SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
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 (I.R.S. Employer
of 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.
168,596,903 shares of Common Stock, par value $3.33 1/3 per share,
were outstanding as of April 30, 1994.
<PAGE>
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
<PAGE>
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, 1994, March 31, 1993, and December 31, 1993, respectively, set
forth on page T-26 of the Corporation's First Quarter Financial Supplement
for the three months ended March 31, 1994, (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, 1994 and 1993, set forth
on page T-27 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, 1994 and 1993, set forth
on page T-28 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
<PAGE>
FIRST UNION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Securities
The Corporation adopted Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" at
January 1, 1994, which requires that debt and equity securities held:
(i) to maturity be classified as such and reported at amortized cost;
(ii) for current resale be classified as trading securities and reported at
fair value, with unrealized gains and losses included in current earnings;
and (iii) for any other purpose be classified as securities available for
sale and reported at fair value, with unrealized gains and losses excluded
from current earnings and reported as a separate component of stockholders'
equity. The adoption of Statement 115 had no impact on net income.
The following table summarizes the effect of this standard on
stockholders' equity:
<TABLE>
<CAPTION>
January 1, March 31,
(In thousands) 1994 1994
<S> <C> <C>
Securities available for sale $139,443 (65,725)
Other assets (deferred income taxes) 46,016 23,899
Stockholders' equity
Unrealized gain (loss) on debt and equity securities $93,427 (41,826)
</TABLE>
Note 2: Off-Balance Sheet Risk and Carrying Amounts and Fair Value of
Financial Instruments
Information related to off-balance sheet risk as of March 31, 1994 is included
in Table 20 through 22 of the Corporation's First Quarter Financial
Supplement on pages T-18 through T-21.
At March 31, 1994, the net fair value of the Corporation's recorded net
financial assets subject to valuation in accordance with Financial
Accounting Standard No. 107, "Disclosures about Fair Value of Financial
Instruments", decreased 11 percent from year-end 1993 as a result of a
decline in the net financial assets subject to such valuation and 10
percent as a result of an increase in interest rates from year-end 1993, which
reduced the fair value of the Corporation's securities and loan portfolios.
Information related to off-balance sheet risk and the impact of changes
in interest rates should be read in conjunction with the "Interest
Rate Risk Management" section of the Corporation's First Quarter Financial
Supplement.
3
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's Analysis of Operations appears on pages 2 through 18 and
T-1 through T-28 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.
4
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the annual meeting of the stockholders of the Corporation held on
April 19, 1994, in addition to the election of the nine directors nominated to
serve as such and the ratification of the selection of KPMG Peat Marwick as
auditors of the Corporation, the following proposals were approved at the
meeting:
FOR AGAINST ABSTAIN
1. Proposal to approve the 127,888,671 2,591,952 1,379,096
Corporation's 1994 Employee
Stock Purchase Plan.
2. Proposal to approve certain 127,150,986 3,752,897 955,837
amendments to the
Corporation's 1992 Master
Stock Compensation Plan.
3. Porposal to approve certain 118,036,055 12,054,988 1,768,676
amendments to the
Corporation's Management
Incentive Plan.
4. Proposal to approve certain 117,801,499 12,516,016 1,542,204
amendments to the
Corporation's Long-Term
Cash Incentive Plan.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
(4) Instruments defining the rights of security
holders, including indentures.*
(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 Financial
Supplement.
(20) The Corporation's First Quarter Report to
Stockholders.**
(99) First Union Corporation of Virginia
Summarized Financial Information.
* The Corporation agrees to furnish to the Commission upon request, copies
of the instrument, including indentures, defining the rights of the holders
of the long-term debt of the Corporation and its consolidated subsidiaries.
** The First Quarter Report to Stockholders is furnished for the information of
the Commission only and is not to be deemed "filed" as part of this Form
10-Q.
5
<PAGE>
(b) Reports on Form 8-K.
During the quarter ended March 31, 1994, no Reports on Form
8-K were filed with the Commission by the Corporation.
SIGNATURES
Pursuant to the Requirements of the Securities and 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 16, 1994 By: /s/ James H. Hatch
James H. Hatch
Senior Vice President and
Corporate Controller
(Principal Accounting
Officer)
6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
(4) Instruments defining the rights of security holders, including
indentures.*
(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 Financial Supplement.
(20) The Corporation's First Quarter Report to Stockholders.**
(99) First Union Corporation of Virginia Summarized Financial
Information.
</TABLE>
* The Corporation agrees to furnish to the Commission upon request,
copies of the instrument, including indentures, defining the rights
of the holders of the long-term debt of the Corporation and its
consolidated subsidiaries.
** The First Quarter Report to Stockholders is furnished for the information
of the Commission only and is not to be deemed "filed" as part of this
Form 10-Q.
Exhibit (12)(a)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three
Months
Ended Years Ended December 31,
March 31,
(Dollars in thousands) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing operations $342,460 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding capitalized
interest 129,991 517,742 456,867 698,898 982,086 890,200
(A.) Earnings $472,451 1,738,523 1,038,070 1,118,699 1,309,446 1,331,863
Interest, excluding interest on
deposits $117,319 467,181 405,297 652,393 949,046 865,413
One-third of rents 12,672 50,561 51,570 46,505 33,040 24,787
Capitalized interest 142 285 381 2,326 3,144 2,507
(B.) Fixed charges $130,133 518,027 457,248 701,224 985,230 892,707
Consolidated ratios of earnings to
fixed charges, excluding interest on
deposits (A./B.) 3.63X 3.36 2.27 1.60 1.33 1.49
INCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing operations $342,460 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding capitalized
interest 448,675 1,841,000 2,072,538 2,789,501 3,127,374 2,728,410
(C.) Earnings $791,135 3,061,781 2,653,741 3,209,302 3,454,734 3,170,073
Interest, including interest on
deposits $436,003 1,790,439 2,020,968 2,742,996 3,094,334 2,703,623
One-third of rents 12,672 50,561 51,570 46,505 33,040 24,787
Capitalized interest 142 285 381 2,326 3,144 2,507
(D.) Fixed charges $448,817 1,841,285 2,072,919 2,791,827 3,130,518 2,730,917
Consolidated ratios of earnings to
fixed charges, including interest on
deposits (C./D.) 1.76X 1.66 1.28 1.15 1.10 1.16
</TABLE>
Exhibit (12)(b)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Three
Months
Ended Years Ended December 31,
March 31,
(Dollars in thousands) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing operations $342,460 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding preferred stock
dividends and capitalized interest 133,080 530,024 473,158 705,944 990,476 890,543
(A.) Earnings $475,540 1,750,805 1,054,361 1,125,745 1,317,836 1,332,206
Interest, excluding interest on
deposits $117,319 467,181 405,297 652,393 949,046 865,413
One-third of rents 12,672 50,561 51,570 46,505 33,040 24,787
Preferred stock dividends 8,815 37,182 48,270 41,615 42,258 1,723
Capitalized interest 142 285 381 2,326 3,144 2,507
(B.) Fixed charges $138,948 555,209 505,518 742,839 1,027,488 894,430
Consolidated ratios of earnings to
fixed charges, excluding interest on
deposits (A./B.) 3.42X 3.15 2.09 1.52 1.28 1.49
INCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing operations $342,460 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding preferred stock
dividends and capitalized interest 451,764 1,853,282 2,088,829 2,796,546 3,135,764 2,728,753
(C.) Earnings $794,224 3,074,063 2,670,032 3,216,347 3,463,124 3,170,416
Interest, including interest on
deposits $436,003 1,790,439 2,020,968 2,742,996 3,094,334 2,703,623
One-third of rents 12,672 50,561 51,570 46,505 33,040 24,787
Preferred stock dividends 8,515 37,182 48,270 41,615 42,258 1,723
Capitalized interest 142 285 381 2,326 3,144 2,507
(D.) Fixed charges $457,632 1,878,467 2,121,189 2,833,442 3,172,776 2,732,640
Consolidated ratios of earnings to
fixed charges, including interest on
deposits (C./D.) 1.74X 1.64 1.26 1.14 1.09 1.16
</TABLE>
EXHIBIT (19)
FIRST UNION CORPORATION
AND SUBSIDIARIES
FIRST QUARTER FINANCIAL SUPPLEMENT
THREE MONTHS ENDED MARCH 31, 1994
FIRST UNION CORPORATION
AND SUBSIDIARIES
FIRST QUARTER FINANCIAL SUPPLEMENT
THREE MONTHS ENDED MARCH 31, 1994
(Unaudited)
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 1
Management's Analysis of Operations . . . . . . . . . . . . . . . . 2
Consolidated Summaries of Income and Per Share Data . . . . . . . . T-1
Noninterest Income . . . . . . . . . . . . . . . . . . . . . . . . T-2
Noninterest Expense . . . . . . . . . . . . . . . . . . . . . . . . T-2
Internal Capital Growth and Dividend Payout Ratios . . . . . . . . T-3
Selected Quarterly Data . . . . . . . . . . . . . . . . . . . . . . T-4
Growth through Acquisitions . . . . . . . . . . . . . . . . . . . . T-5
Securities Available for Sale . . . . . . . . . . . . . . . . . . . T-6
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . T-7
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T-8
Allowance for Loan Losses and Nonperforming Assets . . . . . . . . T-9
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . T-10
Southeast Banks Segregated Assets . . . . . . . . . . . . . . . . . T-11
Allowance for Foreclosed Properties . . . . . . . . . . . . . . . . T-12
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T-13
Time Deposits in Amounts of $100,000 or More . . . . . . . . . . . T-13
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . T-14
Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . T-15
Capital Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . T-16
Interest Rate Gap . . . . . . . . . . . . . . . . . . . . . . . . . T-17
Off-Balance Sheet Derivative Financial Instruments . . . . . . . . T-18
Off-Balance Sheet Derivatives-Expected Maturities . . . . . . . . . T-20
Off-Balance Sheet Derivatives Activity . . . . . . . . . . . . . . T-21
Net Interest Income Summaries
Five Quarters Ended March 31, 1994 . . . . . . . . . . . . . . . T-22
Year-to-date December 31, 1993; September 30, and June 30, 1993 T-24
Consolidated Balance Sheets
Five Quarters Ended March 31, 1994 . . . . . . . . . . . . . . . T-26
Consolidated Statements of Income . . . . . . . . . . . . . . . . . T-27
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . T-28
</TABLE>
SELECTED FINANCIAL DATA
<TABLE>
Three Months Ended
March 31,
Per Common Share Data 1994 1993
<S> <C> <C>
Net income applicable to common stockholders . . . . . . . $ 1.27 1.17
Cash dividends . . . . . . . . . . . . . . . . . . . . . . .40 .35
Book value . . . . . . . . . . . . . . . . . . . . . . . . 29.71 26.23
Quarter-end price . . . . . . . . . . . . . . . . . . . . $41.625 47.750
Financial Ratios
Return on average assets (a)(b) . . . . . . . . . . . . . . 1.28% 1.28
Return on average common stockholders' equity (a)(c) . . . 17.54 18.41
Net interest margin . . . . . . . . . . . . . . . . . . . 4.79 5.00
Net charge-offs to average loans, net (a) . . . . . . . . .27 .61
Allowance for loan losses to:
Loans, net . . . . . . . . . . . . . . . . . . . . . . 2.17 2.29
Nonaccrual and restructured loans . . . . . . . . . . . 168 98
Nonperforming assets . . . . . . . . . . . . . . . . . 127 74
Nonperforming assets to loans, net and
foreclosed properties . . . . . . . . . . . . . . . . . 1.70 3.07
Stockholders' equity to assets . . . . . . . . . . . . . . 7.30 7.40
Tier 1 capital to risk-weighted assets . . . . . . . . . . 9.36 9.20
Dividend payout ratio on common shares . . . . . . . . . . 31.50% 29.91
</TABLE>
Certain ratios related to nonperforming assets, net charge-offs and the loan
loss provision were favorably impacted because of the inclusion of the
acquired Southeast Banks' performing loan portfolio in the calculation of the
ratios.
(a) Quarterly amounts 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 on debt and equity securities.
1
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS
EARNINGS HIGHLIGHTS
First Union reported earnings applicable to common stockholders of
$217 million in the first quarter of 1994, a 12 percent increase
from $193 million in the first quarter of 1993. Net income per
common share increased 9 percent, to $1.27 from $1.17 in the first
quarter of 1993.
Key factors in First Union's first quarter 1994 earnings
performance, in addition to increased efficiencies resulting from
the consolidation of five significant acquisitions in 1993,
included:
(diamond) Continued growth in net interest income;
(diamond) Continued improvement in credit quality; and
(diamond) A decline in noninterest expense from the fourth quarter
of 1993.
First quarter 1993 results do not include the purchase accounting
acquisitions of Georgia Federal Bank and First American Metro
Corp. completed in June 1993.
Domestic banking operations, including trust operations, located
in North and South Carolina, Georgia, Florida, Maryland,
Tennessee, Virginia and Washington, D.C., and mortgage banking
operations are our principal sources of revenues. Foreign banking
operations are immaterial.
The Net Interest Income section provides information about lost
interest income related to nonaccrual and restructured loans and
the Asset Quality section includes further information about the
loan loss provision.
Outlook
This strong first quarter reflects First Union's ability to
improve performance in a rising interest rate environment. Our
focus is on providing the best service and a complete array of
financial products for our customers, while improving our
productivity and credit quality.
We will continue to identify opportunities that will enhance
operating results. This strategy includes making selective
investments in such areas as capital markets, capital management
and card products to further our financial goals.
While net loans were essentially flat at the end of the first
quarter of 1994 compared with the fourth quarter of 1993,
principally due to acquisition-related runoff, a smaller balance
in mortgages held for sale and seasonal declines, the outlook for
loans through the rest of the year is good. During 1994, mortgage
origination should benefit from the implementation of a new bank
branch sales program with a broader array of mortgage products and
the installation of an enhanced loan application system to speed
the mortgage lending process. Implementation of this new program
began in January of 1994.
The first quarter of 1994 included the five major 1993
acquisitions (South Carolina Federal, DFSoutheastern, Dominion
Bancshares, Georgia Federal and First
2
American), which were fully
assimilated into First Union's one common operating system.
During the second quarter of this year, First Union expects to
complete two pooling of interests acquisitions -- that of American
Bancshares Inc. on May 31, 1994, and Lieber & Co. on June 30,
1994.
American Bancshares Inc., the parent corporation of American
Commercial Savings Bank Inc., SSB, had assets of $216 million at
March 31, 1994, and is based in Monroe, North Carolina. In this
acquisition, we expect to issue approximately 518,000 shares of
First Union common stock. Assuming a First Union common stock
price of $42 per share and the issuance of 518,000 shares of First
Union common stock, the transaction value would be approximately
$22 million.
Lieber is an investment management firm that is adviser to the
Evergreen Funds, a $3.5 billion family of mutual funds at March
31, 1994, with headquarters in Purchase, New York. In this
acquisition, we expect to issue approximately 3.1 million shares
of First Union common stock. Assuming a First Union common stock
price of $42 per share and the issuance of 3.1 million shares of
First Union common stock, the transaction value would be
approximately $130 million.
During the third quarter this year, First Union expects to
complete the acquisition, announced on January 17, 1994, of
BancFlorida Financial Corporation, the parent company of
BancFlorida, a Federal Savings Bank, which had assets of $1.5
billion at March 31, 1994, and is based in Naples, Florida. This
acquisition is expected to be accounted for as a purchase.
Assuming a First Union common stock price of $42 per share prior
to closing, First Union would issue approximately 4 million shares
and the transaction value would be approximately $168 million. In
connection with this acquisition, in March and April 1994, we
repurchased 2 million shares of First Union common stock in the
open market at a cost of $83 million. The board of directors has
authorized the repurchase from time to time of up to 15 million
additional shares of common stock for various corporate purposes,
including an additional number of shares which, together with the
2 million shares previously repurchased, are estimated to
approximately equal the number of shares of First Union common
stock expected to be issued upon consummation of the acquisition
of BancFlorida. Such repurchases will not commence until at least
after the special meeting of BancFlorida stockholders to be
held on June 10, 1994. More information on the stock purchase is
included in the Stockholders' Equity section.
Consummation of all three acquisitions is subject to certain
stockholder and regulatory approvals, and other conditions of
closing.
We expect these acquisitions to have a minor impact on 1994
earnings and to be positive to earnings within 12 months of
consummation.
We continue to be alert to opportunities to enhance stockholder
value, especially in view of legislation introduced in the U.S.
Congress and legislative actions in several Southeastern states
that, under certain conditions, would permit the corporation to
acquire banking organizations throughout the nation. We are
evaluating acquisition opportunities, and teams of experienced
bankers from all areas of the corporation frequently conduct due
diligence activities in connection with possible acquisitions.
3
As a result, acquisition discussions and in some cases
negotiations frequently 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 any
future acquisitions.
The Accounting and Regulatory Matters section provides information
about various other legislative, accounting and regulatory matters
that have recently been adopted or proposed.
NET INTEREST INCOME
Tax-equivalent net interest income, the largest contributor to
earnings, was $750 million in the first quarter of 1994, compared
with $696 million in the first quarter of 1993.
Nonperforming loans reduced interest income because the
contribution from these loans is eliminated or sharply reduced. In
the first quarter of 1994, $17 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
1994 was $2 million. However, a $120 million reduction in
nonperforming assets from the fourth quarter of 1993 helped in
contributing to interest income in the first quarter of 1994.
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 4.79 percent in the first quarter of
1994, compared with 5.00 percent in the first quarter of 1993 and
4.61 percent in the fourth quarter of 1993. The margin decline
since the first quarter of 1993 primarily resulted from the
addition of acquired banks and thrifts with lower margins; the
addition of short-term securities, which contribute to net
interest income although they reduce the margin; and the impact of
refinancing activity. The margin increase since the fourth quarter
of 1993 reflects a larger spread between loan yields and deposits
costs, and reduced refinancing activity, which had a positive
effect on mortgage-related securities. Our goal is to continue
increasing net interest income.
The average rate earned on earning assets was 7.59 percent in the
first quarter of 1994, compared with 8.10 percent in the first
quarter of 1993. The average rate paid on interest-bearing
liabilities was 3.29 percent in the first quarter of 1994 and 3.55
percent in the first quarter of 1993.
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.
4
NONINTEREST INCOME
Developing new sources of fee income has been one of our key long-
term strategies for dealing with increased competition from
nonbanking companies and other changes taking place in the
financial services industry.
Noninterest income was $281 million in the first quarter of 1994,
compared with $271 million in the first quarter of 1993 and $324
million in the fourth quarter of 1993. A decrease in trading
account profits, service charges on deposit accounts, and
mortgage banking revenues contributed to the decline from the
fourth quarter of 1993. The first quarter of 1994 included gains
on assets held for sale of $17 million compared with $30 million
in the fourth quarter of 1993.
Trading Activities
Trading activities are undertaken primarily to satisfy customers'
risk management and investment needs. Additionally, trading is
done for the corporation's own account. All trading activities
are conducted within risk limits established by the corporation's
Funds Management Committee.
At March 31, 1994, trading account assets were $821 million
compared with $652 million at year-end 1993. These assets are
carried at market value.
NONINTEREST EXPENSE
Noninterest expense was $640 million in the first quarter of 1994,
compared with $578 million in the first quarter of 1993 and $688
million in the fourth quarter of 1993. The decline in expenses
from the fourth quarter of 1993 reflects the assimilation of five
1993 acquisitions into First Union's one common operating system
and other acquisition-related declines in expenses, and a decline
in credit-related costs. Costs related to environmental matters
were not material.
SECURITIES AVAILABLE FOR SALE
Securities available for sale are used as a part of the
corporation's interest rate risk management strategy and may be
sold in response to changes in interest rates, changes in
prepayment risk, the need to increase regulatory capital ratios
and other factors. In accordance with the adoption of Statement of
Financial Accounting Standards No. 115, we began accounting for
debt and equity securities on a market value basis as of January
1, 1994.
At March 31, 1994, we had $12.7 billion in securities available
for sale, compared with a market value of $11.9 billion at
December 31, 1993. The market value of securities available for
sale was $66 million below amortized costs at the end of the first
quarter of 1994. As a result a $42 million after-tax unrealized
loss has been recorded as a reduction of stockholders' equity.
Table 7 provides information related to unrealized gains and
losses and realized gains and losses.
The average rate earned on securities available for sale in the
first quarter of 1994 was 5.23 percent, compared with 5.16 percent
in the first quarter of 1993. The average maturity of the
portfolio was 2.66 years at March 31, 1994. Portfolio activity in
the first quarter of 1994 included the addition of short-term
Treasuries.
5
The Accounting And Regulatory Matters section provides information
related to the accounting for debt and equity securities.
INVESTMENT SECURITIES
First Union's investment securities amounted to $2.5 billion at
March 31, 1994, compared with $2.7 billion at year-end 1993.
The average rate earned on investment securities in the first
quarter of 1994 was 9.04 percent, compared with 7.51 percent in
the first quarter of 1993. The average maturity of the portfolio
was 4.46 years at March 31, 1994. First quarter 1994 yields and
maturities reflect the reclassification of securities to the
available for sale portfolio at year-end 1993 to better support
our current interest rate risk management strategy.
The Accounting And Regulatory Matters section provides information
related to the accounting for debt and equity securities.
LOANS
Our lending strategy stresses quality growth, diversified by
product, geography and industry. A common credit underwriting
structure is in place throughout the company, and a special real
estate credit group reviews large commercial real estate loans
before approval. Consistent with our long-time standard, we
generally look for two repayment sources for commercial real
estate loans: cash flows from both the project itself and the
borrower.
Our commercial lenders focus principally on middle-market
companies. A majority of our commercial loans range from $50,000
to $10 million. We offer a broad range of financial products and
services to meet our customers' needs, including access to sources
of capital and creative financing solutions for our corporate and
commercial customers.
Our consumer lenders emphasize credit judgments that focus on a
customer's debt obligations, ability and willingness to repay, and
general economic trends.
Net loans at March 31, 1994 were $46.7 billion, compared with
$46.9 billion at December 31, 1993. Loans remained essentially
flat since year-end 1993 due to the anticipated runoff of acquired
loans and lower balances of mortgages held for sale. Commercial
and consumer loan growth was strong in Florida and South Carolina,
flat in North Carolina and Virginia, and down in Georgia, which
reflected the acquisition-related runoff.
The loan portfolio at March 31, 1994, was composed of 47 percent
in commercial loans and 53 percent in consumer loans. The
portfolio mix has not changed significantly from year-end 1993.
Unused loan commitments related to commercial and consumer loans
were $11.3 billion and $7.0 billion, respectively. Commercial and
standby letters of credit were $1.5 billion.
6
At March 31, 1994, loan participations sold to other lenders
amounted to $1.3 billion and were recorded as a reduction of gross
loans.
The average rate earned on loans in the first quarter of 1994 was
8.29 percent, compared with 8.80 percent in the first quarter of
1993. The average prime rate in the first quarter of 1994 was 6.02
percent, compared with 6.00 percent in the first quarter of 1993.
The Asset Quality section provides information about geographic
exposure in the loan portfolio and a loss-sharing arrangement with
the Federal Deposit Insurance Corporation (FDIC) covering the
Southeast Banks commercial and consumer loan portfolios acquired
from the FDIC in 1991.
Commercial Real Estate Loans
Commercial real estate loans amounted to 16 percent of the total
portfolio at March 31, 1994, and at December 31, 1993. This
portfolio included commercial real estate mortgage loans of $5.8
billion at March 31, 1994, and at December 31, 1993. The Asset
Quality section provides information related to geographic
exposure.
Highly Leveraged Transactions
An HLT loan generally is defined as a loan amounting to more than
$20 million involving a buyout, acquisition or recapitalization of
an existing business, in which the loan substantially increases a
company's leverage ratio. At March 31, 1994, outstanding HLT loans
amounted to $700 million, compared with $786 million at December
31, 1993.
ASSET QUALITY
The following portion of the asset quality discussion is divided
into two sections to reflect the loss-sharing arrangement between
First Union and the FDIC in connection with the September 1991
Southeast Banks transaction.
The first section relates to First Union's nonperforming assets,
past due loans, net charge-offs and loan loss allowance, excluding
those related to acquired Southeast Banks nonperforming assets.
The acquired First American segregated assets discussed separately
in previous reporting periods are no longer material for
disclosure purposes and are included in the other assets caption
in the balance sheet.
The second section relates solely to the same categories mentioned
above segregated for the acquired Southeast Banks loan portfolio.
Certain ratios related to First Union's nonperforming assets and
net charge-offs have been favorably affected because Southeast
Banks segregated assets portfolios have not been included in the
determination of these ratios.
Under the terms of the loss-sharing arrangement, the FDIC
reimburses First Union for 85 percent of any losses associated
with the acquired Southeast Banks commercial and consumer loan
portfolio, except revolving consumer credit, for which
reimbursement declines five percent per year to 65 percent in
1996.
7
<PAGE>
The FDIC also provides virtually cost-free funding for the
acquired Southeast Banks nonperforming assets. This was initially
accomplished through five-year revolving notes issued by First
Union. Since the first quarter of 1992, in accordance with the
FDIC assistance agreements, the FDIC has been paying a market rate
of interest on the amount of additions to Southeast Banks
segregated assets.
First Union Nonperforming Assets
Nonperforming assets at March 31, 1994, declined 13 percent to
$796 million, or 1.70 percent of net loans and foreclosed
properties, compared with $916 million, or 1.95 percent, at
December 31, 1993.
The Quarterly Nonperforming Assets By Business Unit table
provides additional information about nonperforming assets.
Quarterly Nonperforming Assets By Business Unit*
(Dollars in millions) 1Q94 4Q93 3Q93 2Q93 1Q93
Florida $325 347 471 529 575
North Carolina 64 81 92 103 112
Georgia 119 134 223 208 152
Virginia 118 161 184 180 181
South Carolina 41 43 51 57 42
Tennessee 13 29 36 32 40
Maryland 28 29 23 23 34
Washington, D.C. 17 9 8 7 9
Other units** 71 83 122 134 123
Total $796 916 1,210 1,273 1,268
* Excludes acquired Southeast Banks
segregated assets.
** First Union Mortgage Corporation, First Union
Home Equity Corporation, Corporate Banking Group
and other units.
Loans or properties of less than $5 million each
made up 82 percent, or $655 million, of
nonperforming assets at March 31, 1994. Of the rest:
(diamond) 8 loans or properties between $5 million and
$10 million each accounted for $53 million; and
(diamond) 6 loans or properties over $10 million each accounted
for $88 million.
Seventy-six percent of nonperforming assets were collateralized by
real estate at March 31, 1994, compared with 71 percent at year-
end 1993.
First Union Past Due Loans
In addition to these nonperforming assets, at March 31, 1994,
accruing loans 90 days past due were $80 million, compared with
$71 million at December 31, 1993. Of these, $22 million were
related to commercial and commercial real estate loans, compared
with $20 million at December 31, 1993.
First Union Net Charge-offs
Annualized net charge-offs as a percentage of average net loans
were .27 percent in the first quarter of 1994, compared with .61
percent in the first quarter of 1993. Table 10 provides
information on net charge-offs by category.
8
First Union Provision And Allowance For Loan Losses
The loan loss provision was $25 million in the first quarter of
1994, compared with $60 million in the first quarter of 1993. The
decrease in the loan loss provision was based primarily upon
current economic conditions, lower levels of nonperforming assets,
the maturity of the nonperforming assets portfolio, and current
and projected lower levels of charge-offs.
In addition, we establish reserves based upon various other
factors, including the results of quantitative analyses of the
quality of commercial loans and commercial real estate loans.
Reserves for commercial and commercial real estate loans are based
principally on loan grades, historical loss rates, borrowers'
creditworthiness, underlying cash flows from the project itself
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 $500,000 that are being
monitored as potential credit problems to determine whether
supplemental, specific reserves are necessary.
For several quarters, the loan loss allowance as a percentage of
net loans has declined and the allowance coverage of nonaccrual
and restructured loans and nonperforming assets has increased, as
indicated in Table 10. In the first quarter of 1994, this was
primarily the result of growth in loans and a $472 million decline
in nonperforming assets from March 31, 1993. These percentages
exclude the acquired Southeast Banks segregated assets. The
Southeast Banks Segregated Assets section provides information
related to a separate $31 million allowance for losses on
segregated assets.
Southeast Banks Segregated Assets
At March 31, 1994, acquired Southeast Banks segregated assets
amounted to $338 million, or $307 million net of the $31 million
allowance referred to above, compared with $380 million, or $347
million net of a $33 million allowance, at December 31, 1993. This
segregated asset portfolio includes nonaccrual loans and
foreclosed properties, net of the allowance for segregated assets
as indicated in Table 12.
Southeast Banks Past Due Loans
Accruing loans 90 days past due included in the acquired Southeast
Banks performing loan portfolio decreased 17 percent from $28
million at December 31, 1993, to $24 million at March 31, 1994.
These loans are subject to the terms of the FDIC loss-sharing
agreement.
Southeast Banks Net Charge-offs
Net charge-offs of $2 million, representing First Union's
approximately 15 percent share of the losses on acquired Southeast
Banks loans, were deducted from the allowance for segregated
assets in the first quarter of 1994, compared with $3 million in
the fourth quarter of 1993.
Geographic Exposure
The loan portfolio in the South Atlantic region of the United
States is spread primarily across 58 metropolitan statistical
areas with diverse economies. Washington, D.C.; Charlotte, North
Carolina; Atlanta, Georgia; and Miami, Jacksonville, West Palm
Beach and Tampa, Florida, are our largest markets, but no
9
individual metropolitan market contains more than 8 percent of the
commercial loan portfolio.
Substantially all of the $7.3 billion commercial real estate
portfolio at March 31, 1994, was located in our banking region,
which includes North Carolina, South Carolina, Georgia, Florida,
Virginia, Maryland, Tennessee and Washington, D.C.
CORE DEPOSITS
Core deposits were $50.0 billion at March 31, 1994, compared with
$50.9 billion at December 31, 1993. Core deposits include savings,
negotiated order of withdrawal (NOW), money market and
noninterest-bearing accounts, and other consumer time deposits.
Average noninterest-bearing deposits were 20 percent of average
core deposits in the first quarter of 1994, compared with 19
percent in the first quarter of 1993. The Net Interest Income
Summaries provide additional information about average core
deposits.
The portion of core deposits in higher-rate, other consumer time
deposits was 33 percent at March 31, 1994, and at year-end 1993.
As market rates have declined, some customers have shifted their
other consumer time deposits either into other deposit products or
other investments. We expect declines in other consumer time
deposit balances as long as rates stay at their current levels.
Other consumer time and other noncore deposits usually pay higher
rates than savings and transaction accounts, but they generally
are not available for immediate withdrawal and are less expensive
to process.
PURCHASED FUNDS
Purchased funds at March 31, 1994, were $12.1 billion, compared
with $10.1 billion at year-end 1993. We purchase funds primarily
to fund short-term investments that have attractive yields.
Primarily, we fund these investments with federal funds,
securities sold under repurchase agreements, and eurodollar time
deposits.
Average purchased funds in the first quarter of 1994 were $10.9
billion, an increase of 20 percent from the first quarter of 1993.
LONG-TERM DEBT
Long-term debt was 60 percent of total stockholders' equity at
March 31, 1994, compared with 59 percent at December 31, 1993.
During the first quarter of 1994, we issued $150 million of 15-
year, 6.375 percent subordinated debt. Proceeds from this debt
issue were designated for general corporate purposes.
Under a shelf registration statement filed with the Securities and
Exchange Commission, we currently have available for issuance $650
million of senior or
10
subordinated debt securities. The sale of any
additional debt securities will depend on future market
conditions, funding needs and other factors.
Debt Obligations
We have a $300 million committed back-up line of credit that
expires in June 1994, which we are negotiating to replace. The
current 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. We expect the new
credit facility also will contain financial covenants. First Union
is currently in compliance with these requirements and has not
used this line of credit.
In 1994, $57 million of long-term debt will mature. Maturing in
1995 is $211 million, and in 1996, $541 million, which includes
notes payable to the FDIC of $225 million at March 31, 1994. We
expect the notes payable to the FDIC will decrease over the
remaining period ending in September 1996 through cash flows
generated by the acquired loans, the sale of the Southeast Banks
segregated assets and FDIC reimbursements.
The Asset Quality section provides additional information related
to the funding of the segregated assets.
STOCKHOLDERS' EQUITY
At March 31, 1994, common stockholders' equity was $5.03 billion,
a two percent increase from $4.92 billion at December 31, 1993.
Total stockholders' equity was $5.28 billion, compared with $5.21
billion at year-end 1993. The increase in equity since year-end
1993 was primarily the result of retained earnings and capital
raised through the dividend reinvestment and employee stock option
and purchase plans, net of a $42 million unrealized loss related
to debt and equity securities and $46 million paid for the
purchase in the open market of 1.1 million shares of common stock
and cancellation of such shares. In April 1994 we repurchased and
cancelled an additional 897,000 common stock at a cost of $37
million.
Series 1990 preferred stock cash dividends of 7.25 percent per
annum were paid for the quarter ended March 31, 1994. We paid $74
million in dividends to preferred and common stockholders in the
first quarter of 1994.
Subsidiary Dividends
Our banking subsidiaries are the largest source of parent company
dividends. Capital requirements established by regulators limit
dividends that these and certain other of our subsidiaries can
pay. The Comptroller of the Currency (OCC) generally limits a
national bank's dividends in two principal ways: first, dividends
cannot exceed the bank's undivided profits, less statutory bad
debt in excess of a bank's allowance for loan losses; and second,
in any year dividends may not exceed a bank's net profits
for that year, plus its retained earnings from the preceding two
years, less any required transfers to surplus.
Under these and other limitations, our subsidiaries had $452
million available for dividends at March 31, 1994. Our
subsidiaries paid $25 million in dividends to the corporation
during the first quarter of 1994.
11
Risk-Based Capital
The minimum requirement for the ratio of total capital to risk-
weighted assets (including certain off-balance-sheet activities,
such as standby letters of credit and interest rate swaps) is
currently 8 percent. At least half of the total capital is to be
composed of common equity, retained earnings and a limited amount
of qualifying preferred stock, less certain intangible assets
(tier 1 capital). The rest may consist of a limited amount of
subordinated debt, nonqualifying preferred stock and a limited
amount of the loan loss allowance (together with tier 1 capital,
total capital).
At March 31, 1994, the corporation's tier 1 and total capital
ratios were 9.36 percent and 15.15 percent, respectively.
In addition, the Federal Reserve Board has established minimum
leverage ratio requirements for bank holding companies. These
requirements provide for a minimum leverage ratio of tier 1
capital to adjusted average quarterly assets equal to 3 percent
for bank holding companies that meet specified criteria, including
having the highest regulatory rating. All other bank holding
companies will generally be required to maintain a leverage ratio
from at least 4 to 5 percent. The corporation's leverage ratio at
March 31, 1994, was 6.57 percent.
The requirements also provide that bank holding companies
experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above
the minimum supervisory levels without significant reliance on
intangible assets. The Federal Reserve Board also has indicated it
will continue to consider a tangible tier 1 leverage ratio
(deducting all intangibles) in evaluating proposals for expansion
or new activity. The Federal Reserve Board has not advised us of
any specific minimum leverage ratio applicable to us.
Each subsidiary bank is subject to similar capital requirements
adopted by the OCC. Each subsidiary bank listed in Table 18 had a
leverage ratio in excess of 5.58 percent at March 31, 1994. 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, 1994, the subsidiary national banks listed in Table
18 met the capital and leverage ratio requirements for well
capitalized banks. We expect to maintain these banks' ratios at
the required levels by the retention of earnings and, if
necessary, the issuance of additional capital.
Failure to meet certain capital ratio or leverage ratio
requirements could subject a bank to a variety of enforcement
remedies, including termination of deposit insurance by the FDIC.
The Accounting and Regulatory Matters section provides more
information about proposed changes in risk-based capital
standards.
12
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. Our inherent
maturity and repricing characteristics of lending and deposit
activities create a naturally asset-sensitive structure. By using
a combination of on- and off-balance sheet financial instruments
we manage interest rate sensitivity within our established policy
guidelines.
The Financial Management Committee of the corporation's board of
directors reviews the corporation's overall interest rate risk
management activity. The Funds Management Committee, which
includes the chief executive officer, president, and senior
executives from our Capital Markets Group, credit and finance
areas, oversees the interest rate risk management process and
approves policy guidelines. Funds Management personnel monitor the
day-to-day exposure to changes in interest rates in response to
loan and deposit flows and make adjustments within established
policy guidelines.
We believe that interest rate risk is best measured by the amount
of earnings per share at risk given specified changes in interest
rates. We have been modeling interest rate sensitivity since the
early 1970s. The model captures all earning assets, interest-
bearing liabilities and all off-balance sheet financial
instruments and combines the various factors affecting rate
sensitivity into an earnings outlook that incorporates our view of
the short-term interest rate environment most likely over the next
24 months. The Funds Management Committee reviews and continuously
updates the underlying assumptions included in the earnings
simulation model.
Our interest rate sensitivity analysis is based on multiple
interest rate scenarios, projected changes in balance sheet
categories and other relevant assumptions. Changes in management's
outlook and other market factors may cause actual results to
differ from our current simulated outlook.
We believe our earnings simulation model is a more relevant
depiction of interest rate risk than traditional gap tables
because it captures multiple effects excluded in less
sophisticated presentations, and it includes significant variables
that we identify as being affected by interest rates. For example
our model captures rate of change differentials, such as federal
funds rates versus savings account rates; maturity effects, such
as calls on securities; and rate barrier effects, such as caps and
floors on loans. It also captures changing balance sheet levels,
such as loans and investment securities; and floating rate loans
that may be tied or related to prime, LIBOR, CD rates, treasury
notes, federal funds or other rate indices, which do not
necessarily move identically as short-term rates change. In
addition it captures leads and lags that occur in long-term rates
as short-term rates move away from current levels; and the effects
of prepayment volatility on various fixed rate assets such as
residential mortgages, mortgage-backed securities and consumer
loans. These and certain other effects are evaluated in developing
the multiple scenarios from which sensitivity of earnings to
changes in interest rates is determined.
13
We determine sensitivity of earnings to changes in interest rates
by assessing the impact on net income in multiple rising and
falling interest rate scenarios. The model is updated at least
monthly and more often if desired.
We use three scenarios in analyzing interest rate sensitivity. The
base line scenario is our estimated most likely path for future
short-term interest rates for the next 24 months. The base line
scenario assumes rising federal funds rates over the next 24
months. 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 remain 100 basis points higher
or lower through the twenty-fourth month. Additionally, other
scenarios are reviewed monthly to examine the effects of different
interest rate movements.
We determine interest rate sensitivity by the change in earnings
per share between the three scenarios over a 12-month policy
measurement period. The earnings per share as calculated by the
earnings simulation model under the base line scenario becomes the
standard. The measurement of interest rate sensitivity is the
percentage change in earnings per share calculated by the model
under high rate versus base-line and under low rate versus base-
line. The policy measurement period begins with the fourth month
forward and ends with the fifteenth month (i.e., the twelve-month
period.) The scenarios do not include the adjustments that
management would make as rate expectations change.
Our policy limit for the maximum negative impact on earnings per
share resulting from either the high rate or low rate scenario is
5 percent. Based upon the April 1994 outlook, if interest rates
were to rise to follow the high rate scenario, which means a full
100 basis point increase over the base line (already a rising rate
scenario), then earnings during the policy measurement period
would be negatively affected by 2.9 percent (assuming management
took no actions.)
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 management include swaps, futures and options with
indices that directly relate to the pricing of specific core
assets and liabilities of the corporation. We believe there is
minimal risk that the derivatives used for rate sensitivity
management will have any significant unintended effect on
corporate earnings.
As a result of interest rate fluctuations, derivatives will from
time to time develop unrealized appreciation or depreciation
in market values as compared with their cost. If the derivatives
are directly linked to specific assets and liabilities of the
organization, then there will generally be offsetting unrealized
appreciation and depreciation on the corporate balance sheet.
Our asset sensitivity arises naturally primarily because the
repricing characteristics of the large core deposit base have a
positive effect on earnings in a rising rate environment and a
negative effect on earnings in a falling rate environment. We use
the traditional investment portfolio as well as off-balance sheet
derivative instruments to neutralize this natural asset
sensitivity of the corporation. This is accomplished primarily by
holding fixed rate debt instruments in the securities
14
portfolio or
by adding off-balance sheet "asset proxies." These "asset proxies"
consist of interest rate swaps that convert floating rate assets
(primarily variable rate loans) into fixed rate assets. The
combination of securities and interest rate swaps enables us to
achieve a desired level of interest rate sensitivity.
Another common application of derivatives in managing the
corporation's interest rate risk is the use of interest rate swaps
to convert fixed rate debt into floating rate debt. This is
accomplished by entering into interest rate swap contracts to
receive a fixed rate of interest to the contractual maturity of
the debt issued and pay a variable rate, usually six-month LIBOR.
These "liability swaps" leave rate sensitivity unchanged, whereas
the fixed-rate debt issuance alone would have increased asset
sensitivity or reduced liability sensitivity. The combination of
the "liability swaps" and debt produces the desired LIBOR-based
floating rate funding regardless of changes in interest rates.
As interest rates move higher, the market value of both categories
of interest rate swaps will decline. In the example of swaps used
as "asset proxies," the market value decline will be somewhat
offset by a gain in value of the corporation's core deposits. For
"liability swaps," the market value decline would be closely
offset by appreciation in the market value of the fixed rate debt
on the balance sheet to which the swaps are directly linked.
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 the corporate earnings are not at risk as interest
rates move up or down.
The notional amount of off-balance sheet derivative financial
instruments used to manage our interest rate risk sensitivity
amounted to $42.6 billion at March 31, 1994, compared to $48.8
billion at December 31, 1993. The related fair value of the off-
balance sheet derivative financial instruments was $18 million at
March 31, 1994, and $369 million at December 31, 1993. The
increased contribution to net interest income in a higher
interest rate environment from on-balance sheet assets and
liabilities is expected to substantially offset the potential
negative impact on net interest income reflected by the decline
in market value of these instruments.
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 all caps, floors, swaps and
swaptions be governed by an International Swap Dealers Association
Master Agreement and be subject to bilateral collateral
arrangements.
Collateral for these transactions is delivered by either party
when the credit risk associated with a particular transaction, or
group of transactions to the extent netting exists, exceeds
acceptable thresholds of credit risk. Thresholds are determined
based on the strength of the individual counterparty and are
bilateral. As of March 31, 1994, the total credit risk in excess
of thresholds was $124 million.
15
The fair value of collateral held was 96 percent of the total
credit risk in excess of thresholds.
LIQUIDITY
We manage liquidity -- the ability to raise funds primarily
through deposits, purchased funds or the issuance of debt or
capital -- through the selection of the asset mix and the
maturity mix of liabilities.
As part of this process, we continually evaluate funding needs and
alternatives. For example, for some time we have focused efforts
in our large branch network toward raising more deposits. This
reduces dependency on national market sources to help meet funding
requirements. In addition, acquired bank and savings bank deposits
have enhanced overall liquidity.
We use these deposits and other funding sources to fund loans and
investments, meet deposit withdrawals and maintain reserve
requirements.
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; and
depreciation and amortization. These items amounted to $106
million in the first quarter of 1994, compared with $152 million
in the first quarter of 1993. This cash was available to increase
earning assets, to reduce borrowings by $32 million and to pay
dividends of $74 million.
Several off-balance sheet assets could be used to increase
liquidity and provide additional financial flexibility. These
include a mortgage servicing portfolio with an estimated fair
value of $255 million over book value at March 31, 1994.
ACCOUNTING AND REGULATORY MATTERS
The Financial Accounting Standards Board (FASB) has issued
Standard No. 112, "Employers' Accounting for Postemployment
Benefits", which requires accrual of a liability for all types of
benefits paid to former or inactive employees after employment but
before retirement. The company adopted this accounting standard
beginning January 1, 1994. Benefits subject to this accounting
pronouncement include salary continuation, supplemental
unemployment benefits, severance benefits, disability-related
benefits (including workers' compensation), job training and
counseling, and continuation of such benefits as health care and
life insurance coverage. The cumulative effect of initially
applying this new accounting standard in 1994 will be
approximately $14 million. The recurring reduction of income
before income taxes is expected to be immaterial.
The FASB also has issued Standard No. 114, "Accounting by
Creditors for Impairment of a Loan", which requires that all
creditors value all specifically reviewed loans for which it is
probable that the creditor will be unable to collect all amounts
due according to the terms of the loan agreement at the present
value of expected cash flows, market price of the loan, if
available, or value of the underlying collateral. Expected cash
flows are required to be discounted at the loan's effective
interest rate. We estimate the initial application of this
accounting standard will not require an increase to the existing
allowance for loan losses. The
16
periodic effect on net income has not been fully determined.
This Standard is required for fiscal years beginning after
December 15, 1994. The FASB has issued an exposure draft,
"Accounting by Creditors for Impairment of a Loan--Income
Recognition", that would amend FASB Statement No. 114 to
allow a creditor to use existing methods for recognizing interest
income on an impaired loan and by requiring additional disclosures
about how a creditor recognizes interest income related to
impaired loans. This proposed Statement would be effective upon
issuance.
The FASB also issued Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", that requires that
debt and equity securities held: (i) to maturity be classified as
such and reported at amortized cost; (ii) for current resale be
classified as trading securities and reported at fair value, with
unrealized gains and losses included in current earnings; and
(iii) for any other purpose be classified as securities available
for sale and reported at fair value, with unrealized gains and
losses excluded from current earnings and reported as a separate
component of stockholders' equity. It is required for fiscal years
beginning after December 15, 1993. The effect of the foregoing
would be to cause fluctuations in stockholders' equity based on
changes in values of debt and equity securities. More information
related to the adoption of this Standard is included in the
Securities Available For Sale section.
The FASB has issued an exposure draft, "Accounting for Stock-based
Compensation", that proposes that the fair value of an award of
equity instruments to employees be recognized as additional equity
at the date the award is granted. Amounts attributable to future
service would be recognized as an asset and amortized to personnel
expense over the period of employee service. If the award is for
past services, personnel expense would be charged in the period in
which the award is granted. Pro forma disclosure of the effects on
net income and income per share for awards granted after December
31, 1993, would be required. The actual fair value adjustments to
net income would be effective for awards granted after December
31, 1996. The effect of the provisions of this proposed accounting
standard on net income and total stockholders' equity would depend
upon the nature of stock-based compensation, if any, awarded by
the corporation in future years.
The FASB has also issued an exposure draft, "Accounting for the
Impairment of Long-Lived Assets", that proposes accounting for the
impairment of long-lived assets, identifiable intangibles and
goodwill related to those assets. It would require the carrying
amount of impaired assets be reduced to fair value. An entity
would estimate the future cash flows expected to result from the
use of an asset and its eventual disposition. If the sum of the
expected future net cash flows (undiscounted and without interest
charges) is less that the carrying amount of the asset, an
impairment loss would be recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use would be based on the fair value of
the asset. Long-lived assets and identifiable intangibles to be
disposed of would be reported at the lower of cost or fair value
less cost to sell, except for certain assets, which in accordance
with current accounting pronouncements, will continue to be
reported at the lower of cost or net realizable value. This
proposed statement also would require a rate-regulated enterprise
to recognize an impairment for the amount of costs excluded when a
regulator excludes all or part of a cost from the enterprise's
rate base. This proposed
17
statement would be effective for financial statements issued for
fiscal years beginning after December 15, 1994.
The FASB has also issued an exposure draft, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments". This proposed statement would require improved
disclosures about derivative financial instruments -- futures,
forward, swap or option contracts, or other financial instruments
with similar characteristics. It would also amend existing
requirements of FASB Statement No.105, Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentration of Credit Risk, and FASB
Statement No.107, Disclosures about Fair Value of Financial
Instruments. It would require that a distinction be made between
financial instruments held or issued for the purposes of trading
or other than trading. For derivative financial instruments held
or issued for trading, this proposed Statement would require
disclosure of average, maximum and minimum aggregate fair values
and of net trading gains or losses. For derivative financial
instruments held or issued for purposes other than trading, it
would require disclosure about those purposes, about how the
instruments are reported in financial statements, and, if the
purpose is hedging anticipated transactions, about the anticipated
transactions, the amounts of hedging gains and losses deferred,
and the transactions or other events that result in recognition of
the deferred gains or losses in income. The proposed Statement
would encourage, but not require, quantitative information about
interest rate or other market risks of derivative financial
instruments, and also of other assets and liabilities, that is
consistent with the way the entity manages or adjusts risks and
that is useful for comparing the results of applying the entity's
strategies to its objectives for holding or issuing the derivative
financial instruments. The proposed Statement would be effective
for financial statements issued for fiscal years ending after
December 15, 1995.
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.
The Federal Deposit Insurance Corporation Improvement Act also
requires a revision of risk-based capital standards. The new
standards are required to incorporate interest rate risk,
concentration of credit risk and the risks of nontraditional
activities and to reflect the actual performance and expected risk
of loss of multifamily mortgages.The Risk-Based Capital section
provides more information on risk assessment classifications.
Legislation has been enacted providing that deposits and certain
claims for administrative expenses and employee compensation
against an insured depository institution would be afforded a
priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, in the
"liquidation or other resolution" of such an institution by any
receiver.
Various other legislative proposals concerning the banking
industry are pending in Congress. Given the uncertainty of the
legislative process, we cannot assess the impact of any such
legislation on our financial condition or results of operations.
18
Table 1
CONSOLIDATED SUMMARIES OF INCOME AND PER SHARE DATA
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
March 31, First Fourth Third Second First
(In thousands except per share data) 1994 Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES
OF INCOME
Interest income* $ 4,719,523 1,186,412 1,196,674 1,199,264 1,137,173 1,123,989
Interest expense 1,798,875 436,003 463,394 470,491 428,987 427,567
Net interest income* 2,920,648 750,409 733,280 728,773 708,186 696,422
Provision for loan losses 186,424 25,000 49,973 50,001 61,450 60,329
Net interest income after
provision for loan losses* 2,734,224 725,409 683,307 678,772 646,736 636,093
Securities available for sale
transactions 12,751 4,300 2,804 4,142 1,505 17,316
Investment security transactions 8,050 615 3,049 815 3,571 -
Noninterest income 1,186,862 275,781 317,727 287,998 305,356 254,005
Noninterest expense 2,583,193 639,841 687,922 664,388 591,042 578,295
Income before income taxes* 1,358,694 366,264 318,965 307,339 366,126 329,119
Income taxes 418,221 120,001 98,469 84,286 115,465 105,040
Tax-equivalent adjustment 100,485 23,804 25,153 27,638 23,890 24,087
Net income 839,988 222,459 195,343 195,415 226,771 199,992
Dividends on preferred stock 23,622 5,726 5,489 6,240 6,167 7,004
Net income applicable to
common stockholders $ 816,366 216,733 189,854 189,175 220,604 192,988
PER COMMON SHARE DATA
Net income $ 4.83 1.27 1.12 1.12 1.32 1.17
Average common shares - 170,314,176 169,981,393 168,540,736 166,972,413 165,272,415
Average common
stockholders' equity**
Quarter-to-date $ - 5,012,086 4,843,889 4,657,544 4,439,393 4,251,677
Year-to-date - 5,012,086 4,550,048 4,451,024 4,346,054 4,251,677
Common stock price
High 51 1/2 43 3/4 48 1/8 49 5/8 51 1/2 50 7/8
Low 37 7/8 39 3/4 37 7/8 43 1/2 40 42 1/4
Period-end $ 41 5/8 41 5/8 41 1/4 47 5/8 48 1/2 47 3/4
To earnings ratio*** 8.62 X 8.62 8.72 13.01 13.86 16.08
To book value 140 % 140 143 169 178 182
Cash dividends $ 1.55 .40 .40 .40 .35 .35
Book value** $ 29.71 29.71 28.90 28.14 27.27 26.23
PER PREFERRED SHARE DATA
Series 1990 preferred stock price
High $ 55 1/2 53 7/8 53 7/8 55 1/2 55 1/8 55 3/8
Low 52 52 1/8 52 53 1/4 53 1/8 53
Period-end 52 1/8 52 1/8 52 3/8 53 1/2 54 7/8 53
Cash dividends $ 3.7376 .9063 .8688 .9875 .9750 1.0563
Dividend rate 7.48 % 7.25 6.95 7.90 7.80 8.45
</TABLE>
*Tax-equivalent.
**Quarter-to-date and year-to-date average common stockholders' equity
excludes average net unrealized gains on debt and equity securities of
$46,966,000. The determination of book value excludes a net unrealized loss
on debt and equity securities of $41,826,000 in the first quarter of 1994.
***Based on net income applicable to common stockholders.
T-1
<PAGE>
Table 2
NONINTEREST INCOME
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
March 31, First Fourth Third Second First
(In thousands) 1994 Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Trading account profits $ 44,691 7,323 21,413 5,814 10,141 5,639
Service charges on deposit accounts 431,095 108,022 114,016 111,163 97,894 97,212
Mortgage banking income 119,541 19,421 30,325 34,444 35,351 38,488
Capital management income 202,429 50,949 49,383 50,283 51,814 50,395
Securities available for sale transactions 12,751 4,300 2,804 4,142 1,505 17,316
Investment security transactions 8,050 615 3,049 815 3,571 -
Merchant discounts 55,653 14,361 14,485 13,600 13,207 14,440
Insurance commissions 43,601 9,990 10,825 11,138 11,648 10,265
Sundry income 289,852 65,715 77,280 61,556 85,301 37,566
Total $ 1,207,663 280,696 323,580 292,955 310,432 271,321
</TABLE>
Table 3
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
March 31, First Fourth Third Second First
(In thousands) 1994 Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Personnel expense
Salaries $ 963,609 244,254 257,418 243,871 218,066 219,054
Other benefits 230,233 65,386 56,117 57,253 51,477 52,643
Total 1,193,842 309,640 313,535 301,124 269,543 271,697
Occupancy 237,708 60,391 63,402 62,085 51,830 51,801
Equipment rentals, depreciation
and maintenance 200,646 56,700 51,975 49,994 41,977 45,643
Advertising 26,645 8,622 3,707 6,855 7,461 4,518
Telephone 55,427 14,678 14,499 14,774 11,476 12,274
Travel 45,535 12,076 13,671 9,952 9,836 8,871
Postage 41,465 11,908 10,225 10,175 9,157 9,981
Printing and office supplies 57,335 13,374 16,958 13,461 13,542 9,343
FDIC insurance 119,962 29,939 30,798 30,715 28,510 28,406
Other insurance 17,313 3,715 4,785 4,872 3,941 4,635
Professional fees 51,791 10,908 17,278 13,570 10,035 11,368
Data processing 40,501 5,236 14,453 14,909 5,903 6,175
Owned real estate expense 36,106 5,296 15,252 5,049 10,509 9,823
Mortgage servicing amortization 82,002 8,326 10,032 32,737 30,907 33,266
Other amortization 106,687 28,052 28,643 28,635 21,357 21,510
Sundry 270,228 60,980 78,709 65,481 65,058 48,984
Total $ 2,583,193 639,841 687,922 664,388 591,042 578,295
</TABLE>
T-2
<PAGE>
Table 4
INTERNAL CAPITAL GROWTH AND DIVIDEND PAYOUT RATIOS
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
INTERNAL CAPITAL GROWTH*
Assets to stockholders' equity (a) 13.28 X 14.08 14.46 13.83 13.89
X
Return on assets 1.28 % 1.07 1.08 1.39 1.28
Return on total stockholders' equity (a) 17.03 % 15.11 15.69 19.22 17.83
X
Earnings retained 66.79 % 62.34 62.22 71.57 71.56
Internal capital growth (a) 11.38 % 9.42 9.76 13.76 12.76
DIVIDEND PAYOUT RATIO ON
Common shares 31.50 % 35.71 35.73 26.52 29.91
Preferred and common shares 33.21 % 37.66 37.78 28.43 28.44
Return on common stockholders' equity** (a) 17.54 % 15.55 16.11 19.93 18.41
</TABLE>
(a) The determination of these ratios exclude average net unrealized gains
on debt and equity securities of $46,966,000 in the first quarter of 1994.
* Based on average balances and net income.
** Based on average balances and net income applicable to common stockholders.
T-3
<PAGE>
Table 5
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
MORTGAGE LOAN PORTFOLIO
PERMANENT LOAN ORIGINATIONS
Residential
Direct $ 509,458 1,099,079 935,103 870,479 796,815
Wholesale 424,460 655,452 477,660 818,478 479,865
Total 933,918 1,754,531 1,412,763 1,688,957 1,276,680
Income property 51,446 111,332 47,984 47,772 41,436
Total $ 985,364 1,865,863 1,460,747 1,736,729 1,318,116
VOLUME OF LOANS SERVICED
Residential $32,178,000 32,786,000 34,833,000 36,461,000 34,156,000
Income property 1,884,000 1,972,000 2,068,000 2,035,000 1,954,000
Total $34,062,000 34,758,000 36,901,000 38,496,000 36,110,000
NUMBER OF OFFICES
Banking
North Carolina 272 266 269 269 269
South Carolina 67 67 65 65 65
Georgia 161 163 165 191 142
Florida 485 488 458 451 454
Washington, D.C. 30 30 40 36 5
Maryland 32 32 55 54 10
Tennessee 64 63 63 67 68
Virginia 197 193 258 260 182
Foreign 2 1 1 1 2
Total banking offices 1,310 1,303 1,374 1,394 1,197
Savings banks - - - 41 43
Home equity lending 164 151 146 139 132
Mortgage banking 24 53 53 57 70
Other 18 18 19 36 36
Total offices 1,516 1,525 1,592 1,667 1,478
OTHER DATA
ATMs 1,180 1,189 1,205 1,266 1,031
Employees 31,670 32,861 32,709 32,184 28,672
</TABLE>
T-4
<PAGE>
Table 6
GROWTH THROUGH ACQUISITIONS
<TABLE>
<CAPTION>
Loans, Stockholders' Net
(In thousands) Assets net Deposits Equity Income
<S> <C> <C> <C> <C> <C>
December 31, 1987, as reported $ 27,629,481 15,388,490 17,425,316 1,794,405 283,122
Pooling of interests acquisitions 10,904,462 8,089,149 8,492,443 635,739 86,588
December 31, 1987, as restated 38,533,943 23,477,639 25,917,759 2,430,144 396,710
1988 acquisition 939,454 498,578 871,281
Growth in operations 1,973,349 4,155,409 2,691,528
December 31, 1988, as reported 41,446,746 28,131,626 29,480,568
Growth in operations 4,060,101 3,469,150 2,051,202
December 31, 1989, as reported 45,506,847 31,600,776 31,531,770
1990 acquisition 7,946,973 4,174,478 5,727,330
Growth in operations 1,134,590 275,465 935,168
December 31, 1990, as reported 54,588,410 36,050,719 38,194,268
1991 acquisitions 12,322,456 7,025,621 9,921,421
Growth (reduction) in operations (7,637,689) (1,692,760) (939,466)
December 31, 1991, as reported 59,273,177 41,383,580 47,176,223
1992 acquisitions 3,739,039 1,773,797 3,645,316
Growth (reduction) in operations 815,815 (1,233,610) (1,670,574)
December 31, 1992, as reported 63,828,031 41,923,767 49,150,965
1993 acquisitions 7,785,479 4,380,362 6,302,873
Growth (reduction) in operations (826,541) 572,048 (1,711,427)
December 31, 1993, as reported 70,786,969 46,876,177 53,742,411
Growth in operations 1,461,404 (143,753) (1,654,620)
March 31, 1994, as reported $ 72,248,373 46,732,424 52,087,791
</TABLE>
Major acquisitions (those greater than $1.0 billion in acquired assets
and/or deposits) include Florida Commercial Banks, Inc. in 1988; Florida
National Banks of Florida, Inc. in 1990; and the Florida Federal Savings, FSB
and Southeast Banks transactions in 1991; the Flagler Savings & Loan
Association transaction and PSFS Thrift Holding Company acquisition in 1992;
the pooling of interests acquisitions of South Carolina Federal Corporation,
DFSoutheastern, Inc. and Dominion Bankshares Corporation in 1993; and the
Georgia Federal Bank, FSB and First American Metro Corp. purchase acquisitions
in 1993. Stockholders' equity includes public offerings of common stock
amounting to $234,934,000 in 1991 and $330,045,000 in 1992.
T-5
<PAGE>
Table 7
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
March 31, 1994
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET VALUE
U.S. Treasury $ 4,335,331 1,241,742 - - 5,577,073 (542) 47,624 5,624,155 1.18
U.S. Government agencies 13,303 1,188,579 1,835,818 567 3,038,267 (1,125) 70,043 3,107,185 5.62
CMOs 352,282 1,785,720 - - 2,138,002 (8,726) 17,403 2,146,679 2.00
Other 343,394 1,329,215 53,386 186,568 1,912,563 (73,974) 15,022 1,853,611 2.95
Total $ 5,044,310 5,545,256 1,889,204 187,135 12,665,905 (84,367) 150,092 12,731,630 2.66
MARKET VALUE
Debt securities $ 5,044,310 5,545,256 1,889,204 1,095 12,479,865 (41,941) 149,019 12,586,943
Sundry securities - - - 186,040 186,040 (42,426) 1,073 144,687
Total $ 5,044,310 5,545,256 1,889,204 187,135 12,665,905 (84,367) 150,092 12,731,630
AMORTIZED COST
Debt securities $ 5,039,514 5,587,545 1,952,007 7,877 12,586,943
Sundry securities - - - 144,687 144,687
Total $ 5,039,514 5,587,545 1,952,007 152,564 12,731,630
WEIGHTED AVERAGE YIELD
U.S. Treasury 4.09 % 5.37 - - 4.38
U.S. Government agencies 4.43 6.54 5.83 6.53 6.10
CMOs 5.16 5.34 - - 5.32
Other 7.17 7.70 6.37 2.83 7.16
Consolidated 4.37 % 6.16 5.85 2.85 5.36
</TABLE>
Included in "Other" at March 31, 1994, are $ 1,357,553,000 of securities
that are denominated in currencies other than the U.S. dollar. The currency
exchange rates were hedged to minimize the exposure to currency revaluation
risks. At March 31, 1994, these securities had a weighted average maturity of
3.07 years and a weighted average yield of 7.41 percent. The weighted average
U.S. equivalent yield of these securities was 5.13 percent based on a weighted
average interest differential of (2.28) percent due to the hedging of the
foreign currency exchange rates.
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, 1994. Average maturity in years
excludes preferred and common stocks and money market funds.
Weighted average yields are based on amortized cost. 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; a North Carolina state tax rate of 7.8275
percent, a Georgia and Tennessee state tax rate of 6 percent; a South Carolina
state tax rate of 4.5 percent; a Florida state tax rate of 5.5 percent; a
Maryland state tax rate of 7 percent; and a Washington, D.C. tax rate of 10.25
percent, respectively.
Securities available for sale at March 31, 1994, do not include commitments
to purchase $77,828,000 of additional securities that at March 31, 1994 had a
market value of $77,818,000 . Securities available for sale at March 31, 1994,
include the carrying value of $478,522,000 of securities which have been sold
for future settlement. 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
1994, were $12,028,000 and $11,500,000, respectively, and on sundry securities
gross gains realized were $3,772,000 .
T-6
<PAGE>
Table 8
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
March 31, 1994
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CARRYING VALUE
U.S. Government agencies $ 9,930 981,624 60,181 - 1,051,735 26,095 (4,810) 1,073,020 3.00
State, county and municipal 102,852 480,451 240,369 471,629 1,295,301 127,887 (1,781) 1,421,407 5.93
Other 6 3,077 6,194 183,334 192,611 9,700 (2) 202,309 .58
Total $ 112,788 1,465,152 306,744 654,963 2,539,647 163,682 (6,593) 2,696,736 4.46
CARRYING VALUE
Debt securities $ 112,788 1,465,152 306,744 559,448 2,444,132 163,682 (6,593) 2,601,221
Sundry securities - - - 95,515 95,515 - - 95,515
Total $ 112,788 1,465,152 306,744 654,963 2,539,647 163,682 (6,593) 2,696,736
MARKET VALUE
Debt securities $ 116,102 1,515,305 327,317 642,497 2,601,221
Sundry securities - - - 95,515 95,515
Total $ 116,102 1,515,305 327,317 738,012 2,696,736
WEIGHTED AVERAGE YIELD
U.S. Government agencies 8.64 % 7.92 6.64 - 7.86
State, county and municipal 11.49 11.29 11.44 12.24 11.68
Other - 5.71 7.42 8.01 7.96
Consolidated 11.24 % 9.02 10.42 11.06 9.81
</TABLE>
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, 1994. 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; a North Carolina
state tax rate of 7.8275 percent; a Georgia and Tennessee state tax rate of 6
percent; a South Carolina state tax rate of 4.5 percent; a Florida state tax
rate of 5.5 percent; a Maryland state tax rate of 7 percent; and a Washington,
D.C. tax rate of 10.25 percent, respectively.
Investment securities do not include commitments to purchase $462,661,000
of additional securities that at March 31, 1994 had a market value of
$463,048,000. Gross gains and losses from sales of investment securities are
accounted for on a trade date basis. Gross gains realized on the sale of debt
securities for the three months ended March 31, 1994 were $615,000 and there
were no gross gains or losses on sundry securities.
T-7
<PAGE>
Table 9
LOANS*
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
FIRST UNION CORPORATION
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 12,630,234 12,509,283 12,318,117 11,817,755 10,485,623
Non-taxable 701,791 724,442 729,685 749,008 695,290
Total commercial, financial
and agricultural 13,332,025 13,233,725 13,047,802 12,566,763 11,180,913
Real estate - construction and other 1,572,105 1,664,694 1,749,011 1,839,204 1,864,478
Real estate - mortgage 5,761,598 5,834,894 5,792,923 5,914,869 5,434,642
Lease financing 916,068 962,599 875,536 776,993 783,558
Foreign 384,740 304,267 278,666 237,471 259,629
Total commercial 21,966,536 22,000,179 21,743,938 21,335,300 19,523,220
RETAIL
Real estate - mortgage 13,401,838 13,318,058 12,877,141 12,955,846 10,366,087
Installment loans to individuals 11,690,649 11,891,999 11,924,617 11,912,721 11,339,801
Total retail 25,092,487 25,210,057 24,801,758 24,868,567 21,705,888
Total loans 47,059,023 47,210,236 46,545,696 46,203,867 41,229,108
UNEARNED INCOME
Loans 133,735 129,830 139,298 140,858 139,446
Lease financing 192,864 204,229 181,454 160,704 160,224
Total unearned income 326,599 334,059 320,752 301,562 299,670
Loans, net $ 46,732,424 46,876,177 46,224,944 45,902,305 40,929,438
ACQUIRED SOUTHEAST BANKS LOANS**
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 304,425 532,388 575,882 637,889 669,379
Non-taxable 47,879 52,977 56,709 58,397 57,033
Total commercial, financial
and agricultural 352,304 585,365 632,591 696,286 726,412
Real estate - construction and other 65,859 87,954 94,991 110,729 138,617
Real estate - mortgage 643,414 695,243 756,693 810,312 835,185
Foreign 9,740 1,448 1,539 1,814 1,290
Total commercial 1,071,317 1,370,010 1,485,814 1,619,141 1,701,504
RETAIL
Real estate - mortgage 745,446 806,576 882,902 970,538 1,062,959
Installment loans to individuals 374,447 911,395 992,447 1,132,309 1,243,564
Total retail 1,119,893 1,717,971 1,875,349 2,102,847 2,306,523
Total loans 2,191,210 3,087,981 3,361,163 3,721,988 4,008,027
UNEARNED INCOME 1,020 1,757 2,876 4,483 6,886
Loans, net $ 2,190,190 3,086,224 3,358,287 3,717,505 4,001,141
</TABLE>
*At March 31, 1994, $380,532,000 of securitized retail real estate mortgage
loans had a market value of $395,501,000. **For a five-year period that began
September 19, 1991, the FDIC will reimburse First Union for 85 percent of all
net charge-offs related to acquired Southeast Banks loans except installment
loan reimbursements, which will decline 5 percent per year to 65 percent by
1996.
T-8
<PAGE>
Table 10
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS*
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of quarter $ 1,020,191 1,029,162 1,036,539 938,334 940,804
Provision for loan losses 25,000 49,973 50,001 61,450 60,329
Allowance of acquired loans and credit cards - 252 - 109,069 -
Loan losses, net (31,190) (59,196) (57,378) (72,314) (62,799)
Balance, end of quarter $ 1,014,001 1,020,191 1,029,162 1,036,539 938,334
(as % of loans, net) 2.17 % 2.18 2.23 2.26 2.29
(as % of nonaccrual and restructured loans) 168 % 147 112 110 98
(as % of nonperforming assets) 127 % 111 85 81 74
LOAN LOSSES
Commercial, financial and agricultural $ 14,176 34,894 32,585 29,744 24,150
Real estate - construction and other 2,942 4,727 3,360 8,988 10,239
Real estate - mortgage 8,533 13,380 13,160 24,244 13,836
Installment loans to individuals 30,417 33,601 29,692 24,644 28,316
Total 56,068 86,602 78,797 87,620 76,541
LOAN RECOVERIES
Commercial, financial and agricultural 15,836 12,590 10,168 3,236 3,687
Real estate - construction and other 431 2,220 1,196 965 1,693
Real estate - mortgage 1,291 5,498 2,994 3,856 3,162
Installment loans to individuals 7,320 7,098 7,061 7,249 5,200
Total 24,878 27,406 21,419 15,306 13,742
Loan losses, net $ 31,190 59,196 57,378 72,314 62,799
(as % of average loans, net)** .27% .51 .50 .69 .61
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 189,759 242,241 321,699 442,411 414,523
Real estate loans 412,748 425,101 580,508 483,428 527,052
Total nonaccrual loans 602,507 667,342 902,207 925,839 941,575
Restructured loans 2,742 26,544 18,617 18,613 14,529
Foreclosed properties 191,153 222,503 288,818 328,735 312,046
Total nonperforming assets $ 796,402 916,389 1,209,642 1,273,187 1,268,150
(as % of loans, net and foreclosed
properties) 1.70 % 1.95 2.60 2.75 3.07
Accruing loans past due 90 days $ 80,479 71,307 108,138 116,673 89,099
*Excluding Southeast Banks segregated assets.
**Annualized.
</TABLE>
T-9
<PAGE>
Table 11
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
MORTGAGE SERVICING RIGHTS $ 82,102 87,350 94,432 124,726 151,348
CREDIT CARD PREMIUM $ 71,538 75,588 79,893 73,836 63,739
OTHER INTANGIBLE ASSETS
Goodwill $ 703,559 712,485 728,107 738,284 636,079
Deposit base premium 240,935 255,359 268,527 272,689 161,765
Other 9,817 10,468 11,172 11,830 13,390
Total $ 954,311 978,312 1,007,806 1,022,803 811,234
</TABLE>
T-10
<PAGE>
Table 12
SOUTHEAST BANKS SEGREGATED ASSETS
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
SEGREGATED ASSETS $338,237 380,515 424,586 477,828 535,284
ALLOWANCE FOR SEGREGATED ASSET LOSSES
Balance, beginning of quarter 33,313 36,280 39,092 41,925 45,362
Transfer (to) from allowance for foreclosed
properties (295) (20) 578 1,440 -
Segregated asset losses, net (1,710) (2,947) (3,390) (4,273) (3,437)
Balance, end of quarter 31,308 33,313 36,280 39,092 41,925
Segregated assets, net $306,929 347,202 388,306 438,736 493,359
SEGREGATED ASSET LOSSES
Commercial, financial and agricultural $ 36 346 417 2,425 427
Real estate - construction and other 4 36 103 97 98
Real estate - mortgage 372 767 1,628 857 1,104
Installment loans to individuals 2,456 2,822 2,578 2,659 3,054
Total 2,868 3,971 4,726 6,038 4,683
SEGREGATED ASSET RECOVERIES
Commercial, financial and agricultural 221 185 526 762 222
Real estate - construction and other - - - - -
Real estate - mortgage 174 166 97 216 155
Installment loans to individuals 763 673 713 787 869
Total 1,158 1,024 1,336 1,765 1,246
Segregated asset losses, net $ 1,710 2,947 3,390 4,273 3,437
SEGREGATED ASSETS
Nonaccrual loans
Commercial loans $ 58,285 67,064 78,293 93,715 119,136
Real estate loans 176,622 187,432 203,946 233,586 279,012
Total nonaccrual loans 234,907 254,496 282,239 327,301 398,148
Foreclosed properties 103,330 126,019 142,347 150,527 137,136
Total segregated assets 338,237 380,515 424,586 477,828 535,284
Less FDIC loss-sharing* (287,501) (323,438) (360,898) (406,154) (454,991)
Total $ 50,736 57,077 63,688 71,674 80,293
Accruing loans past due 90 days $ 23,627 28,493 34,692 31,716 42,935
</TABLE>
*For a five-year period that began September 19, 1991, the FDIC will
reimburse First Union for 85 percent of all net charge-offs related to acquired
Southeast Banks loans except installment loan reimbursements, which will decline
5 percent per year to 65 percent by 1996.
T-11
<PAGE>
Table 13
ALLOWANCE FOR FORECLOSED PROPERTIES*
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Foreclosed properties $ 239,037 278,694 361,739 405,299 389,606
Allowance for foreclosed properties, beginning of quarter 56,191 72,921 76,564 77,660 103,328
Provision for foreclosed properties 2,794 4,666 2,982 13,495 2,587
Transfer from (to) allowance for segregated assets 295 20 (578) (1,440) -
Dispositions, net (11,396) (21,416) (6,047) (13,151) (28,255)
Allowance for foreclosed properties, end of quarter 47,884 56,191 72,921 76,564 77,660
Foreclosed properties, net $ 191,153 222,503 288,818 328,735 312,046
</TABLE>
* Excluding Southeast Banks segregated assets.
T-12
<PAGE>
Table 14
DEPOSITS
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
CORE DEPOSITS
Noninterest-bearing $ 10,428,019 10,861,207 10,245,808 10,186,909 8,644,543
Savings and NOW accounts 12,132,581 12,010,636 11,230,863 11,315,648 9,654,369
Money market accounts 10,931,222 11,131,334 10,519,720 10,555,609 9,770,882
Other consumer time 16,536,800 16,897,062 18,035,692 18,803,261 17,178,613
Total core deposits 50,028,622 50,900,239 50,032,083 50,861,427 45,248,407
Foreign 574,868 1,240,448 1,139,335 2,788,742 1,095,217
Other time 1,484,301 1,601,724 1,763,996 1,786,702 1,512,017
Total deposits $ 52,087,791 53,742,411 52,935,414 55,436,871 47,855,641
</TABLE>
Table 15
TIME DEPOSITS IN AMOUNT OF $100,000 OR MORE
<TABLE>
<CAPTION>
March 31, 1994
Time Other
(In thousands) Certificates Time
<S> <C> <C>
MATURITY OF
3 months or less $ 1,518,352 83,594
Over 3 months through 6 months 643,558 -
Over 6 months through 12 months 536,577 -
Over 12 months 930,905 -
Total $ 3,629,392 83,594
</TABLE>
T-13
<PAGE>
Table 16
LONG-TERM DEBT
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
DEBENTURES AND NOTES
7-1/2% debentures due 2002 $ 15,619 15,619 15,619 15,619 15,619
Floating rate extendible notes due 2005 100,000 100,000 100,000 100,000 100,000
11% notes due 1996 18,360 18,360 18,360 18,360 64,636
Floating rate notes due 1996 150,000 150,000 150,000 150,000 150,000
9-1/4% notes - - 225,000 225,000 225,000
5.95% notes due 1995 149,802 149,762 149,723 149,683 149,644
6-3/4% notes due 1998 248,144 248,021 247,899 247,777 247,655
Fixed rate medium-term senior notes, varying
rates and terms to 1996 61,700 72,200 90,500 90,500 90,500
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 - - - - 50,000
Floating rate subordinated notes due 2003 149,022 149,003 149,020 - -
11% subordinated and variable rate notes due 1996 17,954 17,954 17,954 17,954 17,954
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 147,256 147,164 147,071 146,978 146,885
8-1/8% subordinated notes due 2002 248,322 248,271 248,220 248,169 248,118
8% subordinated notes due 2002 222,850 222,788 222,726 222,664 222,602
7-1/4% subordinated notes due 2003 148,707 148,671 148,651 148,615 148,579
6-5/8% subordinated notes due 2005 247,856 247,807 247,757 - -
6% subordinated notes due 2008 197,160 197,115 - - -
6-3/8% subordinated notes due 2009 147,406 - - - -
Debentures and notes of subsidiaries
Floating rate subordinated notes - - - - 49,833
9-7/8% subordinated capital notes due 1999 74,301 74,267 74,232 74,198 74,164
Floating rate subordinated notes - - - - 34,461
9-5/8% subordinated capital notes due 1999 74,935 74,931 74,928 74,926 74,923
10-1/2% collateralized mortgage obligations due 1996 74,008 72,115 70,271 68,473 -
Debentures and notes with varying rates and terms to 2002 7,400 7,400 7,500 7,500 7,801
Total 2,904,802 2,765,448 2,809,431 2,410,416 2,522,374
MORTGAGES AND OTHER DEBT
Notes payable to FDIC due 1996 214,682 260,846 291,163 342,880 377,505
Advances from the Federal Home Loan Bank 4,453 4,453 4,453 4,453 -
Mortgage notes and other debt 25,401 25,575 26,309 27,860 28,828
Capitalized leases 5,492 5,622 5,796 6,011 6,160
Total long-term debt $ 3,154,830 3,061,944 3,137,152 2,791,620 2,934,867
</TABLE>
T-14
<PAGE>
Table 17
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
March 31, First Fourth Third Second First
(In thousands) 1994 Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of period $ 4,656,312 5,207,625 5,056,518 4,866,617 4,656,312 4,459,163
Net income 839,988 222,459 195,343 195,415 226,771 199,992
Purchase of Class A Series A
preferred stock (130) 4 59 - (193) -
Purchase of common stock (49,856) (46,061) (408) (1,660) (1,727) (56)
Common stock issued for stock
options exercised 55,108 2,082 4,203 9,864 38,959 3,692
Common stock issued through
dividend reinvestment plan 101,930 5,659 25,480 60,019 10,772 48,462
Converted debentures 285 - - 95 190 53
Converted Class A Series
preferred stock (4) - (4) - - -
Pre-merger transactions of
pooled banks - - - - - 1,886
Unrealized loss on debt and
equity securities (41,826) (41,826) - - - -
Cash dividends paid
$2.50 Class A Series A preferred stock (7) - - - (7) (330)
Series 1990 preferred stock (23,615) (5,726) (5,489) (6,240) (6,160) (6,674)
Common stock (262,125) (68,156) (68,077) (67,592) (58,300) (49,876)
Balance, end of period $ 5,276,060 5,276,060 5,207,625 5,056,518 4,866,617 4,656,312
</TABLE>
T-15
<PAGE>
Table 18
CAPITAL RATIOS
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
CONSOLIDATED CAPITAL RATIOS*
Qualifying capital
Tier 1 capital $ 4,467,801 4,342,664 4,154,400 3,950,790 3,985,468
Total capital 7,235,875 6,960,671 6,633,377 6,298,817 6,316,847
Adjusted risk-based assets 47,746,123 47,529,159 48,145,379 49,546,246 43,337,181
Adjusted leverage ratio assets $ 68,023,421 70,785,664 69,899,151 63,738,426 61,827,887
Ratios
Tier 1 capital 9.36 % 9.14 8.63 7.97 9.20
Total capital 15.15 14.64 13.78 12.21 14.58
Leverage 6.57 6.13 5.94 6.20 6.45
Stockholders' equity to assets
Quarter-end 7.30 7.36 7.08 6.76 7.40
Average 7.60 % 7.10 6.92 7.23 7.20
BANK CAPITAL RATIOS
Tier 1 capital
First Union National Bank of
North Carolina 8.34 % 8.24 8.20 7.63 7.78
South Carolina 7.80 7.55 8.42 8.61 8.72
Georgia 9.55 9.58 9.07 8.75 8.60
Florida 9.98 9.13 9.69 9.34 10.41
Washington, D.C. 19.07 14.23 15.04 14.87 30.66
Maryland 16.23 15.78 32.41 32.51 31.61
Tennessee 12.34 12.43 13.05 14.17 23.26
Virginia 10.25 10.77 11.50 10.24 9.49
Total capital
First Union National Bank of
North Carolina 11.41 11.35 11.40 10.87 11.17
South Carolina 12.09 11.82 12.70 12.88 12.72
Georgia 12.60 12.62 12.10 11.56 10.93
Florida 11.68 10.83 11.40 11.05 12.14
Washington, D.C. 20.36 15.52 16.32 16.15 32.03
Maryland 17.52 17.07 33.76 33.94 32.98
Tennessee 13.60 13.69 14.31 15.44 24.52
Virginia 12.58 13.08 14.11 12.81 12.03
Leverage
First Union National Bank of
North Carolina 5.86 5.52 5.77 5.25 5.35
South Carolina 5.59 5.56 6.23 6.23 6.69
Georgia 6.17 5.67 5.63 8.48 6.86
Florida 6.33 5.79 6.17 5.88 6.30
Washington, D.C. 7.05 6.06 7.40 46.06 16.87
Maryland 9.72 9.04 17.03 16.62 20.99
Tennessee 8.30 8.05 8.79 8.55 23.55
Virginia 7.03% 6.89 8.13 7.78 7.62
</TABLE>
*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-16
<PAGE>
Table 19
INTEREST RATE GAP
<TABLE>
<CAPTION>
March 31, 1994
Interest Sensitivity in Days
One to
(In thousands) 1-90 91-180 181-365 Total two years
<S> <C> <C> <C> <C> <C>
EARNING ASSETS
Interest-bearing bank balances $ 799,469 - 100 799,569 -
Federal funds sold and securities
purchased under resale
agreements 1,438,561 20,000 - 1,458,561 -
Trading account assets 820,876 - - 820,876 -
Securities available for sale
U.S. Government and other 1,072,848 4,077,558 1,598,654 6,749,060 1,122,640
Investment securities
U.S. Government and other 51,853 69,386 155,110 276,349 153,577
State, county and municipal 7,585 22,440 61,019 91,044 310,441
Loans*
Commercial and commercial
real estate 18,130,896 193,199 264,411 18,588,506 428,728
Residential mortgages 2,180,155 1,440,247 2,388,339 6,008,741 1,921,594
Installment loans to individuals 4,432,307 447,052 863,420 5,742,779 1,511,092
Lease financing 79,899 34,186 80,269 194,354 272,254
Foreign 261,399 92,656 15,506 369,561 15,179
Total earnings assets 29,275,848 6,396,724 5,426,828 41,099,400 5,735,505
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
Savings and NOW accounts 12,132,581 - - 12,132,581 -
Money market accounts 10,931,222 - - 10,931,222 -
Other consumer time 4,782,993 3,336,554 3,390,433 11,509,980 2,543,891
Foreign 574,868 - - 574,868 -
Other time 761,378 235,233 188,284 1,184,895 134,434
Short-term borrowings 10,038,994 19,348 - 10,058,342 -
Long-term debt 409,315 9,548 44,635 463,498 224,961
Total interest-bearing
liabilities 39,631,351 3,600,683 3,623,352 46,855,386 2,903,286
OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS 456,100 11,012,000 (3,049,427) 8,418,673 (3,051,115)
Total interest-bearing
liabilities and off-balance
sheet financial instruments 40,087,451 14,612,683 573,925 55,274,059 (147,829)
Interest rate gap $(10,811,603) (8,215,959) 4,852,903 (14,174,659) 5,883,334
Cumulative gap $(10,811,603) (19,027,562) (14,174,659) (14,174,659) (8,291,325)
Ratio of cumulative gap to total
earnings assets (16.61) % (29.24) (21.78) (21.78) (12.74)
<CAPTION>
March 31, 1994
Non-Sensitive
Two to and Sensitive
five years Over five years Total
<S> <C> <C> <C>
EARNING ASSETS
Interest-bearing bank balances - - 799,569
Federal funds sold and securities
purchased under resale
agreements - - 1,458,561
Trading account assets - - 820,876
Securities available for sale
U.S. Government and other 4,221,420 638,510 12,731,630
Investment securities
U.S. Government and other 468,890 345,530 1,244,346
State, county and municipal 180,559 713,257 1,295,301
Loans*
Commercial and commercial
real estate 840,008 753,895 20,611,137
Residential mortgages 2,817,303 2,619,289 13,366,927
Installment loans to individuals 2,639,876 1,752,669 11,646,416
Lease financing 75,495 181,101 723,204
Foreign - - 384,740
Total earnings assets 11,243,551 7,004,251 65,082,707
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
Savings and NOW accounts - - 12,132,581
Money market accounts - - 10,931,222
Other consumer time 2,442,906 40,023 16,536,800
Foreign - - 574,868
Other time 160,995 3,977 1,484,301
Short-term borrowings - - 10,058,342
Long-term debt 625,067 1,841,304 3,154,830
Total interest-bearing
liabilities 3,228,968 1,885,304 54,872,944
OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS (3,832,558) (1,535,000) -
Total interest-bearing
liabilities and off-balance
sheet financial instruments (603,590) 350,304 54,872,944
Interest rate gap 11,847,141
Cumulative gap 3,555,816
Ratio of cumulative gap to total
earnings assets 5.46
</TABLE>
*Loans are stated net of unearned income. Since savings, NOW and money
market accounts theoretically can be repriced at any time, all such balances
have been included in 1-90 days. If these amounts were spread based upon
expected repricing characteristics, or if they were treated as nonsensitive, as
many in the industry do, the cumulative gap ratio would be significantly
reduced. Accordingly, this interest rate gap table has inherent limitations
on its ability to accurately portray interest rate sensitivity, and
therefore, it is only provided in conjunction with common banking industry
practice.
T-17
<PAGE>
TABLE 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
March 31, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS (1)
Interest rate swaps $ 12,293,594 5.59% 3.99% 1.67
Carrying amount $ 36,706
Unrealized gross gain 75,918
Unrealized gross loss (125,348)
Total (12,724)
Forward interest rate swaps 2,200,000 5.07 - 1.97 (2)
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (24,177)
Total (24,177)
Other financial instruments 850,000 5.13 4.94 2.19 (3)
Carrying amount 587
Unrealized gross gain 9,135
Unrealized gross loss (9,722)
Total -
Total asset rate conversions $ 15,343,594 5.49% 4.05% 1.74 $ (36,901)
LIABILITY RATE CONVERSIONS
Interest rate swaps $ 2,490,173 7.39% 3.71% 6.52 (4)
Carrying amount $ 46,848
Unrealized gross gain 35,639
Unrealized gross loss (69,739)
Total 12,748
Other financial instruments 760,000 4.00 3.88 2.30 (5)
Carrying amount (3,296)
Unrealized gross gain 5,625
Unrealized gross loss (1,571)
Total 758
Total liability rate conversions $ 3,250,173 7.20% 3.72% 5.53 $ 13,506
BASIS PROTECTION
Prime/federal funds caps $ 5,000,000 4.66% 4.66% 2.01 (6)
Carrying amount $ 5,898
Unrealized gross gain 8,329
Unrealized gross loss -
Total 14,227
Forward prime/federal funds swap 500,000 - - 2.04 (7)
Carrying amount -
Unrealized gross gain 95
Unrealized gross loss -
Total 95
Forward prime/LIBOR swap 500,000 - - 2.22 (8)
Carrying amount -
Unrealized gross gain 980
Unrealized gross loss -
Total 980
Total basis protection $ 6,000,000 4.66% 4.66% 2.03 $ 15,302
<FN>
(1) Converts floating rate assets to fixed rate. Adds to liability sensitivity. Similar characteristics to a fixed income
security. Includes $3.6 billion of indexed amortizing swaps of which $1.5 billion to mature in 1994 if 3 month LIBOR remains below 7
percent and $2.1 billion to mature within five years.
(2) Enables Corporation to, in effect, extend maturities by locking in yields for future periods; $2.0 billion effective December
1994 and $200 million effective March 1995.
(3) Includes $800 million of interest rate floors, of which $400 million were purchased and offset by $400 million sold, locking
in gains to be amortized over the remaining life of the contracts.
(4) Converts fixed rate long-term debt to floating rate by matching maturity of the swap to the debt issue. Maintains neutral
rate sensitivity.
(5) Miscellaneous option-based products for liability management purposes include $285 million of written and purchased options
on swaps, $325 million eurodollar caps and $150 million eurodollar floors.
(6) Simultaneous purchase and sale of caps ($2.5 billion each) to protect against a narrowing in the spread between prime and
federal funds. Protection occurs with prime rate greater than 6 percent and federal funds rate greater than 3.25 percent.
(7) Swap to hedge against a narrowing in the spread between the prime rate and federal funds; pay rate equals the average prime
rate less 233 basis points versus receiving the federal funds rate. Subsequent to March 31, 1994, the forward prime/federal funds
swap was terminated resulting in a loss of $219,000. The loss will be deferred and amortized over the remaining life of the
contract.
(8) Swap to hedge against a narrowing in the spread between the prime rate and 3 month LIBOR; pay rate equals the average prime
rate less 212 basis points versus receiving 3 month LIBOR. Subsequent to March 31, 1994, the forward prime/LIBOR swap was
terminated resulting in a gain of $1.1 million. The gain will be deferred and amortized over the remaining life of the contract.
</TABLE>
(Continued)
T-18
<PAGE>
TABLE 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
March 31, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C> <C>
RATE SENSITIVITY HEDGES
Short eurodollar futures $3,000,000 - % 3.65 % .21 (1)
Carrying amount $ -
Unrealized gross gain 5,425
Unrealized gross loss -
Total 5,425
Put options on eurodollar futures 9,737,000 - 4.20 .27 (2)
Carrying amount 2,339
Unrealized gross gain 6,102
Unrealized gross loss -
Total 8,441
Put options on forward swaps 1,000,000 - 5.03 .73 (3)
Carrying amount 3,187
Unrealized gross gain 8,477
Unrealized gross loss -
Total 11,664
Long euromark and eurodollar
futures $ 726,643 5.28 % - % .96 (4)
Carrying amount $ -
Unrealized gross gain 120
Unrealized gross loss (25)
Total 95
Total rate sensitivity hedges $ 14,463,643 5.28 % 4.14 % .33 $ 25,625
ASSET HEDGE
Short T-Bill futures $ 3,500,000 - % 3.82 % .21 (5)
Carrying amount $ 788
Unrealized gross gain -
Unrealized gross loss -
Total 788
Total asset hedge $ 3,500,000 - % 3.82 % .21 $ 788
<FN>
(1) Reduces liability sensitivity by locking in floating pay rate of the
interest rate swaps; mature in the second quarter of 1994.
(2) Paid a premium for the right to lock in the 3 month LIBOR reset rates on
receive fixed interest rate swaps; $7.2 billion effective June 1994; $2.5
billion effective September 1994. Beneficial in rising short-term rate
environment.
(3) Paid a premium for the right to terminate $1.0 billion of forward interest
rate swaps based on interest rates at settlement date. Reduces liability
sensitivity.
(4)Locks in the rate on the future placement of 3 month eurodollar and
euromark deposits.
(5)Converts the maturity of $3.5 billion U.S. Treasury bills in the
available for sale portfolio from September 1994 to June 1994.
</TABLE>
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Prime Rate - The base rate on corporate loans posted by at least 75 percent of
the nation's 30 largest banks as defined in The Wall Street Journal.
London Interbank Offered Rates (LIBOR) The average of interbank offered rates
on dollar deposits in the London market based on quotations at five major
banks.
Weighted average pay rates are generally based upon one to six month LIBOR.
Pay rates reset at predetermined reset dates over the life of the contract.
Rates shown are the pay rates in effect as of March 31, 1994. Weighted average
receive rates are fixed rates set at the time the contract was entered into.
Carrying amount includes accrued interest receivable/payable, unamortized
premiums paid/received and any related margin accounts.
T-19
<PAGE>
Table 21
OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES*
<TABLE>
<CAPTION>
1 Year 1-5 5 -10 After 10
(In thousands) or Less Years Years Years Total
<S> <C> <C> <C> <C> <C>
Asset Rate Conversions
Notional amount $ 7,317,712 8,015,882 10,000 - 15,343,594
Weighted average receive rate 5.61% 5.37 3.56 - 5.49
Estimated fair value $ 57,616 (93,985) (532) - (36,901)
Liability Rate Conversions
Notional amount $ 965,173 760,000 925,000 600,000 3,250,173
Weighted average receive rate 8.77% 7.44 6.96 6.15 7.20
Estimated fair value $ 13,674 24,573 37,995 (62,736) 13,506
Basis Protection
Notional amount $ - 6,000,000 - - 6,000,000
Weighted average receive rate -% 4.66 - - 4.66
Estimated fair value $ - 15,302 - - 15,302
Rate Sensitivity Hedges
Notional amount $ 14,171,529 292,114 - - 14,463,643
Weighted average receive rate 5.17% 5.43 - - 5.28
Estimated fair value $ 25,563 62 - - 25,625
Asset Hedge
Notional amount $ 3,500,000 - - - 3,500,000
Weighted average receive rate -% - - - -
Estimated fair value $ 788 - - - 788
</TABLE>
*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.
T-20
<PAGE>
TABLE 22
OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
<TABLE>
<CAPTION>
Rate
Asset Rate Liability Rate Basis Sensitivity Asset
(In thousands) Conversions Conversions Protection Hedges Hedge Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 16,079,540 3,241,173 6,000,000 23,493,000 - 48,813,713
Additions - 155,000 - 5,683,753 3,500,000 9,338,753
Maturities/Amortizations (735,946) (146,000) - (8,306,110) - (9,188,056)
Terminations - - - (6,407,000) - (6,407,000)
Balance, March 31, 1994 $ 15,343,594 3,250,173 6,000,000 14,463,643 3,500,000 42,557,410
</TABLE>
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
T-21
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
FIRST QUARTER 1994 FOURTH QUARTER 1993
Interest Average Interest Average
Average Income/ Rates Average Income/ Rates
(In thousands) Balances Expense Earned/Paid Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing bank balances $ 687,314 8,740 5.16% $ 677,135 5,313 3.11%
Federal funds sold and securities
purchased under resale agreements 884,366 6,328 2.90 475,184 3,508 2.93
Trading account assets (a) 928,576 11,190 4.89 1,988,989 19,843 3.96
Securities available for sale (a) 11,655,783 151,785 5.23 6,774,551 87,643 5.16
Investment securities (a)
U.S. Government and other 1,221,890 19,574 6.41 6,166,830 88,791 5.76
State, county and municipal 1,307,801 37,633 11.51 1,190,980 33,853 11.37
Total investment securities 2,529,691 57,207 9.04 7,357,810 122,644 6.67
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 12,646,082 248,571 7.97 12,687,322 238,745 7.47
Real estate - construction and
other 1,605,390 27,712 7.00 2,051,496 32,918 6.37
Real estate - mortgage 5,633,194 101,031 7.27 5,421,146 100,908 7.39
Lease financing 634,610 14,547 9.17 589,613 14,601 9.91
Foreign 236,441 2,674 4.59 343,753 3,997 4.61
Total commercial 20,755,717 394,535 7.70 21,093,330 391,169 7.36
Retail
Real estate-mortgage 11,883,032 212,156 7.14 11,625,424 214,819 7.39
Installment loans to
individuals 13,583,438 344,471 10.19 13,502,979 351,735 10.39
Total retail 25,466,470 556,627 8.77 25,128,403 566,554 9.00
Total loans 46,222,187 951,162 8.29 46,221,733 957,723 8.25
Total earning assets 62,907,917 1,186,412 7.59 63,495,402 1,196,674 7.51
Cash and due from banks 3,038,166 3,748,206
Other assets 4,397,425 4,943,044
Total assets $ 70,343,508 $ 72,186,652
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 11,964,371 61,993 2.10 11,603,921 62,683 2.14
Money market accounts 10,906,396 59,622 2.22 10,933,617 63,140 2.29
Other consumer time 16,663,990 172,855 4.21 17,299,925 185,970 4.26
Foreign 834,297 7,569 3.68 702,989 5,975 3.37
Other time 1,515,325 16,645 4.45 1,655,928 18,912 4.53
Total interest-bearing deposits 41,884,379 318,684 3.09 42,196,380 336,680 3.17
Federal funds purchased and securities
sold under repurchase agreements 7,109,922 65,895 3.76 8,368,019 75,420 3.58
Commercial paper 321,628 2,277 2.87 319,744 1,725 2.14
Other short-term borrowings 1,162,345 10,932 3.82 766,080 6,800 3.52
Long-term debt 3,148,942 38,215 4.85 3,225,556 42,769 5.30
Total interest-bearing
liabilities 53,627,216 436,003 3.29 54,875,779 463,394 3.35
Noninterest-bearing deposits 10,072,065 10,609,800
Other liabilities 1,301,135 1,573,144
Stockholders' equity 5,343,092 5,127,929
Total liabilities and
stockholders' equity $ 70,343,508 $ 72,186,652
Interest income and rate earned $ 1,186,412 7.59 % $1,196,674 7.51%
Interest expense and rate paid 436,003 2.80 463,394 2.90
Net interest income and margin $ 750,409 4.79 % $ 733,280 4.61%
</TABLE>
(a) Yields related to securities and loans exempt from both federal and
state income taxes, federal income taxes only or state income
taxes only are stated on a fully tax-equivalent basis. They are reduced by
the nondeductible portion of interest expense, assuming a federal income tax
rate of 35 percent; a North Carolina state tax rate of 7.8275 percent in 1994
and 7.905 percent in 1993; a Georgia and Tennessee state tax rate of 6 percent;
a South Carolina state tax rate of 4.5 percent; a Florida state tax rate of 5.5
percent; a Maryland state tax rate of 7 percent; and a Washington, D.C. tax
rate of 10.25 percent.
T-22
<PAGE>
<TABLE>
<CAPTION>
THIRD QUARTER 1993 SECOND QUARTER 1993 FIRST QUARTER 1993
Interest Average Interest Average Interest Average
Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balances Expense Earned/Paid Balances Expense Earned/Paid Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 320,216 2,903 3.60% $ 399,424 6,172 6.20% $ 687,907 6,934 4.09%
491,070 3,737 3.02 553,725 4,499 3.26 630,314 5,025 3.23
674,439 8,259 4.86 546,402 7,245 5.32 431,139 5,499 5.17
7,597,882 92,020 4.82 7,240,340 90,582 5.01 6,019,580 77,206 5.16
6,829,166 104,859 6.14 6,194,022 99,996 6.46 6,057,545 101,991 6.74
1,126,833 33,454 11.88 1,010,869 29,750 11.77 1,010,528 30,709 12.15
7,955,999 138,313 6.95 7,204,891 129,746 7.20 7,068,073 132,700 7.51
12,147,950 236,030 7.71 11,213,249 231,304 8.27 10,897,435 219,872 8.18
2,085,368 32,207 6.13 2,093,808 27,838 5.33 2,104,476 31,726 6.11
5,576,267 103,496 7.37 5,185,385 96,239 7.44 5,144,721 99,028 7.80
504,764 13,259 10.51 506,826 13,480 10.64 524,531 13,853 10.56
268,662 3,338 4.93 212,799 2,764 5.21 229,056 2,841 5.03
20,583,011 388,330 7.49 19,212,067 371,625 7.76 18,900,219 367,320 7.88
11,501,250 215,493 7.49 10,259,324 201,500 7.86 10,163,170 207,621 8.17
13,443,492 350,209 10.39 12,229,288 325,804 10.67 11,933,835 321,684 10.81
24,944,742 565,702 9.06 22,488,612 527,304 9.38 22,097,005 529,305 9.60
45,527,753 954,032 8.35 41,700,679 898,929 8.64 40,997,224 896,625 8.80
62,567,359 1,199,264 7.64 57,645,461 1,137,173 7.90 55,834,237 1,123,989 8.10
3,359,195 3,215,118 3,033,398
5,535,224 4,570,557 4,321,888
$71,461,778 $ 65,431,136 $ 63,189,523
11,303,281 62,306 2.19 9,887,786 54,879 2.23 9,441,180 52,363 2.25
10,566,722 60,390 2.27 9,885,606 55,391 2.25 9,883,149 53,480 2.19
18,412,561 200,087 4.31 17,170,942 184,279 4.30 17,485,709 191,287 4.44
581,585 4,968 3.39 779,967 6,661 3.43 236,638 3,301 5.66
1,760,681 20,060 4.52 1,463,190 15,472 4.24 1,721,006 21,654 5.10
42,624,830 347,811 3.24 39,187,491 316,682 3.24 38,767,682 322,085 3.37
7,492,596 68,273 3.62 6,813,985 65,583 3.86 6,156,791 58,477 3.85
297,781 1,774 2.36 367,876 3,147 3.43 299,880 1,708 2.31
1,041,294 12,731 4.85 715,723 5,991 3.36 669,486 5,723 3.47
3,082,522 39,902 5.18 2,848,098 37,584 5.29 2,865,271 39,574 5.60
54,539,023 470,491 3.42 49,933,173 428,987 3.45 48,759,110 427,567 3.55
10,067,212 9,079,037 8,373,863
1,913,959 1,686,281 1,508,615
4,941,584 4,732,645 4,547,935
$ 71,461,778 $ 65,431,136 $ 63,189,523
$ 1,199,264 7.64 % $ 1,137,173 7.90 % $ 1,123,989 8.10 %
470,491 2.99 428,987 2.98 427,567 3.10
$ 728,773 4.65 % $ 708,186 4.92 % $ 696,422 5.00 %
</TABLE>
(b) The loan averages include loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
T-23
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
YEAR ENDED 1993
Interest Average
Average Income/ Rates
(In thousands) Balances Expense Earned/Paid
<S> <C> <C> <C>
ASSETS
Interest-bearing bank balances $ 520,591 21,321 4.10 %
Federal funds sold and securities
purchased under resale agreements 537,021 16,770 3.12
Trading account assets (a) 913,864 40,846 4.47
Securities available for sale (a) 6,912,046 347,451 5.03
Investment securities (a)
U.S. Government and other 6,313,607 395,637 6.27
State, county and municipal 1,085,412 127,766 11.77
Total investment securities 7,399,019 523,403 7.07
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 11,742,520 925,951 7.89
Real estate - construction and
other 2,083,646 124,689 5.98
Real estate - mortgage 5,333,306 399,671 7.49
Lease financing 531,539 55,193 10.38
Foreign 263,896 12,940 4.90
Total commercial 19,954,907 1,518,444 7.61
Retail
Real estate-mortgage 10,892,980 839,434 7.71
Installment loans to individuals 12,783,523 1,349,431 10.56
Total retail 23,676,503 2,188,865 9.24
Total loans 43,631,410 3,707,309 8.50
Total earnings assets 59,913,951 4,657,100 7.77
Cash and due from banks 3,340,993
Other assets 4,846,278
Total assets $ 68,101,222
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 10,567,006 232,231 2.20
Money market accounts 10,320,835 232,402 2.25
Other consumer time 17,594,023 761,623 4.33
Foreign 576,590 20,905 3.63
Other time 1,650,325 76,097 4.61
Total interest-bearing deposits 40,708,779 1,323,258 3.25
Federal funds purchased and securities
sold under repurchase agreements 7,214,686 267,751 3.71
Commercial paper 321,310 8,356 2.60
Other short-term borrowings 799,077 31,245 3.91
Long-term debt 3,006,560 159,829 5.32
Total interest-bearing
liabilities 52,050,412 1,790,439 3.44
Noninterest-bearing deposits 9,540,069
Other liabilities 1,671,344
Stockholders' equity 4,839,397
Total liabilities and
stockholders' equity $ 68,101,222
Interest income and rate earned $ 4,657,100 7.77 %
Interest expense and rate paid 1,790,439 2.99
Net interest income and margin $ 2,866,661 4.78 %
</TABLE>
(a) Yields related to securities and loans exempt from both federal and
state income taxes, federal income taxes only or state income taxes only are
stated on a fully tax-equivalent basis. They are reduced by the nondeductible
portion of interest expense, assuming a federal income tax rate of 35 percent; a
North Carolina state tax rate of 7.905 percent; a Georgia and Tennessee state
tax rate of 6 percent; a South Carolina state tax rate of 4.5 percent; a Florida
state tax rate of 5.5 percent; a Maryland state tax rate of 7 percent; and a
Washington, D.C. tax rate of 10.25 percent.
T-24
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS 1993 SIX MONTHS 1993
Interest Average Interest Average
Average Income/ Rates Average Income/ Rates
Balances Expense Earned/Paid Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C>
$ 467,835 16,008 4.57 % $ 542,869 13,106 4.87 %
557,860 13,262 3.18 591,808 9,524 3.25
551,551 21,003 5.09 489,089 12,744 5.25
6,958,382 259,808 4.99 6,633,331 167,788 5.08
6,363,071 306,846 6.43 6,126,160 201,987 6.59
1,049,836 93,913 11.93 1,010,700 60,459 11.96
7,412,907 400,759 7.21 7,136,860 262,446 7.35
11,424,125 687,206 8.04 11,056,214 451,176 8.23
2,094,481 91,771 5.86 2,099,113 59,564 5.72
5,303,705 298,763 7.53 5,165,165 195,267 7.62
511,968 40,592 10.57 515,629 27,333 10.60
236,984 8,943 5.05 220,883 5,605 5.12
19,571,263 1,127,275 7.70 19,057,004 738,945 7.82
10,646,150 624,615 7.82 10,211,513 409,121 8.01
12,541,068 997,696 10.62 12,082,378 647,488 10.74
23,187,218 1,622,311 9.33 22,293,891 1,056,609 9.49
42,758,481 2,749,586 8.59 41,350,895 1,795,554 8.72
58,707,016 3,460,426 7.87 56,744,852 2,261,162 8.00
3,203,764 3,124,760
4,813,667 4,446,910
$ 66,724,447 $ 64,316,522
10,217,570 169,547 2.22 9,665,717 107,243 2.24
10,114,330 169,262 2.24 9,884,384 108,871 2.22
17,693,132 575,653 4.35 17,327,456 375,565 4.37
533,994 14,930 3.74 509,804 9,962 3.94
1,648,437 57,186 4.64 1,591,386 37,126 4.70
40,207,463 986,578 3.28 38,978,747 638,767 3.30
6,826,017 192,328 3.77 6,487,203 124,060 3.86
321,838 6,629 2.75 334,066 4,855 2.93
810,196 24,450 4.03 692,732 11,714 3.41
2,932,760 117,060 5.32 2,856,637 77,158 5.40
51,098,274 1,327,045 3.47 49,349,385 856,554 3.50
9,179,573 8,728,398
1,704,437 1,597,939
4,742,163 4,640,800
$ 66,724,447 $ 64,316,522
$ 3,460,426 7.87 % $ 2,261,162 8.00 %
1,327,045 3.02 856,554 3.04
$ 2,133,381 4.85 % $ 1,404,608 4.96 %
</TABLE>
(b) The loan averages include loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
T-25
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1994 1993
First Fourth Third Second First
(In thousands except per share data) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 3,054,037 3,351,963 2,790,443 3,210,877 2,711,928
Interest-bearing bank balances 799,569 712,153 587,506 256,230 505,226
Federal funds sold and securities
purchased under resale agreements 1,438,561 351,754 319,012 2,433,874 460,904
Total cash and cash equivalents 5,292,167 4,415,870 3,696,961 5,900,981 3,678,058
Trading account assets 820,876 652,470 2,286,061 565,347 539,606
Securities available for sale 12,665,905 11,744,942 5,944,236 6,344,036 6,899,821
Investment securities 2,539,647 2,692,476 8,100,384 7,853,423 6,568,262
Loans, net of unearned income 46,732,424 46,876,177 46,224,944 45,902,305 40,929,438
Allowance for loan losses (1,014,001) (1,020,191) (1,029,162) (1,036,539) (938,334)
Loans, net 45,718,423 45,855,986 45,195,782 44,865,766 39,991,104
Premises and equipment 1,535,383 1,524,855 1,490,690 1,500,088 1,335,764
Due from customers on acceptances 220,698 246,095 150,448 168,231 220,741
Mortgage servicing rights 82,102 87,350 94,432 124,726 151,348
Credit card premium 71,538 75,588 79,893 73,836 63,739
Other intangible assets 954,311 978,312 1,007,806 1,022,803 811,234
Southeast segregated assets 306,929 347,202 388,306 438,736 493,359
Other assets 2,040,394 2,165,823 2,953,088 3,100,966 2,199,608
Total assets $ 72,248,373 70,786,969 71,388,087 71,958,939 62,952,644
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 10,428,019 10,861,207 10,245,808 10,186,909 8,644,543
Interest-bearing deposits 41,659,772 42,881,204 42,689,606 45,249,962 39,211,098
Total deposits 52,087,791 53,742,411 52,935,414 55,436,871 47,855,641
Short-term borrowings 10,058,342 7,254,178 8,210,812 6,720,792 5,833,296
Bank acceptances outstanding 220,698 246,095 150,448 168,231 220,741
Other liabilities 1,450,652 1,274,716 1,897,743 1,974,808 1,451,787
Long-term debt 3,154,830 3,061,944 3,137,152 2,791,620 2,934,867
Total liabilities 66,972,313 65,579,344 66,331,569 67,092,322 58,296,332
STOCKHOLDERS' EQUITY
Preferred stock
Class A, authorized 40,000,000 shares
Series A, 11% cumulative perpetual;
$25.00 stated and liquidation value - - - - -
Series A, $2.50 cumulative convertible;
no-par value; $25.00 stated and
liquidation value - - - - 13,181
Series B, none issued - - - - -
Series 1990 cumulative perpetual
adjustable rate, no par value;
$5.00 liquidation value;
authorized 10,000,000 shares 31,592 31,592 31,592 31,592 31,592
Common stock, $3.33-1/3 par value;
authorized 750,000,000 shares 564,812 567,791 565,236 560,138 553,914
Paid-in capital 1,555,938 1,591,275 1,564,495 1,501,274 1,446,322
Retained earnings 3,165,544 3,016,967 2,895,195 2,773,613 2,611,303
Unrealized loss on debt and equity securities (41,826) - - - -
Total stockholders' equity 5,276,060 5,207,625 5,056,518 4,866,617 4,656,312
Total liabilities and
stockholders' equity $ 72,248,373 70,786,969 71,388,087 71,958,939 62,952,644
MEMORANDA
Securities available for sale-amortized cost $ 12,731,630 - - - -
Securities available for sale-market value 12,665,905 11,884,385 6,024,087 6,416,169 6,964,331
Investment securities-market value 2,696,736 2,931,139 8,414,741 8,157,663 6,852,557
Common stockholders' equity, net of $(41,826,000) $ 5,033,846 4,923,584 4,772,478 4,582,576 4,359,091
Preferred shares outstanding
Series A, $2.50 cumulative convertible - - - - 527,252
Series 1990 6,318,350 6,318,350 6,318,350 6,318,350 6,318,350
Common shares outstanding 169,443,814 170,337,619 169,573,982 168,041,506 166,188,354
</TABLE>
T-26
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands except per share data) 1994 1993
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 946,151 891,221
Interest and dividends on securities
available for sale 147,558 70,542
Interest and dividends on investment securities:
Taxable income 18,829 100,717
Non-taxable income 24,610 20,308
Trading account interest 10,392 5,155
Other interest income 15,068 11,959
Total interest income 1,162,608 1,099,902
INTEREST EXPENSE
Interest on deposits 318,684 322,085
Interest on short-term borrowings 79,104 65,908
Interest on long-term debt 38,215 39,574
Total interest expense 436,003 427,567
Net interest income 726,605 672,335
Provision for loan losses 25,000 60,329
Net interest income after
provision for loan losses 701,605 612,006
NONINTEREST INCOME
Trading account profits 7,323 5,639
Service charges on deposit accounts 108,022 97,212
Mortgage banking income 19,421 38,488
Capital management income 50,949 50,395
Securities available for sale transactions 4,300 17,316
Investment security transactions 615 -
Merchant discounts 14,361 14,440
Insurance commissions 9,990 10,265
Sundry income 65,715 37,566
Total noninterest income 280,696 271,321
NONINTEREST EXPENSE
Personnel expense 309,640 271,697
Occupancy 60,391 51,801
Equipment rentals, depreciation
and maintenance 56,700 45,643
Postage, printing and supplies 25,282 19,324
FDIC insurance 29,939 28,406
Owned real estate expense 5,296 9,823
Amortization 36,378 54,776
Sundry 116,215 96,825
Total noninterest expense 639,841 578,295
Income before income taxes 342,460 305,032
Income taxes 120,001 105,040
Net income 222,459 199,992
Dividends on preferred stock 5,726 7,004
Net income applicable to
common stockholders $ 216,733 192,988
PER COMMON SHARE DATA
Before extraordinary items and cumulative
Net income $ 1.27 1.17
Cash dividends $ .40 .35
Average common shares 170,314,176 165,272,415
</TABLE>
T-27
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands) 1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 222,459 199,992
Adjustments to reconcile net income to net cash provided (used)
by operating activities
Accretion and amortization of securities discounts
and premiums, net 13,479 (15,390)
Provision for loan losses 25,000 60,329
Provision for foreclosed properties 2,794 2,587
Gain on sale of mortgage servicing rights - (213)
Securities available for sale transactions (4,300) (17,316)
Investment security transactions (615) -
Depreciation and amortization 78,079 89,258
Trading account assets, net (168,406) (370,338)
Mortgage loans held for resale 391,190 (65,727)
Gain on sales of premises and equipment (739) 385
Gain on sale of First American segregated assets (16,731) -
Other assets, net 196,831 178,714
Other liabilities, net 175,936 (382,294)
Net cash provided (used) by
operating activities 914,977 (320,013)
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities available for sale 2,922,982 2,887,368
Maturities of securities available for sale 1,204,690 122,406
Purchases of securities available for sale (5,116,298) (4,667,582)
Sales of investment securities 1,334 98,678
Maturities of investment securities 161,975 538,819
Purchases of investment securities (17,106) (578,384)
Origination of loans, net (271,920) 1,004,148
Sales of premises and equipment 30,398 8,389
Purchases of premises and equipment (81,888) (44,515)
Sales of mortgage servicing rights - 540
Purchases of mortgage servicing rights (3,079) (1,745)
Other intangible assets, net - 12,627
Net cash used by investing
activities (1,168,912) (619,251)
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Sales of deposits, net (1,654,620) (1,295,324)
Securities sold under repurchase agreements
and other short-term borrowings, net 2,804,164 767,959
Issuances of long-term debt 149,270 399,447
Payments of long-term debt (56,384) (615,787)
Sales of common stock 7,741 54,040
Purchases of common stock (46,057) (56)
Cash dividends paid (73,882) (56,880)
Net cash provided (used) by
financing activities 1,130,232 (746,601)
Increase (decrease) in cash and
cash equivalents 876,297 (1,685,865)
Cash and cash equivalents,
beginning of period 4,415,870 5,363,923
Cash and cash equivalents, end of
period $5,292,167 3,678,058
NONCASH ITEMS
Increase in foreclosed properties $ 6,707 6,891
Effect of an unrealized loss on debt and equity
securities included in
Securities available for sale 65,725 -
Other assets (deferred income taxes) $ 23,899 -
</TABLE>
T-28
EXHIBIT (20)
LETTER FROM THE CHAIRMAN
Our earnings in the first quarter of 1994 were $217 million, a 12
percent increase from $193 million in the first quarter of 1993
and 14 percent from $190 million in the fourth quarter of 1993.
Net income per common share increased to $1.27 from $1.17 in the
first quarter of 1993 and $1.12 in the fourth quarter of 1993.
This strong first quarter reflects our ability to improve performance
in a rising interest rate environment. Our focus is on providing the best
service and a complete array of financial products for our customers,
while improving our productivity and credit quality. We will continue to
make selective investments in such areas as capital markets, capital
management and card products to further our financial goals.
Key factors in First Union's first quarter 1994 earnings performance
since the fourth quarter of 1993 included continued growth in net interest
income; improvement in credit quality, including a $120 million
reduction in nonperforming assets since year-end, lower charge-offs and a
lower loan loss provision; and a $48 million decline in noninterest expense.
Tax-equivalent net interest income increased to $750 million from
$696 million in the first quarter of 1993 and $733 million in the fourth
quarter of 1993.
Nonperforming assets declined to $796 million, or 1.70 percent of
net loans and foreclosed properties, at March 31, 1994, compared with
$1.268 billion, or 3.07 percent, at the end of the first quarter a year ago,
and $916 million, or 1.95 percent, at December 31, 1993.
Net loans at March 31, 1994, were $46.7 billion, compared with
$40.9 billion at the end of first quarter of 1993 and $46.9 billion at year-
end 1993. Since year-end, commercial and consumer loan growth has
been partially offset by the planned runoff of acquired loans and lower
balances of mortgages held for sale.
Deposits were $52.1 billion at March 31, 1994, compared with $47.9
billion at the end of the first quarter a year ago and $53.7 billion at year-
end 1993. Total stockholders' equity was $5.28 billion at March 31, 1994,
compared with $4.66 billion at March 31, 1993 and $5.21 billion at year-end.
Results for the first quarter of 1993 do not include the purchase
accounting acquisitions of Georgia Federal Bank and First American
Metro Corp. in June 1993.
At March 31, 1994, First Union had assets of $72.2 billion and
operated 1,308 banking offices in Florida, North Carolina, Georgia, Virginia,
South Carolina, Tennessee, Maryland and Washington, D.C., and 206
nonbanking offices in 39 states.
Thank you for your interest in First Union.
Sincerely,
(Signature of Edward E. Crutchfield Jr.)
Edward E. Crutchfield Jr., Chairman and Chief Executive Officer
<PAGE>
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993
(DOLLARS IN THOUSANDS) 1Q 4Q 3Q 2Q
<S> <C> <C> <C> <C>
RETURN ON AVERAGE ASSETS (A)(B) 1.28% 1.07 1.08 1.39
RETURN ON AVERAGE COMMON EQUITY (A)(C) 17.54 15.55 16.11 19.93
NET INTEREST MARGIN 4.79 4.61 4.65 4.92
ALLOWANCE AS % OF LOANS, NET 2.17 2.18 2.23 2.26
ALLOWANCE AS % OF NONACCRUAL AND RESTRUCTURED LOANS 168 147 112 110
ALLOWANCE AS % OF NONPERFORMING ASSETS 127% 111 85 81
LOAN LOSSES $ 56,067 86,602 78,797 87,620
LOAN RECOVERIES 24,877 27,406 21,419 15,306
LOAN LOSSES, NET $ 31,190 59,196 57,378 72,314
AS % OF AVERAGE LOANS, NET (A) .27% .51 .50 .69
NONPERFORMING ASSETS (D)
COMMERCIAL NONACCRUAL $ 189,759 242,241 321,699 442,411
REAL ESTATE NONACCRUAL 412,748 425,101 580,508 483,428
TOTAL NONACCRUAL LOANS 602,507 667,342 902,207 925,839
RESTRUCTURED LOANS 2,742 26,544 18,617 18,613
FORECLOSED PROPERTIES 191,153 222,503 288,818 328,735
TOTAL NONPERFORMING ASSETS $ 796,402 916,389 1,209,642 1,273,187
AS % OF LOANS, NET AND FORECLOSED PROPERTIES 1.70% 1.95 2.60 2.75
SOUTHEAST SEGREGATED LOSS-SHARING NONPERFORMING ASSETS
NONACCRUAL LOANS $ 234,907 254,496 282,239 327,301
FORECLOSED PROPERTIES 103,330 126,019 142,347 150,527
TOTAL 338,237 380,515 424,586 477,828
LESS FDIC LOSS-SHARING (E) (287,501) (323,438) (360,898) (406,154)
TOTAL $ 50,736(F) 57,077 63,688 71,674
<CAPTION>
1Q
(DOLLARS IN THOUSANDS)
<S> <C>
RETURN ON AVERAGE ASSETS (A)(B) 1.28
RETURN ON AVERAGE COMMON EQUITY (A)(C) 18.41
NET INTEREST MARGIN 5.00
ALLOWANCE AS % OF LOANS, NET 2.29
ALLOWANCE AS % OF NONACCRUAL AND RESTRUCTURED LOANS 98
ALLOWANCE AS % OF NONPERFORMING ASSETS 74
LOAN LOSSES 76,541
LOAN RECOVERIES 13,742
LOAN LOSSES, NET 62,799
AS % OF AVERAGE LOANS, NET (A) .61
NONPERFORMING ASSETS (D)
COMMERCIAL NONACCRUAL 414,523
REAL ESTATE NONACCRUAL 527,052
TOTAL NONACCRUAL LOANS 941,575
RESTRUCTURED LOANS 14,529
FORECLOSED PROPERTIES 312,046
TOTAL NONPERFORMING ASSETS 1,268,150
AS % OF LOANS, NET AND FORECLOSED PROPERTIES 3.07
SOUTHEAST SEGREGATED LOSS-SHARING NONPERFORMING ASSETS
NONACCRUAL LOANS 398,148
FORECLOSED PROPERTIES 137,136
TOTAL 535,284
LESS FDIC LOSS-SHARING (E) (454,991)
TOTAL 80,293
</TABLE>
(A) QUARTERLY AMOUNTS 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 ON DEBT AND
EQUITY SECURITIES.
(D) EXCLUDES NONPERFORMING ASSETS RELATED TO SOUTHEAST BANKS.
(E) FOR A FIVE-YEAR PERIOD THAT BEGAN SEPTEMBER 19, 1991, THE FDIC WILL
REIMBURSE FIRST UNION FOR 85 PERCENT OF ALL NET CHARGE-OFFS RELATED TO
ACQUIRED SOUTHEAST BANKS LOANS EXCEPT INSTALLMENT LOAN REIMBURSEMENTS, WHICH
WILL DECLINE 5 PERCENT PER YEAR OVER THE NEXT THREE YEARS FROM 75 PERCENT TO
65 PERCENT BY 1996.
(F) ALLOWANCE FOR LOSSES ON SEGREGATED ASSETS AMOUNTED TO $31,308,000 AT MARCH
31, 1994. THIS AMOUNT IS NOT INCLUDED IN THE ALLOWANCE FOR LOAN LOSSES.
<PAGE>
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
AVERAGE BALANCE SHEET SUMMARY
<TABLE>
<CAPTION>
1994 1993
(IN THOUSANDS) 1Q 4Q 3Q 2Q
<S> <C> <C> <C> <C>
LOANS, NET $46,222,187 46,221,733 45,527,753 41,700,679
EARNING ASSETS 62,907,917 63,495,402 62,567,359 57,645,461
TOTAL ASSETS 70,343,508 72,186,652 71,461,778 65,431,136
NONINTEREST-BEARING DEPOSITS 10,072,065 10,609,800 10,067,212 9,079,037
CONSUMER TIME DEPOSITS 39,534,757 39,837,463 40,282,564 36,944,334
OTHER TIME DEPOSITS 2,349,622 2,358,917 2,342,266 2,243,157
COMMON STOCKHOLDERS' EQUITY (A) 5,012,086 4,843,889 4,657,544 4,439,393
TOTAL STOCKHOLDERS' EQUITY (A) $ 5,296,126 5,127,929 4,941,584 4,732,645
<CAPTION>
1Q 1Q '94
(IN THOUSANDS) 1Q '93
<S> <C> <C>
LOANS, NET 40,997,224 12.7%
EARNING ASSETS 55,834,237 12.7
TOTAL ASSETS 63,189,523 11.3
NONINTEREST-BEARING DEPOSITS 8,373,863 20.3
CONSUMER TIME DEPOSITS 36,810,038 7.4
OTHER TIME DEPOSITS 1,957,644 20.0
COMMON STOCKHOLDERS' EQUITY (A) 4,251,677 17.9
TOTAL STOCKHOLDERS' EQUITY (A) 4,547,935 16.5%
</TABLE>
<TABLE>
<CAPTION>
CAPITAL RATIOS (B)
<S> <C> <C> <C> <C>
TIER 1 CAPITAL 9.27% 9.14 8.63 7.97
TOTAL CAPITAL 14.99 14.64 13.78 12.21
LEVERAGE 6.57% 6.13 5.94 6.20
<CAPTION>
TIER 1 CAPITAL 9.20
TOTAL CAPITAL 14.58
LEVERAGE 6.45
</TABLE>
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INTANGIBLE ASSETS
GOODWILL $ 703,559 712,485 728,107 738,284
DEPOSIT BASE PREMIUM 240,935 255,359 268,527 272,689
OTHER 9,817 10,468 11,172 11,830
TOTAL $ 954,311 978,312 1,007,806 1,022,803
MORTGAGE SERVICING RIGHTS $ 82,102 87,350 94,432 124,726
CREDIT CARD PREMIUM $ 71,538 75,588 79,893 73,836
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
INTANGIBLE ASSETS
GOODWILL 636,079
DEPOSIT BASE PREMIUM 161,765
OTHER 13,390
TOTAL 811,234
MORTGAGE SERVICING RIGHTS 151,348
CREDIT CARD PREMIUM 63,739
</TABLE>
(A) AVERAGE COMMON STOCKHOLDERS' EQUITY AND AVERAGE TOTAL STOCKHOLDERS' EQUITY
EXCLUDE AVERAGE NET UNREALIZED GAINS ON DEBT AND EQUITY SECURITIES OF
$46,966,000.
(B) 1994 RATIOS ARE BASED ON ESTIMATES AND EXCLUDE NET UNREALIZED LOSSES ON DEBT
AND EQUITY SECURITIES OF $41,826,000.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN THOUSANDS) MARCH 31,
1994 1993
<S> <C> <C>
INTEREST INCOME
INTEREST AND FEES ON LOANS $ 946,151 891,221
INTEREST AND DIVIDENDS ON SECURITIES AVAILABLE FOR SALE 147,558 70,542
INTEREST AND DIVIDENDS ON INVESTMENT SECURITIES
TAXABLE INCOME 18,829 100,717
NON-TAXABLE INCOME 24,610 20,308
TRADING ACCOUNT INTEREST 10,392 5,155
OTHER INTEREST INCOME 15,068 11,959
TOTAL INTEREST INCOME 1,162,608 1,099,902
INTEREST EXPENSE
INTEREST ON DEPOSITS 318,684 322,085
INTEREST ON SHORT-TERM BORROWINGS 79,104 65,908
INTEREST ON LONG-TERM DEBT 38,215 39,574
TOTAL INTEREST EXPENSE 436,003 427,567
NET INTEREST INCOME 726,605 672,335
PROVISION FOR LOAN LOSSES 25,000 60,329
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 701,605 612,006
NONINTEREST INCOME
TRADING ACCOUNT PROFITS 7,323 5,639
SERVICE CHARGES ON DEPOSIT ACCOUNTS 108,022 97,212
MORTGAGE BANKING INCOME 19,421 38,488
CAPITAL MANAGEMENT INCOME 50,949 50,395
SECURITIES AVAILABLE FOR SALE TRANSACTIONS 4,300 17,316
INVESTMENT SECURITY TRANSACTIONS 615 --
MERCHANT DISCOUNTS 14,361 14,440
INSURANCE COMMISSIONS 9,990 10,265
SUNDRY INCOME 65,715 37,566
TOTAL NONINTEREST INCOME 280,696 271,321
NONINTEREST EXPENSE
PERSONNEL EXPENSE 309,640 271,697
OCCUPANCY 60,391 51,801
EQUIPMENT RENTALS, DEPRECIATION AND MAINTENANCE 56,700 45,643
POSTAGE, PRINTING AND SUPPLIES 25,282 19,324
FDIC INSURANCE 29,939 28,406
OWNED REAL ESTATE EXPENSE 5,296 9,823
AMORTIZATION 36,378 54,776
SUNDRY 116,215 96,825
TOTAL NONINTEREST EXPENSE 639,841 578,295
INCOME BEFORE INCOME TAXES 342,460 305,032
INCOME TAXES 120,001 105,040
NET INCOME 222,459 199,992
DIVIDENDS ON PREFERRED STOCK 5,726 7,004
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 216,733 192,988
</TABLE>
<PAGE>
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN THOUSANDS EXCEPT PER SHARE DATA) MARCH 31,
<S> 1994 1993
<C> <C>
NET INCOME $ 222,459 199,992
DIVIDENDS ON PREFERRED STOCK 5,726 7,004
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 216,733 192,988
NET INCOME PER COMMON SHARE $ 1.27 1.17
AVERAGE COMMON SHARES 170,314 165,272
COMMON STOCKHOLDERS' EQUITY (A) $5,033,846 4,359,091
TOTAL STOCKHOLDERS' EQUITY (A) 5,317,886 4,656,312
BOOK VALUE PER COMMON SHARE $ 29.71 26.23
ACTUAL COMMON SHARES 169,444 166,188
COMMON STOCK PERIOD-END PRICE $ 41.625 47.750
SERIES 1990 PREFERRED STOCK PERIOD-END PRICE $ 52.125 53.000
<CAPTION>
PERCENT
INCREASE
(DECREASE)
<S> <C>
NET INCOME 11.2%
DIVIDENDS ON PREFERRED STOCK (18.2)
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS 12.3%
NET INCOME PER COMMON SHARE 8.5%
AVERAGE COMMON SHARES 3.1
COMMON STOCKHOLDERS' EQUITY (A) 15.5
TOTAL STOCKHOLDERS' EQUITY (A) 14.2
BOOK VALUE PER COMMON SHARE 13.3
ACTUAL COMMON SHARES 2.0
COMMON STOCK PERIOD-END PRICE (12.8)
SERIES 1990 PREFERRED STOCK PERIOD-END PRICE (1.7)%
</TABLE>
EARNINGS SUMMARY
<TABLE>
<CAPTION>
1994 1993
(IN THOUSANDS EXCEPT PER SHARE DATA) 1Q 4Q 3Q 2Q 1Q
<S> <C> <C> <C> <C> <C>
NET INTEREST INCOME (B) $ 750,409 733,280 728,773 708,186 696,422
PROVISION FOR LOAN LOSSES 25,000 49,973 50,001 61,450 60,329
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES (B) 725,409 683,307 678,772 646,736 636,093
SECURITIES AVAILABLE FOR SALE TRANSACTIONS 4,300 2,804 4,142 1,505 17,316
INVESTMENT SECURITY TRANSACTIONS 615 3,049 815 3,571 --
NONINTEREST INCOME 275,781 317,727 287,998 305,356 254,005
NONINTEREST EXPENSE 639,841 687,922 664,388 591,042 578,295
INCOME BEFORE INCOME TAXES (B) 366,264 318,965 307,339 366,126 329,119
INCOME TAXES 120,001 98,469 84,286 115,465 105,040
TAX-EQUIVALENT ADJUSTMENT 23,804 25,153 27,638 23,890 24,087
NET INCOME 222,459 195,343 195,415 226,771 199,992
DIVIDENDS ON PREFERRED STOCK 5,726 5,489 6,240 6,167 7,004
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 216,733 189,854 189,175 220,604 192,988
NET INCOME PER COMMON SHARE $ 1.27 1.12 1.12 1.32 1.17
<CAPTION>
1Q '94
vs.
(IN THOUSANDS EXCEPT PER SHARE DATA) 1Q '93
<S> <C>
NET INTEREST INCOME (B) 7.8%
PROVISION FOR LOAN LOSSES (58.6 )
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES (B) 14.0
SECURITIES AVAILABLE FOR SALE TRANSACTIONS (75.2 )
INVESTMENT SECURITY TRANSACTIONS --
NONINTEREST INCOME 8.6
NONINTEREST EXPENSE 10.6
INCOME BEFORE INCOME TAXES (B) 11.3
INCOME TAXES 14.2
TAX-EQUIVALENT ADJUSTMENT (1.2 )
NET INCOME 11.2
DIVIDENDS ON PREFERRED STOCK (18.2 )
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS 12.3%
NET INCOME PER COMMON SHARE 8.5%
</TABLE>
(A) COMMON STOCKHOLDERS' EQUITY AND TOTAL STOCKHOLDERS' EQUITY EXCLUDE NET
UNREALIZED LOSSES ON DEBT AND EQUITY SECURITIES OF $41,826,000.
(B) TAX-EQUIVALENT.
<PAGE>
BOARD OF DIRECTORS
G. ALEX BERNHARDT
President,
Bernhardt Furniture Company
Lenoir, North Carolina
W. WALDO BRADLEY
Chairman,
Bradley Plywood Corporation
Savannah, Georgia
ROBERT J. BROWN
Chairman and President,
B&C Associates Inc.
High Point, North Carolina
EDWARD E. CRUTCHFIELD JR.
Chairman and Chief Executive Officer,
First Union Corporation
Charlotte, North Carolina
ROBERT D. DAVIS
Chairman,
D.D.I. Inc.
Jacksonville, Florida
R. STUART DICKSON
Chairman,
Ruddick Corporation
Charlotte, North Carolina
B.F. DOLAN
Investor
Charlotte, North Carolina
RODDEY DOWD SR.
Chairman,
Charlotte Pipe & Foundry Co.
Charlotte, North Carolina
JOHN R. GEORGIUS
President,
First Union Corporation
Charlotte, North Carolina
WILLIAM H. GOODWIN JR.
Chairman,
AMF Companies
Richmond, Virginia
BRENTON S. HALSEY
Chairman Emeritus,
James River Corporation
Richmond, Virginia
HOWARD H. HAWORTH
President,
The Haworth Group
Morganton, North Carolina
TORRENCE E. HEMBY JR.
President,
Beverly Crest Corporation
Charlotte, North Carolina
LEONARD G. HERRING
President and Chief Executive Officer,
Lowe's Companies Inc.
North Wilkesboro, North Carolina
JACK A. LAUGHERY
Investor
Rocky Mount, North Carolina
MAX LENNON
President,
Clemson University
Clemson, South Carolina
RADFORD D. LOVETT
Chairman,
Commodores Point Terminal Corporation
Jacksonville, Florida
HENRY D. PERRY JR.
Physician
Plantation, Florida
RANDOLPH N. REYNOLDS
President and Chief Executive Officer,
Reynolds Metal Company
Richmond, Virginia
RUTH G. SHAW
Vice President,
Duke Power Company
Charlotte, North Carolina
LANTY L. SMITH
Chairman and Chief Executive Officer,
Precision Fabrics Group Inc.
Greensboro, North Carolina
DEWEY L. TROGDON
Chairman,
Cone Mills Corporation
Greensboro, North Carolina
JOHN D. UIBLE
Investor
Jacksonville, Florida
B.J. WALKER
Vice Chairman,
First Union Corporation
Jacksonville, Florida
KENNETH G. YOUNGER
Chairman,
Carolina Freight Corporation
Cherryville, North Carolina
<PAGE>
CONSOLIDATED BALANCE SHEETS
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS) MARCH 31,
1994 1993
<S> <C> <C>
ASSETS
CASH AND DUE FROM BANKS $ 3,054,037 2,711,928
INTEREST-BEARING BANK BALANCES 799,569 505,226
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER RESALE AGREEMENTS 1,438,561 460,904
TOTAL CASH AND CASH EQUIVALENTS 5,292,167 3,678,058
TRADING ACCOUNT ASSETS 820,876 539,606
SECURITIES AVAILABLE FOR SALE 12,665,905 6,899,821
INVESTMENT SECURITIES 2,539,647 6,568,262
LOANS, NET OF UNEARNED INCOME 46,732,424 40,929,438
ALLOWANCE FOR LOAN LOSSES (1,014,001) (938,334)
LOANS, NET 45,718,423 39,991,104
PREMISES AND EQUIPMENT 1,535,383 1,335,764
DUE FROM CUSTOMERS ON ACCEPTANCES 220,698 220,741
MORTGAGE SERVICING RIGHTS 82,102 151,348
CREDIT CARD PREMIUM 71,538 63,739
OTHER INTANGIBLE ASSETS 954,311 811,234
SOUTHEAST SEGREGATED ASSETS 306,929 493,359
OTHER ASSETS 2,040,394 2,199,608
TOTAL ASSETS $72,248,373 62,952,644
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
NONINTEREST-BEARING DEPOSITS 10,428,019 8,644,543
INTEREST-BEARING DEPOSITS 41,659,772 39,211,098
TOTAL DEPOSITS 52,087,791 47,855,641
SHORT-TERM BORROWINGS 10,058,342 5,833,296
BANK ACCEPTANCES OUTSTANDING 220,698 220,741
OTHER LIABILITIES 1,450,652 1,451,787
LONG-TERM DEBT 3,154,830 2,934,867
TOTAL LIABILITIES 66,972,313 58,296,332
STOCKHOLDERS' EQUITY
PREFERRED STOCK
CLASS A, AUTHORIZED 40,000,000 SHARES
SERIES A, 11% CUMULATIVE PERPETUAL; $25.00 STATED AND LIQUIDATION VALUE -- --
SERIES A, $2.50 CUMULATIVE CONVERTIBLE, NO PAR VALUE; $25.00 STATED AND LIQUIDATION VALUE -- 13,181
SERIES B, NONE ISSUED -- --
SERIES 1990 CUMULATIVE PERPETUAL ADJUSTABLE RATE, NO PAR VALUE;
$5.00 LIQUIDATION VALUE; AUTHORIZED 10,000,000 SHARES 31,592 31,592
COMMON STOCK, $3.33 1/3 PAR VALUE; AUTHORIZED 750,000,000 SHARES 564,812 553,914
PAID-IN CAPITAL 1,555,938 1,446,322
RETAINED EARNINGS 3,165,544 2,611,303
UNREALIZED LOSS ON DEBT AND EQUITY SECURITIES (41,826) --
TOTAL STOCKHOLDERS' EQUITY 5,276,060 4,656,312
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $72,248,373 62,952,644
</TABLE>
<PAGE>
(First Union logo) FIRST UNION Bulk Rate
CORPORATION U.S. Postage
Paid
Two First Union Center Charlotte, NC
Charlotte, NC 28288-0570 Permit No. 736
This First Union quarterly report includes information released to the
public and the news media on April 14, 1994. You may obtain a copy of our
First Quarter Financial Supplement, which contains more detailed financial
and other information, by writing to Investor Relations, Two First Union
Center, Charlotte, North Carolina 28288-0206. There is no charge.
<PAGE>
1 9 9 4
FIRST UNION CORPORATION
FIRST QUARTER REPORT
(First Union logo)
*************************APPENDIX******************************
There are two First Union logos, one on the front of the outside
cover page of the second document and on the back cover (last page of
second document)
***************************************************************
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 period indicated.
CONSOLIDATED STATEMENT OF INCOME DATA
<TABLE>
Three
Months
Ended
March 31,
(In thousands) 1994
<S> <C>
Net interest income $119,659
Income before income taxes 34,517
Net income $ 22,316
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
March 31,
(In thousands) 1994
<S> <C>
Asset $13,194,259
Securities available for sale 2,748,875
Investment securities 76,702
Loans, net of unearned income 7,091,396
Stockholder's equity $1,210,099
</TABLE>
