First Union Corporation
First Union Corporation
Two First Union Center
Charlotte, North Carolina 29288-0507
Fax: (704) 374-3425
Incorporated: 1958 as First Union National Bank of North Carolina
Total Assets: $72.6 billion
Stock Exchanges: New York
SICs: 6712 Bank Holding Companies; 6021 National Commercial Banks
First Union Corporation, with headquarters in Charlotte, North Carolina, ranks as the nation’s ninth largest bank holding company, based on total assets. Its employee base—nearly 35,000 strong—serves a customer group of more than 7 million people. The bank’s 1,314 banking branch offices in the economically diverse South Atlantic states make it the nation’s third largest bank branch network. Together, they provide full-service investment banking, retail banking, commercial banking, and trust services. First Union also has 215 diversified offices throughout the United States to provide its customer base with such financial services as mortgage banking, home equity lending, leasing, insurance, and securities brokerage services.
First Union traces its foundation to 1908 as the Charlotte-based Union National Bank. The First Union name made its initial appearance in 1958 following the merger between Union National Bank and Asheville, North Carolina-based First National Bank. At the time of the merger, the new bank became the first Charlotte bank to own branch offices in another city.
Union National Bank’s founder, H. M. Victor, would have a difficult time recognizing the bank he founded in 1908. The company’s first offices were in the modest Buford Hotel on Charlotte’s main downtown thoroughfare of Tryon Street. Victor raised funds to start Union National Bank by selling 1,000 shares of stock at $100 each. Next, he set up his office at a rolltop desk in the hotel’s main lobby. Soon, Victor had earned a reputation as a conservative banker who always confirmed his customers’ creditworthiness prior to issuing them any loans. For many years, Victor even refused to make loans for the then newly invented automobile. Finally, he relented with a loan to a customer for a Model-T Ford. Just to be safe, however, he held the owner’s keys and title until the loan was repaid in full.
As Union National grew, the company maintained the reputation Victor had established as being an institution of high credit quality, strong financial performance, and excellent customer service. It was this image and visibility that kept the bank open during the troubled 1930s. The Great Depression forced many of Union National’s competitors to shut their doors permanently during that era.
In the successful decades the followed the Depression, Union National Bank stood out as a pioneer and leader in many areas of the banking industry, and it developed an innovative approach to growth and diversification. For example, in 1947 Union National became the first Charlotte-based bank to open a branch office. Later, it was the first bank to offer a flat-fee checking account. Even before the development of MasterCard and Visa, Union National was the first bank to offer a charge card. Through the years, First Union has followed this legacy of leadership, becoming the first bank in the United States to link all of its branches by satellite for data transmission in 1993.
In 1958, a visionary leader at Union National by the name of Carl McCraw, Sr.—then serving as president of the bank— recognized that the future of American banking lay in a strong branching network. With a young manager by the name of C. C. Hope, McCraw traveled to New York to study mergers in depth. McCraw was in very good company with the young Mr. Hope. Hope was later to become vice chairman of the corporation, president of the American Bankers Association, and director of the Federal Deposit Insurance Corporation before his death in 1993.
McCraw and Hope studied bank mergers diligently, and their research paid off later that year when Union National merged with First National Bank and Trust Company of Asheville. The merger created the First Union National Bank of North Carolina. By 1964, the company had further diversified by acquiring the Raleigh-based Cameron-Brown Company. Cameron-Brown was one of the Southeast’s leading mortgage banking and insurance companies. The acquisition propelled First Union to become one of only a few banking companies that was legally empowered to offer a full line of insurance and mortgage products to its customers in all 50 states. Cameron-Brown changed its name to First Union Mortgage Corporation in 1986. By 1994, the mortgage company stood as one of the nation’s 11 largest mortgage banking companies based on mortgage servicing volume.
The late 1960s brought more organizational change to First Union. During that time, the company formed a bank holding company, and C. C. Cameron, the founder of Cameron-Brown, became chairman of the newly-formed holding company. By December 31, 1968, First Union formed a bank holding company with total assets of nearly $1 billion. In 1973, Edward E. Crutchfield, Jr., became the nation’s youngest president of a major banking company when he was named president of First Union at age 32.
From the 1960s to the mid-1980s, First Union expanded across the state, merging with more than thirty banks and adding branches to its statewide system. In 1985, the Supreme Court approved regional interstate banking, and First Union was among the first American banks to take advantage of this decision. At that time, the company expanded into other states and acquired banks in North and South Carolina, Georgia, Florida, and Tennessee.
Also in 1985, Crutchfield succeeded Cameron as chairman and chief executive officer of First Union Corporation. That year, he conducted an expansion program that encompassed Northwestern Financial Corporation of Greensboro, North Carolina. The merger was the largest in North Carolina’s history, and it created the state’s second largest bank. It also established First Union’s flagship banking operation.
In 1988, First Union’s national presence was sufficient to warrant listing its stock on the New York Stock Exchange. Prior to this event, the stock was traded only over the counter. Between 1985 and 1994, First Union used its powerful statewide foundation to complete 40 acquisitions and mergers with banks in North and South Carolina, Georgia, Tennessee, and Florida. In 1993, the company expanded its banking operations into Virginia, Maryland, and Washington, D.C. The corporation grew from $8.2 billion in assets on June 30, 1985, to $70.8 billion on December 31, 1993.
First Union’s basic business strategy has been to seek other banking organizations with compatible management and philosophies. By merging with such similar companies, First Union maintained the reputation established by Victor at the original Union National. As of 1994, the bank held firmly to its image of strong financial performance and quality products and service. As the company consolidated the operations of its acquired banking partners, First Union managed to achieve efficiencies by standardizing products, policies, and procedures and by making full use of high technology automation systems.
During its growth years, First Union’s transition was strengthened by such leaders as Frank H. Dunn, Jr., chairman and chief executive officer of First Union National Bank of North Carolina; Byron E. Hodnett, chief executive officer of First Union National Bank of Florida; Harald R. Hansen, chairman, president, and chief executive officer of First Union National Bank of Georgia; Sidney B. Tate, chairman, president, and chief executive officer of First Union Bank of South Carolina; Robert L. Reid, chairman, president, and chief executive officer of First Union National Bank of Tennessee, and Benjamin P. Jenkins, president and chief operating officer of First Union National Bank of Virginia. The banks’ mergers also added the talents of B. J. Walker, formerly of Atlantic Bancorporation and by 1994 vice chairman of First Union Corporation, to First Union’s arsenal.
Through the early 1990s, management of First Union’s sales, marketing, and customer service fell under the jurisdiction of John R. Georgius, president of the corporation. Georgius helped develop the Quality Customer Service (QCS) program, which by 1994 had become an industrywide model. Under the Quality Customer Service program, First Union constantly trained employees on improved techniques for customer service and sales. Employees earned cash incentives for achieving the program’s high standards of service. The corporation’s incentive program was just one example of its full commitment to providing quality service to its more than 7 million customers. It also served as a baseline for attracting new customers. As Georgius stated in First Union’s Corporate Overview, “In the 1990s, there should be no question that First Union is one of the finest sales-driven, service-oriented organizations in the United States.”
Other people have taken notice of First Union’s success, on both the customer service front and the financial front. First Union Corporation was profiled as one of the “101 Companies that Profit from Customer Care,” a book that cited role models “for the new American manager.” The book praises First Union for its Quality Customer Service program, for its aggressive “mystery shopping” program by an independent firm, and for its in-depth market research into customer definitions of service.
In the 1990s, First Union also continued to build its product inventory. For example, the company built the most competitive foreign exchange operation in the southeastern United States, with a team of experienced traders who provided pricing and advice 24 hours a day. The foreign exchange operation assisted more than 350 corporate customers in some 54,000 transactions in 1993. This exchange operation became increasingly important in the North Carolina region as it attracted foreign-owned corporations at a rate that outpaced the rest of the nation.
Also, after nearly a decade of using derivatives to manage interest rate risk, First Union established a “derivatives products” business in 1993. That year, the company assisted 300 corporate customers in nearly 500 transactions to manage interest rate risk, reduce the cost of financing their businesses, and expand the financing opportunities available to them. The “capital partners” group was established in 1987 to provide merchant banking services to its southeastern communities. First Union also had financing specialists in such fields as trade finance, communications, health care, energy, lease finance, transportation, mortgage banking, and insurance.
That same year, First Union launched an aggressive new strategy to compete head-on with major brokerage and investment banking firms. The company estimates there are more than 100,000 corporations and entrepreneurs who need alternative financing solutions to traditional bank loans. Among those products First Union offered were syndicated loans, private placements, securitization of assets, mezzanine financing and equity capital. The company had recruited more than 60 capital markets experts from top money centers to spearhead the initiative.
After eight years of offering its own proprietary mutual funds, First Union began rapidly developing a licensed sales force to sell mutual funds in 1993. The company increased its range of financial offerings with the acquisition of Lieber & Company, advisor to the Evergreen Funds.
One element on First Union’s side for future growth and success was its home region. The South Atlantic region of the United States has witnessed continued movement, or “in-migration,” of people into the area from other parts of the nation. During the last decade, the South Atlantic states gained 3.3 million people in population in-migration. First Union’s experts predicted that the rate will rise to 4.1 million people over the next decade. This rate is significantly better than any other region in the United States. Between 1991 and 1993, the South Atlantic region attracted more than 3,300 new or expanded plants and offices, 35 percent more than any other region and 29 percent of all new corporate locations in the United States. The South Atlantic region also attracted 45 percent of all new and expanded foreign-based facilities during this same time period. All of these statistics are even more remarkable when the region represents only 18 percent of the total United States population.
Banking opportunities increase with such rapid regional growth. First Union’s banking region was projected to continue to outpace the rest of the nation in population, employment, and personal income growth throughout the 1990s. This situation, plus First Union’s inherent financial strength, meant that the company was well positioned for growth, with resources, management talent, technological advantage, market position, and products to continue to lead the pack in the banking world.
In the company’s corporate profile, Chairman Crutchfield described First Union’s mission “to be the best place for companies and individuals to obtain the financial services and products they want—and then to delight them with our efforts to help them achieve their financial goals.” He continued, “When an individual wants an equity mutual fund, or a corporate treasurer seeks to hedge foreign currency exposure, or a state or municipality wants to issue general obligation bonds, or any customer has any financial need, our vision is for them to think, ‘I bet First Union offers that.’”
First Union Mortgage Corporation; First Union Home Equity Corporation; First Union Brokerage Services, Inc.
—Wendy Johnson Bilas