1994
FIRST UNION CORPORATION
SECOND QUARTER REPORT
(Logo of First Union appears here)
LETTER FROM THE CHAIRMAN
Our earnings in the second quarter of 1994, led by significant loan growth,
rose to $223 million in net income applicable to common stockholders, or
$1.32 per common share.
First Union earned $217 million, or $1.27 per share, in the first quarter of
1994 and $221 million, or $1.32, in the second quarter a year ago. The second
quarter of 1993 included $44 million, or 16 cents per share, in merchant
banking gains.
In the first half of 1994, net income applicable to common stockholders was
$440 million, or $2.59 per share, compared with $414 million, or $2.49 per
share, in the first half of 1993.
Key factors in First Union's second quarter 1994 earnings included:
(bullet) Loan growth of $2.2 billion, up 5 percent from the first quarter;
(bullet) Continued growth in net interest income; and
(bullet) Continued improvement in credit quality, including a 17 percent,
or $134 million, reduction in nonperforming assets since the first quarter
and net charge-offs of .27 percent, among the lowest in the banking industry,
resulting in a flat loan loss provision.
Throughout the rest of 1994, we will continue to make strategic investments
to strengthen our commercial and consumer banking operations and to leverage
our extensive branch network. We are laying the groundwork for our goal of
continuing to achieve superior results for our stockholders.
Well under way is a strategic initiative in the Capital Markets arena that
broadens our ability to offer products and services such as loan syndications
and private placements. In addition, we are streamlining the commercial lending
process to become more responsive to customers' needs.
First Union's mutual funds initiative, which includes licensing two
employees in virtually every branch to sell mutual funds, was enhanced with
the acquisition of the investment adviser to the Evergreen Funds, a nationally
recognized family of mutual funds. This acquisition was consummated on June
30, 1994.
Consumer lending, primarily in credit cards, direct and indirect loans,
led loan growth. Commercial loan growth came primarily from Florida, North
Carolina, the Capital Markets Group, Georgia and Virginia.
In addition, during the second quarter of 1994, First Union announced a
15 percent increase in its common stock dividend to 46 cents per share, or
$1.84 on an annualized basis.
The first half of 1993 includes the purchase accounting acquisitions of
Georgia Federal Bank from June 12, 1993, and First American Metro Corp.
from June 23, 1993.
At June 30, 1994, First Union had assets of $72.6 billion and 1,314 banking
offices in Florida, North Carolina, Georgia, Virginia, South Carolina,
Tennessee, Maryland and Washington, D.C., and 215 nonbanking offices in 39
states.
Thank you for your interest in First Union.
Sincerely,
(Signature of Edward E. Crutchfield Jr. appears here)
Edward E. Crutchfield Jr., Chairman and Chief Executive Officer
FINANCIAL TABLES
First Union Corporation and Subsidiaries
(Unaudited)
FINANCIAL HIGHLIGHTS
Three Months Ended Percent Six Months Ended Percent
June 30, Increase June 30, Increase
(In thousands except per share data) 1994 1993 (Decrease) 1994 1993 (Decrease)
Net income $229,620 226,771 1.3% $452,079 426,763 5.9%
Dividends on preferred stock 6,201 6,167 .6 11,927 13,171 (9.4)
Net income applicable to common stockholders $223,419 220,604 1.3% $440,152 413,592 6.4%
Net income per common share $1.32 1.32 --% $2.59 2.49 4.0%
Average common shares 169,779 166,972 1.7 169,689 166,122 2.1
Common stockholders' equity (a) $5,228,205 4,582,577 14.1 $5,228,205 4,582,577 14.1
Total stockholders' equity (a) 5,512,246 4,866,617 13.3 5,512,246 4,866,617 13.3
Book value per common share $30.26 27.27 11.0 $30.26 27.27 11.0
Actual common shares 172,797 168,042 2.8 172,797 168,042 2.8
Common stock period-end price $46.125 48.500 (4.9) $46.125 48.500 (4.9)
Series 1990 preferred stock period-end price $52.750 54.875 (3.9)% $52.750 54.875 (3.9)%
EARNINGS SUMMARY
2Q '94
1994 1993 vs.
(In thousands except per share data) 2Q 1Q 4Q 3Q 2Q 2Q '93
Net interest income (b) $775,005 750,409 733,280 728,773 708,186 9.4%
Provision for loan losses 25,000 25,000 49,973 50,001 61,450 (59.3)
Net interest income after provision for loan losses (b) 750,005 725,409 683,307 678,772 646,736 16.0
Securities available for sale transactions (2,935) 4,300 2,804 4,142 1,505 (295.0)
Investment security transactions 694 615 3,049 815 3,571 (80.6)
Noninterest income 276,011 275,781 317,727 287,998 305,356 (9.6)
Noninterest expense 651,220 639,841 687,922 664,388 591,042 10.2
Income before income taxes (b) 372,555 366,264 318,965 307,339 366,126 1.8
Income taxes 119,223 120,001 98,469 84,286 115,465 3.3
Tax-equivalent adjustment 23,712 23,804 25,153 27,638 23,890 (.7)
Net income 229,620 222,459 195,343 195,415 226,771 1.3
Dividends on preferred stock 6,201 5,726 5,489 6,240 6,167 .6
Net income applicable to common stockholders $223,419 216,733 189,854 189,175 220,604 1.3%
Net income per common share $1.32 1.27 1.12 1.12 1.32 --%
(a) Common stockholders' equity and total stockholders' equity exclude net
unrealized losses on debt and equity securities of $123,665,000 at
June 30, 1994.
(b) Tax-equivalent.
FINANCIAL TABLES
First Union Corporation and Subsidiaries
(Unaudited)
OTHER FINANCIAL DATA
1994 1993 Six Months
(Dollars in thousands) 2Q 1Q 4Q 3Q 2Q 1994 1993
Return on average assets (a)(b) 1.28% 1.28 1.07 1.08 1.39 1.28 1.34
Return on average common equity (a)(c) 17.53 17.54 15.55 16.11 19.93 17.53 19.19
Net interest margin 4.78 4.79 4.61 4.65 4.92 4.78 4.96
Allowance as % of loans, net 2.06 2.17 2.18 2.23 2.26 2.06 2.26
Allowance as % of nonaccrual and
restructured loans 192 168 147 112 110 192 110
Allowance as % of nonperforming assets 152% 127 111 85 81 152 81
Loan losses $54,517 56,068 86,602 78,797 87,620 110,585 164,161
Loan recoveries 22,746 24,878 27,406 21,419 15,306 47,624 29,048
Loan losses, net $31,771 31,190 59,196 57,378 72,314 62,961 135,113
As % of average loans, net (a) .27% .27 .51 .50 .69 .27 .65
Nonperforming assets (d)
Commercial nonaccrual $159,858 189,759 242,241 321,699 442,411 159,858 442,411
Real estate nonaccrual 363,433 412,748 425,101 580,508 483,428 363,433 483,428
Total nonaccrual loans 523,291 602,507 667,342 902,207 925,839 523,291 925,839
Restructured loans 2,730 2,742 26,544 18,617 18,613 2,730 18,613
Foreclosed properties 136,408 191,153 222,503 288,818 328,735 136,408 328,735
Total nonperforming assets $662,429 796,402 916,389 1,209,642 1,273,187 662,429 1,273,187
As % of loans, net and foreclosed
properties 1.35% 1.70 1.95 2.60 2.75 1.35 2.75
Southeast segregated loss-sharing
nonperforming assets
Nonaccrual loans $201,020 234,907 254,496 282,239 327,301 201,020 327,301
Foreclosed properties 98,923 103,330 126,019 142,347 150,527 98,923 150,527
Total 299,943 338,237 380,515 424,586 477,828 299,943 477,828
Less FDIC loss-sharing (e) (254,952) (287,501) (323,438) (360,898) (406,154) (254,952) (406,154)
Total $44,991(f) 50,736 57,077 63,688 71,674 44,991 71,674
(a) Quarterly amounts annualized.
(b) Based on net income.
(c) Based on net income applicable to common stockholders and average
common stockholders' equity excluding 1994 average net unrealized gains
or losses on debt and equity securities.
(d) Excludes nonperforming assets related to Southeast Banks.
(e) For a five-year period that began September 19, 1991, the FDIC will
reimburse First Union for 85 percent of all net charge-offs related to
acquired Southeast Banks loans except installment loan reimbursements,
which will decline 5 percent per year to 65 percent by 1996.
(f) Allowance for losses on segregated assets amounted to $29,590,000 at
June 30, 1994. This amount is not included in the allowance for loan
losses.
Financial Tables
First Union Corporation and Subsidiaries
(Unaudited)
Average Balance Sheet Summary
2Q '94
1994 1993 vs.
(In thousands) 2Q 1Q 4Q 3Q 2Q 2Q '93
Loans, net $47,321,742 46,222,187 46,221,733 45,527,753 41,700,679 13.5%
Earning assets 64,947,525 62,907,917 63,495,402 62,567,359 57,645,461 12.7
Total assets 71,826,000 70,343,508 72,186,652 71,461,778 65,431,136 9.8
Noninterest-bearing deposits 10,067,077 10,072,065 10,609,800 10,067,212 9,079,037 10.9
Consumer time deposits 39,374,766 39,534,757 39,837,463 40,282,564 36,944,334 6.6
Other time deposits 2,895,097 2,349,622 2,358,917 2,342,266 2,243,157 29.1
Common stockholders' equity (a) 5,112,116 5,012,086 4,843,889 4,657,544 4,439,393 15.2
Total stockholders' equity (a) $ 5,396,156 5,296,126 5,127,929 4,941,584 4,732,645 14.0%
Capital Ratios (b)
Tier 1 capital 9.78% 9.36 9.14 8.63 7.97
Total capital 15.12 15.15 14.64 13.78 12.21
Leverage 6.65% 6.57 6.13 5.94 6.20
Intangible Assets
(In thousands)
Intangible assets
Goodwill $ 682,570 703,559 712,485 728,107 738,284
Deposit base premium 224,918 240,935 255,359 268,527 272,689
Other 9,118 9,817 10,468 11,172 11,830
Total $ 916,606 954,311 978,312 1,007,806 1,022,803
Mortgage servicing rights $ 79,826 82,102 87,350 94,432 124,726
Credit card premium $ 67,524 71,538 75,588 79,893 73,836
(a) Average common stockholders' equity and average total stockholders'
equity exclude average net unrealized losses on debt and equity securities
of $90,899,000 in the second quarter of 1994.
(b) Second quarter 1994 ratios are based on estimates and exclude net
unrealized losses on debt and equity securities of $123,665,000.
Consolidated Statements of Income
First Union Corporation and Subsidiaries
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 1994 1993 1994 1993
Interest Income
Interest and fees on loans $ 999,611 893,699 1,945,762 1,784,920
Interest and dividends on securities available for sale 147,755 83,578 295,313 154,120
Interest and dividends on investment securities
Taxable income 26,632 98,856 45,461 199,573
Non-taxable income 24,341 19,701 48,951 40,009
Trading account interest 13,377 6,778 23,769 11,933
Other interest income 23,490 10,671 38,558 22,630
Total interest income 1,235,206 1,113,283 2,397,814 2,213,185
Interest Expense
Interest on deposits 333,182 316,682 651,866 638,767
Interest on short-term borrowings 103,029 74,721 182,133 140,629
Interest on long-term debt 47,702 37,584 85,917 77,158
Total interest expense 483,913 428,987 919,916 856,554
Net interest income 751,293 684,296 1,477,898 1,356,631
Provision for loan losses 25,000 61,450 50,000 121,779
Net interest income after provision for loan losses 726,293 622,846 1,427,898 1,234,852
Noninterest Income
Trading account profits 10,247 10,141 17,570 15,780
Service charges on deposit accounts 107,083 97,894 215,105 195,106
Mortgage banking income 12,239 35,351 31,660 73,839
Capital management income 50,380 51,814 101,329 102,209
Securities available for sale transactions (2,935) 1,505 1,365 18,821
Investment security transactions 694 3,571 1,309 3,571
Merchant discounts 15,283 13,207 29,644 27,647
Insurance commissions 10,705 11,648 20,695 21,913
Sundry income 70,074 85,301 135,789 122,867
Total noninterest income 273,770 310,432 554,466 581,753
Noninterest Expense
Personnel expense 312,718 269,543 622,358 541,240
Occupancy 56,882 51,830 117,273 103,631
Equipment rentals, depreciation and maintenance 52,435 41,977 109,135 87,620
Postage, printing and supplies 23,910 22,699 49,192 42,023
FDIC insurance 30,155 28,510 60,094 56,916
Owned real estate expense 4,908 10,509 10,204 20,332
Amortization 32,355 52,264 68,733 107,040
Sundry 137,857 113,710 254,072 210,535
Total noninterest expense 651,220 591,042 1,291,061 1,169,337
Income before income taxes 348,843 342,236 691,303 647,268
Income taxes 119,223 115,465 239,224 220,505
Net income 229,620 226,771 452,079 426,763
Dividends on preferred stock 6,201 6,167 11,927 13,171
Net income applicable to common stockholders $ 223,419 220,604 440,152 413,592
Consolidated Balance Sheets
First Union Corporation and Subsidiaries
(Unaudited)
June 30,
(In thousands) 1994 1993
Assets
Cash and due from banks $ 2,809,958 3,210,877
Interest-bearing bank balances 1,387,532 256,230
Federal funds sold and securities purchased under resale agreements 1,909,486 2,433,874
Total cash and cash equivalents 6,106,976 5,900,981
Trading account assets 933,011 565,347
Securities available for sale 9,709,341 6,344,036
Investment securities 2,995,102 7,853,423
Loans, net of unearned income 48,925,495 45,902,305
Allowance for loan losses (1,007,839) (1,036,539)
Loans, net 47,917,656 44,865,766
Premises and equipment 1,518,171 1,500,088
Due from customers on acceptances 94,535 168,231
Mortgage servicing rights 79,826 124,726
Credit card premium 67,524 73,836
Other intangible assets 916,606 1,022,803
Southeast segregated assets 270,353 438,736
Other assets 1,995,300 3,100,966
Total assets $72,604,401 71,958,939
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 10,207,807 10,186,909
Interest-bearing deposits 43,564,453 45,249,962
Total deposits 53,772,260 55,436,871
Short-term borrowings 8,959,378 6,720,792
Bank acceptances outstanding 94,535 168,231
Other liabilities 1,260,203 1,974,808
Long-term debt 3,129,444 2,791,620
Total liabilities 67,215,820 67,092,322
Stockholders' Equity
Preferred stock
Class A, authorized 40,000,000 shares
Series A, 11% cumulative perpetual; $25.00 stated and liquidation value - -
Series A, $2.50 cumulative convertible, no par value; $25.00 stated and liquidation value - -
Series B, none issued - -
Series 1990 cumulative perpetual adjustable rate, no par value;
$5.00 liquidation value; authorized 10,000,000 shares 31,592 31,592
Common stock, $3.33 1/3 par value; authorized 750,000,000 shares 575,989 560,138
Paid-in capital 1,576,872 1,501,274
Retained earnings 3,327,793 2,773,613
Unrealized loss on debt and equity securities (123,665) -
Total stockholders' equity 5,388,581 4,866,617
Total liabilities and stockholders' equity $72,604,401 71,958,939
BOARD OF DIRECTORS
G. Alex Bernhardt Torrence E. Hemby Jr.
President and Chief Executive Officer, President,
Bernhardt Furniture Company Beverly Crest Corporation
Lenoir, North Carolina Charlotte, North Carolina
W. Waldo Bradley Leonard G. Herring
Chairman, President and Chief Executive Officer,
Bradley Plywood Corporation Lowe's Companies Inc.
Savannah, Georgia North Wilkesboro, North Carolina
Robert J. Brown Jack A. Laughery
Chairman, President and Investor
Chief Executive Officer, Rocky Mount, North Carolina
B&C Associates, Inc.
High Point, North Carolina Max Lennon
President and Chief Executive Officer,
Edward E. Crutchfield Jr. Eastern Foods Inc.
Chairman and Chief Executive Officer, Atlanta, Georgia
First Union Corporation
Charlotte, North Carolina Radford D. Lovett
Chairman,
Robert D. Davis Commodores Point Terminal Corporation
Chairman, Jacksonville, Florida
D.D.I. Inc.
Jacksonville, Florida Henry D. Perry Jr.
Physician
R. Stuart Dickson Plantation, Florida
Chairman of Executive Committee,
Ruddick Corporation Randolph N. Reynolds
Charlotte, North Carolina Vice Chairman,
Reynolds Metals Company
B.F. Dolan Richmond, Virginia
Investor
Charlotte, North Carolina Ruth G. Shaw
Senior Vice President
Roddey Dowd Sr. for Corporate Resources,
Chairman, Duke Power Company
Charlotte Pipe & Foundry Co. Charlotte, North Carolina
Charlotte, North Carolina
Lanty L. Smith
John R. Georgius Chairman and Chief Executive Officer,
President, Precision Fabrics Group Inc.
First Union Corporation Greensboro, North Carolina
Charlotte, North Carolina
Dewey L. Trogdon
William H. Goodwin Jr. Chairman,
Chairman, Cone Mills Corporation
AMF Companies Greensboro, North Carolina
Richmond, Virginia
John D. Uible
Brenton S. Halsey Investor
Chairman Emeritus, Jacksonville, Florida
James River Corporation
Richmond, Virginia B.J. Walker
Vice Chairman,
Howard H. Haworth First Union Corporation
President, Jacksonville, Florida
The Haworth Group
Morganton, North Carolina Kenneth G. Younger
Consultant
Gastonia, North Carolina
(First Union logo) FIRST UNION Bulk Rate
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Two First Union Center Charlotte, N.C.
Charlotte, NC 28288-0570 Permit No. 34
This First Union quarterly report includes information released to the
public and the news media on July 14, 1994. You may obtain a copy of our
Second Quarter Financial Supplement, which contains more detailed financial
and other information, by writing to Investor Relations, Two First Union
Center, Charlotte, North Carolina 28288-0206. There is no charge.