EXHIBIT 99(a)
NEWS
[First Union
logo appears here]
Thursday Media Contact:
July 12, 2001 Ginny Mackin 704-383-3715
Mary Eshet 704-383-7777
Investor Contact:
Alice Lehman 704-374-4139
FIRST UNION REPORTS OPERATING EARNINGS OF $649 MILLION, OR 66 CENTS
PER SHARE IN 2nd QUARTER 2001
CEO Thompson says First Union has momentum and proposed First Union-Wachovia
merger will leverage strengths to continue building value for shareholders
SECOND QUARTER 2001 OVERVIEW
o Cash operating earnings of 73 cents per share; operating earnings of 66
cents, exceeding market expectations.
o Outstanding results in the General Bank, with revenue up 9 percent and
operating earnings up 28 percent from second quarter 2000.
o Core deposits grew 4 percent, excluding divested businesses.
o Operating expense decreased 8 percent from second quarter 2000.
o Net charge-offs of 0.52 percent declined 17 basis points from second
quarter 2000.
o Tier 1 capital ratio improved for the fourth consecutive quarter, to
7.40 percent.
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Earnings Highlights Three Months Ended
June 30, March 31, June 30,
---------------------------------
(In millions, except per share data) 2001 2001 2000
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Earnings
Operating earnings (a) $ 649 610 714
Diluted earnings per share (Operating earnings) 0.66 0.62 0.73
Net income (As reported) 633 584 (2,199)
Diluted earnings per share (As reported) $ 0.64 0.59 (2.27)
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Financial ratios (Operating earnings)
Return on average stockholders' equity 16.19 % 15.64 17.74
Overhead efficiency ratio 64.34 65.18 64.36
Net interest margin 3.41 3.42 3.51
Fee and other income as % of total revenue 48.32 47.13 47.50
Dividend payout ratio 36.36 % 38.71 65.75
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Cash operating earnings
Net income $ 723 684 807
Diluted earnings per share $ 0.73 0.69 0.82
Return on average tangible stockholders' equity 23.35 % 22.91 30.18
Overhead efficiency ratio 62.06 % 62.80 61.64
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Asset quality
Allowance as % of nonaccrual and restructured
loans 144 % 143 215
Net charge-offs as % of average loans, net 0.52 0.53 0.69
Nonperforming assets to loans, net,
foreclosed properties and assets held for sale 1.23 % 1.30 0.87
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(a) Operating earnings are reported net income excluding after tax net
restructuring, merger-related and other charges and gains.
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Note: The first half of 2000 included the results of businesses that were
divested in connection with the strategic repositioning announced in June 2000,
as well as extraordinarily strong principal investing revenue.
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FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 2
CHARLOTTE, N.C. - First Union (NYSE:FTU) today reported second quarter 2001 cash
operating earnings of $723 million, or 73 cents per share; operating earnings of
$649 million, or 66 cents per share; and net income of $633 million, or 64 cents
per share. Highlights of the quarter included broad revenue growth, solid
expense control, strengthened capital ratios and improved loan losses.
In the six months ended June 30, 2001, cash operating earnings were $1.4
billion, or $1.43 per share; operating earnings were $1.3 billion, or $1.28 per
share; and net income was $1.2 billion, or $1.23 per share.
The cash operating return on average tangible stockholders' equity was 23.35
percent in the second quarter of 2001. Cash operating earnings are operating
earnings before goodwill and other intangible amortization. Based on second
quarter 2001 operating earnings, First Union's return on average stockholders'
equity was 16.19 percent.
"These strong operating results underscore First Union's momentum. We are
extremely pleased with the revenue growth in all of our businesses this year,
particularly the excellent results from our General Bank," said Ken Thompson,
First Union chairman and CEO. "In addition, capital ratios improved, credit
quality was stable and expenses decreased as expense management becomes more and
more a part of our culture.
"With our restructuring now complete, we are seeing the results, which we
believe provide us a firm foundation for continued growth. We achieved these
solid results while continuing to make excellent progress on planning for a
smooth integration with our merger partner, Wachovia. This is exactly the right
platform to leverage our strengths, and continue building value for
shareholders. We have enormous optimism about our future together," he said.
Net Interest Income
Net interest income on a tax-equivalent basis was $1.7 billion in the second
quarter of 2001, a 10 percent decline from $1.9 billion in the second quarter of
2000, largely due to the reduction in earning assets related to the sale of
loans and securities in connection with First Union's strategic repositioning
announced in June 2000. The net interest margin was 3.41 percent in the second
quarter of 2001 and 3.51 percent in the second quarter of 2000.
Fee and Other Income
On an operating basis, fee and other income in the second quarter of 2001 was
$1.6 billion, down 7 percent from the second quarter of 2000, attributable to a
$263 million decline in principal investing revenue, partially offset by
across-the-board growth in other fee income categories. On an operating basis,
fee and other income as a percentage of total revenue was 48 percent in the
second quarter of 2001 and 47 percent in the second quarter of 2000.
Provision for Loan Losses
The loan loss provision was $223 million in the second quarter of 2001, a
decline of $5 million from the second quarter of 2000. The provision exceeded
net charge-offs by $66 million. At June 30, 2001, the ratio of allowance to net
loans increased to 1.44 percent from 1.33 percent at June 30, 2000.
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FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 3
Noninterest Expense
On an operating basis, noninterest expense was $2.2 billion in the second
quarter of 2001, down 8 percent from the second quarter of 2000, reflecting the
winding down of divested businesses and solid expense control.
Restructuring and Other Charges and Gains
Restructuring and other charges and gains in the second quarter of 2001,
primarily related to the 2000 strategic repositioning, amounted to a pre-tax
charge of $27 million ($16 million after-tax) or 2 cents per share.
Net Charge-offs and Nonperforming Assets
Net charge-offs amounted to $157 million in the second quarter of 2001, a
decrease of $71 million from the second quarter of 2000. This represented 0.52
percent of average net loans, down 17 basis points from the second quarter of
2000.
At June 30, 2001, nonperforming assets were $1.6 billion, or 1.23 percent of net
loans, foreclosed properties and assets held for sale, an increase of 30 percent
from June 30, 2000. Second quarter 2001 nonperforming assets included $250
million of nonperforming assets classified as held for sale.
Lines of Business
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General Bank Highlights
Three Months Ended
June 30, March 31, June 30,
-------------------------------------
2001 2001 2000
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(In millions)
Total revenue $ 1,545 1,453 1,412
Provision for loan losses 98 101 51
Noninterest expense 935 908 966
Operating earnings 343 295 268
Average loans, net 65,501 63,771 58,105
Average core deposits 99,424 98,415 97,499
Economic capital $ 3,744 3,618 3,555
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The General Bank has three major business lines: Consumer, Commercial and Small
Business. General Bank total revenue increased 9 percent from the second quarter
of 2000. The General Bank produced record consumer loan volume and solid deposit
growth in the second quarter of 2001, reflecting improved sales production, a
beneficial rate environment and a renewed focus on attracting low cost core
deposits. Fee and other income grew 30 percent year over year, led by higher
mortgage-related income, service charges and other fee income. The Consumer
provision increased $31 million, of which $18 million was related to a market
valuation adjustment on nonperforming assets moved to assets held for sale and
increased charge-offs on a more seasoned First Union Home Equity portfolio.
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FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 4
The Commercial and Small Business provisions increased $16 million. The impact
of expense control initiatives was reflected in a 3 percent decline in
noninterest expense from the second quarter of 2000 and an operating overhead
efficiency ratio that improved from 67 percent in the second quarter of 2000 to
59 percent in the second quarter of this year.
Average loans increased 13 percent from the second quarter of 2000, with
across-the-board strength in consumer lending, while commercial real estate and
small business lending drove commercial lending growth. Average core deposits
grew 2 percent from the second quarter of 2000, primarily in low cost interest
checking, savings and money market accounts.
Overall customer satisfaction scores as measured by Gallup improved for the
ninth consecutive quarter. Household retention also remained strong. Online
customer growth continued to be rapid, with a 55 percent increase from June 30,
2000, to 2.9 million enrollments at June 30, 2001. This included 130,000 online
wholesale enrollments, which grew 136 percent from June 30, 2000.
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Capital Management Highlights
Three Months Ended
June 30, March 31, June 30,
-------------------------------------
2001 2001 2000
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(In millions)
Total revenue $ 838 831 829
Provision for loan losses - - -
Noninterest expense 667 659 624
Operating earnings 113 113 135
Average loans, net 4,559 4,497 4,250
Average core deposits 7,976 8,003 7,888
Economic capital $ 986 985 972
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Capital Management includes Retail Brokerage Services, Asset Management, and
Wealth and Trust Services. These businesses, with their balanced approach and
multiple channels of distribution, performed solidly in the second quarter of
2001 as mutual fund assets and annuity sales through the bank channel reached an
all-time high. Total revenue increased modestly from the second quarter of 2000
primarily due to increased brokerage production largely related to annuity
sales, as well as the impact of the acquisitions since the second quarter of
2000. Noninterest expense increased 7 percent from the second quarter of 2000,
primarily due to increased corporate allocations and these acquisitions.
In partnership with the General Bank, bank channel annuity sales reached a
quarterly record of $717 million in the second quarter of 2001, a 54 percent
increase from the second quarter of 2000. Mutual fund assets grew to a
quarter-end record $90 billion, up 6 percent from year-end 2000, driven by
strong money market inflows.
Assets under management increased modestly from year-end 2000 to $172 billion at
June 30, 2001. Assets under management include $82 billion in trust assets in
addition to the $90 billion in mutual fund assets.
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FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 5
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Corporate and Investment Banking Highlights
Three Months Ended
June 30, March 31, June 30,
-------------------------------------
2001 2001 2000
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(In millions)
Total revenue $ 773 725 897
Provision for loan losses 93 70 126
Noninterest expense 490 467 509
Operating earnings 153 150 199
Average loans, net 41,145 42,511 42,787
Average core deposits 10,202 9,465 8,928
Economic capital $ 6,112 6,278 5,940
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Our Corporate and Investment Banking businesses offer a range of fixed income
products, debt and equity products, structured products and advisory services
for corporate and institutional clients. Total revenue declined 14 percent from
the second quarter of 2000, primarily related to anticipated lower principal
investing revenue, which was down $263 million from a strong second quarter of
2000. Excluding principal investing, revenue increased 21 percent and operating
earnings were up 200 percent from the second quarter of 2000, reflecting broad
line of business growth. Fixed income fee and other income increased 53 percent
from the second quarter of 2000, primarily driven by fixed income sales and
trading. The agency businesses, primarily merger and acquisition advisory
services, loan syndications and equity capital markets, grew 3 percent from the
second quarter of 2000. Noninterest expense decreased 4 percent from the second
quarter of 2000.
---
First Union (NYSE:FTU), with $246 billion in assets and stockholders' equity of
$16 billion at June 30, 2001, is a leading provider of financial services to 15
million retail and corporate customers throughout the East Coast and the nation.
The company operates full-service banking offices in 11 East Coast states and
Washington, D.C., and full-service brokerage offices in 47 states. Online
banking and brokerage products and services can be accessed through
www.firstunion.com.
Earnings Conference Call
First Union Chairman and CEO Ken Thompson and CFO Bob Kelly will review First
Union's second quarter results in a conference call and audio webcast beginning
at 9 a.m. today. Supplemental materials relating to the second quarter results
are available on the Internet at www.ftuinvestor.com, and investors are
encouraged to access such materials.
Webcast Instructions: To gain access to the webcast, which will be
"listen-only," go to www.ftuinvestor.com and click on the link First Union
Second Quarter Earnings Audio Webcast. In order to listen to the webcast, you
will need to download Real Player Basic 8.
Teleconference Instructions: The telephone number for the conference call is
888-606-7037 for U.S. callers or 415-228-4891 for international callers. You
will be asked to tell the answering coordinator your name and the name of your
firm. Mention the conference Access Code: 33345.
Replay: Thursday, July 12, from noon until 5 p.m. EDT on Monday, July 23. Replay
telephone number is 402-220-3026.
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FIRST UNION REPORTS 2ND QUARTER EARNINGS/Page 6
This news release and the conference call may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
including, without limitation, (i) statements about the benefits of the merger
between First Union
Corporation and Wachovia Corporation, including future financial and operating
results, cost savings, enhanced revenues, and accretion to reported earnings
that may be realized from the merger; (ii) statements with respect to First
Union's plans, objectives, expectations and intentions and other statements that
are not historical facts; and (iii) other statements identified by words such as
"believes", "expects", "anticipates", "estimates", "intends", "plans",
"targets", "projects" and similar expressions. These statements are based upon
the current beliefs and expectations of First Union's management and are subject
to significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements: (1) the risk that the businesses of First Union and
Wachovia will not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected; (2) expected revenue
synergies and cost savings from the merger may not be fully realized or realized
within the expected time frame; (3) revenues following the merger may be lower
than expected; (4) deposit attrition, operating costs, customer loss and
business disruption following the merger, including, without limitation,
difficulties in maintaining relationships with employees, may be greater than
expected; (5) the ability to obtain governmental approvals of the merger on the
proposed terms and schedule; (6) the failure of First Union's and Wachovia's
stockholders to approve the merger; (7) competitive pressures among depository
and other financial institutions may increase significantly and have an effect
on pricing, spending, third-party relationships and revenues; (8) the strength
of the United States economy in general and the strength of the local economies
in which First Union conducts operations may be different than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit, including the resultant effect on First Union's loan
portfolio and allowance for loan losses; (9) changes in the U.S. and foreign
legal and regulatory framework; and (10) adverse conditions in the stock market,
the public debt market and other capital markets (including changes in interest
rate conditions) and the impact of such conditions on First Union's and the
combined company's investment banking and asset management activities.
Additional factors that could cause First Union's results to differ materially
from those described in the forward-looking statements can be found in First
Union's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange
Commission and available at the SEC's Internet site (http://www.sec.gov). All
subsequent written and oral forward-looking statements concerning the proposed
transaction with Wachovia or other matters attributable to First Union or any
person acting on its behalf are expressly qualified in their entirety by the
cautionary statements above. First Union does not undertake any obligation to
update any forward-looking statement to reflect circumstances or events that
occur after the date the forward-looking statements are made.
Additional Information
The proposed merger between First Union and Wachovia will be submitted to First
Union's and Wachovia's stockholders for their consideration. Stockholders are
urged to read the definitive joint proxy statement/prospectus regarding the
proposed transaction and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because they contain
(or will contain) important information. You will be able to obtain a free copy
of the joint proxy statement/prospectus, as well as other filings containing
information about First Union and Wachovia, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC
filings that have been or will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to First Union, Investor Relations, One First Union Center, Charlotte,
North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations,
100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397).
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PAGE 7
FIRST UNION CORPORATION
FINANCIAL HIGHLIGHTS
(Unaudited)
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2001 2000
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(Dollars in millions, except Second First Fourth Third Second
per share data) Quarter Quarter Quarter Quarter Quarter
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FINANCIAL HIGHLIGHTS
Operating Earnings
Net interest income - tax-equivalent $ 1,742 1,734 1,757 1,860 1,930
Fee and other income 1,629 1,546 1,582 1,645 1,746
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Total revenue - tax-equivalent 3,371 3,280 3,339 3,505 3,676
Provision for loan losses 223 219 192 142 228
Noninterest expense 2,169 2,138 2,132 2,328 2,366
Income taxes - tax-equivalent 330 313 334 333 368
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Income before restructuring, merger-
related and other charges and
cumulative effect of a change in
accounting principle (Operating earnings) 649 610 681 702 714
After-tax restructuring, merger-related
and other charges (16) (26) (36) 150 (2,913)
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Income (loss) before cumulative effect
of a change in accounting principle 633 584 645 852 (2,199)
Cumulative effect of a change in the
accounting for beneficial interests, net of tax - - (46) - -
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Net income (loss) (As reported) $ 633 584 599 852 (2,199)
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DILUTED EARNINGS PER SHARE
Income before restructuring, merger-
related and other charges and
cumulative effect of a change in
accounting principle $ 0.66 0.62 0.69 0.71 0.73
Income (loss) before cumulative effect
of a change in accounting principle 0.64 0.59 0.65 0.86 (2.27)
Net income (loss) $ 0.64 0.59 0.60 0.86 (2.27)
====================================================================================================================================
PROFITABILITY (Operating earnings)
Return on average stockholders' equity 16.19 % 15.64 15.36 15.76 17.74
Net interest margin 3.41 3.42 3.46 3.52 3.51
Fee and other income as % of total revenue 48.32 47.13 47.38 46.93 47.50
Overhead efficiency ratio 64.34 65.18 63.85 66.42 64.36
Effective income tax rate 31.54 % 31.54 31.21 30.43 32.45
====================================================================================================================================
CASH OPERATING EARNINGS
Net income $ 723 684 753 778 807
Diluted earnings per share $ 0.73 0.69 0.76 0.79 0.82
Return on average tangible stockholders' equity 23.35 % 22.91 21.55 22.15 30.18
Return on average stockholders' equity 18.04 17.52 17.00 17.47 20.04
Overhead efficiency ratio 62.06 % 62.80 61.46 64.17 61.64
Operating leverage $ 59 (67) 31 (154) (136)
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PAGE 8
FIRST UNION CORPORATION
OTHER FINANCIAL DATA
(Unaudited)
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2001 2000
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(Dollars in millions, except Second First Fourth Third Second
per share data) Quarter Quarter Quarter Quarter Quarter
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CAPITAL ADEQUACY (a)
Tier I capital ratio 7.40 % 7.18 7.02 7.00 6.65
Total capital ratio 11.48 11.33 11.19 11.32 10.57
Leverage ratio 6.01 % 5.88 5.92 5.73 5.34
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ASSET QUALITY
Allowance as % of loans, net 1.44 % 1.43 1.39 1.39 1.33
Allowance as % of nonperforming assets 133 132 135 181 193
Net charge-offs as % of average loans, net 0.52 0.53 0.64 0.46 0.69
Nonperforming assets to loans, net,
foreclosed properties and assets
held for sale 1.23 % 1.30 1.22 0.98 0.87
====================================================================================================================================
OTHER DATA
Employees 67,420 69,362 70,639 70,533 72,890
Branches 2,162 2,164 2,193 2,253 2,258
ATMs 3,419 3,676 3,772 3,831 3,832
Shares outstanding (In thousands) 979,205 981,268 979,963 986,004 986,394
Common stock price $ 34.94 33.00 27.81 32.19 25.00
Book value per common share $ 16.49 16.39 15.66 15.00 14.14
Common stock price to book value 212 % 201 178 215 177
Market capitalization $ 34,213 32,382 27,253 31,739 24,660
Dividends paid per common share $ 0.24 0.24 0.48 0.48 0.48
====================================================================================================================================
AVERAGE BALANCE SHEET DATA
Commercial loans, net $ 76,378 77,270 76,253 75,380 75,951
Consumer loans, net 42,834 42,580 43,840 48,095 56,663
Loans, net 119,212 119,850 120,093 123,475 132,614
Earning assets 204,673 203,720 202,606 211,089 220,061
Total assets 247,254 245,469 239,375 246,818 255,583
Core deposits 119,035 118,192 118,944 118,074 118,256
Total deposits 136,979 137,282 138,329 143,112 141,204
Interest-bearing liabilities 185,224 183,995 181,832 190,146 196,954
Stockholders' equity $ 16,026 15,846 14,753 14,236 16,614
====================================================================================================================================
PERIOD END BALANCE SHEET DATA
Commercial loans, net $ 79,529 80,470 80,240 79,361 78,615
Consumer loans, net 42,963 42,383 43,520 44,058 49,744
Loans, net 122,492 122,853 123,760 123,419 128,359
Goodwill and other intangible assets
Goodwill 3,476 3,524 3,481 3,551 3,510
Deposit base premium 140 157 174 195 215
Other 9 9 9 10 11
Total assets 245,941 252,949 254,170 246,640 257,994
Core deposits 121,022 120,786 122,383 118,317 119,352
Total deposits 138,567 140,795 142,668 138,870 144,864
Stockholders' equity $ 16,144 16,081 15,347 14,795 13,951
====================================================================================================================================
(a) The second quarter of 2001 is based on estimates.
PAGE 9
FIRST UNION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended June 30, 2001 Six Months Ended June 30, 2001
--------------------------------------------------------------------------------
Restructuring Restructuring
and Other and Other
Operating Charges/ As Operating Charges/ As
(In millions, except per share data) Earnings Gains Reported Earnings Gains Reported
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Net interest income $ 1,711 - 1,711 3,413 - 3,413
Provision for loan losses 223 - 223 442 - 442
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Net interest income after provision
for loan losses 1,488 - 1,488 2,971 - 2,971
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Fee and other income
Service charges and fees 486 - 486 954 - 954
Advisory, underwriting and other
investment banking fees 238 - 238 436 - 436
Other income
Security transactions - portfolio - - - (16) - (16)
Asset sales and securitization 64 (8) 56 76 (52) 24
Gain on sale of branches - - - - 73 73
Other income 841 9 850 1,725 8 1,733
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Total fee and other income 1,629 1 1,630 3,175 29 3,204
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Noninterest expense
Restructuring charges - (69) (69) - (67) (67)
Other noninterest expense 2,169 97 2,266 4,307 166 4,473
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Total noninterest expense 2,169 28 2,197 4,307 99 4,406
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Income before income taxes (benefits) 948 (27) 921 1,839 (70) 1,769
Income taxes (benefits) 299 (11) 288 580 (28) 552
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Net income $ 649 (16) 633 1,259 (42) 1,217
===================================================================================================================================
Diluted earnings per share $ 0.66 (0.02) 0.64 1.28 (0.05) 1.23
===================================================================================================================================
PAGE 10
FIRST UNION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATING EARNINGS (a)
(Unaudited)
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2001 2000
---------------------------- -------------------------------------
Second First Fourth Third Second
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter
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INTEREST INCOME
Interest and fees on loans $ 2,420 2,526 2,701 2,768 2,929
Interest and dividends on securities 881 925 939 975 1,023
Trading account interest 198 204 199 212 218
Other interest income 321 370 425 510 322
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Total interest income 3,820 4,025 4,264 4,465 4,492
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INTEREST EXPENSE
Interest on deposits 1,192 1,253 1,367 1,422 1,285
Interest on short-term borrowings 454 493 538 609 750
Interest on long-term debt 463 577 627 600 552
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Total interest expense 2,109 2,323 2,532 2,631 2,587
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Net interest income 1,711 1,702 1,732 1,834 1,905
Provision for loan losses 223 219 192 142 228
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Net interest income after provision for loan losses 1,488 1,483 1,540 1,692 1,677
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FEE AND OTHER INCOME
Service charges and fees 486 468 481 508 491
Commissions 389 375 383 365 375
Fiduciary and asset management fees 384 381 387 384 374
Advisory, underwriting and other investment banking fees 238 198 187 148 182
Principal investing (58) (43) (43) 34 205
Other income 190 167 187 206 119
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Total fee and other income 1,629 1,546 1,582 1,645 1,746
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NONINTEREST EXPENSE
Salaries and employee benefits 1,363 1,329 1,243 1,381 1,396
Occupancy 155 163 150 157 155
Equipment 198 205 221 213 210
Advertising 11 9 16 14 31
Communications and supplies 111 110 123 117 122
Professional and consulting fees 69 73 97 87 82
Goodwill and other intangible amortization 77 78 80 79 100
Sundry expense 185 171 202 280 270
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Total noninterest expense 2,169 2,138 2,132 2,328 2,366
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Income before income taxes 948 891 990 1,009 1,057
Income taxes 299 281 309 307 343
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Net operating earnings $ 649 610 681 702 714
===================================================================================================================================
Diluted earnings per share $ 0.66 0.62 0.69 0.71 0.73
===================================================================================================================================
(a) Operating earnings exclude restructuring, merger-related and other changes and gains and cumulative effect of a change in
accounting principle.
PAGE 11
FIRST UNION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATING EARNINGS (a)
(Unaudited)
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Six Months Ended
June 30,
-------------------
(In millions, except per share data) 2001 2000
- --------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 4,946 5,777
Interest and dividends on securities 1,806 1,989
Trading account interest 402 409
Other interest income 691 630
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Total interest income 7,845 8,805
- --------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 2,445 2,480
Interest on short-term borrowings 947 1,389
Interest on long-term debt 1,040 1,065
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Total interest expense 4,432 4,934
- --------------------------------------------------------------------------------
Net interest income 3,413 3,871
Provision for loan losses 442 420
- --------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,971 3,451
- --------------------------------------------------------------------------------
FEE AND OTHER INCOME
Service charges and fees 954 977
Commissions 764 843
Fiduciary and asset management fees 765 740
Advisory, underwriting and other investment banking fees 436 391
Principal investing (101) 404
Other income 357 233
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Total fee and other income 3,175 3,588
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NONINTEREST EXPENSE
Salaries and employee benefits 2,692 2,825
Occupancy 318 312
Equipment 403 424
Advertising 20 61
Communications and supplies 221 247
Professional and consulting fees 142 153
Goodwill and other intangible amortization 155 202
Sundry expense 356 529
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Total noninterest expense 4,307 4,753
- --------------------------------------------------------------------------------
Income before income taxes 1,839 2,286
Income taxes 580 734
- --------------------------------------------------------------------------------
Net operating earnings $ 1,259 1,552
================================================================================
Diluted earnings per share $ 1.28 1.58
================================================================================
(a) Operating earnings exclude restructuring, merger-related and other changes
and gains.
PAGE 12
FIRST UNION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
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2001 2000
---------------------------- -------------------------------------
Second First Fourth Third Second
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 2,420 2,526 2,701 2,768 2,929
Interest and dividends on securities 881 925 939 975 1,023
Trading account interest 198 204 199 212 218
Other interest income 321 370 425 510 322
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income 3,820 4,025 4,264 4,465 4,492
- -----------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 1,192 1,253 1,367 1,422 1,285
Interest on short-term borrowings 454 493 538 609 750
Interest on long-term debt 463 577 627 600 552
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 2,109 2,323 2,532 2,631 2,587
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 1,711 1,702 1,732 1,834 1,905
Provision for loan losses 223 219 192 322 1,030
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 1,488 1,483 1,540 1,512 875
- -----------------------------------------------------------------------------------------------------------------------------------
FEE AND OTHER INCOME
Service charges and fees 486 468 481 506 447
Commissions 389 375 383 365 375
Fiduciary and asset management fees 384 381 387 384 374
Advisory, underwriting and other investment banking fees 238 198 182 145 182
Principal investing (58) (43) (43) 34 205
Other income 191 195 363 749 (649)
- -----------------------------------------------------------------------------------------------------------------------------------
Total fee and other income 1,630 1,574 1,753 2,183 934
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 1,400 1,373 1,407 1,427 1,396
Occupancy 180 164 150 160 155
Equipment 207 211 233 213 210
Advertising 16 14 35 18 31
Communications and supplies 111 110 130 125 123
Professional and consulting fees 84 83 104 91 82
Goodwill and other intangible amortization 77 78 80 79 100
Restructuring and merger-related charges (69) 2 33 52 2,110
Sundry expense 191 174 205 283 296
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 2,197 2,209 2,377 2,448 4,503
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefits) and
cumulative effect of a change in accounting principle 921 848 916 1,247 (2,694)
Income taxes (benefits) 288 264 271 395 (495)
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change
in accounting principle 633 584 645 852 (2,199)
Cumulative effect of a change in the
accounting for beneficial interests, net of tax - - (46) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 633 584 599 852 (2,199)
===================================================================================================================================
PER SHARE DATA
Basic
Income (loss) before change in accounting principle $ 0.65 0.60 0.66 0.87 (2.27)
Net income (loss) 0.65 0.60 0.61 0.87 (2.27)
Diluted
Income (loss) before change in accounting principle 0.64 0.59 0.65 0.86 (2.27)
Net income (loss) 0.64 0.59 0.60 0.86 (2.27)
Cash Dividends $ 0.24 0.24 0.48 0.48 0.48
AVERAGE SHARES (In thousands)
Basic 969,333 967,671 969,097 971,453 969,707
Diluted 978,185 975,847 990,445 986,763 981,940
===================================================================================================================================
PAGE 13
FIRST UNION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
- --------------------------------------------------------------------------------
Six Months Ended
June 30,
----------------------
(In millions, except per share data) 2001 2000
- --------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 4,946 5,777
Interest and dividends on securities 1,806 1,989
Trading account interest 402 409
Other interest income 691 630
- --------------------------------------------------------------------------------
Total interest income 7,845 8,805
- --------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 2,445 2,480
Interest on short-term borrowings 947 1,389
Interest on long-term debt 1,040 1,065
- --------------------------------------------------------------------------------
Total interest expense 4,432 4,934
- --------------------------------------------------------------------------------
Net interest income 3,413 3,871
Provision for loan losses 442 1,222
- --------------------------------------------------------------------------------
Net interest income after provision for loan losses 2,971 2,649
- --------------------------------------------------------------------------------
FEE AND OTHER INCOME
Service charges and fees 954 933
Commissions 764 843
Fiduciary and asset management fees 765 740
Advisory, underwriting and other investment banking fees 436 391
Principal investing (101) 404
Other income 386 (535)
- --------------------------------------------------------------------------------
Total fee and other income 3,204 2,776
- --------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 2,773 2,825
Occupancy 344 312
Equipment 418 424
Advertising 30 61
Communications and supplies 221 248
Professional and consulting fees 167 153
Goodwill and other intangible amortization 155 202
Restructuring and merger-related charges (67) 2,105
Sundry expense 365 555
- --------------------------------------------------------------------------------
Total noninterest expense 4,406 6,885
- --------------------------------------------------------------------------------
Income (loss) before income taxes (benefits) 1,769 (1,460)
Income taxes (benefits) 552 (101)
- --------------------------------------------------------------------------------
Net income (loss) $ 1,217 (1,359)
================================================================================
PER SHARE DATA
Basic earnings $ 1.24 (1.41)
Diluted earnings 1.23 (1.41)
Cash dividends $ 0.48 0.96
AVERAGE SHARES (In thousands)
Basic 968,502 970,940
Diluted 976,978 983,147
================================================================================
PAGE 14
FIRST UNION CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
---------------------------- -------------------------------------
Second First Fourth Third Second
(In millions, except per share data) Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 8,665 7,857 9,906 7,063 8,028
Interest-bearing bank balances 1,666 2,971 3,239 4,585 1,913
Federal funds sold and securities purchased under
resale agreements (carrying amount of collateral
$2,255 at June 30,2001, $819 repledged) 9,161 11,866 11,240 5,395 9,054
- ------------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 19,492 22,694 24,385 17,043 18,995
- ------------------------------------------------------------------------------------------------------------------------------------
Trading account assets 23,181 20,431 21,630 17,417 18,237
Securities (carrying amount of collateral $21,674 at
June 30,2001) 48,055 51,528 49,246 52,065 55,203
Loans, net of unearned income 122,492 122,853 123,760 123,419 128,359
Allowance for loan losses (1,760) (1,759) (1,722) (1,720) (1,706)
- ------------------------------------------------------------------------------------------------------------------------------------
Loans, net 120,732 121,094 122,038 121,699 126,653
- ------------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 4,852 4,968 5,024 5,090 5,211
Due from customers on acceptances 856 894 874 968 839
Goodwill and other intangible assets 3,625 3,690 3,664 3,756 3,736
Other assets 25,148 27,650 27,309 28,602 29,120
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 245,941 252,949 254,170 246,640 257,994
====================================================================================================================================
IABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 29,633 28,582 30,315 28,501 30,229
Interest-bearing deposits 108,934 112,213 112,353 110,369 114,635
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 138,567 140,795 142,668 138,870 144,864
Short-term borrowings 34,754 39,719 39,446 39,388 50,883
Bank acceptances outstanding 859 902 880 976 847
Trading account liabilities 7,907 8,130 7,475 5,138 4,541
Other liabilities 11,650 11,230 12,545 11,215 9,768
Long-term debt 36,060 36,092 35,809 36,258 33,140
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 229,797 236,868 238,823 231,845 244,043
- ------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock - - - - -
Common stock, $3.33-1/3 par value;
authorized 2 billion shares 3,264 3,271 3,267 3,287 3,288
Paid-in capital 6,345 6,307 6,272 6,211 6,066
Retained earnings 6,627 6,281 6,021 6,135 5,783
Accumulated other comprehensive income, net (92) 222 (213) (838) (1,186)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 16,144 16,081 15,347 14,795 13,951
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 245,941 252,949 254,170 246,640 257,994
====================================================================================================================================
PAGE 15
FIRST UNION CORPORATION
NET INTEREST INCOME SUMMARIES
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
SECOND QUARTER 2001 FIRST QUARTER 2001
-------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
(In millions) Balances Expense Paid Balances Expense Paid
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-bearing bank balances $ 2,529 29 4.57 % $ 1,826 25 5.69 %
Federal funds sold and securities
purchased under resale agreements 8,923 99 4.41 7,036 95 5.49
Trading account assets 13,965 202 5.78 13,315 206 6.24
Securities 49,931 899 7.21 50,417 945 7.50
Loans
Commercial
Commercial, financial and agricultural 53,160 1,098 8.29 53,416 1,130 8.56
Real estate - construction and other 3,193 52 6.56 3,231 62 7.76
Real estate - mortgage 8,525 149 7.01 9,195 180 7.95
Lease financing 6,075 157 10.29 6,084 161 10.62
Foreign 5,425 83 6.12 5,344 92 7.01
- ------------------------------------------------------------------------------- ----------------------
Total commercial 76,378 1,539 8.08 77,270 1,625 8.51
- ------------------------------------------------------------------------------- ----------------------
Consumer
Real estate - mortgage 17,435 318 7.29 17,610 331 7.52
Installment loans and vehicle leasing 25,399 572 9.02 24,970 580 9.41
- ------------------------------------------------------------------------------- ----------------------
Total consumer 42,834 890 8.32 42,580 911 8.63
- ------------------------------------------------------------------------------- ----------------------
Total loans 119,212 2,429 8.17 119,850 2,536 8.55
- ------------------------------------------------------------------------------- ----------------------
Other earning assets 10,113 193 7.68 11,276 250 8.96
- ------------------------------------------------------------------------------- ----------------------
Total earning assets 204,673 3,851 7.54 203,720 4,057 8.03
====================== ====================
Cash and due from banks 7,568 7,749
Other assets 35,013 34,000
- -------------------------------------------------------------------- -----------
Total assets $ 247,254 $ 245,469
==================================================================== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits
Savings and NOW accounts 39,640 267 2.70 38,756 264 2.76
Money market accounts 18,746 225 4.81 17,941 200 4.52
Other consumer time 33,268 477 5.76 34,452 506 5.96
Foreign 6,357 73 4.62 6,851 94 5.59
Other time 11,587 150 5.20 12,239 189 6.27
- ------------------------------------------------------------------------------- ----------------------
Total interest-bearing deposits 109,598 1,192 4.36 110,239 1,253 4.61
Federal funds purchased and securities
sold under repurchase agreements 27,128 356 5.27 25,005 378 6.13
Commercial paper 2,435 25 4.08 2,540 33 5.32
Other short-term borrowings 9,809 73 2.98 9,580 82 3.46
Long-term debt 36,254 463 5.11 36,631 577 6.30
- ------------------------------------------------------------------------------- ----------------------
Total interest-bearing liabilities 185,224 2,109 4.57 183,995 2,323 5.10
====================== ====================
Noninterest-bearing deposits 27,381 27,043
Other liabilities 18,623 18,585
Stockholders' equity 16,026 15,846
- -------------------------------------------------------------------- -----------
Total liabilities and stockholders' equity $ 247,254 $ 245,469
==================================================================== ===========
Interest income and rate earned $ 3,851 7.54 % $ 4,057 8.03 %
Interest expense and equivalent rate paid 2,109 4.13 2,323 4.61
- ------------------------------------------------------------------------------------------- ----------------------
Net interest income and margin (a) $ 1,742 3.41 % $ 1,734 3.42 %
=========================================================================================== ======================
(a) The net margin includes (in basis points): 13, 14, 15, 22, and 27 for the quarters ended June 30, 2001, March 31, 2001,
December 31, 2000, September 30, 2000, and June 30, 2000, respectively, related to net interest income from hedge-related
derivative transactions.
PAGE 16
FIRST UNION CORPORATION
NET INTEREST INCOME SUMMARIES
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
FOURTH QUARTER 2000 THIRD QUARTER 2000 SECOND QUARTER 2000
------------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------------
$ 1,266 14 4.34 % $ 1,465 20 5.28 % $ 977 13 5.52 %
5,994 89 5.86 6,367 97 6.11 9,318 132 5.72
11,569 201 6.95 12,204 214 6.99 12,950 220 6.83
50,554 952 7.54 52,780 988 7.48 56,027 1,035 7.40
53,554 1,233 9.17 53,226 1,250 9.34 54,486 1,251 9.22
3,011 65 8.69 2,676 59 8.65 2,458 52 8.49
9,130 198 8.63 9,294 203 8.70 9,302 195 8.44
5,272 150 11.37 5,168 148 11.45 5,123 153 11.90
5,286 97 7.29 5,016 91 7.17 4,582 80 7.08
------------------------ ------------------------ ------------------------
76,253 1,743 9.11 75,380 1,751 9.24 75,951 1,731 9.15
------------------------ ------------------------ ------------------------
18,805 362 7.70 23,163 432 7.47 25,760 469 7.28
25,035 606 9.63 24,932 596 9.51 30,903 740 9.61
------------------------ ------------------------ ------------------------
43,840 968 8.80 48,095 1,028 8.53 56,663 1,209 8.55
------------------------ ------------------------ ------------------------
120,093 2,711 8.99 123,475 2,779 8.96 132,614 2,940 8.90
------------------------ ------------------------ ------------------------
13,130 322 9.76 14,798 393 10.63 8,175 177 8.66
------------------------ ------------------------ ------------------------
202,606 4,289 8.44 211,089 4,491 8.48 220,061 4,517 8.24
====================== ====================== =======================
7,653 7,446 7,830
29,116 28,283 27,692
------------ ------------ -----------
$ 239,375 $ 246,818 $ 255,583
============ ============ ===========
37,640 301 3.17 37,680 296 3.13 38,940 283 2.92
17,008 202 4.74 15,629 175 4.46 14,959 154 4.13
36,421 541 5.91 36,328 524 5.74 35,386 478 5.43
7,483 110 5.85 9,721 151 6.18 8,795 130 5.92
11,902 213 7.13 15,317 276 7.16 14,153 240 6.82
------------------------ ------------------------ ------------------------
110,454 1,367 4.92 114,675 1,422 4.93 112,233 1,285 4.60
23,686 400 6.72 28,363 459 6.43 36,762 552 6.04
2,639 42 6.19 2,588 40 6.25 3,308 49 6.03
9,345 96 4.09 9,257 110 4.74 11,096 149 5.37
35,708 627 7.03 35,263 600 6.80 33,555 552 6.58
------------------------ ------------------------ ------------------------
181,832 2,532 5.55 190,146 2,631 5.51 196,954 2,587 5.28
====================== ====================== =======================
27,875 28,437 28,971
14,915 13,999 13,044
14,753 14,236 16,614
------------ ------------ -----------
$ 239,375 $ 246,818 $ 255,583
============ ============ ===========
$ 4,289 8.44 % $ 4,491 8.48 % $ 4,517 8.24 %
2,532 4.98 2,631 4.96 2,587 4.73
---------------------- ---------------------- -----------------------
$ 1,757 3.46 % $ 1,860 3.52 % $ 1,930 3.51 %
====================== ====================== =======================
PAGE 17
FIRST UNION CORPORATION
NET INTEREST INCOME SUMMARIES
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED 2001 SIX MONTHS ENDED 2000
---------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
(In millions) Balances Expense Paid Balances Expense Paid
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-bearing bank balances $ 2,179 54 5.04 % $ 822 20 5.07 %
Federal funds sold and securities
purchased under resale agreements 7,985 194 4.89 9,436 261 5.56
Trading account assets 13,642 408 6.00 12,138 413 6.84
Securities 50,173 1,844 7.35 55,208 2,013 7.29
Loans
Commercial
Commercial, financial and agricultural 53,286 2,228 8.43 53,647 2,425 9.09
Real estate - construction and other 3,212 114 7.16 2,432 100 8.29
Real estate - mortgage 8,858 329 7.50 9,141 378 8.32
Lease financing 6,080 318 10.46 5,168 313 12.10
Foreign 5,385 175 6.56 4,557 154 6.82
- ------------------------------------------------------------------------------ ------------------------
Total commercial 76,821 3,164 8.30 74,945 3,370 9.04
- ------------------------------------------------------------------------------ ------------------------
Consumer
Real estate - mortgage 17,522 649 7.41 26,655 968 7.26
Installment loans and vehicle leasing 25,186 1,152 9.22 30,448 1,459 9.62
- ------------------------------------------------------------------------------ ------------------------
Total consumer 42,708 1,801 8.47 57,103 2,427 8.52
- ------------------------------------------------------------------------------ ------------------------
Total loans 119,529 4,965 8.36 132,048 5,797 8.81
- ------------------------------------------------------------------------------ ------------------------
Other earning assets 10,691 443 8.35 8,256 349 8.47
- ------------------------------------------------------------------------------ ------------------------
Total earning assets 204,199 7,908 7.78 217,908 8,853 8.15
===================== =====================
Cash and due from banks 7,658 7,954
Other assets 34,510 26,074
- ------------------------------------------------------------------- -----------
Total assets $ 246,367 $ 251,936
=================================================================== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits
Savings and NOW accounts 39,200 531 2.73 39,385 572 2.92
Money market accounts 18,346 425 4.67 15,262 305 4.01
Other consumer time 33,857 983 5.86 34,688 901 5.22
Foreign 6,603 167 5.12 8,960 253 5.68
Other time 11,911 339 5.75 13,688 449 6.60
- ------------------------------------------------------------------------------ ------------------------
Total interest-bearing deposits 109,917 2,445 4.49 111,983 2,480 4.45
Federal funds purchased and securities
sold under repurchase agreements 26,072 734 5.68 36,024 1,034 5.77
Commercial paper 2,487 58 4.71 3,152 91 5.81
Other short-term borrowings 9,695 155 3.21 10,098 264 5.24
Long-term debt 36,442 1,040 5.71 33,060 1,065 6.44
- ------------------------------------------------------------------------------ ------------------------
Total interest-bearing liabilities 184,613 4,432 4.83 194,317 4,934 5.10
===================== =====================
Noninterest-bearing deposits 27,213 28,829
Other liabilities 18,604 12,191
Stockholders' equity 15,937 16,599
- ------------------------------------------------------------------- -----------
Total liabilities and stockholders' equity $ 246,367 $ 251,936
=================================================================== ===========
Interest income and rate earned $ 7,908 7.78 % $ 8,853 8.15 %
Interest expense and equivalent rate paid 4,432 4.36 4,934 4.55
- ------------------------------------------------------------------------------------------ ---------------------
Net interest income and margin (a) $ 3,476 3.42 % $ 3,919 3.60 %
========================================================================================== =====================
(a) The net interest margin includes (in basis points): 14 and 27 for the six months ended June 30, 2001, and June 30, 2000,
respectively, related to net interest income from hedge-related derivative transactions.