<PAGE> 1
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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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10000
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0898180
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
FIRST UNION CORPORATION
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(Address of principal executive offices)
(Zip Code)
(704) 374-6565
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
980,539,003 shares of Common Stock, par value $3.33 1/3 per share, were
outstanding as of April 30, 2000.
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<PAGE> 2
First Union Corporation (the "Corporation" or "FUNC") may from time to time
make written or oral forward-looking statements", including statements contained
in the Corporation's filings with the Securities and Exchange Commission
(including this Quarterly Report on Form 10-Q and the Exhibits hereto and
thereto), in its reports to stockholders and in other communications by the
Corporation, which are made in good faith by the Corporation pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995.
These forward-looking statements include, among others, statements with
respect to the Corporation's beliefs, plans, objectives, goals, guidelines,
expectations, anticipations, estimates and intentions that are subject to
significant risks and uncertainties and are subject to change based on various
factors (many of which are beyond the Corporation's control). The words "may",
"could", "should", "would", "believe", "anticipate", "estimate", "expect",
"intend", "plan" and similar expressions are intended to identify
forward-looking statements. The following factors, among others, could cause the
Corporation's financial performance to differ materially from that expressed in
such forward-looking statements: the strength of the United States economy in
general and the strength of the local economies in which the Corporation
conducts operations; the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of Governors of
the Federal Reserve System; inflation, interest rate, market and monetary
fluctuations; the timely development of competitive new products and services of
the Corporation and the acceptance of these products and services by new and
existing customers; the willingness of customers to substitute competitors'
products and services for the Corporation's products and services and vice
versa; the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
technological changes; the effect of acquisitions and/or dispositions,
including, without limitation, restructuring and other charges relating thereto
and the failure to achieve the expected revenue growth and/or expense savings
from such acquisitions and/or dispositions; the growth and profitability of the
Corporation's noninterest or fee income being less than expected; unanticipated
regulatory or judicial proceedings; changes in consumer spending and saving
habits; and the success of the Corporation at managing the risks involved in the
foregoing.
The Corporation cautions that the foregoing list of important factors is
not exclusive. The Corporation does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Corporation.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following unaudited consolidated financial statements of the
Corporation 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.
<PAGE> 3
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Consolidated Balance Sheets of the Corporation and subsidiaries at
March 31, 2000, March 31, 1999, and December 31, 1999, respectively, set forth
on page T-25 of the Corporation's First Quarter Financial Supplement for the
three months ended March 31, 2000 (the "Financial Supplement"), are incorporated
herein by reference.
The Consolidated Statements of Income of the Corporation and subsidiaries
for the three months ended March 31, 2000 and 1999, set forth on page T-26 of
the Financial Supplement, are incorporated herein by reference.
The Consolidated Statements of Cash Flows of the Corporation and
subsidiaries for the three months ended March 31, 2000 and 1999, set forth on
page T-27 of the Financial Supplement, are incorporated herein by reference.
A copy of the Financial Supplement is being filed as Exhibit (19) to this
Report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 2 through 16 and T-1 through T-27 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and Qualitative Disclosures About Market Risk appears on pages
13 through 15 and T-18 through T-22 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.
<PAGE> 4
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In 1999, in connection with its stock repurchase program, the Corporation
sold 17 million shares of its common stock to an investment banking firm. In
connection therewith, the Corporation agreed to repurchase the 17 million shares
or otherwise settle the contract, at the Corporation's option. At March 31,
2000, the Corporation had not elected to repurchase those shares. The offer and
sale of the shares of common stock by the Corporation were exempt from
registration under the Securities Act of 1933, as amended, pursuant to Section
4(2) thereof because such offer and sale did not involve a public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders of the Corporation held on April 18,
2000, the following proposals were submitted to a vote of the holders of the
Corporation's common stock voting as indicated:
1. Approval of a proposal to elect the following individuals as directors of
the Corporation:
<TABLE>
<CAPTION>
FOR WITHHELD
Class II directors:
<S> <C> <C>
A. Dano Davis ................................... 784,681,927 36,455,772
Roddey Dowd, Sr. ................................ 781,420,987 39,716,713
William H. Goodwin, Jr. ......................... 781,927,296 39,210,404
Radford D. Lovett ............................... 781,676,083 39,461,618
Mackey J. McDonald .............................. 781,524,162 39,613,537
Lanty L. Smith .................................. 781,261,231 39,876,468
G. Kennedy Thompson ............................. 782,075,405 39,062,295
Class III director:
B. F. Dolan ..................................... 781,311,457 39,826,243
</TABLE>
2. Approval of a proposal to approve the performance goals under the
Corporation's Management Incentive Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
765,734,556 37,130,810 18,151,220
</TABLE>
3. Approval of a proposal to approve the performance goals under the
Corporation's Management Long-Term Cash Incentive Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
765,483,732 37,137,017 18,516,819
</TABLE>
4. Approval of a proposal to ratify the appointment of KPMG LLP as auditors
for the Corporation in 2000:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
810,854,994 5,551,669 4,727,956
</TABLE>
5. Disapproval of a stockholder proposal regarding the nomination of
directors:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
<S> <C> <C> <C> <C>
80,513,850 553,369,484 21,960,497 165,293,870
</TABLE>
<PAGE> 5
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(4) Instruments defining the rights of security holders, including
indentures.*
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges.
(19) The Corporation's First Quarter 2000 Financial Supplement.
(27) The Corporation's Financial Data Schedule.**
(99) Business segments for each of the eight quarters ended
December 31,1999.
* 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.
** Filing by Electronic Data Gathering, Analysis and Retrieval System only.
(b) Reports on Form 8-K.
During the quarter ended March 31, 2000, a Current Report on Form 8-K,
dated March 10, 2000, was filed with the Commission by the Corporation.
<PAGE> 6
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: May 12, 2000
By: /s/ JAMES H. HATCH
------------------
JAMES H. HATCH
SENIOR VICE PRESIDENT AND CORPORATE CONTROLLER
PRINCIPAL ACCOUNTING OFFICER)
<PAGE> 7
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
(4) Instruments defining the rights of security holders, including
indentures.*
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges.
(19) The Corporation's First Quarter 2000 Financial Supplement.
(27) The Corporation's Financial Data Schedule.**
(99) Business segments for each of the eight quarters ended
December 31, 1999.
* 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.
** Filing by Electronic Data Gathering, Analysis and Retrieval System only.
<PAGE> 1
EXHIBIT 12
<PAGE> 2
EXHIBIT (12)
FIRST UNION CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
THREE
MONTHS Years Ended December 31,
ENDED ----------------------------------------------------------
MAR. 31,
(In millions) 2000 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXCLUDING INTEREST
ON DEPOSITS
Pretax income from continuing
operations $ 1,234 4,831 3,965 3,793 3,534 3,409
Fixed charges, excluding capitalized
interest 1,185 3,751 3,504 2,526 2,224 1,821
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings (A) $ 2,419 8,582 7,469 6,319 5,758 5,230
===================================================================================================================================
Interest, excluding interest on deposits $ 1,152 3,645 3,395 2,420 2,120 1,716
One-third of rents 33 106 109 106 104 105
Capitalized interest -- -- -- -- 5 4
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed charges (B) $ 1,185 3,751 3,504 2,526 2,229 1,825
===================================================================================================================================
Consolidated ratios of earnings to
fixed charges, excluding interest
on deposits (A)/(B) 2.04 X 2.29 2.13 2.50 2.58 2.87
===================================================================================================================================
INCLUDING INTEREST
ON DEPOSITS
Pretax income from continuing
operations $ 1,234 4,831 3,965 3,793 3,534 3,409
Fixed charges, excluding capitalized
interest 2,380 7,805 7,820 6,674 6,255 5,837
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings (C) $ 3,614 12,636 11,785 10,467 9,789 9,246
===================================================================================================================================
Interest, including interest on deposits $ 2,347 7,699 7,711 6,568 6,151 5,732
One-third of rents 33 106 109 106 104 105
Capitalized interest -- -- -- -- 5 4
- -----------------------------------------------------------------------------------------------------------------------------------
Fixed charges (D) $ 2,380 7,805 7,820 6,674 6,260 5,841
===================================================================================================================================
Consolidated ratios of earnings to
fixed charges, including interest
on deposits (C)/(D) 1.52 X 1.62 1.51 1.57 1.56 1.58
===================================================================================================================================
</TABLE>
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EXHIBIT 19
<PAGE> 2
EXHIBIT (19)
MANAGEMENT'S ANALYSIS OF OPERATIONS
FIRST UNION
CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS
OF OPERATIONS
QUARTERLY FINANCIAL SUPPLEMENT
THREE MONTHS ENDED MARCH 31, 2000
FIRST QUARTER 2000
DIVIDEND GROWTH
Current dividend
annualized
(In dollars)
(A line chart appears here. See the table for plot points.)
<TABLE>
0.145 0.155 0.165 0.18 0.20 0.225 0.245 0.29 0.325 0.385 0.43 0.50 0.54 0.56 0.64 0.75 0.86 0.98 1.10 1.22 1.58 1.88 1.92
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 Current
</TABLE>
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FIRST UNION CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL SUPPLEMENT
THREE MONTHS ENDED MARCH 31, 2000
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Financial Highlights 1
Management's Analysis of Operations 2
Consolidated Summaries of Income, Per Share, Balance Sheet and Other Data T-1
Merger-Related and Restructuring Charges T-2
Business Segments T-3
Fee and Other Income - Capital Markets T-7
Selected Performance, Dividend Payout and Other Ratios T-8
Loans - On-Balance Sheet, and Managed and Servicing Portfolios T-9
Allowance for Loan Losses and Nonperforming Assets T-10
Intangible Assets T-11
Deposits T-12
Time Deposits in Amounts of $100,000 or More T-13
Long-Term Debt T-14
Changes in Stockholders' Equity T-15
Capital Ratios T-16
Unrealized Gains (Losses) in Certain Financial Instruments T-17
Securities Available for Sale T-18
Investment Securities T-19
Off-Balance Sheet Derivative Financial Instruments T-20
Off-Balance Sheet Derivatives - Expected Maturities T-21
Off-Balance Sheet Derivatives Activity T-22
Net Interest Income Summaries T-23
Consolidated Balance Sheets T-25
Consolidated Statements of Income T-26
Consolidated Statements of Cash Flows T-27
</TABLE>
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
----------------------------
(Dollars in millions, except per share data) 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL HIGHLIGHTS
Net income before merger-related and restructuring
charges (Operating earnings) $ 838 965
After tax merger-related and restructuring charges (2) 259
- ----------------------------------------------------------------------------------------------------------
Net income after merger-related and restructuring charges $ 840 706
- ----------------------------------------------------------------------------------------------------------
PER SHARE DATA
Diluted earnings
Net income before merger-related and restructuring charges $ 0.85 1.00
Net income after merger-related and restructuring charges 0.85 0.73
Basic earnings
Net income before merger-related and restructuring charges 0.86 1.00
Net income after merger-related and restructuring charges 0.86 0.73
Cash dividends 0.48 0.47
Book value 17.16 16.50
Period-end price $ 37.2500 53.4375
Dividend payout ratio (Based on operating earnings) 56.47 % 47.00
Average shares (In thousands)
Diluted 984,095 968,626
Basic 972,174 959,833
Actual shares (In thousands) 984,148 968,139
- ----------------------------------------------------------------------------------------------------------
PERFORMANCE HIGHLIGHTS
Before merger-related and restructuring charges
Return on average assets (a) 1.36 % 1.74
Return on average stockholders' equity (a) 20.31 24.32
Overhead efficiency ratio (b) 62.31 56.13
Net charge-offs as a percentage of average loans, net (a) (c) 0.57 0.51
Nonperforming assets to loans, net, and foreclosed properties (c) 0.93 0.73
Net interest margin (a) 3.69 % 3.74
- ----------------------------------------------------------------------------------------------------------
CASH EARNINGS (EXCLUDING GOODWILL AND OTHER
INTANGIBLE AMORTIZATION)
Before merger-related and restructuring charges
Net income $ 932 1,046
Diluted earnings per share $ 0.95 1.08
Return on average tangible assets (a) 1.54 % 1.93
Return on average tangible stockholders' equity (a) 34.03 38.26
Overhead efficiency ratio (b) 59.65 % 53.58
- ----------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Securities available for sale $ 50,421 39,417
Investment securities 1,668 2,006
Loans, net of unearned income 135,803 129,658
Total assets 253,648 222,700
Noninterest-bearing deposits 29,885 31,757
Interest-bearing deposits 110,005 102,467
Long-term debt 33,043 24,858
Stockholders' equity $ 16,884 15,976
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) The overhead efficiency ratio is equal to noninterest expense divided by
the sum of tax-equivalent net interest income and fee and other income.
(c) Prior period loans held for sale included in loans have been reclassified
to other assets to conform to the presentation in 2000.
1
<PAGE> 5
The following discussion and other portions of this Financial Supplement
contain various forward-looking statements. Please refer to our 1999 Annual
Report and 2000 First Quarter Report on Form 10-Q for a discussion of various
factors that could cause our actual results to differ materially from those
expressed in such forward-looking statements.
EARNINGS HIGHLIGHTS
First Union's operating earnings in the first quarter of 2000 were $838
million, or 85 cents per share. This compares with operating earnings of $965
million in the first quarter of 1999, or $1.00, which included nonrecurring
gains of 12 cents per share related to the sale of First Union's interest in
Electronic Payment Services, Inc. Operating earnings exclude merger-related and
restructuring charges of $259 million after tax, or 27 cents, in the first
quarter of 1999. Merger-related and restructuring charges in the first quarter
of 2000 had no impact on earnings per share. After merger-related and
restructuring charges, net income in the first quarter of 2000 was $840 million,
or 85 cents per share, compared with $706 million, or 73 cents, in the first
quarter of 1999.
Operating earnings in the first quarter of 2000 represent a return on
average stockholders' equity of 20.31 percent and a return on average assets of
1.36 percent.
The first quarter of 2000 included the full impact of the purchase
accounting acquisition of EVEREN Capital Corporation, a full-service brokerage
and asset management firm acquired on October 1, 1999.
Fee and other income, excluding portfolio securities transactions, was $1.9
billion in the first quarter of 2000 and in the first quarter of 1999. Fee
income generated by First Union Securities (encompassing Capital Markets and
Capital Management) increased 38 percent to $1.4 billion in the first quarter of
2000 compared with $983 million in the first quarter of 1999. These results
include approximately $233 million in brokerage fee income from EVEREN.
Noninterest expense, excluding merger-related and restructuring charges,
amounted to $2.4 billion in the first quarter of 2000 compared with $2.1 billion
in the first quarter of 1999. Expenses in the first quarter of 2000 reflect the
purchase accounting acquisition of EVEREN as well as increased incentive
compensation tied to revenue growth.
Annualized net charge-offs in the first quarter of 2000 were 0.57 percent
of average net loans, compared with 0.51 percent in the year-ago period.
Nonperforming assets as a percentage of net loans and foreclosed properties were
0.93 percent in the first quarter of 2000 compared with 0.73 percent in the
first quarter of 1999.
OUTLOOK In 2000 and beyond, we will continue to focus on maximizing
performance by leveraging the business model we have spent the past several
years building. This model capitalizes on the best of our traditional banking
operations coupled with investment banking, asset management and brokerage
products and services. Our parallel objectives in building this new business
model were first, to satisfy our customers' and clients' needs for a wide
selection of financial products and services and convenient access to broad and
diversified distribution channels, and second, to create a revenue mix that
provides more diversified and balanced earnings. Our investments in high-growth
businesses have resulted in a more balanced proportion of revenue from
fee-producing businesses. Forty-eight percent of our revenues in the first
quarter of 2000 and 52 percent in the first quarter of 1999 came from fee and
other income, excluding portfolio securities transactions.
Earnings growth continues to be driven by the securities side of our
business, First Union Securities, which encompasses our Capital Markets and
Capital Management businesses. In addition, we have transformed a traditional
banking business into one with a multi-channel distribution strategy, an
innovative product array and a focused sales and service culture. We have
invested in technologies that enable us to serve our customers more efficiently
and effectively through multiple channels - financial centers, brokerage
offices, automated teller machines, First Union Direct (our centralized sales
and
2
<PAGE> 6
service call centers) and the Internet. On the banking side, we are seeing
encouraging trends in the performance measurements we use for evaluating service
quality, new product sales volumes and the economic contribution of new product
sales.
Our Internet strategy consists of three dimensions: web enabling all
products and services; making selective investments in e-commerce companies to
access new technology and customers and achieve attractive returns on capital;
and web enabling our internal infrastructure. At March 31, 2000, we had 1.6
million online retail customers, 33,200 online commercial customers and 35,500
brokerage clients.
Our business model has created synergies between the General Bank's deposit
and lending products and the nontraditional financial products and services such
as the mutual funds and annuities offered by First Union Securities and the
mortgage loans, home equity loans and other personal finance products offered by
our Specialty Finance businesses.
While this diversified business model has added more exposure to market
volatility in our earnings stream, it also creates the potential for more rapid
growth. This year, we will continue to hone our mix of businesses and operating
strategies to ensure that we are in the optimal position to maximize returns to
stockholders. While the transformation to the new business model may create some
short-term risk to earnings, we believe that the failure to replace the
traditional bank asset-gathering model would pose greater long-term risks.
We continually evaluate our business operations and organizational
structures. Therefore, we routinely explore acquisition opportunities and
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 can be expected. When consistent with our overall business
strategy, we also consider the potential disposition of certain of our assets,
branches, subsidiaries or lines of business.
The Accounting and Regulatory Matters section provides information about
accounting and regulatory matters that have recently been adopted or proposed,
as well as information on recent legislative developments and the potential
impact of permissible business activities for us.
Corporate Results of Operations
NET INTEREST MARGIN Tax-equivalent net interest income was $2.0 billion in
the first quarter of 2000 compared with $1.8 billion in the first quarter of
1999. 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 3.69 percent in the first quarter of 2000 compared with 3.74
percent in the first quarter of 1999. The average rate on earning assets
increased 60 basis points to 8.06 percent in the first quarter of 2000 from 7.46
percent in the first quarter of 1999. The average rate paid on liabilities
increased 61 basis points to 4.92 percent from 4.31 percent during the same
periods. A higher amount of lower yielding assets and greater use of
market-based wholesale funding negatively affected the net interest margin.
Recent actions on interest rates by the Federal Reserve may create downward
pressure on net interest margins of financial services companies. See the Market
Risk Management section for additional information on our methodology for
interest rate risk management. It should be noted that we focus on net income
and economic contribution when evaluating corporate strategies and we place less
importance on the net interest margin impact of these decisions.
FEE AND OTHER INCOME The presentation of fee and other income in the
consolidated statements of income has been changed to better reflect the
functional sources of revenue. Over the past few years, as we developed segment
reporting, our consolidated statements of income began incorporating aspects of
our segment reporting, resulting in a combination of segment and functional
reporting.
3
<PAGE> 7
We believe this new functional presentation, combined with the business
segment disclosures, provides a clearer understanding of the sources of our fee
and other income. In the new presentation, service charges and fees include
service charges on deposit accounts, fees for other banking services and
mortgage banking fees. Commissions include brokerage and insurance commissions.
Fiduciary and asset management fees includes personal trust, personal financial
consulting, corporate trust, institutional trust, mutual funds, CAP Account and
other fee income. Advisory, underwriting and other capital markets fees include
the results from risk management; fixed income sales and trading and equity
capital markets; loan syndications; and other investment banking activities.
Principal investing includes the results of investments in equity and mezzanine
securities. Other income includes the results from portfolio security
transactions, gains or losses on asset sales and securitizations, and other fee
income.
Fee and other income, excluding portfolio securities transactions,was $1.9
billion in the first quarter of 2000 and in the first quarter of 1999.
Commissions increased in the first quarter of 2000 to $468 million from $204
million in the first quarter of 1999, reflecting strong results in retail
brokerage, including the addition of EVEREN. Additionally, fiduciary and asset
management fees also increased to $366 million in the first quarter of 2000 from
$282 million in the first quarter of 1999. Principal investing income amounted
to $199 million, of which $143 million were cash gains, in the first quarter of
2000 compared with $143 million in fee income, of which $105 million were cash
gains, in the first quarter of 1999. These activities are discussed further in
the Business Segments section.
Other income, which includes the results from portfolio securities
transactions and asset sales and securitizations, declined to $114 million in
the first quarter of 2000 from $654 million in the first quarter of 1999. The
first quarter of 2000 reflects the impact of a $47 million charge to provide
additional reserves against lease residuals on our discontinued auto leasing
business. The first quarter of 1999 included a gain of $182 million on the sale
of our investment in Electronic Payment Services, Inc.
Portfolio securities transactions resulted in a net loss of $16 million in
the first quarter of 2000 which included an $17 million impairment loss on our
student loan residual interests in securitizatons reflecting the impact of
accelerated prepayments. In the first quarter of 1999, portfolio securities
transactions amounted to a net gain of $25 million, which included a $19 million
impairment loss on residual interests in certain securitizations of home
improvement loans reflecting the impact of revised loss assumptions.
Asset sales and securitization gains declined to $70 million in the first
quarter of 2000 compared with $244 million in the first quarter of 1999. First
quarter 1999 results reflect the repositioning of our mortgage loan portfolio,
which resulted in gains of $126 million.
NONINTEREST EXPENSE Noninterest expense was $2.4 billion in the first quarter of
2000 and $2.5 billion in the first quarter of 1999. Noninterest expense in the
first quarter of 2000 included the full impact of the acquisition of EVEREN.
First quarter 2000 expenses also included a net $5 million reversal of
restructuring charges compared with merger-related and restructuring charges of
$398 million in the first quarter of 1999. In the first quarter of 1999, this
included net merger-related charges of $51 million related to the April 1998
CoreStates acquisition and a $347 million restructuring charge related to the
restructuring plan we announced in March 1999.
In addition, expenses in the first quarter of 2000 reflected higher
personnel costs, primarily incentives associated with revenue growth in First
Union Securities; continued spending related to increased training and staffing
in our retail financial centers; and investments in our Internet initiatives.
The operating overhead efficiency ratio before merger-related and restructuring
charges was 62.31 percent in the first quarter of 2000 and 56.13 percent in the
first quarter of 1999. The overhead efficiency ratio is likely to remain higher
than in a traditional banking business as we focus on building our securities
business, which is an industry that inherently has higher overhead efficiency
ratios.
The increase in amortization expense in the first quarter of 2000 compared
with the first quarter of 1999 was primarily attributable to goodwill recorded
in connection with the acquisition of EVEREN. We
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had $5.6 billion in goodwill and other intangible assets at March 31, 2000, and
at December 31, 1999. Goodwill was unchanged from year-end 1999 because the
impact of amortization in the first quarter of 2000 was offset by additional
goodwill recorded in connection with the EVEREN acquisition as a result of
refining certain fair value adjustments. Final EVEREN adjustments will be
recorded in the second quarter of 2000 and are expected to be insignificant.
Noninterest expense included $6 million in the first quarter of 2000
related to the Year 2000 project compared with $10 million in the first quarter
of 1999. As of March 31, 2000, $67 million has been incurred since project
inception. We successfully completed the Year 2000 changeover with no
significant customer service issues. We will continue to monitor all business
processes throughout 2000 to address any issues that might arise and to ensure
that all processes continue to function properly. We will also continue to
monitor our customers, vendors and other third parties for Year 2000 related
issues.
MERGER-RELATED AND RESTRUCTURING CHARGES We have incurred a total of $29 million
in merger-related charges in connection with the EVEREN acquisition, of which $9
million was incurred in the first quarter of 2000. We estimate we will incur an
additional $50 million during the rest of 2000 as systems conversions and merger
integration are completed.
In March 1999, we announced a restructuring plan that included
reengineering numerous processes and functions, closing or consolidating
branches, service centers and corporate office space, as well as exiting the
indirect auto leasing business. In connection with this plan, we recorded a $347
million restructuring charge principally composed of costs associated with
employee termination benefits, contract cancellations, vacant space and asset
write-downs. Through March 31, 2000, $283 million had been charged against the
accrual. Based on revised estimates, $16 million of the initial accrual,
primarily relating to asset write-downs, has been reversed. At March 31, 2000,
$48 million of the accrual remained, representing principally amounts still to
be paid in severance benefits and contract cancellations.
In 1998, in connection with the acquisition of CoreStates, we recorded a
$753 million restructuring charge representing payments of employee termination
benefits, costs to close duplicate or excess facilities, write-offs of computer
hardware and software no longer in use, and contract cancellation costs. From
the date of the acquisition through March 31, 2000, $661 million had been
charged against the initial accrual. Substantially all of the remaining balance
of the accrual of $38 million at March 31, 2000, represents employee termination
benefits to be paid over future periods, at the election of the employees. In
November 1997, we recorded a $252 million restructuring charge related to the
acquisition of Signet Banking Corporation, of which $34 million remained in the
restructuring accrual at March 31, 2000. Substantially all of the remaining
accrual represents amounts due to key executives of Signet who were terminated
as a result of the acquisition and whose employment contracts called for
termination benefits to be paid periodically over a specified period.
BUSINESS SEGMENTS
First Union's operations are divided into five business segments
encompassing more than 60 distinct product and service units. These segments
include Capital Markets, Capital Management, Consumer, Commercial and
Treasury/Nonbank. Additional information can be found in Table 3. In the first
quarter of 2000, we realigned the lines of business within certain segments to
better reflect the way that management of these businesses has evolved. Prior
period segment data has been restated to reflect these changes.
CAPITAL MARKETS Our Capital Markets products and services are designed to
provide a full range of capital raising, market making and financial advisory
services to meet the needs of corporate and institutional clients. We provide
full execution including corporate finance, equity research, merger and
acquisition advisory services, and debt and equity financing in 18 industry
specializations.
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Our relationship coverage begins in our East Coast banking markets, and it
extends nationwide through industry expertise in automotive, banking, building
and forest products, business and consumer services, defense, aerospace and
technical services, diversified manufacturing, energy, furnishings and textiles,
healthcare, insurance, media, real estate, retail and consumer products,
specialty finance, technology, telecommunications, utilities, and private equity
groups. In addition, our International unit continues to develop and utilize
strong correspondent banking relationships overseas.
Capital Markets has three primary lines of business: (1) Investment
Banking, which includes merger and acquisition advisory services; principal
investing; loan syndication; investment grade debt; high yield debt; equity
sales, trading, research and underwriting; fixed income sales and trading;
municipal sales, trading and underwriting; fixed income and equity derivatives;
foreign exchange; asset securitization; and commercial real estate investment
banking activities; (2) Corporate Banking, which includes lending activities for
corporate clients with annual sales greater than $100 million, asset-based
lending, operating, finance and leveraged leasing, and railcar leasing; and (3)
International, whose mission is to meet the trade finance and foreign exchange
needs of our domestic customers and correspondent financial institutions around
the world, and to provide commercial banking products to financial institutions
and corporate clients overseas.
In the first quarter of 2000 compared with the first quarter of 1999,
Capital Markets net income was $290 million and $293 million, respectively; net
interest income increased 11 percent to $423 million from $380 million,
primarily due to increased loan outstandings; and fee and other income was $485
million and $483 million, respectively. The overall nominal growth in fee and
other income for Capital Markets included a $19 million increase in Investment
Banking fee income, which was driven by strong principal investing gains and
significant increases in revenues in equity capital markets, asset
securitization and risk management. These strong performances were somewhat
offset by declines in high yield, commercial real estate and fixed income. In
the first quarter of 2000, principal investing contributed $199 million to fee
income, of which $143 million were cash gains, compared with $143 million in fee
income, of which $105 million were cash gains, in the first quarter of 1999.
Principal investing gains were exceptionally strong for the full year 1999, and
we do not anticipate the same level of gains in 2000. In the first quarter of
2000, our Principal Investing Group committed additional funds of $500 million
and ended the quarter with total committed funds of $3.3 billion.
First quarter equity capital markets revenues of $31 million reflected a
$17 million increase from the first quarter of 1999, primarily due to continued
growth in our equity platform. Strong performance in equity capital markets
resulted from increased syndication revenues and institutional sales and trading
activities.
Fee income in asset securitization amounted to $22 million compared with
$16 million in the first quarter of 1999, primarily reflecting increased
structuring and underwriting fees from our Specialty Finance customer base.
Growth in these business units was somewhat offset by decreases in high
yield, commercial real estate and fixed income. In high yield, declines
reflected a comparatively slow high yield origination market for much of the
first quarter of 2000. Commercial real estate had unusually strong results in
the first quarter of 1999 related to recoveries of market losses in commercial
mortgage-backed securitization activities in the third quarter of 1998. The
fixed income results in the first quarter of 1999 included gains from a
municipal finance product activity that has since been discontinued.
The revenues from Capital Markets businesses are typically more volatile
than revenues from more traditional banking businesses and can vary
significantly with market conditions.
Net charge-offs increased to $87 million in the first quarter of 2000
compared with $55 million in the first quarter of 1999. The increase primarily
was related to continued weakness in certain areas of the healthcare industry
and losses in an acquired portfolio in our Asset Securitization Group. Further
information on net charge-offs is in the Asset Quality section.
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Noninterest expense was $395 million in the first quarter of 2000 compared
with $375 million in the first quarter of 1999. The increase in expenses was
largely due to higher personnel costs, including incentives associated with
increased headcount. The increase also includes a modest impact from EVEREN.
CAPITAL MANAGEMENT Through the Capital Management Group (CMG), we have created a
growing and diversified trust, investment management and brokerage organization,
with products and services that provide the link between traditional banking and
investing for retail and institutional customers. Our Capital Management Group
is organized into four major lines of business: Retail Brokerage and Insurance
Services, Wealth and Trust Services, Mutual Funds and CAP Account. CMG offers a
full line of investment products and services distributed through multiple
channels, including our national retail brokerage branch network, full-service
retail financial centers in our East Coast marketplace and our online brokerage.
Assets under management increased 3 percent from year-end 1999 to $175 billion
at March 31, 2000, including $83 billion in Evergreen mutual funds and $92
billion in trust assets.
In the first quarter of 2000 compared with the first quarter of 1999,
Capital Management net income was $185 million and $121 million, respectively;
and net interest income was $161 million and $120 million, respectively. Fee and
other income increased 74 percent to $872 million in the first quarter of 2000
from $500 million in the first quarter of 1999. Growth in fee and other income
was strong across multiple business lines and all delivery channels,
particularly in retail brokerage and insurance, mutual funds and CAP Accounts.
EVEREN contributed approximately $233 million of the increase in fee and other
income.
Noninterest expense in the first quarter of 2000 was $731 million compared
with $425 million in the first quarter of 1999. This increase reflected higher
personnel costs, primarily incentives associated with revenue growth, as well as
the impact of EVEREN.
Fee and other income from Retail Brokerage and Insurance Services was $546
million in the first quarter of 2000 compared with $222 million in the first
quarter of 1999. Retail brokerage results in the first quarter of 2000 were
strong, and in addition, included the impact of EVEREN mentioned above. The
market value of client assets increased to $175 billion at March 31, 2000. Bank
annuity sales volume was $477 million in the first quarter of 2000, an increase
of 20 percent compared with $398 million in the first quarter of 1999.
Our Wealth and Trust Services businesses encompass personal trust and
private client banking, corporate trust and benefit services, and institutional
trust services. Trust Services fee and other income was $183 million in the
first quarter of 2000 and $167 million in the first quarter of 1999. Wealth and
Trust Services had $4.1 billion in average net loans in the first quarter of
2000 compared with $3.7 billion in the first quarter of 1999, and average
deposits of $5.9 billion in the first quarter of 2000 compared with $5.8 billion
in the first quarter of 1999.
Assets in the First Union-advised Evergreen mutual funds at March 31, 2000,
were $83 billion compared with $80 billion at December 31, 1999. Mutual fund
fees increased 21 percent to $130 million in the first quarter of 2000 compared
with the first quarter of 1999.
The CAP Account is an asset management product that enables our customers
to manage their securities trading and banking activities in a single,
consolidated account. Income related to the CAP Account is therefore reflected
in several of Capital Management's lines of business, including Retail Brokerage
and Insurance Services and Mutual Funds. CAP Account amounts in Table 3 reflect
CAP Account fees and the funding benefit attributed to the on-balance sheet
deposits. CAP Account assets increased to $60 billion at March 31, 2000,
compared with $56 billion at year-end 1999, and the number of CAP Accounts
increased to 646,000 compared with 603,000 at year-end 1999. We are seeing
increased investment activity through this product. As an example, the number of
brokerage trades increased 74 percent in the first quarter of 2000 compared with
the first quarter of 1999.
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CONSUMER Our retail delivery strategy is premised on building lifetime customer
relationships by providing a full range of superior products, flexible delivery
and quality customer service across all channels. Our multiple channels,
including full-service retail financial centers, direct telephone bank, call
centers, ATMs and the Internet, are fully integrated, enabling customers to have
a single view of their accounts. The Consumer segment includes First Union
Mortgage (FUMC), our mortgage origination and servicing business; Home Equity,
encompassing First Union Home Equity Bank (FUHEB) and The Money Store; Credit
Cards, which includes the $1.8 billion owned credit card portfolio and the
income from the $3.9 billion securitized portfolio; and Retail Branch Products,
which includes installment loans and the various consumer deposit products with
the exception of the CAP Account, which is included in Capital Management.
In the first quarter of 2000 compared with the first quarter of 1999,
Consumer net income was $139 million and $190 million, respectively. The
decrease in net income was primarily the result of a decline in fee and other
income to $329 million from $463 million in the first quarter of 1999 partially
offset by a modest increase in net interest income and a decrease in noninterest
expense.
FUMC's results for the first quarter of 2000 were break even compared with
net income of $39 million in the first quarter of 1999. FUMC net interest income
declined as a result of lower loan production volume in a higher interest rate
environment. Fee and other income declined to $46 million in the first quarter
of 2000 from $116 million in the same quarter last year. This also reflects the
decrease in loan production volume and the related decline in secondary
marketing income. In addition, FUMC results in the first quarter of 1999
included a higher level of gains on securitizations. Noninterest expense in FUMC
decreased by $22 million to $56 million in the first quarter of 2000, reflecting
lower personnel, incentive and servicing costs related to production levels.
In the home equity businesses, there was a net loss of $18 million in the
first quarter of 2000 compared with net income of $21 million in the first
quarter of 1999. Net interest income increased by 15 percent to $134 million in
the first quarter of 2000, reflecting our decision in the first quarter of 1999
to retain home equity loans as on-balance sheet loans. This was the primary
driver in the $2.4 billion increase in average loan outstandings. This increase
in outstandings also resulted in a $13 million increase in net charge-offs, to
$23 million in the first quarter of 2000. Fee and other income in the home
equity businesses declined to $15 million in the first quarter of 2000 compared
with $86 million in the first quarter of 1999 primarily attributable to a
decrease in securitization gains in connection with the aforementioned change in
strategy for home equity loans, an impairment loss on student loan retained
interests and lower levels of securitizations of non-home equity products.
The first quarter 2000 results in Credit Card showed a marked improvement
over a year ago principally from a decrease in net charge-offs. Charge-offs
declined because of a decrease in outstandings year over year. Receivables
amounting to $1.1 billion were securitized in the second and third quarters of
1999.
Retail Branch Products net income increased by 13 percent to $141 million
in the first quarter of 2000, driven primarily by a $31 million increase in net
interest income to $632 million in the first quarter of 2000 offset by a modest
increase in noninterest expense. Average loan growth excluding securitizations
was $1.8 billion in the first quarter of 2000 compared with the first quarter of
1999. However, average loans year over year declined by $5.5 billion as a result
of the securitization and transfer to the securities available for sale
portfolio of prime equity lines of credit with a balance of $6.7 billion at the
date of transfer in June 1999. Table 6 provides information related to our total
managed portfolio of consumer loans.
COMMERCIAL Our wholesale delivery strategy is to provide a comprehensive array
of financial solutions, including traditional commercial lending and cash
management products, primarily focused on small-business customers (annual sales
up to $10 million) and commercial customers (annual sales of $10
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million to $100 million). In the first quarter of 2000, corporate customer
relationships (annual sales of $100 million to $2 billion) were moved to the
Capital Markets segment.
We have an integrated relationship approach that leverages the strong
relationships in our Commercial business with the capabilities of our Capital
Markets business to provide complex financing solutions, risk management
products and international services, and with the capabilities of our Capital
Management business to provide property and casualty insurance, pension plans
and 401(k) plans. The Commercial segment is divided into four lines of business:
Small Business Banking, which represents only the lending done through our Small
Business Banking Division (SBBD); Lending, which is all other commercial lending
within our state delivery network and loans to small businesses originated
within our state delivery network rather than through SBBD; Real Estate Banking,
which is lending by our specialized real estate bankers; and Cash Management and
Deposit Services. Small Business Administration (SBA) lending, which is
primarily generated through The Money Store, is included in the Consumer
segment. Our combined portfolio of $9.4 billion in small business loans at March
31, 2000, includes loans originated through the SBBD, The Money Store SBA loan
program and other origination channels.
In the first quarter of 2000 and in the first quarter of 1999, Commercial
net income was $126 million and $123 million, respectively; net interest income
was $339 million and $344 million, respectively; and fee and other income was
$144 million and $132 million respectively. Growth in fee and other income,
primarily generated by cash management revenue growth, was offset by a decline
in net interest income related to a lower commercial deposits. Fees related to
new Cash Management product sales increased 15 percent to $21 million in the
first quarter of 2000 compared with the first quarter of 1999. Noninterest
expense was $267 million in the first quarter of 2000 compared with $271 million
in the first quarter of 1999.
Average deposits were $22 billion in the first quarter of 2000 compared
with $24 billion in the fourth quarter of 1999. The decline in deposits
reflected the impact of maturing interest-bearing accounts and movement of
customers into off-balance sheet products.
Average commercial loans increased by $339 million to $26 billion in the
first quarter of 2000 compared with the fourth quarter of 1999. The Real Estate
Banking Division led average loan growth.
TREASURY/NONBANK SEGMENT The Treasury/ Nonbank segment includes management of
our portfolio of first mortgage loans and our securities portfolios, overall
funding requirements and asset and liability management functions. The
Treasury/Nonbank segment also contains the goodwill asset and the associated
amortization expense and funding cost; certain nonrecurring revenue items
discussed in the Fee and Other Income section; certain expenses that are not
allocated to the business segments; corporate charges; and the results of our
discontinued indirect auto leasing business. The Liquidity and Funding Sources
and Market Risk Management sections provide information about our funding
sources, asset and liability management functions and securities portfolios.
LOANS AND ASSET QUALITY
LOANS Net loans were $136 billion at March 31, 2000, and $133 billion at
December 31, 1999. Managed loans increased to $173 billion at March 31, 2000,
from $157 billion at March 31, 1999. Commercial loans represented 59 percent and
consumer loans 41 percent of the loan portfolio at March 31, 2000. The increase
in net loans and managed loans in the first quarter of 2000 was led by
broad-based commercial loan growth. Consumer loan growth was modest despite the
impact of discontinuing our indirect auto leasing business. Average net loans
were $131 billion in the first quarter of 2000 and in the fourth quarter of
1999. The average rate earned on loans was 8.73 percent in the first quarter of
2000 compared with 8.49 percent in the fourth quarter of 1999.
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At March 31, 2000, unused loan commitments related to commercial and
consumer loans were $95 billion and $43 billion, respectively. Commercial and
standby letters of credit were $12 billion and loan participations sold to other
lenders amounted to $834 million at March 31, 2000.
NONPERFORMING ASSETS At March 31, 2000, nonperforming assets were $1.3 billion,
or 0.93 percent of net loans and foreclosed properties, compared with $1.1
billion, or 0.80 percent, at December 31, 1999. Of the increase in nonperforming
assets, $185 million was in the commercial portfolio and was primarily
associated with continued weakness in certain areas of the healthcare industry
due to changes in federal reimbursement policies. Healthcare-related
nonperforming assets amounted to $139 million of the increase. The increase in
installment loan nonperforming assets reflects our decision to hold The Money
Store subprime home equity loans in the loan portfolio rather than securitize
and sell them. The Money Store nonperforming assets were $155 million at March
31, 2000, compared with $138 million at December 31, 1999. We expect this trend
to continue in the near term, which will also affect future net charge-offs.
Over the same period, The Money Store loans increased by $715 million to $6.3
billion at March 31, 2000.
Nonperforming loans reduce interest income because the contribution from
these loans is eliminated or sharply reduced. In the first quarter of 2000, $29
million in gross interest income would have been recorded if all nonaccrual and
restructured loans had been performing in accordance with their original terms
and if they had been outstanding throughout the entire period (or since
origination if held for part of the period). The amount of interest income
recorded on these assets in the first quarter of 2000 was $3 million.
PAST DUE LOANS Accruing loans 90 days past due were $134 million at March 31,
2000, compared with $144 million at December 31, 1999. Of these past due loans
at March 31, 2000, $17 million were commercial loans or commercial real estate
loans and $116 million were consumer loans, of which $2 million related to The
Money Store.
NET CHARGE-OFFS Net charge-offs amounted to $189 million in the first quarter of
2000 and $164 million in the first quarter of 1999. Annualized net charge-offs
were 0.57 percent of average net loans in the first quarter of 2000 compared
with 0.51 percent in the first quarter of 1999. Fifty-one percent of the
increase in net charge-offs was in the commercial portfolio, primarily related
to weakness in the healthcare industry. Additionally, 16 percent of the increase
related to The Money Store and reflected the decision following the first
quarter of 1999 to hold rather than securitize and sell subprime home equity
loans.
PROVISION AND ALLOWANCE FOR LOAN LOSSES The loan loss provision was $192 million
in the first quarter of 2000 compared with $164 million in the first quarter of
1999. The allowance for loan losses was $1.8 billion at March 31, 2000, and at
December 31, 1999. The allowance as a percentage of loans was 1.30 percent at
March 31, 2000, and 1.32 percent at year-end 1999. We believe the allowance for
loan losses is adequate to cover probable credit losses inherent in the loan
portfolio.
Our methodology for determining the allowance for loan losses establishes
both an allocated and an unallocated component. The allocated portion of the
allowance represents the results of analyses of individual commercial loans and
pools of loans within the portfolio. The allocated portion of the allowance for
commercial loans is based principally on current loan grades, historical loan
loss rates adjusted to reflect current conditions, as well as analyses of other
factors that may have affected the collectibility of loans in the portfolio. We
analyze all commercial loans with a principal balance in excess of $1 million
that are being monitored as credit problems to determine whether such loans are
impaired, with impairment measured by reference to the borrowers' collateral
values and cash flows. The allocated
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portion of the allowance for consumer loans is based principally on loan payment
status and historical loss rates adjusted to reflect current conditions. The
unallocated portion of our allowance for loan losses represents the results of
analyses that measure probable losses inherent in our portfolio that are not
adequately captured in the allocated allowance analyses. These analyses include
consideration of unidentified losses inherent in the portfolio resulting from
changing underwriting criteria, including acquired loan portfolios, changes in
the types and mix of loans originated, industry concentrations and evaluations,
allowance levels relative to selected overall credit criteria and other economic
indicators used to estimate probable incurred losses.
Impaired loans, which are included in nonaccrual loans, amounted to $789
million at March 31, 2000, compared with $603 million at December 31, 1999.
Included in the allowance for loan losses at March 31, 2000, was $184 million
related to $651 million of impaired loans. The remaining impaired loans were
recorded at or below fair value. In the first quarter of 2000, the average
recorded investment in impaired loans was $656 million, and $6 million of
interest income was recognized on impaired loans. This income was recognized
using the cash-basis method of accounting.
LIQUIDITY AND FUNDING SOURCES
CORE DEPOSITS Core deposits were $120 billion at March 31, 2000, compared with
$122 billion at December 31, 1999. The $2 billion decline since year-end 1999
primarily reflects the movement of noninterest-bearing and time deposits into
alternative investment products. In response to growing customer demand for
investment products as alternatives to deposit products, we offer mutual funds,
annuities and other investment products in addition to deposits. Although this
reduces our deposit base, it also enables us to retain valuable customer
relationships that might otherwise be lost to other financial services
companies.
The portion of core deposits in higher-rate, other consumer time deposits
was 29 percent at March 31, 2000, and 28 percent at December 31, 1999. 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. They are also less expensive to process.
Average core deposit balances were $118 billion in the first quarter of
2000 and $119 billion in the fourth quarter of 1999.
In the first quarter of 2000 and in the fourth quarter of 1999, average
noninterest-bearing deposits were 24 percent and 25 percent, respectively, of
average core deposits. Deposits can be affected by numerous factors, including
branch closings and consolidations, seasonal factors and the rates being offered
compared to other investment opportunities. The Net Interest Income Summaries
table provides additional information about average core deposits.
PURCHASED FUNDS Average purchased funds, which include wholesale borrowings with
maturities of 12 months or less, were $70 billion in the first quarter of 2000
compared with $65 billion in the fourth quarter of 1999. The increase from the
fourth quarter of 1999 represents growth in short-term funding reflecting growth
in average earning assets of $4 billion and growth in average other assets of $1
billion. Purchased funds at March 31, 2000, and December 31, 1999, were $69
billion.
LONG-TERM DEBT Long-term debt, which includes any wholesale borrowings with an
original maturity in excess of 12 months, amounted to $33 billion at March 31,
2000, and $32 billion at year-end 1999.
Long-term debt included $2.0 billion of trust capital securities at March
31, 2000, and at December 31, 1999. Subsidiary trusts issued these capital
securities and used the proceeds to purchase junior subordinated debentures from
the corporation. These capital securities are considered tier 1 capital for
regulatory purposes.
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In the first quarter of 2000, the parent company issued $1.4 billion of
notes with varying rates and maturities. On May 10, 2000, the parent company
issued an additional $685 million of floating rate notes with varying terms.
Under a shelf registration statement filed with the Securities and Exchange
Commission, we have $315 million of senior or subordinated debt securities,
common stock or preferred stock available for issuance. The sale of any
additional debt or equity securities will depend on future market conditions,
funding needs and other factors.
Our principal banking subsidiary, First Union National Bank, has available
a global note program for the issuance of up to $20 billion of senior and
subordinated notes. Under the program, $16 billion of long-term debt has been
issued and was outstanding at March 31, 2000. In June 1999, First Union National
Bank established an additional global note program for the issuance of up to $25
billion of senior and subordinated notes. At March 31, 2000, $1.6 billion of
long-term debt has been issued and is outstanding under this program. The sale
of any additional notes will depend on future market conditions, funding needs
and other factors.
In 2000, long-term debt of $11 billion will mature. Funds for the payment
of long-term debt will come from operations and refinancings.
CREDIT LINES We have $350 million in committed back-up lines of credit, $175
million of which expires in June 2000 and the remaining $175 million of which
expires in July 2002. These credit facilities contain 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 has not used these lines of credit.
STOCKHOLDERS' EQUITY Stockholders' equity was $17 billion at March 31, 2000, and
at December 31, 1999. Common shares outstanding amounted to 984 million at March
31, 2000, compared with 988 million at December 31, 1999. Seven million shares
at a cost of $221 million were repurchased in the first quarter of 2000, all of
which was pursuant to a Board authorization to repurchase a number of shares
equal to the number issued in the EVEREN acquisition. Of the approximately 31
million shares expected to be repurchased in relation to this acquisition, a
total of 20 million shares had been repurchased as of March 31, 2000. Based on
the Board authorizations for share repurchases in November 1998 and May 1999,
each for 50 million shares, at March 31, 2000, we had authority to repurchase up
to 51 million shares of our common stock, which is incremental to share
repurchases related to the EVEREN acquisition.
In early 1999, the Board authorized the use of forward equity sales
transactions (equity forwards) in connection with our buyback programs. The use
of equity forwards is intended to provide us with the ability to purchase shares
under the buyback programs in the open market and then issue shares in private
transactions to a counterparty in the amounts necessary to maintain targeted
capital ratios. Under the terms of the equity forwards, we issued shares of
common stock to an investment banking firm at a specified price that
approximated market value. Simultaneously, we entered into a forward contract
with the same counterparty to repurchase the shares at the same price plus a
premium (the forward price). The equity forwards mature at various times in
2000. The equity forwards can be extended by mutual consent of the
counterparties. At March 31, 2000, we had equity forwards involving 17 million
shares at a cost of $800 million. In addition to the equity forwards, we also
had forward purchase contracts, involving 13 million shares.
We paid $478 million in dividends to common stockholders in the first
quarter of 2000 compared with $450 million in the first quarter of 1999. This
represented a dividend payout ratio on operating earnings of 56.47 percent in
the first quarter of 2000.
At March 31, 2000, stockholders' equity was reduced by $974 million in
accumulated other comprehensive income, net, substantially all of which was
related to net unrealized losses on debt and equity securities.
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SUBSIDIARY DIVIDENDS First Union National Bank is the largest source of parent
company dividends. Capital requirements established by regulators limit
dividends that this subsidiary and certain other of our subsidiaries can pay.
Under these and other limitations, which include an internal requirement to
maintain all deposit-taking banks at the well capitalized level, at March 31,
2000, our subsidiaries had $2.2 billion available for dividends that could be
paid without prior regulatory approval. Our subsidiaries did not pay dividends
to the parent company in the first quarter of 2000.
REGULATORY CAPITAL At March 31, 2000, our tier 1 and total capital ratios were
6.94 percent and 10.67 percent, respectively, compared with 7.08 percent and
10.87 percent at December 31, 1999. Our leverage ratio at March 31, 2000, was
5.94 percent and at December 31, 1999, 5.97 percent. At March 31, 2000, our
deposit-taking subsidiary banks met the capital and leverage ratio requirements
for well capitalized banks. First Union Home Equity Bank, N.A., First Union
Trust Company, N.A., and First Union Direct Bank, N.A., are not deposit-taking
banks.
MARKET RISK MANAGEMENT
Managing interest rate risk is fundamental to banking. The inherent
maturity and repricing characteristics of our day-to-day 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 Credit/Market Risk Committee of the corporation's Board of Directors
reviews overall interest rate risk management activity. The Funds Management
Committee of the corporation oversees the interest rate risk management process
and approves policy guidelines. Balance sheet management and finance personnel
monitor the day-to-day exposure to changes in interest rates in response to loan
and deposit flows. They make adjustments within established policy guidelines.
In analyzing interest rate sensitivity for policy measurement, we compare
our forecasted earnings per share in both a "high rate" and "low rate" scenario
to a base-line scenario. One base-line scenario is our estimated most likely
path for future short-term interest rates over the next 24 months. The second
base-line scenario holds short-term rates flat at their current level over our
forecast horizon. The "high rate" and "low rate" scenarios assume gradual 200
basis point increases or decreases in the federal funds rate from the beginning
point of each base-line scenario over the most current 12-month period. Our
policy limit for the maximum negative impact on earnings per share resulting
from "high rate" or "low rate" scenarios is 5 percent. The policy limit applies
to both the "most likely rate" scenario and the "flat rate" scenario. The policy
measurement period is 12 months in length, beginning with the first month of the
forecast.
EARNINGS SENSITIVITY Our "flat rate" scenario holds the federal funds rate
constant at 6.00 percent through March 2002. Based on the April 2000 outlook, if
interest rates were to follow our "high rate" scenario (i.e., a 200 basis point
increase in short-term rates from our "flat rate" scenario), the model indicates
earnings during the policy measurement period would be negatively affected by
3.1 percent. Our model indicates that earnings would benefit by 4.0 percent in
our "low rate" scenario (i.e., a 200 basis point decline in short-term rates
from our "flat rate" scenario).
For our "most likely rate" scenario, we currently believe the market
forward implied rate ("market rate") is the most appropriate. This scenario
assumes the federal funds rate gradually rises to 6.77 percent by the end of
March 2001. Sensitivity to the "market rate" scenario is measured using a
gradual 200 basis point increase over a 12-month period. Our model indicates
that earnings would be negatively affected by 3.6 percent in a "high rate"
scenario relative to the "market rate" over the policy period.
In addition to the standard scenarios used to analyze rate sensitivity over
the policy measurement period, we regularly analyze the potential impact of
other remote, more extreme interest rate scenarios. These alternate "what if"
scenarios may include interest rate paths that are higher, lower and more
13
<PAGE> 17
volatile than those used for policy measurement. We also perform our analysis
for time periods that reach beyond the 12-month policy period. For example,
based on our April 2000 outlook, if interest rates in 2001 were 200 basis points
higher than the "market rate" scenario, earnings would be negatively affected by
4.1 percent.
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, and we implement such strategies when we believe
those actions are prudent. As new monthly outlooks become available, we will
continue to formulate strategies aimed at protecting earnings from the potential
negative effects of changes in interest rates.
UNREALIZED GAINS (LOSSES) IN CERTAIN FINANCIAL INSTRUMENTS Information related
to unrealized gains and losses in the securities available for sale, investment
securities and off-balance sheet derivative portfolios is in Table 14. Changes
in the market value of the instruments in these three portfolios, and
corresponding unrealized gains and losses, primarily result from changes in
market interest rates. The securities available for sale and the off-balance
sheet derivatives portfolios are the primary means we use to manage overall
interest rate risk while enhancing corporate earnings. Changes in the market
values of these portfolios offset changes in market values and future interest
income or expense related to other balance sheet items, such as loans, deposits
and borrowings. At March 31, 2000, these three portfolios had a pre-tax net
unrealized loss of $1.5 billion.
SECURITIES AVAILABLE FOR SALE The securities available for sale portfolio
consists primarily of U.S. Treasury, U.S. Government agency, municipal and
asset-backed securities. Activity in this portfolio is undertaken primarily to
manage liquidity and interest rate risk and to take advantage of market
conditions that create more economically attractive returns on these
investments. At March 31, 2000, we had securities available for sale with a
market value of $50 billion compared with $51 billion at year-end 1999.
Included in securities available for sale at March 31, 2000, were residual
interests with a market value of $537 million, which included a net unrealized
gain of $90 million. These residual interests resulted from securitizations of
SBA, credit card, student, auto and home equity loans and lines of credit. At
December 31, 1999, securities available for sale included residual interests
with a market value of $583 million and a net unrealized gain of $84 million.
Securities available for sale transactions resulted in net realized losses
of $16 million in the first quarter of 2000 compared with net realized gains of
$25 million in the first quarter of 1999. Included in these amounts were
impairment losses in certain residual interests of $17 million and $79 million,
respectively.
Activity in this portfolio is undertaken primarily to manage liquidity and
interest rate risk and to take advantage of market conditions that create more
economically attractive returns on these investments.
The average rate earned on securities available for sale was 7.16 percent
in the first quarter of 2000 and 6.60 percent in the first quarter of 1999. The
average maturity of the portfolio was 8.48 years at March 31, 2000.
INVESTMENT SECURITIES The investment securities portfolio consists primarily of
U.S. Government agency, corporate, municipal and mortgage-backed securities, and
collateralized mortgage obligations. Our investment securities had a carrying
value and a market value of $1.7 billion at March 31, 2000, and a carrying value
and a market value of $1.8 billion at December 31, 1999.
The average rate earned on investment securities was 8.22 percent in the
first quarter of 2000 and 8.30 percent in the first quarter of 1999. The average
maturity of the portfolio was 6.01 years at March 31, 2000.
14
<PAGE> 18
OFF-BALANCE SHEET DERIVATIVES FOR INTEREST RATE RISK MANAGEMENT As part of our
overall interest rate risk management strategy, we use 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 risk management
include various interest rate swap, futures and option structures with indices
that relate to the pricing of specific financial instruments of the corporation.
We believe we have appropriately controlled the risk so that derivatives used
for interest rate risk management will not have any significant unintended
effect on corporate earnings. The impact of derivative instruments on our
earnings and rate sensitivity is fully incorporated in the earnings simulation
model in the same manner as on-balance sheet instruments.
The fair value of off-balance sheet derivatives used to manage our interest
rate sensitivity was $211 million, based on a notional amount of $282 billion,
at March 31, 2000, compared with $213 million, based on a notional amount of
$190 billion, at December 31, 1999. The increase in the notional amount of
derivatives in the first quarter of 2000 primarily resulted from additional
interest rate swaps and futures contracts. The aggregate outstanding notional
amount of these positions will reduce substantially by December 31, 2000. From
time to time, we re-balance our off-balance sheet positions to reflect current
market conditions and management's assessment of desired balance sheet
characteristics, and this can result in significant changes in derivative
notional amounts. At March 31, 2000, deferred gains and losses related to
terminated positions were not significant.
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. At March 31, 2000, the total mark-to-market related credit risk for
derivative transactions in excess of counterparty thresholds was $769 million.
The fair value of collateral held exceeded the total mark-to-market related
credit risk in excess of counterparty thresholds as of that date. For nondealer
transactions, the need for collateral is evaluated on an individual transaction
basis, and it is primarily dependent on the financial strength of the
counterparty.
TRADING RISK MANAGEMENT Trading activities are undertaken primarily to satisfy
the investment and risk management needs of our customers and secondarily to
enhance our earnings through profitable trading for the corporation's own
account. We trade a variety of debt securities and foreign exchange instruments,
as well as financial and foreign currency derivatives, in order to provide
customized solutions for the risk management challenges faced by our customers.
We maintain diversified trading positions in both the fixed income and foreign
exchange markets. Risk is controlled through the use of value-at-risk (VAR)
limits and an active, independent monitoring process.
We use the VAR methodology for measuring the market risk of the
corporation's trading positions. This statistical methodology uses recent market
volatility to estimate the maximum daily trading loss that the corporation would
expect to incur, on average, 97.5 percent of the time. The model also estimates
the effect of the interrelationships among the various trading instruments to
determine how much risk is eliminated by offsetting positions. The VAR analysis
is supplemented by stress testing on a daily basis. The analysis captures all
financial assets and liabilities that are considered trading positions. The
calculation uses historical data from the most recent 252 business days. The
total VAR amount at March 31, 2000, was $8 million compared with $6 million at
December 31, 1999, substantially all of which related to interest rate risk. The
high, low and average VARs in the first quarter of 2000 were $9 million, $5
million and $7 million, respectively.
15
<PAGE> 19
Accounting and Regulatory Matters
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by Statement No. 137,
establishes accounting and reporting standards for derivatives and hedging
activities. This Standard requires that all derivatives be recognized as assets
or liabilities in the balance sheet and that these instruments be measured at
fair value through adjustments to either other comprehensive income or current
earnings, depending on the purpose for which the derivative is held. This
Standard, which is effective January 1, 2001, significantly changes the
accounting for hedge-related derivatives portfolio. The corporation is in the
process of assessing the impact of this Standard; however, we expect that it
will affect certain risk management strategies and may result in some
repositioning of the derivatives portfolio.
Legislation has been enacted providing that deposits and certain claims for
administrative expenses and employee compensation against an insured depository
institution are afforded a priority over other general unsecured claims against
an institution, including federal funds and letters of credit, in the
liquidation or other resolution of such an institution by any receiver.
In 1999, the President signed into law the Gramm-Leach-Bliley Financial
Modernization Act of 1999 (Modernization Act). The Modernization Act allows bank
holding companies meeting management, capital and Community Reinvestment Act
standards to engage in a substantially broader range of nonbanking activities
than was permissible before enactment, including underwriting insurance and
making merchant banking investments in commercial and financial companies. It
also allows insurers and other financial services companies to acquire banks;
removes various restrictions that currently apply to bank holding company
ownership of securities firms and mutual fund advisory companies; and
establishes the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations. This part of
the Modernization Act became effective in March 2000. In the first quarter of
2000, First Union became a financial holding company pursuant to the
Modernization Act and is thereby permitted to engage in the broader range of
activities that the Act permits.
The Modernization Act also modifies current law related to financial
privacy and community reinvestment. The new privacy provisions will generally
prohibit financial institutions, including First Union, from disclosing
nonpublic personal financial information to nonaffiliated third parties unless
customers have the opportunity to "opt out" of the disclosure.
16
<PAGE> 20
TABLE 1
CONSOLIDATED SUMMARIES OF INCOME, PER SHARE, BALANCE SHEET AND OTHER DATA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Twelve 2000 1999
Months ------------- ---------------------------------------------------
Ended
March 31, FIRST Fourth Third Second First
(Dollars in millions, except per share data) 2000 QUARTER Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARIES OF INCOME
Interest income $ 15,892 4,313 4,143 3,812 3,624 3,572
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income (a) $ 16,002 4,336 4,169 3,840 3,657 3,603
Interest expense 8,254 2,347 2,198 1,930 1,779 1,792
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income (a) 7,748 1,989 1,971 1,910 1,878 1,811
Provision for loan losses 720 192 173 175 180 164
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses (a) 7,028 1,797 1,798 1,735 1,698 1,647
Securities transactions - portfolio (104) (16) (7) (80) (1) 25
Fee and other income 6,929 1,858 1,844 1,520 1,707 1,925
Merger-related and restructuring
charges (b) 1 (5) 6 -- -- 398
Other noninterest expense 8,734 2,387 2,354 1,940 2,053 2,111
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes (a) 5,118 1,257 1,275 1,235 1,351 1,088
Income taxes 1,651 394 407 405 445 351
Tax-equivalent adjustment 110 23 26 28 33 31
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 3,357 840 842 802 873 706
====================================================================================================================================
PER SHARE DATA
Basic $ 3.48 0.86 0.86 0.84 0.92 0.73
Diluted 3.45 0.85 0.86 0.84 0.90 0.73
Cash dividends $ 1.89 0.48 0.47 0.47 0.47 0.47
Average shares - Basic (In thousands) -- 972,174 976,377 946,802 954,548 959,833
Average shares - Diluted (In thousands) -- 984,095 984,537 953,964 961,793 968,626
Average stockholders' equity
Quarter-to-date $ -- 16,583 16,686 15,299 15,701 16,041
Year-to-date -- 16,583 15,932 15,678 15,870 16,041
Book value 17.16 17.16 16.91 16.19 15.99 16.50
Common stock price
High 55 15/16 37 15/16 43 5/8 48 3/8 55 15/16 65 1/16
Low 28 7/16 28 7/16 32 7/16 35 5/16 42 1/16 48 5/8
Period-end $ 37 1/4 37 1/4 32 15/16 35 5/8 47 1/8 53 7/16
To earnings ratio (c) 10.80 X 10.80 9.89 10.67 13.43 18.62
To book value 217 % 217 195 220 295 324
BALANCE SHEET DATA
Assets $ 253,648 253,648 253,024 234,408 229,452 222,700
Long-term debt $ 33,043 33,043 31,975 31,910 30,350 24,858
OTHER DATA
ATMs 3,786 3,786 3,778 3,954 3,955 3,849
Employees 73,060 73,060 71,659 66,391 66,491 70,775
====================================================================================================================================
</TABLE>
(a) Tax-equivalent.
(b) After tax merger-related and restructuring charges amounted to $(2) million
in the first quarter of 2000; $4 million in the fourth quarter of 1999; and $259
million in the first quarter of 1999.
(c) Based on diluted earnings per share.
T-1
<PAGE> 21
TABLE 2
MERGER-RELATED AND RESTRUCTURING CHARGES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
THREE
MONTHS
ENDED
MARCH 31,
(In millions) 2000
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
MERGER-RELATED CHARGES
EVEREN acquisition $ 9
Reversal of March 1999 restructuring charge (14)
- -------------------------------------------------------------------------------------------------------------------------------
Total merger-related and restructuring charges $ (5)
===============================================================================================================================
After-tax merger-related and restructuring charges $ (2)
===============================================================================================================================
<CAPTION>
March 1999
Restructuring CoreStates Signet
(In millions) Charge Acquisition Acquisition Other Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACTIVITY IN THE RESTRUCTURING ACCRUAL
Balance, December 31, 1999 $ 84 38 34 6 162
Cash payments (18) -- -- (2) (20)
Reversal of prior accruals (14) -- -- -- (14)
Noncash write-downs and other adjustments (4) -- -- -- (4)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2000 $ 48 38 34 4 124
===============================================================================================================================
</TABLE>
T-2
<PAGE> 22
TABLE 3
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2000
------------------------------------------------------------------------------------------
INVESTMENT CORPORATE
(In millions) BANKING BANKING INTERNATIONAL OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 80 312 31 -- 423
Provision for loan losses 34 53 -- -- 87
Fee and other income 421 42 53 (31) 485
Noninterest expense 247 111 37 -- 395
Income tax expense 77 72 18 (31) 136
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 143 118 29 -- 290
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 34.44% 13.40 19.39 -- 20.10
Average loans, net $ 6,886 32,113 4,887 -- 43,886
Average deposits 7,470 5,391 4,220 -- 17,081
Average attributed stockholders'
equity (b) $ 1,673 3,519 608 -- 5,800
===================================================================================================================================
<CAPTION>
RETAIL
BROKERAGE & WEALTH
INSURANCE & TRUST MUTUAL CAP
(In millions) SERVICES SERVICES FUNDS ACCOUNT OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data $
Net interest income 44 56 2 59 -- 161
Provision for loan losses -- -- -- -- -- --
Fee and other income 546 183 130 38 (25) 872
Noninterest expense 483 143 67 38 -- 731
Income tax expense 41 37 25 23 (9) 117
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 66 59 40 36 (16) 185
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 39.04 % 51.56 64.87 72.53 -- 50.05
Average loans, net $ -- 4,130 -- 1 -- 4,131
Average deposits -- 5,941 -- 14,407 -- 20,348
Average attributed stockholders'
equity (b) $ 684 464 184 203 (32) 1,503
===================================================================================================================================
<CAPTION>
HOME
EQUITY &
FIRST THE RETAIL
UNION MONEY CREDIT BRANCH
(In millions) MORTGAGE STORE CARDS PRODUCTS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 10 134 57 632 833
Provision for loan losses -- 23 29 22 74
Fee and other income 46 15 59 209 329
Noninterest expense 56 156 61 590 863
Income tax expense -- (12) 10 88 86
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ -- (18) 16 141 139
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity -- % (5.94) 13.32 30.25 15.12
Average loans, net $ 436 13,718 1,769 10,631 26,554
Average deposits 764 212 15 67,276 68,267
Average attributed stockholders'
equity (b) $ 73 1,265 495 1,883 3,716
===================================================================================================================================
</TABLE>
(Continued)
T-3
<PAGE> 23
TABLE 3
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------------------------------------------
SMALL REAL CASH MGT. &
BUSINESS ESTATE DEPOSIT
(In millions) BANKING LENDING BANKING SERVICES TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 20 70 46 203 339
Provision for loan losses 1 7 5 -- 13
Fee and other income -- -- -- 144 144
Noninterest expense 11 46 15 195 267
Income tax expense 3 6 10 58 77
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 5 11 16 94 126
- ---------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 11.23 % 5.94 14.14 56.83 24.49
Average loans, net $ 2,796 14,652 9,003 -- 26,451
Average deposits -- -- -- 21,624 21,624
Average attributed stockholders'
equity (b) $ 165 785 454 663 2,067
===========================================================================================================================
<CAPTION>
FIRST
CAPITAL CAPITAL UNION TREASURY/
(In millions) MARKETS MGT. SECURITIES CONSUMER COMMERCIAL NONBANK TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 423 161 584 833 339 210 1,966
Provision for loan losses 87 -- 87 74 13 18 192
Fee and other income 485 872 1,357 329 144 12 1,842
Noninterest expense 395 731 1,126 863 267 126 2,382
Income tax expense 136 117 253 86 77 (22) 394
- ---------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 290 185 475 139 126 100 840
After-tax merger-related and
restructuring charges -- -- -- -- -- (2) (2)
- ---------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 290 185 475 139 126 98 838
- ---------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 20.10 % 50.05 26.16 15.12 24.49 11.27 20.31
Average loans, net $ 43,886 4,131 48,017 26,554 26,451 30,459 131,481
Average deposits 17,081 20,348 37,429 68,267 21,624 13,101 140,421
Average attributed stockholders'
equity (b) $ 5,800 1,503 7,303 3,716 2,067 3,497 16,583
===========================================================================================================================
</TABLE>
(Continued)
T-4
<PAGE> 24
TABLE 3
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1999
------------------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 57 276 47 -- 380
Provision for loan losses 21 34 -- -- 55
Fee and other income 402 61 48 (28) 483
Noninterest expense 214 107 54 -- 375
Income tax expense 78 74 16 (28) 140
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 146 122 25 293
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 45.88 % 14.32 16.83 -- 22.16
Average loans, net $ 6,915 31,919 4,924 -- 43,758
Average deposits 5,012 5,414 5,502 -- 15,928
Average attributed stockholders'
equity (b) $ 1,287 3,478 613 -- 5,378
===================================================================================================================================
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 17 57 1 45 -- 120
Provision for loan losses -- 1 -- -- -- 1
Fee and other income 222 167 107 26 (22) 500
Noninterest expense 198 137 59 31 -- 425
Income tax expense 15 33 18 15 (8) 73
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 26 53 31 25 (14) 121
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 32.38 % 50.83 53.31 69.56 -- 48.05
Average loans, net $ -- 3,722 -- -- -- 3,722
Average deposits -- 5,806 -- 14,161 -- 19,967
Average attributed stockholders'
equity (b) $ 313 426 151 143 (28) 1,005
===================================================================================================================================
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 24 117 60 601 802
Provision for loan losses 10 46 23 79
Fee and other income 116 86 57 204 463
Noninterest expense 78 160 62 579 879
Income tax expense 23 12 4 78 117
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 39 21 5 125 190
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 83.99 % 5.91 5.54 27.33 19.90
Average loans, net $ 488 11,325 2,598 16,177 30,588
Average deposits 1,340 2 10 71,908 73,260
Average attributed stockholders'
equity (b) $ 183 1,341 469 1,857 3,850
===================================================================================================================================
</TABLE>
(Continued)
T-5
<PAGE> 25
TABLE 3
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1999
-------------------------------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 20 59 46 219 344
Provision for loan losses 1 6 6 -- 13
Fee and other income -- -- -- 132 132
Noninterest expense 10 52 19 190 271
Income tax expense 4 (5) 8 62 69
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 5 6 13 99 123
- ----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 14.91 % 3.56 11.15 59.12 23.25
Average loans, net $ 2,696 14,609 8,387 -- 25,692
Average deposits -- -- -- 23,538 23,538
Average attributed stockholders'
equity (b) $ 168 877 478 681 2,204
==================================================================================================================================
<CAPTION>
First
Capital Capital Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 380 120 500 802 344 134 1,780
Provision for loan losses 55 1 56 79 13 16 164
Fee and other income 483 500 983 463 132 372 1,950
Noninterest expense 375 425 800 879 271 559 2,509
Income tax expense 140 73 213 117 69 (48) 351
- -----------------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 293 121 414 190 123 (21) 706
After-tax merger-related and
restructuring charges -- -- -- -- -- 259 259
- -----------------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 293 121 414 190 123 238 965
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 22.16 % 48.05 26.02 19.90 23.25 26.49 24.32
Average loans, net $43,758 3,722 47,480 30,588 25,692 25,709 129,469
Average deposits 15,928 19,967 35,895 73,260 23,538 3,569 136,262
Average attributed stockholders'
equity (b) $ 5,378 1,005 6,383 3,850 2,204 3,604 16,041
===================================================================================================================================
</TABLE>
(a) Business Segment information reflects the purchase accounting acquisition
of EVEREN for the three months ended March 31, 2000. This acquisition occurred
on October 1, 1999. See the "Business Segments" discussion in Management's
Analysis of Operations for further information about the methodology and
assumptions used in presenting this information.
(b) Average attributed stockholders' equity excludes merger-related and
restructuring charges. The return on average attributed stockholders' equity for
the Capital Management Mutual Funds unit is net of the amount included in Other.
(c) In the consolidated data, First Union Securities represents the total of
Capital Markets and Capital Management.
T-6
<PAGE> 26
TABLE 4
FEE AND OTHER INCOME - CAPITAL MARKETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
2000 1999
------------ -----------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Principal investing $ 199 220 175 59 143
Risk management (a) 63 41 46 44 58
International banking 53 52 53 51 48
Commercial leasing 46 40 42 38 43
Fixed income sales and trading (a) 35 36 33 23 51
Equity capital markets (a) 31 27 18 20 14
Loan syndications 24 36 30 27 27
Asset securitizations 22 27 20 28 16
Commercial real estate (a) 20 39 11 46 41
Mergers and acquisitions 17 25 17 15 25
High yield debt underwriting and trading (a) 1 2 6 8 14
Proprietary trading (a) (2) 6 (32) 4 (2)
Other 7 4 (3) 14 33
- ----------------------------------------------------------------------------------------------------------------------------
Total 516 555 416 377 511
Eliminations (31) (72) (22) (27) (28)
- ----------------------------------------------------------------------------------------------------------------------------
Total fee and other income - Capital Markets $ 485 483 394 350 483
============================================================================================================================
</TABLE>
(a) The aggregate amounts of trading account profits included in this table in
the first quarter of 2000 and in the fourth, third, second and first
quarters of 1999 were $99 million, $72 million, $20 million, $87 million
and $106 million, respectively. This includes risk management and
proprietary trading as well as amounts included in fixed income sales and
trading, equity capital markets, commercial real estate, and high yield
debt underwriting and trading.
T-7
<PAGE> 27
TABLE 5
SELECTED PERFORMANCE, DIVIDEND PAYOUT AND OTHER RATIOS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
2000 1999
-------- -----------------------------------------
FIRST Fourth Third Second First
QUARTER Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS (a)
Assets to stockholders' equity 14.97 X 14.60 14.98 14.26 13.99
Return on assets 1.36 % 1.37 1.39 1.56 1.28
Return on stockholders' equity 20.38 % 20.00 20.82 22.30 17.85
=====================================================================================================================
DIVIDEND PAYOUT RATIOS ON
Operating earnings 56.47 % 54.65 55.95 52.22 47.00
Net income 56.47 % 54.65 55.95 52.22 64.38
=====================================================================================================================
OTHER RATIOS ON
Operating earnings
Return on assets 1.36 % 1.38 1.39 1.56 1.74
Return on stockholders' equity 20.31 % 19.78 20.47 21.94 24.32
=====================================================================================================================
</TABLE>
(a) Based on average balances and net income.
T-8
<PAGE> 28
TABLE 6
LOANS - ON-BALANCE SHEET, AND MANAGED AND SERVICING PORTFOLIOS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
2000 1999
-------- ----------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ON-BALANCE SHEET LOAN PORTFOLIO
COMMERCIAL
Commercial, financial and agricultural $ 54,082 51,683 52,497 52,727 52,798
Real estate - construction and other 2,344 2,435 2,709 2,636 2,602
Real estate - mortgage 9,275 8,768 8,404 8,441 8,489
Lease financing 12,511 12,742 11,969 10,527 10,525
Foreign 4,587 4,991 4,933 4,609 4,084
- -----------------------------------------------------------------------------------------------------------------
Total commercial 82,799 80,619 80,512 78,940 78,498
- -----------------------------------------------------------------------------------------------------------------
RETAIL
Real estate - mortgage (a) 27,528 27,793 26,427 24,314 19,182
Installment loans - Bankcard (b) 1,752 1,879 1,681 2,133 2,579
Installment loans - other (a) 25,145 23,916 22,853 22,619 27,538
Vehicle leasing 3,822 4,483 5,096 5,753 6,257
- -----------------------------------------------------------------------------------------------------------------
Total retail (a) 58,247 58,071 56,057 54,819 55,556
- -----------------------------------------------------------------------------------------------------------------
Total loans (a) 141,046 138,690 136,569 133,759 134,054
Unearned income 5,243 5,513 5,087 4,188 4,396
- -----------------------------------------------------------------------------------------------------------------
Loans, net (on-balance sheet) (a) $ 135,803 133,177 131,482 129,571 129,658
=================================================================================================================
MANAGED PORTFOLIO (c)
- -----------------------------------------------------------------------------------------------------------------
COMMERCIAL
On-balance sheet $ 82,799 80,619 80,512 78,940 78,498
Securitized loans 1,173 1,223 1,257 1,300 708
Loans held for sale included in other assets 2,056 1,843 -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total commercial 86,028 83,685 81,769 80,240 79,206
- -----------------------------------------------------------------------------------------------------------------
RETAIL
Real estate - mortgage (a)
On-balance sheet 27,528 27,793 26,427 24,314 19,182
Loans held for sale included in other assets 1,341 1,503 1,413 2,314 1,719
- -----------------------------------------------------------------------------------------------------------------
Total real estate mortgage 28,869 29,296 27,840 26,628 20,901
- -----------------------------------------------------------------------------------------------------------------
Installment loans - Bankcard (b)
On-balance sheet 1,752 1,879 1,681 2,133 2,579
Securitized loans 3,941 3,941 3,941 3,398 2,843
- -----------------------------------------------------------------------------------------------------------------
Total Installment loans - Bankcard 5,693 5,820 5,622 5,531 5,422
- -----------------------------------------------------------------------------------------------------------------
Installment loans - other (a)
On-balance sheet 25,145 23,916 22,853 22,619 27,538
Securitized loans 12,052 13,259 14,390 15,312 15,597
Securitized loans included in
securities available for sale 9,596 9,265 8,660 7,976 1,321
Loans held for sale included in other assets 1,339 898 591 177 699
- -----------------------------------------------------------------------------------------------------------------
Total installment loans - other 48,132 47,338 46,494 46,084 45,155
- -----------------------------------------------------------------------------------------------------------------
Vehicle leasing - on-balance sheet 3,822 4,483 5,096 5,753 6,257
- -----------------------------------------------------------------------------------------------------------------
Total retail (a) 86,516 86,937 85,052 83,996 77,735
- -----------------------------------------------------------------------------------------------------------------
Total managed portfolio (a) $ 172,544 170,622 166,821 164,236 156,941
=================================================================================================================
SERVICING PORTFOLIO
Commercial $ 28,985 29,193 28,433 24,693 21,514
Residential $ 37,108 38,200 39,385 40,606 45,578
=================================================================================================================
</TABLE>
(a) Prior period loans held for sale included in loans have been reclassified
to other assets to conform to the presentation in 2000.
(b) Installment loans - Bankcard include credit card, instant cash reserve,
signature and First Choice.
(c) The managed portfolio includes the on-balance sheet loan portfolio, loans
held for sale that are classified in other assets, loans securitized for which
the securities are classified in securities available for sale and the
off-balance sheet portfolio of securitized loans.
T-9
<PAGE> 29
TABLE 7
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
2000 1999
------- -------------------------------------------------
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 (a) $ 1,757 1,759 1,785 1,825 1,826
Provision for loan losses 192 173 175 180 164
Allowance relating to loans acquired, transferred to
accelerated disposition or sold -- (6) (26) (40) (1)
Loan losses, net (189) (169) (175) (180) (164)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 1,760 1,757 1,759 1,785 1,825
===============================================================================================================================
as a % of loans, net (a) 1.30 % 1.32 1.34 1.38 1.41
===============================================================================================================================
as a % of nonaccrual and restructured loans 150 % 181 187 212 217
===============================================================================================================================
as a % of nonperforming assets 139 % 165 169 190 192
===============================================================================================================================
LOAN LOSSES
Commercial, financial and agricultural $ 107 93 95 89 78
Real estate - commercial construction and mortgage 2 9 4 10 1
Real estate - residential mortgage 4 5 5 5 5
Installment loans - Bankcard 31 37 37 43 49
Installment loans - other and vehicle leasing 73 64 67 67 65
- -------------------------------------------------------------------------------------------------------------------------------
Total 217 208 208 214 198
- -------------------------------------------------------------------------------------------------------------------------------
LOAN RECOVERIES
Commercial, financial and agricultural 10 21 17 12 13
Real estate - commercial construction and mortgage 1 3 3 2 1
Real estate - residential mortgage -- 1 -- 2 --
Installment loans - Bankcard 3 1 2 3 4
Installment loans - other and vehicle leasing 14 13 11 15 16
- -------------------------------------------------------------------------------------------------------------------------------
Total 28 39 33 34 34
- -------------------------------------------------------------------------------------------------------------------------------
Loan losses, net $ 189 169 175 180 164
===============================================================================================================================
as % of average loans, net (a) (b) 0.57 % 0.52 0.55 0.55 0.51
===============================================================================================================================
NONPERFORMING ASSETS (c)
Nonaccrual loans
Commercial, financial and agricultural $ 729 551 506 427 434
Real estate - commercial construction and mortgage 62 55 59 69 74
Real estate - residential mortgage 148 150 156 166 181
Installment loans - Bankcard -- -- 5 5 3
Installment loans - other and vehicle leasing 236 212 212 176 149
- -------------------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 1,175 968 938 843 841
Foreclosed properties (d) 95 98 103 97 109
- -------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 1,270 1,066 1,041 940 950
===============================================================================================================================
as % of loans, net, and foreclosed properties (a) 0.93 % 0.80 0.79 0.73 0.73
===============================================================================================================================
Accruing loans past due 90 days $ 134 144 194 209 259
===============================================================================================================================
</TABLE>
(a) Prior period amounts have been reclassified to conform to the presentation
in 2000.
(b) Annualized.
(c) Nonperforming assets at March 31, 2000, do not include $30 million in net
book value of nonperforming loans held for sale. Loans held for sale are
classified in other assets.
(d) Restructured loans are insignificant.
T-10
<PAGE> 30
TABLE 8
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
2000 1999
-------- -----------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill $ 5,065 5,091 4,276 4,336 4,354
Deposit base premium 236 257 283 309 335
Origination network 269 274 279 284 289
Other 11 4 4 5 5
- --------------------------------------------------------------------------------------------------------------------------
Total $ 5,581 5,626 4,842 4,934 4,983
==========================================================================================================================
MORTGAGE AND OTHER SERVICING ASSETS $ 681 703 712 744 700
==========================================================================================================================
CREDIT CARD PREMIUM $ 5 6 8 10 12
==========================================================================================================================
</TABLE>
T-11
<PAGE> 31
TABLE 9
DEPOSITS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
2000 1999
-------- -----------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORE DEPOSITS
Noninterest-bearing $ 29,885 31,375 28,737 31,703 31,757
Savings and NOW accounts 36,955 37,748 36,667 37,354 38,131
Money market accounts 18,207 19,405 19,666 20,109 20,006
Other consumer time 34,881 33,812 32,743 33,192 34,339
- ----------------------------------------------------------------------------------------------------------------------------
Total core deposits 119,928 122,340 117,813 122,358 124,233
OTHER DEPOSITS
Foreign 7,062 6,729 5,590 5,591 4,850
Other time 12,900 11,978 10,500 5,654 5,141
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits $ 139,890 141,047 133,903 133,603 134,224
============================================================================================================================
</TABLE>
T-12
<PAGE> 32
TABLE 10
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
-----------------------
(In millions)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
MATURITY OF
3 months or less $ 6,906
Over 3 months through 6 months 4,918
Over 6 months through 12 months 3,962
Over 12 months 3,266
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 19,052
============================================================================================================================
</TABLE>
T-13
<PAGE> 33
TABLE 11
LONG-TERM DEBT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
2000 1999
-------- -----------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NOTES AND DEBENTURES ISSUED BY
THE PARENT COMPANY
Notes
6.60% to 7.70%, due 2000 to 2005 $ 2,039 1,592 996 648 250
Floating rate, due 2003 to 2005 1,087 90 -- -- --
Floating rate extendible, due 2005 10 10 10 10 10
Subordinated notes
6.00% to 9.45%, due 2001 to 2009 2,662 2,661 2,659 2,659 2,909
7.18% to 8.00%, due 2009 to 2011 208 208 208 208 208
6.30%, Putable/Callable, due 2028 200 200 200 200 200
8.77% -- -- 149 149 149
Floating rate, due 2003 150 150 150 150 149
Subordinated debentures
6.55% to 7.574%, due 2026 to 2035 794 794 794 794 794
- --------------------------------------------------------------------------------------------------------------------
Total notes and debentures issued by the
Parent Company 7,150 5,705 5,166 4,818 4,669
- --------------------------------------------------------------------------------------------------------------------
NOTES ISSUED BY SUBSIDIARIES
Notes, varying rates and terms to 2015 17,339 18,026 18,890 18,527 13,327
Subordinated notes
5-7/8% to 9-5/8%, due 2001 to 2006 1,074 1,074 1,074 1,224 1,324
Bank, 5.80% to 7-7/8%, due 2006 to 2036 1,549 1,200 1,200 1,200 1,200
6-5/8% to 8-3/8%, due 2002 to 2007 570 570 400 400 400
Subordinated capital notes
9-5/8% to 9-7/8% -- -- -- -- 150
- --------------------------------------------------------------------------------------------------------------------
Total notes issued by subsidiaries 20,532 20,870 21,564 21,351 16,401
- --------------------------------------------------------------------------------------------------------------------
OTHER DEBT
Trust preferred securities 1,992 2,027 1,730 1,730 1,736
4.556% auto securitization financing, due
September 30, 2008 945 945 1,022 1,022 1,021
Advances from the Federal Home Loan Bank 2,387 2,387 2,387 1,387 987
Capitalized leases 30 34 34 35 37
Mortgage notes and other debt 7 7 7 7 7
- --------------------------------------------------------------------------------------------------------------------
Total other debt 5,361 5,400 5,180 4,181 3,788
- --------------------------------------------------------------------------------------------------------------------
Total $ 33,043 31,975 31,910 30,350 24,858
====================================================================================================================
</TABLE>
T-14
<PAGE> 34
TABLE 12
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Twelve 2000 1999
Months ------- -----------------------------------------
Ended
March 31, FIRST Fourth Third Second First
(In millions) 2000 QUARTER Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of period $ 15,976 16,709 15,513 15,288 15,976 16,897
- ---------------------------------------------------------------------------------------------------------------------
Comprehensive income
Net income 3,357 840 842 802 873 706
Net unrealized loss on debt and
equity securities (966) (44) (388) (193) (341) (415)
- ---------------------------------------------------------------------------------------------------------------------
Total comprehensive income 2,391 796 454 609 532 291
Purchases of common stock (1,180) (221) (83) (22) (854) (854)
Common stock issued for
Stock options and restricted stock 406 47 66 25 268 49
Dividend reinvestment plan 82 20 20 21 21 22
Acquisitions 1,251 -- 1,251 -- -- --
Deferred compensation, net (197) 11 (48) 44 (204) 21
Cash dividends paid (1,845) (478) (464) (452) (451) (450)
- ---------------------------------------------------------------------------------------------------------------------
Balance, end of period $ 16,884 16,884 16,709 15,513 15,288 15,976
=====================================================================================================================
</TABLE>
T-15
<PAGE> 35
TABLE 13
CAPITAL RATIOS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
2000 1999
------- --------------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED CAPITAL RATIOS (a)
Qualifying capital
Tier 1 capital $ 14,422 14,204 13,117 12,612 12,931
Total capital 22,191 21,810 20,922 20,540 21,033
Adjusted risk-weighted assets 207,955 200,704 187,635 196,195 187,424
Adjusted leverage ratio assets $ 242,869 238,082 224,497 219,208 219,640
Ratios
Tier 1 capital 6.94 % 7.08 6.99 6.43 6.90
Total capital 10.67 10.87 11.15 10.47 11.22
Leverage 5.94 5.97 5.84 5.75 5.89
STOCKHOLDERS' EQUITY TO ASSETS
Quarter-end 6.66 6.60 6.62 6.66 7.17
Average 6.68 % 6.85 6.68 7.01 7.15
- ------------------------------------------------------------------------------------------------------------------------------
BANK CAPITAL RATIOS
Tier 1 capital
First Union National Bank 7.38 % 7.26 7.27 7.13 7.33
First Union Bank of Delaware 11.43 10.83 11.56 9.41 13.11
First Union Home Equity Bank 23.31 22.32 19.18 12.73 13.41
Total capital
First Union National Bank 10.54 10.22 10.39 10.17 10.28
First Union Bank of Delaware 12.45 11.89 12.73 10.98 14.62
First Union Home Equity Bank 26.78 25.88 22.36 14.88 15.51
Leverage
First Union National Bank 6.74 6.48 6.46 6.72 6.63
First Union Bank of Delaware 7.33 7.08 6.05 6.25 8.18
First Union Home Equity Bank 18.45 % 15.42 12.88 10.29 10.53
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 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 percent to
4.00 percent.
T-16
<PAGE> 36
TABLE 14
UNREALIZED GAINS (LOSSES) IN CERTAIN FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
2000 1999
--------- -------------------------------------------
FIRST Fourth Third Second First
(In millions) QUARTER Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECURITIES PORTFOLIOS (a)
Securities available for sale (b) $(1,559) (1,431) (833) (528) (2)
Investment securities 46 51 70 83 122
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses) - securities portfolios (1,513) (1,380) (763) (445) 120
Less unrealized gains (losses) in securities considered
an economic hedge of mortgage servicing rights (34) (79) (56) (45) (9)
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses), net - securities portfolios (1,479) (1,301) (707) (400) 129
- --------------------------------------------------------------------------------------------------------------------------
OFF-BALANCE SHEET DERIVATIVE FINANCIAL
INSTRUMENTS (a)
Asset rate conversions (b) (374) (504) (217) (152) 151
Liability rate conversions 23 338 256 273 386
Rate sensitivity hedges 45 4 (7) (6) (22)
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses) - off-balance sheet
derivative financial instruments (306) (162) 32 115 515
Less unrealized gains (losses) in interest rate swaps
designated as offsets to fixed rate debt (287) (262) (72) 8 266
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses) - off-balance sheet
derivative financial instruments (19) 100 104 107 249
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gains (losses) $(1,498) (1,201) (603) (293) 378
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Additional information related to the securities portfolios can be
found in Tables 15 and 16. Additional information related to off-balance sheet
derivative financial instruments can be found in Tables 17, 18 and 19.
(b) As of March 31, 2000, December 31, 1999, and September 30, 1999,
unrealized gains of $13 million, $14 million and $22 million, respectively,
associated with $8.8 billion, $8.3 billion and $7.5 billion, respectively, of
interest rate swaps that qualify as asset rate conversions of securities
available for sale are included with the results of the securities available
for sale portfolio.
T-17
<PAGE> 37
TABLE 15
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
--------------------------------------------------------------------------------------------
GROSS UNREALIZED AVERAGE
1 YEAR 1-5 5-10 AFTER 10 --------------- AMORTIZED MATURITY
(In millions) OR LESS YEARS YEARS YEARS TOTAL GAINS LOSSES COST IN YEARS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARKET VALUE
U.S. Treasury $ 2 1 1,686 561 2,250 -- 96 2,346 12.51
U.S. Government agencies 7 168 21,622 2,591 24,388 1 1,303 25,690 8.97
Asset-backed 349 10,463 6,019 577 17,408 337 486 17,557 6.22
State, county and municipal -- 1 36 750 787 10 5 782 27.69
Sundry 86 687 2,805 2,010 5,588 87 104 5,605 9.02
- --------------------------------------------------------------------------------------------------------------------
Total $ 444 11,320 32,168 6,489 50,421 435 1,994 51,980 8.48
==================================================================================================================================
MARKET VALUE
Debt securities $ 444 11,320 32,168 5,575 49,507 399 1,987 51,095
Equity securities -- -- -- 914 914 36 7 885
- --------------------------------------------------------------------------------------------------------------------
Total $ 444 11,320 32,168 6,489 50,421 435 1,994 51,980
====================================================================================================================
AMORTIZED COST
Debt securities $ 370 11,183 33,761 5,781 51,095
Equity securities -- -- -- 885 885
- ------------------------------------------------------------------------------------
Total $ 370 11,183 33,761 6,666 51,980
====================================================================================
WEIGHTED AVERAGE
YIELD
U.S. Treasury 5.36 % 4.57 5.76 5.70 5.74
U.S. Government agencies 5.80 7.14 6.57 6.63 6.58
Asset-backed 8.75 8.46 7.01 8.56 7.94
State, county and municipal -- 8.68 6.71 9.01 8.89
Sundry 8.45 7.31 7.41 6.58 7.12
Consolidated 8.60 % 8.37 6.68 6.97 7.10
====================================================================================
</TABLE>
Included in "Sundry" are $3.2 billion of securities denominated in
currencies other than the U.S. dollar. These securities had a weighted average
maturity of 8.12 years and a weighted average yield of 6.83 percent. For
comparative purposes, the weighted average U.S. dollar equivalent yield of
these securities was 8.85 percent based on a weighted average funding cost
differential of (2.02) percent.
Included in "Asset-backed" are interest-only and residual certificates
with a market value of $537 million; gross unrealized gains and losses of $91
million and $1 million, respectively; and an amortized cost of $447 million.
Expected maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without call
or prepayment penalties. Average maturity excludes equity securities and money
market funds.
Yields related to securities exempt from federal and state income
taxes 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 and applicable state tax rates.
At March 31, 2000, there were forward commitments to purchase
securities at a cost which approximates a market value of $180 million, and
commitments to sell securities at a cost which approximates a market value of
$2 million.
Gross gains and losses realized on the sale of debt securities for the
three months ended March 31, 2000, were $5 million and $21 million,
respectively, and gross gains realized on equity securities were $4 million.
T-18
<PAGE> 38
TABLE 16
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
--------------------------------------------------------------------------------------------
GROSS UNREALIZED AVERAGE
1 YEAR 1-5 5-10 AFTER 10 --------------- MARKET MATURITY
(In millions) 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. Treasury $ 12 -- -- -- 12 -- -- 12 0.38
U.S. Government agencies 24 125 839 1 989 5 27 967 5.48
CMOs 18 15 2 -- 35 -- -- 35 1.27
State, county and municipal 46 151 280 128 605 68 -- 673 7.41
Sundry 3 21 1 2 27 -- -- 27 2.66
- -----------------------------------------------------------------------------------------------------------------
Total $ 103 312 1,122 131 1,668 73 27 1,714 6.01
==================================================================================================================================
MARKET VALUE
Debt securities $ 103 322 1,138 151 1,714
- ------------------------------------------------------------------------------------
WEIGHTED AVERAGE
YIELD
U.S. Treasury 5.00 % -- -- -- 5.00
U.S. Government agencies 7.21 7.67 6.76 4.88 6.88
CMOs 7.42 9.06 10.47 -- 8.24
State, county and municipal 9.17 10.33 11.99 11.26 11.21
Sundry 7.51 7.00 6.07 6.61 7.01
Consolidated 7.88 % 8.98 8.07 11.17 8.47
====================================================================================
</TABLE>
Expected maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without call
or prepayment penalties.
Yields related to securities exempt from federal and state income
taxes 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 and applicable state tax rates.
There were no commitments to purchase or sell investment securities at
March 31, 2000.
There were no gains or losses realized on repurchase agreement
underdeliveries and calls of investment securities for the three months ended
March 31, 2000.
T-19
<PAGE> 39
TABLE 17
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS(a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
---------------------------------------------------------------------------
GROSS UNREALIZED AVERAGE
NOTIONAL CARRYING -------------------- MARKET MATURITY IN
(In millions) AMOUNT AMOUNT(f) GAINS LOSSES VALUE YEARS (g)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS(b)
Interest rate swaps $ 59,300 186 213 218 181 5.27
Options(c) 6,573 120 -- 356 (236) 8.19
Futures 30 -- -- -- -- 0.25
- ----------------------------------------------------------------------------------------------------------------
Total asset rate conversions $ 65,903 306 213 574 (55) 5.56
=============================================================================================================================
LIABILITY RATE CONVERSIONS(d)
Interest rate swaps $ 65,822 22 566 678 (90) 6.19
Options(c) 17,170 56 122 1 177 1.51
Futures 58,656 -- 14 -- 14 0.25
- ----------------------------------------------------------------------------------------------------------------
Total liability rate conversions $141,648 78 702 679 101 3.16
=============================================================================================================================
RATE SENSITIVITY HEDGES(e)
Basis swaps $ 706 -- -- -- -- 2.88
Options(c) 9,743 120 7 7 120 0.94
Futures 62,088 -- 44 -- 44 0.25
Options on futures 2,000 -- 1 -- 1 0.47
- ----------------------------------------------------------------------------------------------------------------
Total rate sensitivity hedges $ 74,537 120 52 7 165 0.37
=============================================================================================================================
</TABLE>
(a) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
(b) Off-balance sheet derivative financial instruments with a notional amount
of $57.1 billion at March 31, 2000, primarily convert floating rate loans to
fixed rate. The notional amount includes a $29.2 billion forward-starting swap
maturing in December 2000 that is extendible at the option of the counterparty
as a $7.5 billion forward-starting swap that qualifies as an asset rate
conversion and which matures in 2012. At March 31, 2000, interest rate swaps
with a notional amount of $8.8 billion are rate conversions of securities
available for sale.
(c) Includes purchased interest rate floors, caps and collars and purchased
options on swaps.
(d) Off-balance sheet derivative financial instruments with a notional amount of
$30.4 billion at March 31, 2000, convert fixed rate liabilities, primarily CD's,
long-term debt and bank notes, to floating rate. The 2000 notional amount of
$30.4 billion includes a $19.0 billion interest rate swap that declines on a
quarterly basis through December 2000, based on the estimated decline in the
balance of the designated fixed rate liabilities, to $6.0 billion which matures
in 2009. Off-balance sheet derivative financial instruments with a notional
amount of $111.2 billion convert or hedge floating rate liabilities. Of this
amount, $35.5 billion are forward-starting swaps that convert floating rate
liabilities, primarily deposits and long-term debt, to fixed rate, and $58.7
billion are futures, that hedge floating rate liabilities, primarily deposits
and long-term debt.
(e) Off-balance sheet derivative financial instruments designated as rate
sensitivity hedges are primarily used to modify the interest rate
characteristics of pay-variable interest rate swaps under asset rate
conversions or liability rate conversions.
(f) Carrying amount includes accrued interest receivable or payable and
unamortized premiums.
(g) Estimated maturity approximates average life.
T-20
<PAGE> 40
TABLE 18
OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES(A)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
MARCH 31, 2000
-------------------------------------------------------------------------------
1 YEAR 1 -2 2 -5 5 -10 AFTER 10
(In millions) OR LESS YEARS YEARS YEARS YEARS TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSET RATE CONVERSIONS
Notional amount - swaps $ 27,958 1,821 3,590 9,352 16,579 59,300
Notional amount - other 13 66 216 6,261 47 6,603
Weighted average receive rate(b) 7.01 % 6.36 6.72 6.95 7.11 6.99
Weighted average pay rate(b) 6.14 % 5.95 6.21 5.99 6.08 6.10
Estimated fair value $ 24 (15) (28) (228) 192 (55)
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITY RATE CONVERSIONS
Notional amount - swaps $ 14,598 250 3,300 28,569 19,105 65,822
Notional amount - other 36,778 38,878 170 -- -- 75,826
Weighted average receive rate(b) 6.64 % 7.44 6.86 6.53 7.45 6.68
Weighted average pay rate(b) 6.11 % 6.11 6.50 6.18 6.23 6.18
Estimated fair value $ (46) 121 (31) 122 (65) 101
- -------------------------------------------------------------------------------------------------------------------------------
RATE SENSITIVITY HEDGES
Notional amount - swaps $ 82 178 264 182 -- 706
Notional amount - other 71,588 2,243 -- -- -- 73,831
Weighted average receive rate(b) 6.07 % 6.07 6.07 6.07 -- 6.07
Weighted average pay rate(b) 6.14 % 6.14 6.14 6.14 -- 6.14
Estimated fair value $ 142 23 -- -- -- 165
===============================================================================================================================
</TABLE>
(a) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
(b) Weighted average receive and pay rates include the impact of currently
effective interest rate swaps and basis swaps only, and therefore, they exclude
the impact of forward-starting interest rate swaps. Substantially all of the
currently effective interest rate swaps are receive-fixed/pay-variable with pay
rates generally based on one-to-six month LIBOR, and they are the pay rates in
effect at March 31, 2000.
T-21
<PAGE> 41
TABLE 19
OFF-BALANCE SHEET DERIVATIVES ACTIVITY(a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Asset Liability Rate
Rate Rate Sensitivity
(In millions) Conversions Conversions Hedges Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 $ 57,551 74,158 58,571 190,280
Additions 16,581 81,304 44,940 142,825
Maturities and amortizations (637) (13,814) (21,068) (35,519)
Terminations and redesignations, net (7,592) -- (7,906) (15,498)
- -----------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 $ 65,903 141,648 74,537 282,088
=======================================================================================================================
</TABLE>
(a) Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
T-22
<PAGE> 42
FIRST UNION CORPORATION
NET INTEREST INCOME SUMMARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
FIRST QUARTER 2000 FOURTH QUARTER 1999
-------------------------------------------------------------------
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 $ 666 7 4.40 % $ 859 8 3.62 %
Federal funds sold and securities
purchased under resale agreements 9,555 129 5.40 10,260 136 5.24
Trading account assets (a) 11,326 193 6.84 11,201 185 6.58
Securities available for sale (a) 52,682 943 7.16 51,024 902 7.07
Investment securities (a)
U.S. Government and other 1,100 19 6.92 1,121 19 6.82
State, county and municipal 607 16 10.57 654 18 10.72
- -------------------------------------------------------------------------- ------------------
Total investment securities 1,707 35 8.22 1,775 37 8.26
- -------------------------------------------------------------------------- ------------------
Loans (a) (b)
Commercial
Commercial, financial and agricultural 52,809 1,174 8.95 53,395 1,152 8.57
Real estate - construction and other 2,406 48 8.08 2,655 53 7.88
Real estate - mortgage 8,979 183 8.19 8,472 171 8.00
Lease financing 5,213 160 12.29 5,214 164 12.53
Foreign 4,532 74 6.56 4,684 75 6.37
- -------------------------------------------------------------------------- ------------------
Total commercial 73,939 1,639 8.92 74,420 1,615 8.62
- -------------------------------------------------------------------------- ------------------
Retail
Real estate - mortgage (c) 27,551 499 7.24 27,253 483 7.09
Installment loans - Bankcard 1,822 67 14.62 1,743 54 12.26
Installment loans - other and vehicle
leasing (c) 28,169 652 9.31 27,803 650 9.30
- -------------------------------------------------------------------------- ------------------
Total retail (c) 57,542 1,218 8.49 56,799 1,187 8.33
- -------------------------------------------------------------------------- ------------------
Total loans (c) 131,481 2,857 8.73 131,219 2,802 8.49
- -------------------------------------------------------------------------- ------------------
Other earning assets (c) 8,337 172 8.29 5,346 99 7.43
- -------------------------------------------------------------------------- ------------------
Total earning assets 215,754 4,336 8.06 211,684 4,169 7.84
=============== =================
Cash and due from banks 8,078 8,584
Other assets (c) 24,458 23,272
- --------------------------------------------------------------- --------
Total assets $ 248,290 $243,540
=============================================================== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 39,830 289 2.92 36,761 283 3.07
Money market accounts 15,564 151 3.89 19,493 162 3.29
Other consumer time 33,991 423 5.00 33,047 399 4.79
Foreign 9,125 123 5.44 6,446 79 4.83
Other time 13,224 209 6.37 11,674 179 6.10
- -------------------------------------------------------------------------- ------------------
Total interest-bearing deposits 111,734 1,195 4.30 107,421 1,102 4.07
Federal funds purchased and securities
sold under repurchase agreements 35,286 482 5.50 34,689 454 5.19
Commercial paper 2,996 42 5.56 2,532 33 5.19
Other short-term borrowings 9,100 115 5.09 9,414 119 5.00
Long-term debt 32,564 513 6.30 32,623 490 6.00
- -------------------------------------------------------------------------- ------------------
Total interest-bearing liabilities 191,680 2,347 4.92 186,679 2,198 4.68
=============== =================
Noninterest-bearing deposits 28,687 29,559
Other liabilities 11,340 10,616
Stockholders' equity 16,583 16,686
- --------------------------------------------------------------- --------
Total liabilities and stockholders' equity $ 248,290 $243,540
=============================================================== ========
Interest income and rate earned $ 4,336 8.06 % $ 4,169 7.84 %
Interest expense and equivalent rate paid 2,347 4.37 $ 2,198 4.12
- ------------------------------------------------------------------------------------ =================
Net interest income and margin (d) $ 1,989 3.69 % $ 1,971 3.72 %
==================================================================================== =================
</TABLE>
(a) Yields related to securities and loans exempt from federal and state
income taxes 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 and applicable state tax rates. Lease financing amounts include related
deferred income taxes. (b) The loan averages are stated net of unearned income,
and the averages include loans on which the accrual of interest has been
discontinued.
T-23
<PAGE> 43
<TABLE>
<CAPTION>
THIRD QUARTER 1999 SECOND QUARTER 1999 FIRST QUARTER 1999
----------------------------------------------------------------------------------------------------
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>
$ 593 7 4.43 % $ 574 7 4.27 % $ 1,322 17 5.42 %
8,545 107 4.97 7,989 93 4.68 11,332 123 4.40
10,182 167 6.52 9,141 139 6.09 7,984 118 5.97
46,798 813 6.96 38,996 646 6.63 38,074 628 6.60
1,100 18 6.62 1,192 19 6.50 1,240 22 6.97
695 19 10.62 719 19 10.59 735 19 10.55
------------------- ------------------- ------------------
1,795 37 8.17 1,911 38 8.03 1,975 41 8.30
------------------- ------------------- ------------------
51,331 1,036 8.01 52,714 1,013 7.71 53,418 996 7.55
2,654 50 7.59 2,668 50 7.44 2,613 49 7.61
8,421 166 7.80 8,446 159 7.56 8,532 167 7.94
4,904 154 12.57 4,956 161 13.03 4,792 150 12.49
4,695 69 5.82 4,223 65 6.17 4,393 64 5.94
------------------- ------------------- ------------------
72,005 1,475 8.14 73,007 1,448 7.95 73,748 1,426 7.83
------------------- ------------------- ------------------
25,002 439 7.03 21,822 382 6.99 19,560 357 7.31
2,169 74 13.64 2,620 89 13.73 2,650 88 13.22
28,158 642 9.08 33,703 739 8.78 33,511 733 8.83
------------------- ------------------- ------------------
55,329 1,155 8.33 58,145 1,210 8.33 55,721 1,178 8.50
------------------- ------------------- ------------------
127,334 2,630 8.22 131,152 2,658 8.12 129,469 2,604 8.12
------------------- ------------------- ------------------
4,100 79 7.60 4,172 76 7.31 4,439 72 6.54
------------------- ------------------- ------------------
199,347 3,840 7.67 193,935 3,657 7.55 194,595 3,603 7.46
================= ================== =================
8,477 9,544 10,134
21,338 20,477 19,694
-------- -------- --------
$229,162 $223,956 $224,423
======== ======== ========
37,254 266 2.82 37,839 242 2.57 37,953 244 2.60
20,087 159 3.14 20,131 153 3.06 20,422 157 3.11
32,600 407 4.95 33,500 421 5.04 35,114 448 5.18
5,345 62 4.60 5,167 58 4.46 5,243 60 4.71
7,545 112 5.91 5,293 80 6.05 5,534 83 6.04
------------------- ------------------- ------------------
102,831 1,006 3.88 101,930 954 3.75 104,266 992 3.86
29,940 357 4.73 28,688 332 4.64 26,782 309 4.68
2,287 28 4.83 2,087 23 4.42 1,982 23 4.73
7,973 105 5.26 8,117 101 4.98 11,280 135 4.86
31,112 434 5.59 27,129 369 5.44 23,968 333 5.55
------------------- ------------------- ------------------
174,143 1,930 4.41 167,951 1,779 4.24 168,278 1,792 4.31
================= ================== =================
30,593 31,862 31,996
9,127 8,442 8,108
15,299 15,701 16,041
-------- -------- --------
$229,162 $223,956 $224,423
======== ======== ========
$ 3,840 7.67 % $ 3,657 7.55 % $ 3,603 7.46 %
1,930 3.85 1,779 3.67 1,792 3.72
----------------- ------------------ -----------------
$ 1,910 3.82 % $ 1,878 3.88 % $ 1,811 3.74 %
----------------- ================== =================
</TABLE>
(c) Prior period loans held for sale included in loans have been
reclassified to other assets to conform to the presentation in 2000. (d) The net
interest margin includes (in basis points): 27, 23, 24, 19 and 18 for the
quarters ended March 31, 2000, December 31, 1999, September 30, 1999, June 30,
1999, and March 31, 1999, respectively, related to net interest income from
off-balance sheet derivative transactions.
T-24
<PAGE> 44
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
2000 1999
-------- ----------------------------------------------------
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 $ 7,854 10,081 6,987 8,143 9,968
Interest-bearing bank balances 1,037 1,073 647 335 699
Federal funds sold and securities purchased
under resale agreements 8,206 11,523 8,561 8,373 8,988
- ----------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 17,097 22,677 16,195 16,851 19,655
- ----------------------------------------------------------------------------------------------------------------------------------
Trading account assets 17,076 14,946 13,806 12,244 10,280
Securities available for sale 50,421 51,277 48,695 45,659 39,417
Investment securities 1,668 1,758 1,760 1,871 2,006
Loans, net of unearned income (a) 135,803 133,177 131,482 129,571 129,658
Allowance for loan losses (1,760) (1,757) (1,759) (1,785) (1,825)
- ----------------------------------------------------------------------------------------------------------------------------------
Loans, net (a) 134,043 131,420 129,723 127,786 127,833
- ----------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 5,171 5,180 5,024 5,080 5,098
Due from customers on acceptances 842 995 807 883 769
Goodwill and other intangible assets 5,581 5,626 4,842 4,934 4,983
Other assets (a) 21,749 19,145 13,556 14,144 12,659
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $253,648 253,024 234,408 229,452 222,700
==================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 29,885 31,375 28,737 31,703 31,757
Interest-bearing deposits 110,005 109,672 105,166 101,900 102,467
- ----------------------------------------------------------------------------------------------------------------------------------
Total deposits 139,890 141,047 133,903 133,603 134,224
Short-term borrowings 49,389 50,107 41,834 39,262 37,377
Bank acceptances outstanding 847 995 807 883 769
Other liabilities 13,595 12,191 10,441 10,066 9,496
Long-term debt 33,043 31,975 31,910 30,350 24,858
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 236,764 236,315 218,895 214,164 206,724
- ----------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock -- -- -- -- --
Common stock, $3.33-1/3 par value;
authorized 2 billion shares 3,280 3,294 3,195 3,188 3,227
Paid-in capital 6,021 5,980 4,808 4,644 4,651
Retained earnings 8,557 8,365 8,052 7,805 8,106
Accumulated other comprehensive income, net (974) (930) (542) (349) (8)
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 16,884 16,709 15,513 15,288 15,976
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $253,648 253,024 234,408 229,452 222,700
==================================================================================================================================
MEMORANDA
Securities available for sale - amortized cost $ 51,980 52,708 49,528 46,187 39,419
Investment securities - market value $ 1,714 1,809 1,830 1,954 2,128
Shares outstanding (In thousands) 984,148 988,315 958,440 956,286 968,139
==================================================================================================================================
</TABLE>
(a) Prior period loans held for sale included in loans have been reclassified to
other assets to conform to the presentation in 2000.
T-25
<PAGE> 45
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
2000 1999
----------- ------------------------------------------
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 (a) $ 2,848 2,792 2,615 2,638 2,584
Interest and dividends on securities available for sale 936 895 809 641 624
Interest and dividends on investment securities 30 31 31 32 35
Trading account interest 191 182 164 137 117
Other interest income (a) 308 243 193 176 212
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 4,313 4,143 3,812 3,624 3,572
- ----------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 1,195 1,102 1,006 954 992
Interest on short-term borrowings 639 606 490 456 467
Interest on long-term debt 513 490 434 369 333
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 2,347 2,198 1,930 1,779 1,792
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 1,966 1,945 1,882 1,845 1,780
Provision for loan losses 192 173 175 180 164
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 1,774 1,772 1,707 1,665 1,616
- ----------------------------------------------------------------------------------------------------------------------
FEE AND OTHER INCOME (a)
Service charges and fees 486 513 487 503 484
Commissions 468 398 207 205 204
Fiduciary and asset management fees 366 353 307 296 282
Advisory, underwriting and other Capital Markets fees 209 205 130 184 183
Principal investing 199 220 175 59 143
Other income 114 148 134 459 654
- ----------------------------------------------------------------------------------------------------------------------
Total fee and other income 1,842 1,837 1,440 1,706 1,950
- ----------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 1,429 1,310 1,092 1,130 1,184
Occupancy 157 148 126 130 142
Equipment 214 215 193 182 203
Advertising 30 48 61 64 61
Communications and supplies 125 135 106 117 123
Professional and consulting fees 71 79 59 83 66
Goodwill and other intangible amortization 102 105 95 95 96
Merger-related and restructuring charges (5) 6 -- -- 398
Sundry expense 259 314 208 252 236
- ----------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,382 2,360 1,940 2,053 2,509
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,234 1,249 1,207 1,318 1,057
Income taxes 394 407 405 445 351
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 840 842 802 873 706
======================================================================================================================
PER SHARE DATA
Basic earnings $ 0.86 0.86 0.84 0.92 0.73
Diluted earnings 0.85 0.86 0.84 0.90 0.73
Cash dividends $ 0.48 0.47 0.47 0.47 0.47
AVERAGE SHARES (IN THOUSANDS)
Basic 972,174 976,377 946,802 954,548 959,833
Diluted 984,095 984,537 953,964 961,793 968,626
======================================================================================================================
</TABLE>
(a) Prior period amounts have been reclassified to conform to the presentation
in 2000.
T-26
<PAGE> 46
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
-----------------------------
(In millions) 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 840 706
Adjustments to reconcile net income to net cash provided (used) by operating activities
Accretion and amortization of securities discounts and premiums, net 73 107
Provision for loan losses 192 164
Securitization gains (87) (256)
Gain on sale of mortgage servicing rights (3) (3)
Securities available for sale transactions 16 (25)
Depreciation, goodwill and other amortization 315 276
Trading account assets, net (2,130) (2,019)
Mortgage loans held for resale 163 1,457
Gain on sales of premises and equipment (10) (2)
Other assets, net (1,344) 5,463
Other liabilities, net 1,404 (2,559)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (571) 3,309
- --------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities available for sale 858 7,077
Maturities of securities available for sale 1,538 1,485
Purchases of securities available for sale (3,063) (8,848)
Calls and underdeliveries of investment securities 23 --
Maturities of investment securities 77 149
Purchases of investment securities (11) (132)
Origination of loans, net (2,728) (150)
Sales of premises and equipment 36 38
Purchases of premises and equipment (184) (225)
Goodwill and other intangible assets, net (57) (43)
Purchase of bank-owned separate account life insurance (24) (4)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (3,535) (653)
- --------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Sales of deposits, net (1,157) (8,243)
Securities sold under repurchase agreements and other short-term borrowings, net (718) (4,061)
Issuances of long-term debt 3,683 2,592
Payments of long-term debt (2,615) (683)
Sales of common stock 32 61
Purchases of common stock (221) (854)
Cash dividends paid (478) (450)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (1,474) (11,638)
- --------------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (5,580) (8,982)
Cash and cash equivalents, beginning of year 22,677 28,637
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 17,097 19,655
================================================================================================================================
NONCASH ITEMS
Transfer to securities available for sale from trading accounts $ -- 1,498
Transfer to securities available for sale from loans -- 917
Transfer to other assets from securities available for sale 1,307 --
Transfer to foreclosed properties from loans $ -- 4
=================================================================================================================================
</TABLE>
T-27
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST UNION CORPORATION FOR THE THREE MONTHS ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,854
<INT-BEARING-DEPOSITS> 1,037
<FED-FUNDS-SOLD> 8,206
<TRADING-ASSETS> 17,076
<INVESTMENTS-HELD-FOR-SALE> 50,421
<INVESTMENTS-CARRYING> 1,668
<INVESTMENTS-MARKET> 1,714
<LOANS> 141,046
<ALLOWANCE> (1,760)
<TOTAL-ASSETS> 253,648
<DEPOSITS> 139,890
<SHORT-TERM> 49,389
<LIABILITIES-OTHER> 13,595
<LONG-TERM> 33,043
0
0
<COMMON> 3,280
<OTHER-SE> 13,604
<TOTAL-LIABILITIES-AND-EQUITY> 253,648
<INTEREST-LOAN> 2,848
<INTEREST-INVEST> 966
<INTEREST-OTHER> 308
<INTEREST-TOTAL> 4,313
<INTEREST-DEPOSIT> 1,195
<INTEREST-EXPENSE> 2,347
<INTEREST-INCOME-NET> 1,966
<LOAN-LOSSES> 192
<SECURITIES-GAINS> (18)
<EXPENSE-OTHER> 2,382
<INCOME-PRETAX> 1,234
<INCOME-PRE-EXTRAORDINARY> 1,234
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 840
<EPS-BASIC> 0.86
<EPS-DILUTED> 0.85
<YIELD-ACTUAL> 3.69
<LOANS-NON> 1,175
<LOANS-PAST> 184
<LOANS-TROUBLED> 2
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,757
<CHARGE-OFFS> 217
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 1,760
<ALLOWANCE-DOMESTIC> 1,277
<ALLOWANCE-FOREIGN> 17
<ALLOWANCE-UNALLOCATED> 466
</TABLE>
<PAGE> 1
EXHIBIT 99
<PAGE> 2
EXHIBIT (99)
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended December 31, 1999
-----------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 53 320 35 -- 408
Provision for loan losses 6 63 -- -- 69
Fee and other income 460 43 52 (72) 483
Noninterest expense 222 113 60 -- 395
Income tax expense 101 71 11 (72) 111
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 184 116 16 -- 316
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 43.56 % 12.14 10.23 -- 20.48
Average loans, net $6,718 33,216 4,903 -- 44,837
Average deposits 4,766 5,501 4,415 -- 14,682
Average attributed stockholders'
equity (b) $1,669 3,800 665 -- 6,134
===================================================================================================================================
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 38 56 (2) 62 -- 154
Provision for loan losses -- -- -- -- -- --
Fee and other income 452 188 125 34 (26) 773
Noninterest expense 401 135 50 35 -- 621
Income tax expense 34 41 28 23 (10) 116
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 55 68 45 38 (16) 190
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 35.72 % 57.91 86.74 73.88 -- 53.31
Average loans, net $ 1 3,896 -- -- -- 3,897
Average deposits -- 5,862 -- 14,245 -- 20,107
Average attributed stockholders'
equity (b) $ 612 458 169 200 (33) 1,406
===================================================================================================================================
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 13 137 45 626 821
Provision for loan losses -- 21 35 17 73
Fee and other income 44 30 83 213 370
Noninterest expense 54 196 59 618 927
Income tax expense 1 (19) 13 78 73
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 2 (31) 21 126 118
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 8.44 % (9.64) 17.01 26.69 12.68
Average loans, net $ 440 12,685 1,689 10,410 25,224
Average deposits 900 243 15 66,856 68,014
Average attributed stockholders'
equity (b) $ 65 1,263 482 1,881 3,691
===================================================================================================================================
</TABLE>
(Continued)
1
<PAGE> 3
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended December 31, 1999
----------------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 20 59 43 226 348
Provision for loan losses 1 12 5 -- 18
Fee and other income -- -- -- 140 140
Noninterest expense 12 54 17 192 275
Income tax expense 2 (7) 8 67 70
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 5 -- 13 107 125
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 9.85 % -- 11.48 62.02 22.16
Average loans, net $ 2,756 14,615 8,741 -- 26,112
Average deposits -- -- -- 22,536 22,536
Average attributed stockholders'
equity (b) $ 162 924 450 688 2,224
===================================================================================================================================
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 408 154 562 821 348 214 1,945
Provision for loan losses 69 -- 69 73 18 13 173
Fee and other income 483 773 1,256 370 140 71 1,837
Noninterest expense 395 621 1,016 927 275 142 2,360
Income tax expense 111 116 227 73 70 37 407
- -----------------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 316 190 506 118 125 93 842
After-tax merger-related and
restructuring charges -- -- -- -- -- 4 4
- -----------------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 316 190 506 118 125 97 846
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 20.48 % 53.31 26.62 12.68 22.16 11.91 19.78
Average loans, net $44,837 3,897 48,734 25,224 26,112 31,149 131,219
Average deposits 14,682 20,107 34,789 68,014 22,536 11,641 136,980
Average attributed stockholders'
equity (b) $ 6,134 1,406 7,540 3,691 2,224 3,231 16,686
===================================================================================================================================
</TABLE>
(Continued)
2
<PAGE> 4
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1999
-----------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 54 291 30 -- 375
Provision for loan losses 19 48 -- -- 67
Fee and other income 330 33 53 (22) 394
Noninterest expense 192 87 48 -- 327
Income tax expense 59 71 13 (22) 121
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 114 118 22 -- 254
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 31.41 % 13.50 13.40 -- 18.14
Average loans, net $7,037 31,015 4,828 -- 42,880
Average deposits 4,422 5,218 3,805 -- 13,445
Average attributed stockholders'
equity (b) $1,436 3,450 637 -- 5,523
===================================================================================================================================
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 20 55 -- 53 -- 128
Provision for loan losses -- -- -- -- -- --
Fee and other income 229 172 118 30 (25) 524
Noninterest expense 193 115 51 30 -- 389
Income tax expense 22 43 25 20 (9) 101
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 34 69 42 33 (16) 162
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 42.85 % 63.84 78.74 76.78 -- 61.29
Average loans, net $ -- 3,765 -- -- -- 3,765
Average deposits -- 5,699 -- 14,302 -- 20,001
Average attributed stockholders'
equity (b) $ 324 426 162 168 (31) 1,049
===================================================================================================================================
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 19 143 53 620 835
Provision for loan losses -- 20 35 22 77
Fee and other income 41 (29) 99 212 323
Noninterest expense 53 147 49 611 860
Income tax expense 3 (20) 26 76 85
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 4 (33) 42 123 136
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 21.06 % (9.27) 34.88 26.25 14.08
Average loans, net $ 464 11,910 2,115 10,582 25,071
Average deposits 1,214 295 9 68,176 69,694
Average attributed stockholders'
equity (b) $ 77 1,410 474 1,849 3,810
===================================================================================================================================
</TABLE>
(Continued)
3
<PAGE> 5
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1999
---------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 21 60 45 230 356
Provision for loan losses 1 9 5 -- 15
Fee and other income -- -- -- 144 144
Noninterest expense 10 46 14 173 243
Income tax expense 4 (3) 10 77 88
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 6 8 16 124 154
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 15.22 % 3.01 13.52 74.43 26.31
Average loans, net $2,792 15,152 8,629 -- 26,573
Average deposits -- -- -- 22,422 22,422
Average attributed stockholders'
equity (b) $ 167 1,041 455 663 2,326
===================================================================================================================================
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 375 128 503 835 356 188 1,882
Provision for loan losses 67 -- 67 77 15 16 175
Fee and other income 394 524 918 323 144 55 1,440
Noninterest expense 327 389 716 860 243 121 1,940
Income tax expense 121 101 222 85 88 10 405
- -----------------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 254 162 416 136 154 96 802
After-tax merger-related and
restructuring charges -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 254 162 416 136 154 96 802
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 18.14 % 61.29 25.11 14.08 26.31 14.70 20.47
Average loans, net $42,880 3,765 46,645 25,071 26,573 29,045 127,334
Average deposits 13,445 20,001 33,446 69,694 22,422 7,862 133,424
Average attributed stockholders'
equity (b) $ 5,523 1,049 6,572 3,810 2,326 2,591 15,299
===================================================================================================================================
</TABLE>
(Continued)
4
<PAGE> 6
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1999
------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 70 292 47 -- 409
Provision for loan losses 17 44 -- -- 61
Fee and other income 284 42 51 (27) 350
Noninterest expense 188 100 49 -- 337
Income tax expense 47 71 19 (27) 110
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 102 119 30 -- 251
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 31.76 % 13.64 18.50 -- 18.49
Average loans, net $ 7,231 31,503 4,516 -- 43,250
Average deposits 4,872 5,237 4,539 -- 14,648
Average attributed stockholders'
equity (b) $ 1,287 3,517 651 -- 5,455
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 20 54 1 46 -- 121
Provision for loan losses -- (1) -- -- -- (1)
Fee and other income 234 169 111 29 (22) 521
Noninterest expense 206 126 66 31 -- 429
Income tax expense 18 37 17 17 (8) 81
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 30 61 29 27 (14) 133
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 35.88 % 57.33 44.10 73.32 -- 51.06
Average loans, net $ -- 3,757 -- -- -- 3,757
Average deposits -- 5,743 -- 14,096 -- 19,839
Average attributed stockholders'
equity (b) $ 333 421 158 149 (28) 1,033
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 22 139 62 609 832
Provision for loan losses -- 17 40 20 77
Fee and other income 109 115 108 212 544
Noninterest expense 65 153 62 612 892
Income tax expense 25 32 26 72 155
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 41 52 42 117 252
- -----------------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 127.62 % 15.03 36.50 25.91 26.67
Average loans, net $ 475 11,881 2,564 16,570 31,490
Average deposits 1,332 66 9 70,364 71,771
Average attributed stockholders'
equity (b) $ 129 1,396 467 1,809 3,801
===================================================================================================================================
</TABLE>
(Continued)
5
<PAGE> 7
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1999
----------------------------------------------------------------------
Small Real Cash Mgt.&
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 22 63 45 210 340
Provision for loan losses 1 14 7 -- 22
Fee and other income -- -- -- 138 138
Noninterest expense 10 58 17 182 267
Income tax expense 4 (10) 8 64 66
- ------------------------------------------------------------------------------------------------------------------
Net income $ 7 1 13 102 123
- ------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 16.23 % 0.32 11.27 65.30 22.32
Average loans, net $ 2,751 14,352 8,528 -- 25,631
Average deposits -- -- -- 22,536 22,536
Average attributed stockholders'
equity (b) $ 170 952 472 633 2,227
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 409 121 530 832 340 143 1,845
Provision for loan losses 61 (1) 60 77 22 21 180
Fee and other income 350 521 871 544 138 153 1,706
Noninterest expense 337 429 766 892 267 128 2,053
Income tax expense 110 81 191 155 66 33 445
- ------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 251 133 384 252 123 114 873
After-tax merger-related and
restructuring charges -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 251 133 384 252 123 114 873
- ------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 18.49 % 51.06 23.74 26.67 22.32 14.36 21.94
Average loans, net $43,250 3,757 47,007 31,490 25,631 27,024 131,152
Average deposits 14,648 19,839 34,487 71,771 22,536 4,998 133,792
Average attributed stockholders'
equity (b) $ 5,455 1,033 6,488 3,801 2,227 3,185 15,701
==================================================================================================================
</TABLE>
(Continued)
6
<PAGE> 8
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1999
---------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 57 276 47 -- 380
Provision for loan losses 21 34 -- -- 55
Fee and other income 402 61 48 (28) 483
Noninterest expense 214 107 54 -- 375
Income tax expense 78 73 16 (28) 139
- ------------------------------------------------------------------------------------------------------------
Net income $ 146 123 25 -- 294
- ------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 45.88 % 14.32 16.83 -- 22.16
Average loans, net $ 6,915 31,919 4,924 -- 43,758
Average deposits 5,012 5,414 5,502 -- 15,928
Average attributed stockholders'
equity (b) $ 1,287 3,478 613 -- 5,378
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 17 57 1 45 -- 120
Provision for loan losses -- 1 -- -- -- 1
Fee and other income 222 167 107 26 (22) 500
Noninterest expense 198 137 59 31 -- 425
Income tax expense 16 33 19 15 (8) 75
- ------------------------------------------------------------------------------------------------------------
Net income $ 25 53 30 25 (14) 119
- ------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 32.38 % 50.83 53.31 69.56 -- 48.05
Average loans, net $ -- 3,722 -- -- -- 3,722
Average deposits -- 5,806 -- 14,161 -- 19,967
Average attributed stockholders'
equity (b) $ 313 426 151 143 (28) 1,005
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 24 117 60 601 802
Provision for loan losses -- 10 46 23 79
Fee and other income 116 86 57 204 463
Noninterest expense 78 160 62 579 879
Income tax expense 24 13 3 78 118
- ------------------------------------------------------------------------------------------------------------
Net income $ 38 20 6 125 189
- ------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 83.99 % 5.91 5.54 27.33 19.90
Average loans, net $ 488 11,325 2,598 16,177 30,588
Average deposits 1,340 2 10 71,908 73,260
Average attributed stockholders'
equity (b) $ 183 1,341 469 1,857 3,850
============================================================================================================
</TABLE>
(Continued)
7
<PAGE> 9
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1999
----------------------------------------------------------------------------
Small Real Cash Mgt.&
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 20 59 46 219 344
Provision for loan losses 1 6 6 -- 13
Fee and other income -- -- -- 132 132
Noninterest expense 10 52 19 190 271
Income tax expense 3 (7) 8 62 66
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 6 8 13 99 126
- ------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 14.91 % 3.56 11.15 59.12 23.25
Average loans, net $ 2,696 14,609 8,387 -- 25,692
Average deposits -- -- -- 23,538 23,538
Average attributed stockholders'
equity (b) $ 168 877 478 681 2,204
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
First
Capital Capital Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 380 120 500 802 344 134 1,780
Provision for loan losses 55 1 56 79 13 16 164
Fee and other income 483 500 983 463 132 372 1,950
Noninterest expense 375 425 800 879 271 559 2,509
Income tax expense 139 75 214 118 66 (47) 351
- ------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 294 119 413 189 126 (22) 706
After-tax merger-related and
restructuring charges -- -- -- -- -- 259 259
- ------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 294 119 413 189 126 237 965
- ------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 22.16 % 48.05 26.24 19.90 23.25 26.67 24.32
Average loans, net $43,758 3,722 47,480 30,588 25,692 25,709 129,469
Average deposits 15,928 19,967 35,895 73,260 23,538 3,569 136,262
Average attributed stockholders'
equity (b) $ 5,378 1,005 6,383 3,850 2,204 3,604 16,041
========================================================================================================================
</TABLE>
(Continued)
8
<PAGE> 10
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended December 31, 1998
------------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 81 261 57 -- 399
Provision for loan losses (5) 34 10 -- 39
Fee and other income 262 64 47 (21) 352
Noninterest expense 216 114 50 -- 380
Income tax expense 44 66 17 (21) 106
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 88 111 27 -- 226
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 25.78 % 13.04 16.63 -- 16.70
Average loans, net $ 6,801 31,126 5,180 -- 43,107
Average deposits 5,095 5,529 5,913 -- 16,537
Average attributed stockholders'
equity (b) $ 1,360 3,371 644 -- 5,375
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 8 54 1 43 -- 106
Provision for loan losses -- 1 -- -- -- 1
Fee and other income 201 163 108 23 (21) 474
Noninterest expense 185 128 54 30 -- 397
Income tax expense 9 34 21 14 (8) 70
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 15 54 34 22 (13) 112
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 21.49 % 52.07 67.71 70.79 -- 47.87
Average loans, net $ -- 3,808 -- -- -- 3,808
Average deposits -- 5,377 -- 13,123 -- 18,500
Average attributed stockholders'
equity (b) $ 270 417 152 126 (26) 939
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 27 118 57 630 832
Provision for loan losses -- 3 59 23 85
Fee and other income 123 28 77 259 487
Noninterest expense 82 184 69 620 955
Income tax expense 26 (16) 2 94 106
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 42 (25) 4 152 173
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 88.72 % (7.91) 2.91 30.91 17.56
Average loans, net $ 420 8,092 2,636 16,015 27,163
Average deposits 1,407 65 9 73,332 74,813
Average attributed stockholders'
equity (b) $ 185 1,269 464 1,945 3,863
=============================================================================================================================
</TABLE>
(Continued)
9
<PAGE> 11
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended December 31, 1998
------------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 22 69 49 217 357
Provision for loan losses 1 13 6 -- 20
Fee and other income -- -- -- 127 127
Noninterest expense 11 54 18 197 280
Income tax expense 4 (5) 9 56 64
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 6 7 16 91 120
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 13.90 % 3.35 11.61 54.67 21.32
Average loans, net $ 2,658 15,080 8,651 -- 26,389
Average deposits -- -- -- 24,628 24,628
Average attributed stockholders'
equity (b) $ 166 877 517 660 2,220
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 399 106 505 832 357 104 1,798
Provision for loan losses 39 1 40 85 20 22 167
Fee and other income 352 474 826 487 127 302 1,742
Noninterest expense 380 397 777 955 280 475 2,487
Income tax expense 106 70 176 106 64 (317) 29
- -----------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 226 112 338 173 120 226 857
After-tax merger-related and
restructuring charges -- -- -- -- -- 136 136
- -----------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 226 112 338 173 120 362 993
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 16.70 % 47.87 21.24 17.56 21.32 32.52 22.49
Average loans, net $43,107 3,808 46,915 27,163 26,389 32,526 132,993
Average deposits 16,537 18,500 35,037 74,813 24,628 2,982 137,460
Average attributed stockholders'
equity (b) $ 5,375 939 6,314 3,863 2,220 4,416 16,813
=============================================================================================================================
</TABLE>
(Continued)
10
<PAGE> 12
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1998
------------------------------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 46 264 51 -- 361
Provision for loan losses (1) 68 -- -- 67
Fee and other income 38 81 60 (21) 158
Noninterest expense 145 103 43 -- 291
Income tax expense (36) 65 26 (21) 34
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ (24) 109 42 -- 127
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity (8.24) % 13.03 31.58 -- 9.97
Average loans, net $ 5,670 30,426 4,910 -- 41,006
Average deposits 5,146 5,323 4,796 -- 15,265
Average attributed stockholders'
equity (b) $ 1,183 3,317 528 -- 5,028
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 8 54 1 38 -- 101
Provision for loan losses -- 1 -- -- -- 1
Fee and other income 195 155 105 19 (21) 453
Noninterest expense 184 119 53 28 -- 384
Income tax expense 8 34 20 11 (8) 65
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 11 55 33 18 (13) 104
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 18.11 % 54.59 65.19 67.63 -- 46.59
Average loans, net $ -- 3,824 -- -- -- 3,824
Average deposits -- 5,134 -- 11,534 -- 16,668
Average attributed stockholders'
equity (b) $ 268 403 147 104 (27) 895
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 25 111 95 657 888
Provision for loan losses -- 3 42 35 80
Fee and other income 67 179 147 223 616
Noninterest expense 83 183 75 485 826
Income tax expense 3 40 47 138 228
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 6 64 78 222 370
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 14.64 % 18.31 64.21 44.89 36.82
Average loans, net $ 417 7,887 3,648 15,966 27,918
Average deposits 1,413 159 11 75,948 77,531
Average attributed stockholders'
equity (b) $ 143 1,387 473 1,968 3,971
=============================================================================================================================
</TABLE>
(Continued)
11
<PAGE> 13
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1998
-------------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 22 80 53 207 362
Provision for loan losses 1 12 6 -- 19
Fee and other income -- -- -- 127 127
Noninterest expense 9 49 13 183 254
Income tax expense 4 2 13 58 77
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 8 17 21 93 139
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 17.98 % 8.22 14.96 58.01 25.26
Average loans, net $ 2,648 15,530 9,048 -- 27,226
Average deposits -- -- -- 23,692 23,692
Average attributed stockholders'
equity (b) $ 158 820 554 636 2,168
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 361 101 462 888 362 131 1,843
Provision for loan losses 67 1 68 80 19 72 239
Fee and other income 158 453 611 616 127 459 1,813
Noninterest expense 291 384 675 826 254 167 1,922
Income tax expense 34 65 99 228 77 96 500
- -----------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 127 104 231 370 139 255 995
After-tax merger-related and
restructuring charges -- -- -- -- -- 16 16
- -----------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 127 104 231 370 139 271 1,011
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 9.97 % 46.59 15.47 36.82 25.26 24.54 23.42
Average loans, net $41,006 3,824 44,830 27,918 27,226 33,712 133,686
Average deposits 15,265 16,668 31,933 77,531 23,692 3,058 136,214
Average attributed stockholders'
equity (b) $ 5,028 895 5,923 3,971 2,168 4,382 16,444
=============================================================================================================================
</TABLE>
(Continued)
12
<PAGE> 14
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1998
------------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 38 271 37 -- 346
Provision for loan losses 6 26 1 -- 33
Fee and other income 297 57 47 (21) 380
Noninterest expense 192 104 54 -- 350
Income tax expense 47 75 11 (21) 112
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 90 123 18 -- 231
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 33.84 % 15.92 13.55 -- 19.73
Average loans, net $ 5,191 29,562 5,088 -- 39,841
Average deposits 4,021 5,117 4,484 -- 13,622
Average attributed stockholders'
equity (b) $ 1,067 3,094 530 -- 4,691
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 10 53 1 39 -- 103
Provision for loan losses -- 2 -- -- -- 2
Fee and other income 194 157 102 18 (23) 448
Noninterest expense 170 130 56 26 -- 382
Income tax expense 13 30 18 12 (9) 64
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 21 48 29 19 (14) 103
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 31.83 % 48.93 52.85 72.36 -- 47.07
Average loans, net $ 1 3,608 -- -- -- 3,609
Average deposits -- 4,787 -- 11,150 -- 15,937
Average attributed stockholders'
equity (b) $ 267 399 145 105 (29) 887
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Home
Equity &
First The Retail
Union Money Credit Branch
(In millions) Mortgage Store Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 24 41 84 672 821
Provision for loan losses -- 3 57 19 79
Fee and other income 99 11 57 239 406
Noninterest expense 77 26 61 574 738
Income tax expense 17 9 9 122 157
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 29 14 14 196 253
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 65.14 % 21.90 12.22 39.01 34.72
Average loans, net $ 531 6,062 3,676 16,177 26,446
Average deposits 1,428 105 13 77,895 79,441
Average attributed stockholders'
equity (b) $ 173 264 468 2,019 2,924
=============================================================================================================================
</TABLE>
(Continued)
13
<PAGE> 15
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, 1998
------------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 21 77 50 196 344
Provision for loan losses 1 9 5 -- 15
Fee and other income -- -- -- 133 133
Noninterest expense 10 52 14 192 268
Income tax expense 4 3 12 52 71
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 6 13 19 85 123
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 16.63 % 6.30 14.36 56.25 23.85
Average loans, net $ 2,571 15,483 8,850 -- 26,904
Average deposits -- -- -- 22,028 22,028
Average attributed stockholders'
equity (b) $ 155 753 535 599 2,042
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 346 103 449 821 344 191 1,805
Provision for loan losses 33 2 35 79 15 21 150
Fee and other income 380 448 828 406 133 164 1,531
Noninterest expense 350 382 732 738 268 1,071 2,809
Income tax expense 112 64 176 157 71 (276) 128
- -----------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 231 103 334 253 123 (461) 249
After-tax merger-related and
restructuring charges -- -- -- -- -- 634 634
- -----------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 231 103 334 253 123 173 883
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 19.73 % 47.07 24.02 34.72 23.85 17.00 23.89
Average loans, net $39,841 3,609 43,450 26,446 26,904 34,236 131,036
Average deposits 13,622 15,937 29,559 79,441 22,028 6,013 137,041
Average attributed stockholders'
equity (b) $ 4,691 887 5,578 2,924 2,042 4,081 14,625
=============================================================================================================================
</TABLE>
(Continued)
14
<PAGE> 16
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1998
------------------------------------------------------------------------------------------
Investment Corporate
(In millions) Banking Banking International Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL MARKETS
Income statement data
Net interest income $ 46 270 26 -- 342
Provision for loan losses 1 16 1 -- 18
Fee and other income 176 41 59 (20) 256
Noninterest expense 136 115 46 -- 297
Income tax expense 26 68 15 (20) 89
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 59 112 23 -- 194
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 19.43 % 14.36 22.12 -- 16.37
Average loans, net $ 4,539 29,736 4,168 -- 38,443
Average deposits 3,163 4,717 3,560 -- 11,440
Average attributed stockholders'
equity (b) $ 1,231 3,150 443 -- 4,824
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Retail
Brokerage & Wealth
Insurance & Trust Mutual CAP
(In millions) Services Services Funds Account Other Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL MANAGEMENT
Income statement data
Net interest income $ 12 51 -- 35 -- 98
Provision for loan losses -- 1 -- -- -- 1
Fee and other income 188 150 96 17 (20) 431
Noninterest expense 169 130 54 25 -- 378
Income tax expense 12 27 16 10 (8) 57
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 19 43 26 17 (12) 93
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 29.70 % 44.60 48.56 71.14 -- 43.51
Average loans, net $ -- 3,502 -- -- -- 3,502
Average deposits -- 4,872 -- 10,879 -- 15,751
Average attributed stockholders'
equity (b) $ 264 393 135 97 (26) 863
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
First Retail
Union Home Credit Branch
(In millions) Mortgage Equity Cards Products Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSUMER
Income statement data
Net interest income $ 19 39 94 640 792
Provision for loan losses 1 2 53 25 81
Fee and other income 51 10 57 255 373
Noninterest expense 73 28 62 560 723
Income tax expense (1) 7 14 118 138
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ (3) 12 22 192 223
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity (7.16) % 22.49 19.48 37.91 31.78
Average loans, net $ 531 5,057 3,884 16,858 26,330
Average deposits 1,109 -- 15 77,719 78,843
Average attributed stockholders'
equity (b) $ 125 210 464 2,045 2,844
=============================================================================================================================
</TABLE>
(Continued)
15
<PAGE> 17
BUSINESS SEGMENTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1998
-------------------------------------------------------------------------------------------
Small Real Cash Mgt. &
Business Estate Deposit
(In millions) Banking Lending Banking Services Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL
Income statement data
Net interest income $ 20 66 54 196 336
Provision for loan losses 1 7 2 -- 10
Fee and other income -- -- -- 145 145
Noninterest expense 9 55 15 191 270
Income tax expense 4 -- 14 57 75
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 6 4 23 93 126
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 17.16 % 2.98 15.92 60.42 25.54
Average loans, net $ 2,532 13,302 9,530 -- 25,364
Average deposits -- -- -- 22,191 22,191
Average attributed stockholders'
equity (b) $ 151 657 578 621 2,007
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Capital Capital First Union Treasury/
(In millions) Markets Mgt. Securities Consumer Commercial Nonbank Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED (c)
Income statement data
Net interest income $ 342 98 440 792 336 263 1,831
Provision for loan losses 18 1 19 81 10 25 135
Fee and other income 256 431 687 373 145 144 1,349
Noninterest expense 297 378 675 723 270 170 1,838
Income tax expense 89 57 146 138 75 58 417
- -----------------------------------------------------------------------------------------------------------------------------
Net income after
merger-related and
restructuring charges 194 93 287 223 126 154 790
After-tax merger-related and
restructuring charges -- -- -- -- -- 19 19
- -----------------------------------------------------------------------------------------------------------------------------
Net income before
merger-related and
restructuring charges $ 194 93 287 223 126 173 809
- -----------------------------------------------------------------------------------------------------------------------------
Performance and other data
Return on average attributed
stockholders' equity 16.37 % 43.51 20.47 31.78 25.54 13.83 21.01
Average loans, net $38,443 3,502 41,945 26,330 25,364 36,840 130,479
Average deposits 11,440 15,751 27,191 78,843 22,191 6,349 134,574
Average attributed stockholders'
equity (b) $ 4,824 863 5,687 2,844 2,007 5,074 15,612
=============================================================================================================================
</TABLE>
(a) Business Segment information reflects the April 1998 pooling of interests
merger with CoreStates. The information also reflects the 1998 divestiture of
$3.4 billion of deposits, $2.2 billion of which related to the CoreStates
merger. Information related to the purchase accounting acquisitions of The Money
Store and EVEREN on June 30, 1998, and October 1, 1999, respectively, is
included from the date the acquisitions occurred. See the "Business Segments"
discussion in Management's Analysis of Operations for further information about
the methodology and assumptions used in presenting this information.
(b) Average attributed stockholders' equity excludes merger-related and
restructuring charges. The return on average attributed stockholders' equity for
the Capital Management Mutual Funds unit is net of the amount included in Other.
(c) In the consolidated data, First Union Securities represents the total of
Capital Markets and Capital Management.
16
