<PAGE>
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 June 30, 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)
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<S> <C>
NORTH CAROLINA 56-0898180
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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.
171,934,511 shares of Common Stock, par value $3.33 1/3 per share, were
outstanding as of July 31, 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
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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 June 30, 1994, June 30, 1993, and December 31, 1993, respectively, set forth
on page T-26 of the Corporation's Second Quarter Financial Supplement for the
three months ended June 30, 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 June 30, 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 June 30, 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
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FIRST UNION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SECURITIES
The Corporation adopted Statement of Financial Accounting Standards 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, JUNE 30,
(IN THOUSANDS) 1994 1994
<S> <C> <C>
Securities available for sale....................................................................... $ 139,443 (198,633)
Other assets -- deferred income taxes (benefits).................................................... 46,016 (74,968)
Stockholders' equity
Unrealized gain (loss) on debt and equity securities.............................................. $ 93,427 (123,665)
</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 June 30, 1994 is
included in Tables 20 through 22 of the Corporation's Second Quarter Financial
Supplement on pages T-18 through T-21.
At June 30, 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,"
increased 14 percent from year-end 1993 as a result of an increase in the net
financial assets subject to such valuation and decreased 17 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 Second Quarter Financial Supplement.
3
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Analysis of Operations appears on pages 2 through 20 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Information relating to certain proposals voted on at the annual meeting of
the stockholders of the Corporation held on April 19, 1994, is set forth under
Item 4 in the Corporation's First Quarter 1994 Form 10-Q and incorporated herein
by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
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<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(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 Second Quarter Financial Supplement.
(20) The Corporation's Second Quarter Report to Stockholders.**
(99)(a) First Union Corporation of Virginia and Subsidiaries Summarized Financial Information.
(99)(b) First Union Corporation and Subsidiaries 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 Second 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.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1994, no Reports on Form 8-K were filed
with the Commission by the Corporation.
4
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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: August 15, 1994
/s/ JAMES H. HATCH
JAMES H. HATCH
Senior Vice President and
Corporate Controller (Principal
Accounting Officer)
5
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(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 Second Quarter Financial Supplement.
(20) The Corporation's Second Quarter Report to Stockholders.**
(99)(a) First Union Corporation of Virginia and Subsidiaries Summarized Financial Information.
(99)(b) First Union Corporation and Subsidiaries 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 Second 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.
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EXHIBIT (12)(A)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 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............................ $ 691,303 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding capitalized
interest.............................. 292,669 517,742 456,867 698,898 982,086 890,200
(A.) Earnings........................... $ 983,972 1,738,523 1,038,070 1,118,699 1,309,446 1,331,863
Interest, excluding interest on
deposits.............................. $ 268,050 467,181 405,297 652,393 949,046 865,413
One-third of rents...................... 24,619 50,561 51,570 46,505 33,040 24,787
Capitalized interest.................... 386 285 381 2,326 3,144 2,507
(B.) Fixed charges...................... $ 293,055 518,027 457,248 701,224 985,230 892,707
Consolidated ratios of earnings to fixed
charges, excluding interest on
deposits (A./B.)...................... 3.36X 3.36 2.27 1.60 1.33 1.49
INCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing
operations............................ $ 691,303 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding capitalized
interest.............................. 944,535 1,841,000 2,072,538 2,789,501 3,127,374 2,728,410
(C.) Earnings........................... $1,635,838 3,061,781 2,653,741 3,209,302 3,454,734 3,170,073
Interest, including interest on
deposits.............................. $ 919,916 1,790,439 2,020,968 2,742,996 3,094,334 2,703,623
One-third of rents...................... 24,619 50,561 51,570 46,505 33,040 24,787
Capitalized interest.................... 386 285 381 2,326 3,144 2,507
(D.) Fixed charges...................... $ 944,921 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.)................... 1.73X 1.66 1.28 1.15 1.10 1.16
</TABLE>
<PAGE>
<PAGE>
EXHIBIT (12)(B)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 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............................ $ 691,303 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding preferred stock
dividends and capitalized interest.... 298,981 530,024 473,158 705,944 990,476 890,543
(A.) Earnings........................... $ 990,284 1,750,805 1,054,361 1,125,745 1,317,836 1,332,206
Interest, excluding interest on
deposits.............................. $ 268,050 467,181 405,297 652,393 949,046 865,413
One-third of rents...................... 24,619 50,561 51,570 46,505 33,040 24,787
Preferred stock dividends............... 18,238 37,182 48,270 41,615 42,258 1,723
Capitalized interest.................... 386 285 381 2,326 3,144 2,507
(B.) Fixed charges...................... $ 311,293 555,209 505,518 742,839 1,027,488 894,430
Consolidated ratios of earnings to fixed
charges, excluding interest on
deposits (A./B.)...................... 3.18X 3.15 2.09 1.52 1.28 1.49
INCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing
operations............................ $ 691,303 1,220,781 581,203 419,801 327,360 441,663
Fixed charges, excluding preferred stock
dividends and capitalized interest.... 950,847 1,853,282 2,088,829 2,796,546 3,135,764 2,728,753
(C.) Earnings........................... $1,642,150 3,074,063 2,670,032 3,216,347 3,463,124 3,170,416
Interest, including interest on
deposits.............................. $ 919,916 1,790,439 2,020,968 2,742,996 3,094,334 2,703,623
One-third of rents...................... 24,619 50,561 51,570 46,505 33,040 24,787
Preferred stock dividends............... 18,238 37,182 48,270 41,615 42,258 1,723
Capitalized interest.................... 386 285 381 2,326 3,144 2,507
(D.) Fixed charges...................... $ 963,159 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.)...................... 1.70X 1.64 1.26 1.14 1.09 1.16
</TABLE>
<PAGE>
<PAGE>
FIRST UNION CORPORATION
AND SUBSIDIARIES
Second Quarter Financial Supplement
THREE MONTHS ENDED
JUNE 30, 1994
<PAGE>
FIRST UNION CORPORATION
AND SUBSIDIARIES
SECOND QUARTER FINANCIAL SUPPLEMENT
THREE MONTHS ENDED JUNE 30, 1994
(Unaudited)
TABLE OF CONTENTS
Page
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 June 30, 1994 . . . . . . . . . . . . . . . T-22
Year-to-date June 30, 1994 and 1993; December 31 and
September 30, 1993 . . . . . . . . . . . . . . . . . . . . . . T-24
Consolidated Balance Sheets
Five Quarters Ended June 30, 1994 . . . . . . . . . . . . . . . T-26
Consolidated Statements of Income . . . . . . . . . . . . . . . . . T-27
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . T-28<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
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<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Per Common Share Data 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net income applicable to common stockholders $1.32 1.32 2.59 2.49
Cash dividends . . . . . . . . . . . .40 .35 .80 .70
Book value . . . . . . . . . . . . . 30.26 27.27 30.26 27.27
Quarter-end price . . . . . . . . . $46.125 48.50 46.125 48.50
Financial Ratios
Return on average assets (a)(b) . . . 1.28% 1.39 1.28 1.34
Return on average common stockholders'
equity (a)(c) . . . . . . . . . . 17.53 19.93 17.53 19.19
Net interest margin(a) . . . . . . . 4.78 4.92 4.78 4.96
Net charge-offs to average loans, net (a) .27 .69 .27 .65
Allowance for loan losses to:
Loans, net . . . . . . . . . . . 2.06 2.26 2.06 2.26
Nonaccrual and restructured loans 192 110 192 110
Nonperforming assets . . . . . . 152 81 152 81
Nonperforming assets to loans, net and
foreclosed properties . . . . . . 1.35 2.75 1.35 2.75
Stockholders' equity to assets . . . 7.42 6.76 7.42 6.76
Tier 1 capital to risk-weighted assets 9.30 7.97 9.30 7.97
Dividend payout ratio on common shares 30.30% 26.52 30.89 28.11
</TABLE>
Certain ratios related to nonperforming assets, net charge-offs and the loan
loss provision were favorably affected because the Southeast Banks segregated
assets portfolio has not been included in the calculation of these ratios.
(a) Quarterly and six month amounts annualized.
(b) Based on net income.
(c) Based on net income applicable to common stockholders and average common
stockholders' equity excluding 1994 average net unrealized gains or losses
on debt and equity securities.
1
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MANAGEMENT'S ANALYSIS OF OPERATIONS
EARNINGS HIGHLIGHTS
First Union's earnings applicable to common stockholders increased
to $440 million in the first half of 1994 from $414 million in the
first half of 1993. On a per common share basis, earnings in the
first half of 1994 increased to $2.59 from $2.49 in the first half
of 1993.
Second quarter 1994 net income applicable to common stockholders
was $223 million, or $1.32 per share, compared with $221 million,
or $1.32 per share, in the same quarter a year ago. The second
quarter of 1994 included $18 million of gains on assets held for
sale and the second quarter of 1993 included merchant banking
gains of $44 million, or 16 cents per share after tax.
Key factors during the first half of 1994, in addition to the
impact of the consolidation of our 1993 acquisitions included:
(diamond) Loan growth of $2.2 billion since year-end 1993;
(diamond) Continued growth in net interest income; and
(diamond) Continued improvement in credit quality, including a 28
percent, or $254 million, reduction in nonperforming assets since
year-end 1993 and low charge-offs.
The first half of 1993 included the purchase accounting
acquisitions of Georgia Federal Bank, FSB, from June 12, 1993, and
First American Metro Corp. from June 23, 1993. Additionally, the
pooling of interests accounting acquisitions of Dominion, Georgia
Federal and DFSoutheastern were completed in the first quarter
of 1993.
Also during the second quarter of 1994, First Union announced a 15
percent increase in its common stock dividend to 46 cents per
share, or $1.84 on an annualized basis. This represents the 18th
consecutive year that First Union has increased its dividend.
First Union, including its predecessor Union National Bank, has
paid a dividend every year since 1914.
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
With good loan growth and profitability in the first half of 1994,
we are optimistic about future trends. Throughout the rest of
1994, we will continue to make strategic investments to strengthen
our commercial and consumer banking operations and to leverage our
extensive branch network.
2
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Well under way is a strategic initiative in the Capital Markets
arena that broadens First Union's ability to offer products and
services such as loan syndications, private placements and merger
and acquisition assistance. In addition, First Union is
streamlining the commercial lending process to become more
responsive to customers' needs.
First Union's mutual funds initiative, which includes licensing
two employees in most branches to sell mutual funds, was enhanced
with the acquisition of the investment adviser to the Evergreen
Funds, a nationally recognized family of mutual funds. This
acquisition is discussed below.
In addition, initiatives in the credit card and home equity areas
showed significant results in the second quarter.
First Union completed two pooling of interests acquisitions during
the second quarter of 1994: American Bancshares, Inc. on May 31
and Lieber & Co., the investment adviser to the Evergreen Funds,
on June 30.
American Bancshares, Inc., the parent corporation of American
Commercial Savings Bank, Inc., SSB, had assets of $211 million on
May 31, 1994, and was based in Monroe, North Carolina. In this
acquisition, we issued 518,415 shares of First Union common stock
in exchange for all of the outstanding shares of American
Bancshares, Inc., common and preferred stock. The transaction
value was $24 million.
Lieber is the investment management firm for the Evergreen Funds,
a $3.4 billion family of mutual funds at June 30, 1994, with
headquarters in Purchase, New York. In this acquisition, we issued
3.1 million shares of First Union common stock. The transaction
value was $145 million. Because the $3.4 billion of assets
represent assets under management by Lieber & Co., rather than
assets owned by Lieber, these assets are not included in First
Union's balance sheet.
On August 1, 1994, First Union completed the acquisition of
BancFlorida Financial Corporation, the parent company of
BancFlorida, a Federal Savings Bank, which had assets of $1.6
billion at June 30, 1994, and was based in Naples, Florida. This
acquisition will be accounted for as a purchase. First Union
issued 4 million shares in this acquisition and the transaction
value was $181 million. In conjunction with this acquisition,
since year-end 1993, we have repurchased 4 million shares of
First Union common stock in the open market at a cost of $175
million and subsequently retired those shares. In addition, the
board of directors has authorized the repurchase from time to time
of up to 13 million additional shares of common stock.
During the fourth quarter of 1994, we expect to complete the
acquisitions of Home Federal Savings Bank of Washington, D.C., and
certain deposits and assets of Chase Manhattan Bank of Florida,
N.A., and Great Western Bank, FSB.
Home Federal had assets of $232 million at June 30, 1994. Under
terms of this agreement, Home Federal stockholders will receive
.4835 shares of First Union common stock for each share of Home
Federal common stock, subject to adjustment under certain conditions.
The acquisition is expected to be accounted for as a pooling of
interests, and based on the above exchange ratio and the price
3
<PAGE>
of First Union stock on June 30, 1994, would have a
transaction value of $25 million.
In the Chase Manhattan transaction, First Union expects to acquire
approximately $824 million of deposits from the six branches of
Chase Manhattan in Florida and approximately $11 million of
consumer loans and mortgages. Under the terms of the agreement,
First Union will pay Chase Manhattan a 7 percent premium of the
average deposit balances during a specified period before
completion of the acquisition. Based on deposits on June 30, 1994,
this represents a transaction value of approximately $58 million.
In the Great Western transaction, First Union expects to acquire
approximately $1.0 billion of deposits from 31 branches of Great
Western in Florida and approximately $3 million of consumer
loans. Under the terms of the agreement, First Union will pay
Great Western a 7.25 percent premium of the average deposit
balances during a specified period before completion of the
acquisition. Based on deposits on July 31, 1994, this represents
a deposit premium of approximately $75 million.
Consummation of these pending acquisitions is subject to certain
stockholder and regulatory approvals, and other conditions of
closing. We expect these pending acquisitions to have a minor
impact on 1994 and 1995 earnings and to be positive to earnings
within twelve months of consummation.
We continue to be alert to opportunities to enhance stockholder
value, especially in view of legislation introduced in the United
States 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.
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 $1.53 billion in the first half of 1994, compared
with $1.40 billion in the first half of 1993. Tax-equivalent net
interest income in the second quarter of 1994 was a record $775
million, compared with $708 million in the second quarter of 1993.
Nonperforming loans reduced interest income because the contribution
from these loans is eliminated or sharply reduced. In
the first half of 1994, $31 million in gross
4
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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 half of 1994 was $4 million. However, a $254 million decrease
in nonperforming assets from the fourth quarter of 1993 reduced the
negative impact to interest income in the first half 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 4.78 percent in the first half of 1994,
compared with 4.96 percent in the same period a year ago. The
margin was 4.78 percent in the second quarter of 1994, compared
with 4.79 percent in the first quarter of 1994 and 4.92 percent in
the second quarter of 1993. The margin decline from the first half
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. Our goal is to
continue increasing net interest income, which has increased for
19 consecutive quarters.
The average rate earned on earning assets was 7.68 percent in the
first half of 1994, compared with 8.00 percent in the first half
of 1993. The average rate paid on interest-bearing liabilities was
3.41 percent in the first half of 1994 and 3.50 percent in the
first half 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.
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 $554 million in the first half of 1994,
compared with $582 million in the first half of 1993. Noninterest
income in the second quarter of 1994 was $274 million, compared
with $310 million in the second quarter a year ago. The first half
of 1994 included a decrease in mortgage banking revenues,
reflecting an industry-wide trend. It also included gains on
assets held for sale of $35
million, compared with merchant banking gains of $49 million in
the first half 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 June 30, 1994, trading account assets were $933 million,
compared with $652 million at year-end 1993. These assets are
carried at market value.
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NONINTEREST EXPENSE
Noninterest expense was $1.29 billion during the first half of
1994, compared with $1.17 billion during the first half of 1993.
The increase includes personnel, advertising, automation and other
expenses related to our credit card, mutual fund, and capital
markets initiatives undertaken to improve prospects for revenue
growth.
Noninterest expense was $651 million in the second quarter of
1994, compared with $688 million in the fourth quarter of 1993 and
$591 million in the second quarter of 1993. The decline in
expenses from the fourth quarter of 1993 reflects the assimilation
of the five 1993 acquisitions into First Union and other
acquisition-related efficiencies, 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 June 30, 1994, we had securities available for sale with a
market value of $9.7 billion, compared with a market value of
$11.9 billion at year-end 1993. The market value of securities
available for sale was $199 million below amortized costs at the
end of the second quarter of 1994. As a result a $124 million
after-tax unrealized loss was recorded as a reduction of
stockholders' equity at June 30, 1994. Table 7 provides
information related to unrealized gains and losses and realized
gains and losses on these securities.
The average rate earned on securities available for sale in the
first half of 1994 was 5.27 percent, compared with 5.08 percent in
the first half of 1993. The average maturity of the portfolio was
3.17 years at June 30, 1994.
The Accounting And Regulatory Matters section provides additional
information related to the accounting for debt and equity
securities.
INVESTMENT SECURITIES
First Union's investment securities amounted to $3.0 billion at
June 30, 1994, compared with $2.7 billion at year-end 1993.
The average rate earned on investment securities in the first half
of 1994 was 9.03 percent, compared with 7.35 percent in the first
half of 1993. The average maturity of the portfolio was 5.69 years
at June 30, 1994. First half 1994 rates 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.
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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 June 30, 1994 were $48.9 billion, compared with $46.9
billion at year-end 1993. Consumer loan growth largely reflected
strength in direct lending (loans made directly to individual
customers through the bank and First Union Home Equity branches)
and indirect lending (loans made through third parties, such as
auto dealerships) and our credit card initiative. Commercial loan
growth came primarily from Florida, North Carolina and the Capital
Markets Group.
The loan portfolio at June 30, 1994, was composed of 46 percent in
commercial loans and 54 percent in consumer loans. The portfolio
mix has not changed significantly from year-end 1993.
At June 30, 1994, unused loan commitments related to commercial
and consumer loans were $11.6 billion and $8.5 billion,
respectively. Commercial and standby letters of credit were $1.7
billion.
At June 30, 1994, loan participations sold to other lenders
amounted to $1.2 billion and were recorded as a reduction of gross
loans.
The average rate earned on loans in the first half of 1994 was
8.40 percent, compared with 8.72 percent in the first half of
1993. The average prime rate in the first half of 1994 was 6.46
percent, compared with 6.00 percent in the first half 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.
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<PAGE>
Commercial Real Estate Loans
Commercial real estate loans amounted to 15 percent of the total
portfolio at June 30, 1994, and 16 percent at December 31, 1993.
This portfolio included commercial real estate mortgage loans of
$5.7 billion at June 30, 1994, and $5.8 billion at December 31,
1993.
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 debt to equity ratio. At June 30, 1994, outstanding HLT
loans amounted to $742 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 the Southeast
Banks segregated assets portfolio has not been included in the
determination of these ratios.
Under the terms of the loss-sharing arrangement, the FDIC
reimburses First Union for 85 percent of any losses associated
with the acquired Southeast Banks commercial and consumer loan
portfolio, except revolving consumer credit, for which
reimbursement declines five percent per year to 65 percent in
1996.
The FDIC 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 declined to their lowest level in five years
at June 30, 1994, to $662 million, or 1.35 percent of net loans
and foreclosed properties, compared with $916 million, or 1.95
percent, at December 31, 1993.
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Quarterly Nonperforming Assets By Business Unit*
(Dollars in millions) 2Q94 1Q94 4Q93 3Q93 2Q93
Florida $283 325 347 471 529
North Carolina 57 64 81 92 103
Georgia 91 119 134 223 208
Virginia 93 118 161 184 180
South Carolina 38 41 43 51 57
Tennessee 10 13 29 36 32
Maryland 18 28 29 23 23
Washington, D.C. 12 17 9 8 7
Other units** 60 71 83 122 134
Total $662 796 916 1,210 1,273
* Excludes acquired Southeast Banks segregated assets.
** First Union Mortgage Corporation, First Union Home Equity
Corporation, Capital Markets Group and other units.
Loans or
properties of less
than $5 million
each made up 88
percent, or $585
million, of
nonperforming
assets at June
30, 1994. Of the
rest:
(diamond) 5 loans or
properties
between $5
million and $10
million each
accounted for
$32 million; and
(diamond) Three loans or
properties over
$10 million each accounted for $45 million.
Seventy-five percent of nonperforming assets were collateralized
by real estate at June 30, 1994, compared with 71 percent at year-
end 1993.
First Union Past Due Loans
In addition to these nonperforming assets, at June 30, 1994,
accruing loans 90 days past due were $86 million, compared with
$71 million at December 31, 1993. Of these, $8 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 half of 1994, compared with .65
percent in the first half of 1993.
Annualized net charge-offs in the second quarter 1994 were .27
percent, compared with .27 percent in the first quarter of 1994,
.51 percent in the fourth quarter of 1993, and .69 percent in the
second quarter of 1993. Table 10 provides information on net
charge-offs by category.
First Union Provision And Allowance For Loan Losses
The loan loss provision was $50 million in the first half of 1994,
compared with $122 million in the first half of 1993. The
provision was $25 million in the second quarter of 1994, compared
with $25 million in the first quarter of 1994 and $61 million in
the second quarter of 1993. The decrease in the loan loss
provision in the first half of 1994 was based primarily upon
current economic conditions, lower levels of nonperforming assets,
the maturity of the nonperforming assets portfolio, and current
and projected 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,
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<PAGE>
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 half of 1994, this was
primarily the result of growth in loans and a $254 million decline
in nonperforming assets from December 31, 1993. These percentages
exclude the acquired Southeast Banks segregated assets. The
Southeast Banks Segregated Assets section provides information
related to a separate $30 million allowance for losses on
segregated assets.
Southeast Banks Segregated Assets
At June 30, 1994, acquired Southeast Banks segregated assets
amounted to $300 million, or $270 million net of the $30 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 34 percent to $19
million at June 30, 1994, from $28 million at December 31, 1993.
These loans are subject to the terms of the FDIC loss-sharing
agreement.
Southeast Banks Net Charge-offs
Net charge-offs of $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 second quarter of 1994, compared with $2 million in
the first quarter of 1994 and $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 60 metropolitan statistical
areas with diverse economies. Washington, D.C.; Charlotte, North
Carolina; Atlanta, Georgia; and Miami, Jacksonville, West Palm
Beach and Tampa, Florida, are our largest markets, but no
individual metropolitan market contains more than 8 percent of the
commercial loan portfolio.
Substantially all of the $7.2 billion commercial real estate
portfolio at June 30, 1994, was located in our banking region,
which includes North Carolina, South Carolina, Georgia, Florida,
Virginia, Maryland, Tennessee and Washington, D.C.
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<PAGE>
CORE DEPOSITS
Core deposits were $49.3 billion at June 30, 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 half of 1994, compared with 19 percent
in the first half 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 June 30, 1994, and at year-end 1993.
Average core deposit balances in the second quarter of 1994 were
down $165 million from the first quarter of 1994. Average balances
in money market and other consumer time deposits were lower when
compared with the previous quarter, while savings and NOW account
balances were higher and noninterest-bearing balances were
essentially flat. Core deposit balances can be affected by branch
closings or consolidations, seasonal factors and the rates being
offered for deposits compared to other investment opportunities.
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 June 30, 1994, were $13.5 billion, compared
with $10.1 billion at year-end 1993. We purchase funds primarily
to help fund short-term investments and growth in loan balances.
The majority of our purchased funds include federal funds,
securities sold under repurchase agreements, and eurodollar time
deposits. However, 79 percent of our deposits and purchased funds
comes from core deposits gathered through our large branch
network.
Average purchased funds in the second quarter of 1994 were $12.6
billion, an increase of 7 percent from $11.8 billion in the fourth
quarter of 1993.
LONG-TERM DEBT
Long-term debt was 58 percent of total stockholders' equity at
June 30, 1994, compared with 59 percent at December 31, 1993.
On January 18, 1994, we issued $150 million of 15-year, 6.375
percent subordinated debt, and on August 9, 1994, we issued $150
million of 15-year, 8 percent subordinated debt. Proceeds from
these debt issues are used for general corporate purposes.
Under a shelf registration statement filed with the Securities and
Exchange Commission, we currently have available for issuance $500
million of senior or
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<PAGE>
subordinated debt securities. The sale of any
additional debt securities will depend on future market
conditions, funding needs and other factors.
Debt Obligations
We obtained a $350 million, three-year committed back-up line of
credit on July 1, 1994. This credit facility contains financial
covenants that require First Union to maintain a minimum level of
tangible net worth, restrict double leverage ratios and require
capital levels at subsidiary banks to meet regulatory standards.
First Union is currently in compliance with these requirements and
has not used this line of credit.
In the second half of 1994, $56 million of long-term debt will
mature. Maturing in 1995 is $202 million, and in 1996, $502
million, which includes notes payable to the FDIC of $201 million
at June 30, 1994. We expect the notes payable to the FDIC to
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. On
August 1, 1994, we issued a notice of redemption for the $14.7
million of convertible subordinated debt that we assumed in the
BancFlorida acquisition. We expect that all or substantially all
of this debt will be converted into approximately 440,000 shares
of First Union common stock before the August 31, 1994, redemption
date.
The Asset Quality section provides additional information related
to the funding of the segregated assets.
STOCKHOLDERS' EQUITY
At June 30, 1994, common stockholders' equity was $5.23 billion, a
6 percent increase from $4.92 billion at December 31, 1993. Total
stockholders' equity was $5.39 billion, compared with $5.21
billion at year-end 1993. Since year-end 1993, we have paid $175
million for the purchase in the open market of 4 million shares of
common stock related to the BancFlorida acquisition, which were
subsequently retired. At June 30, 1994, stockholders' equity included
a $124 million unrealized after-tax loss related to debt and equity
securities. The Securities Available for Sale section provides additional
information about the accounting for debt and equity securities.
Series 1990 preferred stock cash dividends of 7.85 percent per
annum were paid for the quarter ended June 30, 1994. We paid $74
million in dividends to preferred and common stockholders in the
second 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.
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<PAGE>
Under these and other limitations, our subsidiaries had $350
million available for dividends at June 30, 1994. Our subsidiaries
paid $279 million in dividends to the corporation in the
first half of 1994.
Risk-Based Capital
The minimum requirement for the ratio of total capital to risk-
weighted assets (including certain off-balance-sheet financial
instruments, such as standby letters of credit and interest rate
swaps) is currently 8 percent. At least half of 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 June 30, 1994, the corporation's tier 1 and total capital
ratios were 9.30 percent and 14.68 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
June 30, 1994, was 6.67 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 5.64 percent at June 30, 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 June 30, 1994, the subsidiary 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.
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<PAGE>
The Accounting and Regulatory Matters section provides more
information about proposed changes in risk-based capital
standards.
INTEREST RATE RISK MANAGEMENT
Managing interest rate risk is fundamental to banking. Banking
institutions manage the inherently different maturity and
repricing characteristics of the lending and deposit-taking lines
of business to achieve a desired interest rate sensitivity
position and to limit exposure to interest rate risk. 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 overall interest rate risk management activity.
The Funds Management Committee, which includes the corporation's
chief executive officer and 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. Our 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.
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<PAGE>
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 over the next twenty-four months. The
base line scenario assumes rising federal funds rates over the
next twenty-four 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 that rates
remain 100 basis points higher or lower through the rest of the
twenty-fourth month period. 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 twelve-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 July 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 2.7 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
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<PAGE>
portfolio or by holding off-balance sheet "asset proxies." These asset
proxies consist of interest rate swaps that convert floating rate assets
(primarily variable rate loans) to 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 that 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 $31.7 billion at June 30, 1994, compared with $48.8
billion at December 31, 1993. The related fair value depreciation
of off-balance sheet derivative financial instruments was $229
million at June 30, 1994, compared with the fair value
appreciation of $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 reduced
contribution to net interest income reflected by the decline in
market value of off-balance sheet derivative financial
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
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<PAGE>
determined based on the strength of the individual counterparty and are
bilateral. As of June 30, 1994, the total credit risk in excess of
thresholds was $51 million. The fair value of collateral held was
88 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 $208
million in the first half of 1994, compared with $315 million in
the first half of 1993. This cash was available to increase
earning assets, to reduce borrowings by $61 million and to pay
dividends of $147 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 $260 million over book value at June 30, 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 effect of initially
applying this new accounting standard in 1994 is estimated to 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
17
<PAGE>
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 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
will 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, 1994, may 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
18
<PAGE>
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 statement would be effective for
financial statements issued for fiscal years beginning after
December 15, 1994. We do not anticipate a material impact to the
corporation's net income should implementation of this exposure
draft be required.
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 FASB has also issued an exposure draft, "Accounting for
Mortgage Servicing Rights and Excess Servicing Receivables and
for Securitization of Mortgage Loans". This proposed statement would
require that an entity recognize as separate assets rights to service
mortgage loans for others, regardless of how such servicing rights are
acquired. An entity that acquires mortgage servicing rights through
either the purchase or origination of mortgage loans and sells those
loans with servicing rights retained would allocate some of the cost
of the loans to the mortgage servicing rights. Additionally, this
proposed statement would require that securitizations of mortgage
loans be accounted for as sales of mortgage loans and acquisitions
of mortgage-backed securities and that capitalized mortgage
servicing rights and capitalized excess servicing receivables be
assessed for impairment. Impairment would be measured based on fair
value. The proposed statement would be applied prospectively in
fiscal years beginning after December 15, 1995 to transactions in
which an entity acquires mortgage servicing rights and to
impairment evaluations of all capitalized mortgage servicing rights
and capitalized excess servicing receivables whenever acquired.
Retroactive application would be prohibited. The impact to net
income has not been assessed.
19
<PAGE>
The FASB has also issued FASB interpretation No. 39, "Offsetting
of Amounts Related to Certain Contracts," which defines right of
set-off and sets forth the conditions under which that right may
be applied. Specific guidance with respect to certain financial
instruments such as forward, interest rate swap, currency swap,
option and other conditional or exchange contracts and
clarification of the circumstances in which it is appropriate to
offset amounts recognized for those contracts in the statement of
financial positions is also included in this Interpretation.
In addition, it permits offsetting of fair value amounts recognized
for multiple forward, swap, option and other conditional or
exchange contracts executed with the same counterparty under a
master netting arrangement. This Interpretation is effective for
financial statements issued for periods beginning after December
15, 1993. Currently the effects of the provisions of this
Interpretation are considered to be immaterial.
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, among
other things, requires a revision of risk-based capital standards.
The new standards are required to incorporate interest rate risk,
concentration of credit risk and the risks of nontraditional
activities and to reflect the actual performance and expected risk
of loss of multifamily mortgages.The Risk-Based Capital section
provides 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.
20
<PAGE>
TABLE 1
CONSOLIDATED SUMMARIES OF INCOME AND PER SHARE DATA
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
June 30, SECOND First Fourth Third Second
(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* $ 4,841,268 1,258,918 1,186,412 1,196,674 1,199,264 1,137,173
Interest expense 1,853,801 483,913 436,003 463,394 470,491 428,987
Net interest income* 2,987,467 775,005 750,409 733,280 728,773 708,186
Provision for loan losses 149,974 25,000 25,000 49,973 50,001 61,450
Net interest income after
provision for loan losses* 2,837,493 750,005 725,409 683,307 678,772 646,736
Securities available for sale
transactions 8,311 (2,935) 4,300 2,804 4,142 1,505
Investment security transactions 5,173 694 615 3,049 815 3,571
Noninterest income 1,157,517 276,011 275,781 317,727 287,998 305,356
Noninterest expense 2,643,371 651,220 639,841 687,922 664,388 591,042
Income before income taxes* 1,365,123 372,555 366,264 318,965 307,339 366,126
Income taxes 421,979 119,223 120,001 98,469 84,286 115,465
Tax-equivalent adjustment 100,307 23,712 23,804 25,153 27,638 23,890
Net income 842,837 229,620 222,459 195,343 195,415 226,771
Dividends on preferred stock 23,656 6,201 5,726 5,489 6,240 6,167
Net income applicable to
common stockholders $ 819,181 223,419 216,733 189,854 189,175 220,604
PER COMMON SHARE DATA
Net income $ 4.83 1.32 1.27 1.12 1.12 1.32
Average common shares - 169,779,057 170,314,176 169,981,393 168,540,736 166,972,413
Average common
stockholders' equity**
Quarter-to-date $ - 5,112,116 5,012,086 4,843,889 4,657,544 4,439,393
Year-to-date - 5,062,377 5,012,086 4,550,048 4,451,024 4,346,054
Common stock price
High 49 5/8 47 5/8 43 3/4 48 1/8 49 5/8 51 1/2
Low 37 7/8 41 1/4 39 3/4 37 7/8 43 1/2 40
Period-end $ 46 1/8 46 1/8 41 5/8 41 1/4 47 5/8 48 1/2
To earnings ratio*** 9.55 X 9.55 8.62 8.72 13.01 13.86
To book value 152 % 152 140 143 169 178
Cash dividends $ 1.60 .40 .40 .40 .40 .35
Book value** $ 30.26 30.26 29.71 28.90 28.14 27.27
PER PREFERRED SHARE DATA
Series 1990 preferred stock price
High $ 55 1/2 53 1/4 53 7/8 53 7/8 55 1/2 55 1/8
Low 52 52 52 1/8 52 53 1/4 53 1/8
Period-end 52 3/4 52 3/4 52 1/8 52 3/8 53 1/2 54 7/8
Cash dividends $ 3.7439 .9813 .9063 .8688 .9875 .9750
Dividend rate 7.49 % 7.85 7.25 6.95 7.90 7.80
<FN>
*Tax-equivalent.
**Quarter-to-date and year-to-date average common stockholders' equity excludes 1994 average net unrealized
gains or losses on debt and equity securities. The determination of book value excludes a net unrealized loss on debt and
equity securities of $123,665,000 in the second quarter of 1994.
***Based on net income applicable to common stockholders.
</TABLE>
T-1
<PAGE>
TABLE 2
NONINTEREST INCOME
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
June 30, SECOND First Fourth Third Second
(In thousands) 1994 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Trading account profits $ 44,797 10,247 7,323 21,413 5,814 10,141
Service charges on deposit accounts 440,284 107,083 108,022 114,016 111,163 97,894
Mortgage banking income 96,429 12,239 19,421 30,325 34,444 35,351
Capital management income 200,995 50,380 50,949 49,383 50,283 51,814
Securities available for sale transactions 8,311 (2,935) 4,300 2,804 4,142 1,505
Investment security transactions 5,173 694 615 3,049 815 3,571
Merchant discounts 57,729 15,283 14,361 14,485 13,600 13,207
Insurance commissions 42,658 10,705 9,990 10,825 11,138 11,648
Sundry income 274,625 70,074 65,715 77,280 61,556 85,301
Total $ 1,171,001 273,770 280,696 323,580 292,955 310,432
</TABLE>
TABLE 3
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
June 30, SECOND First Fourth Third Second
(In thousands) 1994 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Personnel expense
Salaries $ 995,700 250,157 244,254 257,418 243,871 218,066
Other benefits 241,317 62,561 65,386 56,117 57,253 51,477
Total 1,237,017 312,718 309,640 313,535 301,124 269,543
Occupancy 242,755 56,881 60,387 63,402 62,085 51,830
Equipment rentals, depreciation
and maintenance 211,109 52,436 56,704 51,975 49,994 41,977
Advertising 29,843 10,659 8,622 3,707 6,855 7,461
Telephone 57,956 14,005 14,678 14,499 14,774 11,476
Travel 48,190 12,491 12,076 13,671 9,952 9,836
Postage 43,518 11,210 11,908 10,225 10,175 9,157
Printing and office supplies 56,493 12,700 13,374 16,958 13,461 13,542
FDIC insurance 121,607 30,155 29,939 30,798 30,715 28,510
Other insurance 18,146 4,774 3,715 4,785 4,872 3,941
Professional fees 53,787 12,031 10,908 17,278 13,570 10,035
Data processing 39,180 4,582 5,236 14,453 14,909 5,903
Owned real estate expense 30,505 4,908 5,296 15,252 5,049 10,509
Mortgage servicing amortization 56,048 4,953 8,326 10,032 32,737 30,907
Other amortization 112,732 27,402 28,052 28,643 28,635 21,357
Sundry 284,485 79,315 60,980 78,709 65,481 65,058
Total $ 2,643,371 651,220 639,841 687,922 664,388 591,042
</TABLE>
T-2
TABLE 4
INTERNAL CAPITAL GROWTH AND DIVIDEND PAYOUT RATIOS
<TABLE>
<CAPTION>
SIX MONTHS ENDED 1994 1993
June 30,
SECOND First Fourth Third Second
1994 1993 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNAL CAPITAL GROWTH*
Assets to stockholders' equity (a) 13.30 X 13.86 13.31 13.28 14.08 14.46 13.83
X
Return on assets 1.28 % 1.34 1.28 1.28 1.07 1.08 1.39
Return on total stockholders' equity (a) 17.05 % 18.54 17.07 17.03 15.11 15.69 19.22
X
Earnings retained 67.38 % 71.57 67.96 66.79 62.34 62.22 71.57
Internal capital growth (a) 11.49 % 13.27 11.60 11.38 9.42 9.76 13.76
DIVIDEND PAYOUT RATIO ON
Common shares 30.89 % 28.11 30.30 31.50 35.71 35.73 26.52
Preferred and common shares 32.62 % 28.43 32.04 33.21 37.66 37.78 28.43
Return on common stockholders' equity** (a) 17.53 % 19.19 17.53 17.54 15.55 16.11 19.93
</TABLE>
(A) The determination of these ratios exclude 1994 average net
unrealized gains or losses on debt and equity securities.
* Based on average balances and net income.
** Based on average balances and net income applicable to
common stockholders.
T-3
<PAGE>
Table 5
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1994 1993
Second First Fourth Third Second
(Dollars in thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
MORTGAGE LOAN PORTFOLIO
PERMANENT LOAN ORIGINATIONS
Residential
Direct $ 372,732 509,458 1,099,079 935,103 870,479
Wholesale 277,302 424,460 655,452 477,660 818,478
Total 650,034 933,918 1,754,531 1,412,763 1,688,957
Income property 78,353 51,446 111,332 47,984 47,772
Total $ 728,387 985,364 1,865,863 1,460,747 1,736,729
VOLUME OF LOANS SERVICED
Residential $31,779,000 32,178,000 32,786,000 34,833,000 36,461,000
Income property 1,744,000 1,884,000 1,972,000 2,068,000 2,035,000
Total $33,523,000 34,062,000 34,758,000 36,901,000 38,496,000
NUMBER OF OFFICES
Banking
North Carolina 284 272 266 269 269
South Carolina 67 67 67 65 65
Georgia 159 161 163 165 191
Florida 491 485 488 458 451
Washington, D.C. 30 30 30 40 36
Maryland 32 32 32 55 54
Tennessee 65 64 63 63 67
Virginia 186 197 193 258 260
Foreign 2 2 1 1 1
Total banking offices 1,316 1,310 1,303 1,374 1,394
Savings banks - - - - 41
Home equity lending 173 164 151 146 139
Mortgage banking 24 24 53 53 57
Other 18 18 18 19 36
Total offices 1,531 1,516 1,525 1,592 1,667
OTHER DATA
ATMs 1,186 1,180 1,189 1,205 1,266
Employees 31,581 31,670 32,861 32,709 32,184
</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 2,430,144 369,710
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
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
1994 acquisitions 335,728 186,398 268,692
Growth (reduction) in operations 1,481,704 1,862,920 (238,843)
June 30, 1994, as reported $ 72,604,401 48,925,495 53,772,260
</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>
June 30, 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 $ 2,499,903 1,143,289 - - 3,643,192 (536) 69,260 3,711,916 1.47
U.S. Government
agencies 1,004 340,401 1,541,564 321,532 2,204,501 (65) 110,103 2,314,539 6.77
CMOs 222,539 1,741,667 36,036 - 2,000,242 (6,004) 55,555 2,049,793 2.62
Other 319,729 1,250,706 36,559 254,412 1,861,406 (65,257) 35,577 1,831,726 2.62
Total $ 3,043,175 4,476,063 1,614,159 575,944 9,709,341 (71,862) 270,495 9,907,974 3.17
MARKET VALUE
Debt securities $ 3,043,175 4,476,063 1,614,159 322,013 9,455,410 (17,051) 266,379 9,704,738
Sundry securities - - - 253,931 253,931 (54,811) 4,116 203,236
Total $ 3,043,175 4,476,063 1,614,159 575,944 9,709,341 (71,862) 270,495 9,907,974
AMORTIZED COST
Debt securities $ 3,046,189 4,615,321 1,702,286 340,942 9,704,738
Sundry
securities - - - 203,236 203,236
Total $ 3,046,189 4,615,321 1,702,286 544,178 9,907,974
WEIGHTED AVERAGE YIELD
U.S. Treasury 5.01 % 5.18 - - 5.07
U.S. Government
agencies 6.57 4.89 6.27 4.83 5.85
CMOs 5.36 5.29 4.56 - 5.28
Other 8.11 7.92 5.27 3.46 7.40
Consolidated 5.36 % 5.95 6.21 4.32 5.72
</TABLE>
Included in "Other" at June 30, 1994, are $ 1,394,012,000 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
June 30, 1994, these securities had a weighted average maturity of 2.84 years
and a weighted average yield of 8.10 percent. The weighted average U.S.
equivalent yield of these securities was 7.03 percent based on a weighted
average interest differential of (1.07) 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 June 30, 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 June 30, 1994, do not include commitments
to purchase $387,332,000 of additional securities that at June 30, 1994 had a
market value of $386,725,000 . Securities available for sale at June 30, 1994,
include the carrying value of $492,349,000 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 for
the six months ended June 30, 1994 were $23,152,000 and $25,660,000,
respectively, and on sundry securities gross gains realized were $3,873,000.
T-6
<PAGE>
Table 8
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
June 30, 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 $ 10,006 1,279,758 105,939 2,800 1,398,503 15,800 (18,032) 1,396,271 3.70
CMO's - 127,813 - - 127,813 - (1,106) 126,707 2.24
State, county and
municipal 169,727 414,732 226,447 458,955 1,269,861 110,789 (3,367) 1,377,283 7.45
Other - 3,070 6,188 189,667 198,925 6,012 (394) 204,543 16.21
Total $ 179,733 1,825,373 338,574 651,422 2,995,102 132,601 (22,899) 3,104,804 5.69
CARRYING VALUE
Debt securities $ 179,733 1,825,373 338,574 546,371 2,890,051 132,601 (22,899) 2,999,753
Sundry securities - - - 105,051 105,051 - - 105,051
Total $ 179,733 1,825,373 338,574 651,422 2,995,102 132,601 (22,899) 3,104,804
MARKET VALUE
Debt securities $ 184,690 1,846,861 352,457 615,745 2,999,753
Sundry
securities - - - 105,051 105,051
Total $ 184,690 1,846,861 352,457 720,796 3,104,804
WEIGHTED AVERAGE YIELD
U.S. Government
agencies 8.51 % 8.61 6.83 6.62 8.47
CMO's - 5.45 - - 5.45
State, county
and municipal 11.86 11.04 11.46 12.23 11.66
Other - 5.71 7.33 7.76 7.72
Consolidated 11.68 % 8.93 9.94 10.91 9.64
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 June 30, 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.
Gross gains and losses from sales of investment securities are accounted
for on a trade date basis. Gross gains and losses realized on the sale of debt
securities for the six months ended June 30, 1994 were $1,112,000 and $9,000,
respectively, and on sundry securities gross gains realized were $206,000.
At June 30, 1994, there were no commitments to purchase or sell investment
securities.
T-7
</TABLE>
<PAGE>
Table 9
LOANS*
<TABLE>
<CAPTION>
1994 1993
Second First Fourth Third Second
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
FIRST UNION CORPORATION
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 13,460,873 12,630,234 12,509,283 12,318,117 11,817,755
Non-taxable 658,190 701,791 724,442 729,685 749,008
Total commercial, financial
and agricultural 14,119,063 13,332,025 13,233,725 13,047,802 12,566,763
Real estate - construction and other 1,504,546 1,572,105 1,664,694 1,749,011 1,839,204
Real estate - mortgage 5,730,311 5,761,598 5,834,894 5,792,923 5,914,869
Lease financing 931,297 916,068 962,599 875,536 776,993
Foreign 437,967 384,740 304,267 278,666 237,471
Total commercial 22,723,184 21,966,536 22,000,179 21,743,938 21,335,300
RETAIL
Real estate - mortgage 13,813,215 13,401,838 13,318,058 12,877,141 12,955,846
Installment loans to individuals 12,715,803 11,690,649 11,891,999 11,924,617 11,912,721
Total retail 26,529,018 25,092,487 25,210,057 24,801,758 24,868,567
Total loans 49,252,202 47,059,023 47,210,236 46,545,696 46,203,867
UNEARNED INCOME
Loans 136,352 133,735 129,830 139,298 140,858
Lease financing 190,355 192,864 204,229 181,454 160,704
Total unearned income 326,707 326,599 334,059 320,752 301,562
Loans, net $48,925,495 46,732,424 46,876,177 46,224,944 45,902,305
ACQUIRED SOUTHEAST BANKS LOANS**
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 281,902 304,425 532,388 575,882 637,889
Non-taxable 43,406 47,879 52,977 56,709 58,397
Total commercial, financial
and agricultural 325,308 352,304 585,365 632,591 696,286
Real estate - construction and other 50,481 65,859 87,954 94,991 110,729
Real estate - mortgage 600,091 643,414 695,243 756,693 810,312
Foreign 9,698 9,740 1,448 1,539 1,814
Total commercial 985,578 1,071,317 1,370,010 1,485,814 1,619,141
RETAIL
Real estate - mortgage 702,426 745,446 806,576 882,902 970,538
Installment loans to individuals 336,485 374,447 911,395 992,447 1,132,309
Total retail 1,038,911 1,119,893 1,717,971 1,875,349 2,102,847
Total loans 2,024,489 2,191,210 3,087,981 3,361,163 3,721,988
UNEARNED INCOME 569 1,020 1,757 2,876 4,483
Loans, net $ 2,023,920 2,190,190 3,086,224 3,358,287 3,717,505
</TABLE>
*At June 30, 1994, $340,350,000 of securitized retail real estate mortgage
loans had a market value of $348,423,000.
**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
Second First Fourth Third Second
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of quarter $ 1,014,001 1,020,191 1,029,162 1,036,539 938,334
Provision for loan losses 25,000 25,000 49,973 50,001 61,450
Allowance of acquired loans 609 - 252 - 109,069
Loan losses, net (31,771) (31,190) (59,196) (57,378) (72,314)
Balance, end of quarter $ 1,007,839 1,014,001 1,020,191 1,029,162 1,036,539
(as % of loans, net) 2.06 % 2.17 2.18 2.23 2.26
(as % of nonaccrual and restructured loans) 192 % 168 147 112 110
(as % of nonperforming assets) 152 % 127 111 85 81
LOAN LOSSES
Commercial, financial and agricultural $ 16,373 14,176 34,894 32,585 29,744
Real estate - construction and other 1,711 2,942 4,727 3,360 8,988
Real estate - mortgage 7,574 8,533 13,380 13,160 24,244
Installment loans to individuals 28,858 30,417 33,601 29,692 24,644
Total 54,516 56,068 86,602 78,797 87,620
LOAN RECOVERIES
Commercial, financial and agricultural 8,388 15,836 12,590 10,168 3,236
Real estate - construction and other 1,095 431 2,220 1,196 965
Real estate - mortgage 5,076 1,291 5,498 2,994 3,856
Installment loans to individuals 8,186 7,320 7,098 7,061 7,249
Total 22,745 24,878 27,406 21,419 15,306
Loan losses, net $ 31,771 31,190 59,196 57,378 72,314
(as % of average loans, net)** .27% .27 .51 .50 .69
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 159,858 189,759 242,241 321,699 442,411
Real estate loans 363,433 412,748 425,101 580,508 483,428
Total nonaccrual loans 523,291 602,507 667,342 902,207 925,839
Restructured loans 2,730 2,742 26,544 18,617 18,613
Foreclosed properties 136,408 191,153 222,503 288,818 328,735
Total nonperforming assets $ 662,429 796,402 916,389 1,209,642 1,273,187
(as % of loans, net and foreclosed
properties) 1.35 % 1.70 1.95 2.60 2.75
Accruing loans past due 90 days $ 85,948 80,479 71,307 108,138 116,673
</TABLE>
*Excluding Southeast Banks segregated assets.
**Annualized.
T-9
<PAGE>
TABLE 11
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1994 1993
SECOND First Fourth Third Second
(In thousands) QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
MORTGAGE SERVICING RIGHTS $ 79,826 82,102 87,350 94,432 124,726
CREDIT CARD PREMIUM $ 67,524 71,538 75,588 79,893 73,836
OTHER INTANGIBLE ASSETS
GOODWILL $ 682,570 703,559 712,485 728,107 738,284
DEPOSIT BASE PREMIUM 224,918 240,935 255,359 268,527 272,689
OTHER 9,118 9,817 10,468 11,172 11,830
TOTAL $ 916,606 954,311 978,312 1,007,806 1,022,803
</TABLE>
T-10
<PAGE>
Table 12
SOUTHEAST BANKS SEGREGATED ASSETS
<TABLE>
<CAPTION>
1994 1993
Second First Fourth Third Second
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
SEGREGATED ASSETS $ 299,943 338,237 380,515 424,586 477,828
ALLOWANCE FOR SEGREGATED ASSET LOSSES
Balance, beginning of quarter 31,308 33,313 36,280 39,092 41,925
Transfer (to) from allowance for
foreclosed properties 52 (295) (20) 578 1,440
Segregated asset losses, net (1,770) (1,710) (2,947) (3,390) (4,273)
Balance, end of quarter 29,590 31,308 33,313 36,280 39,092
Segregated assets, net $ 270,353 306,929 347,202 388,306 438,736
SEGREGATED ASSET LOSSES
Commercial, financial and
agricultural $ 33 36 346 417 2,425
Real estate - construction and
other 3 4 36 103 97
Real estate - mortgage 378 372 767 1,628 857
Installment loans to individuals 2,406 2,456 2,822 2,578 2,659
Total 2,820 2,868 3,971 4,726 6,038
SEGREGATED ASSET RECOVERIES
Commercial, financial and
agricultural 136 221 185 526 762
Real estate - construction and
other - - - - -
Real estate - mortgage 164 174 166 97 216
Installment loans to individuals 750 763 673 713 787
Total 1,050 1,158 1,024 1,336 1,765
Segregated asset
losses, net $ 1,770 1,710 2,947 3,390 4,273
SEGREGATED ASSETS
Nonaccrual loans
Commercial loans $ 53,847 58,285 67,064 78,293 93,715
Real estate loans 147,173 176,622 187,432 203,946 233,586
Total nonaccrual
loans 201,020 234,907 254,496 282,239 327,301
Foreclosed properties 98,923 103,330 126,019 142,347 150,527
Total segregated
assets 299,943 338,237 380,515 424,586 477,828
Less FDIC loss-sharing* (254,952) (287,501) (323,438) (360,898) (406,154)
Total $ 44,991 50,736 57,077 63,688 71,674
Accruing loans past due 90 days $ 18,895 23,627 28,493 34,692 31,716
</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
Second First Fourth Third Second
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Foreclosed properties $ 177,274 239,037 278,694 361,739 405,299
Allowance for foreclosed properties,
beginning of quarter 47,884 56,191 72,921 76,564 77,660
Provision for foreclosed properties 1,910 2,794 4,666 2,982 13,495
Transfer from (to) allowance for segregated
assets (52) 295 20 (578) (1,440)
Dispositions, net (8,876) (11,396) (21,416) (6,047) (13,151)
Allowance for foreclosed properties, end of
quarter 40,866 47,884 56,191 72,921 76,564
Foreclosed properties, net $ 136,408 191,153 222,503 288,818 328,735
</TABLE>
* Excluding Southeast Banks segregated
assets.
T-12
<PAGE>
Table 14
DEPOSITS
<TABLE>
<CAPTION>
1994 1993
Second First Fourth Third Second
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
CORE DEPOSITS
Noninterest-bearing $ 10,207,807 10,428,019 10,861,207 10,245,808 10,186,909
Savings and NOW accounts 12,085,198 12,132,581 12,010,636 11,230,863 11,315,648
Money market accounts 10,490,933 10,931,222 11,131,334 10,519,720 10,555,609
Other consumer time 16,486,243 16,536,800 16,897,062 18,035,692 18,803,261
Total core deposits 49,270,181 50,028,622 50,900,239 50,032,083 50,861,427
Foreign 2,852,926 574,868 1,240,448 1,139,335 2,788,742
Other time 1,649,153 1,484,301 1,601,724 1,763,996 1,786,702
Total deposits $53,772,260 52,087,791 53,742,411 52,935,414 55,436,871
</TABLE>
Table 15
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
<TABLE>
<CAPTION>
June 30, 1994
Time Other
(In thousands) Certificates Time
<S> <C> <C>
MATURITY OF
3 months or less $1,680,517 83,594
Over 3 months through 6 months 646,805 --
Over 6 months through 12 months 629,591 --
Over 12 months 890,681 --
Total $3,847,594 83,594
</TABLE>
T-13
<PAGE>
Table 16
LONG-TERM DEBT
<TABLE>
<CAPTION>
1994 1993
Second First Fourth Third Second
(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 18,360
Floating rate notes due 1996 150,000 150,000 150,000 150,000 150,000
9-1/4% notes - - - 225,000 225,000
5.95% notes due 1995 149,842 149,802 149,762 149,723 149,683
6-3/4% notes due 1998 248,267 248,144 248,021 247,899 247,777
Fixed rate medium-term senior
notes, varying
rates and terms to 1996 61,700 61,700 72,200 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
due 2003 149,048 149,022 149,003 149,020 -
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 147,349 147,256 147,164 147,071 146,978
8-1/8% subordinated notes due
2002 248,373 248,322 248,271 248,220 248,169
8% subordinated notes due 2002 222,910 222,850 222,788 222,726 222,664
7-1/4% subordinated notes due
2003 148,655 148,707 148,671 148,651 148,615
6-5/8% subordinated notes due
2005 247,888 247,856 247,807 247,757 -
6% subordinated notes due 2008 196,920 197,160 197,115 - -
6-3/8% subordinated notes due
2009 147,405 147,406 - - -
Debentures and notes of subsidiaries
9-7/8% subordinated capital notes
due 1999 74,334 74,301 74,267 74,232 74,198
9-5/8% subordinated capital notes
due 1999 74,937 74,935 74,931 74,928 74,926
10-1/2% collateralized mortgage
obligations due 1996 69,950 74,008 72,115 70,271 68,473
Debentures and notes with varying
rates and terms to 2002 7,400 7,400 7,400 7,500 7,500
Total 2,900,911 2,904,802 2,765,448 2,809,431 2,410,416
MORTGAGES AND OTHER DEBT
Notes payable to FDIC due 1996 193,258 214,682 260,846 291,163 342,880
Advances from the Federal Home
Loan Bank 4,603 4,453 4,453 4,453 4,453
Mortgage notes and other debt 24,623 25,401 25,575 26,309 27,860
Capitalized leases 6,049 5,492 5,622 5,796 6,011
Total long-term
debt $ 3,129,444 3,154,830 3,061,944 3,137,152 2,791,620
</TABLE>
T-14
<PAGE>
Table 17
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Twelve
Months 1994 1993
Ended
June 30, Second First Fourth Third Second
(In thousands) 1994 Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of period $ 4,866,617 5,276,060 5,207,625 5,056,518 4,866,617 4,656,312
Stockholders' equity of pooled banks
not restated prior to 1994 51,832 51,832 - - - -
Net income 842,837 229,620 222,459 195,343 195,415 226,771
Purchase of Class A Series A
preferred stock 63 - 4 59 - (193)
Purchase of common stock (99,654) (51,525) (46,061) (408) (1,660) (1,727)
Common stock issued for stock
options exercised 45,209 29,060 2,082 4,203 9,864 38,959
Common stock issued through
dividend reinvestment plan 100,096 8,938 5,659 25,480 60,019 10,772
Converted debentures 95 - - - 95 190
Converted Class A Series A
preferred stock (4) - - (4) - -
Unrealized loss on debt and
equity securities (123,665) (81,839) (41,826) - - -
Cash dividends paid
$2.50 Class A Series A preferred stock - - - - - (7)
Series 1990 preferred stock (23,656) (6,201) (5,726) (5,489) (6,240) (6,160)
Common stock (271,189) (67,364) (68,156) (68,077) (67,592) (58,300)
Balance, end of period $ 5,388,581 5,388,581 5,276,060 5,207,625 5,056,518 4,866,617
</TABLE>
T-15
<PAGE>
Table 18
CAPITAL RATIOS
<TABLE>
<CAPTION>
1994 1993
Second First Fourth Third Second
(In thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
CONSOLIDATED CAPITAL RATIOS*
Qualifying capital
Tier 1 capital $ 4,664,358 4,467,801 4,342,664 4,154,400 3,950,790
Total capital 7,361,013 7,235,875 6,960,671 6,633,377 6,298,817
Adjusted risk-based assets 50,155,408 47,746,123 47,529,159 48,145,379 49,546,246
Adjusted leverage ratio assets $69,971,938 68,023,421 70,785,664 69,899,151 63,738,426
Ratios
Tier 1 capital 9.30 % 9.36 9.14 8.63 7.97
Total capital 14.68 15.15 14.64 13.78 12.21
Leverage 6.67 6.57 6.13 5.94 6.20
Stockholders' equity to assets
Quarter-end 7.42 7.30 7.36 7.08 6.76
Average 7.39 % 7.60 7.10 6.92 7.23
BANK CAPITAL RATIOS
Tier 1 capital
First Union National Bank of
North Carolina 7.70 % 8.34 8.24 8.20 7.63
South Carolina 8.54 7.80 7.55 8.42 8.61
Georgia 8.74 9.55 9.58 9.07 8.75
Florida 9.63 9.98 9.13 9.69 9.34
Washington, D.C. 16.30 19.07 14.23 15.04 14.87
Maryland 17.75 16.23 15.78 32.41 32.51
Tennessee 13.36 12.34 12.43 13.05 14.17
Virginia 10.57 10.25 10.77 11.50 10.24
Total capital
First Union National Bank of
North Carolina 10.51 11.41 11.35 11.40 10.87
South Carolina 12.96 12.09 11.82 12.70 12.88
Georgia 11.70 12.60 12.62 12.10 11.56
Florida 11.31 11.68 10.83 11.40 11.05
Washington, D.C. 17.60 20.36 15.52 16.32 16.15
Maryland 19.04 17.52 17.07 33.76 33.94
Tennessee 14.62 13.60 13.69 14.31 15.44
Virginia 12.90 12.58 13.08 14.11 12.81
Leverage
First Union National Bank of
North Carolina 5.65 5.86 5.52 5.77 5.25
South Carolina 6.03 5.59 5.56 6.23 6.23
Georgia 6.07 6.17 5.67 5.63 8.48
Florida 6.53 6.33 5.79 6.17 5.88
Washington, D.C. 7.11 7.05 6.06 7.40 46.06
Maryland 10.62 9.72 9.04 17.03 16.62
Tennessee 8.41 8.30 8.05 8.79 8.55
Virginia 7.70 % 7.03 6.89 8.13 7.78
</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>
June 30, 1994
Interest Sensitivity in Days
One to Two to
(In thousands) 1-90 91-180 181-365 Total two years five years
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Interest-bearing bank balances $ 1,387,332 - 200 1,387,532 - -
Federal funds sold and securities
purchased under resale
agreements 1,909,486 - - 1,909,486 - -
Trading account assets 933,011 - - 933,011 - -
Securities available for sale
U.S. Government and other 432,537 2,464,653 1,434,011 4,331,201 1,216,349 3,601,479
Investment securities
U.S. Government and other 56,065 62,484 156,618 275,167 221,095 589,093
State, county and municipal 23,034 10,085 136,659 169,778 289,871 123,985
Loans*
Commercial and commercial
real estate 17,363,588 563,797 311,642 18,239,027 705,909 1,570,379
Residential mortgages 1,774,220 1,275,760 2,591,330 5,641,310 1,870,306 2,889,867
Installment loans to individuals 4,936,218 523,078 944,548 6,403,844 1,644,835 2,742,437
Lease financing 70,270 41,499 68,826 180,595 270,131 70,861
Foreign 211,067 165,494 61,198 437,759 208 -
Total earnings assets 29,096,828 5,106,850 5,705,032 39,908,710 6,218,704 11,588,101
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
Savings and NOW accounts 12,085,198 - - 12,085,198 - -
Money market accounts 10,490,933 - - 10,490,933 - -
Other consumer time 4,609,806 3,283,153 3,705,979 11,598,938 2,269,033 2,595,536
Foreign 2,851,368 1,558 - 2,852,926 - -
Other time 961,522 253,663 162,373 1,377,558 126,908 139,276
Short-term borrowings 8,943,478 15,900 - 8,959,378 - -
Long-term debt 409,453 36,132 43,322 488,907 203,895 989,606
Total interest-bearing
liabilities 40,351,758 3,590,406 3,911,674 47,853,838 2,599,836 3,724,418
OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS 8,282,357 (2,030,673) 1,840,579 8,092,263 (3,693,814) (2,873,449)
Total interest-bearing
liabilities and off-balance
sheet financial instruments 48,634,115 1,559,733 5,752,253 55,946,101 (1,093,978) 850,969
Interest rate gap $(19,537,287) 3,547,117 (47,221) (16,037,391) 7,312,682 10,737,132
Cumulative gap $(19,537,287) (15,990,170) (16,037,391) (16,037,391) (8,724,709) 2,012,423
Ratio of cumulative gap to total
earnings a ssets (29.58)% (24.21) (24.28) (24.28) (13.21) 3.05
</TABLE>
<TABLE>
<CAPTION>
June 30, 1994
Non-Sensitive
and Sensitive
(In thousands) Over five years Total
<S> <C> <C>
EARNING ASSETS
Interest-bearing bank balances - 1,387,532
Federal funds sold and securities
purchased under resale
agreements - 1,909,486
Trading account assets - 933,011
Securities available for sale
U.S. Government and other 758,945 9,907,974
Investment securities
U.S. Government and other 639,886 1,725,241
State, county and municipal 686,227 1,269,861
Loans*
Commercial and commercial
real estate 780,475 21,295,790
Residential mortgages 3,376,488 13,777,971
Installment loans to individuals 1,881,709 12,672,825
Lease financing 219,355 740,942
Foreign - 437,967
Total earnings assets 8,343,085 66,058,600
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
Savings and NOW accounts - 12,085,198
Money market accounts - 10,490,933
Other consumer time 22,736 16,486,243
Foreign - 2,852,926
Other time 5,411 1,649,153
Short-term borrowings - 8,959,378
Long-term debt 1,447,036 3,129,444
Total interest-bearing
liabilities 1,475,183 55,653,275
OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS (1,525,000) -
Total interest-bearing
liabilities and off-balance
sheet financial instruments (49,817) 55,653,275
Interest rate gap
Cumulative gap
Ratio of cumulative gap to total
earnings assets
</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
June 30, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value
<S> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS
Interest rate swaps(1) $ 12,287,184 5.43 % 4.72 % 1.31
Carrying amount $ 27,497
Unrealized gross gain 16,301
Unrealized gross loss 195,977)
Total (152,179)
Forward interest rate swaps(2) 2,200,000 5.07 - 1.72
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (41,919)
Total (41,919)
Other financial instruments(3) 850,000 5.13 5.13 1.94
Carrying amount (1,740)
Unrealized gross gain 8,441
Unrealized gross loss (6,701)
Total -
Total asset rate conversions $ 15,337,184 5.36 % 4.74 % 1.40 $ (194,098)
LIABILITY RATE CONVERSIONS
Interest rate swaps(4) $ 2,228,173 6.53 % 5.10 % 7.02
Carrying amount $ 24,843
Unrealized gross gain 11,240
Unrealized gross loss (100,752)
Total (64,669)
Other financial instruments(5) 510,000 4.00 - 3.08
Carrying amount 2,047
Unrealized gross gain -
Unrealized gross loss (1,869)
Total 178
Total liability rate conversions $2,738,173 6.37 % 4.78 % 6.29 $ (64,491)
BASIS PROTECTION
Prime/federal funds caps(6) $ 5,000,000 4.66 % 6.86 % 2.12
Carrying amount $ 4,550
Unrealized gross gain (1,545)
Unrealized gross loss -
Total 3,005
Total basis protection $5,000,000 4.66 % 6.86 % 2.12 $ 3,005
RATE SENSITIVITY HEDGES
Short eurodollar futures(7) $ 3,000,000 - % 5.20 % .21
Carrying amount $ -
Unrealized gross gain 1,176
Unrealized gross loss -
Total 1,176
Put options on eurodollar
futures(8) 2,516,000 - 4.45 .21
Carrying amount 497
Unrealized gross gain 5,225
Unrealized gross loss -
Total 5,722
Put options on forward swaps(9) 1,000,000 - 5.03 .48
Carrying amount 2,085
Unrealized gross gain 17,498
Unrealized gross loss -
Total 19,583
Long euromark and eurodollar
futures(10) $ 105,876 5.28 % - % .75
Carrying amount $ -
Unrealized gross gain 123
Unrealized gross loss (130)
Total (7)
Total rate sensitivity hedges $6,621,876 5.28 % 4.89 % .26 $ 26,474
ASSET HEDGE
Short T-Bill futures(11) $ 2,000,000 - % 4.78 % .21
Carrying amount $ -
Unrealized gross gain 550
Unrealized gross loss -
Total 550
Total asset hedge $ 2,000,000 - % 4.78 % .21 $ 550
</TABLE>
Comments
(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; $2.2 billion effective March 1996.
(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 $35 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) Reduces liability sensitivity by locking in the floating pay rate on the
interest rate swaps in the fourth quarter of 1994. Beneficial in rising
short-term rate environment.
(8) Reduces liability sensitivity by paying a premium for the right to
lock in the floating pay rate of the interest rate swaps in the fourth
quarter of 1994. Beneficial in rising short-term rate environment.
(9) 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.
(10) Locks in the rate on the future placement of 3 month eurodollar and
euromark deposits.
(11) Converts the maturity of $2.0 billion U.S. Treasury bills in the
available for sale portfolio from December 1994 to September 1994.
*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 June 30, 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 $ 7,534,921 7,802,263 - - 15,337,184
Weighted average receive rate 5.76 % 4.98 - - 5.36
Estimated fair value $ (10,273) (183,825) - - (194,098)
Liability Rate Conversions
Notional amount $ 523,173 690,000 925,000 600,000 2,738,173
Weighted average receive rate 8.56 % 7.45 6.96 3.54 6.37
Estimated fair value $ 1,745 1,311 13,523 (81,070) (64,491)
Basis Protection
Notional amount $ - 5,000,000 - - 5,000,000
Weighted average receive rate - % 4.66 - - 4.66
Estimated fair value $ - 3,005 - - 3,005
Rate Sensitivity Hedges
Notional amount $ 6,591,000 30,876 - - 6,621,876
Weighted average receive rate 5.12 % 5.67 - - 5.28
Estimated fair value $ 26,520 (46) - - 26,474
Asset Hedge
Notional amount $ 2,000,000 - - - 2,000,000
Weighted average receive rate - % - - - -
Estimated fair value $ 550 - - - 550
</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 - 10,226,643 5,500,000 15,881,643
Maturities/Amortizations (742,356) (658,000) - (21,597,767) - (22,998,123)
Terminations - - (1,000,000) (5,500,000) (3,500,000) (10,000,000)
Balance, June 30, 1994 $ 15,337,184 2,738,173 5,000,000 6,621,876 2,000,000 31,697,233
</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>
SECOND QUARTER 1994 FIRST QUARTER 1994
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 $ 786,723 9,915 5.06 % $ 687,314 8,740 5.16 %
Federal funds sold and securities
purchased under resale agreements 1,595,394 13,575 3.41 884,366 6,328 2.90
Trading account assets (a) 904,729 14,010 6.21 928,576 11,190 4.89
Securities available for sale (a) 11,480,968 152,237 5.31 11,655,783 151,785 5.23
Investment securities (a)
U.S. Government and other 1,575,796 27,310 6.93 1,221,890 19,574 6.41
State, county and municipal 1,282,173 37,116 11.58 1,307,801 37,633 11.51
Total investment securities 2,857,969 64,426 9.02 2,529,691 57,207 9.04
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 13,375,599 281,454 8.44 13,155,105 261,856 8.07
Real estate - construction and
other 1,515,456 28,710 7.60 1,605,390 27,712 7.00
Real estate - mortgage 5,743,998 110,471 7.71 5,839,560 105,404 7.32
Lease financing 582,340 13,761 9.45 577,342 13,243 9.17
Foreign 424,662 4,739 4.48 332,993 3,518 4.28
Total commercial 21,642,055 439,135 8.14 21,510,390 411,733 7.76
Retail
Real estate-mortgage 13,600,744 247,665 7.28 13,154,439 240,126 7.30
Installment loans to individuals 12,078,943 317,955 10.54 11,557,358 299,303 10.41
Total retail 25,679,687 565,620 8.82 24,711,797 539,429 8.76
Total loans 47,321,742 1,004,755 8.51 46,222,187 951,162 8.29
Total earning assets 64,947,525 1,258,918 7.76 62,907,917 1,186,412 7.59
Cash and due from banks 2,857,885 3,038,166
Other assets 4,020,590 4,397,425
Total assets $71,826,000 $ 70,343,508
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 12,120,552 64,856 2.15 11,964,371 61,993 2.10
Money market accounts 10,791,758 62,199 2.31 10,906,396 59,622 2.22
Other consumer time 16,462,456 171,773 4.19 16,663,990 172,855 4.21
Foreign 1,327,343 14,088 4.26 834,297 7,569 3.68
Other time 1,567,754 20,266 5.19 1,515,325 16,645 4.45
Total interest-bearing deposits 42,269,863 333,182 3.16 41,884,379 318,684 3.09
Federal funds purchased and securities
sold under repurchase agreements 7,511,271 77,201 4.12 7,109,922 65,895 3.76
Commercial paper 702,645 7,089 4.05 321,628 2,277 2.87
Other short-term borrowings 1,486,748 18,739 5.05 1,162,345 10,932 3.82
Long-term debt 3,138,257 47,702 6.08 3,148,942 38,215 4.85
Total interest-bearing
liabilities 55,108,784 483,913 3.52 53,627,216 436,003 3.29
Noninterest-bearing deposits 10,067,077 10,072,065
Other liabilities 1,344,882 1,301,135
Stockholders' equity 5,305,257 5,343,092
Total liabilities and
stockholders' equity $71,826,000 $ 70,343,508
Interest income and rate earned $ 1,258,918 7.76 % $ 1,186,412 7.59 %
Interest expense and rate paid 483,913 2.98 436,003 2.80
Net interest income and margin $ 775,005 4.78 % $ 750,409 4.79 %
</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>
FOURTH QUARTER 1993 THIRD QUARTER 1993 SECOND QUARTER 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
$ 677,135 5,313 3.11 % $ 320,216 2,903 3.60 % $ 399,424 6,172 6.20 %
475,184 3,508 2.93 491,070 3,737 3.02 553,725 4,499 3.26
1,988,989 19,843 3.96 674,439 8,259 4.86 546,402 7,245 5.32
6,774,551 87,643 5.16 7,597,882 92,020 4.82 7,240,340 90,582 5.01
6,166,830 88,791 5.76 6,829,166 104,859 6.14 6,194,022 99,996 6.46
1,190,980 33,853 11.37 1,126,833 33,454 11.88 1,010,869 29,750 11.77
7,357,810 122,644 6.67 7,955,999 138,313 6.95 7,204,891 129,746 7.20
12,687,322 238,745 7.47 12,147,950 236,030 7.71 11,213,249 231,304 8.27
2,051,496 32,918 6.37 2,085,368 32,207 6.13 2,093,808 27,838 5.33
5,421,146 100,908 7.39 5,576,267 103,496 7.37 5,185,385 96,239 7.44
589,613 14,601 9.91 504,764 13,259 10.51 506,826 13,480 10.64
343,753 3,997 4.61 268,662 3,338 4.93 212,799 2,764 5.21
21,093,330 391,169 7.36 20,583,011 388,330 7.49 19,212,067 371,625 7.76
11,625,424 214,819 7.39 11,501,250 215,493 7.49 10,259,324 201,500 7.86
13,502,979 351,735 10.39 13,443,492 350,209 10.39 12,229,288 325,804 10.67
25,128,403 566,554 9.00 24,944,742 565,702 9.06 22,488,612 527,304 9.38
46,221,733 957,723 8.25 45,527,753 954,032 8.35 41,700,679 898,929 8.64
63,495,402 1,196,674 7.51 62,567,359 1,199,264 7.64 57,645,461 1,137,173 7.90
3,748,206 3,359,195 3,215,118
4,943,044 5,535,224 4,570,557
$72,186,652 $ 71,461,778 $ 65,431,136
11,603,921 62,683 2.14 11,303,281 62,306 2.19 9,887,786 54,879 2.23
10,933,617 63,140 2.29 10,566,722 60,390 2.27 9,885,606 55,391 2.25
17,299,925 185,970 4.26 18,412,561 200,087 4.31 17,170,942 184,279 4.30
702,989 5,975 3.37 581,585 4,968 3.39 779,967 6,661 3.43
1,655,928 18,912 4.53 1,760,681 20,060 4.52 1,463,190 15,472 4.24
42,196,380 336,680 3.17 42,624,830 347,811 3.24 39,187,491 316,682 3.24
8,368,019 75,420 3.58 7,492,596 68,273 3.62 6,813,985 65,583 3.86
319,744 1,725 2.14 297,781 1,774 2.36 367,876 3,147 3.43
766,080 6,800 3.52 1,041,294 12,731 4.85 715,723 5,991 3.36
3,225,556 42,769 5.30 3,082,522 39,902 5.18 2,848,098 37,584 5.29
54,875,779 463,394 3.35 54,539,023 470,491 3.42 49,933,173 428,987 3.45
10,609,800 10,067,212 9,079,037
1,573,144 1,913,959 1,686,281
5,127,929 4,941,584 4,732,645
$72,186,652 $ 71,461,778 $ 65,431,136
$1,196,674 7.51 % $ 1,199,264 7.64 % $ 1,137,173 7.90 %
463,394 2.90 470,491 2.99 428,987 2.98
$ 733,280 4.61 % $ 728,773 4.65 % $ 708,186 4.92 %
</TABLE>
(b) The loan averages include loans on which the accrual of interest
has been discontinued and are stated net of unearned income. Additionally,
certain loan averages and related amounts for the first quarter of 1994 have
been reclassified to conform with summary presentation for the second
quarter of 1994.
T-23
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
SIX MONTHS 1994 SIX MONTHS 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 $ 737,293 18,656 5.10 % $ 542,869 13,106 4.87 %
Federal funds sold and securities
purchased under resale agreements 1,241,844 19,902 3.23 591,808 9,524 3.25
Trading account assets (a) 916,586 25,200 5.54 489,089 12,744 5.25
Securities available for sale (a) 11,567,892 304,022 5.27 6,633,331 167,788 5.08
Investment securities (a)
U.S. Government and other 1,399,821 46,884 6.70 6,126,160 201,987 6.59
State, county and municipal 1,294,916 74,749 11.54 1,010,700 60,459 11.96
Total investment securities 2,694,737 121,633 9.03 7,136,860 262,446 7.35
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 13,265,962 543,310 8.26 11,056,214 451,176 8.23
Real estate - construction and
other 1,560,175 56,422 7.29 2,099,113 59,564 5.72
Real estate - mortgage 5,791,515 215,875 7.51 5,165,165 195,267 7.62
Lease financing 579,854 27,004 9.31 515,629 27,333 10.60
Foreign 379,081 8,257 4.39 220,883 5,605 5.12
Total commercial 21,576,587 850,868 7.95 19,057,004 738,945 7.82
Retail
Real estate-mortgage 13,378,825 487,791 7.29 10,211,513 409,121 8.01
Installment loans to individuals 11,819,591 617,258 10.48 12,082,378 647,488 10.74
Total retail 25,198,416 1,105,049 8.79 22,293,891 1,056,609 9.49
Total loans 46,775,003 1,955,917 8.40 41,350,895 1,795,554 8.72
Total earning assets 63,933,355 2,445,330 7.68 56,744,852 2,261,162 8.00
Cash and due from banks 2,947,527 3,124,760
Other assets 4,207,967 4,446,910
Total assets $71,088,849 $ 64,316,522
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 12,042,894 126,849 2.12 9,665,717 107,243 2.24
Money market accounts 10,848,760 121,821 2.26 9,884,384 108,871 2.22
Other consumer time 16,562,666 344,628 4.20 17,327,456 375,565 4.37
Foreign 1,082,182 21,657 4.04 509,804 9,962 3.94
Other time 1,541,684 36,911 4.83 1,591,386 37,126 4.70
Total interest-bearing deposits 42,078,186 651,866 3.12 38,978,747 638,767 3.30
Federal funds purchased and securities
sold under repurchase agreements 7,311,705 143,096 3.95 6,487,203 124,060 3.86
Commercial paper 513,189 9,366 3.68 334,066 4,855 2.93
Other short-term borrowings 1,325,443 29,671 4.51 692,732 11,714 3.41
Long-term debt 3,143,570 85,917 5.47 2,856,637 77,158 5.40
Total interest-bearing
liabilities 54,372,093 919,916 3.41 49,349,385 856,554 3.50
Noninterest-bearing deposits 10,069,557 8,728,398
Other liabilities 1,323,129 1,597,939
Stockholders' equity 5,324,070 4,640,800
Total liabilities and
stockholders' equity $71,088,849 $ 64,316,522
Interest income and rate earned $2,445,330 7.68 % $ 2,261,162 8.00 %
Interest expense and rate paid 919,916 2.90 856,554 3.04
Net interest income and margin $1,525,414 4.78 % $ 1,404,608 4.96 %
</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 state
tax rate of 7 percent; and a Washington, DC tax rate of 10.25 percent .
T-24
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED 1993 NINE 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>
$ 520,591 21,321 4.10% $ 467,835 16,008 4.57%
537,021 16,770 3.12 557,860 13,262 3.18
913,864 40,846 4.47 551,551 21,003 5.09
6,912,046 347,451 5.03 6,958,382 259,808 4.99
6,313,607 395,637 6.27 6,363,071 306,846 6.43
1,085,412 127,766 11.77 1,049,836 93,913 11.93
7,399,019 523,403 7.07 7,412,907 400,759 7.21
11,742,520 925,951 7.89 11,424,125 687,206 8.04
2,083,646 124,689 5.98 2,094,481 91,771 5.86
5,333,306 399,671 7.49 5,303,705 298,763 7.53
531,539 55,193 10.38 511,968 40,592 10.57
263,896 12,940 4.90 236,984 8,943 5.05
19,954,907 1,518,444 7.61 19,571,263 1,127,275 7.70
10,892,980 839,434 7.71 10,646,150 624,615 7.82
12,783,523 1,349,431 10.56 12,541,068 997,696 10.62
23,676,503 2,188,865 9.24 23,187,218 1,622,311 9.33
43,631,410 3,707,309 8.50 42,758,481 2,749,586 8.59
59,913,951 4,657,100 7.77 58,707,016 3,460,426 7.87
3,340,993 3,203,764
4,846,278 4,813,667
$ 68,101,222 $ 66,724,447
10,567,006 232,231 2.20 10,217,570 169,547 2.22
10,320,835 232,402 2.25 10,114,330 169,262 2.24
17,594,023 761,623 4.33 17,693,132 575,653 4.35
576,590 20,905 3.63 533,994 14,930 3.74
1,650,325 76,097 4.61 1,648,437 57,186 4.64
40,708,779 1,323,258 3.25 40,207,463 986,578 3.28
7,214,686 267,751 3.71 6,826,017 192,328 3.77
321,310 8,356 2.60 321,838 6,629 2.75
799,077 31,245 3.91 810,196 24,450 4.03
3,006,560 159,829 5.32 2,932,760 117,060 5.32
52,050,412 1,790,439 3.44 51,098,274 1,327,045 3.47
9,540,069 9,179,573
1,671,344 1,704,437
4,839,397 4,742,163
$ 68,101,222 $ 66,724,447
$ 4,657,100 7.77% $ 3,460,426 7.87%
1,790,439 2.99 1,327,045 3.02
$ 2,866,661 4.78% $ 2,133,381 4.85%
</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
SECOND First Fourth Third Second
(In thousands except per share data) QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 2,809,958 3,054,037 3,351,963 2,790,443 3,210,877
Interest-bearing bank balances 1,387,532 799,569 712,153 587,506 256,230
Federal funds sold and securities
purchased under resale agreements 1,909,486 1,438,561 351,754 319,012 2,433,874
Total cash and cash equivalents 6,106,976 5,292,167 4,415,870 3,696,961 5,900,981
Trading account assets 933,011 820,876 652,470 2,286,061 565,347
Securities available for sale 9,709,341 12,665,905 11,744,942 5,944,236 6,344,036
Investment securities 2,995,102 2,539,647 2,692,476 8,100,384 7,853,423
Loans, net of unearned income 48,925,495 46,732,424 46,876,177 46,224,944 45,902,305
Allowance for loan losses (1,007,839) (1,014,001) (1,020,191) (1,029,162) (1,036,539)
Loans, net 47,917,656 45,718,423 45,855,986 45,195,782 44,865,766
Premises and equipment 1,518,171 1,535,383 1,524,855 1,490,690 1,500,088
Due from customers on acceptances 94,535 220,698 246,095 150,448 168,231
Mortgage servicing rights 79,826 82,102 87,350 94,432 124,726
Credit card premium 67,524 71,538 75,588 79,893 73,836
Other intangible assets 916,606 954,311 978,312 1,007,806 1,022,803
Southeast segregated assets 270,353 306,929 347,202 388,306 438,736
Other assets 1,995,300 2,040,394 2,165,823 2,953,088 3,100,966
Total assets $ 72,604,401 72,248,373 70,786,969 71,388,087 71,958,939
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 10,207,807 10,428,019 10,861,207 10,245,808 10,186,909
Interest-bearing deposits 43,564,453 41,659,772 42,881,204 42,689,606 45,249,962
Total deposits 53,772,260 52,087,791 53,742,411 52,935,414 55,436,871
Short-term borrowings 8,959,378 10,058,342 7,254,178 8,210,812 6,720,792
Bank acceptances outstanding 94,535 220,698 246,095 150,448 168,231
Other liabilities 1,260,203 1,450,652 1,274,716 1,897,743 1,974,808
Long-term debt 3,129,444 3,154,830 3,061,944 3,137,152 2,791,620
Total liabilities 67,215,820 66,972,313 65,579,344 66,331,569 67,092,322
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 - - - - -
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 575,989 564,812 567,791 565,236 560,138
Paid-in capital 1,576,872 1,555,938 1,591,275 1,564,495 1,501,274
Retained earnings 3,327,793 3,165,544 3,016,967 2,895,195 2,773,613
Unrealized loss on debt and equity securities (123,665) (41,826) - - -
Total stockholders' equity 5,388,581 5,276,060 5,207,625 5,056,518 4,866,617
Total liabilities and
stockholders' equity $ 72,604,401 72,248,373 70,786,969 71,388,087 71,958,939
MEMORANDA
Securities available for sale-amortized cost $ 9,907,974 12,731,630 - - -
Securities available for sale-market value 9,709,341 12,665,905 11,884,385 6,024,087 6,416,169
Investment securities-market value 3,104,804 2,696,736 2,931,139 8,414,741 8,157,663
Common stockholders' equity, net of unrealized loss
on debt and equity securities $ 5,228,205 5,033,846 4,923,584 4,772,478 4,582,576
Preferred shares outstanding 6,318,350 6,318,350 6,318,350 6,318,350 6,318,350
Common shares outstanding 172,796,786 169,443,814 170,337,619 169,573,982 168,041,506
</TABLE>
T-26
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands except per share data) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 999,611 893,699 1,945,762 1,784,920
Interest and dividends on securities
available for sale 147,755 83,578 295,313 154,120
Interest and dividends on investment securities:
Taxable income 26,632 98,856 45,461 199,573
Non-taxable income 24,341 19,701 48,951 40,009
Trading account interest 13,377 6,778 23,769 11,933
Other interest income 23,490 10,671 38,558 22,630
Total interest income 1,235,206 1,113,283 2,397,814 2,213,185
INTEREST EXPENSE
Interest on deposits 333,182 316,682 651,866 638,767
Interest on short-term borrowings 103,029 74,721 182,133 140,629
Interest on long-term debt 47,702 37,584 85,917 77,158
Total interest expense 483,913 428,987 919,916 856,554
Net interest income 751,293 684,296 1,477,898 1,356,631
Provision for loan losses 25,000 61,450 50,000 121,779
Net interest income after
provision for loan losses 726,293 622,846 1,427,898 1,234,852
NONINTEREST INCOME
Trading account profits 10,247 10,141 17,570 15,780
Service charges on deposit accounts 107,083 97,894 215,105 195,106
Mortgage banking income 12,239 35,351 31,660 73,839
Capital management income 50,380 51,814 101,329 102,209
Securities available for sale transactions (2,935) 1,505 1,365 18,821
Investment security transactions 694 3,571 1,309 3,571
Merchant discounts 15,283 13,207 29,644 27,647
Insurance commissions 10,705 11,648 20,695 21,913
Sundry income 70,074 85,301 135,789 122,867
Total noninterest income 273,770 310,432 554,466 581,753
NONINTEREST EXPENSE
Personnel expense 312,718 269,543 622,358 541,240
Occupancy 56,881 51,830 117,268 103,631
Equipment rentals, depreciation
and maintenance 52,436 41,977 109,140 87,620
Postage, printing and supplies 23,910 22,699 49,192 42,023
FDIC insurance 30,155 28,510 60,094 56,916
Owned real estate expense 4,908 10,509 10,204 20,332
Amortization 32,355 52,264 68,733 107,040
Sundry 137,857 113,710 254,072 210,535
Total noninterest expense 651,220 591,042 1,291,061 1,169,337
Income before income taxes 348,843 342,236 691,303 647,268
Income taxes 119,223 115,465 239,224 220,505
Net income 229,620 226,771 452,079 426,763
Dividends on preferred stock 6,201 6,167 11,927 13,171
Net income applicable to
common stockholders $ 223,419 220,604 440,152 413,592
PER COMMON SHARE DATA
Net income $ 1.32 1.32 2.59 2.49
Cash dividends $ .40 .35 .80 .70
Average common shares 169,779,057 166,972,413 169,688,932 166,122,414
</TABLE>
T-27
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands) 1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 452,079 426,763
Adjustments to reconcile net income to net cash provided
(used)
by operating activities
Accretion and amortization of securities
discounts and premiums, net 18,576 (25,820)
Provision for loan losses 50,000 121,779
Provision for foreclosed properties 4,704 16,082
Gain on sale of mortgage servicing rights - (474)
Securities available for sale transactions (1,365) (18,821)
Investment security transactions (1,309) (3,571)
Depreciation and amortization 153,466 177,441
Trading account assets, net (280,541) (396,079)
Mortgage loans held for resale 736,076 (160,820)
Gain on sales of premises and equipment 71 1,643
Gain on sale of First American segregated
assets (34,999) -
Other assets, net 378,157 (67,867)
Other liabilities, net (17,591) (105,553)
Net cash provided (used) by
operating activities 1,457,324 (35,297)
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities available for sale 7,388,888 5,704,461
Maturities of securities available for sale 1,927,771 1,287,185
Purchases of securities available for sale (7,478,317) (5,907,612)
Sales of investment securities 16,500 200,024
Maturities of investment securities 304,877 955,646
Purchases of investment securities (639,652) (2,242,802)
Origination of loans, net (2,651,142) 454,358
Sales of premises and equipment 71,045 6,237
Purchases of premises and equipment (141,627) (81,991)
Sales of mortgage servicing rights - 801
Purchases of mortgage servicing rights (5,755) (6,030)
Other intangible assets, net 17,900 277,594
Purchase of banking organizations, net of
acquired
cash equivalents 100,853 (231,435)
Net cash provided (used) by investing
activities (1,088,659) 416,436
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Sales of deposits, net (238,843) 5,668
Securities sold under repurchase agreements
and other short-term borrowings, net 1,699,301 556,596
Issuances of long-term debt 143,882 447,220
Payments of long-term debt (82,609) (834,013)
Sales of common stock 45,739 103,771
Purchases of preferred stock - (193)
Purchases of common stock (97,582) (1,783)
Cash dividends paid (147,447) (121,347)
Net cash provided by
financing activities 1,322,441 155,919
Increase in cash and
cash equivalents 1,691,106 537,058
Cash and cash equivalents,
beginning of period 4,415,870 5,363,923
Cash and cash equivalents, end of
period $ 6,106,976 5,900,981
NONCASH ITEMS
Increase in foreclosed properties $ 10,815 45,704
Effect of an unrealized loss on debt and
equity securities included in
Securities available for sale 198,633 -
Other assets (deferred income taxes) $ 74,968 -
</TABLE>
T-28
1994
FIRST UNION CORPORATION
SECOND QUARTER REPORT
(Logo of First Union appears here)
<PAGE>
LETTER FROM THE CHAIRMAN
Our earnings in the second quarter of 1994, led by significant loan growth,
rose to $223 million in net income applicable to common stockholders, or
$1.32 per common share.
First Union earned $217 million, or $1.27 per share, in the first quarter of
1994 and $221 million, or $1.32, in the second quarter a year ago. The second
quarter of 1993 included $44 million, or 16 cents per share, in merchant
banking gains.
In the first half of 1994, net income applicable to common stockholders was
$440 million, or $2.59 per share, compared with $414 million, or $2.49 per
share, in the first half of 1993.
Key factors in First Union's second quarter 1994 earnings included:
(bullet) Loan growth of $2.2 billion, up 5 percent from the first quarter;
(bullet) Continued growth in net interest income; and
(bullet) Continued improvement in credit quality, including a 17 percent,
or $134 million, reduction in nonperforming assets since the first quarter
and net charge-offs of .27 percent, among the lowest in the banking industry,
resulting in a flat loan loss provision.
Throughout the rest of 1994, we will continue to make strategic investments
to strengthen our commercial and consumer banking operations and to leverage
our extensive branch network. We are laying the groundwork for our goal of
continuing to achieve superior results for our stockholders.
Well under way is a strategic initiative in the Capital Markets arena that
broadens our ability to offer products and services such as loan syndications
and private placements. In addition, we are streamlining the commercial lending
process to become more responsive to customers' needs.
First Union's mutual funds initiative, which includes licensing two
employees in virtually every branch to sell mutual funds, was enhanced with
the acquisition of the investment adviser to the Evergreen Funds, a nationally
recognized family of mutual funds. This acquisition was consummated on June
30, 1994.
Consumer lending, primarily in credit cards, direct and indirect loans,
led loan growth. Commercial loan growth came primarily from Florida, North
Carolina, the Capital Markets Group, Georgia and Virginia.
In addition, during the second quarter of 1994, First Union announced a
15 percent increase in its common stock dividend to 46 cents per share, or
$1.84 on an annualized basis.
The first half of 1993 includes the purchase accounting acquisitions of
Georgia Federal Bank from June 12, 1993, and First American Metro Corp.
from June 23, 1993.
At June 30, 1994, First Union had assets of $72.6 billion and 1,314 banking
offices in Florida, North Carolina, Georgia, Virginia, South Carolina,
Tennessee, Maryland and Washington, D.C., and 215 nonbanking offices in 39
states.
Thank you for your interest in First Union.
Sincerely,
(Signature of Edward E. Crutchfield Jr. appears here)
Edward E. Crutchfield Jr., Chairman and Chief Executive Officer
<PAGE>
FINANCIAL TABLES
First Union Corporation and Subsidiaries
(Unaudited)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Three Months Ended Percent Six Months Ended Percent
June 30, Increase June 30, Increase
(In thousands except per share data) 1994 1993 (Decrease) 1994 1993 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Net income $229,620 226,771 1.3% $452,079 426,763 5.9%
Dividends on preferred stock 6,201 6,167 .6 11,927 13,171 (9.4)
Net income applicable to common stockholders $223,419 220,604 1.3% $440,152 413,592 6.4%
Net income per common share $1.32 1.32 --% $2.59 2.49 4.0%
Average common shares 169,779 166,972 1.7 169,689 166,122 2.1
Common stockholders' equity (a) $5,228,205 4,582,577 14.1 $5,228,205 4,582,577 14.1
Total stockholders' equity (a) 5,512,246 4,866,617 13.3 5,512,246 4,866,617 13.3
Book value per common share $30.26 27.27 11.0 $30.26 27.27 11.0
Actual common shares 172,797 168,042 2.8 172,797 168,042 2.8
Common stock period-end price $46.125 48.500 (4.9) $46.125 48.500 (4.9)
Series 1990 preferred stock period-end price $52.750 54.875 (3.9)% $52.750 54.875 (3.9)%
</TABLE>
EARNINGS SUMMARY
<TABLE>
<CAPTION>
2Q '94
1994 1993 vs.
(In thousands except per share data) 2Q 1Q 4Q 3Q 2Q 2Q '93
<S> <C> <C> <C> <C> <C> <C>
Net interest income (b) $775,005 750,409 733,280 728,773 708,186 9.4%
Provision for loan losses 25,000 25,000 49,973 50,001 61,450 (59.3)
Net interest income after provision for loan losses (b) 750,005 725,409 683,307 678,772 646,736 16.0
Securities available for sale transactions (2,935) 4,300 2,804 4,142 1,505 (295.0)
Investment security transactions 694 615 3,049 815 3,571 (80.6)
Noninterest income 276,011 275,781 317,727 287,998 305,356 (9.6)
Noninterest expense 651,220 639,841 687,922 664,388 591,042 10.2
Income before income taxes (b) 372,555 366,264 318,965 307,339 366,126 1.8
Income taxes 119,223 120,001 98,469 84,286 115,465 3.3
Tax-equivalent adjustment 23,712 23,804 25,153 27,638 23,890 (.7)
Net income 229,620 222,459 195,343 195,415 226,771 1.3
Dividends on preferred stock 6,201 5,726 5,489 6,240 6,167 .6
Net income applicable to common stockholders $223,419 216,733 189,854 189,175 220,604 1.3%
Net income per common share $1.32 1.27 1.12 1.12 1.32 --%
</TABLE>
(a) Common stockholders' equity and total stockholders' equity exclude net
unrealized losses on debt and equity securities of $123,665,000 at
June 30, 1994.
(b) Tax-equivalent.
<PAGE>
FINANCIAL TABLES
First Union Corporation and Subsidiaries
(Unaudited)
OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 Six Months
(Dollars in thousands) 2Q 1Q 4Q 3Q 2Q 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets (a)(b) 1.28% 1.28 1.07 1.08 1.39 1.28 1.34
Return on average common equity (a)(c) 17.53 17.54 15.55 16.11 19.93 17.53 19.19
Net interest margin 4.78 4.79 4.61 4.65 4.92 4.78 4.96
Allowance as % of loans, net 2.06 2.17 2.18 2.23 2.26 2.06 2.26
Allowance as % of nonaccrual and
restructured loans 192 168 147 112 110 192 110
Allowance as % of nonperforming assets 152% 127 111 85 81 152 81
Loan losses $54,517 56,068 86,602 78,797 87,620 110,585 164,161
Loan recoveries 22,746 24,878 27,406 21,419 15,306 47,624 29,048
Loan losses, net $31,771 31,190 59,196 57,378 72,314 62,961 135,113
As % of average loans, net (a) .27% .27 .51 .50 .69 .27 .65
Nonperforming assets (d)
Commercial nonaccrual $159,858 189,759 242,241 321,699 442,411 159,858 442,411
Real estate nonaccrual 363,433 412,748 425,101 580,508 483,428 363,433 483,428
Total nonaccrual loans 523,291 602,507 667,342 902,207 925,839 523,291 925,839
Restructured loans 2,730 2,742 26,544 18,617 18,613 2,730 18,613
Foreclosed properties 136,408 191,153 222,503 288,818 328,735 136,408 328,735
Total nonperforming assets $662,429 796,402 916,389 1,209,642 1,273,187 662,429 1,273,187
As % of loans, net and foreclosed
properties 1.35% 1.70 1.95 2.60 2.75 1.35 2.75
Southeast segregated loss-sharing
nonperforming assets
Nonaccrual loans $201,020 234,907 254,496 282,239 327,301 201,020 327,301
Foreclosed properties 98,923 103,330 126,019 142,347 150,527 98,923 150,527
Total 299,943 338,237 380,515 424,586 477,828 299,943 477,828
Less FDIC loss-sharing (e) (254,952) (287,501) (323,438) (360,898) (406,154) (254,952) (406,154)
Total $44,991(f) 50,736 57,077 63,688 71,674 44,991 71,674
</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 1994 average net unrealized gains
or losses 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 to 65 percent by 1996.
(f) Allowance for losses on segregated assets amounted to $29,590,000 at
June 30, 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>
2Q '94
1994 1993 vs.
(In thousands) 2Q 1Q 4Q 3Q 2Q 2Q '93
<S> <C> <C> <C> <C> <C> <C>
Loans, net $47,321,742 46,222,187 46,221,733 45,527,753 41,700,679 13.5%
Earning assets 64,947,525 62,907,917 63,495,402 62,567,359 57,645,461 12.7
Total assets 71,826,000 70,343,508 72,186,652 71,461,778 65,431,136 9.8
Noninterest-bearing deposits 10,067,077 10,072,065 10,609,800 10,067,212 9,079,037 10.9
Consumer time deposits 39,374,766 39,534,757 39,837,463 40,282,564 36,944,334 6.6
Other time deposits 2,895,097 2,349,622 2,358,917 2,342,266 2,243,157 29.1
Common stockholders' equity (a) 5,112,116 5,012,086 4,843,889 4,657,544 4,439,393 15.2
Total stockholders' equity (a) $ 5,396,156 5,296,126 5,127,929 4,941,584 4,732,645 14.0%
Capital Ratios (b)
Tier 1 capital 9.78% 9.36 9.14 8.63 7.97
Total capital 15.12 15.15 14.64 13.78 12.21
Leverage 6.65% 6.57 6.13 5.94 6.20
Intangible Assets
(In thousands)
Intangible assets
Goodwill $ 682,570 703,559 712,485 728,107 738,284
Deposit base premium 224,918 240,935 255,359 268,527 272,689
Other 9,118 9,817 10,468 11,172 11,830
Total $ 916,606 954,311 978,312 1,007,806 1,022,803
Mortgage servicing rights $ 79,826 82,102 87,350 94,432 124,726
Credit card premium $ 67,524 71,538 75,588 79,893 73,836
</TABLE>
(a) Average common stockholders' equity and average total stockholders'
equity exclude average net unrealized losses on debt and equity securities
of $90,899,000 in the second quarter of 1994.
(b) Second quarter 1994 ratios are based on estimates and exclude net
unrealized losses on debt and equity securities of $123,665,000.
<PAGE>
Consolidated Statements of Income
First Union Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 999,611 893,699 1,945,762 1,784,920
Interest and dividends on securities available for sale 147,755 83,578 295,313 154,120
Interest and dividends on investment securities
Taxable income 26,632 98,856 45,461 199,573
Non-taxable income 24,341 19,701 48,951 40,009
Trading account interest 13,377 6,778 23,769 11,933
Other interest income 23,490 10,671 38,558 22,630
Total interest income 1,235,206 1,113,283 2,397,814 2,213,185
Interest Expense
Interest on deposits 333,182 316,682 651,866 638,767
Interest on short-term borrowings 103,029 74,721 182,133 140,629
Interest on long-term debt 47,702 37,584 85,917 77,158
Total interest expense 483,913 428,987 919,916 856,554
Net interest income 751,293 684,296 1,477,898 1,356,631
Provision for loan losses 25,000 61,450 50,000 121,779
Net interest income after provision for loan losses 726,293 622,846 1,427,898 1,234,852
Noninterest Income
Trading account profits 10,247 10,141 17,570 15,780
Service charges on deposit accounts 107,083 97,894 215,105 195,106
Mortgage banking income 12,239 35,351 31,660 73,839
Capital management income 50,380 51,814 101,329 102,209
Securities available for sale transactions (2,935) 1,505 1,365 18,821
Investment security transactions 694 3,571 1,309 3,571
Merchant discounts 15,283 13,207 29,644 27,647
Insurance commissions 10,705 11,648 20,695 21,913
Sundry income 70,074 85,301 135,789 122,867
Total noninterest income 273,770 310,432 554,466 581,753
Noninterest Expense
Personnel expense 312,718 269,543 622,358 541,240
Occupancy 56,882 51,830 117,273 103,631
Equipment rentals, depreciation and maintenance 52,435 41,977 109,135 87,620
Postage, printing and supplies 23,910 22,699 49,192 42,023
FDIC insurance 30,155 28,510 60,094 56,916
Owned real estate expense 4,908 10,509 10,204 20,332
Amortization 32,355 52,264 68,733 107,040
Sundry 137,857 113,710 254,072 210,535
Total noninterest expense 651,220 591,042 1,291,061 1,169,337
Income before income taxes 348,843 342,236 691,303 647,268
Income taxes 119,223 115,465 239,224 220,505
Net income 229,620 226,771 452,079 426,763
Dividends on preferred stock 6,201 6,167 11,927 13,171
Net income applicable to common stockholders $ 223,419 220,604 440,152 413,592
</TABLE>
<PAGE>
Consolidated Balance Sheets
First Union Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
June 30,
(In thousands) 1994 1993
<S> <C> <C>
Assets
Cash and due from banks $ 2,809,958 3,210,877
Interest-bearing bank balances 1,387,532 256,230
Federal funds sold and securities purchased under resale agreements 1,909,486 2,433,874
Total cash and cash equivalents 6,106,976 5,900,981
Trading account assets 933,011 565,347
Securities available for sale 9,709,341 6,344,036
Investment securities 2,995,102 7,853,423
Loans, net of unearned income 48,925,495 45,902,305
Allowance for loan losses (1,007,839) (1,036,539)
Loans, net 47,917,656 44,865,766
Premises and equipment 1,518,171 1,500,088
Due from customers on acceptances 94,535 168,231
Mortgage servicing rights 79,826 124,726
Credit card premium 67,524 73,836
Other intangible assets 916,606 1,022,803
Southeast segregated assets 270,353 438,736
Other assets 1,995,300 3,100,966
Total assets $72,604,401 71,958,939
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 10,207,807 10,186,909
Interest-bearing deposits 43,564,453 45,249,962
Total deposits 53,772,260 55,436,871
Short-term borrowings 8,959,378 6,720,792
Bank acceptances outstanding 94,535 168,231
Other liabilities 1,260,203 1,974,808
Long-term debt 3,129,444 2,791,620
Total liabilities 67,215,820 67,092,322
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 - -
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 575,989 560,138
Paid-in capital 1,576,872 1,501,274
Retained earnings 3,327,793 2,773,613
Unrealized loss on debt and equity securities (123,665) -
Total stockholders' equity 5,388,581 4,866,617
Total liabilities and stockholders' equity $72,604,401 71,958,939
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
<S> <C>
G. Alex Bernhardt Torrence E. Hemby Jr.
President and Chief Executive Officer, President,
Bernhardt Furniture Company Beverly Crest Corporation
Lenoir, North Carolina Charlotte, North Carolina
W. Waldo Bradley Leonard G. Herring
Chairman, President and Chief Executive Officer,
Bradley Plywood Corporation Lowe's Companies Inc.
Savannah, Georgia North Wilkesboro, North Carolina
Robert J. Brown Jack A. Laughery
Chairman, President and Investor
Chief Executive Officer, Rocky Mount, North Carolina
B&C Associates, Inc.
High Point, North Carolina Max Lennon
President and Chief Executive Officer,
Edward E. Crutchfield Jr. Eastern Foods Inc.
Chairman and Chief Executive Officer, Atlanta, Georgia
First Union Corporation
Charlotte, North Carolina Radford D. Lovett
Chairman,
Robert D. Davis Commodores Point Terminal Corporation
Chairman, Jacksonville, Florida
D.D.I. Inc.
Jacksonville, Florida Henry D. Perry Jr.
Physician
R. Stuart Dickson Plantation, Florida
Chairman of Executive Committee,
Ruddick Corporation Randolph N. Reynolds
Charlotte, North Carolina Vice Chairman,
Reynolds Metals Company
B.F. Dolan Richmond, Virginia
Investor
Charlotte, North Carolina Ruth G. Shaw
Senior Vice President
Roddey Dowd Sr. for Corporate Resources,
Chairman, Duke Power Company
Charlotte Pipe & Foundry Co. Charlotte, North Carolina
Charlotte, North Carolina
Lanty L. Smith
John R. Georgius Chairman and Chief Executive Officer,
President, Precision Fabrics Group Inc.
First Union Corporation Greensboro, North Carolina
Charlotte, North Carolina
Dewey L. Trogdon
William H. Goodwin Jr. Chairman,
Chairman, Cone Mills Corporation
AMF Companies Greensboro, North Carolina
Richmond, Virginia
John D. Uible
Brenton S. Halsey Investor
Chairman Emeritus, Jacksonville, Florida
James River Corporation
Richmond, Virginia B.J. Walker
Vice Chairman,
Howard H. Haworth First Union Corporation
President, Jacksonville, Florida
The Haworth Group
Morganton, North Carolina Kenneth G. Younger
Consultant
Gastonia, North Carolina
</TABLE>
<PAGE>
(First Union logo) FIRST UNION Bulk Rate
CORPORATION U.S. Postage
PAID
Two First Union Center Charlotte, N.C.
Charlotte, NC 28288-0570 Permit No. 34
This First Union quarterly report includes information released to the
public and the news media on July 14, 1994. You may obtain a copy of our
Second 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>
EXHIBIT (99)(a)
FIRST UNION CORPORATION OF VIRGINIA AND SUBSIDIARIES
SUMMARIZED FINANCIAL INFORMATION
In connection with the merger of Dominion Bankshares Corporation into First
Union Corporation of Virginia ("FUNC-VA"), a wholly-owned subsidiary of First
Union Corporation (the "Corporation"), on March 1, 1993, FUNC-VA assumed, and
subsequently the Corporation guaranteed, FUNC-VA's publicly held 9 5/8%
Subordinated Capital Notes Due 1999. Set forth below is summarized consolidated
financial information for FUNC-VA and subsidiaries for the periods indicated.
CONSOLIDATED STATEMENTS OF INCOME DATA
<TABLE>
<CAPTION>
THREE SIX
MONTHS MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
(IN THOUSANDS) 1994 1994
<S> <C> <C>
Net interest income.................................................................................. $124,261 243,920
Income before income taxes........................................................................... 42,874 77,391
Net income........................................................................................... $ 28,451 50,767
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30,
(IN THOUSANDS) 1994
<S> <C>
Assets........................................................................................................ $12,334,937
Securities available for sale................................................................................. 2,624,555
Investment securities......................................................................................... 309,395
Loans, net of unearned income................................................................................. 7,186,922
Stockholder's equity.......................................................................................... $ 1,202,990
</TABLE>
<PAGE>
<PAGE>
EXHIBIT (99)(b)
FIRST UNION CORPORATION AND SUBSIDIARIES SUMMARIZED FINANCIAL INFORMATION
In connection with the June 30, 1994 acquisition by First Union Corporation
(the "Corporation") of Lieber & Company ("Lieber"), the investment adviser to
the Evergreen family of mutual funds, pooling of interest accounting rules
restrict certain transactions in the Corporation's common stock by the
"affiliates" of the Corporation (I.E., the directors and executive officers of
the Corporation) until publication of financial results covering at least 30
days of post-merger combined operations.
Absent this filing, such publication would normally take place with the
issuance of a news release in early to mid-October with respect to the
Corporation's 1994 third quarter financial results. In order to facilitate the
transactions referred to above, the Corporation is making this filing with
respect to certain summarized financial information of the Corporation for the
seven-months ended July 31, 1994, which includes combined financial results of
the Corporation and Lieber for the month of July 1994. Results for the
seven-months ended July 31, 1994, are not necessarily indicative of results
which may be expected for any other interim period or for the year as a whole.
CONSOLIDATED STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED JULY 31,
(IN THOUSANDS) 1994
<S> <C>
Net interest income.................................................................. $1,672,053
Income before income taxes........................................................... 814,339
Net income applicable to common stockholders......................................... $ 517,642
</TABLE>
<PAGE>
