SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 14, 1998
--------------------------
FIRST UNION CORPORATION
(Exact name of Registrant as specified in its charter)
North Carolina 1-10000 56-0898180
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One First Union Center
Charlotte, North Carolina 28288-0013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704)374-6565
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
On April 14, 1998, First Union Corporation issued a news release (the
"News Release") announcing its earnings for the three-month period ended March
31, 1998. A copy of the News Release is being filed as Exhibit (99) to this
report and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(99) The News Release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST UNION CORPORATION
Date: April 15, 1998 By: /s/ Kent S. Hathaway
---------------------
Name: Kent S. Hathaway
Title: Senior Vice President
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(99) The News Release.
Exhibit (99)
N E W S
Tuesday Media Contact: Mary Eshet
April 14, 1998 704-383-7777 (office)
704-366-6492 (home)
(First Union logo Investor Contact: Alice Lehman
appears here) 704-374-4139
SOLID REVENUE GROWTH PROPELS FIRST UNION'S RECORD EARNINGS
Solid revenue momentum drove First Union Corporation's first quarter 1998
operating earnings per share up 18 percent, to a record 93 cents on a diluted
basis compared with 79 cents in the first quarter of 1997. Operating earnings,
which represent earnings before merger-related and restructuring charges, were a
record $606 million, an increase of 20 percent from $504 million in the first
quarter of 1997. First quarter 1998 operating earnings represent a return on
average common equity of 20.21 percent and a return on average assets of 1.50
percent.
Merger-related and restructuring charges of $19 million after-tax were
associated with the January 31, 1998, acquisition of Wheat First Butcher Singer
Inc. After these charges, earnings were 90 cents per diluted share.
"This was a very solid quarter for First Union, with strong revenue
contributions from our Capital Markets and Capital Management businesses;
integration of our acquisitions well under way; and the continuing
implementation of our Future Bank throughout our branch network," said Edward E.
Crutchfield, chairman and chief executive officer. "Product introduction and
training are proceeding on schedule in our completed acquisitions. In addition,
our work to revamp our branch network is meeting success in the markets where
our Future Bank has been implemented. We are very enthusiastic about our future
as these efforts begin to translate into revenue growth."
First Union's Capital Markets Group and Capital Management Group continued to be
strong contributors to earnings growth in the first quarter of 1998. Including
Wheat First Union, Capital Management noninterest income increased 68 percent
and Capital Markets noninterest income increased 59 percent from the first
quarter of 1997. First Union's 1997 quarterly results have not been restated for
Wheat First Union.
First Union's Capital Markets Group provides a variety of sophisticated
corporate financing solutions focused on integrating the best of banking with
the best of the securities business. The Capital Management Group, with $98
billion in assets under management, provides a comprehensive selection of
products and services to meet customers' lifetime financial needs.
The consolidation of Signet's 1 million customers and 3 million accounts into
First Union's systems was completed in less than four months following the
completion of this pooling of interests acquisition in November 1997. First
Union's 1997 quarterly results have been restated for the Signet acquisition.
1
<PAGE>
FIRST UNION'S EARNINGS SET RECORD/page 2
Key factors, in addition to the contribution of Wheat First Union, in the first
quarter of 1998 compared with the first quarter of 1997 include:
(bullet) A 39 percent increase in noninterest income, led by Capital Markets and
Capital Management activity, to $1.1 billion. This amount excludes
investment securities transactions.
(bullet) A modest decline in net interest income, largely as a result of First
Union's strategy to sell or securitize certain loans rather than
holding them on the balance sheet. Average net loans were $96 billion
compared with $101 billion in the year ago period. First Union
continues to pursue a balance sheet management strategy to maximize
return on capital. As part of this strategy, $5 billion in consumer
loans were securitized or sold in 1997.
(bullet) Continuing strength in credit quality. Nonperforming assets as a
percentage of net loans and foreclosed properties improved to
0.74 percent from 0.80 percent. Annualized net charge-offs improved to
0.36 percent of average net loans, compared with 0.63 percent in the
year-ago period.
First Union's pooling of interests acquisition of Philadelphia-based CoreStates
Financial Corp received shareholder approval on February 27, 1998, and Federal
Reserve approval on April 13, 1998. On a pro forma basis, the combined company's
net income before merger-related and restructuring charges would have been $809
million at March 31, 1998, or, on a diluted earnings per share basis, 83 cents,
compared to $702 million and 72 cents in the year ago period. The acquisition is
expected to close by April 30, 1998, subject to certain conditions of closing.
The combined company will have the leading banking presence on the Eastern
Seaboard with the largest share of retail deposits on the East Coast. More
information concerning the CoreStates acquisition is available in First Union's
Current Reports on Form 8-K filed with the Securities and Exchange Commission
(SEC) on November 18, 1997, November 28, 1997, and December 2, 1997; in First
Union's registration statement on Form S-4, filed with the SEC on January 9,
1998; and First Union's 1997 Annual Report on Form 10-K.
First Union (NYSE:FTU) is a leading provider of financial services to more than
14 million customers throughout the East Coast and the nation. At March 31,
1998, First Union had assets of $172 billion and total stockholders' equity of
$12 billion. On a pro forma basis with CoreStates, the combined company's assets
would be $220 billion and total stockholders' equity would be $16 billion. The
company operates full-service banking offices in Connecticut, Delaware, Florida,
Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Virginia and Washington, D.C.
This news release contains various forward-looking statements. A discussion of
various factors that could cause First Union's actual results to differ
materially from those expressed in such forward-looking statements is included
in First Union's filings with the SEC.
2
<PAGE>
<TABLE>
<CAPTION>
PAGE 3
FIRST UNION CORPORATION
EARNINGS DATA
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 1 Q 98
-------------------------------
vs
(Dollars in millions, except per share data) 1998 1997 1 Q 97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL HIGHLIGHTS
Net income after merger-related and restructuring
charges $ 587 504 16 %
After-tax merger-related and restructuring charges 19 - 100
- --------------------------------------------------------------------------------------------------------------------------------
Net income before merger-related and restructuring
charges $ 606 504 20 %
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Basic earnings
Net income after merger-related and restructuring
charges $ 0.91 0.80 14 %
Net income before merger-related and restructuring
charges 0.94 0.80 18
Diluted earnings
Net income after merger-related and restructuring
charges 0.90 0.79 14
Net income before merger-related and restructuring
charges 0.93 0.79 18
Cash dividends 0.37 0.29 28
Book value 19.16 16.62 15
Period-end price $ 56.81 40.50 40
Average shares (In thousands)
Basic 642,343 627,402 2
Diluted 651,355 635,852 2
Actual shares (In thousands) 644,493 625,914 3
Dividend payout ratios (based on operating earnings) 39.74 % 35.43 - %
- ---------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE HIGHLIGHTS
Before merger-related and restructuring charges
Return on average assets (a) (b) 1.50 % 1.40 -
Return on average stockholders' equity (a) (c) 20.21 19.15 -
Overhead efficiency ratio (d) 59 57 -
Net charge-offs as a percentage of
Average loans, net (a) 0.36 0.63 -
Average loans, net, excluding Bankcard (a) 0.22 0.25 -
Nonperforming assets to loans, net and
foreclosed properties 0.74 0.80 -
Net interest margin (a) 3.88 % 4.44 -
- -------------------------------------------------------------------------------------------------------------------------------
CASH EARNINGS (EXCLUDING OTHER
INTANGIBLE AMORTIZATION)
Before merger-related and restructuring charges
Net income $ 659 558 18 %
Earnings per share - basic $ 1.03 0.89 16
Return on average tangible assets (a) 1.66 % 1.58 -
Return on average tangible stockholders' equity (a) (c) 28.15 29.09 -
Overhead efficiency ratio (d) 56 % 54 - %
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Quarterly amounts annualized.
(b) Based on net income.
(c) Based on net income and average stockholders' equity excluding average
net unrealized gains or losses on debt and equity securities.
(d) The overhead efficiency ratio is equal to noninterest expense divided by
net operating revenue. Net operating revenue is equal to the sum of
tax-equivalent net interest income and noninterest income, including
investment securities transactions.
<PAGE>
<TABLE>
<CAPTION>
PAGE 4
FIRST UNION CORPORATION
EARNINGS DATA
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 1 Q 98
-------------------------
vs
(In millions) 1998 1997 1 Q 97
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (a) $ 1,366 1,422 (4) %
Provision for loan losses 90 162 (44)
- ---------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses (a) 1,276 1,260 1
Securities available for sale transactions 20 4 400
Noninterest income 1,129 813 39
Merger-related and restructuring charges 29 - 100
Noninterest expense 1,479 1,283 15
- ---------------------------------------------------------------------------------------------------------
Income before income taxes (a) 917 794 15
Income taxes 310 272 14
Tax-equivalent adjustment 20 18 11
- ---------------------------------------------------------------------------------------------------------
Net income after merger-related and restructuring
charges $ 587 504 16 %
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Loans, net of unearned income $ 96,026 101,012 (5) %
Earning assets 141,150 129,921 9
Total assets 163,970 146,284 12
Noninterest-bearing deposits 20,580 18,468 11
Interest-bearing deposits 80,307 81,961 (2)
Stockholders' equity (b) $ 12,158 10,678 14 %
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Tax-equivalent.
(b) Excludes average net unrealized gains or losses on debt and equity
securities.
<PAGE>
<TABLE>
<CAPTION>
PAGE 5
FIRST UNION CORPORATION
QUARTERLY FINANCIAL HIGHLIGHTS
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ --------------------------------------------------
First Fourth Third Second First
(Dollars in millions, except common stock prices) Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED LINES OF BUSINESS DATA
Capital Markets
Tax-equivalent net interest income $ 131 109 111 116 99
- -----------------------------------------------------------------------------------------------------------------------------------
Fee and other income
Investment banking 143 60 59 50 56
Real estate finance 17 82 26 58 12
Risk management 22 36 21 20 17
Traditional banking 23 21 21 34 18
Commercial leasing and rail 50 45 48 51 57
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capital Markets fee and other income $ 255 244 175 213 160
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Management
Trust $ 98 98 94 90 88
Mutual funds 93 66 62 61 63
CAP account 17 15 14 13 13
Retail brokerage services 180 71 65 67 64
Private client group 2 2 2 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
Total 390 252 237 233 229
Less internal management reporting adjustments (a) (17) (9) (8) (7) (7)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capital Management income $ 373 243 229 226 222
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK PRICE
High $ 58.2500 52.8750 50.6875 47.875 47.750
Low 47.0625 46.9375 45.8750 39.125 36.625
Period-end $ 56.8125 51.2500 50.0625 46.250 40.500
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Internal management reporting adjustments represent the elimination of
inter-affiliate fee income, the results of which are included in the
consolidated statements of income.
<PAGE>
<TABLE>
<CAPTION>
PAGE 6
FIRST UNION CORPORATION
QUARTERLY FINANCIAL HIGHLIGHTS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ --------------------------------------------------
First Fourth Third Second First
(Dollars in millions) Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PERIOD-END BALANCE SHEET DATA
Securities available for sale $ 32,111 21,415 18,924 18,817 16,839
Investment securities 2,072 2,175 2,268 2,285 2,408
Loans, net of unearned income 98,092 96,873 101,452 102,783 101,747
Earning assets 150,002 134,370 137,571 137,245 131,526
Total assets 171,966 157,274 155,175 154,795 148,442
Noninterest-bearing deposits 22,425 21,753 20,734 20,962 19,978
Interest-bearing deposits 80,901 81,136 78,669 80,027 80,320
Long-term debt 8,252 8,042 8,169 7,608 8,004
Guaranteed preferred beneficial interests 991 991 990 990 990
Stockholders' equity $ 12,349 12,032 11,710 10,916 10,400
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED CAPITAL RATIOS (a)
Tier 1 capital 8.56 % 8.41 8.18 7.55 7.28
Total capital 13.46 13.40 13.72 12.64 12.24
Leverage 6.53 6.81 6.53 6.23 6.13
STOCKHOLDERS' EQUITY TO ASSETS
Quarter-end 7.18 7.65 7.55 7.05 7.01
Average 7.59 % 7.77 7.38 7.03 7.27
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The first quarter of 1998 is based on estimates. Amounts prior to the
fourth quarter of 1997 have not been restated for the Signet Banking
Corporation acquisition.
<PAGE>
<TABLE>
<CAPTION>
PAGE 7
FIRST UNION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ --------------------------------------------------
First Fourth Third Second First
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 2,045 2,167 2,226 2,216 2,162
Interest and dividends on securities available for sale 465 329 325 337 276
Interest and dividends on investment securities
Taxable income 27 27 28 29 30
Nontaxable income 14 14 14 14 15
Trading account interest 82 100 88 71 56
Other interest income 122 109 110 104 86
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income 2,755 2,746 2,791 2,771 2,625
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 822 821 818 821 804
Interest on short-term borrowings 459 377 380 364 287
Interest on long-term debt 128 132 130 126 130
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 1,409 1,330 1,328 1,311 1,221
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 1,346 1,416 1,463 1,460 1,404
Provision for loan losses (a) 90 325 175 178 162
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 1,256 1,091 1,288 1,282 1,242
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Trading account profits 53 86 24 61 33
Service charges on deposit accounts 214 222 214 208 210
Mortgage banking income 66 74 59 58 56
Capital management income 362 226 223 219 214
Securities available for sale transactions 20 12 10 5 4
Investment security transactions - - 2 1 -
Fees for other banking services 41 27 37 41 46
Equipment lease rental income 46 43 48 46 50
Sundry income 347 227 230 176 204
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,149 917 847 815 817
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries 653 597 543 554 527
Other benefits 138 116 118 124 137
- -----------------------------------------------------------------------------------------------------------------------------------
Personnel expense 791 713 661 678 664
Occupancy 101 99 102 100 100
Equipment 150 132 137 126 129
Advertising 30 22 25 29 27
Telecommunications 35 32 30 29 30
Travel 36 35 27 26 22
Postage, printing and supplies 49 45 40 40 45
FDIC assessment 5 6 6 6 5
Professional fees 32 54 29 27 24
External data processing 20 22 25 23 24
Other intangibles amortization 66 71 69 68 69
Merger-related and restructuring charges 29 210 - 59 -
Sundry expense 164 219 141 143 144
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 1,508 1,660 1,292 1,354 1,283
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes (benefits) 897 348 843 743 776
Income taxes (benefits) (a) 310 (14) 296 260 272
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 587 362 547 483 504
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Basic earnings $ 0.91 0.57 0.88 0.78 0.80
Diluted earnings 0.90 0.56 0.87 0.77 0.79
Cash dividends $ 0.37 0.32 0.32 0.29 0.29
AVERAGE SHARES (In thousands)
Basic 642,343 631,004 622,650 621,541 627,402
Diluted 651,355 639,031 630,552 629,654 635,852
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Certain corporate and interstate banking entities were reorganized,
which resulted in a reduction in the effective federal income tax rate
in the fourth quarter of 1997. This benefit was principally offset by a
higher provision for loan losses related to the restructuring of the
unsecured consumer loan portfolio.
<PAGE>
<TABLE>
<CAPTION>
PAGE 8
FIRST UNION CORPORATION
LOANS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ ---------------------------------------------------
First Fourth Third Second First
(In millions) Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Commercial, financial and agricultural $ 27,910 28,111 27,244 27,414 26,683
Real estate - construction and other 2,288 2,386 2,530 2,699 2,837
Real estate - mortgage 8,411 8,576 8,916 9,179 9,460
Lease financing 7,843 8,056 7,871 7,775 6,587
Foreign 1,520 1,431 1,308 1,395 1,091
- ------------------------------------------------------------------------------------------------------------------------------
Total commercial 47,972 48,560 47,869 48,462 46,658
- ------------------------------------------------------------------------------------------------------------------------------
RETAIL
Real estate - mortgage 26,114 25,382 26,086 26,636 27,356
Installment loans - Bankcard (a) 2,514 2,708 5,137 5,494 5,453
Installment loans - other 20,282 19,297 21,660 21,671 21,309
Vehicle leasing 4,457 4,312 4,005 3,858 3,704
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 53,367 51,699 56,888 57,659 57,822
- ------------------------------------------------------------------------------------------------------------------------------
Total loans 101,339 100,259 104,757 106,121 104,480
Unearned income 3,247 3,386 3,305 3,338 2,733
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net $ 98,092 96,873 101,452 102,783 101,747
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Installment loans - Bankcard include credit card, ICR, signature and First
Choice amounts.
<TABLE>
<CAPTION>
INTANGIBLE ASSETS
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ ---------------------------------------------------
First Fourth Third Second First
(IN MILLIONS) Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MORTGAGE AND OTHER SERVICING ASSETS $ 436 421 380 367 322
- ---------------------------------------------------------------------------------------------------------------------------
CREDIT CARD PREMIUM $ 21 24 26 29 32
- ---------------------------------------------------------------------------------------------------------------------------
OTHER INTANGIBLE ASSETS
Goodwill $ 2,267 2,247 2,278 2,314 2,354
Deposit base premium 393 421 457 488 519
Other 5 6 8 7 9
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 2,665 2,674 2,743 2,809 2,882
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE 9
FIRST UNION CORPORATION
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997
----------- --------------------------------------------------
First Fourth Third Second First
(In millions) Quarter Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of period $ 1,212 1,496 1,490 1,487 1,502
Provision for loan losses 90 325 175 178 162
Allowance relating to loans acquired, transferred to
accelerated disposition or sold 9 (478) - - (17)
Loan losses, net (87) (131) (169) (175) (160)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 1,224 1,212 1,496 1,490 1,487
- ----------------------------------------------------------------------------------------------------------------------------------
(as % of loans, net) 1.25 % 1.25 1.47 1.45 1.46
- ----------------------------------------------------------------------------------------------------------------------------------
(as % of nonaccrual and restructured loans) 195 % 195 235 233 209
- ----------------------------------------------------------------------------------------------------------------------------------
(as % of nonperforming assets) 168 % 168 203 201 182
- ----------------------------------------------------------------------------------------------------------------------------------
LOAN LOSSES
Commercial, financial and agricultural $ 16 45 15 13 10
Real estate - commercial construction and mortgage 4 8 8 6 10
Real estate - residential mortgage 7 10 6 13 7
Installment loans - Bankcard 39 60 113 116 107
Installment loans - other and Vehicle leasing 42 41 56 55 54
- ----------------------------------------------------------------------------------------------------------------------------------
Total 108 164 198 203 188
- ----------------------------------------------------------------------------------------------------------------------------------
LOAN RECOVERIES
Commercial, financial and agricultural 6 16 8 6 12
Real estate - commercial construction and mortgage 2 3 2 4 1
Real estate - residential mortgage - - 1 - -
Installment loans - Bankcard 3 5 9 7 6
Installment loans - other and Vehicle leasing 10 9 9 11 9
- ----------------------------------------------------------------------------------------------------------------------------------
Total 21 33 29 28 28
- ----------------------------------------------------------------------------------------------------------------------------------
Loan losses, net $ 87 131 169 175 160
- ----------------------------------------------------------------------------------------------------------------------------------
(as % of average loans, net) (a) 0.36 % 0.53 0.67 0.69 0.63
- ----------------------------------------------------------------------------------------------------------------------------------
(as % of average loans, net, excluding Bankcard) (a) 0.22 % 0.33 0.27 0.28 0.25
- ----------------------------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 246 236 215 219 231
Commercial real estate loans 80 76 88 101 125
Consumer real estate loans 186 186 188 181 214
Installment loans 114 124 143 136 131
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 626 622 634 637 701
Restructured loans 1 2 1 2 11
Foreclosed properties 102 99 103 102 107
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 729 723 738 741 819
- ----------------------------------------------------------------------------------------------------------------------------------
(as % of loans, net and foreclosed properties) 0.74 % 0.75 0.73 0.72 0.80
- ----------------------------------------------------------------------------------------------------------------------------------
Accruing loans past due 90 days $ 229 232 306 318 332
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
<PAGE>
<TABLE>
<CAPTION>
PAGE 10
FIRST UNION CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ ---------------------------------------------------
First Fourth Third Second First
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 7,077 6,445 6,661 6,971 6,540
Interest-bearing bank balances 217 710 204 492 353
Federal funds sold and securities purchased
under resale agreements 10,828 7,740 6,898 7,450 5,985
- ---------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 18,122 14,895 13,763 14,913 12,878
- ---------------------------------------------------------------------------------------------------------------------------------
Trading account assets 6,682 5,457 7,825 5,418 4,194
Securities available for sale 32,111 21,415 18,924 18,817 16,839
Investment securities 2,072 2,175 2,268 2,285 2,408
Loans, net of unearned income 98,092 96,873 101,452 102,783 101,747
Allowance for loan losses (1,224) (1,212) (1,496) (1,490) (1,487)
- ---------------------------------------------------------------------------------------------------------------------------------
Loans, net 96,868 95,661 99,956 101,293 100,260
- ---------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 4,398 4,233 4,228 4,230 4,310
Due from customers on acceptances 575 854 838 730 635
Other intangible assets 2,665 2,674 2,743 2,809 2,882
Other assets 8,473 9,910 4,630 4,300 4,036
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 171,966 157,274 155,175 154,795 148,442
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 22,425 21,753 20,734 20,962 19,978
Interest-bearing deposits 80,901 81,136 78,669 80,027 80,320
- ---------------------------------------------------------------------------------------------------------------------------------
Total deposits 103,326 102,889 99,403 100,989 100,298
Short-term borrowings 40,301 27,357 29,545 29,544 24,500
Bank acceptances outstanding 575 855 838 730 635
Other liabilities 6,172 5,108 4,520 4,018 3,615
Long-term debt 8,252 8,042 8,169 7,608 8,004
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 158,626 144,251 142,475 142,889 137,052
- ---------------------------------------------------------------------------------------------------------------------------------
Guaranteed preferred beneficial interests 991 991 990 990 990
- ---------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock - - - - -
Common stock, $3.33-1/3 par value; authorized
2,000,000,000 shares 2,148 2,121 2,118 2,091 2,086
Paid-in capital 1,203 1,384 1,296 1,010 1,000
Retained earnings 8,749 8,273 8,115 7,760 7,452
Unrealized gain (loss) on debt and equity securities, net 249 254 181 55 (138)
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 12,349 12,032 11,710 10,916 10,400
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 171,966 157,274 155,175 154,795 148,442
- ---------------------------------------------------------------------------------------------------------------------------------
MEMORANDA
Securities available for sale-amortized cost $ 31,720 21,020 18,639 18,723 17,049
Investment securities-market value 2,214 2,322 2,412 2,417 2,522
Stockholders' equity, net of unrealized
gain (loss) on debt and equity securities $ 12,349 12,032 11,710 10,916 10,400
Shares outstanding (In thousands) 644,493 636,394 635,335 627,398 625,914
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE 11
FIRST UNION CORPORATION
CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997
------------ ---------------------------------------------------
First Fourth Third Second First
(In millions) Quarter Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ 12,032 11,710 10,916 10,400 10,932
- --------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 587 362 547 483 504
Unrealized gain (loss) on debt and equity
securities, net (5) 73 126 193 (140)
- --------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 582 435 673 676 364
- --------------------------------------------------------------------------------------------------------------------------------
Purchase of common stock (406) - (83) (105) (836)
Common stock issued for stock options
exercised 121 80 38 118 103
Common stock issued through dividend
reinvestment plan 12 10 - 2 13
Common stock issued through public
offerings - - 358 - -
Common stock issued for acquisitions 249 - - - 3
Cash dividends paid (241) (203) (192) (175) (179)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 12,349 12,032 11,710 10,916 10,400
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997
--------------- ---------------------------------------------------
First Fourth Third Second First
(In millions) Quarter Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED CAPITAL RATIOS (a)
Tier 1 capital $ 10,538 10,215 8,986 8,135 7,752
Total capital 16,574 16,279 15,073 13,614 13,027
Adjusted risk-based assets 123,143 121,503 109,851 107,726 106,451
Adjusted leverage ratio assets $ 161,417 149,921 137,516 130,666 126,465
Ratios
Tier 1 capital 8.56 % 8.41 8.18 7.55 7.28
Total capital 13.46 13.40 13.72 12.64 12.24
Leverage 6.53 6.81 6.53 6.23 6.13
STOCKHOLDERS' EQUITY TO ASSETS
Quarter-end 7.18 7.65 7.55 7.05 7.01
Average 7.59 % 7.77 7.38 7.03 7.27
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The first quarter of 1998 is based on estimates. Amounts prior to the
fourth quarter of 1997 have not been restated for the Signet Banking
Corporation acquisition.
<PAGE>
<TABLE>
<CAPTION>
PAGE 12
FIRST UNION CORPORATION
NET INTEREST INCOME SUMMARIES
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST QUARTER 1998 FOURTH QUARTER 1997
---------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
(In millions) Balances Expense Paid Balances Expense Paid
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing bank balances $ 242 3 4.52 % $ 382 5 5.30%
Federal funds sold and securities
purchased under resale agreements 9,108 119 5.33 7,527 104 5.44
Trading account assets 5,512 83 6.13 6,383 101 6.30
Securities available for sale 28,152 469 6.68 19,192 331 6.90
Investment securities
U.S. Government and other 1,399 27 7.63 1,473 28 7.46
State, county and municipal 711 19 10.90 731 20 10.97
- --------------------------------------------------------------------------- ----------------------
Total investment securities 2,110 46 8.74 2,204 48 8.63
- --------------------------------------------------------------------------- -----------------------
Loans
Commercial
Commercial, financial and agricultural 27,830 527 7.68 27,094 508 7.44
Real estate - construction and other 2,313 48 8.37 2,486 50 7.95
Real estate - mortgage 8,503 175 8.35 8,726 188 8.55
Lease financing 3,782 105 11.09 3,988 108 10.80
Foreign 1,448 23 6.44 1,299 22 6.62
- --------------------------------------------------------------------------- ----------------------
Total commercial 43,876 878 8.10 43,593 876 7.98
- --------------------------------------------------------------------------- -----------------------
Retail
Real estate - mortgage 25,686 499 7.77 25,719 507 7.89
Installment loans - Bankcard 2,493 116 18.63 4,982 213 17.17
Installment loans - other and Vehicle leasing 23,971 562 9.49 24,380 582 9.48
- --------------------------------------------------------------------------- ----------------------
Total retail 52,150 1,177 9.08 55,081 1,302 9.43
- --------------------------------------------------------------------------- -----------------------
Total loans 96,026 2,055 8.63 98,674 2,178 8.79
- --------------------------------------------------------------------------- -----------------------
Total earning assets 141,150 2,775 7.92 134,362 2,767 8.20
-------------------- -----------------------
Cash and due from banks 6,111 5,978
Other assets 16,709 12,134
- -------------------------------------------------------------- -----------
Total assets $ 163,970 $ 152,474
- -------------------------------------------------------------- -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 30,188 225 3.02 28,585 222 3.09
Money market accounts 15,282 123 3.27 16,073 125 3.09
Other consumer time 29,493 386 5.31 29,482 391 5.27
Foreign 1,515 20 5.41 1,002 17 6.48
Other time 3,829 68 7.17 3,995 66 6.47
- --------------------------------------------------------------------------- -----------------------
Total interest-bearing deposits 80,307 822 4.15 79,137 821 4.11
Federal funds purchased and securities
sold under repurchase agreements 28,946 360 5.04 22,270 282 5.03
Commercial paper 1,071 14 5.27 864 18 8.17
Other short-term borrowings 6,296 85 5.49 5,094 77 6.03
Long-term debt 8,230 128 6.23 8,173 132 6.49
- --------------------------------------------------------------------------- -----------------------
Total interest-bearing liabilities 124,850 1,409 4.57 115,538 1,330 4.57
-------------------- -----------------------
Noninterest-bearing deposits 20,580 20,264
Other liabilities 5,111 3,842
Guaranteed preferred beneficial interests 991 990
Stockholders' equity 12,438 11,840
- --------------------------------------------------------------------------- -----------------------
Total liabilities and stockholders'
equity $ 163,970 $ 152,474
- -------------------------------------------------------------- -----------
Interest income and rate earned $ 2,775 7.92 % $ 2,767 8.20%
Interest expense and equivalent rate paid 1,409 4.04 1,330 3.93
- ---------------------------------------------------------------------------------------- -----------------------
Net interest income and margin $ 1,366 3.88 % $ 1,437 4.27%
- ---------------------------------------------------------------------------------------- ------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE 13
FIRST UNION CORPORATION
NET INTEREST INCOME SUMMARIES
- ------------------------------------------------------------------------------------------------------------------------------
THIRD QUARTER 1997 SECOND QUARTER 1997 FIRST QUARTER 1997
- ------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Interest Rates Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/
Balances Expense Paid Balances Expense Paid Balances Expense Paid
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
489 6 4.74% $ 377 5 5.66 % $ 284 3 4.41 %
7,573 104 5.46 7,096 99 5.54 6,110 83 5.59
5,301 88 6.55 4,289 72 6.72 3,557 57 6.49
18,636 328 6.98 19,275 341 7.09 16,525 278 6.84
1,533 28 7.36 1,531 29 7.61 1,646 31 7.47
742 21 10.89 766 21 11.21 787 21 11.03
- ------------------------- ------------------------ ------------------------
2,275 49 8.51 2,297 50 8.81 2,433 52 8.62
- ------------------------- ------------------------ ------------------------
26,582 510 7.61 26,661 513 7.72 25,702 485 7.66
2,625 58 8.80 2,795 60 8.65 2,879 61 8.53
9,117 202 8.78 9,289 203 8.77 9,630 200 8.41
4,043 106 10.42 3,919 100 10.19 3,419 83 9.83
1,296 20 6.27 1,290 19 6.14 1,024 16 6.16
- ------------------------- ------------------------ ------------------------
43,663 896 8.14 43,954 895 8.17 42,654 845 8.03
- ------------------------- ------------------------ ------------------------
26,373 519 7.80 27,279 534 7.85 28,601 555 7.87
5,321 213 15.87 5,510 202 14.68 5,514 192 14.09
25,096 606 9.59 24,860 592 9.55 24,243 578 9.67
- ------------------------- ------------------------ ------------------------
56,790 1,338 9.35 57,649 1,328 9.24 58,358 1,325 9.21
- ------------------------- ------------------------ ------------------------
100,453 2,234 8.82 101,603 2,223 8.78 101,012 2,170 8.71
- ------------------------- ------------------------ ------------------------
134,727 2,809 8.27 134,937 2,790 8.29 129,921 2,643 8.25
------------------------- ------------------------ -------------------------
5,740 5,835 5,933
10,895 10,528 10,430
- ------------ ------------ -----------
151,362 $ 151,300 $ 146,284
- ------------ ------------ -----------
29,357 219 2.96 29,507 210 2.85 28,840 199 2.80
14,794 119 3.20 14,257 107 3.00 14,696 106 2.93
30,991 409 5.23 31,721 410 5.19 32,920 421 5.18
1,263 17 5.48 3,068 41 5.39 1,821 24 5.27
3,328 54 6.46 3,422 53 6.27 3,684 54 5.94
- ------------------------- ------------------------ ------------------------
79,733 818 4.07 81,975 821 4.02 81,961 804 3.98
22,011 281 5.06 21,958 275 5.00 18,801 229 4.96
1,089 14 5.36 1,280 18 5.40 905 11 5.05
5,616 85 6.00 4,630 71 6.21 3,296 47 5.73
7,854 130 6.51 7,707 126 6.59 8,032 130 6.54
- ------------------------- ------------------------ ------------------------
116,303 1,328 4.53 117,550 1,311 4.47 112,995 1,221 4.38
----------------------- ---------------------- -----------------------
19,197 18,808 18,468
3,696 3,313 3,274
990 990 913
11,176 10,639 10,634
- ------------ ------------ -----------
151,362 $ 151,300 $ 146,284
- ------------ ------------ -----------
$ 2,809 8.27% $ 2,790 8.29 % $ 2,643 8.25 %
1,328 3.91 1,311 3.90 1,221 3.81
- ------------------------------------- ------------------------------------ ------------------------------------
$ 1,481 4.36% $ 1,479 4.39 % $ 1,422 4.44 %
- ------------------------------------- ------------------------------------ ------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE 14
FIRST UNION CORPORATION
CORESTATES FINANCIAL CORP
PRO FORMA FINANCIAL INFORMATION (a)
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA) 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMBINED FINANCIAL HIGHLIGHTS
Net income after merger-related and restructuring
charges $ 790 702
After-tax merger-related and restructuring charges 19 -
- --------------------------------------------------------------------------------------------------------------------------------
Net income before merger-related and restructuring
charges $ 809 702
- --------------------------------------------------------------------------------------------------------------------------------
COMBINED PER SHARE DATA
Basic earnings
Net income after merger-related and restructuring
charges $ 0.82 0.72
Net income before merger-related and restructuring
charges 0.84 0.72
Diluted earnings
Net income after merger-related and restructuring
charges 0.81 0.72
Net income before merger-related and restructuring
charges 0.83 0.72
Book value $ 16.31 14.41
- --------------------------------------------------------------------------------------------------------------------------------
COMBINED PERIOD-END BALANCE SHEET DATA
Securities available for sale $ 34,388 19,059
Investment securities 3,172 4,024
Loans, net of unearned income 133,092 135,342
Earning assets 192,925 171,945
Total assets 220,066 193,507
Noninterest-bearing deposits 30,530 28,934
Interest-bearing deposits 107,605 104,434
Long-term debt 12,010 10,761
Guaranteed preferred beneficial interests 1,741 1,740
Stockholders' equity $ 15,806 13,843
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) It is assumed that the CoreStates acquisition will be accounted for on a
pooling of interests accounting basis. Accordingly, an exchange ratio of
1.62 shares of the Corporation's common stock has been applied as
appropriate to the pro forma financial information presented herein. For
the three months ended March 31, 1998 and 1997, CoreStates had net income
applicable to common stockholders of $203 million and $198 million,
respectively. At March 31, 1998, CoreStates had total assets of $48 billion
and 201 million shares of common stock outstanding. Additional pro forma
financial information with respect to the CoreStates acquisition can be
found in First Union's Current Reports on Form 8-K filed with the
Securities and Exchange Commission (SEC) on November 18, 1997, November 28,
1997, and December 2, 1997, in First Union's registration statement on Form
S-4, filed with the SEC on January 9, 1998, and in First Union's 1997 Form
10-K. Reference is hereby made to such information, including the notes to
such information.
