Letter From The Chairman
Continuing strength in net interest income, fee income, loan growth and credit
quality contributed to First Union's 24 percent increase in earnings in the
third quarter of 1994 compared with the third quarter of 1993.
First Union Corporation's earnings rose to $235 million in net income
applicable to common stockholders, or $1.35 per common share, in the third
quarter of 1994, compared with $189 million, or $1.12, in the third quarter a
year ago. Earnings were $223 million, or $1.32 per share in the second quarter
of 1994.
In the first nine months of 1994, net income applicable to common
stockholders rose to $675 million, a 12 percent increase from $603 million in
the first nine months of 1993. On a per share basis, nine-month earnings were
$3.94 at September 30, 1994, compared with $3.61 at September 30, 1993.
Third quarter 1994 results represent a return on average common
stockholders' equity (ROE) of 17.29 percent and a return on average assets (ROA)
of 1.31 percent.
Key factors in the third quarter 1994 performance included:
(Bullet) Growth in loans of 12 percent, or $5.4 billion since the third
quarter of 1993, and 6 percent, or $2.7 billion, (including $1.0 billion from
1994 acquisitions) since the second quarter of 1994.
(Bullet) Growth in tax-equivalent net interest income to a record $799
million, up 10 percent since the third quarter of 1993 and 3 percent since the
second quarter of 1994. The third quarter 1994 growth represented the 20th
consecutive quarterly increase.
(Bullet) Growth in fee income of 3 percent since the third quarter of 1993
and 11 percent since the second quarter of 1994. Growth this year was largely
related to increased capital management and mortgage banking income.
(Bullet) Continued solid improvement in credit quality. This included 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 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.
The third quarter's strength in underlying fundamentals gives us a great
deal of optimism as we continue to invest for the future. We are pleased with
First Union's ability to continue to generate increased net interest income in
this rising interest rate environment.
Thank you for your interest in First Union.
Sincerely,
(Signature of Edward E. Crutchfield, Jr.)
Edward E. Crutchfield Jr.,
Chairman and Chief Executive Officer
Financial Tables
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
Other Financial Data
1994 1993 Nine Months
(Dollars in thousands) 3Q 2Q 1Q 4Q 3Q 1994 1993
Return on average assets (a)(b) 1.31% 1.28 1.28 1.07 1.08 1.29 1.25
Return on average common equity
(a)(c) 17.29 17.53 17.54 15.55 16.11 17.45 18.11
Net interest margin 4.84 4.78 4.79 4.61 4.65 4.80 4.85
Allowance as % of loans, net 1.95 2.06 2.17 2.18 2.23 1.95 2.23
Allowance as % of nonaccrual and
restructured loans 203 192 168 147 112 203 112
Allowance as % of nonperforming
assets 154% 152 127 111 85 154 85
Loan losses $ 72,120 54,516 56,068 86,602 78,797 182,704 242,958
Loan recoveries 24,964 22,745 24,878 27,406 21,419 72,587 50,467
Loan losses, net $ 47,156 31,771 31,190 59,196 57,378 110,117 192,491
As % of average loans, net (a) .38% .27 .27 .51 .50 .31 .60
Nonperforming assets (d)
Commercial nonaccrual $ 154,861 159,858 189,759 242,241 321,699 154,861 321,699
Real estate nonaccrual 339,881 363,433 412,748 425,101 580,508 339,881 580,508
Total nonaccrual loans 494,742 523,291 602,507 667,342 902,207 494,742 902,207
Restructured loans 674 2,730 2,742 26,544 18,617 674 18,617
Foreclosed properties 158,234 136,408 191,153 222,503 288,818 158,234 288,818
Total nonperforming
assets $ 653,650 662,429 796,402 916,389 1,209,642 653,650 1,209,642
As % of loans, net and foreclosed
properties 1.26% 1.35 1.70 1.95 2.60 1.26 2.60
Southeast segregated loss-sharing
nonperforming assets
Nonaccrual loans $ 149,854 201,020 234,907 254,496 282,239 149,854 282,239
Foreclosed properties 85,814 98,923 103,330 126,019 142,347 85,814 142,347
Total 235,668 299,943 338,237 380,515 424,586 235,668 424,586
Less FDIC loss-sharing (e) (200,318) (254,952) (287,501) (323,438) (360,898) (200,318) (360,898)
Total $ 35,350(f) 44,991 50,736 57,077 63,688 35,350 63,688
(a) Quarterly amounts annualized.
(b) Based on net income.
(c) Based on net income applicable to common stockholders and average
common stockholders' equity excluding 1994 average net unrealized gains
or losses on debt and equity securities.
(d) Excludes nonperforming assets related to Southeast Banks.
(e) For a five-year period that began September 19, 1991, the FDIC will
reimburse First Union for 85 percent of all net charge-offs related to
acquired Southeast Banks loans except installment loan reimbursements,
which will decline 5 percent per year to 65 percent by 1996.
(f) Allowance for losses on segregated assets amounted to $26,459,000 at
September 30, 1994. This amount is not included in the allowance for
loan losses.
Financial Tables
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
Average Balance Sheet Summary
1994 1993
3Q '94
vs.
(In thousands) 3Q 2Q 1Q 4Q 3Q 3Q '93
Loans, net $50,012,756 47,321,742 46,222,187 46,221,733 45,527,753 9.9%
Earning assets 65,961,440 64,947,525 62,907,917 63,495,402 62,567,359 5.4
Total assets 73,020,089 71,826,000 70,343,508 72,186,652 71,461,778 2.2
Noninterest-bearing deposits 9,927,448 10,067,077 10,072,065 10,609,800 10,067,212 (1.4)
Consumer time deposits 39,975,098 39,374,766 39,534,757 39,837,463 40,282,564 (.8)
Other time deposits 3,632,802 2,895,097 2,349,622 2,358,917 2,342,266 55.1
Common stockholders' equity (a) 5,396,497 5,112,116 5,012,086 4,843,889 4,657,544 15.9
Total stockholders' equity (a) $ 5,680,537 5,396,156 5,296,126 5,127,929 4,941,584 15.0%
Capital Ratios (b)
Tier 1 capital 9.58% 9.30 9.36 9.14 8.63
Total capital 15.04 14.68 15.15 14.64 13.78
Leverage 6.76% 6.67 6.57 6.13 5.94
Intangible Assets
(In thousands)
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
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
(a) Average common stockholders' equity and average total stockholders'
equity exclude average net unrealized losses on debt and equity
securities of $116,921,000 in the third quarter of 1994.
(b) Third quarter 1994 ratios are based on estimates and exclude net
unrealized losses on debt and equity securities of $170,918,000.
Consolidated Statements of Income
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands) 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
Financial Tables
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
Financial Highlights
Three Months Ended Percent Nine Months Ended Percent
September 30, Increase September 30, Increase
(In thousands except per share data) 1994 1993 (Decrease) 1994 1993 (Decrease)
Net income $ 241,752 195,415 23.7% $ 693,831 622,178 11.5%
Dividends on preferred
stock 6,595 6,240 5.7 18,522 19,411 (4.6)
Net income applicable to common stockholders $ 235,157 189,175 24.3% $ 675,309 602,767 12.0%
Net income per common
share $ 1.35 1.12 20.5% $ 3.94 3.61 9.1%
Average common shares 174,417 168,541 3.5 171,265 166,929 2.6
Common stockholders'
equity (a) $ 5,509,508 4,772,478 15.4 $ 5,509,508 4,772,478 15.4
Total stockholders' equity (a) 5,793,549 5,056,518 14.6 5,793,549 5,056,518 14.6
Book value per common
share (a) $ 31.34 28.14 11.4 $ 31.34 28.14 11.4
Actual common shares 175,785 169,574 3.7 175,785 169,574 3.7
Common stock period-end
price $ 43.250 47.625 (9.2) $ 43.250 47.625 (9.2)
Series 1990 preferred
stock period-end price $ 52.125 53.500 (2.6)% $ 52.125 53.500 (2.6)%
Earnings Summary
3Q '94
1994 1993 vs.
(In thousands except per share data) 3Q 2Q 1Q 4Q 3Q 3Q '93
Net interest income (b) $ 799,339 775,005 750,409 733,280 728,773 9.7%
Provision for loan losses 25,000 25,000 25,000 49,973 50,001 (50.0)
Net interest income after provision for loan losses (b) 774,339 750,005 725,409 683,307 678,772 14.1
Securities available for sale transactions (2,946) (2,935) 4,300 2,804 4,142 (171.1)
Investment security transactions 2,286 694 615 3,049 815 180.5
Noninterest income 303,259 276,011 275,781 317,727 287,998 5.3
Noninterest expense 682,219 651,220 639,841 687,922 664,388 2.7
Income before income taxes (b) 394,719 372,555 366,264 318,965 307,339 28.4
Income taxes 130,147 119,223 120,001 98,469 84,286 54.4
Tax-equivalent adjustment 22,820 23,712 23,804 25,153 27,638 (17.4)
Net income 241,752 229,620 222,459 195,343 195,415 23.7
Dividends on preferred stock 6,595 6,201 5,726 5,489 6,240 5.7
Net income applicable to common stockholders $ 235,157 223,419 216,733 189,854 189,175 24.3%
Net income per common share $ 1.35 1.32 1.27 1.12 1.12 20.5%
(a) Common stockholders' equity and total stockholders' equity exclude net
unrealized losses on debt and equity securities of $170,918,000 at
September 30, 1994.
(b) Tax-equivalent.
Board of Directors
G. Alex Bernhardt
President and Chief Executive Officer,
Bernhardt Furniture Company
Lenoir, North Carolina
W. Waldo Bradley
Chairman,
Bradley Plywood Corporation
Savannah, Georgia
Robert J. Brown
Chairman, President and
Chief Executive Officer,
B&C Associates, Inc.
High Point, North Carolina
Edward E. Crutchfield Jr.
Chairman and Chief Executive Officer,
First Union Corporation
Charlotte, North Carolina
Robert D. Davis
Chairman,
D.D.I. Inc.
Jacksonville, Florida
R. Stuart Dickson
Chairman of Executive Committee,
Ruddick Corporation
Charlotte, North Carolina
B.F. Dolan
Investor
Charlotte, North Carolina
Roddey Dowd Sr.
Chairman,
Charlotte Pipe & Foundry Co.
Charlotte, North Carolina
John R. Georgius
President,
First Union Corporation
Charlotte, North Carolina
William H. Goodwin Jr.
Chairman,
AMF Companies
Richmond, Virginia
Brenton S. Halsey
Chairman Emeritus,
James River Corporation
Richmond, Virginia
Howard H. Haworth
President,
The Haworth Group
Morganton, North Carolina
Torrence E. Hemby Jr.
President,
Beverly Crest Corporation
Charlotte, North Carolina
Leonard G. Herring
President and Chief Executive Officer,
Lowe's Companies Inc.
North Wilkesboro, North Carolina
Jack A. Laughery
Investor
Rocky Mount, North Carolina
Max Lennon
President and Chief Executive Officer,
Eastern Foods Inc.
Atlanta, Georgia
Radford D. Lovett
Chairman,
Commodores Point Terminal Corporation
Jacksonville, Florida
Henry D. Perry Jr.
Physician
Plantation, Florida
Randolph N. Reynolds
Vice Chairman,
Reynolds Metals Company
Richmond, Virginia
Ruth G. Shaw
Senior Vice President
for Corporate Resources,
Duke Power Company
Charlotte, North Carolina
Lanty L. Smith
Chairman and Chief Executive Officer,
Precision Fabrics Group Inc.
Greensboro, North Carolina
Dewey L. Trogdon
Chairman,
Cone Mills Corporation
Greensboro, North Carolina
John D. Uible
Investor
Jacksonville, Florida
B.J. Walker
Vice Chairman,
First Union Corporation
Jacksonville, Florida
Kenneth G. Younger
Consultant
Gastonia, North Carolina
Consolidated Balance Sheets
FIRST UNION CORPORATION AND SUBSIDIARIES
(UNAUDITED)
September 30,
(In thousands) 1994 1993
Assets
Cash and due from banks $3,212,888 2,790,443
Interest-bearing bank balances 632,206 587,506
Federal funds sold and securities purchased under
resale agreements 1,771,643 319,012
Total cash and cash equivalents 5,616,737 3,696,961
Trading account assets 1,303,453 2,286,061
Securities available for sale 8,226,530 5,944,236
Investment securities 3,179,763 8,100,384
Loans, net of unearned income 51,633,034 46,224,944
Allowance for loan losses (1,004,298) (1,029,162)
Loans, net 50,628,736 45,195,782
Premises and equipment 1,617,933 1,490,690
Due from customers on acceptances 133,928 150,448
Mortgage servicing rights 89,666 94,432
Credit card premium 62,463 79,893
Other intangible assets 1,091,488 1,007,806
Southeast segregated assets 209,209 388,306
Other assets 2,083,212 2,953,088
Total assets $ 74,243,118 71,388,087
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 10,295,616 10,245,808
Interest-bearing deposits 43,391,435 42,689,606
Total deposits 53,687,051 52,935,414
Short-term borrowings 9,988,596 8,210,812
Bank acceptances outstanding 133,928 150,448
Other liabilities 1,541,549 1,897,743
Long-term debt 3,269,363 3,137,152
Total liabilities 68,620,487 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
Common stock, $3.33 1/3 par value; authorized
750,000,000 shares 585,948 565,236
Paid-in capital 1,693,389 1,564,495
Retained earnings 3,482,620 2,895,195
Unrealized loss on debt and equity securities (170,918) -
Total stockholders' equity 5,622,631 5,056,518
Total liabilities and stockholders' equity $74,243,118 71,388,087
(FIRST UNION logo here) FIRST UNION Bulk Rate
CORPORATION U.S. Postage
Two First Union Center PAID
Charlotte, NC 28288-0570 Charlotte, NC
Permit No. 34
The First Union quarterly report includes information released to the public
and the news media on October 11, 1994. You may obtain a copy of our Third
Quarter Financial Supplement, which contains more detailed financial and
other information, by writing to Investor Relations, Two First Union Center,
Charlotte, North Carolina 28288-0206. There is no charge.
1 9 9 4
First Union Corporation
Third Quarter Report
(FIRST UNION LOGO appears here)
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APPENDIX
On the Letter from the Chairman's page the signature of Edward E. Crutchfield,
Jr. appears where noted.
On both the front cover and the back cover the First Union logo
appears where noted.