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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, 1995
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.)
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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.
171,851,544 shares of Common Stock, par value $3.33 1/3 per share, were
outstanding as of July 31, 1995.
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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.
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FUNC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Consolidated Balance Sheets of FUNC and Subsidiaries at June 30, 1995,
June 30, 1994, and December 31, 1994, respectively, set forth on page T-23 of
the Corporation's Second Quarter Financial Supplement for the six months ended
June 30, 1995, (the "Financial Supplement"), are incorporated herein by
reference.
The Consolidated Statements of Income of FUNC and Subsidiaries for the
three and six months ended June 30, 1995 and 1994, set forth on pages T-24 and
T-25 of the Financial Supplement, are incorporated herein by reference.
The Consolidated Statements of Cash Flows of FUNC and Subsidiaries for the
six months ended June 30, 1995 and 1994, set forth on page T-26 of the Financial
Supplement, are incorporated herein by reference.
A copy of the Financial Supplement is being filed as Exhibit (19) to this
Report.
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FUNC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: LOANS
The Financial Accounting Standards Board (FASB) has issued Standard No.
114, "Accounting by Creditors for Impairment of a Loan," which requires that all
creditors value all specifically reviewed loans for which it is probable that
the creditor will be unable to collect all amounts due according to the terms of
the loan agreement at the present value of expected cash flows, market price of
the loan, if available, or value of the underlying collateral. Expected cash
flows are required to be discounted at the loan's effective interest rate. This
Standard is required for fiscal years beginning after December 15, 1994.
The FASB also has issued Standard No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures," that amends FASB
Standard 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
Standard is to be implemented concurrently with Standard No. 114.
On January 1, 1995, the provisions of Standards No. 114 and 118 were
adopted. The adoption of the Standards required no increase to the allowance for
loan losses and had no impact on net income in the first six months of 1995. The
impact to historical and current amounts related to in-substance foreclosures
was not material, and accordingly, historical amounts have not been restated.
When the ultimate collectibility of an impaired loan's principal is in
doubt, wholly or partially, all cash receipts are applied to principal. When
this doubt does not exist, cash receipts are applied under the contractual terms
of the loan agreement first to principal and then to interest income. Once the
recorded principal balance has been reduced to zero, future cash receipts are
applied to interest income, to the extent that any interest has been foregone.
Further cash receipts are recorded as recoveries of any amounts previously
charged off.
A loan is also considered impaired if its terms are modified in a troubled
debt restructuring after January 1, 1995. For these accruing impaired loans,
cash receipts are typically applied to principal and interest receivable in
accordance with the terms of the restructured loan agreement. Interest income is
recognized on these loans using the accrual method of accounting. As of June 30,
1995, there were no accruing impaired loans.
At June 30, 1995, impaired loans amounted to $342 million. Included in the
allowance for loan losses is $25 million related to $222 million of impaired
loans. The remainder of the impaired loans are recorded at or below fair value.
In the first six months of 1995, the average recorded investment in
impaired loans was $353 million and $7 million of interest income was recognized
on loans while they were impaired. All of this income was recognized using a
cash-basis method of accounting.
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, 1995, is
included in Tables 19 through 21 of the Financial Supplement on pages T-16
through T-18.
At June 30, 1995, 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 25 percent from year-end 1994 as a result of an increase in the net
financial assets subject to such valuation and decreased 10 percent as a result
of changes in interest rates from year-end 1994.
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 Financial Supplement.
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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 18 and T-1
through T-26 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 18, 1995, is set forth under
Item 4 in the Corporation's 1995 First Quarter Report on Form 10-Q and
incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
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EXHIBIT NO. DESCRIPTION
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(2) Agreement and Plan of Acquisition, dated June 18, 1995, by and among FUNC, First Union Corporation of New Jersey
and First Fidelity Bancorporation ("First Fidelity") (including as exhibits thereto, a First Fidelity Option
Agreement (Exhibit A thereto), a FUNC Option Agreement (Exhibit C thereto), an Agreement among Banco Santander,
S.A., FUNC and First Fidelity (Exhibit B thereto), and a Third Amendment to FUNC's Shareholder Protection Rights
Agreement (Exhibit E thereto))*.
(4) Instruments defining the rights of security holders, including indentures.*
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges.
(19) The Corporation's Second Quarter Financial Supplement.
(20) The Corporation's Second Quarter Report to Stockholders.**
(27) The Corporation's Financial Data Schedule.***
(99)(a) First Union Corporation of Virginia and Subsidiaries Summarized Financial Information.
(99)(b) Pro Forma Financial Information.
(99)(c) Certain Financial Information of First Fidelity.
</TABLE>
* The Corporation agrees to furnish to the Commission upon request, copies of
the instruments, including indentures, defining the rights of the holders of
the long-term debt of the Corporation and its consolidated subsidiaries.
** 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.
*** Filing by Electronic Data Gathering, Analysis and Retrieval System only.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1995, Current Reports on Form 8-K, dated
June 19, 1995, June 20, 1995, June 21, 1995 and June 30, 1995 were filed with
the Commission by the Corporation.
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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 14, 1995
By: /s/ JAMES H. HATCH
JAMES H. HATCH
SENIOR VICE PRESIDENT AND
CORPORATE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
(2) Agreement and Plan of Acquisition, dated June 18, 1995, by and among FUNC, First Union Corporation of New Jersey
and First Fidelity Bancorporation ("First Fidelity") (including as exhibits thereto, a First Fidelity Option
Agreement (Exhibit A thereto), a FUNC Option Agreement (Exhibit C thereto), an Agreement among Banco Santander,
S.A., FUNC and First Fidelity (Exhibit B thereto), and a Third Amendment to FUNC's Shareholder Protection Rights
Agreement (Exhibit E thereto)).*
(4) Instruments defining the rights of security holders, including indentures.*
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges.
(19) The Corporation's Second Quarter Financial Supplement.
(20) The Corporation's Second Quarter Report to Stockholders.**
(27) The Corporation's Financial Data Schedule.***
(99)(a) First Union Corporation of Virginia and Subsidiaries Summarized Financial Information.
(99)(b) Pro Forma Financial Information.
(99)(c) Certain Financial Information of First Fidelity.
</TABLE>
* The Corporation agrees to furnish to the Commission upon request, copies of
the instruments, including indentures, defining the rights of the holders of
the long-term debt of the Corporation and its consolidated subsidiaries.
** 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.
*** Filing by Electronic Data Gathering, Analysis and Retrieval System only.
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EXHIBIT (12)
FIRST UNION CORPORATION
COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
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SIX
MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing
operations............................ $ 752,299 1,415,456 1,220,781 581,203 419,801 327,360
Fixed charges, excluding capitalized
interest.............................. 461,405 669,978 517,742 456,867 698,898 982,086
(A.) Earnings........................... $1,213,704 2,085,434 1,738,523 1,038,070 1,118,699 1,309,446
Interest, excluding interest on
deposits.............................. $ 437,753 619,698 467,181 405,297 652,393 949,046
One-third of rents...................... 23,652 50,280 50,561 51,570 46,505 33,040
Capitalized interest.................... 746 1,120 285 381 2,326 3,144
(B.) Fixed charges...................... $ 462,151 671,098 518,027 457,248 701,224 985,230
Consolidated ratios of earnings to fixed
charges, excluding interest on
deposits (A./B.)...................... 2.63X 3.11 3.36 2.27 1.60 1.33
INCLUDING INTEREST ON DEPOSITS:
Pretax income from continuing
operations............................ $ 752,299 1,415,456 1,220,781 581,203 419,801 327,360
Fixed charges, excluding capitalized
interest.............................. 1,430,199 2,111,226 1,841,000 2,072,538 2,789,501 3,127,374
(C.) Earnings........................... $2,182,498 3,526,682 3,061,781 2,653,741 3,209,302 3,454,734
Interest, including interest on
deposits.............................. $1,406,547 2,060,946 1,790,439 2,020,968 2,742,996 3,094,334
One-third of rents...................... 23,652 50,280 50,561 51,570 46,505 33,040
Capitalized interest.................... 746 1,120 285 381 2,326 3,144
(D.) Fixed charges...................... $1,430,945 2,112,346 1,841,285 2,072,919 2,791,827 3,130,518
Consolidated ratios of earnings to fixed
charges, including interest
on deposits (C./D.)................... 1.53X 1.67 1.66 1.28 1.15 1.10
</TABLE>
FIRST UNION CORPORATION
AND SUBSIDIARIES
Second Quarter
Financial
Supplement
Six Months Ended
June 30, 1995
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FIRST UNION CORPORATION
AND SUBSIDIARIES
SECOND QUARTER FINANCIAL SUPPLEMENT
SIX MONTHS ENDED JUNE 30, 1995
(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
Allowance for Foreclosed Properties. . . . . . . . . . . . . . . . T-10
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T-11
Time Deposits in Amounts of $100,000 or More . . . . . . . . . . . T-11
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . T-12
Changes in Stockholders' Equity. . . . . . . . . . . . . . . . . . T-13
Capital Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . T-14
Interest Rate Gap. . . . . . . . . . . . . . . . . . . . . . . . . T-15
Off-Balance Sheet Derivative Financial Instruments . . . . . . . . T-16
Off-Balance Sheet Derivatives-Expected Maturities. . . . . . . . . T-18
Off-Balance Sheet Derivatives Activity . . . . . . . . . . . . . . T-18
Net Interest Income Summaries
Five Quarters Ended June 30, 1995. . . . . . . . . . . . . . . . T-19
Year-to-date June 30, September 30, and December 31, 1994. . . . T-21
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . T-23
Consolidated Statements of Income
Five Quarters Ended June 30, 1995. . . . . . . . . . . . . . . . T-24
Year-to-date June 30, 1995 and 1994. . . . . . . . . . . . . . . T-25
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . T-26
<PAGE>
SELECTED FINANCIAL DATA
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Three Months Ended Six Months Ended
June 30, June 30,
Per Common Share Data 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net income applicable to common stockholders. . . . . . . . . $1.45 1.32 2.77 2.59
Cash dividends. . . . . . . . . . . . . . . .46 .40 .92 .80
Book value. . . . . . . . . . . . . . . . . 33.39 29.54 33.39 29.54
Quarter-end price . . . . . . . . . . . . . $45.25 46.125 45.25 46.125
Financial Ratios
Return on average assets (a)(b) . . . . . . 1.25% 1.28 1.24 1.28
Return on average common stockholders' equity (a)(c). . . . . . . . 17.71 17.53 17.22 17.53
Net interest margin(a). . . . . . . . . . . 4.62 4.78 4.61 4.78
Net charge-offs to average loans, net (a) . . . . . . .44 .27 .38 .27
Allowance for loan losses to:
Loans, net . . . . . . . . . . . . . . . 1.61 2.06 1.61 2.06
Nonaccrual and restructured loans. . . . . . . . . 222 192 222 192
Nonperforming assets . . . . . . . . . . 170 152 170 152
Nonperforming assets to loans, net and
foreclosed properties. . . . . . . . . . .95 1.35 .95 1.35
Stockholders' equity to assets. . . . . . . 6.90 7.42 6.90 7.42
Tier 1 capital to risk-weighted assets. . . . . . . . 6.86 9.30 6.86 9.30
Dividend payout ratio on common shares. . . . . . . . 31.72% 30.30 33.21 30.89
</TABLE>
(a) Annualized.
(b) Based on net income.
(c) Based on net income applicable to common stockholders and average
common stockholders' equity excluding average net unrealized gains
and losses on debt and equity securities.
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MANAGEMENT'S ANALYSIS OF OPERATIONS
EARNINGS HIGHLIGHTS
First Union's earnings applicable to common stockholders increased to
$479 million, or $2.77 per common share, in the first half of 1995,
compared with $440 million, or $2.59, in the first half of 1994.
Second quarter 1995 net income applicable to common stockholders
increased to $249 million, or $1.45 per common share, compared with $223
million, or $1.32, in the second quarter of 1994 and $230 million, or
$1.32, in the first quarter of 1995.
Key factors in first half 1995 results included:
(bullet) 7 percent growth in tax-equivalent net interest income, to $1.6
billion at June 30, 1995, compared with the six months ended June
30, 1994;
(bullet) 11 percent loan growth since
year-end 1994;
(bullet) A decline in nonperforming assets to
.95 percent of net loans and foreclosed properties; and
(bullet) 14 percent growth in noninterest income to $634 million
at June 30, 1995, compared with the six months ended June
30, 1994.
Net loans at June 30, 1995, were $60.0 billion, an increase of $6.0
billion since year-end 1994, including $2.6 billion from acquisitions
that closed during the first half of 1995. Loan growth was strong in all
categories, particularly in the consumer portfolio, which was led by
direct consumer lending through First Union's retail branch system,
credit cards and home equity lending. Residential mortgages also
increased through the acquisitions of First Florida Savings Bank, FSB,
and Virginia-based Ameribanc Savings Bank, FSB, which closed on April 1,
1995, and Coral Gables FedCorp., which closed on May 31, 1995.
Nonperforming assets were $569 million at June 30, 1995, compared with
$577 million at March 31, 1995, and $558 million at year-end 1994. They
were .95 percent of net loans and foreclosed properties, the lowest
percentage in nine years. Annualized net charge-offs for the first six
months of 1995 were .38 percent of average net loans.
Growth in noninterest income for the first six months of 1995 compared
with same period in 1994 was realized in virtually all categories,
including mortgage banking income, capital management income,
fee income from capital markets activity and service charges on deposits.
On June 19, 1995, First Union announced a 13 percent increase in its
common stock dividend to 52 cents per share, or $2.08 on an annualized
basis, representing the 18th consecutive year that First Union has
increased its dividend. First Union has increased its dividend four
times in the past three years. First Union, including its predecessor
Union National Bank, has paid a dividend every year since 1914. The
common stock dividend is payable on September 15, 1995, to stockholders
of record as of August 31, 1995.
Domestic banking operations, including trust operations, located in
North and South Carolina, Georgia, Florida, Maryland, Tennessee,
Virginia and Washington, D.C., and
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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 information about the loan loss provision.
Outlook
Our first half performance supports our belief that both our fundamental
trends and the investments in capital markets products and services,
commercial lending re-engineering, card products (including credit
cards), retail investment products, technology and other initiatives we
have undertaken to enhance revenues have helped to produce earnings
momentum.
On June 19, 1995, First Union announced the signing of an agreement to
acquire First Fidelity Bancorporation, a $35.4 billion asset banking
company based in Newark, N.J., and Philadelphia, Pa. This transaction is
estimated to be initially dilutive, but to be accretive to earnings in
1997 and beyond.
The First Fidelity merger agreement provides, among other things, for
(i) the merger of First Fidelity with and into a wholly-owned subsidiary
of First Union, (ii) the exchange of each outstanding share of First
Fidelity common stock for 1.35 shares of First Union common stock,
subject to possible adjustment in certain circumstances, and (iii) the
exchange of each share of the three outstanding series of First Fidelity
preferred stock for one share of one of three corresponding new series
of First Union's Class A Preferred Stock having substantially identical
terms as the relevant series of First Fidelity preferred stock, all
subject to the terms and conditions contained the First Fidelity merger
agreement.
In connection with the execution of the First Fidelity merger agreement,
First Fidelity granted an option to First Union to purchase, under
certain circumstances, up to 19.9 percent of the outstanding shares of
First Fidelity common stock at a per share exercise price equal to
$59.00, and First Union granted an option to First Fidelity to purchase,
under certain circumstances, up to 19.9 percent of the outstanding
shares of First Union common stock at a per share exercise price
equal to $45.625.
Also, in connection with the execution of the First Fidelity merger agreement,
Banco Santander, S.A., the owner of approximately 30 percent of the
outstanding shares of First Fidelity common stock, agreed, among other
things, to vote the First Fidelity shares held by it in favor of the
First Fidelity merger agreement. Following consummation of the First
Fidelity merger, Banco Santander is expected to own approximately 11.4
percent of the outstanding shares of First Union common stock.
The First Fidelity merger will be accounted for as a pooling of
interests. Consummation is expected by January 1, 1996, and is subject to
the receipt of regulatory approvals, First Fidelity and First Union
stockholder approvals and other conditions set forth in the First Fidelity
merger agreement.
Based on the $47.625 closing price of First Union common stock on the
New York Stock Exchange on June 16, 1995, the transaction would be
valued at approximately $5.4 billion and represent a purchase price of
$64.29 for each share of First Fidelity common stock.
Before consummation of the First Fidelity merger, First Fidelity and
First Union may purchase up to 5.5 million shares of First Fidelity
common stock or 7.4 million shares of First Union common stock, or some
combination of the two. Approximately 105 million shares of First Union
common stock are expected to be issued in the First Fidelity merger
(including outstanding First Fidelity employee stock options and
convertible preferred stock, and net of the expected purchase of First
Fidelity and First Union common stock referred to above). The
Stockholders' Equity section includes further information on the
purchase of First Union common stock. In addition, it is expected
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that after-tax restructuring charges of $140 million will be taken in
the fourth quarter of 1995 in connection with the First Fidelity merger.
Following consummation of the First Fidelity merger, the current
chairman and chief executive officer of First Fidelity, Anthony P.
Terracciano, will join Edward E. Crutchfield and John R. Georgius in an
"Office of the Chairman" of First Union. Mr. Crutchfield will continue
to serve as chairman and chief executive officer, Mr. Georgius will
serve as vice chairman and Mr. Terracciano will serve as president of
First Union. Additionally, six First Fidelity directors, including Mr.
Terracciano and a representative of Banco Santander, will join the First
Union Corporation Board of Directors.
Additional historical, pro forma and other information relating to the
First Fidelity merger is available in First Union Form 8-K documents
dated June 19, 1995, June 20, 1995, June 21, 1995, and June 30, 1995,
which have been filed with the Securities and Exchange Commission.
During the second quarter of 1995, we completed the purchase accounting
acquisitions of Florida-based Coral Gables Fedcorp, Inc.; Ameribanc
Investors Group, parent of Ameribanc Savings Bank, FSB, in Virginia, and
First Florida Savings Bank, FSB. These three acquisitions had combined
assets of $3.2 billion, net loans of $2.6 billion and deposits of $2.8
billion.
During the third quarter of 1995, we completed the purchase accounting
acquisitions of American Savings of Florida, FSB, and Home Federal
Savings Bank of Rome, Ga. In the second half of 1995, we expect to
consummate the purchase accounting acquisitions of United Financial
Corporation of South Carolina Inc. and Columbia First Bank, FSB, in
Virginia. During the first quarter of 1996, we expect to consummate the
pending purchase accounting acquisitions of RS Financial Corp., parent
company of Raleigh Federal Savings Bank, and Brentwood National Bank,
based in the Nashville suburb of Brentwood, Tenn. At June 30, 1995,
these six pending or completed purchase acquisitions had combined
assets, net loans and deposits of $8.0 billion, $5.6 billion and $5.3
billion, respectively.
We continue to be alert to opportunities to enhance stockholder value through
acquisitions. We are continually 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 temporary dilution of net income per common share
may occur in connection with some 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.
4
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NET INTEREST INCOME
Tax-equivalent net interest income increased 7 percent compared with the
first half of 1994, to $1.6 billion in the first half of 1995.
Tax-equivalent net interest income increased 8 percent from the second
quarter of 1994 and 4 percent from the first quarter of 1995, to a
record $836 million in the second quarter of 1995. The increase in the
first half of 1995 reflected strong loan growth, the repricing of
variable rate assets and reduced premium amortization for the purchase
of options contracts to hedge against rising interest rates. During the
second half of 1995, we are optimistic about our ability to continue to
increase tax-equivalent net interest income.
Nonperforming loans reduced interest income because the contribution
from these loans is eliminated or sharply reduced. In the first half of
1995, $31 million in gross interest income would have been recorded if
all nonaccrual and restructured loans had been current in accordance
with their original terms and had been outstanding throughout the
period, or since origination if held for part of the period. The amount
of interest income related to these assets and included in income in the
first half of 1995 was $8 million.
Net Interest Margin
The net interest margin, which is the difference between the
tax-equivalent yield on earning assets and the rate paid on funds to
support those assets, was 4.62 percent in the second quarter of 1995,
compared with 4.57 percent in the first quarter of 1995 and 4.78 percent
in the second quarter of 1994. Loan repricing and a lag in deposit
repricing were factors in the margin increase from the first quarter of
1995. The margin declined from 4.78 percent in the first six months of
1994 to 4.61 percent in the first six months of 1995 primarily because
of the addition of acquired banks and thrifts with lower margins; the
addition of short-term securities; and increasingly competitive loan
pricing. While we continue to expect growth in net interest income and
loans, particularly in credit cards and direct consumer loans, we also
anticipate a modest contraction in the margin in future quarters as a
result of the impact of acquisitions and the generation of lower-spread
assets related to Capital Markets activity. We expect the margin to
benefit from the repricing of adjustable rate mortgages and run-off in
off-balance sheet positions that have had a negative impact on the
margin. It should be noted that the margin is not our primary management
focus or goal. Our goal is to continue increasing net interest income,
which has increased for 23 consecutive quarters.
The average rate earned on earning assets was 8.59 percent in the first
half of 1995, compared with 7.68 percent in the first half of 1994. The
average rate paid on interest-bearing liabilities was 4.60 percent in
the first half of 1995 and 3.41 percent in the first half of 1994.
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
Virtually all categories of noninterest income grew in the first half of
1995, including capital management income, mortgage banking income and
service charges on deposit accounts, reflecting greater volume due to
acquisitions. Mortgage banking income more than doubled from the second
quarter of 1994. This increase reflected both the $3.8 billion growth in
the mortgage servicing portfolio to $37.3 billion at June 30, 1995, as a
result of acquisitions since the second quarter of 1994, as well as
increased
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originations from the first quarter of 1995. Capital management income,
including personal and corporate trust, brokerage, mutual funds and
asset management income, increased 34 percent, to a record $68 million.
Mutual fund assets under management grew to $9.2 billion with the
acquisition by First Union's proprietary family of mutual funds of five
of the six Florida-based ABT family of mutual funds. Our proprietary
mutual fund family was renamed "The Evergreen Funds" on July 7, 1995.
Capital markets activity also was strong during the first half of 1995.
Trading Activities
Trading activities are undertaken to satisfy customers' risk management
and investment needs and for the corporation's own account. All trading
activities are conducted within risk limits established by the
corporation's Funds Management Committee, and all trading positions are
marked to market daily.
Trading activities include fixed income securities, money market
instruments, foreign exchange, options, futures, forward rate agreements
and swaps.
At June 30, 1995, trading account assets were $1.6 billion, compared
with $1.2 billion at year-end 1994.
NONINTEREST EXPENSE
Noninterest expense increased 8 percent in the first half of 1995
compared with the first half of 1994, largely reflecting growth in
personnel, advertising and other expenses related to card products,
financial planning, capital markets and other initiatives undertaken to
improve prospects for revenue growth, as well as expenses related to
acquisitions. Noninterest expense increased 4 percent compared with the
first quarter of 1995, largely as a result of acquisitions that closed
during the second quarter. Increases in other intangible assets from
$917 million at June 30, 1994, to $1.2 billion at year-end 1994 and $1.4
billion at June 30, 1995, and the related increase in amortization
expense, contributed to the increase in noninterest expense. 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, liquidity needs,
the need to increase regulatory capital ratios and other factors. During
the first half of 1995, we allowed securities to mature without material
reinvestment in order to fund loan growth and to avoid material exposure
to interest rate movements.
At June 30, 1995, we had securities available for sale with a market
value of $7.4 billion, compared with a market value of $7.8 billion at
year-end 1994. The market value of securities available for sale was $13
million above amortized cost at the end of the second quarter of 1995.
Despite the unrealized gain, an $8 million after-tax unrealized loss was
recorded as a reduction of stockholders' equity at June 30, 1995, as a
result of a transfer loss recorded when securities were moved to investment
securities in 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 1995 was 6.37 percent, compared with 5.27 percent in the first
half of 1994. The average maturity of the portfolio was 3.32 years at
June 30, 1995.
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INVESTMENT SECURITIES
First Union's investment securities amounted to $3.6 billion at June 30,
1995, compared with $3.7 billion at year-end 1994.
The average rate earned on investment securities in the first half of
1995 was 8.93 percent, compared with 9.03 percent in the first half of
1994. The average maturity of the portfolio was 5.09 years at June 30,
1995.
Table 8 provides information related to unrealized gains and losses and
realized gains and losses on these 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 the project and other
resources of the borrower.
Our commercial lenders focus principally on middle-market companies. A
majority of our commercial loans are for less than $10 million.
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, 1995, were $60.0 billion, compared with $54.0
billion at year-end 1994. Of this increase, $2.6 billion was related to
acquisitions that closed in the first six months of 1995, with the rest
coming from strong loan growth in all of our banking states and in
virtually all loan categories. Consumer loan growth led the increase,
largely reflecting strength in credit cards, direct lending and second
mortgages.
The loan portfolio at June 30, 1995, was composed of 45 percent in
commercial loans and 55 percent in consumer loans. The portfolio mix did
not change significantly from year-end 1994.
At June 30, 1995, unused loan commitments related to commercial and
consumer loans were $17.1 billion and $11.0 billion, respectively.
Commercial and standby letters of credit were $2.2 billion.
At June 30, 1995, loan participations sold to other lenders amounted to
$1.1 billion and were recorded as a reduction of gross loans.
The average rate earned on loans in the first half of 1995 was 9.05
percent, compared with 8.40 percent in the first half of 1994. The
average prime rate in the first half of 1995 was 8.91 percent, compared
with 6.46 percent in the first half of 1994. Factors affecting rates
between the first half of 1994 and the first half of 1995 included:
rapid increases in the prime rate throughout 1994; an increased portion
of the loan portfolio tied to rate indices other than the prime rate; a
larger portfolio of fixed and adjustable rate mortgages; and a rapidly
growing credit card portfolio, which reflected recent solicitations with
introductory rates that will reprice throughout 1995.
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The Asset Quality section provides information about geographic exposure
in the loan portfolio.
Commercial Real Estate Loans
Commercial real estate loans amounted to 13 percent of the total
portfolio at June 30, 1995, and at December 31, 1994. This portfolio
included commercial real estate mortgage loans of $6.0 billion at June
30, 1995, and $5.4 billion at December 31, 1994.
ASSET QUALITY
Nonperforming Assets
At June 30, 1995, nonperforming assets were $569 million, or .95 percent
of net loans and foreclosed properties, compared with $577 million, or
1.03 percent, at March 31, 1995, and $558 million, or 1.03 percent, at
December 31, 1994.
Segregated assets, which are not included in nonperforming assets and
which relate to the acquisition of Southeast Banks in 1991, were $189
million at June 30, 1995, or $169 million net of a $20 million allowance
for losses on segregated assets. This compared with $187 million, or
$165 million net of a $22 million allowance, at December 31, 1994.
Under a 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 by 1996. Segregated assets are included in other assets.
Loans or properties of less than $5 million each made up 79 percent, or
$450 million, of nonperforming assets at June 30, 1995. Of the rest:
(diamond) Seven loans or properties between $5 million and $10 million each
accounted for $45 million; and
(diamond) Three loans or properties over $10 million each accounted for $74
million.
Sixty-three percent of nonperforming assets were collateralized by real
estate at June 30, 1995, compared with 72 percent at year-end 1994.
Past Due Loans
In addition to these nonperforming assets, at June 30, 1995, accruing
loans 90 days past due were $118 million, compared with $206 million at
March 31, 1995, and $140 million at December 31, 1994. Of these, $7
million were related to commercial and commercial real estate loans,
compared with $27 million at December 31, 1994.
Net Charge-offs
Annualized net charge-offs as a percentage of average net loans were .38
percent in the first half of 1995, compared with .27 percent in the
first half of 1995. Annualized net charge-offs were .44 percent in the
second quarter of 1995, .31 percent in the first quarter of 1995, and
.40 percent in the fourth quarter of 1994. As our credit card portfolios
have matured, annualized net charge-offs have increased. We expect a
moderate increase in the dollar level of charge-offs during the rest of
the year as the credit card portfolios continue to mature. Table 10
provides information on net charge-offs by category.
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Provision And Allowance For Loan Losses
The loan loss provision was $77 million in the first half of 1995,
compared with $50 million in the first half of 1994. The provision was
$44 million in the second quarter of 1995, compared with $25 million in
the second quarter of 1994. The increase in the loan loss provision was
based primarily on current economic conditions, on the maturity and
level of nonperforming assets, and on projected levels of charge-offs,
particularly in relation to the credit card portfolio.
We establish reserves based upon various other factors, including the
results of quantitative analyses of the quality of commercial loans and
commercial real estate loans. Reserves for commercial and commercial
real estate loans are based principally on loan grades, historical loss
rates, borrowers' creditworthiness, underlying cash flows from the
project and from borrowers, and analysis of other less quantifiable
factors that might influence the portfolio. Reserves for consumer loans
are based principally on delinquencies and historical loss rates. We
analyze all loans in excess of $500,000 that are being monitored as
potential credit problems to determine whether supplemental, specific
reserves are necessary.
Since December 31, 1994, the loan loss allowance as a percentage of net
loans, nonaccrual and restructured loans, and nonperforming assets has
declined, as indicated in Table 10. Since the third quarter of 1994, the
provision for loan losses has been less than net charge-offs.
At June 30, 1995, impaired loans, which are included in nonaccrual
loans, amounted to $342 million, compared with $330 million at March 31,
1995. Included in the allowance for loan losses is $25 million related
to $226 million of impaired loans at June 30, 1995. The rest of the
impaired loans are recorded at or below fair value. The Accounting and
Regulatory Matters section provides further information about impaired
loans.
Geographic Exposure
The loan portfolio in the South Atlantic region of the United States is
spread primarily across 61 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 $7.9 billion commercial real estate portfolio
at June 30, 1995, was located in our banking region.
LIQUIDITY AND FUNDING SOURCES
Liquidity planning and management are necessary to ensure we maintain
the ability to fund operations cost-effectively and to meet current and
future obligations. In this process, we focus on both assets and
liabilities and the manner in which they combine to provide adequate
liquidity to meet the corporation's needs.
Funding sources primarily include customer-based core deposits but also
include purchased funds and cash flows from operations. First Union is
one of the nation's largest core deposit-funded banking institutions.
Our large consumer deposit base, which is spread across the economically
strong South Atlantic region, creates considerable funding diversity and
stability. Further, our acquisitions of bank and thrift deposits have
enhanced liquidity.
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Asset liquidity is maintained through maturity management and our
ability to liquidate assets, primarily assets held for sale. Another
significant source of asset liquidity is the potential to securitize
assets such as credit card receivables and auto, home equity and
mortgage loans. Off-balance sheet sources of liquidity exist as well,
such as a mortgage servicing portfolio for which the estimated fair
value exceeded book value by $182 million at June 30, 1995.
Cash Flows
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 $268 million in the first half of
1995, compared with $208 million in the first half of 1994. This cash
was available during the first half of 1995 to increase earning assets
and to reduce borrowings by $103 million, and to pay dividends of $165
million.
Core Deposits
Core deposits were $54.5 billion at June 30, 1995, compared with $53.2
billion at December 31, 1994. Core deposits include savings, negotiable
order of withdrawal (NOW), money market and noninterest-bearing
accounts, and other consumer time deposits.
In the first half of 1995 and 1994, average noninterest-bearing deposits
were 19 percent and 20 percent, respectively, of average core deposits.
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 37 percent at June 30, 1995, and 35 percent at year-end
1994. 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.
Average core deposit balances in the first half of 1995 increased $3.0
billion from the first half of 1994. Average balances in savings and
NOW, other consumer time deposits and noninterest-bearing deposits were
higher when compared with the previous year, while money market deposits
were lower. Deposits were primarily affected by acquisitions and can
also be affected by branch closings or consolidations, seasonal factors
and the rates being offered for deposits compared to other investment
opportunities.
Purchased Funds
Purchased funds at June 30, 1995, were $14.7 billion, compared with
$13.3 billion at year-end 1994. Purchased funds are acquired primarily
through (i) our large branch network, consisting principally of $100,000
and over certificates of deposit, public funds and treasury deposits,
and (ii) national market sources, consisting of relatively short-term
funding sources such as federal funds, securities sold under repurchase
agreements, eurodollar time deposits, short-term bank notes and
commercial paper, and longer-term funding sources such as term bank
notes, Federal Home Loan Bank borrowings and corporate notes.
Average purchased funds in the first half of 1995 were $14.9 billion, an
increase of 27 percent from $11.8 billion in the first half of 1994. The
increase was used primarily to fund loan growth.
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LONG-TERM DEBT
Long-term debt was 94 percent of total stockholders' equity at June 30,
1995, compared with 64 percent at December 31, 1994.
The increase in long-term debt since year-end 1994 was primarily related
to the issuance of $1.1 billion of bank notes with varying rates and
terms to mature in 1997. Additionally, in the first half of 1995, we
issued $300 million of three-year floating rate notes and $250 million
of 40-year, 7 1/2 percent subordinated debentures, which can be redeemed in
whole or in part at the option of the holders in 2005. On August 7,
1995, we issued $250 million of 10-year, 7.05 percent subordinated notes
that are not redeemable prior to maturity. Proceeds from these debt
issues have been used for general corporate purposes.
Under a shelf registration statement filed with the Securities and
Exchange Commission, we currently have available for issuance $200
million of senior or subordinated debt securities. The sale of any
additional debt securities will depend on future market conditions,
funding needs and other factors.
Debt Obligations
We have a $350 million, three-year committed back-up line of credit that
expires in June 1997. 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 1995, $263 million of long-term debt will mature.
Maturing in 1996 is $1.5 billion, which includes bank notes of $875
million at June 30, 1995.
STOCKHOLDERS' EQUITY
At June 30, 1995, common stockholders' equity was $5.74 billion,
compared with $5.40 billion at December 31, 1994. Between year-end 1994
and August 7, 1995, we have paid $606 million for the repurchase of 13.2
million shares of First Union common stock related to the acquisition of
American Savings of Florida and the pending acquisitions of United
Financial, Columbia First, RS Financial and First Fidelity. These shares
have been retired. As of August 7, 1995, we also have purchased 2.7 million
shares of First Fidelity common stock for $170 million and 250,000
shares of First Fidelity convertible preferred stock for $12 million in
connection with the pending First Fidelity acquisition. In
April 1995, the board of directors renewed its authorization for the
purchase from time to time of up to 15 million shares of First Union
common stock. As of August 7, 1995, 6.3 million shares can be purchased
pursuant to such authorization, in addition to up to 7.4 million shares
in connection with the First Fidelity acquisition, or up to 5.5 million
shares of First Fidelity common stock, or some combination thereof.
We paid $165 million in dividends to preferred and common stockholders
in the first half of 1995.
At June 30, 1995, stockholders' equity included an $8 million unrealized
after-tax loss related to debt and equity securities. The Securities
Available for Sale section provides additional information about debt
and equity securities.
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Subsidiary Dividends
Our banking subsidiaries are the largest source of parent company
dividends. Capital requirements established by regulators limit
dividends that these and certain other of our subsidiaries can pay. The
Office of the Comptroller of the Currency (OCC) generally limits a
national bank's dividends in two principal ways: first, dividends cannot
exceed the bank's undivided profits, less statutory bad debt in excess
of a bank's allowance for loan losses; and second, in any year dividends
may not exceed a bank's net profits for that year, plus its retained
earnings from the preceding two years, less any required transfers to
surplus.
Under these and other limitations, our subsidiaries had $153 million
available for dividends at June 30, 1995. Our subsidiaries paid $394
million in dividends to the corporation in the first half of 1995.
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, 1995, the corporation's tier 1 and total capital ratios were
6.86 percent and 11.58 percent, respectively, compared with 9.30 percent
and 14.68 percent at June 30, 1994. These ratios have declined primarily
as a result of our First Union common stock repurchase program, our
preferred stock redemption, and because we have increased total assets
and intangible assets during the past year. These ratios remain above
regulatory minimums.
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 of at least 4 to 5 percent. The corporation's
leverage ratio at June 30, 1995, was 5.74 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 17 had a leverage ratio
in excess of 5.14 percent at June 30, 1995. 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
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ratio of 5 percent, a tier 1 capital ratio of 6 percent and a total
capital ratio of 10 percent.
At June 30, 1995, the deposit-taking subsidiary banks listed in Table 17
met the capital and leverage ratio requirements for "well capitalized"
banks. We expect to maintain these banks' ratios at the required levels
by the retention of earnings and, if necessary, the issuance of
additional capital. First Union Home Equity Bank is not a deposit-taking
bank.
Failure to meet certain capital ratio or leverage ratio requirements
could subject a bank to a variety of enforcement remedies, including
termination of deposit insurance by the FDIC.
The Accounting and Regulatory Matters section provides more information
about proposed changes in risk-based capital standards.
INTEREST RATE RISK MANAGEMENT
Managing interest rate risk is fundamental to banking. Banking
institutions manage the inherently different maturity and repricing
characteristics of the lending and deposit-taking lines of business to
achieve a desired interest rate sensitivity position and to limit
exposure to interest rate risk. The inherent maturity and repricing
characteristics of our lending and deposit activities create a naturally
asset-sensitive structure. By using a combination of on- and off-balance
sheet financial instruments, we manage the sensitivity of earnings to
changes in interest rates within our established policy guidelines.
The Financial Management Committee of the corporation's board of
directors reviews overall interest rate risk management activity. The
corporation's 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. Balance sheet 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 measure interest rate sensitivity by estimating the amount of
earnings per share at risk based on the modeling of future changes in
interest rates. Our model captures all assets and liabilities and
off-balance sheet financial instruments, and combines various
assumptions affecting rate sensitivity and changes in balance sheet mix
into an earnings outlook that incorporates our view of the interest rate
environment most likely over the next 24 months. Balance sheet
management and finance personnel review and update continuously the
underlying assumptions included in the earnings simulation model. The
results of the model are reviewed by the Funds Management Committee. The
model is updated at least monthly and more often as appropriate.
Our interest rate sensitivity analysis is based on multiple interest
rate scenarios, projected changes in growth in balance sheet categories
and other assumptions. Changes in management's outlook related to
interest rates and their effect on our balance sheet mix of assets and
liabilities and other market factors may cause actual results to differ
from our current simulated outlook.
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We believe our earnings simulation model is a more relevant depiction of
interest rate risk than traditional gap tables because it captures
multiple effects excluded in less sophisticated presentations, and it
includes significant variables that we identify as being affected by
interest rates. For example, our model captures rate of change
differentials, such as federal funds rates versus savings account rates;
maturity effects, such as calls on securities; and rate barrier effects,
such as caps and floors on loans. It also captures changing balance
sheet levels, such as commercial and consumer loans, both floating and
fixed rate, noninterest-bearing deposits and investment securities. In
addition, it considers leads and lags that occur in long-term rates as
short-term rates move away from current levels; the elasticity in the
repricing characteristics of savings and money market deposits; and the
effects of prepayment volatility on various fixed rate assets such as
residential mortgages, mortgage-backed securities and consumer loans.
These and certain other effects are evaluated in developing the
scenarios from which sensitivity of earnings to changes in interest
rates is determined.
We use three standard scenarios in analyzing interest rate sensitivity
for policy measurement. The base-line scenario is our estimated most
likely path for future short-term interest rates over the next 24
months. The "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 24-month period. Our estimate in July 1995
of the most likely path for future short-term interest rates was that
the federal funds rate would decline to 5.60 percent by June 1996,
followed by a gradual increase to 6.00 percent by May 1997.
We determine interest rate sensitivity by the change in earnings per
share between the three scenarios over a 12-month policy measurement
period. The earnings per share as calculated by the earnings simulation
model under the base-line scenario becomes the standard. The measurement
of interest rate sensitivity is the percentage change in earnings per
share calculated by the model under high rate versus base-line and under
low rate versus base-line. The policy measurement period begins with the
fourth month forward and ends with the 15th month (i.e., the 12-month
period).
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 on the July 1995 outlook, if interest rates were to decline to
follow the low rate scenario, which means a full 100 basis point
decrease under the base-line, then earnings during the policy
measurement period would be negatively affected by 3.3 percent. Our
model indicates that earnings would be positively affected in our high
rate scenario.
In addition to the three standard scenarios used to analyze rate
sensitivity over the policy measurement period, we also analyze the
potential impact of other interest rate scenarios on corporate earnings
in managing and monitoring our interest rate sensitivity. These
alternate scenarios may include interest rate paths both higher, lower
and more volatile than those used for policy measurement.
While our interest rate sensitivity modeling assumes that management
takes no action, we regularly assess the viability of strategies to
reduce unacceptable risks to earnings resulting not only from the
standard scenarios over which policy period sensitivity is measured, but
also from alternate scenarios.
We regularly analyze strategies to mitigate the negative effect on
earnings of adverse changes in interest rates beyond the rate changes
set forth by our policy measurement criteria. As new monthly forecast
results become available, management will continue
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to formulate strategies to protect earnings from the potential negative
effects of changing assumptions and interest rates.
Off-Balance Sheet Derivatives For Interest Rate Risk Management
As part of our overall interest rate risk management strategy, for many
years we have used off-balance sheet derivatives as a cost- and
capital-efficient way to modify the repricing or maturity
characteristics of on-balance sheet assets and liabilities. Our
off-balance sheet derivative transactions used for interest rate
sensitivity management include interest rate swaps, futures and options
with indices that relate to the pricing of specific core assets and
liabilities of the corporation. We believe we have appropriately
controlled the risk so that the derivatives used for rate sensitivity
management will not have any significant unintended effect on corporate
earnings.
As a result of interest rate fluctuations, off-balance sheet
transactions (and securities) will from time to time develop unrealized
appreciation or depreciation in market values when compared with their
cost. The impact on net interest income attributable to off-balance
sheet transactions, all of which are linked to specific assets and
liabilities as part of our overall interest rate risk management
strategy, will generally be offset by net interest income of on-balance
sheet assets and liabilities.
Our asset sensitivity arises naturally, primarily because the repricing
characteristics of our large core deposit base have a positive effect on
net interest income in a rising rate environment and a negative effect
on net interest income in a declining or low-rate environment.
Conversely, our fixed-rate securities and off-balance sheet instruments
have the opposite effect when rates go up or down. We mitigate our
natural asset sensitivity by holding fixed-rate debt instruments in the
available-for-sale securities 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 unrealized appreciation and depreciation of these asset
proxies generally offset the appreciation and depreciation of core
deposits. The combination of securities and interest rate swaps enables
us to achieve a desired level of interest rate sensitivity.
Another common application of off-balance sheet instruments 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 to pay a variable rate, usually six-month LIBOR. These
"liability swaps," all of which are linked to specific debt issuances,
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
overall rates.
Our overall goal is to manage the corporation's rate sensitivity in ways
that the earnings momentum is not adversely affected materially whether
rates go up or down.
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 fair value appreciation of off-balance sheet derivative financial
instruments used to manage our interest rate sensitivity was $78 million
at June 30, 1995, compared with fair value depreciation of $422 million
at December 31, 1994.
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The carrying amount of financial instruments used for interest rate risk
management includes amounts for deferred gains and losses related to terminated
positions. The amount of deferred gains and losses from off-balance sheet
instruments used to manage interest rate risk was $10 million and $21 million,
respectively, as of June 30, 1995. These net losses will reduce net interest
income by $9 million in 1995 and $2 million in 1996. 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 swaps and options be governed
by an International Swaps and Derivatives Association Master Agreement.
Bilateral collateral arrangements are in place for substantially all
dealer counterparties.
Collateral for dealer transactions and derivatives used in our trading
activities is delivered by either party when the credit risk associated
with a particular transaction, or group of transactions to the extent
netting exists, exceeds acceptable thresholds of credit risk. Thresholds
are determined based on the strength of the individual counterparty and
are bilateral. As of June 30, 1995, the total credit risk in excess of
thresholds was $148 million. The fair value of collateral held was 100
percent of the total credit risk in excess of thresholds. For nondealer
transactions, the need for collateral is evaluated on an individual
transaction basis and is primarily dependent on the financial strength
of the counterparty.
ACCOUNTING AND REGULATORY MATTERS
The Financial Accounting Standards Board (FASB) has issued Standard No.
114, "Accounting by Creditors for Impairment of a Loan," which requires
that all creditors value all specifically reviewed loans for which it is
probable that the creditor will be unable to collect all amounts due
according to the terms of the loan agreement at the present value of
expected cash flows, market price of the loan, if available, or value of
the underlying collateral. Expected cash flows are required to be
discounted at the loan's effective interest rate. This Standard is
required for fiscal years beginning after December 15, 1994. The FASB
also has issued Standard No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures," that amends
FASB Standard 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 Standard is to be implemented
concurrently with Standard No. 114. On January 1, 1995, we adopted the
provisions of Standards No. 114 and 118. The adoption of the Standards
required no increase to the allowance for loan losses and had no impact
on net income in the first half of 1995. The impact to historical and
current amounts related to in-substance foreclosures was not material,
and accordingly, historical amounts will not be restated. The Asset
Quality section includes information about impaired loans.
16
<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 position 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. The FASB has also
issued FASB Interpretation No. 41, "Offsetting of Amounts Related to
Certain Repurchase and Reverse Repurchase Agreements," which modifies
FASB Interpretation No. 39 to permit offsetting in the statement of
financial position of payables and receivables that represent repurchase
agreements and reverse repurchase agreements, respectively, which have
the same settlement date, are executed with the same counterparty in
accordance with a master netting arrangement, involve securities that
exist in "book entry" form, and settle on securities transfer systems
that have the same key operating characteristics as the Federal
Securities Transfer System. This Interpretation is effective for
financial statements issued for periods ending after December 31, 1994.
The effect of the corporation's adoption of the provisions of these
Interpretations currently has been immaterial.
The FASB also has issued Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An estimate of the future
cash flows expected to result from the use of the asset and its eventual
disposition should be performed during a review for recoverability. An
impairment loss (based on the fair value of the asset) is recognized if
the sum of the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset.
Additionally, Standard No. 121 requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell, except for
certain assets. These assets will continue to be reported at the lower
of carrying amount or net realizable value. The periodic effect on net
income, if any, has not been determined. This Standard is required for
fiscal years beginning after December 15, 1995.
The FASB also has issued Standard No. 122, "Accounting for Certain
Mortgage Banking Activities," which requires that a mortgage banking
enterprise recognize as separate assets the rights to service mortgage
loans for others, however those servicing rights are acquired. A
mortgage banking enterprise that acquires mortgage servicing rights
through either the purchase or origination of mortgage loans and sells
or securitizes those loans with servicing rights retained should
allocate the total cost of the mortgage loans to the mortgage servicing
rights and the loans (without the mortgage servicing rights) based on
their relative fair values if it is practicable to estimate those fair
values. If it is not practicable to estimate the fair values of the
mortgage servicing rights and the mortgage loans (without the mortgage
servicing rights), the entire cost of purchasing or originating the
loans should be allocated only to the mortgage loans without the
mortgage servicing rights. Additionally, this Standard requires that a
mortgage banking enterprise periodically assess its capitalized mortgage
servicing rights for impairment based on the fair value of those rights.
The corporation
17
<PAGE>
adopted this Standard on a prospective basis only, beginning on July 1,
1995, and the periodic effect on net income will not be material to the
results of operations.
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 information on risk
assessment classifications.
In addition, the FDIC has announced a reduction in the rate that banks
pay to insure domestic deposits beginning with the Bank Insurance Fund
(BIF) premium on September 30, 1995. With respect to First Union's
subsidiary banks, the rate is expected to be reduced from 23 cents to 4
cents per $100 of BIF deposits. The FDIC also will refund, with
interest, the assessments collected at the old rate from the time the
BIF reached its designated reserve ratio of 1.25 percent, which the FDIC
estimated to be sometime in the second quarter of 1995. Deposits that
are subject to assessment by the Savings Association Insurance Fund
(SAIF) continue to be assessed at a rate of 23 cents per $100 of
deposits. At March 31, 1995, First Union had a BIF deposit assessment
base of $40.5 billion and a SAIF deposit assessment base of $14.7
billion. Various legislative proposals have been made, but not enacted,
that also would affect the BIF and SAIF premium assessments, including a
one-time special assessment for SAIF deposits that could have a
significant impact. It is uncertain at this time whether or when this or
any other related proposals might be adopted.
Legislation has been enacted providing that deposits and certain claims
for administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general
unsecured claims against such an institution, including federal funds
and letters of credit, in the "liquidation or other resolution" of such
an institution by any receiver.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(IBBEA) authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation beginning September 27, 1995. In
addition, beginning June 1, 1997, a bank may merge with a bank in
another state as long as neither of the states opt out of interstate
branching between the date of enactment of IBBEA and May 31, 1997. IBBEA
further provides that a state may enact laws permitting interstate
merger transactions before June 1, 1997.
The Riegle Community Development and Regulatory Improvement Act of 1994
includes a list of regulatory relief items. The regulatory relief
sections eliminate or modify many regulatory requirements under existing
law.
Various other legislative proposals concerning the banking industry are
pending in Congress. Given the uncertainty of the legislative process,
we cannot assess the impact of any such legislation on our financial
condition or results of operations.
18
<PAGE>
TABLE 1
CONSOLIDATED SUMMARIES OF INCOME AND PER SHARE DATA
<TABLE>
<CAPTION>
Twelve
Months 1995 1994
Ended
June 30, SECOND First Fourth Third Second
(In thousands except per share data) 1995 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES
OF INCOME
Interest income* $ 5,786,782 1,574,711 1,469,997 1,411,877 1,330,197 1,258,918
Interest expense 2,547,577 738,338 668,209 610,172 530,858 483,913
Net interest income* 3,239,205 836,373 801,788 801,705 799,339 775,005
Provision for loan losses 126,500 44,000 32,500 25,000 25,000 25,000
Net interest income after
provision for loan losses* 3,112,705 792,373 769,288 776,705 774,339 750,005
Securities available for sale
transactions (7,994) 1,243 3,635 (9,926) (2,946) (2,935)
Investment security transactions 4,147 1,233 217 411 2,286 694
Noninterest income 1,242,720 326,503 301,539 311,419 303,259 276,011
Noninterest expense 2,785,608 714,739 684,702 703,948 682,219 651,220
Income before income taxes* 1,565,970 406,613 389,977 374,661 394,719 372,555
Income taxes 517,106 135,291 130,963 120,705 130,147 119,223
Tax-equivalent adjustment 89,518 22,186 22,105 22,407 22,820 23,712
Net income 959,346 249,136 236,909 231,549 241,752 229,620
Dividends on preferred stock 20,455 - 7,029 6,831 6,595 6,201
Net income applicable to common
stockholders before redemption premium 938,891 249,136 229,880 224,718 235,157 223,419
Redemption premium on preferred stock 41,355 - - 41,355 - -
Net income applicable to
stockholders after redemption premium $ 897,536 249,136 229,880 183,363 235,157 223,419
PER COMMON SHARE DATA
Net income before redemption premium $ 5.40 1.45 1.32 1.28 1.35 1.32
Net income after redemption premium $ 5.16 1.45 1.32 1.04 1.35 1.32
Average common shares - 171,561,676 173,928,984 176,378,717 174,417,288 169,063,689
Average common
stockholders' equity**
Quarter-to-date $ - 5,642,420 5,579,362 5,601,222 5,396,497 5,112,116
Year-to-date - 5,611,065 5,579,362 5,282,412 5,174,974 5,062,377
Common stock price
High 49 3/4 49 3/4 45 1/8 45 1/4 47 1/4 47 5/8
Low 39 3/8 42 7/8 41 3/8 39 3/8 43 1/4 41 1/4
Period-end $ 45 1/4 45 1/4 43 3/8 41 3/8 43 1/4 46 1/8
To earnings ratio*** 8.38 X 8.38 8.23 7.93 8.55 9.55
To book value 136 % 136 136 135 142 156
Cash dividends $ 1.84 .46 .46 .46 .46 .40
Book value $ 33.39 33.39 31.91 30.66 30.37 29.54
</TABLE>
*Tax-equivalent.
**Quarter-to-date and year-to-date average common stockholders' equity
excludes average net unrealized gains or losses on debt and equity
securities.
***Based on net income applicable to common stockholders before redemption
premium.
T-1
<PAGE>
TABLE 2
NONINTEREST INCOME
<TABLE>
<CAPTION>
Twelve
Months 1995 1994
Ended
June 30, SECOND First Fourth Third Second
(In thousands) 1995 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Trading account profits $ 35,814 10,265 1,536 13,107 10,906 10,247
Service charges on deposit accounts 447,859 117,625 110,127 110,782 109,325 107,083
Mortgage banking income 91,275 25,415 23,586 20,873 21,401 12,239
Capital management income 258,363 67,754 67,413 59,727 63,469 50,380
Securities available for sale transactions (7,994) 1,243 3,635 (9,926) (2,946) (2,935)
Investment security transactions 4,147 1,233 217 411 2,286 694
Fees for other banking services 83,557 24,093 21,928 20,703 16,833 17,959
Merchant discounts 67,604 17,775 16,633 16,939 16,257 15,283
Insurance commissions 46,377 10,511 11,490 11,870 12,506 10,705
Sundry income 211,871 53,065 48,826 57,418 52,562 52,115
Total $ 1,238,873 328,979 305,391 301,904 302,599 273,770
TABLE 3
NONINTEREST EXPENSE
</TABLE>
<TABLE>
<CAPTION>
Twelve
Months 1995 1994
Ended
June 30, SECOND First Fourth Third Second
(In thousands) 1995 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Personnel expense
Salaries $ 1,107,692 288,542 273,862 283,101 262,187 250,157
Other benefits 250,486 62,969 67,797 55,845 63,875 62,561
Total 1,358,178 351,511 341,659 338,946 326,062 312,718
Occupancy 237,694 57,433 59,401 62,006 58,854 56,877
Equipment rentals, depreciation
and maintenance 248,441 63,292 65,917 63,245 55,987 52,440
Advertising 42,845 12,690 10,852 10,221 9,082 10,659
Telephone 59,884 15,509 14,727 15,769 13,879 14,005
Travel 60,399 17,978 13,467 16,157 12,797 12,491
Postage 55,136 11,252 18,128 13,147 12,609 11,210
Printing and office supplies 57,215 15,115 13,309 16,899 11,892 12,700
FDIC insurance 120,711 30,935 30,162 30,293 29,321 30,155
Other insurance 16,125 4,777 4,954 2,956 3,438 4,774
Professional fees 77,705 16,503 17,263 27,637 16,302 12,031
Data processing 27,434 7,018 5,735 9,493 5,188 4,582
Owned real estate expense 17,236 1,926 3,220 3,305 8,785 4,908
Mortgage servicing amortization 20,368 5,298 4,824 5,266 4,980 4,953
Other amortization 145,345 40,889 38,827 34,488 31,141 27,402
Sundry 240,892 62,613 42,257 54,120 81,902 79,315
Total $ 2,785,608 714,739 684,702 703,948 682,219 651,220
</TABLE>
T-2
<PAGE>
TABLE 4
INTERNAL CAPITAL GROWTH AND DIVIDEND PAYOUT RATIOS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995 1994
SECOND First Fourth Third Second
1995 1994 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNAL CAPITAL GROWTH*
Assets to stockholders' equity (a) 14.06X 13.30 14.22 13.89 12.92 12.85 13.31
X
Return on assets 1.24% 1.28 1.25 1.24 1.22 1.31 1.28
Return on total stockholders' equity (a) 17.47% 17.05 17.71 17.22 15.74 16.88 17.07
X
Earnings retained 65.96% 67.38 68.28 63.41 61.61 64.04 67.96
Internal capital growth (a) 11.52% 11.49 12.09 10.92 9.70 10.81 11.60
DIVIDEND PAYOUT RATIO ON
Common shares 33.21% 30.89 31.72 34.85 44.23 34.16 30.30
Preferred and common shares 34.04% 32.62 31.72 36.59 38.39 35.96 32.04
Return on common stockholders' equity
before redemption premium** (a) 17.22 17.53 17.71 16.71 15.92 17.29 17.53
Return on common stockholders' equity
after redemption premium** (a) 17.22% 17.53 17.71 16.71 12.99 17.29 17.53
</TABLE>
(a) The determination of these ratios exclude average net unrealized gains or
losses on debt and equity securities.
* Based on average balances and net income.
** Based on average balances and net income applicable to common
stockholders.
T-3
<PAGE>
TABLE 5
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
1995 1994
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 $ 550,022 400,998 605,034 656,986 1,028,783
Wholesale 46,193 64,097 98,624 132,828 277,302
Total 596,215 465,095 703,658 789,814 1,306,085
Income property 91,800 44,050 190,266 123,291 78,353
Total $ 688,015 509,145 893,924 913,105 1,384,438
VOLUME OF LOANS SERVICED
Residential $ 35,664,000 32,668,000 32,677,000 31,661,000 31,779,000
Income property 1,610,000 1,532,000 1,537,000 1,603,000 1,744,000
Total $ 37,274,000 34,200,000 34,214,000 33,264,000 33,523,000
NUMBER OF OFFICES
Banking
North Carolina 254 273 276 280 284
South Carolina 63 62 66 66 67
Georgia 145 149 154 157 159
Florida 559 521 552 545 491
Washington, D.C. 24 25 33 28 30
Maryland 23 26 26 31 32
Tennessee 55 55 54 55 65
Virginia 178 174 177 186 186
Foreign 3 2 2 2 2
Total banking offices 1,304 1,287 1,340 1,350 1,316
First Union Home Equity Bank 154 154 184 183 173
Mortgage banking 18 17 18 23 24
Other 21 21 20 18 18
Total offices 1,497 1,479 1,562 1,574 1,531
OTHER DATA
ATMs 1,227 1,247 1,242 1,185 1,186
Employees 32,004 31,844 31,858 32,019 31,581
T-4
<PAGE>
TABLE 6
GROWTH THROUGH ACQUISITIONS
</TABLE>
<TABLE>
<CAPTION>
Loans,
(In thousands) Assets net Deposits
<S> <C> <C> <C>
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 4,595,762 1,238,703 4,026,375
Growth in operations 1,930,774 5,914,872 1,189,487
December 31, 1994, as reported 77,313,505 54,029,752 58,958,273
1995 acquisitions 3,203,831 2,644,832 2,787,396
Growth (reduction) in operations 2,584,276 3,345,923 (2,903,645)
June 30, 1995, as reported $ 83,101,612 60,020,507 58,842,024
</TABLE>
Acquisitions (those greater than $3.0 billion in acquired assets and/or
deposits) include the purchase acquisitions of Florida National Banks of
Florida, Inc. in 1990 and the Southeast Banks transaction in 1991; the pooling
of interests acquisition of Dominion Bankshares Corporation in 1993; and the
Georgia Federal Savings Bank, FSB and First American Metro Corp. purchase
acquisitions in 1993.
T-5
<PAGE>
TABLE 7
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
June 30, 1995
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 $ 1,170,409 1,048,720 - - 2,219,129 (4,468) 24,246 2,238,907 1.79
U.S. Government agencies 184,382 1,102,832 1,528,109 598 2,815,921 (10,444) 24,537 2,830,014 4.82
CMOs 60,044 909,226 134,713 - 1,103,983 (5,629) 5,467 1,103,821 3.07
Other 119,959 755,041 32,466 307,427 1,214,893 (66,261) 19,649 1,168,281 2.72
Total $ 1,534,794 3,815,819 1,695,288 308,025 7,353,926 (86,802) 73,899 7,341,023 3.32
MARKET VALUE
Debt securities $ 1,534,794 3,815,819 1,695,288 32,309 7,078,210 (25,324) 71,072 7,123,958
Sundry securities - - - 275,716 275,716 (61,478) 2,827 217,065
Total $ 1,534,794 3,815,819 1,695,288 308,025 7,353,926 (86,802) 73,899 7,341,023
AMORTIZED COST
Debt securities $ 1,533,189 3,845,996 1,711,784 32,989 7,123,958
Sundry securities - - - 217,065 217,065
Total $ 1,533,189 3,845,996 1,711,784 250,054 7,341,023
WEIGHTED AVERAGE YIELD
U.S. Treasury 6.79% 5.45 - - 6.15
U.S. Government agencies 7.31 7.18 6.65 7.26 6.90
CMOs 7.60 6.42 6.97 - 6.55
Other 6.78 6.50 3.98 3.36 5.79
Consolidated 6.89% 6.38 6.62 3.37 6.44
</TABLE>
Included in "Other" at June 30, 1995, are $767,370,000 of securities that
are denominated in currencies other than the U.S. dollar. The currency exchange
rates were hedged utilizing both on and off-balance sheet instruments to
minimize the exposure to currency revaluation risks. At June 30, 1995, these
securities had a weighted average maturity of 2.28 years and a weighted average
yield of 6.29 percent. The weighted average U.S. equivalent yield for
comparative purposes of these securities was 4.91 percent based on a weighted
average funding cost differential of (1.38) percent.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. The aging of mortgage-backed securities is based on
their weighted average maturities at June 30, 1995. 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 7.75 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 9.975 percent,
respectively.
There were commitments to purchase securities at a cost of $291,051,000
that had a market value of $293,161,000 at June 30, 1995. There were no
commitments to sell securities at June 30, 1995. Gross gains and losses from
sales are accounted for on a trade date basis. Gross gains and losses realized
on the sale of securites in the first six months of 1995 were $21,672,000 and
$21,551,000, respectively. Gross gains realized on sundry securities were
$4,757,000.
T-6
<PAGE>
TABLE 8
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
June 30, 1995
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 $ 15,148 894,243 401,134 - 1,310,525 19,871 (2,811) 1,327,585 4.43
CMOs 55,904 896,280 - - 952,184 16,825 (588) 968,421 3.05
State, county and
municipal 331,912 203,866 126,588 419,360 1,081,726 104,911 (2,227) 1,184,410 7.28
Other 1,519 52,000 4,165 181,787 239,471 7,090 (1,402) 245,159 8.75
Total $ 404,483 2,046,389 531,887 601,147 3,583,906 148,697 (7,028) 3,725,575 5.09
CARRYING VALUE
Debt securities $ 404,483 2,046,389 531,887 484,898 3,467,657 148,697 (7,028) 3,609,326
Sundry securities - - - 116,249 116,249 - - 116,249
Total $ 404,483 2,046,389 531,887 601,147 3,583,906 148,697 (7,028) 3,725,575
MARKET VALUE
Debt securities $ 411,056 2,089,892 550,685 557,693 3,609,326
Sundry securities - - - 116,249 116,249
Total $ 411,056 2,089,892 550,685 673,942 3,725,575
WEIGHTED AVERAGE YIELD
U.S. Government agencies 6.66% 8.66 8.00 - 8.44
CMOs 7.28 7.30 - - 7.30
State, county and municipal 11.17 10.56 11.66 12.31 11.55
Other 5.70 7.62 7.63 7.62 7.61
Consolidated 10.44% 8.23 8.87 10.89 9.02
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. The aging of mortgage-backed securities is based on
their weighted average maturities at June 30, 1995.
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 7.75 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 9.975 percent, respectively.
There were commitments to purchase investment securities at a cost
of $49,961,000 that had a market value of $49,920,000 at June 30, 1995.
There were no commitments to sell investment securities at June 30, 1995.
Gross gains and losses realized on the repurchase agreement underdeliveries
and calls of investment securities in the first six months of 1995 were
$1,887,000 and $437,000, respectively.
T-7
<PAGE>
TABLE 9
LOANS
<TABLE>
<CAPTION>
1995 1994
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 $ 16,228,226 15,849,852 15,198,651 13,765,745 13,460,873
Nontaxable 766,843 658,502 709,092 688,238 658,190
Total commercial, financial
and agricultural 16,995,069 16,508,354 15,907,743 14,453,983 14,119,063
Real estate - construction and other 1,925,310 1,842,099 1,734,095 1,674,297 1,504,546
Real estate - mortgage 5,985,057 5,664,837 5,437,496 5,932,374 5,730,311
Lease financing 2,247,931 1,940,681 1,613,763 1,334,570 931,297
Foreign 441,927 426,907 415,857 509,030 437,967
Total commercial 27,595,294 26,382,878 25,108,954 23,904,254 22,723,184
RETAIL
Real estate - mortgage 16,572,033 14,292,795 15,014,775 14,682,624 13,813,215
Installment loans - Bankcard 4,506,927 4,098,790 3,959,657 3,299,675 2,785,470
Installment loans - other 12,315,693 11,795,465 10,618,696 10,288,391 9,930,333
Total retail 33,394,653 30,187,050 29,593,128 28,270,690 26,529,018
Total loans 60,989,947 56,569,928 54,702,082 52,174,944 49,252,202
UNEARNED INCOME
Loans 152,463 148,584 145,691 142,587 136,352
Lease financing 816,977 653,626 526,639 399,323 190,355
Total unearned income 969,440 802,210 672,330 541,910 326,707
Loans, net $ 60,020,507 55,767,718 54,029,752 51,633,034 48,925,495
</TABLE>
T-8
<PAGE>
TABLE 10
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS*
<TABLE>
<CAPTION>
1995 1994
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 $ 968,828 978,795 1,004,298 1,007,839 1,014,001
Provision for loan losses 44,000 32,500 25,000 25,000 25,000
Allowance of acquired loans 20,486 - 2,296 18,615 609
Loan losses, net (64,192) (42,467) (52,799) (47,156) (31,771)
Balance, end of quarter $ 969,122 968,828 978,795 1,004,298 1,007,839
(as % of loans, net) 1.61 % 1.74 1.81 1.95 2.06
(as % of nonaccrual and restructured loans) 222 % 224 245 203 192
(as % of nonperforming assets) 170 % 168 175 154 152
LOAN LOSSES
Commercial, financial and agricultural $ 9,596 6,321 16,357 20,898 16,373
Real estate - construction and other 725 41 1,270 2,974 1,711
Real estate - mortgage 16,106 3,457 20,228 17,773 7,574
Installment loans - Bankcard 47,515 38,096 19,970 15,492 15,399
Installment loans - other 14,915 14,047 14,398 14,983 13,459
Total 88,857 61,962 72,223 72,120 54,516
LOAN RECOVERIES
Commercial, financial and agricultural 13,723 9,097 11,125 12,965 8,388
Real estate - construction and other 1,579 907 884 424 1,095
Real estate - mortgage 1,987 2,466 1,530 4,657 5,076
Installment loans - Bankcard 2,822 2,572 2,455 2,234 2,710
Installment loans - other 4,554 4,453 3,430 4,684 5,476
Total 24,665 19,495 19,424 24,964 22,745
Loan losses, net $ 64,192 42,467 52,799 47,156 31,771
(as % of average loans, net)** .44 % .31 .40 .38 .27
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 210,464 200,915 155,752 154,861 159,858
Real estate loans 225,802 231,183 241,886 339,881 363,433
Total nonaccrual loans 436,266 432,098 397,638 494,742 523,291
Restructured loans 630 670 1,872 674 2,730
Foreclosed properties 132,204 144,188 158,464 158,234 136,408
Total nonperforming assets $ 569,100 576,956 557,974 653,650 662,429
(as % of loans, net and foreclosed
properties) .95 % 1.03 1.03 1.26 1.35
Accruing loans past due 90 days $ 117,874 205,654 140,081 115,903 85,948
</TABLE>
*Any loans classified by regulatory examiners as loss, doubtful, substandard
or special mention that have not been disclosed hereunder or under the "Loans"
or "Asset Quality" narrative discussions do not (i) represent or result from
trends or uncertainties that management expects will materially impact future
operating results, liquidity or capital resources, or (ii) represent material
credits about which management is aware of any information that causes
management to have serious doubts as to the ability of such borrowers to comply
with the loan repayment terms.
**Annualized.
T-9
<PAGE>
TABLE 11
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1995 1994
SECOND First Fourth Third Second
(In thousands) QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
MORTGAGE SERVICING RIGHTS $ 101,024 80,266 84,898 89,666 79,826
CREDIT CARD PREMIUM $ 51,005 54,703 58,494 62,463 67,524
OTHER INTANGIBLE ASSETS
Goodwill $ 945,295 742,435 754,417 763,832 682,570
Deposit base premium 443,830 422,827 437,025 319,522 224,918
Other 6,243 6,844 7,465 8,134 9,118
Total $ 1,395,368 1,172,106 1,198,907 1,091,488 916,606
</TABLE>
TABLE 12
ALLOWANCE FOR FORECLOSED PROPERTIES*
<TABLE>
<CAPTION>
1995 1994
SECOND First Fourth Third Second
(In thousands) QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Foreclosed properties $ 162,860 178,416 193,290 197,261 177,274
Allowance for foreclosed properties, beginning of quarter 34,228 34,826 39,027 40,866 47,884
Provision for foreclosed properties (2,696) 715 1,913 (2,114) 1,910
Transfer from (to) allowance for segregated assets 40 (48) 1,177 302 (52)
Dispositions, net (916) (1,265) (7,291) (27) (8,876)
Allowance for foreclosed properties, end of quarter 30,656 34,228 34,826 39,027 40,866
Foreclosed properties, net $ 132,204 144,188 158,464 158,234 136,408
</TABLE>
* Excluding Southeast Banks segregated assets.
T-10
<PAGE>
TABLE 13
DEPOSITS
<TABLE>
<CAPTION>
1995 1994
SECOND First Fourth Third Second
(In thousands) QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
CORE DEPOSITS
Noninterest-bearing $ 10,854,459 10,412,883 10,523,538 10,295,616 10,207,807
Savings and NOW accounts 14,114,289 14,065,617 13,991,987 12,677,630 12,085,198
Money market accounts 9,127,362 9,122,752 10,118,963 10,316,481 10,490,933
Other consumer time 20,392,737 18,667,810 18,544,324 17,361,310 16,486,243
Total core deposits 54,488,847 52,269,062 53,178,812 50,651,037 49,270,181
Foreign 2,296,483 2,582,452 4,069,587 1,328,032 2,852,926
Other time 2,056,694 1,951,391 1,709,874 1,707,982 1,649,153
Total deposits $ 58,842,024 56,802,905 58,958,273 53,687,051 53,772,260
</TABLE>
TABLE 14
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
June 30, 1995
Time Other
(In thousands) Certificates Time
MATURITY OF
3 months or less $ 2,426,480 76,972
Over 3 months through 6 months 1,157,723 -
Over 6 months through 12 months 1,030,236 -
Over 12 months 987,582 -
Total $ 5,602,021 76,972
T-11
<PAGE>
TABLE 15
LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
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 10,100 100,000 100,000 100,000 100,000
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
5.95% notes due 1995 150,000 149,960 149,921 149,881 149,842
6-3/4% notes due 1998 248,756 248,634 248,511 248,389 248,267
Floating rate notes due 1998 299,766 299,744 - - -
Fixed rate medium-term senior notes, varying
rates and terms to 1996 200 200 32,700 61,700 61,700
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 149,153 149,127 149,101 149,074 149,048
11% subordinated and variable rate notes due
1996 17,951 17,951 17,951 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 147,721 147,628 147,535 147,442 147,349
8-1/8% subordinated notes due 2002 248,577 248,526 248,475 248,424 248,373
8% subordinated notes due 2002 223,161 223,099 223,037 222,972 222,910
7-1/4% subordinated notes due 2003 148,811 148,772 148,733 148,694 148,655
6-5/8% subordinated notes due 2005 248,094 248,046 247,999 247,935 247,888
6% subordinated notes due 2008 197,135 197,081 197,028 196,974 196,920
6-3/8% subordinated notes due 2009 147,581 147,538 147,495 147,449 147,405
8% subordinated notes due 2009 148,607 148,583 148,559 148,535 -
8.77% subordinated notes due 2004 148,510 148,470 148,430 - -
9-7/8% subordinated notes due 1999 74,473 74,439 74,404 74,370 74,334
7-1/2% subordinated notes due 2035 246,095 - - - -
Debentures and notes of subsidiaries
9-5/8% subordinated capital notes due 1999 74,951 74,948 74,945 74,942 74,937
10-1/2% collateralized mortgage obligations due
2014 54,070 56,919 60,010 65,927 69,950
Bank notes with varying rates and
terms to 1997 1,175,000 225,000 100,000 - -
Debentures and notes with varying rates and
terms to 2002 7,275 7,275 7,275 7,275 7,400
9-1/2% mortgage backed bonds 3,500 - - - -
Total 4,757,466 3,649,919 3,260,088 3,045,916 2,900,911
MORTGAGES AND OTHER DEBT
Notes payable to FDIC due 1996 92,355 99,887 117,271 171,614 193,258
Advances from the Federal Home Loan Bank 482,846 4,846 4,696 4,603 4,603
Mortgage notes and other debt 38,590 41,578 41,153 41,814 24,623
Capitalized leases 5,026 5,196 5,306 5,416 6,049
Total long-term debt $ 5,376,283 3,801,426 3,428,514 3,269,363 3,129,444
</TABLE>
T-12
<PAGE>
TABLE 16
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Twelve
Months 1995 1994
Ended
June 30, SECOND First Fourth Third Second
(In thousands) 1995 QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of period $ 5,388,581 5,490,734 5,397,517 5,622,631 5,388,581 5,276,060
Stockholders' equity of pooled banks
not restated prior to 1994 12,519 - - 12,535 (16) 51,832
Net income 959,346 249,136 236,909 231,549 241,752 229,620
Redemption of preferred stock (325,396) - - (325,396) - -
Purchase of common stock (374,050) (56,707) (197,371) (37,580) (82,392) (51,525)
Common stock issued for stock
options exercised 80,321 37,337 6,168 15,386 21,430 29,060
Common stock issued through
dividend reinvestment plan 40,666 6,471 16,952 10,628 6,615 8,938
Common stock for purchase
accounting acquisition 161,073 - - (6) 161,079 -
Converted debentures 19,760 - - - 19,760 -
Cash dividends paid
Series 1990 preferred stock (20,455) - (7,029) (6,831) (6,595) (6,201)
Common stock (320,800) (78,758) (79,660) (82,052) (80,330) (67,364)
Unrealized gain (loss) on debt and
equity securities 115,282 88,634 117,248 (43,347) (47,253) (81,839)
Balance, end of period $ 5,736,847 5,736,847 5,490,734 5,397,517 5,622,631 5,388,581
</TABLE>
T-13
<PAGE>
TABLE 17
CAPITAL RATIOS
<TABLE>
<CAPTION>
1995 1994
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 $ 4,429,775 4,489,955 4,466,670 4,763,409 4,664,358
Total capital 7,484,114 7,512,040 7,450,602 7,654,430 7,361,013
Adjusted risk-based assets 64,609,109 59,651,481 57,593,799 53,904,132 50,155,408
Adjusted leverage ratio assets $ 77,237,551 74,633,796 73,011,243 70,315,199 69,971,938
Ratios
Tier 1 capital 6.86 % 7.53 7.76 8.84 9.30
Total capital 11.58 12.59 12.94 14.20 14.68
Leverage 5.74 6.02 6.12 6.77 6.67
Stockholders' equity to assets
Quarter-end 6.90 7.05 6.98 7.57 7.42
Average 6.96 % 7.01 7.49 7.62 7.39
BANK CAPITAL RATIOS
Tier 1 capital
First Union National Bank of
North Carolina 6.65 % 7.13 7.32 7.14 7.70
South Carolina 7.86 8.24 7.88 8.21 8.54
Georgia 8.72 8.61 8.26 8.28 8.74
Florida 6.55 7.94 7.95 8.79 9.63
Washington, D.C. 17.46 16.55 16.75 17.31 16.30
Maryland 20.14 20.78 20.53 19.01 17.75
Tennessee 11.62 12.34 12.76 13.08 13.36
Virginia 6.81 8.97 9.21 10.88 10.57
First Union Home Equity Bank 5.28 6.49 7.60 7.16 -
Total capital
First Union National Bank of
North Carolina 10.32 10.32 10.69 9.62 10.51
South Carolina 11.79 12.40 12.15 12.53 12.96
Georgia 11.52 11.46 11.18 11.22 11.70
Florida 10.01 10.70 10.76 10.35 11.31
Washington, D.C. 18.74 17.83 18.03 18.60 17.60
Maryland 21.42 22.07 21.81 20.30 19.04
Tennessee 12.88 13.60 14.02 14.34 14.62
Virginia 10.39 12.80 13.11 13.17 12.90
First Union Home Equity Bank 8.28 10.34 12.10 11.54 -
Leverage
First Union National Bank of
North Carolina 5.81 6.25 6.10 5.74 5.65
South Carolina 5.94 5.75 5.77 6.06 6.03
Georgia 6.40 6.06 5.69 5.96 6.07
Florida 5.15 5.75 5.91 6.30 6.53
Washington, D.C. 7.70 7.11 8.33 7.88 7.11
Maryland 13.08 13.44 12.82 11.53 10.62
Tennessee 7.71 7.88 8.47 8.54 8.41
Virginia 5.28 6.95 7.10 8.26 7.70
First Union Home Equity Bank 5.53 % 6.22 7.22 6.24 -
</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-14
<PAGE>
TABLE 18
INTEREST RATE GAP
<TABLE>
<CAPTION>
June 30, 1995
Interest Sensitivity in Days Non-Sensitive
One to Two to and Sensitive
(In thousands) 1-90 91-180 181-365 Total two years five years Over five years Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Interest-bearing bank balances $ 446,612 100 446,712 - - - 446,712
Federal funds sold and securities
purchased under resale
agreements 2,042,624 9,612 - 2,052,236 - - - 2,052,236
Trading account assets 1,559,021 - - 1,559,021 - - - 1,559,021
Securities available for sale 423,820 253,408 1,674,050 2,351,278 1,022,596 3,112,408 854,741 7,341,023
Investment securities 336,679 192,659 335,998 865,336 464,384 1,204,230 1,049,956 3,583,906
Loans* 32,072,986 3,031,263 4,988,165 40,092,414 4,825,840 6,938,178 8,164,075 60,020,507
Total
earnings assets 36,881,742 3,487,042 6,998,213 47,366,997 6,312,820 11,254,816 10,068,772 75,003,405
INTEREST-BEARING LIABILITIES
Interest-bearing deposits 18,713,868 4,592,453 4,942,333 28,248,654 2,597,855 3,821,571 13,319,485 47,987,565
Short-term borrowings 11,009,707 3,008 - 11,012,715 - - - 11,012,715
Long-term debt 763,467 7,284 817,218 1,587,969 1,350,470 400,298 2,037,546 5,376,283
Total
interest-bearing
liabilities 30,487,042 4,602,745 5,759,551 40,849,338 3,948,325 4,221,869 15,357,031 64,376,563
OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS (10,722,359)12,987,000 503,094 2,767,735 998,122 (1,690,857) (2,075,000) -
Total
interest-bearing
liabilities and off-balance
sheet financial
instruments 19,764,683 17,589,745 6,262,645 43,617,073 4,946,447 2,531,012 13,282,031 64,376,563
Interest rate gap $17,117,059 (14,102,703) 735,568 3,749,924 1,366,373 8,723,804
Cumulative gap $17,117,059 3,014,356 3,749,924 3,749,924 5,116,297 13,840,101
Ratio of cumulative gap to total
earnings assets 22.82% 4.02 5.00 5.00 6.82 18.45
</TABLE>
The information included herein should be read in conjunction with the
discussion appearing under "Interest Rate Risk Management" and with Tables 19-
21. 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. The amounts presented
herein are based on contractual maturities or repricing terms, as appropriate,
and internally-prepared prepayment assumptions related to certain mortgage
products, and do not reflect deposit run-off or other assumptions.
Additionally, in conjunction with such practices, savings and NOW accounts are
included in the non-sensitive and sensitive over five years classification.
Money market accounts are included in the 1-90 day classification.
*Loans are stated net of unearned income.
T-15
<PAGE>
TABLE 19
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
June 30, 1995 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS Converts floating rate commercial loans
Interest rate swaps $ 5,762,963 5.98% 6.15% 1.23 to fixed rate. Adds to liability
Carrying amount $ 14,211 sensitivity. Similar characteristics
Unrealized gross gain 14,599 to a fixed income security funded with
Unrealized gross loss (58,854) variable rate liabilities. Includes
Total (30,044) $1.6 billion of indexed amortizing
swaps, all of which mature within three
and one half years.
Forward interest rate swaps 1,120,000 8.05 - 1.33
Carrying amount -
Unrealized gross gain 23,287 Converts floating rates on commercial
Unrealized gross loss - loans to fixed rates at higher than
Total 23,287 current yields in future periods. $63
million effective March 1996 and $57
Total asset rate conversions $ 6,882,963 6.32% 6.15% 1.25 $ (6,757) million effective March 1997. $1.0
billion effective September 1995 with
LIABILITY RATE CONVERSIONS put options on forward swaps referenced
Interest rate swaps $ 2,772,000 7.28% 6.05% 7.36 under "Rate Sensitivity Hedges" linked
Carrying amount $ 25,520 to this item.
Unrealized gross gain 95,178
Unrealized gross loss (28,210)
Total 92,488
Converts long-term fixed rate debt to
Other financial instruments 185,000 - - 6.65 floating rate by matching maturity of
Carrying amount (2,677) the swap to the debt issue. Rate
Unrealized gross gain - sensitivity remains unchanged due to the
Unrealized gross loss (811) simultaneous, direct linkage of the
Total (3,488) swap to the debt issue.
Total liability rate
conversions $ 2,957,000 7.28% 6.05% 7.32 $ 89,000 Miscellaneous purchased option-based
products for liability management
purposes include $10 million of options
on swaps, $25 million of eurodollar caps
and $150 million of eurodollar floors.
(Continued)
T-16
<PAGE>
TABLE 19
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
</TABLE>
<TABLE>
<CAPTION>
Weighted
Average Rate Estimated
June 30, 1995 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
<S> <C> <C> <C> <C> <C> <C>
RATE SENSITIVITY HEDGES Paid a premium for the right to lock in
Put options on eurodollar the 3 month LIBOR reset rates on pay
futures $ 19,422,000 - % 8.09% .39 variable rate swaps and short-term
Carrying amount $ 5,772 liabilities. $13.0 billion effective
Unrealized gross gain - September 1995; $2.1 billion effective
Unrealized gross loss (4,796) December 1995; $2.4 billion effective
Total 976 March 1996; $1.9 billion effective June
1996.
Put options on forward swaps 1,000,000 - 8.08 .22
Carrying amount 1,135 Paid a premium for the right to
Unrealized gross gain - terminate $1.0 billion of forward
Unrealized gross loss (1,145) interest rate swaps based on interest
Total (10) rates in effect in September 1995.
Reduces liability sensitivity.
Interest rate cap 67,200 - - .93
Carrying amount 239 Purchased cap to convert floating rate
Unrealized gross gain 32 liabilities to fixed rate if short-term
Unrealized gross loss (203) rates rise above 8.00 percent.
Total 68
Locks in the funding on German mark
Short euromark futures 362,188 - 5.80 .35 denominated securities from September
Carrying amount - 1995 through March 1996.
Unrealized gross gain -
Unrealized gross loss (1,099) Locks in the funding on U.S. Treasury
Total (1,099) securities and the three month LIBOR
reset rates on pay variable rate swaps.
Short eurodollar futures 10,293,000 - 5.83 .48 $4.1 billion effective September 1995;
Carrying amount - $3.1 billion effective December 1995;
Unrealized gross gain 3,429 $1.8 billion effective March 1996;
Unrealized gross loss (7,387) $1.2 billion effective June 1996; $64
Total (3,958) million effective September 1996.
Total rate sensitivity Consists of $800 million of interest
hedges $ 31,144,388 -% 7.31% .41 $ (4,023) rate floors, of which $400 million were
purchased and offset by $400 million
OFFSETTING POSITIONS sold, locking in gains to be amortized
Interest rate floors $ 800,000 6.28% 6.28% .96 over the remaining life of the
Carrying amount $ (1,100) contracts.
Unrealized gross gain 4,524
Unrealized gross loss (3,424) In December 1994, the corporation
Total - offset an existing federal funds cap
(purchased) and a prime rate cap
Prime/federal funds cap 4,000,000 6.10 6.10 .78 (written) position by simultaneously
Carrying amount 1,272 purchasing a prime rate cap and writing
Unrealized gross gain 1,866 a federal funds cap at strikes of 6.00
Unrealized gross loss (3,138) percent and 3.25 percent, respectively.
Total - The notional amount of each cap is $1.0
billion. Locks in losses to be
Total offsetting positions $ 4,800,000 6.13% 6.13% .81 $ - amortized over the remaining life of the
contracts.
</TABLE>
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Prime Rate - The base rate on corporate loans posted by at least 75
percent of the nation's 30 largest banks as defined in The Wall Street
Journal.
London Interbank Offered Rates (LIBOR) - The average of interbank
offered rates on dollar deposits in the London market, based on
quotations at five major banks.
Weighted average pay rates are generally based upon one to six month
LIBOR. Pay rates related to forward interest rate swaps are set on the
future effective date. Pay rates reset at predetermined reset dates
over the life of the contract. Rates shown are the rates in effect as
of June 30, 1995. Weighted average receive rates are fixed rates at the
time the contract was transacted.
Carrying amount includes accrued interest receivable/payable and
unamortized premiums paid/received.
T-17
<PAGE>
TABLE 20
OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES*
<TABLE>
<CAPTION>
June 30, 1995 1 Year 1 -2 2 -5 5 -10 After 10
(In thousands) or Less Years Years Years Years Total
<S> <C> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS
Notional amount $ 3,700,428 2,016,678 1,165,857 - - 6,882,963
Weighted average receive rate 6.03 % 7.33 5.48 - - 6.32
Estimated fair value $ (13,996) 32,552 (25,313) - - (6,757)
LIABILITY RATE CONVERSIONS
Notional amount $ 190,000 110,000 582,000 1,325,000 750,000 2,957,000
Weighted average receive rate 8.86 % 8.04 6.49 7.78 6.67 7.28
Estimated fair value $ 771 3,341 4,795 100,666 (20,573) 89,000
RATE SENSITIVITY HEDGES
Notional amount $ 31,063,188 81,200 - - - 31,144,388
Weighted average receive rate - % - - - - -
Estimated fair value $ (4,098) 75 - - - (4,023)
OFFSETTING POSITIONS
Notional amount $ 4,800,000 - - - - 4,800,000
Weighted average receive rate 6.13 % - - - - 6.13
Estimated fair value $ - - - - - -
</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. Weighted average pay rates are indicated in Table 19.
TABLE 21
OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
<TABLE>
<CAPTION>
Asset Rate Liability Rate Asset Rate Sensitivity Offsetting
(In thousands) Conversions Conversions Hedge Hedges Positions Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 8,222,116 2,762,500 1,200,000 28,256,000 4,800,000 45,240,616
Additions 120,000 592,000 - 32,356,631 - 33,068,631
Maturities/Amortizations (1,459,153) (397,500) (200,000) (28,468,243) - (30,524,896)
Terminations - - (1,000,000) (1,000,000) - (2,000,000)
Balance, June 30, 1995 $ 6,882,963 2,957,000 - 31,144,388 4,800,000 45,784,351
</TABLE>
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
T-18
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
SECOND QUARTER 1995 FIRST QUARTER 1995
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 $ 533,228 6,326 4.76% $ 689,482 10,147 5.97%
Federal funds sold and securities
purchased under resale agreements 1,867,479 27,678 5.94 1,855,472 26,274 5.74
Trading account assets (a) 1,106,447 16,617 6.02 1,310,294 21,360 6.61
Securities available for sale (a) 7,582,334 121,194 6.40 7,993,897 126,046 6.33
Investment securities (a)
U.S. Government and other 2,459,190 49,084 7.98 2,474,530 46,902 7.58
State, county and municipal 1,119,586 31,917 11.40 1,190,113 33,761 11.34
Total investment securities 3,578,776 81,001 9.05 3,664,643 80,663 8.80
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 16,696,776 342,321 8.22 16,126,010 323,169 8.13
Real estate - construction and
other 1,901,095 44,023 9.29 1,795,504 41,579 9.39
Real estate - mortgage 5,932,344 130,056 8.79 5,435,291 119,344 8.90
Lease financing 1,105,363 27,237 9.86 908,580 22,259 9.80
Foreign 503,888 8,734 6.95 426,788 7,089 6.74
Total commercial 26,139,466 552,371 8.47 24,692,173 513,440 8.34
Retail
Real estate - mortgage 15,464,047 298,827 7.73 14,193,098 268,320 7.56
Installment loans - Bankcard 4,314,121 163,271 15.14 3,993,532 138,477 13.87
Installment loans - other 11,955,712 307,426 10.31 11,536,143 285,270 10.01
Total retail 31,733,880 769,524 9.71 29,722,773 692,067 9.36
Total loans 57,873,346 1,321,895 9.15 54,414,946 1,205,507 8.90
Total earning assets 72,541,610 1,574,711 8.70 69,928,734 1,469,997 8.44
Cash and due from banks 3,154,820 3,261,626
Other assets 4,558,615 4,302,719
Total assets $80,255,045 $77,493,079
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 14,145,903 99,246 2.81 14,015,277 98,540 2.85
Money market accounts 9,158,122 64,932 2.84 9,504,775 66,326 2.83
Other consumer time 19,430,344 262,518 5.42 18,502,556 226,494 4.96
Foreign 2,596,487 41,933 6.48 3,319,697 45,566 5.57
Other time 2,066,530 33,427 6.49 1,951,836 29,812 6.19
Total interest-bearing deposits 47,397,386 502,056 4.25 47,294,141 466,738 4.00
Federal funds purchased and securities
sold under repurchase agreements 7,568,559 113,463 6.01 7,268,262 101,498 5.66
Commercial paper 1,033,078 15,372 5.97 669,792 9,551 5.78
Other short-term borrowings 1,723,886 24,662 5.74 1,655,853 27,205 6.66
Long-term debt 4,945,394 82,785 6.70 3,576,802 63,217 7.07
Total interest-bearing
liabilities 62,668,303 738,338 4.72 60,464,850 668,209 4.48
Noninterest-bearing deposits 10,256,782 9,978,428
Other liabilities 1,741,524 1,614,095
Stockholders' equity 5,588,436 5,435,706
Total liabilities and
stockholders' equity $80,255,045 $77,493,079
Interest income and rate earned $1,574,711 8.70% $1,469,997 8.44%
Interest expense and rate paid 738,338 4.08 668,209 3.87
Net interest income and margin $ 836,373 4.62% $ 801,788 4.57%
</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 7.75 percent in 1995 and 7.8275 percent in
1994; 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 9.975
percent in 1995 and 10.25 percent in 1994, respectively.
T-19
<PAGE>
<TABLE>
<CAPTION>
FOURTH QUARTER 1994 THIRD QUARTER 1994 SECOND QUARTER 1994
INTEREST AVERAGE Interest Average Interest Average
AVERAGE INCOME/ RATES Average Income/ Rates Average Income/ Rates
BALANCES EXPENSE EARNED/PAID Balances Expense Earned/Paid Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 879,330 12,342 5.57% $ 675,188 8,552 5.03% $ 786,723 9,915 5.06%
1,507,490 19,473 5.12 1,469,486 16,354 4.42 1,595,394 13,575 3.41
1,187,382 19,776 6.61 1,062,744 15,641 5.84 904,729 14,010 6.21
8,199,014 121,948 5.93 9,777,730 139,512 5.69 11,480,968 152,237 5.31
2,435,018 46,625 7.66 1,715,051 32,076 7.48 1,575,796 27,310 6.93
1,233,949 35,554 11.53 1,248,484 35,694 11.44 1,282,173 37,116 11.58
3,668,967 82,179 8.96 2,963,535 67,770 9.15 2,857,969 64,426 9.02
14,662,782 288,875 7.82 14,001,417 291,147 8.25 13,375,599 281,454 8.44
1,722,032 39,020 8.99 1,588,419 33,731 8.42 1,515,456 28,710 7.60
5,764,302 125,431 8.63 5,964,848 121,637 8.09 5,743,998 110,471 7.71
807,143 19,641 9.73 665,678 15,983 9.60 582,340 13,761 9.45
520,581 8,397 6.40 434,532 5,844 5.34 424,662 4,739 4.48
23,476,840 481,364 8.14 22,654,894 468,342 8.20 21,642,055 439,135 8.14
14,228,831 271,675 7.64 14,239,519 260,489 7.32 13,600,744 247,665 7.28
3,633,266 124,530 13.71 3,088,541 106,859 13.84 2,351,062 85,594 14.56
11,244,806 278,590 9.87 10,029,803 246,678 9.80 9,727,881 232,361 9.57
29,106,903 674,795 9.26 27,357,863 614,026 8.96 25,679,687 565,620 8.82
52,583,743 1,156,159 8.76 50,012,757 1,082,368 8.62 47,321,742 1,004,755 8.51
68,025,926 1,411,877 8.27 65,961,440 1,330,197 8.03 64,947,525 1,258,918 7.76
3,265,432 3,017,964 2,857,885
4,142,050 4,040,685 4,020,590
$75,433,408 $73,020,089 $71,826,000
13,259,937 86,455 2.59 12,449,336 71,848 2.29 12,120,552 64,856 2.15
10,132,757 67,193 2.63 10,483,003 65,849 2.49 10,791,758 62,199 2.31
17,690,805 210,568 4.72 17,042,759 187,185 4.36 16,462,456 171,773 4.19
2,361,927 32,459 5.45 1,958,291 21,840 4.42 1,327,343 14,088 4.26
1,669,113 24,289 5.77 1,674,511 21,696 5.14 1,567,754 20,266 5.19
45,114,539 420,964 3.70 43,607,900 368,418 3.35 42,269,863 333,182 3.16
7,490,396 95,168 5.04 6,970,468 78,962 4.49 7,511,271 77,201 4.12
615,930 7,684 4.95 998,167 11,115 4.42 702,645 7,089 4.05
1,601,779 25,238 6.25 1,422,176 20,617 5.75 1,486,748 18,739 5.05
3,366,685 61,118 7.26 3,198,320 51,746 6.47 3,138,257 47,702 6.08
58,189,329 610,172 4.16 56,197,031 530,858 3.75 55,108,784 483,913 3.52
9,997,860 9,927,448 10,067,077
1,593,558 1,331,994 1,344,882
5,652,661 5,563,616 5,305,257
$75,433,408 $73,020,089 $71,826,000
$1,411,877 8.27% $1,330,197 8.03% $1,258,918 7.76%
610,172 3.56 530,858 3.19 483,913 2.98
$ 801,705 4.71% $ 799,339 4.84% $ 775,005 4.78%
</TABLE>
(b) The loan average include loans on which the accrul of interest has been
discontiued and are stated net of unearned income.
T-20
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
SIX MONTHS 1995 SIX MONTHS 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 $ 610,923 16,473 5.44% $ 737,293 18,656 5.10 %
Federal funds sold and securities
purchased under resale agreements 1,861,508 53,952 5.84 1,241,844 19,902 3.23
Trading account assets (a) 1,207,807 37,977 6.34 916,586 25,200 5.54
Securities available for sale (a) 7,786,979 247,240 6.37 11,567,892 304,022 5.27
Investment securities (a)
U.S. Government and other 2,466,818 95,986 7.78 1,399,821 46,884 6.70
State, county and municipal 1,154,655 65,678 11.37 1,294,916 74,749 11.54
Total investment securities 3,621,473 161,664 8.93 2,694,737 121,633 9.03
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 16,412,970 665,490 8.18 13,265,962 543,310 8.26
Real estate - construction and
other 1,848,591 85,602 9.34 1,560,175 56,422 7.29
Real estate - mortgage 5,685,190 249,400 8.84 5,791,515 215,875 7.51
Lease financing 1,007,515 49,496 9.83 579,854 27,004 9.31
Foreign 465,551 15,823 6.85 379,081 8,257 4.39
Total commercial 25,419,817 1,065,811 8.45 21,576,587 850,868 7.95
Retail
Real estate - mortgage 14,832,083 567,147 7.65 13,378,825 487,791 7.29
Installment loans - Bankcard (c) 4,154,712 301,748 14.53 2,180,345 160,213 14.70
Installment loans - other 11,747,087 592,696 10.16 9,639,246 457,045 9.52
Total retail 30,733,882 1,461,591 9.54 25,198,416 1,105,049 8.79
Total loans 56,153,699 2,527,402 9.05 46,775,003 1,955,917 8.40
Total earning assets 71,242,389 3,044,708 8.59 63,933,355 2,445,330 7.68
Cash and due from banks 3,207,928 2,947,527
Other assets 4,431,375 4,207,967
Total assets $78,881,692 $71,088,849
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 14,080,951 197,786 2.83 12,042,894 126,849 2.12
Money market accounts 9,330,491 131,258 2.84 10,848,760 121,821 2.26
Other consumer time 18,969,013 489,012 5.20 16,562,666 344,628 4.20
Foreign 2,956,094 87,499 5.97 1,082,182 21,657 4.04
Other time 2,009,500 63,239 6.35 1,541,684 36,911 4.83
Total interest-bearing deposits 47,346,049 968,794 4.13 42,078,186 651,866 3.12
Federal funds purchased and securities
sold under repurchase agreements 7,419,240 214,961 5.84 7,311,705 143,096 3.95
Commercial paper 852,438 24,923 5.90 513,189 9,366 3.68
Other short-term borrowings 1,690,058 51,867 6.19 1,325,443 29,671 4.51
Long-term debt 4,264,879 146,002 6.85 3,143,570 85,917 5.47
Total interest-bearing
liabilities 61,572,664 1,406,547 4.60 54,372,093 919,916 3.41
Noninterest-bearing deposits 10,118,374 10,069,557
Other liabilities 1,678,161 1,323,129
Stockholders' equity 5,512,493 5,324,070
Total liabilities and
stockholders' equity $78,881,692 $71,088,849
Interest income and rate earned $3,044,708 8.59% $2,445,330 7.68%
Interest expense and rate paid 1,406,547 3.98 919,916 2.90
Net interest income and margin 1,638,161 4.61% $1,525,414 4.78%
</TABLE>
(a) Yields related to securities and loans exempt from both federal and
state income taxes, federal income taxes only or state income taxes only are
stated on a fully tax-equivalent basis. They are reduced by the nondeductible
portion of interest expense, assuming a federal income tax rate of 35 percent; a
North Carolina state tax rate of 7.75 percent in 1995 and 7.8275 percent in
1994; 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 9.975
percent in 1995 and 10.25 percent in 1994, respectively.
T-21
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED 1994 NINE MONTHS 1994
INTEREST AVERAGE Interest Average
AVERAGE INCOME/ RATES Average Income/ Rates
BALANCES EXPENSE EARNED/PAID Balances Expense Earned/Paid
<S> <C> <C> <C> <C> <C>
$ 757,440 39,550 5.22 % $ 716,364 27,208 5.08 %
1,366,180 55,729 4.08 1,318,559 36,256 3.68
1,021,681 60,617 5.93 965,841 40,840 5.65
10,267,532 565,482 5.51 10,964,614 443,534 5.40
1,740,203 125,585 7.22 1,506,052 78,960 6.99
1,267,845 145,997 11.52 1,279,269 110,443 11.51
3,008,048 271,582 9.03 2,785,321 189,403 9.07
13,803,412 1,123,333 8.14 13,513,807 834,458 8.26
1,608,090 129,173 8.03 1,569,693 90,153 7.68
5,828,345 462,942 7.94 5,849,927 337,512 7.71
658,776 62,628 9.51 608,777 42,987 9.41
428,724 22,498 5.25 397,768 14,101 4.74
22,327,347 1,800,574 8.06 21,939,972 1,319,211 8.04
13,810,015 1,019,955 7.39 13,668,875 748,280 7.30
2,775,476 391,603 14.11 2,486,403 267,072 14.32
10,142,377 982,312 9.69 9,770,863 703,723 9.62
26,727,868 2,393,870 8.96 25,926,141 1,719,075 8.85
49,055,215 4,194,444 8.55 47,866,113 3,038,286 8.48
65,476,096 5,187,404 7.92 64,616,812 3,775,527 7.80
3,045,410 2,971,264
4,149,188 4,151,594
$ 72,670,694 $ 71,739,670
12,452,101 285,151 2.29 12,179,863 198,697 2.18
10,576,097 254,863 2.41 10,725,502 187,670 2.34
16,968,029 742,381 4.38 16,724,456 531,813 4.25
1,625,575 75,956 4.67 1,377,427 43,497 4.22
1,607,283 82,897 5.16 1,586,446 58,607 4.94
43,229,085 1,441,248 3.33 42,593,694 1,020,284 3.20
7,270,734 317,225 4.36 7,196,709 222,058 4.13
661,327 28,166 4.26 676,625 20,481 4.05
1,419,477 75,526 5.32 1,358,042 50,288 4.95
3,213,607 198,781 6.19 3,162,021 137,663 5.80
55,794,230 2,060,946 3.69 54,987,091 1,450,774 3.53
10,015,666 10,021,667
1,393,526 1,326,116
5,467,272 5,404,796
$72,670,694 $71,739,670
$ 5,187,404 7.92% $ 3,775,527 7.80%
2,060,946 3.15 1,450,774 3.00
$ 3,126,458 4.77 % $ 2,324,753 4.80 %
</TABLE>
(b) The loan averages include loans on which the accrual of interest has been
discontinued and are stated net of unearned income.
T-22
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1994
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 $ 3,191,431 3,157,119 3,740,691 3,212,888 2,809,958
Interest-bearing bank balances 446,712 722,062 945,126 632,206 1,387,532
Federal funds sold and securities
purchased under resale agreements 2,052,236 1,488,462 1,371,025 1,771,643 1,909,486
Total cash and cash equivalents 5,690,379 5,367,643 6,056,842 5,616,737 6,106,976
Trading account assets 1,559,021 1,453,038 1,206,675 1,303,453 933,011
Securities available for sale 7,353,926 7,298,853 7,752,479 8,226,530 9,709,341
Investment securities 3,583,906 3,634,798 3,729,869 3,179,763 2,995,102
Loans, net of unearned income 60,020,507 55,767,718 54,029,752 51,633,034 48,925,495
Allowance for loan losses (969,122) (968,828) (978,795) (1,004,298) (1,007,839)
Loans, net 59,051,385 54,798,890 53,050,957 50,628,736 47,917,656
Premises and equipment 1,881,947 1,771,052 1,756,297 1,617,933 1,518,171
Due from customers on acceptances 383,289 302,248 218,849 133,928 94,535
Mortgage servicing rights 101,024 80,266 84,898 89,666 79,826
Credit card premium 51,005 54,703 58,494 62,463 67,524
Other intangible assets 1,395,368 1,172,106 1,198,907 1,091,488 916,606
Other assets 2,050,362 1,921,011 2,199,238 2,292,421 2,265,653
Total assets $ 83,101,612 77,854,608 77,313,505 74,243,118 72,604,401
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 10,854,459 10,412,883 10,523,538 10,295,616 10,207,807
Interest-bearing deposits 47,987,565 46,390,022 48,434,735 43,391,435 43,564,453
Total deposits 58,842,024 56,802,905 58,958,273 53,687,051 53,772,260
Short-term borrowings 11,012,715 9,681,076 7,532,343 9,988,596 8,959,378
Bank acceptances outstanding 383,289 302,248 218,849 133,928 94,535
Other liabilities 1,750,454 1,876,219 1,778,009 1,541,549 1,260,203
Long-term debt 5,376,283 3,701,426 3,428,514 3,269,363 3,129,444
Total liabilities 77,364,765 72,363,874 71,915,988 68,620,487 67,215,820
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 572,790 573,564 586,779 585,948 575,989
Paid-in capital 1,260,261 1,272,386 1,433,422 1,693,389 1,576,872
Retained earnings 3,912,179 3,741,801 3,591,581 3,482,620 3,327,793
Unrealized loss on debt and equity securities (8,383) (97,017) (214,265) (170,918) (123,665)
Total stockholders' equity 5,736,847 5,490,734 5,397,517 5,622,631 5,388,581
Total liabilities and
stockholders' equity $ 83,101,612 77,854,608 77,313,505 74,243,118 72,604,401
MEMORANDA
Securities available for sale-amortized cost $ 7,341,023 7,421,417 8,054,592 8,489,477 9,907,974
Investment securities-market value 3,725,575 3,730,577 3,742,534 3,269,641 3,104,804
Common stockholders' equity, net of unrealized loss
on debt and equity securities $ 5,736,847 5,490,734 5,397,517 5,338,590 5,104,540
Preferred shares outstanding - - - 6,318,350 6,318,350
Common shares outstanding 171,837,122 172,069,353 176,033,912 175,784,527 172,796,786
T-23
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
</TABLE>
<TABLE>
<CAPTION>
1995 1994
SECOND First Fourth Third Second
(In thousands except per share data) QUARTER Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,315,702 1,199,923 1,150,493 1,077,083 999,611
Interest and dividends on securities
available for sale 117,747 123,000 119,062 135,621 147,755
Interest and dividends on investment securities
Taxable income 48,457 46,313 46,029 31,478 26,632
Nontaxable income 21,156 22,321 23,394 23,490 24,341
Trading account interest 15,459 19,914 18,677 14,799 13,377
Other interest income 34,004 36,421 31,815 24,906 23,490
Total interest income 1,552,525 1,447,892 1,389,470 1,307,377 1,235,206
INTEREST EXPENSE
Interest on deposits 502,056 466,738 420,964 368,418 333,182
Interest on short-term borrowings 153,497 138,254 128,090 110,694 103,029
Interest on long-term debt 82,785 63,217 61,118 51,746 47,702
Total interest expense 738,338 668,209 610,172 530,858 483,913
Net interest income 814,187 779,683 779,298 776,519 751,293
Provision for loan losses 44,000 32,500 25,000 25,000 25,000
Net interest income after
provision for loan losses 770,187 747,183 754,298 751,519 726,293
NONINTEREST INCOME
Trading account profits 10,265 1,536 13,107 10,906 10,247
Service charges on deposit accounts 117,625 110,127 110,782 109,325 107,083
Mortgage banking income 25,415 23,586 20,873 21,401 12,239
Capital management income 67,754 67,413 59,727 63,469 50,380
Securities available for sale transactions 1,243 3,635 (9,926) (2,946) (2,935)
Investment security transactions 1,233 217 411 2,286 694
Fees for other banking services 24,093 21,928 20,703 16,833 17,959
Merchant discounts 17,775 16,633 16,939 16,257 15,283
Insurance commissions 10,511 11,490 11,870 12,506 10,705
Sundry income 53,065 48,826 57,418 52,562 52,115
Total noninterest income 328,979 305,391 301,904 302,599 273,770
NONINTEREST EXPENSE
Personnel expense 351,511 341,659 338,946 326,062 312,718
Occupancy 57,433 59,401 62,006 58,854 56,881
Equipment rentals, depreciation
and maintenance 63,292 65,917 63,245 55,987 52,436
Postage, printing and supplies 26,367 31,437 30,046 24,501 23,910
FDIC insurance 30,935 30,162 30,293 29,321 30,155
Professional fees 16,503 17,263 27,637 16,302 12,031
Owned real estate expense 1,926 3,220 3,305 8,785 4,908
Amortization 46,187 43,651 39,754 36,121 32,355
Sundry 120,585 91,992 108,716 126,286 125,826
Total noninterest expense 714,739 684,702 703,948 682,219 651,220
Income before income taxes 384,427 367,872 352,254 371,899 348,843
Income taxes 135,291 130,963 120,705 130,147 119,223
Net income 249,136 236,909 231,549 241,752 229,620
Dividends on preferred stock - 7,029 6,831 6,595 6,201
Net income applicable to common
stockholders before
redemption premium 249,136 229,880 224,718 235,157 223,419
Redemption premium on preferred stock - - 41,355 - -
Net income applicable to common
stockholders after
redemption premium $ 249,136 229,880 183,363 235,157 223,419
PER COMMON SHARE DATA
Net income before redemption premium $ 1.45 1.32 1.28 1.35 1.32
Net income after redemption premium 1.45 1.32 1.04 1.35 1.32
Cash dividends $ .46 .46 .46 .46 .40
Average common shares 171,561,676 173,928,984 176,378,717 174,417,288 169,779,057
</TABLE>
T-24
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands except per share data) 1995 1994
<S> <C> <C>
INTEREST INCOME
Interestand fees on loans 2,515,625 1,945,762
Interest and dividends on securities
available for sale 240,747 295,313
Interest and dividends on investment securities:
Taxable income 94,770 45,461
Non-taxable income 43,477 48,951
Trading account interest 35,373 23,769
Other interest income 70,425 38,558
Total interest income 3,000,417 2,397,814
INTEREST EXPENSE
Interest on deposits 968,794 651,866
Interest on short-term borrowings 291,751 182,133
Interest on long-term debt 146,002 85,917
Total interest expense 1,406,547 919,916
Net interest income 1,593,870 1,477,898
Provision for loan losses 76,500 50,000
Net interest income after
provision for loan losses 1,517,370 1,427,898
NONINTEREST INCOME
Trading account profits 11,801 17,570
Service charges on deposit accounts 227,752 215,105
Mortgage banking income 49,001 31,660
Capital management income 135,167 101,329
Securities available for sale transactions 4,878 1,365
Investment security transactions 1,450 1,309
Fees for other banking services 46,021 31,716
Merchant discounts 34,408 29,644
Insurance commissions 22,001 20,695
Sundry income 101,891 104,073
Total noninterest income 634,370 554,466
NONINTEREST EXPENSE
Personnel expense 693,170 622,358
Occupancy 116,834 117,268
Equipment rentals, depreciation
and maintenance 129,209 109,140
Postage, printing and supplies 57,804 49,192
FDIC insurance 61,097 60,094
Professional fees 33,766 22,939
Owned real estate expense 5,146 10,204
Amortization 89,838 68,733
Sundry 212,577 231,133
Total noninterest expense 1,399,441 1,291,061
Income before income taxes 752,299 691,303
Income taxes 266,254 239,224
Net income 486,045 452,079
Dividends on preferred stock 7,029 11,927
Net income applicable to common
stockholders 479,016 440,152
PER COMMON SHARE DATA
Net income before redemption premium 2.77 2.59
Net income after redemption premium 2.77 2.59
Cash dividends .92 .80
Average common shares 172,745,330 169,688,932
</TABLE>
T-25
<PAGE>
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands) 1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 486,045 452,079
Adjustments to reconcile net income to net cash provided
(used)
by operating activities
Accretion and amortization of securities
discounts and premiums, net (22,306) 18,576
Provision for loan losses 76,500 50,000
Provision for foreclosed properties (1,981) 4,704
Securities available for sale transactions (4,878) (1,365)
Investment security transactions (1,450) (1,309)
Depreciation and amortization 193,700 153,466
Trading account assets, net (352,346) (280,541)
Mortgage loans held for resale (27,348) 736,076
Loss on sales of premises and equipment 6,650 71
Gain on sale of First American segregated
assets (14,730) (34,999)
Other assets, net 115,273 378,157
Other liabilities, net (78,388) (17,591)
Net cash provided by operating
activities 374,741 1,457,324
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities available for sale 3,635,942 7,388,888
Maturities of securities available for sale 453,842 1,927,771
Purchases of securities available for sale (2,620,389) (7,478,317)
Underdeliveries and calls of investment
securities 21,465 16,500
Maturities of investment securities 237,248 304,877
Purchases of investment securities (115,813) (639,652)
Origination of loans, net (3,436,486) (2,651,142)
Sales of premises and equipment 27,290 71,045
Purchases of premises and equipment (213,359) (141,627)
Purchases of mortgage servicing rights (5,918) (5,755)
Other intangible assets, net (268,688) 17,900
Purchase of banking organizations, net of
acquired
cash equivalents (262,635) 100,853
Net cash used by investing
activities (2,547,501) (1,088,659)
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Sales of deposits, net (2,903,645) (238,843)
Securities sold under repurchase agreements
and other short-term borrowings, net 3,121,397 1,699,301
Issuances of long-term debt 2,191,514 143,882
Payments of long-term debt (250,372) (82,609)
Sales of common stock 66,928 45,739
Purchases of common stock (254,078) (97,582)
Cash dividends paid (165,447) (147,447)
Net cash provided by financing
activities 1,806,297 1,322,441
Increase (decrease) in cash and
cash equivalents (366,463) 1,691,106
Cash and cash equivalents,
beginning of period 6,056,842 4,415,870
Cash and cash equivalents, end of
period $ 5,690,379 6,106,976
NONCASH ITEMS
Increase in foreclosed properties and decrease
in loans $ 11,253 10,815
Effect on stockholders' equity of an
unrealized gain (loss)
on debt and equity securities included
in Securities available for sale 315,016 (198,633)
Other assets (deferred income taxes) $ (109,134) 74,968
T-26
<PAGE>
</TABLE>
FIRST UNION CORPORATION
SECOND QUARTER REPORT
FIRST UNION
1995
<PAGE>
CONTENTS
Letter from the Chairman
3
News Highlights
4
Financial Tables
6
Board of Directors
16
<PAGE>
LONG-TERM PERFORMANCE
DIVIDENDS PER COMMON SHARE
(Dollars per share)
*Annualized
(Bar graph appears here with the following plot points.)
1978 1995
.29 2.08*
BOOK VALUE PER SHARE GROWTH
(In dollars)
Originally reported (adjusted for stock splits),
not restated for pooling of interest acquisitions.
(Bar graph appears here with the following plot points.)
Dec 1978 June 1995
6.63 33.39
1
...
<PAGE>
BUSINESS PROFILE
FIRST UNION CORPORATION, A BANK HOLDING COMPANY WITH HEADQUARTERS IN
CHARLOTTE, NORTH CAROLINA, HAD ASSETS OF $83.1 BILLION AT JUNE 30, 1995. ON
JUNE 19, 1995, FIRST UNION ANNOUNCED AN AGREEMENT TO ACQUIRE $35 BILLION-ASSET
FIRST FIDELITY BANCORPORATION. FIRST UNION CURRENTLY IS THE NATION'S NINTH
LARGEST BANK HOLDING COMPANY, WITH THE FOURTH LARGEST BANKING NETWORK AND
EIGHTH LARGEST AUTOMATED TELLER MACHINE NETWORK.
FIRST UNION'S FULL-SERVICE BANKING OFFICES IN FLORIDA, NORTH CAROLINA,
GEORGIA, VIRGINIA, SOUTH CAROLINA, TENNESSEE, MARYLAND AND WASHINGTON, D.C.,
PROVIDE A WIDE RANGE OF COMMERCIAL BANKING, CONSUMER BANKING AND RETAIL
INVESTMENT SERVICES. THROUGH NEARLY 200 OFFICES IN 37 STATES, WE ALSO PROVIDE
SUCH FINANCIAL SERVICES AS MORTGAGE BANKING, HOME EQUITY LENDING, CAPITAL
MARKETS PRODUCTS AND SERVICES, INSURANCE AND SECURITIES BROKERAGE SERVICES.
TOTAL RETURN
IF YOU HAD INVESTED $1,000 IN FIRST UNION COMMON STOCK:
<TABLE>
<CAPTION>
TOTAL DOLLAR VALUE PERCENT CHANGE IN COMPOUND ANNUAL
JUNE 30, 1995 DOLLAR VALUE GROWTH RATE
<S> <C> <C> <C>
Three Years Ago... $ 1,336 34% 10%
Five Years Ago.... $ 2,970 197% 24%
Ten Years Ago..... $ 3,330 233% 13%
</TABLE>
ASSUMES DIVIDENDS REINVESTED.
2
...
<PAGE>
LETTER FROM THE CHAIRMAN
Strong loan and revenue growth contributed to First Union's record
quarterly earnings in the second quarter of 1995, which also included the
lowest percentage of nonperforming assets to net loans and foreclosed
properties in nine years.
First Union earned $249 million, or $1.45 on a per common share basis, for
the second quarter of 1995. This compared with $230 million, or $1.32, in the
first quarter of 1995, and $223 million, or $1.32, in the second quarter a year
ago. Second quarter 1995 results represent a return on average assets (ROA) of
1.25 percent and a return on average common stockholders' equity (ROE) of 17.71
percent. In the first half of 1995, net income applicable to common stockholders
was $479 million, or $2.77 per share, compared with $440 million, or $2.59 per
share, in the first half of 1994.
We are pleased with our results, which are at the top of the range we
estimated on June 19 when we announced our pending acquisition of First Fidelity
Bancorporation, a $35 billion-asset banking company based in Newark, N.J., and
Philadelphia, Pa. Our second quarter results confirm that both our fundamental
trends and the revenue-enhancing initiatives we have undertaken in business
units such as Capital Markets have helped produce continued earnings momentum.
Key factors in First Union's second quarter 1995 results compared with the
first quarter of 1995 included:
(Bullet) Tax-equivalent net interest income growth for the 23rd consecutive
quarter, to a record $836 million;
(Bullet) Loan growth of 8 percent, to $60.0 billion;
(Bullet) A decline in nonperforming assets to .95 percent of net loans and
foreclosed properties; and
(Bullet) Noninterest income growth of 8 percent, to $329 million.
I am gratified by the continuing support of our stockholders. I would also
like to thank our employees and directors for their invaluable contributions to
the success of First Union.
Sincerely,
(Signature of Edward E. Crutchfield appears here)
Edward E. Crutchfield, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
3
...
<PAGE>
NEWS HIGHLIGHTS
RETAIL INVESTMENT SERVICES FOR INDIVIDUAL CUSTOMERS
For individual customers, First Union has developed an extensive offering of
financial planning and investment services, including a proprietary family of
more than 30 mutual funds, as well as annuities and asset management accounts.
First Union has led the banking industry in training and developing its own in-
house investment sales force. On July 7, 1995, First Union's proprietary mutual
fund family was officially renamed "The Evergreen Funds." The Evergreen Funds
have grown to more than $9 billion in assets under management, including the
June 30, 1995, acquisition of most of the Florida-based ABT family of mutual
funds.
NATIONWIDE TELEPHONE BANKING SERVICE LAUNCHED
First Union has launched a new nationwide telephone banking service designed
to attract customers in all 50 states. First Union's "telephone branch" allows
new or existing First Union customers all over the country to conveniently
manage their banking and investment transactions over the phone.
First Union's telephone branch offers every banking service available at
First Union's more than 1,300 branches in the Southeast through one toll-free
number (1-800-413-7898). Anyone in the United States can open First Union
checking and savings accounts, transfer funds, apply for mortgage, home equity
or car loans, request credit cards and conduct other banking transactions by
simply picking up the phone. By year's end, customers will also be able to
purchase a variety of investment products, including mutual funds and annuities,
through the phone service.
FIRST UNION ON THE "INTERNET"
First Union offers information, an electronic marketplace, and secured, on-
line credit card applications over the Internet global computer network. First
Union's First Access Network is available at URL:http://www.firstunion.com/.
Electronic mail can be sent to the address of [email protected]. First
Union is the intermediary for an electronic marketplace called
"CommunityCommerce(sm)" on the World Wide Web at
URL:http://www.firstunion.com/community/comcom.html/.
4
...
<PAGE>
CAPITAL MARKETS GROUP INCREASINGLY ACTIVE
The Capital Markets Group provides loan syndications, private placements,
asset securitizations, international trade finance, risk management products and
other sophisticated financing solutions for corporate customers. These products
and services are increasingly strong contributors to noninterest income. For
example, during the second quarter of 1995, First Union's Capital Markets Group
completed its first commercial mortgage securitization, a $250 million
transaction that will contribute to noninterest income in the third quarter of
1995. In addition, the Capital Markets Group leveraged the origination
capability of the organization by completing a $65 million private placement of
home equity loans originated by First Union Home Equity Bank. First Union
Capital Markets also has received approval from the Federal Reserve Board to
engage in debt underwriting and dealing activities, one of a select group of
U.S. bank holding companies to receive such powers.
INTERNATIONAL GROUP FACILITATES CUSTOMERS' TRADE FINANCE
First Union also has opened a gateway to facilitate its export/ import
customers' trade between the United States, Latin America and Asia through a new
branch office at Lippobank headquarters in Los Angeles. The office is linked to
First Union's corporate headquarters in North Carolina via satellite. This is
the second partnership that First Union has formed with the Lippo Group. The two
banking companies joined forces in December 1994 to form a jointly owned
deposit-taking company, "First Union HKCB Asia, Ltd." to provide trade finance
services to customers in Hong Kong, mainland China and the United States.
DIVIDEND INCREASED 13%
First Union announced a 13 percent increase in its common stock dividend to
52 cents per share, or $2.08 on an annualized basis, representing 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. The common stock dividend is payable on September 15, 1995, to
stockholders of record as of August 31, 1995.
5
...
<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
1995 1994 (DECREASE) 1995 1994 (DECREASE)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
Net income $ 249,136 229,620 8.5% $ 486,045 452,079 7.5%
Dividends on preferred stock - 6,201 (100.0) 7,029 11,927 (41.1)
Net income applicable to common stockholders $ 249,136 223,419 11.5% $ 479,016 440,152 8.8%
Net income per common share $ 1.45 1.32 9.8% $ 2.77 2.59 6.9%
Average common shares 171,562 169,064 1.5 172,745 169,689 1.8
Common stockholders' equity $5,736,847 5,104,540 12.4 $5,736,847 5,104,540 12.4
Total stockholders' equity 5,736,847 5,388,581 6.5 5,736,847 5,388,581 6.5
Book value per common share $ 33.39 29.54 13.0 $ 33.39 29.54 13.0
Actual common shares 171,837 172,797 (.6) 171,837 172,797 (.6)
Common stock period-end price $ 45.250 46.125 (1.9)% $ 45.250 46.125 (1.9)%
.................................
EARNINGS SUMMARY
2Q '95
1995 1994 VS.
(IN THOUSANDS EXCEPT PER SHARE DATA) 2Q 1Q 4Q 3Q 2Q 2Q '94
Net interest income (a) $ 836,373 801,788 801,705 799,339 775,005 7.9%
Provision for loan losses 44,000 32,500 25,000 25,000 25,000 76.0
Net interest income after provision
for loan losses (a) 792,373 769,288 776,705 774,339 750,005 5.6
Securities available for sale transactions 1,243 3,635 (9,926) (2,946) (2,935) 142.4
Investment security transactions 1,233 217 411 2,286 694 77.7
Noninterest income 326,503 301,539 311,419 303,259 276,011 18.3
Noninterest expense 714,739 684,702 703,948 682,219 651,220 9.8
Income before income taxes (a) 406,613 389,977 374,661 394,719 372,555 9.1
Income taxes 135,291 130,963 120,705 130,147 119,223 13.5
Tax-equivalent adjustment 22,186 22,105 22,407 22,820 23,712 (6.4)
Net income 249,136 236,909 231,549 241,752 229,620 8.5
Dividends on preferred stock - 7,029 6,831 6,595 6,201 (100.0)
Net income applicable to common stockholders
before redemption premium 249,136 229,880 224,718 235,157 223,419 11.5
Redemption premium on preferred stock - - 41,355 - - -
Net income applicable to common stockholders
after redemption premium $ 249,136 229,880 183,363 235,157 223,419 11.5%
Net income per common share before
redemption premium $ 1.45 1.32 1.28 1.35 1.32 9.8%
Net income per common share after
redemption premium $ 1.45 1.32 1.04 1.35 1.32 9.8%
</TABLE>
(a) Tax-equivalent
6 7
... ...
<PAGE>
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
<TABLE>
<CAPTION>
.................................
AVERAGE BALANCE SHEET SUMMARY
2Q '95
1995 1994 VS.
2Q 1Q 4Q 3Q 2Q 2Q '94
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Loans, net
Earning assets $ 57,873,346 54,414,946 52,583,743 50,012,757 47,321,742 22.3%
Total assets 72,541,610 69,928,734 68,025,926 65,961,440 64,947,525 11.7
Noninterest-bearing deposits 80,255,045 77,493,079 75,433,408 73,020,089 71,826,000 11.7
Consumer time deposits 10,256,782 9,978,428 9,997,860 9,927,448 10,067,077 1.9
Other time deposits 42,734,369 42,022,608 41,083,499 39,975,098 39,374,766 8.5
Common stockholders' equity (a) 4,663,017 5,271,533 4,031,040 3,632,802 2,895,097 61.1
Total stockholders' equity (a) 5,642,420 5,579,362 5,601,222 5,396,497 5,112,116 10.4
$ 5,642,420 5,579,362 5,837,407 5,680,537 5,396,156 4.6%
...............................
CAPITAL RATIOS (B)
Tier 1 capital
Total capital 6.90% 7.53 7.76 8.84 9.30
Leverage 11.65 12.59 12.94 14.20 14.68
5.75% 6.02 6.12 6.77 6.67
...............................
INTANGIBLE ASSETS
(IN THOUSANDS)
Intangible assets
Goodwill $ 945,295 742,435 754,417 763,832 682,570
Deposit base premium 443,830 422,827 437,025 319,522 224,918
Other 6,243 6,844 7,465 8,134 9,118
Total $ 1,395,368 1,172,106 1,198,907 1,091,488 916,606
Mortgage servicing rights $ 101,024 80,266 84,898 89,666 79,826
Credit card premium $ 51,005 54,703 58,494 62,463 67,524
</TABLE>
(a) Average common stockholders' equity and average total stockholders' equity
exclude average net unrealized gains or losses on debt and equity
securities.
(b) The second quarter 1995 ratios are based on estimates and exclude net
unrealized gains or losses on debt and equity securities.
8 9
... ...
<PAGE>
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
.................................
OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
1995 1994 SIX MONTHS
2Q 1Q 4Q 3Q 2Q 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets (a)(b) 1.25% 1.24 1.22 1.31 1.28 1.24 1.28
Return on average common equity before redemption premium
(a)(c) 17.71 16.71 15.92 17.29 17.53 17.22 17.53
Return on average common equity after redemption premium
(a)(c) 17.71 16.71 12.99 17.29 17.53 17.22 17.53
Net interest margin (a) 4.62 4.57 4.71 4.84 4.78 4.61 4.78
Allowance as % of loans, net 1.61 1.74 1.81 1.95 2.06 1.61 2.06
Allowance as % of nonaccrual and restructured loans 222 224 245 203 192 222 192
Allowance as % of nonperforming assets 170% 168 175 154 152 170 152
Loan losses $ 88,857 61,962 72,223 72,120 54,516 150,819 110,585
Loan recoveries 24,665 19,495 19,424 24,964 22,745 44,160 47,624
Loan losses, net $ 64,192 42,467 52,799 47,156 31,771 106,659 62,961
As % of average loans, net (a) .44% .31 .40 .38 .27 .38 .27
Nonperforming assets
Commercial nonaccrual $210,464 200,915 155,752 154,861 159,858 210,464 159,858
Real estate nonaccrual 225,802 231,183 241,886 339,881 363,433 225,802 363,433
Total nonaccrual loans 436,266 432,098 397,638 494,742 523,291 436,266 523,291
Restructured loans 630 670 1,872 674 2,730 630 2,730
Foreclosed properties 132,204 144,188 158,464 158,234 136,408 132,204 136,408
Total nonperforming assets $569,100 576,956 557,974 653,650 662,429 569,100 662,429
As % of loans, net and foreclosed properties .95% 1.03 1.03 1.26 1.35 .95 1.35
</TABLE>
(a) Annualized.
(b) Based on net income.
(c) Based on net income applicable to common stockholders and average common
stockholders' equity excluding average net unrealized gains or losses on
debt and equity securities.
10 11
... ...
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 1,315,702 999,611 2,515,625 1,945,762
Interest and dividends on securities available for
sale 117,747 147,755 240,747 295,313
Interest and dividends on investment securities
Taxable income 48,457 26,632 94,770 45,461
Nontaxable income 21,156 24,341 43,477 48,951
Trading account interest 15,459 13,377 35,373 23,769
Other interest income 34,004 23,490 70,425 38,558
Total interest income 1,552,525 1,235,206 3,000,417 2,397,814
Interest Expense
Interest on deposits 502,056 333,182 968,794 651,866
Interest on short-term borrowings 153,497 103,029 291,751 182,133
Interest on long-term debt 82,785 47,702 146,002 85,917
Total interest expense 738,338 483,913 1,406,547 919,916
Net interest income 814,187 751,293 1,593,870 1,477,898
Provision for loan losses 44,000 25,000 76,500 50,000
Net interest income after provision for loan losses 770,187 726,293 1,517,370 1,427,898
Noninterest Income
Trading account profits 10,265 10,247 11,801 17,570
Service charges on deposit accounts 117,625 107,083 227,752 215,105
Mortgage banking income 25,415 12,239 49,001 31,660
Capital management income 67,754 50,380 135,167 101,329
Securities available for sale transactions 1,243 (2,935) 4,878 1,365
Investment security transactions 1,233 694 1,450 1,309
Fees for other banking services 24,093 17,959 46,021 31,716
Merchant discounts 17,775 15,283 34,408 29,644
Insurance commissions 10,511 10,705 22,001 20,695
Sundry income 53,065 52,115 101,891 104,073
Total noninterest income 328,979 273,770 634,370 554,466
Noninterest Expense
Personnel expense 351,511 312,718 693,170 622,358
Occupancy 57,433 56,877 116,834 117,268
Equipment rentals, depreciation and maintenance 63,292 52,440 129,209 109,140
Postage, printing and supplies 26,367 23,910 57,804 49,192
FDIC insurance 30,935 30,155 61,097 60,094
Professional fees 16,503 12,031 33,766 22,939
Owned real estate expense 1,926 4,908 5,146 10,204
Amortization 46,187 32,355 89,838 68,733
Sundry 120,585 125,826 212,577 231,133
Total noninterest expense 714,739 651,220 1,399,441 1,291,061
Income before income taxes 384,427 348,843 752,299 691,303
Income taxes 135,291 119,223 266,254 239,224
Net income 249,136 229,620 486,045 452,079
Dividends on preferred stock - 6,201 7,029 11,927
Net income applicable to common stockholders $ 249,136 223,419 479,016 440,152
</TABLE>
12 13
... ...
<PAGE>
CONSOLIDATED BALANCE SHEETS
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1995 1994
<S> <C> <C>
Assets
Cash and due from banks
Interest-bearing bank balances $ 3,191,431 2,809,958
Federal funds sold and securities purchased under
resale agreements 446,712 1,387,532
Total cash and cash equivalents 2,052,236 1,909,486
Trading account assets 5,690,379 6,106,976
Securities available for sale 1,559,021 933,011
Investment securities 7,353,926 9,709,341
Loans, net of unearned income 3,583,906 2,995,102
Allowance for loan losses 60,020,507 48,925,495
Loans, net (969,122) (1,007,839)
Premises and equipment 59,051,385 47,917,656
Due from customers on acceptances 1,881,947 1,518,171
Mortgage servicing rights 383,289 94,535
Credit card premium 101,024 79,826
Other intangible assets 51,005 67,524
Other assets 1,395,368 916,606
Total assets 2,050,362 2,265,653
$83,101,612 72,604,401
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 10,854,459 10,207,807
Interest-bearing deposits 47,987,565 43,564,453
Total deposits 58,842,024 53,772,260
Short-term borrowings 11,012,715 8,959,378
Bank acceptances outstanding 383,289 94,535
Other liabilities 1,750,454 1,260,203
Long-term debt 5,376,283 3,129,444
Total liabilities 77,364,765 67,215,820
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
Common stock, $3.331/3 par value; authorized
750,000,000 shares 572,790 575,989
Paid-in capital 1,260,261 1,576,872
Retained earnings 3,912,179 3,327,793
Unrealized loss on debt and equity securities (8,383) (123,665)
Total stockholders' equity 5,736,847 5,388,581
Total liabilities and stockholders'
equity $83,101,612 72,604,401
</TABLE>
14 15
... ...
<PAGE>
BOARD OF DIRECTORS
G. ALEX BERNHARDT
President and Chief Executive Officer,
Bernhardt Furniture Company
Lenoir, North Carolina
W. WALDO BRADLEY
Chairman, Bradley Plywood Corporation
Savannah, Georgia
ROBERT J. BROWN
Chairman, President and Chief
Executive Officer, B&C Associates, Inc.
High Point, North Carolina
EDWARD E. CRUTCHFIELD
Chairman and Chief Executive Officer,
First Union Corporation
Charlotte, North Carolina
ROBERT D. DAVIS
Chairman, D.D.I., Inc.
Jacksonville, Florida
R. STUART DICKSON
Chairman of Executive Committee,
Ruddick Corporation
Charlotte, North Carolina
B.F. DOLAN
Investor
Charlotte, North Carolina
RODDEY DOWD SR.
Chairman,Charlotte Pipe & Foundry Co.
Charlotte, North Carolina
JOHN R. GEORGIUS
President, First Union Corporation
Charlotte, North Carolina
WILLIAM H. GOODWIN JR.
Chairman, AMF Companies
Richmond, Virginia
BRENTON S. HALSEY
Chairman Emeritus,
James River Corporation
Richmond, Virginia
HOWARD H. HAWORTH
President, The Haworth Group
Morganton, North Carolina
TORRENCE E. HEMBY JR.
President, Beverly Crest Corporation
Charlotte, North Carolina
LEONARD G. HERRING
President and Chief Executive Officer,
Lowe's Companies, Inc.
North Wilkesboro, North Carolina
JACK A. LAUGHERY
Chairman, The Bagel Group, Inc.
Rocky Mount, North Carolina
MAX LENNON
President and Chief Executive Officer,
Eastern Foods, Inc.
Atlanta, Georgia
RADFORD D. LOVETT
Chairman, Commodores Point
Terminal Corporation
Jacksonville, Florida
HENRY D. PERRY JR.
Physician
Plantation, Florida
RANDOLPH N. REYNOLDS
Vice Chairman,
Reynolds Metals Company
Richmond, Virginia
RUTH G. SHAW
Senior Vice President, Corporate
Resources and Chief Administrative
Officer, Duke Power Company
Charlotte, North Carolina
LANTY L. SMITH
Chairman and Chief Executive Officer,
Precision Fabrics Group, Inc.
Greensboro, North Carolina
DEWEY L. TROGDON
Chairman, Cone Mills Corporation
Greensboro, North Carolina
JOHN D. UIBLE
Investor
Jacksonville, Florida
B.J. WALKER
Vice Chairman,
First Union Corporation
Jacksonville, Florida
KENNETH G. YOUNGER
Transportation Consultant
Gastonia, North Carolina
16
...
<PAGE>
(FIRST UNION LOGO APPEARS HERE) Bulk Rate
FIRST UNION CORPORATION U.S.Postage
Two First Union Center PAID
Charlotte, NC 28288-0570 Charlotte, N.C.
Permit No. 1
The First Union Quarterly report includes information released to the
public and the news media on July 12, 1995. 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.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,191,431
<INT-BEARING-DEPOSITS> 446,712
<FED-FUNDS-SOLD> 2,052,236
<TRADING-ASSETS> 1,559,021
<INVESTMENTS-HELD-FOR-SALE> 7,353,926
<INVESTMENTS-CARRYING> 3,583,906
<INVESTMENTS-MARKET> 3,725,575
<LOANS> 60,989,947
<ALLOWANCE> (969,122)
<TOTAL-ASSETS> 83,101,612
<DEPOSITS> 58,842,024
<SHORT-TERM> 11,012,715
<LIABILITIES-OTHER> 1,750,454
<LONG-TERM> 5,376,283
<COMMON> 572,790
0
0
<OTHER-SE> 5,164,057
<TOTAL-LIABILITIES-AND-EQUITY> 83,101,612
<INTEREST-LOAN> 2,515,625
<INTEREST-INVEST> 378,994
<INTEREST-OTHER> 70,425
<INTEREST-TOTAL> 3,000,417
<INTEREST-DEPOSIT> 968,794
<INTEREST-EXPENSE> 1,406,547
<INTEREST-INCOME-NET> 1,593,870
<LOAN-LOSSES> 76,500
<SECURITIES-GAINS> 6,328
<EXPENSE-OTHER> 1,399,441
<INCOME-PRETAX> 752,299
<INCOME-PRE-EXTRAORDINARY> 486,045
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 486,045
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.77
<YIELD-ACTUAL> 4.61
<LOANS-NON> 436,266
<LOANS-PAST> 117,874
<LOANS-TROUBLED> 630
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 968,828
<CHARGE-OFFS> 150,819
<RECOVERIES> 44,160
<ALLOWANCE-CLOSE> 969,122
<ALLOWANCE-DOMESTIC> 771,869
<ALLOWANCE-FOREIGN> 3,180
<ALLOWANCE-UNALLOCATED> 194,073
</TABLE>
<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 MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(IN THOUSANDS) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net interest income.......................................................... $133,121 124,261 260,005 243,920
Income before income taxes................................................... 64,820 42,874 127,794 77,391
Net income................................................................... $ 40,937 28,451 82,078 50,767
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
JUNE 30,
(IN THOUSANDS) 1995 1994
<S> <C> <C>
Assets........................................................................................ $14,077,338 12,334,937
Securities available for sale................................................................. 2,128,559 2,624,555
Investment securities......................................................................... 344,177 309,395
Loans, net of unearned income................................................................. 8,715,900 7,186,922
Stockholder's equity.......................................................................... $ 1,125,418 1,202,990
</TABLE>
<PAGE>
EXHIBIT (99)(B)
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(THE CORPORATION, THE PURCHASE ACQUISITIONS AND FIRST FIDELITY)
JUNE 30, 1995
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet combines
the consolidated historical balance sheets of the Corporation, the companies
involved in the Purchase Acquisitions (as hereinafter defined) and First
Fidelity, assuming the companies had been combined as of June 30, 1995, on a
purchase accounting basis with respect to the Purchase Acquisitions (pending at
June 30, 1995, or announced on or before August 14, 1995) and on a pooling of
interests accounting basis with respect to First Fidelity.
<TABLE>
<CAPTION>
THE PURCHASE PRO FORMA PRO FORMA FIRST PRO FORMA PRO FORMA
(IN THOUSANDS) CORPORATION ACQUISITIONS ADJUSTMENTS COMBINED FIDELITY ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks............ $ 3,191,431 84,413 (595,981) 2,679,863 1,750,833 -- 4,430,696
Interest-bearing balances.......... 446,712 67,273 -- 513,985 455,033 -- 969,018
Federal funds sold and securities
purchased under resale
agreements....................... 2,052,236 8,275 -- 2,060,511 703,375 -- 2,763,886
Total cash and cash
equivalents...................... 5,690,379 159,961 (595,981) 5,254,359 2,909,241 -- 8,163,600
Trading account assets............. 1,559,021 -- -- 1,559,021 100,529 -- 1,659,550
Securities available for sale...... 7,353,926 381,101 -- 7,735,027 2,409,976 -- 10,145,003
Investment securities.............. 3,583,906 1,577,325 (28,790) 5,132,441 3,877,896 -- 9,010,337
Loans, net of unearned income...... 60,020,507 5,575,914 (6,473) 65,589,948 23,999,147 -- 89,589,095
Allowance for loan losses........ (969,122) (45,706) -- (1,014,828) (565,450) -- (1,580,278)
Loans, net....................... 59,051,385 5,530,208 (6,473) 64,575,120 23,433,697 -- 88,008,817
Premises and equipment............. 1,881,947 59,022 (14,645) 1,926,324 428,328 -- 2,354,652
Due from customers on
acceptances...................... 383,289 -- -- 383,289 161,355 -- 544,644
Mortgage servicing rights.......... 101,024 12,694 8,792 122,510 47,101 -- 169,611
Credit card premium................ 51,005 -- -- 51,005 -- -- 51,005
Other intangible assets............ 1,395,368 70,814 412,390 1,878,572 808,540 -- 2,687,112
Other assets....................... 2,050,362 210,032 1,155 2,261,549 1,185,118 -- 3,446,667
Total assets..................... $83,101,612 8,001,157 (223,552) 90,879,217 35,361,781 -- 126,240,998
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing.............. 10,854,459 115,570 -- 10,970,029 5,195,045 -- 16,165,074
Interest-bearing................. 47,987,565 5,209,243 -- 53,196,808 23,623,878 -- 76,820,686
Total deposits................. 58,842,024 5,324,813 -- 64,166,837 28,818,923 -- 92,985,760
Short-term borrowings.............. 11,012,715 1,750,452 -- 12,763,167 2,020,966 -- 14,784,133
Bank acceptances outstanding....... 383,289 -- -- 383,289 161,355 -- 544,644
Other liabilities.................. 1,750,454 144,846 (3,632) 1,891,668 744,470 -- 2,636,138
Long-term debt..................... 5,376,283 247,829 -- 5,624,112 676,750 -- 6,300,862
Total liabilities.............. 77,364,765 7,467,940 (3,632) 84,829,073 32,422,464 -- 117,251,537
STOCKHOLDERS' EQUITY
Preferred stock.................... -- -- -- -- 219,219 -- 219,219
Common stock....................... 572,790 16,907 4,973 594,670 81,999 271,939 948,608
Paid-in capital.................... 1,260,261 390,804 (99,387) 1,551,678 1,255,143 (437,293) 2,369,528
Retained earnings.................. 3,912,179 128,674 (128,674) 3,912,179 1,556,804 -- 5,468,983
Less: Treasury stock............... -- (3,329) 3,329 -- (165,354) 165,354 --
Unrealized gain (loss) on debt and
equity securities................ (8,383) 161 (161) (8,383) (8,494) -- (16,877)
Total stockholders' equity..... 5,736,847 533,217 (219,920) 6,050,144 2,939,317 -- 8,989,461
Total liabilities and
stockholders' equity......... $83,101,612 8,001,157 (223,552) 90,879,217 35,361,781 -- 126,240,998
</TABLE>
See accompanying notes to pro forma financial information.
<PAGE>
PRO FORMA COMBINED CONDENSED INCOME STATEMENTS
(THE CORPORATION AND THE PURCHASE ACQUISITIONS)
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of the Corporation and the companies
involved in the Purchase Acquisitions, assuming the companies had been combined
for each period presented on a purchase accounting basis (effective as of
January 1, 1994).
<TABLE>
<CAPTION>
THE PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995
Interest income...................................................... $3,000,417 377,671 (40,193) 3,337,895
Interest expense..................................................... 1,406,547 240,696 -- 1,647,243
Net interest income.................................................. 1,593,870 136,975 (40,193) 1,690,652
Provision for loan losses............................................ 76,500 4,130 -- 80,630
Net interest income after provision for loan losses.................. 1,517,370 132,845 (40,193) 1,610,022
Securities available for sale transactions........................... 4,878 (3,679) -- 1,199
Investment security transactions..................................... 1,450 -- -- 1,450
Noninterest income................................................... 628,042 29,339 -- 657,381
Noninterest expense.................................................. 1,399,441 179,316 20,111 1,598,868
Income before income taxes........................................... 752,299 (20,811) (60,304) 671,184
Income taxes......................................................... 266,254 990 (19,709) 247,535
Net income........................................................... 486,045 (21,801) (40,595) 423,649
Dividends on preferred stock......................................... 7,029 -- -- 7,029
Net income applicable to common stockholders......................... 479,016 (21,801) (40,595) 416,620
Pro forma per common share data
Net income available to common stockholders........................ $ 2.77 2.32
Average common shares (in thousands)............................... 172,745 179,310
<CAPTION>
THE PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS EXCEPT PER SHARE DATA) CORPORATION ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Interest income...................................................... $5,094,661 786,606 (80,286) 5,800,981
Interest expense..................................................... 2,060,946 453,964 -- 2,514,910
Net interest income.................................................. 3,033,715 332,642 (80,286) 3,286,071
Provision for loan losses............................................ 100,000 1,643 -- 101,643
Net interest income after provision for loan losses.................. 2,933,715 330,999 (80,286) 3,184,428
Securities available for sale transactions........................... (11,507) 2,647 -- (8,860 )
Investment security transactions..................................... 4,006 -- -- 4,006
Noninterest income................................................... 1,166,470 55,018 -- 1,221,488
Noninterest expense.................................................. 2,677,228 270,493 52,677 3,000,398
Income before income taxes........................................... 1,415,456 118,171 (132,963) 1,400,664
Income taxes......................................................... 490,076 38,119 (40,535) 487,660
Net income........................................................... 925,380 80,052 (92,428) 913,004
Dividends on preferred stock......................................... 25,353 -- -- 25,353
Net income applicable to common stockholders before redemption
premium............................................................ 900,027 80,052 (92,428) 887,651
Redemption premium on preferred stock................................ 41,355 -- -- 41,355
Net income applicable to common stockholders after redemption
premium............................................................ $ 858,672 80,052 (92,428) 846,296
Pro forma per common share data
Net income available to common stockholders before redemption
premium.......................................................... $ 5.22 5.06
Net income available to common stockholders after redemption
premium.......................................................... $ 4.98 4.82
Average common shares (in thousands)............................... 172,543 175,554
</TABLE>
See accompanying notes to pro forma financial information.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(THE CORPORATION, THE PURCHASE ACQUISITIONS AND FIRST FIDELITY)
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of the Corporation, the companies
involved in the Purchase Acquisitions and First Fidelity, assuming the
companies had been combined for each period presented on a purchase accounting
basis as to the Purchase Acquisitions (for the six months ended June 30, 1995,
and the year ended December 31, 1994, only) and on a pooling of interests
accounting basis as to First Fidelity.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(DOLLARS IN THOUSANDS, JUNE 30, YEARS ENDED DECEMBER 31,
EXCEPT PER SHARE DATA) 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income........................ $4,493,006 3,434,281 7,937,133 6,601,528 6,608,666 7,031,400 7,549,088
Interest expense....................... 2,112,573 1,254,749 3,246,946 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income.................... 2,380,433 2,179,532 4,690,187 4,119,576 3,666,986 2,960,515 2,742,617
Provision for loan losses.............. 100,630 94,000 180,643 369,753 642,708 946,284 923,409
Net interest income after provision for
loan losses.......................... 2,279,803 2,085,532 4,509,544 3,749,823 3,024,278 2,014,231 1,819,208
Securities available for sale
transactions......................... 15,242 10,173 8,860 25,767 34,402 -- --
Investment security transactions....... 1,450 1,309 4,006 14,452 1,944 208,614 32,271
Noninterest income..................... 864,592 738,949 1,620,712 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense.................... 2,135,961 1,816,102 4,070,027 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes............. 1,025,126 1,019,861 2,073,095 1,795,265 977,302 699,815 316,110
Income taxes........................... 373,284 347,323 709,028 578,912 278,514 129,843 59,868
Net income............................. 651,842 672,538 1,364,067 1,216,353 698,788 569,972 256,242
Dividends on preferred stock........... 17,350 22,204 46,020 45,553 53,040 51,746 47,151
Net income applicable to common
stockholders before redemption
premium.............................. 634,492 650,334 1,318,047 1,170,800 645,748 518,226 209,091
Redemption premium on preferred
stock................................ -- -- 41,355 -- -- -- --
Net income applicable to common
stockholders after redemption
premium.............................. $ 634,492 650,334 1,276,692 1,170,800 645,748 518,226 209,091
Pro forma per common share data:
Net income applicable to common
stockholders before redemption
premium............................ $ 2.22 2.32 4.63 4.30 2.53 2.34 .97
Net income applicable to common
stockholders after redemption
premium............................ $ 2.22 2.32 4.48 4.30 2.53 2.34 .97
Average common shares
(in thousands)....................... 285,492 280,153 284,673 272,439 255,384 221,469 215,529
Corporation historical per common
share data:
Net income applicable to common
stockholders before redemption
premium.......................... $ 2.77 2.59 5.22 4.73 2.23 2.24 1.68
Net income applicable to common
stockholders after redemption
premium.......................... $ 2.77 2.59 4.98 4.73 2.23 2.24 1.68
Average common shares
(in thousands)....................... 172,745 169,689 172,543 167,692 158,683 140,003 135,622
</TABLE>
See accompanying notes to pro forma financial information.
<PAGE>
PRO FORMA COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
(THE CORPORATION AND FIRST FIDELITY)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Pretax income from continuing
operations............................ $1,106,241 2,087,887 1,795,265 977,302 699,815 316,110
Fixed charges, excluding capitalized
interest.............................. 556,534 816,102 607,462 569,638 866,728 1,402,761
(A.) Earnings........................... $1,662,775 2,903,989 2,402,727 1,546,940 1,566,543 1,718,871
Interest, excluding interest on
deposits.............................. $ 523,173 746,938 537,964 501,556 803,787 1,349,953
One-third of rents...................... 33,361 69,164 69,498 68,082 62,941 52,808
Capitalized interest.................... 746 1,120 285 381 2,326 3,144
(B.) Fixed charges...................... $ 557,280 817,222 607,747 570,019 869,054 1,405,905
Consolidated ratios of earnings to fixed
charges, excluding interest on
deposits (A./B.)...................... 2.98x 3.55 3.95 2.71 1.80 1.22
INCLUDING INTEREST ON DEPOSITS
Pretax income from continuing
operations............................ $1,106,241 2,087,887 1,795,265 977,302 699,815 316,110
Fixed charges, excluding capitalized
interest.............................. 1,905,238 2,862,146 2,551,450 3,009,762 4,133,826 4,859,279
(C.) Earnings........................... $3,011,479 4,950,033 4,346,715 3,987,064 4,833,641 5,175,389
Interest, including interest on
deposits.............................. $1,871,877 2,792,982 2,481,952 2,941,680 4,070,885 4,806,471
One-third of rents...................... 33,361 69,164 69,498 68,082 62,941 52,808
Capitalized interest.................... 746 1,120 285 381 2,326 3,144
(D.) Fixed charges...................... $1,905,984 2,863,266 2,551,735 3,010,143 4,136,152 4,862,423
Consolidated ratios of earnings to fixed
charges, including interest on
deposits (C./D.)...................... 1.58x 1.73 1.70 1.32 1.17 1.06
</TABLE>
See accompanying notes to pro forma financial information.
<PAGE>
PRO FORMA COMPUTATIONS OF CONSOLIDATED
RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(THE CORPORATION AND FIRST FIDELITY)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Pretax income from continuing
operations............................ $1,106,241 2,087,887 1,795,265 977,302 699,815 316,110
Fixed charges, excluding preferred stock
dividends and capitalized interest.... 566,072 861,573 628,840 591,458 878,337 1,422,265
(A.) Earnings........................... $1,672,313 2,949,460 2,424,105 1,568,760 1,578,152 1,738,375
Interest, excluding interest on
deposits.............................. $ 523,173 746,938 537,964 501,556 803,787 1,349,953
One-third of rents...................... 33,361 69,164 69,498 68,082 62,941 52,808
Preferred stock dividends*.............. 26,888 132,846 66,931 74,860 63,354 66,655
Capitalized interest.................... 746 1,120 285 381 2,326 3,144
(B.) Fixed charges...................... $ 584,168 950,068 674,678 644,879 932,408 1,472,560
Consolidated ratios of earnings to fixed
charges, excluding interest on
deposits (A./B.)...................... 2.86x 3.10 3.59 2.43 1.69 1.18
INCLUDING INTEREST ON DEPOSITS
Pretax income from continuing
operations............................ $1,106,241 2,087,887 1,795,265 977,302 699,815 316,110
Fixed charges, excluding preferred stock
dividends and capitalized interest.... 1,914,776 2,907,617 2,572,828 3,031,582 4,145,434 4,878,783
(C.) Earnings........................... $3,021,017 4,995,504 4,368,093 4,008,884 4,845,249 5,194,893
Interest, including interest on
deposits.............................. $1,871,877 2,792,982 2,481,952 2,941,680 4,070,885 4,806,471
One-third of rents...................... 33,361 69,164 69,498 68,082 62,941 52,808
Preferred stock dividends*.............. 26,888 132,846 66,931 74,860 63,354 66,655
Capitalized interest.................... 746 1,120 285 381 2,326 3,144
(D.) Fixed charges...................... $1,932,872 2,996,112 2,618,666 3,085,003 4,199,506 4,929,078
Consolidated ratios of earnings to fixed
charges, including interest on
deposits (C./D.)...................... 1.56x 1.67 1.67 1.30 1.15 1.05
</TABLE>
* Includes redemption premium of $41,355,000 in 1994.
See accompanying notes to pro forma financial information.
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Purchase Acquisitions indicated in Note (3) below and the
First Fidelity acquisition been consummated at the beginning of the
periods indicated, nor is it necessarily indicative of the results of
operations in future periods or the future financial position of the
combined entities. Consummation of the First Fidelity acquisition or any
of the Purchase Acquisitions is not contingent upon consummation of any
other of such acquisitions. Consummation of one or all of the Purchase
Acquisitions prior to consummation of the First Fidelity acquisition would
not materially impact the results of operations of the Corporation.
(2) It is assumed that the First Fidelity acquisition will be accounted for on a
pooling of interests accounting basis, and accordingly, the related pro
forma adjustments herein reflect, where applicable, an exchange ratio of (i)
1.35 shares of the Corporation's common stock for each of the 81,998,930
shares of First Fidelity common stock (less 3,345,884 treasury shares) which
were outstanding at June 30, 1995; and (ii) one share of one of three
corresponding new series of the Corporation's class A preferred stock for
each share of the related three series of First Fidelity preferred stock
outstanding at June 30, 1995, one series of which includes 4,368,848 shares
of convertible preferred stock, which are currently convertible into
3,408,138 shares of First Fidelity common stock. The new series of the
Corporation's class A preferred stock will have substantially identical
terms as the series being exchanged therefor. The 1.35 exchange ratio is
subject to possible adjustment under certain circumstances.
As a result, information was adjusted for the First Fidelity acquisition by
the (i) addition of 106,181,612 shares of the Corporation's common stock
amounting to $353,938,000; (ii) elimination of 81,998,930 shares of First
Fidelity common stock amounting to $81,999,000; (iii) cancellation of
3,345,884 treasury shares of First Fidelity at a cost of $165,354,000; and
(iv) recordation of the remaining net amount of $437,293,000 as a reduction
in paid-in capital at June 30, 1995.
The pro forma financial information presented herein does not give effect to
the possible purchase by the Corporation and/or First Fidelity of up to 5.5
million shares of First Fidelity common stock or 7.4 million shares of the
Corporation's common stock, or some combination of the two (the "First
Fidelity Acquisition Shares"), prior to consummation of the First Fidelity
acquisition. From July 3, 1995 through August 7, 1995, the Corporation
purchased 2.7 million shares of First Fidelity common stock at a cost of
$170 million, and 250,000 shares of FFB convertible preferred stock at
a cost of $12 million.
As of June 30, 1995, the Corporation and First Fidelity had 14,441,144 and
6,788,278 shares of common stock reserved for issuance, respectively,
(excluding, as to the Corporation, shares reserved for issuance in
connection with the First Fidelity acquisition, the Purchase Acquisitions,
or upon exercise of the rights attached to shares of the Corporation's
common stock).
For the six months ended June 30, 1995, First Fidelity had net income
applicable to common stockholders of $217,872,000.
(3) During the period from January 1, 1994 through August 14, 1995, the
Corporation completed or had pending at August 14, 1995, the following
purchase accounting acquisitions (the "Purchase Acquisitions"): (i) the
acquisition of BancFlorida Financial Corporation (completed August 1994)
with assets of $1.6 billion for 3.6 million shares of the Corporation's
common stock valued at $161 million, (ii) the acquisitions of First
Florida Savings Bank, FSB (completed in April 1995), Ameribanc Investors
Group (completed in April 1995), Coral Gables Fedcorp, Inc. (completed
May 1995), and Home Federal Savings Bank of Rome, Georgia (completed
August 1995), at an aggregate cost of $623 million in cash, (iii) the
acquisitions of American Savings Bank of Florida, FSB (completed July
1995) and United Financial Corporation of South Carolina, Inc., Columbia
First Bank, FSB, RS Financial Corp. and Brentwood National Bank (each of
which is pending at August 14, 1995) for an estimated 16.5 million shares
of the Corporation's common stock valued at an estimated $785 million,
(iv) the December 1994 purchase of a DE MINIMUS amount of loans, and the
purchase of deposits from Chase Manhattan Bank of Florida, N.A. ("Chase")
and Great Western Federal Savings Bank ("Great Western"), which in the
aggregate amounted to $1.8 billion, at an aggregate cost of approximately
$137 million, and (v) the purchase of deposits of Jacksonville Federal
Savings Association, Citizens Federal Savings Association, Cobb Federal
Savings Association and Hollywood Federal Savings Association from the
Resolution Trust Corporation ("RTC") in the aggregate amount of $640
million, at an aggregate cost of $68 million. Purchases of deposits from
Chase, Great Western and the RTC do not constitute a sufficient continuity
<PAGE>
of operations, and moreover, additional financial data is not available to
develop meaningful and reliable pro forma income statement information with
respect to such purchases.
Goodwill and deposit base premium of approximately $701 million and $378
million, respectively, are currently expected to result from the Purchase
Acquisitions.
In connection with certain of the foregoing purchase accounting acquisitions
in which the consideration involved or will involve the issuance of the
Corporation's common stock, the pro forma financial information presented
herein includes actual and assumed repurchases of the Corporation's common
stock that in the aggregate amount to 20.5 million shares at a cost of
$932 million.
In April 1995, the Corporation's Board of Directors authorized the purchase
of up to 15 million shares of the Corporation's common stock, which is in
addition to the possible purchase of the First Fidelity Acquisition
Shares. As of August 7, 1995, the Corporation had authority to purchase up
to 6.3 million shares of its common stock, in addition to the First
Fidelity Acquisition Shares.
(4) The pro forma adjustment amounts related to the pro forma combined condensed
statements of income reflect a 5.84 percent and 4.08 percent cost of funds
for the six months ended June 30, 1995 and the year ended December 31, 1994,
respectively, a six-to-ten year straight-line life related to investment
securities, a nine-year straight-line life related to loans, a 10-year
straight-line life related to premises and equipment and mortgage servicing
rights, a 10-year sum-of-the-years digits method related to deposit base
premium, and a 25-year straight-line life related to goodwill.
These adjustments resulted in reductions in interest income, net interest
income and net interest income after provision for loan losses for the six
months ended June 30, 1995 and the year ended December 31, 1994 of
$40,193,000 and $80,286,000, respectively; increases in noninterest expense
of $20,111,000 and $52,677,000, respectively; reductions in income before
income taxes of $60,304,000 and $132,963,000, respectively; reductions in
income taxes of $19,709,000 and $40,535,000, respectively; and reductions in
net income applicable to common stockholders of $40,595,000 and $92,428,000,
respectively.
(5) Income per share data has been computed based on the combined historical net
income applicable to common stockholders of the Corporation, First Fidelity
and the companies involved in the Purchase Acquisitions using the historical
weighted average shares outstanding of the Corporation's common stock and
the weighted average outstanding shares, adjusted to equivalent shares of
the Corporation's common stock, as of the earliest period presented.
(6) Certain insignificant reclassifications have been included herein to conform
statement presentations. Transactions conducted in the ordinary course of
business between the companies are immaterial, and accordingly, have not
been eliminated.
(7) The unaudited pro forma financial information does not include any material
expenses or restructuring charges related to the First Fidelity acquisition
or the Purchase Acquisitions. Such after-tax restructuring charges are
currently estimated to be $140 million relating to the First Fidelity
acquisition.
(8) As indicated by the foregoing unaudited pro forma financial information and
based solely on combined financial information as of June 30, 1995, upon
consummation of the First Fidelity acquisition and the Purchase
Acquisitions, the Corporation's historical net income per common share
after redemption premium for the six months ended June 30, 1995 and year
ended December 31, 1994, would have been diluted by 20 percent and 10
percent, respectively. It should not necessarily be assumed, however, that
the foregoing data will represent actual dilution with respect to the
First Fidelity acquisition and the Purchase Acquisitions.
(9) For purposes of computing the combined ratios of earnings to fixed charges
of the Corporation and First Fidelity, earnings represent income from
continuing operations before extraordinary items and cumulative effect of a
change in accounting principle plus income taxes and fixed charges
(excluding capitalized interest). Fixed charges, excluding interest on
deposits, represent interest (other than on deposits, but including
capitalized interest), one-third (the proportion deemed representative of
the interest factor) of rents and all amortization of debt issuance costs.
Fixed charges, including interest on deposits, represent all interest
(including capitalized interest), one-third (the proportion deemed
representative of the interest factor) of rents and all amortization of debt
issuance costs. Pretax preferred stock dividends are included in fixed
charges when computing the combined ratios of earnings to fixed charges and
preferred stock dividends.
<PAGE>
2 of 36
Part I - Financial Information
------------------------------
Item 1 - Financial Statements
-----------------------------
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
(thousands, except per share amounts) Three Months Ended
June 30
--------------------
1995 1994
-------- --------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans......................... $474,282 $403,509
Interest on federal funds sold and securities
purchased under agreements to resell............. 711 372
Interest and dividends on securities:
Taxable interest income.......................... 93,629 97,481
Tax-exempt interest income....................... 8,483 9,898
Dividends........................................ 985 1,422
Interest on bank deposits.......................... 565 7,322
Interest on trading account securities............. 1,350 1,846
-------- --------
Total Interest Income.......................... 580,005 521,850
-------- --------
INTEREST EXPENSE
Interest on:
Deposits......................................... 195,630 144,154
Short-term borrowings............................ 28,249 13,577
Long-term debt................................... 14,111 12,682
-------- --------
Total Interest Expense......................... 237,990 170,413
-------- --------
Net Interest Income.......................... 342,015 351,437
Provision for possible credit losses................. 10,000 20,000
-------- --------
Net Interest Income after Provision
for Possible Credit Losses....................... 332,015 331,437
-------- --------
NON-INTEREST INCOME
Trust income....................................... 27,513 27,628
Service charges on deposit accounts................ 36,503 36,621
Other service charges, commissions and fees........ 26,821 20,816
Trading revenue.................................... 2,158 984
Net securities transactions........................ 6,970 4,726
Other income....................................... 11,944 5,806
-------- --------
Total Non-Interest Income........................ 111,909 96,581
-------- --------
NON-INTEREST EXPENSE
Salaries and benefits expense...................... 123,664 118,883
Occupancy expense.................................. 28,891 28,443
Equipment expense.................................. 11,268 10,295
Other expenses..................................... 101,430 103,841
-------- --------
Total Non-Interest Expense....................... 265,253 261,462
-------- --------
<PAGE>
3 of 36
Income before income taxes........................... 178,671 166,556
Income taxes......................................... 63,413 54,963
-------- --------
Net Income........................................... 115,258 111,593
Dividends on Preferred Stock......................... 5,113 5,146
-------- --------
Net Income Applicable to Common Stock................ $110,145 $106,447
======== ========
Per common share:
Net income:
Primary.......................................... $1.37 $1.29
Fully diluted.................................... 1.34 1.27
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 4 of 36
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
(thousands, except per share amounts) Six Months Ended
June 30
---------------------
1995 1994
--------- ---------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans........................ $932,314 $797,655
Interest on federal funds sold and securities
purchased under agreements to resell............ 1,062 490
Interest and dividends on securities:
Taxable interest income......................... 198,634 194,196
Tax-exempt interest income...................... 17,261 20,407
Dividends....................................... 2,171 2,617
Interest on bank deposits......................... 1,095 17,681
Interest on trading account securities............ 2,574 3,421
--------- ---------
Total Interest Income......................... 1,155,111 1,036,467
--------- ---------
INTEREST EXPENSE
Interest on:
Deposits........................................ 379,910 287,261
Short-term borrowings........................... 55,840 24,057
Long-term debt.................................. 29,580 23,515
--------- ---------
Total Interest Expense........................ 465,330 334,833
--------- ---------
Net Interest Income......................... 689,781 701,634
Provision for possible credit losses................ 20,000 44,000
--------- ---------
Net Interest Income after Provision
for Possible Credit Losses...................... 669,781 657,634
--------- ---------
NON-INTEREST INCOME
Trust income...................................... 53,882 54,891
Service charges on deposit accounts............... 72,222 73,905
Other service charges, commissions and fees....... 52,141 40,686
Trading revenue................................... 5,065 4,635
Net securities transactions....................... 14,043 8,808
Other income...................................... 23,901 13,040
--------- ---------
Total Non-Interest Income....................... 221,254 195,965
--------- ---------
NON-INTEREST EXPENSE
Salaries and benefits expense..................... 249,880 241,022
Occupancy expense................................. 58,636 60,377
Equipment expense................................. 22,469 21,223
Other expenses.................................... 206,108 202,419
--------- ---------
Total Non-Interest Expense...................... 537,093 525,041
--------- ---------
</TABLE>
<PAGE>
5 of 36
<TABLE>
<CAPTION>
<S> <C> <C>
Income before income taxes.......................... 353,942 328,558
Income taxes........................................ 125,749 108,099
--------- ---------
Net Income.......................................... 228,193 220,459
Dividends on Preferred Stock........................ 10,321 10,277
--------- ---------
Net Income Applicable to Common Stock............... $217,872 $210,182
========= =========
Per common share:
Net income:
Primary......................................... $2.69 $2.54
Fully diluted................................... 2.62 2.49
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES) 6 of 36
CONSOLIDATED STATEMENTS OF CONDITION
June 30 December 31
1995 1994
(thousands) (unaudited)
----------- -----------
[S] [C] [C]
ASSETS
Cash and due from banks............................ $1,750,833 $2,082,002
Interest-bearing time deposits..................... 455,033 35,567
Securities held to maturity........................ 3,877,896 4,186,860
(market value of $3,879,660 at June 30, 1995
and $4,049,457 at December 31, 1994)
Securities available for sale, at market value..... 2,409,976 3,781,163
Trading account securities, at market value........ 100,529 110,494
Federal funds sold and securities purchased under
agreements to resell............................. 703,375 50,675
Loans, net of unearned income...................... 23,999,147 23,801,241
Less: Reserve for possible credit losses......... (565,450) (599,333)
----------- -----------
Net loans...................................... 23,433,697 23,201,908
Premises and equipment............................. 428,328 437,677
Customers' acceptance liability.................... 160,374 215,556
Other assets....................................... 2,041,740 2,113,794
----------- -----------
Total Assets................................. $35,361,781 $36,215,696
=========== ===========
LIABILITIES
Deposits in domestic offices:
Demand deposits.................................. $5,195,045 $5,393,749
Savings/NOW deposits............................. 8,831,105 9,271,335
Money market deposit accounts.................... 3,919,395 4,257,135
Other consumer time deposits..................... 9,467,150 8,858,443
Corporate certificates of deposit................ 381,616 393,058
Deposits in overseas offices....................... 1,024,612 733,132
----------- -----------
Total Deposits................................. 28,818,923 28,906,852
Short-term borrowings.............................. 2,020,966 2,716,922
Acceptances outstanding............................ 161,355 218,625
Other liabilities.................................. 744,470 682,699
Long-term debt..................................... 676,750 813,623
----------- -----------
Total Liabilities............................ 32,422,464 33,338,721
<PAGE>
7 of 36
STOCKHOLDERS' EQUITY
Preferred stock.................................... 219,219 229,707
Common stock ($1.00 par)
Authorized: 150,000,000 shares
Issued: 81,998,930 shares at June 30, 1995 and
82,003,121 shares at December 31, 1994......... 81,999 82,003
Surplus............................................ 1,255,143 1,256,020
Retained earnings.................................. 1,556,804 1,430,149
Net unrealized losses--securities
available for sale............................... (8,494) (75,232)
Less treasury stock, at cost: 3,345,884 shares at
June 30, 1995 and 1,020,282 shares
at December 31, 1994........................... (165,354) (45,672)
----------- -----------
Total Common Stockholders' Equity............ 2,720,098 2,647,268
----------- -----------
Total Stockholders' Equity................... 2,939,317 2,876,975
----------- -----------
Total Liabilities and Stockholders' Equity... $35,361,781 $36,215,696
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
8 of 36
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Balance, January 1.................................. $2,876,975 $2,738,428
Net income........................................ 228,193 220,459
Common Stock issued:
Private placement--Santander exercise
of warrants................................... - 121,189
Stock options and dividend reinvestment plan.... 13,744 13,114
Other........................................... - 1,567
Purchases of treasury stock....................... (155,699) (144,634)
Dividends on Common Stock......................... (80,313) (67,118)
Dividends on Preferred Stock...................... (10,321) (10,277)
Net unrealized gains (losses)-- securities
available for sale.............................. 66,738 (55,624)
Other............................................. - 3,200
---------- ----------
Balance, June 30.................................... $2,939,317 $2,820,304
========== ==========
</TABLE>
<PAGE>
9 of 36
FIRST FIDELITY BANCORPORATION (AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------
(thousands) 1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................... $228,193 $220,459
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible credit losses............... 20,000 44,000
Depreciation, amortization and accretion........... 39,837 36,363
Deferred income tax provision...................... 26,858 27,524
Gain on sale of assets............................. (16,950) (6,828)
Net securities transactions (gains)................ (14,043) (8,808)
Proceeds from sales of trading account
securities....................................... 5,081,262 5,084,239
Purchases of trading account securities............ (5,066,232) (5,092,353)
Decrease (increase) in accrued interest receivable. 3,925 (3,081)
Increase in accrued interest payable............... 40,645 42,066
Change in current taxes payable.................... 13,965 35,621
Other, net......................................... 98,209 127,329
---------- ----------
Net cash provided by operating activities...... 455,669 506,531
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity................................. 736,264 1,439,318
Purchases of securities held to maturity........... (501,122) (936,070)
Proceeds from sales of securities available
for sale......................................... 1,621,565 497,067
Proceeds from maturities of securities
available for sale............................... 197,910 408,296
Purchases of securities available for sale......... (247,134) (1,396,346)
Net (disbursements) from lending activities........ (217,335) (129,033)
Purchases of premises and equipment................ (26,952) (31,043)
Proceeds from sales of premises and equipment...... 1,621 6,378
Net change in acceptances.......................... (2,088) (5,600)
Net cash on acquisitions........................... 943,182 49,454
---------- ----------
Net cash provided by/(used in)
investing activities......................... 2,505,911 (97,579)
Cash flows from financing activities:
Change in demand, savings/NOW, and money market
deposits......................................... (1,432,538) (546,401)
Change in corporate certificates of deposit and
deposits in overseas offices..................... 280,038 (6,880)
Change in other consumer time deposits............. 2,543 (469,920)
Change in short-term borrowings.................... (695,956) 442,503
Issuance of long-term debt......................... - 200,000
Payments on long-term debt......................... (136,873) (181)
Purchases of treasury stock........................ (155,699) (144,634)
Issuance of common stock........................... 13,744 134,303
Dividends paid..................................... (95,842) (77,380)
---------- ----------
Net cash (used in) financing activities........ (2,220,583) (468,590)
---------- ----------
<PAGE>
10 of 36
Net change in cash and cash equivalents........ 740,997 (59,638)
Cash and cash equivalents at beginning
of period (A)................................ 2,168,244 2,826,039
---------- ----------
Cash and cash equivalents at end
of period (A)................................ $2,909,241 $2,766,401
========== ==========
Supplemental disclosures:
Total amount of interest paid for the period....... $424,685 $292,767
========== ==========
Total amount of income taxes paid for
the period....................................... $81,535 $99,196
========== ==========
Total amount of loans transferred to OREO.......... $17,668 $23,194
========== ==========
(A) Reconciliation: June 30 December 31
---------------------- ----------------------
1995 1994 1994 1993
---------- ---------- ---------- ----------
Cash and due from banks......... $1,750,833 $1,765,962 $2,082,002 $1,831,270
Interest-bearing time deposits.. 455,033 441,899 35,567 979,769
Federal funds sold and
securities purchased under
agreements to resell.......... 703,375 558,540 50,675 15,000
---------- ---------- ---------- ----------
Total cash and cash
equivalents................... $2,909,241 $2,766,401 $2,168,244 $2,826,039
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
11 of 36
SUMMARIZED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) In Management's opinion, the financial information, which
is unaudited, reflects all adjustments (consisting solely
of normal recurring adjustments) necessary for a fair
presentation of the financial information as of and for
the three and six month periods ended June 30, 1995 and
June 30, 1994 in conformity with generally accepted
accounting principles. These financial statements should
be read in conjunction with First Fidelity
Bancorporation's ("First Fidelity" or "the Company"
herein) 1994 Annual Report on Form 10-K.
(2) Primary earnings per share is based on the weighted
average number of common shares outstanding during each
period, including the assumed exercise of dilutive stock
options and warrants, using the treasury stock method.
Primary earnings per share also reflects provisions for
dividend requirements on all outstanding shares of the
Company's preferred stock.
Fully diluted earnings per share is based on the weighted
average number of common shares outstanding during each
period, including the assumed conversion of convertible
preferred stock into common stock and the assumed
exercise of dilutive stock options and warrants using the
treasury stock method. Fully diluted earnings per share
also reflects provisions for dividend requirements on
non-convertible preferred stock.
(3) As previously reported, effective January 1, 1995, the
Company adopted Statement of Financial Accounting
Standards ("SFAS") 114, "Accounting by Creditors for
Impairment of a Loan" and SFAS 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition
and Disclosures". Under SFAS 114 and SFAS 118, impaired
loans must be measured based on the present value of
expected future cash flows, discounted at the loan's
effective interest rate, or as a practical expedient, at
the loan's observable market price, or the fair value of
the collateral if the loan is collateral-dependent.
