FIRST UNION CORPORATION
AND SUBSIDIARIES
Third Quarter Financial Supplement
THREE MONTHS ENDED
SEPTEMBER 30, 1994
FIRST UNION CORPORATION
AND SUBSIDIARIES
THIRD QUARTER FINANCIAL SUPPLEMENT
THREE MONTHS ENDED SEPTEMBER 30, 1994
(Unaudited)
TABLE OF CONTENTS
Page
Selected Financial Data. . . . . . . . . . . . . . . . . 1
Management's Analysis of Operations. . . . . . . . . . . 2
Consolidated Summaries of Income and Per Share Data. . .T-1
Noninterest Income . . . . . . . . . . . . . . . . . . .T-2
Noninterest Expense. . . . . . . . . . . . . . . . . . .T-2
Internal Capital Growth and Dividend Payout Ratios . . .T-3
Selected Quarterly Data. . . . . . . . . . . . . . . . .T-4
Growth through Acquisitions. . . . . . . . . . . . . . .T-5
Securities Available for Sale. . . . . . . . . . . . . .T-6
Investment Securities. . . . . . . . . . . . . . . . . .T-7
Loans. . . . . . . . . . . . . . . . . . . . . . . . . .T-8
Allowance for Loan Losses and Nonperforming Assets . . .T-9
Intangible Assets. . . . . . . . . . . . . . . . . . . .T-10
Southeast Banks Segregated Assets. . . . . . . . . . . .T-11
Allowance for Foreclosed Properties. . . . . . . . . . .T-12
Deposits . . . . . . . . . . . . . . . . . . . . . . . .T-13
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
Interest Rate Gap. . . . . . . . . . . . . . . . . . . .T-17
Off-Balance Sheet Derivative Financial Instruments . . .T-18
Off-Balance Sheet Derivatives-Expected Maturities. . . .T-20
Off-Balance Sheet Derivatives Activity . . . . . . . . .T-21
Net Interest Income Summaries
Five Quarters Ended September 30, 1994 . . . . . . . .T-22
Year-to-date September 30 and June 30, 1994;
December 31 and September 30, 1993. . . . . . . . .T-24
Consolidated Balance Sheets
Five Quarters Ended September 30, 1994 . . . . . . . .T-26
Consolidated Statements of Income. . . . . . . . . . . .T-27
Consolidated Statements of Cash Flows. . . . . . . . . .T-28
SELECTED FINANCIAL DATA
Three Months Ended Nine Months Ended
September 30, September 30,
Per Common Share Data 1994 1993 1994 1993
Net income applicable to common stockholders $1.35 1.12 3.94 3.61
Cash dividends .46 .40 1.26 1.10
Book value 31.34 28.14 31.34 28.14
Quarter-end price $43.25 47.625 43.25 47.625
Financial Ratios
Return on average assets (a)(b) 1.31% 1.08 1.29 1.25
Return on average common stockholders'
equity (a)(c) 17.29 16.11 17.45 18.11
Net interest margin(a) 4.84 4.65 4.80 4.85
Net charge-offs to average loans, net (a) .38 .50 .31 .60
Allowance for loan losses to:
Loans, net 1.95 2.23 1.95 2.23
Nonaccrual and restructured loans 203 112 203 112
Nonperforming assets 154 85 154 85
Nonperforming assets to loans, net and
foreclosed properties 1.26 2.60 1.26 2.60
Stockholders' equity to assets 7.57 7.08 7.57 7.08
Tier 1 capital to risk-weighted assets 8.84 8.63 8.84 8.63
Dividend payout ratio on common shares 34.16% 35.73 31.96 29.16
Certain ratios related to nonperforming assets, net charge-offs and the loan
loss provision were favorably affected because the Southeast Banks segregated
assets portfolio has not been included in the calculation of these ratios.
(a) Quarterly and nine month 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.
1
MANAGEMENT'S ANALYSIS OF OPERATIONS
Earnings Highlights
First Union's earnings applicable to common stockholders increased 12
percent to $675 million in the first nine months of 1994 from $603 million
in the first nine months of 1993. On a per common share basis, earnings in
the first nine months of 1994 increased to $3.94 from $3.61 in the first
nine months of 1993.
Third quarter 1994 net income applicable to common stockholders increased
24 percent to $235 million, or $1.35 per share, compared with $189 million,
or $1.12 per share, in the same quarter a year ago.
Key factors during the first nine months of 1994 included:
(diamond) 10 percent growth in loans;
(diamond) Record net interest income; and
(diamond) Continued improvement in credit quality.
Net loans increased by $4.8 billion (including $1.0 billion related to
1994 purchase accounting acquisitions) since year-end 1993. Commercial
loan growth was steady throughout First Union's banking states, led by
Florida, North Carolina and the relatively new franchise in Virginia.
Consumer loan growth was led by direct consumer loans through the retail
bank branches and credit cards.
Loan growth and pricing discipline on loans and deposits contributed
to the increase in tax-equivalent net interest income to a record $2.32
billion in the first nine months of 1994, compared with $2.13 billion in
the first nine months of 1993. For the third quarter of 1994,
tax-equivalent net interest income rose to a record $799 million, up
10 percent from $729 million in the third quarter of 1993 and up 3 percent
from $775 million in the second quarter of 1994.
Credit quality continued to improve, with a $556 million decrease in
nonperforming assets since the third quarter of 1993 and a net $9 million
decrease in nonperforming assets since the second quarter of 1994.
Excluding $95 million in nonperforming assets acquired with the purchase
accounting acquisition of BancFlorida Financial Corporation on August 1,
1994, First Union's nonperforming assets would have decreased $104 million
in the third quarter of 1994 from the second quarter of 1994. Another key
measure of credit quality is charge-offs; First Union's annualized net
charge-offs for the first nine months of 1994 remained low at .31 percent
of average net loans, compared with .60 percent in the first nine months
of 1993.
In the first nine months of 1994, we completed six bank-related
acquisitions amounting to $2.5 billion in assets; $1.0 billion in net
loans; and $2.0 billion in deposits. In addition we completed the
acquisition of Lieber & Co., the investment adviser to the Evergreen
family of mutual funds. The bank-related acquisitions included
American Bancshares, Inc., Jacksonville Federal, Citizens Federal,
BancFlorida, Cobb Federal and Hollywood Federal. The
purchase accounting acquisition of BancFlorida, with $1.6 billion in
assets, $847 million in loans and $1.2 billion in deposits, was the most
significant bank-related acquisition. The first nine months of 1993
included the purchase accounting acquisitions of
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Georgia Federal Bank, FSB, from June 12, 1993, and First American Metro
Corp. from June 23, 1993. Additionally the pooling of interests accounting
acquisitions of Dominion, South Carolina Federal and DFSoutheastern were
completed in the first quarter of 1993.
Domestic banking operations, including trust operations, located in North
and South Carolina, Georgia, Florida, Maryland, Tennessee, Virginia and
Washington, D.C., and mortgage banking operations are our principal
sources of revenues. Foreign banking operations are immaterial.
The Net Interest Income section provides information about lost interest
income related to nonaccrual and restructured loans and the Asset Quality
section includes further information about the loan loss provision.
Outlook
The strength in our underlying fundamentals gives us a great deal of
optimism as we continue to invest for the future to leverage the
capabilities of our consumer and commercial banking operations and our
fee-income-producing specialty businesses.
We expect these investments to result in continued growth in loans, net
interest income and fee income.
Consummation of the pooling of interests acquisition of Home Federal
Savings Bank occurred on November 1, 1994.
We currently have three pending acquisitions in Florida and one in Virginia
involving banking operations. Upon consummation of these acquisitions, we
expect to acquire approximately $3.0 billion in assets and $2.6 billion in
deposits. Two of these are expected to close in the fourth quarter of 1994:
certain branches of Chase Manhattan Bank of Florida, N.A., and Great
Western Bank, FSB. Consummation of the pending acquisition of First
Florida Savings Bank, FSB, in Florida and Ameribanc Investors Group, parent
of Ameribanc Savings Bank, FSB, in Virginia is expected in the first half
of 1995. We expect these acquisitions to have a minor impact on 1994 and
1995 earnings and to be positive to earnings within 12 months of
consummation.
We continue to be alert to opportunities to enhance stockholder value,
especially in view of the recently adopted federal legislation that will
permit the corporation to acquire banking organizations throughout the
nation. We are evaluating acquisition opportunities, and teams of
experienced bankers from all areas of the corporation frequently conduct
due diligence activities in connection with possible acquisitions.
As a result, acquisition discussions and in some cases negotiations
frequently take place, and future acquisitions involving cash, debt or
equity securities may be expected. Acquisitions typically involve the
payment of a premium over book and market values. Some dilution of First
Union's book value and net income per common share may occur in connection
with any future acquisitions.
The Accounting and Regulatory Matters section provides information about
various other legislative, accounting and regulatory matters that have
recently been adopted or proposed.
3
Net Interest Income
Loan growth and pricing discipline on loans and deposits contributed to
record net interest income, the largest contributor to earnings, in both
the first nine months of 1994 and the third quarter of 1994.
Nonperforming loans reduced interest income because the contribution
from these loans is eliminated or sharply reduced. In the first nine
months of 1994, $41 million in gross interest income would have been
recorded if all nonaccrual and restructured loans had been current in
accordance with their original terms and had been outstanding throughout
the period or since origination, if held for part of the period. The
amount of interest income related to these assets and included in income
in the first nine months of 1994 was $5 million. However, a $263 million
decrease in nonperforming assets from the fourth quarter of 1993 reduced
the negative impact to interest income in the first nine months of 1994.
Net Interest Margin
The net interest margin, which is the difference between the tax-equivalent
yield on earning assets and the rate paid on funds to support those assets,
was 4.80 percent in the first nine months of 1994, compared with 4.85
percent in the same period a year ago. The margin was 4.84 percent in the
third quarter of 1994, compared with 4.78 percent in the second quarter of
1994, 4.79 percent in the first quarter of 1994 and 4.65 percent in the
third quarter of 1993. The margin is not our primary management focus or
goal; our goal is to continue increasing net interest income, which has
increased for 20 consecutive quarters.
The average rate earned on earning assets was 7.80 percent in the first
nine months of 1994, compared with 7.87 percent in the first nine months
of 1993. The average rate paid on interest-bearing liabilities was 3.53
percent in the first nine months of 1994 and 3.47 percent in the first nine
months of 1993.
We use securities and off-balance sheet transactions to manage interest
rate sensitivity. More information on these transactions is included in
the Interest Rate Risk Management section.
Noninterest Income
Developing new sources of fee income has been one of our key long-term
strategies for dealing with increased competition from nonbanking companies
and other changes taking place in the financial services industry.
We are meeting the new competitive challenges with a broader, more
sophisticated range of products and services supported by significant
initiatives in credit cards, capital markets and mutual funds.
Noninterest, or fee income, was $857 million in the first nine months of
1994. Noninterest income was $875 million in the first nine months of
1993, which included a large volume of refinancing activity, an
industry-wide trend. The third quarter of 1994 saw a modest increase in
noninterest income to $303 million from $293 million in the third quarter
of 1993 and an 11 percent increase from $274
4
million in the second quarter of 1994. In addition to an increase in
service charges on deposit accounts related to a larger customer base
because of acquisitions, contributions to this more recent growth came
largely from capital management income and reduced discount losses
related to mortgage banking.
Trading Activities
Trading activities are undertaken primarily to satisfy customers' risk
management and investment needs. Additionally, trading is done for the
corporation's own account. All trading activities are conducted within
risk limits established by the corporation's Funds Management Committee.
At September 30, 1994, trading account assets were $1.3 billion, compared
with $652 million at year-end 1993. These assets are carried at market
value. Trading account interest income and profits were $67 million in the
first nine months of 1994, compared with $41 million in the first nine
months of 1993.
Noninterest Expense
Noninterest expense was $1.97 billion during the first nine months of 1994,
compared with $1.83 billion during the first nine months of 1993.
Noninterest expense was $682 million in the third quarter of 1994 and $664
million in the third quarter of 1993. The increase reflects growth in
personnel, advertising, automation and other expenses related to our credit
card, mutual fund and capital markets initiatives undertaken to improve
prospects for revenue growth, as well as the purchase accounting
acquisition of BancFlorida. Costs related to environmental matters were
not material.
Securities Available For Sale
Securities available for sale are used as a part of the corporation's
interest rate risk management strategy and may be sold in response to
changes in interest rates, changes in prepayment risk, liquidity needs,
the need to increase regulatory capital ratios and other factors. In
accordance with the adoption of Statement of Financial Accounting Standards
No. 115, we began accounting for debt and equity securities on a market
value basis as of January 1, 1994.
At September 30, 1994, we had securities available for sale with a market
value of $8.2 billion, compared with a market value of $11.9 billion at
year-end 1993. The market value of securities available for sale was $263
million below amortized costs at the end of the third quarter of 1994. As
a result a $171 million after-tax unrealized loss was recorded as a
reduction of stockholders' equity at September 30, 1994. Table 7 provides
information related to unrealized gains and losses and realized gains and
losses on these securities.
The average rate earned on securities available for sale in the first nine
months of 1994 was 5.40 percent, compared with 4.99 percent in the first
nine months of 1993. The average maturity of the portfolio was 3.69 years
at September 30, 1994.
The Accounting And Regulatory Matters section provides additional
information related to the accounting for debt and equity securities.
5
Investment Securities
First Union's investment securities amounted to $3.2 billion at September
30, 1994, compared with $2.7 billion at year-end 1993.
The average rate earned on investment securities in the first nine months
of 1994 was 9.07 percent, compared with 7.21 percent in the first nine
months of 1993. The average maturity of the portfolio was 6.26 years at
September 30, 1994.
The Accounting And Regulatory Matters section provides information
related to the accounting for debt and equity securities.
Loans
Our lending strategy stresses quality growth, diversified by product,
geography and industry. A common credit underwriting structure is in place
throughout the company, and a special real estate credit group reviews
large commercial real estate loans before approval. Consistent with our
long-time standard, we generally look for two repayment sources for
commercial real estate loans: cash flows from both the project itself and
the borrower.
Our commercial lenders focus principally on middle-market companies. A
majority of our commercial loans range from $50,000 to $10 million. We
offer a broad range of financial products and services to meet our
customers' needs, including access to sources of capital and creative
financing solutions for our corporate and commercial customers.
Our consumer lenders emphasize credit judgments that focus on a customer's
debt obligations, ability and willingness to repay, and general economic
trends.
Net loans at September 30, 1994, were $51.6 billion, compared with $46.9
billion at year-end 1993. Consumer loan growth largely reflected strength
in direct lending (loans made directly to individual customers through our
retail bank) and our credit card initiative. Commercial loan growth came
primarily from Florida, North Carolina and our relatively new franchise
in Virginia. The increase also includes $1.0 billion related to 1994
purchase accounting acquisitions.
The loan portfolio at September 30, 1994, was composed of 46 percent in
commercial loans and 54 percent in consumer loans. The portfolio mix has
not changed significantly from year-end 1993.
At September 30, 1994, unused loan commitments related to commercial and
consumer loans were $13.9 billion and $9.4 billion, respectively.
Commercial and standby letters of credit were $1.9 billion.
At September 30, 1994, loan participations sold to other lenders amounted
to $1.3 billion and were recorded as a reduction of gross loans.
The average rate earned on loans in the first nine months of 1994 was
8.48 percent, compared with 8.59 percent in the first nine months of
1993. The average
6
prime rate in the first nine months of 1994 was 6.81 percent, compared
with 6.00 percent in the first nine months of 1993.
The Asset Quality section provides information about geographic exposure in
the loan portfolio and a loss-sharing arrangement with the Federal Deposit
Insurance Corporation (FDIC) covering the Southeast Banks commercial and
consumer loan portfolios acquired from the FDIC in 1991.
Commercial Real Estate Loans
Commercial real estate loans amounted to 15 percent of the total portfolio
at September 30, 1994, and 16 percent at December 31, 1993. This portfolio
included commercial real estate mortgage loans of $5.9 billion at September
30, 1994, and $5.8 billion at December 31, 1993.
Highly Leveraged Transactions
An HLT loan generally is defined as a loan amounting to more than $20
million involving a buyout, acquisition or recapitalization of an existing
business, in which the loan substantially increases a company's debt to
equity ratio. At September 30, 1994, outstanding HLT loans amounted to $824
million, compared with $786 million at December 31, 1993.
Asset Quality
The following portion of the asset quality discussion is divided into two
sections to reflect the loss-sharing arrangement between First Union and
the FDIC in connection with the September 1991 Southeast Banks transaction.
The first section relates to First Union's nonperforming assets, past due
loans, net charge-offs and loan loss allowance, excluding those related to
acquired Southeast Banks nonperforming assets. The acquired First American
segregated assets discussed separately in previous reporting periods are no
longer material for disclosure purposes and are included in the other
assets caption in the balance sheet.
The second section relates solely to the same categories mentioned above
segregated for the acquired Southeast Banks loan portfolio. Certain ratios
related to First Union's nonperforming assets and net charge-offs have been
favorably affected because the Southeast Banks segregated assets portfolio
has not been included in the determination of these ratios.
Under the terms of the loss-sharing arrangement, the FDIC reimburses First
Union for 85 percent of any losses associated with the acquired Southeast
Banks commercial and consumer loan portfolio, except revolving consumer
credit, for which reimbursement declines five percent per year to 65
percent in 1996.
The FDIC also provides virtually cost-free funding for the acquired
Southeast Banks nonperforming assets. This was initially accomplished
through five-year revolving notes issued by First Union. Since the first
quarter of 1992, in accordance with the
7
FDIC assistance agreements, the FDIC has been paying a market rate of
interest on the amount of additions to Southeast Banks segregated assets.
First Union Nonperforming Assets
Nonperforming assets declined to their lowest level in five years at
September 30, 1994, to $654 million, or 1.26 percent of net loans and
foreclosed properties, compared with $916 million, or 1.95 percent, at
December 31, 1993.
Quarterly Nonperforming Assets By Business Unit*
(Dollars in millions) 3Q94 2Q94 1Q94 4Q93 3Q93
Florida $313 283 325 347 471
North Carolina 63 57 64 81 92
Georgia 81 91 119 134 223
Virginia 73 93 118 161 184
South Carolina 31 38 41 43 51
Tennessee 10 10 13 29 36
Maryland 17 18 28 29 23
Washington, D.C. 8 12 17 9 8
Other units** 58 60 71 83 122
Total $654 662 796 916 1,210
* Excludes acquired Southeast Banks segregated assets. Increases
between the second and third quarters of 1994 include nonperforming
assets acquired with the BancFlorida acquisition in Florida and
the American Commercial acquisition in North Carolina.
** First Union Mortgage Corporation, First Union Home Equity Bank,
Capital Markets Group and other units.
Loans or properties of less than $5 million each made up 87 percent, or
$568 million, of nonperforming assets at September 30, 1994. Of the rest:
(Diamond) Six loans or properties between $5 million and $10 million each
accounted for $41 million; and
(Diamond) Three loans or properties over $10 million each accounted for
$45 million.
Seventy-six percent of nonperforming assets were collateralized by real
estate at September 30, 1994, compared with 71 percent at year-end 1993.
First Union Past Due Loans
In addition to these nonperforming assets, at September 30, 1994, accruing
loans 90 days past due were $116 million, compared with $71 million at
December 31, 1993. Of these, $17 million were related to commercial and
commercial real estate loans, compared with $20 million at December 31,
1993.
First Union Net Charge-offs
Annualized net charge-offs as a percentage of average net loans were .31
percent in the first nine months of 1994, compared with .60 percent in the
first nine months of 1993. Annualized net charge-offs in the third quarter
1994 were .38 percent, compared with .27 percent in both the second and
first quarters of 1994, .51 percent in the fourth quarter of 1993, and .50
percent in the third quarter of 1993. The increase in the third quarter of
1994 compared with the previous two quarters
8
was primarily related to a bulk sale of nonperforming assets in Florida.
Table 10 provides information on net charge-offs by category.
First Union Provision And Allowance For Loan Losses
The loan loss provision was $75 million in the first nine months of 1994,
compared with $172 million in the first nine months of 1993. The provision
was $25 million in each of the first three quarters of 1994 and $50 million
in the third quarter of 1993. The decrease in the loan loss provision in
the first nine months of 1994 was based primarily upon current economic
conditions, lower levels of nonperforming assets, the maturity of the
nonperforming assets portfolio, and current and projected levels of
charge-offs.
In addition, we establish reserves based upon various other factors,
including the results of quantitative analyses of the quality of commercial
loans and commercial real estate loans. Reserves for commercial and
commercial real estate loans are based principally on loan grades,
historical loss rates, borrowers' creditworthiness, underlying cash flows
from the project itself and from borrowers, and analysis of other less
quantifiable factors that might influence the portfolio. Reserves for
consumer loans are based principally on delinquencies and historical loss
rates. We analyze all loans in excess of $500,000 that are being monitored
as potential credit problems to determine whether supplemental, specific
reserves are necessary.
For several quarters, the loan loss allowance as a percentage of net loans
has declined and the allowance coverage of nonaccrual and restructured
loans and nonperforming assets has increased, as indicated in Table 10. In
the first nine months of 1994, this was primarily the result of growth in
loans and a $263 million decline in nonperforming assets from December 31,
1993. These percentages exclude the acquired Southeast Banks segregated
assets. The Southeast Banks Segregated Assets section provides information
related to a separate $26 million allowance for losses on segregated
assets.
Southeast Banks Segregated Assets
At September 30, 1994, acquired Southeast Banks segregated assets amounted
to $236 million, or $210 million net of the $26 million allowance referred
to above, compared with $380 million, or $347 million net of a $33 million
allowance, at December 31, 1993. This segregated asset portfolio includes
nonaccrual loans and foreclosed properties, net of the allowance for
segregated assets as indicated in Table 12.
Southeast Banks Past Due Loans
Accruing loans 90 days past due included in the acquired Southeast Banks
performing loan portfolio decreased 29 percent to $20 million at September
30, 1994, from $28 million at December 31, 1993. These loans are subject to
the terms of the FDIC loss-sharing agreement.
9
Southeast Banks Net Charge-offs
Net charge-offs of $3 million, representing First Union's approximately 15
percent share of the losses on acquired Southeast Banks loans, were
deducted from the allowance for segregated assets in the third quarter of
1994, compared with $2 million in both the second and first quarters of
1994 and $3 million in the fourth and third quarters of 1993.
Geographic Exposure
The loan portfolio in the South Atlantic region of the United States is
spread primarily across 64 metropolitan statistical areas with diverse
economies. Washington, D.C.; Charlotte, North Carolina; Atlanta, Georgia;
and Miami, Jacksonville, West Palm Beach and Tampa, Florida, are our
largest markets, but no individual metropolitan market contains more than 7
percent of the commercial loan portfolio.
Substantially all of the $7.6 billion commercial real estate portfolio at
September 30, 1994, was located in our banking region, which includes North
Carolina, South Carolina, Georgia, Florida, Virginia, Maryland, Tennessee
and Washington, D.C.
Core Deposits
Core deposits were $50.7 billion at September 30, 1994, compared with $50.9
billion at December 31, 1993. Core deposits include savings, negotiated
order of withdrawal (NOW), money market and noninterest-bearing accounts,
and other consumer time deposits.
Average noninterest-bearing deposits were 20 percent of average core
deposits in the first nine months of 1994, compared with 19 percent in the
first nine months of 1993. The Net Interest Income Summaries provide
additional information about average core deposits.
The portion of core deposits in higher-rate, other consumer time deposits
was 34 percent at September 30, 1994, and 33 percent at year-end 1993.
Average core deposit balances in the third quarter of 1994 increased $461
million from the second quarter of 1994. Average balances in savings and
NOW and other consumer time deposits were higher when compared with the
previous quarter, while money market account and noninterest bearing
deposits were lower. Core deposit balances can be affected by purchase
accounting acquisitions, branch closings or consolidations, seasonal
factors and the rates being offered for deposits compared to other
investment opportunities.
Other consumer time and other noncore deposits usually pay higher rates
than savings and transaction accounts, but they generally are not available
for immediate withdrawal and are less expensive to process.
10
Purchased Funds
Purchased funds at September 30, 1994, were $13.1 billion compared with
$10.1 billion at year-end 1993. The majority of these funds have been used
to fund short- term investments and growth in loan balances. Purchased
funds are acquired primarily through (a) our large branch network,
consisting principally of $100,000 and over certificates of deposit, public
funds and treasury deposits, and (b) the national market sources,
consisting of federal funds, securities sold under repurchase agreements,
eurodollar time deposits and commercial paper. Purchased funds declined
$407 million from June 30, 1994 to September 30, 1994.
Average purchased funds in the third quarter of 1994 were $13.0 billion, an
increase of 10 percent from $11.8 billion in the fourth quarter of 1993.
Long-Term Debt
Long-term debt was 58 percent of total stockholders' equity at September
30, 1994, compared with 59 percent at December 31, 1993.
This year we have issued $150 million of 15-year, 6.375 percent
subordinated debt, $150 million of 15-year, 8 percent subordinated debt,
and $150 million of 10-year subordinated, 8.77 percent debt. Proceeds from
these debt issues are used for general corporate purposes.
Under a shelf registration statement filed with the Securities and Exchange
Commission, we currently have available for issuance $350 million of senior
or subordinated debt securities. The sale of any additional debt securities
will depend on future market conditions, funding needs and other factors.
Debt Obligations
We obtained a $350 million, three-year committed back-up line of credit in
the third quarter of 1994. This credit facility contains financial
covenants that require First Union to maintain a minimum level of tangible
net worth, restrict double leverage ratios and require capital levels at
subsidiary banks to meet regulatory standards. First Union is currently in
compliance with these requirements and has not used this line of credit.
In the fourth quarter of 1994, $37 million of long-term debt will mature.
Maturing in 1995 is $201 million, and in 1996, $504 million, which includes
notes payable to the FDIC of $201 million at September 30, 1994. We expect
the notes payable to the FDIC to decrease over the remaining period ending
in September 1996 through cash flows generated by the acquired loans, the
sale of the Southeast Banks segregated assets and FDIC reimbursements.
During the third quarter of 1994, we redeemed $15 million of convertible
subordinated debt that we assumed in the BancFlorida acquisition, which was
converted into approximately 437,000 shares of First Union common stock
prior to redemption.
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The Asset Quality section provides additional information related to the
funding of the segregated assets.
Stockholders' Equity
At September 30, 1994, common stockholders' equity was $5.51 billion, a 12
percent increase from $4.92 billion at December 31, 1993. Total
stockholders' equity was $5.62 billion, compared with $5.21 billion at
year-end 1993. Since year- end 1993, we have paid $175 million for the
purchase in the open market of 4 million shares of common stock related to
the BancFlorida acquisition. These shares were subsequently retired. In
addition, the board of directors has authorized the repurchase from time to
time of up to 13 million additional shares of common stock. At September 30,
1994, stockholders' equity included a $171 million unrealized after-tax loss
related to debt and equity securities. The Securities Available for Sale
section provides additional information about the accounting for debt and
equity securities.
Series 1990 preferred stock cash dividends of 8.35 percent per annum were
paid for the quarter ended September 30, 1994. We paid $87 million in
dividends to preferred and common stockholders in the third quarter of
1994.
Subsidiary Dividends
Our banking subsidiaries are the largest source of parent company
dividends. Capital requirements established by regulators limit dividends
that these and certain other of our subsidiaries can pay. The Comptroller
of the Currency (OCC) generally limits a national bank's dividends in two
principal ways: first, dividends cannot exceed the bank's undivided
profits, less statutory bad debt in excess of a bank's allowance for loan
losses; and second, in any year dividends may not exceed a bank's net
profits for that year, plus its retained earnings from the preceding two
years, less any required transfers to surplus.
Under these and other limitations, our subsidiaries had $193 million
available for dividends at September 30, 1994. Our subsidiaries paid $474
million in dividends to the corporation in the first nine months of 1994.
Risk-Based Capital
The minimum requirement for the ratio of total capital to risk-weighted
assets (including certain off-balance-sheet financial instruments, such as
standby letters of credit and interest rate swaps) is currently 8 percent.
At least half of the total capital is to be composed of common equity,
retained earnings and a limited amount of qualifying preferred stock, less
certain intangible assets (tier 1 capital). The rest may consist of a
limited amount of subordinated debt, nonqualifying preferred stock and a
limited amount of the loan loss allowance (together with tier 1 capital,
total capital).
At September 30, 1994, the corporation's tier 1 and total capital ratios
were 8.84 percent and 14.20 percent, respectively.
12
In addition, the Federal Reserve Board has established minimum leverage
ratio requirements for bank holding companies. These requirements provide
for a minimum leverage ratio of tier 1 capital to adjusted average
quarterly assets equal to 3 percent for bank holding companies that meet
specified criteria, including having the highest regulatory rating. All
other bank holding companies will generally be required to maintain a
leverage ratio from at least 4 to 5 percent. The corporation's leverage
ratio at September 30, 1994, was 6.77 percent.
The requirements also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. The Federal Reserve
Board also has indicated it will continue to consider a tangible tier 1
leverage ratio (deducting all intangibles) in evaluating proposals for
expansion or new activity. The Federal Reserve Board has not advised us of
any specific minimum leverage ratio applicable to us.
Each subsidiary bank is subject to similar capital requirements adopted by
the OCC. Each subsidiary bank listed in Table 18 had a leverage ratio in
excess of 5.73 percent at September 30, 1994. None of our subsidiary banks
has been advised of any specific minimum capital ratios applicable to it.
The regulatory agencies also have adopted regulations establishing capital
tiers for banks. Banks in the highest capital tier, or "well capitalized,"
must have a leverage ratio of 5 percent, a tier 1 capital ratio of 6
percent and a total capital ratio of 10 percent.
At September 30, 1994, the subsidiary banks listed in Table 18 met the
capital and leverage ratio requirements for well capitalized banks, except
for First Union National Bank of North Carolina, which had a total capital
ratio of 9.62 percent. As a result of a subsequent $75 million capital
contribution from the bank's parent company, the bank's total capital ratio
at September 30, 1994, would have been 10.03 percent. We expect to maintain
these banks' ratios at the required levels by the retention of earnings
and, if necessary, the issuance of additional capital.
Failure to meet certain capital ratio or leverage ratio requirements could
subject a bank to a variety of enforcement remedies, including termination
of deposit insurance by the FDIC.
The Accounting and Regulatory Matters section provides more information
about proposed changes in risk-based capital standards.
Interest Rate Risk Management
Managing interest rate risk is fundamental to banking. Banking institutions
manage the inherently different maturity and repricing characteristics of
the lending and deposit-taking lines of business to achieve a desired
interest rate sensitivity position and to limit exposure to interest rate
risk. Our inherent maturity and repricing characteristics of lending and
deposit activities create a naturally asset-sensitive structure. By using a
combination of on- and off-balance sheet financial instruments we manage
interest rate sensitivity within our established policy guidelines.
13
The Financial Management Committee of the corporation's board of directors
reviews overall interest rate risk management activity. The Funds
Management Committee, which includes the corporation's chief executive
officer and president, and senior executives from our Capital Markets
Group, credit and finance areas, oversees the interest rate risk management
process and approves policy guidelines. Funds Management personnel monitor
the day-to-day exposure to changes in interest rates in response to loan
and deposit flows and make adjustments within established policy
guidelines.
We believe that interest rate risk is best measured by the amount of
earnings per share at risk given specified changes in interest rates. We
have been modeling interest rate sensitivity since the early 1970s. Our
model captures all earning assets, interest-bearing liabilities and
off-balance sheet financial instruments and combines the various factors
affecting rate sensitivity into an earnings outlook that incorporates our
view of the interest rate environment most likely over the next 24 months.
The Funds Management Committee reviews and continuously updates the
underlying assumptions included in the earnings simulation model.
Our interest rate sensitivity analysis is based on multiple interest rate
scenarios, projected changes in balance sheet categories and other relevant
assumptions. Changes in management's outlook and other market factors may
cause actual results to differ from our current simulated outlook.
We believe our earnings simulation model is a more relevant depiction of
interest rate risk than traditional gap tables because it captures multiple
effects excluded in less sophisticated presentations, and it includes
significant variables that we identify as being affected by interest rates.
For example our model captures rate of change differentials, such as
federal funds rates versus savings account rates; maturity effects, such as
calls on securities; and rate barrier effects, such as caps and floors on
loans. It also captures changing balance sheet levels, such as loans and
investment securities; and floating rate loans that may be tied or related
to prime, LIBOR, CD rates, treasury notes, federal funds or other rate
indices, which do not necessarily move identically as short-term rates
change. In addition it captures leads and lags that occur in long-term
rates as short-term rates move away from current levels; and the effects of
prepayment volatility on various fixed rate assets such as residential
mortgages, mortgage-backed securities and consumer loans. These and certain
other effects are evaluated in developing the multiple scenarios from which
sensitivity of earnings to changes in interest rates is determined.
We determine sensitivity of earnings to changes in interest rates by
assessing the impact on net income in multiple rising and falling interest
rate scenarios. The model is updated at least monthly and more often if
desired.
We use three scenarios in analyzing interest rate sensitivity. The base
line scenario is our estimated most likely path for future short-term
interest rates over the next twenty-four months. The base line scenario
currently assumes rising federal funds rates over the next 24 months. The
"high rate" and "low rate" scenarios assume 100 basis point shifts from the
base line scenario in the federal funds rate by the fourth succeeding month
and that rates remain 100 basis points higher or lower through the rest of
the 24-month period. Additionally, other scenarios are reviewed monthly to
examine the effects of different interest rate movements.
14
We determine interest rate sensitivity by the change in earnings per share
between the three scenarios over a 12-month policy measurement period. The
earnings per share as calculated by the earnings simulation model under the
base line scenario becomes the standard. The measurement of interest rate
sensitivity is the percentage change in earnings per share calculated by
the model under high rate versus base-line and under low rate versus
base-line. The policy measurement period begins with the fourth month
forward and ends with the 15th month (i.e., the 12- month period.) The
scenarios do not include the adjustments that management would make as rate
expectations change.
Our policy limit for the maximum negative impact on earnings per share
resulting from either the high rate or low rate scenario is 5 percent.
Based upon the October 1994 outlook, if interest rates were to rise to
follow the high rate scenario, which means a full 100 basis point increase
over the base line (already a rising rate scenario), then earnings during
the policy measurement period would be negatively affected by 2.3 percent
(assuming management took no actions.)
Off-Balance Sheet Derivatives For Interest Rate Risk Management
As part of our overall interest rate risk management strategy, for many
years we have used off-balance sheet derivatives as a cost- and
capital-efficient way to modify the repricing or maturity characteristics
of on-balance sheet assets and liabilities. Our off-balance sheet
derivative transactions used for interest rate sensitivity management
include swaps, futures and options with indices that directly relate to the
pricing of specific core assets and liabilities of the corporation. We
believe there is minimal risk that the derivatives used for rate
sensitivity management will have any significant unintended effect on
corporate earnings.
As a result of interest rate fluctuations, off-balance sheet transactions
(and securities) will from time to time develop unrealized appreciation or
depreciation in market values as compared with their cost. When the
off-balance sheet transactions are directly linked to specific assets and
liabilities employed as part of our overall interest rate risk management
strategy, then there will generally be offsetting unrealized appreciation
and depreciation on the corporate balance sheet.
Our asset sensitivity arises naturally primarily because the repricing
characteristics of the large core deposit base have a positive effect on
earnings in a rising rate environment and a negative effect on earnings in
a falling rate environment. We use the traditional investment portfolio as
well as off-balance sheet derivative instruments to neutralize this natural
asset sensitivity of the corporation. This is accomplished primarily by
holding fixed rate debt instruments in the securities portfolio or by
holding off-balance sheet "asset proxies." These asset proxies consist of
interest rate swaps that convert floating rate assets (primarily variable
rate loans) to fixed rate assets. The combination of securities and
interest rate swaps enables us to achieve a desired level of interest rate
sensitivity.
Another common application of off-balance sheet transactions in managing
the corporation's interest rate risk is the use of interest rate swaps to
convert fixed rate debt into floating rate debt. This is accomplished by
entering into interest rate swap contracts to receive a fixed rate of
interest to the contractual maturity of the debt issued and pay a variable
rate, usually six-month LIBOR. These "liability swaps" leave rate
sensitivity unchanged, whereas the fixed-rate debt issuance alone would
15
have increased asset sensitivity or reduced liability sensitivity. The
combination of the liability swaps and debt produces the desired
LIBOR-based floating rate funding regardless of changes in interest rates.
As interest rates move higher, the market value of both categories of
interest rate swaps will decline. In the example of swaps used as asset
proxies, the market value decline will be somewhat offset by a gain in
value of the corporation's core deposits. For liability swaps, the market
value decline would be closely offset by appreciation in the market value
of the fixed rate debt on the balance sheet to which the swaps are directly
linked.
The important consideration is not the shifting of unrealized appreciation
or depreciation between and among on- and off-balance sheet instruments,
but the prudent management of interest rate sensitivity so that corporate
earnings are not at risk as interest rates move up or down.
The notional amount of off-balance sheet derivative financial instruments
used to manage our interest rate risk sensitivity amounted to $25.4 billion
at September 30, 1994, compared with $48.8 billion at December 31, 1993.
The related fair value depreciation of off-balance sheet derivative
financial instruments was $308 million at September 30, 1994, compared with
the fair value appreciation of $369 million at December 31, 1993. The
increased contribution to net interest income in a higher interest rate
environment from on-balance sheet assets and liabilities is expected to
substantially offset the potential reduced contribution to net interest
income reflected by the decline in market value of off-balance sheet
derivative financial instruments.
Although off-balance sheet derivative financial instruments do not expose
the corporation to credit risk equal to the notional amount, we are exposed
to credit risk equal to the extent of the fair value gain in an off-balance
sheet derivative financial instrument if the counterparty fails to perform.
We minimize the credit risk in these instruments by dealing only with high
quality counterparties. Each transaction is specifically approved for
applicable credit exposure.
In addition, our policy is to require all caps, floors, swaps and swaptions
be governed by an International Swaps and Derivatives Association Master
Agreement and be subject to bilateral collateral arrangements.
Collateral for these transactions is delivered by either party when the
credit risk associated with a particular transaction, or group of
transactions to the extent netting exists, exceeds acceptable thresholds of
credit risk. Thresholds are determined based on the strength of the
individual counterparty and are bilateral. As of September 30, 1994, the
total credit risk in excess of thresholds was $24 million. The fair value
of collateral held was 105 percent of the total credit risk in excess of
thresholds.
Liquidity
We manage liquidity -- the ability to raise funds primarily through
deposits, purchased funds or the issuance of debt or capital -- through the
selection of the asset mix and the maturity mix of liabilities.
16
As part of this process, we continually evaluate funding needs and
alternatives. In addition, we have a large branch network through which we
raise most of our deposits. First Union is one of the nation's largest
core deposit-funded banking companies. This reduces dependency on national
market sources to help meet funding requirements. In addition, acquired
bank and savings bank deposits have enhanced overall liquidity.
We use these deposits and other funding sources to fund loans and
investments, meet deposit withdrawals and maintain reserve requirements.
Net cash provided from operations primarily results from net income
adjusted for the following noncash accounting items: the provisions for
loan losses and foreclosed properties; and depreciation and amortization.
These items amounted to $329 million in the first nine months of 1994,
compared with $471 million in the first nine months of 1993. This cash was
available to increase earning assets, to reduce borrowings by $95 million
and to pay dividends of $234 million.
Several off-balance sheet assets could be used to increase liquidity and
provide additional financial flexibility. These include a mortgage
servicing portfolio with an estimated fair value of $289 million over book
value at September 30, 1994.
Accounting And Regulatory Matters
The Financial Accounting Standards Board (FASB) has issued Standard No.
112, "Employers' Accounting for Postemployment Benefits", which requires
accrual of a liability for all types of benefits paid to former or inactive
employees after employment but before retirement. The company adopted this
accounting standard beginning January 1, 1994. Benefits subject to this
accounting pronouncement include salary continuation, supplemental
unemployment benefits, severance benefits, disability-related benefits
(including workers' compensation), job training and counseling, and
continuation of such benefits as health care and life insurance coverage.
The effect of initially applying this new accounting standard in 1994 is
estimated to be approximately $13 million. The recurring reduction of
income before income taxes is expected to be immaterial.
The FASB also has issued Standard No. 114, "Accounting by Creditors for
Impairment of a Loan", which requires that all creditors value all
specifically reviewed loans for which it is probable that the creditor will
be unable to collect all amounts due according to the terms of the loan
agreement at the present value of expected cash flows, market price of the
loan, if available, or value of the underlying collateral. Expected cash
flows are required to be discounted at the loan's effective interest rate.
We estimate the initial application of this accounting standard will not
require an increase to the existing allowance for loan losses. The periodic
effect on net income has not been fully determined. This Standard is
required for fiscal years beginning after December 15, 1994. The FASB also
has issued Standard No. 118, "Accounting by Creditors for Impairment of a
Loan -- Income Recognition and Disclosures", that amends FASB Standard No.
114 to allow a creditor to use existing methods for recognizing interest
income on an impaired loan and by requiring additional disclosures about
how a creditor recognizes interest income related to impaired loans. This
Standard is to be implemented concurrently with Standard No. 114.
17
The FASB also issued Standard No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", that requires that debt and equity
securities held: (i) to maturity be classified as such and reported at
amortized cost; (ii) for current resale be classified as trading securities
and reported at fair value, with unrealized gains and losses included in
current earnings; and (iii) for any other purpose be classified as
securities available for sale and reported at fair value, with unrealized
gains and losses excluded from current earnings and reported as a separate
component of stockholders' equity. It is required for fiscal years
beginning after December 15, 1993. The effect of the foregoing will be to
cause fluctuations in stockholders' equity based on changes in values of
debt and equity securities. More information related to the adoption of
this Standard is included in the Securities Available For Sale section.
The FASB has also issued Standard No. 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments", which
requires improved disclosures about derivative financial instruments --
futures, forward, swap or option contracts, or other financial instruments
with similar characteristics. It also amends existing requirements of FASB
Standard No.105, Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentration of
Credit Risk, and FASB Standard No.107, Disclosures about Fair Value of
Financial Instruments. It requires that a distinction be made between
financial instruments held or issued for the purposes of trading or other
than trading. For derivative financial instruments held or issued for
trading, disclosure of average fair values and of net trading gains or
losses is required. For derivative financial instruments held or issued for
purposes other than trading, it requires disclosure about those purposes,
about how the instruments are reported in financial statements, and, if the
purpose is hedging anticipated transactions, about the anticipated
transactions, the classes of derivative financial instruments used to hedge
those transactions, the amounts of hedging gains and losses deferred, and
the transactions or other events that result in recognition of the deferred
gains or losses in income. The Standard encourages, but does not require,
quantitative information about interest rate or other market risks of
derivative financial instruments, and also of other assets and liabilities,
that is consistent with the way the entity manages or adjusts risks and
that is useful for comparing the results of applying the entity's
strategies to its objectives for holding or issuing the derivative
financial instruments. The Standard amends Standard No. 105 to require
disaggregation of information about financial instruments with
off-balance-sheet risk of accounting loss by class, business activity, risk
or other category that is consistent with the entity's management of those
instruments. The Standard also amends Standard No. 107 to require that fair
value information be presented without combining, aggregating or netting
the fair value of derivative financial instruments with the fair value of
nonderivative financial instruments and be presented together, with the
related carrying amounts in the body of the financial statements, a single
footnote or a summary table in a form that makes it clear whether the
amounts represent assets or liabilities. The Standard is required for
financial statements issued for fiscal years ending after December 15,
1994.
The FASB has issued an exposure draft, "Accounting for Stock-based
Compensation", that proposes that the fair value of an award of equity
instruments to employees be recognized as additional equity at the date the
award is granted. Amounts attributable to future service would be
recognized as an asset and amortized to personnel expense over the period
of employee service. If the award is
18
for past services, personnel expense would be charged in the period in
which the award is granted. Pro forma disclosure of the effects on net
income and income per share for awards granted after December 31, 1994, may
be required. The actual fair value adjustments to net income would be
effective for awards granted after December 31, 1996. The effect of the
provisions of this proposed accounting standard on net income and total
stockholders' equity would depend upon the nature of stock-based
compensation, if any, awarded by the corporation in future years.
The FASB has also issued an exposure draft, "Accounting for the Impairment
of Long-Lived Assets", that proposes accounting for the impairment of
long-lived assets, identifiable intangibles and goodwill related to those
assets. It would require the carrying amount of impaired assets be reduced
to fair value. An entity would estimate the future cash flows expected to
result from the use of an asset and its eventual disposition. If the sum of
the expected future net cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss
would be recognized. Measurement of an impairment loss for long- lived
assets and identifiable intangibles that an entity expects to hold and use
would be based on the fair value of the asset. Long-lived assets and
identifiable intangibles to be disposed of would be reported at the lower
of cost or fair value less cost to sell, except for certain assets, which
in accordance with current accounting pronouncements, will continue to be
reported at the lower of cost or net realizable value. This proposed
statement also would require a rate-regulated enterprise to recognize an
impairment for the amount of costs excluded when a regulator excludes all
or part of a cost from the enterprise's rate base. This proposed statement
would be effective for financial statements issued for fiscal years
beginning after December 15, 1994. We do not anticipate a material impact
to the corporation's net income should implementation of this exposure
draft be required.
The FASB also has issued an exposure draft, "Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans." This proposed statement would require that an entity
recognize as separate assets rights to service mortgage loans for others,
regardless of how such servicing rights are acquired. An entity that
acquires mortgage servicing rights through either the purchase or
origination of mortgage loans and sells those loans with servicing rights
retained would allocate some of the cost of the loans to the mortgage
servicing rights. Additionally, the proposed statement would require that
securitizations of mortgage loans be accounted for as sales of mortgage
loans and acquisitions of mortgage-backed securities and that capitalized
mortgage servicing rights and capitalized excess servicing receivables be
assessed for impairment. Impairment would be measured based on fair value.
The proposed statement would be applied prospectively in fiscal years
beginning after December 15, 1995, to transactions in which an entity
acquires mortgage servicing rights and to impairment evaluation of all
capitalized mortgage servicing rights and capitalized excess servicing
receivables whenever acquired. Retroactive application would be prohibited.
The impact to net income has not been assessed.
The FASB has also issued FASB Interpretation No. 39, "Offsetting of Amounts
Related to Certain Contracts," which defines right of set-off and sets
forth the conditions under which that right may be applied. Specific
guidance with respect to certain financial instruments such as forward,
interest rate swap, currency swap, option and other conditional or exchange
contracts and clarification of the circumstances in which it is appropriate
to offset amounts recognized for those
19
contracts in the statement of financial positions is also included in this
Interpretation. In addition, it permits offsetting of fair value amounts
recognized for multiple forward, swap, option and other conditional or
exchange contracts executed with the same counterparty under a master
netting arrangement. This Interpretation is effective for financial
statements issued for periods beginning after December 15, 1993. Currently
the effects of the Corporation's adoption of the provisions of this
Interpretation have been immaterial. The FASB has also issued an exposure
draft, "Offsetting of Amounts Related to Certain Repurchase and Reverse
Repurchase Agreements." This proposed interpretation would modify FASB
Interpretation No. 39 to permit offsetting in the statement of financial
position of payables and receivables that represent repurchase agreements
and reverse repurchase agreements, respectively, have the same settlement
date, are executed with the same counterparty in accordance with a master
netting arrangement, involve securities that exist in "back entry" form,
and settle on securities transfer systems that have the same key operating
characteristics as the Fedwire Securities Transfer System. This proposed
Interpretation would be effective on issuance.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA), among other provisions, imposes liability on a bank insured by
the FDIC for certain obligations to the FDIC incurred in connection with
other insured banks under common control.
The Federal Deposit Insurance Corporation Improvement Act, among other
things, requires a revision of risk-based capital standards. The new
standards are required to incorporate interest rate risk, concentration of
credit risk and the risks of nontraditional activities and to reflect the
actual performance and expected risk of loss of multifamily mortgages.The
Risk-Based Capital section provides more information on risk assessment
classifications.
Legislation has been enacted providing that deposits and certain claims for
administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general
unsecured claims against such an institution, including federal funds and
letters of credit, in the "liquidation or other resolution" of such an
institution by any receiver.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(IBBEA) authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation beginning September 27, 1995. In
addition, beginning June 1, 1997, a bank may merge with a bank in another
state as long as neither of the states opt out of interstate branching
between the date of enactment of IBBEA and May 31, 1997. IBBEA further
provides that a state may enact laws permitting interstate merger
transactions before June 1, 1997.
The Riegle Community Development and Regulatory Improvement Act of 1994
includes a list of regulatory relief items. The regulatory relief sections
eliminate or modify many regulatory requirements under existing law.
Various other legislative proposals concerning the banking industry are
pending in Congress. Given the uncertainty of the legislative process, we
cannot assess the impact of any such legislation on our financial condition
or results of operations.
20
TABLE 1
CONSOLIDATED SUMMARIES OF INCOME AND PER SHARE DATA
Twelve
Months 1994 1993
Ended
September 30, THIRD Second First Fourth Third
(In thousands except per share data) 1994 QUARTER Quarter Quarter Quarter Quarter
CONSOLIDATED SUMMARIES
OF INCOME
Interest income* $ 4,972,201 1,330,197 1,258,918 1,186,412 1,196,674 1,199,264
Interest expense 1,914,168 530,858 483,913 436,003 463,394 470,491
Net interest income* 3,058,033 799,339 775,005 750,409 733,280 728,773
Provision for loan losses 124,973 25,000 25,000 25,000 49,973 50,001
Net interest income after
provision for loan losses* 2,933,060 774,339 750,005 725,409 683,307 678,772
Securities available for sale
transactions 1,223 (2,946) (2,935) 4,300 2,804 4,142
Investment security transactions 6,644 2,286 694 615 3,049 815
Noninterest income 1,172,778 303,259 276,011 275,781 317,727 287,998
Noninterest expense 2,661,202 682,219 651,220 639,841 687,922 664,388
Income before income taxes* 1,452,503 394,719 372,555 366,264 318,965 307,339
Income taxes 467,840 130,147 119,223 120,001 98,469 84,286
Tax-equivalent adjustment 95,489 22,820 23,712 23,804 25,153 27,638
Net income 889,174 241,752 229,620 222,459 195,343 195,415
Dividends on preferred stock 24,011 6,595 6,201 5,726 5,489 6,240
Net income applicable to
common stockholders $ 865,163 235,157 223,419 216,733 189,854 189,175
PER COMMON SHARE DATA
Net income $ 5.06 1.35 1.32 1.27 1.12 1.12
Average common shares - 174,417,288 169,063,689 170,314,176 169,981,393 168,540,736
Average common
stockholders' equity**
Quarter-to-date $ - 5,396,497 5,112,116 5,012,086 4,843,889 4,657,544
Year-to-date - 5,174,974 5,062,377 5,012,086 4,550,048 4,451,024
Common stock price
High 48 1/8 47 1/4 47 5/8 43 3/4 48 1/8 49 5/8
Low 37 7/8 43 1/4 41 1/4 39 3/4 37 7/8 43 1/2
Period-end 43 1/4 43 1/4 46 1/8 41 5/8 41 1/4 47 5/8
To earnings ratio*** 8.55 X 8.55 9.55 8.62 8.72 13.01
To book value 138 % 138 152 140 143 169
Cash dividends $ 1.66 .46 .40 .40 .40 .40
Book value** 31.34 31.34 30.26 29.71 28.90 28.14
PER PREFERRED SHARE DATA
Series 1990 preferred stock price
High 53 7/8 53 1/2 53 1/4 53 7/8 53 7/8 55 1/2
Low 52 52 52 52 1/8 52 53 1/4
Period-end 52 1/8 52 1/8 52 3/4 52 1/8 52 3/8 53 1/2
Cash dividends $ 3.8002 1.0438 .9813 .9063 .8688 .9875
Dividend rate 7.60 % 8.35 7.85 7.25 6.95 7.90
*Tax-equivalent.
**Quarter-to-date and year-to-date average common stockholders' equity excludes
1994 average net unrealized gains or losses on debt and equity securities.
The determination of book value excludes a net unrealized loss on debt and
equity securities of $170,918,000 in the third quarter of 1994.
***Based on net income applicable to common stockholders.
T-1
TABLE 2
NONINTEREST INCOME
Twelve
Months 1994 1993
Ended
September 30, THIRD Second First Fourth Third
(In thousands) 1994 QUARTER Quarter Quarter Quarter Quarter
Trading account profits $ 49,889 10,906 10,247 7,323 21,413 5,814
Service charges on deposit accounts 438,446 109,325 107,083 108,022 114,016 111,163
Mortgage banking income 83,386 21,401 12,239 19,421 30,325 34,444
Capital management income 214,181 63,469 50,380 50,949 49,383 50,283
Securities available for sale transactions 1,223 (2,946) (2,935) 4,300 2,804 4,142
Investment security transactions 6,644 2,286 694 615 3,049 815
Merchant discounts 60,386 16,257 15,283 14,361 14,485 13,600
Insurance commissions 44,026 12,506 10,705 9,990 10,825 11,138
Sundry income 282,464 69,395 70,074 65,715 77,280 61,556
Total $ 1,180,645 302,599 273,770 280,696 323,580 292,955
TABLE 3
NONINTEREST EXPENSE
Twelve
Months 1994 1993
Ended
September 30, THIRD Second First Fourth Third
(In thousands) 1994 QUARTER Quarter Quarter Quarter Quarter
Personnel expense
Salaries $ 1,014,016 262,187 250,157 244,254 257,418 243,871
Other benefits 247,939 63,875 62,561 65,386 56,117 57,253
Total 1,261,955 326,062 312,718 309,640 313,535 301,124
Occupancy 239,524 58,854 56,877 60,391 63,402 62,085
Equipment rentals, depreciation
and maintenance 217,102 55,987 52,440 56,700 51,975 49,994
Advertising 32,070 9,082 10,659 8,622 3,707 6,855
Telephone 57,061 13,879 14,005 14,678 14,499 14,774
Travel 51,035 12,797 12,491 12,076 13,671 9,952
Postage 45,952 12,609 11,210 11,908 10,225 10,175
Printing and office supplies 54,924 11,892 12,700 13,374 16,958 13,461
FDIC insurance 120,213 29,321 30,155 29,939 30,798 30,715
Other insurance 16,712 3,438 4,774 3,715 4,785 4,872
Professional fees 56,519 16,302 12,031 10,908 17,278 13,570
Data processing 29,459 5,188 4,582 5,236 14,453 14,909
Owned real estate expense 34,241 8,785 4,908 5,296 15,252 5,049
Mortgage servicing amortization 28,291 4,980 4,953 8,326 10,032 32,737
Other amortization 115,238 31,141 27,402 28,052 28,643 28,635
Sundry 300,906 81,902 79,315 60,980 78,709 65,481
Total $ 2,661,202 682,219 651,220 639,841 687,922 664,388
T-2
TABLE 4
INTERNAL CAPITAL GROWTH AND DIVIDEND PAYOUT RATIOS
NINE MONTHS ENDED 1994 1993
September 30,
THIRD Second First Fourth Third
1994 1993 QUARTER Quarter Quarter Quarter Quarter
INTERNAL CAPITAL GROWTH*
Assets to stockholders' equity (a) 13.14 X 14.07 12.85 13.31 13.28 14.08 14.46
X
Return on assets 1.29 % 1.25 1.31 1.28 1.28 1.07 1.08
Return on total stockholders' equity (a) 16.99 % 17.54 16.88 17.07 17.03 15.11 15.69
X
Earnings retained 66.22 % 68.63 64.04 67.96 66.79 62.34 62.22
Internal capital growth (a) 11.25 % 12.04 10.81 11.60 11.38 9.42 9.76
DIVIDEND PAYOUT RATIO ON
Common shares 31.96 % 29.16 34.16 30.30 31.50 35.71 35.73
Preferred and common shares 33.78 % 31.37 35.96 32.04 33.21 37.66 37.78
Return on common stockholders' equity** (a) 17.45 % 18.11 17.29 17.53 17.54 15.55 16.11
(A) The determination of these ratios exclude 1994 average net unrealized
gains or losses on debt and equity securities.
* Based on average balances and net income.
** Based on average balances and net income applicable to common
stockholders.
T-3
TABLE 5
SELECTED QUARTERLY DATA
1994 1993
THIRD Second First Fourth Third
(Dollars in thousands) QUARTER Quarter Quarter Quarter Quarter
MORTGAGE LOAN PORTFOLIO
PERMANENT LOAN ORIGINATIONS
Residential
Direct $ 656,986 1,028,783 * 1,278,648 * 1,099,079 935,103
Wholesale 132,828 277,302 424,460 655,452 477,660
Total 789,814 1,306,085 1,703,108 1,754,531 1,412,763
Income property 123,291 78,353 51,446 111,332 47,984
Total $ 913,105 1,384,438 1,754,554 1,865,863 1,460,747
VOLUME OF LOANS SERVICED
Residential $ 31,661,000 31,779,000 32,178,000 32,786,000 34,833,000
Income property 1,603,000 1,744,000 1,884,000 1,972,000 2,068,000
Total $ 33,264,000 33,523,000 34,062,000 34,758,000 36,901,000
NUMBER OF OFFICES
Banking
North Carolina 280 284 272 266 269
South Carolina 66 67 67 67 65
Georgia 157 159 161 163 165
Florida 545 491 485 488 458
Washington, D.C. 28 30 30 30 40
Maryland 31 32 32 32 55
Tennessee 55 65 64 63 63
Virginia 186 186 197 193 258
Foreign 2 2 2 1 1
Total banking offices 1,350 1,316 1,310 1,303 1,374
First Union Home Equity Bank 183 173 164 151 146
Mortgage banking 23 24 24 53 53
Other 18 18 18 18 19
Total offices 1,574 1,531 1,516 1,525 1,592
OTHER DATA
ATMs 1,185 1,186 1,180 1,189 1,205
Employees 32,019 31,581 31,670 32,861 32,709
*Amounts for first and second quarter of 1994 have been revised.
T-4
TABLE 6
GROWTH THROUGH ACQUISITIONS
Loans, Stockholders' Net
(In thousands) Assets net Deposits Equity Income
December 31, 1987, as reported $27,629,481 15,388,490 17,425,316 1,794,405 283,122
Pooling of interests acquisitions 10,904,462 8,089,149 8,492,443 635,739 86,588
December 31, 1987, as restated 38,533,943 23,477,639 25,917,759 2,430,144 369,710
1988 acquisition 939,454 498,578 871,281
Growth in operations 1,973,349 4,155,409 2,691,528
December 31, 1988, as reported 41,446,746 28,131,626 29,480,568
Growth in operations 4,060,101 3,469,150 2,051,202
December 31, 1989, as reported 45,506,847 31,600,776 31,531,770
1990 acquisition 7,946,973 4,174,478 5,727,330
Growth in operations 1,134,590 275,465 935,168
December 31, 1990, as reported 54,588,410 36,050,719 38,194,268
1991 acquisitions 12,322,456 7,025,621 9,921,421
Reduction in operations (7,637,689) (1,692,760) (939,466)
December 31, 1991, as reported 59,273,177 41,383,580 47,176,223
1992 acquisitions 3,739,039 1,773,797 3,645,316
Growth (reduction) in operations 815,815 (1,233,610) (1,670,574)
December 31, 1992, as reported 63,828,031 41,923,767 49,150,965
1993 acquisitions 7,785,479 4,380,362 6,302,873
Growth (reduction) in operations (826,541) 572,048 (1,711,427)
December 31, 1993, as reported 70,786,969 46,876,177 53,742,411
1994 acquisitions 2,526,704 1,030,156 2,001,563
Growth (reduction) in operations 929,445 3,726,701 (2,056,923)
September 30, 1994, as reported $74,243,118 51,633,034 53,687,051
Major acquisitions (those greater than $1.0 billion in acquired assets
and/or deposits) include Florida Commercial Banks, Inc. in 1988; Florida
National Banks of Florida, Inc. in 1990; and the Florida Federal Savings, FSB
and Southeast Banks transactions in 1991; the Flagler Savings & Loan Association
transaction and PSFS Thrift Holding Company acquisition in 1992; the pooling of
interests acquisitions of South Carolina Federal Corporation, DFSoutheastern,
Inc. and Dominion Bankshares Corporation in 1993; the Georgia Federal Bank, FSB
and First American Metro Corp. purchase acquisitions in 1993; and the
BancFlorida Financial Corporation purchase acquisition of 1994. Stockholders'
equity includes public offerings of common stock amounting to $234,934,000 in
1991 and $330,045,000 in 1992.
T-5
TABLE 7
SECURITIES AVAILABLE FOR SALE
September 30, 1994
Average
1 Year 1-5 5-10 After 10 Gross Unrealized Amortized Maturity
(In thousands) or Less Years Years Years Total Gains Losses Cost in Years
MARKET VALUE
U.S. Treasury $1,602,533 1,052,875 - - 2,655,408 (104) 73,917 2,729,221 1.66
U.S. Government agencies - 143,450 1,767,667 341,164 2,252,281 (22) 129,370 2,381,629 7.00
CMOs 129,112 1,444,287 35,675 - 1,609,074 (618) 54,230 1,662,686 3.19
Other 154,128 1,290,952 18,540 246,147 1,709,767 (38,884) 45,058 1,715,941 2.69
Total $1,885,773 3,931,564 1,821,882 587,311 8,226,530 (39,628) 302,575 8,489,477 3.69
MARKET VALUE
Debt securities $1,885,773 3,931,564 1,821,882 341,488 7,980,707 (5,793) 298,061 8,272,975
Sundry securities - - - 245,823 245,823 (33,835) 4,514 216,502
Total $1,885,773 3,931,564 1,821,882 587,311 8,226,530 (39,628) 302,575 8,489,477
AMORTIZED COST
Debt securities $1,887,837 4,093,443 1,926,341 365,354 8,272,975
Sundry securities - - - 216,502 216,502
Total $1,887,837 4,093,443 1,926,341 581,856 8,489,477
WEIGHTED AVERAGE YIELD
U.S. Treasury 5.36% 6.00 - - 5.62
U.S. Government agencies - 4.34 6.18 4.79 5.85
CMOs 5.07% 5.13 5.03 - 5.12
Other 8.93 7.68 3.03 4.19 7.30
Consolidated 5.63% 6.17 6.12 4.56 5.93
Included in "Other" at September 30, 1994, are $ 1,372,611,000 of securities
that are denominated in currencies other than the U.S. dollar. The currency
exchange rates were hedged to minimize the exposure to currency revaluation
risks. At September 30, 1994, these securities had a weighted average maturity
of 2.73 years and a weighted average yield of 8.25 percent. The weighted
average U.S. equivalent yield of these securities was 7.56 percent based on a
weighted average interest differential of (.69) percent due to the hedging of
the foreign currency exchange rates.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. The aging of mortgage-backed securities is based on
their weighted average maturities at September 30, 1994. Average maturity in
years excludes preferred and common stocks and money market funds.
Weighted average yields are based on amortized cost. Yields related to
securities exempt from both federal and state income taxes, federal income taxes
only or state income taxes only are stated on a fully tax-equivalent basis.
They are reduced by the nondeductible portion of interest expense, assuming a
federal tax rate of 35 percent; a North Carolina state tax rate of 7.8275
percent, a Georgia and Tennessee state tax rate of 6 percent; a South Carolina
state tax rate of 4.5 percent; a Florida state tax rate of 5.5 percent; a
Maryland state tax rate of 7 percent; and a Washington, D.C. tax rate of 10.25
percent, respectively.
Securities available for sale at September 30, 1994, do not include
commitments to purchase $40,912,000 of additional securities that at September
30, 1994 had a market value of $40,262,000 . Gains and losses from sales are
accounted for on a trade date basis. Gross gains and losses realized on the
sale of debt securities for the nine months ended September 30, 1994 were
$23,333,000 and $29,543,000, respectively. Gross gains and losses realized on
sundry securities were $5,337,000 and $708,000, respectively.
T-6
TABLE 8
INVESTMENT SECURITIES
September 30, 1994
Average
1 Year 1-5 5-10 After 10 Gross Unrealized Market Maturity
(In thousands) or Less Years Years Years Total Gains Losses Value in Years
CARRYING VALUE
U.S. Government agencies $ - 130,075 1,206,966 - 1,337,041 11,975 (24,769) 1,324,247 6.06
CMO's - 421,253 - - 421,253 - (1,597) 419,656 2.83
State, county and municipal 238,355 336,582 216,936 450,054 1,241,927 100,810 (2,610) 1,340,127 7.26
Other - 2,561 6,183 170,798 179,542 8,699 (2,630) 185,611 12.50
Total $238,355 890,471 1,430,085 620,852 3,179,763 121,484 (31,606) 3,269,641 6.26
CARRYING VALUE
Debt securities $238,355 890,471 1,430,085 516,750 3,075,661 115,693 (31,606) 3,159,748
Sundry securities - - - 104,102 104,102 5,791 - 109,893
Total $238,355 890,471 1,430,085 620,852 3,179,763 121,484 (31,606) 3,269,641
MARKET VALUE
Debt securities $245,370 904,926 1,432,825 576,627 3,159,748
Sundry securities 5,791 - - 104,102 109,893
Total $251,161 904,926 1,432,825 680,729 3,269,641
WEIGHTED AVERAGE YIELD
U.S. Government agencies - % 6.82 6.93 - 6.92
CMO's - 5.35 - - 5.35
State, county and municipal 12.12 10.69 11.45 12.22 11.65
Other - 5.71 7.42 7.79 7.75
Consolidated 12.12% 7.58 7.62 11.00 8.61
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. The aging of mortgage-backed securities is based on
their weighted average maturities at September 30, 1994. Average maturity in
years excludes preferred and common stocks and money market funds.
Yields related to securities exempt from both federal and state income
taxes, federal income taxes only or state income taxes only are stated on a
fully tax-equivalent basis. They are reduced by the nondeductible portion of
interest expense, assuming a federal tax rate of 35 percent; a North Carolina
state tax rate of 7.8275 percent; a Georgia and Tennessee state tax rate of 6
percent; a South Carolina state tax rate of 4.5 percent; a Florida state tax
rate of 5.5 percent; a Maryland state tax rate of 7 percent; and a Washington,
D.C. tax rate of 10.25 percent, respectively.
Investment securities at September 30, 1994, do not include commitments to
purchase $186,045,000 of additional securities that at September 30, 1994, had a
market value of $184,998,000. Gross gains and losses from sales of investment
securities are accounted for on a trade date basis. Gross gains and losses
realized on the sale of debt securities for the nine months ended September 30,
1994 were $1,228,000 and $37,000, respectively, and on sundry securities gross
gains realized were $2,404,000.
T-7
TABLE 9
LOANS*
1994 1993
THIRD Second First Fourth Third
(In thousands) QUARTER Quarter Quarter Quarter Quarter
FIRST UNION CORPORATION
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 13,765,745 13,460,873 12,630,234 12,509,283 12,318,117
Non-taxable 688,238 658,190 701,791 724,442 729,685
Total commercial, financial
and agricultural 14,453,983 14,119,063 13,332,025 13,233,725 13,047,802
Real estate - construction and other 1,674,297 1,504,546 1,572,105 1,664,694 1,749,011
Real estate - mortgage 5,932,374 5,730,311 5,761,598 5,834,894 5,792,923
Lease financing 1,334,570 931,297 916,068 962,599 875,536
Foreign 509,030 437,967 384,740 304,267 278,666
Total commercial 23,904,254 22,723,184 21,966,536 22,000,179 21,743,938
RETAIL
Real estate - mortgage 14,682,624 13,813,215 13,401,838 13,318,058 12,877,141
Installment loans to individuals 13,588,066 12,715,803 11,690,649 11,891,999 11,924,617
Total retail 28,270,690 26,529,018 25,092,487 25,210,057 24,801,758
Total loans 52,174,944 49,252,202 47,059,023 47,210,236 46,545,696
UNEARNED INCOME
Loans 142,587 136,352 133,735 129,830 139,298
Lease financing 399,323 190,355 192,864 204,229 181,454
Total unearned income 541,910 326,707 326,599 334,059 320,752
Loans, net $ 51,633,034 48,925,495 46,732,424 46,876,177 46,224,944
ACQUIRED SOUTHEAST BANKS LOANS**
COMMERCIAL
Commercial, financial and agricultural
Taxable $ 269,208 281,902 304,425 532,388 575,882
Non-taxable 34,385 43,406 47,879 52,977 56,709
Total commercial, financial
and agricultural 303,593 325,308 352,304 585,365 632,591
Real estate - construction and other 48,860 50,481 65,859 87,954 94,991
Real estate - mortgage 554,627 600,091 643,414 695,243 756,693
Foreign 9,133 9,698 9,740 1,448 1,539
Total commercial 916,213 985,578 1,071,317 1,370,010 1,485,814
RETAIL
Real estate - mortgage 672,807 702,426 745,446 806,576 882,902
Installment loans to individuals 302,677 336,485 374,447 911,395 992,447
Total retail 975,484 1,038,911 1,119,893 1,717,971 1,875,349
Total loans 1,891,697 2,024,489 2,191,210 3,087,981 3,361,163
UNEARNED INCOME 317 569 1,020 1,757 2,876
Loans, net $ 1,891,380 2,023,920 2,190,190 3,086,224 3,358,287
*At September 30, 1994, $321,996,000 of securitized retail real estate
mortgage loans had a market value of $328,474,000.
**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.
T-8
TABLE 10
ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING ASSETS*
1994 1993
THIRD Second First Fourth Third
(In thousands) QUARTER Quarter Quarter Quarter Quarter
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of quarter $ 1,007,839 1,014,001 1,020,191 1,029,162 1,036,539
Provision for loan losses 25,000 25,000 25,000 49,973 50,001
Allowance of acquired loans 18,615 609 - 252 -
Loan losses, net (47,156) (31,771) (31,190) (59,196) (57,378)
Balance, end of quarter $ 1,004,298 1,007,839 1,014,001 1,020,191 1,029,162
(as % of loans, net) 1.95% 2.06 2.17 2.18 2.23
(as % of nonaccrual and restructured loans) 203% 192 168 147 112
(as % of nonperforming assets) 154% 152 127 111 85
LOAN LOSSES
Commercial, financial and agricultural $ 20,898 16,373 14,176 34,894 32,585
Real estate - construction and other 2,974 1,711 2,942 4,727 3,360
Real estate - mortgage 17,773 7,574 8,533 13,380 13,160
Installment loans to individuals 30,475 28,858 30,417 33,601 29,692
Total 72,120 54,516 56,068 86,602 78,797
LOAN RECOVERIES
Commercial, financial and agricultural 12,965 8,388 15,836 12,590 10,168
Real estate - construction and other 424 1,095 431 2,220 1,196
Real estate - mortgage 4,657 5,076 1,291 5,498 2,994
Installment loans to individuals 6,918 8,186 7,320 7,098 7,061
Total 24,964 22,745 24,878 27,406 21,419
Loan losses, net $ 47,156 31,771 31,190 59,196 57,378
(as % of average loans, net)** .38% .27 .27 .51 .50
NONPERFORMING ASSETS
Nonaccrual loans
Commercial loans $ 154,861 159,858 189,759 242,241 321,699
Real estate loans 339,881 363,433 412,748 425,101 580,508
Total nonaccrual loans 494,742 523,291 602,507 667,342 902,207
Restructured loans 674 2,730 2,742 26,544 18,617
Foreclosed properties 158,234 136,408 191,153 222,503 288,818
Total nonperforming assets $ 653,650 662,429 796,402 916,389 1,209,642
(as % of loans, net and foreclosed
properties) 1.26% 1.35 1.70 1.95 2.60
Accruing loans past due 90 days $ 115,903 85,948 80,479 71,307 108,138
*Excluding Southeast Banks segregated assets.
**Annualized.
T-9
Table 11
INTANGIBLE ASSETS
1994 1993
Third Second First Fourth Third
(In thousands) Quarter Quarter Quarter Quarter Quarter
MORTGAGE SERVICING RIGHTS $ 89,666 79,826 82,102 87,350 94,432
CREDIT CARD PREMIUM $ 62,463 67,524 71,538 75,588 79,893
OTHER INTANGIBLE ASSETS
Goodwill $ 763,832 682,570 703,559 712,485 728,107
Deposit base premium 319,522 224,918 240,935 255,359 268,527
Other 8,134 9,118 9,817 10,468 11,172
Total $ 1,091,488 916,606 954,311 978,312 1,007,806
T-10
TABLE 12
SOUTHEAST BANKS SEGREGATED ASSETS
1994 1993
THIRD Second First Fourth Third
(In thousands) QUARTER Quarter Quarter Quarter Quarter
SEGREGATED ASSETS $ 235,668 299,943 338,237 380,515 424,586
ALLOWANCE FOR SEGREGATED ASSET LOSSES
Balance, beginning of quarter 29,590 31,308 33,313 36,280 39,092
Transfer (to) from allowance for foreclosed
properties (302) 52 (295) (20) 578
Segregated asset losses, net (2,829) (1,770) (1,710) (2,947) (3,390)
Balance, end of quarter 26,459 29,590 31,308 33,313 36,280
Segregated assets, net $ 209,209 270,353 306,929 347,202 388,306
SEGREGATED ASSET LOSSES
Commercial, financial and agricultural $ 448 33 36 346 417
Real estate - construction and other - 3 4 36 103
Real estate - mortgage 1,202 378 372 767 1,628
Installment loans to individuals 2,454 2,406 2,456 2,822 2,578
Total 4,104 2,820 2,868 3,971 4,726
SEGREGATED ASSET RECOVERIES
Commercial, financial and agricultural 440 136 221 185 526
Real estate - construction and other - - - - -
Real estate - mortgage 82 164 174 166 97
Installment loans to individuals 753 750 763 673 713
Total 1,275 1,050 1,158 1,024 1,336
Segregated asset losses, net $ 2,829 1,770 1,710 2,947 3,390
SEGREGATED ASSETS
Nonaccrual loans
Commercial loans $ 40,196 53,847 58,285 67,064 78,293
Real estate loans 109,658 147,173 176,622 187,432 203,946
Total nonaccrual loans 149,854 201,020 234,907 254,496 282,239
Foreclosed properties 85,814 98,923 103,330 126,019 142,347
Total segregated assets 235,668 299,943 338,237 380,515 424,586
Less FDIC loss-sharing* (200,318) (254,952) (287,501) (323,438) (360,898)
Total $ 35,350 44,991 50,736 57,077 63,688
Accruing loans past due 90 days $ 20,206 18,895 23,627 28,493 34,692
*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.
T-11
TABLE 13
ALLOWANCE FOR FORECLOSED PROPERTIES*
1994 1993
THIRD Second First Fourth Third
(In thousands) QUARTER Quarter Quarter Quarter Quarter
Foreclosed properties $ 197,261 177,274 239,037 278,694 361,739
Allowance for foreclosed properties, beginning of quarter 40,866 47,884 56,191 72,921 76,564
Provision for foreclosed properties (2,114) 1,910 2,794 4,666 2,982
Transfer from (to) allowance for segregated assets 302 (52) 295 20 (578)
Dispositions, net (27) (8,876) (11,396) (21,416) (6,047)
Allowance for foreclosed properties, end of quarter 39,027 40,866 47,884 56,191 72,921
Foreclosed properties, net $ 158,234 136,408 191,153 222,503 288,818
* Excluding Southeast Banks segregated assets.
T-12
TABLE 14
DEPOSITS
1994 1993
THIRD Second First Fourth Third
(In thousands) QUARTER Quarter Quarter Quarter Quarter
CORE DEPOSITS
Noninterest-bearing $ 10,295,616 10,207,807 10,428,019 10,861,207 10,245,808
Savings and NOW accounts 12,677,630 12,085,198 12,132,581 12,010,636 11,230,863
Money market accounts 10,316,481 10,490,933 10,931,222 11,131,334 10,519,720
Other consumer time 17,361,310 16,486,243 16,536,800 16,897,062 18,035,692
Total core deposits 50,651,037 49,270,181 50,028,622 50,900,239 50,032,083
Foreign 1,328,032 2,852,926 574,868 1,240,448 1,139,335
Other time 1,707,982 1,649,153 1,484,301 1,601,724 1,763,996
Total deposits $ 53,687,051 53,772,260 52,087,791 53,742,411 52,935,414
TABLE 15
TIME DEPOSITS IN AMOUNTS OF $100,000 OR MORE
September 30, 1994
Time Other
(In thousands) Certificates Time
MATURITY OF
3 months or less $ 1,850,268 78,505
Over 3 months through 6 months 675,528 -
Over 6 months through 12 months 768,885 -
Over 12 months 904,488 -
Total $ 4,199,169 78,505
T-13
TABLE 16
LONG-TERM DEBT
1994 1993
THIRD Second First Fourth Third
(In thousands) QUARTER Quarter Quarter Quarter Quarter
DEBENTURES AND NOTES
7-1/2% debentures due 2002 $ 15,619 15,619 15,619 15,619 15,619
Floating rate extendible notes due 2005 100,000 100,000 100,000 100,000 100,000
11% notes due 1996 18,360 18,360 18,360 18,360 18,360
Floating rate notes due 1996 150,000 150,000 150,000 150,000 150,000
9-1/4% notes - - - - 225,000
5.95% notes due 1995 149,881 149,842 149,802 149,762 149,723
6-3/4% notes due 1998 248,389 248,267 248,144 248,021 247,899
Fixed rate medium-term senior notes, varying
rates and terms to 1996 61,700 61,700 61,700 72,200 90,500
Fixed rate medium-term subordinated notes,
varying
rates and terms to 2001 54,000 54,000 54,000 54,000 54,000
Floating rate subordinated notes due 2003 149,074 149,048 149,022 149,003 149,020
11% subordinated and variable rate notes due
1996 17,954 17,954 17,954 17,954 17,954
8-1/8% subordinated notes due 1996 100,000 100,000 100,000 100,000 100,000
9.45% subordinated notes due 1999 250,000 250,000 250,000 250,000 250,000
9.45% subordinated notes due 2001 147,442 147,349 147,256 147,164 147,071
8-1/8% subordinated notes due 2002 248,424 248,373 248,322 248,271 248,220
8% subordinated notes due 2002 222,972 222,910 222,850 222,788 222,726
7-1/4% subordinated notes due 2003 148,694 148,655 148,707 148,671 148,651
6-5/8% subordinated notes due 2005 247,935 247,888 247,856 247,807 247,757
6% subordinated notes due 2008 196,974 196,920 197,160 197,115 -
6-3/8% subordinated notes due 2009 147,449 147,405 147,406 - -
8% subordinated notes due 2009 148,535 - - - -
Debentures and notes of subsidiaries
9-7/8% subordinated capital notes due 1999 74,370 74,334 74,301 74,267 74,232
9-5/8% subordinated capital notes due 1999 74,942 74,937 74,935 74,931 74,928
10-1/2% collateralized mortgage obligations due
1996 65,927 69,950 74,008 72,115 70,271
Debentures and notes with varying rates and
terms to 2002 7,275 7,400 7,400 7,400 7,500
Total 3,045,916 2,900,911 2,904,802 2,765,448 2,809,431
MORTGAGES AND OTHER DEBT
Notes payable to FDIC due 1996 171,614 193,258 214,682 260,846 291,163
Advances from the Federal Home Loan Bank 4,603 4,603 4,453 4,453 4,453
Mortgage notes and other debt 41,814 24,623 25,401 25,575 26,309
Capitalized leases 5,416 6,049 5,492 5,622 5,796
Total long-term debt $ 3,269,363 3,129,444 3,154,830 3,061,944 3,137,152
T-14
TABLE 17
CHANGES IN STOCKHOLDERS' EQUITY
Twelve
Months 1994 1993
Ended
September 30, THIRD Second First Fourth Third
(In thousands) 1994 QUARTER Quarter Quarter Quarter Quarter
Balance, beginning of period $ 5,056,518 5,388,581 5,276,060 5,207,625 5,056,518 4,866,617
Stockholders' equity of pooled banks
not restated prior to 1994 51,816 (16) 51,832 - - -
Net income 889,174 241,752 229,620 222,459 195,343 195,415
Purchase of Class A Series A
preferred stock 63 - - 4 59 -
Purchase of common stock (180,386) (82,392) (51,525) (46,061) (408) (1,660)
Common stock issued for stock
options exercised 56,775 21,430 29,060 2,082 4,203 9,864
Common stock issued through
dividend reinvestment plan 46,692 6,615 8,938 5,659 25,480 60,019
Issuance of common stock
for acquisition 161,079 161,079 - - - -
Converted debentures 19,760 19,760 - - - 95
Converted Class A Series A
preferred stock (4) - - - (4) -
Unrealized loss on debt and
equity securities (170,918) (47,253) (81,839) (41,826) - -
Cash dividends paid
Series 1990 preferred stock (24,011) (6,595) (6,201) (5,726) (5,489) (6,240)
Common stock (283,927) (80,330) (67,364) (68,156) (68,077) (67,592)
Balance, end of period $ 5,622,631 5,622,631 5,388,581 5,276,060 5,207,625 5,056,518
T-15
TABLE 18
CAPITAL RATIOS
1994 1993
THIRD Second First Fourth Third
(IN THOUSANDS) QUARTER Quarter Quarter Quarter Quarter
CONSOLIDATED CAPITAL RATIOS*
QUALIFYING CAPITAL
TIER 1 CAPITAL $ 4,763,409 4,664,358 4,467,801 4,342,664 4,154,400
TOTAL CAPITAL 7,654,430 7,361,013 7,235,875 6,960,671 6,633,377
ADJUSTED RISK-BASED ASSETS 53,904,132 50,155,408 47,746,123 47,529,159 48,145,379
ADJUSTED LEVERAGE RATIO ASSETS $ 70,315,199 69,971,938 68,023,421 70,785,664 69,899,151
RATIOS
TIER 1 CAPITAL 8.84% 9.30 9.36 9.14 8.63
TOTAL CAPITAL 14.20 14.68 15.15 14.64 13.78
LEVERAGE 6.77 6.67 6.57 6.13 5.94
STOCKHOLDERS' EQUITY TO ASSETS
QUARTER-END 7.57 7.42 7.30 7.36 7.08
AVERAGE 7.62% 7.39 7.60 7.10 6.92
BANK CAPITAL RATIOS
TIER 1 CAPITAL
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA 7.14% 7.70 8.34 8.24 8.20
SOUTH CAROLINA 8.21 8.54 7.80 7.55 8.42
GEORGIA 8.28 8.74 9.55 9.58 9.07
FLORIDA 8.79 9.63 9.98 9.13 9.69
WASHINGTON, D.C. 17.31 16.30 19.07 14.23 15.04
MARYLAND 19.01 17.75 16.23 15.78 32.41
TENNESSEE 13.08 13.36 12.34 12.43 13.05
VIRGINIA 10.88 10.57 10.25 10.77 11.50
FIRST UNION HOME EQUITY BANK 7.16 - - - -
TOTAL CAPITAL
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA 9.62 10.51 11.41 11.35 11.40
SOUTH CAROLINA 12.53 12.96 12.09 11.82 12.70
GEORGIA 11.22 11.70 12.60 12.62 12.10
FLORIDA 10.35 11.31 11.68 10.83 11.40
WASHINGTON, D.C. 18.60 17.60 20.36 15.52 16.32
MARYLAND 20.30 19.04 17.52 17.07 33.76
TENNESSEE 14.34 14.62 13.60 13.69 14.31
VIRGINIA 13.17 12.90 12.58 13.08 14.11
FIRST UNION HOME EQUITY BANK 11.54 - - - -
LEVERAGE
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA 5.74 5.65 5.86 5.52 5.77
SOUTH CAROLINA 6.06 6.03 5.59 5.56 6.23
GEORGIA 5.96 6.07 6.17 5.67 5.63
FLORIDA 6.30 6.53 6.33 5.79 6.17
WASHINGTON, D.C. 7.88 7.11 7.05 6.06 7.40
MARYLAND 11.53 10.62 9.72 9.04 17.03
TENNESSEE 8.54 8.41 8.30 8.05 8.79
VIRGINIA 8.26 7.70 7.03 6.89 8.13
FIRST UNION HOME EQUITY BANK 6.24% - - - -
*Risk-based capital ratio guidelines require a minimum ratio of tier 1 capital
to risk-weighted assets of 4.00 percent and a minimum ratio of total capital to
risk-weighted assets of 8.00 percent. The minimum leverage ratio of tier 1
capital to adjusted average quarterly assets is from 3.00 to 5.00 percent.
T-16
TABLE 19
INTEREST RATE GAP
September 30, 1994
Interest Sensitivity in Days Non-Sensitive
One to Two to and Sensitive
(In thousands) 1-90 91-180 181-365 Total two years five years Over five years Total
EARNING ASSETS
Interest-bearing bank balances $ 632,106 - 100 632,206 - - - 632,206
Federal funds sold and securities
purchased under resale
agreements 1,761,980 9,663 - 1,771,643 - - - 1,771,643
Trading account assets 1,303,453 - - 1,303,453 - - - 1,303,453
Securities available for sale
U.S. Government and other 559,925 1,412,633 523,548 2,496,106 987,114 3,835,054 1,171,203 8,489,477
Investment securities
U.S. Government and other 81,736 72,948 136,074 290,758 258,201 688,792 700,086 1,937,837
State, county and municipal 9,677 52,623 175,667 237,967 247,499 89,036 667,424 1,241,926
Loans*
Commercial and commercial
real estate 19,011,085 240,288 280,394 19,531,767 515,784 1,301,886 657,020 22,006,457
Residential mortgages 1,755,854 1,283,826 3,018,421 6,058,101 1,933,207 3,010,304 3,645,893 14,647,505
Installment loans to individuals 6,690,282 384,210 673,171 7,747,663 1,201,307 2,411,227 2,174,598 13,534,795
Lease financing 32,514 33,897 68,098 134,509 109,740 170,901 520,097 935,247
Foreign 310,111 163,100 26,758 499,969 277 3,503 5,281 509,030
Total earnings assets 32,148,723 3,653,188 4,902,231 40,704,142 5,253,129 11,510,703 9,541,602 67,009,576
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
Savings and NOW accounts 12,677,630 - - 12,677,630 - - - 12,677,630
Money market accounts 10,316,481 - - 10,316,481 - - - 10,316,481
Other consumer time 4,846,737 3,583,872 3,918,292 12,348,901 2,189,938 2,730,316 92,155 17,361,310
Foreign 1,312,307 15,725 - 1,328,032 - - - 1,328,032
Other time 1,041,059 205,438 220,598 1,467,095 176,065 59,887 4,936 1,707,983
Short-term borrowings 9,988,596 - - 9,988,596 - - - 9,988,596
Long-term debt 435,025 36,976 159,790 631,791 52,180 902,150 1,683,242 3,269,363
Total interest-bearing
liabilities 40,617,835 3,842,011 4,298,680 48,758,526 2,418,183 3,692,353 1,780,333 56,649,395
OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS 5,185,397 2,458,230 (623,077) 7,020,550 (3,143,700) (2,201,850)(1,675,000) -
Total interest-bearing
liabilities and off-balance
sheet financial instruments 45,803,232 6,300,241 3,675,603 55,779,076 (725,517) 1,490,503 105,333 56,649,395
Interest rate gap $(13,654,509) (2,647,053) 1,226,628 (15,074,934) 5,978,646 10,020,200
Cumulative gap $(13,654,509)(16,301,562)(15,074,934)(15,074,934)(9,096,288) 923,912
Ratio of cumulative gap to total
earnings assets (20.38)% (24.33) (22.50) (22.50) (13.57) 1.38
*Loans are stated net of unearned income. Since savings, NOW and money market
accounts theoretically can be repriced at any time, all such balances have
been included in 1-90 days. If these amounts were spread based upon expected
repricing characteristics, or if they were treated as nonsensitive, as many
in the industry do, the cumulative gap ratio would be significantly reduced.
Accordingly, this interest rate gap table has inherent limitations on its
ability to accurately portray interest rate sensitivity, and therefore, it is
only provided in conjunction with common banking industry practice.
T-17
TABLE 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
Weighted
Average Rate Estimated
September 30, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
ASSET RATE CONVERSIONS
Interest rate swaps(1) $ 11,054,897 5.53% 5.22% 1.14
Carrying amount $ 26,152
Unrealized gross gain 7,964
Unrealized gross loss (213,365)
Total (179,249)
Forward interest rate swaps(2) 2,200,000 5.07 - 1.47
Carrying amount -
Unrealized gross gain -
Unrealized gross loss (44,402)
Total (44,402)
Other financial instruments(3) 850,000 4.22 4.22 1.69
Carrying amount (1,529)
Unrealized gross gain 1,962
Unrealized gross loss (433)
Total -
$ 14,104,897 5.38% 5.15% 1.22 $ (223,651)
LIABILITY RATE CONVERSIONS
Interest rate swaps(4) $ 2,318,173 7.25% 5.69% 7.46
Carrying amount $ 22,592
Unrealized gross gain 6,794
Unrealized gross loss (133,134)
Total (103,748)
Other financial instruments(5) 442,000 4.00 - 3.28
Carrying amount 1,974
Unrealized gross gain -
Unrealized gross loss (1,806)
Total 168
Total liability rate conversions $ 2,760,173 7.05% 5.69% 6.79 $ (103,580)
BASIS PROTECTION
Prime/federal funds caps(6) $ 5,000,000 4.63% 5.98% 1.87
Carrying amount $ 3,035
Unrealized gross gain 926
Unrealized gross loss (5,122)
Total (1,161)
Total basis protection $ 5,000,000 4.63% 5.98% 1.87 $ (1,161)
(1)Converts floating rate assets to fixed rate. Adds to liability
sensitivity. Similar characteristics to a fixed income security.
Includes $3.6 billion of indexed amortizing swaps of which
$1.5 billion to mature in December 1994 if 3 month LIBOR
remains below 7 percent and $2.1 billion to mature within five
years.
(2)Enables Corporation to, in effect, extend maturities by locking
in yields for future periods; $2.0 billion effective December 1994;
$200 million effective March 1995.
(3)Includes $800 million of interest rate floors, of which $400
million were purchased and offset by $400 million sold,
locking in gains to be amortized over the remaining life of
the contracts.
(4)Converts fixed rate long-term debt to floating rate by
matching maturity of the swap to the debt issue. Maintains
neutral rate sensitivity.
(5)Miscellaneous option-based products for liability
management purposes include $35 million of written and
purchased options on swaps, $257 million eurodollar caps
and $150 million eurodollar floors.
(6)Simultaneous purchase and sale of caps ($2.5 billion each)
to lock-in a 2.75 percent spread between prime and federal
funds as protection against a narrowing in the spread in a
rising interest rate environment. The locked spread occurs with
prime rate greater than 6 percent and federal funds rate greater
than 3.25 percent.
(Continued)
T-18
TABLE 20
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS*
Weighted
Average Rate Estimated
September 30, 1994 Notional Maturity Fair
(In thousands) Amount Receive Pay In Years Value Comments
RATE SENSITIVITY HEDGES
Put options on eurodollar futures(1) $ 1,500,000 - % 6.50% .21
Carrying amount $ 94
Unrealized gross gain -
Unrealized gross loss (19)
Total 75
Put options on forward swaps(2) 1,000,000 - 5.03 .22
Carrying amount 981
Unrealized gross gain 19,728
Unrealized gross loss -
Total 20,709
Long eurodollar
futures(3) $ 50,000 5.27% - % .33
Carrying amount $ -
Unrealized gross gain -
Unrealized gross loss (109)
Total (109)
Total rate sensitivity hedges $ 2,550,000 5.27% 5.91% .22 $ 20,675
ASSET HEDGE
Short T-Bill futures(4) $ 1,000,000 - % 5.35% .19
Carrying amount $ -
Unrealized gross gain 63
Unrealized gross loss -
Total 63
Total asset hedge $ 1,000,000 - % 5.35% .19 $ 63
(1)Reduces liability sensitivity by paying a premium for the right
to lock in the floating pay rate of the interest rate swaps in
the fourth quarter of 1995. Beneficial in rising short-term
rate environment.
(2)Paid a premium for the right to terminate $1.0 billion of
forward interest rate swaps based on interest rates at
settlement date. Reduces liability sensitivity.
(3)Locks in the rate on the future placement of 3 month
eurodollar deposits.
(4)Converts the maturity of $1.0 billion U.S. Treasury bills in the
available for sale portfolio from March 1995 to December
1994.
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Prime Rate - The base rate on corporate loans posted by at least 75 percent of
the nation's 30 largest banks as defined in The Wall Street Journal.
London Interbank Offered Rates (LIBOR) - The average of interbank offered
rates on dollar deposits in the London market based on quotations at five
major banks.
Weighted average pay rates are generally based upon one to six month LIBOR.
Pay rates reset at predetermined reset dates over the life of the contract.
Rates shown are the pay rates in effect as of September 30, 1994. Weighted
average receive rates are fixed rates set at the time the contract was entered
into.
Carrying amount includes accrued interest receivable/payable, unamortized
premiums paid/received and any related margin accounts.
T-19
TABLE 21
OFF-BALANCE SHEET DERIVATIVES - EXPECTED MATURITIES*
September 30, 1994 1 Year 1 -5 5 -10 After 10
(In thousands) or Less Years Years Years Total
ASSET RATE CONVERSIONS
Notional amount $ 7,336,347 6,768,550 - - 14,104,897
Weighted average receive rate 5.49% 5.26 - - 5.38
Estimated fair value $ (13,878) (209,773) - - (223,651)
LIABILITY RATE CONVERSIONS
Notional amount $ 583,173 492,000 925,000 760,000 2,760,173
Weighted average receive rate 7.64% 7.68 6.96 6.43 7.05
Estimated fair value $ 2,360 1,543 (3,698) (100,699) (103,580)
BASIS PROTECTION
Notional amount $ - 5,000,000 - - 5,000,000
Weighted average receive rate - % 4.63 - - 4.63
Estimated fair value $ - (1,161) - - (1,161)
RATE SENSITIVITY HEDGES
Notional amount $ 2,550,000 - - - 2,550,000
Weighted average receive rate 5.27% - - - 5.27
Estimated fair value $ 20,675 - - - 20,675
ASSET HEDGE
Notional amount $ 1,000,000 - - - 1,000,000
Weighted average receive rate - % - - - -
Estimated fair value $ 63 - - - 63
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
Pay rates are generally based upon one to six month LIBOR and reset at
predetermined reset dates. Current pay rates are not necessarily indicative
of future pay rates and therefore have been excluded from the above table.
T-20
TABLE 22
OFF-BALANCE SHEET DERIVATIVES ACTIVITY*
Rate
Asset Rate Liability Rate Basis Sensitivity Asset
(In thousands) Conversions Conversions Protection Hedges Hedge Total
Balance, December 31, 1993 $ 16,079,540 3,241,173 6,000,000 23,493,000 - 48,813,713
Additions - 305,000 - 16,726,643 6,500,000 23,531,643
Maturities/Amortizations (1,974,643) (786,000) - (32,169,643) (2,000,000) (36,930,286)
Terminations - - (1,000,000) (5,500,000) (3,500,000) (10,000,000)
Balance, September 30, 1994 $ 14,104,897 2,760,173 5,000,000 2,550,000 1,000,000 25,415,070
*Includes only off-balance sheet derivative financial instruments related to
interest rate risk management activities.
T-21
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
THIRD QUARTER 1994 SECOND QUARTER 1994
INTEREST AVERAGE Interest Average
AVERAGE INCOME/ RATES Average Income/ Rates
(In thousands) BALANCES EXPENSE EARNED/PAID Balances Expense Earned/Paid
ASSETS
Interest-bearing bank balances $ 675,188 8,552 5.03 % $ 786,723 9,915 5.06 %
Federal funds sold and securities
purchased under resale agreements 1,469,486 16,354 4.42 1,595,394 13,575 3.41
Trading account assets (a) 1,062,744 15,641 5.84 904,729 14,010 6.21
Securities available for sale (a) 9,777,730 139,512 5.69 11,480,968 152,237 5.31
Investment securities (a)
U.S. Government and other 1,715,051 32,076 7.48 1,575,796 27,310 6.93
State, county and municipal 1,248,484 35,694 11.44 1,282,173 37,116 11.58
Total investment securities 2,963,535 67,770 9.15 2,857,969 64,426 9.02
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 14,001,417 291,147 8.25 13,375,599 281,454 8.44
Real estate - construction and
other 1,588,419 33,731 8.42 1,515,456 28,710 7.60
Real estate - mortgage 5,964,848 121,637 8.09 5,743,998 110,471 7.71
Lease financing 665,678 15,983 9.60 582,340 13,761 9.45
Foreign 434,532 5,844 5.34 424,662 4,739 4.48
Total commercial 22,654,894 468,342 8.20 21,642,055 439,135 8.14
Retail
Real estate-mortgage 14,239,519 260,489 7.32 13,600,744 247,665 7.28
Installment loans to individuals 13,118,344 353,537 10.75 12,078,943 317,955 10.54
Total retail 27,357,863 614,026 8.96 25,679,687 565,620 8.82
Total loans 50,012,757 1,082,368 8.62 47,321,742 1,004,755 8.51
Total earning assets 65,961,440 1,330,197 8.03 64,947,525 1,258,918 7.76
Cash and due from banks 3,017,964 2,857,885
Other assets 4,040,685 4,020,590
Total assets $73,020,089 $ 71,826,000
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 12,449,336 71,848 2.29 12,120,552 64,856 2.15
Money market accounts 10,483,003 65,849 2.49 10,791,758 62,199 2.31
Other consumer time 17,042,759 187,185 4.36 16,462,456 171,773 4.19
Foreign 1,958,291 21,840 4.42 1,327,343 14,088 4.26
Other time 1,674,511 21,696 5.14 1,567,754 20,266 5.19
Total interest-bearing deposits 43,607,900 368,418 3.35 42,269,863 333,182 3.16
Federal funds purchased and securities
sold under repurchase agreements 6,970,468 78,962 4.49 7,511,271 77,201 4.12
Commercial paper 998,167 11,115 4.42 702,645 7,089 4.05
Other short-term borrowings 1,422,176 20,617 5.75 1,486,748 18,739 5.05
Long-term debt 3,198,320 51,746 6.47 3,138,257 47,702 6.08
Total interest-bearing
liabilities 56,197,031 530,858 3.75 55,108,784 483,913 3.52
Noninterest-bearing deposits 9,927,448 10,067,077
Other liabilities 1,331,994 1,344,882
Stockholders' equity 5,563,616 5,305,257
Total liabilities and
stockholders' equity $73,020,089 $ 71,826,000
Interest income and rate earned $ 1,330,197 8.03 % $ 1,258,918 7.76 %
Interest expense and rate paid 530,858 3.19 483,913 2.98
Net interest income and margin $ 799,339 4.84 % $ 775,005 4.78 %
(a) Yields related to securities and loans exempt from both federal and state
income taxes, federal income taxes only or state income taxes only are
stated on a fully tax-equivalent basis. They are reduced by the
nondeductible portion of interest expense, assuming a federal income tax
rate of 35 percent; a North Carolina state tax rate of 7.8275 percent in
1994 and 7.905 percent in 1993; a Georgia and Tennessee state tax rate of
6 percent; a South Carolina state tax rate of 4.5 percent; a Florida
state tax rate of 5.5 percent; a Maryland state tax rate of 7 percent;
and a Washington, D.C. tax rate of 10.25 percent.
T-22
FIRST QUARTER 1994 FOURTH QUARTER 1993 THIRD QUARTER 1993
Interest Average Interest Average Interest Average
Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balances Expense Earned/Paid Balances Expense Earned/Paid Balances Expense Earned/Paid
$ 687,314 8,740 5.16% $ 677,135 5,313 3.11% $ 320,216 2,903 3.60%
884,366 6,328 2.90 475,184 3,508 2.93 491,070 3,737 3.02
928,576 11,190 4.89 1,988,989 19,843 3.96 674,439 8,259 4.86
11,655,783 151,785 5.23 6,774,551 87,643 5.16 7,597,882 92,020 4.82
1,221,890 19,574 6.41 6,166,830 88,791 5.76 6,829,166 104,859 6.14
1,307,801 37,633 11.51 1,190,980 33,853 11.37 1,126,833 33,454 11.88
2,529,691 57,207 9.04 7,357,810 122,644 6.67 7,955,999 138,313 6.95
13,155,105 261,856 8.07 12,687,322 238,745 7.47 12,147,950 236,030 7.71
1,605,390 27,712 7.00 2,051,496 32,918 6.37 2,085,368 32,207 6.13
5,839,560 105,404 7.32 5,421,146 100,908 7.39 5,576,267 103,496 7.37
577,342 13,243 9.17 589,613 14,601 9.91 504,764 13,259 10.51
332,993 3,518 4.28 343,753 3,997 4.61 268,662 3,338 4.93
21,510,390 411,733 7.76 21,093,330 391,169 7.36 20,583,011 388,330 7.49
13,154,439 240,126 7.30 11,625,424 214,819 7.39 11,501,250 215,493 7.49
11,557,358 299,303 10.41 13,502,979 351,735 10.39 13,443,492 350,209 10.39
24,711,797 539,429 8.76 25,128,403 566,554 9.00 24,944,742 565,702 9.06
46,222,187 951,162 8.29 46,221,733 957,723 8.25 45,527,753 954,032 8.35
62,907,917 1,186,412 7.59 63,495,402 1,196,674 7.51 62,567,359 1,199,264 7.64
3,038,166 3,748,206 3,359,195
4,397,425 4,943,044 5,535,224
$70,343,508 $72,186,652 $ 71,461,778
11,964,371 61,993 2.10 11,603,921 62,683 2.14 11,303,281 62,306 2.19
10,906,396 59,622 2.22 10,933,617 63,140 2.29 10,566,722 60,390 2.27
16,663,990 172,855 4.21 17,299,925 185,970 4.26 18,412,561 200,087 4.31
834,297 7,569 3.68 702,989 5,975 3.37 581,585 4,968 3.39
1,515,325 16,645 4.45 1,655,928 18,912 4.53 1,760,681 20,060 4.52
41,884,379 318,684 3.09 42,196,380 336,680 3.17 42,624,830 347,811 3.24
7,109,922 65,895 3.76 8,368,019 75,420 3.58 7,492,596 68,273 3.62
321,628 2,277 2.87 319,744 1,725 2.14 297,781 1,774 2.36
1,162,345 10,932 3.82 766,080 6,800 3.52 1,041,294 12,731 4.85
3,148,942 38,215 4.85 3,225,556 42,769 5.30 3,082,522 39,902 5.18
53,627,216 436,003 3.29 54,875,779 463,394 3.35 54,539,023 470,491 3.42
10,072,065 10,609,800 10,067,212
1,301,135 1,573,144 1,913,959
5,343,092 5,127,929 4,941,584
$70,343,508 $ 72,186,652 $ 71,461,778
$ 1,186,412 7.59% $ 1,196,674 7.51% $ 1,199,264 7.64%
436,003 2.80 463,394 2.90 470,491 2.99
$ 750,409 4.79% $ 733,280 4.61% $ 728,773 4.65%
(b) The loan averages include loans on which the accrual of interest has
been discontinued and are stated net of unearned income. Additionally,
certain loan averages and related amounts for the first quarter of 1994
have been reclassified to conform with summary presentation for the second
quarter of 1994.
T-23
FIRST UNION CORPORATION AND SUBSIDIARIES
NET INTEREST INCOME SUMMARIES
NINE MONTHS 1994 SIX MONTHS 1994
INTEREST AVERAGE Interest Average
AVERAGE INCOME/ RATES Average Income/ Rates
(In thousands) BALANCES EXPENSE EARNED/PAID Balances Expense Earned/Paid
ASSETS
Interest-bearing bank balances $ 716,364 27,208 5.08% $ 737,293 18,656 5.10%
Federal funds sold and securities
purchased under resale agreements 1,318,559 36,256 3.68 1,241,844 19,902 3.23
Trading account assets (a) 965,841 40,840 5.65 916,586 25,200 5.54
Securities available for sale (a) 10,964,614 443,534 5.40 11,567,892 304,022 5.27
Investment securities (a)
U.S. Government and other 1,506,052 78,960 6.99 1,399,821 46,884 6.70
State, county and municipal 1,279,269 110,443 11.51 1,294,916 74,749 11.54
Total investment securities 2,785,321 189,403 9.07 2,694,737 121,633 9.03
Loans (a) (b)
Commercial
Commercial, financial and
agricultural 13,513,807 834,458 8.26 13,265,962 543,310 8.26
Real estate - construction and
other 1,569,693 90,153 7.68 1,560,175 56,422 7.29
Real estate - mortgage 5,849,927 337,512 7.71 5,791,515 215,875 7.51
Lease financing 608,777 42,987 9.41 579,854 27,004 9.31
Foreign 397,768 14,101 4.74 379,081 8,257 4.39
Total commercial 21,939,972 1,319,211 8.04 21,576,587 850,868 7.95
Retail
Real estate-mortgage 13,668,875 748,280 7.30 13,378,825 487,791 7.29
Installment loans to individuals 12,257,266 970,795 10.57 11,819,591 617,258 10.48
Total retail 25,926,141 1,719,075 8.85 25,198,416 1,105,049 8.79
Total loans 47,866,113 3,038,286 8.48 46,775,003 1,955,917 8.40
Total earning assets 64,616,812 3,775,527 7.80 63,933,355 2,445,330 7.68
Cash and due from banks 2,971,264 2,947,527
Other assets 4,151,594 4,207,967
Total assets $ 71,739,670 $ 71,088,849
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing deposits
Savings and NOW accounts 12,179,863 198,697 2.18 12,042,894 126,849 2.12
Money market accounts 10,725,502 187,670 2.34 10,848,760 121,821 2.26
Other consumer time 16,724,456 531,813 4.25 16,562,666 344,628 4.20
Foreign 1,377,427 43,497 4.22 1,082,182 21,657 4.04
Other time 1,586,446 58,607 4.94 1,541,684 36,911 4.83
Total interest-bearing deposits 42,593,694 1,020,284 3.20 42,078,186 651,866 3.12
Federal funds purchased and securities
sold under repurchase agreements 7,196,709 222,058 4.13 7,311,705 143,096 3.95
Commercial paper 676,625 20,481 4.05 513,189 9,366 3.68
Other short-term borrowings 1,358,042 50,288 4.95 1,325,443 29,671 4.51
Long-term debt 3,162,021 137,663 5.80 3,143,570 85,917 5.47
Total interest-bearing
liabilities 54,987,091 1,450,774 3.53 54,372,093 919,916 3.41
Noninterest-bearing deposits 10,021,667 10,069,557
Other liabilities 1,326,116 1,323,129
Stockholders' equity 5,404,796 5,324,070
Total liabilities and
stockholders' equity $ 71,739,670 $ 71,088,849
Interest income and rate earned $ 3,775,527 7.80% $ 2,445,330 7.68%
Interest expense and rate paid 1,450,774 3.00 919,916 2.90
Net interest income and margin $ 2,324,753 4.80% $ 1,525,414 4.78%
(a) Yields related to securities and loans exempt from both federal and state
income taxes, federal income taxes only or state income taxes only are
stated on a fully tax-equivalent basis. They are reduced by the
nondeductible portion of interest expense, assuming a federal income tax
rate of 35 percent; a North Carolina state tax rate of 7.8275 percent in
1994 and 7.905 percent in 1993; a Georgia and Tennessee state tax rate of 6
percent; a South Carolina state tax rate of 4.5 percent; a Florida state
tax rate of 5.5 percent; a Maryland state tax rate of 7 percent; and a
Washington, D.C. tax rate of 10.25 percent.
T-24
YEAR ENDED 1993 NINE MONTHS 1993
Interest Average Interest Average
Average Income/ Rates Average Income/ Rates
Balances Expense Earned/Paid Balances Expense Earned/Paid
$ 520,591 21,321 4.10% $ 467,835 16,008 4.57%
537,021 16,770 3.12 557,860 13,262 3.18
913,864 40,846 4.47 551,551 21,003 5.09
6,912,046 347,451 5.03 6,958,382 259,808 4.99
6,313,607 395,637 6.27 6,363,071 306,846 6.43
1,085,412 127,766 11.77 1,049,836 93,913 11.93
7,399,019 523,403 7.07 7,412,907 400,759 7.21
11,742,520 925,951 7.89 11,424,125 687,206 8.04
2,083,646 124,689 5.98 2,094,481 91,771 5.86
5,333,306 399,671 7.49 5,303,705 298,763 7.53
531,539 55,193 10.38 511,968 40,592 10.57
263,896 12,940 4.90 236,984 8,943 5.05
19,954,907 1,518,444 7.61 19,571,263 1,127,275 7.70
10,892,980 839,434 7.71 10,646,150 624,615 7.82
12,783,523 1,349,431 10.56 12,541,068 997,696 10.62
23,676,503 2,188,865 9.24 23,187,218 1,622,311 9.33
43,631,410 3,707,309 8.50 42,758,481 2,749,586 8.59
59,913,951 4,657,100 7.77 58,707,016 3,460,426 7.87
3,340,993 3,203,764
4,846,278 4,813,667
$ 68,101,222 $ 66,724,447
10,567,006 232,231 2.20 10,217,570 169,547 2.22
10,320,835 232,402 2.25 10,114,330 169,262 2.24
17,594,023 761,623 4.33 17,693,132 575,653 4.35
576,590 20,905 3.63 533,994 14,930 3.74
1,650,325 76,097 4.61 1,648,437 57,186 4.64
40,708,779 1,323,258 3.25 40,207,463 986,578 3.28
7,214,686 267,751 3.71 6,826,017 192,328 3.77
321,310 8,356 2.60 321,838 6,629 2.75
799,077 31,245 3.91 810,196 24,450 4.03
3,006,560 159,829 5.32 2,932,760 117,060 5.32
52,050,412 1,790,439 3.44 51,098,274 1,327,045 3.47
9,540,069 9,179,573
1,671,344 1,704,437
4,839,397 4,742,163
$ 68,101,222 $ 66,724,447
$ 4,657,100 7.77% $ 3,460,426 7.87%
1,790,439 2.99 1,327,045 3.02
$ 2,866,661 4.78% $ 2,133,381 4.85%
(b) The loan averages include loans on which the accrual of interest has
been discontinued and are stated net of unearned income.
T-25
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
1994 1993
Third Second First Fourth Third
(In thousands except per share data) Quarter Quarter Quarter Quarter Quarter
ASSETS
Cash and due from banks $ 3,212,888 2,809,958 3,054,037 3,351,963 2,790,443
Interest-bearing bank balances 632,206 1,387,532 799,569 712,153 587,506
Federal funds sold and securities
purchased under resale agreements 1,771,643 1,909,486 1,438,561 351,754 319,012
Total cash and cash equivalents 5,616,737 6,106,976 5,292,167 4,415,870 3,696,961
Trading account assets 1,303,453 933,011 820,876 652,470 2,286,061
Securities available for sale 8,226,530 9,709,341 12,665,905 11,744,942 5,944,236
Investment securities 3,179,763 2,995,102 2,539,647 2,692,476 8,100,384
Loans, net of unearned income 51,633,034 48,925,495 46,732,424 46,876,177 46,224,944
Allowance for loan losses (1,004,298) (1,007,839) (1,014,001) (1,020,191) (1,029,162)
Loans, net 50,628,736 47,917,656 45,718,423 45,855,986 45,195,782
Premises and equipment 1,617,933 1,518,171 1,535,383 1,524,855 1,490,690
Due from customers on acceptances 133,928 94,535 220,698 246,095 150,448
Mortgage servicing rights 89,666 79,826 82,102 87,350 94,432
Credit card premium 62,463 67,524 71,538 75,588 79,893
Other intangible assets 1,091,488 916,606 954,311 978,312 1,007,806
Southeast segregated assets 209,209 270,353 306,929 347,202 388,306
Other assets 2,083,212 1,995,300 2,040,394 2,165,823 2,953,088
Total assets $ 74,243,118 72,604,401 72,248,373 70,786,969 71,388,087
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits 10,295,616 10,207,807 10,428,019 10,861,207 10,245,808
Interest-bearing deposits 43,391,435 43,564,453 41,659,772 42,881,204 42,689,606
Total deposits 53,687,051 53,772,260 52,087,791 53,742,411 52,935,414
Short-term borrowings 9,988,596 8,959,378 10,058,342 7,254,178 8,210,812
Bank acceptances outstanding 133,928 94,535 220,698 246,095 150,448
Other liabilities 1,541,549 1,260,203 1,450,652 1,274,716 1,897,743
Long-term debt 3,269,363 3,129,444 3,154,830 3,061,944 3,137,152
Total liabilities 68,620,487 67,215,820 66,972,313 65,579,344 66,331,569
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 31,592 31,592 31,592
Common stock, $3.33-1/3 par value;
authorized 750,000,000 shares 585,948 575,989 564,812 567,791 565,236
Paid-in capital 1,693,389 1,576,872 1,555,938 1,591,275 1,564,495
Retained earnings 3,482,620 3,327,793 3,165,544 3,016,967 2,895,195
Unrealized loss on debt and equity securities (170,918) (123,665) (41,826) - -
Total stockholders' equity 5,622,631 5,388,581 5,276,060 5,207,625 5,056,518
Total liabilities and
stockholders' equity $ 74,243,118 72,604,401 72,248,373 70,786,969 71,388,087
MEMORANDA
Securities available for sale-amortized cost $ 8,489,477 9,907,974 12,731,630 - -
Securities available for sale-market value 8,226,530 9,709,341 12,665,905 11,884,385 6,024,087
Investment securities-market value 3,269,641 3,104,804 2,696,736 2,931,139 8,414,741
Common stockholders' equity, net of unrealized loss
on debt and equity securities $ 5,509,508 5,228,205 5,033,846 4,923,584 4,772,478
Preferred shares outstanding 6,318,350 6,318,350 6,318,350 6,318,350 6,318,350
Common shares outstanding 175,784,527 172,796,786 169,443,814 170,337,619 169,573,982
T-26
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands except per share data) 1994 1993 1994 1993
INTEREST INCOME
Interest and fees on loans $ 1,077,083 947,226 3,022,845 2,732,146
Interest and dividends on securities
available for sale 135,621 84,583 430,934 238,703
Interest and dividends on investment securities:
Taxable income 31,478 103,721 76,939 303,294
Non-taxable income 23,490 21,778 72,441 61,787
Trading account interest 14,799 7,678 38,568 19,611
Other interest income 24,906 6,640 63,464 29,270
Total interest income 1,307,377 1,171,626 3,705,191 3,384,811
INTEREST EXPENSE
Interest on deposits 368,418 347,811 1,020,284 986,578
Interest on short-term borrowings 110,694 82,778 292,827 223,407
Interest on long-term debt 51,746 39,902 137,663 117,060
Total interest expense 530,858 470,491 1,450,774 1,327,045
Net interest income 776,519 701,135 2,254,417 2,057,766
Provision for loan losses 25,000 50,001 75,000 171,780
Net interest income after
provision for loan losses 751,519 651,134 2,179,417 1,885,986
NONINTEREST INCOME
Trading account profits 10,906 5,814 28,476 21,594
Service charges on deposit accounts 109,325 111,163 324,430 306,269
Mortgage banking income 21,401 34,444 53,061 108,283
Capital management income 63,469 50,283 164,798 152,492
Securities available for sale transactions (2,946) 4,142 (1,581) 22,963
Investment security transactions 2,286 815 3,595 4,386
Merchant discounts 16,257 13,600 45,901 41,247
Insurance commissions 12,506 11,138 33,201 33,051
Sundry income 69,395 61,556 205,184 184,423
Total noninterest income 302,599 292,955 857,065 874,708
NONINTEREST EXPENSE
Personnel expense 326,062 301,124 948,420 842,364
Occupancy 58,854 62,085 176,122 165,716
Equipment rentals, depreciation
and maintenance 55,987 49,994 165,127 137,614
Postage, printing and supplies 24,501 23,636 73,693 65,659
FDIC insurance 29,321 30,715 89,415 87,631
Owned real estate expense 8,785 5,049 18,989 25,381
Amortization 36,121 61,372 104,854 168,412
Sundry 142,588 130,413 396,660 340,948
Total noninterest expense 682,219 664,388 1,973,280 1,833,725
Income before income taxes 371,899 279,701 1,063,202 926,969
Income taxes 130,147 84,286 369,371 304,791
Net income 241,752 195,415 693,831 622,178
Dividends on preferred stock 6,595 6,240 18,522 19,411
Net income applicable to
common stockholders $ 235,157 189,175 675,309 602,767
PER COMMON SHARE DATA
Net income $ 1.35 1.12 3.94 3.61
Cash dividends $ .46 .40 1.26 1.1
Average common shares 174,417,288 168,540,736 171,265,051 166,928,521
T-27
FIRST UNION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
(In thousands) 1994 1993
OPERATING ACTIVITIES
Net income $ 693,831 622,178
Adjustments to reconcile net income to net cash provided
(used)
by operating activities
Accretion and amortization of securities
discounts and premiums, net (11,720) (28,336)
Provision for loan losses 75,000 171,780
Provision for foreclosed properties 2,590 19,064
Gain on sale of mortgage servicing rights - (724)
Securities available for sale transactions 1,581 (22,963)
Investment security transactions (3,595) (4,386)
Depreciation and amortization 234,263 279,839
Trading account assets, net (650,983) (2,116,793)
Mortgage loans held for resale 696,206 1,197
Gain on sales of premises and equipment 2,312 3,713
Gain on sale of First American segregated
assets (59,007) -
Other assets, net 438,953 134,877
Other liabilities, net 220,267 (182,618)
Net cash provided (used) by
operating activities 1,639,698 (1,123,172)
INVESTING ACTIVITIES
Increase (decrease) in cash realized from
Sales of securities available for sale 10,615,074 11,385,544
Maturities of securities available for sale 2,277,201 2,019,254
Purchases of securities available for sale (9,372,162) (11,885,704)
Sales of investment securities 38,953 231,188
Maturities of investment securities 408,004 1,555,763
Purchases of investment securities (655,333) (3,148,831)
Origination of loans, net (4,514,323) (95,094)
Sales of premises and equipment 56,646 33,159
Purchases of premises and equipment (238,695) (142,611)
Sales of mortgage servicing rights - 1,051
Purchases of mortgage servicing rights (7,063) (8,473)
Other intangible assets, net 244,602 3,904
Purchase of banking organizations, net of
acquired cash equivalents 429,593 22,560
Net cash used by investing
activities (717,503) (28,290)
FINANCING ACTIVITIES
Increase (decrease) in cash realized from
Sales of deposits, net (2,056,923) (2,495,789)
Securities sold under repurchase agreements
and other short-term borrowings, net 2,475,147 2,046,616
Issuances of long-term debt 323,732 845,794
Payments of long-term debt (122,722) (886,960)
Sales of common stock 73,784 173,654
Purchases of preferred stock - (193)
Purchases of common stock (179,974) (3,443)
Cash dividends paid (234,372) (195,179)
Net cash provided (used) by
financing activities 278,672 (515,500)
Increase (decrease) in cash and cash
equivalents 1,200,867 (1,666,962)
Cash and cash equivalents,
beginning of period 4,415,870 5,363,923
Cash and cash equivalents, end of
period $ 5,616,737 3,696,961
NONCASH ITEMS
Converted debentures 19,760 -
Increase in foreclosed properties $ 18,702 38,286
Effect of an unrealized loss on debt and
equity securities included in
Securities available for sale 262,949 -
Other assets (deferred income taxes) $ 92,031 -
T-28