FIRST UNION CORPORATION
SECOND QUARTER REPORT
FIRST UNION
1995
CONTENTS
Letter from the Chairman
3
News Highlights
4
Financial Tables
6
Board of Directors
16
LONG-TERM PERFORMANCE
DIVIDENDS PER COMMON SHARE
(Dollars per share)
*Annualized
(Bar graph appears here with the following plot points.)
1978 1995
.29 2.08*
BOOK VALUE PER SHARE GROWTH
(In dollars)
Originally reported (adjusted for stock splits),
not restated for pooling of interest acquisitions.
(Bar graph appears here with the following plot points.)
Dec 1978 June 1995
6.63 33.39
1
...
BUSINESS PROFILE
FIRST UNION CORPORATION, A BANK HOLDING COMPANY WITH HEADQUARTERS IN
CHARLOTTE, NORTH CAROLINA, HAD ASSETS OF $83.1 BILLION AT JUNE 30, 1995. ON
JUNE 19, 1995, FIRST UNION ANNOUNCED AN AGREEMENT TO ACQUIRE $35 BILLION-ASSET
FIRST FIDELITY BANCORPORATION. FIRST UNION CURRENTLY IS THE NATION'S NINTH
LARGEST BANK HOLDING COMPANY, WITH THE FOURTH LARGEST BANKING NETWORK AND
EIGHTH LARGEST AUTOMATED TELLER MACHINE NETWORK.
FIRST UNION'S FULL-SERVICE BANKING OFFICES IN FLORIDA, NORTH CAROLINA,
GEORGIA, VIRGINIA, SOUTH CAROLINA, TENNESSEE, MARYLAND AND WASHINGTON, D.C.,
PROVIDE A WIDE RANGE OF COMMERCIAL BANKING, CONSUMER BANKING AND RETAIL
INVESTMENT SERVICES. THROUGH NEARLY 200 OFFICES IN 37 STATES, WE ALSO PROVIDE
SUCH FINANCIAL SERVICES AS MORTGAGE BANKING, HOME EQUITY LENDING, CAPITAL
MARKETS PRODUCTS AND SERVICES, INSURANCE AND SECURITIES BROKERAGE SERVICES.
TOTAL RETURN
IF YOU HAD INVESTED $1,000 IN FIRST UNION COMMON STOCK:
TOTAL DOLLAR VALUE PERCENT CHANGE IN COMPOUND ANNUAL
JUNE 30, 1995 DOLLAR VALUE GROWTH RATE
Three Years Ago... $ 1,336 34% 10%
Five Years Ago.... $ 2,970 197% 24%
Ten Years Ago..... $ 3,330 233% 13%
ASSUMES DIVIDENDS REINVESTED.
2
...
LETTER FROM THE CHAIRMAN
Strong loan and revenue growth contributed to First Union's record
quarterly earnings in the second quarter of 1995, which also included the
lowest percentage of nonperforming assets to net loans and foreclosed
properties in nine years.
First Union earned $249 million, or $1.45 on a per common share basis, for
the second quarter of 1995. This compared with $230 million, or $1.32, in the
first quarter of 1995, and $223 million, or $1.32, in the second quarter a year
ago. Second quarter 1995 results represent a return on average assets (ROA) of
1.25 percent and a return on average common stockholders' equity (ROE) of 17.71
percent. In the first half of 1995, net income applicable to common stockholders
was $479 million, or $2.77 per share, compared with $440 million, or $2.59 per
share, in the first half of 1994.
We are pleased with our results, which are at the top of the range we
estimated on June 19 when we announced our pending acquisition of First Fidelity
Bancorporation, a $35 billion-asset banking company based in Newark, N.J., and
Philadelphia, Pa. Our second quarter results confirm that both our fundamental
trends and the revenue-enhancing initiatives we have undertaken in business
units such as Capital Markets have helped produce continued earnings momentum.
Key factors in First Union's second quarter 1995 results compared with the
first quarter of 1995 included:
(Bullet) Tax-equivalent net interest income growth for the 23rd consecutive
quarter, to a record $836 million;
(Bullet) Loan growth of 8 percent, to $60.0 billion;
(Bullet) A decline in nonperforming assets to .95 percent of net loans and
foreclosed properties; and
(Bullet) Noninterest income growth of 8 percent, to $329 million.
I am gratified by the continuing support of our stockholders. I would also
like to thank our employees and directors for their invaluable contributions to
the success of First Union.
Sincerely,
(Signature of Edward E. Crutchfield appears here)
Edward E. Crutchfield, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
3
...
NEWS HIGHLIGHTS
RETAIL INVESTMENT SERVICES FOR INDIVIDUAL CUSTOMERS
For individual customers, First Union has developed an extensive offering of
financial planning and investment services, including a proprietary family of
more than 30 mutual funds, as well as annuities and asset management accounts.
First Union has led the banking industry in training and developing its own in-
house investment sales force. On July 7, 1995, First Union's proprietary mutual
fund family was officially renamed "The Evergreen Funds." The Evergreen Funds
have grown to more than $9 billion in assets under management, including the
June 30, 1995, acquisition of most of the Florida-based ABT family of mutual
funds.
NATIONWIDE TELEPHONE BANKING SERVICE LAUNCHED
First Union has launched a new nationwide telephone banking service designed
to attract customers in all 50 states. First Union's "telephone branch" allows
new or existing First Union customers all over the country to conveniently
manage their banking and investment transactions over the phone.
First Union's telephone branch offers every banking service available at
First Union's more than 1,300 branches in the Southeast through one toll-free
number (1-800-413-7898). Anyone in the United States can open First Union
checking and savings accounts, transfer funds, apply for mortgage, home equity
or car loans, request credit cards and conduct other banking transactions by
simply picking up the phone. By year's end, customers will also be able to
purchase a variety of investment products, including mutual funds and annuities,
through the phone service.
FIRST UNION ON THE "INTERNET"
First Union offers information, an electronic marketplace, and secured, on-
line credit card applications over the Internet global computer network. First
Union's First Access Network is available at URL:http://www.firstunion.com/.
Electronic mail can be sent to the address of COMMENTS@FIRSTUNION.COM. First
Union is the intermediary for an electronic marketplace called
"CommunityCommerce(sm)" on the World Wide Web at
URL:http://www.firstunion.com/community/comcom.html/.
4
...
CAPITAL MARKETS GROUP INCREASINGLY ACTIVE
The Capital Markets Group provides loan syndications, private placements,
asset securitizations, international trade finance, risk management products and
other sophisticated financing solutions for corporate customers. These products
and services are increasingly strong contributors to noninterest income. For
example, during the second quarter of 1995, First Union's Capital Markets Group
completed its first commercial mortgage securitization, a $250 million
transaction that will contribute to noninterest income in the third quarter of
1995. In addition, the Capital Markets Group leveraged the origination
capability of the organization by completing a $65 million private placement of
home equity loans originated by First Union Home Equity Bank. First Union
Capital Markets also has received approval from the Federal Reserve Board to
engage in debt underwriting and dealing activities, one of a select group of
U.S. bank holding companies to receive such powers.
INTERNATIONAL GROUP FACILITATES CUSTOMERS' TRADE FINANCE
First Union also has opened a gateway to facilitate its export/ import
customers' trade between the United States, Latin America and Asia through a new
branch office at Lippobank headquarters in Los Angeles. The office is linked to
First Union's corporate headquarters in North Carolina via satellite. This is
the second partnership that First Union has formed with the Lippo Group. The two
banking companies joined forces in December 1994 to form a jointly owned
deposit-taking company, "First Union HKCB Asia, Ltd." to provide trade finance
services to customers in Hong Kong, mainland China and the United States.
DIVIDEND INCREASED 13%
First Union announced a 13 percent increase in its common stock dividend to
52 cents per share, or $2.08 on an annualized basis, representing the 18th
consecutive year that First Union has increased its dividend. First Union,
including its predecessor Union National Bank, has paid a dividend every year
since 1914. The common stock dividend is payable on September 15, 1995, to
stockholders of record as of August 31, 1995.
5
...
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
.................................
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED PERCENT SIX MONTHS ENDED PERCENT
JUNE 30, INCREASE JUNE 30, INCREASE
1995 1994 (DECREASE) 1995 1994 (DECREASE)
(IN THOUSANDS EXCEPT PER SHARE DATA)
Net income $ 249,136 229,620 8.5% $ 486,045 452,079 7.5%
Dividends on preferred stock - 6,201 (100.0) 7,029 11,927 (41.1)
Net income applicable to common stockholders $ 249,136 223,419 11.5% $ 479,016 440,152 8.8%
Net income per common share $ 1.45 1.32 9.8% $ 2.77 2.59 6.9%
Average common shares 171,562 169,064 1.5 172,745 169,689 1.8
Common stockholders' equity $5,736,847 5,104,540 12.4 $5,736,847 5,104,540 12.4
Total stockholders' equity 5,736,847 5,388,581 6.5 5,736,847 5,388,581 6.5
Book value per common share $ 33.39 29.54 13.0 $ 33.39 29.54 13.0
Actual common shares 171,837 172,797 (.6) 171,837 172,797 (.6)
Common stock period-end price $ 45.250 46.125 (1.9)% $ 45.250 46.125 (1.9)%
.................................
EARNINGS SUMMARY
2Q '95
1995 1994 VS.
(IN THOUSANDS EXCEPT PER SHARE DATA) 2Q 1Q 4Q 3Q 2Q 2Q '94
Net interest income (a) $ 836,373 801,788 801,705 799,339 775,005 7.9%
Provision for loan losses 44,000 32,500 25,000 25,000 25,000 76.0
Net interest income after provision
for loan losses (a) 792,373 769,288 776,705 774,339 750,005 5.6
Securities available for sale transactions 1,243 3,635 (9,926) (2,946) (2,935) 142.4
Investment security transactions 1,233 217 411 2,286 694 77.7
Noninterest income 326,503 301,539 311,419 303,259 276,011 18.3
Noninterest expense 714,739 684,702 703,948 682,219 651,220 9.8
Income before income taxes (a) 406,613 389,977 374,661 394,719 372,555 9.1
Income taxes 135,291 130,963 120,705 130,147 119,223 13.5
Tax-equivalent adjustment 22,186 22,105 22,407 22,820 23,712 (6.4)
Net income 249,136 236,909 231,549 241,752 229,620 8.5
Dividends on preferred stock - 7,029 6,831 6,595 6,201 (100.0)
Net income applicable to common stockholders
before redemption premium 249,136 229,880 224,718 235,157 223,419 11.5
Redemption premium on preferred stock - - 41,355 - - -
Net income applicable to common stockholders
after redemption premium $ 249,136 229,880 183,363 235,157 223,419 11.5%
Net income per common share before
redemption premium $ 1.45 1.32 1.28 1.35 1.32 9.8%
Net income per common share after
redemption premium $ 1.45 1.32 1.04 1.35 1.32 9.8%
(a) Tax-equivalent
6 7
... ...
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
.................................
AVERAGE BALANCE SHEET SUMMARY
2Q '95
1995 1994 VS.
2Q 1Q 4Q 3Q 2Q 2Q '94
(IN THOUSANDS)
Loans, net
Earning assets $ 57,873,346 54,414,946 52,583,743 50,012,757 47,321,742 22.3%
Total assets 72,541,610 69,928,734 68,025,926 65,961,440 64,947,525 11.7
Noninterest-bearing deposits 80,255,045 77,493,079 75,433,408 73,020,089 71,826,000 11.7
Consumer time deposits 10,256,782 9,978,428 9,997,860 9,927,448 10,067,077 1.9
Other time deposits 42,734,369 42,022,608 41,083,499 39,975,098 39,374,766 8.5
Common stockholders' equity (a) 4,663,017 5,271,533 4,031,040 3,632,802 2,895,097 61.1
Total stockholders' equity (a) 5,642,420 5,579,362 5,601,222 5,396,497 5,112,116 10.4
$ 5,642,420 5,579,362 5,837,407 5,680,537 5,396,156 4.6%
...............................
CAPITAL RATIOS (B)
Tier 1 capital
Total capital 6.90% 7.53 7.76 8.84 9.30
Leverage 11.65 12.59 12.94 14.20 14.68
5.75% 6.02 6.12 6.77 6.67
...............................
INTANGIBLE ASSETS
(IN THOUSANDS)
Intangible assets
Goodwill $ 945,295 742,435 754,417 763,832 682,570
Deposit base premium 443,830 422,827 437,025 319,522 224,918
Other 6,243 6,844 7,465 8,134 9,118
Total $ 1,395,368 1,172,106 1,198,907 1,091,488 916,606
Mortgage servicing rights $ 101,024 80,266 84,898 89,666 79,826
Credit card premium $ 51,005 54,703 58,494 62,463 67,524
(a) Average common stockholders' equity and average total stockholders' equity
exclude average net unrealized gains or losses on debt and equity
securities.
(b) The second quarter 1995 ratios are based on estimates and exclude net
unrealized gains or losses on debt and equity securities.
8 9
... ...
FINANCIAL TABLES
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
.................................
OTHER FINANCIAL DATA
(DOLLARS IN THOUSANDS)
1995 1994 SIX MONTHS
2Q 1Q 4Q 3Q 2Q 1995 1994
Return on average assets (a)(b) 1.25% 1.24 1.22 1.31 1.28 1.24 1.28
Return on average common equity before redemption premium
(a)(c) 17.71 16.71 15.92 17.29 17.53 17.22 17.53
Return on average common equity after redemption premium
(a)(c) 17.71 16.71 12.99 17.29 17.53 17.22 17.53
Net interest margin (a) 4.62 4.57 4.71 4.84 4.78 4.61 4.78
Allowance as % of loans, net 1.61 1.74 1.81 1.95 2.06 1.61 2.06
Allowance as % of nonaccrual and restructured loans 222 224 245 203 192 222 192
Allowance as % of nonperforming assets 170% 168 175 154 152 170 152
Loan losses $ 88,857 61,962 72,223 72,120 54,516 150,819 110,585
Loan recoveries 24,665 19,495 19,424 24,964 22,745 44,160 47,624
Loan losses, net $ 64,192 42,467 52,799 47,156 31,771 106,659 62,961
As % of average loans, net (a) .44% .31 .40 .38 .27 .38 .27
Nonperforming assets
Commercial nonaccrual $210,464 200,915 155,752 154,861 159,858 210,464 159,858
Real estate nonaccrual 225,802 231,183 241,886 339,881 363,433 225,802 363,433
Total nonaccrual loans 436,266 432,098 397,638 494,742 523,291 436,266 523,291
Restructured loans 630 670 1,872 674 2,730 630 2,730
Foreclosed properties 132,204 144,188 158,464 158,234 136,408 132,204 136,408
Total nonperforming assets $569,100 576,956 557,974 653,650 662,429 569,100 662,429
As % of loans, net and foreclosed properties .95% 1.03 1.03 1.26 1.35 .95 1.35
(a) Annualized.
(b) Based on net income.
(c) Based on net income applicable to common stockholders and average common
stockholders' equity excluding average net unrealized gains or losses on
debt and equity securities.
10 11
... ...
CONSOLIDATED STATEMENTS OF INCOME
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
Interest Income
Interest and fees on loans $ 1,315,702 999,611 2,515,625 1,945,762
Interest and dividends on securities available for
sale 117,747 147,755 240,747 295,313
Interest and dividends on investment securities
Taxable income 48,457 26,632 94,770 45,461
Nontaxable income 21,156 24,341 43,477 48,951
Trading account interest 15,459 13,377 35,373 23,769
Other interest income 34,004 23,490 70,425 38,558
Total interest income 1,552,525 1,235,206 3,000,417 2,397,814
Interest Expense
Interest on deposits 502,056 333,182 968,794 651,866
Interest on short-term borrowings 153,497 103,029 291,751 182,133
Interest on long-term debt 82,785 47,702 146,002 85,917
Total interest expense 738,338 483,913 1,406,547 919,916
Net interest income 814,187 751,293 1,593,870 1,477,898
Provision for loan losses 44,000 25,000 76,500 50,000
Net interest income after provision for loan losses 770,187 726,293 1,517,370 1,427,898
Noninterest Income
Trading account profits 10,265 10,247 11,801 17,570
Service charges on deposit accounts 117,625 107,083 227,752 215,105
Mortgage banking income 25,415 12,239 49,001 31,660
Capital management income 67,754 50,380 135,167 101,329
Securities available for sale transactions 1,243 (2,935) 4,878 1,365
Investment security transactions 1,233 694 1,450 1,309
Fees for other banking services 24,093 17,959 46,021 31,716
Merchant discounts 17,775 15,283 34,408 29,644
Insurance commissions 10,511 10,705 22,001 20,695
Sundry income 53,065 52,115 101,891 104,073
Total noninterest income 328,979 273,770 634,370 554,466
Noninterest Expense
Personnel expense 351,511 312,718 693,170 622,358
Occupancy 57,433 56,877 116,834 117,268
Equipment rentals, depreciation and maintenance 63,292 52,440 129,209 109,140
Postage, printing and supplies 26,367 23,910 57,804 49,192
FDIC insurance 30,935 30,155 61,097 60,094
Professional fees 16,503 12,031 33,766 22,939
Owned real estate expense 1,926 4,908 5,146 10,204
Amortization 46,187 32,355 89,838 68,733
Sundry 120,585 125,826 212,577 231,133
Total noninterest expense 714,739 651,220 1,399,441 1,291,061
Income before income taxes 384,427 348,843 752,299 691,303
Income taxes 135,291 119,223 266,254 239,224
Net income 249,136 229,620 486,045 452,079
Dividends on preferred stock - 6,201 7,029 11,927
Net income applicable to common stockholders $ 249,136 223,419 479,016 440,152
12 13
... ...
CONSOLIDATED BALANCE SHEETS
FIRST UNION CORPORATION AND SUBSIDIARIES (UNAUDITED)
(IN THOUSANDS)
JUNE 30,
1995 1994
Assets
Cash and due from banks
Interest-bearing bank balances $ 3,191,431 2,809,958
Federal funds sold and securities purchased under
resale agreements 446,712 1,387,532
Total cash and cash equivalents 2,052,236 1,909,486
Trading account assets 5,690,379 6,106,976
Securities available for sale 1,559,021 933,011
Investment securities 7,353,926 9,709,341
Loans, net of unearned income 3,583,906 2,995,102
Allowance for loan losses 60,020,507 48,925,495
Loans, net (969,122) (1,007,839)
Premises and equipment 59,051,385 47,917,656
Due from customers on acceptances 1,881,947 1,518,171
Mortgage servicing rights 383,289 94,535
Credit card premium 101,024 79,826
Other intangible assets 51,005 67,524
Other assets 1,395,368 916,606
Total assets 2,050,362 2,265,653
$83,101,612 72,604,401
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits 10,854,459 10,207,807
Interest-bearing deposits 47,987,565 43,564,453
Total deposits 58,842,024 53,772,260
Short-term borrowings 11,012,715 8,959,378
Bank acceptances outstanding 383,289 94,535
Other liabilities 1,750,454 1,260,203
Long-term debt 5,376,283 3,129,444
Total liabilities 77,364,765 67,215,820
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
Common stock, $3.331/3 par value; authorized
750,000,000 shares 572,790 575,989
Paid-in capital 1,260,261 1,576,872
Retained earnings 3,912,179 3,327,793
Unrealized loss on debt and equity securities (8,383) (123,665)
Total stockholders' equity 5,736,847 5,388,581
Total liabilities and stockholders'
equity $83,101,612 72,604,401
14 15
... ...
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
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
Chairman, The Bagel Group, Inc.
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, Corporate
Resources and Chief Administrative
Officer, 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
Transportation Consultant
Gastonia, North Carolina
16
...
(FIRST UNION LOGO APPEARS HERE) Bulk Rate
FIRST UNION CORPORATION U.S.Postage
Two First Union Center PAID
Charlotte, NC 28288-0570 Charlotte, N.C.
Permit No. 1
The First Union Quarterly report includes information released to the
public and the news media on July 12, 1995. You may obtain a copy of our
Second Quarter Financial Supplement, which contains more detailed
financial and other information, by writing to Investor Relations,
Two First Union Center, Charlotte, North Carolina 28288-0206.
There is no charge.