000 560,000 5,515,000 Weighted average receive rate 6.26 % 6.36 6.57 7.11 6.73 6.80 Estimated fair value $ 2,433 11,089 7,720 41,960 (16,270) 46,932 ASSET HEDGES Notional amount $ 228,000 - - - - 228,000 Weighted average receive rate - % - - - - - Estimated fair value $ (139) - - - - (139) RATE SENSITIVITY HEDGES Notional amount $ 19,284,000 15,481,000 4,165,200 - - 38,930,200 Weighted average receive rate 5.36 % 5.78 6.47 - - 5.74 Estimated fair value $ 6,763 (15,123) 1,675 - - (6,685) OFFSETTING POSITIONS Notional amount $ 4,800,000 - - - - 4,800,000 Weighted average receive rate 5.77 % - - - - 5.77 Estimated fair value $ - - - - - -
*Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. Pay rates are generally based upon one to six month LIBOR and reset at predetermined reset dates. Current pay rates are not necessarily indicative of future pay rates and therefore have been excluded from the above table. Weighted average pay rates are indicated in Table 18. TABLE 20 OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
Rate Asset Rate Liability Rate Asset Sensitivity Offsetting (In thousands) Conversions Conversions Hedges Hedges Positions Total Balance, December 31, 1995 $ 17,402,355 5,307,000 1,016,000 29,674,200 4,800,000 58,199,555 Additions - 623,000 - 13,668,000 - 14,291,000 Maturities/Amortizations (3,328,475) (415,000) (697,000) (4,412,000) - (8,852,475) Offsets - - - - - 0 Terminations - - (91,000) - - (91,000) Balance, March 31, 1996 $ 14,073,880 5,515,000 228,000 38,930,200 4,800,000 63,547,080
*Includes only off-balance sheet derivative financial instruments related to interest rate risk management activities. T-16 FIRST UNION CORPORATION AND SUBSIDIARIES NET INTEREST INCOME SUMMARIES
FIRST QUARTER 1996 FOURTH QUARTER 1995 AVERAGE Average INTEREST RATES Interest Rates AVERAGE INCOME/ EARNED/ Average Income/ Earned/ (In thousands) BALANCES EXPENSE PAID Balances Expense Paid ASSETS Interest-bearing bank balances $ 127,147 2,395 7.58 % $ 154,079 1,853 4.77% Federal funds sold and securities purchased under resale agreements 5,728,049 75,229 5.28 2,887,716 42,364 5.82 Trading account assets (a) 3,081,296 47,381 6.18 1,890,870 30,386 6.38 Securities available for sale (a) 17,007,148 277,897 6.54 11,878,325 191,710 6.40 Investment securities (a) U.S. Government and other 1,890,006 34,848 7.38 6,373,019 111,199 6.92 State, county and municipal 1,125,754 30,161 10.71 1,248,272 33,413 10.62 Total investment securities 3,015,760 65,009 8.62 7,621,291 144,612 7.53 Loans (a) (b) Commercial Commercial, financial and agricultural 23,112,732 444,229 7.73 23,555,239 462,776 7.79 Real estate - construction and other 2,546,046 55,279 8.73 2,476,227 56,485 9.05 Real estate - mortgage 9,832,235 209,685 8.58 9,947,990 221,349 8.83 Lease financing 1,810,366 43,171 9.54 1,614,409 38,086 9.36 Foreign 689,207 10,643 6.21 654,411 11,598 7.03 Total commercial 37,990,586 763,007 8.07 38,248,276 790,294 8.20 Retail Real estate - mortgage 27,418,713 526,238 7.68 26,558,521 511,960 7.65 Installment loans - Bankcard 3,693,029 137,026 14.84 3,490,503 119,494 13.58 Installment loans - other 20,171,676 470,072 9.36 19,584,784 468,950 9.50 Total retail 51,283,418 1,133,336 8.86 49,633,808 1,100,404 8.80 Total loans 89,274,004 1,896,343 8.52 87,882,084 1,890,698 8.54 Total earning assets 118,233,404 2,364,254 8.02 112,314,365 2,301,623 8.13 Cash and due from banks 5,051,839 5,260,097 Other assets 7,451,490 7,510,406 Total assets $130,736,733 $ 125,084,868 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing deposits Savings and NOW accounts 24,626,132 159,365 2.60 23,446,948 154,577 2.62 Money market accounts 13,266,876 91,757 2.78 13,114,443 97,040 2.94 Other consumer time 31,860,581 421,874 5.33 31,929,740 431,620 5.36 Foreign 2,272,200 31,128 5.51 2,307,046 33,326 5.73 Other time 2,823,767 41,256 5.88 2,716,067 43,591 6.37 Total interest-bearing deposits 74,849,556 745,380 4.01 73,514,244 760,154 4.10 Federal funds purchased and securities sold under repurchase agreements 16,320,595 207,034 5.10 12,144,455 170,570 5.57 Commercial paper 987,430 12,716 5.18 1,038,616 14,538 5.55 Other short-term borrowings 3,651,978 48,773 5.37 3,764,835 54,304 5.72 Long-term debt 7,242,535 113,515 6.27 6,940,303 112,005 6.40 Total interest-bearing liabilities 103,052,094 1,127,418 4.40 97,402,453 1,111,571 4.53 Noninterest-bearing deposits 16,285,735 16,118,425 Other liabilities 2,193,102 2,668,287 Stockholders' equity 9,205,802 8,895,703 Total liabilities and stockholders' equity $130,736,733 $ 125,084,868 Interest income and rate earned $ 2,364,254 8.02 % $ 2,301,623 8.13% Interest expense and rate paid 1,127,418 3.83 1,111,571 3.93 Net interest income and margin $ 1,236,836 4.19 % $ 1,190,052 4.20%
(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 tax rate of 35 percent; and tax rates of 7.75 percent in North Carolina; 5.5 percent in Florida; 4.5 percent in South Carolina; 6 percent in Georgia and Tennessee ; 7 percent in Maryland; 9.975 percent in Washington, D.C.; 4.87 percent in 1996 in Delaware; 6.5 percent in 1996 in New Jersey; and 10.75 percent in 1996 in Connecticut. T-17
THIRD QUARTER 1995 SECOND QUARTER 1995 FIRST QUARTER 1995 Average Average Average Interest Rates Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/ Balances Expense Paid Balances Expense Paid Balances Expense Paid $ 461,644 6,525 5.61% $ 568,339 6,891 4.86% $ 725,454 10,677 5.97% 2,372,023 33,381 5.58 1,912,030 28,389 5.96 1,878,723 26,625 5.75 1,664,614 25,461 6.07 1,196,164 18,092 6.07 1,392,093 22,738 6.62 10,888,645 176,461 6.43 10,428,756 167,105 6.43 11,653,141 183,223 6.38 5,982,856 98,061 6.50 5,807,669 98,052 6.77 5,939,109 96,201 6.57 1,430,075 38,933 10.80 1,590,136 44,017 11.10 1,689,032 46,417 11.15 7,412,931 136,994 7.33 7,397,805 142,069 7.70 7,628,141 142,618 7.58 22,828,203 451,025 7.84 22,534,030 451,104 8.03 21,596,735 427,098 8.02 2,352,583 54,400 9.17 2,196,238 50,723 9.26 2,032,587 48,916 9.76 9,855,667 221,011 8.90 9,939,381 222,533 8.98 9,558,266 207,712 8.81 1,463,774 33,974 9.21 1,401,798 32,063 9.17 1,178,878 26,524 9.12 620,863 11,166 7.14 632,201 11,170 7.09 546,685 9,309 6.91 37,121,090 771,576 8.25 36,703,648 767,593 8.39 34,913,151 719,559 8.36 24,973,345 481,819 7.65 21,671,463 412,950 7.64 20,268,449 378,981 7.58 4,941,979 185,517 14.89 4,690,786 176,392 15.08 4,361,638 150,152 13.96 18,998,053 459,770 9.60 18,397,114 441,524 9.63 17,994,692 417,121 9.40 48,913,377 1,127,106 9.14 44,759,363 1,030,866 9.24 42,624,779 946,254 9.00 86,034,467 1,898,682 8.76 81,463,011 1,798,459 8.86 77,537,930 1,665,813 8.71 108,834,324 2,277,504 8.30 102,966,105 2,161,005 8.42 100,815,482 2,051,694 8.25 4,917,048 4,842,107 4,994,256 7,058,234 6,553,205 6,331,037 $ 120,809,606 $ 114,361,417 $112,140,775 22,887,084 145,153 2.25 22,886,367 143,950 2.52 22,964,565 144,481 2.55 13,371,543 97,742 2.90 12,994,625 95,721 2.95 13,603,142 97,132 2.90 31,298,954 419,446 5.32 28,415,455 366,816 5.18 27,406,830 320,573 4.74 2,891,083 39,293 5.39 3,287,551 52,039 6.35 3,889,210 53,488 5.58 2,759,297 42,836 6.16 2,462,712 39,160 6.38 2,340,219 35,344 6.13 73,207,961 744,470 4.03 70,046,710 697,686 4.00 70,203,966 651,018 3.76 10,745,161 161,603 5.97 9,332,402 138,492 5.95 9,037,372 125,255 5.62 1,103,356 15,753 5.66 1,193,619 17,566 5.90 874,201 12,254 5.68 3,291,754 52,291 6.30 1,782,631 25,688 5.78 1,727,432 28,336 6.65 5,766,258 94,250 6.48 5,703,380 96,896 6.81 4,390,421 78,686 7.27 94,114,490 1,068,367 4.50 88,058,742 976,328 4.45 86,233,392 895,549 4.21 15,619,317 15,226,362 15,096,912 2,539,377 2,629,844 2,514,605 8,536,422 8,446,469 8,295,866 $ 120,809,606 $ 114,361,417 $112,140,775 $ 2,277,504 8.30% $ 2,161,005 8.42% $2,051,694 8.25% 1,068,367 3.89 976,328 3.80 895,549 3.60 $ 1,209,137 4.41% $ 1,184,677 4.62% $1,156,145 4.65%
(b)The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income. T-18 FIRST UNION CORPORATION AND SUBSIDIARIES NET INTEREST INCOME SUMMARIES
YEAR ENDED 1995 Average Interest Rates Average Income/ Earned/ (In thousands) Balances Expense Paid ASSETS Interest-bearing bank balances $ 475,771 25,946 5.45% Federal funds sold and securities purchased under resale agreements 2,265,686 130,759 5.77 Trading account assets (a) 1,537,655 96,677 6.29 Securities available for sale (a) 11,211,947 718,499 6.41 Investment securities (a) U.S. Government and other 6,026,734 403,513 6.70 State, county and municipal 1,488,009 162,780 10.94 Total investment securities 7,514,743 566,293 7.54 Loans (a) (b) Commercial Commercial, financial and agricultural 22,634,368 1,792,003 7.92 Real estate - construction and other 2,265,962 210,524 9.29 Real estate - mortgage 9,826,476 872,605 8.88 Lease financing 1,416,042 130,647 9.23 Foreign 613,855 43,243 7.04 Total commercial 36,756,703 3,049,022 8.30 Retail Real estate - mortgage 23,389,576 1,785,710 7.63 Installment loans - Bankcard 4,370,403 631,555 14.45 Installment loans - other 18,748,715 1,787,365 9.53 Total retail 46,508,694 4,204,630 9.04 Total loans 83,265,397 7,253,652 8.71 Total earning assets 106,271,199 8,791,826 8.27 Cash and due from banks 5,003,881 Other assets 6,867,006 Total assets $ 118,142,086 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing deposits Savings and NOW accounts 23,047,127 588,161 2.55 Money market accounts 13,269,875 387,635 2.92 Other consumer time 29,779,347 1,538,455 5.17 Foreign 3,088,832 178,146 5.77 Other time 2,571,123 160,931 6.26 Total interest-bearing deposits 71,756,304 2,853,328 3.98 Federal funds purchased and securities sold under repurchase agreements 10,324,539 595,920 5.77 Commercial paper 1,053,037 60,111 5.71 Other short-term borrowings 2,649,027 160,619 6.06 Long-term debt 5,707,257 381,837 6.69 Total interest-bearing liabilities 91,490,164 4,051,815 4.43 Noninterest-bearing deposits 15,518,337 Other liabilities 2,588,347 Stockholders' equity 8,545,238 Total liabilities and stockholders' equity $ 118,142,086 Interest income and rate earned $ 8,791,826 8.27% Interest expense and rate paid 4,051,815 3.81 Net interest income and margin $ 4,740,011 4.46%
(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 tax rate of 35 percent; and tax rates of 7.75 percent in North Carolina; 5.5 percent in Florida; 4.5 percent in South Carolina; 6 percent in Georgia and Tennessee; 7 percent in Maryland; and 9.975 percent in Washington, D.C. T-19
NINE MONTHS ENDED 1995 SIX MONTHS ENDED 1995 Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balances Expense Paid Balances Expense Paid $ 584,179 24,093 5.51% $ 646,462 17,568 5.48% 2,056,065 88,395 5.75 1,895,468 55,014 5.85 1,418,622 66,291 6.25 1,293,587 40,830 6.36 10,987,382 526,789 6.41 11,037,567 350,328 6.40 5,910,039 292,314 6.61 5,873,028 194,253 6.67 1,568,799 129,367 11.03 1,639,311 90,434 11.12 7,478,838 421,681 7.54 7,512,339 284,687 7.64 22,324,167 1,329,227 7.96 22,067,973 878,202 8.03 2,194,975 154,039 9.38 2,114,864 99,639 9.50 9,785,527 651,256 8.90 9,749,876 430,245 8.90 1,349,194 92,561 9.17 1,290,953 58,587 9.15 600,188 31,645 7.05 589,679 20,479 7.00 36,254,051 2,258,728 8.33 35,813,345 1,487,152 8.37 22,321,653 1,273,750 7.63 20,973,831 791,931 7.61 4,666,926 512,061 14.67 4,527,121 326,544 14.55 18,466,962 1,318,415 9.55 18,197,015 858,645 9.52 45,455,541 3,104,226 9.13 43,697,967 1,977,120 9.12 81,709,592 5,362,954 8.78 79,511,312 3,464,272 8.79 104,234,678 6,490,203 8.32 101,896,735 4,212,699 8.34 4,917,538 4,917,786 6,650,178 6,442,771 $ 115,802,394 $113,257,292 22,912,389 433,584 2.53 22,925,250 288,431 2.54 13,322,255 290,595 2.92 13,297,203 192,853 2.92 29,054,672 1,106,835 5.09 27,913,931 687,389 4.97 3,352,292 144,820 5.78 3,586,718 105,527 5.93 2,522,277 117,340 6.22 2,401,804 74,504 6.26 71,163,885 2,093,174 3.93 70,124,906 1,348,704 3.88 9,711,226 425,350 5.86 9,185,690 263,747 5.79 1,057,897 45,573 5.76 1,034,792 29,820 5.81 2,273,011 106,315 6.25 1,755,196 54,024 6.21 5,291,726 269,832 6.82 5,050,528 175,582 7.01 89,497,745 2,940,244 4.39 87,151,112 1,871,877 4.33 15,316,111 15,161,995 2,561,407 2,572,604 8,427,131 8,371,581 $ 115,802,394 $113,257,292 $ 6,490,203 8.32% $4,212,699 8.34% 2,940,244 3.77 1,871,877 3.70 $ 3,549,959 4.55% $2,340,822 4.64%
(b) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income. T-20 FIRST UNION CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
1996 1995 FIRST Fourth Third Second First (In thousands except per share data) QUARTER Quarter Quarter Quarter Quarter ASSETS Cash and due from banks $ 5,250,210 6,312,076 4,986,548 4,942,264 4,953,988 Interest-bearing bank balances 51,347 79,235 562,043 901,745 853,948 Federal funds sold and securities purchased under resale agreements 4,416,024 4,152,754 2,635,144 2,755,611 1,498,462 Total cash and cash equivalents 9,717,581 10,544,065 8,183,735 8,599,620 7,306,398 Trading account assets 3,307,356 1,881,066 1,406,046 1,659,550 1,523,313 Securities available for sale 17,177,885 18,193,699 11,475,348 9,762,983 10,700,609 Investment securities 2,926,617 3,139,616 7,601,687 7,461,802 7,431,607 Loans, net of unearned income 89,990,048 90,562,880 86,189,543 84,019,654 79,860,248 Allowance for loan losses (1,435,845) (1,507,798) (1,456,306) (1,534,572) (1,550,223) Loans, net 88,554,203 89,055,082 84,733,237 82,485,082 78,310,025 Premises and equipment 2,733,508 2,553,170 2,376,732 2,310,275 2,203,057 Due from customers on acceptances 391,648 616,301 585,758 544,644 484,344 Mortgage servicing rights 147,157 148,933 149,330 148,125 127,956 Credit card premium 44,947 43,894 47,403 51,005 54,703 Other intangible assets 2,435,080 2,431,667 2,296,452 2,204,408 1,902,567 Other assets 3,145,282 3,272,380 3,062,915 3,234,980 3,208,834 Total assets $ 130,581,264 131,879,873 121,918,643 118,462,474 113,253,413 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Noninterest-bearing deposits 16,725,597 17,043,223 15,598,097 16,049,504 15,523,593 Interest-bearing deposits 73,792,207 75,511,995 71,796,760 71,611,443 69,223,551 Total deposits 90,517,804 92,555,218 87,394,857 87,660,947 84,747,144 Short-term borrowings 20,371,290 19,500,127 15,972,619 13,033,681 12,380,411 Bank acceptances outstanding 391,648 616,301 585,758 544,644 484,344 Other liabilities 2,651,914 3,044,136 2,685,411 2,494,924 2,652,868 Long-term debt 7,539,045 7,120,947 6,717,374 6,053,033 4,615,040 Total liabilities 121,471,701 122,836,729 113,356,019 109,787,229 104,879,807 STOCKHOLDERS' EQUITY Preferred stock 170,960 183,223 195,527 218,349 227,604 Common stock, $3.33-1/3 par value; authorized 750,000,000 shares 936,878 926,152 909,172 926,728 930,486 Paid-in capital 2,098,641 1,974,833 1,786,573 2,078,062 2,124,759 Retained earnings 5,941,677 5,847,922 5,686,537 5,468,983 5,234,810 Unrealized gain (loss) on debt and equity securities (38,593) 111,014 (15,185) (16,877) (144,053) Total stockholders' equity 9,109,563 9,043,144 8,562,624 8,675,245 8,373,606 Total liabilities and stockholders' equity $ 130,581,264 131,879,873 121,918,643 118,462,474 113,253,413 MEMORANDA Securities available for sale-amortized cost $ 17,225,841 17,992,898 11,453,883 9,743,438 10,868,942 Investment securities-market value 3,059,921 3,319,602 7,749,740 7,605,235 7,467,747 Common stockholders' equity, net of unrealized gain (loss) on debt and equity securities $ 8,938,603 8,859,921 8,367,097 8,456,896 8,146,002 Preferred shares outstanding 2,897,428 3,387,950 3,880,110 4,792,978 4,738,178 Common shares outstanding 281,063,734 277,845,768 272,752,001 278,018,734 279,145,954
T-21 FIRST UNION CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
1996 1995 FIRST Fourth Third Second First (In thousands except per share data) QUARTER Quarter Quarter Quarter Quarter INTEREST INCOME Interest and fees on loans $ 1,888,659 1,883,708 1,891,195 1,789,984 1,657,955 Interest and dividends on securities available for sale 274,207 188,555 173,281 163,648 180,081 Interest and dividends on investment securities Taxable income 34,421 110,634 97,474 97,425 95,612 Nontaxable income 20,206 22,780 26,037 29,384 30,910 Trading account interest 44,363 28,520 24,542 16,809 21,138 Other interest income 77,624 44,217 39,906 35,280 37,302 Total interest income 2,339,480 2,278,414 2,252,435 2,132,530 2,022,998 INTEREST EXPENSE Interest on deposits 745,380 760,154 744,470 697,686 651,018 Interest on short-term borrowings 268,523 239,412 229,647 181,746 165,845 Interest on long-term debt 113,515 112,005 94,250 96,896 78,686 Total interest expense 1,127,418 1,111,571 1,068,367 976,328 895,549 Net interest income 1,212,062 1,166,843 1,184,068 1,156,202 1,127,449 Provision for loan losses 70,000 64,500 59,000 54,000 42,500 Net interest income after provision for loan losses 1,142,062 1,102,343 1,125,068 1,102,202 1,084,949 NONINTEREST INCOME Trading account profits 20,524 34,537 18,004 12,423 4,443 Service charges on deposit accounts 160,730 159,102 156,476 154,128 145,846 Mortgage banking income 37,191 39,978 39,489 35,624 34,494 Capital management income 114,873 107,636 100,506 95,267 93,782 Securities available for sale transactions 14,583 15,701 9,718 8,213 10,708 Investment security transactions 800 777 2,591 1,233 217 Fees for other banking services 33,040 39,786 41,926 40,575 37,284 Insurance commissions 19,032 17,384 12,686 11,553 12,220 Sundry income 125,691 146,920 97,667 81,872 75,742 Total noninterest income 526,464 561,821 479,063 440,888 414,736 NONINTEREST EXPENSE Personnel expense 525,346 520,043 499,059 475,175 467,875 Occupancy 93,299 87,097 89,984 86,324 89,146 Equipment rentals, depreciation and maintenance 93,232 87,609 80,749 74,560 77,118 Postage, printing and supplies 42,328 34,556 35,939 31,744 37,038 FDIC insurance 12,211 19,240 8,166 46,942 46,141 Professional fees 6,424 51,542 41,528 41,311 41,978 Owned real estate expense 338 3,732 2,737 2,736 4,776 Amortization 72,760 68,774 67,487 60,156 57,283 Merger-related restructuring charges 281,229 94,446 - - - Sundry 165,448 170,255 192,992 161,044 135,187 Total noninterest expense 1,292,615 1,137,294 1,018,641 979,992 956,542 Income before income taxes 375,911 526,870 585,490 563,098 543,143 Income taxes 133,061 191,508 204,909 198,704 193,299 Net income 242,850 335,362 380,581 364,394 349,844 Dividends on preferred stock 3,900 4,084 4,956 5,113 12,237 Net income applicable to common stockholders $ 238,950 331,278 375,625 359,281 337,607 PER COMMON SHARE DATA Net income $ 0.85 1.19 1.36 1.30 1.19 Cash dividends $ 0.52 0.52 0.52 0.46 0.46 Average common shares 280,374,291 278,526,745 275,484,290 278,118,886 282,566,184
T-22 FIRST UNION CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, (In thousands) 1996 1995 OPERATING ACTIVITIES Net income $ 242,850 349,844 Adjustments to reconcile net income to net cash provided (used) by operating activities Accretion and amortization of securities discounts and premiums, net 10,754 (17,733) Provision for loan losses 70,000 42,500 Provision for foreclosed properties (882) 715 Securities available for sale transactions (14,583) (10,708) Investment security transactions (800) (217) Depreciation and amortization 144,543 127,264 Trading account assets, net (1,426,290) (206,144) Mortgage loans held for resale (121,205) 140,166 Loss on sales of premises and equipment 94 967 Gain on sale of segregated assets (811) (6,978) Other assets, net 231,348 264,882 Other liabilities, net (412,851) 192,160 Net cash provided (used) by operating activities (1,277,833) 876,718 INVESTING ACTIVITIES Increase (decrease) in cash realized from Sales of securities available for sale 5,625,983 1,563,214 Maturities of securities available for sale 1,458,443 163,122 Purchases of securities available for sale (6,097,805) (572,433) Sales and calls of investment securities 2,506 8,821 Maturities of investment securities 266,166 450,766 Purchases of investment securities (49,748) (50,040) Origination of loans, net 1,158,247 (2,228,476) Sales of premises and equipment 9,880 28,563 Purchases of premises and equipment (252,314) (106,431) Purchases of mortgage servicing rights (7,150) (266) Other intangible assets, net 489 (12,206) Purchases of banking organizations, net of acquired cash equivalents 36,929 (4,430) Net cash provided (used) by investing activities 2,151,626 (759,796) FINANCING ACTIVITIES Increase (decrease) in cash realized from Sales of deposits, net (2,769,871) (3,143,485) Securities sold under repurchase agreements and other short-term borrowings, net 813,690 2,131,146 Issuances of long-term debt 562,316 427,556 Payments of long-term debt (155,664) (54,653) Sales of common stock 35,439 32,066 Purchases of preferred stock - (870) Purchases of common stock (37,092) (295,017) Cash dividends paid (149,095) (132,353) Net cash used by financing activities (1,700,277) (1,035,610) Decrease in cash and cash equivalents (826,484) (918,688) Cash and cash equivalents, beginning of year 10,544,065 8,225,086 Cash and cash equivalents, end of year $ 9,717,581 7,306,398 NONCASH ITEMS Increase in securities available for sale $ - 57,382 Decrease in investment securities - (72,274) Increase in other assets - 14,892 Increase in foreclosed properties and a decrease in loans 1,000 12,326 Conversion of preferred stock to common stock 12,263 1,233 Issuance of common stock for purchase accounting acquisitions 123,924 - Effect on stockholders' equity of an unrealized gain (loss) on debt and equity securities included in Securities available for sale (248,757) 227,716 Other assets (deferred income taxes) $ (99,150) 82,272
T-23 EX-27 6 EXHIBIT 27
9 3-MOS DEC-31-1996 MAR-31-1996 5,250,210 51,347 4,416,024 3,307,356 17,177,885 2,926,617 3,059,921 91,618,998 (1,435,845) 130,581,264 90,517,804 20,371,290 2,651,914 7,539,045 0 170,960 936,878 8,001,725 130,581,264 1,888,659 328,834 77,624 2,339,480 745,380 1,127,418 1,212,062 70,000 15,383 1,292,615 375,911 375,911 0 0 242,850 0.85 0.85 4.19 727,255 274,666 594 0 1,507,798 171,725 23,604 1,435,845 994,684 5,270 435,891
EX-99 7 EXHIBIT 99 EXHIBIT (99) FIRST UNION CORPORATION OF VIRGINIA AND SUBSIDIARIES SUMMARIZED FINANCIAL INFORMATION In connection with the merger of Dominion Bankshares Corporation into First Union Corporation of Virginia ("FUNC-VA"), a wholly-owned subsidiary of First Union Corporation (the "Corporation"), on March 1, 1993, FUNC-VA assumed, and subsequently the Corporation guaranteed, FUNC-VA's publicly held 9 5/8% Subordinated Capital Notes Due 1999. Set forth below is summarized consolidated financial information for FUNC-VA and subsidiaries for the periods indicated. CONSOLIDATED STATEMENTS OF INCOME DATA
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1996 1995 Net interest income.................................................................................. $144,204 126,884 Income before income taxes........................................................................... 86,819 62,974 Net income........................................................................................... $ 54,723 41,141
CONSOLIDATED BALANCE SHEET DATA
MARCH 31, (IN THOUSANDS) 1996 1995 Assets........................................................................................ $16,758,507 13,167,312 Securities available for sale................................................................. 2,929,814 2,267,339 Investment securities......................................................................... 486,323 358,496 Loans, net of unearned income................................................................. 10,358,940 7,890,963 Stockholder's equity.......................................................................... $ 1,410,312 1,081,742
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